Document:

Exhibit 10.1

 

SHARE PURCHASE AGREEMENT

 

THIS AGREEMENT made as of the 17th day of November, 2010,

 

BETWEEN:

 

AUDLEY CAPITAL MANAGEMENT
LIMITED, a company existing under
the laws of Guernsey, AUDLEY EUROPEAN
OPPORTUNITIES MASTER FUND LIMITED, a company existing under the laws
of Guernsey, AUDLEY INVESTMENT I, a company
existing under the laws of the Cayman Islands, and AUDLEY
INVESTMENT II,  a company
existing under the laws of the Cayman Islands,

 

(hereinafter, collectively, called the “Vendor”),

 

- and -

 

WALTER ENERGY, INC., a corporation incorporated under the laws of
Delaware,

 

(hereinafter called the “Purchaser”),

 

WITNESSES THAT in consideration of the respective covenants,
agreements, representations and warranties contained herein and for other good
and valuable consideration (the receipt and sufficiency of which are
acknowledged by each party), the parties covenant and agree as follows:

 

ARTICLE 1

INTERPRETATION

 

1.1          Defined
Terms.

 

For the purpose of this Agreement, unless the
context otherwise requires, the following terms shall have the respective
meanings set out below and grammatical variations of such terms shall have
corresponding meanings:

 

“Acquisition  Proposal” means (a) any plan of arrangement,
amalgamation, merger, acquisition, consolidation, share exchange,
recapitalization or reorganization involving the Corporation; (b) any sale
of any material assets of the Corporation; (c) any take-over bid for, or
offer to purchase, acquire or subscribe for, any securities of the Corporation;
or (d) any similar transaction or business combination involving the
Corporation or any of its subsidiaries.

 

“Affiliate” has
the meaning given to it in the Securities Act
(Ontario);

 

 

“Business  Day” means any day, other than a Saturday or a Sunday, on
which banks in Toronto, Ontario, New York, New York and London, England are
open for business;

 

“Common Shares”
means the common shares in the capital of the Corporation;

 

“Competition Act Approval”
means (a) the issuance of an advance ruling certificate pursuant to
section 102 of the Competition Act
(Canada) by the Commissioner of Competition, or (b) (i) the expiry,
termination or waiver of any applicable waiting periods under Part IX of
the Competition Act (Canada), and (ii) the
Commissioner advising the Purchaser, in writing, on terms satisfactory to the
Purchaser, acting reasonably, that she does not intend to make an application
under Part VIII of the Competition Act (Canada)
in respect of the transactions contemplated by this Agreement;

 

“Contract” means
any agreement, indenture, contract, lease, deed of trust, licence, option,
instrument or other commitment, whether written or oral;

 

“Corporation”
means Western Coal Corp., a corporation existing under the laws of the Province
of British Columbia;

 

“Encumbrance”
means any encumbrance, lien, charge, hypothec, pledge, mortgage, title
retention agreement, security interest of any nature, adverse claim, exception,
reservation, easement, right of occupation, any matter capable of registration
against title, option, right of pre-emption, privilege or any Contract to
create any of the foregoing;

 

“Foreign Antitrust
Clearance” means any applicable approval or clearance shall have
been received from a Governmental Entity outside Canada or the U.S. and/or any
applicable waiting/suspensory period shall have expired or been terminated or
waived by a Governmental Entity in relation to any Foreign Antitrust Filing
identified by either party and which Foreign Antitrust Filing the Purchaser,
acting reasonably, has agreed is required to be made to consummate the
transactions contemplated by this Agreement;

 

“Foreign Antitrust Filing”
means a filing that must be made by either party (or both parties) to a
Governmental Entity outside Canada or the U.S. under any applicable antitrust,
competition, foreign investment or similar law applicable to the purchase and
sale of the Initial Shares or the Remaining Shares, as the case may be;

 

“Governmental Entity”
means: (a) any multinational, federal, provincial, territorial, state,
regional, municipal, local or other government, governmental or public
department, central bank, court, tribunal, arbitral body, commission, board,
bureau, agency or entity, domestic or foreign; (b) any stock exchange,
including the New York Stock Exchange; (c) any subdivision, agent,
commission, board or authority of any of the foregoing; or (d) any
quasi-governmental or private body, including any tribunal, commission,
regulatory agency or self-regulatory organization, exercising any regulatory,
expropriation or taxing authority under or for the account of any of the
foregoing;

 

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“Hart-Scott-Rodino Approval”
means the expiration of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
or earlier termination thereof, including any voluntarily agreed extensions
with respect to the transactions contemplated by this Agreement;

 

“Initial Closing Date”
means the third Business Day following the satisfaction or waiver of the
condition set out in Section 7.1(a), provided that all of the conditions
set out in Article 7 shall also have been satisfied or waived, or such
other date as may be mutually agreed upon by the Vendor and the Purchaser;

 

“Investment Canada Act
Approval” means the approval of the Minister of Industry under the Investment Canada Act concerning the completion of the
transactions contemplated by this Agreement shall have been obtained or deemed
to have been obtained on terms that are acceptable to the Purchaser, in its
reasonable judgment;

 

“Outside Date”
means April 30, 2011;

 

“Purchase  Price” has the meaning set out in section 2.2;

 

“Purchased Shares”
has the meaning set out in section 2.1;

 

“Regulatory Approvals”
means those sanctions, rulings, consents, orders, exemptions, permits and other
approvals (including the waiver or lapse, without objection, of a prescribed
time under a statute or regulation that states that a transaction may be
implemented if a prescribed time lapses following the giving of notice without
an objection being made) of Governmental Entities, including the
Hart-Scott-Rodino Approval, Competition Act Approval, Investment Canada
Act Approval and any Foreign Antitrust Clearance;

 

“Subsequent Event”
means the occurrence of the earlier of: (a) the completion of an
Acquisition Proposal between the Purchaser and the Corporation; and (b) the
Outside Date, provided however, that if there
shall have occurred any competing Acquisition Proposal by a third party, the
Purchaser shall be permitted to purchase the Remaining Shares at any time
preceding the Outside Date on two Business Days’ notice to the Vendor to enable
the Purchaser to accept, tender to, or otherwise participate in, such
competing, third party Acquisition Proposal;

 

“Time of Closing”
means 10:00 a.m. (Toronto time) on the Initial Closing Date; and

 

“Walter Common Shares”
means the shares of common stock in the capital of the Purchaser.

 

1.2          Knowledge.

 

References in this Agreement to the “knowledge”
of the Vendor means the actual knowledge of Julian A. Treger and Michael
Treichl, in each case without further inquiry.

 

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1.3          Currency.

 

Unless otherwise indicated, all dollar amounts
referred to in this Agreement are expressed in Canadian dollars.

 

1.4          Sections
and Headings.

 

The division of this Agreement into sections
and the insertion of headings are for convenience of reference only and shall
not affect the interpretation of this Agreement. Unless otherwise indicated,
any reference in this Agreement to an Article, section, subsection, clause or a
Schedule refers to the specified Article, section, subsection or clause of or
Schedule to this Agreement.

 

1.5          Entire
Agreement.

 

This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all prior agreements, understandings, negotiations and discussions, whether
written or oral. There are no conditions, covenants, agreements,
representations, warranties or other provisions, express or implied,
collateral, statutory or otherwise, relating to the subject matter hereof
except as herein provided.

 

1.6          Time
of Essence.

 

Time shall be of the essence of this Agreement.

 

1.7          Applicable
Law.

 

This Agreement shall be construed, interpreted and
enforced in accordance with, and the respective rights and obligations of the
parties shall be governed by, the laws of the Province of Ontario and the
federal laws of Canada applicable therein, and each party hereby irrevocably
and unconditionally submits to the exclusive jurisdiction of the courts of such
province and all courts competent to hear appeals therefrom.

 

1.8          Severability.

 

If any provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such determination shall not impair or affect the
validity, legality or enforceability of the remaining provisions hereof, and
each provision is hereby declared to be separate, severable and distinct.

 

1.9          Successors
and Assigns.

 

This Agreement shall enure to the benefit of
and shall be binding on and enforceable by the parties and, where the context
so permits, their respective successors and permitted assigns. No party may
assign any of its rights or obligations hereunder without the prior written
consent of the other party.

 

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1.10        Amendment
and Waivers.

 

No amendment or waiver of any provision of this
Agreement shall be binding on any party unless consented to in writing by such
party. No waiver of any provision of this Agreement shall constitute a waiver
of any other provision, nor shall any waiver constitute a continuing waiver
unless otherwise expressly provided.

 

ARTICLE 2

PURCHASE AND SALE OF PURCHASED SHARES

 

2.1          Purchase
and Sale of Purchased Shares.

 

Subject to the terms and conditions hereof, the
Vendor covenants and agrees to sell, assign and transfer to the Purchaser and
the Purchaser covenants and agrees to purchase from the Vendor:

 

(a)           at
the Time of Closing, 25,274,745 issued and outstanding Common Shares (the “Initial  Shares”); and

 

(b)           upon
the occurrence of a Subsequent Event, 29,273,113 issued and outstanding Common
Shares (the “Remaining Shares”, and together
with the Initial Shares, the “Purchased Shares”).

 

2.2          Purchase
Price.

 

The purchase price payable by the Purchaser to
the Vendor for the Purchased Shares (the “Purchase Price”)
shall be $11.50 per Purchased Share. The Purchase Price shall be payable as
follows:

 

(a)           in
respect of the Initial Shares, at the Time of Closing, $11.50 in cash for each
Initial Share;

 

(b)           in
respect of the Remaining Shares, in circumstances where the Remaining Shares
are acquired pursuant to the completion of an Acquisition Proposal between the
Purchaser and the Corporation, contemporaneously with or as promptly as
practicable following the occurrence of the completion of such Acquisition
Proposal, the equivalent of $11.50 for each Remaining Share in such combination
of cash and/or Walter Common Shares based on the same methods for determining
the exchange ratio and on the basis of providing the same elections in respect
of the consideration (the “Form of Consideration”) as is agreed upon in
the definitive agreement between the Purchaser and the Corporation providing
for such Acquisition Proposal in respect of the consideration for the other
shareholders of the Corporation, provided however, that if the Form of
Consideration is not acceptable to the Vendor, each Remaining Share shall be
purchased for $11.50 in cash;

 

(c)           in
respect of the Remaining Shares, in circumstances where the Remaining Shares
are acquired at the Outside Date, contemporaneously 

 

5

 

with
or as promptly as practicable following the Outside Date, $11.50 in cash for
each Remaining Share; and

 

(d)           in
respect of the Remaining Shares, in circumstances where the Remaining Shares
are acquired to enable the Purchaser to accept, tender to, or otherwise
participate in, a competing, third party Acquisition Proposal, $11.50 in cash
for each Remaining Share.

 

2.3          Price
Protection for Remaining Shares.

 

(a)           If
at any time following the date of this Agreement and prior to the Outside Date
(the “Price Protection Period”):

 

(i)            the
Purchaser or any of its Affiliates makes an offer or proposal to the
Corporation respecting, or publicly announces an intention to undertake, an
amalgamation or merger with, or an arrangement involving, the Corporation (or
other similar transaction) pursuant to which the Purchaser will directly, or
indirectly through an Affiliate, acquire all or a majority portion of the
outstanding Common Shares or the business of the Corporation; or

 

(ii)           the
Purchaser or any of its Affiliates makes an offer or proposal to the
Corporation respecting, or publicly announces an intention to undertake, a
take-over bid by take-over bid circular in compliance with applicable Canadian
securities laws, after giving effect to which the Purchaser, if successful,
would beneficially own directly or indirectly through an Affiliate, a majority
of the Common Shares;

 

(any such transaction being a “Price Protection Transaction”) then within five business
days following the completion by the Purchaser or its Affiliate of the Price
Protection Transaction, the Purchaser will pay, or cause an Affiliate to pay,
to the Vendor the Adjustment Payment (as defined below), if applicable.

 

(b)           The
Vendor will be entitled to receive an additional amount on account of each of
the Remaining Shares (the “Adjustment Payment”)
in cash and/or Walter Common Shares, on the same basis as received by the other
holders of the Corporation’s Common Shares pursuant to the Price Protection
Transaction, equal to the amount by which the consideration per Common Share
received by the holders of the Corporation’s Common Shares pursuant to the
Price Protection Transaction (the “Greater Price”)
exceeds the Purchase Price.

 

(c)           If
all or any portion of the consideration forming the Greater Price has a value
expressed in a currency other than Canadian dollars, then the value of that
consideration will be expressed in Canadian dollars based upon a conversion
rate of exchange equal to the noon spot rate quoted by the Bank of Canada on
the date of the completion of the Price Protection 

 

6

 

Transaction
for the purchase of Canadian dollars using the currency in which the
consideration (or portion thereof) was originally denominated.

 

(d)           In
the event of any disagreement between the Parties with respect to the
calculation of the value of the Greater Price, the matter will be submitted to
an internationally recognized firm of chartered accountants to be agreed upon
by the parties, provided that such firm may not be the auditors of either the
Vendor or the Purchaser. The decision of such firm of chartered accountants as
to the value of the Adjustment Payment will be final and binding on the
parties.

 

2.4          Competing
Transaction

 

(a)           In
the event the Remaining Shares are purchased pursuant to a Subsequent Event and
within 120 days following the Outside Date the Purchaser subsequently sells the
Remaining Shares pursuant to a competing, third party Acquisition Proposal
commenced prior to the Outside Date, on the third business day following the
completion of, and delivery of, payment to the Purchaser under such third party
Acquisition Proposal, the Purchaser shall pay the Vendor a cash amount per
Common Share equal to 50% of the amount by which the per share consideration
payable to the Purchaser under such competing, third party Acquisition Proposal
exceeds $11.50 (the “Shared Amount”).

 

(b)           If
all or any portion of the Shared Amount is in the form of:

 

(i)            cash, the consideration shall be valued based on the
face value of the cash,

 

(ii)           publicly traded securities, the consideration shall be
valued based on the simple average of the closing prices of such securities
over the twenty trading days preceding the date of the completion of the third
party Acquisition Proposal on the published market on which the greatest volume
of trading in such securities, or

 

(iii)          any other consideration, the consideration shall be valued at its fair
market value as the Vendor and the Purchaser shall mutually agree, acting
reasonably; any disagreement between the Parties with respect to such value
shall be resolved in the manner provided in Section 2.3(e).

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE VENDOR

 

The Vendor represents and warrants to the
Purchaser as follows and acknowledges that the Purchaser is relying on such
representations and warranties in connection with its purchase of the Purchased
Shares:

 

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3.1          Organization.

 

The Vendor is a company validly existing under
the laws of the jurisdiction in which it was incorporated or organized and has
all necessary corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.

 

3.2          Authorization
and Enforceability.

 

This Agreement has been duly authorized,
executed and delivered by the Vendor and is a legal, valid and binding obligation
of the Vendor enforceable against the Vendor by the Purchaser in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency
and other laws affecting the rights of creditors generally and except that
equitable remedies may be granted only in the discretion of a court of
competent jurisdiction.

 

3.3          No
Other Agreements to Purchase.

 

No person other than the Purchaser has any
written or oral agreement or option or any right or privilege (whether by law,
pre-emptive or contractual) capable of becoming an agreement or option for the
purchase or acquisition from the Vendor of any of the Purchased Shares.

 

3.4          Ownership
of Purchased Shares.

 

(a)           Schedule
“A” hereto sets forth the Common Shares, stock options (“Options”)
and common share purchase warrants (“Warrants” and
together with the Common Shares and the Options, the “Owned
Securities”) of the Corporation held of record or beneficially owned
by the Vendor on the date hereof.

 

(b)           The
Owned Securities constitute all of the Common Shares, Warrants and Options that
are held of record or beneficially owned by the Vendor on the date hereof.

 

(c)           Subject
to any proxies or powers of attorney granted hereunder, the Vendor has the sole
voting and the sole dispositive power, and the sole power to agree to the
matters set forth herein with respect to the Owned Securities.

 

(d)           Other
than the Owned Securities set forth on Schedule “A” hereto, no Common Shares,
Options, Warrants or other securities of the Corporation which by their terms
are exercisable for or convertible into or exchangeable for Common Shares, are
beneficially owned or controlled, directly or indirectly, by the Vendor.

 

(e)           The
Purchaser is the beneficial owner of the Purchased Shares, with good and
marketable title thereto, free and clear of all Encumbrances and, without
limiting the generality of the foregoing, none of the Purchased 

 

8

 

Shares
is subject to any voting trust, shareholder agreement or voting agreement.

 

(f)            The
Purchaser will have good title to the Purchased Shares free and clear of any
and all Encumbrances at the time that the Purchaser acquires the Common Shares
pursuant to this Agreement.

 

3.5          No
Violation.

 

The execution and delivery of this Agreement by
the Vendor and the consummation of the transactions herein provided for will
not result in either:

 

(a)           the
breach or violation of any of the provisions of, or constitute a default under,
or conflict with or cause the acceleration of any obligation of the Vendor
under:

 

(i)            any
provisions of the constating documents, by-laws or resolutions of the board of
directors (or any committee thereof) or shareholders of the Vendor;

 

(ii)           any
judgment, decree, order or award of any court, Governmental Entity or arbitrator
having jurisdiction over the Vendor;

 

(iii)          any
licence, permit, approval, consent or authorization held by the Vendor that is
necessary for the ownership of the Purchased Shares; or

 

(iv)          any
applicable law, statute, ordinance, regulation or rule; or

 

(b)           the
creation or imposition of any Encumbrance on any of the Purchased Shares.

 

3.6          Consents
and Approvals.

 

Except for the Regulatory Approvals, there is
no requirement for the Vendor to make any filing with, give any notice to or to
obtain any licence, permit, certificate, registration, authorization, consent
or approval of, any Governmental Entity as a condition to the lawful sale of
the Purchased Shares as contemplated by this Agreement. There is no requirement
under any Contract to which the Vendor is a party or by which the Vendor is
bound to give any notice to, or to obtain the consent or approval of, any party
to such agreement, instrument or commitment relating to the sale of the
Purchased Shares as contemplated by this Agreement.

 

3.7          No
Actions, Proceedings.

 

There is no action, proceeding or investigation
(whether or not purportedly on behalf of the Vendor) pending or, to the
knowledge of the Vendor, threatened against or affecting the Vendor, at law or
in equity, before or by any Governmental Entity, which questions the validity
of the purchase and sale of the Purchased Shares or any action taken or to be
taken by the Vendor pursuant to this Agreement.

 

9

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser represents and warrants to the
Vendor as follows and acknowledges that the Vendor is relying on such
representations and warranties in connection with its sale of the Purchased
Shares:

 

4.1          Organization.

 

The Purchaser is a corporation validly existing
under the laws of the State of Delaware and has all necessary corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder.

 

4.2          Authorization.

 

The transaction contemplated by this Agreement
has been duly authorized, and this Agreement has been duly executed and
delivered by the Purchaser and is a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser by the Vendor in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency and
other laws affecting the rights of creditors generally and except that
equitable remedies may be granted only in the discretion of a court of
competent jurisdiction.

 

4.3          No
Violation.

 

The execution and delivery of this Agreement by
the Purchaser and the consummation of the transactions herein provided for will
not result in either:

 

(a)           the
breach or violation of any of the provisions of, or constitute a default under,
or conflict with or cause the acceleration of any obligation of the Purchaser
under:

 

(i)            any
provision of the constating documents, by-laws or resolutions of the board of
directors (or any committee thereof) of the Purchaser;

 

(ii)           any
judgment, decree, order or award of any court, Governmental Entity or
arbitrator having jurisdiction over the Purchaser;

 

(iii)          any
license, permit, approval, consent or authorization held by the Purchaser and
necessary for the completion of the transaction contemplated by this Agreement
or the operation of the Purchaser’s business; or

 

(iv)          any
applicable law, statute, ordinance, regulation or rule; or

 

(b)           the
creation or imposition of any Encumbrance on any of the material properties or
assets of the Purchaser.

 

10

 

 

4.4                               Consents and Approvals.

 

Except for the Regulatory Approvals, there is
no requirement for the Purchaser to make any filing with, give any notice to or
to obtain any licence, permit, certificate, registration, authorization,
consent or approval of, any Governmental Entity as a condition to the purchase
of the Purchased Shares, or the fulfillment by the Purchaser of the terms of
this Agreement, except reports of private placement and the payment of the
corresponding fees to any required securities regulatory authorities.

 

4.5                               Ownership of Common Shares.

 

The Purchaser does not beneficially own,
directly or indirectly, and is not the registered holder of any Common Shares.

 

4.6                               No Actions, Proceedings.

 

There is no action, proceeding or investigation
(whether or not purportedly on the Purchaser’s behalf) pending or, to the
knowledge of the Purchaser, threatened against or affecting the Purchaser, at
law or in equity, before or by any Governmental Entity which questions the
validity of any action taken or to be taken by the Purchaser pursuant to this
Agreement.

 

4.7                               No Material Change.

 

The Purchaser has no knowledge of any fact
relating to the Purchaser that has not been publicly disclosed and that would
be material to an investor in the shares of common stock of the Purchaser,
other than any of the matters contemplated by this Agreement.

 

ARTICLE 5

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

 

5.1                               Survival of Representations and
Warranties.

 

To the extent that they have not been fully
performed at or prior to the Time of Closing, the covenants, representations
and warranties of the parties contained in this Agreement and any agreement,
instrument, certificate or other document executed or delivered pursuant
hereto, except as otherwise expressly provided in any agreement, instrument,
certificate or other document executed or delivered pursuant to this Agreement,
shall survive the closing of the transactions contemplated hereby for a period
of one year and, notwithstanding such closing nor any investigation made by or
on behalf of the Purchaser, shall continue in full force and effect for the
benefit of the Purchaser, in respect of the Vendor, and for the Vendor in
respect of the Purchaser during such period, except that the representations
and warranties set out in section 3.2, 3.3 and section 3.4 shall survive and
continue in full force and effect without limitation of time.

 

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ARTICLE 6

COVENANTS

 

6.1                               Conduct Prior to Closing.

 

(a)                                  Without in any way limiting any other obligations hereunder, during the
period from the date hereof to the Subsequent Event, each of the parties hereto
shall use its commercially reasonable efforts to take and cause to be taken all
necessary actions, steps and proceedings to consummate the completion of the
transactions contemplated hereby, including:

 

(i)                                     to obtain all necessary approvals, consents or waivers, including the
Regulatory Approvals, and to effect all necessary registrations and other
filings and submissions of information to Governmental Entities;

 

(ii)                                  to defend all lawsuits or other legal proceedings challenging this
agreement or the consummation of the transactions contemplated hereby; and

 

(iii)                               to cause to be lifted or rescinded any injunction or restraining order
or other order adversely affecting the consummation of the transactions
contemplated hereby.

 

6.2                               Standstill.

 

(a)                                  Neither the Vendor nor any of its Representatives will, directly or
indirectly,

 

(i)                                     submit, solicit, initiate, discuss or knowingly encourage or facilitate
any proposal, offer or enquiry from a third party relating to an Acquisition
Proposal,

 

(ii)                                  enter into any agreement, arrangement, commitment or understanding
related to any Acquisition Proposal from a third party;

 

(iii)                               engage in any negotiations concerning, or provide any information or
data to, or have any substantive discussions with, any person other than the
Purchaser relating to an Acquisition Proposal; or

 

(iv)                              otherwise cooperate in or knowingly facilitate any effort or attempt to
make, implement or accept any proposal or offer that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal from a third party.

 

(b)                                 The Vendor and its Representatives shall suspend any and all discussions
with any third party regarding any Acquisition Proposal.

 

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(c)                                  For the purposes of this agreement, “Representatives”
means, with respect to any person, such person’s Affiliates, shareholders,
controllers, partners, directors, officers, employees and advisors (including
financial advisors and legal counsel, but excluding any persons at a law firm
acting behind a firewall established to segregate such persons from the persons
acting for such a person), and “person”
includes, without limitation, any corporation, partnership, individual or other
entity.

 

6.3                               Negative Covenants.

 

(a)                                  Until the occurrence of a Subsequent Event, neither the Vendor nor any
of its Representatives will, directly or indirectly,

 

(i)                                     sell, transfer, gift, assign, pledge, hypothecate, encumber, convert or
otherwise dispose of any of the Purchased Shares (or permit any of the
foregoing with respect to any of the Purchased Shares), other than transfers or
assignments by and among each of the companies comprising the Vendor, and other
than the exercise of Warrants or Options in accordance with their terms for
Common Shares, or enter into any agreement, arrangement or understanding in
connection therewith; or

 

(ii)                                  except as contemplated by this Agreement, grant (or permit to be
granted) any proxies or powers of attorney or attorney in fact, or deposit (or
permit to be deposited) the Purchased Shares into a voting trust or enter into
a voting agreement, understanding or arrangement with respect to the voting of
such Purchased Shares.

