Document:

Exhibit 10.39

 

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 406

 

 

EMBRAER-170

 

 

PURCHASE AGREEMENT DCT-
014/2004

 

 

between

 

 

EMBRAER - EMPRESA BRASILEIRA DE
AERONÁUTICA S.A.

 

 

and

 

 

REPUBLIC AIRLINE, INC.

 

 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE
SECURITIES ACT OF 1933.  THE OMITTED
MATERIALS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

 

INDEX

 

	
   

  	
  ARTICLE

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
   

  
	
  2.

  	
  SUBJECT

  	
   

  
	
  3.

  	
  PRICE

  	
   

  
	
  4.

  	
  PAYMENT

  	
   

  
	
  5.

  	
  DELIVERY

  	
   

  
	
  6.

  	
  CERTIFICATION

  	
   

  
	
  7.

  	
  ACCEPTANCE AND TRANSFER OF OWNERSHIP

  	
   

  
	
  8.

  	
  STORAGE
  CHARGE

  	
   

  
	
  9.

  	
  DELAYS IN DELIVERY

  	
   

  
	
  10.

  	
  INSPECTION AND QUALITY CONTROL

  	
   

  
	
  11.

  	
  CHANGES

  	
   

  
	
  12.

  	
  WARRANTY

  	
   

  
	
  13.

  	
  PRODUCT SUPPORT PACKAGE

  	
   

  
	
  14.

  	
  ASSIGNMENT

  	
   

  
	
  15.

  	
  RESTRICTIONS AND PATENT INDEMNITY

  	
   

  
	
  16.

  	
  MARKETING PROMOTIONAL RIGHTS

  	
   

  
	
  17.

  	
  TAXES

  	
   

  
	
  18.

  	
  APPLICABLE
  LAW

  	
   

  
	
  19.

  	
  ARBITRATION

  	
   

  
	
  20.

  	
  SOVEREIGN IMMUNITY, VENUE AND FORUM NON
  CONVENIENS

  	
   

  
	
  21.

  	
  TERMINATION

  	
   

  
	
  22.

  	
  RIGHT TO PURCHASE THE CONDITIONAL AIRCRAFT

  	
   

  
	
  23.

  	
  OPTION FOR THE PURCHASE OF ADDITIONAL
  AIRCRAFT

  	
   

  
	
  24.

  	
  NOTICES

  	
   

  
	
  25.

  	
  CONFIDENTIALITY

  	
   

  
	
  26.

  	
  INTEGRATED AGREEMENT

  	
   

  
	
  27.

  	
  NEGOTIATED AGREEMENT

  	
   

  
	
  28.

  	
  COUNTERPARTS

  	
   

  
	
  29.

  	
  ENTIRE
  AGREEMENT

  	
   

  
	
  30.

  	
  NO
  WAIVER

  	
   

  
	
  31.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  

 

ATTACHMENTS

 

“A”
- AIRCRAFT CONFIGURATION, FINISHING AND REGISTRATION MARKS

“B”
- FERRY EQUIPMENT AND PRODUCT SUPPORT PACKAGE

“C”
- WARRANTY CERTIFICATE - MATERIAL AND WORKMANSHIP

“D”-
PRICE ESCALATION FORMULA

 

 

“E”
- DIRECT MAINTENANCE COST GUARANTEE 

“F”
- SCHEDULE RELIABILITY GUARANTEE

“G”
- [*]

“H”
- PERFORMANCE GUARANTEE

“I”
- AUTHORIZED REPRESENTATIVE APPOINTMENT

“J”
- FORM OF WARRANTY BILL OF SALE

“K”
- FORM OF GUARANTEE

 

 

* Confidential

 

PURCHASE AGREEMENT
DCT-014/2004

 

THIS
AGREEMENT IS ENTERED INTO THIS 19th DAY OF MARCH 2004, BY AND
BETWEEN EMBRAER - EMPRESA BRASILEIRA DE AERONÁUTICA S.A. AND REPUBLIC AIRLINE,
INC., FOR THE PURCHASE AND SALE OF EMBRAER AIRCRAFT.

 

THE
SALE COVERED BY THIS AGREEMENT SHALL BE GOVERNED SOLELY BY THE TERMS AND
CONDITIONS HEREIN SET FORTH, AS WELL AS BY THE PROVISIONS SET FORTH IN THE
ATTACHMENTS HERETO.

 

THIS
AGREEMENT SHALL NOT BE EFFECTIVE UNLESS AND UNTIL IT IS SIGNED BY AN AUTHORIZED
OFFICER OF REPUBLIC AIRLINE, INC. AND EXECUTED BY TWO AUTHORIZED OFFICERS OF
EMBRAER - EMPRESA BRASILEIRA DE AERONÁUTICA S.A.

 

1.             DEFINITIONS

 

For
the purpose of this Agreement, the Parties hereby adopt the following
definitions and, unless otherwise expressly provided, the singular includes the
plural and the masculine includes the feminine and neutral genders:

 

1.1       “Actual Delivery Date”: shall mean, with
respect to each Aircraft, the date on which Buyer obtains title to that
Aircraft in accordance with Article 7.

 

1.2       “AD’s”: shall mean Airworthiness Directives
issued by either the CTA or the Aviation Authority, in connection with and with
respect to the Aircraft.

 

1.3       “Agreement”: shall mean this Purchase
Agreement DCT-014/2004, its Attachments and any Letter Agreement between the
Parties executed on the date hereof.

 

1.4       “Aircraft”: shall mean the EMBRAER 170 LR
aircraft (certification designation ERJ 170-100 LR) (the “EMBRAER 170
Aircraft”) or, where there is more than one of such Aircraft, each of the
EMBRAER 170 Aircraft, manufactured by Embraer for sale to Buyer pursuant to
this Agreement (which for the avoidance of doubt shall include Firm Aircraft,
Conditional Aircraft and Option Aircraft) according to the Preliminary
Technical Description PTD 170 — Rev.4 dated as of May 2003 (which, although not
attached hereto, is incorporated herein by reference) and the Aircraft
configuration described in Attachment “A”, and as may be amended from time to
time as specified in Article 11. [*]

 

1.5       “Aviation Authority”: shall mean United
States Federal Aviation Administration or FAA.

 

1.6       “Basic Price”: shall mean the Aircraft total
price, effective on the date of execution of this Agreement contained in
Article 3.1 or, in case of revision thereof, on the date of its revision.

 

1.7       “Buyer”: shall mean Republic Airline, Inc.,
a Delaware corporation with its principal place of business at 2500 S. High
School Road, Indianapolis, Indiana 46241, United States or its assignee
pursuant to Article 14.

 

* Confidential

 

 

1.8       “Business Day(s)”: shall mean days on which
the banks in each of New York, New York, United States and São Paulo, and São
José dos Campos, S.P. Brazil are open for the normal transaction of business.

 

1.9       “Conditional Aircraft”: shall be the
additional EMBRAER-170 LR aircraft that Buyer shall have the right to purchase
as per the terms of Article 22.

 

1.10     “Contractual Delivery Date”: shall mean for
any Firm Aircraft the delivery date referred to in Article 5 for such Firm
Aircraft.

 

1.11     “CTA”: shall mean the Aerospace Technical
Center of the Brazilian Ministry of Aeronautics.

 

1.12     “Embraer”: shall mean Embraer - Empresa
Brasileira de Aeronáutica S.A., a Brazilian corporation with its principal
place of business at Av. Brigadeiro Faria Lima, 2170 - Putim, São José
dos Campos, São Paulo, Brazil.

 

1.13     “Excusable Delay”: shall have the meaning
assigned to such term in Article 9.1.1.

 

1.14     “FAA”: shall mean the Federal Aviation
Administration of the United States of America.

 

1.15     “Firm Aircraft”: shall mean the Aircraft
specified in Article 2.1.

 

1.16     “Non-Excusable Delay”: any delay in the
delivery of an Aircraft or in the performance of any act by Embraer under this
Agreement that is not an Excusable Delay.

 

1.17     “Option Aircraft”: shall be the additional
EMBRAER-170 LR aircraft that Buyer shall have the option to purchase as per the
terms of Article 23.

 

1.18     “Parties”: shall mean Embraer and Buyer.

 

1.19     “Product Support Package”: shall mean the
products and Services to be provided by Embraer as per Article 13.

 

1.20     “Purchase Price”: shall mean the Aircraft
total price, effective on the relevant Aircraft Contractual Delivery Date,
resulting from the application of the escalation formula contained in
Attachment “D” to the Basic Price as set forth in Article 3.3.

 

1.21     “Services”: shall mean the familiarization
and on-site support for the Aircraft, part of the Product Support Package, as
specified in Attachment “B”.

 

1.22     “Technical Publications”: shall mean the
technical documentation pertaining and related to the Aircraft as listed in
Exhibit 1 to Attachment “B”.

 

References
to Articles or Attachments in the main body of this Purchase Agreement shall be
deemed to be references to Articles of or Attachments to this Agreement,
respectively, except as the context requires otherwise.

 

 

2.     SUBJECT

 

Subject to the terms and conditions of this
Agreement:

 

2.1       Embraer shall sell and deliver and Buyer
shall purchase and take delivery of thirteen (13) Aircraft;

 

2.2       Embraer shall provide to Buyer the Services
and the Technical Publications;

 

2.3       Buyer shall have the right to purchase up to
twelve (12) Conditional Aircraft, in accordance with Article 22; and

 

2.4       Buyer shall have the option to purchase up
to twenty-five (25) Option Aircraft, in accordance with Article 23.

 

3.     PRICE

 

Subject to the terms and conditions of this
Agreement:

 

3.1       Buyer agrees to pay Embraer, in United
States dollars, for each Aircraft the per unit Basic Price of [*] economic conditions.

 

3.2       The Services and Technical Publications are
to be provided [*] Additional
technical publications as well as other services shall be billed to Buyer in
accordance with Embraer’s rates prevailing at the time Buyer places a purchase
order for such additional technical publications or other services.

 

3.3       The Basic Price for an Aircraft shall be
escalated according to the escalation formula contained in Attachment “D”. Such
price as escalated shall be the Aircraft Purchase Price and it will be provided
by Embraer to Buyer [*] prior to
each Aircraft Contractual Delivery Date.

 

4.     PAYMENT

 

4.1       To secure the Firm Aircraft delivery
positions set forth in Article 5.1 and to ensure delivery of the Firm Aircraft
in accordance with the Contractual Delivery Dates, Buyer shall pay Embraer for
each Firm Aircraft in accordance with the terms and conditions contained in
this Article 4. The Parties acknowledge that each of the Firm Aircraft and the
corresponding delivery positions have been reserved for purchase by Buyer and
such Firm Aircraft have been removed from the market. Buyer has already paid to
Embraer prior to the execution of this Agreement a [*] deposit per Firm Aircraft (the “Initial Deposit”). Upon
execution of this Agreement by the Parties the Initial Deposit shall be [*] and shall be considered part of the
progress payment for each relevant Firm Aircraft. The amounts specified in this
Article 4.1 shall be paid by Buyer by wire transfer in immediately available
United States dollars funds, to such bank account in the United States as
directed by Embraer to Buyer [*]
prior to the date of payment, as follows:

 

4.1.1        A [*]
progress payment [*] shall become
due and payable [*] prior to the
relevant Contractual Delivery Date for such Aircraft.

 

4.1.2        A [*]
progress payment [*] shall become
due and payable [*] prior to the
relevant Contractual Delivery Date for such Aircraft.

 

* Confidential

 

 

4.1.3        A [*]
progress payment of the Basic Price for each Firm Aircraft shall become due and
payable [*] prior to the relevant
Contractual Delivery Date for such Aircraft.

 

4.1.4        The balance of the Purchase Price for a Firm
Aircraft shall become due and payable at the time Buyer [*] of such Firm Aircraft pursuant to
Article 7.

 

Progress payments shall be due
on the dates specified in Articles 4.1.1 through 4.1.3 except if any such
date is not a Business Day in which case the progress payment shall be due [*].
 Any progress payment that would
otherwise be due [*] shall be due [*].
 Progress payments shall be
nonrefundable, except as otherwise expressly provided in this Agreement.

 

4.2       Late Payments: Interest will accrue at the
rate of [*] percent [*] per month or pro rated on any part
thereof on any amount not paid to Embraer as set forth in Articles 4.1.1
through 4.1.4, from the date on which such payments should have been made as
therein set forth, until (and excluding) the actual receipt by Embraer of such
amounts.  Without prejudice to Embraer’s
rights set forth in Article 4.3, interest accrued will be invoiced by Embraer
on a monthly basis, beginning one month after date on which payments should
have been made, and payment thereof shall be made by Buyer in accordance with
the instructions contained therein.

 

4.3       Termination for failure to make payments:

 

In case of a late payment as per
the terms and conditions contained in Article 4.2, Embraer shall [*].
 Embraer shall be entitled to
exercise its termination right pursuant to this paragraph without waiting for
the expiration of the above referenced [*].  In the event Embraer does not receive any payment required by
Articles 4.1.1 through 4.1.3 within [*],
Embraer shall have the right to either (i) postpone, at its sole criteria, the
relevant Aircraft’s Contractual Delivery Date; or (ii) terminate this Agreement
in relation to the affected Aircraft in accordance with Article 21.3.

 

5.     DELIVERY

 

5.1       Aircraft: Subject to payment in accordance
with Article 4 and the provisions of Articles 7 and 9, Embraer shall offer the
Firm Aircraft to Buyer for inspection, acceptance and subsequent delivery in
fly away factory (“FAF”) condition, with the Aircraft to be flown away from
Embraer’s facilities by Buyer) in compliance with this Agreement, at São José
dos Campos, Brazil [*] pursuant to
Article 7.1 (the “Contractual Delivery Date”):

 

	
  Firm

  A/C

  	
   

  	
  Delivery

  Month

  	
   

  
	
  1

  	
   

  	
  Jun 2004

  	
   

  
	
  2

  	
   

  	
  [*]

  	
   

  
	
  3

  	
   

  	
  [*]

  	
   

  
	
  4

  	
   

  	
  [*]

  	
   

  
	
  5

  	
   

  	
  [*]

  	
   

  
	
  6

  	
   

  	
  [*]

  	
   

  
	
  7

  	
   

  	
  [*]

  	
   

  
	
  8

  	
   

  	
  [*]

  	
   

  
	
  9

  	
   

  	
  [*]

  	
   

  
	
  10

  	
   

  	
  [*]

  	
   

  
	
  11

  	
   

  	
  [*]

  	
   

  
	
  12

  	
   

  	
  [*]

  	
   

  
	
  13

  	
   

  	
  Mar 2005

  	
   

  

 

* Confidential

 

 

6.     CERTIFICATION

 

6.1       The Aircraft shall be “Type Certified”
pursuant to the Aviation Authority airworthiness requirement FAR Part 25 amendment
25-1 through 25-98 effective on 10/March/99. The Aircraft shall
comply with the operational requirements of the Aviation Authority, except for
the items that are under Buyer’s regulatory responsibility pursuant to the
operational requirements of the FAR’s which are not otherwise required to be provided
by Embraer under this Agreement.

 

6.2       The Aircraft shall be delivered to Buyer
with an export certificate of airworthiness issued by the CTA stating that the
aircraft meets the “Type Design” approved by the Aviation
Authority. The condition of the Aircraft on delivery and the documentation
delivered with the Aircraft, including the above mentioned export certificate
of airworthiness, shall enable Buyer to obtain an Aviation Authority
certificate of airworthiness. Subject to the above, it shall be Buyer’s
responsibility to obtain such certificate of airworthiness for the registration
of the Aircraft with the Aviation Authority, at Buyer’s sole expense.  Embraer shall assist Buyer, at Buyer’s
request and expense, in obtaining such certificate of airworthiness from the
Aviation Authority.  [*]

 

7.     ACCEPTANCE AND TRANSFER OF OWNERSHIP

 

7.1       Unless Embraer notifies Buyer otherwise, the
Aircraft shall be delivered in accordance with the provisions and schedule
specified in Article 5 herein. Embraer shall give Buyer [*] advance notice of the date on which
Embraer considers that each Aircraft will be ready for delivery in the
condition specified herein. Upon successful completion of ground and flight
tests performed by Embraer, Embraer will give Buyer [*] advance notice of the day that the Aircraft concerned is
ready for inspection by Buyer.

 

7.2       Buyer shall be allowed a reasonable period
of time to conduct a ground inspection and an acceptance flight or flights
(together, the “Inspection”) of each Aircraft prior to its delivery. [*] After such acceptance flight and if
Buyer accepts the Aircraft in accordance with this Article 7, such Aircraft
will be delivered by Embraer to Buyer in accordance with Article 6 hereof [*].

 

7.3       Buyer shall accept the Aircraft provided, [*]. 
Immediately after such acceptance, Buyer shall make the payments due, if
any, with respect to such Aircraft according to Article 4 and accept delivery
of such Aircraft, whereupon [*]
title and risk of loss will be transferred by Embraer to Buyer and Embraer
shall execute the necessary title and risk transfer documents required in order
to effect title transfer, including but not limited to an FAA form Bill of Sale
and a Warranty Bill of Sale substantially in the form attached hereto as
Attachment “J”. [*]

 

7.4       If Buyer declines to accept an Aircraft
after its Inspection because the Aircraft failed to meet the terms of this
Agreement, Buyer shall promptly give Embraer

 

 

* Confidential

 

 

notice of all specific reasons
for such refusal and Embraer shall have [*],
commencing on the first Business Day after receipt of such notice, to take all
necessary actions [*] in order to
resubmit the Aircraft to Buyer for re-inspection

 

7.5       Subsequent to a refusal of acceptance
pursuant to Article 7.4, Buyer shall inspect the Aircraft, as provided for
in Article 7.2, within [*] after [*] from Embraer that all necessary actions
were taken (“Reinspection”). All costs of such Reinspection [*].

 

7.6       Should Buyer or Embraer fail to comply with
the procedures specified in this Article 7, the other party shall not be held
liable for any delays in delivery resulting from such failure.

 

7.7       Should Buyer not perform its obligations in
accordance with this Article 7 within [*],  Embraer shall be entitled to [*]
its obligations in accordance with this Article 7, [*] Embraer shall be entitled to [*] pursuant to Article 21.3.

 

7.8       Embraer agrees to indemnify and hold
harmless Buyer and Buyer’s officers, directors, agents, employees and assignees
from and against all liabilities, damages, losses, judgments, claims and suits,
including costs and expenses incident thereto, which may be suffered by,
accrued against, be charged to or recoverable from Buyer and/or Buyer’s
officers, directors, agents, employees and assignees by reason of loss or
damage to property, or injury or death of any person, resulting from or in any
way connected with the tests on the ground or in flight on or prior to Actual
Delivery Date of each Aircraft, except to the extent attributable to the gross
negligence or willful misconduct of Buyer, its officers, directors, agents,
employees and assignees.

 

7.9       Buyer shall be permitted to delegate its
duties in this Article 7 as to the physical inspection, reinspection, and
acceptance and delivery of the Aircraft to its authorized representative in the
form attached hereto as Attachment “I”.

 

[*]

 

8.     STORAGE
CHARGE

 

8.1       A storage charge equal to [*] per day shall be charged by Embraer to
Buyer commencing on:

 

8.1.1        Buyer’s failure to perform Inspection or
Reinspection of an Aircraft, per the date or time period specified in writing
by Embraer, according to Article 7 until such Inspection or Reinspection is
performed.

 

8.1.2        Buyer’s default in taking title to such
Aircraft when required and making the payment then due, until such payment is
made.

