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Exhibit 10.7
CHAUTAUQUA JET
SERVICE AGREEMENT
BETWEEN
US AIRWAYS
AND
CHAUTAUQUA
DATED AS OF
MARCH 19,1999
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CHAUTAUQUA JET SERVICE AGREEMENT
This Agreement is made and entered as of this 19th day of March, 1999, by and
between US Airways, Inc., (herein referred to as "US Airways"), a Delaware
corporation having its principal place of business at 2345 Crystal Drive,
Arlington, Virginia 22227, and Chautauqua Airlines, Inc., (herein referred to as
"Chautauqua"), a New York corporation, having a principal place of business at
2500 S. High School Road, Indianapolis, Indiana 46251.
WITNESSETH:
WHEREAS, US Airways holds a certificate of public convenience and necessity
issued by the Department of Transportation ("DOT") authorizing US Airways 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, Chautauqua engages in the interstate air transportation of persons,
property and mail in the United States pursuant to an exemption under 14 C.F.R
Part 298;
WHEREAS, US Airways owns various trademarks, service marks and logos, including
"US Airways," "US Airways Express," and distinctive exterior color decor and
patterns on its aircraft, hereinafter referred to individually and collectively
as the "US Airways servicemarks";
WHEREAS, Chautauqua desires to operate regional jets as US Airways Express air
transportation services as provided in this Agreement and wishes to acquire a
nonexclusive license for use of one or more of US Airways' Servicemarks for use
in connection with Chautauqua's operation of such services;
WHEREAS, US Airways desires to contract for the operation of such regional jets
as scheduled air transportation services by Chautauqua and does hereby grant
Chautauqua the use of one or
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more of US Airways' Servicemarks in connection with Chautauqua's operation of
such services; and
WHEREAS, both parties desire that Chautauqua be compensated by US Airways for
operating such regional jets as air transportation services and that US Airways
assume certain of the business obligations associated with the marketing and
sale of such transportation services to the traveling public, in each case as
more particularly described herein;
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:
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ARTICLE 1 COMPLIANCE WITH REGULATIONS
Chautauqua 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 Chautauqua's operations,
including, but not limited to the Federal Aviation Administration and the DOT
(for purposes of this Agreement, any applicable regulatory authority, whether
domestically or internationally, shall be referred to as the "FAA"). Chautauqua
hereby accepts the sole and exclusive responsibility for complying with such
governmental statutes, orders, rules, and regulations and the parties agree that
US Airways will have no obligations or responsibilities, whether direct or
indirect, with respect to such matters, except for sharing the costs associated
therewith as and to the extent provided herein.
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ARTICLE 2 AIR TRANSPORTATION SERVICES TO BE PROVIDED BY CONTRACTOR
SECTION 2.1 SCHEDULE REQUIREMENTS
At all times during the term of this Agreement and any amendment or extension
thereof, Chautauqua will schedule and operate US Airways Express air
transportation service between various U.S. domestic city-pairs and between
various U.S - Canadian city-pairs selected in accordance with the immediately
succeeding sentence (hereinafter referred to as the "Service") using [*]
aircraft or such other aircraft as may be substituted therefore pursuant to
the terms hereof (hereinafter referred to as the "Aircraft"), based on the
implementation schedule set forth in Exhibit 2.1, attached hereto and made a
part hereof. The city-pairs from which the air transportation services are to
be provided by Chautauqua pursuant to this Agreement will be selected [*]
subject only to operations and safety requirements, minimum and maximum
schedule requirements, and the other parameters set forth in Exhibit 2.1(a).
US Airways may, [*] to Chautauqua, designate changes in the following: [*]
provided that the new [*] continue to satisfy the parameters set forth in
Exhibit 2.1(a).
SECTION 2.2 LEFT INTENTIONALLY BLANK
SECTION 2.3 TECHNICAL OPERATIONS
During the term of this Agreement, Chautauqua will be responsible for the
technical operation of the Aircraft and the safe performance of the flights in
accordance with all applicable law (such law of any jurisdiction having
authority, the "FAA Regulations'). Chautauqua shall retain full authority,
operational control and possession of the Aircraft to enable it to do so. In
particular,
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Chautauqua or its agents or employees will, for the purpose of the safe
performance of such flights, have absolute discretion in all matters concerning
the preparation of the Aircraft for flight, the flight, the load carried and its
distribution in so far as such matters affect the safety of the Aircraft, the
decision whether or not such flight shall be undertaken, and all other matters
relating to the technical operation of the Aircraft. Chautauqua will be solely
responsible for, and US Airways will have no obligations or duties with respect
to the dispatch of Chautauqua's flights operated pursuant to this Agreement or
otherwise. For the purpose of this Section 2.3, the, term flight dispatch will
include, but will not be limited to, all planning of flight itineraries and
flight paths, fueling and flight release.
SECTION 2.4 FAA REGULATIONS
The operation of the Aircraft shall be carried out in accordance with the FAA
Regulations and the approved standards and practices of Chautauqua thereunder.
SECTION 2.5 OPERATING PROCEDURES
Chautauqua will furnish to US Airways a copy of relevant operating
specifications, operational regulations, manuals and calculations in respect of
the Aircraft and will also furnish to US Airways a copy of all flight statistics
in respect of the flights operated.
SECTION 2.6 AIRCRAFT REGISTRATION
During the term of this Agreement, the Aircraft will remain registered in the
United States of America in accordance with the FAA Regulations.
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SECTION 2.7 CHAUTAUQUA RESPONSIBILITIES
Chautauqua will be responsible for providing, at its own cost, in connection
with the Services provided under this Agreement, all services and materials
identified under [*] (collectively, the "Chautauqua Services").
