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EXHIBIT 10.2
CODE SHARE AND REVENUE SHARING AGREEMENT
This CODE SHARE AND REVENUE SHARING AGREEMENT (the "Agreement") is made and
entered into to be effective as of March 20, 2001 (the "Effective Date"), by and
between AMERICA WEST AIRLINES, INC., a Delaware corporation ("AWA"), and
CHAUTAUQUA AIRLINES, INC., a New York corporation ("CAI").
R E C I T A L S
A. AWA holds a certificate of public convenience and necessity issued by the
Department of Transportation ("DOT") authorizing AWA to engage in the interstate
and oversees air transportation of persons, property and mail between all points
in the United States, its territories and possessions.
B. CAI holds a certificate of public convenience and necessity issued by the DOT
authorizing CAI to engage in the interstate transportation of persons, property
and mail in the United States, its territories and possessions.
C. AWA owns various trades marks, services marks and logos, including "America
West Airlines," "America West Express," and distinctive exterior color decor and
patterns on its aircraft, hereinafter referred to individually and collectively
as the "AWA Service Marks".
D. AWA and CAI desire to provide scheduled air transportation services as
America West Express using a Columbus, Ohio hub and to share in the revenue and
costs of such services as provided in this Agreement.
NOW, THEREFORE, in consideration of the promises, covenants, representations and
warranties hereinafter set forth, and for other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, AWA and CAI agree as
set forth below.
A G R E E M E N T
1. RIGHTS, RESPONSIBILITIES AND OBLIGATIONS OF CAI:
1.1 FLIGHT SERVICE. Commencing upon the date the first Aircraft is
placed into Flight Services pursuant to Section 1.2 (the
"Commencement Date"), and continuing during the term of this
Agreement, CAI shall operate America West Express air
transportation services (the "Flight Services"), using the
fleet of aircraft as established pursuant to Section 1.2, to
and from Columbus, Ohio as the hub city ("CMH") for the Flight
Services, and based upon the schedule established from time to
time by AWA (the "Schedule") in written notice to CAI (a
"Schedule Notice"). AWA, to the extent reasonably practicable,
shall provide CAI with a Schedule Notice at least 60 days
prior to any Schedule change. For purposes of this Agreement,
"Flights" means flights operated pursuant to the Schedule. AWA
may change the Schedule by issuance of a Schedule Notice at
any time. When creating a Schedule,
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Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933. The
omitted materials have been filed separately with the Securities and Exchange
Commission.
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AWA shall: (i) take into account the number of Aircraft in
the Fleet and CAI's aircraft maintenance requirements; (ii)
create a Schedule which will permit CAI to schedule flight
crews in a manner consistent with industry operational
practices; (iii) schedule block times based on AWA's
internal block time policy; (iv) provide for a minimum of
30 minute turn time in CMH and 25 minute turn time in other
cities; (v) provide for at least [*] of the Aircraft to
remain overnight in CMH for a minimum of [*] hours; (vi)
provide for Aircraft to remain overnight at least [*] hours
in cities other than CMH; (vii) take into account airport
facilities available for Aircraft handling; (viii) provide
for the following Aircraft utilization: (a) an average of
not less than [*] block hours per day per Aircraft in the
Fleet during each calendar month; (b) an average of not
less than [*] Available Seat Miles nor more than [*]
Available Seat Miles per day per Aircraft in the Fleet
during each calendar month; and (c) an average of not less
than [*] departures per day per Aircraft in the Fleet
during each calendar month; and (ix) provide for scheduled
heavy maintenance on Aircraft as required from time to
time. CAI, to the extent reasonably practicable, shall
implement all changes in the Schedule contained in a
Schedule Notice in accordance with AWA's scheduling
requirements but in no event greater than 60 days after
receipt of a Schedule Notice. CAI or any of its affiliates
shall not provide any flight service from Columbus for any
other airline utilizing Columbus, Ohio as a hub city.
Except as provided in the previous sentence, CAI may
provide flight services for other airlines. "Available Seat
Miles" means one seat traveling one statute mile.
CAI acknowledges that AWA may Schedule Flights using ERJs
in and out of the Phoenix, Arizona Sky Harbor International
airport. Prior to CAI commencing such Flights, CAI and AWA,
in good faith based on prevailing market costs and
expenses, shall adjust the Guaranteed Costs payable
pursuant to Section 6.2 to take into consideration the
additional and increased cost of operating such Flights in
such location. Upon agreeing to the Guaranteed Costs
adjustment, AWA and CAI shall execute and attach an
addendum to this Agreement supplementing the Guaranteed
Costs Schedule. In addition to paying the increased or
additional Guaranteed Costs, AWA shall reimburse CAI for
all actual and reasonable out-of-pocket costs and expenses
incurred by CAI in connection with establishing Flight
Services out of the Phoenix, Arizona Sky Harbor
International Airport (the "Transition Costs"). CAI, within
60 days after commencement of such Flights, shall submit to
AWA a statement for the Transition Costs together with
backup documentation of such Transition Costs (the
"Transition Statement"). AWA shall reimburse the Transition
Costs within 30 days after receipt of the Transition
Statement.
1.2 FLEET.
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1.2.1 INITIAL ERJ FLEET. CAI shall provide the Flight
Services using EMB 145 LR's with AE 3007 A1-P
engines (collectively, the "Fleet" and individually,
each an "Aircraft"). One Aircraft shall be
placed into Flight Services by CAI during or before
each of the following calendar months: August 2001,
September, 2001, October 2001 (2 Aircraft), January
2002, February 2002, March 2002, April 2002, May
2002, June 2002, July 2002, and August 2002 for a
total of 12 Aircraft (collectively, the "Firm
Aircraft"). CAI shall provide AWA with at least 90
days' prior written notice of the calendar week in
which each of the Firm Aircraft will be placed into
Flight Services under this Agreement (each, a
"Scheduled Delivery Week"). If an Aircraft is not a
"new" Aircraft from the manufacturer, then the
Aircraft shall not be older than [*] from new
manufacturer delivery and the interior and exterior
shall be decorated, painted and reconfigured to AWA
specifications at CAI's sole cost and expense prior
to the delivery date.
1.2.2 ERJ FLEET EXPANSION. AWA shall have the options to
expand the Fleet by 12 additional 50-seat ERJ
Aircraft from the options held by CAI to acquire
the Aircraft in the years 2002 and 2003 pursuant
to that certain agreement with the Aircraft
manufacturer referenced on Exhibit D, attached
hereto. On or before each Option Exercise Date
(set forth in the chart below), AWA, by written
notice to CAI, shall have the option to require
CAI to increase the Fleet by the addition of two
new Aircraft in the applicable In Service Months
(each, a "Fleet Expansion Option"):
<Table>
<Caption>
Option Exercise Date in Service Months
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October 20, 2001 September,
October, November
and December 2002
December 20, 2001 January and
February 2003
February 20, 2002 March and April
2003
April 20, 2002 May and June
2003
June 20, 2002 July and August
2003
</Table>
The Fleet Expansion Options are separate
and individual options and may be
exercised or not exercised on a separate
and individual basis. The two Aircraft
that are the subject of each Fleet
Expansion Option shall be added to the
Fleet by CAI one each in each of the
applicable In Service Months.
(c) CAI shall provide AWA with at least 90 days'
prior written notice of the Scheduled
Delivery Week for each Option Aircraft that
is placed into Flight Service pursuant to
this Section 1.2.2.
1.2.3 FLEET REDUCTION. AWA, by providing at least 180
days' prior written notice to CAI, amy require CAI
to remove from Flight Services each
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Aircraft after the 10th anniversary of the date
such Aircraft is placed into Flight Services
(each, a "Elimination Notice"). In addition, AWA
may require CAI to remove from Flight Services (i)
any one Aircraft after the sixth anniversary of
the Commencement Date, and (ii) any two Aircraft
after the eighth anniversary of the Commencement
Date, by providing CAI with an Elimination Notice
no less than 365 days prior to the removal date
(each, an "Early Elimination"). CAI shall remove
the applicable Aircraft from providing Flight
Services on the date set forth in the Elimination
Notice (the "Elimination Date"). From and after
the Elimination Date, the Aircraft shall no longer
be used to provide Flight Services and AWA shall
have no further payment obligations under this
Agreement for such Aircraft. In the event of an
Early Elimination, within 30 days after each
Elimination Date, AWA shall pay to CAI an amount
equal to [*] for each Aircraft subject to Early
Elimination.