 

(b)                                 Until the occurrence of the earlier of a Subsequent Event and the
termination of this Agreement, in respect of the Purchased Shares, the Vendor
hereby appoints the Purchaser as attorney in fact (which appointment is
unconditional, irrevocable and is coupled with an interest) for and on its
behalf to execute a proxy appointing such person designated by the Purchaser to
attend and act on behalf of the Vendor at any meeting of shareholders of the
Corporation in respect of any matter, including a meeting requisitioned by a
third party or a meeting in respect of an Acquisition Proposal, and to act on
behalf of the Vendor on every action or approval by written consent of the
Corporation’s shareholders. The Purchaser shall advise the Vendor upon
executing or revoking any proxies, as applicable, in respect of the Vendor.

 

(c)                                  The Vendor hereby agrees not to do anything to frustrate or hinder the
purchase and sale of the Purchased Shares including the consummation of an
Acquisition Proposal between the Purchaser and the Corporation.

 

6.4                               Other Agreements.

 

(a)                                  Each of the parties agrees:

 

13

 

(i)                                     to the existence and factual details of this Agreement being disclosed
by the other party to the extent required by law, which, for greater certainty,
shall include the public announcement and filing of reports under section 102
of the Securities Act (Ontario); and

 

(ii)                                  to this Agreement being filed or available for inspection to the extent
required by law.

 

(b)                                 The Vendor shall not, and hereby agrees not to:

 

(i)                                     exercise any dissent rights and waives any rights of appraisal, or
rights to dissent from an Acquisition Proposal between the Purchaser and the
Corporation that the Vendor may have;

 

(ii)                                  commence or participate in, and shall, and hereby agrees to, take all
actions necessary to opt out of any class in any class action with respect to,
any claim, derivative or otherwise, against the Purchaser or any of its
subsidiaries (or any successor) relating to the negotiation, execution and
delivery of this Agreement or a definitive agreement to be entered into among
the Purchaser and the Corporation in respect of an Acquisition Proposal between
the Purchaser and the Corporation.

 

ARTICLE 7

CONDITIONS OF CLOSING

 

7.1                               Conditions of Closing in Favour
of the Purchaser.

 

The completion of the purchase and sale of the
Purchased Shares is subject to the satisfaction or waiver of the following
conditions for the exclusive benefit of the Purchaser, to be fulfilled or
performed at or prior to the Time of Closing, with regard to the Initial
Shares, and at or prior to the closing related to a Subsequent Event with
regard to the Remaining Shares:

 

(a)                                  Regulatory
Approvals. Hart-Scott-Rodino Approval
and any Foreign Antitrust Clearance shall have been obtained, in the case of
the purchase and sale of the Initial Shares and of the Remaining Shares, as
applicable, and, in addition thereto, Competition Act Approval, Investment
Canada Act Approval and any other required Regulatory Approval shall have been
obtained, in the case of the purchase and sale of the Remaining Shares pursuant
to a Subsequent Event that is an Acquisition Proposal between the Purchaser and
the Corporation;

 

(b)                                 Representations
and Warranties. The representations
and warranties of the Vendor contained in this Agreement shall be true and
correct in all material respects at the Time of Closing or at the time of the
closing related to a Subsequent Event, as applicable, with the same force and 

 

14

 

effect
as if such representations and warranties were made at and as of such time;

 

(c)                                  Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Vendor at or before the Time
of Closing or the closing related to a Subsequent Event, as applicable, shall
have been complied with or performed; and

 

(d)                                 No
Action or Proceeding. No
legal or regulatory action or proceeding shall be pending or threatened by any
Governmental Entity to enjoin, restrict or prohibit the purchase and sale of
the Purchased Shares contemplated hereby.

 

If any of the conditions contained in this
section 7.1 shall not be performed or fulfilled at or prior to the Outside Date
to the satisfaction of the Purchaser, acting reasonably, the Purchaser may, by
notice to the Vendor, if the Purchaser is not in breach of its obligations
under this Agreement, terminate this Agreement and the obligations of the
Vendor and the Purchaser under this Agreement other than the obligations
contained in sections 9.2, 9.3 and 9.5 shall be terminated. Any such condition
may be waived in whole or in part by the Purchaser without prejudice to any
claims it may have for breach of covenant, representation or warranty.

 

7.2                               Conditions of Closing in Favour
of the Vendor.

 

The completion of the purchase and sale of the
Purchased Shares is subject to the satisfaction or waiver of the following
conditions for the exclusive benefit of the Vendor, to be fulfilled or
performed at or prior to the Time of Closing, with regard to the Initial
Shares, and at or prior to the closing related to a Subsequent Event with
regard to the Remaining Shares:

 

(a)                                  Representations
and Warranties. The representations
and warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects at the Time of Closing or the closing related
to a Subsequent Event, as applicable, with the same force and effect as if such
representations and warranties were made at and as of such time;

 

(b)                                 Covenants. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Purchaser at or before the
Time of Closing or the closing related to a Subsequent Event, as applicable,
shall have been complied with or performed; and

 

(c)                                  No
Action or Proceeding. No
legal or regulatory action or proceeding shall be pending or threatened by any
Governmental Entity to enjoin, restrict or prohibit the purchase and sale of
the Purchased Shares contemplated hereby.

 

If any of the conditions contained in this
section 7.2 shall not be performed or fulfilled at or prior to the Outside Date
to the satisfaction of the Vendor, acting reasonably, the Vendor may, by notice
to the Purchaser, if the Vendor is not in breach of its obligations 

 

15

 

under this Agreement, terminate this Agreement
and the obligations of the Vendor and the Purchaser under this Agreement other
than the obligations contained in sections 9.2, 9.3 and 9.5 shall be terminated.
Any such condition may be waived in whole or in part by the Vendor without
prejudice to any claims it may have for breach of covenant, representation or
warranty.

 

ARTICLE 8

CLOSING ARRANGEMENTS

 

8.1                               Place of Closing.

 

Each of the purchase and sale of the Initial
Shares at the Time of Closing and the purchase and sale of the Remaining Shares
upon the occurrence of a Subsequent Event, other than the completion of an
Acquisition Proposal between the Purchaser and the Corporation which shall take
place pursuant to such Acquisition Proposal, shall take place at the offices of
Osler, Hoskin & Harcourt LLP, 1 First Canadian Place Toronto, Ontario,
Canada M5X 1B8.

 

8.2                               Transfer.

 

At the Time of Closing, upon fulfilment of all
the conditions set out in Article 7, the Vendor shall execute and deliver
to the Purchaser all such documents, certificates and instruments and do all
such other acts and things as the Purchaser may consider necessary or
desirable, acting reasonably, to effectively transfer and assign the Purchased
Shares to the Purchaser, with a good and marketable title, free and clear of
all Encumbrances, except as contemplated by this Agreement, and to deliver
possession thereof to the Purchaser.

 

8.3                               Further Assurances.

 

Each party to this Agreement covenants and
agrees that, from time to time subsequent to the Closing Date, it will, at the
request and expense of the requesting party, execute and deliver all such
documents, including, without limitation, all such additional conveyances,
transfers, consents and other assurances and do all such other acts and things
as any other party hereto, acting reasonably, may from time to time request be
executed or done in order to better evidence or perfect or effectuate any
provision of this Agreement or of any agreement or other document executed
pursuant to this Agreement or any of the respective obligations intended to be
created hereby or thereby.

 

ARTICLE 9

MISCELLANEOUS

 

9.1                               Notices.

 

(a)                                  Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be delivered in person, transmitted by telecopy
or similar means of recorded electronic communication or sent by registered
mail, charges prepaid, addressed as follows:

 

16

 

	
  (i)

  	
  if to the Vendor:

  
	
   

  	
   

  
	
   

  	
  Audley Capital

  
	
   

  	
  11 Grafton Street

  
	
   

  	
  London, W1S 4EW

  
	
   

  	
  United Kingdom

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  Julian Treger

  
	
   

  	
  Fax:

  	
  44.20.7529.6901

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Davies Ward Phillips & Vineberg LLP

  
	
   

  	
  1 First Canadian Place

  
	
   

  	
  P.O. Box 63

  
	
   

  	
  Toronto, Ontario M5X 1B1

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Vincent Mercier and Peter Hong

  
	
   

  	
  Facsimile:

  	
  416.863.0871

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
  if to the Purchaser:

  
	
   

  	
   

  
	
   

  	
  Walter Energy, Inc.

  
	
   

  	
  4211 W. Boy Scout Blvd.

  
	
   

  	
  Tampa, Florida

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  General Counsel

  
	
   

  	
  Fax:

  	
  813.871.4399

  
	
   

  	
   

  	
   

  
	
   

  	
  With a required copy (which shall not be
  deemed notice) to:

  
	
   

  	
   

  
	
   

  	
  Osler, Hoskin & Harcourt LLP

  
	
   

  	
  1 First Canadian Place

  
	
   

  	
  Box 50, Toronto, Ontario M5X 1B8

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Emmanuel Pressman

  
	
   

  	
  Facsimile:

  	
  416.862.6666

  
	
   

  	
   

  	
   

  
	
   

  	
  With a required copy (which shall not be
  deemed notice) to:

  
	
   

  	
   

  
	
   

  	
  Simpson Thacher & Bartlett LLP

  
	
   

  	
  425 Lexington Avenue

  
	
   

  	
  New York, New York 10017 - 3954

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Peter Gordon

  
	
   

  	
  Facsimile:

  	
  212.455.2502

  

 

(b)                                 Any such notice or other communication shall be deemed to have been
given and received on the day on which it was delivered or transmitted (or, if
such day is not a Business Day, on the next following Business 

 

17

 

Day)
or, if mailed, on the third Business Day following the date of mailing;
provided, however, that if at the time of mailing or within three Business Days
thereafter there is or occurs a labour dispute or other event which might
reasonably be expected to disrupt the delivery of documents by mail, any notice
or other communication hereunder shall be delivered or transmitted by means of
recorded electronic communication as aforesaid.

 

(c)                                  Any party may at any time change its address for service from time to
time by giving notice to the other parties in accordance with this section 9.1.

 

9.2                               Commissions, etc.

 

The Vendor agrees to indemnify and save
harmless the Purchaser from and against all claims, damages and expenses
suffered or incurred by the Purchaser in respect of any commission or other
remuneration payable or alleged to be payable to any broker, agent or other
intermediary who purports to act or have acted for or on behalf of the Vendor.

 

The Purchaser agrees to indemnify and save
harmless the Vendor from and against all claims, damages and expenses suffered
or incurred by the Vendor in respect of any commission or other remuneration
payable or alleged to be payable to any broker, agent or other intermediary who
purports to act or have acted for or on behalf of the Purchaser.

 

Each party shall be responsible for any expenses
incurred by it in connection with this Agreement.

 

9.3                               Consultation.

 

The parties shall consult with each other
before issuing any press release or making any other public announcement with
respect to this Agreement or the transactions contemplated hereby. The parties
will use their respective reasonable efforts not to issue any press releases or
other public statements inconsistent with the results of such consultation.

 

9.4                               Best Efforts.

 

The parties acknowledge and agree that, for all
purposes of this Agreement, an obligation on the part of any party to use its
best efforts to obtain any waiver, consent, approval, permit, licence or other
document shall not require such party to make any payment to any person for the
purpose of procuring the same, other than payments for amounts due and payable
to such person, payments for incidental expenses incurred by such person and
payments required by any applicable law or regulation.

 

9.5                               Remedy.

 

Each party acknowledges that a breach by the
other party of this Agreement will cause the non-breaching party to sustain
injury for which it would not have an adequate remedy at law for monetary
damages. Therefore, the parties agree that in the event of 

 

18

 

such breach, the non-breaching party shall be
entitled to the remedy of specific performance of the covenants and commitments
contained herein and permanent and preliminary injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or
in equity, and the parties further agree to waive any requirement for the
securing or posting of any bond in connection with the obtaining of such
injunctive or other equitable relief.

 

9.6                               Assignment.

 

The provisions of this Agreement shall be
binding upon and enure to the benefit of the parties hereto and their
respective successors and permitted assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights, interests or obligations
under this Agreement without the prior written consent of the other parties
hereto, and except that the Purchaser may, assign, delegate or otherwise
transfer any of its rights, interests or obligations under this Agreement to an
Affiliate.

 

9.7                               Counterparts.

 

This Agreement may be executed in counterparts,
each of which shall constitute an original and all of which taken together
shall constitute one and the same instrument.

 

[Signature Page Follows.]

 

19

 

IN WITNESS WHEREOF this Agreement has been executed by the parties.

 

	
   

  	
  AUDLEY CAPITAL MANAGEMENT
  LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Simon Thornton

  
	
   

  	
   

  	
  Name: Simon Thornton

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AUDLEY EUROPEAN OPPORTUNITIES
  MASTER FUND LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Simon Thornton

  
	
   

  	
   

  	
  Name: Simon Thornton

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AUDLEY INVESTMENT I

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Simon Thornton

  
	
   

  	
   

  	
  Name: Simon Thornton

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AUDLEY INVESTMENT II

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Simon Thornton

  
	
   

  	
   

  	
  Name: Simon Thornton

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WALTER ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael T. Tokarz

  
	
   

  	
   

  	
  Michael T. Tokarz

  
	
   

  	
   

  	
  Chairman of the Board of Directors

  

 

20

 

SCHEDULE “A”

 

SECURITIES

 

	
  HOLDER

  	
   

  	
  COMMON SHARES

  (Specify whether

  registered, beneficial

  or controlled)

  
	
  Audley Capital Management
  Limited — Audley Investment I

  	
   

  	
  21,137,050

   

  beneficial and registered

  
	
   

  	
   

  	
   

  
	
  Audley Capital Management
  Limited — Audley Investment II

  	
   

  	
  2,369,101

   

  beneficial and registered

  
	
   

  	
   

  	
   

  
	
  Audley European
  Opportunities Master Fund Limited

  	
   

  	
  39,680,711

   

  beneficial and registered

  

 

The number of Purchased Shares to be sold by
any particular company comprising the Vendor to the Purchaser and whether such
Purchased Shares form part of the Initial Shares or the Remaining Shares will
be determined by the Vendor, provided that the aggregate number of Initial
Shares shall be 25,274,745 and the aggregate number of Remaining Shares shall
be 29,273,113.Exhibit
10.1

 

Execution Version

 

 

CAPACITY PURCHASE AGREEMENT

 

 

BETWEEN

 

 

CONTINENTAL AIRLINES, INC.

 

 

AND

 

 

EXPRESSJET AIRLINES, INC.

 

 

DATED AS OF NOVEMBER 12, 2010

 

 

TABLE OF CONTENTS

 

	
  Parties

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Recitals

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  ARTICLE II CAPACITY
  PURCHASE, SCHEDULES AND FARES

  	
  1

  
	
   

  	
   

  
	
  Section 2.01

  	
  Capacity Purchase

  	
  1

  
	
  Section 2.02

  	
  Flight-Related Revenues

  	
  2

  
	
  Section 2.03

  	
  Pass Travel

  	
  3

  
	
  Section 2.04

  	
  Additional Aircraft

  	
  3

  
	
  Section 2.05

  	
  Early Replacement of Covered Aircraft

  	
  7

  
	
  Section 2.06

  	
  Return Aircraft

  	
  10

  
	
  Section 2.07

  	
  Other Withdrawal of Aircraft

  	
  11

  
	
  Section 2.08

  	
  Commodity Events

  	
  13

  
	
  Section 2.09

  	
  Return Conditions; Storage

  	
  16

  
	
  Section 2.10

  	
  Separate Withdrawal Rights

  	
  18

  
	
  Section 2.11

  	
  Rate Reset

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE III CONTRACTOR
  COMPENSATION

  	
  19

  
	
   

  	
   

  
	
  Section 3.01

  	
  Base and Incentive Compensation

  	
  19

  
	
  Section 3.02

  	
  Periodic Adjustment of Base and Incentive Compensation and
  Commodity Prices

  	
  19

  
	
  Section 3.03

  	
  Contractor Expenses

  	
  20

  
	
  Section 3.04

  	
  Continental Expenses

  	
  20

  
	
  Section 3.05

  	
  Audit Rights; Financial Information

  	
  21

  
	
  Section 3.06

  	
  Billing and Payment; Reconciliation

  	
  22

  
	
  Section 3.07

  	
  Synergy Savings

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV CONTRACTOR
  OPERATIONS AND AGREEMENTS WITH CONTINENTAL

  	
  24

  
	
   

  	
   

  
	
  Section 4.01

  	
  Crews, Etc.

  	
  24

  
	
  Section 4.02

  	
  Governmental Regulations

  	
  24

  
	
  Section 4.03

  	
  Quality of Service

  	
  25

  
	
  Section 4.04

  	
  Incidents or Accidents

  	
  26

  
	
  Section 4.05

  	
  Emergency Response

  	
  26

  
	
  Section 4.06

  	
  Safety Matters

  	
  26

  
	
  Section 4.07

  	
  Master Facility and Ground Handling Agreement

  	
  26

  
	
  Section 4.08

  	
  Codeshare Terms

  	
  26

  
	
  Section 4.09

  	
  Administrative Support and Information Services

  	
  26

  
	
  Section 4.10

  	
  Fuel Purchasing Agreement

  	
  27

  
	
  Section 4.11

  	
  Slots and Route Authorities

  	
  27

  

 

i

 

	
  Section 4.12

  	
  Use of Continental Marks

  	
  27

  
	
  Section 4.13

  	
  Use of Contractor Marks

  	
  27

  
	
  Section 4.14

  	
  Catering Standards

  	
  27

  
	
  Section 4.15

  	
  Ticket Handling Terms

  	
  27

  
	
  Section 4.16

  	
  Fuel Efficiency and Revenue Programs

  	
  28

  
	
  Section 4.17

  	
  Reasonable Operating Constraints and Conditions

  	
  28

  
	
  Section 4.18

  	
  Covered Aircraft Subleases

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE V CERTAIN RIGHTS OF
  CONTINENTAL

  	
  30

  
	
   

  	
   

  
	
  Section 5.01

  	
  Use of Covered Aircraft

  	
  30

  
	
  Section 5.02

  	
  Change of Control

  	
  30

  
	
  Section 5.03

  	
  Limitation on Transfers of Interest

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI INSURANCE

  	
  30

  
	
   

  	
   

  
	
  Section 6.01

  	
  Minimum Insurance Coverages

  	
  30

  
	
  Section 6.02

  	
  Endorsements

  	
  31

  
	
  Section 6.03

  	
  Evidence of Insurance Coverage

  	
  31

  
	
  Section 6.04

  	
  Insurance Through Combined Placement

  	
  32

  
	
  Section 6.05

  	
  Insurance Through Other Than Combined Placement

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII INDEMNIFICATION

  	
  32

  
	
   

  	
   

  
	
  Section 7.01

  	
  Contractor Indemnification of Continental

  	
  32

  
	
  Section 7.02

  	
  Continental Indemnification of Contractor

  	
  33

  
	
  Section 7.03

  	
  Indemnification Claims

  	
  34

  
	
  Section 7.04

  	
  Employer’s Liability; Independent Contractors; Waiver of
  Control

  	
  35

  
	
  Section 7.05

  	
  Survival

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII TERM,
  TERMINATION AND DISPOSITION OF AIRCRAFT

  	
  36

  
	
   

  	
   

  
	
  Section 8.01

  	
  Term

  	
  36

  
	
  Section 8.02

  	
  Early Termination

  	
  36

  
	
  Section 8.03

  	
  Disposition of Aircraft during Wind-Down Period

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX REPRESENTATIONS,
  WARRANTIES AND COVENANTS

  	
  41

  
	
   

  	
   

  
	
  Section 9.01

  	
  Representations and Warranties of Contractor

  	
  41

  
	
  Section 9.02

  	
  Representations and Warranties of Continental

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE X MISCELLANEOUS

  	
  43

  
	
   

  	
   

  
	
  Section 10.01

  	
  Transition Arrangements

  	
  43

  
	
  Section 10.02

  	
  Notices

  	
  45

  
	
  Section 10.03

  	
  Binding Effect; Assignment

  	
  46

  
	
  Section 10.04

  	
  Amendment and Modification

  	
  46

  
	
  Section 10.05

  	
  Waiver

  	
  46

  

 

ii

 

	
  Section 10.06

  	
  Interpretation

  	
  46

  
	
  Section 10.07

  	
  Confidentiality

  	
  47

  
	
  Section 10.08

  	
  Survival

  	
  47

  
	
  Section 10.09

  	
  Counterparts

  	
  48

  
	
  Section 10.10

  	
  Severability

  	
  48

  
	
  Section 10.11

  	
  Equitable Remedies; Limitation on Damages

  	
  48

  
	
  Section 10.12

  	
  Relationship of Parties

  	
  48

  
	
  Section 10.13

  	
  Entire Agreement; No Third-Party Beneficiaries

  	
  48

  
	
  Section 10.14

  	
  Governing Law

  	
  49

  
	
  Section 10.15

  	
  Guarantee

  	
  49

  
	
  Section 10.16

  	
  Right of Set-Off

  	
  49

  
	
  Section 10.17

  	
  Cooperation with Respect to Reporting

  	
  49

  
	
  Section 10.18

  	
  Amendment of Certain Contracts

  	
  50

  

 

	
  SCHEDULE
  1:

  	
  Covered
  Aircraft

  	
   

  
	
  SCHEDULE
  2:

  	
  Transition
  Aircraft and Spare Engines

  	
   

  
	
  SCHEDULE
  3:

  	
  Compensation
  for Capacity Purchase

  	
   

  
	
  SCHEDULE
  4:

  	
  Return
  Aircraft Sublease — Supplemental Terms

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A:

  	
  Definitions

  	
   

  
	
  EXHIBIT B:

  	
  Form of
  Amended and Restated Covered Aircraft Sublease

  	
   

  
	
  EXHIBIT C:

  	
  Master
  Facility and Ground Handling Agreement

  	
   

  
	
  EXHIBIT D:

  	
  Terms
  of Codeshare Arrangements

  	
   

  
	
  EXHIBIT E:

  	
  Non-Revenue
  Pass Travel Privileges

  	
   

  
	
  EXHIBIT F:

  	
  Fuel
  Purchasing Agreement

  	
   

  
	
  EXHIBIT G:

  	
  Use
  of Continental Marks

  	
   

  
	
  EXHIBIT H:

  	
  Use
  of Contractor Marks

  	
   

  
	
  EXHIBIT I:

  	
  Catering
  Standards

  	
   

  
	
  EXHIBIT J:

  	
  Reasonable
  Operating Constraints and Conditions

  	
   

  
	
  EXHIBIT K:

  	
  Ticket
  Handling Terms

  	
   

  
	
  EXHIBIT L:

  	
  Fuel
  Efficiency Program

  	
   

  
	
  EXHIBIT M:

  	
  Form of
  Guarantee

  	
   

  
	
  EXHIBIT N:

  	
  Administrative
  Support and Information Services

  	
   

  
	
  EXHIBIT O:

  	
  [Intentionally
  omitted]

  	
   

  
	
  EXHIBIT P:

  	
  Form of
  Storage Sublease

  	
   

  

 

iii

 

CAPACITY PURCHASE AGREEMENT

 

This Capacity Purchase Agreement (this “Agreement”),
dated as of November 12, 2010, is between Continental Airlines, Inc., a
Delaware corporation and ExpressJet Airlines, Inc., a Delaware
corporation.

 

WHEREAS, Contractor, certain of its Affiliates and
Continental are parties to that certain Amended and Restated Capacity Purchase
Agreement, dated as of April 17, 2002, as amended (the “Existing CPA”);

 

WHEREAS, the Existing CPA will terminate contemporaneously
with the execution and delivery of this Agreement pursuant to that certain
Letter Agreement, dated as of August 3, 2010, between Continental and
Parent; and

 

WHEREAS, the parties are entering into Ancillary Agreements
(as defined herein), including aircraft leases, in each case as an integral
part of this Agreement;

 

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

 

ARTICLE I

DEFINITIONS

 

Capitalized
terms used in this Agreement (including, unless otherwise defined therein, in
the Schedules, Appendices and Exhibits to this Agreement) shall have the
meanings set forth in Exhibit A hereto.

 

ARTICLE II

CAPACITY PURCHASE, SCHEDULES AND FARES

 

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

 

(a)                                  Fares, Rules and Seat
Inventory.  Continental
shall establish and publish all fares and related tariff rules for all
seats on the Covered Aircraft. 
Contractor shall not publish any fares, tariffs, or related information
for the Covered Aircraft.  In addition,
subject to the terms and conditions of the Non-Revenue Pass Travel Privileges
attached hereto as Exhibit E, Continental shall have complete
control over all seat inventory and inventory and revenue management decisions
for the Covered Aircraft, including overbooking levels, discount seat levels
and allocation of seats among various fare buckets.