SECTION 2.8 SUBSTITUTE AIRCRAFT
In addition to the Aircraft described in Section 2.1, Chautauqua may arrange
for, and may have substitute aircraft as may be required to maintain
effectively the seat miles which US Airways will purchase under this
Agreement, during periods when Chautauqua's primary aircraft may be out of
service due to unforeseen and irregular maintenance requirements. [*] In the
case of another aircraft, US Airways' prior approval shall be required, but
such approval not be unreasonably withheld or delayed. In such event,
Chautauqua will be paid as follows with respect to [*]. In addition,
Chautauqua will be paid for the [*]. For all other Chautauqua Services
involving substitute aircraft, Chautauqua will be compensated in accordance
with [*] between Chautauqua and US Airways. If a substitute aircraft is to be
utilized for [*], Chautauqua and US Airways will mutually agree upon the
route that will be covered by the substitute aircraft.
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ARTICLE 3 OPERATION UNDER THE "US AIRWAYS EXPRESS" NAME
SECTION 3.1 SERVICE TRADEMARKS
The Aircraft utilized by Chautauqua pursuant to this Agreement will bear US
Airways Servicemarks, presently consisting of the red, white, gray and blue
aircraft exterior color decor and pattern provided by US Airways and the name
"US Airways Express." At any time during the term of this Agreement, and at the
sole discretion of US Airways, Chautauqua shall use such new or different
servicemarks and exterior color decor and patterns on its Aircraft as US Airways
may determine. Interior color schemes must also be approved by US Airways. Upon
written notice from US Airways, which will include the specifications for any
such changes in servicemarks and/or exterior aircraft decor and patterns,
Chautauqua will effect such changes as promptly as is reasonably practicable.
Chautauqua will not be required to implement changes in the exterior color decor
and pattern more than once in any consecutive three-year period. Any
out-of-pocket expenses to repaint or to redecorate the Aircraft or reconfigure
or redecorate the interior of the Aircraft as a result of changes required by US
Airways, other than routine maintenance, shall be [*].
SECTION 3.2 SIGNAGE
In addition to use of the US Airways Servicemarks on the Aircraft, Chautauqua
will use and display suitable signs on the interior and exterior of the Aircraft
identifying Chautauqua as the operator of the services being provided pursuant
to this Agreement. The location of the signs will be subject to the prior
written approval, such approval not to be unreasonably withheld or delayed, of
US Airways as to nature, size and location on Chautauqua's Aircraft provided
that the signs will satisfy the FAA Regulations.
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ARTICLE 4 US AIRWAYS' SUPPORT SERVICES AND FACILITIES
SECTION 4.1 US AIRWAYS SERVICES
US Airways and/or third party providers, at the discretion of US Airways,
will provide [*] to the extent and in the manner set forth in the subsequent
sections of this Article 4 (collectively, and together with the
responsibilities of US Airways under Exhibit 2.8 hereof, the "US Airways
Services"). Such services and facilities will be furnished only with respect
to Chautauqua's Services offered under this Agreement.
SECTION 4.2 RESERVATIONS
(a) All reservations will be requested and confirmed for passengers using the
Aircraft operated by Chautauqua under this Agreement through US Airways'
internal reservations services. Connecting reservations to US Airways or to
other air carriers will be requested and confirmed through US Airways' internal
reservations system in accordance with currently established methods and
procedures utilized by US Airways for its passengers. For passengers originating
their travel at points other than those served by Chautauqua under this
Agreement, either on US Airways' internal reservations system or on the
reservations systems of other airlines, connecting reservations to the services
of Chautauqua will also be made in accordance with currently established methods
and procedures utilized by US Airways for its passengers. In all cases, US
Airways will confirm the reservations of Chautauqua's passengers through the
entire itinerary of their scheduled trips. When a contact number is supplied by
the passengers making such reservations, US Airways will assume the
responsibility of notifying passengers of any changes in Chautauqua's schedules
or operations, provided that Chautauqua furnishes US Airways with sufficient
advance notice of such changes.
(b) In the event of flight delays, cancellations or other schedule
irregularities affecting Chautauqua's scheduled services, and as soon as
information concerning such irregularities is
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available, Chautauqua will notify US Airways' reservations control center in a
manner prescribed by US Airways and furnish such information in as much detail
as is reasonably practicable. All schedule changes and passenger
re-accommodations for Chautauqua passengers will be performed in the same manner
as they would for US Airways passengers.
(c) From time to time, and solely upon the request of Chautauqua or its flight
crews, US Airways may furnish Chautauqua's flight crew with such U.S. weather
bureau information or data as may be available to US Airways; provided, that in
furnishing any such weather information or data to Chautauqua, neither US
Airways nor its employees or agents will be responsible or liable for the
accuracy thereof.
SECTION 4.3 STATION FACILITIES AND GROUND SUPPORT SERVICE
US Airways and/or third patty providers, at the discretion of US Airways, will
provide, at US Airways' cost and expense, the following services at locations
where Chautauqua provides air transportation services pursuant to this
Agreement:
(a) [*]
(b) [*]
(c) [*]
(d) [*]
(e) [*]
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(f) [*]
(g) [*]
(h) [*]
SECTION 4.4 CARGO, COMPANY MATERIALS ("COMAT") AND MAIL HANDLING SERVICES
(a) US Airways' personnel and/or third party personnel, at the discretion of US
Airways, will process appropriate tickets and/or bills of lading and US Airways
airbills, accept for transportation, and will load on the regularly scheduled
air transportation Services operated by Chautauqua under this Agreement, such
cargo and U. S. mail as will be tendered to it by the United States Postal
Service ("USPS") and by cargo customers, provided that no Hazardous Materials
may be accepted and transported on Chautauqua Aircraft, except as permitted by
the Department of Transportation pursuant to regulations contained in 49 C.F.R.