1.2.4 SPARE AIRCRAFT. The 22nd Aircraft placed into Flight
Services under this Agreement shall be a spare
Aircraft under this Agreement. The spare Aircraft
shall be an Aircraft providing Flight Services for
all purposes under this Agreement, including, without
limitation, payments under Section 6.1.7 and 6.2.
1.2.5 FAILED DELIVERY. Notwithstanding anything in this
Agreement to the contrary, CAI shall not be liable
to AWA for the failure to deliver any Aircraft
during a Scheduled Delivery Week (a "FAILED
DELIVERY") if: (i) the failure to deliver is the
result of the manufacturer's failure to deliver
the Aircraft to CAI as a result events, facts or
circumstances beyond the control of CAI and not
directly or indirectly attributable to or arising
or resulting from the acts or omissions of CAI,
its agents, employees or contractors; (ii) CAI
uses commercially reasonable efforts to acquire a
replacement aircraft for the Aircraft that was not
delivered; and (iii) CAI pays to AWA any
compensation, damages or award obtained by Mesa
from the manufacturer as a result of the failed
delivery (an "EXCUSED FAILURE"). In the event of a
Failed Delivery, CAI shall use commercially
reasonable efforts to obtain the applicable
Aircraft as soon as practicable after the
Scheduled Delivery Week. If the Aircraft that is
the subject of a Failed Delivery is not delivered
within 90 days after the Scheduled Delivery Week,
then AWA shall have the option to elect not to
include such Aircraft under this Agreement by
providing written notice to CAI at any time prior
to the actual delivery of such Aircraft. If a
Failed Delivery is not the result of an Excused
Failure, then AWA shall have all rights and
remedies under this Agreement for such Failed
Delivery.
1.3 PERSONNEL; TRAINING. CAI shall employ and maintain a
sufficient number of competent, trained personnel,
including, but not limited to pilots, flight attendants and
maintenance personnel necessary to provide the Flight
Services as required by this Agreement. In addition, CAI
shall employ and
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maintain a commercially reasonable number of reserve pilots
and flight attendants based in Columbus, Ohio Metropolitan
area based on the Flight Services to be provided pursuant
to this Agreement. CAI shall cause all CAI personnel
providing Flight Services to wear uniforms approved by AWA,
which approval shall not be unreasonably withheld, and
shall comply with all appearance guidelines required of all
AWA personnel.
CAI shall provide initial training, recurrent training and
customer service training to personnel reasonably
identified by AWA at programs approved by AWA. AWA shall
provide applicable training materials. CAI shall pay all
training expenses including AWA instructor travel expenses.
In the event AWA becomes a hazardous materials carrier,
CAI, at AWA's expense, shall conduct all hazardous
materials training required by AWA or AWA's other code
share partners.
1.4 SERVICE QUALITY AND LEVEL. All Flight Services shall be
provided by CAI at a service quality and level of service
(other than first class service) equal to or greater than the
service quality and level of service provided by AWA to the
extent applicable to the type of Aircraft used to provide the
Flight Services.
1.5 MAINTENANCE.
1.5.1 OBLIGATION. CAI, at its own cost and expense, shall
be responsible for the service, repair, maintenance,
overhauling and testing of each Aircraft: (i) in
compliance with the maintenance program for each
Aircraft as approved by the FAA and pursuant to all
applicable aircraft maintenance manuals applicable to
each Aircraft; (ii) so as to keep each Aircraft in
good and safe operating condition; and (iii) so as to
keep the Aircraft in such operating condition as may
be necessary to enable the airworthiness
certification of the Aircraft to be maintained in
good standing. CAI shall retain full authority and
control over the service, repair, maintenance,
overhauling and testing of each Aircraft. AWA shall
have no obligations or duties with respect to the
service, repair, maintenance, overhauling or testing
of any Aircraft.
1.5.2 LOCATION. CAI shall maintain its maintenance base for
the Aircraft in Columbus, Ohio. CAI shall not
relocate its maintenance base, without the prior
written consent of AWA, which consent may be withheld
if the new location fails to meet AWA's maintenance
base requirements. CAI, with the prior written
consent of AWA, may add maintenance bases as
necessary to provide the Flight Services at locations
which meet AWA's maintenance base requirements.
1.6 EMERGENCY OPERATIONS. CAI and AWA shall coordinate to develop
a plan that complies with applicable Regulations (as defined
below) to be implemented in the event of any incident
involving personal injury or death to a passenger or crew
member on a Flight. The emergency response teams of AWA and
CAI shall coordinate their efforts and shall cooperate fully
in response to such emergency.
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1.7 FLEET CONFIGURATION. All Aircraft in the Fleet on the
Commencement Date and Aircraft added to the Fleet shall have a
passenger seating configuration and seating capacity as
provided in the first Aircraft in the Fleet. AWA, at AWA's
cost and expense, may require CAI to reconfigure or change the
seating capacity of an Aircraft. All such requested changes
shall be implemented within 180 days after CAI's receipt of
written request from AWA. Upon the expiration or termination
of this Agreement or the elimination of any reconfigured
Aircraft pursuant to Section 1.2.3, AWA, within 30 days after
receipt of written request, shall reimburse CAI for all actual
out-of-pocket costs and expenses incurred by CAI to
reconfigure any Aircraft back to the original configuration
existing prior to any reconfiguration requested by AWA.
1.8 CLEANLINESS. Except as provided in Section 2.3, CAI, at its
sole cost and expense, shall cause all Aircraft while
remaining overnight at CMH to be cleaned and maintained in
an appearance in accordance with cleaning standards,
requirements and guidelines promulgated by AWA from time to
time.
2. RIGHTS, RESPONSIBILITIES AND OBLIGATIONS OF AWA.
2.1 FLIGHT MANAGEMENT ITEMS. AWA, in its sole discretion, shall:
(i) designate from time to time, pursuant to each Schedule
Notice, the routes on and destinations to which CAI is to
provide the Flight Services and the times of departure for the
Flights; (ii) set the fares to be paid for such Flights by the
passengers; and (iii) be responsible for the passenger
booking, yield management and overbooking of Flights, limited
only by the Fleet required to be maintained by CAI pursuant to
this Agreement.
2.2 MARKETING/REVENUE. AWA, in its sole discretion and at its sole
cost, shall market, advertise and sell tickets on all Flights.
AWA shall provide all reservation services for the Flight
Services and shall pay all ticketing and advertising expenses,
credit card charges, travel agent commissions and CRS fees
applicable to such services. AWA shall be entitled to retain,
and CAI shall pay to AWA, all revenue and income generated by
the Flight Services. CAI shall provide to AWA all tickets and
other revenue documentation collected or lifted by CAI. AWA
shall process CAI lifted passenger lift documents using
standard industry pricing procedures. CAI agrees to cooperate
with AWA on any special pricing or reporting requirements. CAI
shall supply AWA with specific reporting requirements.
2.3 AIRPORT SERVICES. AWA, at its sole cost and expense, shall:
(i) provide curb-side service, check-in service, ticketing
and security services for all Flights; (ii) transfer all
baggage for passengers connecting to and from AWA flights
and Flights; (iii) provide baggage, cargo and mail handling
services for all Flights; (iv) provide Aircraft ground
handling; (v) provide Aircraft cleaning (other than during
overnight turns at CMH) and provisioning during turns and
overnight stays; (vi) provide food and beverage supplies
for each Flight; and (vii) provide such other ground
services selected by AWA.
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2.4 OTHER CODE SHARE PARTNERS. AWA shall have the right to enter
into code share, joint marketing, charter or other
alliance-type agreements with any other flight service
commuter operator to provide flight services to any
destinations or for any routes. AWA may permit any of AWA's
other code share partners to place their code on any Flight.
AWA or its code share partners shall pay all costs and
expenses incurred by CAI in placing such other code on such
Flights.
2.5 CHARTERS. AWA, at its sole discretion, may market charter
flights on the Aircraft. CAI shall operate such charter
flights provided flight crews and Aircraft are available and
not otherwise subject or committed to maintenance
requirements. CAI is required to operate the charters in a
manner consistent with the terms of this Agreement. In respect
of any charter flight, AWA and CAI, in good faith, shall
negotiate the costs and expenses to be paid by AWA for such
services.
2.6 AIRPORT SLOTS. AWA shall provide to CAI the right to use the
airport slots owned by AWA at airports that are or become slot
controlled (the "Slots"). The Slots shall at all times remain
the property of AWA and upon the expiration or earlier
termination of this Agreement or upon the request of AWA, CAI
shall take all steps necessary to insure all rights acquired
by CAI in the Slots, if any, are conveyed to AWA or any other
person or entity designated by AWA.