 

 

(b)                                 Flight Schedules.  Subject to the terms and conditions of this
Agreement, Continental shall, in its sole discretion, establish and publish all
schedules for the Covered Aircraft (such scheduled flights, flights otherwise
made at Continental’s request, Maintenance Flights and any flights using Spare
Aircraft, referred to herein collectively as “Scheduled Flights”),
including determining the city-pairs served, frequencies, utilization and
timing of scheduled arrivals and departures, and shall, in its sole discretion,
make all determinations regarding the establishment and scheduling of any
flights other than Scheduled Flights; provided,  that such schedules shall be subject to Reasonable
Operating Constraints and Conditions. 
Continental shall also be entitled, in its sole discretion and at any
time prior to takeoff, to direct Contractor to delay or cancel a Scheduled
Flight, including without limitation for delays and cancellations that are ATC
or weather related, and Contractor shall take all necessary action to give
effect to any such direction.  Not later
than the fourth Wednesday of each calendar month, Continental shall provide
Contractor with a planned flight schedule for the Covered Aircraft (other than
Spare Aircraft), taking into account Reasonable Operating Constraints and
Conditions, for each of the next four months (the “Proposed Schedule”).  On the fourth Friday of each calendar month,
Contractor and Continental shall meet to review the Proposed Schedule.  At such meeting, Continental shall review and
consider any changes to the Proposed Schedule suggested by Contractor.  Not later than five Business Days prior to
the beginning of each calendar month, or, if later, the day after such meeting,
Continental will deliver to Contractor the Final Monthly Schedule.  Following such monthly meetings, delivery of
the Final Monthly Schedule and consideration by Continental of such changes to
the Proposed Schedule as suggested by Contractor, however, Continental may make
such adjustments to the proposed Final Monthly Schedule as it deems appropriate
(subject to Reasonable Operating Constraints and Conditions).

 

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

 

(d)                                 Spare Aircraft.  Notwithstanding anything to the contrary
contained in this Section 2.01, Contractor shall maintain one Spare
Aircraft to operate Scheduled Flights at each Continental Hub Airport where
Contractor provides Regional Airlines Services. 
Contractor shall be entitled to use the Spare Aircraft in Contractor’s
reasonable discretion to replace another aircraft in the operation of a flight
scheduled in the Final Monthly Schedule. 
In addition, subject to applicable Reasonable Operating Constraints and
Conditions, Contractor shall use such Spare Aircraft to operate flights as
directed by Continental (unless such Spare Aircraft was, prior to such
direction by Continental, already scheduled as contemplated by the immediately
preceding sentence), including flights originally scheduled to be operated by
other Continental service providers.

 

Section 2.02                                Flight-Related Revenues.  Contractor acknowledges and agrees that all
revenues resulting from the sale and issuance of passenger tickets associated
with the operation of the Covered Aircraft and all other sources of revenue
associated with the operation of the Covered Aircraft, including without
limitation (a) revenues relating to the transportation of cargo or mail by
Covered Aircraft, (b) revenues associated with food, beverage, duty-free
services and 

 

2

 

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

 

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

 

Section 2.04                                Additional Aircraft.

 

(a)                                  At any time during the
period beginning on the Effective Date and ending on the earliest of
(1) the eleventh anniversary of the Effective Date, with respect to any
Expiration Aircraft (as defined below), (2) the tenth anniversary of the
Effective Date, with respect to any Growth Aircraft (as defined below), and
(3) the occurrence of a Termination Date pursuant to Section 8.02,
with respect to any Additional Aircraft (as defined below), if Continental
(i) replaces, or continues to operate within Continental’s regional
airline service, one or more Covered Aircraft for which the Covered Aircraft Sublease
terminates on or prior to the tenth anniversary of the Effective Date (other
than a termination of such Covered Aircraft Sublease resulting directly from a
breach of the applicable Covered Aircraft Sublease by Contractor or pursuant to
Section 8.02(a), 8.02(b) or 8.02(d) of this
Agreement) (an “Expiration Aircraft”), or (ii) begins the use of
additional regional aircraft in Continental’s regional airline service (other
than an aircraft that was previously withdrawn pursuant to Section 2.07(b))
(a “Growth Aircraft” and, together with the Expiration Aircraft but
subject to Section 2.04(b), an “Additional Aircraft”), and,
in each case, (iii) immediately after giving effect to the inclusion of
such Additional Aircraft in Continental’s regional airline service, if less
than the Minimum Percentage (as adjusted pursuant to Section 2.04(c))
of the regional aircraft used in Continental’s regional airline service are CPA
Aircraft, then, at least 18 months (or such lesser period as available aircraft
or aircraft delivery positions may allow, as determined by Continental in its
reasonable discretion) prior to the entry of such Additional Aircraft into
Continental’s regional airline service, Continental agrees to give Contractor
written notice of its intention to use such Additional Aircraft, and to offer
Contractor and its Affiliates the opportunity to bid on such Additional
Aircraft.  In that regard, from time to
time, at the request of Continental, Contractor will promptly provide
Continental with a schedule of aircraft delivery positions available to
Contractor.  If, at the time the
foregoing notice is given and at the time of any award referenced below,
(A) Contractor (or, if applicable, its Affiliate) has consistently
satisfied in all material respects the standards of care and service described
in Section 4.03 in connection with its 

 

3

 

obligations
under this Agreement and any other similar agreement between Continental,
Contractor or any of their respective Affiliates related to any CPA Aircraft
(it being understood that any repeated failure to correct any violation of any
standard of care and service reasonably asserted by Continental to be material
shall be deemed to be a material failure) and otherwise complied in all
material respects with the terms of such agreement and any ancillary
agreements, except to the extent such non-compliance directly results from
material circumstances outside of Contractor’s or such Affiliate’s reasonable
control, and (B) Continental and Contractor (or, if applicable, Contractor’s
Affiliate), each acting reasonably, agree on economic terms and conditions
relating to such Additional Aircraft, then Contractor (or, at the election of
Contractor, its Affiliates) shall be awarded all or a portion of the Additional
Aircraft such that, after giving effect to such Additional Aircraft, the number
of CPA Aircraft is at least the Minimum Percentage (as adjusted pursuant to Section 2.04(c))
of the regional aircraft used in Continental’s regional airline service; provided, that if Continental shall have issued a request
for proposal or otherwise conducted a bid process for such Additional Aircraft,
then Continental shall be deemed to be acting reasonably if it refuses to agree
with Contractor to terms and conditions that are less beneficial to Continental
than the terms and conditions contained in the bona fide bid of any third party
to which Continental in good faith would intend to award the Additional
Aircraft, after providing Contractor with a certificate signed by an authorized
officer of Continental setting forth the material terms of such bid
(specifically including all terms material and beneficial to Contractor) and
providing Contractor not less than 20 days to review and match such bid.  If Contractor (or, at the election of
Contractor, its Affiliate) is awarded any Additional Aircraft, then within 30
days after such award Contractor or such Affiliate and Continental shall use
their respective commercially reasonable efforts to enter into a separate
capacity purchase agreement (and accompanying ancillary agreements) or amend an
existing capacity purchase agreement (and accompanying ancillary agreements)
for such Additional Aircraft reflecting the agreed-upon terms and conditions
and otherwise being in a form substantially similar to the terms and conditions
set forth herein and in the Ancillary Agreements; provided,
that unless otherwise agreed by the parties, such separate agreement shall not
contain provisions substantially similar to this Section 2.04 or Sections 2.06,
2.11, 6.04, 6.05 or 10.01 and, in any provision
substantially similar to Section 6.01(a), all references to $***
million shall be $*** million with respect to any aircraft with more than 50
passenger seats; and provided further,
that if Contractor or such Affiliate and Continental do not enter into such
separate capacity purchase agreement (and accompanying ancillary agreements) or
amend an existing capacity purchase agreement (and accompanying ancillary
agreements) within such 30-day period with respect to any Additional Aircraft,
unless due to Continental’s bad faith, then Continental shall have the option
to cancel the award of such Additional Aircraft to Contractor or such Affiliate
and thereafter to award such Additional Aircraft to any other party.  For the purposes of this Section 2.04,
references to Continental shall be deemed to include United.

 

(b)                                 Notwithstanding anything to
the contrary in this Section 2.04, (u) Contractor’s rights
arising pursuant to this Section 2.04 shall be subordinate to its
rights arising pursuant to Section 2.08; (v) the term “Additional
Aircraft” shall not include (I) any aircraft that enters Continental’s
regional airline service as a result of any merger, combination or similar
transaction (other than an acquisition) of, with or by Continental or its
Affiliates, (II) any aircraft that enters Continental’s regional airline
service as a result of the acquisition by Continental or its Affiliates of all
or substantially all of the assets of another air carrier, or (III) any
Replacement Aircraft, Charter Aircraft or United Aircraft that becomes Covered 

 

4

 

Aircraft
under this Agreement, any Affiliate CPA or any separate capacity purchase
agreement between Continental and Contractor or Contractor’s Affiliate,
pursuant to Section 2.05 or 2.06 of this Agreement;
(w) the term “Growth Aircraft” shall not include (I) any Expiration
Aircraft, (II) any other aircraft that is already in service in
Continental’s regional airline service pursuant to an agreement that is being
extended or (III) any Make-Whole Aircraft; (x) the phrase “regional
aircraft used in Continental’s regional airline service” (and similar phrases)
shall (I) include only (A) Continental-branded regional aircraft (or
any successor branded regional aircraft) flying in and out of domestic
Continental Hub Airports or other domestic regional airline routes and
(B) regional aircraft operated by Gulfstream International Airlines
exclusively for flights for which the primary airline code is Continental’s
code (or Continental’s successor code) and (II) exclude (A) any
aircraft operated directly by Continental (or any successor of Continental) and
(B) any aircraft that becomes subject to a Capacity Purchase Arrangement
as a result of any matching rights, rights of first refusal, rights of last
look or similar rights to operate future aircraft contained in any Capacity
Purchase Arrangement between United and SkyWest Airlines, Inc. in effect
as of the Effective Date (which amount described in this clause (x),
as of the Effective Date, constituted *** aircraft); (y) the phrase “replaces
... Covered Aircraft” in clause (i) of Section 2.04(a) shall
refer to an aircraft (but not more than one) that enters Continental’s regional
airline service within six months after a Covered Aircraft exits such service
following the termination of the Covered Aircraft Sublease as described in clause (i) of
Section 2.04(a); and (z) references to the termination of a
Covered Aircraft Sublease (and similar phrases) shall mean the termination of
such sublease at the end of the base term or, if applicable, any extension
terms pursuant to the terms thereof.

 

(c)                                  The “Minimum Percentage”
shall be equal to ***% as of the Effective Date, and shall be reduced by ***% (e.g., to ***% for the first aircraft) for (i) each
Additional Aircraft that does not become a CPA Aircraft pursuant to Section 2.04(a) or
Section 2.08(h), as the case may be, as a result of
(x) Contractor’s or, if applicable, its Affiliate’s failure to agree to
terms and conditions that are as beneficial to Continental as the terms and
conditions contained in a bona fide bid of any third party to which Continental
in good faith would intend to award the Additional Aircraft, after providing
Contractor with a certificate signed by an authorized officer of Continental
setting forth the material terms of such bid (specifically including all terms
material and beneficial to Contractor) and providing Contractor not less than
20 days to review and match such bid and agree to such terms and conditions as
contemplated under Section 2.04(a) or Section 2.08(h),
as the case may be; provided, that
Continental does in fact award the Additional Aircraft to such third party
under the terms of such bona fide bid, (y) Contractor’s or, if applicable,
its Affiliate’s failure to enter into a separate capacity purchase agreement
(and accompanying ancillary agreements) within the 30-day period referenced in Section 2.04(a)
or Section 2.08(h), as the case may be, due to its bad faith, or
(z) Contractor’s or, if applicable, its Affiliate’s failure to procure and
provide such Additional Aircraft pursuant to such separate capacity purchase
agreement (and accompanying ancillary agreements) as contemplated under Section 2.04(a) or
Section 2.08(h), as the case may be, (it being understood that any
failure of Contractor or, if applicable, its Affiliate to provide or enter into
an agreement with respect to a Replacement Aircraft pursuant to Section 2.05
or with respect to a Make-Whole Aircraft, in each case, shall not constitute a
failure for purposes of this Section 2.04(c)), (ii) each CPA
Aircraft that ceases to be operated by Contractor or its Affiliates as a result
of (A) a default under the applicable Capacity Purchase Arrangement, (B) such
Affiliate ceasing to be an affiliate of Contractor or (C) withdrawal by
Continental pursuant to Section 2.07(b); provided,  that the 

 

5

 

Minimum
Percentage shall be increased by ***% at such time, if any, that such aircraft
is returned to service as a Covered Aircraft pursuant to Section 2.07(e),
and (iii) each Covered Aircraft subject to bid pursuant to Section 2.11
that is withdrawn pursuant to Section 2.11 as a result of Contractor’s
failure to agree to base and incentive compensation rates that are as
beneficial to Continental as the base and incentive compensation rates
contained in a bona fide bid of any third party to which Continental in good
faith would intend to award the Covered Aircraft, after providing Contractor
with a certificate signed by an authorized officer of Continental setting forth
the material terms of such bid (specifically including all terms material and
beneficial to Contractor) and providing Contractor not less than 20 days to
review and match such bid and agree to such base and incentive compensation
rates as contemplated under Section 2.11; provided,
that Continental does in fact award such aircraft to such third party under the
terms of the bona fide bid.  In addition,
at any time that aircraft enter Continental’s regional airline service pursuant
to clauses (v)(I) or (v)(II) of Section 2.04(b),
then (A) all references in this Section 2.04 to “Continental
branded regional aircraft,” “Continental’s code,” “directly operated by
Continental” and “Continental regional airlines service” (and, in each case,
similar phrases) shall mean the regional aircraft, code or services, as the
case may be, applicable to the surviving entity (or entities) of such acquisition,
merger, combination or similar transaction and (B) the then-applicable
Minimum Percentage and the ***% referenced in this Section 2.04(c) shall
each be adjusted by multiplying it by a fraction, the numerator of which shall
be the total number of “regional aircraft used in Continental’s regional
airline service” immediately before such acquisition, merger, combination or
other similar transaction, and the denominator of which shall be the total
number of “regional aircraft used in Continental’s regional airline service”
immediately after such acquisition, merger, combination or other similar
transaction.

 

(d)                                 Prior to the tenth
anniversary of the Effective Date, Continental shall offer Contractor and its
Affiliates the opportunity to bid on an aggregate of 15 Additional Aircraft in
accordance with and subject to the limitations, terms and conditions contained
in this Section 2.04(d).  At
least 18 months (or such lesser period as available aircraft or aircraft
delivery positions may allow, as determined by Continental in its reasonable
discretion) prior to the entry of such Additional Aircraft into Continental’s
regional airline service, Continental shall give Contractor written notice of
its intention to use such Additional Aircraft. 
If, at the time the foregoing notice is given and at the time of any
award referenced below, (A) Contractor (or, if applicable, its Affiliate)
has consistently satisfied in all material respects the standards of care and
service described in Section 4.03 in connection with its
obligations under this Agreement and any other similar agreement among
Continental, Contractor or any of their respective Affiliates related to any
CPA Aircraft (it being understood that any repeated failure to correct any
violation of any standard of care and service reasonably asserted by
Continental to be material shall be deemed to be a material failure) and
otherwise complied in all material respects with the terms of this Agreement
and the Ancillary Agreements, except to the extent such non-compliance directly
results from material circumstances outside of Contractor’s or such Affiliate’s
reasonable control, and (B) Continental and Contractor (or, if applicable,
Contractor’s Affiliate), each acting reasonably, agree on economic terms and
conditions relating to such Additional Aircraft, then Contractor (or, at the
election of Contractor, its Affiliates) shall be awarded such Additional
Aircraft (each such awarded Additional Aircraft, a “Make-Whole Aircraft”);
provided, that if Continental shall have
issued a request for proposal or otherwise conducted a bid process for such
Additional Aircraft, then Continental shall be deemed to be acting reasonably
if it refuses to agree with Contractor to terms and conditions that are less 

 

6

 

beneficial
to Continental than the terms and conditions contained in the bona fide bid of
any third party to which Continental in good faith would intend to award the
Additional Aircraft, after providing Contractor with a certificate signed by an
authorized officer of Continental setting forth the material terms of such bid
(specifically including all terms material and beneficial to Contractor) and
providing Contractor not less than 20 days to review and match such bid.  Within 30 days after the award of such
Make-Whole Aircraft, Contractor or such Affiliate and Continental shall use
their respective commercially reasonable efforts to enter into a separate
capacity purchase agreement (and accompanying ancillary agreements) or amend an
existing capacity purchase agreement (and accompanying ancillary agreements)
for such Make-Whole Aircraft reflecting the agreed-upon terms and conditions
and otherwise being in a form substantially similar to the terms and conditions
set forth herein and in the Ancillary Agreements; provided,
that unless otherwise agreed by the parties, such separate agreement shall have
a term of at least 10 years and shall not contain provisions substantially
similar to this Section 2.04 or Sections 2.06, 2.11,
6.04, 6.05 or 10.01 and, in any provision substantially
similar to Section 6.01(a), all references to $*** million shall be
$*** million with respect to any aircraft with more than 50 passenger seats;
and provided further, that if Contractor or
such Affiliate and Continental do not enter into such separate capacity
purchase agreement (and accompanying ancillary agreements) or amend an existing
capacity purchase agreement (and accompanying ancillary agreements) within such
30-day period with respect to any Additional Aircraft, unless due to
Continental’s bad faith, then Continental shall have the option to cancel the
award of such Additional Aircraft to Contractor or such Affiliate and
thereafter to award such Additional Aircraft to any other party; provided, that if Continental has issued a request for
proposal or otherwise conducted a bid process and Contractor fails to match a
bona fide bid as provided above, the award right of Contractor shall not be
reduced if Continental does not in fact award such Additional Aircraft to such
third party under the terms of such bona fide bid.  For the avoidance of doubt, Continental’s
obligations under this Section 2.04(d) are in addition to
Contractor’s rights under Section 2.04(a), but Continental may
satisfy such obligations in connection with one or more opportunities to bid on
Additional Aircraft pursuant to Section 2.04(a); provided, that the requirements of this Section 2.04(d) are
also satisfied; and provided further,
that Continental shall provide notice to Contractor not later than the date of
any award of such aircraft that (a) such Additional Aircraft awarded shall
constitute Make-Whole Aircraft, and such Make-Whole Aircraft shall not be
counted in determining whether the Minimum Percentage has been met pursuant to Section 2.04(a)
or (b) in the event that such Additional Aircraft are not awarded to
Contractor, that, subject to the terms of this clause (d), the award
right of Contractor pursuant to this Section 2.04(d) shall be
reduced without otherwise reducing the Minimum Percentage as provided in Section 2.04(c).

 

(e)                                  With respect to any “request
for proposal” or “RFP” issued by Continental to multiple parties prior to the
tenth anniversary of the Effective Date for aircraft in circumstances in which
the condition set forth in clause (iii) of Section 2.04(a) is
not met, Continental agrees to include Contractor in the parties to which such
RFP is delivered.

 

Section 2.05                                Early Replacement of Covered
Aircraft.  Continental
shall be entitled to withdraw and replace up to 75 Covered Aircraft from this
Agreement, in accordance with and subject to the limitations, terms and
conditions contained in this Section 2.05.

 

7

 

(a)                                  For each Covered Aircraft
withdrawn from this Agreement pursuant to this Section 2.05,
Contractor and/or one of its Affiliates (selected by Contractor) will use its
commercially reasonable efforts to procure and provide an aircraft of the type
selected by Continental (a “Replacement Aircraft”), which must be of a
type that (i) on the date of the notice of replacement provided pursuant
to Section 2.05(b) below, is operated or contracted to be
operated by Contractor or its Affiliates and (ii) after taking into
account the procurement of such Replacement Aircraft pursuant to this Section 2.05(a),
Contractor and its Affiliates shall be operating at least 19 aircraft of such
aircraft type as of the date of such replacement, and enter into a separate
capacity purchase agreement or amend an existing capacity purchase agreement
with Continental on or prior to the Replacement Date (as defined below)
pursuant to which such Replacement Aircraft shall be utilized on a capacity
purchase basis.  The separate or amended
agreement shall contain block hour rates and other economic terms applicable to
such Replacement Aircraft that are consistent with those contained in the most
recent Capacity Purchase Arrangement entered into by Contractor or any of its
Affiliates with respect to such aircraft type (excluding any Affiliate CPA and
the United Agreement); provided, that
such rates and other economic terms shall be adjusted to reflect the lower of
then-applicable market aircraft acquisition costs or Contractor’s actual costs
for the acquisition of such Replacement Aircraft (“Similar Economic Term
Transaction”), the rates and economic terms of which shall be set forth in
a certificate delivered to Continental signed by an authorized officer of
Contractor; provided, in all events, that the term
of such separate or amended agreement (x) with respect to each Replacement
Aircraft that is a new aircraft shall be for a period no less than 15 years,
and (y) with respect to each other Replacement Aircraft shall be for a
period not less than the remaining term under this Agreement of the Covered
Aircraft being replaced by such Replacement Aircraft; and provided
further, that unless otherwise agreed by the parties, such separate
agreement shall be in a form substantially similar to the terms and conditions
set forth herein and in the Ancillary Agreements (other than as provided in
this Section 2.05); provided, however, unless otherwise agreed by the parties, such
separate agreement shall not contain provisions substantially similar to Sections 2.04,
2.06, 2.11, 6.04, 6.05 or 10.01 of this
Agreement and, in any provision substantially similar to Section 6.01(a),
all references to $*** million shall be $*** million with respect to any
aircraft with more than 50 passenger seats. 
Contractor acknowledges that any failure by Contractor to timely provide
the certification required pursuant to Section 2.05(b), procure and
provide a Replacement Aircraft or enter into a separate capacity purchase
agreement or amend an existing capacity purchase agreement as contemplated
above with Continental on or prior to the Replacement Date shall not prevent
Continental from exercising its right to withdraw Covered Aircraft from this
Agreement pursuant to this Section 2.05.

 

(b)                                 To effect a replacement
under Section 2.05(a), at any time and from time to time,
Continental shall give Contractor not less than 18 months’ written notice of
replacement of any Covered Aircraft (or, in the case of a Replacement Aircraft
of a type for which Contractor or such Affiliate is already certificated, such
lesser period as available aircraft or aircraft delivery positions may allow, as
determined by Continental in its reasonable discretion); provided,
absent the consent of Contractor in its sole discretion, that Continental shall
not be entitled to replace more than four Covered Aircraft in any given
month.  Such notice shall be irrevocable
(except as provided below) and shall specify a replacement date (the “Replacement
Date”) for each such Covered Aircraft to be replaced and the type and
number of Covered Aircraft to be replaced. 
Within 90 days of its receipt of such notice from Continental,
Contractor may, at its option, 

 

8

 

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

 

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

 

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

 

9

 

Section 2.06                                Return Aircraft.

 

(a)                                  Contractor operates (i) certain
aircraft pursuant to the terms and conditions of the United Agreement, such
aircraft being identified in Section A.1 of Schedule 2
hereto (“United 8 Aircraft”), in Section A.2 of Schedule
2 hereto (“United Other Aircraft)” and in Section B of Schedule
2 hereto (“United Short-Term Aircraft”, and together with United 8
Aircraft and the United Other Aircraft, “United Aircraft”) and (ii) Contractor’s
Charter Services (as defined in Section 10.01(b)) with certain
aircraft, such aircraft being identified in Section B of Schedule 2
hereto (“Charter Aircraft”). 
Pursuant to the terms and conditions of Section 10.01(b) of
this Agreement, Contractor shall wind-up Contractor’s Charter Service.  Upon (A) the termination of the United
Agreement as to a United Aircraft or (B) the removal of any Charter
Aircraft from Contractor’s Charter Service as contemplated by Section 10.01(b),
Continental, at its option, may designate such United Aircraft or Charter
Aircraft as Covered Aircraft under this Agreement.  Continental shall give Contractor not less
than 45 days advance written notice of such United Aircraft or Charter Aircraft
becoming a Covered Aircraft (except that, for any notice delivered during the
first 120 days following the Effective Date, Continental shall be required to
give only 30 days advance written notice). 
Continental’s notice to Contractor shall designate an effective date for
such United Aircraft or Charter Aircraft to become a Covered Aircraft.  On such effective date, the Return Aircraft
Sublease relating to such United Aircraft or Charter Aircraft shall be
terminated and replaced with a Covered Aircraft Sublease.

 

(b)                                 With respect to any United
Aircraft or Charter Aircraft that is not designated by Continental as a Covered
Aircraft pursuant to clause (a) of this Section 2.06,
upon the termination of the United Agreement as to such United Aircraft or its
removal from Contractor’s Charter Service as contemplated by Section 10.01(b),
as applicable, Contractor shall immediately deliver possession of such aircraft
to Continental or its designee and the provisions of Section 2.09
shall apply (except that references in such Section 2.09 to “Covered
Aircraft” and “Covered Aircraft Sublease” shall mean “Charter Aircraft,” “United
Aircraft,” and “Return Aircraft Sublease,” as applicable, to the extent they
apply to Charter Aircraft or United Aircraft, as applicable, covered by this Section 2.06(b)).

 

(c)                                  Subject to Section 4.18,
the Return Aircraft Sublease shall remain in effect with respect to any United
Aircraft or Charter Aircraft until its termination pursuant to Section 2.06(a) or
2.06(b) above or Section 2.09 below.  The Return Aircraft Subleases for United
Aircraft are amended and supplemented by the terms set forth on Schedule 4
hereto.