Parts 171 through 180.
(b) US Airways will observe and comply with all applicable regulations,
instructions and procedures with respect to mail, CoMat and cargo packages.
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(c) Subject to subpart (b) of Section 4.4, above, US Airways will process any
Chautauqua CoMat that Chautauqua may desire to send on Chautauqua Aircraft.
(d) Chautauqua personnel will comply with US Airways' applicable instructions
and procedures with respect to CoMat packages tendered to US Airways pursuant to
this Agreement.
SECTION 4.5 TERMS OF TRANSPORTATION, SALES AND PROMOTION
(a) US Airways' Terms of Transportation, with certain exceptions listed therein,
including procedures with respect to schedule change and passenger
re-accommodation procedures, will be applicable to Chautauqua Services provided
pursuant to this Agreement. Such Terms of Transportation will at all times be
available for public inspection at Chautauqua's corporate offices and at each
airport ticket counter and sales office maintained and operated by US Airways in
connection with the Services provided under this Agreement.
(b) All tickets issued for air passenger transportation, and all bills of
lading, US Airways airbills and invoices issued for U. S. mail and cargo
shipments, provided on the Service offered under this Agreement, will bear the
"US Airways" airline designator code.
(c) US Airways is responsible for [*].
(d) US Airways will include the scheduled air services provided by Chautauqua
pursuant to Article 2 of this Agreement in its public timetables (including
Chautauqua's connecting schedules on the same basis as it does its own), if
published. All references in US Airways' public timetables to Chautauqua's US
Airways Express services will also contain notations indicating that such
scheduled services are performed by Chautauqua as an independent contractor
under the appropriate US Airways Servicemarks and will comply with all
regulatory disclosure requirements.
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ARTICLE 5 PURCHASE OF [*]
SECTION 5.1 PRICING MODEL
US Airways and Chautauqua have developed a certain model, hereinafter referred
to as "the Pricing Model" and set forth in Exhibit 5.1, which will be used to
determine the compensation to be paid by US Airways for city-pairs flown by
Chautauqua pursuant to this Agreement.
SECTION 5.2 CHAUTAUQUA [*]
The Pricing Model, which will be used to compensate Chautauqua, [*].
(a) Chautauqua will be reimbursed for [*] according to the rates
set forth in [*] based upon the following:
(i) with respect to the [*] costs set forth therein, the number of
[*]
(ii) with respect to the [*] costs set forth therein, the [*]
(iii) with respect to the [*] costs set forth therein,; [*]
(iv) with respect to the [*] set forth therein, the [*]
(v) with respect to the [*] set forth therein, the amount of such
[*]. After [*] of the implementation of Service with the [*]
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[*]
(b) Each cost component will be adjusted [*] within the Term of this
Agreement based upon the escalation factor set forth in [*], except that with
respect to [*] such escalation will take effect at the time of the increases
provided for [*], currently [*], and currently [*].
(c) Chautauqua will be reimbursed for "Pass Through Costs" based upon the actual
costs incurred by Chautauqua.
SECTION 5.3 LEFT INTENTIONALLY BLANK
SECTION 5.4 [*]
(a) US Airways will pay Chautauqua [*] based upon the Pricing Model's [*]
(b) After the end of the month, US Airways will pay Chautauqua an amount
based upon [*]. If it is determined that US Airways' estimated payment is [*].
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(c) At the end of the month, a payment from [*]
(d) Notwithstanding the provisions set forth in this Article 5, in the event
that Chautauqua is unable to provide the Chautauqua Services due to the
grounding of the Aircraft as a result of a defect in the design or
manufacture of the Aircraft or as a result of a strike by employees of
Chautauqua, US Airways shall [*]. In the event that Chautauqua is unable to
provide the Chautauqua Services as a result of Chautauqua's failure to
properly maintain the Aircraft, or to otherwise comply with FAA Regulations
associated with the maintenance and/or operation of the Aircraft, [*]. In the
event Chautauqua is unable to provide the Chautauqua Services as a result of
any other reason, including without limitation, due to a US Airways strike,
[*].
SECTION 5.5 [*]
In addition to the cost reimbursement set forth in Section 5.2 above, US Airways
will pay Chautauqua monthly in arrears a [*]
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[*]
SECTION 5.6 INTENTIONALLY LEFT BLANK
SECTION 5.7 LEFT INTENTIONALLY BLANK
SECTION 5.8 PAYMENTS
All payments due under this Article will be paid directly to Chautauqua, or
US Airways, as the case may be, [*] of the calculation of any payment that is
due under this Agreement, except as provided in [*].
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ARTICLE 6 LIABILITY, INDEMNIFICATION AND INSURANCE
SECTION 6.1 CHAUTAUQUA IS AN INDEPENDENT CONTRACTOR
(a) The employees, agents, and/or independent contractors of Chautauqua engaged
in performing any of the services Chautauqua is to perform pursuant to this
Agreement will be employees, agents, and independent contractors of Chautauqua
for all purposes, and under no circumstances will be deemed to be employees,
agents or independent contractors of US Airways. 1n its performance under this
Agreement, Chautauqua will act, for all purposes, as an independent contractor
and not as an agent for US Airways. US Airways will have no supervisory power or
control over any employees, agents or independent contractors engaged by
Chautauqua in connection with its performance hereunder, and all complaints or
requested changes in procedures will, in all events, be transmitted by US
Airways to a designated officer of Chautauqua. Nothing contained in this
Agreement is intended to limit or condition Chautauqua's control over its
operations or the conduct of its business as an air carrier, and Chautauqua and
its principals assume all risks of financial losses which may result from the
operation of the air transportation services to be provided by Chautauqua
hereunder.
