<Page>
Exhibit 10.6
SERVICE AGREEMENT
AGREEMENT made this 9th day of February, 1994 by and between USAIR, INC.
(USAir), a Delaware corporation having a principal place of business at Crystal
Park Four, 2345 Crystal Drive, Arlington, Virginia 22227 and Chautauqua
Airlines, Inc., (Contractor), a New York corporation having a principal place of
business at Chautauqua county Airport, RD #1, Airport Drive, Jamestown, New York
14701 as follows:
WITNESSETH:
WHEREAS, USAir holds a certificate of public convenience and necessity
issued by the Department of Transportation (DOT) authorizing USAir to engage in
the interstate and overseas air transportation of persons, property and mail
between all points in the United States, its territories and possessions:
WHEREAS, Contractor is a commuter air carrier engaged in air transportation
of persons and property pursuant to Part 298 of the DOT's Economic Regulations:
WHEREAS, USAir owns various trademarks, service marks and logos, including
"USAir," "USAir Express," and distinctive exterior color decor and patterns on
its aircraft, hereinafter referred to individually and collectively as the
"USAir Servicemarks;"
WHEREAS, contractor wishes to acquire a nonexclusive license, and USAir
does hereby grant unto the Contractor, the use
i
<Page>
of one or more of USAir's Trademarks in connection with the scheduled air
transportation services operated by Contractor pursuant to this Agreement,
including the use of the "US" designator code; and
WHEREAS, Contractor desires to operate, and USAir is willing to contract
for, USAir Express operations in the manner and to the extent hereinafter
described;
NOW, THEREFORE, for and in consideration of the foregoing premises and the
mutual covenants and obligations hereinafter set forth, the parties to this
Agreement hereby agree as follows:
ii
<Page>
Article 1 - COMPLIANCE WITH REGULATIONS
Contractor hereby represents, warrants, and agrees that all air
transportation services performed by it pursuant to this Agreement or otherwise
shall be conducted in full compliance with any and all applicable statutes,
orders, rules, and regulations, whether now in effect or hereafter promulgated,
of all governmental agencies having jurisdiction over Contractor's operations,
including, but not limited to the Federal Aviation Administration (FAA) and the
DOT. Contractor's compliance with such governmental statutes, orders, rules, and
regulations shall be the sole and exclusive obligation of Contractor, and USAir
will have no obligations or responsibilities, whether direct or indirect, with
respect to such matters.
1.1
<Page>
Article 2 - AIR SERVICES TO BE PROVIDED BY CONTRACTOR
Section 2.01 SCHEDULES TO BE OPERATED
I. Section 2.u1(a) is hereby amended by adding the following under the two
column headings:
<Table>
<Caption>
"MARKETS EFFECTIVE DATES
PIT-HGR
PIT-YXU
PIT-LNS
PIT-YHM [*]
PIT-A00
PIT-JST
DAY-DTW
DAY-GRR
CMH-GRR
</Table>
Unless otherwise approved by USAir in writing, Contractor will operate a minimum
of [*].
(b) USAir, at its sole discretion, shall allow Contractor to operate
as "USAir Express" in non-exclusive markets provided the Contractor complies
with Sections 2.01(c) and (e), Section 8.O1(c), and provided, further, that
USAir reserves the right to withdraw its approval of all or any part of
Contractor's schedules at any time and to require Contractor to reduce its
schedules if USAir's facilities do not have the ability or
2.1
- ----------
* Confidential
<Page>
capacity to handle Contractor's schedules as determined by USAir in the exercise
of its sole discretion and judgment.
(c) Any changes in the schedules operated by Contractor pursuant to
Section 2.01(a) or 2.01(b), whether necessitated by altered connections,
operating experience or other reasons, [*] to the effective date of such
changes, and all such changes must be approved, [*]. Requests for new markets
to Section 2.01(a) and 2.01(b) must be submitted to USAir [*]. Requests for
changes in Contractor's schedules must be made in writing. Before such
requests, USAir and Contractor will, as far in advance as practicable, advise
each other of any desired modifications or amendments of their respective
schedules so as to ensure that the primary needs of both the local and
connecting traffic between the cities operated by Contractor as a USAir
Express carrier are being adequately met. Within the operating capability of
the aircraft used by Contractor as described in Section 2.03, or some other
substitute aircraft used by Contractor with the prior written consent of
USAir, all reasonable and practicable requests by USAir to Contractor to
adjust the service schedules required by Section 2.01 will be complied with
by Contractor; provided that the primary needs of the markets listed in
Section 2.01(a) are met.
2.2
- --------
* Confidential
<Page>
(d) [*]
(e) [*]
(f) In the event Contractor suspends operations in any city pair
previously approved under Section 2.01 for a period of [*].
(g) No terms, provision or condition contained in this Article shall
be construed so as to prohibit the operation of additional schedules beyond
those frequencies in cities pairs previously approved in 2.01(a) or 2.01(b) with
the aircraft described in Section 2.03, if, in contractor's judgment, [*].
Section 2.02 OPERATION OF NON-AFFILIATED FLIGHTS Notwithstanding
anything to the contrary contained in this Section 2.01, Contractor shall be
entitled to operate additional services under its own name [*], provided that
such services, [*]
2.3
- ---------
* Confidential
<Page>
[*] and that any aircraft used in providing such services [*].
III. Section 2.03(a) is deleted in its entirety and the following is
substituted:
(a) Contractor will provide the scheduled air services described in
Section 2.01 with [*] aircraft shall meet the requirements for commuter air
carrier operations set forth in Part 298 of the DOT's Economic Regulations
and the Federal Aviation Regulations. Such aircraft shall have a design
capacity of [*]. Contractor and USAir agree that the Fairchild Metro III
aircraft, Jetstream J31 series of aircraft and SAAB 340 aircraft are
acceptable for purposes of this Agreement.