 

(d)                                 For each United Aircraft or
Charter Aircraft that becomes a Covered Aircraft pursuant to Section 2.06(a),
Continental shall have the right to withdraw from the capacity purchase
provisions of this Agreement one of the ERJ-145 Covered Aircraft listed in Schedule 1
hereto (unless all of such aircraft shall already have been withdrawn).  Continental shall be entitled to give
Contractor notice of such withdrawal not later than 90 days after such United
Aircraft or Charter Aircraft becomes a Covered Aircraft, and Continental shall
have complete discretion in the selection of the particular Covered Aircraft
and the particular Engines to be withdrawn pursuant to this Section 2.06(d).  In addition, the provisions of Section 2.09
shall apply to the Covered Aircraft and Engines being withdrawn.  Continental shall bear the cost 

 

10

 

of
any engine swaps necessary to accommodate its Engine selections, and shall
agree to such Engine swaps under the applicable Covered Aircraft Subleases.

 

Section 2.07                                Other Withdrawal of Aircraft.

 

(a)                                  Intentionally Omitted

 

(b)                                 In the event of a Labor
Strike, or during any 30-day cooling-off period under the Railway Labor Act
applicable to Contractor and one of its collective bargaining units or within
30 days after the end of any such period, or at such other times as Continental
and Contractor shall agree from time to time, Continental shall be entitled to
withdraw Covered Aircraft (other than any Covered Aircraft that is not subject
to a Covered Aircraft Sublease) from the capacity purchase provisions of this
Agreement in accordance with and subject to the limitations, terms and
conditions contained in this Section 2.07, by providing written
notice of the withdrawal of Covered Aircraft from this Agreement, which notice
shall be revocable and shall specify the total number of Covered Aircraft to be
withdrawn pursuant to such notice and a desired withdrawal schedule,
specifying, for each particular aircraft, the date of withdrawal.  If such notice is delivered during the 30-day
cooling off period referenced above or within 30 days after the end of such
cooling off period (provided that a
Labor Strike has not been initiated during such period), then the withdrawal
schedule in such notice shall be subject to Reasonable Operating Constraints
and Conditions.  For each Covered
Aircraft withdrawn pursuant to this Section 2.07(b), such aircraft
shall be operated by an Affiliate of Contractor and become subject to an
Affiliate CPA if (i) Continental and Contractor mutually agree that such
Affiliate of Contractor is capable of performing its obligations under such
Affiliate CPA immediately upon the execution of such Affiliate CPA,
(ii) at the time of such withdrawal, neither Contractor nor, if any
Affiliate CPA is then in effect, each Affiliate of Contractor that is a party
to an Affiliate CPA shall be, and Contractor and, if applicable, each such
Affiliate shall certify to Continental that it is not, in material default
under, or in material breach of, this Agreement or any Ancillary Agreement or,
if applicable, such Affiliate CPA, (iii) such withdrawn aircraft shall
become subject to the Affiliate CPA on the day following the date of its
withdrawal from this Agreement, and (iv) such operation by an Affiliate is
not prohibited by any collective bargaining agreements or similar arrangements
then in effect between Contractor and any labor union.  If any of the conditions set forth in clauses (i)
through (iv) above is not satisfied, Continental shall be entitled to
withdraw Covered Aircraft pursuant to this Section 2.07(b) without
entering into an Affiliate CPA.  Subject
to Continental identifying the Covered Aircraft and particular Engines to be
withdrawn pursuant to Section 2.07(c) below, the withdrawal
schedule may begin immediately upon its delivery, and shall not provide for the
withdrawal of more than 75 Covered Aircraft per month (subject, in the case of
any notice delivered during the 30-day cooling off period or the subsequent
30-day period referenced above (provided that a
Labor Strike has not been initiated during such period), to Reasonable
Operating Constraints and Conditions).

 

(c)                                  Taking into account the
aircraft type specified in the notice of withdrawal, Continental shall have
complete discretion to select the particular Covered Aircraft and the
particular Engines to be withdrawn during any particular month pursuant to this
Section 2.07; provided, that
if the Covered Aircraft are to be withdrawn pursuant to Section 2.07(b),
then (i) Continental shall use reasonable efforts to avoid Engine swaps
prior to such withdrawal, (ii) Contractor shall carry out such Engine
swaps as are requested prior to such withdrawal and 

 

11

 

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

 

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

 

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

 

12

 

Section 2.08                                Commodity Events.

 

(a)                                  If a Commodity Withdrawal
Event shall occur, then at any time during the sixty days following any such
event (the “Commodity Withdrawal Period”), Continental shall be entitled
to withdraw Covered Aircraft from the capacity purchase provisions of this
Agreement in accordance with and subject to the limitations, terms and
conditions contained in this Section 2.08.

 

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

 

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

 

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

 

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

 

(f)                                    If a Commodity Replacement
Event shall occur, then at any time during the sixty days following any such
event (the “Commodity Replacement Period”), Contractor shall be entitled
to require Continental to return to the capacity purchase provisions of this 

 

13

 

Agreement (and to execute a Covered Aircraft
Sublease with respect to) each Covered Aircraft withdrawn from the capacity
purchase provisions of this Agreement pursuant to any First Commodity
Withdrawal Event (if the Commodity Replacement Event is a First Commodity
Replacement Event) or any Second Commodity Withdrawal Event (for any Commodity
Replacement Event) in accordance with and subject to the limitations, terms and
conditions contained in this Section 2.08; provided,
that such Covered Aircraft to be returned is not, at the time of such return, a
Disposed Aircraft (in which case Contractor shall not be entitled to require
the return of such aircraft, and references in Section 2.08(g) to
Covered Aircraft shall not include Disposed Aircraft).

 

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

 

(h)                                 If at any time the aggregate
number of Covered Aircraft withdrawn pursuant to Section 2.08(b)
exceeds (x) the aggregate number of Covered Aircraft returned pursuant to Section 2.08(g)
plus (y) the aggregate number of Additional Aircraft previously included
in Continental’s regional airline service and operated by Contractor or its
Affiliates pursuant to this Section 2.08(h) (such excess number of
aircraft, as adjusted pursuant to the last sentence of this Section 2.08(h),
constituting a “Commodity Aircraft Deficit”), then, at least 18 

 

14

 

months (or such lesser period as available aircraft
or aircraft delivery positions may allow, as determined by Continental in its
reasonable discretion) prior to the entry of any Additional Aircraft into
Continental’s regional airline service on or before the earlier of the eleventh
anniversary of the Effective Date and the occurrence of a Termination Date
pursuant to Section 8.02, Continental agrees to give Contractor
written notice of its intention to use Additional Aircraft (up to the number of
aircraft constituting a Commodity Aircraft Deficit), and to offer Contractor
and its Affiliates the opportunity to bid on such Additional Aircraft, and the
provisions of Sections 2.04(a) (other than the first sentence
thereof, and subject to the immediately following sentence of this Section 2.08(h))
and 2.04(b) shall apply to such notice and offer and to any award of
such Additional Aircraft pursuant thereto. 
The obligation to award Additional Aircraft to Contractor (or, at the
election of Contractor, its Affiliates) arising pursuant to this Section 2.08
shall apply only to the extent of any Commodity Aircraft Deficit, and shall
apply without regard to any measurement of the Minimum Percentage and shall be
in addition to any Make-Whole Aircraft. 
The Commodity Aircraft Deficit shall be reduced by one aircraft for each
Additional Aircraft that does not become subject to a separate capacity
purchase agreement (and accompanying ancillary agreements) or any amendments to
an existing capacity purchase agreement (and accompanying ancillary agreements)
between Continental and Contractor or its Affiliate as a result of (i) Contractor’s
or its Affiliate’s failure to agree to terms and conditions that are as
beneficial to Continental as the terms and conditions contained in a bona fide
bid of any third party to which Continental in good faith would intend to award
the Additional Aircraft (and in fact does award such aircraft pursuant to such
bona fide bid) (or, if no bona fide bid has been received, then those terms and
conditions contained in the most recent Similar Economic Term Transaction as
set forth in a certificate delivered to Continental signed by an authorized
officer of Contractor), after providing Contractor with a certificate signed by
an authorized officer of Continental setting forth the material terms of such
bid (specifically including all terms material and beneficial to Contractor)
and providing Contractor not less than 20 days to review and match such bid and
agree to such terms and conditions as contemplated under this Section 2.08(h),
(ii) Contractor’s or its Affiliate’s failure to enter into a separate capacity
purchase agreement (and accompanying ancillary agreements) or any amendments to
an existing capacity purchase agreement (and accompanying ancillary agreements)
within the 30-day period referenced in Section 2.04(a) due to its
bad faith, or (iii) Contractor’s or its Affiliate’s failure to procure and
provide such Additional Aircraft pursuant to such separate capacity purchase
agreement (and accompanying ancillary agreements) or any amendments to an
existing capacity purchase agreement (and accompanying ancillary agreements) as
contemplated under Section 2.04(a) (it being understood that any
failure of Contractor or its Affiliates to provide or enter into an agreement
with respect to a Replacement Aircraft pursuant to Section 2.05 or
a Make-Whole Aircraft pursuant to Section 2.04(d) shall not constitute a
failure for purposes of this Section 2.08(h)).

 

(i)                                     The aggregate number of
Covered Aircraft withdrawn pursuant to Section 2.08(b) in respect
of all First Commodity Withdrawal Events, net of the aggregate number of
Covered Aircraft returned pursuant to this Section 2.08(g), shall
not be more than 50 in the aggregate. 
The aggregate number of Covered Aircraft withdrawn pursuant to Section 2.08(b)
in respect of all Commodity Withdrawal Events, net of the aggregate number of
Covered Aircraft returned pursuant to this Section 2.08(g), shall
not be more than 100 in the aggregate. 
If any Affiliate CPAs or other Capacity Purchase Arrangement between
Continental and Contractor or its Affiliates are in effect pursuant to this Article II
at the time when any rights 

 

15

 

under this Section 2.08 are exercised by
any party, and such agreements contain correlative provisions to this Section 2.08,
then all numerical limits relating to the number of aircraft (whether aggregate
or monthly) shall apply to this Agreement and to all such other agreements in
the aggregate.  Notwithstanding anything
to the contrary contained in this Section 2.08, Continental’s right
to withdraw aircraft under this Section 2.08 and its corresponding
provisions in any Affiliate CPA or other Capacity Purchase Arrangement between
Continental and Contractor or its Affiliate in effect pursuant to this Article II
shall only apply to aircraft leased or subleased by Continental to Contractor
or such Affiliate.

 

Section 2.09                                Return Conditions; Storage.

 

(a)                                  Upon the date for withdrawal
from the capacity purchase provisions of this Agreement of a Covered Aircraft
subject to a Covered Aircraft Sublease pursuant to Sections 2.05, 2.06,
2.07, 2.08, 2.11, 8.03(a), 8.03(b), 8.03(c)
or 8.03(d), such aircraft shall cease being a Covered Aircraft,
Contractor shall immediately deliver possession of such aircraft to Continental
or its designee, or, in the case of Section 2.07, to the applicable
Affiliate of Contractor.  Upon such
delivery of possession, if all conditions set forth in the applicable Covered
Aircraft Sublease, including any return conditions, have been satisfied in
accordance with its terms, then the Covered Aircraft Sublease for such aircraft
shall terminate as of such date in accordance with the terms of such Covered
Aircraft Sublease (regardless of the underlying term of such Covered Aircraft
Sublease); provided, that so long as the applicable
Covered Aircraft is not being withdrawn from this Agreement pursuant to Section
8.02(c), the Covered Aircraft Sublease may remain in effect as provided in Section
2.09(c) or, to the extent provided by Section 2.09(b), the Covered
Aircraft Sublease may be replaced with a Storage Sublease. In the case of an
applicable transfer pursuant to Section 2.07, the obligations of
Contractor shall be assumed by the applicable Affiliate of Contractor (and such
Covered Aircraft Sublease shall thereafter constitute an ancillary agreement
for purposes of the applicable Affiliate CPA). 
Other than in the case of a transfer described in Section 2.07,
upon satisfaction of the foregoing return conditions and those specified in the
applicable Covered Aircraft Sublease (or, in the event of a termination
pursuant to Section 8.02(b)(x), promptly after the end of any
grounding that would prevent a ferrying of the aircraft), Contractor shall
ferry the applicable Covered Aircraft at Continental’s expense to a location
within the continental United States selected by Continental.  Promptly after the delivery of any
termination notice by any party hereto to another party, but in no event more
than five days after such delivery (and immediately in connection with a
termination pursuant to Section 8.02(a)) or 180 days prior to the
end of the Term, Contractor shall deliver to Continental a reasonably detailed
current summary and forecast of the maintenance and repair status and condition
of each aircraft and each Engine, and a list detailing the location of each
such engine (by aircraft or, if appropriate, maintenance facility).  In addition, Contractor shall update such
summary from time to time promptly upon Continental’s request.

 

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

 

16

 

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

 

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

 

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

 

17

 

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

 

Section 2.11                                Rate Reset.

 

(a)                                  Continental may withdraw any
Covered Aircraft (other than any Additional Aircraft that becomes a Covered
Aircraft pursuant to Sections 2.04 or 2.08(h) or any
Replacement Aircraft that becomes a Covered Aircraft pursuant to Section 2.05)
from the capacity purchase provisions of this Agreement in accordance with and
subject to the limitations, terms and conditions contained in this Section
2.11.

 

(b)                                 In order to withdraw Covered
Aircraft pursuant to this Section 2.11, on or before July 1, 2014 (but
not prior to May 1, 2014), Continental shall give Contractor written notice
(the “Withdrawal/Rate Reset Notice”) of its intention to withdraw all or
a portion of the Covered Aircraft subject to withdrawal pursuant to this Section
2.11, and shall allow Contractor a minimum of 30 days to bid on such
Covered Aircraft, with such bid process to be concluded on or before February
15, 2015.  If Continental is withdrawing
only a portion of the Covered Aircraft subject to withdrawal pursuant to this Section
2.11, the portion subject to withdrawal shall be such Covered Aircraft with
the shortest remaining terms under the applicable Covered Aircraft
Subleases.  If, at the time the
Withdrawal/Rate Reset Notice is given and at the time of any award referenced
below, (A) Contractor has consistently satisfied in all material respects
the standards of care and service described in Section 4.03 in
connection with its obligations under this Agreement and any other similar
agreement among Continental and Contractor (it being understood that any
repeated failure to correct any violation of any standard of care and service
reasonably asserted by Continental to be material shall be deemed to be a
material failure) and otherwise complied in all material respects with the
terms of this Agreement and the Ancillary Agreements, except to the extent such
non-compliance directly results from material circumstances outside of
Contractor’s reasonable control, and (B) Continental and Contractor, each
acting reasonably, agree on base and incentive rates relating to such Covered
Aircraft (the “Reset Rates”), then Contractor shall be awarded at least
the portion of such Covered Aircraft subject to withdrawal with the longest
remaining terms under the applicable Covered Aircraft Subleases such that,
after giving effect to any withdrawal pursuant to this Section 2.11, the
number of CPA Aircraft is at least the Minimum Percentage (as adjusted pursuant
to Section 2.04(c)) of the regional aircraft used in Continental’s
regional airline service (as such phrase is used in Section 2.04) (each
Covered Aircraft so awarded, a “Rate Reset Aircraft”), and such Rate
Reset Aircraft shall not be withdrawn from the capacity purchase provisions of
this Agreement pursuant to the Withdrawal/Rate Reset Notice.  For the purposes of this Section 2.11,
if Continental shall have issued a request for proposal or otherwise conducted
a bid process for any Covered Aircraft to be withdrawn pursuant to this Section 2.11,
then Continental shall be deemed to be acting reasonably if it refuses to agree
with Contractor to base and incentive compensation rates that are less
beneficial to Continental than the base and incentive compensation rates
contained in the bona fide bid of any third party to which Continental in good
faith would intend to award such Covered Aircraft, after providing Contractor
with a certificate signed by an authorized officer of Continental setting forth
the material terms of such bid (specifically including all terms material and
beneficial to Contractor) and providing Contractor 

 

18

 

not less than 20 days to review and match such
bid.  If a Covered Aircraft subject to
withdrawal is not awarded to Contractor as a result of a bona fide bid
referenced in the immediately preceding sentence and if such Covered Aircraft
is not awarded to such third party bidder pursuant to the terms of such bona
fide bid on or before February 15, 2015, then such Covered Aircraft shall not
be subject to withdrawal pursuant to this Section 2.11.

 

(c)                                  Prior to March 15, 2015,
Continental shall provide Contractor a withdrawal schedule relating to any
Covered Aircraft set forth in the Withdrawal/Rate Reset Notice (other than any
Rate Reset Aircraft set forth in the Withdrawal/Rate Reset Notice and other
than any Covered Aircraft referenced in the last sentence of Section 2.11(b)
above) specifying the aircraft type and Engines to be withdrawn and the date of
withdrawal.  Such aircraft shall be
withdrawn from the capacity purchase provisions of this Agreement on the date
of return set forth in any such schedule that is in compliance with the
provisions of this Section 2.11; provided,
that such schedule shall not provide for the withdrawal of more than 15 such
aircraft per month or that any such withdrawal shall commence prior to July 1,
2015.

 

(d)                                 Subject to Section 2.11(b)
and taking into account the aircraft type specified in the withdrawal schedule,
Continental shall have complete discretion to select the particular Covered
Aircraft and particular Engines subject to withdrawal pursuant to this Section 2.11
to be withdrawn during any particular month pursuant to this Section 2.11.  Promptly following its receipt of the
Withdrawal/Rate Reset Notice (but in any event within 20 days thereafter),
Contractor shall deliver to Continental a reasonably detailed current summary
and forecast of the maintenance and repair status and condition of each Covered
Aircraft and Engine.  Continental shall
bear the cost of any Engine swaps necessary to accommodate its Engine
selections, and shall agree to such Engine swaps under the applicable Covered
Aircraft Subleases.

 

(e)                                  The provisions of Section 2.09
shall apply to the withdrawal of any Covered Aircraft pursuant to this Section 2.11.

 

(f)                                    On July 1, 2015, the base
and incentive compensation rates applicable to the Rate Reset Aircraft shall
automatically be deemed modified to the Reset Rates and the base and incentive
compensation rates set forth in this Agreement shall cease to apply to such
Rate Reset Aircraft.

 

ARTICLE III

CONTRACTOR COMPENSATION

 

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

 

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

 

(a)                                  The rates under this
Agreement set forth in Appendix 1 and Appendix 6 to Schedule 3
hereto and the Controllable Completion Factor Incentive Rate set forth in Appendix 2

 

19

 

to Schedule 3 hereto shall remain in
effect through the last day of the month in which the first anniversary of this
Agreement falls, and shall be adjusted on the first day of the immediately
following month and each anniversary of such date (each, an “Adjustment Date”),
as follows: the new rates, applicable beginning on such Adjustment Date, shall
equal the rates in effect on the date immediately preceding such Adjustment
Date multiplied by the higher of (x) *** and (y) the lower of (i) ***
and (ii) ***.

 

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

 

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

 

Section 3.04                                Continental Expenses.

 

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

 

(b)                                 Design Changes.  Continental shall be responsible for any
reasonable out-of-pocket expenses incurred by Contractor relating to interior
and exterior design changes to the 

 

20

 

Covered
Aircraft and other product-related changes required by Continental, including
facility-related design changes and the cost of changes in uniforms and other
livery, in each case that occur outside of Contractor’s normal aircraft and
facility refurbishment program.

 

Section 3.05                                Audit Rights; Financial
Information.  Contractor
shall make available for inspection by Continental and its outside auditors and
advisors during normal business hours, within a reasonable period of time after
Continental makes a written request therefor, all of Contractor’s books and
records relating to the Covered Aircraft or Charter Aircraft and this Agreement
or any Ancillary Agreement, in each case for the preceding 24-month period and,
with respect to books and records related to an ongoing good faith dispute
arising during such 24-month period (or, with regard to any Reconciled Expenses
or any dispute involving Reconciled Expenses, the 24-month period following the
date such Reconciled Expenses (or documentation thereof) were presented to
Continental by Contractor or a third party), for any additional period until
the final resolution of such dispute (each such period, an “Audit Period”)
as necessary to audit (a) any reimbursement of expenses set forth on Appendix 3
of Schedule 3 hereto and/or incentive or rebate, (b) any agreement
or arrangement upon which the block hour rates and other terms of a separate
capacity purchase agreement are based pursuant to Section 2.05(a)
or 2.08(h), (c) any calculations pursuant to Section 3.07 or
(d) any costs to be reimbursed by Continental pursuant to Section 10.01(b)
(all such books and records collectively, “CPA Records”).  In connection with such audit, Continental
and its outside auditors and advisors shall be entitled to make copies and
notes of such CPA Records as they deem necessary and to discuss such CPA
Records with Contractor’s Chief Financial Officer or such other employees or
agents of Contractor knowledgeable about such records.  Notwithstanding the foregoing, Contractor
shall not be required to provide Continental or its outside auditors and
advisors access to (x) any agreement or arrangement upon which the block hour
rates and other terms of a separate capacity purchase agreement are based
pursuant to Section 2.05(a) or 2.08(h) or (y) any CPA
Records in connection with an audit of the matters described in clauses (c)
or (d) of this Section 3.05, in each case to the extent that
Contractor is prohibited from doing so by any confidentiality agreement; provided, that Contractor shall (i) upon the request of
Continental, use its commercially reasonable efforts to allow, at Continental’s
cost, an independent third party selected by Continental to review such CPA
Records and provide Continental with a summary setting forth (A) in connection
with an audit of the matters described in clause (b) of this Section 3.05,
the block hour rates and other economic terms of the Similar Economic Term
Transaction, and, if applicable, acquisition costs and (B) in connection with
an audit of the matters described in clauses (c) or (d) of this Section
3.05, a summary of any costs, expenses or revenues used to calculate
amounts pursuant to Sections 3.07 or 10.01(b), as
applicable, and (ii) to the extent that Contractor, after using its
commercially reasonable efforts, is unable to comply with the preceding clause
(i), Contractor shall provide Continental with a certificate signed by an
authorized officer of Contractor setting forth (A) in connection with an audit
of the matters described in clause (b) of this Section 3.05, the
block hour rates and other economic terms of the Similar Economic Term
Transaction, and, if applicable, acquisition costs and (B) in connection with
an audit of the matters described in clauses (c) or (d) of this Section 3.05,
a summary of any costs, expenses or revenues used to calculate amounts pursuant
to Sections 3.07 or 10.01(b), as applicable.  Following the termination of each respective
Audit Period, Continental’s right to audit the CPA Records for such Audit
Period shall terminate.

 

21

 

Section 3.06                                Billing and Payment;
Reconciliation.

 

(a)                                  Billing and Payment.  Within two Business Days after Contractor
receives the Final Monthly Schedule from Continental pursuant to Section 2.01(b),
Contractor shall present a reasonably detailed written invoice for amounts due
under this Agreement in respect of the Base Compensation for the Scheduled
Flights during the month to which such Final Monthly Schedule pertains.  Continental shall pay Contractor the amount
due under such invoice (the “Invoiced Amount”), subject to Continental’s
right to dispute any calculations set forth on such invoice that do not comply
with the terms of this Agreement or any Ancillary Agreement, net of amounts due
and owing by Contractor to Continental under this Agreement or any Ancillary
Agreement, as follows:

 

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

 

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

 

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

 

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

 

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

 

22

 

Continental
pursuant to Section 3.06(a)(iv) above for the applicable month, or
(y) shall be paid by Contractor to Continental or set off by Continental
against any other amounts owing to Contractor under this Agreement or any
Ancillary Agreement.

 

(c)                                  Notwithstanding anything to
the contrary in this Agreement or any Ancillary Agreement, neither Continental
nor Contractor shall have any obligation to make any payment required under
this Agreement or any Ancillary Agreement that is subject to a good faith
dispute or any right to set off any amount that has been disputed in good faith
by the other party; provided,  that within five Business Days following the resolution of
any such dispute in accordance with the terms of this Agreement, Continental or
Contractor, as applicable, shall make any payments required by such
resolution.  All payments made by
Contractor or Continental as provided in this Agreement or any Ancillary
Agreement shall be deemed final and not subject to further review, audit or
reconciliation after the later to occur of (I) the date that is 24 months
after the date of the applicable payment and (II) the date of final
resolution of any good faith dispute regarding the applicable payment arising
during the 24 months following the date of the applicable payment.

 

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

 

23

 

occur
following the reduction, if any, occurring as of the first anniversary of the
Effective Date attributable to the Savings as provided herein.

 

ARTICLE IV

CONTRACTOR OPERATIONS AND AGREEMENTS WITH CONTINENTAL

 

Section 4.01                                Crews, Etc.