(b) The employees, agents, and/or independent contractors of US Airways engaged
in performing any of the services US Airways is to perform pursuant to this
Agreement will be employees, agents, and/or independent contractors of US
Airways for all purposes, and under no circumstance will they be deemed to be
employees, agents, and/or independent contractors of Chautauqua. Chautauqua will
have no supervision or control over any such US Airways employees, agents,
and/or independent contractors and any complaint or requested change in
procedure will be transmitted by Chautauqua to US Airways' designated
representative.
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SECTION 6.2 LIABILITY AND INDEMNIFICATION
(a) Each party hereto assumes full responsibility for any and all liability to
its own directors, officers, employees, or agents arising from injury, or death
resulting from or sustained in the performance of its respective services under
this Agreement.
(b) Chautauqua will indemnify, defend, protect, save, and hold harmless US
Airways, its directors, officers, employees, and agents from and against any
and all liabilities, claims, demands, suits, judgments, damages, and losses
(including the reasonable costs, fees, and expenses in connection therewith and
incident thereto), brought against US Airways, its directors, officers,
employees or agents by or on behalf of any director, officers, employee, agent
or independent contractor of Chautauqua 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 or arising out of any act or
omission of Chautauqua (collectively "Chautauqua Claims") occurring during the
term of this Agreement except for claims based on matters for which US Airways
is responsible under the terms of this Agreement or claims arising solely from
the gross negligence or willful misconduct of US Airways. US Airways will give
Chautauqua prompt and timely written notice of any claim made or suit instituted
against US Airways which in any way results in indemnification hereunder, and
Chautauqua will have the right to compromise or participate in the defense of
same to the extent of its own interest, including the selection of counsel to
represent its interest in the matter.
(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
retirement 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 made 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.
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(d) US Airways will indemnify, defend, protect, save, and hold harmless
Chautauqua, its directors, officers, employees, and agents from and against any
and all reasonable liabilities, claims, demands, suits, judgments, damages, and
losses (including all reasonable costs, fees and expenses in connection
therewith or incident thereto), brought against Chautauqua, its directors,
officers, employees or agents by or on behalf of any director, officer,
employee, agent or independent contractor of US Airways 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 or arising out of
any act or omission of US Airways (collectively "US Airways Claims") occurring
during the term of this Agreement except for claims based on matters for which
Chautauqua is responsible under the terms of this Agreement or claims arising
solely from the gross negligence or willful misconduct of Chautauqua. Chautauqua
will give US Airways prompt and timely notice of any claim made or suit
instituted against Chautauqua which in any way results in indemnification
hereunder, and US Airways will have the right to compromise or participate in
the defense of same to the extent of its own interest, including the selection
of counsel to represent its interest in the matter.
SECTION 6.3 INSURANCE COVERAGE
(a) [*]
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(i) provide that any waiver of rights of subrogation against other parties
by Chautauqua will not affect the coverage provided hereunder with respect
to US Airways;
(ii) with respect to the Services performed by the parties pursuant to this
Agreement, provide that Chautauqua's underwriters will [*], except for
claims based solely upon the gross negligence or willful misconduct of US
Airways or any such person; and
(iii) be duly and properly endorsed to provide that each such policy or
policies or any part or parts thereof will not be canceled, terminated, or
materially altered, changed or amended by Chautauqua's insurance
underwriters, until [*] to US Airways which thirty (30) days written
notice will commence to run from the date such notice is mailed via
reputable overnight carrier to the attention of [*].
(d) With respect to policies of insurance described in subsection numbered 1 of
Section 6.3 (a) of this Agreement, Chautauqua will provide that such policies:
(i) [*]
(ii) constitute primary insurance for such claims and acknowledge that any
other insurance policy or policies of US Airways will be secondary or
excess insurance;
(iii) [*]
(iv) [*] clauses acceptable to US Airways, and a specific contractual
liability insurance provision covering liability assumed by Chautauqua
under this Agreement.
(e) With respect to policies of insurance for coverage described in subsections
1 and 4 of Section 6.3(a) of this Agreement, [*] must be provided by
Chautauqua's insurers.
(f) All aircraft hull insurance provided pursuant to subsection 4 of Section
6.3(a) of this Agreement will be provided on [*], and, except with the
consent of
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US Airways, will not be subject to more than the standard market deductibles, as
certified by a recognized broker in the event of loss, settled on the basis of a
total loss, all losses will be payable in full.
(g) In the event that any of Chautauqua's insurance policies under this
Agreement are obtained directly from foreign underwriters, US Airways must be
allowed to maintain against such foreign underwriters, a direct action in the
United States upon said insurance policies and to provide for service of
process to an attorney located within the United States, who maintains an office
in Washington, D. C., or New York, New York.
(h) Upon the effective date of this Agreement, and from time to time thereafter
upon request by US Airways, Chautauqua will furnish to US Airways certificates
of insurance satisfactory to US Airways of the aforesaid insurance coverage,
limits and endorsements. In addition to the certificates of insurance,
Chautauqua's insurance broker will provide their written opinion that the policy
or policies of insurance carried by Chautauqua are in full compliance with all
of the insurance requirements set forth herein and are in full force and effect.
Initially, this evidence will be provided by certified copies of the policies
required hereunder. In the event of a change of broker by Chautauqua, such
certificates will be supplied to US Airways from broker reasonably satisfactory
to US Airways.