(b) The aircraft scheduled and any replacement aircraft utilized by
Contractor pursuant to this Section 2.01, shall bear USAir's Trademarks,
consisting of the red, white, and blue aircraft exterior color decor and pattern
provided by USAir and the name "USAir Express." At any time during the life of
this Agreement, and at the sole discretion of USAir, Contractor may be permitted
to use such new or different trademarks and exterior color decors and patterns
on its aircraft as USAir may determine. Upon written notice from USAir, which
shall include the specifications for any such changes in trademarks and/or
exterior aircraft decor and patterns, Contractor shall effect such changes as
promptly as is reasonably practicable.
2.4
- --------
* Confidential
<Page>
In addition to use of the USAir Trademarks on its aircraft, Contractor
shall use and display a suitable sign on the exterior of its aircraft
identifying Contractor as the operator of the services being provided pursuant
to this Agreement. The use and display of such sign shall be subject to the
prior written approval of USAir as to its nature, size and location on
Contractor's aircraft.
(c) In addition to the aircraft described in Section 2.03(a) above,
Contractor will arrange for, and will have available for its use such [*] as
are required to maintain effectively the scheduled services operated pursuant
to Sections 2.01 during periods when Contractor's [*] due to unforeseen and
irregular maintenance requirements. Such [*].
Section 2.04 FLIGHT CREWS TO BE USED
All services performed by Contractor pursuant to Sections 2.01 and
10.01 shall be operated with at least the minimum number of qualified flight
crew members required by the Federal Aviation Agency. All such crew members
shall at all times meet all currently applicable governmental requirements, as
such requirements may be amended from time to time during the life of this
Agreement, and shall be fully licensed and qualified for the services to be
performed hereunder, and, in addition, all of Contractor's captains shall hold a
current Airline Transport Pilot Certificate. All of contractor's first officers
must have
2.5
- --------
* Confidential
<Page>
satisfactorily completed the [*]. Such crew members shall also meet any and
all requirements imposed by the insurance policies which are to be maintained
pursuant to Section 7.03.
2.05 MAINLINE OPERATIONS
Nothing contained in Section 2.01 or any other provision of this
Agreement shall prevent the operation of [*].
2.6
- -------
* Confidential
<Page>
Article 3 - SUPPORT SERVICES AND FACILITIES
Section 3.01 GENERAL PROVISION
USAir and Contractor will provide ground support services and
facilities to the extent and in the manner set forth in the subsequent sections
of this Article 3. Such ground support services and facilities will be furnished
only with respect to Contractor's scheduled air services described in Sections
2.01; PROVIDED, HOWEVER, that with respect to schedules operated by Contractor
in addition to the minimum schedules established by Section 2.01(a), [*].
Section 3.02 COMMUNICATIONS
Reservation telephone lines will be maintained by USAir at the points
in Section 2.01 connecting those cities with USAir's reservations center.
Section 3.03 RESERVATIONS
(a) All reservations will be requested and confirmed for passengers
using the services described in Sections 2.01 through USAir's reservations
system (PACER). Connecting reservations to USAir or to other air carriers will
be requested and confirmed through USAir's PACER system in accordance with
currently established industry methods and procedures. For
3.1
- -------
* Confidential
<Page>
passengers originating their travel at points other than those served by
Contractor pursuant to Section 2.01, either on USAir's system or on the systems
of other airlines, connecting reservations to the services of Contractor will
also be made in accordance with currently established industry methods and
procedures. In all cases, USAir will confirm the reservations of Contractor's
passengers through the entire itinerary of their scheduled trips. When a contact
number is supplied by the passengers making such reservations, USAir will assume
the responsibility of notifying passengers of any changes in Contractor's
schedules or operations, PROVIDED that Contractor furnishes USAir with
sufficient advance notice of such changes.
(b) Contractor agrees to make available the minimum of [*].
(c) In the event of flight delays, cancellations or other schedule
irregularities affecting Contractor's scheduled services, and as soon as
information concerning such irregularities is available, Contractor shall notify
USAir's reservations control center in a manner prescribed by USAir and furnish
USAir such information in as much detail as practicable.
(d) [*]
3.2
- --------
* Confidential
<Page>
[*]. For the purposes of this section 3.03(d), the term flight dispatch shall
include, but shall not be limited to, all planning of flight itineraries and
routings, fueling and flight release.
(e) From time to time, and solely upon request of Contractor or its
flight crews, USAir may furnish Contractor's flight crews with such U.S. Weather
Bureau information or data as may be available to USAir; PROVIDED, that in
furnishing any such weather information or data to Contractor, neither USAir nor
its employees or agents will be responsible or liable for the accuracy thereof.
Section 3.04 RESERVED
Section 3.05 [*]
(a) USAir will provide the following services at locations (except as
mutually agreed) outlined in Sections 2.01 and 2.06 where USAir personnel are
represented, subject to provisions outlined in Section 3.01 and 8.01(c).
(1) [*]
(2) use of USAir's passenger facilities by Contractor's
passengers;
(3) [*]
3.3
- --------
* Confidential
<Page>
(4) [*]
(5) [*]
(6) arrangements, made at Contractor's request and its sole cost
and expense, for [*]
(7) in the event USAir is unable to accommodate Contractor's
scheduled air services beyond the minimum requirements of
Section 2.01(a) at USAir's own facilities, USAir reserves
the right to provide the services and facilities herein at
another suitable location on the airport selected by mutual
agreement by the
3.4
- --------
* Confidential
<Page>
parties subject to provisions outlined in Section 8.01(c).
(b) Contractor will provide the following services and facilities at
locations not provided under Section 3.05(a):
(1) [*]
(2) [*]
(3) [*]
(4) [*]
Section 3.06 TERMS OF TRANSPORTATION, SALES AND PROMOTION
(a) USAir's Terms of Transportation, with certain exceptions as listed
therein, shall be applicable to services provided by Contractor pursuant to this
Agreement. Such Terms of Transportation shall at all times be available for
public inspection at Contractor's corporate offices and at each airport ticket
counter and sales office maintained and operated by or on behalf of Contractor.