2.7 HANGER. AWA shall use commercially reasonable efforts to
provide CAI with hanger space at CAI leased by AWA (the
"Hanger"). Prior to entering into a lease for hanger space at
CMH, CAI shall meet and confer with AWA as to the availability
of the Hanger. If CAI executes a lease for hanger space at
CMH, then CAI shall not be required to use the Hanger provided
by AWA unless AWA reimburses CAI for all costs and expenses
incurred by CAI in terminating the lease and any unamortized
capital improvements to such space. If AWA provides the Hanger
to CAI, then the Guaranteed Costs shall be reduced by an
amount equal to the actual occupancy costs being paid by CAI
at CMH.
3. COMPLIANCE WITH REGULATIONS.
3.1 REGULATIONS. CAI shall perform its obligations and duties
under this Agreement, including, without limitation, all
Flight Services in full compliance with any and all applicable
laws, ordinances, codes, statutes, orders, directives,
mandates, requirements, rules and regulations, whether now in
effect or hereafter adopted or promulgated, of all
governmental agencies having jurisdiction over CAI's
operations, including but not limited to the FAA and the DOT
(collectively, "Regulations").
3.2 FLIGHT OPERATIONS. CAI shall be responsible for the operation
of each Aircraft and the safe performance of the Flights in
accordance with the Regulations and airline industry standard
practice and shall retain full authority, operational control
and possession of the Aircraft to do so. CAI, its
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agents or employees, for the purpose of the safe performance
of the Flights, shall have absolute discretion in and shall
have sole responsibility for all matters concerning the
preparation of each Aircraft for its Flights, and all other
matters relating to the technical operation of the Aircraft.
CAI, insofar as such relates to the safe operation of a
Flight, shall have sole and absolute discretion as to the load
carried and its distribution and as to the decision whether
such Flight shall be taken. CAI shall be solely responsible
for and AWA shall have no obligations or duties with respect
to the dispatch of all Flights.
3.3 REGISTRATION. All Aircraft shall remain registered in the
United States of America in accordance with the Regulations.
3.4 DISCLOSURE. CAI, upon 3 business days' prior written request,
shall provide AWA the opportunity to review all operating
specifications, operational regulations, manuals and
calculations with respect to all Aircraft and flight
statistics with respect to all Flights at CAI's corporate or
other relevant offices where such records are located.
3.5 REVIEW/AUDIT. AWA, upon 3 business days' prior written
notice, may review, at CAI's corporate office, airport
ticket offices and other relevant offices, all records,
books, logs, files, documentation and information
maintained by CAI, or any of its maintenance or service
contracts, in connection with Flight operation, safety and
regulatory compliance, employee training, Flight dispatch,
Aircraft use, operation, maintenance and repair, Flight
incidents and governmental orders, mandates and
requirements.
3.6 REPORTING. This Agreement shall be treated as a code share for
DOT reporting requirements. AWA, in a timely manner, shall
provide CAI with such information necessary for CAI to make
the DOT reports and disclosures.
4. OPERATIONAL PERFORMANCE CRITERIA, INCENTIVES AND PENALTIES.
4.1 ON TIME PERFORMANCE RATE CRITERIA. Commencing for the first
full calendar month after [*] is placed into Flight
Services under this Agreement, CAI's target minimum OTP
Rate for each calendar month (defined below) is set forth
on Exhibit B, attached hereto (the "OTP Rate Target"). The
"OTP Rate" is defined as the percentage determined by
dividing the number of flight segments not Delayed (defined
below) by the total number of flight segments for any
calendar month. For purposes of this Agreement, "Delayed"
means a flight segment that does not arrive at the
destination within 15 minutes after the scheduled arrival
time. All flights will be included for calculating the OTP
Rate, except Flights that are delayed as a result of events
or circumstances beyond the control of CAI, its employees,
agents, contractors or subcontractors, including, without
limitation, air traffic control delays, weather, the acts
or omissions of AWA, its employees, agents or contractors
and acts of God. For purposes of the prior sentence, all
Aircraft maintenance and repair events or circumstances
shall be deemed to be within CAI's control. [*] A flight
delayed at AWA's request to accommodate connecting
passengers is not a Delayed Flight. To the extent that
CAI's OTP Rate falls below the OTP Rate Target for any
calendar month, CAI, within 10 days after receipt of
written demand, shall pay to AWA the penalty set forth on
Exhibit B. To the extent CAI's OTP Rate exceeds the OTP
Rate Target set forth on Exhibit B for any calendar month,
AWA, within 10 days after receipt of written demand, shall
pay the bonus set forth on Exhibit B.
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4.2 FLIGHT COMPLETION FACTOR. Commencing in the first calendar
month after [*] is placed into Flight Service, CAI's target
minimum FCF (defined below) for each calendar month is set
forth on Exhibit B. "FCF" is defined as the percentage of
published, scheduled Flights completed for a calendar
month. Flights not completed due to events or circumstances
beyond the control of CAI, its employees, agents,
contractors or subcontractors, including, without
limitation, weather, air traffic control failures, the acts
or omissions of AWA, its employees, agents or contractors,
the grounding of all the Aircraft as a result of a
governmental requirement applied to all aircraft similar to
the Aircraft, the failure of the Aircraft manufacturer to
deliver an Aircraft timely (except to the extent such delay
is caused by CAI ) and acts of God will not be included for
calculating the FCF. For purposes of the prior sentence,
all Aircraft maintenance and repair events or circumstances
shall be deemed to be within CAI's control. To the extent
CAI's FCF falls below the target minimum FCF for any
calendar month, CAI, within 10 days after receipt of
written demand, shall pay to AWA the penalty set forth on
Exhibit B (the "Monthly Payment"). To the extent CAI's FCF
exceeds the target minimum FCF for bonuses for any calendar
month set forth on Exhibit B, AWA, within 10 days after
receipt of written demand, shall pay the bonus set forth on
Exhibit B.
4.3 RECORDS. All records of Delayed and canceled flights (the
"Flight Records") shall be input into AWA's internal MAPPER
System ("MAPPER System"). AWA shall make the Flight Records
available to CAI through a computer link to the MAPPER
System. CAI shall object to any entries in the MAPPER
System within 2 business days after the Flight Records are
recorded in the MAPPER System. If CAI does not object to
any entry, timely, then absent manifest error, the MAPPER
System Flight Records shall control. If CAI does not object
to any entry, timely, then absent manifest error, the
MAPPER System Flight Records shall control. If CAI does
object to any entry, timely, then CAI and AWA, in good
faith, shall work to correct the error within 24 hours
after the objection is made and if CAI and AWA agree to
revise the entry, then AWA shall revise the entry in the
MAPPER System. If CAI and AWA cannot agree to revise the
entry, then the entry in the Flight Records shall remain as
originally posted.
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4.4 SETOFF. All undisputed sums payable by CAI to AWA pursuant to
this Section 4 may, at AWA's election, be setoff against
amounts next due by AWA to CAI pursuant to this Agreement.
4.5 DUPLICATIVE PAYMENTS. CAI shall not be required to pay both
an OTP Rate penalty and FCF penalty for the same calendar
month and AWA shall not be required to pay both an OTP Rate
bonus and FCF bonus for the same calendar month. If
penalties or bonuses are due for both the OTP Rate or FCF
in any calendar month, then only the greater of the two
penalties or bonuses payable for such month shall be due
and payable.
5. IRREGULAR OPERATIONS. If during any calendar month America West Express
passengers misconnect to AWA flights due to Flights arriving at
their destination more than 15 minutes after the scheduled arrival
and, as a result, such passengers have less than the minimum
connection time (reasonably established by AWA from time to time for
AWA flights) to reach their next flight and the passengers miss the
flight and during such calendar month CAI's OTP Rate is below [*],
then CAI shall reimburse AWA for costs incurred in providing, as
applicable, such passengers the "Misconnected PAX Benefits" given to
AWA passengers missing connecting flights pursuant to policies
adopted by AWA from time to time. "Misconnected PAX Benefits"
include, but are not limited to, "Silverliner" passes, travel
vouchers or similar service vouchers, meals and hotels for overnight
stays. For determining actual costs, "Silverliner" passes will be
valued at [*], increased each January 1 in accordance with the CPI
pursuant to Section 6.4. All other costs will be at actual cost.