(i) In the event Chautauqua fails to maintain in full force and effect any of
the insurance and endorsements described in this Section 6.3, US Airways will
have the right [*]. Chautauqua agrees not to cancel, terminate or materially
alter, change or amend any of the policies referred to in this Section until
after providing [*] advance written notice to US Airways, of its intent to so
cancel, terminate or materially alter, change or amend said policies or
insurance, which [*] period will commence to run from the date notice is
mailed via reputable overnight carrier to the [*].
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SECTION 6.4 CARGO LIABILITY INSURANCE
US Airways will maintain cargo liability insurance coverage, in types and
amounts required by law, for all air freight transported by Chautauqua under a
US Airways airbill on flights operated pursuant to the Services provided by
Chautauqua under this Agreement.
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ARTICLE 7 TERM AND TERMINATION
SECTION 7.1 EFFECTIVE DATE AND TERM
This Agreement is effective as of the date and year first written above, and
Services provided hereunder will continue, without interruption, for a period
of [*] from the implementation date of the first Aircraft, unless it is
terminated on an earlier date pursuant to the provisions of this Article 7.
US Airways, [*]
SECTION 7.2 REGULATORY CHANGES
In the event of any change in the statutes and/or regulations governing the
provision of the Services to be provided pursuant to this Agreement that
materially and adversely affects the economic value of this Agreement, taken as
a whole, to either US Airways or Chautauqua, 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 to preserve the essence of the 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 change or
changes, or whether this Agreement should be canceled in light of the
occurrences as described above, and such failure to reach agreement will
continue for a period of [*] following the commencement of the
consultations provided for by this Section 7.2, then [*]
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SECTION 7.3 TERMINATION
US Airways may terminate this Agreement, for cause, upon not less than [*] to
Chautauqua, should any of the following conditions set forth in subparts (a)
through (d) of this Section 7.3 occur during the term of this Agreement,
subject to Chautauqua's right to cure such condition as set forth herein.
After notice of termination is given, US Airways will meet with Chautauqua
for the purpose of resolving the conditions so occurring. Should such
conditions not be corrected [*], then the termination is effective. If the
conditions are corrected (or all steps to remedy the situation were promptly
taken if the correction cannot be completed reasonably within [*] days), the
termination notice shall be deemed rescinded. The conditions arc:
(a) [*], except as otherwise provided herein; or
(b) If, after Chautauqua's introduction of services hereunder with the
[*], Chautauqua's [*] responsibility of Chautauqua under thus
Agreement:
[*] months, or
[*] months, or
(c) If, after Chautauqua's introduction of services hereunder with the
[*], Chautauqua's [*] as measured in [*] falls below either of the
following:
[*], or
[*] months; or
(d) If Chautauqua admits liability or is found liable [*]
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SECTION 7.4 TERMINATION BY CHAUTAUQUA
Chautauqua shall have the right to terminate this Agreement [*]
SECTION 7.5 RETURN OF PROPERTY
Upon final termination of this Agreement, each party will, as soon as
practicable, return any and all property of the other party to such other party.
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ARTICLE 8 PENALTIES FOR [*]
SECTION 8.1 [*]
Following Chautauqua's introduction of Services hereunder with the [*]
US Airways will [*]
SECTION 8.2 [*]
Chautauqua's operating performance will be measured each month following
Chautauqua's introduction of services hereunder with the [*]
based upon the following metrics:
(a) [*]
(b) [*]
(c) [*]
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[*]
SECTION 8.3 [*]
At the end of each month, US Airways will compute the total number [*]
Chautauqua and provide a summary statement summarizing [*] the preceding
month. US Airways will [*] based upon the following table:
<Table>
[*]
</Table>
SECTION 8.4 [*]
Any disputes between US Airways and Chautauqua arising as a result of [*]
will be resolved in accordance with the dispute resolution procedures set
forth in Article 15.
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ARTICLE 9 SERVICE MARK LICENSE FOR SERVICES PROVIDED PURSUANT TO THIS AGREEMENT
SECTION 9.1 GRANT OF LICENSE
US Airways hereby grants to Chautauqua a nonexclusive, nontransferable license
to use such US Airways Servicemarks as US Airways may designate from
time-to-time in connection with the services to be rendered by Chautauqua under
this Agreement; PROVIDED, HOWEVER, that at any time during the term of this
Agreement, US Airways may alter, amend or revoke the license hereby granted and
require at US Airways' expense, if directed by US Airways, Chautauqua's use of
any new or different US Airways Servicemarks in conjunction with the air
transportation services provided hereunder as US Airways may determine in the
exercise of its sole discretion and judgment.
SECTION 9.2 TERMS AND CONDITIONS GOVERNING TRADEMARK LICENSE
(a) Chautauqua hereby acknowledges US Airways' ownership of the US Airways
Servicemarks, further acknowledges the validity of the US Airways Servicemarks,
and agrees that it will not do anything in any way to infringe or abridge US
Airways' rights in its Servicemarks or directly or indirectly to challenge the
validity of the US Airways Servicemarks.
(b) Chautauqua agrees that, in providing the Services contemplated under this
Agreement or the Service Agreement dated February 9, 1994, as amended, it will
not advertise or make use of the US Airways Servicemarks without the prior
written approval of US Airways. US Airways will have absolute discretion to
withhold its consent concerning any and all such advertising and use of the US
Airways Servicemarks in advertising by Chautauqua. In the event US Airways
approves the use of such US Airways Servicemarks in any advertising, such
advertising will identify US Airways as the owner of such servicemarks, and
conform with any additional requirements specified by US Airways.
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(c) To the extent that Chautauqua is licensed to use the US Airways Servicemarks
or the Service Agreement dated as of February 9, 1994, as amended, they will
only be used in conjunction with the Chautauqua Services specifically covered by
this Agreement and not in connection with any other businesses or activities of
Chautauqua or any other entity.