 

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

 

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

 

Section 4.02                                Governmental Regulations.  Contractor has and shall maintain all
certifications, permits, licenses, certificates, exemptions, approvals, plans,
and insurance required by governmental authorities, including, without
limitation, FAA, DOT and TSA, to enable Contractor to perform the services
required by this Agreement.  All flight
operations, dispatch operations and all other operations and services
undertaken by Contractor pursuant to this Agreement shall be conducted,
operated and provided by Contractor in compliance with all U.S. and foreign
governmental laws, regulations and requirements, including, without limitation,
those relating to airport security, the use and transportation of hazardous
materials and dangerous goods, crew qualifications, crew training and crew
hours, the carriage of persons with disabilities and without any violation of
U.S. or foreign laws, regulations or governmental prohibitions.  Without limiting Contractor’s obligations
under any Covered Aircraft Sublease, all Covered Aircraft shall be operated and
maintained by Contractor in compliance with all laws, regulations and
governmental requirements, Contractor’s own operations manuals and maintenance
manuals and procedures, and all applicable equipment manufacturers’ manuals and
instructions.  Continental shall control
the use and substitution of any and all slots, operating authorizations and
similar or successor authority issued by the FAA or any airport operator for
the operation of each flight under this Agreement to enable Continental to
manage the priority of each such flight among all flights in Continental’s
network system.  In connection with any
capital improvements to any Covered Aircraft required by an airworthiness
directive, Contractor (taken together with its Affiliates) shall not
discriminate against such Covered Aircraft with regard to efforts to satisfy 

 

24

 

the
requirements of the airworthiness directives including the method and date of
compliance, and shall use its reasonable commercial efforts to satisfy such
requirements, including any efforts used or applied by Contractor or its
Affiliates with regard to any similar aircraft type owned or operated by
Contractor or its Affiliates.  In
connection with any grounding of any of the Covered Aircraft, Contractor shall
not discriminate against such Covered Aircraft with regard to efforts to
satisfy the applicable requirements to lift such grounding order, and shall use
its reasonable commercial efforts to satisfy such requirements, including any
efforts used or applied by Contractor or its Affiliates with regard to any
similar aircraft type owned or operated by Contractor or its Affiliates.

 

Section 4.03                                Quality of Service.  At all times, Contractor shall provide
Regional Airline Services with appropriate standards of care, but in no event
lower than such standards utilized by Contractor in 2009.  Continental procedures, performance standards
and means of measurement thereof concerning the provision of air passenger and
air cargo services shall be applicable to all Regional Airline Services
provided by Contractor; provided that
all such procedures and means of measurement shall be no more stringent than
those used by Continental with respect to the performance of all other
operators of regional jet aircraft for Continental.  Contractor shall achieve at least the
comparable quality of airline service as provided by Continental, subject to
limitations imposed by the type of aircraft used by Contractor and its route
network.  Contractor shall comply with
all airline customer service commitments and policies of Continental as of the
Effective Date, including without limitation the “CustomerFirst” commitments,
and employee conduct, appearance and training policies in place as of the
Effective Date, and shall handle customer-related services in a professional,
businesslike and courteous manner.  In
connection therewith, Contractor shall maintain aircraft cleaning cycles and
policies, and shall maintain adequate staffing levels, to ensure at least a
comparable level of customer service and operational efficiency that
Continental achieves, including without limitation in respect of customer
complaint response, ticketing and boarding timing, oversales, baggage services
and handling of irregular operations.  In
addition, at the request of Continental, Contractor shall comply with all such
airline customer service commitments, policies and standards of care of
Continental as adopted, amended or supplemented after the Effective Date.  Contractor shall ensure that all Covered
Aircraft are equipped with an ARINC aircraft communications addressing and
reporting system (or such other system as is designated by Continental), the
cost of which will be borne by Continental. Contractor shall make such interior
and exterior design and product-related changes as may be required by
Continental from time to time, including both those for which the cost is borne
by Continental pursuant to Section 3.04(b), and those that occur
within Contractor’s normal aircraft and facility refurbishment program.  Contractor shall provide Continental with
timely communication regarding the status of all Scheduled Flights, and shall
perform closeout procedures, in both cases, at service levels at least as high
as those of Continental at comparably-sized airports.  Contractor shall maintain the capability of
performing ACARS-based automated weight and balance procedures for each
Scheduled Flight, and shall accurately and timely perform such procedures.  Contractor shall maintain and utilize
Contractor’s passenger and bag weight program approved by the FAA and existing
on the Effective Date (unless and until otherwise directed by the FAA).  Contractor shall ensure that all Scheduled
Flights are capable of operating in Category 2 conditions.  Contractor will use Continental’s standard
procedures for processing and adjudicating all claims for which Contractor is
responsible in an effort to avoid such matters becoming the subject of claims,
litigation or an investigation by a governmental agency or authority.  At either party’s request, Contractor and
Continental will meet to discuss 

 

25

 

and
review Contractor’s customer service and handling procedures and policies and its
employees’ conduct, appearance and training standards and policies.  Continental shall give Contractor written
notice of any non-safety-related alleged breach of this Section 4.03,
identifying with reasonable specificity such alleged breach, not less than 15
days prior to exercising any remedy regarding such alleged breach.

 

Section 4.04                                Incidents or Accidents.  Contractor shall promptly notify Continental
of all irregularities involving a Scheduled Flight or Covered Aircraft operated
by Contractor (including, without limitation, aircraft accidents and incidents)
which result in any damage to persons and/or property or may otherwise result
in a complaint or claim by passengers or an investigation by a governmental
agency or authority.  Contractor shall furnish
to Continental as much detail as practicable concerning such irregularities and
shall cooperate with Continental at Contractor’s own expense in any appropriate
investigation.

 

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

 

Section 4.06                                Safety Matters.  At any time, Continental shall have the
right, but not the obligation, at its own cost, to inspect, review, and observe
Contractor’s operations of Scheduled Flights. 
Notwithstanding the conduct or absence of any such review, Contractor is
and shall remain solely responsible for the safe operation of its aircraft and
the safe provision of Regional Airline Services, including all Scheduled
Flights, and nothing in this Section 4.06 or otherwise in this
Agreement is intended or shall be interpreted to make Continental responsible
for such safety matters.  Contractor shall
maintain its membership in the IATA Operational Safety Audit registry and shall
not be suspended from such registry.

 

Section 4.07                                Master Facility and Ground
Handling Agreement. 
Contemporaneous with the execution and delivery of this Agreement, Contractor
and Continental shall enter into a Master Facility and Ground Handling
Agreement in the form attached hereto as Exhibit C.  The parties agree that, in the event of a
conflict between the provisions of Article VII hereof and the
indemnification provisions of the Master Facility and Ground Handling
Agreement, the latter shall control.

 

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

 

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

 

26

 

Section 4.10                                Fuel Purchasing Agreement.  Contemporaneous with the execution and
delivery of this Agreement, Continental and Contractor shall enter into a Fuel
Purchasing Agreement in the form attached hereto as Exhibit F.

 

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

 

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

 

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

 

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

 

Section 4.15                                Ticket Handling Terms.  Continental and Contractor shall comply with
the ticket handling requirements set forth in Exhibit K
hereto.  The parties agree that, in the
event of 

 

27

 

a
conflict between the provisions of Exhibit K and the Contractor
Ground Handling Agreement, the provisions of Exhibit K shall control.

 

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

 

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

 

Section 4.18                                Covered Aircraft Subleases.

 

(a)                                  As soon as practicable after
the execution and delivery of this Agreement for each Covered Aircraft then
subject to the terms hereof, and contemporaneous with the entry of any other
aircraft into service as a Covered Aircraft hereunder (other than aircraft that
Contractor acquires from other than Continental), Continental and Contractor
shall enter into a Covered Aircraft Sublease for each Covered Aircraft in the form
attached hereto as Exhibit B. 
In connection with the entry into each Covered Aircraft Sublease for a
Covered Aircraft, Continental shall use commercially reasonable efforts to
assign to Contractor the warranties of the aircraft and engine manufacturers available
to Continental with respect to such Covered Aircraft.  If Continental is unable to assign the
foregoing warranties and is not otherwise able to provide for an agreement
directly between Contractor and the applicable manufacturer providing for warranty
coverage of such Covered Aircraft, then Continental shall act on behalf of
Contractor in dealing with the applicable manufacturer to enable Contractor to
obtain the benefit of such warranties as if Continental had been able to make
such assignment.  Continental further
covenants and agrees not to accelerate the “Head Lease Expiration Date” as
provided on Schedule 1 hereto with respect to any aircraft being
operated by Contractor pursuant to this Agreement as of the time of
determination without the prior written consent of Contractor if such
acceleration would result in the Head Lease Expiration Date occurring prior to
the tenth anniversary of the Effective Date. 
In addition, as to the United Aircraft, the Return Aircraft Sublease
shall be deemed amended to provide for termination as contemplated in Section 2.06
hereof, the lease term related thereto shall continue for such time as the
United Aircraft is subject to the United Agreement and the return conditions
shall be consistent with those contained in Annex B of the Covered Aircraft
Sublease attached hereto as Exhibit B and the Parties hereto agree to act in accordance with such provisions,
regardless of whether any formal amendment of such sublease is entered into.  At the request of Contractor, Continental
will cooperate with Contractor to amend any such Return Aircraft Sublease in
the manner described in the immediately preceding sentence at Contractor’s cost
and expense.

 

(b)                                 Basic Rent payable under
each Covered Aircraft Sublease shall be entirely abated unless and until
(A) such Covered Aircraft has been withdrawn from this Agreement and no
longer constitutes a Covered Aircraft, or (B) the occurrence of a Labor
Strike, in which case such Basic Rent shall be payable until (x) such
aircraft shall have been returned to Continental in accordance with the terms
of such Covered Aircraft Sublease and this Agreement, or (y) such 

 

28

 

Labor
Strike shall have ended, as the case may be. 
In addition, in connection with the return of aircraft to Continental
pursuant to Sections 2.08, 2.11, 8.02(b)(x) or 8.02(c)(i),
or in connection with the repossession of a Covered Aircraft by a lessor,
lender or other financing party under a head lease for or mortgage of such aircraft
(other than a repossession resulting from a breach of the Covered Aircraft
Sublease by Contractor), Basic Rent shall continue to be entirely abated for
the following period:

 

(i)                                     for the return
of aircraft pursuant to Section 8.02(b)(x), with respect to any
such aircraft, (A) the duration (if any) of the grounding applicable to such
aircraft (but only if such grounding is a complete grounding, as opposed to a
grounding for passenger service only), plus (B) such period as is
reasonably necessary for Contractor to return such aircraft in compliance with
the provisions of the applicable Covered Aircraft Sublease, but in any event
for not more than a period of four weeks after the later of the applicable
Termination Date or the end of the Wind Down Period for such aircraft, if any,
for the first 59 such Covered Aircraft being returned, eight weeks after such
date for the next 59 such Covered Aircraft being returned, twelve weeks after
such date for the next 58 such Covered Aircraft being returned, and sixteen
weeks after such date for the remaining such Covered Aircraft being returned
(such periods to run concurrently); and

 

(ii)                                  for the return
of aircraft pursuant to Sections 2.08, Section 2.11 or 8.02(c)(i)
or in connection with the repossession of a Covered Aircraft by a lessor,
lender or other financing party under a head lease for or mortgage of such
aircraft (other than a repossession resulting from a breach of the Covered
Aircraft Sublease by Contractor), such period as is reasonably necessary for Contractor
to return such aircraft in compliance with the provisions of the applicable
Covered Aircraft Sublease, but in any event for not more than a period of two
weeks after the applicable Termination Date for the first 59 such Covered
Aircraft being returned, four weeks after such date for the next such 59
Covered Aircraft being returned, six weeks after such date for the next such 58
Covered Aircraft being returned, and eight weeks after such date for the
remaining such Covered Aircraft being returned (such periods to run
concurrently);

 

provided, that Basic
Rent shall in each case cease to be abated with respect to any aircraft to be
returned on the day following the day, if any, on which Continental waives any
unsatisfied return conditions with respect to such aircraft.  In addition, the provisions of Section 2.09
shall apply to the Covered Aircraft subject to a Covered Aircraft Sublease
being returned to Continental.  No Basic
Rent shall be payable under any Storage Sublease.

 

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

 

(d)                                 Notwithstanding anything
else contained herein to the contrary, if and when a Covered Aircraft Sublease
terminates in accordance with its terms, then the aircraft 

 

29

 

subject
to such sublease shall no longer constitute a Covered Aircraft effective on the
date on which the term of such Covered Aircraft Sublease ends, regardless of
whether the event giving rise to such sublease termination also constitutes an
independent termination or withdrawal event hereunder.  Any withdrawal occurring upon such a
termination of a Covered Aircraft Sublease shall be separate and distinct from,
and shall not limit or supersede, any other withdrawal rights of Continental
contained in this Agreement.

 

ARTICLE V

CERTAIN RIGHTS OF CONTINENTAL

 

Section 5.01                                Use of Covered Aircraft.  Contractor agrees that, except as otherwise
directed or approved in writing by Continental in its sole discretion, the
Covered Aircraft may be used only to provide Regional Airline Services.  Without the written consent of Continental,
the Covered Aircraft may not be used by Contractor for any other purpose,
including without limitation flying for any other airline or on Contractor’s
own behalf.

 

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

 

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

 

ARTICLE VI

INSURANCE

 

Section 6.01                                Minimum Insurance Coverages.  During the Term, in addition to any insurance
required to be maintained by Contractor pursuant to the terms of any aircraft
lease (including any Covered Aircraft Sublease or Storage Sublease), or by any
applicable governmental or airport authority, Contractor shall maintain, or
cause to be maintained, in full force and effect policies of insurance with
insurers of recognized reputation and responsibility, in each case to the
extent available on a commercially reasonable basis, as follows:

 

(a)                                  Comprehensive aircraft hull
and liability insurance, including aircraft third party, passenger liability
(including passengers’ baggage and personal effects), cargo and mail legal
liability, and all-risk ground and flight physical damage, with a combined
single limit of not less than the greater of (i) $*** million per occurrence
and (ii) the highest single limit per occurrence of any aircraft hull and
liability insurance maintained by Contractor under any other Capacity Purchase
Arrangement, and a minimum limit in respect of personal injury (per clause
AVN 60 or its equivalent) of $*** million per occurrence and in the
aggregate, and war risk hull 

 

30

 

and
liability insurance as provided by the FAA program or by commercial providers
of such insurance with a combined single limit no less than the greater of (i) $***
million per occurrence and (ii) the highest single limit per occurrence of
any war risk hull and liability insurance maintained by Contractor under any
other Capacity Purchase Arrangement;

 

(b)                                 Workers’ compensation as
required by the appropriate jurisdiction and employer’s liability with a limit
of not less than $1 million combined single limit; and

 

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

 

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

 

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

 

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

 

(c)                                  To provide that insurance
shall be primary to and without right of contribution from any other insurance
which may be available to the additional insureds;

 

(d)                                 To include a breach of
warranty provision in favor of the additional insureds;

 

(e)                                  To accept and insure
Contractor’s hold harmless and indemnity undertakings set forth in this
Agreement, but only to the extent of the coverage afforded by the policy or
policies; and

 

(f)                                    To provide that such
policies shall not be canceled, terminated or materially altered, changed or
amended until 30 days (but seven days or such lesser period as may be available
in respect of hull, war and allied perils) after written notice shall have been
sent to Continental.

 

Section 6.03                                Evidence of Insurance Coverage.  At the commencement of this Agreement, and
thereafter at Continental’s request, Contractor shall furnish to Continental
evidence reasonably satisfactory to Continental of such insurance coverage and
endorsements (other than any insurance coverage obtained pursuant to Section 6.04),
including certificates certifying that such insurance and endorsements are in
full force and effect.  Initially, this 

 

31

 

evidence
shall be a certificate of insurance.  If
Contractor fails to acquire or maintain insurance as herein provided,
Continental may at its option secure such insurance on Contractor’s behalf at
Contractor’s expense.

 

Section 6.04                                Insurance Through Combined
Placement.

 

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

 

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

 

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

 

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

 

ARTICLE VII

INDEMNIFICATION

 

Section 7.01                                Contractor Indemnification of
Continental.  Contractor
shall be liable for and hereby agrees to fully defend, release, discharge,
indemnify and hold harmless Continental, its directors, officers, employees and
agents from and against any and all claims, demands, damages, liabilities,
suits, judgments, actions, causes of action, losses, costs and expenses of any
kind, character or nature whatsoever, including reasonable attorneys’ fees,
costs and expenses in connection therewith and expenses of investigation and
litigation thereof, which may be suffered by, accrued against, charged to, or
recoverable from Continental or its directors, officers, employees or agents,
including but not limited to, any such losses, costs and expenses involving
(i) death or injury (including claims of emotional distress and other
non-physical injury by passengers) to any person including any of Contractor’s
or Continental’s directors, officers, employees or agents, (ii) loss of,
damage to, or destruction of property (including real, tangible and intangible
property, and specifically including regulatory property such as route
authorities, slots and other landing rights), including any loss of use of such
property, and (iii) damages due to delays in any manner, in each case
arising out of, connected with, or attributable to (w) any act or omission by
Contractor or any of its directors, officers, employees or agents relating to
the provision of Regional Airline Services, (x) the performance, improper
performance, or non-

 

32

 

performance
of any and all obligations to be undertaken by Contractor or any of its
directors, officers, employees or agents pursuant to this Agreement or any
Ancillary Agreement, or (y) the operation, non-operation, or improper
operation of the Covered Aircraft, Storage Aircraft or Other Subleased Aircraft
or Contractor’s equipment or facilities at any location, in each case excluding
only claims, demands, damages, liabilities, suits, judgments, actions, causes
of action, losses, costs and expenses (A) to the extent resulting from the
negligence or willful misconduct of Continental or its directors, officers,
agents or employees (other than negligence or willful misconduct imputed to
such indemnified person by reason of its interest in a Covered Aircraft,
Storage Aircraft or Other Subleased Aircraft or a Covered Aircraft Sublease or
Storage Sublease), (B) for which Continental is obligated to indemnify or
otherwise reimburse Contractor pursuant to this Agreement or any Ancillary
Agreement or (C) directly caused by a breach by Continental of this
Agreement or any Ancillary Agreement. 
Contractor will use commercially reasonable efforts to cause and assure
that Contractor will at all times be and remain in custody and control of all
aircraft, equipment, and facilities of, or operated by, Contractor, and
Continental and its directors, officers, employees and agents shall not, for
any reason, be deemed to be in custody or control, or a bailee, of such
aircraft, equipment or facilities, until such time (if any) that such aircraft,
equipment or facilities, pursuant to the terms of this Agreement and the
Ancillary Agreements, are required or intended to be, and are, in the actual
possession of Continental or any of the above listed parties and no longer in
the control of Contractor.

 

Section 7.02                                Continental Indemnification of
Contractor.  Continental
shall be liable for and hereby agrees to fully defend, release, discharge,
indemnify, and hold harmless Contractor, its directors, officers, employees,
and agents from and against any and all claims, demands, damages, liabilities,
suits, judgments, actions, causes of action, losses, costs and expenses of any
kind, character or nature whatsoever, including reasonable attorneys’ fees,
costs and expenses in connection therewith and expenses of investigation and
litigation thereof, which may be suffered by, accrued against, charged to, or
recoverable from Contractor, or its directors, officers, employees or agents,
including but not limited to, any such losses, costs and expenses involving
(i) death or injury (including claims of emotional distress and other
non-physical injury by passengers) to any person including any of Contractor’s
or Continental’s directors, officers, employees or agents, (ii) loss of,
damage to, or destruction of property (including real, tangible and intangible
property, and specifically including regulatory property such as route
authorities, slots and other landing rights), including any loss of use of such
property, and (iii) damages due to delays in any manner, in each case
arising out of, connected with, or attributable to, (x) the performance,
improper performance, or non-performance of any and all obligations to be
undertaken by Continental or any of its directors, officers, employees or
agents pursuant to this Agreement, any Ancillary Agreement or any head lease or
other financing agreement relating to any Covered Aircraft, United Aircraft or
Charter Aircraft, or (y) the operation, non-operation or improper
operation of Continental’s aircraft, equipment or facilities (excluding, for
the avoidance of doubt, Covered Aircraft and any equipment or facilities leased
or subleased by Continental to Contractor) at any location, in each case
excluding only claims, demands, damages, liabilities, suits judgments, actions,
causes of action, losses, costs and expenses (A) to the extent resulting
from the negligence or willful misconduct of Contractor or its directors,
officers, agents or employees, or (B) for which Contractor is obligated to
indemnify or otherwise reimburse Continental pursuant to this Agreement or any
Ancillary Agreement or (C) directly caused by a breach by Contractor of
this Agreement or any Ancillary Agreement. 
Continental 

 

33

 

will
use commercially reasonable efforts to cause and assure that Continental will
at all times be and remain in custody and control of any aircraft, equipment
and facilities of, or operated by, Continental, and Contractor and its
directors, officers, employees and agents shall not, for any reason, be deemed
to be in the custody or control, or a bailee, of such aircraft, equipment or
facilities, until such time (if any) that such aircraft, equipment or
facilities, pursuant to the terms of this Agreement and the Ancillary
Agreements, are required or intended to be, and are, in the actual possession
of Contractor or any of the above listed parties and no longer in the control
of Continental.

 

Section 7.03                                Indemnification Claims.  A party (the “Indemnified Party”) that
may be entitled to indemnification from another party under the terms of this
Agreement (the “Indemnifying Party”) shall provide the Indemnifying
Party with prompt written notice (an “Indemnity Notice”) of any
third-party claim which the Indemnified Party believes may give rise to a claim
for indemnity against the Indemnifying Party hereunder.  Notwithstanding the foregoing, the failure of
an Indemnified Party to promptly provide an Indemnity Notice shall not
constitute a waiver by the Indemnified Party of any right to indemnification or
otherwise relieve such Indemnifying Party from any liability hereunder unless
and only to the extent that the Indemnifying Party is materially prejudiced as
a result thereof, and in any event shall not relieve such Indemnifying Party
from any liability which it may have otherwise than on account of this Article VII.  The Indemnifying Party shall be entitled, if
it accepts financial responsibility for the third-party claim, to control the
defense of or to settle any such third-party claim at its own expense and by
its own counsel; provided, that the Indemnified
Party’s prior written consent (which may not be unreasonably withheld or
delayed) must be obtained prior to settling any such third-party claim.  The Indemnified Party shall promptly provide
the Indemnifying Party with such information as the Indemnifying Party shall
reasonably request to defend any such third-party claim and shall otherwise
cooperate with the Indemnifying Party in the defense of any such third-party
claim.  Except as set forth in this Section 7.03,
the Indemnified Party shall not enter into any settlement or other compromise
or consent to a judgment with respect to a third-party claim as to which the
Indemnifying Party has an indemnity obligation hereunder without the prior
written consent of the Indemnifying Party (which may not be unreasonably
withheld or delayed), and the entering into of any settlement or compromise or
the consent to any judgment in violation of the foregoing shall constitute a
waiver by the Indemnified Party of its right to indemnity hereunder to the
extent the Indemnifying Party was prejudiced thereby.  Any Indemnifying Party shall be subrogated to
the rights of the Indemnified Party to the extent that the Indemnifying Party
pays for any loss, damage or expense suffered by the Indemnified Party hereunder.  If the Indemnifying Party does not accept
financial responsibility for the third-party claim or fails to defend against
the third-party claim that is the subject of an Indemnity Notice within 30 days
of receiving such notice (or sooner if the nature of the third-party claim so
requires), or otherwise contests its obligation to indemnify the Indemnified
Party in connection therewith, the Indemnified Party may, upon providing
written notice to the Indemnifying Party, pay, compromise or defend such
third-party claim without the prior consent of the (otherwise) Indemnifying
Party.  In the latter event, the
Indemnified Party, by proceeding to defend itself or settle the matter, does
not waive any of its rights hereunder to later seek reimbursement from the Indemnifying
Party.

 

34

 

Section 7.04                                Employer’s Liability; Independent
Contractors; Waiver of Control.

 

(a)                                  Employer’s Liability and Workers’
Compensation.  Each party
hereto assumes full responsibility for its employer’s and workers’ compensation
liability to its respective officers, directors, employees or agents on account
of injury or death resulting from or sustained in the performance of their
respective service under this Agreement. 
Each party, with respect to its own employees, accepts full and
exclusive liability for the payment of workers’ compensation and employer’s
liability insurance premiums with respect to such employees, and for the
payment of all taxes, contributions or other payments for unemployment
compensation or old age or retirement benefits, pensions or annuities now or
hereafter imposed upon employers by the government of the United States or any
other governmental body, including state, local or foreign, with respect to
such employees measured by the wages, salaries, compensation or other
remuneration paid to such employees, or otherwise.

 

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

 

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

 

(d)                                 Contractor Flights.  The fact that Contractor’s operations are
conducted under Continental’s Marks and listed under the CO designator code
will not affect their status as flights operated by Contractor for purposes of this
Agreement or any other agreement between the parties, and Contractor and
Continental agree to advise all third parties, including passengers, of this
fact.

 

Section 7.05                                Survival.  The provisions of this Article VII
shall survive the termination of this Agreement for a period of seven years.

 

35

 

ARTICLE VIII

TERM, TERMINATION AND DISPOSITION OF AIRCRAFT

 

Section 8.01                                Term.  The Term of this Agreement shall commence on
and shall be effective as of the Effective Date and, unless earlier terminated
or extended as provided herein, shall continue until the tenth anniversary of
the Effective Date (the “Term”).

 

Section 8.02                                Early Termination.