AWA, by written notice given to CAI at the end of any calendar month
in which CAI's OTP Rate falls below [*], shall invoice CAI for the
misconnection costs and expenses incurred by AWA during such
calendar month for which CAI is responsible pursuant to this Section
5 (the "Denied Boarding Invoice"). CAI shall pay the sums due in
each Denied Boarding Invoice within 30 days after receipt. The
Denied Boarding Invoice shall be accompanied by supporting
documentation containing reasonable detail to support the charges
set forth in the Denied Boarding Invoice.
6. PAYMENT OF FEES/REVENUE SHARING. Commencing on the Commencement Date,
CAI and AWA hereby agree to pay the following sums as consideration for
this Agreement and the provision of the Flight Services and Other
Services provided for herein:
6.1 CAI ACTUAL COSTS. AWA, in accordance with Section 6.5, shall
reimburse to CAI the following actual costs and expenses
actually paid by CAI with reference to the performance of
the Flight Services and Other Services ("Actual Costs").
6.1.1 Hull insurance premiums paid by CAI for each
Aircraft for the prior calendar month. Insurance
shall be allocated and paid by AWA on a monthly
basis equally over the applicable premium period
for which the insurance is paid. Insurance shall
be prorated by CAI in any premium period during
which an Aircraft is added or deleted from this
Agreement. If the monthly insurance payments made
by AWA are less than the actual premiums paid by
CAI, then AWA shall pay such excess in the month
CAI pays the insurance premiums. If the monthly
payments made by AWA exceed the actual insurance
premiums, then AWA shall be entitled to a credit
against the next payment of the Actual Costs in an
amount equal to such overpayment. CAI, within 10
days after receipt, shall provide AWA with copies
of all premium notices received for insurance
premiums.
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6.1.2 Liability insurance premiums paid by CAI for the
Flight Services on a revenue passenger mile basis.
Insurance shall be allocated and paid on a monthly
basis equally over the applicable premium period
for which the insurance is paid. Insurance shall
be prorated by CAI in any premium period during
which this Agreement commences, terminates or
expires. If the monthly insurance payments made
by AWA are less than the actual premiums paid by
CAI, then AWA shall pay such excess in the month
CAI pays the insurance premiums. If the monthly
payments made by AWA exceed the actual insurance
premiums, then AWA shall be entitled to a credit
against the next payment of the Actual Costs in an
amount equal to such overpayment. CAI, within 10
days after receipt, shall provide AWA with copies
of all premium notices received for insurance
premiums.
6.1.3 Property taxes paid by CAI for each Aircraft or the
Fleet. Property taxes shall be allocated and paid
on a monthly basis equally over the applicable tax
period for which the property taxes are assessed
and paid. Property taxes shall be prorated by CAI
in 2001 for the initial Fleet. If an Aircraft is
added to the Fleet after property taxes are
assessed for a tax period, then AWA shall not pay
property taxes on the Aircraft for such tax
period. If the monthly tax payments made by AWA
are less than the actual property taxes assessed
and paid by CAI, then AWA shall pay such excess in
the month CAI pays the property taxes. If the
monthly payments made by AWA exceed the actual
property taxes assessed, then AWA shall be
entitled to a credit against the next payment of
Actual Costs in an amount equal to such
overpayment. CAI, within 10 days after receipt,
shall provide AWA with copies of all tax notices
received for property taxes assessed against any
portion of the Fleet.
6.1.4 De-Icing expenses paid by CAI for each Aircraft for
the prior calendar month.
6.1.5 Fuel costs paid by CAI during the prior calendar
month, calculated as gallons of fuel burned per
hour.
6.1.6 Landing fees calculated per Flight departure
incurred during the prior calendar month.
11
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6.1.7 Monthly lease or other finance expense for each
Aircraft accounted for by CAI and paid by AWA in
accordance with general accounting principles
consistently applied.
6.1.8 Actual costs and expenses incurred by CAI during the
prior calendar month as a result of Aircraft not
remaining overnight at least 9.5 hours in cities,
other than at CMH.
6.1.9 Repainting of Aircraft costs paid by CAI, made at
the request of AWA or for maintenance purposes.
6.1.10 Any airport taxes imposed on CAI for operating the
Flight services from an airport, if any.
CAI shall not enter into any contract with an affiliate to
provide the services or materials for which AWA pays the
Actual Costs unless such contract is on commercially
reasonable terms substantially similar to those available
in the market place for arms-length transactions with third
parties; provided, however, that CAI may contract with
Solitair Corp. for providing aircraft financing services
provided the charges do not exceed $500,000.00 plus
out-of-pocket expenses per Aircraft. In the event any of
the services or materials for which AWA pays the Actual
Costs are purchased for the Flight Services provided by
this Agreement and for other services provided by CAI and
its affiliates, then the costs of such services and
materials shall be equitably allocated to Actual Costs
payable by AWA such that AWA only pays for the portion of
such costs attributable to the Flight Services provided by
this Agreement. CAI shall use commercially reasonable
efforts to operate the Flight Services in an efficient and
cost effective manner to minimize the Actual Costs payable
by AWA while maintaining the quality and quantity of
services required by this Agreement. CAI shall take all
commercially reasonable actions to minimize the taxes
imposed on the Fleet. If requested by AWA, in writing, AWA,
at AWA's cost and expense, on behalf of CAI may pursue any
tax protest or contest for property taxes imposed on the
Fleet or any Aircraft in the Fleet in the manner prescribed
by applicable law. An "affiliate" of CAI means any person
or entity controlling, controlled by or under common
control with CAI.
6.2 CAI GUARANTEED COSTS. Commencing on the Commencement Date,
AWA, in accordance with Section 6.5, shall pay to CAI the
amounts set forth in and determined in accordance with the
number of Aircraft in Flight Services as set forth in Exhibit
A (the "Guaranteed Costs Schedule"),
12
<Page>
as certain amounts may be adjusted in accordance with
Section 6.4 below and the terms Exhibit A (the "Guaranteed
Costs"). If the term of this Agreement commences or
expires or an Aircraft is added or eliminated from the
Fleet on other than the first or last day of a calendar
month, then the Guaranteed Costs payable by AWA under this
Agreement, for existing Aircraft and for such additional
Aircraft shall be prorated based on the actual number of
days this Agreement is in effect, the actual number of
days before and after an Aircraft is added or eliminated
for existing Aircraft, and the number of days the new
Aircraft is in the Fleet during such month and the actual
number of days in such month. Guaranteed Costs shall not
be incurred for an Aircraft until it is placed into Flight
Services under this Agreement which in no event shall be
sooner that 7 days prior to the Scheduled Delivery Week
for an Aircraft. For purposes of prorating Guaranteed
Costs on existing Aircraft the actual date that an
Aircraft is placed into or eliminated from Flight Services
shall be used.
6.3 CONTRACT NEGOTIATION. AWA, in its sole discretion, may assist
CAI in the negotiation of contracts for the provision of
materials or services, including, without limitation, fuel,
subject to the Actual Costs and Guaranteed Costs; provided CAI
is not subject to an existing contract for such services or
materials.
6.4 CONSUMER PRICE INDEX ADJUSTMENT. For the purposes of
calculating CPI increases in certain categories of the
Guaranteed Costs as provided in Exhibit A and the Revenue Rate
pursuant to Section 6.6, the following definitions and
formulas shall be applied:
6.4.1 DEFINITION. "CPI" shall mean the Consumer Price
Index, U.S. City Average, All Urban Consumers, All
Items (base index year 1982-84 = 100) as published by
the United States Department of Labor, Bureau of
Labor Statistics. If the manner in which the Consumer
Price Index as determined by the Bureau of Labor
Statistics shall be substantially revised, including,
without limitation, a change in the base index year,
an adjustment shall be made by the parties in such
revised index which would produce results equivalent,
as nearly as possible, to those which would have been
obtained if such Consumer Price Index had not been so
revised. If the Consumer Price Index shall become
unavailable to the public because publication is not
readily available to enable the parties to make the
adjustment referred to in this Section, then the
parties shall mutually agree to substitute therefor a
comparable index based upon changes in the cost of
living or purchasing power of the consumer dollar
published by any other governmental agency or, if no
such index shall be available, then a comparable
index published by a major bank or other financial
institution or by a university or a recognized
financial publication.