(d) Nothing in this Agreement will be construed to give Chautauqua the exclusive
right to use the US Airways Servicemarks, or to abridge US Airways' right to use
and/or license its Servicemarks, and US Airways hereby reserves the right to
continue use of the US Airways Servicemarks and to license such other uses of
said Servicemarks as US Airways may desire.
(e) No term or provision of this Agreement will be construed to give Chautauqua
the exclusive right to use the US Airways Servicemarks. US Airways hereby
reserves the right to continue use of the US Airways Servicemarks and to license
such other uses of said Servicemarks as US Airways may desire.
(f) No term or provision of this Agreement will be construed to preclude the use
of the Servicemarks "US Airways Express" or the aircraft exterior color decor
and patterns by other individuals or entities not covered by this Agreement.
(g) Upon the cancellation or termination of this Agreement, the license and use
of the US Airways Servicemarks by Chautauqua will cease, and such use will not
thereafter occur except as appropriate in any phase-out of service of this
Agreement.
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ARTICLE 10 FORCE MAJEURE
SECTION 10.1 FORCE MAJEURE
Notwithstanding anything to the contrary herein contained, it is agreed that
either Party will be relieved of its obligations hereunder in the event and to
the extent that performance hereof is delayed or prevented by any cause beyond
its control and not caused by the Party claiming relief hereunder, including,
without limitation, acts of God, public enemies, war, labor shortages, strikes,
insurrection, acts or orders of governmental authorities, fire, flood,
explosion, or riots or the recovery from such cause ("force majeure"), PROVIDED,
HOWEVER, that the foregoing will not apply to the obligations of the parties
under Article 6 or the obligations of US Airways to pay for the Chautauqua
Services as and to the extent provided under Article 5 of this Agreement.
SECTION 10.2 RESUMPTION OF SERVICE
Chautauqua agrees that where relief is obtained under this provision to make its
best efforts to resume Service. Chautauqua further agrees to consult with and
advise US Airways of any anticipated delay or failure, as soon as it becomes
aware of such anticipated delay or failure or the possibility thereof, whether
for FORCE MAJEURE or otherwise, and where applicable, to reestablish applicable
timetables.
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ARTICLE 11 NOTICES
Except where specified elsewhere in this Agreement, any and all notices,
approvals or demands required or permitted to be given by the Parties hereto
will be sufficient if made in writing and sent by certified mail, postage
prepaid, overnight courier or delivered by hand. When sent by mail, such notices
will also be sent by facsimile. Notices to US Airways will be addressed to:
<Table>
<Caption>
US Airways, Inc.: Chautauqua Airlines, Inc.:
Gregory T. Taylor
Vice President, US Airways Express President
US Airways, Inc. Chautauqua Airlines, Inc.
2345 Crystal Drive 2500 S. High School Road
Arlington, VA 22227 Indianapolis, IN 46251
Telephone: (703)872-7062 Telephone: (317)484-6000
Facsimile: (703)872-7312 Facsimile: (317)484-6060
with copies delivered at the same address with copies delivered to:
to the attention of US Airways' General Counsel,
Facsimile: (703)872-5252 Arthur Amron
Senior Vice President and General Counsel
Wexford Management, LLC
411-West Putnam Avenue
Greenwich, CT 06830
Telephone: (203)862-7012
Facsimile: (203)862-7312
and to
Joseph Jacobs
President
Wexford Management, LLC
411 West Putnam Avenue
Greenwich, CT 06830
Telephone: (203)862-7020
Facsimile: (203)862-7320
</Table>
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<Page>
ARTICLE 12 MAINTENANCE [*]
SECTION 12.1 MAINTENANCE [*]
[*]
SECTION 12.2 INTENTIONALLY DELETED
SECTION 12.3 MAINTENANCE [*]
[*]
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[*]
SECTION 12.4 MAINTENANCE [*]
Any disputes between US Airways and Chautauqua arising as a result of the
application of the Maintenance [*] will be resolved in accordance
with the dispute resolution procedure set forth in Article 15.
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<Page>
ARTICLE 13 MISCELLANEOUS
SECTION 13.1 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
unless subsequently amended in writing, executed by duly authorized
representatives of both parties or their respective successors in interest.
SECTION 13.2 HEADINGS
Article titles and subheadings contained herein are inserted only as a matter of
convenience and for reference. Such titles in no way define, limit, or describe
the scope or extent of any provision of this Agreement.
SECTION 13.3 SEVERABILITY
If, for any reason, any portion of this Agreement will be deemed unenforceable
or determined by a court of competent jurisdiction to be in violation of or
contrary to any applicable statute, regulation, ordinance, order, or common law
doctrine, then that portion will be of no effect. Nevertheless, the balance of
the Agreement will remain in full force and effect as if such provision were
never included.
SECTION 13.4 WAIVER
Except as otherwise specifically provided in this Agreement, a waiver by either
Party of any breach of any provision of this Agreement, or either Party's
decision not to invoke or enforce any right under this Agreement, will not be
deemed a waiver of any right or subsequent breach, and all provisions of this
Agreement will remain in force.
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SECTION 13.5 ASSIGNABILITY
The Parties agree that this Agreement and the rights and obligations
established hereunder, [*]. Notwithstanding any such assignment, the Parties
agree that they will remain responsible for their financial obligations under
this Agreement.