 

8.1.3        Buyer’s failure within [*] after title transfer to remove an
Aircraft from Embraer’s facilities.

 

Storage charges shall end as
provided above or, if earlier on i) Buyer’s and Embraer’s agreement to end such
storage charge, ii) removal of the relevant Aircraft from Embraer’s facilities
or iii) in the event this Agreement with respect to such Aircraft is terminated
in accordance with Article 21.3.

 

* Confidential

 

 

If however, Buyer notifies
Embraer in writing [*] days in
advance of its expected delay in the performance of its obligations set forth
in this Article 8, the storage charge shall commence [*] day after the occurrence of the events set forth in this
Article 8.1.

 

8.2       In the event that an Aircraft’s Contractual
Delivery Date must be extended by Embraer from that which is designated in
Article 5, due to Buyer’s failure to perform any action or provide any
information required to be performed or provided by Buyer by this Agreement
other than the ones specified in the preceding items, and the Aircraft
otherwise was to be delivered on the Contractual Delivery Date, the storage
charge shall commence [*] day
after the Contractual Delivery Date relative to such Aircraft.

 

8.3       Buyer shall pay the storage charge set forth
in Article 8.1 and 8.2, as applicable, per each month of delay or part thereof,
within [*] after the presentation
of each invoice by Embraer.

 

9.     DELAYS IN DELIVERY

 

9.1       Excusable Delays:

 

9.1.1        Embraer shall not be held liable or be found
in default for any delays in the delivery of an Aircraft or in the performance
of any act to be performed by Embraer under this Agreement, resulting from the
following events or occurrences, hereinafter referred to as “Excusable Delays”:
(a) force majeure [*], or (b) any
delay to the extent resulting from any failure by Buyer to perform any action
or provide any information contemplated by this Agreement.

 

9.1.2        Within [*]
after the occurrence of any of the above mentioned events which constitute
causes of Excusable Delays in delivery of an Aircraft or in the performance of
any act to be performed by Embraer under this Agreement, Embraer shall send a
notice to Buyer, with a requested acknowledgment of receipt, including a
description of details involved and an estimate of the effects expected upon
the timing of the performance of its contractual obligations.

 

9.1.3        Any such Excusable Delays shall extend the
time for delivery of an Aircraft [*].
Embraer undertakes to use all commercially reasonable efforts whenever possible
to avoid or remove any such cause of delay and to minimize its effect on the
Contractual Delivery Date of an Aircraft.

 

9.1.4        If the cause of such Excusable Delay is such
as to last longer than [*] days or
to render the performance of this Agreement impossible, then Buyer shall have
the option to terminate this Agreement without liability to either Party, in
accordance with Article 21.2.

 

9.2       Non-Excusable Delays:

 

9.2.1        If the delivery of an Aircraft is delayed,
not as a result of an Excusable Delay, by more than [*] days after the Contractual Delivery Date for such
Aircraft, Buyer will be entitled to elect to receive in accordance with

 

* Confidential

 

 

Article 9.2.3 from Embraer
liquidated damages as compensation for such delay equal to [*], for each day of delay in excess of the
above mentioned [*] calendar days,
up to the date that the Aircraft is ready for delivery and available to Buyer
by means of confirmation of the successful completion of ground and flight
tests performed by Embraer, to be provided per Article 7.1, it being understood
that such liquidated damages will not, in any event, exceed [*] and that it will only be due and
payable by Embraer to Buyer after Buyer pays to Embraer the total Aircraft
Purchase Price.  [*]

 

9.2.2        The grace period of [*], granted by Buyer to Embraer as
mentioned in Article 9.2.1 shall only apply if Embraer provides notice to
Buyer advising of the expected delay [*].

 

9.2.3        If, with respect to a delayed Aircraft,
Embraer does not receive notice for [*]
as mentioned in paragraph 9.2.1, from Buyer within [*] after the Actual Delivery Date of such Aircraft, Buyer
shall be deemed to have fully waived its right to such liquidated damages.

 

[*]           If as a result of [*] agreed to in writing by the Parties, [*] will not apply [*].

 

[*]

 

9.3       Delay Due to Loss or Structural Damage of
the Aircraft: Should any Aircraft be destroyed or damaged before acceptance by
Buyer to the extent that it becomes commercially useless, Buyer may, at its
sole discretion take a replacement Aircraft under the same terms and conditions
of this Agreement at a later delivery date to be agreed by the Parties.

 

Within one (1) month after such
loss, Embraer will provide Buyer with a new delivery date for a replacement
Aircraft.  If Buyer in its sole discretion
rejects the new delivery date after further consultation with Embraer on
scheduling the delivery of the Aircraft, Buyer may terminate this Agreement
with respect to such Aircraft, [*].  In the event Embraer [*].

 

10.  INSPECTION AND QUALITY CONTROL

 

10.1     Buyer is hereby permitted to have one or
more authorized representatives at Embraer’s facilities for a period commencing
[*] prior to the Contractual
Delivery Date of each Aircraft in order to assure that the Aircraft was
developed in accordance with the procedures specified in this Agreement and
according to all applicable quality control standards. Buyer may communicate
its concerns as to the production of the Aircraft to Embraer. Buyer’s
representatives shall be allowed to observe certain intermediate stages of the
Aircraft assembly during its manufacture.

 

10.2     Buyer shall notify Embraer of the name of
each of such authorized representative at least fifteen (15) days prior to the
intended arrival at Embraer’s facilities and which Aircraft it desires to
follow and which phase of the production process it desires to observe. Buyer’s
representatives shall not interfere with or hinder the production or
manufacture of any Aircraft. Buyer

 

* Confidential

 

 

may substitute authorized
representatives, provided written notice is given to Embraer fifteen (15)
calendar days prior to effectivity.

 

10.3     Such representatives may also be authorized
to sign the acceptance and transfer of title and risk documents and accept
delivery of the Aircraft pursuant to Article 7.

 

10.4     With respect to this Article 10, Embraer
shall provide for use in accordance with the Agreement at no cost to Buyer,
communication facilities (telephone and facsimile) for Buyer’s authorized
representatives, as well as the necessary tools, measuring devices, test
equipment and technical assistance as may be necessary to perform acceptance
tests.

 

10.5     Buyer’s authorized representatives shall
observe Embraer’s administrative rules and instructions while at Embraer’s
facilities, and Buyer’s representatives will be provided with all appropriate
rules and regulations upon arrival.

 

10.6     Buyer’s authorized representatives shall be
allowed exclusively in those areas related to the subject matter hereof and
Buyer agrees to hold harmless Embraer from and against all and any kind of
liabilities in respect to such representatives, for whom Buyer is solely and
fully responsible under all circumstances and in any instance except to the
extent caused by the gross negligence or willful misconduct of Embraer, its
officers, directors, employees or agents.

 

11.  CHANGES

 

11.1     At delivery each Aircraft will comply with
the standards defined in Attachment “A” and shall incorporate all modifications
which are classified as Airworthiness Directives (AD’s) mandatory by CTA or FAA
and shall also at the Actual Delivery Date incorporate any change agreed upon
by Buyer and Embraer in accordance with this Article 11.

 

[*]

 

11.2     Embraer can make changes in the design of
the Aircraft in accordance with the terms and conditions set forth in Articles
11.2 through 11.7. The definition of which and its respective classification
shall be in compliance to the Aircraft type specification, as follows:

 

11.2.1      Minor Changes: defined as those
modifications which shall not adversely affect the Aircraft in any of the
following characteristics:

 

[*]

 

11.2.2      Major Changes: defined as those
modifications, which affect at least one of the topics mentioned in Article
11.2.1.

 

11.3     Embraer shall have the right, but not the
obligation, to incorporate Minor Changes in the Aircraft still in the
production line at its own cost, without the prior consent of Buyer.

 

* Confidential

 

 

11.4     Embraer shall provide Buyer with written
notice (the “Proposal of Major Change – or PMC”) of those Major Changes that
are classified as AD’s by means of service bulletins approved by the Aviation
Authority and/or CTA, as appropriate. Service bulletins that implement such
AD’s shall be referred to as Mandatory Service Bulletins (“MSB”). Embraer shall
incorporate Mandatory Service Bulletins as follows:

 

11.4.1      Compliance required before Contractual
Delivery Date: Embraer shall incorporate MSB in undelivered Aircraft at
Embraer’s expense in a reasonable period of time if the compliance time for
such MSB is before the Aircraft’s Contractual Delivery Date. Embraer shall not
be liable for any delays resulting from incorporation of MSB when the Aircraft
has already passed the specific production stage affected by the incorporation
of said change but Embraer shall [*]
to incorporate such changes prior to the Aircraft’s Contractual Delivery Date [*]. In the event of delay caused by
incorporation of any Embraer Service Bulletin (other than an MSB), [*].

 

11.4.2      Compliance required after Contractual
Delivery Date: During the applicable Aircraft warranty coverage periods as
specified in the Aircraft Warranty that is the subject of Attachment “C”,
Embraer shall [*]. When flight
safety is affected, such changes shall be immediately incorporated. If warranty
coverage is not available or applicable pursuant to Attachment “C”, the
provisions of Article 11.5 shall apply.

 

11.5     Except for the Major Changes referred to in
Article 11.4, any other Major Change, such as (i) any change developed by
Embraer as product improvement, (ii) any change requested by Buyer in relation
to the Aircraft configuration, or (iii) any change required by the Aviation
Authority as a consequence of alterations, amendments and/or innovations of its
present applicable regulations, shall be considered as optional and, pursuant
to Buyer’s request, Embraer shall submit to Buyer a Proposal of Major Change
(“PMC”), which shall describe all possible impacts on the provisions contained
in this Agreement, including but not limited to Aircraft pricing, weight, etc.
Should Buyer not approve such PMC, the change shall not be incorporated in the
Aircraft.

 

11.6     Any Major Change to the Aircraft, made in
accordance with the foregoing paragraphs that affect the provisions of
Attachment “A”, shall be incorporated in said Attachment by means of an
amendment. The amendment shall be submitted to Buyer for signature thirty (30)
days prior to the relevant Aircraft’s Contractual Delivery Date, a copy of
which shall be received by Embraer, duly signed, prior to such Aircraft’s
Actual Delivery Date.

 

11.7     Except [*],
should an Aircraft not comply with the terms and conditions of Attachment “A”,
Buyer shall be entitled to either [*].
Determination of such compliance shall be made by Buyer pursuant to Article 7.

 

* Confidential

 

 

12.  WARRANTY

 

The materials and workmanship relative to the
Aircraft subject to this Agreement will be warranted in accordance with the
terms and conditions specified in Attachment “C”. Embraer hereby guarantees to
Buyer [*], and performance of and
with respect to the Aircraft in accordance with the terms and conditions
specified in Attachments "E", "F" [*] and “H”.

 

13.  PRODUCT SUPPORT PACKAGE

 

Embraer shall supply to Buyer the Product
Support Package described in Article 2 of Attachment “B”, which includes
Embraer’s spare parts policy, the Technical Publications and the Services.

 

14.  ASSIGNMENT

 

14.1     Buyer may request, and Embraer will take,
any action reasonably necessary for the purpose of causing an Aircraft at the
time of delivery to be subject to an equipment trust, conditional sale, lien,
lease or other arrangement for the initial financing of the Aircraft in
connection with the delivery of such Aircraft to Buyer, provided however that
Buyer’s rights and obligations contained in Attachments “E”, “F”, “G” and “H”
shall not be assignable and that the assignment of its rights and obligations
contained in Attachment C shall be governed by the provisions of Attachment C.

 

14.2     Buyer may assign its rights with respect  to Aircraft to another wholly-owned subsidiary
of Republic Airways Holdings Inc. (such subsidiary, the “Sibling”) as provided
in this Article 14.2. Such assignment and the Sibling’s exercise of such rights
shall be subject to [*].

 

14.2     Except as expressly permitted by this
Article 14, neither Embraer’s nor Buyer’s rights and obligations hereunder may
be assigned, conveyed, subcontracted, transferred or delegated, without the
other party’s prior written consent.

 

14.3     Republic Airways Holdings Inc. shall
guarantee the obligations of Buyer hereunder pursuant to a guarantee in the
form attached hereto as Attachment “K”, and it shall be a breach of this
Agreement by Buyer if such guarantee is at any time not effective in accordance
with its terms or if Republic Airways Holdings Inc. breaches, defaults, or fails
to perform under such guarantee.

 

15.  RESTRICTIONS AND PATENT INDEMNITY

 

15.1     Claims Against Buyer. Embraer shall indemnify and hold Buyer,
its subsidiaries and affiliates, and their officers, directors, agents and
employees (collectively, for purposes of this Article 15, “Buyer”) harmless
from and against any and all royalties, liabilities, damages, settlement costs
and expenses, losses, claims, actions, lawsuits, demands, fines, penalties, and
all expenses (including but not limited to costs of investigation and defense
and reasonable fees incurred for attorneys, expert witnesses, consultants and
litigation support services) associated with any of the foregoing
(collectively, the “Damages”) based upon, caused by, arising from, or in any
manner connected with, directly or indirectly, any suit, action, proceeding,
allegation, assertion or claim that

 

* Confidential

 

 

(x) any article or service purchased or
supplied hereunder or any portion thereof (including without limitation any
accessory, equipment or part supplied to Embraer from any other manufacturer,
or supplier) (collectively, “Item”) and/or the use or operation thereof
constitutes an infringement of any United States or foreign patent, design or
model duly granted or registered (“Claim”), provided that from the time of
design of such Item and until such Claim is resolved, such foreign country in
which any foreign patent is held and the flag country of the Aircraft is each a
party to (1) the International Convention for the Protection of International
Property (Paris Convention) in any of its revised forms or (2) Article 27 of
the Chicago Convention on International Civil Aviation of December 7, 1944, or

 

(y) Aircraft software or materials, or any
part of such Aircraft software or materials as furnished by Embraer, and used
within the scope of the license granted by Embraer, constitutes an alleged or
actual infringement of any copyright of the United States or misappropriates
any third party trade secret (“Copyright Claim”), provided that from the time
of design of such item and until such Copyright Claim is resolved, any such
foreign country in which the infringement claim is made and the flag country of
the Aircraft is each a member of The Berne Union.

 

The indemnification by Embraer provided in this Paragraph 15.1 shall
not apply to Buyer furnished or installed equipment, engines, or APUs and their
related parts.

 

15.2     Buyer’s Remedies and Judgments.  In
connection with the foregoing, Embraer agrees to defend at its expense any suit
or action in respect of any claim or copyright claim.  Buyer’s remedy and Embraer’s obligation and liability under this
Article 15 are conditional upon Buyer giving Embraer written notice promptly
after Buyer receives notice of a suit or action against Buyer alleging infringement
or after Buyer receives a written claim of infringement, whichever is
earlier.  Failure to notify Embraer as
provided in the foregoing sentence shall relieve Embraer of liability that it
may have to Buyer only to the extent that the defense of any such claim is
prejudiced thereby. Embraer’s obligations hereunder with respect to any actual
or alleged infringement are also conditioned upon (i) Buyer’s promptly
furnishing to Embraer all the data, papers, records and other assistance within
the control of Buyer material to the resistance of or defense against any such
charge or suits for infringement, (ii) upon Embraer’s reasonable request,
Buyer’s use of diligent efforts in full cooperation with Embraer to reduce
royalties, liabilities, damages, costs and expenses involved, and (iii)
Embraer’s prior approval of Buyer’s payment, assumption or admission of any
liabilities, or royalties for which Embraer is asked to indemnify Buyer
hereunder.  [*]  Embraer shall have
the option but not the obligation at any time to conduct negotiations with the
party or parties charging infringement and may intervene in any suit commenced.
Whether or not Embraer intervenes in any such suit, it shall be entitled at any
stage of the proceedings to assume control and conduct the defense and/or
settlement of such suit or action either in the name of Embraer or of Buyer, or
both.  Buyer shall

 

* Confidential

 

 

cooperate with Embraer and
shall, upon Embraer’s reasonable request and at Embraer’s expense, arrange for
attendance of representatives of Buyer at hearings and trial and assist in
effecting settlements, securing and giving evidence, obtaining the attendance
of witnesses and in the conduct of the defense of such suits or actions.  Embraer shall assume and pay any and all [*] assessed against Buyer in a judgment of
any such suit or action, and Embraer will pay any payments in settlement
imposed upon or incurred by Buyer with Embraer’s approval, together with all
interest accruing after entry of any such judgment or after the making of any
such settlement, [*].

 

15.3     Continuing Use. In the event any Item purchased or
supplied hereunder, or any portion thereof, becomes the subject of any Claim or
Copyright Claim, or if Embraer in its reasonable judgment at any time decides
that the item purchased or supplied hereunder, or any portion thereof, shall
become the subject of such a Claim or Copyright Claim, Embraer shall promptly,
but, in any event, no more than thirty (30) days after receipt of written
notice from Buyer of a Claim, Copyright Claim or the entry of any order or
decree permanently or temporarily enjoining the use of the Item purchased or
supplied hereunder, or any portion thereof, at its own expense and option
either: (i) obtain for Buyer the right to use the infringing Item, or portion
thereof; or (ii) replace, modify, substitute, or update the infringing article,
or portion thereof, so that it becomes non-infringing.

 

In the event that any such suit or action results in an order, decree
or judgment enjoining or otherwise prohibiting Buyer from effectively using any
Item for its intended purposes, or any settlement made or approved by Embraer
has such result, Embraer agrees at its option and expense to promptly either:
(i) procure for Buyer the right to continue using said Item; or (ii) modify
said Item so that it becomes non-infringing and otherwise complies with the
provisions of this Agreement; or (iii) replace said item with a non-infringing
Item suitable for Buyer’s requirements and in a condition equivalent to that of
the Item removed.  The foregoing
provisions hereof shall apply in case of any such order, decree, judgment or
settlement prohibiting Buyer from effectively using any component or part of
the Item.

 

If the party or parties making a claim or
copyright claim for which Embraer has agreed to indemnify Buyer hereunder
obtains an injunction restraining Buyer’s use of the Item and a bond or other
security will be necessary and efficacious to void same, Embraer shall promptly
pay to Buyer the amount of premium for any bond or the costs of any other
security given by Buyer to release or void such injunction, or alternatively at
Embraer’s election shall furnish such bond or other security in Buyer’s behalf.

 

15.4     Exemptions.  [*] from all damages caused by, arising from or in any way
connected with in the event of any suit or action relative to Buyer furnished
designs, equipment, materials or data, or any design which is imposed by Buyer
on Embraer as an alternative to Embraer’s suggested design, or any Buyer modification
of the Embraer supplied Item, or any component or part thereof, or any new
designs, equipment, materials or data incorporated, after delivery and
acceptance of the Item, by Buyer without the involvement of Embraer.

 

15.5     Modifications. The foregoing indemnity shall not extend
to any claim of infringement based on any modification, change or combination
not in accordance with Embraer’s

 

* Confidential

 

 

written procedures or without
Embraer’s written approval or consent thereto, provided that the claim for
infringement relates to the combination, change or modification as opposed to
solely the article itself. However, the exclusion set forth in this
subparagraph shall not relieve Embraer of its obligation under this Article 15
if the Item continues to be infringing after the removal, as the case may be,
of any changes, modifications or combinations, or after-incorporated designs,
equipment, materials or data.

 

15.6     Restrictions. The sales contemplated by this Agreement
do not include the transfer of the right to use, or any ownership of, design,
copyrights, patents, and other similar rights of Buyer.

