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Exhibit 10.5
AIR SERVICES AGREEMENT
This Agreement, dated as of June 11, 2001, but to be effective on
the SABRE Cutover Date (as defined below), is between AMR Corporation ("AA"),
a Delaware corporation having offices at 4333 Amon Carter Boulevard, Mail
Drop 5494, Fort Worth, Texas, 75261, and CHAUTAUQUA AIRLINES, INC.
("CONTRACTOR"), a New York corporation having its principal place of business
at Indianapolis International Airport, 2500 South High School Road,
Indianapolis, IN 46241.
WITNESSETH:
WHEREAS, AA holds a certificate of public convenience and necessity
issued pursuant to the federal transportation statutes authorizing it to engage
in air transportation of persons, property and mail, and is a major air carrier
providing scheduled domestic and international air transportation; and
WHEREAS, Contractor holds a certificate of public convenience and
necessity issued pursuant to the Federal Transportation Statute authorizing it
to engage in air transportation of persons, property and mail, and is a regional
air carrier providing scheduled domestic air transportation; and
WHEREAS, TWA Airlines, L.L.C., an Affiliate (as defined below) of AA,
and Contractor have entered into an agreement regarding the operation of Feeder
Air Service (as defined herein) utilizing turbo-prop aircraft and regional jets
pursuant to that certain Asset Purchase Agreement dated January 9, 2001; and
WHEREAS, AA and Contractor desire to amend and restate said agreement,
namely the Amended and Restated Trans World Express Air Service Agreement dated
February 15, 2001.
NOW, THEREFORE, in consideration of the foregoing premises, mutual
covenants and obligations hereinafter contained and subject to securing any and
all necessary corporate and Federal, State and local regulatory approvals, and
where necessary, airport consents or approvals, but only to the extent such
approvals and consents are required for the performance of services hereunder,
the parties agree as follows:
DEFINITIONS
1. "AA" means American Airlines, Inc.
2. "AADAMS" means American Airlines Digital Asset Management
System.
3. "AA TARIFFS" has the meaning ascribed to it in Exhibit H.
4. "AATV" means AA Travel Vouchers.
5. "AA UNAUTHORIZED OBLIGATION" has the meaning ascribed to it in
Section 6.02(b).
6. "ABR" means the name, as to be designated in writing by AA on
or prior to July 31, 2001, pursuant to which Contractor will
operate Feeder Air Service.
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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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7. "ABR MARKS" shall mean those trademarks, service marks,
tradenames, logos, emblems, uniform designs, and distinctive
exterior and interior color decor and patterns for aircraft,
all as used in connection with the AA ABR brand of commuter
air service and listed or described on Exhibit B-1.
8. "ACCEPTED FREQUENT FLYER PROGRAM" means the AAdvantage
Frequent Flyer Program and any other carrier's frequent flyer
program designated by AA.
9. "ACQUIRING PARTY" has the meaning ascribed to it in Section
9.02(b).
10. "ACT" means the Securities Act of 1933, as amended.
11. "AFFILIATE" means, with respect to a Person, any other Person
controlling, controlled by, or under common control with, such
Person.
12. "AIRPORT SUPPORT SERVICES" means those Ground Handling,
Passenger Handling Duties associated with providing AA's
desired ground service levels in conjunction with the Feeder
Air Services contemplated herein.
13. "AMERICAN EAGLE" OR "AE" means AMR Corporation's wholly owned
regional airline, American Eagle Airlines, Inc.
14. "AMR ENTITIES" means AMR Corporation and its successors,
subsidiaries, Affiliates, parent companies, general partners,
limited partners, predecessors and assigns, including but not
limited to TWA, AA and AE.
15. "APPROVED AIRCRAFT" means any aircraft included in the Fleet
Plan and made a part of this Agreement.
16. "ATAC" means AA's automated agent check out system.
17. "ATA MANUAL" means the Air Transportation Association's Air
Cargo Council Trade Practice Manual.
18. "AUTOMATION EQUIPMENT" has the meaning ascribed to it in
Exhibit L.
19. "BAGGAGE CLAIM" means notification by a passenger that his
baggage has been lost, damaged, delayed, pilfered or stolen
and may originate in the form of a report prepared on behalf
of the passenger by airline personnel, which may or may not
entitle the passenger to receive compensation.
20. "BANKRUPT PARTY" has the meaning ascribed to it in Section
7.02(a).
21. "BLOCK HOUR" means that time that commences when an aircraft
moves under its own power for the purpose of flight and ends
when the aircraft comes to rest after landing.
22. "BMAS" or "BAGGAGE MANAGEMENT ANALYSIS SYSTEM" means an
internal AA baggage tracking system.
23. "CALL OPTION" has the meaning ascribed to it in Section 7.03.
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24. "CAUSE" means termination of this Agreement prior to the end
of the Term for any of the reasons specified in Section 7.02.
25. "CDO" means continual duty overnight.
26. "CHARTER FLIGHT" means an unpublished revenue flight marketed
by an AMR Entity and operated by Contractor with an Approved
Aircraft.
27. "CLAIMS" has the meaning assigned to it in Section 6.03(b).
28. "CLDR" means the Contractor Location Departure Ratio as
defined in Exhibit E.
29. "COMMON STOCK" has the meaning ascribed to it in Section
9.03(d).
30. "COMPLETION FACTOR" means number of Scheduled Flights operated
divided by number of Scheduled Flights.
31. "CONNECTING PASSENGERS" means passengers whose flight
itinerary involves a transfer to (or from) a Contractor flight
from (or to) an AA or AA Affiliate flight at the STL Hub,
Focus City or other such location where Contractor has
connections to multiple AA destinations.
32. "CONSUMER ADJUSTMENTS" has the meaning ascribed to it in
Exhibit F.
33. "CONSUMER PRICE INDEX" or "CPI" means the reference index
published by the Bureau of Labor Statistics Data, U.S.
Department of Labor Statistics Data, U.S. Department of Labor
for the Consumer Price Index - All-Urban Consumers, U.S. City
average, all items (Base year 1982-1984=100).
34. "CONTRACTOR" means Chautauqua Airlines, Inc.
35. "CONTRACTOR CONVERSION" means the complete assumption by
Contractor of ground operations at a Covered Location, which
results in the Covered Location becoming a Contractor
Location.
36. "CONTRACTOR LOCATION" means any airport terminal facility
where Contractor provides Feeder Air Services pursuant to this
Agreement and only Contractor has employees stationed, or
causes the delivery of vendor-provided services in lieu of
services provided by Contractor employees (including joint
locations where Contractor provides Feeder Air Services
pursuant to this Agreement at a different terminal facility
from which AA and/or its Affiliate operates in the same
airport).
37. "CONTRACTOR TICKETING LOCATION" has the meaning ascribed to it
in Exhibit F.
38. "CONTRACTOR UNAUTHORIZED OBLIGATION" has the meaning ascribed
to it in Section 6.02(a).
39. "CONVERSION EXPENSES" has the meaning ascribed to it in
Section 7.03.
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40. "CORPORATE COMPLAINT RATIO" means Corporate Complaints per
1,000 boarded passengers.
41. "CORPORATE COMPLAINTS" means total number of complaints
received by Contractor and AA from passengers which are
attributable to Contractor's ABR service, as tracked and
reported in AA's CAARE System or any successor system.
42. "COSTS" has the meaning ascribed to it in Exhibit E.
43. "COVERED CONVERSION" means the complete assumption by an AMR
Entity of ground operations at a Feeder Airport which results
in the Feeder Airport becoming a Covered Location.
44. "COVERED LOCATION" means any airport terminal facility where
Contractor and an AMR Entity both have operations and only the
AMR Entity has employees stationed in such terminal facility.
45. "CRS" means computerized reservation system.
46. "CUSTOMER SERVICE POLICIES AND PROCEDURES" means the
procedures prescribed in writing by AA from time to time, for
various activities relating to the provision of air
transportation services.
47. "DBC" means denied boarding compensation.
48. "DEFAULTING PARTY" has the meaning ascribed to it in Section
7.02(a).
49. "DESIGNATED USERS" has the meaning ascribed to it in Exhibit
L.
50. "DISCREPANCY NOTICES" has the meaning ascribed to it in
Exhibit F.
51. "DOD" means United States Department of Defense.
52. "DOT" means United States Department of Transportation.
53. "ESCALATION PERCENT" and "EP" shall be defined and calculated
pursuant to Schedule E-4.
54. "EXTRAORDINARY TRANSACTION" has the meaning ascribed to it in
Section 9.03(a).
55. "FAA" means United States Federal Aviation Administration.
56. "FEEDER AIR SERVICE" and "FEEDER AIR SERVICE FLIGHTS" means
scheduled air transportation utilizing the AA code, and
operated by Contractor as ABR or comparable AA fully branded
flights under a non-exclusive license to use the AA Marks in
connection with such transportation.
57. "FEEDER AIRPORT" means any airport, other than the Hub, where
Contractor provides Feeder Air Service Flights at the request
of AA pursuant to this Agreement.
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58. "FIRM APPROVED AIRCRAFT" has the meaning ascribed to it in
Schedule C-1.
59. "FLEET PLAN" shall mean the schedule of placing aircraft into
operation for Feeder Air Service and code share flights as
more fully set forth in Exhibit C.
60. "FOCUS CITY" shall mean any airport so designated by AA other
than the STL Hub where AA and/or an AA Affiliate has
connections to multiple points within the AA network.
61. "FORCE MAJEURE" has the meaning ascribed to it in Section
7.03.
62. "FOS" means AA's Flight Operations System.
63. "FTP" means File Transfer Protocol.
64. "GROUND HANDLING" and "GROUND HANDLING DUTIES" means the
provision of one or more of the following: (1) handling,
loading, and unloading of baggage, cargo and mail, (2) receipt
and dispatch, including , towing/pushback, and observing
aircraft engine start (3) baggage delivery, (4) servicing
potable water (5) connection and removal of ground power unit
and pre-conditioned air, (6) Light Aircraft Cleaning, and (7)
any other similar duties agreed upon by the parties in
writing.
65. "HOLDING COMPANY" has the meaning ascribed to it in Section
9.02.
66. "HUB" and "STL" means Lambert - St. Louis International
Airport, St. Louis, Missouri.
67. "INSECURE PARTY" has the meaning ascribed to it in Section
7.02(a).
68. "IPO" has the meaning ascribed to it in Section 9.03(d).
69. "IPO PARTICIPATION RIGHT" has the meaning ascribed to it in
Section 9.03(d).
70. "IPO SHARE PRICE" has the meaning ascribed to it in Section
9.03(d)(1).
71. "IPO SHARES" has the meaning ascribed to it in Section
9.03(d).
72. "LABOR CONTRACT RESTRICTIONS" means certain contractual
limitations related to AA commuter carriers and the operation
of regional jets as stated in the AA-Allied Pilots Association
collective bargaining agreement dated May 5, 1997, as amended
from time to time, or any successor agreement.
73. "LEASE" means a long-term aircraft lease for Approved Aircraft
that complies with the provisions hereof.
74. "LIGHT AIRCRAFT CLEANING" means wiping interior surfaces and
windows, sweeping/vacuuming, crossing seat belts, folding
blankets, trash removal, clean/restock seatback pockets and
overhead bins, mopping galley and lavatory, and lavatory
service on an as needed basis.
75. "MAGSA" has the meaning ascribed to it in Exhibit E.
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76. "MAIL" has the meaning ascribed to it in Schedule H-1.
77. "MARKS" means any trademark, trade name, trade dress, service
mark, domain name, or other indicia of ownership owned or used
by the AMR Entities.
78. "MISHANDLED BAGS" means total number of Baggage Claims
received by AA from Connecting Passengers for which Contractor
is at fault for lost, damaged, delayed, or pilfered baggage.
79. "MITIGATING FACTORS" means on days where AA operations control
has advised Contractor operations control that AA is
"thinning" its operation, Contractor's maximum 100% completion
number will be reduced by the percentage of flights cancelled
by AA and those "thinned" Contractor flights will be excluded
from the Completion Factor calculation.
80. "NEW AHI CALCULATED RATE" has the meaning ascribed to it in
Schedule E-3.
81. "NEW PLI CALCULATED RATE" has the meaning ascribed to it in
Schedule E-3.
82. "NTSB" means the National Transportation Safety Board.
83. "OAG" means the Official Airline Guide.
84. "ON-TIME ARRIVAL" means a Scheduled Flight that arrives prior
to 15 minutes after scheduled arrival time; cancelled and
diverted flights are not considered on-time arrivals.
85. "ONE-TIME CALL OPTION" has the meaning ascribed to it in
Section 7.03(b).
86. "ONE-TIME PUT OPTION" has the meaning ascribed to it in
Section 7.03.
87. "OPTION AIRCRAFT" has the meaning ascribed to it in Schedule
C-1.
88. "ORIGINAL APPROVED AIRCRAFT" has the meaning ascribed to it in
Schedule C-1.
89. "PASSENGER HANDLING" and "PASSENGER HANDLING DUTIES" means the
provision of one or more of the following in conformance with
Customer Service Policies And Procedures: (1) ticketing and
check-in of passengers, including boarding pass issuance,
re-accommodating and reprotecting passengers, (2) gate
passenger processing, including aircraft boarding and
deplaning duties via jetway or ramp level, (3) baggage service
office duties, (4) passenger security screening, (5) skycap
services, (6) special passenger assistance, and (7) any other
duties normally agreed upon by the parties in writing.
90. "PASS THROUGH COSTS" mean those specific costs identified in
Schedule E-3.
91. "PAWOB" means passengers arriving without bags.
92. "PAWOB RATIO" means Mishandled Bags divided by 50% of
Connecting Passengers measured per 1,000 Connecting
Passengers.
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93. "PERFORMANCE PERIOD" means a six (6) month period, from
January 1 - June 30, and from July 1 - December 31.
94. "PERSON" means a natural person, a corporation, a partnership,
a limited liability company, an estate, a governmental agency
or any other entity.
95. "PRIVATE PLACEMENT SHARES" has the meaning ascribed to it in
Section 9.03(d)(2).
96. "PROPOSED AGREEMENT" has the meaning ascribed to it in Section
10.04(c).
97. "REVENUE PASSENGER" means each passenger who holds a ticket
(electronic or otherwise), flight coupon, voucher, or other
form of document which is valid for travel. The term "Revenue
Passenger" includes all passengers boarded on a Contractor ABR
flight except AA, Contractor, and/or other airline employees,
dependents and other eligible persons traveling on a space
available or positive space basis in conjunction with an
employee travel benefits program.
98. "RJ TURN FEE" has the meaning ascribed to it in Exhibit E.
99. "RON" means remain over night.
100. "RPMS" means revenue passenger miles.
101. "SABRE CUTOVER DATE" means the date designated by AA that
Contractor discontinues the use of WorldSpan technology and
commences the use of Sabre Services in the performance of its
duties under this Agreement.
102. "SABRE SERVICES" means the computerized SABRE Reservations and
Ticketing Service (or any similar or substitute service
offered by or on behalf of AA), including associated support
systems as designated by AA that performs flight, hotel,
rental car and other travel related services, reservations and
ticket issuance functions.
103. "SCHEDULED FLIGHTS" means those flights published in AA's CRS
as of seven (7) days prior to departure date.
104. "SHARED CODE SHARING JET FLIGHTS" shall mean the regional jet
air transportation operated by Contractor, as may be
designated in writing by AA from time to time, which flights
are code shared with AA and a third party air carrier.
105. "SHIPMENTS" has the meaning ascribed to it in Exhibit H.
106. "SSIM" means Standard Schedules Information Manual.
107. "STANDARD MARKED" means Approved Aircraft painted with the
"ABR" markings and distinctive colors described in Exhibit B-1
in addition to being painted with Contractor's name in such
fashion as AA shall approve, such approval not to be
unreasonably withheld or delayed; PROVIDED, that with respect
to the Original Approved Aircraft, the term "Standard Marked"
means the TransWorld Express" markings and distinctive colors
described in Exhibit B-2.
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108. "TAX" or "TAXES" has the meaning ascribed to it in Article 8.
109. "TERM" has the meaning ascribed to it in Section 7.01(a).
110. "TP TURN FEE" has the meaning ascribed to it in Exhibit E.
111. "TWA" means TWA Airlines, LLC, a subsidiary of American
Airlines, Inc.
112. "TWA MARKS" shall mean those trademarks, service marks,
tradenames, logos, emblems, uniform designs, and distinctive
exterior and interior color decor and patterns for aircraft
all as used in connection with the TransWorld Express brand of
commuter air service and listed or described on Exhibit B-2.
113. "UNCONTROLLABLE CANCELLATIONS" means cancellations that are
not due to any failure of Contractor or its vendors or
subcontractors to provide equipment, facilities, personnel,
aircraft and crews necessary to operate scheduled Feeder Air
Service flights and include, without limitation cancellations
due to acts or omissions of AA or any other third party or
cancellations due to acts of God.
114. "USPS" means the United States Postal Service.
115. "WORLDTRACER" means an external AA baggage tracking system.
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ARTICLE 1 - OPERATION OF FEEDER AIR SERVICES
1.01 - USE OF MARKS
(a) Contractor has no right or permission to use any of the Marks
without first receiving AA's express written approval to do
so. Subject to the terms of this Agreement, as amended,
Contractor is hereby granted the non-exclusive,
non-transferable right and license to use the TWA Marks (but
only to the extent affixed to the Original Approved Aircraft)
and to use the ABR Marks both in connection with the operation
of Contractor's Feeder Air Services. If Contractor receives
written permission to reproduce any additional Marks, then
Contractor will be given access to the AADAMS so that
Contractor may retrieve accurate renditions of such Marks.
Contractor acknowledges and agrees that it has permission to
use to the extent provided herein only the TWA Marks and the
ABR Marks and those Marks to which it has been granted access
on AADAMS. Contractor may not use the Marks in any manner
other than as contemplated by this Agreement, as amended.