SECTION 13.6 GOVERNING LAW
This Agreement will be governed by, construed and enforced in accordance with
the laws of the United States and the State of New York, as though the entire
contract were performed in New York and without regard to New York's conflict of
laws, rules, or statutes. The parties further agree that they consent to the
jurisdiction of the Courts of New York or the federal courts located within the
State of New York and waive any claim of jurisdiction or FORUM NON CONVENIENS.
SECTION 13.7 NO FRANCHISE
Nothing is this Agreement is intended to imply or confer upon the arrangements
contemplated hereunder, any status as a "franchise" as recognized under any
state law. Accordingly, no franchiser-franchisee relationship exists between US
Airways and Chautauqua as a result of this Agreement.
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<Page>
ARTICLE 14 CONFIDENTIALITY
SECTION 14.1 CONFIDENTIALITY OF AGREEMENT
The Parties agree that the terms of this Agreement and any other Confidential
Information (as defined in Section 14.2 hereof) furnished hereunder will be
treated as confidential and will not be disclosed to any other person or entity
without the express written consent of the other party; provided that each party
may, without the consent of the other party, disclose Confidential Information
as expressly permitted below:
(a) to directors, officers, employees, permitted assigns and agents of each
party and their respective Affiliates (as defined in Section 14.4 or 14.5
hereof); or
(b) to prospective financial institutions for the purposes of providing
financing of Aircraft for Chautauqua; or
(c) to subcontractors, auditors, accountants or legal and financial
advisors of such party and its Affiliates; or
(d) to such other parties as may be required by law, by government
regulation or order, by subpoena or by any other legal process. In the
event that a disclosure becomes necessary, as provided in this subclause
(d) of this Section 14.1, each party shall consult and cooperate with the
other party to limit (to the extent permissible) the scope and form of such
disclosure. In the event of such disclosure required by law, only those
portions of this Agreement required to be disclosed will be released. The
disclosing party will make good faith efforts to minimize the portions to
be disclosed and will seek confidential treatment by the receiving party or
agency or any portions disclosed. In the event of one party being served a
subpoena or discovery request, prior to responding to the subpoena or
request, the party served will notify the other party, so that the other
party will have an opportunity to contest, if it chooses to do so, the
disclosure of the content of this Agreement.
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<Page>
SECTION 14.2 CONFIDENTIAL INFORMATION
"Confidential Information" means all restricted information having business
value, regardless of the form in which it exists, including, without limitation,
the terms of this Agreement, written documents, oral communications, recordings,
videos, software, databases, business plans, and electronic/magnetic media,
provided to or observed by either party pursuant to this Agreement, including
information owned or provided by either party to the other party, except
otherwise as expressly provided in Section 14.3 hereof. Each party agrees that
it will maintain all Confidential Information in confidence using the same
degree of care with respect to such Confidential Information as it uses in
protecting its own proprietary information, and will use it solely for purposes
of its own business operations in accordance with the terms hereof. Such
Confidential Information will be distributed within each party's company only to
personnel with a need to know such information for permitted purposes or in
compliance with a court order or statutory or regulatory requirements; PROVIDED,
HOWEVER, that prior to any such latter disclosure, the party shall inform all
such persons of the confidential nature of the information, and that it is
subject to this non-disclosure obligation, and shall further instruct such
persons to treat such information confidentially. The parties expressly
acknowledge and agree that the terms and conditions of this Agreement and any
reports, invoices, or other communications between US Airways and Chautauqua
given hereunder or in connection herewith constitute Confidential Information of
both parties.
SECTION 14.3 EXCLUSIONS FROM CONFIDENTIAL INFORMATION
Notwithstanding the foregoing, Confidential Information will not be considered
confidential and each party and their respective Affiliates may disclose any
item of Confidential Information without restriction in any of the following
circumstances if such item:
(a) is publicly available (either to the general public or to any relevant
trade or industry) prior to either party's receipt of it from the other
party hereto;
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<Page>
(b) is thereafter made publicly available (either to the general public or
to any relevant trade or industry) by another party hereto or by a third
party which is entitled to make such item publicly available;
(c) becomes available to either party hereto on a non-confidential basis
from a source which has represented to such party that such source is
entitled to disclose it; or
(d) was known to either party hereto on a non-confidential basis prior to
its disclosure to such party by another party hereto. The provisions of
this Article 14 will survive any termination of this Agreement for a period
of three (3) years.
SECTION 14.4 INFORMATION SHARED WITH US AIRWAYS GROUP, INC.
Notwithstanding anything to the contrary herein, Chautauqua acknowledges and
agrees that any Confidential Information shared or given to US Airways pursuant
to this Agreement may be [*].
SECTION 14.5 INFORMATION SHARED WITH CHAUTAUQUA
Notwithstanding anything to the contrary herein, US Airways acknowledges and
agrees that any Confidential Information shared or given to Chautauqua pursuant
to this Agreement may be [*].
SECTION 14.6 RETURN OF DOCUMENTS
(a) Upon the reasonable request of either party, each party will immediately
return to the other party, at its own expense, all documents of the requesting
party and all copies of such
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<Page>
documents in its possession or under the control either directly or indirectly
of its agents. Each party acknowledges and agrees that the other party will have
the right to exercise this right as many times as it deems necessary throughout
the term of this Agreement.
(b) Upon termination of this Agreement, with or without cause and for any
reason, each party shall, within ninety (90) days of such termination, either
deliver to the other party, of destroy, all of such other party's Confidential
Information (including copies thereof encoded or stored on magnetic or other
electronic media or processors; PROVIDED, HOWEVER, that neither party shall be
required to purge or destroy any Confidential Information for so long as such
Confidential Information is reasonably necessary continued administration and
operation of their respective programs or is reasonably necessary in connection
with the resolution of any disputes which may have at the time arisen pursuant
to the terms of this Agreement; PROVIDED, FURTHER, that any Confidential
Information not purged or destroyed pursuant to the preceding proviso shall be
purged or destroyed as soon as it is no longer reasonably necessary for
continued administration or resolution of disputes.