6.4.2 ADJUSTMENT FORMULA. On each January 1, commencing on
January 1, 2002 (each an "Adjustment Date"), to
determine the amount of adjustment based on the
CPI as provided in Exhibit A or Section 5, the
applicable category of the Guaranteed Costs or
value of Silver Liner passes, as applicable, in
effect during the prior calendar year, shall be
adjusted by multiplying the applicable category of
Guaranteed Costs on the Guaranteed Costs Schedule
or value of Silver Line passes, as applicable, in
effect for the prior calendar year, by a fraction,
the numerator of which shall be the CPI for the
month of October immediately preceding the
Adjustment Date, and the denominator of which
shall be the CPI for the month of October in the
immediately preceding calendar year (the
"Adjustment"). CAI and AWA shall execute an
amendment to the Guaranteed Costs Schedule or this
Agreement within 10 days after each Adjustment
occurs. The failure to execute such an amendment
shall not affect the effectiveness of any
Adjustment or the bases for any subsequent
Adjustment. Each adjusted category of Guaranteed
Costs and value of Silver Liner passes shall be
effective until the next applicable Adjustment
Date.
13
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6.5 PAYMENT OF ACTUAL AND GUARANTEED COSTS. Commencing on the
Commencement Date, AWA shall pay to CAI the estimated
Actual Costs and Guaranteed Costs for each calendar month
based on 99% FCF (the "Estimated Costs") as follows: By the
20th day of each calendar month commencing July 20, 2001,
CAI shall provide AWA with a statement of the Estimated
Costs for the following month. CAI shall use its
commercially reasonable judgment to establish the Estimated
Costs for each month. For purposes of the Estimated Costs,
AWA's fuel cost forecasts shall apply. On or before the
5th, 10th, 15th and 20th day of each calendar month (or
next business day thereafter if any such dates is other
than a business day), AWA shall pay 25% of the Estimated
Costs for such calendar month.
On or before the 25th day of each calendar month, CAI shall
submit to AWA a statement of the actual Guaranteed Costs and
Actual Costs (the "Incurred Costs") payable by AWA for the
prior calendar month (the "Incurred Costs Statement"). If the
Estimated Costs paid by AWA in any calendar month exceed the
Incurred Costs in any calendar month, then CAI, together with
the Incurred Costs Statement for such calendar month, shall
reimburse AWA the amount by which the Estimated Costs paid by
AWA exceeded the Incurred Costs. If the Incurred Costs in any
calendar month exceed the Estimated Costs paid by AWA in any
calendar month, then AWA within [*] after receipt of the
Incurred Costs Statement, shall reimburse and pay to CAI the
amount by which the Incurred Costs exceed the Estimated Costs
paid by AWA for the subject calendar month.
6.6 SEGMENT REVENUE SHARING. Commencing in the first calendar
month after the month in which the Commencement Date occurs,
AWA shall pay to CAI, by the 20th day of each calendar month,
an amount equal to the product obtained by multiplying the
Segment Revenue Percentage by the Segment Revenue generated
during the prior calendar month.
14
<Page>
For purposes of this Agreement, the following terms have the
following definitions:
"Segment Revenue" means total fares paid by passengers
traveling on flights flown by CAI pursuant to this
Agreement, less all taxes, assessments, airport charges and
other governmental and quasi-governmental charges included
in the fares. For calculating Segment Revenue, the
fares shall include the portion of the revenue attributed
to the CAI Flight segment only, as reasonably determined by
AWA.
"Segment Revenue Percentage" means the amount set forth in
Exhibit C, attached hereto.
6.7 STATEMENTS AND AUDIT RIGHTS. All Incurred Costs Statements and
other requests for payment made by CAI pursuant to this
Section 6 shall be accompanied by such supporting
information, documentation and calculations as AWA may
request from time to time. AWA, by written notice given
within 90 days after receipt of an Incurred Costs Statement,
may object to the Actual Costs set forth in an Incurred
Costs Statement and, within 90 days after the objection
and upon 2 days' prior written notice, may review and
audit, or cause its independent accountants to review and
audit all records and files (including computer data bases)
maintained by CAI and relevant to the calculation of
Actual Costs pursuant to this Agreement. If AWA's review of
the records and files reveals that CAI has overcharged AWA,
then CAI shall pay to AWA, upon demand, the overpayments
and the costs and expenses of AWA incurred in completing
such review and audit and, if such overcharge or
underpayment is willful or intentional or exceeds more
than 5% of the sums actually payable by AWA, then CAI
shall be in default under this Agreement. CAI shall
maintain all records, files, information, data and
documentation (including computer data bases) used in
calculating the Actual Costs in good condition and order
at CAI's corporate headquarters. AWA shall not be
required to pay any sums, and shall be entitled to
receive a refund of any sum paid, for which CAI is
unable to provide supporting information, documentation
or data. If AWA does not object to an Incurred Costs Statement
timely, then the Incurred Costs Statement, absent fraud,
shall be final.
7. TERM AND TERMINATION. The term of this Agreement (the "Term") shall
commence on the Effective Date and expire on the 10th anniversary of
the date that the last Aircraft is added to the Fleet pursuant to
Section 1.2 of this Agreement ("Expiration Date"), unless earlier
terminated as provided in this Agreement. AWA, upon 180 days' prior
written notice to CAI ("Termination Notice"), may terminate this
Agreement if CAI's FCF falls below [*] months (the "Cancellation
Event"). CAI shall have no cure rights months pursuant to Section 12
if a Cancellation Event shall occur. Such termination right shall be
in addition to any payments set forth in Section 4 and termination
rights for an Event of Default pursuant to Section 12. If AWA elects
to terminate this Agreement pursuant to this Section 7, AWA, in the
Termination Notice, shall establish as the termination date
- ---------
* Confidential
15
<Page>
any date between 180 and 210 days after delivery of the Termination
Notice. CAI shall continue to provide the Flight Services and Other
Services required by this Agreement until the termination date set
forth in the Termination Notice. AWA and CAI shall make all payments
as required by this Agreement for the period through and including
the termination date set forth in the Termination Notice.
8. SERVICE MARK LICENSE FOR SERVICES PROVIDED BY CAI.
8.1 GRANT OF LICENSE. For the payment of $1.00, AWA hereby grants
to CAI a non-exclusive, non-transferable license to use such
AWA Service Marks as AWA may designate, in writing, from
time-to-time in connection with the Flight Services and Other
Services to be rendered by CAI; provided, however, that at any
time prior to expiration or termination of this Agreement AWA
may alter, amend or revoke the license hereby granted and
require CAI's use of any new or different AWA Service Mark in
conjunction with the Services provided hereunder as AWA may
determine in its sole discretion and judgment.
8.2 OPERATION UNDER AWA SERVICE MARKS. CAI shall, at its
expense, cause the Fleet and any replacement Aircraft
utilized by CAI to provide the Flight Services, to bear AWA
Service Marks, consisting of AWA aircraft exterior and
interior color decor and pattern provided by AWA and the
name "America West Express." Upon written notice from AWA,
which shall include the specifications for any such changes
in AWA Service Marks and exterior or interior aircraft
decor and patterns, CAI shall effect changes in the
aircraft decor and patterns within 3 months from the date
of such notice. AWA shall reimburse CAI for the cost of
repainting and redecorating the Fleet in the event that AWA
changes its logo and color decor and pattern from the
design existing as of the Effective Date. CAI shall use and
display suitable signs on the interior and exterior of each
Aircraft identifying CAI as the operator of the Services,
such signs shall be subject to the prior written consent of
AWA as to nature, size and location provided that the signs
shall comply with all Regulations. All announcements,
displays or literature used or viewed by CAI customers on
Flights shall highlight "America West Express." No such
announcements, displays or literature shall reference "CAI
Airlines," other than to identify CAI or the operator of
the Services, on briefing cards or as required by the
Regulations.
8.3 TERMS AND CONDITIONS GOVERNING TRADEMARK LICENSE.
8.3.1 CAI hereby acknowledges AWA's ownership of the AWA
Service Marks, further acknowledges the validity of
the AWA Service Marks, and agrees that it shall not
do anything in any way to infringe or abridge upon
AWA's rights in the AWA Service Marks or directly or
indirectly to challenge the validity of the AWA
Service Marks.
8.3.2 To assure that the production appearance and quality
of the AWA Service Marks is consistent with AWA's
reputation for high quality and the goodwill
associated with the AWA Service Marks, CAI agrees to
maintain a level of quality consistent with AWA's
quality in the
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<Page>
Flight Services it provides pursuant to this
Agreement and to follow AWA's written instructions
regarding use of AWA's Service Marks, as they may be
amended from time to time.
8.3.3 CAI agrees that, in providing the Flight Services, it
shall not advertise or make use of the AWA Service
Marks without the prior written consent of AWA. AWA
shall have absolute discretion to withhold its
consent concerning any and all such advertising and
use of the AWA Service Marks in any advertising by
CAI. In the event AWA approves the use of such AWA
Service Marks in any advertising, such advertising
shall identify AWA as the owner of such Service Marks
and conform with any additional requirements
specified by AWA.
8.3.4 To the extent that CAI is licensed to use the AWA
Service Marks, the AWA Service Marks shall be used
only in connection with the Flight Services
specifically covered by this Agreement and not in
connection with any other business or activity of CAI
or any other entity, except for approved charters.
8.3.5 Nothing in this Agreement shall be construed to give
CAI the exclusive right to use the AWA Service Marks
or abridge AWA's right to use and license the AWA
Service Marks, and AWA hereby reserves the right to
continue to use the AWA Service Marks and to license
such other uses of the AWA Service Marks as AWA may
desire.
8.3.6 No term or provision of this Agreement shall be
construed to preclude the use of the AWA Service
Marks, including "America West Express," or the
aircraft exterior color decor and patterns by other
individuals or entities not covered by this
Agreement.
8.3.7 Upon the termination or expiration of this Agreement,
the license and use of the AWA Service Marks by CAI
shall cease and such use shall not thereafter occur.
9. LIABILITY AND INDEMNIFICATION.
9.1 RELATIONSHIP BETWEEN THE PARTIES. Nothing contained in this
Agreement will be deemed to create any agency or partnership
or similar relationship between AWA and CAI. Nothing contained
in this Agreement will be deemed to authorize either AWA or
CAI to bind or obligate the other. CAI and its employees
engaged in performing the Flight Services shall be employees
of CAI for all purposes, and under no circumstances shall be
deemed to be employees, agents or independent contractors of
AWA. AWA and its employees engaged in performing the
obligations of AWA under this Agreement shall be employees,
agents and independent contractors of AWA for all purposes,
and under no circumstances shall be deemed to be employees,
agents or independent contractors of CAI. Pursuant to this
17
<Page>
Agreement, CAI shall act, for all purposes, as an independent
contractor and not as an agent for AWA. AWA shall have no
supervisory power or control over any employees engaged by CAI
in connection with its performance hereunder, and all
complaints or requested changes in procedures shall be
transmitted by AWA to a designated officer of CAI. Nothing
contained in this Agreement shall be intended to limit or
condition CAI's control over its operations or the conduct of
its business as an air carrier, and CAI and its principals
assume all risks of financial losses which may result from the
operation of the Flight Services to be provided by CAI
hereunder.
9.2 INDEMNIFICATION BY CAI. CAI agrees to indemnify, defend and
hold harmless AWA, its directors, officers, employees, agents,
parent corporation, subsidiaries and affiliates for, from and
against any and all loss, liability, claim, damage, penalty,
fine, charge, cause of action, demand, cost and expense
(including attorneys' and consultants' fees and costs)
whatsoever (collectively, "Damages"), as incurred, arising out
of, resulting from or incurred in connection with: (i) the
provision of the Flight Services by CAI; (ii) CAI's breach of
this Agreement; (iii) damage or destruction of property of any
person, or injury or death of any person, caused by, arising
out of, or in connection with any act or omission of CAI, its
employees, agents, licensees, contractors, suppliers, officers
or directors; (iv) any taxes, impositions, assessments or
other governmental charges incurred by CAI in providing the
Flight Services or imposed on any revenue generated by this
Agreement (except as set forth in Section 6.1.3); (v)
passenger complaints or claims by passengers using the Flight
Services; and (vi) failure to comply with any Regulations. CAI
shall reimburse AWA or other Indemnified Party (as defined
below) for any legal and any other expenses reasonably
incurred in investigating, preparing or defending against any
claim or action arising out of or relating to any of the
foregoing.
9.3 INDEMNIFICATION BY AWA. AWA agrees to indemnify, defend and
hold harmless CAI, its directors, officers, employees, agents,
parent corporation, subsidiaries and affiliates for, from and
against any and all Damages, as incurred, arising out of,
resulting from or incurred in connection with: (i) AWA's
breach of this Agreement; (ii) damage or destruction of
property of any person, or injury or death of any person,
caused by, arising out of, or in connection with any act or
omission of AWA, its employees, agents, licensees,
contractors, suppliers, officers or directors in performing
AWA's obligations under this Agreement to the extent not
covered by insurance required to be maintained by CAI pursuant
to this Agreement; and (iii) any taxes, impositions,
assessments or other governmental charges incurred by AWA for
revenue received by AWA under this Agreement. AWA shall
reimburse CAI or other Indemnified Party (as defined below)
for any legal and any other expenses reasonably incurred in
investigating, preparing or defending against any claim or
action arising out of or relating to any of the foregoing.
9.4 CONDUCT OF INDEMNIFICATION PROCEEDINGS. The person or entity
claiming indemnification hereunder is referred to as the
"Indemnified Party" and the
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party against whom such claims are asserted hereunder is
referred to as the "Indemnifying Party". Each Indemnified
Party shall give reasonably prompt notice to the
Indemnifying Party of any action or proceeding or assertion
or threat of claim commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify
the Indemnifying Party (i) shall not relieve the
Indemnifying Party from any liability which it may have
under the indemnity agreement provided in this Agreement,
unless and to the extent it did not otherwise learn of such
action, threat or claim and the lack of notice by the
Indemnified Party results in the forfeiture by the
Indemnifying Party of substantial rights and defenses and
(ii) shall not, in any event, relieve the Indemnifying
Party from any obligations to the Indemnified Party other
than the indemnification obligation provided under Sections
9.2 and 9.3 above. If the Indemnifying Party elects within
a reasonable time after receipt of notice, the Indemnifying
Party may assume the defense of the action or proceeding at
Indemnifying Party's own expense with counsel chosen by the
Indemnifying Party and approved by the Indemnified Party;
PROVIDED, HOWEVER, that, if the Indemnified Party
reasonably determines upon advice of counsel that a
conflict of interest exists where it is advisable for the
Indemnified Party to be represented by separate counsel or
that, upon advice of counsel, there may be legal defenses
available to it which are different from or in addition to
those available to the Indemnifying Party, then the
Indemnified Party shall be entitled to separate counsel at
the Indemnifying Party's expense, which counsel shall be
chosen by the Indemnified Party in its sole discretion. If
the Indemnifying Party does not assume the defense, after
having received the notice referred to in the second
sentence of this Section, the Indemnifying Party will pay
the reasonable fees and expenses of counsel for the
Indemnified Party. Unless and until a final judgment that
an Indemnified Party is not entitled to the costs of
defense under the foregoing provision, the Indemnifying
Party shall reimburse, promptly as they are incurred, the
Indemnified Party's costs of defense. The Indemnifying
Party shall not settle or compromise any claim for which an
Indemnified Party is entitled to indemnity without the
prior written consent of the Indemnified Party.
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9.5 INSURANCE.
9.5.1 CAI, at all times during the Agreement, shall have and
maintain in full force and effect, policies of insurance
satisfactory to AWA, of the types of coverage, and in the
minimum amounts stated below with insurance companies
satisfactory to AWA and under terms and conditions
satisfactory to AWA, including insurance coverage on all
Aircraft used to provide Flight Services. Unless otherwise
specified, the minimum amounts of insurance coverage required
hereunder shall be per occurrence, combined single limit for
all insurance coverage required hereunder.
<Table>
1. Aircraft Liability and Ground Liability [*]
Insurance (including Commercial General
Liability)
a. Bodily Injury and Personal Injury [*]
- Passengers
b. Bodily Injury and Personal Injury [*]
- Third Parties
c. Property Damage [*]
Per Accident
------------
2. Worker's Compensation Insurance (Company [*]
Employees)
3. Employers' Liability (Company Employees) [*]
4. All Risk Hull Insurance on Aircraft [*]
Performing Services Hereunder
5. Baggage Liability [*]
6. Cargo Liability [*]
[*]
</Table>
9.5.2 The parties hereby agree that from time to time during the
Term of this Agreement, AWA may require CAI to have and
maintain amounts of insurance coverage different from those
amounts set forth
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* Confidential
20
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in Section 9.5.1, should AWA, in its reasonable judgment, deem
the circumstances and conditions of the Flight Services to
require increases in any or all of the foregoing minimum
insurance coverages.
9.5.3 CAI shall cause all policies of insurance which it maintains
pursuant to this Agreement, to be duly and properly endorsed
by CAI's insurance underwriters as follows:
9.5.3.1 To provide that any waiver of rights of subrogation
against other parties by CAI shall not affect the
coverage provided hereunder with respect to AWA.
9.5.3.2 To provide that CAI's underwriters shall waive any
and all subrogation rights against AWA, its
directors, officers, agents and employees without
regard to any breach of warranty by CAI or to provide
other evidence of such waiver of recourse against
AWA, its directors, officers, agents, or employees as
shall be acceptable to AWA.
9.5.3.3 Be duly and properly endorsed to provide that each
such policy or policies or any part or parts thereof
shall not be canceled, terminated, or materially
altered, changed or amended by CAI's insurance
underwriters, until after 30 days' written notice
to AWA which 30 days' written notice shall
commence to run from the date such notice is
actually received by AWA.
9.5.4 With respect to policies of insurance described as Aircraft
Liability and Ground Liability Insurance, CAI will provide
that such policies:
9.5.4.1 Endorse AWA, its directors, officers, agents,
parents, subsidiaries and employees as Additional
Insureds thereunder.
9.5.4.2 Constitute primary insurance for such claims and
acknowledge that any other insurance policy or
policies of AWA will be secondary or excess
insurance;
9.5.4.3 Cover AWA's costs of defending against such
insured claims including, without limitation, to
the extent permitted by the policies, costs
incurred in the retention of separate legal
counsel of its choice; and
9.5.4.4 Provide a cross-liability clause acceptable to
AWA, and a specific contractual liability
insurance provision covering liability assumed by
CAI under this Agreement.
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9.5.5 With respect to policies of insurance for coverage described
as Aircraft Liability and General Liability Insurance and All
Risk Hull Insurance, CAI shall cause its insurance
underwriters to provide a breach of warranty clause.
9.5.6 All aircraft hull insurance provided pursuant to this
Agreement shall be provided on agreed value basis and,
except with the consent of AWA, 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.
9.5.7 Prior to the Commencement Date and from time to time
thereafter upon request by AWA, CAI shall furnish to AWA
evidence satisfactory to AWA of the aforesaid insurance
coverage 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.
9.5.8 With respect to policies of insurance obtained directly from
foreign underwriters, CAI shall cause such insurance
underwriters to provide that AWA may maintain against CAI's
underwriters a direct action in the United States upon such
insurance policies and to this end to provide a standard
service of suit clause designating an agent for service of
process in the United States of America.
9.5.9 In the event CAI fails to maintain in full force and effect
any of the insurance and endorsements described in Section
9.5, AWA shall have the right (but not the obligation) to
procure and maintain such insurance or any part thereof.
The cost of such insurance shall be payable by CAI to AWA
upon demand by AWA. The procurement of such insurance or
any part thereof by AWA shall not discharge or excuse CAI's
obligation to comply with the provisions of Section 9.5.
CAI agrees not to cancel, terminate or materially alter,
change or amend any of the policies referred to in Section
9.5 without 30 days' prior written notice to AWA of its
intent to cancel, terminate or materially alter, change or
amend said policies or insurance which 30 day notice period
shall commence to run from the date notice is actually
received by AWA.
9.5.10 AWA shall maintain cargo liability coverage, in types and
amounts required by law, for all air freight transported by
CAI under an AWA airbill on any Flights.
9.5.11 CAI shall use commercially reasonable efforts to divide the
Fleet from CAI's turbo prop fleet in order to reduce its
liability insurance costs. AWA, in its sole discretion, may
elect to acquire the liability insurance required to be
maintained by CAI on behalf of CAI.
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10. CONFIDENTIALITY.
10.1 AWA and CAI agree that the terms of this Agreement shall be
treated as confidential and shall not be disclosed to third
parties without the express written consent of AWA and CAI, or
as required by law. In the event of disclosure required by
law, only those portions of this Agreement required to be
disclosed shall be disclosed. The disclosing party shall make
good faith efforts to minimize the portions to be disclosed
and shall seek confidential treatment by the receiving party
or agency for 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 shall
notify the other party to provide the other party an
opportunity to contest the disclosure of any terms of this
Agreement.
10.2 "Confidential Information" means any information in any form,
including, without limitation, the terms of this Agreement,
written documents, oral communications, recordings, videos,
software, data bases, business plans, and electronic and
magnetic media, provided to or observed by AWA or CAI pursuant
to this Agreement, including information owned or provided by
either party to the other party, except for information
generally available to the public. AWA and CAI agree that they
shall maintain all Confidential Information in confidence and
use such Confidential Information solely for purposes of
performance under this Agreement. Such Confidential
Information shall be distributed within each party's company
only to personnel and to its legal counsel, auditors and other
consultants on a need-to-know basis for purposes related to
this Agreement or in compliance with a court order or
statutory or regulatory requirements. Except for legal counsel
and auditors, and as permitted by Section 10.1, in no event
shall either party disclose Confidential Information to any
third parties except subcontractors and independent
consultants and then only if approved by both parties in
writing in advance of such disclosure. Confidential
Information does not include information that is available to
the general public other than as a result of disclosure by the
disclosing party or information that was known or
independently developed by the receiving party prior to
disclosure, as evidenced by records kept in the ordinary
course of business.
10.3 CAI acknowledges and agrees that any Confidential Information
shared or given to AWA pursuant to this Agreement may be
shared by AWA on a confidential basis with America West
Holdings Corporation, The Leisure Company and other
subsidiaries and affiliates of AWA. AWA acknowledges and
agrees that the terms of this Agreement and any Confidential
Information shared or given to CAI pursuant to this Agreement
may be shared by CAI on a confidential basis with Wexford
Capital LLC, CAI's financial partners and financial providers
and other subsidiaries or affiliates of CAI and may be
disclosed to the extent legally required or necessary.
11. TAXES. CAI shall pay, prior to delinquency, all airport, property,
sales, use, excise or any other taxes, impositions, assessments or
other governmental charges incurred in connection with the provision of
the Flight Services under this Agreement and all
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taxes imposed or any sums paid by AWA to CAI under this Agreement. AWA
shall pay, prior to delinquency, all taxes imposed on any sums paid by
CAI to AWA under this Agreement.
12. DEFAULTS AND REMEDIES.
12.1 DEFAULT BY CAI. The occurrence of any one or more of the
following events shall constitute a material default and
breach of this Agreement by CAI (an "Event of Default"):
12.1.1 The failure of CAI to make any payment required to be
made by CAI to AWA hereunder, as and when due, and
such failure continues for 5 business days after
receipt of written notice;
12.1.2 If CAI is required by the FAA or DOT to suspend a
substantial portion of its operations for any
safety reason and has not resumed such operation
within 10 business days of the suspension or if
CAI suspends a substantial portion of the Flight
Services for any other reason, except as a result
of an emergency airworthiness directive from the
FAA affecting all aircraft similarly equipped to
the Aircraft (not just those owned or operated by
CAI);
12.1.3 The failure of CAI to observe or perform any of the
covenants, conditions or provisions of this Agreement
to be observed or performed by CAI, other than as
described in Sections 7 or 12.1.1 or 12.1.2 above,
and such failure shall continue for a period of 15
days after written notice thereof from AWA to CAI;
12.1.4 (i) the cessation of CAI's business operations as a
going concern; (ii) the making of CAI of any general
assignment, or general arrangement for the benefit of
creditors; (iii) the failure of CAI to generally pay
CAI's debts as they come due or CAI's written
admission of its inability to pay its debts as they
come due; (iv) the filing by or against CAI of a
petition to have CAI adjudged bankrupt or a petition
for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of
petition filed against CAI, the same is dismissed,
stayed or vacated within 60 days); (v) an
adjudication of CAI's insolvency; (vi) appointment of
a trustee or receiver to take possession of
substantially all of CAI's assets which is not
dismissed, stayed or vacated within 60 days; or (vii)
the attachment, execution or other judicial seizure
of all of CAI's assets.
12.1.5 Upon an Event of Default, AWA may: (a) by written
notice to CAI (a "Default Termination Notice")
terminate this Agreement effective as of the date
set forth in the Default Termination Notice which
date shall not be less than 30 nor more than 180
days after the date of the Default unless the
event in 12.1.2 occurs, in which case immediate;
and/or (b) pursue all other rights and remedies
available at law or in
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equity to AWA for the Event of Default, including,
without limitation, injunctive relief, specific
performance and damages. After receipt of a Default
Termination Notice, CAI shall continue to provide the
Flight Services in accordance with this Agreement
until the termination date set forth in the Default
Termination Notice. No remedy or election by AWA
hereunder shall be deemed exclusive, but shall,
wherever possible, be cumulative with all other
rights and remedies at law or in equity.
12.2 AWA DEFAULT. The occurrence of any one or more of the
following events shall constitute a material default and
breach of this Agreement by AWA (an "AWA Event of Default"):
12.2.1 The failure of AWA to make any payment required to be
made to CAI by AWA hereunder, as and when due, and
such failure continues for 5 business days after
receipt of written notice;
12.2.2 The failure of AWA to observe or perform any of the
covenants, conditions or provisions of this Agreement
to be observed or performed by AWA, and such failure
shall continue for a period of 15 days after
written notice thereof from CAI to AWA;
12.2.3 (i) the cessation of AWA's business operations as a
going concern; (ii) the making of AWA of any general
assignment, or general arrangement for the benefit of
creditors; (iii) the failure of AWA to generally pay
AWA's debts as they come due or AWA's written
admission of its inability to pay its debts as they
come due; (iv) the filing by or against AWA of a
petition to have AWA adjudged bankrupt or a petition
for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of
petition filed against AWA, the same is dismissed,
stayed or vacated within 60 days); (v) an
adjudication of AWA's insolvency; (vi) appointment of
a trustee or receiver to take possession of
substantially all of AWA's assets which is not
dismissed, stayed or vacated within 60 days; or (vii)
the attachment, execution or other judicial seizure
of all of AWA's assets which is not dismissed, stayed
or vacated within 60 days.
12.2.4 Upon the occurrence and continuance of an AWA Event
of Default, CAI may: (a) by written notice to AWA
(an "AWA Default Notice") terminate this Agreement
effective as of the date set forth in the AWA
Default Notice which date shall not be less than
30 nor more than 180 days after the date of the
AWA Event of Default; and/or (b) pursue all other
rights and remedies available at law or in equity
to CAI for the AWA Event of Default, including,
without limitation, injunctive relief, specific
performance and damages. After receipt of an AWA
Default Notice, AWA shall continue to perform its
obligations under this Agreement until the
termination date set forth in the AWA Default
Notice. No remedy or election by CAI hereunder
shall be deemed
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exclusive, but shall, wherever possible, be
cumulative with all other rights and remedies at law
or in equity.
12.3 LIMITATION ON DAMAGES. In no event shall either party be
liable to the other party for consequential, special or
speculative damages, except to the extent recoverable in an
indemnity claim pursuant to Section 9.
13. RECORDS AND REPORTS.
13.1 RETENTION OF RECORDS. CAI shall keep accurate and complete
books and records of all Flight Services and Other Services
performed under this Agreement as well as any additional
records that the parties agree may be required in accordance
with AWA's procedures and the Regulations. CAI shall retain
such records in accordance with applicable law, AWA's
procedures and the Regulations.
13.2 PROVISION OF FINANCIAL RECORDS. Upon AWA's request, and until
such time as AWA advises CAI that such reports are no
longer necessary, CAI shall furnish to AWA, within 60 days
following the close of the first three fiscal quarters of
CAI, unaudited financial statements including CAI's current
corporate balance sheets and profit and loss statements,
and within 120 days after the close of its fiscal year, CAI
shall furnish AWA with audited financial statements of CAI
(or its parent company) including, either separately or on
a consolidated basis, the balance sheet and profit and loss
statements of that party. The appropriate reports filed on
Form 10-Q and 10-K shall be satisfactory to fulfill such
obligation.
13.3 PROVISION OF ADDITIONAL RECORDS. CAI shall promptly furnish
AWA with a copy of every report that it prepares and is
required to submit to the DOT, FAA, National Transportation
Safety Board ("NTSB") or any other governmental agency,
relating to any accident or incident involving an Aircraft
used in performing Flight Services under this Agreement, when
such accident or incident is claimed to have resulted in the
death of or substantial injury to any person or the loss of,
damage to, or destruction of any property.
13.4 ADDITIONAL REPORTS. CAI shall promptly notify AWA in writing
of (i) any change in or relinquishment of control of CAI, (ii)
any agreement contemplating such a change or relinquishment
with a copy of such agreement, if in writing, to AWA, or (iii)
any change or contemplated change in the Chief Executive
Officer position of CAI.
14. MISCELLANEOUS PROVISIONS.
14.1 NOTICES. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to
this Agreement shall be in writing and given by (i) hand
delivery, (ii) facsimile, (iii) express overnight delivery
service or (iv) certified or registered mail, return receipt
requested. Notices shall be provided to the parties and
addresses (or facsimile numbers, as applicable) specified
below and shall be effective upon receipt, except if
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delivered by facsimile outside of business hours in which case
they shall be effective on the next succeeding business day:
If to AWA: America West Airlines, Inc.
4000 E. Sky Harbor Blvd.
Phoenix, Arizona 85034
Attn: Vice President and General
Counsel
Telephone: (602) 693-5805
Facsimile: (602) 693-5932
If to CAI: Chautauqua Airlines, Inc.
2500 S. High School Drive
Indianapolis, Indiana 46241
Attn: President
Telephone: (317) 484-6047
Facsimile: (317) 484-4547\
with a copy to: Wexford Capital LLC
Wexford Plaza
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attn: General Counsel
Telephone: (203) 861-7012
Facsimile: (203) 862-7312
14.2 WAIVER AND AMENDMENT. No provisions of this Agreement shall be
deemed waived or amended except by a written instrument
unambiguously setting forth the matter waived or amended and
signed by the party against which enforcement of such waiver
or amendment is sought. Waiver of any matter shall not be
deemed a waiver of the same or any other matter on any future
occasion.
14.3 CAPTIONS. Captions are used throughout this Agreement for
convenience of reference only and shall not be considered in
any manner in the construction or interpretation hereof.
14.4 ATTORNEYS' FEES. In the event of any judicial or other
adversarial proceeding between the parties concerning this
Agreement, the prevailing party shall be entitled to recover
its attorneys' fees and other costs in addition to any other
relief to which it may be entitled.
14.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject
matter hereof, and there are no other representations,
warranties or agreements, written or oral, between AWA and CAI
with respect to the subject matter of this Agreement.
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14.6 CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona.
14.7 SEVERABILITY. If this Agreement, any one or more of the
provisions of this Agreement, or the applicability of this
Agreement or any one or more of the provisions of this
Agreement to a specific situation, shall be held invalid,
illegal or unenforceable or in violation of any contract or
agreement to which CAI or AWA are a party, then AWA and CAI
shall in good faith amend and modify this Agreement,
consistent with the intent of CAI and AWA, as evidenced by
this Agreement, to the minimum extent necessary to make it or
its application valid, legal and enforceable and in accordance
with the applicable agreement or contract, and the validity or
enforceability of all other provisions of this Agreement and
all other applications of any such provision shall not be
affected thereby.
14.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
14.9 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of AWA and CAI and their respective successors
and permitted assigns.
14.10 NO ASSIGNMENT. The rights, obligations and duties of AWA and
CAI under this Agreement may not be assigned or delegated,
except as may otherwise be mutually agreed by AWA and CAI, in
their sole and absolute discretion.
AWA:
America West Airlines, Inc.,
a Delaware corporation
By: /s/ William A. Franke
-----------------------------------
Name: William A. Franke
---------------------------------
Title: Chairman and CEO
--------------------------------
CAI:
Chautauqua Airlines, Inc.,
a New York corporation
By: /s/ Bryan Bedford
-----------------------------------
Name: Bryan Bedford
---------------------------------
Title: President
--------------------------------
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EXHIBITS
<Page>
EXHIBIT A
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURUSANT TO A REQUEST FOR CONFIDENTIAL TREATEMENT]
<Page>
EXHIBIT B
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURUSANT TO A REQUEST FOR CONFIDENTIAL TREATEMENT]
<Page>
EXHIBIT C
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURUSANT TO A REQUEST FOR CONFIDENTIAL TREATEMENT]
<Page>
Note to Exhibit 10.5(a)
The two additional Letter Agreements are substantially identical in all
material in all respects except to the filed Letter Agreement except as
follows:
Date of Letter Agreement Serial Numbers Covered
- ------------------------ ----------------------
February 20, 2002
March 27, 2002