3.5
- --------
* Confidential
<Page>
(b) USAir and contractor agree that each carrier is authorized to sell
air transportation of passengers and property on the scheduled flights operated
by the other carrier; PROVIDED, HOWEVER, that neither USAir nor Contractor shall
issue passenger tickets or exchange orders which provide for space on a
particular flight except on the basis of a confirmed reservation for such space.
(c) The party issuing a ticket or exchange order for passenger
transportation shall pay to the party furnishing the transportation pursuant
thereto, or pursuant to a ticket issued in exchange for such exchange order, the
charges applicable to the transportation furnished. Such payments shall be made
as follows:
(1) with respect to passenger tickets and exchange orders issued
by Contractor for transportation on Contractor, USAir and
other air carriers, Contractor shall remit to USAir through
the Airlines Clearing House, Inc. (Clearing House) in
accordance with the procedures set forth in the currently
effective MANUAL OF PROCEDURES issued by said Clearing
House, but in no event later than the twenty-eighth (28th)
day of the month following the month in which the sale
occurred, all of the monies or proceeds of such sales.
Contractor shall prepare and
3.6
<Page>
furnish to USAir all written reports, accounts, and
documentation that USAir may require daily or at such lesser
frequency as USAir may prescribe, at its sole reasonable
discretion, from time to time during the life of this
Agreement; and
(2) with respect to passenger transportation furnished by
Contractor pursuant to this Agreement, invoices for all
flight coupons collected by Contractor from its passengers,
whether issued by, or on behalf of Contractor, USAir or
other air carriers, shall be forwarded to the Clearing House
in accordance with the procedures set forth in the currently
effective MANUAL OF PROCEDURES issued by said Clearing
House. All payments for transportation furnished by
Contractor shall be made by the Clearing House, including
all passenger transportation accounts receivable from USAir
and other air carrier participants in the Clearing House.
(d) With respect to airbills issued by Contractor for transportation
of property on Contractor, USAir and other air carriers, and with respect to
inbound collect shipments, including without limitation, inbound C.O.D.
shipments, handled by Contractor as the final carrier, all monies or proceeds
3.7
<Page>
collected and received by Contractor in connection with such transactions shall
be remitted to USAir through the Clearing House in accordance with the
procedures set forth in the currently effective MANUAL OF PROCEDURES issued by
said clearing House, but in no event later than the twenty-eighth (28th) day of
the month following the month in which such monies or proceeds were collected.
In addition, Contractor shall prepare and furnish to USAir all written reports,
accounts and documents that USAir may reasonably require, on a daily basis or at
such lesser frequency as USAir may prescribe, at its sole discretion, from time
to time during the life of this Agreement.
(e) USAir may prescribe in its reasonable discretion from time to time
during the life of this Agreement such new or different passenger and air
freight sales and accounting procedures as may reasonably be required by
experience or changed circumstances. In addition, USAir and Contractor by mutual
agreement, may reasonably establish alternative or modified passenger sales and
accounting procedures in order to accommodate tickets or exchange orders issued
by air carriers which are not participants in the Clearing House.
(f) No commission will be paid for the sale of air transportation when
such sale is made directly by the parties hereto and not by a travel agent. When
Contractor accepts as payment a credit card charge on behalf of USAir in
exchange for issuing tickets, exchange orders or air freight bills for
transportation of persons or property on Contractor, USAir or
3.8
<Page>
other carriers, [*] all commissions charged by the issuer of such credit card
with respect to such credit card charge sale.
(g) [*] shall assume full liability for and shall indemnify, defend,
protect, save, and hold harmless [*], its directors, officers, agents, and
employees from any and all liabilities, damages, claims, suits, judgments,
and all related expenses or losses on account of the loss, misapplication,
theft or forgery of passenger tickets, exchange orders, airbills or other
supplies furnished by or on behalf of [*], or the proceeds thereof, whether
or not such loss is occasioned by the insolvency of either the purchaser of
the aforesaid passenger tickets, exchange orders, airbills or other documents
or of a bank in which Contractor may have deposited such proceeds. [*]
responsibility hereunder for passenger tickets, exchange orders, airbills,
and other supplies shall commence immediately upon delivery of said passenger
tickets, exchange orders, airbills, and other supplies into the possession of
[*] or any duly authorized officer, agent or employee of contractor. [*]
shall furnish [*] prompt and timely notice of any claims made, or suits
instituted against USAir which in any way may result in the indemnification
hereunder, and [*] shall have the right to compromise or participate in the
defense of same to the extent of its own interest.
(h) USAir will include the scheduled air services provided by
Contractor pursuant to Section 2.01 in its public
3.9
- ---------
* Confidential
<Page>
timetables. All references in USAir's public timetables to Contractor's USAir
Express services shall also contain notations indicating that such scheduled
services are performed by Contractor as an independent contractor under the
appropriate USAir Trademarks.
3.10
<Page>
Article 4 - PASSENGER FARES AND DIVISION OR REVENUES
Section 4.01 [*]
[*]
Section 4.02 ALL OTHER FARES
[*]
Section 4.03 DIVISION OF REVENUES
(1) [*]
(2) [*]
4.1
- --------
* Confidential
<Page>
Article 5 - AIR FREIGHT RATES
Section 5.01 JOINT AIR FREIGHT RATES
Throughout the life of this Agreement, USAir and Contractor shall
[*] air freight rates, including rates covering general commodity, small
package, and priority air freight shipments.
Section 5.02 Compensation to Contractor FOR AIR FREIGHT
For the transportation of air freight on the scheduled services to be
operated by Contractor pursuant to Section 2.01 above, USAir will pay Contractor
the following:
(a) General Commodity Freight - [*] per pound;
(b) Priority Freight - [*] per pound;
(c) Small Package Freight - [*] per shipment, originated or
terminated.
The foregoing rates to be paid Contractor for the transportation of air freight
shall be subject to adjustment from time to time as required by experience and
as mutually agreed to by USAir and Contractor.