 

(a)                                  By Continental for Cause.  Continental shall have the right to terminate
this Agreement, immediately upon written notice (but without any prior notice)
following the occurrence of any event that constitutes Cause.  Any termination pursuant to this Section 8.02(a)
shall supersede any other termination pursuant to any other provision of this
Agreement (even if such other right of termination shall already have been
exercised), and the date of such notification of termination for Cause shall be
the Termination Date for purposes of this Agreement (and such Termination Date pursuant
to this Section 8.02(a) shall supersede any other Termination Date
that may have been previously established pursuant to another
termination).  In the event that
Continental shall not have delivered written notice of termination pursuant to
this Section 8.02(a) within four months after the later of (x) Continental
receives written notice from Contractor of the occurrence of any event that
constitutes Cause and (y) such event is no longer continuing, then
Continental shall be conclusively deemed to have waived any right to terminate
this Agreement based upon such event; provided, that
such waiver shall not apply to any subsequent or continuing event that
constitutes Cause.

 

(b)                                 By Continental for Breach.  Continental may terminate this Agreement, by providing
written notice to Contractor (with or without any prior notice), upon the
occurrence of a material breach of this Agreement by Contractor as described in
clause (ii) below. 
Continental may terminate this Agreement, by providing written notice to
Contractor, upon the occurrence of any other material breach of this Agreement
by Contractor, which breach shall not have been cured within 60 days (or 15
days in the case of clause (x) below) after written notice of such
breach is delivered by Continental to Contractor (which notice period may run
concurrently with the 15-day notice period, if any, provided pursuant to Section 4.03
for non-safety-related breaches).  Any
such written notice delivered pursuant to the foregoing sentences shall specify
the Termination Date (subject to the provisions of this Article VIII).  The parties hereto agree that, without
limiting the circumstances or events that may constitute a material breach,
each of the following shall constitute a material breach of this Agreement by
Contractor: (i) the occurrence of a System Flight Disruption, (ii) a
reasonable and good faith determination by Continental, using recognized
standards of safety, that there is a material safety concern with the operation
of any Scheduled Flights, (iii) the grounding of any Contractor Fleet by
regulatory or court order or other governmental action, other than a
non-carrier specific grounding, (iv) a Controllable Cancellation Factor
for any two consecutive calendar months of ***% or below, (v) a Controllable
On-Time Departure Rate for any two consecutive calendar months of ***% or
below, (vi) concurrent material defaults by Contractor under ten or more
Covered Aircraft Subleases or a material default under any other Ancillary
Agreement that, in either case, materially adversely affects Contractor’s
performance of its obligations under this Agreement or any Ancillary Agreement
and is not cured during any applicable cure period, (vii) a material default by
Contractor under any Flight Hour Agreement that adversely affects the
maintenance 

 

36

 

of
any Covered Aircraft, Charter Aircraft or United Aircraft, any material
maintenance reserve provided for under such agreement, or the maintenance costs
under such agreement, which default is not cured during any applicable cure
period, (viii) a Change of Control shall occur to which Continental shall not
have consented in writing in advance, (ix) a Prohibited Transfer shall
occur or (x) the non-carrier specific grounding of any Contractor Fleet by
regulatory or court order or other governmental action.  In the event that Continental shall not have
delivered written notice of termination pursuant to this Section 8.02(b)
within four months after the later of (A) the date upon which Continental
receives written notice from Contractor of any material breach of this
Agreement by Contractor and (B) such event is no longer continuing, then
Continental shall be conclusively deemed to have waived any right to terminate
this Agreement based upon such breach; provided that
such waiver shall not apply to any subsequent or continuing breach.  Notwithstanding the foregoing, the
termination right attributable to an event described in clause (x) above
shall be limited to the termination of this Agreement as it relates solely to
the particular Contractor Fleet subject to such grounding.

 

(c)                                  By Contractor for Breach.  Contractor may terminate this Agreement, by
providing written notice to Continental, upon (i) Continental’s failure to
make any payment of $500,000 or more due to Contractor under Article III
or Section 10.01 of this Agreement, including without limitation,
payments which become due during any Wind-Down Period, which payment is not
subject to any ongoing good faith dispute and which failure shall not have been
cured within five Business Days after receipt of written notice from Contractor
of such failure, or (ii) upon the occurrence of any other material breach
of this Agreement by Continental, which breach shall not have been cured within
60 days after written notice of such material breach is delivered by Contractor
to Continental.  Such written notice of
termination shall specify the Termination Date (subject to the provisions of
this Article VIII). In the event that Contractor shall not have
delivered written notice of termination pursuant to this Section 8.02(c)
within four months after the later of (x) the date upon which Contractor
receives written notice from Continental of any material breach under this
Agreement by Continental and (y) such material breach is no longer
continuing, then Contractor shall be conclusively deemed to have waived any
right to terminate this Agreement based upon such breach; provided,
that such waiver shall not apply to any subsequent or continuing breach.

 

(d)                                 By Continental for Breach of
Affiliate CPA.  Continental
may terminate this Agreement, by providing written notice to Contractor (with
or without prior notice) upon the early termination by Continental of any
Affiliate CPA or other Capacity Purchase Arrangement between Continental and
Contractor; provided, that the foregoing termination
right in this Section 8.02(d) shall not apply in the event the
Affiliate CPA or Capacity Purchase Arrangement is terminated solely as a result
of events or actions similar to those described in clauses (i), (ii)
or (iii) of the definition of Cause herein.  Such written notice of termination shall
specify the Termination Date (subject to the provisions of this Article VIII).

 

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

 

37

 

(f)                                    Survival
During Wind-Down Period.  Upon any termination hereunder, the Term
shall continue, and this Agreement shall survive in full force and effect,
beyond the Termination Date until the end of the Wind-Down Period, if any, and
the rights and obligations of the parties under this Agreement, including
without limitation remedies available upon the occurrence of events
constituting Cause or material breach, shall continue with respect to each
Covered Aircraft until it is withdrawn from this Agreement and otherwise until
the later of the Termination Date and the end of the Wind-Down Period, if any.

 

Section 8.03                                Disposition of Aircraft during
Wind-Down Period.

 

(a)                                  Termination by Continental for
Cause.  If this
Agreement is terminated pursuant to Section 8.02(a), then the
Covered Aircraft shall be withdrawn from the capacity purchase provisions of
this Agreement in accordance with the following terms and conditions.  Within 90 days of delivery of any notice of
termination, Continental shall deliver to Contractor a revocable written
Wind-Down Schedule, providing for the withdrawal of such Covered Aircraft from
the capacity purchase provisions of this Agreement, delineating the number of
each aircraft type to be withdrawn by month. 
Continental may amend or modify such Wind-Down Schedule in its sole
discretion by providing two weeks written notice to Contractor of such
amendment or modification.  The Wind-Down
Schedule may begin immediately upon its delivery, and may not provide for the
withdrawal of any Covered Aircraft beyond the earlier of (i) the date 60
months after the date of delivery of the Wind-Down Schedule, and (ii) the
date on which the head lease applicable to the Covered Aircraft
terminates.  The provisions of this Section 8.03(a)
shall supersede any Wind Down Schedule delivered pursuant to any other
provision of this Agreement in accordance with a Wind-Down Schedule to be
delivered by Continental to Contractor on the Termination Date.

 

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

 

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

 

38

 

(i)                                     The notice of
termination delivered by Contractor to Continental pursuant to Section 8.02(c)(i)
shall be irrevocable by Contractor and shall contain a Termination Date that is
not more than 60 days after the date of such notice; provided,
that such termination notice shall be void and of no further effect
automatically upon the payment by Continental prior to the Termination Date of
all unpaid amounts giving rise to the default under Section 8.02(c)(i).  As of the Termination Date set forth in a
notice of termination delivered pursuant to Section 8.02(c)(i), all
of the Covered Aircraft shall automatically be withdrawn from the capacity
purchase provisions of this Agreement and shall cease to be Covered Aircraft as
of such date and this Agreement shall terminate.

 

(ii)                                  The notice of
termination delivered by Contractor to Continental pursuant to Section 8.02(c)(ii)
or Section 8.02(e) shall be irrevocable by Contractor and shall
contain a Termination Date that is at least 180 days after the date of such
notice.  Prior to the 90th day after
receipt of such termination notice, Continental shall deliver to Contractor a
Wind-Down Schedule beginning on such Termination Date.  The Wind-Down Schedule may not provide for
the withdrawal of more than 15 Covered Aircraft per month (excluding the
withdrawal of any Covered Aircraft upon the termination of the head lease
related to such Covered Aircraft), and may not provide for the withdrawal of
any Covered Aircraft on any date more than 60 months after the Termination
Date.

 

(d)                                 Termination at End of Term.  If the Agreement is terminated at the end of
the Term (other than pursuant to Section 8.02), then each Covered
Aircraft shall be withdrawn from the capacity purchase provisions of this
Agreement in accordance with a Wind-Down Schedule to be delivered by
Continental to Contractor no later than six months prior to the end of the
Term.  The Wind-Down Schedule shall not
commence prior to the end of the Term and may not provide for the withdrawal of
more than 15 Covered Aircraft per month (excluding the withdrawal of any
Covered Aircraft upon the termination of the head lease related to such Covered
Aircraft), and may not provide for the withdrawal of any Covered Aircraft on
any date more than 36 months after the end of the Term.

 

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

 

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

 

(g)                                 Other Remedies for Labor Strike
and Other Circumstances.  In the event of (i) the occurrence of a
Labor Strike or (ii) the mandatory grounding of any of the Contractor Fleets by
the FAA due to any action or inaction of Contractor, then for so long as such
Labor Strike or grounding shall continue and thereafter until the number of
Scheduled Flights that are 

 

39

 

Controllable
On-Time Departures (including giving effect to any delays resulting from a
Labor Strike or grounding) on any day of the week equals or exceeds the number
of Scheduled Flights that were Controllable On-Time Departures on the same day
of the week prior to such Labor Strike or grounding, Continental shall not be
required to pay any of the amounts set forth on Appendix 1 to Schedule 3
as being required “for each Covered Aircraft for each month in the Term.”  The rights set forth in this Section 8.03(g)
are in addition to, and not in limitation of, any other right of Continental
arising hereunder.

 

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

 

(i)                                     Punitive
Damages.  No party to
this Agreement or any of its Affiliates shall be liable to any other party
hereto or any of its Affiliates for claims for incidental, indirect,
consequential, punitive, special or exemplary damages, including lost revenues,
lost profits or lost prospective economic advantage, arising out of or relating
to this Agreement or the transactions contemplated hereby, regardless of
whether a claim is based on contract, tort (including negligence), strict
liability, violation of any applicable deceptive trade practices act or similar
law or any other legal or equitable principle, and each party releases the
others and their respective Affiliates from liability for any such
damages.  No party shall be entitled to
rescission of this Agreement as a result of breach of any other party’s
representations, warranties, covenants or agreements, or for any other matter; provided, that nothing in this Section 8.03(i) shall
restrict the right of any party to exercise any right to terminate this
Agreement pursuant to the terms hereof.

 

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

 

40

 

ARTICLE IX

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

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

 

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

 

(b)                                 Authority
Relative to this Agreement.  Contractor has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Contractor.  This Agreement has been duly and validly
executed and delivered by Contractor and is, assuming due execution and
delivery thereof by Continental and that Continental has legal power and right
to enter into this Agreement, a valid and binding obligation of Contractor,
enforceable against Contractor in accordance with its terms, except as
enforcement hereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors’ rights generally and legal principles
of general applicability governing the availability of equitable remedies
(whether considered in a proceeding in equity or at law or otherwise under
applicable law).

 

(c)                                  Broker.  Except for the fees and expenses payable to
Raymond James Financial Inc. (which amounts shall be paid by Contractor), no broker,
investment banker, or other person is entitled to any broker’s, finder’s or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Contractor.

 

(d)                                 Permits.  Contractor possesses all material
certificates, authorizations and permits issued by FAA and other applicable
federal, state or foreign regulatory authorities necessary to conduct its
business, to provide Regional Airlines Services and otherwise to perform its
obligations hereunder, and Contractor has not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, individually or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a material
adverse effect on Contractor or on its ability to conduct its business, to
provide Regional Airlines Services and otherwise to perform its obligations
hereunder.

 

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

 

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

 

41

 

(b)                                 Authority
Relative to this Agreement.  Continental has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Continental.  This Agreement has been duly and validly
executed and delivered by Continental and is, assuming due execution and
delivery thereof by Contractor and that Contractor has legal power and right to
enter into this Agreement, a valid and binding obligation of Continental,
enforceable against Continental in accordance with its terms, except as
enforcement hereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors’ rights generally and legal principles
of general applicability governing the availability of equitable remedies
(whether considered in a proceeding in equity or at law or otherwise under
applicable law).

 

(c)                                  Conflicts;
Defaults.  Neither the
execution or delivery of this Agreement nor the performance by Continental of
the transactions contemplated hereby will (i) violate, conflict with, or
constitute a default under any of the terms of Continental’s certificate of
incorporation, by-laws, or any provision of, or result in the acceleration of
any obligation under, any material contract, sales commitment, license,
purchase order, security agreement, mortgage, note, deed, lien, lease or other
agreement to which Continental is a party or by which it or its properties or
assets may be bound, (ii) result in the creation or imposition of any
lien, charge or encumbrance in favor of any third person or entity,
(iii) violate any law, statute, judgment, decree, order, rule or
regulation of any governmental authority or body, or (iv) constitute any
event which, after notice or lapse of time or both, would result in such
violation, conflict, default, acceleration or creation or imposition of liens,
charges or encumbrances.

 

(d)                                 Broker.  No broker, investment banker, or other person
is entitled to any broker’s, finder’s or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Continental.

 

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

 

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

 

42

 

ARTICLE X

MISCELLANEOUS

 

Section 10.01                          Transition
Arrangements.

 

(a)                                  Conversion
of Covered Aircraft Livery.  For each aircraft currently subject to a
sublease or lease between Continental and Contractor, at such time (if ever) as
such aircraft enters service as a Covered Aircraft, if such aircraft is not
already prepared in the livery required by Paragraph 8 of Exhibit G
and otherwise appropriately configured, then Continental shall be responsible
for Contractor’s reasonable out-of-pocket costs of preparing each Covered
Aircraft in such livery and appropriate configuration prior to its being placed
into service hereunder, up to $*** for each such Covered Aircraft.

 

(b)                                 Contractor’s
Other Airline Passenger Services.  The parties agree and acknowledge that
(x) Contractor intends to wind-up Contractor’s airline passenger services
operated by ExpressJet as of the Effective Date, including, without limitation,
any charter services (other than Regional Airlines Services and any services
pursuant to any United Agreement) (“Contractor’s Charter Service”),
(y) in consideration of Contractor’s entering into this Agreement,
Continental is willing to be responsible for all costs of the wind-up of
Contractor’s Charter Service, (z) in order to permit Continental to
maximize the efficiency and minimize the cost of such wind-up, Contractor is
willing to permit Continental to direct and manage the wind-up of Contractor’s
Charter Service, including any limited continuation of such service that may
occur in the process of such wind-up.  In
that regard, from and after the Effective Date:

 

(i)                                     Contractor
shall continue to provide Contractor’s Charter Service during such wind up
period as is determined by Continental, at a level of performance and safety
equivalent to Contractor’s provision of Regional Airlines Services hereunder;

 

(ii)                                  Continental
shall complete the final wind-up of Contractor’s Charter Service within a time
frame reasonably determined by Continental following consultation with
Contractor;

 

(iii)                               all revenues
attributable to such Contractor’s Charter Service shall be for Continental’s
account;

 

(iv)                              Contactor shall
enter into such amendments to and/or terminations of existing agreements
relating to Contractor’s Charter Service as shall be requested by Continental,
including without limitation amendments to and/or terminations of airport and
office leases, maintenance agreements, aircraft leases or subleases,
reservation service agreements and service contracts;

 

(v)                                 all costs of Contractor’s
Charter Service and the wind-up of such service (under the direction and
management of Continental), shall be for Continental’s account, including
specifically the following:

 

(A)                              the cost of
termination of contracts relating solely to Contractor’s Charter Service,
including without limitation airport and office 

 

43

 

leases, maintenance agreements, aircraft leases or
subleases, reservation service agreements and service contracts;

 

(B)                                any necessary
employee termination and severance costs;

 

(C)                                costs of
removal, if any, of satellite-based passenger entertainment systems not used
for Regional Airline Services; and

 

(D)                               all costs and
expenses directly associated with the operation and management of Contractor’s
Charter Service incurred by Contractor from and after the Effective Date for
which Contractor is not otherwise compensated in block hour rates under this
Agreement (but not including non-cash expenses such as write-offs or
write-downs);

 

(vi)                              the
indemnification provisions of Article VII shall apply to both
Continental and Contractor with respect to such parties’ obligations in respect
of the continuation and wind-up of Contractor’s Charter Service; and

 

(vii)                           within 60 days
following the Effective Date, Continental shall amend the subleases of each aircraft
constituting part of Contractor’s Charter Service (x) so that the amended
sublease is in the form attached as Exhibit B and (y) to
provide that such sublease shall terminate upon termination of this Agreement.

 

Contractor
shall cooperate with Continental and use its reasonable best efforts to
mitigate the costs of Contractor’s Charter Service and the winding-up of such
service in a manner as is reasonably requested by Continental.  Upon the wind-up of Contractor’s Charter
Service with respect to any aircraft, at Continental’s direction and
management, such aircraft shall either become a Covered Aircraft or be returned
to Continental, in each case pursuant to Section 2.06 and, if
applicable, Section 2.09.  In
connection with the wind-up of Contractor’s Charter Services, Continental have
the opportunity to review a current summary and forecast of the maintenance and
repair status of and condition of each Charter Aircraft (including the United
Short-Term Aircraft), and select in its sole discretion the particular Charter
Aircraft (including any United Short-Term Aircraft) for the purposes of the
immediately preceding sentence.  Upon
delivery of possession of any aircraft returned pursuant to the immediately
preceding sentence, if all conditions set forth in the applicable Return
Aircraft Sublease, including any return conditions, have been satisfied in
accordance with its terms, then such Return Aircraft Sublease shall terminate,
in each case pursuant to Section 2.06 and, if applicable, Section 2.09.  Contractor shall provide Continental monthly
with a written statement of the costs for which Continental is obligated to
reimburse Contractor pursuant to this Section 10.01(b), signed by
the chief financial officer of Contractor. 
Within five Business Days after receipt by Continental of such written
statement, Continental shall pay Contractor the full sum of such costs for the
period at issue.  Notwithstanding
anything in this Agreement to the contrary, in the event this Agreement is
terminated by Continental and such termination is not attributable to a breach
by Contractor of its obligations under this Agreement with respect to the
Charter Aircraft or the Contractor’s Charter Service, the obligations of the
parties under this Agreement as to the Charter Aircraft, Contractor’s Charter
Service or as otherwise described in this Section 10.01(b), shall
continue until such time as the wind-up of Contractor’s Charter Service is
completed.

 

44

 

Section 10.02                          Notices.  All notices made pursuant to this Agreement
shall be in writing and shall be deemed given upon (a) a transmitter’s
confirmation of a receipt of a facsimile transmission (but only if followed by
confirmed delivery by a standard overnight courier the following Business Day
or if delivered by hand the following Business Day), or (b) confirmed
delivery by a standard overnight courier or delivered by hand, to the parties
at the following addresses:

 

if
to Continental:

 

Continental
Airlines, Inc.

77 West Wacker Drive

Chicago, IL 60601

Attention:  Alexandria P. Marren

Facsimile No.: (847) 700-9545

 

with
a copy to:

 

Continental
Airlines, Inc.

77 West Wacker Drive

Chicago, IL 60601

Attention:  General Counsel

Facsimile No.: (312) 997-8110

 

if
to Contractor:

 

ExpressJet
Airlines, Inc.

700 North Sam Houston Parkway West, Suite 200

Houston, Texas 77067

Attn: President

Facsimile No.: (832) 353-1008

 

with
a copy to:

 

SkyWest, Inc.

444 River Road

St. George, UT 84790

Attn:  Bradford R. Rich, Chief Financial
Officer

Facsimile No:  (435) 634 3305

Telephone No: (435) 634-3200

 

if
to Parent or any other Guarantor:

 

SkyWest, Inc.

444 River Road

St. George, UT 84790

Attn:  Bradford R. Rich, Chief Financial
Officer

Facsimile No:  (435) 634 3305

Telephone No:  (435) (634-3200)

 

45

 

or
to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section 10.02.

 

Section 10.03                          Binding
Effect; Assignment.  This
Agreement and all of the provisions hereof shall be binding upon the parties
hereto and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.  Except
with respect to a merger or other consolidation of either party with another
Person or the transfer of all or substantially all of the assets of either
party to another Person (in which event the surviving Person or the Person
acquiring the assets shall be deemed a successor and permitted assign) (and
without limiting Continental’s rights pursuant to Section 5.02 or 5.03
hereof), neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written consent
of the other parties.  In connection with
any assignment of this Agreement by Contractor or merger, consolidation or
other similar transaction that results in a successor to Contractor, Contractor
shall bear the cost of any payments or fees associated with such assignment,
merger, consolidation or other similar transaction, including without
limitation, any fees paid to secure route authorities, operating certificates,
permits and any similar costs for Contractor’s assignee, but excluding any
costs incurred by Continental in connection with providing notice to head
lessors of such assignment, merger, consolidation or other similar transaction.

 

Section 10.04                          Amendment
and Modification.  This
Agreement may not be amended or modified in any respect except by a written
agreement signed by the parties hereto that specifically states that it is
intended to amend or modify this Agreement.

 

Section 10.05                          Waiver.  The observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) by the party entitled to enforce such term, but
such waiver shall be effective only if it is in writing signed by the party
against which such waiver is to be asserted that specifically states that it is
intended to waive such term.  Unless
otherwise expressly provided in this Agreement, no delay or omission on the
part of any party in exercising any right or privilege under this Agreement
shall operate as a waiver thereof, nor shall any waiver on the part of any
party of any right or privilege under this Agreement operate as a waiver of any
other right or privilege under this Agreement nor shall any single or partial
exercise of any right or privilege preclude any other or further exercise
thereof or the exercise of any other right or privilege under this
Agreement.  No failure by any party to
take any action or assert any right or privilege hereunder shall be deemed to
be a waiver of such right or privilege in the event of the continuation or
repetition of the circumstances giving rise to such right unless expressly
waived in writing by each party against whom the existence of such waiver is
asserted.

 

Section 10.06                          Interpretation.  The table of contents and the section and
other headings and subheadings contained in this Agreement and in the exhibits
and schedules hereto are solely for the purpose of reference, are not part of
the agreement of the parties hereto, and shall not in any way affect the
meaning or interpretation of this Agreement or any exhibit or schedule
hereto.  All references to days (but not
Business Days) or months shall be deemed references to calendar days or
months.  All references to “$” shall be
deemed references to United States dollars. 
Unless the context otherwise requires, any reference to an “Article,” a “Section,”
an “Exhibit,” or a “Schedule” shall be deemed to refer to a section of this
Agreement or an exhibit or schedule to 

 

46

 

this
Agreement, as applicable.  The words “hereof,”
“herein” and “hereunder” and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement.  Whenever
the words “include,” “includes” or “including” are used in this Agreement,
unless otherwise specifically provided, they shall be deemed to be followed by
the words “without limitation.”  All
references in this Agreement to the past practices of “Contractor,” including
the practices of “Contractor” during any historical period (whether under this
Agreement or the Existing CPA), shall be deemed to refer to the performance or
practices of the entity that operated substantially all of the Covered Aircraft
during such historical period.  This
Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing the
document to be drafted.

 

Section 10.07                          Confidentiality.  Except as required by law or stock exchange
or other regulation or in any proceeding to enforce the provisions of this
Agreement, or as otherwise provided below, each party to this Agreement hereby
agrees not to publicize or disclose to any third party the terms or conditions
of this Agreement or any of the Ancillary Agreements, or any exhibit, schedule
or appendix hereto or thereto, or any CPA Records, without the prior written
consent of the other parties thereto (except that a party may disclose such
information to its third-party consultants, advisors and representatives, in
each case who are themselves bound to keep such information confidential).  Except as required by law or stock exchange
or other regulation or in any proceeding to enforce the provisions of this
Agreement or any of the Ancillary Agreements, or as otherwise provided below,
each party hereby agrees not to disclose to any third party any confidential
information or data, both oral and written, received from the other, whether
pursuant to or in connection with this Agreement or any of the Ancillary
Agreements, without the prior written consent of the party providing such
confidential information or data (except that a party may disclose such
information to its third-party consultants, advisors and representatives, in
each case who are themselves bound to keep such information confidential).  Each party hereby agrees not to use any such
confidential information or data of the other party other than in connection
with performing their respective obligations or enforcing their respective rights
under this Agreement or any of the Ancillary Agreements, or as otherwise
expressly permitted or contemplated by this Agreement or any of the Ancillary
Agreements.  If either party is served
with a subpoena or other process requiring the production or disclosure of any
of such agreements or information, then the party receiving such subpoena or
other process, before complying with such subpoena or other process, shall
immediately notify the other parties hereto of the same and permit said other
parties a reasonable period of time to intervene and contest disclosure or
production.  Upon termination of this
Agreement, each party must return to each other any confidential information or
data received from the other which is still in the recipient’s possession or
control.  Without limiting the foregoing,
no party shall be prevented from disclosing the following terms of this
Agreement: the number of aircraft subject hereto, the periods for which such
aircraft are subject hereto, and any termination provisions contained herein.  The provisions of this Section 10.07
shall survive the termination of this Agreement for a period of ten years.