Contractor acknowledges that the Marks are the property of the
AMR Entities, and upon termination of this Agreement,
Contractor will immediately cease use of the Marks. Under no
circumstances will Contractor: (1) use or display any Marks
(other than the TWA Marks) that Contractor obtained from a
source other than AADAMS; (2) alter the Marks in any way; or
(3) display the Marks without the appropriate proprietary
rights notices. Contractor agrees that it shall in no way
contest or deny the validity of, or the right or title of the
AMR Entities in or to the Marks, and shall not encourage or
assist others directly or indirectly to do so, whether during
the Term of this Agreement or thereafter. Contractor will take
no actions that are adverse to the AMR Entities' ownership
rights in the Marks. Contractor shall not utilize the Marks in
any manner that would diminish their value or harm the
reputation of the AMR Entities. Contractor shall not use or
register any domain name that is identical to or similar to
any of the Marks without first receiving AA's prior written
approval. Upon written request from AA, Contractor agrees to
provide AA with reports at least every ninety days setting
forth Contractor's use of the Marks. Contractor may combine
these reports with any other report Contractor provides to AA
under this Agreement. Contractor will not, under any
circumstances, transfer, sell, or give away to a third party
any products bearing the Marks that do not meet AA's quality
standards.
Notwithstanding the above, and except as may be otherwise
provided herein, Contractor shall have no right to use the TWA
Marks beyond the date that 145-08 is removed from service
under the phase out plan set forth in Schedule C-1.
(b) The Feeder Air Services operated by Contractor shall be
identified as follows:
1. The name "ABR" and/or other ABR Marks shall be
painted on aircraft and ground equipment used for Contractor's
Feeder Air Service Flights in accordance with paint color and
graphic design specifications of AA; no other identification
shall appear on the aircraft and ground equipment except that
Contractor's name shall appear in such fashion as AA shall
approve. Use of the "ABR" painted aircraft for Charter Flight
use is also permitted.
2. Signage at the STL Hub and at Feeder Airport
ticket counters and gates shall depict the name "ABR" and/or
other ABR Marks in accordance with size, color and design
specifications of AA. "ABR" is a Mark as defined by this
Agreement and subject to the provisions relating to Marks,
including but not limited to Section 1.01(a).
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3. All Feeder Air Services shall be operated under
the name "ABR" or other such name, incorporating an AA Mark,
as AA shall from time to time approve. All Feeder Air Service
Flights shall be identified by an "AA" or "AA*" designator
code, as appropriate, in the OAG; in AA, Contractor, and third
party computer reservations systems, including internet
reservation systems; in AA timetables; in airport flight
information displays; and in passenger tickets and like media
distributed to or accessed by travel agents, other airlines or
the public.
4. Contractor personnel at Feeder Airports and Hub
ramp positions and gates used for "ABR" flights shall wear an
AA designed "ABR" uniform, if so designated by AA.
5. All ground equipment used by Contractor for the
Feeder Air Services shall be painted in an AA's color scheme,
and identified by an "ABR" marking.
6. All advertising and promotion of the Feeder Air
Services by Contractor or by AA shall use the name "ABR," and
not the Contractor name, except to the extent required by law
for disclosure of the operating carrier.
7. To the extent not already implemented, AA and
Contractor shall establish a Marks conversion timeline to
effect the usage of the ABR Marks at locations where TWA Marks
are in use.
(c) In the event AA adopts new or different ABR Marks for which AA
grants Contractor a license pursuant to subsection (a) above,
AA may require Contractor to use such new or different ABR
Marks in connection with Contractor's Feeder Air Services and
if AA does so, Contractor's right and license to use
previously licensed ABR Marks shall automatically terminate
upon completion of Contractor's changeover to the new ABR
Marks pursuant to Section 1.02(l). Contractor's right and
license to use any and all Marks shall also automatically
terminate after 10 days prior written notice and opportunity
to cure in the event Contractor does anything during the Term
of this Agreement to contest, infringe or abridge AA's rights
in any ABR Marks or TWA Marks.
(d) AA may from time to time change the Marks and logos used for
"ABR" service. At any time during the Term of this Agreement,
and in the sole discretion of AA, Contractor may be required
to use such new or different Marks, external or internal color
decor and patterns on its Approved Aircraft and uniform design
as AA may determine and to discontinue use of certain other
Marks; PROVIDED, Contractor will not be required to
discontinue its use of TWA Marks on the Original Approved
Aircraft. Upon written notice from AA, which will include the
specifications for any such changes, Contractor will effect
such changes as promptly as practicable. Contractor will pay
all costs it incurs in any painting and decor modification of
its aircraft as a result of a change in AA's specifications of
its external and internal decor; PROVIDED such modifications
occur at the end of the useful life of the existing decor. For
the purposes of this subsection, the parties agree that the
useful life shall be forty-eight (48) months from the date the
Approved Aircraft are decorated with the ABR Marks. If AA
requires a change to new or different ABR Marks on a
Contractor aircraft which has been previously decorated with
the ABR Marks within the last four years, the cost of such
modifications will be prorated between AA and Contractor based
upon forty-eight (48) month useful life commencing on the date
each aircraft is decorated with the ABR Marks. For example, if
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AA requires Contractor to repaint an Approved Aircraft at the
end of the third year (36th month) of its useful life,
Contractor would be responsible for 75% of the cost and AA
would be responsible for the remaining 25% of the cost.
1.02 - SERVICE DESCRIPTION
(a) Contractor will continue Feeder Air Service with Original
Approved Aircraft as described in the Fleet Plan in Schedule
C-1. Further, Contractor will commence Feeder Air Service with
Firm Approved Aircraft (as defined in Schedule C-1) upon the
Sabre Cutover Date (which shall not be prior to October 1,
2001), including obtaining all DOD, DOT, FAA and other
regulatory approvals and will phase-in operation of all Firm
Approved Aircraft in accordance with the in service dates
provided in the Fleet Plan in Schedule C-1. Contractor will
discontinue operation of all Original Approved Aircraft in
accordance with the phase-out dates indicated in the Fleet
Plan provided in Schedule C-1. Unless otherwise agreed by AA,
Contractor will operate all flights under this Agreement with
such aircraft type and passenger seat capacity as specified in
the Fleet Plan.
Contractor acknowledges that in the event such Firm Approved
Aircraft are not placed into service as of the date(s)
indicated in the Fleet Plan, except to the extent any such
delay or failure arises out of (i) an event that would give
rise to a right to terminate this Agreement for Force Majeure,
or (ii) a matter exempted from this Section 1.02(a) under the
terms of Section 7.03(c), AA will suffer damages in connection
with air transportation services AA intended to market and
sell in connection with the use of such Firm Approved
Aircraft. Accordingly, in such situation, Contractor agrees
to pay AA the sume of [*] per day of delay per regional jet,
as liquidated damages.
(b) Contractor agrees to operate Feeder Air Services from
concourse `B' or some other space at the STL Hub as designated
by AA that is adequate to perform its duties hereunder.
Contractor shall not operate Approved Aircraft in revenue
service at the Hub except for the Feeder Air Services (other
than occasional Charter Flights).
(c) Contractor acknowledges and agrees that participation in the
ABR program obligates Contractor to offer and maintain a
quality and professional level of service in terms of
schedules, customer service, and the like. Accordingly, at the
request of AA, the parties will: (1) meet to review and
discuss the services, operations, and objectives of Contractor
as an ABR carrier; and (2) jointly develop a written business
plan for the operations and services of Contractor. Contractor
will use its commercially reasonable best efforts to comply
with said business plan and to accommodate all reasonable
recommendations of AA in these respects.
(d) It is understood and agreed that the use of regional jets in
the performance of services under this Agreement is subject to
Labor Contract Restrictions. Further, with respect to AA, the
provision of Feeder Air Service on certain routes and with
certain aircraft types is subject to certain restrictions in
existing agreements with other parties. Accordingly,
Contractor agrees to dedicate such aircraft type and number to
accommodate such Labor Contract Restrictions. Notwithstanding
the foregoing, AA represents that Contractor shall have the
right to provide Contractor's Feeder Air Services with Firm
Approved Aircraft.
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* Confidential
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(e) Contractor may operate its Feeder Air Services as an ABR
carrier only as directed in writing by AA. Pursuant to the
terms of this Agreement, AA hereby consents to Contractor's
operation as an ABR carrier with respect to such routes and
frequency of service designated by AA in writing.
At AA's request Contractor agrees to enter into such
agreements(s) with another air carrier (holding a valid and
effective Certificate of Public Convenience and Necessity or
other appropriate authority) as may be necessary to implement
Shared Code Sharing Jet Flights with such other carrier in
connection with the Feeder Air Service Flights which are the
subject of this Agreement, including, but not limited to,
passenger and baggage transit procedures.
(f) Contractor agrees to maintain the Feeder Air Service in
accordance with the criteria set forth in Exhibits A and C,
with respect to the aircraft types and operation of Feeder Air
Service Flights. Within the operating capability of the
aircraft used by Contractor, and subject to equipment
availability and the other provisions of this Agreement,
Contractor will comply with all requests by AA to increase,
decrease, or in any other way adjust or terminate the flight
frequencies or city pairs, or both, as operated and served
pursuant to the provisions of Exhibit A. AA will cooperate
with Contractor to optimize the use of its aircraft and crews
to maintain schedule integrity and efficiency. Contractor
agrees to assist AA with market planning and sales functions
as requested by AA. Coinciding with each regular AA schedule
change after the date hereof, Contractor shall adjust the
scheduled times of operation of its Feeder Air Service Flights
as directed by AA, based on a minimum connecting time of
twenty five (25) minutes or such other minimum connect time as
AA may from time to time publish. Additionally, the Feeder Air
Service Flights shall at all times be maintained by Contractor
at levels sufficient to satisfy the Scheduled Flights.
(g) AA shall be responsible for schedule production for
Contractor's Feeder Air Service Flights and input of such
schedules into AA's scheduling system. However, AA may
delegate certain of those functions and responsibilities to a
third party or by mutual agreement with Contractor, to
Contractor. Such schedule changes will be included in the
information sent to the OAG.
(h) Procedures for regular submission of schedules shall be set
forth in a procedures manual which will be jointly developed
by Contractor and AA scheduling departments.
(i) All aircraft used by Contractor to provide the Feeder Air
Services shall comply with the applicable portions of Parts
298 and 25 of the Economic Regulations of the DOT and Part 121
of the Federal Aviation Regulations, or their successor
regulations as applicable. Further, aircraft types shall be
subject to acceptance by AA in accordance with the approved
Fleet Plan provided for in Exhibit C.
(j) All aircraft used for the Feeder Air Services shall be
Standard Marked. From time to time, Contractor may
temporarily (for not more than 60 days, unless approved
in writing by AA, such approval not to be unreasonably
withheld or delayed) operate Approved Aircraft that are not
Standard Marked (as provided in Exhibit C(1)(A)(3)) but
utilize an AA flight designator. All of Contractor's airport
ticket counters and gates used for Feeder Air Services shall
display AA timetables (and such promotional material as is
from time to time furnished by AA), and shall be identified
by signage as described in Exhibit B-1. All Feeder Air Service
Flights shall display on the exterior (adjacent to the
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boarding door) and in the interior of the aircraft, an AA
approved sign or legend identifying the flight as an "ABR"
flight "operated by Chautauqua Airlines, Inc." Aircraft safety
briefing cards shall incorporate the ABR Marks. Contractor
shall also distribute or place American Way or other magazines
in the aircraft seat pockets as determined and provided by AA.
No other airline magazine shall be placed in aircraft used for
Feeder Air Services.
(k) Contractor shall require all of its personnel in job
classifications requiring direct public contact who provide
Contractor's Feeder Air Services to wear uniforms and
accessories furnished by Contractor which are of colors and
styles as approved by AA from time to time. Other Contractor
employees who are visible to the public and who provide
Contractor's Feeder Air Services are to wear industry standard
AA approved uniforms furnished by Contractor as are
appropriate for the locale and environment. AA will consider
modifications to such uniforms that may better represent the
demands of the regional airline employee (E.G. exposure to
elements and cross utilization).
1.03 - STANDARDS OF SERVICE AND PERFORMANCE
Contractor agrees that, in providing services under this Agreement in
conjunction with one or more of the AA Marks, it will maintain or
exceed the Standards of Service and Performance Standards set forth in
Exhibits D and J respectively. AA will have the right, from time to
time, to inspect Contractor's Feeder Air Services to determine if they
conform with such Standards. Failure on the part of AA to conduct such
inspections will not relieve Contractor of its obligations to conform
to the applicable standards. The extent to which Contractor meets,
exceeds or fails to meet certain of the Performance Standards shall
determine the amount of the performance incentive paid to Contractor
by AA or performance penalty paid to AA by Contractor in accordance
with the terms set forth in Exhibit J.
ARTICLE 2 - SUPPORT SERVICES AND FACILITIES
2.01 - GENERAL
AA and Contractor agree that support services and facilities shall be
required to provide a high quality, seamless Feeder Air Service to
passengers. Facilities must, at all times, be kept clean, up-to-date,
and have adequate signage and lighting. Both parties agree to adhere to
the provisions described herein as the mechanism by which such support
services and facilities shall be managed.
2.02 - RESERVATIONS SUPPORT SERVICES
AA, at its sole cost, will handle reservations for all Feeder Air
Service Flights in the same manner and within the same standards that
AA utilizes to handle its own reservations.
2.03 - COMPUTERIZED RESERVATIONS SYSTEM AND ASSOCIATED SERVICES
(a) AA, at its sole cost, will provide Contractor with Sabre
Services, including without limitation, maintenance of the
Feeder Air Service Flights seat inventory and passenger
processing, and other associated support systems as directed
by AA .
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(b) Contractor will perform and maintain in effect its standard
SABRE equipment and systems use agreement at all times during
the Term of this Agreement. Contractor shall comply with the
provisions of Exhibit L.
(c) Unless otherwise agreed to in writing between Contractor and
AA, connecting reservations to or from AA or other air
carriers in an "AA*" itinerary will be made by AA and
Contractor (and their respective agents) and by other airlines
in accordance with AA's practices and any currently applicable
industry methods and procedures. In all cases, SABRE will be
used by Contractor to confirm the reservations of ABR
passengers through the entire itinerary of their scheduled
trips. AA will make reasonable efforts to notify passengers of
any last minute changes in Contractor's Feeder Air Service
schedules or operations, consistent with notification
practices and policies for AA's own flights.
(d) Contractor shall provide AA in a timely manner, and in the
format required by AA, such flight movement, bulkout, sales
and other information as AA reasonably requires to enable it
to carry out the reservations, sales, invoicing, audit,
planning, and other services to be performed by AA under this
Agreement.
(e) AA shall be responsible for the collection and remittance of
all booking fees, passenger facilities charges (PFCs),
transportation Taxes, and the like, applicable to Contractor's
Feeder Air Services.
2.04 - OPERATIONS
(a) Contractor will provide accurate updates of its flights'
planned and actual departure and arrival times (including
updates of irregularities) in SABRE as soon as the planned
flight schedule is changed, or the flight departs or arrives,
or suffers an irregularity. In the event of flight delays,
cancellations or other schedule irregularities affecting
Contractor's Feeder Air Services Flights, and as soon as
information concerning such irregularities is available,
Contractor shall update AA's FOS system via SABRE to reflect
such information. Further, when requested by AA, Contractor
will notify the designated AA department/personnel regarding
certain irregularities. For purposes of this Agreement, such
scheduled and actual departure and arrival and irregularity
information shall be known as "FLIFO." If Contractor becomes
aware of any station(s) which have any deficiencies in
reporting FLIFO as required by this Section, Contractor will
promptly take corrective action to remedy such problem
including, if requested by AA, the submission to AA of a
corrective action plan.
(b) Contractor will be solely responsible for, and AA will have no
obligations or duties with respect to, the dispatch of
Contractor's flights. For the purposes of this Section, the
term "flight dispatch" will include, but will not be limited
to, all planning of aircraft itineraries and routings, fueling
and flight release.
(c) Each party hereby represents, warrants and agrees that all air
transportation services performed, including the maintenance
of aircraft and engines, pursuant to this Agreement or
otherwise shall be conducted in full compliance with all
applicable statutes, orders, rules, regulations and
notifications, whether now in effect or hereafter promulgated,
of all governmental agencies having jurisdiction over its
operations, including, but not limited to, the FAA, DOD, and
DOT. Each party's compliance with such governmental statutes,
orders, rules, regulations and notifications will be the sole
and exclusive obligation of the
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operating carrier, and the non-operating carrier will have no
obligation, responsibility, or liability, whether direct or
indirect, with respect to such matters. Additionally,
Contractor will comply during the Term of this Agreement with
the AA/ABR Safety Standards, as described on Exhibit I.
(d) From time to time and upon the request of Contractor or its
flight crews, AA shall furnish Contractor's flight crews with
such U.S. Weather Bureau information or data as may be
available to AA, provided that in furnishing any such weather
information or data to Contractor: (1) neither AA nor its
employees or agents will be responsible or liable for the
accuracy thereof; and (2) that any and all costs incurred by
AA in connection with providing such weather information or
data will be paid by Contractor.
2.05 - STATION FACILITIES, EQUIPMENT AND GROUND SUPPORT SERVICES
(a) Covered Locations
At all Covered Locations, AA, at its sole cost, shall provide
Contractor with all Airport Support Services, equipment, and
facilities, with the exception of the following:
1. aircraft on-call maintenance;
2. crew lounge;
3. equipment which is unique or specific for
the operation of Approved Aircraft at that
location; and
4. fuel services, to include into plane
services.
At Covered Locations where an AMR Entity has the capability to
provide the above excluded equipment and Airport Support
Services, Contractor agrees to allow AA to bid on these items,
and will use AA if competitively priced.
In the event that AA requests that Contractor utilize third
party vendors to provide Airport Support Services not excluded
above, Contractor shall directly enter into agreements with
such vendors. Charges associated with vendor service provided
to Contractor at Covered Locations shall be handled in
accordance with Exhibit E.