5.1
- -------
* Confidential
<Page>
Article 6 - U.S. MAIL
(a) Contractor shall accept for transportation, and shall transport on
the regularly scheduled air transportation services it shall operate pursuant to
Section 2.01 of this Agreement, such U.S. mail as shall be tendered to it by the
United States Postal Service (USPS) and by USAir. In the performance of its
transportation of the U.S. mail as aforesaid, Contractor shall observe and
comply with any and all applicable postal regulations, instructions and
procedures and with any applicable orders or regulations of the DOT governing
the transportation of mail by scheduled air carriers.
(b) All mail transported by Contractor pursuant to this Article 6
shall be transported under the currently effective service mail rates
established by the DOT or the USPS for the transportation of the U.S. mail by
USAir. USAir shall make all reports and keep all records and accounts and
perform such other administrative functions as may be required by the USPS in
connection with the transportation of the mails by Contractor in the markets
covered by this Agreement.
(c) All payments by the USPS under USAir's effective service mail
rates for the transportation of the mails by Contractor in the markets covered
by this Agreement, shall be made to USAir. USAir shall pay to Contractor
monthly, via procedures of the Airline's Clearing House, a sum of money equal to
20 CENTS per pound for all categories of mail boarded on Contractor's scheduled
flights. The rate of 20 CENTS per pound of
6.1
<Page>
mail boarded established by this paragraph (c) shall be subject to adjustment
from time to time during the effectiveness of this Agreement as mutually agreed
upon by USAir and Contractor.
(d) Contractor shall assume full liability for and shall indemnify,
defend, protect, save, and hold harmless USAir, its directors, officers, agents,
and employees from and against any and all liabilities, damages, claims,
demands, suits, judgments, including, without limitation, any and all fines,
penalties or other sanctions imposed by the USPS (including all costs, fees, and
expenses in connection therewith or incident thereto), for the loss, delay,
damage or destruction of any of the mails tendered to Contractor by the USPS or
by USAir for transportation pursuant to this article and for any and all
violations or failures on the part of Contractor, its directors, officers,
agents, employees or independent contractors to observe and comply with any
applicable rules, regulations or orders of the USPS, the DOT, or any other duly
authorized governmental agency relating to the transportation of the mails,
arising out of, or in any way connected with the performance by Contractor, its
directors, officers, agents, employees, and independent contractors of the
transportation of the mails pursuant to this Agreement. USAir shall give
Contractor prompt and timely notice of any claims made, suits instituted or
fines, penalties or other sanctions imposed against USAir which may in any way
result in a claim for the indemnification hereunder, and Contractor shall have
the right to participate in the compromise, or the defense
6.2
<Page>
of same, at its sole expense and to the extent of its own interest. In the event
USAir shall be required to pay any fine, penalty or other monetary sanction
imposed against USAir which in any way results in the indemnification hereunder,
it is mutually agreed that the amount of such fines, penalties or other monetary
sanctions shall be deducted and set off against payments USAir is required to
make to Contractor pursuant to paragraph (c) above, such deduction and setoff to
continue until USAir recovers the full amount of any fine, penalty or other
monetary sanction it shall be required to pay by reason of any act or omission
of Contractor, its directors, officers, agents, employees, and independent
contractors in the performance under this article.
6.3
<Page>
Article 7 - LIABILITY, INDEMNIFICATION AND INSURANCE
Section 7.01 Contractor Shall Act as An INDEPENDENT CONTRACTOR
(a) The employees, agents, and/or independent contractors of
Contractor engaged in performing any of the services Contractor is to perform
pursuant to this Agreement shall be employees, agents, and independent
contractors of Contractor for all purposes, and under no circumstances shall be
deemed to be employees, agents or independent contractors of USAir. In its
performance under this Agreement, Contractor shall act, for all purposes, as an
independent contractor and not as an agent for USAir. USAir shall have no
supervisory power or control over any employees, agents or independent
contractors engaged by Contractor in connection with its performance hereunder,
and all complaints or requested changes in procedures shall, in all events, be
transmitted by USAir to a designated officer of Contractor. Nothing contained in
this Agreement is intended to limit or condition Contractor's control over its
operations or the conduct of its business as a commuter air carrier, and
Contractor and its principals assume all risks of financial losses which may
result from the operation of the air services to be provided by Contractor
hereunder.
(b) The employees, independent contractors, and agents of USAir
engaged in performing any of the services USAir is to perform pursuant to this
Agreement shall be employees, independent contractors, and agents of USAir for
all purposes, and under no circumstances shall be deemed to be employees and
7.1
<Page>
agents of Contractor. contractor shall have no supervisory power or control over
any such USAir employees, independent contractors, and agents engaged by USAir
and any complaint or requested change in procedure shall be transmitted by
Contractor to USAir's designated representative.
Section 7.02 LIABILITY AN INDEMNIFICATION
(a) Each party hereto assumes full responsibility for any and all
liability to its own directors, officers, employees, or agents on account of
injury, or death resulting from or sustained in the performance of their
respective services under this Agreement.
(b) Contractor shall indemnify, defend, protect, save, and hold
harmless USAir, its directors, officers, employees, and agents from and against
any and all liabilities, claims, demands, suits, judgments, damages, and losses
(including the costs, fees, and expenses in connection therewith and incident
thereto), brought against USAir, its directors, officers, employees or agents by
or on behalf of any director, officer, employee, agent or independent contractor
of Contractor or anyone else claiming through such persons, or by reason of
damage or destruction of property of any such person, or injury to or death of
such person caused by, arising out of, or in any way related to the services
contimplated by the Agreement, and any acts or omissions of Contractor occurring
while this Agreement is in effect. USAir shall give Contractor prompt and timely
notice of any claim made or suit instituted against USAir which in any way
results in
7.2
<Page>
indemnification hereunder, and Contractor shall have the right to compromise or
participate in the defense of same to the extent of its own interest.