 

Section 10.08                          Survival.  The obligations of the parties under Section 2.02,
Section 2.04, Section 2.08, Section 2.09, Article III,
Article IV, Article VII, Section 8.03(f), Section 8.03(i),
Section 10.01(b), Section 10.02, Section 10.07,
Section 10.08, Section 10.11, Section 10.12,
Section 10.13, Section 10.14, Section 10.15,
Section 10.16, Exhibit G, Exhibit H and Exhibit M

 

47

 

(to
the extent of any surviving obligations of Contractor) shall survive the
expiration or termination of this Agreement.

 

Section 10.09                          Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  The Agreement may be executed by facsimile
signature.

 

Section 10.10                          Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. 
Any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 10.11                          Equitable
Remedies; Limitation on Damages.

 

(a)                                  Equitable
Remedies.  Each party
acknowledges and agrees that, under certain circumstances, the breach by a
party of a term or provision of this Agreement will materially and irreparably
harm the other party, that money damages will accordingly not be an adequate
remedy for such breach and that the non-defaulting party, in its sole
discretion and in addition to its rights under this Agreement and any other
remedies it may have at law or in equity, may apply to any court of law or
equity of competent jurisdiction (without posting any bond or deposit) for
specific performance and/or other injunctive relief in order to enforce or
prevent any breach of the provisions of this Agreement.

 

(b)                                 Other
Limitations on Seeking Damages.  Neither the right of any party to terminate
this Agreement, nor the exercise of such right, shall constitute a limitation
on such party’s right to seek damages or such other legal redress to which to
which such party may otherwise be entitled; provided, that
absent the occurrence of another breach of this Agreement by Contractor and
without limiting the effect of the provisions of Sections 2.07 and 4.18,
Continental shall not be entitled to seek damages solely for the occurrence of
(i) an event of Cause of the type described in clause (iii) of
the definition thereof, (ii) a material breach of the type described in clauses (viii) or
(x) of Section 8.02(b), or (iii) any other breach
of this Agreement directly attributable to the matters described in clauses (i) or
(ii) above.

 

Section 10.12                          Relationship
of Parties.  Nothing in
this Agreement shall be interpreted or construed as establishing between the
parties a partnership, joint venture or other similar arrangement.

 

Section 10.13                          Entire
Agreement; No Third-Party Beneficiaries.  This Agreement (including the exhibits and
schedules hereto) and the Ancillary Agreements are intended by the parties as a
complete statement of the entire agreement and understanding of the parties
with respect to the subject matter hereof and all matters between the parties
related to the subject matter herein or therein set forth.  Specifically, this Agreement and each
Ancillary Agreement shall constitute a single, integrated agreement.  This Agreement is made among, and for the
benefit of, the parties hereto, and the parties do not intend to create any
third-party beneficiaries hereby, and no other Person shall have any rights
arising under, or interests in or to, this Agreement.

 

48

 

Section 10.14                          Governing
Law.  This Agreement is subject to,
and will be governed by and interpreted in accordance with, the laws of the
State of New York, excluding conflicts of laws principles, and of the United
States of America.  Any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Agreement may only be brought in the United States District Court
for the Southern District of New York (or, if such court does not accept
jurisdiction, such action or proceeding may only be brought in any New York
state court sitting in the County of New York, New York) and each of the
parties hereto irrevocably consents to the exclusive jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives, to the fullest extent permitted by law, any objection to
venue laid therein.  Notwithstanding the
preceding sentence, process in any action or proceeding referred to therein may
be served by appropriate means on the other party outside of the Southern
District of New York (or the County of New York, New York, as applicable).  Each party further agrees to waive any right
to a trial by jury.  Because a breach of
the provisions of this Agreement could not adequately be compensated by money
damages, any party shall be entitled to an injunction restraining such breach
or threatened breach and to specific performance of any provision of this
Agreement and, in either case, no bond or other security shall be required in
connection therewith, and the parties hereby consent to the issuance of such
injunction and to the ordering of specific performance.

 

Section 10.15                          Guarantee.  Contemporaneous with the execution and
delivery of this Agreement, Guarantor shall execute a guarantee in favor of
Continental in the form of Exhibit M.

 

Section 10.16                          Right
of Set-Off.  Subject to Section 3.06(c),
if any party hereto shall be in default hereunder or under any Ancillary Agreement
to any other party hereto, then in any such case the non defaulting party shall
be entitled to set off from any payment owed by such non defaulting party to
the defaulting party hereunder any amount due and owing by the defaulting party
to the non defaulting party thereunder and not subject to dispute in good
faith; provided, that contemporaneously with
any such set off, the non-defaulting party shall, unless legally enjoined or
otherwise stayed from doing so, give written notice of such action to the
defaulting party; provided further, that the
failure to give such notice shall not affect the validity of the set off.  It is specifically agreed that (i) for
purposes of the set off by any non defaulting party, mutuality shall be deemed
to exist between Continental and Contractor; (ii) reciprocity between
Continental and Contractor exists with respect to their relative rights and
obligations in respect of any such set off; and (iii) the right of set off
is given as additional security to induce the parties to enter into the
transactions contemplated hereby and by the Ancillary Agreements.  Upon completion of any such set off, the
obligation of the defaulting party to the non defaulting party shall be
extinguished to the extent of the amount so set-off.  Each party hereto further waives any right to
assert as a defense to any attempted set off the requirements of liquidation or
mutuality.  This set-off provision shall
be without prejudice, and in addition, to any right of set off, combination of
accounts, lien or other right to which any non defaulting party is at any time
otherwise entitled (either by operation of law, contract or otherwise),
including without limitation pursuant to Section 3.06(b)(ii) hereof.

 

Section 10.17                          Cooperation
with Respect to Reporting.  Each of the parties hereto agrees to use its
commercially reasonable efforts to cooperate with each other party in providing
necessary data, to the extent in the possession of the first party, required by
such other party in 

 

49

 

order
to meet any reporting requirements to, or otherwise in connection with any
filing with or provision of information to be made to, any regulatory agency or
other governmental authority.

 

Section 10.18                          Amendment
of Certain Contracts. 
Without Continental’s express prior written consent, (and such consent
shall not be unreasonably withheld) Contractor shall not amend, supplement,
grant a waiver or extension under, or otherwise modify or enter into a
replacement contract for, the Embraer Contract or any Flight Hour
Agreement.  In addition, Contractor shall
use its reasonable commercial efforts to assist Continental in the negotiation
of any Flight Hour Agreement or any amendment thereto.

 

50

 

IN WITNESS WHEREOF, the parties hereto have
caused this Second Amended and Restated Capacity Purchase Agreement to be duly
executed and delivered as of the date and year first written above.

 

	
   

  	
  CONTINENTAL
  AIRLINES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Jeffery
  A. Smisek

  
	
   

  	
  Title:

  	
  President &
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXPRESSJET
  AIRLINES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

SIGNATURE PAGE TO CAPACITY
PURCHASE AGREEMENT

 

 

SCHEDULE 1

Covered Aircraft

 

As last adjusted as of: November 12,
2010

 

***

 

 

SCHEDULE 1 -1

 

SCHEDULE 2

Transition Aircraft and Spare Engines

 

***

 

SCHEDULE 2 -1

 

SCHEDULE 3

Compensation for Capacity Purchase

 

A.                                   Base
and Incentive Compensation.

 

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

 

a.                                       98% of the
number of block hours set forth on the Final Monthly Schedule for such month,
multiplied by the “for each block hour” rate as set forth in Appendix 1
hereto; plus

 

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

 

For
purposes of this Paragraph 1, the weighted average number of Covered
Aircraft during any month shall be calculated by determining, for each Covered
Aircraft, the number of days during such month during which such aircraft was a
Covered Aircraft, and then aggregating such number of days for all Covered
Aircraft, and then dividing such aggregate number of days by the number of days
in such month. In addition, Continental will pay Contractor an allocation for
Reconciled Expenses set forth in Appendix 3, and as reconciled and
further described in Paragraph B(5)(a) below:

 

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

 

d.                                      for Reconciled
Expenses described in clauses (iii), (iv), (vi), (vii),
(x) and (xiii) of Paragraph B(5)(a) of
this Schedule 3, Base Compensation shall include an allocation
based on the statistical drivers set forth for such Reconciled Expenses on Appendix 3
and calculated in accordance with Paragraph B(5)(b).

 

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

 

2.                                       Incentive
Compensation.  With
respect to each calendar month, incentive compensation shall be calculated as
follows:

 

a.                                       On-Time
Bonus/Rebate.  The
reconciliation for any calendar month shall include, as applicable, a bonus
(represented by a payment by Continental to Contractor) or a rebate
(represented by a payment by Contractor to 

 

SCHEDULE 3 - 1

 

Continental),
in each case in respect of on-time performance, as determined pursuant to
paragraph 1 of Appendix 4 to this Schedule 3.

 

 

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

 

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

 

B.                                     Expenses
and Reconciliation.

 

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

 

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

 

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

 

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

 

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

 

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

 

SCHEDULE 3 - 2

 

f.                                         rent for
Terminal Facilities at Continental Airports;

 

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

 

h.                                      technology
services related to all passenger services processes; and

 

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

 

2.                                       Flight
Reconciliation.

 

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

 

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

 

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

 

3.                                       Flight
Cancellation Reconciliation.

 

a.                                       With respect to
Scheduled Flights, for any calendar month in which (x) the actual number
of Controllable Cancellations exceeds (y) the product of the FCR Factor
multiplied by the total number of actual Scheduled Flight departures
(calculated in accordance with past practices) in such calendar month (the “Benchmark
Controllable Cancellation Number” for such 

 

SCHEDULE 3 - 3

 

calendar
month), then the reconciliation for such period shall include a payment by
Contractor to Continental in an amount equal to the product of (i) the
Controllable Completion Factor Incentive Rate set forth on Appendix 2
multiplied by (ii) the number of such excess actual Controllable
Cancellations over the Benchmark Controllable Cancellation Number.  The “FCR Factor” shall be an amount
equal to (i) for any calendar month beginning prior to December 31,
2011, (A) for the purposes of any calculation pursuant to Paragraph
B(3)(a) of this Schedule 3, *** until the completion of
three full calendar months following the Effective Date and *** thereafter, and
(B) for the for the purposes of any calculation pursuant to Paragraph
B(3)(b) of this Schedule 3, ***; and (ii) for any
calendar month beginning on or after January 1, 2012, *** minus ***
expressed as a decimal rounded to the nearest 1/10,000th.

 

b.                                      With respect to
Scheduled Flights, for any calendar month in which (x) the Benchmark
Controllable Cancellation Number for such calendar month exceeds (y) the
actual number of Controllable Cancellations in such calendar month, then the
reconciliation for such period shall include a payment by Continental to
Contractor in an amount equal to the product of (i) the Controllable
Completion Factor Incentive Rate as set forth in Appendix 2 multiplied
by (ii) the excess of such Benchmark Controllable Cancellation Number over
the number of actual Controllable Cancellations.

 

c.                                       For all
purposes of this Agreement, the term Uncontrollable Cancellations shall include
the following:

 

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

 

II.                                     If any proposed
Scheduled Flight on a planned flight schedule involves a flight to a new
airport which will be a Contractor Airport, and Contractor experiences a delay
in preparing the required facilities and making all necessary arrangements to
complete a flight to such airport, which delay either (i) is caused by the
Environmental Protection Agency, airport or any other governmental authority,
or (ii) occurs after Contractor received less than 90 days’ advance notice
of such Scheduled Flight to a new airport and used its commercially reasonable
efforts to prepare the required facilities and make all necessary arrangements
(all in accordance with the Master Facility and Ground Handling Agreement), and
in either case such Scheduled Flight is cancelled, 

 

SCHEDULE 3 - 4

 

then
such cancellation shall constitute an Uncontrollable Cancellation; it being
understood that any airport to which Contractor flies on the Effective Date or
has previously flown pursuant to this Agreement shall not constitute a “new
airport.”

 

d.                                      For purposes of
this Schedule 3, in the event of a Labor Strike, all calculations of the
actual number of Controllable Cancellations and the Benchmark Controllable
Cancellation Number shall not include any Scheduled Flight cancelled as a
result of such Labor Strike.

 

e.                                       Contractor
hereby agrees that each cancellation of a Scheduled Flight shall be designated
as either a Controllable Cancellation or an Uncontrollable Cancellation on a
basis consistent with Continental’s historical experience and practice with
operators of its regional jets.

 

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

 

SCHEDULE 3 - 5

 

available
each day for such calendar quarter shall be calculated by determining, for each
Covered Aircraft other than Spare Aircraft, the number of days during such
calendar quarter during which such aircraft was a Covered Aircraft and
available for scheduling, and then aggregating such number of days for all
Covered Aircraft other than Spare Aircraft, and then dividing such aggregate
number of days by the number of days in such calendar quarter.

 

5.                                       Reconciled
Expenses.

 

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

 

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

 

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

 

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

 

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

 

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

 

(vi) air navigation fees paid to NavCanada (or
any Canadian successor thereto) and Servicios a la Navegacion en el Espacio
Aereo Mexicano (SENEAM) (or any Mexican successor thereto), in each case in

 

SCHEDULE 3 - 6

 

respect
of Scheduled Flights, it being understood that any fees paid to secure route
authorities (other than in connection with the initiation of routes not
previously flown by Contractor), operating certificates, permits and any
related costs will not be considered air navigation fees;

 

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

 

(viii) Incentive Program Costs;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

I.                                         The amount of
Aviation Insurance costs referred to in clause (iii) of Paragraph B(5)(a) and
the amount of TSA fees or charges and any other passenger security fees or
charges at all Contractor 

 

SCHEDULE 3 - 7

 

Airports
for security referred to in clause (vii) of Paragraph B(5)(a) included
in the Base Compensation for any particular month will be equal to the product
of (1) the insurance rate and TSA rates set forth on Appendix 3
multiplied by (2) the Forecasted Passengers for such month.

 

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

 

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

 

IV.                                 The amount of
Engine power-by-the-hour costs referred to in clause (xiii) of
Paragraph B(5)(a) included in the Base Compensation for any
particular month will be equal to the aggregate sum of the following products: (1) the
Engine power-by-the-hour costs rate set forth in Appendix 3,
multiplied by (2) the number of scheduled block hours set forth in the
Final Monthly Schedule, multiplied by (3) 98%.

 

6.                                       Insurance
Costs

 

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

 

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

 

SCHEDULE 3 - 8

 

block
hour rates or otherwise) to the extent that its insurance costs exceed the
Average Peer Group Rates.

 

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

 

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

 

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

 

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

 

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

 

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

 

SCHEDULE 3 - 9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SCHEDULE 3 - 10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

f.                                         Contractor
shall be reimbursed in full for the aggregate dollar amount of all Aviation
Insurance deductibles paid with respect to Regional Airline Services 

 

SCHEDULE 3 - 11

 

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

 

7.                                       Spare
Engine LLPs

 

a.                                       Subject to Paragraph 7(b),
Continental shall not be liable for replacement costs attributable to Spare
Engine LLPs in an amount in excess of the product of (i) the amount set
forth in the applicable invoice for the replacement of such Spare Engine LLP
and (ii) a fraction, the numerator of which shall be the product of (x) the
number of Covered Aircraft at such time and (y) ***, and the denominator
of which shall be the number of Spare Engines at such time.

 

b.                                      At Continental’s
request, Contractor shall cooperate with Continental to allow the replacement
costs attributable to Spare Engine LLPs associated with a portion of the Spare
Engines to be included in a power-by-the-hour arrangement; provided,
that such power-by-the-hour arrangement include Spare Engine LLPs installed on
a number of Spare Engines equal to or greater than the product of (x) the
number of Covered Aircraft at such time and (y) *** (a “Spare Engine
Power-by-the-Hour Arrangement”). 
During the effectiveness of any Spare Engine Power-by-the-Hour
Arrangement, Continental shall not be liable for any replacement costs
attributable to Spare Engine LLPs other than pursuant to such Spare Engine
Power-by-the-Hour Arrangement.  The Spare
Engines to be included in any Spare Engine Power-by-the-Hour Arrangement shall
consist of equal portions of the Spare Engines with the highest Average
Remaining Cycle Life and lowest Average Remaining Cycle Life (or, in the event
of an odd number of Spare Engines, as equal as possible with one more Spare
Engine with the lowest Average Remaining Cycle Life).  The “Average Remaining Cycle Life” for
a Spare Engine shall be the sum of the remaining cycle life for each Spare
Engine LLP installed on such Spare Engine divided by the total number of Spare
Engine LLPs installed on such Spare Engine.

 

c.                                       Promptly
following the effectiveness of any Spare Engine Power-by-the Hour Arrangement,
Contractor shall pay to Continental in respect of each Spare Engine that is not
included in such arrangement an amount equal to the product of (i) the
aggregate amount of Reconciliation Expenses described in clause (xii) of
Paragraph B(5)(a) incurred prior to the Spare Engine LLP
Reconciliation Date attributable to such Spare Engine LLP and (ii), a
fraction, the numerator of which is difference, as of the Reconciliation Date,
between the cycle limit on such Spare Engine LLP and the actual number of
cycles incurred on such Spare Engine LLP since such part was last replaced, and
the denominator of which is the cycle limit on such Spare Engine LLP.

 

d.                                      With respect to
each Spare Engine (other than any Spare Engine for which Contractor has made a
payment in accordance with clause (c) above), on the date 

 

SCHEDULE 3 - 12

 

such
Spare Engine ceases to be a Spare Engine, Contractor shall pay to Continental
in respect of such Spare Engine an amount equal to the product of (i) the
aggregate amount of Reconciliation Expenses described in clause (xii) of
Paragraph B(5)(a) attributable to such Spare Engine LLP (other
than any Reconciliation Expenses paid pursuant to a Spare Engine
Power-by-the-Hour Arrangement) incurred prior to such date attributable to such
Spare Engine LLP and (ii), a fraction, the numerator of which is
difference, as of such date, between the cycle limit on such Spare Engine LLP
and the actual number of cycles incurred on such Spare Engine LLP since such
part was last replaced, and the denominator of which is the cycle limit on such
Spare Engine LLP.

 

 

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

 

SCHEDULE 3 - 13

 

Schedule 3 Appendices

 

	
  Appendix
  1

  	
   

  	
  Base
  Compensation Rates

  
	
  Appendix
  2

  	
   

  	
  Controllable
  Completion Factor Incentives and Rebates

  
	
  Appendix
  3

  	
   

  	
  Reconciliation
  of Expenses

  
	
  Appendix
  4

  	
   

  	
  Incentive
  Bonuses/Rebates

  
	
  Appendix
  5

  	
   

  	
  Insurance
  Rates

  
	
  Appendix
  6

  	
   

  	
  Low
  Block Hour Utilization Rates

  

 

SCHEDULE 3 - 14

 

Appendix 1 to Schedule 3

 

Base Compensation Rates

 

	
  $***

  	
  For
  each block hour

  
	
  $***

  	
  For
  each Covered Aircraft for each month in the Term

  

 

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

 

 

Appendix 2 to Schedule 3

 

Controllable
Completion Factor Incentives and Rebates

 

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

 

 

Appendix 3 to Schedule 3

 

	
  Reconciled

  	
   

  	
  Schedule 3

  	
   

  	
  Statistical

  	
   

  	
   

  
	
  Expense

  	
   

  	
  Reference

  	
   

  	
  Driver

  	
   

  	
  Rate

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Terminal
  Facility Rent at Contractor Airports

  	
   

  	
  Sched3.B.5(a)(i)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Property
  Taxes

  	
   

  	
  Sched3.B.5(a)(ii)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Aviation
  Insurance

  	
   

  	
  Sched3.B.5(a)(iii)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Landing
  Fees

  	
   

  	
  Sched3.B.5(a)(iv)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Glycol
  and De-icing at Contractor Airports

  	
   

  	
  Sched3.B.5(a)(v)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Canadian
  and Mexican Air Navigation

  	
   

  	
  Sched3.B.5(a)(vi)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  TSA Fees or Charges and any Other Passenger
  Security Fees or Charges for Security at all Contractor Airports

  	
   

  	
  Sched
  3.B.5(a)(vii)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Incentive
  Programs

  	
   

  	
  Sched
  3.B.5(a)(viii)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  ARINC
  System Costs

  	
   

  	
  Sched
  3.B.5(a)(ix)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Landing
  Gear Overhaul and Landing Gear LLP Costs

  	
   

  	
  Sched
  3.B.5(a)(x)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Engine
  LLP Costs

  	
   

  	
  Sched
  3.B.5(a)(xi)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Spare
  Engine LLP Costs

  	
   

  	
  Sched.
  3.B.5(a)(xii)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  
	
  Engine
  Power-by-the-Hour Costs

  	
   

  	
  Sched
  3.B.5(a)(xiii)

  	
   

  	
  ***

  	
   

  	
  $

  	
   ***

  

 

	
  *
  

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

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

  

 

 

Appendix 4 to Schedule 3

 

Incentive Bonuses/Rebates

 

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

 

a.                                      Contractor’s
on-time Scheduled Flight departures to or from each of EWR, CLE and IAH shall
be measured monthly. For the purposes of this Appendix 4, a
Scheduled Flight departure is an “on time” departure only if such Scheduled
Flight actually departed the gate not later than the scheduled departure time. “Excused
Departures” are cancelled flights and those Scheduled Flight departures that
were prevented from departing on time solely because of weather, ATC, late
arriving equipment delays, or departures delayed upon Continental’s request or
any combination thereof as determined by Continental in accordance with its
systems operations control center delay coding protocol.  As of January 2010, numerical delay
codes for weather, ATC, late arriving equipment or Continental’s request are
82, 86, 80, 10, 11, and 13, respectively.

 

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

 

For purposes of this Appendix 4, the “Monthly
Historical Percentage” for any of EWR, CLE or IAH for any month shall equal
the average of the actual number of Scheduled Flight on-time departures during
the respective calendar month during each of the last five full calendar years
prior to the month in question (expressed as percentages of Contractor’s
Scheduled Flight departures for any such calendar month to or from any of EWR,
CLE or IAH, respectively, that are not Excused Departures); provided, that for the purposes of calculating the Monthly Historical
Percentage, for any month of any prior year during which Contractor did not
have operations hereunder at such airport, the performance data for such month
shall include data for all regional aircraft flights that 

 

 

month that were operated to or from such airport as
Continental Connection or Continental Express, to the extent that such
historical performance data is available and that Continental in good faith
deems reliable and accurate is available (it being acknowledged, for the
avoidance of doubt, that if Contractor had operations hereunder to or from such
airport during any month, then only Contractor’s performance data to or from
such airport that month shall be taken into account for purposes of calculating
the Monthly Historical Percentage). Should the processes currently utilized by
the air traffic control system in the United States to manage commercial
aircraft change in any material way, Contractor and Continental agree, if
requested in writing by either party, to meet and confer within the next thirty
(30) days, in good faith to adjust the targets. 
Additionally, should Continental’s hub flight schedule or ground
handling performance materially change from historical performance levels, if
requested in writing by either party, Contractor and Continental agree to meet
and confer in good faith to adjust the targets. 
In either case, should the parties be unable, despite their good faith
efforts, to reach an agreement on adjustments to the prospective targets to
take into account the effect of such material change, all the on-time incentive
provisions (both bonus and rebate) set forth in this Appendix 4
will cease to be of any force or effect from and after the end of such thirty
(30) day-period.  Notwithstanding the
foregoing definition of Monthly Historical Percentages, the Monthly Historical
Percentages for EWR, CLE or IAH for each of the months during the calendar year
2010 is hereby stipulated by the parties as being as follows (it being acknowledged
that the Monthly Historical Percentages for months during subsequent calendar
years shall be determined as above provided):

 

	
   

  	
   

  	
  CLE

  	
   

  	
  EWR

  	
   

  	
  IAH

  
	
  January

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  February

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  March

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  April

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  May

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  June

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  July

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  August

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  September

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  October

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  November

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  December

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  

 

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

 

2.             Fuel Efficiency Bonus:  At Continental’s expense, Contractor agrees
to implement a Fuel efficiency program modeled on Continental’s Fuel program as
set forth in Exhibit L following the mutual agreement of Contractor
and Continental with respect to the matters set forth in the last sentence of
this paragraph.  Contractor acknowledges
that such program is the property of 

 

 

Continental,
shall be deemed confidential by Contractor and, for Contractor but not for
Continental, shall be subject to the provisions of Section 10.07 of
the Agreement. If Contractor achieves the applicable target Fuel efficiency
under such program, then Continental shall pay Contractor a Fuel efficiency
bonus equal to (a) 10% of the annual Fuel savings attributable to the Fuel
efficiency program, less (b) any expenses incurred or reimbursable by
Continental under the terms of the program for its development, implementation
or management by Contractor.  The program
shall specify a measurement period and a Fuel savings measurement mechanism,
including target adjustments for stage length, load factor and flight hour to
block hour ratio.