(b) Contractor Locations
1. At all Contractor Locations, Contractor, at its
sole cost, shall provide all manpower, equipment and airport
facilities necessary to provide Airport Support Services
for Contractor's Feeder Air Service Flights with the
exception of any incremental fluid, manpower, or vendor costs
associated with the de-icing of Contractor aircraft.
Charges for such de-icing at Contractor Locations shall
be handled in accordance with Exhibit E(1)(C)(3-4).
2. Contractor agrees to staff Contractor Locations
that have three (3) or more daily round trips (weekdays)
with its own employees where facility constraints permit.
Contractor shall be given reasonable notice of schedule
changes that will require it to staff under this provision.
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3. In the event AA and/or its Affiliate(s) operates a
flight to a Contractor Location and requests Contractor to
handle such flight, AA agrees to pay Contractor for Airport
Support Services provided by Contractor, at the rate of [*]
per scheduled departure plus any incremental charges
unique to such aircraft versus Contractor jet aircraft.
However, where AA operates flight(s) to Contractor
Locations that utilize a third party vendor to
provide Airport Support Services, AA shall, if it
desires to use such vendor, directly enter into
agreement(s) with such vendor.
4. For the initial purchase of new Contractor
Location automation equipment, as defined in Exhibit L,
Contractor and AA agree to adhere to the terms set forth in
Exhibit E(3).
(c) The Hub
1. Except as provided in subsection 3 below, at the
Hub, Contractor, at its sole cost, shall be responsible for
the gate operations of its passengers and aircraft,
security screening charges, purchasing its equipment and
leasing its facilities, including facilities improvement
surcharges. Contractor, at its sole cost, shall enter into
and maintain an operating agreement with AA for space
adequate to perform its duties hereunder at Lambert -
St. Louis International Airport.
2. At the Hub, AA, at its sole cost, shall
be responsible for providing ticket counter services,
skycap services, all passenger busing resulting from
AA mandated remote parking of Contractor aircraft,
remote de-icing service for regional jet aircraft
(when such a remote de-icing operation is in effect for
AA), and de-icing fluid for on-gate de-icing. Charges
associated with the de-icing fluid for on-gate de-icing
shall be handled in accordance with the provisions set
forth in Exhibit E(1)(C)(3-4).
3. At AA's sole discretion, AA, and/or its Affiliate,
or a third party may assume all gate and ramp handling duties
at the Hub, as detailed in subsection 1 above, upon 120 days
prior written notice. In such case and for this purpose only,
the Hub would be considered a Covered Location. In such event,
AA and Contractor shall modify the cost model to reflect such
a change proportionately.
(d) Contractor Conversion
In the event AA or an AA Affiliate no longer staffs personnel
at a Covered Location, AA reserves the right to designate such
former Covered Location as a Contractor Location, and
Contractor will completely assume ground operations at such
former Covered Location.
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(e) Covered Conversion
In the event of a Covered Conversion, AA, at its sole
discretion, may purchase and Contractor agrees to sell,
at Contractor's net book value, any existing equipment
necessary to operate AA flights. Furthermore, before hiring
new employees in that city, provided they meet AA's
eligibility requirements, AA shall allow Contractor's
employees to apply for appropriate positions in that
location.
2.06 - SALES; PROMOTION; PASSENGER SERVICE DOCUMENTS
(a) AA will be responsible for advertising the Feeder Air
Services except as otherwise provided for herein.
(b) Contractor agrees to dedicate sales representatives,
at its sole cost and expense to support the marketing
of Feeder Air Services hereunder, at the request of AA.
(c) Contractor will notify all Feeder Air Service passengers
connecting to AA flights, via AA-provided ticket jackets and
appropriate signage, AA's passenger liability limits (Warsaw
and domestic), conditions of carriage, denied boarding
compensation and like matters. Contractor also agrees to adopt
and maintain AA's domestic (and if applicable, international)
baggage liability rules as well as AA's PAWOB and DBC policies
as are from time to time in effect. In selling air
transportation of passengers, both on-line and off-line,
Contractor will use AA passenger ticket stock. Contractor will
report and remit to AA all ticket sales in accordance with the
Accounting Procedures set forth in Exhibit F.
(d) In the performance of its duties hereunder, Contractor will
follow the Customer Service Policies and Procedures using AA
passenger handling documents, including but not limited to
ticket stock, travel vouchers, baggage tags, passenger refund
and compensation checks, and the like. Contractor will
reimburse AA for any expenses incurred as a result of
Contractor's non-compliance with the Customer Service Policies
and Procedures, in accordance with Exhibit F.
(e) AA will include in its public timetables all of the Feeder
Airports and the scheduled Feeder Air Services provided by
Contractor pursuant to this Agreement, along with appropriate
notations showing that services between the Hub and such
Feeder Airports are flights operated by Contractor as an
independent contractor. All such references in AA's public
timetables shall also contain notations indicating that use of
the name "ABR" or any Marks by Contractor is pursuant to a
limited trademark license from AA.
(f) Area phone directories (white and yellow pages) for the Feeder
Airports will include, at the earliest possible time (at the
expense of AA), the AA toll free reservations phone number
which shall be answered by AA reservations personnel in
accordance with Section 2.02, and, if desired by AA, a local
phone number for the station.
(g) Contractor is authorized to, and shall, issue AA boarding
passes to those passengers checking in at the Feeder Airports
who are ticketed for AA, or an AA Affiliate and ABR
connections at the Hub. AA and its Affiliates, as appropriate
will issue boarding passes to those passengers checking in for
such Feeder Air Service Flights at all locations where AA or
an AA Affiliate provides Passenger Handling Duties.
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(h) AA shall be responsible for sales programs promoting "ABR" and
the Feeder Air Services including, without limitation,
Contractor participation in AA's "AAdvantage" Program. No
advertisement, solicitation, document or any other material
using any AA Mark will be published or otherwise promulgated
without AA's prior inspection and approval. No advertising
that relates in any way to AA, ABR or Contractor's Feeder Air
Services will be placed by Contractor with an advertising
agency unless AA has given its prior consent regarding copy,
layout and the specific media plan. In addition, if AA has
agreed to share the costs of any such advertising, Contractor
will obtain the prior consent of AA regarding the funds to be
expended for such advertising.
(i) Contractor shall participate in the AAdvantage Frequent Flyer
Program at no charge to Contractor. Feeder Air Service
passengers shall be eligible to accrue and redeem mileage on
such flights and on AA, and/or AA Affiliate flights consistent
with AA's policies for AA. Contractor shall carry all
passengers traveling pursuant to award travel from an Accepted
Frequent Flyer Program at no charge to AA.
2.07 - BAGGAGE HANDLING AND SETTLEMENT
(a) In the performance of its duties hereunder, Contractor will
follow the Customer Service Policies and Procedures related to
baggage handling, including procedures for delayed, pilfered,
lost, and damaged baggage. Baggage Claims shall be settled in
accordance with the procedures specified in Exhibit F.
(b) The parties agree to report and search for AA (and/or AA
Affiliate) and ABR lost baggage in accordance with AA's
procedures using WorldTracer and/or BMAS as appropriate..
ARTICLE 3 - PASSENGER FARES
3.01 - PASSENGER FARES
AA has sole responsibility to establish all fares for Contractor's
Feeder Air Services under this Agreement.
3.02 - CONTRACTOR COMPENSATION
In consideration for the Feeder Air Services provided hereunder, AA
shall pay Contractor the amounts set forth in Exhibit E.
3.03 - INVENTORY CONTROL
AA shall establish and maintain all inventory and seat allocations on
flights operated by Contractor pursuant to this Agreement. AA may at
its discretion delegate this responsibility to a third party or to
Contractor, subject to Contractor's concurrence to perform such duties
for the time period requested by AA.
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ARTICLE 4 - SMALL PACKAGE, FREIGHT AND MAIL
Terms for an ABR small package, freight and Mail service on Feeder Air
Service Flights are set forth in Exhibit H. Settlement of all small
package and Mail transportation transactions shall be in accordance
with Exhibit F.
ARTICLE 5 - OTHER ACTIVITIES
(a) Contractor shall not either directly or indirectly engage (or
attempt to engage) on its own behalf in any revenue air
transportation (other than pursuant to this Agreement) in any
of the routes between the Hub and Feeder Airports.
(b) Nothing in this Agreement shall prohibit Contractor or its
Affiliates from operating such air services as they may
desire, except to the extent such activities directly conflict
with the express provisions of this Agreement. In this regard,
both parties recognize that this Agreement would be violated
if:
1. Contractor, or any Affiliate of Contractor,
entered into a cooperative marketing and service arrangement
comparable to this Agreement with another air carrier
providing feeder air service in connection with hub operations
at MEM, BNA, MCI, or any location within fifty (50) statute
miles of the STL Hub.
2. Contractor or any of its Affiliates operates
aircraft with Marks for non-Feeder Air Service (other than for
Charter Flights).
3. Contractor, or any Affiliate of Contractor,
markets any flight to or from the Hub with any name other than
as provided herein, including but not limited to, under
Contractor's or such Affiliate's own two letter airline code.
(c) Contractor agrees to not engage in any conflicting activity
referred to in (b) above unless the AA has given its advance
written consent for such activity to be undertaken, except as
may otherwise be provided for herein.
(d) Nothing in this Agreement shall prohibit any of the AMR
Entities from operating such air services as they may desire.
Further, nothing in this Agreement shall prohibit AA from
engaging in comparable "ABR" cooperative marketing and
services arrangements with other operators of aircraft.
(e) Contractor will not use any of the services, facilities or
equipment provided by AA to Contractor or its Affiliates
under this Agreement for air transportation or related
services provided by Contractor outside the scope of this
Agreement. Neither Contractor nor any of its Affiliates will
be permitted to operate aircraft bearing Marks in city pairs
other than those specified by AA without the prior written
consent of AA. Contractor will not, without AA's prior
written consent, permit any third party, whether under a
lease arrangement or otherwise, to operate any aircraft
in revenue service bearing Marks.
(f) AA reserves the right, at its sole discretion, to finance the
Option Aircraft and become the Lessor of such aircraft to
Contractor under the terms of a Lease.
<Page>
ARTICLE 6 - LIABILITY, INDEMNIFICATION AND INSURANCE
6.01 - INDEPENDENT CONTRACTORS
(a) The employees, agents, and independent contractors of
Contractor engaged in performing any of the services
Contractor is to perform pursuant to this Agreement shall be
deemed to be employees, agents or independent contractors of
Contractor for all purposes, and under no circumstances shall
be deemed to be employees, agents or independent contractors
of AA or any of the other AMR Entities. In its performance
under this Agreement, Contractor shall act, for all purposes,
as an independent contractor and not as an agent of AA or any
of the other AMR Entities. Neither AA nor any of the other AMR
Entities shall have supervisory power or control over any
employees, agents or independent contractors engaged by
Contractor in connection with its performance hereunder, and
all complaints or requested changes in procedures shall, in
all events, be transmitted by AA to a designated officer of
Contractor. Nothing contained in this Agreement is intended to
limit or condition Contractor's control over its operations or
the conduct of its business as an air carrier, and Contractor
and its principals assume all risks or financial losses which
may result from the operation of the air services to be
provided by Contractor hereunder.
(b) The employees, agents, and independent contractors of AA
engaged in performing any of the services AA is to perform
pursuant to this Agreement shall be deemed to be employees,
agents, and independent contractors of AA for all purposes,
and under no circumstances shall be deemed to be employees,
agents or independent contractors of Contractor. In its
performance under this Agreement, AA shall act, for all
purposes, as an independent contractor and not as an agent of
Contractor. Contractor shall have no supervisory power or
control over any employees, agents or independent contractors
engaged by AA in connection with its performance hereunder,
and all complaints or requested changes in procedures shall,
in all events, be transmitted by Contractor to a designated
officer of AA. Nothing contained in this Agreement is intended
to limit or condition AA's control over its operations or the
conduct of its business as an air carrier.
6.02 - UNAUTHORIZED OBLIGATIONS
(a) Nothing in this Agreement authorizes AA to make any contract,
agreement, warranty, or representation on Contractor's behalf,
or to incur any debt or obligation in Contractor's name
("CONTRACTOR UNAUTHORIZED OBLIGATION"); and AA hereby agrees
to defend, indemnify, save, release, reimburse and hold
Contractor, its officers, directors, shareholders, employees
and agents harmless from any and all liabilities, claims,
judgments and obligations which arise as a result of or in
connection with, or by reason of any such Contractor
Unauthorized Obligation made by AA, its officers, directors,
shareholders, employees, agents or independent contractors in
the conduct of AA's operations.
(b) Nothing in this Agreement authorizes Contractor to make any
contract, agreement, warranty, or representation on AA's
behalf or on behalf of any other AMR Entity, or to incur any
debt or obligation in AA's name or on behalf of any other AMR
Entity ("AA UNAUTHORIZED OBLIGATION"); and Contractor hereby
agrees to defend, indemnify, save, release, reimburse and hold
AA, the AMR Entities, and their respective officers,
directors, shareholders, employees and agents harmless from
any and all liabilities, claims, judgments and obligations
which arise as a result of or in connection with, or by
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reason of any such AA Unauthorized Obligation made by
Contractor, its officers, directors, shareholders, employees,
agents or independent contractors in the conduct of
Contractor's operations.
(c) The fact that Contractor's operations are conducted under
Marks and listed under the TW designator code will not affect
their status as flights operated by Contractor for purpose of
this Agreement or any other agreement between the parties.
Further, both parties acknowledge that the Contractor's Feeder
Air Services are flights operated by Contractor and both
parties agree to advise passengers and all third parties of
Contractor's operation of these flights as required by
applicable law, rule, or regulation.
6.03 - INDEMNIFICATION AND INSURANCE
(a) Each party, with respect to its own employees, accepts full
and exclusive liability for the payment of worker's
compensation and/or employer's liability insurance premiums
with respect to such employees, and for the payment of all
Taxes, contributions or other payments for unemployment
compensation or old age benefits, pensions or annuities now or
hereafter imposed upon employers by the government of the
United States or by any state or local governmental body with
respect to such employees measured by the wages, salaries,
compensation or other remuneration paid to such employees, or
otherwise, and each party further agrees to make such payments
and to make and file all reports and returns, and to do
everything necessary to comply with the laws imposing such
Taxes, contributions or other payments.
(b) Contractor shall indemnify, defend, hold harmless and promptly
reimburse AA, the AMR Entities and their respective directors,
officers, employees and agents from and against any and all
claims, suits, penalties, liabilities, judgments, fines,
losses and expenses of any nature or kind ("CLAIMS") arising
out of, caused by or occurring in connection with (or alleged
to arise out of, be caused by or be occurring in connection
with):
1. The death of or injury to persons, or delay or
loss of or damage to property (including aircraft, baggage or
cargo) occurring while such persons or property are under the
control or in the custody of, or being transported by
Contractor (including, for the avoidance of doubt, claims
arising out of death of or injury to Feeder Air Service
passengers traveling on AA tickets that implement limits or
conditions of liability or jurisdictional rules with respect
to passenger claims that differ from those of Contractor),
except to the extent caused by the willful misconduct of AA or
another AMR Entity; and
2. Negligent acts or omissions of Contractor that are
in any way related to services contemplated by this Agreement,
except for Claims arising from the death of, or injury to,
persons, or delay or loss of or damage to property occurring
while such persons or property are in the control or custody
of, or being transported by, AA of the type referred to in
Section 6.03(c)(1), in which case AA shall indemnify and
reimburse Contractor, notwithstanding such negligent (but not
willful) acts or omissions of Contractor.
(c) AA shall indemnify, defend and hold harmless Contractor and
its directors, officers, employees and agents from and against
any and all Claims arising out of, caused by or occurring in
connection with (or alleged to arise out of, be caused by or
occurring in connection with):
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1. The death of or injury to persons, or delay or
loss of or damage to property (including aircraft, baggage or
cargo) occurring while such persons or property are under the
control or in the custody of, or being transported by, AA,
except to the extent caused by the willful misconduct of
Contractor.
2. Negligent acts or omissions of AA that are in any
way related to services contemplated by this Agreement, except
for Claims arising from the death of, or injury to, persons,
or delay or loss of or damage to property occurring while such
persons or property are in the control or custody of, or are
being transported by, Contractor of the type referred to in
Section 6.03(b)(1) (in which event Contractor shall indemnify
and reimburse AA notwithstanding such negligent (but not
willful) acts or omissions of AA); and
3. Passenger claims based on AA's failure to properly
issue and complete transportation documentation in accordance
with the provisions of the standard Airlines Clearing House or
IATA ticketing procedures, including the failure to put a
proper notice of the limits of liability on such documentation
(it being understood that in ticketing Feeder Air Service
passengers, AA is entitled to apply the limits of liability
provided for in its own conditions of carriage).
(d) During the Term of the Agreement, Contractor agrees to
maintain Airline Liability insurance, including
comprehensive/commercial general liability, passenger
(including passengers on Feeder Air Service flights, and all
other revenue and non-revenue passengers), baggage, cargo,
mail, and aircraft third party legal liability (all policies
shall be extended to include war risks, hijacking, and allied
perils), with limits of at least [*] per any one occurrence
or such higher limits as Contractor may have in effect
during the Term of this Agreement. Such insurance policies
shall be with an insurance company or companies of
recognized financial responsibility, and satisfactory to
AA, and which at a minimum shall:
1. Name AA, the AMR Entities, and their directors,
officers, employees, agents and representatives as Additional
Insureds,
2. Contain a Breach of Warranty Clause in favor of
AA and the other Additional Insureds, insuring AA's and their
interests regardless of any breach or violation by Contractor
of any warranties, declarations or conditions contained in
such policies,
3. Contain a Waiver of Subrogation Clause in favor
of AA and the other Additional Insureds, to the extent
Contractor has waived its rights against AA under this
Agreement,
4. Contain a Cross Liability clause, providing AA
and each of the other Additional Insureds the benefit of
all of the provisions of the policy, except the limits of
liability, in the same manner as if there were a separate
policy covering each insured,
5. Specifically state that the indemnification
agreement stated in (b) above is insured as a contractual
obligation of Contractor's insurers,
6. Contain a provision requiring Contractor's
insurers to provide AA with a written notice of any
cancellation or adverse material change in such insurance
and
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providing that the same shall not be effective as to the
benefit and interest of AA or any of the other Additional
Insureds for thirty (30) days after written notice of such
cancellation or adverse material change is received by
Contractor and AA,
7. Contain a provision stating that Contractor's
liability policy is primary without a right of contribution
from any Policy carried by AA or any of the other Additional
Insureds. The notice period in respect of war and allied
perils coverage shall be seven days or such lesser period
as is or may be available in accordance with policy
conditions, and
8. Contain a Date Recognition Limited Coverage
Write-Back clause or endorsement, in the event Contractor's
insurance policy contains a Date Recognition Exclusion
clause.