(c) Each party, with respect to its own employees, accepts full and
exclusive liability for the payment of worker's compensation and/or employer's
liability insurance premiums with respect to such employees, and for the payment
of all taxes, contributions or other payments for unemployment compensation or
old age benefits, pensions or annuities now or hereafter imposed upon employers
by the government of the United States or by any state or local governmental
body with respect to such employees measured by the wages, salaries,
compensation or other remuneration paid to such employees, or otherwise, and
each party further agrees to make such payments and to make and file all reports
and returns, and to do everything necessary to comply with the laws imposing
such taxes, contributions or other payments.
(d) Contractor hereby assumes liability for and shall indemnify,
defend, protect, save, and hold harmless USAir, its directors, officers, agents,
and employees from and against any and all liabilities, claims, demands, suits,
judgments, damages, and losses (including all costs, fees, and expenses in
connection therewith or incident thereto), for death of or injury to any person
whomsoever, including, but not limited to Contractor's directors, officers,
employees, or agents, and for loss of, damage to, or destruction of any
property whatsoever, including
7.3
<Page>
any loss of use thereof, and including, but not limited to, property of
Contractor, its directors, officers, employees or agents, caused by, arising out
of, or in any way related to the performance, operations, and any acts or
omissions of either Contractor or USAir, or their respective directors,
officers, employees, and agents, except for the gross negligence or willful
misconduct of USAir, its directors, officers, employees or agents, which are in
any way related to the services contemplated by this Agreement, and in the case
of Contractor alone, any other services, or acts or omissions or the use,
operation, storage or possession of any aircraft, whether or not bearing USAir
Express exterior decor, colors, and logo, and whether or not used in performance
of the services contemplated hereby or in connection with any other services
permitted by Article 10, or otherwise. USAir shall give Contractor prompt and
timely notice of any claim made or suit instituted against USAir which in any
way results in indemnification hereunder, and Contractor shall have the right to
compromise or participate in the defense of same to the extent of its own
interest.
Section 7.03 INSURANCE COVERAGE
(a) In consideration of the privileges granted herein, Contractor
shall, at all times during the effectiveness of this Agreement, commencing with
the first day thereof, have and maintain in full force and effect policies of
insurance satisfactory to USAir, of the types of coverages, including coverage
on all aircraft described in Section 2.03, and in the
7.4
<Page>
minimum amounts stated below with companies satisfactory to USAir and under
terms and conditions satisfactory to USAir as follows:
Minimum
Amounts of Insurance coverages
(U.S. CURRENCY)
1. AIRCRAFT LIABILITY
AND GROUND LIABILITY
INSURANCE;
(Including Comprehensive
Public Liability)
a. Bodily Injury and
Personal Injury -
Passengers
b. Bodily Injury and
Personal Injury -
Third Parties
c. Property Damage
The minimum amounts of insurance coverages required under this
paragraph shall be [*] per occurrence, combined single limit for all coverages
required under this paragraph 1 utilizing aircraft with less than twenty
seats and [*] per occurrence combined single limit liability for all
coverages utilizing aircraft with twenty or greater seating capacity.
PER ACCIDENT
2. WORKMEN'S COMPENSATION
INSURANCE:
(Company Employees) [*]
3. EMPLOYER'S LIABILITY:
(Company Employees) [*]
4. ALL RISK HULL INSURANCE
ON AIRCRAFT PERFORMING [*]
SERVICES HEREUNDER:
5. BAGGAGE LIABILITY: [*]
7.5
- ---------
* Confidential
<Page>
6. CARGO LIABILITY: [*]
(b) The parties hereby agree that from time to time during the life of
this Agreement, USAir may require Contractor to have and maintain amounts set
forth in paragraph (a) above, should the circumstances and conditions of
Contractor's operations under this Agreement be deemed in USAir's sole
judgment,' to require reasonable increases in any or all of the foregoing
minimum insurance coverages.
Section 7.04 ADDITIONAL REQUIREMENT
(a) Contractor shall cause the policies of insurance described in
Section 7.03 to be duly and properly endorsed by Contractor's insurance
underwriters as follows:
(1) as to the policies of insurance described in paragraphs 1,
2, 3, 4, 5, and 6 of said Section 7.03(a);
(A) to provide that any waiver of rights of subrogation
against other parties by contractor will not affect the
coverage provided hereunder with respect to USAir; and
(B) [*]
7.6
- --------
* Confidential
<Page>
[*]
(2) as to policies of insurance described in paragraphs 1, 5,
and 6 of said Section 7.03(a):
(A) [*]
(B) [*]
(3) as to policies of insurance described in paragraphs 1 and 4
of said Section 7.03(a) to provide a breach of warranty
clause to said policies acceptable to USAir;
(4) as to policies of insurance described in paragraph 1 only of
said Section 7.03(a):
(A) to provide, with respect to claims in favor of USAir,
its directors, officers,
7.7
- --------
* Confidential
<Page>
agents and employees against Contractor, its directors,
officers, agents and employees, that USAir, its
directors, officers, agents, and employees shall not be
deemed to be insured under the said insurance policies,
and to this end to provide a [*]
(B) to provide contractual liability insurance coverage for
liability assumed by Contractor under this Agreement.
(5) as to policies of insurance described in paragraph 4 above
of said Section 7.03(a), to provide that said Aircraft Hull
Insurance shall be on an agreed value basis, and, except
with the consent of USAir, shall not be subject to more than
the standard market deductibles in the event of loss,
settled on the basis of a total loss, all losses shall be
payable in full:
(6) as to any insurance obtained directly from foreign
underwriters, to provide that USAir
7.8
- -------
* Confidential
<Page>
may maintain against said Contractor's underwriters a direct
action in the United States upon said insurance policies and
to this end provide a standard service of suit clause
designating a United States attorney in Washington, D.C. or
New York, N.Y.
(b) Contractor shall cause each of the insurance policies referred
to in Section 7.03 to be duly and properly endorsed to provide that said policy
or policies or any part or parts thereof shall not be cancelled, terminated or
materially altered, changed or amended by Contractor's insurance underwriters,
until after [*] written notice to USAir which [*] notice period shall commence
to run from the date such notice is actually received by USAir.