 

16.  MARKETING PROMOTIONAL RIGHTS

 

Embraer shall have the right to
show for marketing purposes, free of any charge, the image of the Aircraft,
painted with Buyer’s colors and emblems, affixed in photographs, drawings,
films, slides, audiovisual works, models or any other medium of expression
(pictorial, graphic, and sculptural works), through all mass communications
media such as billboards, magazines, newspaper, television, movie, theaters, as
well as in posters, catalogues, models and all other kinds of promotional
material. In the event such Aircraft is sold to or operated by or for another
company or person, Embraer shall be entitled to continue to show the image of
the Aircraft, free of any charge, for marketing purposes, with the original
colors and emblems, unless otherwise notified by Buyer, provided that any
prohibition shall in no way apply to the promotional materials or pictorial,
graphic or sculptural works already existing or to any contract for the display
of such materials or works already binding Embraer at the time of receipt of
the notification.  If the Aircraft is
sold to or operated by or for another company or person, Buyer shall upon
Embraer’s request seek the approval of such other company or person to show the
image of the Aircraft as described above.

 

17.  TAXES

 

Embraer shall pay all taxes [*].
All other taxes [*]. impost, fees, withholding taxes,
stamp taxes, documentary taxes and any other similar or dissimilar taxes, as
well as any duties as may be imposed on the sale subject of this Agreement
(“Taxes”), shall be borne by Buyer. [*]

 

18.  APPLICABLE
LAW

 

This Agreement, and the rights
and obligations of the Parties hereunder, shall in all respects be governed by,
and construed and interpreted in accordance with, the laws of the State of New
York including all matters of construction, validity and performance.

 

19.  ARBITRATION

 

19.1     The Parties each irrevocably submit to the
exclusive jurisdiction of arbitration and expressly and irrevocably waive its
right to bring suit against the other Party in any court of law except for the
limited purposes of enforcing an arbitral award obtained with respect to a
dispute, or for obtaining any injunctive, temporary or preventative order or
similar order available to it under the laws of

 

* Confidential

 

 

any jurisdiction for a breach or
threatened breach by the other Party of this Agreement which threatens
irreparable damage.

 

19.2     Any dispute submitted for arbitration must
be finally settled by binding and confidential arbitration according to the
Rules of the American Arbitration Association (the “Rules”), except as may be
modified by mutual agreement of Embraer and Buyer. The arbitration, including
the rendering of the award, will be conducted by arbitrators (selected as set
forth below) who are fluent in the English language. The arbitration proceeding
will be conducted with discovery in accordance with the Federal Rules of Civil
Procedure. The arbitrators will be appointed in accordance with the Rules
except as otherwise provided for herein. The arbitration proceedings will take
place in New York, New York, and will be conducted in the English language.

 

19.3     The Arbitrator will be selected as
follows:  within fifteen (15) Business
Days of the referral of any matter to arbitration, each Party will select an
arbitrator.  Thereafter, within fifteen
(15) Business Days of each party’s selection of an arbitrator, the two
arbitrators selected by the Parties shall meet to select a mutually agreeable
third arbitrator. In the event a Party fails to select an arbitrator with in
the time period specified above, the Party that has timely complied with the
selection of an arbitrator shall select a second arbitrator.  These two arbitrators shall within seven (7)
Business Days after the time in which the other Party should have selected an
arbitrator, meet to select a mutually agreeable third arbitrator. These three
arbitrators shall comprise the arbitral panel and all arbitral proceedings
shall be conducted in the presence of all three arbitrators.

 

19.4     If there is a dispute submitted to
arbitration, any subsequent additional disputes referred for arbitration
(including counterclaims between the Parties) will be consolidated in the same
arbitration proceeding.

 

19.5     The arbitral proceeding will not exceed one
hundred (100) days commencing on the date the last arbitrator accepts his or
her appointment. If the arbitral award is not issued within this time, then the
arbitration proceeding will be automatically renewed for another one hundred
(100) days. Evidence may not be taken in the arbitral proceeding except in the
presence of both Parties and all witnesses, if any, may be questioned by both
Parties. The only evidence which may be considered by the arbitrators in
reaching their decision is that which is otherwise admissible in accordance
with the then current United States Federal Rules of Evidence.

 

19.6     Any decision or award of the arbitrators
must be based solely on the terms of this Agreement and the substantive
governing law applicable to this Agreement. 
The decision of the arbitrators must be issued in writing with an
explanation of its reasoning, and will be final and conclusive when
issued.  Judgment upon the award
rendered in the arbitration may be entered and enforced by the Court specified
in Article 19.7.

 

19.7     Each Party irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York sitting in the County of New

 

 

York for purposes of enforcing
any arbitral award or for other legal proceedings arising out of this Agreement
or any transactions contemplated in this Agreement as provided for herein.
However nothing contained in this Agreement shall be deemed to prevent either
Party from enforcing any decision of the United States District Court for the
Southern District of New York sitting in the County of New York for purposes of
enforcing or collecting any such award in any court or jurisdiction as such
party deems necessary or prudent.

 

19.8     Each Party shall bear its own costs and
expenses of arbitration. The Parties shall share equally the costs, expenses
and fees of any arbitral panel designated pursuant to this Agreement.

 

20.  SOVEREIGN IMMUNITY, VENUE AND FORUM NON CONVENIENS

 

Embraer represents and warrants that, under
the laws of the United States or of any other jurisdiction affecting Embraer,
it is subject to private commercial law and suit, and is not entitled to
sovereign immunity under any such laws, for its performance of its obligations
under this Agreement.  Embraer’s
performance of its obligations hereunder constitute commercial acts done for
commercial purposes. The Parties furthermore waive to the extent permitted by
law any objections to venue of the United States District Court for the
Southern District of New York sitting in the County of New York for purposes of
enforcing any arbitral award and any right or claim to any transfer or
dismissal of any enforcement proceeding in the United States District Court for
the Southern District of New York sitting in the County of New York on the
grounds of forum non conveniens.

 

21.  TERMINATION

 

21.1     Should either Party fail to comply partially
or completely with its obligations hereunder, the other Party shall be entitled
to give notice of such failure and to require that such failure be remedied
within the period specified in that notice, which period shall not be less than
[*] days. Should such failure not
be remedied within the period so specified, then the Party who gave notice of
such failure shall be entitled to terminate this Agreement. Should termination
occur in accordance with the foregoing, the defaulting Party shall pay to the
non-defaulting Party, as damages, an amount determined by agreement or by law.
The foregoing provision shall not apply in any circumstance where an express
right of termination is available or will be available under this Agreement
upon the expiration of a specific period of time whether or not such
termination rights are exercised, except with respect to Buyer’s right to
terminate this Agreement in accordance with Article 21.2 in case of termination
for a Non-Excusable Delay of [*]
or longer [*].

 

21.2     Buyer shall have the right but not the
obligation to terminate this Agreement in respect to the relevant Aircraft,
upon the occurrence of any Excusable Delay of [*]
or longer, as provided for in Article 9.1.4, or any Non-Excusable Delay in
accordance with Article 9.2.1 of [*]
or longer after such Aircraft’s Contractual Delivery Date, such right to be
exercisable by notice from Buyer to Embraer to such effect no earlier than the [*], as applicable, of impossibility,
reasonably

 

* Confidential

 

 

thereafter, as applicable.  Upon receipt of such notice of termination,
Embraer shall, within [*] after
Embraer receives the notice referred to above, return to Buyer an amount equal
to the amounts previously paid by Buyer relative to the relevant Aircraft [*] in effect as of the time such amounts
were paid, less the value of equipment and services previously delivered or
performed by Embraer with respect to such terminated Aircraft and not paid for
by Buyer valued in accordance with Embraer’s list price for such equipment and
services at time of such termination in accordance with this Article 21.2. In
the event the equipment referred to above in the immediately preceding sentence
has not been used, it may be returned to Embraer at the Buyer’s sole cost and
expense and subject to Embraer’s reasonable right to inspect such equipment,
and in the event of such return and acceptance of the condition of the
equipment, the value of such returned equipment shall not be deducted from the
amounts payable by Embraer as provided for above. No other penalty or indemnity
shall be due from Embraer in this case, except in the case of a termination for
a Non-Excusable Delay of [*] or
longer [*].  In the event Embraer
fails to return the deposits and progress payments [*] to Buyer as provided for herein, Embraer shall also pay to
Buyer [*] on such outstanding
amounts not paid by Embraer from the date on which such payments were to have
been made until receipt by Buyer.

 

[*]

 

21.3     If Buyer terminates this Agreement before an
Aircraft Actual Delivery Date for any reason not attributable to Embraer’s
default under this Agreement or, if Embraer terminates this Agreement as to any
Aircraft or in its entirety pursuant to Article 7.7, Article 4.3 or Article 25,
Buyer shall pay to Embraer [*] and
shall indemnify Embraer for the value of equipment and services previously
delivered and/or performed by Embraer and for the reasonable costs and expenses
of reconfiguring Aircraft for sale to another customer.  Such costs and expenses shall be based on Embraer ́s
then prevailing price list.  For these
purposes Embraer may, in its sole discretion, retain all amounts previously
paid by Buyer to apply as part of the payments of the damages resulting from
such default on the part of Buyer.

 

21.4     If Buyer terminates this Agreement in
respect to an Aircraft or all Aircraft, as the case may be, pursuant to Article
9.3 or 11.7, Embraer, upon Buyer’s request, shall [*] Embraer receives the notice of termination referred to
above, return to Buyer all amounts previously paid by Buyer with respect to the
relevant Aircraft [*] in effect on
the date of receipt of such amounts. No other penalty or indemnity shall be due
from Embraer in this case. In the event Embraer fails to return the deposits
and progress payments [*] to Buyer
as provided for herein, Embraer shall also pay to Buyer [*] on such outstanding amounts not paid by
Embraer from the date on which such payments were to have been made until
receipt by Buyer.

 

21.5     In the case of a termination of this
Agreement or as to any Aircraft, the [*]
shall survive the termination of this Agreement or the termination of this
Agreement with respect to one or more Aircraft.

 

* Confidential

 

 

22.  RIGHT TO PURCHASE THE CONDITIONAL AIRCRAFT

 

Subject to confirmation by Buyer as described
below, Buyer shall have the right to purchase up to twelve (12) additional
Aircraft (the “Conditional Aircraft”), to be delivered on the last day of the
applicable month set forth below or such earlier date in such month specified
pursuant to Article 7.1:

 

	
  Conditional

  A/C

  	
   

  	
  Delivery

  Month

  	
   

  
	
  14

  	
   

  	
  Apr 2005

  	
   

  
	
  15

  	
   

  	
  [*]

  	
   

  
	
  16

  	
   

  	
  [*]

  	
   

  
	
  17

  	
   

  	
  [*]

  	
   

  
	
  18

  	
   

  	
  [*]

  	
   

  
	
  19

  	
   

  	
  [*]

  	
   

  
	
  20

  	
   

  	
  [*]

  	
   

  
	
  21

  	
   

  	
  [*]

  	
   

  
	
  22

  	
   

  	
  [*]

  	
   

  
	
  23

  	
   

  	
  [*]

  	
   

  
	
  24

  	
   

  	
  [*]

  	
   

  
	
  25

  	
   

  	
  Sep 2006

  	
   

  

 

22.1     Buyer’s right to purchase [*] shall be subject to Buyer giving notice
to Embraer of its election to purchase [*]
on or before [*] in relation to [*], and on or before [*] in relation to the [*]. Buyer shall be allowed to confirm the
acquisition of all or part of [*]
in either such group.

 

If Buyer does not exercise its
purchase right with respect to [*]
on or before the dates above referred to, then Buyer’s rights to purchase such [*] shall be considered terminated and
Embraer shall [*]. 
In the event Embraer fails to [*].

 

22.2     To secure the Conditional Aircraft delivery
positions set forth in this Article 22 and to ensure delivery of the
Conditional Aircraft in accordance with its delivery schedule, Buyer shall pay
Embraer the purchase price of each Conditional Aircraft as to which Buyer
exercises its purchases right in accordance with the terms and conditions contained
in this Article 22.2. The Parties acknowledge that each of the Conditional
Aircraft and the corresponding delivery positions have been reserved for
purchase by Buyer and such Conditional Aircraft have been removed from the
market. Buyer has paid to Embraer prior to the execution of this Agreement a [*] deposit per Conditional Aircraft (the
“Conditional Aircraft Deposit”).  The
Conditional Aircraft Deposit with respect to a Conditional Aircraft shall [*] at the time Buyer’s purchase right for
such Conditional Aircraft is exercised by Buyer pursuant to Article 22.1. The
same terms and conditions applicable to Firm Aircraft as specified in Articles
4.1.1 through 4.1.4 shall apply to the Conditional Aircraft as if they were
Firm Aircraft, provided that any progress payment that would otherwise be due
before the exercise of such purchase right for such Conditional Aircraft shall
instead be due [*].  Any Payments shall be paid by Buyer by wire
transfer in immediately available United States dollars funds, to such bank
account in the United States as directed by Embraer to Buyer in writing at
least [*] prior to the date of
payment, as described in Articles 4.1.1 through 4.1.4.

 

22.3     Unless [*].

 

* Confidential

 

 

23.  OPTION FOR THE PURCHASE OF ADDITIONAL AIRCRAFT

 

Buyer shall have the option to purchase [*], to be delivered on the last day of the
applicable month set forth below or such earlier date in such month specified
pursuant to Article 7.1:

 

	
  Option

  Aircraft

  	
   

  	
  Delivery

  Month

  	
   

  
	
  01

  	
   

  	
  Aug 2006

  	
   

  
	
  02

  	
   

  	
  [*]

  	
   

  
	
  03

  	
   

  	
  [*]

  	
   

  
	
  04

  	
   

  	
  [*]

  	
   

  
	
  05

  	
   

  	
  [*]

  	
   

  
	
  06

  	
   

  	
  [*]

  	
   

  
	
  07

  	
   

  	
  [*]

  	
   

  
	
  08

  	
   

  	
  [*]

  	
   

  
	
  09

  	
   

  	
  [*]

  	
   

  
	
  10

  	
   

  	
  [*]

  	
   

  
	
  11

  	
   

  	
  [*]

  	
   

  
	
  12

  	
   

  	
  [*]

  	
   

  
	
  13

  	
   

  	
  [*]

  	
   

  
	
  14

  	
   

  	
  [*]

  	
   

  
	
  15

  	
   

  	
  [*]

  	
   

  
	
  16

  	
   

  	
  [*]

  	
   

  
	
  17

  	
   

  	
  [*]

  	
   

  
	
  18

  	
   

  	
  [*]

  	
   

  
	
  19

  	
   

  	
  [*]

  	
   

  
	
  20

  	
   

  	
  [*]

  	
   

  
	
  21

  	
   

  	
  [*]

  	
   

  
	
  22

  	
   

  	
  [*]

  	
   

  
	
  23

  	
   

  	
  [*]

  	
   

  
	
  24

  	
   

  	
  [*]

  	
   

  
	
  25

  	
   

  	
  May 2008

  	
   

  

 

The Option Aircraft will be supplied in
accordance with the following terms and conditions:

 

23.1     To secure the Option Aircraft delivery
schedule, Buyer shall [*] per
Option Aircraft upon signature of this Agreement.

 

23.2     The unit basic price of each Option Aircraft
shall be equal to [*], unless
otherwise modified by the Parties and the costs for such changes shall be in
addition to the Basic Price.

 

23.3     The unit basic price of each relevant Option
Aircraft above mentioned shall be escalated according to the escalation formula
subject of Attachment “D”, determining the Option Aircraft Purchase Price.

 

23.4     To secure the Option Aircraft delivery
positions set forth in this Article 23 and to ensure delivery of the Option
Aircraft in accordance with its delivery schedule, Buyer shall pay Embraer the
purchase price of each Option Aircraft in accordance with the terms and
conditions contained in this Article 23.4. The Parties acknowledge that each of
the Option Aircraft and the corresponding delivery positions have been reserved
for purchase by Buyer and such Option Aircraft have been removed from the
market.

 

[*] shall apply toward the purchase price of
the relevant Option Aircraft and shall be considered non-refundable  (except as expressly provided in this
Agreement) with respect to an Option Aircraft upon Buyer’s written notice
informing Embraer that Buyer is exercising its option to purchase such Option
Aircraft.

 

The same terms and conditions
applicable to Firm Aircraft as specified in Articles 4.1.1 through 4.1.4 shall
apply to the Option Aircraft, provided that for any progress payment that would
otherwise be due before the exercise by

 

* Confidential

 

 

Buyer of its purchase option for
such Option Aircraft shall be due within two (2) Business Days after the date that
Buyer exercises its option to purchase such  Option Aircraft. Any
Payments shall be paid by Buyer by wire transfer in immediately available
United States dollars funds, to such bank account in the United States as
directed by Embraer to Buyer in writing at least two (2) Business Days prior to
the date of payment, as described in Articles 4.1.1 through 4.1.4.

 

23.5     CONFIRMATION OF OPTION AIRCRAFT: The option
to purchase [*] shall be exercised
in [*] of [*] per group (the “Option Groups”) no
later than [*] prior to the
delivery of the first Option Aircraft in each group. Each Option Group may be
partially or completely exercised by Buyer. Exercise of the option to purchase
the Option Aircraft shall be accomplished by means of a written notice from
Buyer delivered to Embraer by mail, express delivery or facsimile, return
receipt requested.

 

23.6     FAILURE TO CONFIRM; RETURN OF DEPOSIT: In the event an Option Group is not
exercised by its option exercise date as specified in the preceding paragraph,
Buyer shall lose all rights to said Option Group. In the event two Option
Groups are not exercised by their option exercise date, Buyer shall also lose
all rights to the remaining Option Groups. Any Option Aircraft not exercised by
Buyer as per the terms and conditions of this paragraph will be considered
relinquished and the relevant [*]
in effect on the date of receipt of [*]. 
In the event Embraer fails to [*].

 

23.7     If the options are confirmed by Buyer as
specified above, an amendment to this Agreement shall be executed by and
between the Parties within thirty (30) calendar days following the Option
Aircraft option exercise date, setting forth the terms and conditions
applicable to, if any, exclusively to the Option Aircraft.

 

23.8     The product support package to be applied to
the Option Aircraft is described in Article 2 of Attachment “B”.

 

24.  NOTICES

 

All notices permitted or required hereunder
shall be in writing in the English language and sent, by registered mail,
express courier or facsimile, to the attention of the Director of Contracts as
to Embraer and of the President as to Buyer, to the addresses indicated below
or to such other address as either Party may, by written notice, designate to
the other. In the event notice is issued by registered mail or express courier,
it shall be deemed received on the day on which the Party receiving such notice
executes the delivery receipt.  In the
event notice is issued by facsimile, it shall be deemed received on the day on
which the sender of such notice receives a facsimile confirmation receipt of
such facsimile notice.

 

24.1     EMBRAER:

 

	
  EMBRAER
  - Empresa Brasileira de Aeronáutica S.A.

  
	
  Av.
  Brigadeiro Faria Lima, 2170

  
	
  12.227-901
  São José dos Campos - SP

  
	
  Brasil

  
	
  Telephone:
  (+55-12) 3927-1410

  
	
  Facsimile:
  (+55-12) 3927-1257

  

 

* Confidential

 

 

24.2     BUYER:

 

	
  Republic Airline, Inc.

  
	
  2500 S. High School Road

  
	
  Indianapolis, Indiana  46241

  
	
  Attention:  President

  
	
  Tel:  317-484-6047

  
	
  Fax:  317-484-6060

  
	
   

  
	
  With a Copy to:

  
	
   

  
	
  Wexford Capital LLC

  
	
  411 West Putnam Avenue

  
	
  Greenwich, Connecticut  06830

  
	
  Attention:  Jay Maymudes

  
	
  Tel:  203-862-7050

  
	
  Fax:  203-862-7350

  
	
   

  
	
  and

  
	
   

  
	
  Republic Airways Holdings Inc.

  
	
  2500 S. High School Road

  
	
  Indianapolis, Indiana  46241

  
	
  Attention:  President

  
	
  Tel:  317-484-6000

  
	
  Fax:  317-484-6040

  

 

25.  CONFIDENTIALITY

 

Neither Party shall have the right to
disclose the terms of this Agreement except as required by law. To the fullest
extent permitted by law, except as aforesaid, neither Party shall disclose any
portion of this Agreement or its Attachments, amendments or any other
supplement, to any third party, other than to its accountants, attorneys,
agents, consultants or permitted assignees without the other Party’s prior
written consent, and a Party shall cause its accountants, attorneys, agents consultants
or permitted assignees to comply with the terms of this Article 25.  Without limiting the foregoing, in the event
either Party is legally required to disclose the terms of this Agreement, the
Parties agree to exert their reasonable best efforts to request confidential
treatment of the clauses and conditions of this Agreement relevantly designated
by either Party as confidential. 
Without limiting its obligations pursuant to the preceding sentence,
Buyer agrees that if it is required, in the opinion of counsel, to file
publicly or otherwise disclose the terms of this Agreement under applicable
federal and/or state securities or other laws, it shall promptly (but in no
case less than ten (10) Business Days prior to the proposed filing in question)
notify Embraer so that Embraer has a reasonable opportunity to contest or limit
the scope of such required disclosure, and Buyer shall request, and shall use
its best reasonable efforts to obtain, confidential

 

 

treatment for such sections of this Agreement
as Embraer may designate. Buyer further agrees that it shall not in any
circumstances file publicly or otherwise disclose the terms of this Agreement
under applicable federal and/or state securities or other laws if it has not
complied with its obligations pursuant to the previous sentence. Embraer shall
have the right to terminate this Agreement pursuant to Article 21.3 if Buyer
fails to comply with its obligations pursuant to the previous two sentences
(e.g., to notify Embraer that Buyer is require to file or otherwise disclose
terms of this Agreement, to request and use its best reasonable efforts to
obtain confidential treatment of sections designated by Embraer as
confidential, or to file publicly or otherwise disclose the terms of this
Agreement if it has not complied with its obligations).

 

26.  INTEGRATED AGREEMENT

 

All Attachments referred to in this Agreement
and attached hereto are, by such reference and attachment, incorporated in this
Agreement. This Agreement, including all Attachments and all amendments,
modifications and supplements, is herein and hereinafter called the “Agreement”
or the “Purchase Agreement”.

 

27.  NEGOTIATED AGREEMENT

 

This Agreement, including all of its
Attachments, has been the subject of discussion and negotiation and is fully
understood by the Parties, and the rights, obligations and other agreements of
the Parties contained in this Agreement are the result of complete discussion
and negotiation between the Parties.

 

28.  COUNTERPARTS

 

This Agreement may be signed by the Parties
in any number of separate counterparts with the same effect as if the
signatures thereto and hereto were upon the same instrument and all of which
when taken together shall constitute one and the same instrument.

 

29.  ENTIRE AGREEMENT

 

This Agreement constitutes the entire
agreement of the Parties with respect to the sale described as its subject and
supersedes all previous and connected negotiations, representations and
agreements between the Parties. This Agreement may not be altered, amended or
supplemented except by a written instrument executed by the Parties.

 

30.  NO
WAIVER

 

Any Party’s forbearance from exercising any
claim or remedy provided for herein shall not be deemed a waiver of such claim
or remedy, and shall not relieve the other Party from the performance of such
obligation at any subsequent time or from the performance of any of its other
obligations hereunder.

 

31.  REPRESENTATIONS AND WARRANTIES

 

31.1     Effective as of the date of this Agreement
and as of the Actual Delivery Date of each Aircraft, Embraer represents and
warrants that:

 

 

31.1.1      Embraer is a corporation duly organized,
validly existing and in good standing under the laws of Brazil, is the
manufacturer of the EMBRAER-170 model aircraft and has all necessary corporate
power and authority to conduct the business in which it is currently engaged
and to enter into and perform its obligations under this Agreement.

 

31.1.2      Embraer has taken, or caused to be taken,
all necessary corporate action to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder.

 

31.1.3      The execution and delivery by Embraer of
this Agreement, the performance by Embraer of its obligations hereunder and the
consummation by Embraer of the transactions contemplated hereby, do not and
will not (A) violate or conflict with any provision of the constitutional
documents of Embraer, (B) violate or conflict with any law, rule, or regulation
applicable to or binding on Embraer or (C) violate or constitute any breach or default
(other than a breach or default that would not (x) result in a material adverse
change to Embraer or (y) adversely affect Embraer’s ability to perform any of
its obligations hereunder),under any agreement, instrument or document to which
Embraer is a party or by which Embraer or any of its properties is or may be
bound or affected.

 

31.1.4      The execution and delivery by Embraer of
this Agreement, the performance by Embraer of its obligations hereunder and the
consummation by Embraer of the transactions contemplated hereby do not and will
not require the consent, approval or authorization of, or the giving of notice
to, or the registration with, or the recording or filing of any documents with,
or the taking of any other action in respect of, (A) any trustee or other
holder of any indebtedness or obligation of Embraer, (B) any national, state or
municipal government regulatory, judicial, or administrative entity of
competent jurisdiction, or (C) any other party.

 

31.1.5      This Agreement has been duly authorized,
executed and delivered by Embraer and, assuming the due authorization,
execution and delivery hereof by the other Party constitutes the legal, valid
and binding obligation of Embraer enforceable against Embraer in accordance
with the terms hereof, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights of creditors generally and general principles
of equity, whether considered in a proceeding at law or in equity.

 

31.1.6      Each of the foregoing representations and
warranties shall survive the execution and delivery of this Agreement and any
termination hereof.

 

31.2         Effective as of the date of this Agreement
and as of the Actual Delivery Date of each Aircraft, Buyer represents and
warrants that:

 

 

31.2.1      Buyer is a corporation duly organized and
validly existing under the laws of the its state of incorporation in the United
States and has all necessary corporate power and authority to conduct the
business in which it is currently engaged and to enter into and perform its
obligations under this Agreement.

 

31.2.2      Buyer has taken, or caused to be taken, all
necessary corporate action to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder.

 

31.2.3      The execution and delivery by Buyer of this
Agreement, the performance by Buyer of its obligations hereunder and the
consummation by Buyer of the transactions contemplated hereby, do not and will
not (A) violate or conflict with any provision of the constitutional documents
of Buyer, (B) violate or conflict with any law, rule, or regulation applicable
to or binding on Buyer or (C) violate or constitute any breach or default
(other than a breach or default that would not (x) result in a material adverse
change to Buyer or (y) adversely affect Buyer’s ability to perform any of its
obligations hereunder),under any agreement, instrument or document to which
Buyer is a party or by which Buyer or any of its properties is or may be bound
or affected.

 

31.2.4      The execution and delivery by Buyer of this
Agreement, the performance by Buyer of its obligations hereunder and the
consummation by Buyer of the transactions contemplated hereby do not and will
not require the consent, approval or authorization of, or the giving of notice
to, or the registration with, or the recording or filing of any documents with,
or the taking of any other action in respect of, (A) any trustee or other
holder of any indebtedness or obligation of Buyer, (B) any national, federal,
state or local government regulatory, judicial, or administrative entity of
competent jurisdiction (other than recordation of the Aircraft with FAA) or (C)
any other party.

 

31.2.5      This Agreement has been duly authorized, executed
and delivered by Buyer and, assuming the due authorization, execution and
delivery hereof by the other Party constitutes the legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with the terms
hereof, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.

 

31.2.6      Each of the foregoing representations and
warranties shall survive the execution and delivery of this Agreement and any
termination hereof.

 

 

IN WITNESS WHEREOF, the Parties have caused
this Agreement to be duly executed and delivered by their proper and duly
authorized officers and to be effective as of the day and year first above
written.

 

 

	
  EMBRAER
  - Empresa Brasileira

  de Aeronáutica S.A.

  	
  BUYER – Republic Airline, Inc.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Frederico Fleury Curado

  	
   

  	
  By:

  	
  /s/ Bryan Bedford

  	
   

  
	
  Name: Frederico Fleury Curado

  	
  Name: Bryan Bedford

  
	
  Title: Executive Vice
  President Civil Aircraft

  	
  Title: Chairman & CET

  
	
   

  	
   

  
	
  By:

  	
  /s/ Flavio Rimoli

  	
   

  	
   

  
	
  Name: Flavio Rimoli

  	
   

  
	
  Title: Sr. Vice President
  Airline Market

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  Date:

  
	
  Place:

  	
  Place:

  
	
   

  	
   

  
	
  Witnesses:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Robert H. Cooper

  	
   

  
	
  Name:

  	
  Name: Robert H. Cooper

  
	
  ID:

  	
  ID: EVP & CFO

  
									

 

 

ATTACHMENT “A” - AIRCRAFT CONFIGURATION

 

1.     EMBRAER 170 CONFIGURATION

 

1.1.     EMBRAER 170 Standard Aircraft

 

The Aircraft EMBRAER 170 shall be manufactured according to (i) the
standard configuration specified in the Preliminary Technical Description
PTD-170 Rev. 4 dated May 2003, which although not attached hereto, is
incorporated herein by reference, and (ii) the characteristics described in the
items below.

 

1.2.     EMBRAER 170 Optional Equipment

 

The Aircraft will also be fitted with the following options selected by
Buyer:

 

1.2.1.  Aircraft Model and Engines

a. EMBRAER 170 LR

b. GE CF34-8E5 Engine

 

1.2.2.  Options By Ata Chapter

[*]

 

1.2.3.        EMBRAER 170 Basic Interior
Configuration (70 seats)

 

[*]

 

[*]

 

3.     FINISHING

 

The Aircraft
will be delivered to Buyers as follows:

 

3.1 EXTERIOR FINISHING:

 

The fuselage of the Aircraft shall be painted according to Buyer’s
color and paint scheme which shall be supplied to Embraer by Buyer on or before
six (6) months prior to the relevant Aircraft Contractual Delivery Date.

 

[*]  

 

The wings and the horizontal stabilizer of all Aircraft shall be
supplied in the standard colors, i.e., gray BAC707.

 

3.2      INTERIOR FINISHING:

 

Buyer shall inform Embraer on or before [*] months prior to the relevant Aircraft Contractual Delivery
Date of its choice of materials and colors of all and any item of interior
finishing such as seat covers, carpet, floor lining on galley areas, side walls
and overhead lining, galley lining and curtain. The above-mentioned schedule
for definition of interior finishing shall only be applicable if Buyer selects
its materials from the choices offered by and available at Embraer. In case
Buyer opts to use different materials and or patterns, such schedule shall be
mutually agreed between the Parties at the time of signature of the Purchase
Agreement.

 

* Confidential

 

 

3.3      BUYER FURNISHED AND BUYER
INSTALLED EQUIPMENT (BFE and BIE):

 

Buyer may choose to have carpets, tapestries, seat covers and curtain
fabrics supplied to Embraer for installation in the Aircraft as BFE. Materials
shall conform to the required standards and comply with all applicable
regulations and airworthiness requirements. Delays in the delivery of BFE
equipment or quality restrictions that prevent the installation thereof in the
time frame required by the Aircraft manufacturing process shall entitle Embraer
to either delay the delivery of the Aircraft or present the Aircraft to Buyer
without such BFE, in which case Buyer [*]
of the Aircraft. All BFE equipment shall be delivered to Embraer in DDP –
Embraer facilities in São José dos Campos, SP, Brazil (Incoterms 2000)
conditions.

 

The Aircraft galleys have provisions for the following BIE items that,
unless timely agreed by the Parties, are not supplied or installed by Embraer:
Trolleys, ovens, coffee makers, hot jugs and standard units.

 

4.     REGISTRATION MARKS AND
TRANSPONDER CODE

 

The Aircraft
shall be delivered to Buyer with the registration marks painted on them. The
registration marks and the transponder code shall be supplied to Embraer by
Buyer no later than ninety (90) Days before each relevant Aircraft Contractual
Delivery Date.

 

IT
IS HEREBY AGREED AND UNDERSTOOD BY THE PARTIES THAT IF THERE IS ANY CONFLICT
BETWEEN THE TERMS OF THIS ATTACHMENT “A” AND THE TERMS OF THE TECHNICAL
DESCRIPTION ABOVE REFERRED, THE TERMS OF THIS ATTACHMENT “A” SHALL PREVAIL.

 

* Confidential

 

 

ATTACHMENT B - FERRY EQUIPMENT AND PRODUCT
SUPPORT PACKAGE

 

1. FERRY EQUIPMENT AND ASSISTANCE

 

1.1           If it is necessary for any ferry equipment
to be installed by Embraer in the Aircraft for the ferry flight between Brazil
and the United States of America, Embraer will make available a standard ferry
equipment to Buyer (hereinafter the “Kit”), at no charge to Buyer, except as
set forth below. In this case, Buyer shall immediately upon the Aircraft’s
arrival at Embraer Marketing Aircraft Corporation (“EMAC”) facilities in Fort
Lauderdale – Fl, remove the Kit from the Aircraft and EMAC shall return the Kit
to Embraer in Brazil at [*],
including the necessary insurance.

 

If Embraer provides the Kit to Buyer and if the Kit is either utilized,
whether totally or not, or if the Kit is not returned by Buyer, in Embraer’s
reasonable discretion, complete and in the same condition as it was delivered
to Buyer, Buyer shall pay Embraer the value of a new Kit. In such case, the
original Kit shall [*], and the
above-mentioned payment shall be made to Embraer by Buyer upon [*].

 

1.2           [*]

 

1.3           At no additional charge to Buyer and at
Buyer’s request, Embraer shall make a technical representative available on
board of the Aircraft during the ferry flight in order to assist Buyer’s flight
crew with any possible technical problem with the Aircraft and also to assist
Buyer with the communication with Brazilian custom clearances and Aircraft
refueling individuals. Such representative shall remain on board of the
Aircraft until the last stop in Brazilian territory. Any other arrangement
shall be requested by Buyer with [*]
days prior to the relevant Aircraft Contractual Delivery Date and Embraer will
inform Buyer the terms and conditions to provide such additional service to
Buyer.

 

2. PRODUCT SUPPORT PACKAGE

 

2.1 MATERIAL SUPPORT

 

2.1.1        Spares Parts General Policy: Embraer guarantees
the supply of line replaceable units, spare parts, ground support equipment and
tooling, except engines and engine accessories, hereinafter referred to as
“Spare(s)”, for the Aircraft for a period of [*]
years after production of the last aircraft of the same type. Such Spares shall
be supplied according to the prevailing availability, sale conditions, delivery
schedule and effective price on the date of acceptance by Embraer of the
purchase order. The Spares may be supplied either by Embraer in Brazil or
through its subsidiaries or distribution centers located abroad.

 

Embraer’s spare parts policy is to provide the following categories of
spares as specified in the respective Embraer publications and available to be
purchased through Embraer:

 

•      Line Replaceable
Units (LRU’s);

 

•      Parts to
repair and overhaul components manufactured under Embraer specification to be
used only on the Aircraft;

 

•      Parts to line
maintenance;

 

* Confidential

 

 

•      Parts to fulfill all
maintenance tasks per maintenance manual and/or maintenance plan issued by
Embraer;

 

•      Embraer-made parts;

 

•      Aircraft Ground Equipment
(AGE);

 

•      Aircraft Ground Equipment
spare parts manufactured under Embraer specifications;

 

•      Special tools; and

 

•      Bulk materials.

 

2.1.2        Recommended Spare Parts List (“RSPL”):
Upon Buyer’s request, Embraer shall present to Buyer a recommended Spare
provisioning list (the “RSPL”). The objective of the RSPL is to provide Buyer
with a detailed list of Spares that will be necessary to support the initial
operation and maintenance of the Aircraft by Buyer. Such recommendation will be
based on the experience of Embraer and on the operational parameters
established by Buyer.

 

Embraer will provide a qualified team to attend pre-provisioning
conferences, as necessary, to discuss Buyer requirements and the RSPL as well
as any available spare parts support programs offered by Embraer. Such meeting
shall be held at a mutually agreed upon place and time, [*] prior to the Contractual Delivery Date
of the first Firm Aircraft.

 

Buyer may elect to acquire all the items contained in the RSPL or to
combine a partial acquisition of the RSPL items with a participation in the
special spare parts support programs, available from Embraer.

 

Buyer may acquire the items contained in the RSPL directly from Embraer
or directly from Embraer’s vendors. For the items contained in the RSPL that
Buyer elects to purchase directly from Embraer (the “IP Spares”). If Buyer
places a IP Spares purchase order on or before [*] days prior to the first Firm Aircraft Contractual Delivery
Date, [*].  For purchase orders placed by Buyer after
the schedule set forth above, the IP Spares shall be provided to Buyer in
accordance with the quoted lead times.

 

Embraer will deliver the IP Spares in FCA (Free Carrier - Incoterms
2000) condition, at the port of clearance indicated by Embraer [*].

 

If requested by Buyer, Embraer will update the data of the RSPL
incorporating engineering and price changes. Embraer will maintain a master
copy of the RSPL updated [*].

 

2.1.3        Credit for surplus IP Spares: Embraer offers to
Buyer a program for certain surplus IP Spares manufactured by Embraer and which
were recommended in writing by Embraer limited to the quantities, part numbers
and serial numbers (if applicable) identified in the relevant invoices. Such
program will provide terms no less favorable than the following:

 

* Confidential

 

 

a.     Credit Program: During the period commencing [*] after delivery of the first Aircraft
under the Purchase Agreement of which this is an Attachment and ending [*] after such delivery, Embraer will, [*], offer a credit for new and unused IP
Spares manufactured by Embraer (i) which have been supplied by Embraer as IP
Spares for the Aircraft subject of this Agreement and (ii) which are surplus to
Buyer ́s needs. Such credit may be used toward the purchase of Spares
manufactured by Embraer, Technical Publications or Services (excluding
training) offered by Embraer.

 

a.1       Exceptions: Embraer will not issue credits for
IP Spares which were purchased by Buyer in excess to or differently from the IP
Spares recommended in writing by Embraer to Buyer by the IPL as initial
provisioning for the Aircraft and for IP Spares which have become obsolete or
have been superseded by another part as a result of (i) Buyer’s modification of
an Aircraft for which the IP Spares were purchased; (ii) Embraer design
improvements (except for IP Spares which have become obsolete because of a
defect in design); (iii) IP Spares which are shelf-life limited; (iv) damaged
IP Spares; or (v) IP Spares that were not properly stored.

 

a.2       Credit values: The credit for each IP Spare to
be issued by Embraer will be: (i) an amount equal to [*] or (ii) an amount equal to [*] whichever is less.

 

a.3       Delivery of surplus IP Spares: IP Spares for
which a credit has been requested shall be delivered by Buyer, freight and
insurance prepaid, to Embraer’s plant in São José dos Campos, SP, Brazil, or
any other destination as Embraer may reasonably designate. All returned IP
Spares are subject to Embraer’s quality control inspection and acceptance. All
IP Spares which are rejected by Embraer’s quality control and/or are included
in the exceptions set forth in paragraph a.1 hereinabove, will be returned to
Buyer at Buyer’s expense, no credit being due in this case.

 

a.4       Credit issue: After Embraer’s acceptance of
those IP Spares suitable for the credit program, under the terms of this
Agreement, Embraer will notify the available credit amount to Buyer and provide
all relevant information as to credit utilization.

 

2.1.4        Other Spare Parts Services:

 

a.     AOG services: Embraer will maintain a call center
for the AOG services, twenty-four (24) hours a day, seven (7) days a week. All
the contacts with the call center can be made through TOLL FREE numbers (phone
and fax), e-mail [*]. Embraer will
also maintain the regular direct lines (phone and fax), in case of failures.
The information concerning TOLL FREE, regular lines and e-mail address can be
obtained through the Customer Account Manager designated to Buyer by Embraer or
through Embraer’s Customer Service offices. Embraer will deliver parts under
AOG from Buyer nearest location, provided that the part is available at this
location at the moment of the

 

* Confidential

 

 

request, in FCA condition - Embraer’s facility, respecting Buyer’s
shipping instructions.

 

Other than AOG orders, Buyer may expedite spare parts orders as spare
parts critical orders (imminent AOG or work stoppage situation) or as spare
parts routine expedite orders (urgent stock replenishment – “USR”). [*]

 

[*]

 

b.     Routine and/or Critical Spares: Embraer will
deliver routine and/or critical Spares (other than AOG Spares) in [*], depending on where the purchase order
was placed with or otherwise agreed between Embraer and Buyer. Routine and/or
critical Spares shall be delivered according to their lead times, depending
upon the purchase order priority and with the respective authorized release
certificate or any similar document issued by a duly authorized person.

 

2.1.5        Parts Exchange Program: According to its
prevailing availability, Embraer may offer an “exchange program” for repairable
parts whenever the vendor does not have its own exchange program.

 

2.1.6        Parts Repair Program: For any repair
required by Chautauqua on any Embraer or vendor repairable item, Embraer may
assist Chautauqua to perform such repair in order to ensure the shortest turn
around time (TAT).

 

2.1.7        Pricing: Embraer will maintain a spare
parts price list updated periodically. Items not shown on the list will be
quoted on request.

 

2.2 AIRCRAFT
TECHNICAL PUBLICATIONS:

 

2.2.1        Aircraft Publications: Embraer shall supply, at
no additional charge to Buyer, [*]
complete sets of operational and maintenance publications (as defined in
Exhibit 1 hereto), plus one (1) operational set (as defined in Exhibit 1
hereto) on board of each Aircraft to be delivered to Buyer, in the English
language. The list of manuals is specified in Exhibit “1” to this Attachment
“B”. Such publications are issued under the applicable specification and are [*]. The revision service for these
publications is provided, [*],
including mailing services (except for air cargo shipping) and the software
license fee [*].

 

2.2.2        Vendor’s items Publications: With respect
to vendor items installed in the Aircraft which have their own publications,
Buyer will receive them in the same quantity specified in paragraph 2.2.1, in
their original content and printed form, directly from the suppliers, which are
also responsible to keep them continuously updated through a direct
communication system with Buyer.

 

2.2.3        All Embraer Operational and Maintenance
Technical Publications are available [*]
except for [*] that are available [*].

 

Maintenance Technical Publications, [*]
will be provided [*].

 

* Confidential

 

 

2.2.4        The Parties further understand and agree that
in the event Buyer elects not to take all or any one of the publications above
mentioned, or revisions thereof, no refund or other financial adjustment of the
Aircraft Basic Price will be made since such publications are offered at no
charge to Buyer.

 

2.2.5        The terms and conditions of this Article 2.2 do
not apply to [*] except for [*] that Embraer shall [*].

 

2.3 SERVICES

 

Embraer shall provide familiarization programs and on-site support for
the Aircraft (the “Services”) in accordance with the terms and conditions
described below:

 

2.3.1        Aircraft familiarization program:

 

a.     The familiarization program specified in paragraph
“e” below (the “Training Package”) is being offered at [*], except for the [*], which are used in flight training to
be performed in the Aircraft, if any, as well as, travel and board &
lodging expenses of Buyer’s trainees, [*].
The Training Package shall be conducted in accordance with Buyer’s training
program and with all applicable regulations and requirements of the Aviation
Authority.

 

b.     Notwithstanding the eventual use of the term
“training” in this paragraph 2.3.1, the intent of this program is solely to
familiarize Buyer’s pilots, mechanics, employees or representatives, duly qualified
per the governing body in the country of Buyer’s operation, with the operation
and maintenance of the Aircraft. It is not the intent of Embraer to provide
basic training (“ab-initio”) to any representatives of Buyer.

 

c.     The Training Package, as applicable, shall occur
prior to the [*] Aircraft Actual
Delivery Date, as it shall be previously agreed upon by Buyer and Embraer, [*].

 

Buyer must give written notification to Embraer [*] days in advance of Buyer’s expected
training schedule (including the full name and identification of each attendee)
and Buyer shall [*]. Substitutions
will not be accepted for training within this period.

 

[*] should Buyer not
take all or any portion of the Training Package on or before [*], Buyer shall be deemed to have fully
waived its rights to such service, no refund or indemnity being due by Embraer
to Buyer in this case.

 

d.     The Training Package shall be conducted by
Embraer’s designated trainer provider in United States, or at such other
location, as Embraer shall reasonably designate [*].

 

e.     The Training Package covers:

 

e.1       One (1) Pilot Familiarization Program for up to [*] including (i) ground familiarization as
regards Aircraft systems, weight and balance, performance and normal/emergency
procedures and, (ii) flight simulator

 

* Confidential

 

 

training in [*]
in accordance with the Aviation Authority’s approved Flight Operations Training
Program.

 

e.2       One (1) Maintenance Familiarization Course for
up to [*]. This course shall
consist of classroom familiarization with Aircraft systems and structures and
shall be in accordance with ATA specification 104, level III.

 

e.3       One (1) Flight Attendant Familiarization Course
for up to [*]. This course shall
consist of classroom familiarization, including a general description of
Aircraft and systems to be used by flight attendants.

 

e.4       In addition to the above, the following
individuals shall be trained:

 

•      Up to [*] which received [*] to be trained [*]

 

•      Up to [*] which received [*] to be trained [*]

 

•      Up to [*] which received [*] to be trained [*]

 

•      Up to [*]

 

•      Up to [*]

 

•      Up to [*] to be trained [*]

 

•      Up to [*]

 

f.      Buyer shall be solely responsible for submitting
its training programs to the Aviation Authority for approval.

 

g.     The presence of Buyer’s authorized trainees shall
be allowed exclusively in those areas related to the subject matter hereof and
Buyer agrees to hold harmless Embraer from and against all and any kind of
liabilities in respect of such trainees to the extent permitted by law.

 

Any other service will be subject to a specific agreement to be
negotiated by the Parties and will be charged by Embraer accordingly.

 

2.3.2 [*]
support:

 

a.     Embraer shall identify in its sole discretion, and
provide a technical support representative (the “TSR”) [*].

 

b.     TSR shall assist and advise Buyer on the Aircraft
maintenance during its initial operation and act as liaison between Buyer and
Embraer.

 

c.     At no charge to Embraer, Buyer shall provide each
such TSR with communication services (telephone, facsimile) as well as office
space and facilities at Buyer’s designated maintenance base. Buyer shall also
(a) arrange all necessary work permits and airport security clearances required
for Embraer employees, to permit the accomplishment of the services mentioned
in this item 2.3.2, in due time; and (b) obtain all necessary custom clearances
both to enter and depart from Buyer’s country for Embraer’s employees and their
personal belongings and professional tools.

 

* Confidential

 

 

d.     During the [*],
Buyer shall permit access to the maintenance and operation facilities as well
as to the data and files of Buyer’s Aircraft fleet. It is hereby agreed and
understood that Buyer shall make available [*],
one (1) set of updated Technical Publications as referred to in Article 2.2
above, it being Buyer’s responsibility to perform the revision services in
order to maintain such publications updated within the period [*].

 

e.     Buyer shall bear all expenses related to [*].

 

f.      Without a previous written authorization from
Embraer, TSR shall not participate in test flights or flight demonstrations. In
case Buyer obtains such previous authorization, Buyer shall include the TSR in
Buyer’s insurance policy. Embraer reserves the right to halt the services
mentioned in this item 2.3.2, should any of the following situations occur at
Buyer’s base: a) there is a labor dispute or work stoppage in progress; b) war
or war like operations, riots or insurrections; c) any conditions which is
dangerous to the safety or health of Embraer’s employee; or d) the government
of Buyer’s country refuses permission to Embraer’s employee to enter the
country.

 

g.     The Parties further understand and agree that in
the event Buyer elects not to take all or any portion of the [*] support provided for herein, [*]. Any other additional on site support
shall depend on mutual agreement between the Parties and shall be charged by
Embraer accordingly.

 

h.     The presence of TSR shall be allowed exclusively
in those areas related to the subject matter hereof and Embraer agrees to hold
harmless Buyer from and against all and any kind of liabilities in respect of
such TSR to the extent permitted by law.

 

i.      Buyer agrees to indemnify and hold harmless
Embraer and Embraer’s officers, agents, employees and assignees from and against
all liabilities, damages, losses, judgments, claims and suits, including costs
and expenses incident thereto, which may be suffered by, accrued against, be
charged to or recoverable from Embraer and/or Embraer’s officers, agents,
employees and assignees by reason of loss or damage to property or by reason of
injury or death of any person resulting from or in any way connected with the
performance of services by employees, representatives or agents of Embraer for
or on behalf of Buyer related to Aircraft delivered by Embraer to Buyer,
including, but not limited to, the Services and any other services such as
technical operations, maintenance, and training services and assistance
performed while on the premises of Embraer or Buyer, while in flight on Buyer-owned
Aircraft or while performing such activities, at any place, in conjunction with
the Aircraft operations of Buyer, [*].

 

2.3.3        [*]

 

* Confidential

 

 

[*] the following technical publications
covering Aircraft operation and maintenance, plus [*],
shall be delivered to Buyer in accordance with the following list:

OPERATIONAL SET 

	
  1.
  Airplane Flight Manual (AFM)(*)

  
	
  2.
  Weight & Balance Manual (WB)(*)

  
	
  3.
  Airplane Operations Manual (AOM)(*)

  
	
  4.
  Quick Reference Handbook (QRH)(*)

  
	
  5.
  Dispatch Deviation Procedures Manual (DDPM)(*)

  
	
  6.
  Supplementary Performance Manual (SPM)(*)

  
	
  7.
  Operational Bulletins Set (OB)

  
	
  8.
  Master Minimum Equipment List CTA (MMEL)

  
	
  9.
  Standard Operating Procedures Manual (SOPM)

  
	
  10.
  Flight Attendant Manual (FAM)

  

 

MAINTENANCE SET

	
  1.
  Aircraft Maintenance Manual (AMM)

  
	
  2.
  Aircraft Illustrated Parts Catalog (AIPC)

  
	
  3.
  Fault Isolation Manual (FIM)

  
	
  4.
  Non Destructive Testing Manual (NDI)

  
	
  5.
  Maintenance Planning Document (MPD)

  
	
  6.
  Wiring Manual (WM)

  
	
  7.
  Structural Repair Manual (SRM)

  
	
  8.
  Service & Information Bulletins Set (SB/IB)

  
	
  9.
  Service Newsletters (SNL)

  
	
  10.
  Parts Information Letter (PIL)

  
	
  11.
  System Schematic Manual (SSM)

  
	
  12.
  Instructions for Ground Fire Extinguishing and Rescue (IGFER)

  
	
  13.
  Airport Planning Manual (APM)

  
	
  14.
  Illustrated Tool & Equipment Manual (ITEM)

  
	
  15.
  Task Card System CDROM (TCS)

  
	
  16.
  Ramp Maintenance Manual (RMM)

  
	
  17.
  Power plant Build-up Manual (PPBM) (**)

  
	
  18.
  Corrosion Prevention Manual (CPM)

  
	
  19.
  Component Maintenance Manual (CMM) (**)

  
	
  20.
  Airplane Recovery Manual (ARM)

  
	
  21.
  Maintenance Facility and Equipment Planning (MFEP)

  
	
  22.
  Standard Wiring Practices Manual (SWPM)

  
	
  23.
  Standard Manual (SM)

  
	
  24.
  Consumable Products Catalog (CPC)

  
	
  25.
  Maintenance Review Board Report (MRB)

  

 

(*)           One extra copy on board each Aircraft

(**)         To be delivered by the suppliers directly to Buyer.

 

* Confidential

 

 

ATTACHMENT "C" - WARRANTY -
MATERIAL AND WORKMANSHIP

 

1)     Embraer, subject to the conditions and limitations
hereby expressed, warrants the EMBRAER 170 Aircraft subject of the Purchase
Agreement to which this is an Attachment, as follows:

 

a.     For a period of [*]
months from the date of delivery to Buyer, each Aircraft will be free from:

 

•      Defects in
materials, workmanship and manufacturing processes in relation to parts
manufactured by Embraer or by its subcontractors holding an Embraer part
number;

 

•      Defects
inherent to the design of the Aircraft and its parts designed or manufactured
by Embraer or by its subcontractors holding an Embraer part number.

 

b.     For a period of [*]
months from the date of delivery to Buyer, each Aircraft will be free from:

 

•      Defects in operation of
vendor (Embraer’s supplier) manufactured parts, not including the Engines,
Auxiliary Power Unit (APU) and their accessories (“Vendor Parts”), as well as
failures of mentioned parts due to incorrect installation or installation not
complying with the instructions issued or approved by their respective
manufacturers.

 

•      Defects due to
non-conformity of Vendor Parts to the technical specification referred to in
the Purchase Agreement of the Aircraft.

 

Once the above-mentioned periods have expired, Embraer will transfer to
Buyer the original Warranty issued by the vendors, if it still exists.

 

2)     Embraer, subject to the conditions and limitations
hereby expressed, warrants that:

 

a.     All spare parts or ground support equipment, not
including Engines, APU and their Accessories, which have been manufactured by
Embraer or by its subcontractors holding an Embraer part number, which will
permit their particular identification and which have been sold by Embraer or
its representatives will, for a period of [*]
months from the date of the invoice, be free from defects of material,
workmanship, manufacturing processes and defects inherent to the design of the
above mentioned parts or ground support equipment.

 

b.     All spare parts or ground support equipment, which
have been designed and manufactured by vendors, not including Engines, APU and
their related accessories, and stamped with a serial number which will permit
their particular identification and which have been sold by Embraer or its
representatives will, for a period of [*]
months from the date of the invoice, be free from malfunction, defect of
material and manufacture.

 

3)     The obligations of Embraer as expressed in this
Warranty are limited to replace or repair defective parts, depending solely
upon its own judgment. The defective parts shall be returned to Embraer or its
representatives within a period of [*]
days after the later of either the occurrence of the defect, or after Buyer
should reasonably have been aware of the defect, whichever is longer, at
Buyer’s own expense

 

* Confidential

 

 

(including but not limited to, freight, insurance, customs duties),
adequately packed, provided that such components are actually defective and
that the defect has occurred within the periods stipulated in this certificate.
Should the defective part not be returned to Embraer within such [*] day period, Embraer may have the right,
at its sole discretion, to deny the warranty claim. [*]

 

NOTE:    Notification of any defect claimed under this item
3 must be given to Embraer within [*]
days after such defect is found.

 

Freight, insurance, taxes and other costs incurred by Embraer or its
representative for the return of the part to Buyer, as well as the associated
costs with the reinstallation and adjustments are Buyer’s responsibility.

 

Parts supplied to Buyer as replacement for defective parts are
warranted for the balance of the warranty period still available from the
original warranty of the exchanged parts.

 

4)     Embraer will accept no warranty claims under any
of the circumstances listed below unless [*]:

 

a.     When the Aircraft has been used in an attempt to
break records, or subjected to experimental flights, or in any other way not in
conformity with the flight manual or the airworthiness certificate, or
subjected to any manner of use in contravention of the applicable aerial
navigation or other regulations and rules, issued or recommended by government
authorities of whatever country in which the Aircraft is operated, when
accepted and recommended by I.C.A.O.;

 

b.     When the Aircraft or any of its parts have been
altered or modified by Buyer, without prior approval from Embraer or from the
manufacturer of the parts through a service bulletin;

 

c.     Whenever the Aircraft or any of its parts have
been involved in an accident, or when parts either defective or not complying
to manufacturer’s design or specification have been used;

 

d.     Whenever parts have had their identification
marks, designation, seal or serial number altered or removed;

 

e.     In the event of negligence, misuse or maintenance
services done on the Aircraft, or any of its parts not in accordance with the
respective maintenance manual;

 

f.      In cases of deterioration, wear, breakage, damage
or any other defect resulting from the use of inadequate packing methods when
returning items to Embraer or its representatives.

 

5)     This Warranty does not apply to defects presented
by expendable items, arising after the applicable service life or maintenance
cycle for such item, and to materials or parts subjected to deterioration.

 

6)     The Warranty hereby expressed is established
between Embraer and Buyer, and it cannot be transferred or assigned to others,
unless by written consent of Embraer, according to Article 14 of the Purchase
Agreement of which this is an Attachment.

 

* Confidential

 

 

7)     THE WARRANTIES, OBLIGATIONS AND LIABILITIES OF
EMBRAER AND REMEDIES OF BUYER SET FORTH IN THIS WARRANTY CERTIFICATE ARE EXCLUSIVE
AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES, ALL
OTHER WARRANTIES, OBLIGATIONS AND LIABILITIES OF EMBRAER AND ANY ASSIGNEE OF
EMBRAER AND ALL OTHER RIGHTS, CLAIMS AND REMEDIES OF BUYER AGAINST EMBRAER OR
ANY ASSIGNEE OF EMBRAER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH
RESPECT TO ANY NON-CONFORMANCE OR DEFECT OR FAILURE OR ANY OTHER REASON IN ANY
AIRCRAFT OR OTHER THING DELIVERED UNDER THE PURCHASE AGREEMENT OF WHICH THIS IS
AN ATTACHMENT, INCLUDING DATA, DOCUMENT, INFORMATION OR SERVICE, INCLUDING BUT
NOT LIMITED TO:

 

a.     ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS;

 

b.     ANY IMPLIED WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE;

 

c.     ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
IN TORT, WHETHER OR NOT ARISING FROM THE NEGLIGENCE OR OTHER RELATED CAUSES OF
EMBRAER OR ANY ASSIGNEE OF EMBRAER, WHETHER ACTIVE, PASSIVE OR IMPUTED; AND

 

d.     ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
FOR LOSS OF OR DAMAGE TO ANY AIRCRAFT, FOR LOSS OF USE, REVENUE OR PROFIT WITH
RESPECT TO ANY AIRCRAFT OR FOR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES.

 

8)     No representative or employee of Embraer is
authorized to establish any other warranty than the one hereby expressed, nor
to assume any additional obligation, relative to the matter, in the name of
Embraer and therefore any such statements eventually made by, or in the name of
Embraer, shall be void and without effect.

 

9)     Provided the provisions hereof are still effective
in accordance with their terms, then Buyer may assign Buyer’s rights pursuant
to this warranty to any entity (but for entities or air carriers which are
owned, effectively controlled or managed by any other airframe manufacturer
which competes in the thirty seven (37) to one hundred ten (110) seat turbo jet
market (“Transferee”)) provided Buyer notifies Embraer of the identity of such
Transferee prior to such transaction. In the event such Transferees or Other
Transferees (as defined herein) subsequently transfer any Aircraft, any
Transferees’ or Other Transferees’ rights which remain pursuant to this
Warranty with respect to such Aircraft may also be transferred to any other
entity (but for entities or air carriers which are owned, effectively
controlled or managed by any other airframe manufacturer which competes in the
thirty seven (37) to one hundred ten (110) seat turbo jet market) (“Other
Transferees”)) provided that the Transferees or Other Transferees notify
Embraer of the identity of such other entity prior to such transaction.

 

 

ATTACHMENT “D” - EMBRAER 170 ESCALATION FORMULA

 

[*]

 

* Confidential

 

 

ATTACHMENT  “E” - DIRECT MAINTENANCE COST GUARANTEE

 

I.      Embraer, subject to the terms, conditions
and limitations contained in this Attachment, shall guarantee the incurred
direct maintenance cost (the “Maintenance Cost Guarantee”) for the fleet of
Aircraft subject of the Purchase Agreement as follows:

 

a.      The Maintenance Guarantee for the Aircraft
shall be for the period that begins at [*] (“Guarantee Term”). [*]

 

b.      For the first [*] commencing with the first
Aircraft Actual Delivery Date, the Achieved cumulative Maintenance Cost - AMC
for [*]
of Buyer’s Aircraft, shall not exceed a Maintenance Cost Guarantee (“MCG(1)”) rate of: 

 

	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  

c.      [*]

 

d.      The [*] shall be [*] in accordance with [*]

 

e.      Measurement will be computed annually on the
anniversary date of [*]. The results will be reconciled year by
year until [*].

 

f.       In the event at the end of each annual measurement
period, the AMC is higher than the MCG, Embraer shall provide [*]
to Buyer as provided for below:

[*]

 

g.      Buyer shall use [*] to calculate and submit
to Embraer the AMC [*] in electronic format, within [*]
during the Guarantee Term. In the event that Buyer fails to submit such data to
Embraer as described in the preceding sentence, Embraer shall send a written
notice to Buyer requesting such data, and the guarantee contained in this
Attachment shall terminate in the event Buyer fails to submit the AMC to
Embraer within [*] of such written notice.  

 

The Parties
shall use [*]
to reach an agreement over the data [*] after the submission of AMC in regard
to [*].
In the event that the AMC contains [*] the Parties shall [*]. Any [*] will be [*].

 

h.      This Maintenance Guarantee is based upon the
following assumptions, and any change to the assumptions shall result in an
appropriate recalculation of the MCG rate specified in items “b” and “c” above,
at Embraer criteria.

 

Fleet Size [*]: A minimum fleet size of [*] Aircraft delivered in
accordance with Article 5 of the Purchase Agreement.

[*]

[*]

1      Economic condition: [*] 

 

2      Utilization: The guarantee covers a minimum
of [*]
flight hours per cycle, [*] APU hour per flight hour plus or minus [*]
APU hour per flight hour and [*] APU cycle per flight cycle plus or
minus [*]
APU cycle per flight cycle. Buyer’s fleet-wide average annual Aircraft

 

* Confidential

 

 

utilization shall be [*] flight hours, plus or
minus [*].

 

3      Labor rate: [*] per man-hour [*].

 

4      Maintenance Review Board Report: MRB 170.

[*]

5      [*] 

 

6      [*]

 

7      Labor rate: [*] per man-hour [*].

 

8      Maintenance Review Board Report: MRB 170.

 

i.       The following are the elements covered under
this Maintenance Guarantee:

 

1.      Material
cost for non-repairable parts purchased from or through Embraer and / or
Embraer approved vendors.

 

2.   Overhaul/repair
costs incurred at Embraer approved repair facilities.

 

3.   Expendable
which can be accounted for on an unit basis, i.e. filters, gaskets, excluding
wire, rivets, nuts, bolts, washers, pins, brackets, tie wraps.

 

4.   Parts and
materials consumed through scheduled maintenance according to the Maintenance
Review Board Report (MRB).

 

j.       The
following elements are not covered under this guarantee:

 

1.   Costs
associated with taxes, levies, imposts, customs fees.

 

2.   Shipping,
receiving, ferry, packing, storage, warehousing and insurance expenses.

 

3.   General
administrative and overhead expenses.

 

4.   Restoration
expenses incurred due to damage to or failure of Aircraft, components or parts
caused by accident, incident, FOD or Acts of God, negligence, abuse, misuse
and/or maintenance errors.

 

5.      When the
Aircraft or any of its parts has/have been altered or modified by Buyer,
without prior approval from Embraer or from the manufacturer of the parts
through a service bulletin, provided such approvals have not been unreasonably
withheld.

 

6.      Consumables including but not limited to
fluids, water, oils, sealants, washing compounds, cleansers, solvents, and
lubricants.

 

7.      Labor costs [*] and [*].

 

8.      Normal line operations activities (i.e.
Aircraft servicing) including but not limited to walkaround (i.e. visual
inspection), fueling, parking, washing, lavatory servicing and gallery
servicing.

 

9.      Service bulletins and or airworthiness
directives.

 

10.    Parts or components returned from vendors
with “no-fault” found, i.e., re-certification charges without any repair and
associated labor. Any part removed and replaced from an Aircraft which does not
solve the Aircraft problem (poor troubleshooting) and associated labor.

 

11.    Leasing or loan fees related to the aircraft
or any of its parts which are being used in place of an unserviceable unit.

 

12.    Any part supplied on a “no-charge basis” or
for which a warranty credit or

 

* Confidential

 

 

replacement part has been supplied.

 

13.    Aircraft downtime costs.

 

14.    Any parts that are changed during scheduled
or unscheduled maintenance, due to failure, which are still under the warranty
period and, are not submitted to Embraer or the suppliers for warranty credit.

 

15.    Cabin equipment and furnishing materials,
such as but not limited to carpets, seat covers, galley equipment and passenger
commodities.

 

16.    Spare parts prices [*].

 

17.    In cases of deterioration, wear, breakage,
damage or any other defect resulting from the use of inadequate packing methods
when returning items to Embraer or its representatives.

 

18.    Maintenance problems caused by Buyer’s
negligence or misuse of parts or Buyer’s failure to take all maintenance
actions on the Aircraft as recommended in all applicable maintenance manuals.

 

19.    Maintenance problems involving Aircraft or
parts that has / have been involved in an accident, or when parts either
defective or not complying to manufacturer’s design or specification have been
used.

 

20.    Maintenance problems involving parts that
have had their identification marks, designation, seal or serial number altered
or removed.

 

21.    Extraordinary costs incurred as a result of
any labor disruption or dispute involving a significant work action that
affects in whole or part the Aircraft’s normal operation or maintenance.

 

22.    Engines, related parts and related LRU
costs.

 

23.    Nacelle and Thrust Reverser.

 

24.    BFE (Buyer Furnished Equipment) and / or BIE
(Buyer Installed Equipment) costs.

 

25.    Maintenance reserves.

 

26.    GSE (Ground Support Equipment) costs.

 

II.    The foregoing maintenance guarantee is
provided subject to Buyer’s adherence to the following general conditions:

 

a.       Airplane Operation: Aircraft shall be
operated in airline service in accordance with the applicable Air Authority
regulations and as recommended by Embraer through the official and updated
Operations and Airplane Flight Manual.

 

b.      Inspection Program: The Aircraft shall be
maintained in accordance with the current Maintenance Review Board Report –
(MRB), and the checks shall in no event occur at a time [*] Buyer’s Maintenance
Program must have provisions for escalating the checks interval as soon as the
applicable Air Authority allows. Buyer’s program should also include the use of
task cards to assist the maintenance personnel in performing inspection task.

 

c.       Aircraft Manuals: Buyer shall keep a
complete set of Embraer recommended manuals up-to-date and available to airline
personnel for assisting them with the maintenance and operation of the
Aircraft. A set of recommended manuals or a electronic link to the data should
be available at all maintenance bases (line or heavy) and shall be maintained
with the latest revisions at all times.

 

* Confidential

 

 

d.      Warranty: Buyer shall have at minimum, one
person which will be dedicated to the. Aircraft warranty program. This
person(s) will be trained by Embraer warranty department on the correct
procedures for filing Buyer warranty claims in accordance with mutually agreed
format. This person(s) shall also be responsible for the filing of warranty
claims directly to suppliers for credit, repair or replacement.

 

e.       Parts Repair: All shop repairs shall be
performed in Embraer’s or Embraer’s suppliers’ authorized repair shops.

 

f.       Staff levels: Buyer shall have available
reasonable staff to properly maintain the Aircraft during scheduled and
unscheduled maintenance. This shall include, but not be limited to, mechanics,
electricians, avionics specialists, inspectors, cleaners, ground personnel and
flight crews licensed or certified by the applicable Air Authority as required
by the applicable Air Authority regulations.

 

g.      Training: Buyer is required to put in place
a training program approved by the local airworthiness authority, which, at a
minimum, shall include the following items:

 

1.      initial and recurrent training for pilots in
the Aircraft;

 

2.      initial and recurrent training for flight
attendants in the Aircraft; and

 

3.      initial and recurrent training for the
maintenance staff (airframe, powerplant, electric avionics specialists) in the
Aircraft.

 

A reasonable number of
maintenance specialist will require supplier’s training.

 

Buyer is required to train to
the above standards a reasonable number of new hired employee who will work in
or on the Aircraft.

 

h.      Spare Parts [*].

 

i.        Buyer will be required to provide Embraer an
every three month service bulletin status report, containing service bulletin
number, Aircraft serial number, Aircraft total time and total cycles.

 

j.        Ground Support Equipment: Embraer shall
provide Buyer a list of tooling and ground support equipment required to
maintain the Aircraft, this list shall be subject to Buyer’s reasonable
approval. Buyer will be required to maintain these levels of required tooling
and ground support equipment in good working order at all times.

 

k.       Reliability Reporting: Buyer is to provide
monthly to Embraer a Aircraft reliability report. This report shall include
Aircraft total time and cycles, component removals, shop finding reports and
tear down reports (for each failure completed) by authorized agencies and SDR’s
(Service Difficult Report) with date, Aircraft registration, problem
description, maintenance action, and part number and serial number of the
components removed and installed. Buyer shall use the ATA 100 chapter breakdown
format for all reports.

 

l.      Accounting System:

 

1.      Buyer shall have an accounting system,
subject to Embraer’s reasonable approval, which demonstrates the ability to
discriminate between chargeable and non-chargeable costs and expenses. Buyer’s
accounting

 

* Confidential

 

 

system
shall be presented to Embraer, upon Embraer’s written request, [*]
before [*].

 

2.      Upon Embraer’s written request, Buyer shall
also provide on a [*] basis an activity and expenditure
report satisfactory to Embraer, in electronic format and in accordance with
Embraer’s Service News Letter for data exchange.

 

3.      Upon Embraer’s written request, Embraer and
Buyer may convene frequently meetings to address issues concerning the AMC and
to identify methods to decrease Buyer’s maintenance costs. At a minimum,
Embraer and Buyer shall have two meetings per year to confirm and compute all
costs claimed by Buyer. Buyer shall permit Embraer access to all Buyer data
which can be used to verify any reports produced pursuant to this Attachment.

 

m.    Duplicated Guarantee: If Buyer negotiates
directly with any of Embraer’s suppliers/vendors a particular maintenance cost
guarantee or equivalent program (including fleet hour agreements), or an
alternative support program with Embraer, the Parties shall negotiate in good
faith and agree on the portion of cost related to this equipment/system that
shall be excluded from the MCG rate, specified in Article I.b and I.c, and
shall result in an appropriate recalculation of the MCG.

 

III.   Buyer shall not unreasonably reject
Embraer’s recommendations, changes or solutions to elements of maintenance that
would result in cost savings, as reasonably determined by the Parties.

 

IV.   EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT THE GUARANTEES, OBLIGATIONS AND LIABILITIES OF EMBRAER, AND REMEDIES
OF BUYER SET FORTH IN THIS AIRCRAFT MAINTENANCE COST GUARANTEE ARE EXCLUSIVE
AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES, ALL
OTHER RIGHTS, CLAIMS, DAMAGES AND REMEDIES OF BUYER AGAINST EMBRAER OR ANY
ASSIGNEE OF EMBRAER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH
RESPECT TO ANY GUARANTEED LEVEL OF AIRCRAFT MAINTENANCE COSTS.

 

V.    The guarantee hereby expressed is established
between Embraer and Buyer and it cannot be transferred or assigned to others,
unless stated in this Agreement or by previous written consent of Embraer.

 

* Confidential

 

 

ATTACHMENT
"F" - SCHEDULE RELIABILITY GUARANTEE

 

I.         Definitions.

 

a.     Available for Dispatch: An Aircraft which is
on the ground and cleared for dispatch by signature of Buyer’s responsible
maintenance personnel at least [*] before the scheduled departure time of
the initial flight in any given day shall be deemed to be “available for
dispatch”.

 

b.    Maintenance Interruption.

 

1.    A maintenance interruption occurs when the
malfunction of an item, or necessary checking and/or corrective actions, cause
a revenue flight not to take place or a flight delay exceeding [*].

 

2.    For the
purposes of this guarantee, only the initial Maintenance Interruption shall be
accounted as interruption. Maintenance Interruption of any or all flights on
subsequent days arising from the initial Maintenance Interruption shall not
constitute an additional Maintenance Interruption.

 

3.    Before a
flight may be considered as a Maintenance
Interruption for the purpose of this Schedule Reliability
Guarantee the Aircraft must be inspected for mechanical failure or malfunction.

 

4.    A
repetitive problem, which caused an actual maintenance interruption and was not previously corrected, shall not be
counted as a Maintenance
Interruption.

 

5.    To be
accounted as a Maintenance
Interruption, any malfunction reported, either verbal or written,
must result in maintenance corrective action. “No-trouble-found” or “could not
duplicate” or “reset” events shall not be accounted as Maintenance Interruption.

 

6.    A maintenance interruption that occurs due
to failures of systems or parts from suppliers or vendors that have a separate
maintenance interruption guarantee agreement with Buyer, and which is not
assigned to Embraer, shall not be considered as a Maintenance Interruption.

 

c.     Achieved Dispatch Reliability Percentage
(“ADRP”).

 

ADRP is the actual dispatch
reliability percentage obtained by Buyer’s fleet of Aircraft in regular revenue
service, which are the subject of this Agreement.

 

ADRP shall be computed [*]
commencing with [*] by Buyer as follows:

[*]

 

II.        Embraer, subject to the conditions and
limitations expressed herein, will guarantee the Aircraft’s schedule
reliability percentage as follows:

 

a.     The average ADRP for the [*]
period after [*] delivered under the Purchase Agreement, shall be [*].

 

b.    In the event that the ADRP [*]
is lower than GDR [*] Embraer shall [*]

[*]

 

c.     In the
event the average ADRP [*]
described in paragraph “II.a.” is
lower than the GDR [*] Embraer shall [*]

[*] 

 

In the event [*] ADRP [*] described
in paragraph “II.a.” above is [*] the [*]

 

* Confidential

 

 

calculated according to the formula above shall be [*]. 

 

Measurements will be calculated
and submitted by Buyer [*] referred to in Article II a. herein.
The Parties shall do their efforts to reach an agreement over the data [*]
of the submission thereof. Any [*] will be [*] to Buyer or to Embraer [*]
after each agreement date [*] Buyer may [*] Embraer may [*].

 

The [*] under
this Dispatch Reliability Guarantee shall not exceed [*] Buyer’s entire Aircraft fleet for the [*].

 

d.    This dispatch reliability guarantee is based
upon the following assumptions provided by Buyer, and any change to the
assumptions shall be cause for reevaluation or adjustments of this guarantee
upon the reasonable agreement of the Parties.

 

Fleet [*] Minimum of [*]
Aircraft, delivered in accordance with Article 5 of the Purchase Agreement.

 

Utilization for Fleet [*]
The guarantee covers a minimum of [*] flight hours per cycle, [*]
APU hour per flight hour plus or minus [*] APU hour per flight hour and [*]
APU cycle per flight cycle plus or minus [*] APU cycle per flight cycle. Buyer’s
fleet-wide average annual Aircraft utilization shall be [*] flight hours, plus or
minus [*].

[*]

 

e.     The following elements are not covered under
this guarantee:

 

•       Interruptions of scheduled flights due to reasons other than Aircraft
mechanical failures, including without limitation:

•       Air Traffic Control

•       Weather, acts of God, FOD, wars, riots, third party criminal acts

•       Accidents

•       Incidents

•       Negligence

•       Conditions that exist prior to dispatch which lead to a flight
interruption and could have been prevented by maintenance prior to dispatch
(including but not limited to worn, flat and cut tires, servicing (ATA Chapter
12), dead batteries, and worn brakes)

•       Hard landing.

•       Late out of maintenance

•       Force majeure

•       Crew refusal

•       Optional equipment other than that identified on Attachment “A” to this
Agreement

•       Operational delays or cancellations not related to maintenance

•       Passenger and/or baggage loading

•       Non-availability of spares or equipment

•       Non-availability of personnel

•       Operation interruptions or Maintenance Interruptions, which occurred due
to items, related in the Minimum Equipment List (“MEL”) issued and/or approved
by the local regulatory authority was followed

 

* Confidential

 

 

•       If the Aviation Authority grounds Buyer’s fleet, or one of Buyer’s
Aircraft

•       Maintenance problems caused by Buyer’s negligence or misuse of parts or
Buyer’s failure to take all maintenance actions on the Aircraft as recommended
in all applicable maintenance manuals

•       Maintenance problems involving Aircraft or parts that has/have been
involved in an accident, or when parts either defective or not complying to
manufacturer’s design or specification have been used.

•       Maintenance problems involving parts that have had their identification
marks, designation, seal or serial number altered or removed

•       Maintenance problem resulting from inadequate packing for shipment and
storage

•       A flight interruption shall not be
considered as a Maintenance
Interruption if, at the time of the interruption, Buyer has a spare
aircraft in its fleet, even though for a different model, that could
commercially reasonable be used to avoid such interruption and is not otherwise
deployed in service

•       Regulatory changes compliance

•       Cancellations or delays caused by components repaired in non-approved
local airworthiness authority shop

•       Flight cancellation or delay occurred due to one same problem on the
same Aircraft within [*]. 

 

III.      The foregoing dispatch reliability guarantee
is provided subject to Buyer’s adherence in all material respects to the
following general conditions:

 

a.     Airplane Operation: Aircraft shall be
operated in airline service in accordance with the Aviation Authority
regulations and as recommended by Embraer through the official and most updated
Operations and Airplane Flight Manual. Buyer shall have available one spare
Aircraft for each twenty Aircraft at all times.

 

b.    Inspection Program: The Aircraft shall be
maintained in accordance with the most current MRB document. Buyer’s program
must have provisions for escalating the checks intervals as soon as the
Aviation Authority allows. Buyer’s program should also include the use of task
cards to assist the maintenance personnel in performing inspection tasks.

 

c.     Aircraft Manuals: Buyer shall keep a
complete set of Embraer recommended manuals up-to-date and available to airline
personnel for assisting them with the maintenance and operation of the
Aircraft. A set of recommended manuals should be available at all maintenance
bases (line or heavy) and shall be maintained with the latest revisions at all
times.

 

d.    MEL: Buyer shall keep its MEL up to date,
with the most current issue.

 

e.     Stocking Levels: Buyer shall be responsible
to stock and maintain the recommended spare parts list (RSPL) in inventory,
throughout the guarantee period. There shall be a minimum inventory level at
each line maintenance base along with the major parts being stored at the heavy
maintenance facility. In the event during the ADR meetings, the Aircraft does
not achieve the guaranteed values, and if the cause of this non-performance is
the lack of spare parts

 

* Confidential

 

 

initially recommended by Embraer for the RSPL
and not purchased by Buyer, this guarantee will not be applicable. Embraer is
to receive annually an inventory list from the Buyer that shows current
stocking levels and the locations of all Aircraft spare parts and will make any
recommendations on additional inventory if needed. 

 

f.     Parts Repair: All shop repairs shall be
performed in Embraer’s or Embraer’s suppliers’ authorized repair shops.

 

g.    Staff Levels: Buyer shall have available
reasonable staff to properly maintain the Aircraft during scheduled and
unscheduled maintenance. This shall include, but not be limited to, mechanics,
electricians, avionics specialists, inspectors, cleaners, ground personnel and
flight crews licensed or certified by the Aviation Authority as required by
Aviation Authority regulations.

 

h.    Training: Buyer is required to put in place
a training program approved by the Aviation Authority, which, at a minimum,
shall include the following items:

 

1.    Initial and recurrent training for pilots in
the Aircraft;

 

2.    Initial and recurrent training for flight
attendants in the Aircraft; and

 

3.    Initial and recurrent training for the
maintenance staff (airframe, power plant, electric avionics specialists) in the
Aircraft.

 

Any maintenance specialist
(engine, APU, avionics) will require suppliers’ training.

 

Buyer is required to train to
the above standards any new hired employee who will work in or on the Aircraft.

 

i.      Aircraft Cleaning: Buyer shall keep the
Aircraft reasonably clean, inside and out, by commercial airline standards at
all times. This includes without limitation, the engines, wheel wells,
nacelles, landing gear and flight control areas.  

 

j.      Service Bulletins: When Embraer recommends
that Buyer implement a service bulletin which improves performance or dispatch
reliability, enhances flight operations or decreases maintenance costs, [*]
and Buyer concludes by a cost benefit analysis that the SB is commercially
reasonable, Embraer Customer Support Department shall contact Buyer’s Vice
President of Maintenance, in writing, with recommendations that the service
bulletin be complied with.  Buyer will
schedule the Aircraft for incorporation of such service bulletin [*]
but, subject to Embraer agreement which shall not be unreasonably withheld,
Buyer may schedule it for incorporation during a maintenance check, so as to
minimize interruption to scheduled service.

 

k.     Ground Support Equipment: Embraer shall
provide Buyer two lists of tooling and ground support equipment required to
maintain the Aircraft, which lists shall be subject to Buyer’s reasonable
approval. One list will cover line maintenance bases while the other will apply
to heavy maintenance facilities. Buyer will be required to maintain these
levels of required tooling and ground support equipment in good working order
at all times.

 

l.      Reliability Reporting: Buyer shall monthly
provide to Embraer, in electronic format, a reliability and maintenance cost
report in accordance with the latest revision of the Embraer’s Service News
Letter for data exchange.

 

* Confidential

 

 

m.    Rejection: Buyer shall not unreasonably
reject Embraer’s recommendations / changes / solutions which in Embraer’s
opinion, would result in an improvement in Buyer’s dispatch reliability. Any
such rejection shall be cause for re-evaluation and/or adjustment of this
guarantee. Anything in this Agreement to the contrary
notwithstanding, Buyer shall not be required to comply with or implement, and
the benefits and rights provided Buyer hereunder will not be adversely affected
by, Buyer’s not complying with or implementing any Embraer recommendation /
changes / solutions (including without limitation, recommended service
bulletins) or any provision of applicable product literature for which
compliance is not mandated by the local airworthiness authority rules and
regulations if Buyer has determined in good faith that such recommendation /
change / solution or provision of such product literature is not reasonably
expected to result in a net economic benefit to Buyer in light of all
applicable facts and circumstances, including, without limitation, the number
of man-hours reasonably estimated by Embraer to be required to accomplish such
recommendation / change / solution, the labor cost to be incurred, the
potential reduction in maintenance costs to be realized, the time value of
money and the period which would be required for such savings resulting from
the improvement in dispatch reliability to offset the labor and other costs
associated with such man-hours (provided that Buyer may not consider any
benefits to Buyer under any product guarantees to the extent resulting from
Buyer’s decision to comply or not to comply with or implement a recommendation,
change, or solution).

 

n.    Certification or Regulatory Changes: The
achieved maintenance interruption shall not take into account those
interruptions, which were originated by conformity to mandatory regulatory
change.

 

o.    Achieved Dispatch Reliability Review
Meeting: An Achieved Dispatch Reliability Review Meeting shall be scheduled, if
necessary, and at the end of each six (6) month period of Buyer’s Aircraft
operation. Representatives of Buyer and Embraer shall participate in the
meetings and will:

 

1.    Review current Achieved Dispatch
Reliability;

 

2.    Eliminate irrelevant or
non-Aircraft-intrinsic interruption claims from computed cancellation rates;
and

 

3.    Review Buyer’s compliance with Service
Bulletins as required by Article III.j herein, review disputed claims, and
consider methods for improvement of Achieved Dispatch Reliability.

 

Buyer shall permit Embraer
access to all Buyer data which can be used in understanding and analyzing the
dispatch reliability failure.

 

p.    Duplicated Guarantee: If Buyer negotiates
directly with any of Embraer’s suppliers/vendors a particular dispatch or
completion reliability guarantee, or an alternative support program with
Embraer, this amount shall be excluded from the guarantee rate, specified in
Article III.a, and shall result in an appropriate recalculation of this
guarantee in accordance with Embraer criteria.

 

IV.      Suspension

 

a.     This guarantee shall be automatically
suspended and shall not apply during the period of any labor disruption or
dispute involving a significant work action,

 

 

which affects in whole or in part the
Aircraft normal operation and maintenance.

 

b.     This guarantee shall be automatically
suspended and shall not apply during the computation period of which worldwide
EMBRAER 170 fleet (excluding Buyer’s Aircraft) average dispatch reliability
percentage is at least 1% higher than Buyer’s Aircraft dispatch reliability
percentage.

 

V.        Buyer will not include in the calculation of
the ADRP Maintenance Interruptions occurring under any of the circumstances
listed below:

 

a.     When the Aircraft has been used in an
attempt to break records, or subjected to experimental flights, or in any other
way not in conformity with the flight manual or the airworthiness certificate,
or subject to any manner of use in contravention of the applicable aerial
navigation or other regulations or rules, issued or recommended by government
authorities of whatever country in which the Aircraft is operated, when
accepted and recommended by ICAO; and

 

b.    When the Aircraft or any of its parts
has/have been altered or modified by Buyer, without prior approval from Embraer
or from the manufacturer of the parts through a service bulletin, provided such
approval has not been unreasonably withheld.

 

VI.      THE GUARANTEES, OBLIGATIONS AND LIABILITIES
OF EMBRAER, AND REMEDIES OF BUYER SET FORTH IN THIS SCHEDULE RELIABILITY
GUARANTEE ARE EXCLUSIVE AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES,
RELEASES AND RENOUNCES, ALL OTHER RIGHTS, CLAIMS, DAMAGES AND REMEDIES OF BUYER
AGAINST EMBRAER OR ANY ASSIGNEE OF EMBRAER, EXPRESS OR IMPLIED, ARISING BY LAW
OR OTHERWISE, WITH RESPECT TO ANY ACHIEVED DISPATCH RELIABILITY.

 

VII.     The terms and conditions of this dispatch
reliability guarantee do not alter, modify or impair, in any way, the terms and
conditions of Attachment “C” (Aircraft Warranty Certificate) to the Purchase
Agreement.

 

VIII.    The guarantee hereby expressed is
established between Embraer and Buyer and it cannot be transferred or assigned
to others, unless by previous written consent of Embraer.

 

 

[*]

 

[*]

 

* Confidential

 

 

ATTACHMENT
"H" - EMBRAER 170 - PERFORMANCE GUARANTEE

 

1.             GUARANTEES

 

Embraer, subject to the conditions and limitations hereby expressed,
and considering the Aircraft EMBRAER 170 LR version with a maximum takeoff
weight of 82,011 lb (37,200 kg), equipped with Embraer furnished General
Electric CF34-8E5 engines, guarantees that each Aircraft on the relevant Actual
Delivery Date shall comply with the following performance:

 

1.1           CRUISE SPECIFIC AIR RANGE

 

The cruise specific air range at a gross
weight of 69,444 lb (31,500 kg) in a standard day (ISA), at an altitude of
35,000 ft, at 450 KTAS using not more than maximum cruise thrust, shall not be
less than the guarantee value:

 

[*]

[*]

 

GUARANTEE:      [*]  NAM/lb

 

1.2           MISSION

 

1.2.1        Mission Payload: the payload for a stage length
of 1,300 nautical miles in still air, shall not be less than the guarantee
value:

 

Guarantee:            [*] lb  ([*] kg)

 

Note: The mission payload guaranteed value is
subject to the same tolerance applicable to the MEW pursuant to Paragraph 1.3
below.

 

The mission payload guarantee is based on the following conditions and
operating rules:

 

i. Stage Length: The stage is
defined as the sum of the distances for climb, cruise and descent.

 

ii.       Takeoff: The airport altitude is at sea level.
The takeoff weight is not limited by the airport conditions. Maximum takeoff
thrust is used for the takeoff.

 

iii.      Climbout Maneuver: Following the takeoff to [*] ft, the Aircraft accelerates to [*] KCAS while climbing to [*] ft above the departure airport altitude
and retracting flaps and landing gear.

 

iv.      Climb: The Aircraft climbs from [*] ft above the departure airport altitude
to [*] ft altitude at [*] KCAS. The Aircraft then accelerates to
a speed of [*] KCAS. The climb
continues at [*] KCAS until [*] ft is reached. The climb continues at [*] Mach number to cruise altitude. The
temperature is [*] during the
climb. Maximum climb thrust is used throughout the climb.

 

v.       Cruise: The Aircraft cruises at an average speed
of [*] Mach number. The cruise
altitude is [*] ft. The
temperature is [*] during cruise.
The cruise thrust is not to exceed maximum cruise thrust.

 

vi.      Descent: The Aircraft descends from the cruise
altitude at a speed of [*] Mach
until [*] ft is reached and
continues at [*] KCAS until [*] ft

 

* Confidential

 

 

altitude. The descent continues at [*]
KCAS to an altitude of [*] ft. The
temperature is[*] during descent.

 

vii.     Approach and Landing Maneuver: The Aircraft
decelerates to the final approach speed while extending landing gear and flaps,
then descends and lands. The elevation of the airport of destination is at sea
level.

 

viii.    Fixed       Allowances: For the purpose of this guarantee
and for the purpose of establishing compliance with this guarantee, the
following shall be used as fixed quantities and allowances:

 

•      Taxi-out fuel: [*] lb, [*]

 

•      Takeoff and climbout
maneuver fuel: [*]

 

•      Approach and landing
maneuver fuel: [*]

 

•      Taxi-in fuel (shall be
consumed from the reserve fuel): [*]

 

•      The usable reserve fuel
remaining upon completion of the landing: [*]
lb.

 

1.2.2        Operational Empty Weight Basis: Operational
Empty Weight (OEW) derived in accordance with Paragraph 1.2.3 shall be used as
the basis for the mission payload guarantees of Paragraph 1.2.1.

 

1.2.3        EMBRAER 170 Weight Summary

 

[*]

 

1.3           Weight: the manufacturer’s empty weight
(MEW) for Buyer’s Aircraft configuration is guaranteed to be:

 

	
  NOMINAL:

  	
   

  	
  [*]  Pounds ([*] Kg)

  
	
  TOLERANCE:

  	
   

  	
  [*]  Pounds ([*] Kg)

  
	
  GUARANTEE:

  	
   

  	
  [*]  Pounds ([*] Kg)

  

 

2.             AIRCRAFT CONFIGURATION

 

2.1       The guarantees stated above are based on the
Aircraft configuration as defined in the Technical Description PTD-170 Rev. 4
dated May 2003, plus specific Buyer configuration options as defined at
Attachment “A” to the Purchase Agreement, (hereinafter referred to as the
“Detail Specification”). If necessary, appropriate adjustment to this Aircraft
Performance Guarantees shall be made for changes in such Detail Specification
(including but not limited to Buyer requests for changes, Proposal of Major
Changes or any other changes mutually agreed upon between the Buyer and
Embraer) approved in writing by the Buyer and Embraer. Such adjustments shall
be accounted for by Embraer in its evidence of compliance with the guarantees.

 

In the event a change is made to any law,
governmental regulation or requirement, or in the interpretation of any such
law, governmental regulation or requirement that affects the certification
basis for the Aircraft, and as a result thereof, a change is made to the
configuration and/or the

 

* Confidential

 

 

performance of the Aircraft in order to
obtain certification, the guarantees set forth in this Aircraft Performance
Guarantee shall be appropriately modified to reflect any such change.

 

2.2       The performance guarantees of Article 1 of this
Attachment shall be adjusted by Embraer for the following in its evidence of
compliance with such guarantees:

 

a.         Changes to the Detail Specification including
Major Changes or any other changes mutually agreed upon between the Buyer and
Embraer.

 

b.         The difference between the weight allowances
of optional items listed in the Detail Specification and the actual weights.

 

3.             GUARANTEE CONDITIONS

 

3.1       All guaranteed performance data are based on the
ICAO International Standard Atmosphere (ISA) unless otherwise specified.
Altitudes are pressure altitudes.

 

3.2       The FAA Regulations referred to in this
Attachment are, unless otherwise specified, the Certification Basis regulations
specified in the Aircraft Type Certificate Data Sheet.

 

3.3       The cruise specific air range and the climb,
cruise and descent portions of the mission guarantees include allowances for
normal electrical power extraction and normal operation of the air conditioning
system. Normal power extraction shall be defined as not less than a 41 kW total
electrical and hydraulic loads. Normal operation of the air conditioning system
shall be defined as operation in the automatic mode, with the temperature
control set to maintain a nominal cabin temperature of 70 °F, and all
air conditioning systems operating normally. This operation nominally allows a
maximum cabin pressure differential of [*]
lb per square inch, with a nominal Aircraft cabin ventilation rate of [*] cu.ft per min at [*] ft including passenger cabin
recirculation (nominal recirculation is [*]%).
The APU is turned off unless otherwise specified.

 

3.5       The cruise specific air range, speed and the
climb, cruise, and descent portions of the mission guarantees are based on an
Aircraft center of gravity location of [*]%
of the mean aerodynamic chord.

 

3.6       Performance, where applicable, is based on a
fuel Lower Heating Value (LHV) of 18,580 BTU per pound and a fuel density of
6.7 lb per U.S. gallon.

 

4.
            PARTIES’ OBLIGATIONS ACCORDING TO THIS GUARANTEE

 

4.1       During the Aircraft acceptance to be performed
by Buyer in accordance with Article 7 of the Purchase Agreement, Buyer shall
check the Aircraft performance specified in Article 1 of this Attachment H, [*].

 

4.2       Embraer’s obligations in respect to the guarantees
stated in Article 1 of this Attachment are limited to Buyer’s right to [*], should it be reasonably

 

* Confidential

 

 

verified that such Aircraft, during the
acceptance procedure specified in Article 7 of the Purchase Agreement, cannot
comply with the performances guaranteed hereunder, after Embraer has had a
reasonable opportunity to cure such deficiencies in accordance with Article 7
of the Purchase Agreement. [*]

 

4.3       In case, during the above mentioned acceptance
procedure, it is proven that the Aircraft performance does not comply with the
performances specified in Article 1 of this Attachment, [*].

 

4.4       Upon acceptance of the Aircraft by Buyer, all
obligations of Embraer regarding the Aircraft performance guarantees shall
cease.

 

5.             GUARANTEE COMPLIANCE

 

5.1       Compliance with the guarantees of Article 1 of
this Attachment shall be based on the conditions specified in that article, the
Aircraft configuration contained in Attachment “A” to the Purchase Agreement
and the guarantee conditions of Article 3 above.

 

5.2       Compliance with the cruise specific air range,
and the climb, cruise and descent portions of the mission guarantees shall be
established by calculations based on the comparison mentioned in paragraph 4.1
above.

 

5.3       The data derived from tests shall be adjusted as
required by conventional methods of correction, interpolation or extrapolation
in accordance with established engineering practices to show compliance with
the performance guarantee.

 

5.4       Compliance with the Equipped Empty Weight
guarantee shall be based on information in the appropriate approved weight and
balance manual, and associated document or report.

 

6.             EXCLUSIVE GUARANTEES

 

6.1       The only performance guarantees applicable to
the Aircraft are those set forth in this document. The performance guarantees
set forth herein are established between Buyer and Embraer and may not be
transferred or assigned to others, unless by previous written consent of
Embraer.

 

6.2       THE GUARANTEES, OBLIGATIONS AND LIABILITIES OF
EMBRAER, AND REMEDIES OF BUYER SET FORTH IN THIS PERFORMANCE GUARANTEE ARE
EXCLUSIVE AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND
RENOUNCES, ALL OTHER RIGHTS, CLAIMS, DAMAGES AND REMEDIES OF BUYER AGAINST
EMBRAER OR ANY ASSIGNED OF EMBRAER, EXPRESS OR IMPLIED, ARISING BY LAW OR
OTHERWISE, WITH RESPECT TO ANY ACHIEVED PERFORMANCE.

 

6.3       The terms and conditions of this performance
guarantee do not alter, modify or impair, in any way, the terms and conditions
of Attachment “C” (Aircraft Warranty Certificate) to the Purchase Agreement.

 

* Confidential

 

ATTACHMENT “I” – APPOINTMENT OF AUTHORIZED
REPRESENTATIVE

 

(“Buyer”) hereby designates and
appoints                                       as
the authorized representative of Buyer for the purpose of inspecting,
reinspecting, and  accepting
delivery from EMBRAER - Empresa Brasileira de Aeronautica S.A. (“Embraer”), on
behalf of and in the name of Buyer, of the Embraer Model EMBRAER-170 LR aircraft having Manufacturer’s
Serial No. 170        (including the engines,
appliances and parts installed thereon, the “Aircraft”), as defined  in that certain Purchase Agreement
DCT-014/2004 between Republic Airline, Inc. and EMBRAER  dated March 19, 2004, to be delivered by
Embraer to Buyer pursuant to the Purchase Agreement Assignment to be dated as
of or about
                              ,
200    between                                        
and Buyer, including the authority to accept delivery of said Aircraft, and to
execute and deliver any additional documents with respect to the delivery for
said Aircraft in such form as such authorized representative executing the same
shall deem appropriate.

 

 

Dated:                                                 ,
200   

 

 

	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
   

  
	
  The foregoing appointment is
  hereby accepted

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Name:

  
				

 

 

ATTACHMENT “J” – FORM OF WARRANTY BILL OF
SALE

 

KNOW ALL MEN BY THESE PRESENTS THAT Embraer –
Empresa Brasileira de Aeronáutica S.A. (“SELLER”), a Brazilian company, whose
address Av. Brigadeiro Faria Lima, 2170 - Putim, São José dos Campos, São
Paulo, Brazil, is the owner of good and marketable title to that certain
EMBRAER-170 LR aircraft bearing Manufacturer’s Serial No.
                            ,
with two General Electric CF34-8E5 Engines bearing manufacturer’s serial
numbers
[                  ]
and
[                     ],
and all appliances, parts, instruments, appurtenances, accessories, furnishings
and/or other equipment or property incorporated in or installed on or attached
to said aircraft and engines (hereinafter collectively referred to as the
“Aircraft”) to be sold by SELLER under the Purchase Agreement No. DCT-014/2004,
dated as of March 19, 2004, including Attachments, Exhibits, Letters,
Amendments and Agreements by and between SELLER and Republic Airline, Inc.

 

THAT for and in consideration of the sum of
US$ 10.00 and other valuable consideration, receipt of which is hereby
acknowledged, SELLER does this
                     
day of
                   ,
200    , grant, convey, transfer, bargain and sell, deliver
and set over to
                     
(“BUYER”) and unto its successors and assigns forever, all of SELLER’s rights,
title and interest in and to the Aircraft.

 

THAT SELLER hereby represents and warrants to
BUYER, its successors and assigns:

 

(i)                                     that SELLER has good and marketable title to
the Aircraft and the good and lawful right to the Aircraft and the good and
lawful right to sell the same; and

 

(ii)                                  that good and marketable title to the
Aircraft is hereby duly vested in BUYER free and clear of all claims, liens,
encumbrances and rights of others of any nature.  SELLER hereby covenants and agrees to defend such title forever
against all claims and demands whatsoever.

 

This Full Warranty Bill of Sale is governed
by the laws of the state of New York, United States of America.

 

IN WITNESS WHEREOF, SELLER has caused this
instrument to be executed and delivered by its duly authorized officer and
attorney in fact.

 

	
  Date as of
                                                        ,
  200    .