(e) Hull All Risk insurance, including war risk, which shall
include a waiver or subrogation in favor of the AMR Entities
to the extent of the indemnity specified in
Section 6.03(b), and
(f) Contractor agrees to furnish AA, in a timely manner, and not
later than the expiration date of each respective policy, with
certificates of insurance evidencing its maintaining and
renewal of the insurance required under (d) above.
6.04 - ENVIRONMENTAL
With respect to all matters which relate to or may affect the
environment, each party agrees to conduct its operations (including its
compliance with all federal, state and local laws and regulations
relating to pollution or the environment) in a prudent manner
consistent with industry policies and practices related to
environmental matters, including, without limitation, taking reasonable
preventive measures consistent with such policies and practices to
avoid liabilities related to environmental matters.
ARTICLE 7 - EFFECTIVE DATE, TERMINATION AND CANCELLATION
7.01 - EFFECTIVE DATE AND TERM
(a) This Agreement will become effective on the SABRE Cutover Date
and will continue in effect through February 1, 2013, unless
terminated or canceled at an earlier date pursuant to one or
more of the provisions of this Article 7 or Exhibit
J(2)(D)(the "TERM").
(b) In the event there is any change in the statutes governing the
economic regulation of air carriers, or in the applicable
rules, regulations or orders of the DOT or some successor
agency or department of the government having jurisdiction
over air transportation which change or changes materially
affect the rights and/or obligations presently in force with
respect to the air transportation services of AA or
Contractor, or both, or in the event for reasons wholly beyond
the control of the parties, the AA designator code cannot for
any reason be used as contemplated under this Agreement, then
the parties will consult within thirty (30) days after any of
the occurrences described herein, in order to determine what,
if any, changes to this Agreement are necessary or
appropriate, including but not limited to the early
termination and cancellation of this Agreement. If the parties
hereto are unable to agree whether any change or changes to
this Agreement are necessary or appropriate, or as to the
terms of such changes, or whether the Agreement should be
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cancelled in light of the occurrences described above, then
the parties shall submit the matter to a neutral third party
mediator who will assist the parties in reaching a mutually
agreeable settlement in accordance with the Commercial
Mediation Rules of the American Arbitration Association. Each
party covenants to cooperate in any such proceeding for up to
thirty (30) days.
7.02 - TERMINATION
In addition to the foregoing provisions of this Article:
(a) If one party (the "DEFAULTING PARTY") becomes insolvent or
fails to pay debts as they become due; or if the Defaulting
Party takes steps leading to its cessation as a going concern;
makes an assignment for the benefit of creditors or a similar
disposition of the assets of the business; or if the
Defaulting Party either ceases or suspends operations for
reasons other than a strike, then the other party (the
"INSECURE PARTY") may on five (5) business days prior written
notice, terminate this Agreement on notice to the Defaulting
Party unless the Defaulting Party, within said five (5)
business days, gives adequate assurance of the future
performance of this Agreement by establishing an irrevocable
letter of credit, issued by a U.S. bank acceptable to the
Insecure Party, on terms and conditions acceptable to the
Insecure Party, and in an amount sufficient to cover all
amounts potentially due from the Defaulting Party under this
Agreement. Such letter of credit may be drawn upon by the
Insecure Party if the Defaulting Party does not fulfill its
obligations under this Agreement in a timely manner.
If bankruptcy proceedings are commenced with respect to either
party ("BANKRUPT PARTY") and if this Agreement has not
otherwise terminated, then the non-bankrupt party may suspend
all further performance of this Agreement until the Bankrupt
Party assumes or rejects this Agreement pursuant to Section
365 of the Bankruptcy Code or any similar or successor
provision. Within thirty (30) days of the commencement of such
bankruptcy proceeding, the Bankrupt Party agrees to move the
Court in which such bankruptcy proceeding is pending to assume
or reject this Agreement. Any such suspension of further
performance by the non-bankrupt party pending the Bankrupt
Party's assumption or rejection will not be a breach of this
Agreement and will not affect the non-bankrupt party's right
to pursue or enforce any of its rights under this Agreement or
otherwise.
(b) Unless provided for elsewhere in this Agreement, and except
for the failure to make payments of amounts when due, if
either party shall fail to perform, keep, and observe any of
the material terms, covenants or conditions herein contained
on the part of such party to be performed, kept or observed
(other than insurance requirements or any other condition or
requirement, noncompliance with which is specifically covered
under another subsection of this Article 7), the other party
may give notice in writing to correct the condition or cure
the default and, if the condition or default continues for
thirty (30) days after the receipt of notice by the defaulting
party and, if within that thirty (30) day period the
defaulting party has not prosecuted with due diligence and
corrected or commenced efforts to correct the condition or
default, the other party may then terminate this Agreement
upon an additional thirty (30) days prior written notice, and
this Agreement shall thereupon cease and expire at the end of
such additional thirty (30) days in the same manner and with
the same effect as if it were the expiration of the original
term. For purposes of this Article 7.02 (b), Contractor's
failure to comply with the Standards of Service as set forth
in Exhibit D hereof, shall be deemed a material default.
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If either party shall fail to make payment of amounts when due
under this Agreement after receiving written notice thereof,
the non-paying party shall have five (5) business days after
the receipt of such written notice to cure such non-payment.
(c) In the event Contractor fails to meet any of the milestones,
as may be provided in a corrective action plan pursuant to
Exhibit J(3)(D), AA may terminate this Agreement upon fifteen
(15) days written notice to Contractor.
(d) If the services of the Airline Clearing House are withdrawn as
to either party, or if either party suspends or is required to
suspend all system operations for any safety reason, the other
party may terminate this Agreement upon five (5) days prior
written notice.
(e) In the event of a material breach of any representation or
warranty of Article 2.04(c), that in AA's reasonable
discretion, creates a serious and imminent threat to the safe
operation of Contractor's ABR Services, AA may immediately
terminate this Agreement in writing.
(f) In the event of any material failure to comply with the
insurance provisions of Article 6.03, this Agreement may be
immediately terminated by AA.
(g) Early termination or cancellation of this Agreement based on
one or more of the provisions of this Article 7 shall not be
construed so as to relieve any party hereto of any debts or
monetary obligations to any other party that shall have
accrued hereunder prior to the effective date of such
termination or cancellation, or any damages suffered as a
result of such termination, if such termination is due to a
breach of this Agreement.
(h) In the event of the replacement of the President and Chief
Executive Officer of Contractor (or any executive performing
the duties of a chief executive officer however so titled)
(the "CEO"). Contractor shall have the right to designate an
interim CEO. At such time as Contractor identifies or selects
a proposed permanent replacement CEO (or at Contractor's
option, one or more candidates for the position of permanent
replacement CEO) (collectively, the "Proposed CEO"),
Contractor shall provide written notice to AA identifying such
Proposed CEO. AA shall have the right to approve (such
approval not to be unreasonably withheld) or disapprove (such
disapproval not to be unreasonably provided) such Proposed
CEO, and shall provide written notice to Contractor of its
approval or disapproval within 10 business days following AA's
receipt of notice of the Proposed CEO. In the event AA fails
to provide notice of its approval or disapproval within such
10 day period, AA shall be conclusively deemed to have
approved the Proposed CEO. In the event Contractor fails to
identify a Proposed CEO who is approved by AA as provided
herein within 180 days after the replacement of the CEO, AA
may terminate this Agreement.
(i) In the event of a termination of this Agreement prior to the
end of the Term for any reason, AA agrees to reimburse
Contractor for any pre-paid aircraft rents under any Lease for
all Firm Approved Aircraft upon the date of such termination.
(j) Upon termination of this Agreement for any reason, the right
to use Marks granted herein will immediately revert back to
AA.
(k) AA may terminate this Agreement without Cause upon 180 days
prior written notice; PROVIDED, that (1) such notice may not
be given prior to September 30, 2005, (2) AA shall
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reimburse Contractor for the unamortized portion of training
start up costs (principal only) pursuant to the 120-month
amortization table attached hereto as Exhibit M corresponding
to the month during which the Agreement terminates, and (3)
the provisions of Section 7.03 herein will apply. As a
condition to AA's conversion of the Option Aircraft to Firm
Approved Aircraft, AA and Contractor will negotiate a mutually
acceptable extension of the date set forth in clause (1) of
this Section 7.02(k) prior to conversion of the Option
Aircraft.
(l) A material failure to represent the AA brand to the same
extent as other users of the AA brand, including AE and other
ABR carriers, as reasonably specified by AA in writing and
uniformly applied to all users of the AA brand, including AE
and other ABR carriers, will be deemed cause for termination
of this Agreement as provided in Section 7.02, provided that
such failure is noted in two consecutive audits.
(m) The provisions of Sections 6.02, 6.03, 6.04, 7.03, 11.01,
11.02, 11.03, 11.04, 13.02 and Article 8 shall survive the
termination of this Agreement.
7.03 - RECIPROCAL OPTION FOR ASSIGNMENT OF LEASES
(a) In the event of a termination of this Agreement for Cause by
AA, Contractor grants to AA an option to be assigned any or
all of the Leases for the Firm Approved Aircraft (the "CALL
OPTION"), exercisable at its sole discretion, at the date
notice of such termination is delivered to Contractor. AA may
exercise this Call Option by written notice delivered to
Contractor, within 60 Days following delivery of the notice
of such termination, designating those Leases to be assigned
to AA. Upon delivery of notice of such exercised Call Option,
Contractor will be deemed to have assigned all of its rights
and duties under the designated Leases to AA. Contractor shall
pay within 30 days of invoice for any maintenance conversion
expenses required to transfer the Firm Approved Aircraft
subject to such Leases from compliance with the Contractor's
FAA-approved maintenance program to AA's FAA-approved
maintenance program ("CONVERSION EXPENSES"). Further, any
parts and components subject to "power-by-the-hour"
maintenance arrangements shall be paid in full by Contractor
through the date of termination of this Agreement.
(b) In the event of termination of this Agreement without Cause by
AA:
1. AA grants to Contractor a one-time option to
assign to AA any or all of the Leases for the Firm Approved
Aircraft (the "ONE-TIME PUT OPTION"), exercisable, at its sole
discretion, within 60 days after Contractor's receipt of
written notice of termination by AA. Contractor may exercise
this One-Time Put Option by written notice delivered to AA
within such 60 days exercising the One-Time Put Option and
designating those Leases to be put to AA. Upon delivery of
notice of such exercise of the One-Time Put Option, AA will be
deemed to assume the designated Leases on the schedule set
forth in subsection (3) below.
2. Contractor grants to AA a one-time Call Option
(the "ONE-TIME CALL OPTION") to be assigned any or all of the
Leases for the Firm Approved Aircraft, exercisable, at its
sole discretion, at the date notice of such termination is
delivered to Contractor. AA may exercise this One-Time Call
Option by written notice delivered to Contractor
contemporaneously with the notice of such termination. Upon
delivery of notice of such exercised One-Time Call Option,
Contractor will be deemed to have
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assigned all of its rights and duties under the designated
Leases to AA on the schedule set forth in subsection (3)
below.
3. Following notice of the One-Time Put Option or
One-Time Call Option under this subsection (b), the parties
shall meet not later than 90 days following such notice, to
effect a plan of orderly transition and wind down of the
Agreement. Such transition plan shall include, but not be
limited to a transition phasing of the designated aircraft
from Contractor to AA (beginning not later than the 181st day
following such notice), at a rate of two aircraft per month,
on the last day of each month, for five months, based on a
schedule to be determined by AA, followed by the remaining
five aircraft on the last day of the sixth month. In such
event, the Term of the Agreement will be deemed to continue
until the last designated aircraft is phased from Contractor
to AA, provided however that performance measurement pursuant
to Exhibit J shall not be applicable during such a transition.
Contractor will not be liable for Conversion Expenses under this
Section 7.03(b), provided that Contractor continues to operate each
Firm Approved Aircraft in strict accordance with its approved
maintenance program following notice of termination, up to and
including the date of termination of this Agreement. Further, any parts
and components subject to "power-by-the-hour" arrangements must be paid
in full by Contractor through the date of termination of this Agreement
in the event of the exercise of either a Put Option or Call Option
pursuant to this Section 7.03(b).
AA agrees to indemnify and hold harmless Contractor from and against
any Claim arising from events or circumstances occurring after the date
of assignment out of any Lease that AA is deemed to assume hereunder.
Contractor agrees to indemnify and hold harmless AA from and against
any Claim arising from events or circumstances occurring on or before
the date of assignment out of any Lease that AA is deemed to assume
hereunder.
(c) Contractor agrees not to enter into any lease or similar
arrangement (however so titled) for Firm Approved Aircraft
other than pursuant to a Lease. Contractor will not amend any
Leases, or waive any material rights thereunder, without the
prior written consent of AA, such consent not to be
unreasonably withheld.
Each Lease entered into by Contractor must, at a minimum,
contain terms providing for the following: (1) the Lease must
be not less than 13 years in duration; (2) the Lease must be
assignable to AA without the consent of the Lessor and may not
contain any provisions that, upon assignment of such Lease to
AA, impose a penalty or any other adverse action on AA as a
result of such assignment; (3) the Lease must be assignable to
AA under the exact same terms and provisions as existed in the
Lease immediately prior to such assignment and such terms may
not become more onerous to the Lessee over the Term of the
Lease; (4) shall contain a "half-life" return condition
provision; and (5) AA must have the ability to purchase the
leased aircraft on commercially reasonable terms reasonably
acceptable to AA.
AA will make its representative reasonably available for
consultation and assistance in negotiating a Lease. Once terms
and provisions of a Lease have been agreed upon by Contractor
and the third party, Contractor shall provide a copy of such
Lease to AA. AA will then have ten (10) business days to
approve the Lease (such approval not to be
<Page>
unreasonably withheld) or to disapprove the Lease (such
disapproval not to be unreasonably provided), and to provide
written notice to Contractor of such approval or disapproval.
If AA disapproves a Lease, it shall include in its notice of
disapproval a detailed statement of the reasons for its
disapproval and a detailed statement of any suggested
non-economic changes, which if obtained by Contractor, would
require AA to approve the Lease, as modified. In the event AA
fails to provide notice of its approval or disapproval within
such 10 business day period, AA shall be conclusively deemed
to have accepted the Lease. Approval or disapproval of a Lease
by AA shall not be considered a waiver of its rights hereunder
with respect to future Leases. In the event that AA desires to
change any non-economic term or provision of the Lease or add
a new term or provision and such changes are reasonable taking
into account the aircraft type subject to the proposed Lease
and the relative bargaining power of Contractor, Contractor
shall have 15 business days to seek to effect such changes.
Further, during both the period in which AA reviews and
comments on the Lease term (up to 10 business days) and the
period in which Contractor seeks to effect such changes (up to
15 business days), Contractor shall be exempt from the [*]
of delay liquidated damages provided for in Section 1.02(a).
If such changes cannot be agreed upon between
Contractor and the third party, then Contractor may not enter
into the Lease.
To the extent that AA requires changes to a Lease that cause a
delay in placing a Firm Approved Aircraft into service, AA
will not be entitled to, and Contractor will not be liable
for, the penalty of [*] of delay per regional jet, as
liquidated damages, provided for pursuant to Section 1.02(a).
7.04 - FORCE MAJEURE
Except for any payments due hereunder, neither party shall be liable
for delays or failure in performance hereunder caused by acts of God,
acts of terrorism or hostilities, war, strike, labor disputes, work
stoppage, fire, act of government, court order, or any other cause,
whether similar or dissimilar, beyond the control of that party
including but not limited to non-delivery or delay in delivery of
aircraft to Contractor or delay in completion of required training of
Contractor's employees by the aircraft manufacturer or delay in receipt
of any necessary government approvals ("FORCE MAJEURE"). If any such
event of Force Majeure substantially prevents one party's performance
of the Agreement for a period of [*] or more, the other
party may terminate this Agreement on [*] prior written
notice.
ARTICLE 8 - TAXES
Each of Contractor and AA shall be responsible for and agree to pay all
Taxes, fees, levies, imposts, duties, charges and withholdings of any
nature (together with any and all fines, penalties, additions to Tax or
interest thereon or computed by reference thereto)(individually, a
"TAX" and collectively, "TAXES") which are imposed by any government,
governmental subdivision or other taxing authority of or in any
jurisdiction, or by any international organization on the sale,
delivery, use of materials, equipment or facilities or performance of
services under this Agreement which are related to such party's
respective operations or such party's performance of its respective
obligations under this Agreement.
Neither party shall be required by the foregoing Section to be
responsible for any Taxes which are imposed by any government,
governmental subdivision or other taxing authority of or in the United
States or any foreign jurisdiction and which are based on or measured
by the net income, capital, assets or net worth of the other party.