(c) Upon the effective date of this Agreement, and from time to time
thereafter upon request by USAir, Contractor shall furnish to USAir evidence
satisfactory to USAir of the aforesaid insurance coverages and endorsements,
including certificates certifying that the aforesaid insurance policy or
policies with the aforesaid policy limits are duly and properly endorsed as
aforesaid and are in full force and effect. Initially, this evidence shall be
certified copies of the policies required hereunder.
(d) In the event Contractor fails to maintain in full force and
effect any of the insurance and endorsements described in Sections 7.03 and
7.04, USAir shall have the right (but not
7.9
- --------
* Confidential
<Page>
the obligation) to procure and maintain such insurance or any part thereof. The
cost of such insurance shall be payable by Contractor to USAir upon demand by
USAir. The procurement of such insurance or any part thereof by USAir does not
discharge or, excuse Contractor's obligation to comply with the provisions of
Sections 7.03 and 7.04. Contractor agrees not to cancel, terminate or materially
alter, change or amend any of the policies referred to in Section 7.03 until
after providing [*] to USAir, of its intent to so cancel, terminate or
materially alter, change or amend said policies of insurance, which [*]
period shall commence to run from the date [*] by USAir.
Section 7.05 CARGO LIABILITY INSURANCE
USAir agrees to make available to Contractor cargo liability
insurance coverage under USAir's cargo liability insurance policy solely with
respect to air freight transported by Contractor under a USAir airbill in
scheduled air services operated pursuant to Sections 2.01 and 2.03 and such
coverage shall be deemed to satisfy Contractor's obligation to have and maintain
in full force and effect cargo liability insurance coverage in accordance with
the terms of Section 7.03(a)(6), PROVIDED, HOWEVER, that USAir may cancel,
terminate, alter, change or amend the cargo liability insurance coverage
furnished to Contractor pursuant to this Section 7.06, upon [*], and PROVIDED,
FURTHER, if
7.10
- -------
* Confidential
<Page>
USAir cancels or terminates such coverage with respect to Contractor, Contractor
shall furnish USAir evidence, on or before the effective date of such
cancellation or termination, that it has obtained cargo liability insurance
coverage in accordance with Section 7.03(a)(6).
7.11
<Page>
Article 8 - CONSIDERATION, RECORDS AND REPORTS
Section 8.01 CONSIDERATION
(a) For and in consideration of system charges, such as but not
limited to reservations (OAL CRS charges excluded) ground services, credit
card fees, facilities and other related services to be provided to contractor
hereunder; the nonexclusive, nontransferable license granted to Contractor
authorizing the specified uses of USAir's Trademarks and other valuable
consideration provided by this Agreement, Contractor shall [*].
(b) Contractor shall remit such [*] to USAir through the Clearing
House referred to in Article 3 in accordance with the procedures set forth in
the currently effective MANUAL OF PROCEDURES issued by said Clearing House,
but in no event later than [*] following the month in which services were
provided. In the event Contractor fails to pay USAir in full all [*] payable
hereunder when due, Contractor agrees to pay to USAir, in addition to such
Service Charges, interest on the unpaid balance of such Service Charges
computed at the rate per annum of [*]
8.1
- ---------
* Confidential
<Page>
[*].
(c) It is hereby mutually agreed and understood by the parties
hereto that the aforesaid [*] per Contractor passenger boarded contemplate
that in the performance of the services described in Article 3 hereof, USAir
will use only the personnel in its employ and the equipment and facilities
which it owns or leases. In the event USAir is required to employ, retain or
otherwise furnish additional personnel or obtain, by purchase, lease or
otherwise any additional facilities or equipment, or incur in any manner
whatsoever any expenses or disbursements in connection with its performance
of this Agreement in excess of the personnel, facilities or equipment being
provided in the normal course of business, [*].
(d) The [*] referenced in Paragraph (a) of this Section shall be
subject to adjustment from time to time during the term of this Agreement in
order to more accurately reflect [*]experienced in furnishing the services
contemplated hereby. Such reasonable
8.2
- -------
* Confidential
<Page>
adjustments shall be made upon [*] advance notice in writing from USAir to
Contractor.
(e) All payments and/or reimbursements contemplated in this Article
shall be deemed to be in addition to and not in lieu of any other payments
and/or reimbursements required of either party hereto by other articles of this
Agreement, including but not limited to Article 3.
Section 8.02 RECORDS AND REPORTS
(a) Contractor shall provide reports in a form acceptable to USAir
detailing scheduled air services operated by Contractor pursuant to Sections
2.01.
(1) Reports due by the 10th working day of the following month shall
contain the following minimum:
- [*]
- [*]
- [*]
- [*]
- [*]
- [*]
8.3
- --------
* Confidential
<Page>
[*]
(2) Reports due by the 5th working day of the month following shall
contain the following minimum:
- [*]
(b) [*]
(c) At USAir's option, an authorized representative of USAir may
inspect Contractor's corporate records and accounts at least [*] during each
calendar [*] during the life of this Agreement.
(d) Contractor shall promptly furnish USAir a copy of every report
that Contractor files with the DOT, or some
8.4
- --------
* Confidential
<Page>
successor agency, and such other traffic, operating and financial information as
USAir may request, from time to time, during the life of this Agreement.
(e) Contractor shall also promptly furnish USAir with a copy of
every report that Contractor prepares, whether or not such report is filed with
the FAA, National Transportation Safety Board (NTSB) or any other governmental
agency, relating to any accident or incident involving an aircraft used by
Contractor in performing services under this Agreement, whether or not such
aircraft bears any USAir Trademarks, when such accident or incident is claimed
to have resulted in the death of or injury to any person or the loss of, damage
to or destruction of any property.
(f) Contractor shall promptly notify USAir in writing of (i) any
change in or relinquishment of the ownership or control of Contractor or (ii)
any agreement contemplating such a change or relinquishment. Contractor agrees
to provide promptly a copy of such agreement, if in writing, to USAir.