 

 

Appendix 5 to Schedule 3

 

Insurance Rates

 

	
  Insurance Type

  	
   

  	
  Rate

  	
   

  	
  Driver Units

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hull Insurance

  	
   

  	
  $

  	
  ***

  	
   

  	
  per
  $100 value

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Liability Insurance

  	
   

  	
  $

  	
  ***

  	
   

  	
  per
  1000 RPMs

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  War Risk Insurance

  	
   

  	
  $

  	
  ***

  	
   

  	
  per
  1000 RPMs and

  
	
   

  	
   

  	
  $

  	
  ***

  	
   

  	
  per
  Passenger

  

 

 

Appendix 6 to Schedule 3

 

***

 

 

SCHEDULE
4

Return
Aircraft Sublease — Supplemental Terms

 

Terms Relating to United 8 Aircraft

 

The terms of the applicable Return Aircraft Sublease
for the United Aircraft listed in Section A.1 of Schedule 2,
identified as “United 8 Aircraft,” are modified and supplemented as follows:

 

Basic Rent

 

The basic rent payable
under each Return Aircraft Sublease for United 8 Aircraft will be the
following. The Basic Rent will be $*** per United 8 Aircraft per month, through
the period ending at the end of the month in which the total number of aircraft
months for the Return Aircraft Subleases for the United 8 Aircraft (measured in
the aggregate for all United 8 Aircraft) equals two hundred forty (240) (the “Baseline
Date”).  (For purposes of calculating
the Baseline Date, if any partial month in which the applicable Return Aircraft
Sublease commences on or before the 15th of
the month, then such month shall count as a full aircraft month, and, if any
partial month in which the applicable Return Aircraft Sublease commences after
the 15th of the month,
then such month shall not count as any portion of an aircraft month.)  During the month in which the Baseline Date
is reached, the basic rent will be $*** per United 8 Aircraft per month for
each aircraft month in excess of two hundred forty (240) accrued during such
month.  For eighteen months after the
Baseline Date, the basic rent will be $*** per United 8 Aircraft per
month.  For the nineteenth month after
the Baseline Date and for so long thereafter as such Return Aircraft Sublease
is in effect, the basic rent will be $*** per United 8 Aircraft per month.  Contractor shall provide reasonable
documentation and access to Contractor’s maintenance records so that
Continental may substantiate all charges, maintenance events, operational
statistics and expenses reimbursable hereunder. 
The basic rent for partial months will be pro-rated based on the number
of calendar days in such month.  Notwithstanding
the payment terms for basic rent set forth in the applicable aircraft sublease,
payment of basic rent for the United 8 Aircraft for each month will be made on
the first Business Day of such month, or the first Business Day of the term of
each applicable Return Aircraft Sublease, if such Return Aircraft Sublease term
commences after the first Business Day of any month.

 

Landing Gear Charge

 

In addition to the basic
rent and engine LLP charges set forth below, Contractor shall also pay to
Continental a charge of $*** for every aircraft cycle flown after the sublease
term commencement by the United 8 Aircraft for so long as each United 8
Aircraft remains a United 8 Aircraft as compensation for the consumption of
landing gear useful life between overhauls, including the consumption of the
useful life of landing gear LLP. These charges are non-refundable and are not
in any way predicated or contingent upon the performance of any landing gear
maintenance, overhaul or parts replacement. 
Such payment shall be made on the 15th day of the month following the
month of operation (or if such day is not a Business Day, the next Business
Day).  If Contractor incurs out-of-pocket
expenses for the scheduled overhaul of landing gear, including landing gear LLP
replacement expenses (excluding removal and installation 

 

SCHEDULE 4 - 1

 

expenses and otherwise consistent with Paragraph B(5)(a)(x)
of Schedule 3) for landing gear removed from such United 8
Aircraft, then Continental shall reimburse Contractor for such expenses, within
30 days of Contractor’s presentation to Continental of an invoice along with
evidence that Contractor has paid all applicable third parties for such
material and services.  Contractor shall,
in a manner consistent with industry best practices, prolong the life of
landing gear assemblies as long as possible before removing for scheduled
maintenance.

 

Engine LLP Charge

 

In addition to the basic
rent and landing gear charges set forth above, Contractor shall also pay to
Continental a charge of $*** for every aircraft cycle flown after the Return
Aircraft Sublease term commencement by the United 8 Aircraft for so long as
each United 8 Aircraft remains a United 8 Aircraft as compensation for the
consumption of the useful life of engine LLP. 
It being acknowledged that, as of December 22, 2009, Contractor provided
the Spare Engines and Contractor and Continental agreed to reduce the above
rate of $*** to $*** for the term and any extension thereof of the Return
Aircraft Subleases for so long as Contractor continues to provide at least 42
Spare Engines.  To the extent that the
number of Spare Engines becomes less than 42 (whether or not periodically
unserviceable in the ordinary course of business), the rate of $*** will be
increased by $*** for each such Spare Engine up to a maximum rate of $***.
These charges are non-refundable and are not in any way predicated or
contingent upon the replacement of any engine LLP.  Such payment shall be made on the 15th day of
the month following the month of operation (or if such day is not a Business
Day, the next Business Day).

 

Engine LLP Program

 

If the Engine Maintenance
Agreement is amended to provide coverage for life-limited parts for engines (as
defined in Contractor’s maintenance program) replacement in exchange for a
charge per cycle (or a similar arrangement) (an “LLP Program”) and the
engines associated with the United 8 Aircraft pursuant to the applicable Return
Aircraft Sublease are included within the scope of such LLP Program, then, upon
the commencement of such LLP Program and thereafter, for so long as such
engines remain within the scope of an LLP Program, Contractor shall be relieved
of its obligation to pay the engine LLP charge described above, conditioned
upon Contractor making payment to the maintenance provider of the LLP Program
services, for all charges payable under such LLP Program relating to the cycles
(or other operable parameter that may be the basis for payment under such LLP
Program).  Without limiting Contractor’s
right to decide whether or not the engines associated with the United 8
Aircraft are included within the scope of an LLP Program, Contractor shall keep
the engines associated with the United Aircraft within the scope of the Engine
Maintenance Agreement (excluding any provisions related to such LLP Program),
unless otherwise agreed by Continental, and, if so directed by Continental,
Contractor shall include the engines associated with the United 8 Aircraft
within the scope of the LLP Program, provided,
that if the charges to include such engines in the LLP Program exceeds the per
cycle fee set forth in the preceding paragraph, then Continental will reimburse
Contractor for such excess costs.

 

SCHEDULE 4 - 2

 

Engine LLP Replacement Expenses

 

If Contractor incurs out-of-pocket
expenses for replacement of life-limited parts for engines (as defined in
Contractor’s maintenance program) for the cycle limit driven replacement of
such parts for engines associated under the applicable Return Aircraft Sublease
with the United 8 Aircraft (consistent with Paragraph B(5)(a)(xi)
of Schedule 3), then Continental shall reimburse Contractor for
such expenses, within 30 days of Contractor’s presentation to Continental of an
invoice along with evidence that Contractor has paid all applicable third
parties for such material and services. 
Contractor shall, in a manner consistent with industry best practices,
prolong the life of such engine life-limited parts as long as possible before
replacement.

 

Return Aircraft Sublease Term
Commencement

 

The term of each Return
Aircraft Sublease for the United 8 Aircraft will commence on the later of the
(i) date that such aircraft is released from its status as a Covered
Aircraft and no longer providing Regional Airline Services, or (ii) date set
forth in the following schedule: 
(a) December 29, 2009 for the first two United 8 Aircraft,
(b) January 5, 2010 for the third, fourth, fifth and sixth United 8
Aircraft and (c) April 6, 2010 for the seventh and eighth United 8
Aircraft.  Upon transition of such
aircraft from Covered Aircraft to United 8 Aircraft, such aircraft shall be
fully fueled at Continental’s expense and Contractor shall deliver to
Continental a delivery receipt, including a description of operational and
maintenance history, in a form reasonably acceptable to Continental.

 

Return Sublease Term Duration

 

The average term of all
of the Return Aircraft Subleases for the United 8 Aircraft will be thirty (30)
months from May 1, 2010; provided,
that the minimum term for any such Return Aircraft Sublease is twenty-four (24)
months from May 1, 2010; and provided
further, that if the thirty (30) month average term described above
for such Return Aircraft Subleases is less than the average term of all the
United Other Aircraft operated by Contractor pursuant to the United Agreement,
then, upon Continental’s election, the term of one or more of such Return
Aircraft Subleases for the United 8 Aircraft will be extended such that the
average term (measured from May 1, 2010) of all the Return Aircraft Subleases
for United 8 Aircraft equals the average term for all of the United Other
Aircraft operated by Contractor pursuant to the United Agreement.  If United elects to extend the term of the
United Agreement, then Contractor shall immediately notify Continental of such
election in writing.

 

Each time that United
extends the term of the United Agreement Continental may extend the term of one
or more of the Return Aircraft Subleases for United 8  Aircraft for the term of such extension (but
not beyond April 30, 2015), but not more than the number of Return Aircraft
Subleases for United 8 Aircraft that would cause the total number of Return
Aircraft Sublease for United 8 Aircraft terms extended (including any extension
options exercised by Contractor as provided below) to exceed one Return
Aircraft Sublease for United 8 Aircraft for every two United Other Aircraft
covered by such extension of the United Agreement.  Within twenty (20) days of notice by
Contractor to Continental that United has elected to extend the United
Agreement, Continental shall 

 

SCHEDULE 4 - 3

 

provide notice to Contractor identifying the
particular Return Aircraft Subleases for United 8 Aircraft that Continental
elects to extend, if any, as described above.

 

Each time that United
extends the term of the United Agreement; provided,
that Continental is given notice of such election no less than six (6) months
prior to the effective date of such extension, Contractor may extend the term
of one or more of the Return Aircraft Subleases for United 8 Aircraft for the
term of such extension (but not beyond April 30, 2015), but not more than the
number of Return Aircraft Subleases for United 8 Aircraft that would cause the
total number of Return Aircraft Sublease for United 8 Aircraft terms extended
(including any extension options exercised by Continental as provided above) to
exceed one Return Aircraft Sublease for United 8 Aircraft for every two United
Other Aircraft covered by such extension of the United Agreement.  Within twenty (20) days of notice by
Contractor to Continental that United has elected to extend the United
Agreement, Contractor shall provide notice to Continental of the number of
Return Aircraft Subleases of United 8 Aircraft that Contractor wishes to
extend.  Continental shall select the
particular United 8 Aircraft for which the Return Aircraft Sublease(s) will be
extended.

 

For the avoidance of
doubt, in all events, at such time as the United Agreement terminates as to a
United Aircraft, the term of the Return Aircraft Sublease for such aircraft
shall terminate and the aircraft shall be returned to Continental in accordance
with Section 2.06.

 

Contractor Representations Regarding
the United Agreement

 

Contractor warrants and
represents that (a) of the thirty-two (32) aircraft to be operated by
Contractor pursuant to the United Agreement (i) the term for which the United
Agreement is applicable to eleven (11) of such aircraft is not less than
twenty-four (24) months, (ii) the term for which the United Agreement is
applicable to the other eleven (11) aircraft is not less than thirty-six (36)
months, and (iii) the term for which the United Agreement is applicable for ten
(10) of such aircraft expires no sooner than December 15, 2010, (b) Contractor
will immediately notify Continental of any notice provided by United related to
any extension of the term of the United Agreement, (c) Contractor will promptly
provide notice of any change to the notice provisions of the United Agreement relating
to the term thereof, and (d) Contractor will provide a true and correct
representation with respect to the term of the United Agreement and any
extension options.

 

Terms Relating to United Other
Aircraft and the United Short-Term Aircraft

 

The terms of the applicable Return Aircraft Sublease
for the United Aircraft listed in Section A.2 of Schedule 2,
identified as “United Other Aircraft,” and 10 of the aircraft identified in Section
B of Schedule 2 as being operated for United (“United Short-Term Aircraft”)
are modified and supplemented as follows:

 

SCHEDULE 4 - 4

 

Basic Rent

 

The basic rent payable
under each Return Aircraft Sublease for the United Other Aircraft and the
United Short-Term Aircraft is set forth in the following table:

 

***

 

SCHEDULE 4 - 5

 

EXHIBIT A

Definitions

 

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

 

Additional
Aircraft — is defined in Section 2.04.

 

Adjustment
Date — is defined in Section 3.02.

 

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

 

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

 

Affiliate
CPA — means a capacity purchase agreement and accompanying ancillary
agreements entered into pursuant to Section 2.07, in each case
between Continental and an Affiliate of Contractor that is in the business of
providing passenger air service, with terms and conditions identical to the
terms of this Agreement and the Ancillary Agreements; provided,
that the identity of the parties, the aircraft and the engines shall be revised
appropriately; provided further, that the
Capacity Purchase Arrangement shall contain (i) representations and
warranties by such Affiliate regarding conflicts and defaults coextensive with
the representations in Sections 4(g) and 4(h) of the Guarantee,
but without any qualification as to knowledge, (ii) provisions in the
Guarantee reflecting the then-existing partial ownership (if applicable) of
such Affiliate by Guarantor (but otherwise containing the restrictive
provisions set forth in Section 5 of the Guarantee as to Guarantor’s
then-existing partial ownership) and (iii) cross default provisions
similar to Sections 8.02(d) and 8.02(e) but
relating to this Agreement, and, unless otherwise agreed by the parties, shall
exclude provisions similar to Sections 2.04, 2.06, 2.11,
6.04, 6.05 and 10.01 of this Agreement and, in any
provision substantially similar to Section 6.01(a), all references
to $*** million shall be $*** million with respect to any aircraft with more
than 50  passenger seats.

 

 

Affiliate
Marks — is defined in Section 4.12.

 

Agreement — means this
Second Amended and Restated Capacity Purchase Agreement, dated as of the
Effective Date, among Continental and Contractor, as amended from time to time
pursuant to Section 10.04 hereof.

 

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

 

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

 

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

 

Audit
Period — is defined in Section 3.05.

 

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

 

Average Peer Group Rates — means, with respect to
any insurance coverage and as of any date of determination, (x) the
insurance rates set forth on Appendix 5 to Schedule 3, multiplied
by (y) the average percentage increase or decrease, as appropriate, from January 1,
2010 to such date of determination, in the cost of such insurance coverage for
the five regional airlines with annual revenue passenger miles closest to those
of 

 

 

Contractor,
as determined by available information obtained from public sources or
reputable insurance brokers, excluding (i) any such regional airline that
experienced a major loss within the previous three years, and (ii) any
regional airline whose insurance rates are included with its major airline
partner(s).

 

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

 

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

 

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

 

Baseline
Date — is defined in Schedule 4.

 

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

 

Benchmark
Controllable Cancellation Number — is defined in Paragraph B(3)(a) of
Schedule 3.

 

Business
Day — means each Monday, Tuesday, Wednesday, Thursday and Friday unless
such day shall be a day when financial institutions in New York, New York or
Houston, Texas are authorized by law to close.

 

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

 

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

 

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

 

Change
of Control — means:

 

(i)                                     Parent consolidates with, or
merges with or into, a Prohibited Person or conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to a 

 

 

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

 

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

 

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

 

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

 

(v)                                 the sale, transfer or other
disposition of all or substantially all of the airline assets of Parent or
Contractor on a consolidated basis directly or indirectly to a 

 

 

Prohibited
Person or its Affiliate, whether in a single transaction or a series of related
transactions; or

 

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

 

Charter
Aircraft — is defined in Section 2.06(a).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Continental — means
Continental Airlines, Inc., a Delaware corporation, and its successors and
permitted assigns.

 

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

 

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

 

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

 

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

 

Continental
Hub Airport — means (i) George Bush Intercontinental
Airport in Houston, Texas (IAH), Hopkins International Airport in Cleveland,
Ohio (CLE) and Liberty International Airport in Newark, New Jersey (EWR), and
(ii) as of any date of determination, any other airport at which
Contractor operates an average of more than 50 Scheduled Flights per day during
the 90 days prior to such date of determination.

 

Continental
Marks — is defined in Exhibit G.

 

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

 

Contractor — means
ExpressJet and its successors and permitted assigns.

 

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

 

Contractor’s
Charter Service — is defined in Section 10.01(b).

 

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

 

 

such
aircraft manufactured within specific time frames), in each case, if such
aircraft constitutes one or more Covered Aircraft.

 

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

 

Contractor
Marks — is defined in Exhibit H.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Covered
Aircraft — means all of the aircraft listed on Schedule 1
(as amended from time to time pursuant to the provisions of this Agreement) and
presented for service by Contractor, as adjusted from time to time for
additions and withdrawals pursuant to Article II, Section 4.18,
Article VIII and Section 10.01(b) (it being understood
by the parties hereto that Schedule 1 shall be revised from time to
time to reflect any such additions and withdrawals).

 

 

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

 

CPA
Aircraft — means any regional aircraft operated by (i) Contractor
under a Capacity Purchase Arrangement (including this Agreement) with
Continental and (ii) an Affiliate of Contractor under a Capacity Purchase
Arrangement or Affiliate CPA entered into as a result of Contractor’s election
pursuant to Section 2.04, 2.05, 2.07 or 2.08;
but excluding (x) Make-Whole Aircraft and (y) following the United
Merger, any aircraft subject to a Capacity Purchase Arrangement between either
Contractor or, in the event of a merger of Contractor and Atlantic Southeast
Airlines, Inc. (“ASA”), ASA and United, which Capacity Purchase
Arrangement was in effect as of the earlier of (a) the Effective Date or (b) the
effective time of the United Merger.  For
the avoidance of doubt, regional aircraft operated by SkyWest Airlines, Inc.
(“SA”) for United shall not be CPA Aircraft except to the extent such
aircraft are operated by SA as a result of the provisions of Section 2.04,
2.05, 2.07 or 2.08 hereof.

 

CPA
Records — is defined in Section 3.05.

 

CPA
Target Income — is defined in Section 3.07.

 

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

 

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

 

 

DOT — means the
United States Department of Transportation.

 

Effective
Date — means November 12, 2010.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Expiration
Aircraft — is defined in Section 2.04.

 

 

ExpressJet — means
ExpressJet Airlines, Inc., a Delaware corporation.

 

FAA — means the
United States Federal Aviation Administration.

 

FCR  Factor — is defined in Paragraph B(3)(a) of
Schedule 3.

 

Final
Monthly Schedule — means the final schedule of Scheduled Flights for
the next calendar month delivered by Continental to Contractor pursuant to Section 2.01(b).

 

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

 

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

 

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

 

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

 

Flight
Related Revenue — is defined in Section 2.02.

 

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

 

 

Fuel — means any
fuel customarily used as aviation fuel.

 

Fuel
Purchasing Agreement — means that certain Fuel Purchasing Agreement,
dated as of the Effective Date, between Continental and Contractor, in the form
attached hereto as Exhibit F (or as otherwise agreed or amended).

 

Growth
Aircraft — is defined in Section 2.04(a).

 

Guarantor —
means each of (i) Parent, (ii) ExpressJet Holdings, Inc., a
Delaware corporation, (iii) XJT Holdings, Inc., a Delaware
corporation, and (iv) Atlantic Southeast Airlines, Inc., a Georgia
corporation.

 

Guaranty — means that
certain Guaranty Agreement, dated as of the Effective Date, between Guarantor
and Continental.

 

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

 

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

 

Indemnified
Party — is defined in Section 7.03.

 

Indemnifying
Party — is defined in Section 7.03.

 

Indemnity
Notice — is defined in Section 7.03.

 

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

 

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

 

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

 

LLP
Program — is defined in Schedule 4.

 

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

 

Major
Carrier — means an air carrier (other than Continental and its successors and
any Subsidiary thereof), the consolidated annual revenues of which for the most
recently 

 

 

completed
fiscal year for which audited financial statements are available are in excess
of the Revenue Threshold as of the date of determination (or the U.S. dollar
equivalent thereof).

 

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

 

Make-Whole
Aircraft — is defined in Section 2.04(d).

 

Master
Facility and Ground Handling Agreement — means that certain Master
Facility and Ground Handling Agreement, dated as of the Effective Date, between
Continental and Contractor, in the form attached hereto as Exhibit C
(or as otherwise agreed or amended).

 

Minimum
Percentage — is defined in Section 2.04(c).

 

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

 

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

 

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

 

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

 

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

 

Person — means an
individual, partnership, limited liability company, corporation, joint stock
company, trust, estate, joint venture, association or unincorporated
organization, or any other form of business or professional entity.

 

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

 

 

Prohibited
Transfer — is defined in Section 5.03.

 

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

 

Rate
Reset Aircraft — is defined in Section 2.11(b).

 

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

 

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

 

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

 

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

 

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

 

Reset
Rate — is defined in Section 2.11(b).

 

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

 

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

 

Revenue
Threshold — means 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 CPI has increased to such date above
the CPI for calendar year 2000.  For
purposes hereof, the CPI for calendar year 2000 is the monthly average of the
CPI for the twelve months ending on December 31, 2000.

 

Savings
— is defined in Section 3.07.

 

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

 

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

 

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

 

 

Section 2.08(b) (and thus
may not begin until the day after the date of any Commodity Withdrawal Event,
if any, that may otherwise have occurred during such 90-day period).

 

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

 

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

 

SkyWest
Merger — means the legal merger contemplated by the Agreement and Plan of
Merger, dated as of August 3, 2010, by and among Parent, Express Delaware
Merger Co., an indirect, wholly-owned subsidiary of Parent, and ExpressJet
Holdings, Inc., the parent of Contractor.

 

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

 

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

 

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

 

Spare
Engine LLP Reconciliation Date — is defined in Paragraph B(7)(d) of
Schedule 3.

 

Spare
Engine Power-by-the-Hour Arrangement — is defined in Paragraph B(7)(b) of
Schedule 3.

 

Storage
Sublease — means the Storage Sublease (or a lease)
substantially in the form of the Exhibit P(1) (or as otherwise
agreed or amended) between Continental and Contractor, pursuant to which
Contractor subleases (or leases) a Parked Aircraft, Other Subleased Aircraft or
other aircraft from Continental pursuant to the terms of this Agreement.  

 

(1) 
Form of Storage Sublease to be agreed upon by Contractor and Continental
prior to the Effective Date with both parties acting reasonably and in good
faith

 

 

Storage
Sublease shall also include any deemed Storage Sublease as provided in Section 2.09(c).

 

Subsidiary — means, as to
any Person, (a) any corporation more than 50% of whose stock of any class
or classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether or not
at the time, any class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
owned by such Person directly or indirectly through Subsidiaries and
(b) any partnership, association, joint venture, limited liability
company, joint stock company or any other form of business or professional
entity, in which such Person directly or indirectly through Subsidiaries has
more than 50% equity interest at any time.

 

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

 

Target
Savings — is defined in Section 3.07.

 

Term — has the
meaning set forth in Section 8.01, as earlier terminated pursuant
to Section 8.02, if applicable, and any Wind-Down Period.

 

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

 

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

 

TSA — means the
United States Transportation Security Administration.

 

Uncontrollable
Cancellation — means a cancellation of a Scheduled Flight that
is (A) solely weather-related, air traffic control-related or an event
described in Paragraph B(3)(c) of Schedule 3, in
each case as coded on Contractor’s operations reports 

 

 

in
accordance with Continental’s standard coding policies and pursuant to Paragraph B(3)(e) of
Schedule 3, it being understood and agreed that if Continental’s
operations are subject to the same circumstance giving rise to the cancellation
and Continental does not cancel flights as a result (except where such
circumstances apply differently to Contractor’s aircraft type and Continental’s
aircraft type), such cancellation shall be a Controllable Cancellation,
(B) flights cancelled due to aircraft damage caused by Continental or its
agents, (C) the result of a non-carrier specific grounding of any
Contractor Fleet by regulatory or court order or other governmental action,
(D) cancellations on any day during which a Labor Strike is continuing or
(E) cancellations due to extraordinary events beyond Contractor’s
reasonable control, it being understood and agreed that if Continental’s
operations are subject to the same circumstance giving rise to the cancellation
and Continental does not cancel flights as a result, such cancellation shall be
a Controllable Cancellation.

 

United — means United
Airlines, Inc., a Delaware corporation, and its successors and assigns.

 

United
8 Aircraft — is defined in Section 2.06(a).

 

United
Agreement — means that certain United Express Agreement, as
amended, dated December 1, 2009, by and among Contractor and United.

 

United
Aircraft — is defined in Section 2.06(a).

 

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

 

United
Other Aircraft — is defined in Section 2.06(a).

 

United
Short-Term Aircraft — is defined in Section 2.06(a).

 

Wind-Down
Period — means the period after the Termination Date and until the time when
the last Covered Aircraft has been withdrawn from the capacity purchase
provisions of this Agreement.

 

Wind-Down
Schedule — means the schedule, determined as provided in Article VIII
of this Agreement, for Covered Aircraft to be withdrawn from the capacity
purchase provisions of this Agreement.

 

Withdrawal/Rate
Reset Notice — is defined in Section 2.11(b).

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