- ----------
* Confidential
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ARTICLE 9 - ASSIGNMENT, MERGER AND EXTRAORDINARY TRANSACTION
9.01 - ASSIGNMENT
This Agreement may be cancelled or terminated by either AA or
Contractor if there is, by operation of law or otherwise, an assignment
of this Agreement, or of any of the rights, duties or obligations
created hereunder with respect to any party to this Agreement, without
the written consent of the other party. In the event that this
Agreement is assigned, whether by operation of law or otherwise,
without such consent having been given in writing, the party not making
the assignment shall have the right to terminate the Agreement
following five (5) business days written notice to the other party and
an opportunity to cure within such five (5) business days period.
Notwithstanding the foregoing, (i) AA may, without consent of
Contractor, assign and/or delegate any or all of its rights or
obligations under this Agreement to any Affiliate or any company into
which or with which AA or its successor may be merged, combined or
consolidated, or which may otherwise succeed to all or any substantial
portion of AA's assets; (ii) Contractor may, without consent of AA,
assign or transfer this Agreement pursuant to a transaction permitted
under Section 9.02(a) hereof; and (iii) either party shall have the
right to assign as security all of its rights to money to be received
so long as all offsets in favor of, and amounts due to, the party not
assigning such rights, have been or shall be taken into account.
9.02 - MERGER
In the event Contractor merges with or is controlled or acquired by
another air carrier, or a corporation Affiliated with such an air
carrier ("HOLDING COMPANY"), or a corporation owned, controlled or
Affiliated with any such Holding Company and except for any such merger
with or acquisition by an entity that is under common control, directly
or indirectly, with Contractor, AA will have the option to terminate
this Agreement without liability to Contractor except as otherwise
provided in Section 9.03 (b) below.
9.03 - EXTRAORDINARY TRANSACTION
(a) For purposes of this Section, "EXTRAORDINARY TRANSACTION"
means any (1) merger of Contractor with another company not
under common control, directly or indirectly with Contractor,
(2) sale, transfer or lease by Contractor of all or
substantially all of its assets, rights or powers to an entity
not under common control, directly or indirectly, with
Contractor, or (3) the acquisition by another corporation or
entity not under common control, directly or indirectly, with
Contractor of all or a majority (at least 51%) of the
outstanding voting power of Contractor.
(b) Contractor may enter into an Extraordinary Transaction,
provided that AA's consent to assignment of this Agreement is
not otherwise required pursuant to Article 9.01 herein and
Contractor obtains for AA an affirmation from any such third
party, who succeeds to Contractor's interest in this
Agreement, that guarantees the full and faithful performance
of Contractor's Feeder Air Services under this Agreement. In
the event Contractor is unable to obtain such affirmation, AA
may, at its option, terminate this Agreement upon consummation
of the Extraordinary Transaction.
(c) Contractor agrees that (1) within thirty (30) days prior to
the closing of any Extraordinary Transaction with a third
party, or any initial or subsequent public offering of common
stock of Contractor, or (2) within seven (7) days prior to the
closing of any merger, sale,
<Page>
lease, or transfer of all or substantially all of its assets,
or acquisition by another entity which is not an Extraordinary
Transaction, Contractor will notify AA of such event.
(d) Contractor grants to AA a right to purchase up to five percent
(5%) of the common Stock of Contractor (the "COMMON STOCK")
offered for sale in connection with any initial public
offering of Common Stock ("IPO SHARES") by Contractor pursuant
to an effective registration statement under the Act or
comparable statement under any similar federal or other
statute then in force that will result in the IPO Shares being
listed or admitted to trading on a national securities
exchange or nationally recognized automated interdealer
quotation system ("IPO"). This right to purchase Common Stock
of Contractor granted to AA ("IPO PARTICIPATION RIGHT") shall
be subject to the following terms and conditions:
1. In the event that the effective date of the
registration statement covering the IPO Shares under the Act
occurs after February 15, 2002 (the one year anniversary of
the granting of the IPO Participation Right), AA may purchase
up to five percent (5%) of the IPO Shares in the IPO. The
purchase price of the IPO Shares subject to the IPO
Participation Agreement shall equal the per share price at
which the IPO Shares are offered to the public pursuant to the
IPO ("IPO SHARE PRICE"). AA may purchase less than all of the
IPO Shares available under the IPO Participation Right.
2. In the event that the effective date of the
registration statement covering the IPO Shares under the Act
occurs prior to February 15, 2002, AA may purchase up to a
number of shares of Common Stock equal to five percent (5%) of
the IPO Shares in the IPO in a private placement
contemporaneous with the IPO ("PRIVATE PLACEMENT SHARES"). The
purchase price of the Private Placement Shares subject to the
IPO Participation Right shall equal 75% of the IPO Share
Price. AA may purchase less than all of the Private Placement
Shares available under the IPO Participation Right.
3. Contractor shall give AA prompt notice of its
determination to conduct an IPO, but in no event later than
the date of the filing of the IPO Shares registration
statement under the Act. Contractor shall provide to AA a copy
of the preliminary prospectus concurrent with its distribution
to the public. Contractor shall provide AA no less than 72
hours notice of the commencement of public trading of the IPO.
AA shall inform Contractor of the number of IPO Shares or
Private Placement Shares that AA will purchase pursuant to the
IPO Participation Right no later than 48 hours prior to the
commencement of public trading of the IPO.
Further, in the event Contractor enters into an agreement with
another air carrier to provide regional air service under a
code share agreement and provides such other air carrier with
the right to participate in an IPO on terms more favorable to
such air carrier than the foregoing with respect to the type,
amount or pricing of participation, Contractor agrees, subject
to the provisions of this Section, to amend the type, amount
and/or pricing of rights granted to AA to participate in an
IPO so that they are not less favorable than the type, amount
and pricing or rights granted to such other air carrier.
Notwithstanding the foregoing, Contractor may provide another
air carrier with the right to participate in an IPO with a
type, amount or pricing of participation more favorable than
that available to AA, provided that such more favorable
treatment is proportionate to an increase in the number of
regional jets subject to such third party code share agreement
as compared to the Firm Approved Aircraft committed by AA to
be placed in service under the terms of this Agreement
(initially fifteen).
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(e) Sections 9.03 (b) and (c) herein above will not apply to any
proposed sale or disposition by Contractor of its aircraft or
assets that: (a) have become worn out or obsolete or are no
longer used and useful in Contractor's day to day business;
PROVIDED, however, that such sale or disposition does not
impair or negatively affect Contractor's ability to complete
scheduled service on a day to day basis under this Agreement;
or (b) are being replaced with other assets of a similar type
which are at least of equal quality and utility to Contractor
in carrying on its day to day business and meeting its
obligation under this Agreement.
ARTICLE 10 - COMMUNICATIONS, TRAINING AND BENEFITS
10.01 - MEDIA COMMUNICATIONS
The corporate communications functions and personnel of Contractor and
AA will operate independently but in coordination with respect to "ABR"
joint marketing objectives. In the event of any Feeder Air Service
accident or flight or ground incident involving the death of any
person(s) or threat or injury or potential injury to persons or
property, it is agreed that the provisions concerning emergency
response procedures as set forth in Exhibit I shall apply and that the
sole official spokespersons and liaison personnel with the media shall
be those individuals designated in AA's Emergency Response Procedures
Plan.
10.02 - TRAINING AND TRAINING MATERIALS
Subject to the terms or specific training programs set forth in
Exhibits D and H:
(a) For existing programs, AA will provide to Contractor at AA's
incremental cost, recurrent training and training materials
pertaining to any specialized programs Contractor will be
utilizing under this Agreement, such as WorldTracer and BMAS.
(b) For new programs, AA will provide initial training and
training materials to Contractor employees at AA's expense.
Contractor shall be responsible for all Contractor employee
expenses while attending such training.
(c) Should Contractor request AA instructors for the purpose of
exclusive training for Contractor employees either for
existing or new programs, and if such training is permitted by
AA, Contractor will pay AA the actual salary related costs,
including fringe benefits, plus any reasonable and customary
expenses incurred by the AA instructor(s).
10.03 - CONTRACTOR REPORTS
(a) Upon departure of each Contractor Feeder Air Service flight
from Feeder Air Service cities, flight close-out entries shall
be made by Contractor in SABRE as required by AA. If
Contractor becomes aware of any station(s) which have any
deficiencies in making "close-out "entries as required by this
Section, Contractor will promptly take corrective action to
remedy such problem including the submission to AA of a
corrective action plan.
(b) Contractor will furnish to AA operating performance reports in
accordance with Exhibit K.
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(c) Contractor will furnish to AA (1) within 45 days after the
end of each of the three interim calendar quarters, unaudited
financial statements including Contractor's then current
corporate balance sheet and profit and loss statement, and (2)
within 91 days after the end of Contractor's fiscal year,
Contractor's then current, audited financial statements
including, either separately or on a consolidated basis, the
balance sheet and the profit and loss statement, together with
associated footnotes, and a copy of the independent auditor's
report.
(d) AA may inspect Contractor's corporate records and accounts
related to Contractor's Feeder Air Services, from time to
time, upon reasonable notice during the life of this
Agreement.
(e) Each business day Contractor will furnish to AA (Attention: -
Director - Planning) daily operating reports for each day of
the week in a format specified by AA for the preceding day(s)
as per Exhibit K.
(f) Contractor will be responsible for filing all reports and
plans relating to its operations with the DOD, DOT, FAA, NTSB
or any state or airport authority, and Contractor will
promptly furnish AA with copies of all such reports and such
other available traffic and operating reports as AA may
request from time to time during the life of this Agreement
as per Exhibit K.
(g) Contractor will promptly furnish AA with a copy of every
report and plan that Contractor prepares, whether or not such
report is filed with the FAA, NTSB or any other governmental
agency, relating to any accident or incident involving an
aircraft used by Contractor in performing services under this
Agreement, whether or not such aircraft bears any Marks, when
such accident or incident is claimed to have resulted in the
death or injury to any person or the loss of, damage to or
destruction of any property.
(h) Contractor shall advise AA's legislative affairs department
(with a copy to AA Director-Planning) of all planned
communications, whether written or oral, with government
or civic officials in connection with Contractor's Feeder
Air Services. If requested by AA, Contractor shall provide
copies of any written communications. Further, each party
will endeavor to report to the other party any unplanned
meetings (where it is anticipated that negative media
coverage could result) that occur between either party and
any local, state, or federal governmental officials regarding
Contractor's performance as an ABR carrier.
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10.04 - AGREEMENTS WITH OTHER CARRIERS
(a) [*]
(b) Subject to Article 5 herein, in the event Contractor enters
into an agreement with a third party governing pursuant to
which Contractor will provide services substantially
similar to those provided to AA under this Agreement
employing ERJ-140 aircraft, Contractor shall: (i) provide
promptly to AA a copy of all documentation of same, and
(ii) offer, on an all-or-nothing basis, to AA, the
opportunity to amend this Agreement to incorporate
prospectively from the date of AA's election all of the
terms and conditions of such agreement to govern all
Approved Aircraft, including all Option Aircraft. AA, in
its sole discretion, may elect, within 10 business days
after receiving such notice from Contractor, to amend this
Agreement to reflect such terms and conditions, and
Contractor agrees to promptly approve such amendment in
writing in accordance with Section 13.01 herein. The rights
granted to AA pursuant to this Section 10.04(a) may be
exercised an unlimited number of times throughout the Term
of the Agreement.
(c) Subject to Article 5 herein, in the event Contractor reaches
agreement in principle on all of the material terms of a
contemplated agreement with a third party pursuant to which
Contractor proposes to provide services substantially similar
to those provided under the terms of this Agreement employing
aircraft other than ERJ-140 aircraft (a "PROPOSED AGREEMENT"),
Contractor shall (i) provide promptly to AA written notice of
such Proposed Agreement, including a detailed description of
all of the material terms and conditions thereof, and
(ii) offer, on an all-or-nothing basis, AA the opportunity to
enter into an agreement on the same terms and conditions as
such Proposed Agreement for the provision of the same type of
services by Contactor employing the same aircraft that
would be employed under such Proposed Agreement. AA shall
have the right, on only one occasion, within 10 business
days after receiving such notice from Contractor to elect
to enter into an agreement with Contractor on the same
terms and conditions as a Proposed Agreement, involving the
provision of the same type of services by Contractor with
the same aircraft as the Proposed Agreement; provided that
either (i) AA elects concurrently to exercise its Option
on all Option Aircraft for which the time to exercise such
option has not already expired or (ii) AA has exercised
all such options. If AA fails to accept such offer in
writing, Contractor will be permitted to consummate the
Proposed Agreement (on terms materially no more favorable
to the third party than were offered to AA) with a third
party within 120 days of such failure to accept;
provided, that if no transaction is consummated with a
third party on such terms and conditions within such
120-day period, the provisions of this Section 10.04(b)
shall again apply.
10.05 - WAIVERS
No failure by either party to exercise, or delay in exercising, any
right, power or remedy, and no course of dealings between the parties
shall constitute a waiver of such right, power or remedy. No waiver by
either party or any default, misrepresentation or breach of warranty,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach. No waiver shall be
valid unless in writing.
Notwithstanding the foregoing, neither party shall recover costs (with
the exception of interline settlements made in accordance with
Exhibit F) or enforce monetary penalties or incentive
- ----------
* Confidential
<Page>
payments to which it is entitled by the terms of this Agreement if the
party seeking such recovery or enforcement either knew or, with
reasonable due diligence, should have known of the facts or conditions
giving rise to its claim and failed to notify the other party in
writing within twelve (12) months thereafter.
ARTICLE 11 - CONFIDENTIALITY
11.01 - NONDISCLOSURE OF AGREEMENT
Except as required by law or in any proceeding to enforce the
provisions of this Agreement, AA and Contractor hereby agree not to
disclose or publicize to any third party the terms or conditions of the
Agreement or any related Agreement except in the sole discretion and
with the prior written consent of AA.
Notwithstanding the foregoing, either party may disclose the terms of
this Agreement on a need-to-know basis to its Affiliates, financial
advisors, outside law and accounting firms, bank lenders, or to other
financial entities or underwriters, provided such entities acknowledge
the confidential nature of such information and agree to be bound by
the non-disclosure requirements of this Article 11.
11.02 - NONDISCLOSURE OF INFORMATION
For purposes of this Agreement, confidential information, whether oral,
written or in any other form is that information which pertains to the
business, marketing, or operational plans or procedures of the
disclosing party and which should reasonably be understood by the
receiving party by the circumstances of disclosure or by the nature of
the information itself, to be proprietary and confidential to the
disclosing party. Except as required by law or in any proceeding to
enforce the provision of this Agreement, AA and Contractor hereby agree
to use confidential information solely for purposes related to the
performance of services under this Agreement and further agree not to
disclose to any third party any confidential information received from
the other party without the prior written consent of the party
providing such confidential information or data. The foregoing
restrictions for the use and/or disclosure of confidential information
shall not apply to information that:
(a) was publicly known at the time such information was
communicated by the disclosing party to the receiving party;
or
(b) becomes publicly known through no fault of the receiving
party subsequent to the disclosure of such information; or
(c) was in the receiving party's possession, free of any
obligation of confidence at the time of the disclosing
party's communication to the receiving party; or
(d) is developed by the receiving party independently of and
without reference to the disclosing party's confidential
information or other information that the disclosing party
communicated in confidence to any third party; or
(e) is rightfully obtained by the receiving party from third
parties authorized to make such disclosure without
restriction; or
(f) is identified by the disclosing party as no longer proprietary
or confidential.
(g) is disclosed to an Affiliate on a need-to-know basis and that
Affiliate agrees to abide by the provisions of this Section
11.02.
<Page>
11.03 - NOTIFICATION
If either party is served with a subpoena or other process requiring
the production or disclosure of any of the Agreement or confidential
information referenced in Article 11.02, then the party receiving such
subpoena or other process, before complying with such subpoena or
other process, shall immediately notify the other party of same and
permit the other party a reasonable period of time to intervene and
contest disclosure or production.
11.04 - RETURN OF INFORMATION
Upon termination of this Agreement, each party must return to the other
any confidential information or data received from the other and
designated as such by the party providing such confidential information
which is still in the recipient's possession or control.
ARTICLE 12 - RELATED AGREEMENTS
(a) Contemporaneously with the execution of this Agreement, AA and
Contractor acknowledge that the parties have or will enter
into the following additional agreements:
Reduced Rate Agreement for Employee Travel
Hub Real Estate Subleases
System Ground Handling Agreement
Warrant Agreement of even date herewith
Amendment No. 3 to the Amended and Restated Trans
World Express Air Services Agreement, dated February
15, 2001
(b) Upon execution of this Agreement, the parties shall promptly
meet and proceed to work together in good faith to negotiate
and conclude the terms and conditions of each of the Related
Agreements not executed simultaneously with this Agreement.
(c) The agreements enumerated in this Article 12 are herein
referred to as the "Related Agreements." Notwithstanding
anything to the contrary contained in the Related Agreements,
the term of each of the Related Agreements shall be
coterminous with the Term of this Agreement.
ARTICLE 13 - MISCELLANEOUS
13.01 - ENTIRE AGREEMENT AND AMENDMENTS
This Agreement, including any Appendices, Attachments and Exhibits
attached hereto or thereto, contains the complete, final and exclusive
agreement between the parties hereto with respect to the subject matter
hereof, and supersedes all previous agreements and understandings, oral
and written, with respect to such specific matter. This Agreement will
not be modified, amended or terminated by mutual agreement or in any
manner except by an instrument in writing, executed by the parties
hereto.
<Page>
13.02 - GENERAL
(a) Any and all notices, approvals or demands required or
permitted to be given under this Agreement shall be sufficient
if sent by certified or registered mail, postage prepaid, or
if sent by courier or overnight delivery service, or via
facsimile provided a confirming copy of such notice is sent
via one of the foregoing methods,
<Table>
<Caption>
if addressed to AA: with a copy to:
Director - Planning Corporate Secretary
American Airlines, Inc. American Airlines, Inc.