8.5
<Page>
Article 9 - EFFECTIVE DATE, TERMINATION AND CANCELLATION
II. Section 9.01(a) is deleted in its entirety and the following is
substituted:
(a) This Agreement will become effective on May 8, 1994 and will
continue in effect thereafter until [*], unless it is terminated
at an earlier date pursuant to one or more of the provisions of
Article 9.
operated by Contractor pursuant to Section 2.01 shall be maintained, without
interruption, throughout the term of this Agreement.
(c) In the event there is any change in the statutes governing the
economic regulation of air transportation, or in the applicable rules,
regulations or orders of the DOT or some successor agency or department of the
government having jurisdiction over air transportation which change or changes
materially affect the rights and/or obligations presently in force with respect
to the air transportation services of USAir or Contractor, or both, then the
parties hereto will consult, within [*] after any of the occurrences
described herein, in order to determine what, if any, changes to this
Agreement are necessary or appropriate, including but not limited to the
early termination and cancellation of this Agreement. If the parties hereto
are unable to agree whether any change or changes to this Agreement are
necessary and proper, or as to the terms of such changes, or whether this
Agreement should be cancelled in light of the occurrences described above,
and such failure to reach
9.1
- --------
* Confidential
<Page>
agreement shall continue for a period of [*] following the commencement of
the consultations provided for by this Section 9.01(c), then [*].
Section 9.02 TERMINATION
(a) In addition to the foregoing provisions of this Article, this
Agreement may be cancelled or terminated by either USAir or Contractor if [*].
In the event that this Agreement is assigned, whether by operation of law
or otherwise, without such consent having been given in writing, [*].
Notwithstanding the foregoing, USAir may, without consent of the other party
hereto, [*].
(b) In the event that USAir shall file a voluntary petition in
bankruptcy or that proceedings in bankruptcy shall be instituted against it and
USAir shall be adjudged bankrupt, or that a court shall take jurisdiction of
USAir and its assets pursuant to proceedings brought under the provisions of any
9.2
- -------
* Confidential
<Page>
federal reorganization act, or that a receiver of USAir's assets shall be
appointed and such taking or appointment shall not be stayed or vacated
within a period of sixty [*], Contractor may thereupon terminate this
Agreement by [*] prior written notice to USAir.
(c) If USAir shall fail to perform, keep, and observe any of the
terms, covenants or conditions herein contained on the part of USAir to be
performed, kept or observed, Contractor may give USAir notice in writing to
correct such condition or cure such default and, if any such condition or
default shall continue for [*] after the receipt of such notice by USAir and,
if within such period of time USAir has not prosecuted with diligence the
correction of such condition or default, Contractor may then [*], and this
Agreement shall thereupon [*] manner and to the same effect as if it were the
expiration of the original term.
(d) USAir, in addition to the other provisions of this section and
Section 9.01 above, may terminate this Agreement upon [*]:
(1) [*]
9.3
- --------
* Confidential
<Page>
(2)(a) If, during the life of this Agreement, [*]
(b) [*]
[*]
(3) if Contractor fails to comply with the [*] provisions of
Article 11 of this Agreement;
(4) in the event that Contractor shall file a voluntary petition
in bankruptcy or that proceedings in bankruptcy shall be
instituted against it and Contractor shall be adjudged
9.4
- -------
* Confidential
<Page>
bankrupt, or that a court shall take jurisdiction of
Contractor, and its assets pursuant to proceedings
brought under the provisions of any federal
reorganization act, or that a receiver of the assets of
Contractor shall be appointed and such taking or
appointment shall not be stayed or vacated within a
period of sixty (60) days, or that Contractor shall be
divested of, or be prevented by any action of any
federal authority from [*];
(5) if Contractor shall fail to perform, keep, and observe any
of the terms, covenants or conditions herein contained on
the part of such party to be performed, kept or observed,
USAir may give Contractor notice in writing to correct such
condition or cure such default and, [*].
9.5
- --------
* Confidential
<Page>
(6) if there is, without the written approval of USAir first had
and obtained, any change in or relinquishment of the [*].
For the purposes of this Agreement, ownership or control of
Contractor shall consist of [*] of [*] of the [*] stock of
Contractor,
(e) Either USAir or Contractor may terminate this Agreement without
cause [*] to the other party. USAir incurs substantial personnel, facilities
and other costs in contemplation of continued provision of Contractor's USAir
Express services, which costs cannot be eliminated without adequate advance
notice. In the event Contractor terminates this Agreement on less than [*],
Contractor agrees to [*].
(f) Any early termination or cancellation of one or more of the
provisions of this Article 9 shall not be construed so as to relieve any party
hereto of any debts or monetary obligations to the other party that shall have
accrued hereunder prior to the effective date of such termination of
cancellation.
9.6
- --------
* Confidential
<Page>
Section 9.03 FORCE MAJEURE
Neither USAir nor Contractor shall be liable for any failure to
perform under this Agreement if such failure is due to causes beyond its
control, including, but not limited to, acts of God or the public enemy, fire,
floods, epidemics, quarantine, work actions or strikes; PROVIDED, HOWEVER, that
the foregoing shall not apply to the obligations assumed by Contractor under
Article 7 of this Agreement.
9.7
<Page>
Article 10 - OPERATING RESTRICTIONS
Section 10.01 USE OF CONTRACTOR'S AIRCRAFT
In the event that aircraft owned and/or operated by Contractor
bearing the USAir Trademarks are available and can be utilized without adversely
affecting in any manner the regular scheduled services operated pursuant to
Sections 2.01, such aircraft may be used:
(1) for nonscheduled planeload passenger charters; or
(2) for scheduled or nonscheduled services limited to the
transportation of freight and/or mail in markets other than
the markets described in [*]; or
(3) on an emergency basis in operations not covered by this
Agreement.
10.1
- -------
* Confidential
<Page>
Article 11 - TRADEMARK LICENSE FOR OPERATIONS TO BE CONDUCTED
BY CONTRACTOR PURSUANT TO THIS AGREEMENT
Section 11.01 GRANT OF TRADEMARK LICENSE
Contractor will conduct all operations described in Section 2.01
above, and any additional operations undertaken by subsequent amendment hereto
under the trademark "USAir Express" and shall utilize the USAir Trademarks
consisting of the exterior color decor and patterns on its aircraft as
prescribed by USAir. USAir hereby grants to Contractor a nonexclusive,
nontransferable license to use such USAir Trademarks in connection with the
services to be rendered by Contractor under this Agreement; PROVIDED, HOWEVER,
that at any time during the life of this Agreement, USAir may alter, amend or
revoke the license hereby granted and require Contractor's use of any new or
different USAir Trademarks in conjunction with the air transportation services
provided hereunder as USAir may determine in the exercise of its sole discretion
and judgment.
Section 11.02 TERMS AND CONDITIONS GOVERNING TRADEMARK LICENSE
(a) Contractor hereby acknowledges USAir's ownership of the USAir
Trademarks, further acknowledges the validity of the USAir Trademarks, and
agrees that it will not do anything in any way to infringe or abridge USAir's
rights in its trademarks or directly or indirectly to challenge the validity of
the USAir Trademarks.
(b) Contractor agrees that, in providing the services to be provided
under this Agreement in conjunction with one or more of the USAir Trademarks, it
will conform to such standards of service (including types of aircraft,
qualification of personnel, customer
11.1
<Page>
service standards, and other reasonable quality control measures) as may be
prescribed by USAir either specifically in this Agreement or by subsequent
written communications to Contractor. USAir shall have the right, through such
agents or representatives as it may designate, to inspect the services and
standards being performed by Contractor under this Agreement, and in the event
that, in USAir's opinion, there has been some deviation from such services
and/or standards, Contractor agrees upon written notice from USAir to rectify
promptly any such deviation.
(c) Contractor shall not, without USAir's express prior written
consent, advertise the services to be rendered hereunder, nor make use of the
USAir Trademarks referred to in Section 11.01 above in any advertising. USAir
shall have absolute discretion to withhold its consent concerning any and all
such advertising and use of the USAir Trademarks in advertising by Contractor.
In the event USAir approves the use of such USAir Trademarks in any advertising,
such advertising shall identify USAir as the owner of such trademark(s), and to
the extent that any mark is registered, shall so specify.
(d) To the extent that Contractor is licensed to use the mark
"USAir," Contractor will use said mark only in the mark "USAir Express" and then
only in conjunction with the services specifically embraced by this Agreement.
(e) Nothing in this Agreement shall be construed to give Contractor
the exclusive right to use the USAir trademarks, or to bridge USAir's right to
use and/or to license its trademarks, and USAir hereby reserves the right to
continue use of the USAir
11.2
<Page>
Trademarks and to license such other uses of said trademarks as USAir may
desire.
(f) No term or provision of this Agreement shall be construed to
preclude the use of the trademarks "USAir Express" or the aircraft exterior
color decor and patterns by other individuals or corporations not covered by
this Agreement, except in the markets covered by Section 2.01 (a) of this
Agreement.
(g) Should this Agreement be cancelled or otherwise terminated for
any reason as set forth in Article 9 hereof, the USAir Trademarks shall revert
to USAir and shall not thereafter be used by Contractor in connection with any
operations of Contractor.
11.3
<Page>
Article 12 - ENTIRE AGREEMENT, AMENDMENT, NOTICES AND TITLES
Section 12.01 ENTIRE AGREEMENT AND AMENDMENTS
(a) This Agreement represents the entire agreement between the
parties hereto unless subsequently amended as hereinafter provided, and said
Agreement shall not be modified or cancelled by mutual agreement or in any
manner except by an instrument in writing, executed by the parties or their
respective successors in interest.
(b) The parties hereto may by mutual agreement amend any provision
of this Agreement, or delete or add any provision to this Agreement by an
instrument in writing, executed by each of the parties or their authorized
representatives or successors in interest. Any amendment, deletion or additions
executed as prescribed herein shall become a part of, and shall be construed as
part of this Agreement.
(c) Effective May 8, 1994, this Agreement supersedes and cancels the
prior Service Agreement between the parties, dated June 26, 1984.
Section 12.02 NOTICES AND MISCELLANEOUS PROVISIONS
(a) Any and all notices, approvals or demands required or permitted
to be given by the parties hereto shall be sufficient if sent by certified mail,
postage prepaid, to USAir addressed to:
Vice President-Express Division
USAir, Inc.
Crystal Park Four
2345 Crystal Drive
Arlington, VA 22227
and to Contractor, addressed to:
President
Chautauqua Airlines, Inc.
RD #1, Airport Drive
Jamestown, NY 14707
12.1
<Page>
With a copy to:
Glenn W. Sturm
Nelson, Mullins, Riley & Scarborough
400 Colony Square, Suite 2200
1201 Peachtree Street
Atlanta, Georgia 30361
or to such other addresses in the continental United States as the parties may
specify by notice as provided herein.
(b) Description titles contained in this Agreement are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
(c) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be entered into and signed as of the day and year first written above.
CHAUTAUQUA AIRLINES, INC.
WITNESS: /s/ By /s/ Bryan Bedford
---------------------- ---------------------
USAIR, INC.
WITNESS: /s/ By /s/ Keith D. Houk
---------------------- ---------------------
Keith D. Houk
Vice President-
USAir Express Division
12.2
<Page>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.1 to
said Agreement to be entered into and duly executed as of the day and year first
written above.
CHAUTAUQUA AIRLINES, INC.
By /s/ Bryan Bedford
-----------------------
Title President
--------------------
ATTEST:
/s/
- ----------------------------
USAIR, INC.
By /s/ Keith D. Houk
-----------------------
Keith D. Houk
Vice President-
USAir Express and
Shuttle Divisions
ATTEST:
/s/
- ----------------------------
3