  
	
   

  
	
  EMBRAER – EMPRESA BRASILIERA
  DE AERONAUTICA S.A.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

ATTACHMENT “K” - FORM OF GUARANTEE

 

FORM OF
GUARANTY

 

FOR VALUE RECEIVED, Republic Airways Holdings
Inc., a corporation organized under the laws of Delaware (“Guarantor”), pursuant
to Article 14.3 of that certain Purchase Agreement DCT-014/2004 dated as of
March 19, 2004, between Republic Airline, Inc. (“Buyer”) and EMBRAER-Empresa
Brasileira de Aeronáutica S.A. (“Embraer”), as the same may be amended from
time to time (the “Purchase Agreement”), does hereby unconditionally and
irrevocably guarantee to Embraer (i) the due and punctual performance and
observance by Buyer of each covenant, agreement, undertaking, representation,
warranty and any other obligation or condition binding upon or to be performed
or observed by it under and in accordance with the terms of the Purchase
Agreement, and (ii) the due and punctual payment of each amount that Buyer is
or may become obligated to pay under and in accordance with the terms of the Purchase
Agreement (such payment and other obligations of Buyer being herein referred to
as the “Obligations”) and in the event of any nonpayment or nonperformance,
agrees to pay or perform or cause such payment or performance to be made of
such nonpayment or nonperformance. Guarantor further agrees to pay all
reasonable expenses (including, without limitations all reasonable fees and
disbursements of counsel) that may be paid or incurred in enforcing any rights
with respect to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, Guarantor under this
Guaranty.  The obligations of Guarantor
to make any payments hereunder shall be subject to the terms and conditions of
the Purchase Agreement applicable to the Obligations.

 

Capitalized terms used but not defined herein
shall have the respective meanings set forth in, and shall be construed and
interpreted in the manner described in, the Purchase Agreement.

 

Guarantor hereby waives notice of acceptance
of this Guaranty, and agrees that, in its capacity as a guarantor, it shall not
be required to consent to, or to receive any notice of, any supplement to or
amendment of, or waiver or modification of the terms of, the Purchase
Agreement.

 

This Guaranty is being furnished to induce
Embraer to enter into the Purchase Agreement.

 

Guarantor represents and warrants that, as of
the date hereof:

 

a.                                       Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and has all
necessary corporate power and authority to conduct the business in which it is
currently engaged and to enter into and perform its obligations under this
Guaranty.

 

b.                                      Guarantor has taken, or caused to be taken,
all necessary corporate action to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder.

 

 

c.                                       The execution and delivery by Guarantor of
this Guaranty, the performance by Guarantor of its obligations hereunder and
the consummation by Guarantor of the transactions contemplated hereby, do not
and will not (A) violate or conflict with any provision of the certificate of
incorporation or by-laws of Guarantor, (B) violate or conflict with any law,
rule, or regulation applicable to or binding on Guarantor or (C) violate or
constitute any breach or default (other than a breach or default that would not
(x) result in a material adverse change to Guarantor or (y) adversely
affect Guarantor’s ability to perform any of its obligations hereunder) under
any agreement, instrument or document to which Guarantor is a party or by which
Guarantor or any of its properties is or may be bound or affected.

 

d.                                      The execution and delivery by Guarantor of
this Guaranty, the performance by Guarantor of its obligations hereunder and
the consummation by Guarantor of the transactions contemplated hereby do not
and will not require the consent, approval or authorization of, or the giving
of notice to, or the registration with, or the recording or filing of any
documents with, or the taking of any other action in respect of, (A) any
trustee or other holder of any indebtedness or obligation of Buyer, (B) any
national, federal, state or local government regulatory, judicial, or
administrative entity of competent jurisdiction, or (C) any other party.

 

e.                                       This Guaranty has been duly authorized,
executed and delivered by Guarantor and constitutes the legal, valid and
binding obligation of Guarantor enforceable against Guarantor in accordance
with the terms hereof, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws affecting the rights of creditors generally and general principles
of equity, whether considered in a proceeding at law or in equity.

 

f.                                         Each of the foregoing representations and
warranties shall survive the execution and delivery of this Guaranty.

 

No failure or delay or lack of demand, notice
or diligence in exercising any right under this Guaranty shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right under this Guaranty.

 

This Guaranty is an absolute, unconditional
and continuing guaranty of payment and not of collection.  Guarantor waives any right to require that
any right to take action against Buyer be exhausted or that resort be made to
any security prior to action being taken against Guarantor.

 

In the event that this Guaranty or the
Purchase Agreement shall be terminated, rejected or disaffirmed as a result of
bankruptcy, insolvency, reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar proceedings with respect to

 

 

Buyer, Guarantor’s obligations hereunder to
Embraer shall continue to the same extent as if the same had not been so
terminated, rejected or disaffirmed. 
Guarantor shall and does hereby waive all rights and benefits that
might, in whole or in part, relieve it from the performance of its duties and
obligations by reason of any proceeding as specified in the preceding sentence,
and Guarantor agrees that it shall be liable for all sums guaranteed, in
respect of and without regard to, any modification, limitation or discharge of
the liability of Buyer that may result from any such proceedings and
notwithstanding any stay, injunction or other prohibition issued in any such
proceedings.  Furthermore, the
obligation of Guarantor hereunder will not be discharged by: (a) any extension
or renewal of any obligation of Buyer under the Purchase Agreement; (b) any
modification of, or amendment or supplement to, any such Purchase Agreement;
(c) any furnishing or acceptance of additional security or any release of any
security; (d) any waiver, consent or other action or inaction or any exercise
or non-exercise of any right, remedy or power with respect to Buyer; (e) any
change in the structure of the Buyer, any change in ownership of the shares of
capital stock of Guarantor or Buyer or any merger or consolidation of either
thereof into or with any other person; (f) any assignment, transfer, sublease
or other arrangement by which Buyer transfers or loses control of the use of
the Aircraft or any part thereof; or (g) any other occurrence whatsoever,
except payment in full of all amounts payable by Buyer under the Purchase
Agreement and performance in full of all the Obligations in accordance with the
terms and conditions of the Purchase Agreement.

 

Guarantor understands and agrees that its
obligations hereunder shall be continuing, absolute and unconditional without
regard to, and Guarantor hereby waives any defense to, or right to seek a
discharge of, its obligations hereunder with respect to; (a) the validity,
legality or enforceability of the Purchase Agreement, any of the Obligations or
any collateral security therefor or guaranty or right of offset with respect
thereto at any time or from time to time held by Embraer; (b) any defense,
setoff or counterclaim (other than a defense of payment, performance (including
payment or performance attributable to a right of setoff provided for in the
Purchase Agreement that may at any time be available to or be asserted by
Buyer) or breach by either party to the Purchase Agreement until such breach is
resolved under the terms of the Purchase Agreement); or (c) any other
circumstances whatsoever (with or without notice to or knowledge of Buyer or
Guarantor) that constitutes, or might be construed to constitute, an equitable
or legal discharge of Buyer or the Obligations, or of Guarantor under this Guaranty,
in bankruptcy or in any other instance.

 

Notwithstanding any payment or payments made
by Guarantor hereunder or any set off or application of funds of Guarantor by
Embraer, Guarantor shall not be entitled to be subrogated to any of the rights
of Embraer against Buyer or any collateral, security or guaranty or right of
set off held by Embraer for the payment of the Obligations, nor shall Guarantor
seek or be entitled to seek any reimbursement from Buyer in respect of payments
made by Guarantor hereunder, until all amounts and performance owing to Embraer
by Buyer on account of the Obligations are paid and performed in full.  The obligations of Guarantor hereunder shall
be automatically reinstated if and to the extent that any payment by or on
behalf of Buyer in respect of any of the Obligations is

 

 

rescinded or must be otherwise restored by
any holder of any of the Obligations as a result of any proceedings in
bankruptcy or reorganization or similar proceedings and Buyer agrees that it
will reimburse such holders on demand for all reasonable expenses (including,
without limitation, all reasonable fees and disbursements of counsel) incurred
by such holders in connection with such rescission or restoration.

 

Any provision of this Guaranty that 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

This Guaranty shall be binding upon the
successors and assigns of Guarantor; provided, that no transfer, assignment or
delegation by Guarantor, other than a transfer, assignment or delegation by
operation of law, without the consent of Embraer, shall release Guarantor from
its liabilities hereunder.  Subject to
the second preceding paragraph, this Guaranty shall terminate and be of no
further force and effect upon the performance and observance in full of the
Obligations.

 

All notices, requests and demands to or upon
Guarantor or any beneficiary shall be mailed to Buyer in accordance with the
terms of Article 24 of the Purchase Agreement. Guarantor hereby agrees to be
bound as if it were the Buyer by the provisions of Articles 18, 19, 20, 21, and
25 of the Purchase Agreement, which are incorporated herein by reference as if
fully set forth herein.

 

	
  Dated:
                               ,  2004

  
	
   

  
	
  REPUBLIC AIRWAYS HOLDINGS INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:Exhibit 10.40

CONFIDENTIAL
TREATMENT

REQUESTED
PURSUANT TO RULE 406

 

LETTER
AGREEMENT DCT-015/2004

 

This Letter of Agreement DCT-015/2004 (“Agreement”) dated March 19,
2004, is an agreement between Republic Airline, Inc. (“Buyer”) with its
principal place of business at 2500 S. High School Road, Indianapolis,
Indiana  46241, United States, and
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A. (“Embraer”), with its
principal place of business at Sao Jose dos Campos, Sao Paulo, Brazil, relating
to the Purchase Agreement DCT-014/2004 dated March 19, 2004 (the “Purchase
Agreement”) for the purchase by Buyer of up to fifty (50) new ERJ 170 - 100 LR
aircraft (the “Aircraft”).

 

This Agreement constitutes an amendment and
modification of the Purchase Agreement, and it sets forth additional agreements
of the Parties with respect to the matters set forth in the Purchase Agreement.
All terms defined in the Purchase Agreement shall have the same meaning when
used herein, and in case of any conflict between this Agreement and the
Purchase Agreement, this Agreement shall govern.

 

NOW, THEREFORE, for good and valuable
consideration, receipt of which is hereby acknowledged, Embraer and Buyer agree
as follows:

 

1.               PARTS ADDITIONAL SUPPORT

 

[*]

 

(ii)           Spare Parts Credit:  Embraer will provide a spare parts
(except for engines, engine related parts and APU), ground support equipment
and test equipment credit of [*].  This spare parts credit shall be made
available to Buyer upon [*].  If for any reason the Purchase Agreement is
terminated in relation to any Aircraft, then [*]
Buyer shall pay [*]. The spare
parts credit with respect to an Aircraft shall only be made available to Buyer
in the event there is [*].  If any such credit is not so made available
to Buyer because [*] such credit
shall be made available [*].  Any portion of such credit which remains
unused [*] shall be deemed to have
been waived by Buyer, and no further compensation shall be due from Embraer to
Buyer for such spare parts credit(s). 
Such spare parts credit(s) shall be applied against [*].

 

CERTAIN PORTIONS OF
THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
UNDER RULE 406 OF THE SECURITIES ACT OF 1933. 
THE OMITTED MATERIALS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

 

*   Confidential

 

 

(iii)    [*]

 

(iv)          [*]: Embraer shall [*] rent tooling and test equipment for non-routine
maintenance tasks at a daily rate of 1/365 of the tooling or test equipment
purchase price. In case Embraer [*].

 

(v)            Spare Parts Special
Programs: Embraer shall
make available to Buyer a spare parts support program that shall include the
following elements:

 

A Fleet Hour Program - POOL, for
repairable spares candidate to this program.

A Consignment Program for other
repairable spares and expendable parts.

A Rental Program for tools,
ground support equipment and insurance items.

 

The terms and conditions for making such
programs available to Buyer shall be further detailed by Embraer upon Buyer’s
request and are subject to Buyer and Embraer entering into a specific spares
support agreement to be negotiated in good faith by the Parties on or before
the first Firm Aircraft actual delivery date.

[*]

[*]

3.               ADDITIONAL CUSTOMER SUPPORT
SERVICES

 

3.1             Start-up team:

 

With respect to the Aircraft,
Embraer shall provide a start-up team to
take place at the initial line operation and proving runs of the first
Aircraft, composed of the following individuals:

 

[*]
pilots for [*] days to [*]

[*]
for [*] days

[*]
for [*] days

[*]
days

 

The purpose of these specialists
is to advise and assist with Buyer’s start-up operations and operator’s
certification proving runs, making Buyer’s pilots and mechanics familiar with
the operation and maintenance of the Aircraft. The start-up team is in addition
to the pilot and mechanic training, and to the Technical Representative. During
Buyer’s EMBRAER 170 Aircraft proving runs, Embraer shall provide technical
assistance to Buyer through the start-up team defined above. This support shall
be conditioned on Buyer giving Embraer notice at least [*] before the start of such proving runs.

 

*   Confidential

 

Embraer pilot and mechanic shall
not shall not be authorized to perform any direct flight or maintenance
services on Buyer’s Aircraft. In the event Buyer requests a team member to
perform any services which would directly affect the Aircraft and Embraer
issues its prior written consent to such services, Buyer shall cover such
Embraer personnel under its insurance policy in accordance with terms and
conditions contained in Schedule “2”
to this Letter Agreement.

 

Buyer shall bear all expenses
related to the transportation, board & lodging of the Embraer personnel in
the event such personnel is required to render the services provided for herein
in any place other than Buyer’s main maintenance base, otherwise all costs of
travel and accommodation for such personnel shall be borne by Embraer.

 

At no charge to Embraer, Buyer
shall provide Embraer pilots with transportation means between Buyer’s main
maintenance base and any airport where such pilots will render the services, so
that the pilots can report to Buyer’s operation facilities or leave the airport
in a timely manner according to the schedule of the flights they are engaged
in.

 

3.2           Aerochain:

 

AEROchain (www.aerochain.com) is
an electronic marketplace that provides value-added after-sales services and
extended supply chain collaboration, at no additional charge used on the
aerospace community. The AEROchain Technical Services section incorporates the
features formerly included in the Embraer CIS (Customer Integration System).
Access to Aerochain Technical Services section (former CIS) shall be [*] provided, however, that [*].

 

3.3           Technical and Engineering Support:

 

Embraer shall provide remote
technical and engineering support services, twenty-four (24) hours a day and
seven (7) days a week, for airframe and systems. This service may be accessed
by phone, fax and e-mail at the main facilities of Embraer.

This remote technical support is
intended to assist Buyer to identify and investigate the causes of in-services
issues, and during AOG situations, as well to support daily operations, as
required. This support is provided [*]
to Buyer, up to [*].

 

4.             CONVERSION

 

a)   General

 

Buyer shall have the flexibility
to request the conversion of any Option Aircraft  into the EMBRAER 175, the EMBRAER 190, or the EMBRAER 195 jet
aircraft (collectively, the “Conversion Aircraft”),
provided [*].

[*]

 

[*]

 

*   Confidential

 

 

5.             ADDITIONAL ASSISTANCE AND
SUPPORT

 

Terms and conditions of certain additional assistance and support are
provided in Schedules “4” and “5”.

 

6.             MISCELLANEOUS

 

All terms and conditions of the
Purchase Agreement that have not been specifically altered or modified
hereunder shall remain in full force and effect.

 

7.             SURVIVAL

 

In the case of a termination of
this Agreement or the Purchase Agreement with respect to one or more Aircraft, [*].

 

[The remainder of this page has
been left blank intentionally.]

 

*   Confidential

 

 

IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed and
delivered by their proper and duly authorized officers and to be effective as
of the day and year first above written.

 

 

	
  EMBRAER
  – EMPRESA BRASILEIRA

  DE AERONAUTICA S.A.

  	
   

  	
  REPUBLIC AIRLINE, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Frederico Fleury Curado

  	
   

  	
   

  	
  By:

  	
  /s/ Bryan Bedford
  

  	
   

  
	
  Name:  Frederico Fleury Curado

  	
   

  	
  Name: Bryan Bedford

  
	
  Title:

  	
  Executive Vice President

  Civil Aircraft

  	
   

  	
  Title: Chairman and CEO
  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Flavio Rimoli
  

  	
   

  	
   

  	
   

  
	
  Name:  Flavio Rimoli

  	
   

  	
   

  
	
  Title:

  	
  Sr. Vice President

  Airline Market  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness:

  	
   

  	
   

  	
   

  	
  Witness:

  	
  /s/ Robert H. Cooper

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name: Robert H. Cooper  

  
																

 

 

SCHEDULES

[*]

 

“2”          INSURANCE SPECIAL CLAUSE

 

[*]

 

“4”          ADDITIONAL ASSISTANCE

 

“5”          MUTUAL SUPPORT

 

*   Confidential

 

 

SCHEDULE “1” – [*]

 

[*]

 

*   Confidential

 

 

SCHEDULE “2” – INSURANCE SPECIAL CLAUSE

 

Buyer shall include the following
endorsements in its Hull and Comprehensive Airline Liability insurance
policies:

 

1.   Hull All
Risks Policy, including War, Hi-jacking and Other Perils.

 

“It
is hereby understood and agreed that Insurers agree to waive rights of
subrogation against Embraer with regard to the insured Aircraft.

 

This
endorsement shall not operate to prejudice Insurer’s rights of recourse against
Embraer - Empresa Brasileira de Aeronáutica S.A. as manufacturer, repairer,
supplier or servicing agent where such right of recourse would have existed had
this endorsement not been effected under this Policy.”

 

2.   Comprehensive
Airline Liability Policy, based on the AVN53 - Additional Insured Endorsement

 

“It is hereby understood and agreed that
Embraer - Empresa Brasileira de Aeronáutica S.A. including any business entity
owned by or subsidiaries to Embraer, and all partners, executive officers,
employees and stock holders, are added as Additional Insureds only with respect
to the operation of the Aircraft by the Named Insured.

 

This
endorsement does not provide coverage for any Additional Insured with respect
to claims arising out of its legal liability as manufacturer, repairer,
supplier or servicing agent and shall not operate to prejudice Insurer’s right
of recourse against any Additional Insured as manufacturer, repairer, supplier
or servicing agent.”

 

3.   Notwithstanding anything to the contrary as
specified in the Policy or any endorsement thereof, the coverages stated in
paragraphs 1 and 2 above, shall not be cancelled or modified by the Insurer,
without 48 hours advance written notice to Embraer to such effect.

 

This Endorsement attaches to and forms part
of Policy No.
                            ,
and is effective from the          day
of             ,
200  .

 

 

SCHEDULE “3” – [*]

 

[*]

 

*   Confidential

 

 

SCHEDULE “4” – ADDITIONAL ASSISTANCE

 

[*]

 

*   Confidential

 

 

SCHEDULE “5” – MUTUAL SUPPORT

 

This schedule sets forth additional
agreements of the Parties with respect to the matters set forth in the Purchase
Agreement DCT–014/2004) dated as of March 19, 2004 (including the Letter
Agreement DCT–015/2004) between Embraer and Buyer (the “Agreement”).  All terms defined in the Agreement shall
have the same meaning when used herein, and in case of any conflict between
this [*] and the Agreement, this [*] shall govern.

 

Embraer will use [*] to [*] debt [*]

 

	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  Republic Airline, Inc., [*]. 
  Notwithstanding anything to the contrary [*].

  
	
   

  	
   

  	
   

  
	
  Net Aircraft
  Purchase Price:

  	
   

  	
  The escalated Aircraft
  Purchase Price as defined in the Agreement, [*].

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  Terms:

  	
   

  	
  Buyer agrees to [*].

  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  

 

*   Confidential

 

 

	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [*]

  

 

*   Confidential

 

 

	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
   

  

 

*   Confidential

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00064-of-00352.parquet"}]]