4333 Amon Carter Blvd. 4333 Amon Carter Blvd.
MD 5494 Ft. Worth, TX 76155
Ft. Worth, TX 76155
Fax: (817) 967-3407 Fax: (817) 967-4313
and if to Contractor, addressed to: with a copy to:
President and CEO Wexford Capital, LLC
Chautauqua Airlines, Inc. 411 West Putnam Avenue
Indianapolis Int'l Airport Greenwich, CT 06830
Suite #160 Attention: President
2500 South High School Road Attention: General Counsel
Indianapolis, IN 46241
Fax # 317-484-4547 Fax # 203-862-7312
</Table>
or to such other addresses as either party may hereafter
specify by notice as provided herein.
(b) This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Texas.
(c) This Agreement may be executed in two or more counterparts,
each of which will be deemed an original and all of which
together will constitute one instrument.
(d) If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws
effective during the Term, the legality, validity, and
enforceability of the remaining provisions of this Agreement
shall not be affected thereby, and in lieu of such illegal,
invalid, or unenforceable provision, there shall be added
automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable
provision as may be legal, valid, and enforceable.
(e) The prevailing party in any legal proceeding based upon this
Agreement shall be entitled to reasonable attorney's fees and
court costs, in addition to any other recoveries allowed by
law.
<Page>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be entered
into and signed by their proper officers thereunto duly authorized as of the day
and year first above written.
CHAUTAUQUA AIRLINES, INC. AMR CORPORATION
By: /s/ Bryan Bedford By: /s/ Charles D. Marlett
------------------------------- ---------------------------------
Name: Bryan Bedford Name: Charles D. Marlett
Title: President Title:
--------------------------- -----------------------------
<Page>
EXHIBIT A - FEEDER AIRPORTS
1. ST. LOUIS FEEDER AIRPORTS AND SCHEDULING STANDARDS
A. Subject to conditions specified elsewhere in the Agreement,
Contractor will provide Feeder Air Service between AA
designated Feeder Airports on the one hand, and the STL Hub on
the other hand during and upon completion of the Fleet Plan
phase-in.
B. In scheduling Contractor operated aircraft, AA will not unduly
require the use of more than one flight crew (pilots and
flight attendants) per overnight ("RON"). In the event the
marketing schedule does not provide the crew with "legal
rest," Contractor shall either "stage" a replacement crew at
the affected location or schedule the crew on a CDO. If a CDO
or staged RON is required, AA shall reimburse Contractor its
direct cost for such CDO or staged RON.
C. AA shall designate which Approved Aircraft type will be
operated to and from Feeder Airports and the STL Hub.
D. AA shall schedule the Approved Aircraft to maintain average
daily scheduled utilization within the minimum and maximum
parameters noted on schedules E-1a, E-1b, and E-2.
E. AA shall schedule the Approved Aircraft in an efficient
manner at the Hub and Feeder Airports.
F. AA shall have the discretion to change the frequency and
deployment of Feeder Air Service Flights between the Hub and
Feeder Airports provided reasonable notice, as defined in
Section 2 below, is given to Contractor.
2. ROUTE CHANGES
AA shall have the discretion to redeploy Approved Aircraft from time to
time given reasonable prior written notice is provided to the
Contractor. For the purposes of this Section, reasonable notice shall
mean:
A. Thirty (30) days to add or delete service to Feeder Airports
that are Covered Locations or locations served by a third
party ABR provider; and
B. Sixty (60) days to add Feeder Airports that are new
Contractor Locations; and
C. Sixty (60) days to delete Feeder Airports that are Contractor
Locations.
In the event AA requests Contractor to operate routes other than to or
from the STL Hub, Contractor and AA shall meet to determine what, if
any, changes are required to the STL cost model for the operation of
such non-STL Hub Feeder Air Service Flights.
* * *
<Page>
EXHIBIT B-1 -ABR MARKS
1. THE ABR MARKS ARE:
A. "ABR," "ABR," and AA's aircraft interior and exterior decor,
colors, and logos. Such ABR Marks may be retrieved by
Contractor when granted access to AADAMS pursuant to Section
1.01(a) on or after the execution date of this Agreement. The
ABR Marks may be revised by AA from time to time.
B. "AA" and "AA*", as appropriate as code to designate Feeder Air
Service Flights in the OAG, airline and third party
reservations systems, airport flight information displays,
passenger tickets, and similar media.
C. The "AAdvantage" frequent traveler program for promotion and
benefits.
D. Any other ABRMark which AA from time to time may designate.
* * *
<Page>
EXHIBIT B-2 - TWA MARKS
1. THE TWA MARKS ARE:
A. "Trans World Express," "TWE," "TWExpress," and TWA's aircraft
interior and exterior decor, colors, and logos. Such TWA Marks
are depicted in the logo sheet previously furnished by TWA to
Contractor, and attached hereto, which may be revised by AA
from time to time.
B. "TW" and "TW*", as appropriate as code to designate Feeder Air
Service Flights in the OAG, airline and third party
reservations systems, airport flight information displays,
passenger tickets, and similar media.
C. The "Aviators" frequent traveler program for promotion and
benefits.
D. Any other TWA Mark which AA from time to time may designate.
* * *
<Page>
EXHIBIT C - FLEET PLAN AND OTHER CONDITIONS
1. FEEDER AIR SERVICE APPROVED AIRCRAFT
A. REGIONAL JET AND TURBO PROP AIR TRANSPORTATION SERVICE
(1) As directed by AA and subject to certain Labor
Contract Restrictions, Contractor will utilize
Embraer regional jet aircraft, types 145 and 140,
(ERJ) configured in American Eagle specifications
(including but not limited to airframe, powerplant,
cabin interior, exterior trade dress, avionics, and
the like) , and Saab 340 (SF3) turbo prop aircraft,
configured with not less than 30 seats. Each
aircraft shall be equipped with cold galley,
lavatory, and 3 crew personnel. Unless otherwise
directed by AA, all ERJ aircraft operated by
Contractor will be the 140 LR version, although AA
may at its discretion change from the 140 LR version
to the 145 LR version. AA will give Contractor
timely notice of such change. Both parties agree
that the use of ERJ type 145 will require a
separate schedule of Block Hour and passenger
stipend charges.
(2) Other regional jet and turbo-prop aircraft types may
be used subject to AA's prior approval and
corresponding amendment to this Agreement as
appropriate.
(3) Contractor is permitted to assign one or more
Standard Marked Approved Aircraft as a spare aircraft
to protect operations pursuant to this Agreement.
B. RIGHT OF FIRST REFUSAL
Should Contractor have aircraft in excess of its operational
needs, Contractor will grant AA a right of first refusal to
place such aircraft in service for AA. All terms and
conditions contained in this Agreement shall apply to any
service operated by Contractor on behalf of AA with such
additional aircraft.
2. IN-SERVICE DATES / PHASE OUT DATES
In-service and phase out dates shall be as indicated on
Schedule C-1.
3. AIRCRAFT INTERIOR AND EXTERIOR SPECIFICATIONS
AA shall direct Contractor regarding the exterior trade dress
and interior fabric and color selection process of all
aircraft Contractor operates under this Agreement to ensure
consistency with AA's or AE's product appearance.
4. MAINTENANCE
A. Contractor agrees to maintain the Firm Approved Aircraft fleet
to the highest service non-mandatory bulletin/modification
("SB") status maintained on the other aircraft operated by
Contractor. Contractor and AA agree to cause their maintenance
personnel to meet at least once each calendar quarter, or more
often at the request of AA, to review the SB status of the
Firm Approved Aircraft fleet. In the event that Contractor
determines a particular SB is not cost beneficial, AA may
cause Contractor to perform the SB on the Firm Approved
Aircraft under the following circumstances:
<Page>
(1) If AA performs an SB on its fleet and desires such SB
to be performed on Contractor's Firm Approved
Aircraft fleet when such SB is not already preformed
or is not intended to be performed on any of the
Contractor fleet, then:
If AA provides a part or component to Contractor at
no charge to Contractor, Contractor will provide, at
no additional charge to AA, up to 100 man-hours per
Firm Approved Aircraft of labor to comply with the
SB. Any man-hours in excess of 100 shall be
reimbursed by AA to Contractor at straight-time
rates.
B. During the Term, Contractor shall furnish to AA such
information concerning the location, condition, use and
operation of the Approved Aircraft as AA may reasonably
request. Contractor shall permit any Person designated in
writing by AA, at AA's expense, to visit and inspect (at any
reasonable time, provided that such inspection shall not
unreasonably interfere in any material respect with
Contractor's business operations or operation or maintenance
of the Approved Aircraft) the Approved Aircraft and the logs,
manuals, records and other documentation maintained in
connection therewith and, at AA's expense, to make copies of
such records as AA may reasonably designate. AA shall have no
duty to make any such inspection and shall not incur any
liability or obligation by reason of making or not making any
such inspection. Any such inspection of the Approved Aircraft
shall be a visual, walk-around inspection which may include
going on board the Approved Aircraft and shall not include
opening any panels, bays, or the like; PROVIDED, that any such
designee of AA shall be entitled to be present during any
maintenance check of any Approved Aircraft at which any
panels, bays or the like may be opened and shall have the
right to inspect such items during such maintenance check.
Upon written request from AA, Contractor shall provide AA with
the anticipated dates of any scheduled major maintenance
checks (including any "C", heavy "C" or "D" check) occurring
within the six-month period following such request. Contractor
shall promptly address any concerns of AA's Flight Operations,
Ground Operations, Maintenance and Safety Departments.
C. Contractor shall maintain, service, repair, overhaul and test
or cause to be maintained, serviced, repaired, overhauled and
tested each Approved Aircraft (and all parts and components
thereof) in accordance with its FAA approved maintenance
program, so as to keep each Approved Aircraft (and all parts
and components thereof) in at least as good an operating
condition as when delivered, ordinary wear and tear excepted,
and within the acceptable limits of performance provided in
the manufacturer's manuals.
* * *
<Page>
SCHEDULE C-1 - FLEET PLAN AND IN-SERVICE DATES
At the STL Hub, Contractor has agreed to continue to operate the
following in service ERJ-145 LR and Saab 340 aircraft until the phase
out dates listed (the ERJ-145 units and the SAAB 340 units are
collectively referred to as "ORIGINAL APPROVED AIRCRAFT"), and to place
the following 15 firm ERJ-140 LR units into service according to the
following schedule (the ERJ-140 LR units are collectively referred to
as "FIRM APPROVED AIRCRAFT"):
<Table>
<Caption>
Contractor Make/ In-Service Total AA Phase-out Total AA
Unit Model Date SF3 Units Date RJ Units
- ----------------- ---------------- ------------- ---------- ------------------------ ----------
SF 01 - 06 SF3 6 April 1, 2002
145-01 145 LR F-08 in service date 1
145-02 145 LR F-09 in service date 2
145-03 145 LR F-10 in service date 3
145-04 145 LR F-11 in service date 4
145-05 145 LR F-12 in service date 5
145-06 145 LR F-13 in service date 6
145-07 145 LR F-14 in service date 7
145-08 145 LR F-15 in service date 8
F-01 140 LR Oct-01 9
F-02 140 LR Oct-01 10
F-03 140 LR Nov-01 11
F-04 140 LR Nov-01 12
F-05 140 LR Dec-01 13
F-06 140 LR Dec-01 14
F-07 140 LR Dec-01 15
F-08 140 LR Jan-02 15
F-09 140 LR Jan-02 15
F-10 140 LR Jan-02 15
F-11 140 LR Feb-02 15
F-12 140 LR Feb-02 15
F-13 140 LR Mar-02 15
F-14 140 LR Mar-02 15
F-15 140 LR Apr-02 15
</Table>
Note: For the purposes of Section 1.02, specific "in-service" date shall be
confirmed to AA by Contractor not less than 90 days prior to the
scheduled date of delivery.
Additional Approved Aircraft may be added to the Fleet Plan by mutual
agreement between the parties and under the same terms and conditions
stated herein.
<Page>
OPTION AIRCRAFT
The aircraft described in the table below are collectively known as the
"OPTION AIRCRAFT."
<Table>
<Caption>
Potential
Option RJ Commitment Notice to Delivery Total AA
Unit Make/ Model Date Convert Date Units
--------- ----------- ---------- --------- -------- ---------
O-01 Jul-01 Jul-01 Apr-02 16
O-02 Jul-01 Jul-01 [*] 17
O-03 Jul-01 Jul-01 [*] 18
O-04 Jul-01 Jul-01 [*] 19
O-05 Jul-01 Jul-01 [*] 20
O-06 Jul-01 Oct-01 [*] 21
O-07 Jul-01 Oct-01 [*] 22
O-08 Aug-01 Nov-01 [*] 23
O-09 Aug-01 Nov-01 [*] 24
O-10 Sep-01 Dec-01 [*] 25
O-11 Sep-01 Dec-01 [*] 26
O-12 Oct-01 Jan-02 [*] 27
O-13 Oct-01 Jan-02 [*] 28
O-14 Nov-01 Feb-02 [*] 29
O-15 Nov-01 Feb-02 [*] 30
O-16 Dec-01 Mar-02 [*] 31
O-17 Dec-01 Mar-02 [*] 32
O-18 Jan-02 Apr-02 [*] 33
O-19 Jan-02 Apr-02 [*] 34
O-20 Feb-02 May-02 [*] 35
</Table>
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<Page>
EXHIBIT D - STANDARDS OF SERVICE
1. CUSTOMER SERVICE
Contractor will perform all customer-related services in a
professional, businesslike, and courteous manner.
A. In order to ensure a high level of customer satisfaction,
Contractor agrees that it will train or cause to be trained to
proficiency, all Contractor customer service employees
associated with Contractor's ABR Services.
B. Contractor will establish and maintain customer handling
procedures and policies which conform with Customer Service
Policies and Procedures or other such documentation as AA may
from time to time adopt, to the extent that such procedures
and policies are appropriate for an ABR operation.
Further, Contractor will establish, maintain, and enforce
employee conduct, appearance and training standards and
policies which are similar to those utilized by AA.
C. Contractor agrees to participate in any and all special
training or other programs that AA provides for its customer
service employees. Contractor may elect to accomplish such
training through the use of a "Train the Trainer" concept, if
permitted by AA.
D. Upon the request of either party, Contractor and AA will meet
to discuss and review Contractor's customer handling
procedures and policies and Contractor's employee conduct,
appearance, and training standards and policies to ensure
compliance with this Exhibit D.
E. Contractor shall resolve all customer complaints in accordance
with AA's Customer Service Policies and Procedures and will
forward all customer complaints to AA's Customer Relations
Department to ensure timely resolution of all customer
concerns associated with the ABR Services provided by
Contractor.
2. IN-FLIGHT SERVICE PRODUCT AND DELIVERY
Contractor shall cater flights as directed by AA. Contractor shall
coordinate with AA's (or its Affiliate's) In-flight Services
Department to ensure consistency and quality of Contractor's
in-flight service product, including but not limited to non-safety
related functions such as inflight marketing announcements, meal
and beverage presentation and delivery, provisioning and usage of
passenger amenity kits, and the like. Contractor shall implement
suggestions made by AA's (or its Affiliate's) In-flight Services
Department if such suggestions can be implemented without additional
cost to Contractor. AA shall assist Contractor in obtaining
commissary items (beverages and complimentary foodstuffs) at AA's
actual cost, i.e., on a pass through basis. If meal service is
required by AA, Contractor shall pass the additional cost through
to AA.
...
Contractor will coordinate with AA to ensure consistency with AA's
product delivery, including but not limited to AA logo napkins, stir
rods, cups and the like. AA shall provide such amenities at no charge
to Contractor.
<Page>
3. REPRESENTATION AND PRESENTATION OF THE AA BRAND
A material failure to represent the AA brand to the same extent as
other users of the AA brand, including AE and other ABR carriers as
reasonably specified by AA in writing and uniformly applied to all
users of the AA brand, including AE and other ABR carriers, will be
deemed cause for termination of this Agreement as provided in
Section 7.02, provided that such failure is noted in two
consecutive audits.
* * *
<Page>
EXHIBIT E - CHARGES PAYABLE
1. CHARGES PAYABLE BY AA
A. BLOCK HOUR CHARGE
AA shall pay Contractor a fixed fee per actual Block Hour
flown in revenue service. The Block Hour rate is based upon
Contractor's fixed costs and will vary based upon the number
of scheduled Block Hours on an average daily basis for each
Approved Aircraft fleet (see Schedules E-1a and E-1b for
ERJ-145 and ERJ-140 respectively, and Schedule E-2).
Contractor will bear all product reliability and operating
cost risk unless otherwise stated herein. The rate per Block
Hour shall be adjusted only in conjunction with schedule
changes that affect the scheduled Block Hour utilization
subject to a minimum payment calculated on the basis of [*]
per day, regardless of whether the Approved Aircraft are
scheduled for such number of Block Hours per day.
For the avoidance of doubt, AA will schedule the Firm Approved
Aircraft for a minimum daily utilization of [*] per day on
average. For example, in the event that AA schedules the Firm
Approved Aircraft for an average of [*] hours per day, but
Contractor actually flies only [*], Contractor shall be
paid for [*] at the Block Hour rate corresponding to [*].
Certain components of the Block Hour cost shall be subject to
periodic adjustment based upon Section C below.
B. PASSENGER STIPEND
AA shall pay contractor a passenger stipend for each Revenue
Passenger carried onboard Contractor's aircraft. The
applicable amount of passenger stipend is detailed in
Schedules E-1a, E-1b and E-2.
C. ADJUSTMENTS TO CHARGES
In addition to the Block Hour charge and passenger stipend,
AA agrees to pay Contractor the following items:
(1) AA agrees to reimburse Contractor for certain Pass
Through Costs fully or partially excluded from the
Block Hour charge or passenger stipend. These Pass
Through Costs and their associated rules of
application are listed in Schedule E-3(1)(I).
(2) AA agrees to reimburse Contractor for all third
party vendor charges incurred in providing Feeder
Air Services at a Covered Location. Contractor
should contract such services when necessary, pay
the vendor directly, and then submit charges to AA
as Other Pass Through Costs as described in
Schedule E-3(1)(I).