SECTION 14.7 REMEDIES
Each party acknowledges and agrees that the party disclosing Confidential
Information under this Agreement will have no adequate remedy at law if there is
a breach or threatened breach of this Article 14 and accordingly, that the
disclosing party shall be entitled to an injunction or other equitable or
preventative relief against the other party or its representatives for such
breach or threatened breach. Nothing herein shall be construed as a waiver of
any other legal or equitable remedies which may be available to the disclosing
party in the event of a breach or threatened breach of this Article 14 and the
disclosing party may pursue any other such remedy, including the recovery of
damages.
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ARTICLE 15 DISPUTE RESOLUTION
SECTION 15.1 CERTAIN DISPUTES
Any dispute, difference, controversy or claim arising out of or relating to a
significant event that might affect [*] Section 8.2 of this Agreement, [*]
Article 12 or the adjustment of [*]Section 5.2(a), the breach or
non-performance thereof shall first be attempted to be resolved by US Airways
and Chautauqua through mutual negotiations, consultation and discussions for
[*].
SECTION 15.2 DISPUTE RESOLUTION PROCEEDINGS
In the event that the parties are unable to settle their differences or disputes
which may arise between them under Section 15.1, above, then either party [*]:
(a) [*]
(b) [*]
(c) [*]
(d) [*]
(e) [*]
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<Page>
(f) [*]
(g) [*]
(h) [*]
IN WITNESS WHEREOF, US Airways and Chautauqua have caused this Agreement to be
executed by their duly authorized representatives on the day and year first
above written.
CHAUTAUQUA AIRLINES, INC. US AIRWAYS, INC.
/s/ Arthur Amron /s/ Gregory T. Taylor
- -------------------- --------------------------
By: Arthur Amron By: Gregory Taylor
Title: Vice President Title: Vice President
Chautauqua Airlines, Inc. US Airways Express
/s/ Kia E. Hardy /s/ [ILLEGIBLE]
- -------------------- --------------------------
Witness Witness
[SEAL] [SEAL]
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<Page>
EXHIBIT 2.1 IMPLEMENTATION SCHEDULE OF AIRCRAFT DEPLOYMENT
<Table>
<Caption>
DATE NUMBER OF OPERATIONAL AIRCRAFT
July 1999 [*]
September 1999 [*]
December 1999 [*]
February 2000 [*]
April 2000 [*]
June 2000 [*]
August 2000 [*]
October 2000 [*]
December 2000 [*]
</Table>
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<Page>
EXHIBIT 2.1(a) SCHEDULE REQUIREMENTS
The weekly schedules for the Aircraft specified by US Airways must meet the
following [*] schedule parameters.
<Table>
<Caption>
[*]
[*]
</Table>
US Airways will meet the following criteria in devising the schedule:
1. [*]
[*]
2. [*]
[*]
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<Page>
3. Maintenance Base
The schedule will allow for the establishment of a single maintenance base in
Indianapolis, Indiana.
4. Crew Overnights
[*]
5. Crew Bases
[*]
6. Hub Arrivals/Departures
[*]
7. Consent to Schedule Changes
To the extent that US Airways' schedule falls outside of the criteria set forth
herein, US Airways [*].
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EXHIBIT 2.8 DIVISION OF RESPONSIBILITIES
(1) The parties will be responsible for providing, at their own cost, service
and materials, as set forth below, Assignment of services and materials to
categories will be according to generally accepted accounting principals and in
keeping with Airline Industry Standard Functional Classifications as required
for reporting Form 41 data to the Department of Transportation. Except as
otherwise provided in Articles 4 and 5, the assignment of responsibility will be
as follows:
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
(2) Chautauqua will be responsible for [*] as described in Section 5.4.
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EXHIBIT 5.1 PRICING MODEL
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
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EXHIBIT 12.2 AIRCRAFT MAINTENANCE ITEMS*
APU (Sundstrand)
Engine (Allison)
Avionics (Honeywell)
Placards & Markings (ATA ref 11)
AC Press (ATA ref. 21)
Auto Flight (ATA ref 22)
Communications (ATA ref. 23)
Electrical Power (ATA ref. 24)
Interior (ATA ref. 25)
Fire Protection (ATA ref. 26)
Flight Controls (ATA ref. 27)
Fuel System (ATA ref, 28)
Hydraulic Systems (ATA ref. 29)
Ice/Rain Prot (ATA ref. 30)
Indicating & Rec. (ATA ref. 31)
Landing Gear (ATA ref. 32)
Lights (ATA ref. 33)
Navigation (ATA ref. 34)
Oxygen (ATA ref. 35)
Bleed Air (ATA ref. 36)
Waste Water (ATA ref. 38)
Central MTC System (ATA ref. 45)
Airborne Auxiliary Power (ATA ref 49)
Structures (ATA ref. 51)
Doors (ATA ref. 52 and 53)
Nacelles/Pylons (ATA ref 54)
Stabilizers (ATA ref 55)
Windows (ATA ref. 56)
Wings (ATA ref 57
Engine Mounting (ATA ref 71)
Engines (ATA ref 72)
Fuel & Control (ATA ref 73)
Ignition (ATA ref 74)
Engine Controls (ATA ref 76)
Engine Indicating (ATA ref. 77)
Exhaust (ATA ref. 78)
Oil (ATA ref 79)
Starting (ATA ref. 80)
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* Aircraft maintenance subjects as defined by the Air Transportation Authority
(ATA)
47