(3) AA agrees to reimburse Contractor for de-icing
services provided by vendors at all locations.
Contractor should contract such services when
necessary, pay the vendor directly, and then
submit charges to AA as other Pass Through Costs
as described in Schedule E-3(1)(I).
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<Page>
(4) AA agrees to reimburse Contractor for de-icing
fluid provided by AA maintenance at the Hub for
purposes of on-gate de-icing of Approved Aircraft.
Contractor should pay AA maintenance directly for
such fluid, and then submit charges back to AA as
Other Pass Through Costs as described in Schedule
E-3(1)(I).
(5) The Block Hour charge contemplates Contractor
performing Passenger Handling and Ground Handling
Duties for [*]. That number will be adjusted for
actual deployment by use of CLDR (or Contractor
Location Departure Ratio) as defined herein. "CLDR"
means the number of scheduled, weekday Feeder Air
Service regional jet departures handled by
Contractor, divided by the total number of scheduled
weekday Feeder Air Service regional jet departures
operated by Contractor. AA shall recompute the CLDR
based upon the current marketing schedule then in
effect. The computation of CLDR shall be made at the
beginning of each calendar quarter when the total
regional jet fleet count is less than 20 units and
semi-annually (January 1 and July 1) when the total
regional jet fleet count is 20 units or more. For
purposes of Contractor cost reimbursement, the
following calculations shall be performed on a
monthly basis and AA agrees to reimburse Contractor
the amount generated by such calculation:
[*]
NOTE: The [*] departure cost (the "RJ Turn Fee")
is based upon April 2000 economics and is subject
to the Escalation Percent (see Schedule E-4)
beginning April 1, 2002.
(6) If, during any calendar quarter, the level of
Uncontrollable Cancellations incurred by Contractor
is more than [*] of scheduled Block Hours, then AA
shall pay to Contractor an amount determined in
accordance with the following formula:
[*]
where
[*]
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* Confidential
<Page>
2. CHARGES PAYABLE BY CONTRACTOR
A. AA GROUND AND PASSENGER SUPPORT SERVICES TRAINING
Contractor will provide, at no cost to AA, at no cost
to AA, all necessary training to enable AA, and/or its
Affiliate(s) to fulfill its obligations under any ground
handling agreements.
B. AUTOMATION
1. Contractor shall pay all communications charges
in the Feeder Cities and Hub, as appropriate.
2. Contractor shall pay all communications charges
associated with the transmission and reception of
ACARS data.
C. UNANTICIPATED COSTS
Any costs incurred by Contractor in conjunction with
Contractor's ABR Services shall remain the responsibility
of Contractor unless expressly subject to payment by AA
as provided elsewhere in this Agreement.
D. OTHER CHARGES INCURRED
1. Contractor agrees to pay AA for all costs or
expenses, including fines and penalties ("COSTS")
imposed on AA directly arising out of Contractor's
failure to comply with AA's Customer Services
Policies and Procedures with regard to the
ticketing and boarding of any passenger for ABR
Services or any other passenger connecting to
transportation services offered by AA, including
but not limited to Costs arising out of Contractor's
failure to verify travel documents or under
collection or under remittance of fares, Taxes,
PFC's, security surcharges or the like, except to
the extent Contractor's non-compliance is due
to the failure of AA to comply with any such
applicable law, rule, regulation, or procedure.
2. Any services, if requested by Contractor and
performed by TWA, that are not otherwise identified
in this Agreement shall be at [*] of Mutual
Assistance Ground Service Agreement ("MAGSA") rates.
E. TURBO-PROP AIRPORT SUPPORT SERVICES
Contractor shall pay AA [*] scheduled turbo-prop ("TP Turn
Fee") at each Covered Location where AA or its Affiliate
provides Airport Support Services. Contractor shall make
arrangements with AA Vendors, if applicable, to pay such
Vendors directly and may submit such bills back to AA for
credit/reimbursement from the TP Turn Fee.
Contractor's payment of the TP Turn Fee may be withheld from
the Contractor payment/wire transfer by AA at AA's option.
3. SHARED COSTS
AA and Contractor agree to share the following costs on an equal
(50/50) basis:
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A. Ongoing SABRE automation equipment cost
B. Installation of initial SABRE automation equipment at
Contractor locations
AA will purchase and install equipment, then bill Contractor
fifty percent (50%) of such cost. AA will retain all rights to
the equipment. In the event of a Covered Conversion, AA will
reimburse Contractor's expenses for the initial purchase and
installation.
4. HUB RELOCATION
In the event AA requires Contractor to relocate to different facilities
at the Hub other than Concourse B, AA and Contractor shall modify the
cost model to reflect any changes as a direct result of the relocation
proportionately.
* * *
<Page>
SCHEDULE E-1a
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT
* * *
<Page>
SCHEDULE E-1b
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT
* * *
<Page>
SCHEDULE E-2
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT
* * *
<Page>
SCHEDULE E-3
1. The following cost groups shall be reconciled on a monthly basis,
with the cost difference passed through to either AA or Contractor.
The difference between the direct costs to the Contactor and the
cost assumed in the pricing model shall be reconciled monthly by
Contractor and such reconciled difference shall be either reimbursed
to Contractor (under payment) or credited to AA (over payment). The
settlement date for all Pass Through Costs shall be made in
accordance with the terms set forth in Exhibit F. AA reserves the
right to audit Contractor's Pass Through Costs.
A. Fuel (into-plane) - The Block Hour charge assumes a gross (into-plane
including taxes and servicing) fuel price of [*] of Jet A fuel. To the
extent that Contractor's actual fuel costs per gallon deviate from this
amount, the difference, multiplied by the actual number of Jet A fuel
gallons consumed by Contractor's Feeder Air Service Flights, shall
either be reimbursed to Contractor or credited to AA.
B. Landing Fees - The Block Hour charge assumes a gross landing fee (per
1,000 lbs of maximum aircraft landing weight) [*] To the extent that
actual landing fees paid by Contractor deviate from this amount, the
difference, multiplied by the actual amount of landing weight for
Contractor's Feeder Air Service Flights, shall either be reimbursed to
Contractor or credited to AA.
C. Passenger Liability Insurance - The Block Hour charge assumes an
insurance cost of [*] 1,000 RPMs. Each year, on the anniversary date of
Contractor's policy, the rate shall adjust up or down [*] To the
extent that the insurance cost for Passenger Liability Insurance paid
to Contractor by AA deviates from the New PLI Calculated Rate, the
difference, multiplied by the actual number of RPMs (000) associated
with Contractor's Feeder Air Service Flights shall be either reimbursed
to Contractor or credited to AA. Alternatively, AA, at its sole
discretion, may elect to offer Contract Passenger Liability Insurance
coverage for its Feeder Air Service operations with terms and
conditions to be mutually agreed to by the parties.
D. Aircraft Hull Insurance - The Block Hour charge assumes a cost of [*]
of Aircraft Hull value. Each year, on the anniversary date of
Contractor's policy, the rate shall adjust up or down [*]. To the
extent that the insurance cost for Aircraft Hull Insurance paid to
Contractor by AA deviates from the New AHI Calculate Rate, the
difference, multiplied by the actual Hull values divided by $100,
associated with Contractor's Feeder Air Service Flight shall either be
reimbursed to Contractor or credited to AA. Alternatively, AA, at its
sole discretion, may elect to offer Aircraft Hull Insurance coverage
for its Feeder Air Service operations with terms and conditions to be
mutually agreed to by the parties.
E. Aircraft Property Taxes - The Block Hour charge assumes a property Tax
of [*] of assessed aircraft property value. To the extent that the
actual property Tax ratio paid by Contractor deviates from this amount,
the difference, multiplied by the actual assessed aircraft property
value, shall either be reimbursed to Contractor or credited to AA.
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F. De-Icing Services - The Block Hour charge does not include any expenses
related to the cost of de-icing aircraft. Contractor shall pay for
these services when required to do so and shall submit the direct cost
of these services back to AA for reimbursement. AA shall reimburse
Contractor for its actual cost of de-icing associated with Contractor's
Feeder Air Service Flights.
G. International Service Fees - The Block Hour charges does not include
any cost associated with NAV-CANADA, customs clearance, or other
services fees associated with operating service to non- US destination
points. To the extent that Contractor incurs such costs in providing
Feeder Air Service, AA agrees to reimburse Contractor its actual costs
incurred.
H. In-Flight Meals - The Block Hour charge does not include any expenses
associated with meal service provided by Contractor on longer flights
furnished in accordance with AA dining standards and directives. To the
extent that Contractor incurs such costs in providing these meal
services, AA agrees to reimburse Contractor it's actual costs incurred.
I. Other Pass Through Costs - AA agrees to reimburse Contractor for
certain costs directly related to Contractor's Feeder Air Services and
costs associated with vendor services at Covered Locations as set forth
in Section 2.05.
J. Aircraft Ownership Costs
[*]
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SCHEDULE E-4 - ESCALATION PERCENT
The escalation percent as computed below (the "ESCALATION PERCENT" or "EP")
shall be applied to the Block Hour rates and Revenue Passenger stipend rates in
Schedules E-1a, E-1b and E-2. The first escalation adjustment shall be made
effective April 1, 2002, and shall be computed based upon the change (expressed
as a percent) from the March 2000 CPI index of 171.2. Thereafter, the escalation
adjustment shall be made effective April 1 of each subsequent year and shall be
computed based upon the published report of CPI released during the immediately
preceding March. The escalation adjustment shall be used to adjust the rates for
the fiscal year beginning that April 1st by applying the EP to the rates in
effect for the prior year. However, in no event shall any EP adjustment for any
single year exceed [*]. The Escalation Percent shall be computed as follows:
[*]
* * *
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EXHIBIT F - ACCOUNTING PROCEDURES
The following accounting procedures reflect the understanding between AA and
Contractor regarding various accounting, reporting and settlement procedures.
These procedures are based on Contractor using AA stock, and each
Contractor-operated AA ticketing location ("CONTRACTOR TICKETING LOCATION")
operating as if it were an AA-operated AA ticketing location.
1. SALES REPORTING AND CASH TRANSFER
A. Each Contractor Ticketing Location will be automated with AA's
ATAC, and Contractor agrees to adhere to the same ticketing
procedures, ticket reporting and cash remittance timing as
required of a Covered Location, including:
(1) Reporting of auditor coupons and other sale documents
daily to AA's ticket lift processing facility in
Juarez, Mexico.
(2) Depositing cash and check sales the next business day
into the local AA depository bank. These funds will
be withdrawn automatically from the local depository
bank (on the second business day following the day of
the sale) by AA's central depository bank through
utilization of the Bank Automated Clearing House
system.
B. AA and Contractor have agreed to establish the local
depository bank accounts as AA accounts managed and overseen
by AA.
C. All sales by Contractor will be subject to the same sales
audits, to be conducted at such times as AA may elect, as may
be performed by AA on sales reports for any AA staffed
location. The audit will include establishing discrepancy
notices ("DISCREPANCY NOTICES") for ticketing errors, cash
under collections or shortages, and unreported sales which
have been determined to be the fault of Contractor. Contractor
will be charged for these errors (up to the amount of any
actual expense incurred by AA) in the same manner AA charges
any AA staffed location, if not corrected, except as provided
in Section 4.B of this Exhibit, within 90 days after the
Discrepancy Notice is established.
D. Sales will include those made using the same credit cards
accepted by AA. The sale amount will be billed directly to the
credit card companies for billing to their cardholders via
AA's Advance Credit Billing System programs through ATAC.
E. Contractor will be responsible for and will indemnify, hold
harmless and reimburse/pay AA the tariff value of, any
transportation furnished by AA or other carriers on AA ticket
stock lost, stolen or fraudulently issued after delivery of
the same to Contractor, up to the date that such ticket stock
is blacklisted. Blacklisted ticket stock accepted by
Contractor employees for transportation shall be subject to
full reimbursement by Contractor to AA.
2. REFUNDS
A. Contractor shall be responsible for and shall indemnify, hold
harmless and reimburse/pay AA the tariff value of, any
transportation refunded by AA or other carriers on AA ticket
stock lost, stolen or fraudulently issued after delivery of
the same to Contractor, up to the date that such ticket stock
is blacklisted. Blacklisted ticket stock accepted by
Contractor
<Page>
employees for refund shall be subject to full reimbursement
by Contractor to AA, if the refund applied to AA.
B. Refunds made by Contractor are subject to audit and a
Discrepancy Notice will be established for any over refunds
issued at the error of Contractor. The original Discrepancy
Notice will be sent to the issuing location with a copy to
Contractor central accounting within 45 days of the issued
refund. If the discrepancy is not corrected, Contractor will
be charged 90 days after the Discrepancy Notice is
established.
C. Contractor shall adhere to AA's procedures pertaining to the
flow of refund documents (unused coupons, lost ticket
applications, and the like). AA will provide such procedures
to Contractor in writing.
D. Applications for refunds of lost AA tickets will follow
standard AA procedures, including but not limited to
collection and payment to AA by Contractor of the applicable
AA lost ticket charge.
E. For consumer adjustments, denied boarding, Baggage Claims or
involuntary refunds pertaining to Contractor flights
(collectively "CONSUMER ADJUSTMENTS"), Contractor shall be
authorized to issue appropriate settlement documents as AA may
direct and authorize from time to time, and in accordance with
AA's policies and procedures pursuant to Section 2.06(d).
3. INTERLINE SETTLEMENTS AND WIRE TRANSFERS
A. Except as otherwise provided for herein, AA and Contractor
agree to settle all interline transactions using the rules
prescribed in the ACH Manual of Procedure and any other
applicable industry procedures.
B. AA shall pay Contractor for Feeder Air Services, via wire
transfer, according to the provisions set forth below:
(1) AA shall estimate Contractor monthly payment based
upon the published flight schedule and shall pay
Contractor [*] of the estimated Block Hour charges
in the following installments:
(a) On the 5th day of the month, or the next
business day, AA shall pay Contractor [*]
of the estimated Block Hour charge for the
current month;
(b) On the 10th day, or the next business day,
AA shall pay Contractor [*] of the estimated
Block Hour charge for the current month; and
(c) On the 25th day, or the next business day AA
shall pay Contractor [*] of the estimated
Block Hour charge for the current month,
plus the reconciliation of the prior month's
Block Hours charges and prior month's
passenger stipend, as detailed below, plus
any amounts due Contractor for Freight and
Small Package shipments under Section 6 of
Exhibit F below.
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AA may offset amounts due AA by Contractor
against the prior month's reconciled amount
identified in Section 1.C above.
C. AA shall perform all revenue accounting functions for
passenger revenue to the same degree as it would for any AA
station, within the limits of AA's automation systems.
Contractor may audit AA's procedures at any time upon
reasonable notice.
D. Within 60 days of the conclusion of a performance period as
specified in Exhibit J, AA and Contractor will settle as
appropriate under Exhibit J, based upon Contractor's
performance and amount of bonus or penalty incurred. AA and
Contractor will be jointly responsible for determining the
payment to be made or any penalty to be credited to AA.
E. Ticket Stock, AATVs, and the like will be payable by
Contractor, and Contractor shall at all times be responsible
for all accountable items, including but not limited to AATVs,
ticket stock, and the like. There shall be no charge for
proper use of AATVs for DBC.
F.- N. [INTENTIONALLY OMITTED]
O. BAGGAGE SETTLEMENTS
Contractor shall handle all baggage related matters in
accordance with AA's procedures, as may be amended from time
to time. [*] Baggage Claims involving Connecting Passengers
in which the cause or blame cannot be determined shall be
[*].
4. FURTHER DEDUCTIONS FROM INTERLINE SETTLEMENTS / WIRE TRANSFERS
A. [INTENTIONALLY OMITTED].
B. AA will deduct from its payment under Section 3.B above to
Contractor any Discrepancy Notices issued to Contractor
Locations which have not been paid or cleared within ninety
(90) days from date of issuance. If Contractor, after making a
good faith effort to collect, cannot do so because of the age
of the item at the time the discrepancy was established, AA
will consider adjusting the deduction, but is not obligated to
do so.
C. AA, in the exercise of its sole discretion, may elect to
deduct from AA's payment to Contractor under Section 3.B above
those charges to Contractor outlined in Exhibit E of this
Agreement, or any other amounts or charges payable to AA by
Contractor pursuant to this Agreement, or otherwise as may be
authorized by Contractor, including Performance Penalties
under Exhibit J(2)(C).
D. In lieu of Section 4.C above, AA, may invoice Contractor
through the ACH for passenger billings, non-transportation or
any other charges payable to AA.
5. CREDIT TRANSACTIONS
A. AA authorization and form of payment procedures will be
followed for acceptance of credit cards and checks.
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6. SMALL PACKAGE, FREIGHT, AND MAIL
A. Exhibit H sets forth the applicable procedures and revenue
split for the carriage of Shipments, as that term is defined
in Exhibit H. Contractor shall use only AA documents for
Shipments.
(1) Contractor will report all Shipment transactions in
accordance with AA's procedures.
(2) AA payments to Contractor for Shipments shall be in
conjunction with AA's wire transfers under Section
3.B above on a mutually agreed schedule.
(3) Billing discrepancies detected at the time of an
audit by AA will be handled consistent with Section 1
of this Exhibit F above.
(4) In consideration of the revenue split detailed in
Exhibit H, AA shall provide Cargo Revenue Accounting
services for Shipments and applicable required
documents to Contractor at no additional charge.
B. Schedule H-1 sets forth the applicable procedures for the
carriage of Mail, as that term is define in Schedule H-1.
Contractor shall carry mail at no charge to AA. All mail
revenues accrue to AA.
7. AUDIT AND SECURITY MATTERS
A. Contractor shall permit AA to examine Contractor Ticketing
Locations to the same extent any AA staffed location is
audited internally.
B. Security reviews will be conducted as required by AA's
Security Department.
C. Contractor will follow AA policy and procedures for security
of ticket stock, undeposited cash, and the like, copies of
which shall be furnished to Contractor upon request.
D. Contractor will observe all sine table security and other
computer security measures that AA adopts for its own airport
and sales functions.
8. AA ACCOUNTS
A. AA shall maintain such books of accounts and records as shall
be necessary to perform the foregoing accounting and
settlement services, which books of accounts and records will
be available at all reasonable times upon reasonable prior
notice for inspection by Contractor or its designated
representatives.
B. AA will use the same degree of care and will apply the same
standards and safeguards for the accounting and settlement
services provided hereunder as AA uses for its own accounting
services.
* * *
<Page>
EXHIBIT G - DIVISION OF PASSENGER REVENUE
All passenger revenues shall accrue to the benefit of AA.
* * *
<Page>
EXHIBIT H - SMALL PACKAGE, FREIGHT AND MAIL
1. If requested by AA, Contractor will provide services under the terms of
this Exhibit H. This Exhibit H sets forth the terms which will govern
the transport of small packages ("AA TODAY DOOR TO DOOR" and "PRIORITY
PARCEL SERVICE") and general air freight, but not mail (herein
collectively referred to as "SHIPMENTS") carried from origin to
destination in part on AA and in part on Contractor's Feeder Air
Services. The attached Schedule H-1 states the terms governing the
transport of Mail. Shipments shall be as defined in AA's tariffs, as
published in the ATPCO Official Local Cargo Rate Tariff (the "AA
TARIFFS") for Domestic shipments and the TACT for International
shipments.
2. All Shipments shall be transferred between AA and Contractor at the
designated transfer city as shown on the airbill of each Shipment.
However, general air freight shall be originated only at AA staffed
stations. Freight routed inbound to an ABR city from the Hub may be
accepted for carriage. ABR shall not carry hazardous materials, as that
term is defined by federal aviation regulations and/or the DOT.
3. The procedures which govern the interline transfer of Shipments between
Contractor and AA, as described in this Exhibit H, shall be those set
forth in the AA Tariffs and the ATA Manual, all as are in effect from
time to time, except that (a) to the extent that any such procedures
are inconsistent with the terms of this Agreement, this Agreement shall
govern, and (b) to the extent the procedures set forth in the AA
Tariffs and the ATA Manual are inconsistent, the AA Tariffs shall
govern. Contractor agrees to adopt the AA Tariffs as from time to time
are in effect.
4. For all Shipments flown by both AA and Contractor, Contractor shall
receive [*].
5. AA and Contractor shall cooperate in the promotion of Shipment
services.
6. For Shipments carried from origin to destination entirely on
Contractor, [*]. Contractor may establish its own rates which
AA, at Contractor's request, shall relay to ATPCO for publication.
Contractor acknowledges, however, that AA shall not be responsible in
any way for the content of any rates which AA relays to ATPCO for
Contractor hereunder, and Contractor shall be solely responsible for
assuring the accuracy of any such information published by ATPCO. When
cumulative ATPCO charges for Contractor tariff revisions exceed $1,000
during any twelve (12) month period, that portion of the charges in
excess of $1,000 will be billed to Contractor by AA, and Contractor
will make prompt payment to AA of such charges in excess of $1,000.
7. [INTENTIONALLY OMITTED]
8. [INTENTIONALLY OMITTED]
9. Refunds for small package service failures will be apportioned as
follows:
A. When carriage is in part on AA and in part on Contractor,
[*]
B. When carriage to exclusively on Contractor, [*]
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C. In the event that AA or Contractor discover repetitive refunds
or other unusual activity associated with a particular flight
or shipper, AA and Contractor shall promptly meet to discuss
the appropriate action to be taken.
10. From time to time Contractor shall permit AA to inspect
Contractor's cargo operations, including Contractor policies
and procedures for the handling of cargo; PROVIDED however
that any inspection of Contractor operations shall be
conducted by AA so as to minimize any disruption to
Contractor. Contractor shall promptly address all reasonable
concerns of AA noted during such inspection, to AA's
satisfaction.
11. Contractor agrees to pay for, adopt and implement, in
accordance with AA's policies and procedures, any automation
(to the extent that the cost/benefit of such automation allows
Contractor's to continue its cargo operations) required by any
regulatory authority in connection with the security, tracking
and accounting functions of handling and transporting small
package shipments by air. Contractor shall comply with AA's
reasonable request of Contractor to implement new
automation/technology that is not required by regulation. For
any new automation functions, AA will provide training to
Contractor training instructors per Section 10.02(b).
12. AA will make cargo training available to Contractor employees
requiring such training on a space available basis at no cost
to Contractor. However, Contractor will pay the cost of its
employee travel and expenses while attending such training.
Cargo training classes established exclusively for Contractor
personnel will be conducted by AA at a cost agreed upon by
Contractor and AA based on the locations and the number of
Contractor personnel to be trained.
A. Each Contractor station manager shall receive
approved AA cargo training.
B. Each Contractor employee who bills, handles or
processes small packages shall receive approved AA
cargo training.
C. If, in AA's sole discretion, Contractor experiences
cargo service failures, AA will so advise Contractor
in writing. Within thirty (30) days thereafter,
Contractor shall discuss the situation with AA and
commence corrective action.
<Page>
SCHEDULE H-1 - MAIL
1. This Schedule H-1 to Exhibit H sets forth the terms which will govern
the carriage of mail, when carried by Contractor at AA's request. Mail
shall be defined as all items offered by the USPS for carriage on
flights operated by AA, Contractor, or both ("MAIL").
2. The provisions of sections 10, 11, and 12 of Exhibit H shall equally
apply to the carriage of Mail. However, Contractor bears the
responsibility of obtaining any training that is provided or required
by the USPS for the carriage of mail.
3. All revenues for Mail shall accrue to AA.
4. Contractor's compliance with the terms of this Schedule H-1 shall be at
no additional cost to AA.
5. Contractor shall not be responsible for service failures in the
carriage of mail provided that identifiable service failure issues are
promptly addressed to prevent future failures.
6. Mail shall be handled and carried by Contractor (or an AA approved
subcontractor) at no additional charge to AA. Contractor will arrange
all necessary staffing and ground handling to pickup Mail from the
origin airport Mail facility and insure such Mail is loaded on its
flights. Mail scheduled for delivery to the Mail facility at a
destination of a flight operated by the Contractor shall be delivered
by the Contractor or its subcontractor to the designated facility.
Contractor shall also be responsible to transfer Mail arriving on one
of its flights to another Contractor flight, third party ABR operator,
AE, or AA, when the USPS has designated such a flight routing on the
destination and routing label affixed to the Mail container(s). At the
STL Hub, such transfer shall occur at a mutually agreeable Mail
exchange point.
7. Contractor agrees to comply with all personnel screening requirements
set forth by the USPS, and all other provisions of the USPS Air System
Contract for transportation of Mail by air. The USPS Air System
Contract shall be made available by AA to Contractor in the event
Contractor is not already a signatory to the USPS offering. Contractor
understands that any of its subcontractors who are engaged in mail
handling as any part of their duties must comply with USPS personnel
screening requirements in order to become and remain eligible
subcontractors for mail handling services.
* * *
<Page>
EXHIBIT I - ABR SAFETY STANDARDS
1. Contractor shall comply with all applicable safety, operational,
maintenance, and personnel standards. These shall include all
applicable Federal Aviation Regulations; all DOD, DOT regulations; any
appropriate directives from the NTSB and all special regulatory
mandates, such as advisory circulars. Contractor shall coordinate with
AA to ensure that Contractor's compliance with such initiatives is not
inconsistent with AA's compliance (E.G. timing of placing
defibrillators on board aircraft and associated training).
2. AA is entitled to audit all relevant aspects of Contractor's operations
and facilities, including safety, flight operations, maintenance, cargo
and ground operations. These audits shall be of reasonable length, and
shall be in sufficient depth and detail to permit AA's auditors to
properly certify Contractor's safety and compliance with all applicable
regulations. AA shall notify Contractor of an intended audit with
reasonable notice of the audit dates. The audit shall not unreasonably
disrupt Contractor's operations.
3. AA and Contractor agree to fully comply with all provisions of the
Family Assistance Act of 1996 and any amendments thereto. AA and
Contractor shall maintain and file with the NTSB and DOT required plans
which are fully compliant with the provisions of the Act. Copies of
these plans shall be exchanged for effective planning purposes.
4. Within a reasonable time following the execution of this Agreement, AA
and Contractor shall meet to set forth, at AA's direction, each party's
role, responsibilities, and obligations in the event of an aviation
disaster and the activation of each carrier's family assistance plan.
Both parties shall accomplish all training and preparation necessary
for their respective full and complete compliance with every
requirement under the Family Assistance Act and for the coordinated
response to a disaster involving either party, as determined by AA.
* * *
<Page>
EXHIBIT J - PERFORMANCE STANDARDS, INCENTIVES AND PENALTIES
Pursuant to Article 1.02 (c) of this Agreement, both parties recognize
the importance of maintaining the highest level of product delivery and customer
satisfaction. Accordingly, Contractor agrees to adhere to the performance
standards outlined in this Exhibit J.
1. PERFORMANCE STANDARDS
Contractor agrees to use its best efforts to meet the target range
standards of completion, on-time performance, customer service
performance (complaints), and baggage delivery during each month of the
Term of this Agreement, as indicated in the following table:
<Table>
<Caption>
SERVICE BONUS TARGET PENALTY DEFAULT
CATEGORY LEVEL RANGE LEVEL LEVEL
----------------------- -------------------- --------------------------- ----------------- -----------------
Completion [*] [*] [*] [*]
Factor or greater or lower or lower
On-Time [*] [*] [*] [*]
Arrivals or greater or lower or lower
Corporate Complaint [*] [*] [*] [*]
Ratio or less or greater or greater
PAWOB [*] [*] [*] [*]
Ratio or less or greater or greater
</Table>
The above service categories shall be measured according to DOT
definitions and rules unless otherwise agreed by AA and Contractor.
Contractor shall make available to AA its statistics within 15 days of
the close of each calendar month and in accordance with Exhibit K of
this Agreement. AA may periodically audit Contractor statistics for
accuracy and compliance to definitions.
Contractor shall be held accountable to the PAWOB ratio performance
standards to the extent Contractor performs Ground Handling Duties at
the Hub.
The parties agree to review performance status upon delivery of the
15th regional jet aircraft (as delineated in Exhibit C) to Contractor.
Contractor agrees to negotiate in good faith other performance criteria
that AA may request.
2. INCENTIVES/PENALTIES
A. BONUS LEVEL
In the event that Contractor meets the bonus level for any
performance category on average for a Performance Period,
AA shall pay to Contractor an amount equal to [*] per Revenue
Passenger boarded during the Performance Period for each
performance category met or exceeded, up to a maximum bonus
of [*] per enplaned Revenue Passenger.
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B. TARGET RANGE
Should Contractor fall within the target range levels for any
performance category on average for a Performance Period,
there shall be no payment due to/from Contractor for the
performance category measured.
C. PENALTY LEVEL
In the event that Contractor falls within or below the penalty
level for any performance category for a Performance Period,
then Contractor shall pay to AA a penalty of [*] per
Revenue Passenger enplaned during the Performance Period
for each performance category within the penalty level
range on average for the Performance Period, for a maximum
penalty of [*] per Revenue Passenger enplaned.
D. DEFAULT LEVEL
In the event that Contractor fails to achieve a level of
performance above the lesser of (i) the default level, or (ii)
[*]. In the event that Contractor fails to meet the
milestones of such approved plan, then AA may terminate this
Agreement pursuant to Section 7.02(c).
For each Performance Period in which Contractor's performance
falls within the Default Level provided in the chart above in
any category, [*]
E. MEASUREMENT AND PAYMENT PARAMETERS
(1) Measurement of the service categories shall be made
on a semi-annual basis, from January 1 - June 30, and
from July 1 - December 31.
(2) The first Performance Period measured shall be
January - July 2002, and thereafter all Performance
Periods shall follow regularly.
(3) AA and Contractor shall measure Contractor's monthly
and semi-annual performance based upon the most
recent information pursuant to the provision of
reports in Exhibit K of this Agreement. Contractor
and AA shall jointly share responsibility for
performance measurement and calculation of incentive
or penalty. Verification of performance shall be
accomplished within 25 days following the end of
every month and semi-annual Performance Period as
appropriate, unless otherwise agreed to by the
parties.
(4) Contractor shall be eligible to receive the bonus
payment from AA, or required to make its penalty
payment to AA, within 60 days of the conclusion of
the end of each Performance Period. All payments will
be made by wire transfer between the parties.
* * *
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EXHIBIT K - REPORTS
1. BOARDING INFORMATION. Information reports containing data covering
boarding and other information agreed to by the parties for
Contractor's operations hereunder will be produced from the close-out
entries and provided by AA to Contractor, on a monthly basis as soon as
available.
2. QUARTERLY COST DATA. Contractor will furnish to AA in a Microsoft
Excel(R) spreadsheet format, within forty-five (45) days after the end
of each quarter, the following reports: DOT Form 41 Schedule P-1.2
(Statement of Operations) and P-5.2 (Aircraft Operating Expenses by
type). Contractor agrees to provide this information to AA regardless
of its obligation to report to the DOT.
3. DAILY / MONTHLY OPERATIONS. Each day Contractor will furnish to AA
(Attention: Director - Planning) daily operating reports for the
preceding day which will include the number of revenue passengers
boarded; the number of denied boardings, in both raw numbers and
percentage terms (using a base of 1,000 passenger boardings); the
number of scheduled flight departures; the number and percentage
(compared to schedule) of actual flight departures; the reason for each
flight cancellation; number of flight departures on time within five
minutes; percentage of On-Time Arrivals in accordance with a format to
be provided by AA or other mutually agreed upon format. The foregoing
flight departure, flight cancellation and on-time performance response
shall show a break down by equipment type.
The above report shall be furnished to AA by Contractor and will
include month-to-date numbers and an attachment describing Mitigating
Factors, if any.
4. PASSENGER IRREGULARITY REPORTS. Contractor shall provide a copy
(Attention: AA's Managing Director - Inflight) of any irregularity
report involving a passenger travelling on Contractor's Feeder Air
Services that is deemed reportable to any governing authority.
5. FURTHER INFORMATION. Additional information as may be reasonably
requested by AA shall be furnished by Contractor upon request.
* * *
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EXHIBIT L - AUTOMATION INTEGRATION
1. COMPUTER RESERVATIONS SYSTEM USE
A. INSTALLATION AND TRAINING
Subject to the provisions of this Agreement, and
notwithstanding any separate agreement between Contractor and
SABRE, Contractor will maintain a minimum complement (as
designated by AA, consistent with its standard automation
installations) of terminals plus associated equipment for
printing messages, data, air tickets, boarding passes, baggage
tags, and the like ("AUTOMATION EQUIPMENT") at each of
Contractor's Feeder Air Service airport locations and selected
administrative locations. Any and all modifications,
enhancements, improvements or developments pertaining to the
Automation Equipment, or other new related technology, may be
made available to Contractor by AA, in its sole discretion,
under terms and conditions to be determined by AA on a
case-by-case basis. AA will train Contractor employees in
accordance with Section 10.02 of this Agreement, as
applicable, in the proper use of SABRE and Automation
Equipment. Where permitted by AA, Contractor agrees to
establish a training program with internal instructors. Only
qualified personnel who have satisfactorily completed an AA
prescribed training program will be permitted to operate any
Automation Equipment (hereinafter "DESIGNATED USERS"). AA may,
at its discretion, monitor or test the proficiency level of
Designated Users. If AA determines that their proficiency
levels are insufficient for the proper use of the Automated
Equipment or SABRE, then Contractor must arrange for its
Designated Users to undertake any further training which AA
determines necessary to bring such Designated Users to the
desired proficiency level.
B. STANDARDS OF USE
(1) To maintain an effective interconnection between
SABRE and the Automation Equipment and to prevent
misuse thereof, Contractor agrees that SABRE and the
Automation Equipment will be used and operated (1) in
strict accordance with operating instructions
provided by AA , and (2) solely for the performance
of the specific business functions designated by AA.
Any undesignated business use and all non-business
uses are strictly prohibited. Prohibited uses
include, but are not limited to, personal messages,
servicing subscribers, travel agencies, or any other
third party, training any other party or any other
use designated as prohibited in the SABRE Manual.
Contractor will maintain a list of all employees and
agents who have access to SABRE and their assigned
file number and passwords. AA may at any time deny
access to SABRE to any employee of Contractor if such
employee is found by AA to have engaged in
unauthorized operation of SABRE or abused the
Automation Equipment. Contractor will take all
precautions necessary to prevent unauthorized
operation or use of SABRE and the Automation
Equipment.
(2) Contractor will not alter or change the SABRE
Services display as provided by AA or its Affiliates
without the consent of AA as reflected in an
amendment to this Agreement. Contractor may not
provide SABRE or its data base to any other person or
entity without the consent of AA as reflected in a
written amendment to this Agreement.
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(3) Except as expressly permitted in this Agreement or
other written agreement with AA, Contractor will not
allow (or permit) SABRE (including, but not limited
to, its software, data bases, intellectual property,
and customer information) to be used (as a basis for
any software development or otherwise), commercially
exploited, copied, redistributed, retransmitted,
published, sold, rented, leased, marketed,
sublicensed, pledged, assigned, disposed of,
encumbered, transferred, or otherwise altered,
modified or enhanced, without the express written
permission of AA.
(4) Contractor will not engage in any speculative booking
or reservation of space for any airline, hotel,
rental car company, or any other vendor's service or
product available through SABRE.
2. TECHNOLOGY INTERFACE
AA agrees to provide the necessary support to ensure dynamic transfer
of operational data directly to Contractor's System Operational Control
center in Indianapolis, IN. [*]
AA may require Contractor to install and operate certain support
programs necessary for AA's internal reporting systems. In such case,
AA shall bear responsibility for purchase, installation, and training
of Contractor employees for use of such support programs.
* * *
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* Confidential
<Page>
EXHIBIT M
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT