EX-10.2 3 mesa-ex10_2.htm EX-10.2 EX-10.2

Exhibit 10.2

 

 

 

 

 

 

 

 

THIRD AMENDED AND RESTATED

 

 

CAPACITY PURCHASE AGREEMENT

 

 

Among

 

 

United Airlines, Inc.,

 

 

Mesa Airlines, Inc.

 

AND

 

 

 

Mesa Air Group, Inc.

 

 

 

 

DATED AS OF DECEMBER 27, 2022

 

 

 

 

 

 

 

 

 

 

1


Exhibit 10.2

 

 

Table of Contents

Parties 1

Recitals 1

ARTICLE I DEFINITIONS 1

ARTICLE II

CAPACITY PURCHASE, SCHEDULES AND FARES 1

2.1
Capacity Purchase 1
2.2
Revenues 6
2.3
Pass Travel 6
2.4
Removal Events 7

ARTICLE III

CONTRACTOR COMPENSATION 11

3.1
Compensation for Carrier Controlled Costs 11
3.2
Incentive Program 11
3.3
Certain Payments as to E175LL Covered Aircraft 14
3.4
Expenses 14
3.5
Audit Rights; Financial Information 16
3.6
Billing and Payment 18
3.7
Government Assistance 32
3.8
Certain Reimbursement Obligations of United for Modification of CRJ900 Covered Aircraft for United Express Service 33

ARTICLE IV

CONTRACTOR OPERATIONS AND AGREEMENTS WITH UNITED 35

4.1
Crews, Etc 35
4.2
Governmental Regulations; Maintenance 37
4.3
Quality of Service 37
4.4
Regulatory Complaints 39
4.5
DOD Approval 39
4.6
Aircraft Ground Movement 39
4.7
Incidents or Accidents 40
4.8
Emergency Response 40
4.9
Safety Matters 41
4.10
Facilities 41
4.11
Codeshare Terms 44
4.12
Fuel Procurement and Fuel Services 44
4.13
Slots and Route Authorities 45

2


Exhibit 10.2

4.14
Code Share Limitation 46
4.15
Use of United Marks 46
4.16
Use of Contractor Marks 46
4.17
Catering Standards 47
4.18
Fuel Efficiency Program 47
4.19
Environmental 47
4.20
Early Brake Release 51
4.21
Ground Handling 52
4.22
IT Requirements 53
4.23
Maintenance Right to Bid 53
4.24
Landing Fees 53
4.25
Ground Support Equipment (GSE) 53
4.26
Ozone Monitoring 53
4.27
Block-Hour Requirement; Pilot Requirement; Designation of Non-Comp Aircraft 54
4.28
Training 58
4.29
Crew Base Locations 59

ARTICLE V

CERTAIN RIGHTS OF UNITED 59

5.1
Use of Covered Aircraft 59
5.2
Prohibited Transaction 59
5.3
Performance Discussions 60

ARTICLE VI INSURANCE 60

6.1
Minimum Insurance Coverages 60
6.2
Endorsements 61
6.3
Evidence of Insurance Coverage 62

ARTICLE VII INDEMNIFICATION 62

7.1
Contractor Indemnification of United 62
7.2
United Indemnification of Contractor 63
7.3
Indemnification Claims 64
7.4
Employer’s Liability; Independent Contractors; Waiver of Control 65
7.5
No Double Recovery 66
7.6
Survival 66

ARTICLE VIII

TERM, TERMINATION AND DISPOSITION OF AIRCRAFT 66

8.1
Term 66
8.2
Early Termination 66
8.3
Disposition of Aircraft During Wind-Down Period 68
8.4
Certain Other Remedies 70

ARTICLE IX

3


Exhibit 10.2

REPRESENTATIONS, WARRANTIES AND COVENANTS 76

9.1
Representations and Warranties of Contractor 76
9.2
Representations, Warranties and Covenants of United 79

ARTICLE X

CERTAIN AIRCRAFT-RELATED PROVISIONS 80

10.1
Right to Call 80
10.2
Extension of E175 Aircraft Term 86
10.3
Alternative Aircraft 87
10.4
Additional Aircraft 87
10.5
Covered Aircraft Leases 88
10.6
Lien; Subordination 89
10.7
New Aircraft Configuration 90
10.8
United’s Call Option on Certain Engines 90
10.9
Parked Covered Aircraft 92
10.11
Certain Material Terms as to Equity Issuance and Governance 94
10.12
E175LL Covered Aircraft Call Option 94

ARTICLE XI

MISCELLANEOUS 97

11.1
Notices 97
11.2
Binding Effect; Assignment 98
11.3
Amendment and Modification 98
11.4
Waiver 99
11.5
Interpretation 99
11.6
Confidentiality 99
11.7
Counterparts 100
11.8
Severability 100
11.9
Relationship of Parties 101
11.10
Entire Agreement; No Third Party Beneficiaries 101
11.11
Governing Law 101
11.12
Right of Set-Off 102
11.13
Cooperation with Respect to Reporting 102
11.14
Parent Guarantee 103
11.15
Arbitration 103
11.16
Unauthorized Payments 105

 

SCHEDULE 1: Covered Aircraft

SCHEDULE 2A: E175 Covered Aircraft Compensation for Carrier Controlled Costs SCHEDULE 2B: CRJ900 Covered Aircraft Compensation for Carrier Controlled Costs SCHEDULE 3: Pass-Through Costs

SCHEDULE 4: On-Time Adjustment SCHEDULE 5: Ownership Rate Schedule

4


Exhibit 10.2

SCHEDULE 6: Call Option Engines SCHEDULE 7: Loan Payment Amounts SCHEDULE 8: Certain CRJ900 Aircraft

EXHIBIT A: Definitions

EXHIBIT B: Terms of Codeshare Arrangements EXHIBIT C: Non-Revenue Pass Travel EXHIBIT D: Fuel Services

EXHIBIT E: Use of United Marks and Other Identification EXHIBIT F: Use of Contractor Marks

EXHIBIT G: Catering Standards EXHIBIT H: Fuel Efficiency Program EXHIBIT I: IT Requirements

EXHIBIT J: Aircraft Cleanliness and Refurbishment Standards EXHIBIT K: Parent Guarantee

EXHIBIT L: Letter of Agreement EXHIBIT M: Career Path Program for Pilots

EXHIBIT N: Safety Standards for United and United Express Carriers EXHIBIT O: Form of Assignment Agreement

EXHIBIT P: Charter Flight Operations EXHIBIT Q: Ground Handler Indemnity

EXHIBIT R: Certain Material Terms as to Equity Issuance and Governance EXHIBIT S: United Wi-Fi

 

5


Exhibit 10.2

THIRD AMENDED AND RESTATED CAPACITY PURCHASE AGREEMENT

 

This Third Amended and Restated Capacity Purchase Agreement (this “Agreement”), dated as of and effective December 27, 2022 (the “Effective Date”) is among United Airlines, Inc., a Delaware corporation (“United”), Mesa Airlines, Inc., a Nevada corporation (“Contractor”), and Mesa Air Group, Inc., a Nevada corporation (“Parent”).

 

WHEREAS, the parties previously entered into that certain Amended and Restated Capacity Purchase Agreement, dated as of November 26, 2019 (as amended, the “Amended Agreement”);

 

WHEREAS, the parties previously entered into that certain Second Amended and Restated Capacity Purchase Agreement, dated as of November 4, 2020 (as amended, the “Second Amended Agreement”);

 

WHEREAS, Contractor desires to perform Contractor Services pursuant to the terms hereof, and United desires to engage Contractor to perform such services, provided that the performance of such services is guaranteed by Parent;

 

WHEREAS, the parties have previously entered into the Ancillary Agreements (as defined herein), in each case as an integral part of this Agreement; and

 

WHEREAS, the Second Amended Agreement is hereby amended and restated in its entirety.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and obligations hereinafter contained, the parties agree to:

 

ARTICLE I DEFINITIONS

 

Capitalized terms used in this Agreement (including, unless otherwise defined therein, in the Schedules, Appendices and Exhibits to this Agreement) shall have the meanings set forth in Exhibit A hereto.

 

ARTICLE II

CAPACITY PURCHASE, SCHEDULES AND FARES

 

2.1
Capacity Purchase.

 

(a)
Contractor shall present each Covered Aircraft for service under this Agreement on the Actual In-Service Date determined with respect to such aircraft pursuant to Table 1 in Schedule 1 (for the E175 Covered Aircraft, other than E175LL Covered Aircraft), the Actual In-Service Date as determined pursuant to Note 1, clause (d) of

6


Exhibit 10.2

Table 2 in Schedule 1 (for the CRJ900 Covered Aircraft), and the E175LL

Committed In-Service Date set forth on Table 3 in Schedule 1 (for the E175LL Covered Aircraft), and for each day thereafter until the exit date set forth for such aircraft on the applicable table in Schedule 1 under the caption “Scheduled Exit Date”, as such date may be extended pursuant to Section 10.2 or Section 10.10 hereof, in each case unless such aircraft is earlier withdrawn from the terms of this Agreement or this Agreement is earlier terminated, and United agrees to purchase the capacity of each such Covered Aircraft for the period during which such Covered Aircraft is so presented for service, all under the terms and conditions set forth herein and for the consideration described in Article III. [***] Subject to the terms and conditions of this Agreement, Contractor shall provide all of the capacity of the Covered Aircraft solely to United and use the Covered Aircraft solely to operate the Scheduled Flights and as otherwise expressly provided herein, including without limitation in Section 3.6(c)(v). All Covered Aircraft operated by Contractor in the provision of Regional Airline Services to United under this Agreement shall be painted and otherwise outfitted in the aircraft livery as set forth in Section 8 of Exhibit E hereto. Contractor will do all things necessary to cause and assure, and will cause and assure, that it will at all times be and remain in custody and control of the Covered Aircraft and all other aircraft and equipment of, or operated by, Contractor and used in the performance of Contractor Services, and United and its directors, officers, employees, and agents shall not, for any reason, be deemed to be in custody or control, or a bailee, of any such aircraft or equipment. Contractor represents that the provisions of this Agreement setting the schedule for Contractor to begin to provide Regional Airline Services, including those set forth above and in Schedules 1 and 1A, afford sufficient time for Contractor to be able to provide such services in a safe and reliable manner consistent with the requirements set forth in Article IV and Exhibit N and as otherwise required by this Agreement, including without limitation sufficient time for Contractor to obtain all certifications, permits, licenses, certificates, exemptions, approvals, plans and insurance required in order for it to provide Regional Airline Services and for Contractor to train its flight and cabin crews, maintenance personnel and other staff as necessary for the safe and reliable provision of Regional Airline Services. Contractor acknowledges that United is relying on this representation in connection with entering into this Agreement.

 

(b)
Fares, Rules and Seat Inventory. United shall establish and publish all fares and related tariff rules for all seats on the Covered Aircraft. Contractor shall not publish any fares, tariffs, or related information for the Covered Aircraft. In addition, United shall have complete control over all seat inventory and inventory and revenue management decisions for the Covered Aircraft, including overbooking levels, discount seat levels and allocation of seats among various fare buckets.

 

(c)
Flight Schedules. United shall, in its sole discretion, establish and publish all schedules for the Covered Aircraft (such scheduled flights, together with Charter Flights, referred to herein as “Scheduled Flights”), including determining the city-

7


Exhibit 10.2

pairs served, frequencies, utilization and timing of scheduled arrivals and departures, and shall, in its sole discretion, make all determinations regarding the establishment and scheduling of any flights other than Scheduled Flights; provided that such schedules shall be subject to Reasonable Operating Constraints and Conditions and the provisions of this Section 2.1 and shall only provide for Scheduled Flights utilizing Available to Schedule Aircraft; and provided further that Contractor shall operate all Charter Flights in accordance with the provisions set forth on Exhibit P; and provided further that Scheduled Flights may include flights from a maintenance base to any Applicable Airport or from one Hub Airport to another Hub Airport. United shall also be entitled, in its sole discretion and at any time prior to takeoff, to direct Contractor to delay or cancel a Scheduled Flight, including without limitation for delays and cancellations that are ATC or weather related, and Contractor shall take all necessary action to give effect to any such direction; provided that, if United, following delivery of a Final Monthly Schedule for such calendar month, directs the cancellation of flights (each, a “United Directed Cancelled Flight” and collectively, the “United Directed Cancelled Flights”) and that flight cancellation is coded in United’s systems as a United initiated cancel then [***] Except as otherwise provided in the last sentence of this Section 2.1(c), any Scheduled Flight canceled at United’s direction shall be coded in accordance with United’s standard practices as an Uncontrollable Cancellation for all purposes hereunder. Contractor shall be entitled to make such maintenance, ferry and repositioning flights as may be required to facilitate the proper maintenance of the Covered Aircraft or to accommodate the Scheduled Flights. At least [***] calendar days prior to the first day of each month to which a proposed Final Monthly Schedule relates, United shall present a planned flight schedule for such month, together with a proposed Final Monthly Schedule for the following [***] months (the “Initial Proposed Monthly Schedule”). In addition, United may from time to time submit to Contractor a schedule of proposed block hours for future periods and request confirmation from Contractor as to its availability to operate the Covered Aircraft for such number of block hours, and Contractor shall respond in a timely manner to any such request (it being understood that, notwithstanding any such request or response, the Scheduled Flights shall operate in accordance with the applicable Final Monthly Schedule). United shall review and consider any changes to the planned flight schedule for the Covered Aircraft, including the Initial Proposed Monthly Schedule, suggested by Contractor. Not later than [***] calendar days prior to the beginning of the calendar month to which a proposed Final Monthly Schedule relates, United will deliver to Contractor the Final Monthly Schedule. Following such delivery of the Final Monthly Schedule, however, United may make such adjustments to such Final Monthly Schedule as it deems appropriate (subject to Reasonable Operating Constraints and Conditions); provided that such adjustments

by United shall not require more flight crew resources to operate the Final Monthly Schedule, based on reasonable flight crew requirements, than the flight crew resources that would have been necessary to operate the Initial Proposed Monthly Schedule. In addition, if, after such delivery of the Final Monthly Schedule, United decides to adjust the Final Monthly Schedule by removing a flight either (x) at

8


Exhibit 10.2

Contractor’s request or (y) because United reasonably determines, in good faith, that

(I) (after having consulted directly with a designated point of contact with Contractor in an effort to resolve any concerns regarding Contractor’s ability to perform) such flight would have resulted in a Controllable Cancellation and (II) Contractor has not acted in accordance with, or complied with United Express’s standard and/or customary operating policy and/or past practices in promptly and accurately, to the best of its knowledge, notifying United of Contractor’s ability to perform such flight, then, in each case of clause (x) and (y), notwithstanding the removal of such flight from the Final Monthly Schedule, such flight shall be deemed to have resulted in a Controllable Cancellation for all purposes hereunder.

 

(d)
Spare Aircraft. Notwithstanding anything to the contrary contained in this Section 2.1 but subject to the provisions below in this Section 2.1(d) and also subject to Section 10.9, at any time from time to time, (A) with respect to E175 Covered Aircraft, Contractor shall maintain the number of spare regional jet aircraft [***] The aircraft constituting spare aircraft in accordance with this Section 2.1 at any given time shall be, collectively, the “Spare Aircraft.” Contractor shall select the specific aircraft that shall constitute the Spare Aircraft, in a proportion that complies with United’s instructions, and Contractor shall be entitled to use the Spare Aircraft in Contractor’s reasonable discretion to replace another regional jet aircraft in the operation of a flight scheduled in the Final Monthly Schedule; provided, however, that, notwithstanding anything to the contrary in this Agreement, without United’s prior

written consent or unless as directed otherwise by United in writing, (x) Contractor shall not operate a Spare Aircraft for a Scheduled Flight if such Spare Aircraft’s aircraft type is not identical to the aircraft type for the aircraft originally scheduled to operate such Scheduled Flight, and (y) Contractor shall not operate an E175LL Spare Aircraft for a Scheduled Flight originally scheduled for an E175 Covered Aircraft. Notwithstanding anything in the preceding sentence to the contrary, if Contractor and United mutually agree in writing that Spare Aircraft has not been evenly distributed throughout the network flown by Contractor (i.e., if all Spares are E175LL Spare Aircraft), then Contractor may operate an E175LL Spare Aircraft for a Scheduled Flight originally scheduled for an E175 Covered Aircraft. In addition, subject to applicable Reasonable Operating Constraints and Conditions, Contractor shall use such Spare Aircraft to operate flights as directed by United (unless such Spare Aircraft was, prior to such direction by United, already scheduled as permitted by the immediately preceding sentence), including flights originally scheduled to be operated by United or other United service providers; provided that if a Scheduled Flight is delayed or cancelled due to the unavailability of a Spare Aircraft which unavailability would not have occurred but for Contractor’s use of such Spare Aircraft at United’s direction (given over Contractor’s expressly stated objection) for another United service provider pursuant to this sentence, then, each such delay or cancellation occurring within a reasonable period after such unavailability shall be deemed an Uncontrollable Delay or an Uncontrollable Cancellation, as the case may be, for all purposes hereunder.

9


Exhibit 10.2

 

(e)
Non-Comp Aircraft. Notwithstanding any provision of this Section 2.1 or any other provision of this Agreement to the contrary, United will not at any time include the then-current number of Non-Comp Aircraft at such time in its scheduling of lines of flying for Scheduled Flights. The number of Non-Comp Aircraft at any time shall be determined in accordance with the provisions of Section 4.27. [***] Determination of “Per Aircraft Per Month” Rates).

 

(f)
Excess Spare Aircraft. Notwithstanding anything to the contrary in this Agreement, by delivering no later than [***] advance written notice to United, (x) for so long as there are at least [***] Covered Aircraft (not including Excess Spare Aircraft (as defined below)) operated in scheduled lines of flying for the performance of Regional Airline Services under this Agreement, Contractor may elect to use [***] Covered Aircraft as an operational spare to optimize Contractor’s performance of Regional Airline Services under this Agreement and (y) for so long as there are at least [***] Covered Aircraft (not including Excess Spare Aircraft) operated in scheduled lines of flying for the performance of Regional Airline Services under this Agreement,

Contractor may elect to use up to [***] Covered Aircraft as operational spare(s) to optimize Contractor’s performance of Regional Airline Services under this Agreement (each aircraft so elected by Contractor under the foregoing clause

(x) or clause (y), an “Excess Spare Aircraft”). Each such Excess Spare Aircraft will be treated as an Available Covered Aircraft, except that the “per aircraft per month” rate will be [***] for any period that such aircraft is an Excess Spare Aircraft. On a [***] basis, Contractor and United agree to meet to confer and exchange information reasonably necessary to determine whether Excess Spare Aircraft (if any) during the immediately prior [***] improved Contractor’s operational performance for United during such prior [***] If United reasonably determines that any of the Excess Spare Aircraft has failed to improve Contractor’s operational performance for United under this Agreement, or that such aircraft has not operated for United under this Agreement while designated as an Excess Spare Aircraft, then, in each case, following such determination, effective upon delivery of written notice to Contractor, United shall have the right in its sole discretion to cause one or more of the following to occur: (i) cease paying such [***] rate for such aircraft, and

(ii) to require Contractor to cease use of such aircraft as an Excess Spare Aircraft.

 

(g)
From and after the Effective Date, Contractor shall use best efforts to ensure that, at all times at which CRJ900 Covered Aircraft are being operated for Regional Airline Services under this Agreement, no fewer [***] of such CRJ900 Covered Aircraft being operated hereunder are comprised of aircraft set out on Schedule 8.

 

2.2
Revenues.

 

Contractor and Parent acknowledge and agree that all revenues resulting from the sale and issuance of passenger tickets associated with the operation of the Covered Aircraft and all other

10


Exhibit 10.2

sources of revenue associated with the operation of the Covered Aircraft or the provision of Regional Airline Services, in each case following the Effective Date and during the Term, including without limitation revenues relating to Charter Flights, the transportation of cargo or mail, the sale of food, beverages and onboard entertainment, checked baggage fees, duty-free services, exterior and interior advertising and guaranteed or incentive payments from airport or governmental authorities, civic associations or other third parties in connection with scheduling flights to such airport or locality, are the sole property of and shall be retained by United (or, if received by Contractor or Parent, shall be promptly remitted to United, free and clear of claims of any third party arising by, through or under Contractor or Parent or their affiliates). Contractor agrees that it shall reasonably cooperate with United so as to permit United to receive all revenues of the type described above.

 

2.3
Pass Travel.

 

All pass travel and other non-revenue travel on any Scheduled Flight shall be administered in accordance with Exhibit C.

2.4
Removal Events.

 

(a) With respect to CRJ900 Covered Aircraft, at any time from time to time, United shall have the right, in its sole discretion, to remove from this Agreement any or all of the CRJ900 Covered Aircraft as provided in this Section 2.4(a) by delivering a revocable notice (a “2.4(a) Notice”) to Contractor, which 2.4(a) Notice shall specify (i) the number of CRJ900 Covered Aircraft to be removed (each such removed aircraft, a “CRJ900 Removed Aircraft”), (ii) whether United is exercising any right to add a New Aircraft pursuant to Section 10.4 concurrently with its delivery of such 2.4(a) Notice (it being understood for the avoidance of doubt that United’s decision to exercise rights under Section 10.4 concurrent with the delivery of a 2.4(a) Notice is in United’s sole discretion) and (iii) a Termination Date for each such aircraft not earlier than[***] [***] days following the date of such 2.4(a) Notice; provided, however, that (A) if a 2.4(a) Notice is submitted concurrently with United’s exercise of its right to add a New Aircraft pursuant to Section 10.4, then the immediately preceding reference [***]” shall instead be deemed to be a reference to [***] and (B) as to each CRJ900 Covered Aircraft, the foregoing clause (iii) shall be disregarded prior to the date that such aircraft has commenced scheduled service under this Agreement; provided further that, with respect to any CRJ900 Removed Aircraft subject to a 2.4(a) Notice, the applicable 2.4(a) Notice will cease to be revocable from and after the later to occur of (x) the Termination Date specified in such notice and (y) the date on which such aircraft ceases to be operated in scheduled service pursuant to the capacity purchase provisions of this Agreement. For clarification purposes, CRJ900 Covered Aircraft that are not the subject of a 2.4(a) Notice shall remain subject to the terms of this Agreement (including this Section 2.4). Subject to Section 8.4(f), following the delivery of a 2.4(a) Notice, the provisions of Section 8.3(b)(i) and (ii) shall apply to each CRJ900 Removed Aircraft. United shall have the right to designate which CRJ900 Covered Aircraft shall be removed pursuant to a 2.4(a) Notice by providing written notice of the same to Contractor within [***] days following delivery of the 2.4(a) Notice to Contractor.

 

(b)

11


Exhibit 10.2

 

(i)
With respect to United Owned E175 Covered Aircraft, at any time and from time to time, United shall have the right, in its sole discretion, to remove from this Agreement any or all of such aircraft as provided in this Section 2.4(b)(i) by delivering a revocable notice (a “2.4(b)(i) Notice”) to Contractor, which 2.4(b)(i) Notice shall specify (x) the number of aircraft to be removed (each such removed aircraft, an “E175 Removed Aircraft”),

(y) whether United is exercising any right to add a New Aircraft pursuant to Section 10.4 concurrently with its delivery of such 2.4(b)(i) Notice (it being understood for the avoidance of doubt that United’s decision to exercise rights under Section 10.4 concurrent with the delivery of a 2.4(b)(i) Notice is in United’s sole discretion) and (z) a Termination Date not earlier than [***] days following the date of such 2.4(b)(i) Notice; provided, however, that, if a 2.4(b)(i) Notice is submitted concurrently with United’s exercise of its right to add a New Aircraft pursuant to Section 10.4, then the immediately preceding reference to [***] shall instead be

deemed to be a reference to [***] provided that, with respect to any E175 Removed Aircraft subject to a 2.4(b)(i) Notice, the applicable 2.4(b)(i) Notice will cease to be revocable from and after the later to occur of (x) the Termination Date specified in such notice and (y) the date on which such aircraft ceases to be operated in scheduled service pursuant to the capacity purchase provisions of this Agreement. For clarification purposes, United Owned E175 Covered Aircraft that are not the subject of a 2.4(b)(i) Notice shall remain subject to the terms of this Agreement (including this Section 2.4). Subject to Section 8.4(f), following the delivery of a 2.4(b)(i) Notice, the provisions of Section 8.3(b)(i) and (ii) shall apply to each E175 Removed Aircraft and, at the end of the applicable Wind-Down Period for such aircraft, [***]. United shall have the right to designate which United Owned E175 Covered Aircraft shall be removed pursuant to a 2.4(b)(i) Notice by providing written notice of the same to Contractor within [***] days following delivery of the 2.4(b)(i) Notice to Contractor.

 

(ii)
With respect to Contractor Owned E175 Covered Aircraft, at any time and from time to time, United shall have the right, in its sole discretion, to remove from this Agreement any or all of such aircraft as provided in this Section 2.4(b)(ii) by delivering a notice (a “2.4(b)(ii) Notice”) to Contractor, which 2.4(b)(ii) Notice shall specify (x) the specific aircraft to be removed (each such removed aircraft, a “Contractor Owned E175 Removed Aircraft”), (y) whether such 2.4(b)(ii) Notice is delivered in connection with United’s substitution right pursuant to Section 10.4 and (z) a Termination Date for each such aircraft not earlier than [***] days following the date of such 2.4(b)(ii) Notice; provided that, the Termination Date for each such aircraft removed pursuant to clause (y) shall not be earlier than [***] days following the date of such 2.4(b)(ii) Notice. Contractor shall have the right to designate which Contractor Owned E175

12


Exhibit 10.2

Covered Aircraft shall be removed pursuant to a 2.4(b)(ii) Notice by providing written notice of the same to United within [***] days following receipt of a 2.4(b)(ii) Notice. For clarification purposes, Contractor Owned E175 Covered Aircraft that are not the subject of a 2.4(b)(ii) Notice shall remain subject to the terms of this Agreement (including this Section 2.4). Subject to Section 8.4(f), following the delivery of a 2.4(b)(ii) Notice, the provisions of Section 8.3(b)(i) and (ii) shall apply to each Contractor Owned E175 Removed Aircraft and, at the end of the applicable Wind-Down Period for such aircraft, (i) the provisions of Section 10.1 shall apply to each Contractor Owned E175 Removed Aircraft that is owned or leased by Contractor, other than any such aircraft

leased from United, except that United must irrevocably exercise the Call Option with respect to such aircraft, and (ii) [***]for each Contractor Owned E175 Removed Aircraft removed pursuant to clause (y) above; provided that, notwithstanding the immediately preceding clause (i) above, Contractor shall have the right to retain, and United shall then not have the right or obligation to acquire, any or all Contractor Owned E175 Removed Aircraft upon written notice by Contractor to United exercising such right to retain within, as applicable, (A) other than in the case of United’s submission of a 2.4(b)(ii) Notice pursuant to clause (y) above [***] days of Contractor’s receipt of the 2.4(b)(ii) Notice, or (B) in the case of United’s submission of a 2.4(b)(ii) Notice pursuant to clause (y) above, [***] days of Contractor’s receipt of the 2.4(b)(ii) Notice; provided further that the specific Contractor Owned E175 Removed Aircraft retained by Contractor, if any, shall be those aircraft with the latest Termination Dates as set forth in the relevant 2.4(b)(ii) Notices. Notwithstanding anything to the contrary in this Agreement, (i) any 2.4(b)(ii) Notice given by United with respect to the [***] Aircraft must be given with respect to all of the [***] Aircraft, and (ii) the provisions of clause (i) and the final two provisos of the immediately preceding sentence shall not apply to any 2.4(b)(ii) Notice with respect to the [***] Aircraft or any Secured Loan Aircraft.

 

(c)

 

(i) Without limiting, and in addition to, the other rights set forth in Section 2.4(c), with respect to each E175LL Covered Aircraft at any time and from time to time following the Actual In-Service Date set forth on Table 3 of Schedule 1 of such aircraft, United shall have the right, in its sole discretion, to remove from this Agreement such aircraft (but United shall have the right to remove less than all E175LL Covered Aircraft) as provided in this Section 2.4(c)(i) by delivering a notice (a “2.4(c)(i) Notice”) to Contractor, which 2.4(c)(i) Notice shall specify (x) the number of aircraft to be removed (each such removed aircraft, an “E175LL Removed Aircraft”), (y) whether United is exercising any right to add a New Aircraft pursuant to Section 10.4 concurrently with its delivery of such 2.4(c)(i) Notice (it being

13


Exhibit 10.2

understood for the avoidance of doubt that United’s decision to exercise rights under Section 10.4 concurrent with the delivery of a 2.4(c)(i) Notice is in United’s sole discretion), and (z) a Termination Date not earlier than [***] days following the date of such 2.4(c)(i) Notice; provided, however, that, if a 2.4(c)(i) Notice is submitted concurrently with United’s exercise of its right to add a New Aircraft pursuant to Section 10.4, then the immediately preceding reference

to [***] shall instead be deemed to be a reference to [***]

[***] days”. United shall have sole discretion to designate which E175LL Covered Aircraft shall be removed pursuant to a 2.4(c)(i) Notice. For clarification purposes, E175LL Covered Aircraft that are not the subject of a 2.4(c)(i) Notice shall remain subject to the terms of this Agreement (including this Section 2.4). Subject to Section 8.4(f), following the delivery of a 2.4(c)(i) Notice, the provisions of Section 8.3(b)(i) and (ii) shall apply to each E175LL Removed Aircraft, and, at the end of the applicable Wind- Down Period for such aircraft, [***] for each E175LL Removed Aircraft removed pursuant to clause (y) above.

 

(ii) [intentionally omitted.]

 

(iii) Without limiting, and in addition to, the other rights set forth in this Section 2.4(c), with respect to each E175LL Covered Aircraft that is owned by United or for which United is the head lessee, from and after the final day of any month in which Contractor’s Liquidity (as defined below) is less than [***] and until the [***] day thereafter (provided, that, in the event of any good faith dispute between the parties regarding the accuracy of a Liquidity Notice (as defined below), such deadline shall be extended until the resolution of such dispute), United shall have the right, exercisable in its sole discretion by delivery of a written notice to Contractor (an “E175LL Liquidity Termination Notice”) to remove from this Agreement such aircraft (but United shall have the right to remove less than all E175LL Covered Aircraft), which E175LL Liquidity Termination Notice shall specify (x) the number of aircraft to be removed, (y) whether United is exercising any right to add a New Aircraft pursuant to Section

10.4 concurrently with its delivery of such 2.4(c)(iii) Notice (it being understood for the avoidance of doubt that United’s decision to exercise rights under Section 10.4 concurrent with the delivery of a 2.4(c)(i) Notice is in United’s sole discretion), and (z) a Termination Date not earlier than [***] days following the date of such E175LL Liquidity Termination Notice; provided, however, that, if a 2.4(c)(iii) Notice is submitted concurrently with United’s exercise of its right to add a New Aircraft pursuant to Section 10.4, then the immediately preceding reference to [***] days” shall instead be deemed to be a reference to [***] days”. As used herein, the term “Liquidity” means the amount of cash and cash equivalents of Contractor determined on a consolidated basis in accordance with GAAP.

14


Exhibit 10.2

In furtherance of the foregoing, and in addition to Contractor’s disclosure obligations set forth in Section 3.5, no later than the [***] day following each calendar month, Contractor shall deliver to United a good faith written certification, signed by Contractor’s chief financial officer (each, a “Liquidity Notice”), of its Liquidity, together with

reasonable supporting documentation. United shall have the right to dispute, in good faith, the contents of each such Liquidity Notice. [***]

 

ARTICLE III CONTRACTOR COMPENSATION

 

[***]

 

3.1
Compensation for Carrier Controlled Costs.

 

[***]

 

3.2
Incentive Program.

 

[***]

[***]

 

(a)
Controllable Completion Adjustment. For each calendar month during the Term, a controllable completion adjustment amount shall be determined as set forth in this Section 3.2(a), which shall be comprised of such an adjustment with respect to the E175 Covered Aircraft, on the one hand (the “E175 CCF Adjustment”), and such an adjustment with respect to the CRJ900 Covered Aircraft, on the other hand (the “CRJ900 CCF Adjustment”); [***]

 

[***]

 

 

All covered aircraft calculated by each fleet type*

 

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

* Both metrics exclude spares, round aircraft age to nearest whole number

 

15


Exhibit 10.2

(b)
On-Time Adjustment. For each calendar month during the Term, an on-time adjustment amount (the “On-Time Adjustment Amount”) shall be determined as set forth in this Section 3.2(b) and Schedule 4 [***]

 

(c)
CCF Bonus Program. For each calendar month in the period [***] (the “CCF Bonus Adjustment Period”), an additional adjustment shall be determined in accordance with the table below and this Section 3.2(c) (such adjustment, the “CCF Bonus Adjustment”).

For each calendar month during the CCF Bonus Adjustment Period, the CCF Bonus Adjustment shall be calculated pursuant to the table and the definitions set forth below. The Monthly Incentive Adjustment for any applicable month shall be increased by the applicable CCF Bonus Adjustment for such month, if any.

 

Adjusted CCF (as defined in Exhibit A)

CCF Bonus Adjustment

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

3.3
Certain Payments as to E175LL Covered Aircraft. Notwithstanding the fact that there are [***] E175LL Covered Aircraft subject to this Agreement as compared to immediately prior to the Effective Date, the parties acknowledge and agree that, for the period [***] as if such aircraft were Covered Aircraft. Notwithstanding the foregoing, the parties acknowledge and agree that such [***] aircraft are not Covered Aircraft and that this Section 3.3 is included solely for the purpose of the foregoing sentence.

 

3.4
Expenses.

 

(a)
United Directly Incurred Expenses. With respect to Regional Airline Services, in consideration of the provision by Contractor of Contractor Services and its compliance with the other terms and conditions of this Agreement, the following

16


Exhibit 10.2

expenses, together with such expenses, if any, as are referenced in the last sentence of Section 3.4(b), shall be incurred directly by United:

 

(i)

advertising costs, computer reservation system fees, credit card fees, interline fees, revenue taxes, GDS fees, reservation costs, revenue accounting costs, including costs associated with ticket sales reporting and unreported sales, and Mileage Plus participation costs and beverage voucher coupons;

 

(ii)
denied boarding compensation and the cost of travel certificates;

 

(iii)
with respect to the E175 Covered Aircraft and CRJ900 Covered Aircraft, baggage handling claims, repairs and delivery costs related to Uncontrollable Delays, Uncontrollable Cancellations, Controllable Delays, and Controllable Cancellations and passenger-related interrupted trip costs (including hotel, meal, and ground transportation vouchers) related to Uncontrollable Delays and Uncontrollable Cancellations; provided that, for avoidance of doubt, Contractor is responsible for all passenger related interrupted trip costs (hotel, meal, and ground transportation vouchers) for all Controllable Delays and Controllable Cancellations;

 

(iv)
if United elects to procure, or arrange for the procurement of, aircraft fuel and/or Fuel Services, as the case may be, pursuant to Section 4.12(b), and in consideration of Contractor’s compliance with its obligations under such Section 4.12, (I) the cost of such fuel procurement, including any administration fees of any fuel supplier, and/or (II) charges for such Fuel Services, as applicable;

 

(v)
rent for Terminal Facilities used by Contractor hereunder that are not Contractor Terminal Facilities constituting both exclusive and common use charges imposed or charged by airports; provided that, for avoidance of doubt, rents and any associated expenses for Contractor flight operations facilities including, but not limited to, maintenance, training, flight ops crews, in-flight crews, or corporate, station, or domicile management office space are Contractor expenses and shall not be reconciled;

 

(vi)
all ground handling costs incurred pursuant to United’s standard ground handling agreement;

 

(vii)
the cost of technology services provided by United for its reservation, check-in and baggage-handling processes;

 

17


Exhibit 10.2

(viii)
TSA fees or charges and any other passenger security fees or charges for security, other than such fees and charges for which United is or would be entitled to indemnification under Article VII;

 

(ix)
reasonable out-of-pocket expenses of Contractor associated with Design Changes directed and approved by United; and
(x)
if United elects to pay for landing fees on behalf of Contractor for Scheduled Flights pursuant to Section 4.24(a), landing fees.

 

If, notwithstanding the foregoing, Contractor incurs any of the expenses set forth in this Section 3.4(a), and only to the extent that United determines, in its sole discretion, that such expenses are both reasonable and should properly have been incurred by United hereunder, then United shall reimburse Contractor for such expenses.

 

(b)
Contractor Expenses. Except as provided in Section 3.4(a), Contractor shall pay in accordance with commercially reasonable practices all expenses or costs incurred in connection with Contractor’s provision of Contractor Services. Without limiting the foregoing, for the avoidance of doubt, Contractor shall be responsible for the payment of all costs necessary to comply with airworthiness directives relating to the CRJ900 Covered Aircraft and E175LL Covered Aircraft (including without limitation those pertaining to pressure floors), and shall perform any and all repairs as may be necessary in connection therewith in accordance with (i) its maintenance program and/or (ii) any applicable airworthiness directives or other regulatory requirements. Contractor agrees that, in connection with its provision of Contractor Services to United hereunder and the provision of the other services contemplated to be performed by Contractor under the Ancillary Agreements, it shall use commercially reasonable efforts to minimize costs incurred by it if such costs would be reimbursable by United to Contractor in accordance with the terms of this Agreement or any Ancillary Agreement (it being understood that the payment of any amount owed pursuant to Schedule 2A or 2B, as the case may be, shall not constitute “costs that would be reimbursable by United” for purposes of this sentence); provided that the parties acknowledge and agree that (x) for the avoidance of doubt, the costs described in this sentence include, without limitation, maintenance costs with respect to airframes and engines, and (y) Contractor’s obligations pursuant to this sentence shall include, without limitation, the obligation to cooperate with United to identify opportunities to manage maintenance expenses relating to airframes and engines. Further, with respect to any service or item the cost of which United is required to reimburse Contractor hereunder or under any Ancillary Agreement, if United can provide or arrange to provide such service or item at a lower cost than the reimbursement cost that United would otherwise be charged and at substantially similar quality or service level, then Contractor shall allow United to provide or arrange to provide such service or item in order to permit United to lower its costs, and the cost of providing such service or item shall be treated as a United directly-incurred cost pursuant to Section 3.4(a).

18


Exhibit 10.2

 

3.5
Audit Rights; Financial Information.

 

Contractor shall make available for inspection by United and its outside auditors and advisors, within a reasonable period of time after United makes a written request therefor, all of Contractor’s books and records (including all financial and accounting records and operations

reports, and records of other subsidiaries or affiliates of Contractor, if any) (i) as necessary to audit any payments made or amounts or setoff pursuant to this Agreement, and (ii) otherwise related to Contractor’s provision of Contractor Services to United or any of Contractor’s other obligations under this Agreement, including without limitation relating to the performance, regulatory and operational standards in Sections 4.2, 4.3, 4.4, 4.5, 4.7, 4.8, 4.9, 4.17, 4.18, 4.19, 4.20 and 4.22 (all such books and records, collectively, the “CPA Records”). United and its outside auditors and advisors shall be entitled to make copies and notes of such information as they deem necessary and to discuss such records with Contractor’s Chief Financial Officer or such other employees or agents of Contractor knowledgeable about such records. Upon the reasonable written request of United or its outside auditors or advisors, Contractor will cooperate with United and its outside auditors and advisors to permit United and its outside auditors and advisors access to Contractor’s outside auditors for purposes of reviewing such records. Any audit conducted pursuant to this Section 3.5 shall be paid for by United, unless pursuant to such audit it is determined that Contractor owes United in excess of [***] in which case Contractor shall pay to United the entire costs and expenses incurred by United in connection with such audit.

 

In addition, Contractor shall deliver or cause to be delivered to United (I) as soon as available, but in any event within [***] days after the end of each fiscal year, a copy of the consolidated balance sheet of Contractor, as at the end of such year, and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on by an independent certified public accountants of nationally recognized standing; and (II) as soon as available, but in any event not later than [***] days after the end of each of the [***]periods of each fiscal year, the unaudited consolidated balance sheet of Contractor, as at the end of such quarter, and the related unaudited consolidated statements of income and retained earnings and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a responsible officer of Contractor as being fairly stated in all material respects (subject to normal year-end audit adjustments); provided, that Contractor shall not be required to deliver financial statements pursuant to this sentence at any time that Contractor is a reporting issuer pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and such financial statements are timely filed with the Securities and Exchange Commission pursuant thereto. All financial statements delivered hereunder shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein).

 

Without limiting, and in addition to, the foregoing in this Section 3.5, upon United’s delivery of a written notice at any time and from time to time pursuant to this Section 3.5 (any

19


Exhibit 10.2

such notice, a “3.5 Notice”), Contractor shall promptly provide responsive information, which shall in all events be responsive to any specific information requests delivered by United in any such 3.5 Notice, together with reasonable supporting documentation (which, in the case of projected information, will include reasonable supporting assumptions), it being understood that a

3.5 Notice may include, but shall not be limited to, requests regarding any of the following with respect to Contractor or its affiliates (including Parent): crew resources and availability (including

with respect to pilots and flight attendants), and historical and projected operational statistics. In addition (i) following the end of the third week of each calendar month, pursuant to a written report to be delivered by Contractor to United no later than [***] Business Days following the end of such calendar week, and also promptly following United’s written requests from time to time, Contractor shall deliver to United reasonably detailed information as to such three-week period regarding the availability and use of flight simulators and flight simulator instructors, the percentage of Contractor’s entire pilot cadre that have claimed sick leave, the success percentages and completion percentages as to Contractor’s pilots in all applicable training programs, and (ii) no less than weekly, pursuant to a written report to be delivered by Contractor to United no later than [***] Business Days following the end of each calendar week, and also promptly following United’s written requests from time to time, Contractor shall deliver to United reasonably detailed information as to the entire cadre of Contractor pilots, flight attendants or other resources (including use and availability of training staff) related to the operation of regional jet aircraft and each fleet relating thereto (whether such pilots, flight attendants or other resources are applicable, or subject to, capacity purchase provisions in this Agreement or any other agreement with a code share partner other than United), including total pilot headcount, total flight attendant headcount, mechanic headcount, dispatch headcount, staffing, pay rates, bonus and incentive programs, training pipelines and facility lease terms, and also including any and all events or circumstances that would reasonably be expected to have a material impact (positive or negative) on Contractor’s performance of Regional Airline Services under this Agreement (including Contractor’s block hour capabilities). Upon United’s reasonable requests from time to time, Contractor shall provide United and its representatives with reasonable access to Contractor’s training processes, facilities, and records in order to allow United to confirm the information provided to United under this Section 3.5, and shall consider in good faith United’s suggestions from time to time to optimize the same for the performance by Contractor of Regional Airline Services under this Agreement.

 

3.6
Billing and Payment.

 

(a)
Prepayment. At least [***] days prior to the commencement of the applicable month to which a Final Monthly Schedule relates, Contractor shall present a reasonably detailed written invoice for the following amount (the “Prepayment”) due under this Agreement in respect of the month to which such Final Monthly Schedule pertains:

 

(i)
[***][***] plus

 

(ii)
[***] plus

 

(iii)
[***] plus

20


Exhibit 10.2

 

(iv)
[***] plus

 

(v)
[***]

 

(b)
Reconciliation.

 

(i)
Reconciliation of Certain Compensation for Carrier Controlled Costs.

 

(A)
[***]

 

[***]

(B)
[***]

 

 

(C)
[***]

 

(D)
[***]

 

 

(E)
[***]

 

(F)
[***] [***]

 

(G)
[***]

 

(H)
[***]

 

(ii)
Reconciliation of Pass-Through Costs.

 

(A)
The following expenses incurred in connection with Regional Airline Services (collectively, the “Pass-Through Costs”) shall be reconciled to actual costs as set forth below:

 

(1)
[***]
(2)
[***]

 

(3)
[***]

 

(4)
[***]

 

 

(5)
[***]

21


Exhibit 10.2

 

(6)
[***] as provided by and in consideration of Contractor’s compliance with its obligations under Section 4.12 (A) if United shall not have elected to procure fuel pursuant to clause (i) of Section 4.12(b), the cost of such fuel procurement, including any administration fees of any fuel supplier, and (B) if United shall not have elected to procure Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.12(b), charges for Fuel Services;

 

(7)
[***]

 

(8)
[***]

 

[***][***]

 

(9)
[***]

 

(10)
[***]

 

(11)
[***]

 

(12)
[***]

 

(13)
[***]

 

(14)
[***]

 

(B)
The Prepayment paid pursuant to Section 3.6(c)(i) shall include an allocation of Pass-Through Costs, determined as follows:
(1)
[***].

 

(2)
[***]

 

(3)
[***]

 

 

(4)
[***]

 

(5)
[***]

 

 

(6)
[***]

[***]

22


Exhibit 10.2

 

(C)
Without limiting United’s audit rights, (i) if in any month the Contractor’s actual Pass-Through Costs exceed the amount of Prepayment in respect of Pass-Through Costs for such month as described in Section 3.6(b)(ii)(B), [***]

 

(iii)
Reconciliation for Scheduled Block-Hours. With respect to any Final Monthly Schedule for any calendar month from time to time, with respect to the fleet of the E175 Covered Aircraft, on the one hand, and the fleet of the CRJ900 Covered Aircraft, on the other hand, if the total number of scheduled block-hours for the applicable fleet in such Final Monthly Schedule (the “Total Monthly Scheduled Block-Hours”) is less than the Block-Hour Monthly Threshold (as defined below) for such fleet, then United shall pay Contractor the Block-Hour Adjustment Amount (as defined below) for such fleet. [***] For the purposes of this Section 3.6(b)(iii), the following definitions shall apply:

 

Block-Hour Adjustment Amount” – means, for any calendar month, the product of (x) the Block-Hour Monthly Threshold minus the Total Monthly Scheduled Block-Hours, multiplied by (y) [***]; provided that the figure in the foregoing clause (y) shall be adjusted on each June 1 of each calendar year as follows: the new figure, applicable beginning on June 1 of each calendar year, shall be equal to the figure in effect on the date immediately preceding June 1 of each calendar year multiplied by [***]); provided further that the Block-Hour Adjustment Amount shall be calculated separately for the fleet of the E175 Covered Aircraft, on the one hand, and the fleet of the CRJ900 Covered Aircraft, on the other hand; and provided further that, notwithstanding anything to the contrary in this Section 3.6(b)(iii), the Block-Hour Adjustment Amount for any fleet for any calendar month shall be reduced to the extent that the number of block- hours actually flown for such calendar month is less than the Block-Hour Monthly Threshold for such calendar month due to United’s good faith

determination that Contractor did not have the operational capacity to operate the applicable Block-Hour Monthly Threshold for such calendar month.

 

Block-Hour Monthly Threshold” – means, with respect to any calendar month, [***] provided that the Block-Hour Monthly Threshold shall be calculated separately for the fleet of the E175 Covered Aircraft, on the one hand, and the fleet of the CRJ900 Covered Aircraft, on the other hand; and provided further that the number of block-hours per day corresponding to a particular [***] particular fleet as referenced in the foregoing clause (x) shall be determined by applying the [***] in the applicable Final Monthly Schedule to the table set forth below (subject to linear interpolation between the data points in such table).

23


Exhibit 10.2

 

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

 

(c)
Payment.

 

24


Exhibit 10.2

(i)
Payment of Invoiced Prepayments. United shall pay Contractor the Prepayment, subject to (x) United’s right to dispute any calculations set forth on such invoice that do not comply with the terms of this Agreement,

(y) United’s set-off rights as set forth in Section 3.6(c)(ii) and Section 11.13, and (z) any other adjustments as mutually agreed to by both Contractor and United, as follows:

 

(A)
[***] of the balance of the Prepayment shall be payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the first Wednesday of the month (or if such day is not a Business Day, the next Business Day) to which such invoice relates, as adjusted pursuant to Section 3.6(c)(ii) below;

 

(B)
[***] of the balance of the Prepayment shall be payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 2nd Wednesday of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates;

 

(C)
[***] of the balance of the Prepayment shall be payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 3rd Wednesday of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates, as adjusted pursuant to Section 3.6(c)(ii) below; and
(D)
[***] of the balance of the Prepayment shall be payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 4th Wednesday of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates, as adjusted pursuant to Section 3.6(c)(ii).

 

(ii)
Payment of Reconciled Items. Not later than [***] following the end of each month, Contractor and United shall make the reconciliation calculations provided for in Subsections 3.6(b)(i), (ii) and (iii) above, in accordance with the other provisions set forth in Section 3.6(b). On or before the fourth Wednesday following the end of such month (or if such day is not a Business Day, the next Business Day), the sum of (A) such reconciled amounts for such month, (B) if any, liquidated damage amounts owed and unpaid by Contractor to United pursuant to Article VIII in respect of the period to and including the third Wednesday following the end of such month, (C) any Basic Rent payable pursuant to Section 10.4 and/or a Covered Aircraft Lease with respect to the period to and including the second Wednesday following the end of such month and (D) any unpaid

25


Exhibit 10.2

EBR Payment with respect to an EBR Cure Period ending on or prior to the third Wednesday following the end of such month, (i) shall be paid by United to Contractor, together with any payment to be made by United pursuant to Section 3.6(c)(i)(C) above, or (ii) shall be paid by Contractor to United or set off by United against any other amounts owing to Contractor under this Agreement or any Ancillary Agreement. Further reconciliations shall be made on or prior to the first Wednesday of the month following the end of such month (or if such day is not a Business Day, the next Business Day) to the extent necessary as a result of United’s review of financial information provided by Contractor in respect of such month and, in addition, with respect to insurance and, solely with respect to E175 Covered Aircraft, E175LL Covered Aircraft, and CRJ900 Covered Aircraft Property Taxes, reconciliation shall occur on an annual basis. Such further reconciled amounts for such month (x) shall be paid by United to Contractor, together with any other payment to be made by United pursuant to Section 3.6(c)(i)(D) above, or (y) shall be paid by Contractor to United or set off by United against any other amounts owing to Contractor. Notwithstanding the foregoing, United shall have the right to set-off any payment owed by Contractor to United which is not enumerated above against any of the amounts otherwise payable by United pursuant to Section 3.6(c)(i). Notwithstanding any provisions in this Article III to the contrary, expenses presented by Contractor hereunder more than six (6) months after they were incurred shall not be reimbursed or paid pursuant to this Section 3.6, and United shall have no obligation to Contractor with respect to such expenses and shall be entitled to reconcile such expenses as

null and void. In addition, reconciliation of out of pocket third-party costs incurred by Contractor under any of agreements listed in clauses 9, 10, 11, 12 and 13 of Section 3.6(b)(ii)(A) will occur under such timeframe and terms as are mutually agreeable by the parties.

 

(iii)
No Payment for Disputed Items. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement (other than the CRJ550 Aircraft Purchase Agreement ), neither United nor Contractor shall have any obligation to make any payment required under this Agreement or any Ancillary Agreement that is subject to a good faith dispute; provided, that within [***] following the resolution of any such dispute in accordance with the terms of this Agreement, United or Contractor, as applicable, shall make any payments required by such resolution. Except as may result from the exercise by United of its audit rights pursuant to Section 3.5, all payments made by Contractor or United as provided in this Agreement or any Ancillary Agreement shall be deemed final and not subject to further review or reconciliation after the later to occur of (I) the date that is [***] months after the date of the applicable payment and (II) the date of final resolution of any good faith dispute regarding the applicable payment arising during the [***] months following the date of the applicable payment.

26


Exhibit 10.2

 

(iv)
No Payment for Fines, Etc. Notwithstanding anything to the contrary contained in this Section 3.6, United shall not be required to incur any cost or make any reconciliation payment pursuant to this Section 3.6 to the extent that such cost or reconciliation payment is attributable to any costs, expenses or losses (including fines, penalties, settlements and any costs and expenses associated with any related investigation or defense) incurred by Contractor or its agents as a result of any violation by Contractor or such agent of any law, statute, judgment, decree, order, rule, regulation or lease requirement of any governmental or airport authority.

 

(v)
No Payment for Maintenance and Ferry Operations. Notwithstanding anything to the contrary contained in Section 3.4 or this Section 3.6, United shall not make any payments, including but not limited to those provided for on Schedules 2A and 2B hereto, to Contractor or incur any expense for any maintenance flights or ferry or reposition operations (to the extent such flights or operations are directly related to maintenance events) or any other expenses due to reasons or events within Contractor’s control, including without limitation with respect to fuel, landing fees, ground handling expenses, aircraft parking and other airport facility/use fees, de-icing or towing. [***].
(vi)
No Payment for Significantly Delayed Flights. If (x) Contractor operates any Scheduled Flight either (a) more than [***] late from the scheduled departure time with a revenue passenger load factor of less than [***] or (b) more than [***] late with [***] revenue passengers, and

(y) United did not direct Contractor to operate such flight in such manner (such flights, “Excess Delayed Flights”), then the block hours, flight hours, aggregate number of passengers and departures attributable to such Excess Delayed Flights shall not be included when calculating Compensation for Carrier Controlled Costs, and Contractor shall not otherwise be reimbursed for such flight including without limitation with respect to Fuel Services, landing fees, or any other reconciled expense pursuant to Section 3.6 or otherwise, and United shall be reimbursed for fuel and any other expenses specifically relating to such flight that were directly incurred by United pursuant to Section 3.4(a); provided that such flight shall be included in the measurements utilized in the Incentive Program and other measurements of delays and cancellations under this Agreement.

 

(vii)
For the avoidance of doubt, Contractor acknowledges and agrees that, after the Effective Date, all amounts owing to Contractor by United or to United by Contractor arising hereunder shall be settled in accordance with the provisions of this Article III or other applicable provisions of this Agreement, as the case may be, and not through the Automated Clearing House (ACH) invoice process.

 

27


Exhibit 10.2

(d)
Ownership Rate. [***] in [***] installments during such month (consistent with the payment schedule referenced in Section 3.6(c)(i)), provided that United shall have no obligation to make a payment with respect to an [***] that would otherwise be due during the calendar month of any such payment date that occurs after the earliest of (i) in the case of any [***] Aircraft not previously financed pursuant to the [***] Transaction, the date that such [***] Aircraft is no longer able to be financed pursuant to the [***] Transaction, (ii) the date of withdrawal of such [***] Aircraft from the capacity purchase provisions of this Agreement, (iii) the date of purchase of such [***] Aircraft by United and (iv) the date that all equipment notes issued in the [***] Transaction with respect to such [***] Aircraft shall have been paid in full, and such [***] Aircraft shall cease to be an [***] Aircraft on such earliest date.

 

(e)
Ownership Rate for Secured Loan Aircraft. As compensation for the cost of ownership of each Secured Loan Aircraft, United shall pay to Contractor an amount

equal to each regularly scheduled payment of principal and interest, as set forth on Schedule 7, with respect to the loan under the Secured Loan Agreement with respect to such Secured Loan Aircraft in [***] installments during the calendar month (consistent with the payment schedule referenced in Section 3.6(c)(i)) of the payment date on which such payment is due under the applicable Secured Loan Agreement (the “Secured Loan Ownership Rate”), provided that United shall have no obligation to make any Secured Loan Ownership Rate payment with respect to a Secured Loan Aircraft (x) to the extent United shall have paid the corresponding principal and interest payment pursuant to United’s guaranty under the applicable Secured Loan Transaction and United has not been reimbursed as of the first day of the month in during which such Secured Loan Ownership Rate payment is due or

(y) if such payment would otherwise first become due on any such payment month that occurs after the earliest of (i) the date of withdrawal of such Secured Loan Aircraft from the capacity purchase provisions of this Agreement, (ii) the date of purchase of such Secured Loan Aircraft by United, and (iii) the date that all principal of and interest on the loans under the Secured Loan Agreements with respect to such Secured Loan Aircraft shall have been paid in full, and such Secured Loan Aircraft shall cease to be a Secured Loan Aircraft on such earliest date. United shall be entitled to set-off against its obligation to make any Secured Loan Ownership Rate payment with respect to any Secured Loan Aircraft any amount that United shall have paid under United’s guaranty with respect to any due and unpaid Contractor obligation under the related Secured Loan Transaction for which United has not been reimbursed as of the date such Secured Loan Ownership Rate payment is due.

 

3.7
Government Assistance.

 

To the extent permissible by law, in the event the existing terms of the Federal payroll protection CARES Act are extended beyond [***] without any modification or other amendments or changes thereto other than such extension, Contractor agrees to provide the same level of concessions to United as provided in the First Amendment, which concessions shall remain in effect for the duration of such extension. Conversely, if the existing Federal payroll protection

28


Exhibit 10.2

CARES Act is extended beyond [***], but with modifications, amendments or changes thereto, the parties agree to negotiate in good faith with respect to further modifications to the concessions set forth in the First Amendment, taking into consideration such modifications, amendments or changes thereto. For purposes of example only, further modifications to this First Amendment may include, but shall not be limited to, rate reductions, waiver of performance incentives, and waiver of utilization minimums (or provisions giving Contractor certain rights or entitlements in the event that certain utilization figures are not met in applicable flight schedules). For the avoidance doubt, this provision will not require Contractor to violate any requirement imposed by the government as a condition of accepting such government grant(s) or assistance; rather, the parties intend this provision to reflect Contractor’s financial situation and its ability to provide appropriate concessions in the interest of equity between the parties.

3.8
Certain Reimbursement Obligations of United for Modification of CRJ900 Covered Aircraft for United Express Service.

 

(a)
No later than [***] following the Effective Date, Contractor shall submit to United a good faith written proposal, together with reasonable supporting detail and reasonable specificity (including evidence demonstrating Contractor’s operational capacity to fly such CRJ900 Covered Aircraft) for the following expenses anticipated to be incurred with respect to the induction into revenue service of the CRJ900 Covered Aircraft for the performance by Contractor of Regional Airline Services under this Agreement (collectively, the “Reimbursable Mod Expenses”):

(i) changes to livery on the exterior of the CRJ900 Covered Aircraft to conform to the standards set forth on Exhibit E, (ii) changes to the seat configuration of the CRJ900 Covered Aircraft to conform to the requested United Express seat configuration, (iii) installation of other United-requested interior configurations including United-branded placards; provided that such proposal shall only include such expenses that meet all of the following criteria (1) such expenses are out-of- pocket, (2) such expenses are solely and directly attributable to the induction into revenue service of the CRJ900 Covered Aircraft in accordance with Schedule 1 (including the footnotes thereto), and (3) such expenses are one-time and non- recurring; provided, however, that Reimbursable Mod Expenses shall in all events exclude any and all costs that are beyond the express scope of items (i) through (iii) above, it being understood that such excluded costs include, without limitation, costs related to the preservation, maintenance, maintenance base movements, cleaning, or other interior aircraft repairs, airworthiness directive compliance, the repair of any landing gears, engines or airframe maintenance or any actions necessary to make such CRJ900 Covered Aircraft airworthy and in a condition to operate Scheduled Flights in accordance with the terms of this Agreement, among other costs. Contractor shall consider in good faith any proposals submitted in good faith by United to modify any such proposal delivered by Contractor to provide that United directly incur any Reimbursable Mod Expenses in lieu of Contractor incurring such expenses.

 

(b)
If United delivers written notice to Contractor of United’s approval, which approval may be withheld for any reason or no reason by United in its sole and absolute

29


Exhibit 10.2

discretion, of such proposal or of any component thereof (any such expense so approved by United, an “Approved Reimbursable Mod Expense”), then Contractor shall be obligated to conduct the applicable activities related to the applicable Approved Reimbursable Mod Expenses and to proceed to incur the applicable Approved Reimbursable Mod Expenses in accordance with such proposal or component thereof. United will be deemed to have rejected a proposal (or any component thereof) submitted by Contractor pursuant to Section 3.8(a) (which rejection shall be revocable by United at any time in United’s sole and absolute discretion) if either (x) United delivers a written notice rejecting such proposal (or any component thereof that is for an expense amount greater than [***]) or (y) United does not deliver written notice of acceptance as contemplated by the

preceding sentence on or prior to the [***] day following United’s receipt of such proposal from Contractor. As to each incurrence of an Approved Reimbursable Mod Expense, no later than [***] following such incurrence, Contractor shall deliver to United evidence of such incurrence, together with reasonable supporting documentation, including any applicable invoices and evidence of payment. Subject to Section 3.5, no later than [***] following United’s timely receipt of such evidence of incurrence as to an Approved Reimbursable Mod Expense within the deadline referenced in the immediately preceding sentence, United shall reimburse Contractor for any undisputed portion of such Approved Reimbursable Mod Expense that Contractor has incurred in accordance with this Section 3.8.

 

(c)
Notwithstanding anything to the contrary in this Agreement:

 

(i)
United shall not have any reimbursement obligations under this Agreement that has not been timely submitted by Contractor to United in accordance with Section 3.8(a) above.

 

(ii)
Contractor and United acknowledge and agree that United’s reimbursement obligations are not intended to be duplicative, and that the categories of Reimbursable Mod Expenses are intended to address reimbursements for separate, distinct and mutually exclusive categories of Reimbursable Mod Expenses. As such, in the event of any unintended duplication of payments by United from time to time pursuant to this Section 3.8 or pursuant to any other provision of this Agreement to the extent relating to Reimbursable Mod Expenses, Contractor and Untied shall work together in good faith to remedy such duplication by crediting United’s future payment obligations under this Agreement (whether or not arising pursuant to this Section 3.8) against the aggregate amount of such duplicated payments.

 

3.9
Collective Bargaining Agreement Extension.

 

The parties acknowledge and agree that Contractor is currently in negotiations with its pilots as to a potential extension of the applicable collective bargaining agreement (the “CBA Extension”). From and after the CBA Extension, if any, the parties shall cooperate in good faith to

30


Exhibit 10.2

consider appropriate adjustments to the terms and conditions of this Agreement, including the rates set forth on Schedules 2A and 2B, to address any changes in the term of such collective bargaining agreement and/or the costs of such collective bargaining agreement; provided, however, that nothing in this Section 3.9 shall obligate either party to incur any out-of-pocket expenditures or to agree to any amendment to this Agreement, it being understood that any amendment to this Agreement must be mutually agreed by the parties.

ARTICLE IV

CONTRACTOR OPERATIONS AND AGREEMENTS WITH UNITED

 

4.1
Crews, Etc.

 

(a)
Contractor shall be responsible for providing all crews (flight and cabin), maintenance personnel, aircraft ground movement teams and other staff necessary to operate the Scheduled Flights and for all aspects (personnel and other) of dispatch control in each case pursuant to this Section 4.1 and, as applicable, in accordance with Exhibit P.

 

(b)
Flight Crews. Aircraft used for Regional Airline Services will be operated with crews consisting of a captain or pilot, and a first officer or co-pilot. All such crew members will at all times meet all currently applicable governmental requirements, as such requirements may be amended from time to time during the Term, and will be fully licensed and qualified for the services that they perform hereunder. In addition, each of the Contractor’s captains, first officers and co-pilots will hold a current license to operate aircraft in scheduled (Part 121) service and all members of all flight crews used to provide Regional Airline Services hereunder must be qualified to fly between all city pairs on the Effective Date of this Agreement. Contractor shall ensure that crew members meet all requirements imposed by the insurance policies that are to be maintained pursuant to Article VI. Without limiting any of Contractor’s or Parent’s obligations (or United’s remedies) under the Agreement as amended by the Amendment, Contractor and Parent (i) will ensure that any reductions to United’s Scheduled Flights due to lack of crew availability are no less favorable to United than those that are proportional to flight reductions made by Contractor to Contractor’s regional air services for other carriers operating fleet types with pilots that are trained to operate Embraer aircraft in the same period due to lack of crew availability and (ii) will each take commercially reasonable efforts to hire crews to support United’s Scheduled Flights in the same proportion as Contractor and Parent are taking with respect to Contractor’s regional air services for other carriers.

 

(c)
Flight Attendants. Contractor’s flight attendants will at all times possess all necessary training and meet all currently applicable governmental requirements and any other requirements pursuant to this Agreement (including without limitation as referenced in Section 4.3), in each case as such requirements may be amended from time to time during the Term.

 

31


Exhibit 10.2

(d)
United shall require Contractor flight and cabin crew daily schedules and forward planning schedules inclusive of reserves and placement for operational integrity; provided that such schedules shall be de-identified with respect to individual employee names and any information that would allow United to specifically identify individual employees. Such information will be used for irregular operations management and slot control.
(e)
Contractor agrees to be bound by and to remain in compliance with all obligations on United Express Carriers (as such term is defined in the Letter of Agreement) as set forth in that certain Letter of Agreement (LOA 11) between United Airlines, Inc. and the Air Line Pilots in the service of United Airlines, Inc., as represented by ALPA (the “Letter of Agreement”) attached to this Agreement as Exhibit L.

 

(f)
In the event that United determines that the continued utilization by Contractor of any individual Contractor employee, independent contractor or agent in the provision of Contractor Services to United has provided customer service at a lower level than the standards to which Contractor and United have agreed herein, then United shall give Contractor notice to that effect requesting that such Contractor employee, independent contractor or agent no longer be utilized by Contractor in the provision of Contractor Services to United under this Agreement. Contractor shall have ten (10) Business Days following United’s request in which to investigate the matters forming the basis of such request, correct any deficient performance and provide United with written assurances that such deficient performance shall not recur. If, following such ten (10) Business Day period, United is not reasonably satisfied with the results of Contractor’s efforts to correct the deficient performance and/or to ensure its non-recurrence, then Contractor shall, as soon as possible, cease utilizing such Contractor employee, independent contractor or agent in Contractor’s provision of Contractor Services to United under this Agreement, without cost to United. Nothing in this provision shall operate or be construed to limit Contractor’s responsibility for the acts or omission of the Contractor employee, independent contractor or agent, or be construed as joint employment, or excuse any of Contractor’s obligations under Section 4.1(a) herein or under any other provision of this Agreement.

 

AviateTM Participation Agreement. From and after the Effective Date, for any pilot who is enrolled as a “Candidate” (a “Candidate”) in the cooperative pilot recruitment and development program referred to as “Aviate” in that certain AviateTM Participation Agreement entered into by and between Contractor (as a “Participating Institution” thereunder) and United, [***][***]

 

4.2
Governmental Regulations; Maintenance.

 

Contractor has and shall maintain all certifications, permits, licenses, certificates, exemptions, approvals, plans, and insurance required by governmental authorities and Airport Authorities, including, without limitation, FAA, DOT and TSA, to enable Contractor to perform

32


Exhibit 10.2

the services required by this Agreement. All flight operations, dispatch operations and all other operations and services undertaken by Contractor pursuant to this Agreement shall be conducted, operated and provided by Contractor in compliance with all laws, regulations and requirements of applicable governmental authorities and Airport Authorities (foreign and domestic), including, without limitation, those relating to airport security, the use and transportation of hazardous materials and dangerous goods, crew qualifications, crew training and crew hours, the carriage of persons with disabilities and without any violation of U.S. or foreign laws, regulations or governmental prohibitions. All Covered Aircraft shall be operated and maintained by Contractor in compliance with all laws, regulations and governmental requirements of applicable governmental authorities and Airport Authorities (foreign and domestic), Contractor’s own operations manuals and maintenance manuals and procedures, all applicable provisions of any aircraft lease, mortgage or sublease, and all applicable equipment manufacturers’ manuals and instructions. Without limiting the foregoing, Contractor and its subcontractors shall abide by the requirements of 41 CFR §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a), which regulations (x) prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin, and (y) require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability.

 

4.3
Quality of Service.

 

(a)
At all times, Contractor shall provide Contractor Services with appropriate standards of care, but in no event lower than such standards utilized by United as of the date of this Agreement. United procedures, performance standards and means of measurement thereof concerning the provision of air passenger and air cargo services shall be applicable to all Regional Airline Services provided by Contractor. Contractor shall achieve at least the comparable quality of airline service as provided by United. Contractor shall comply with all airline customer service commitments, policies and service standards of United as of the Commencement Date, including without limitation the “Customer First” commitments, on board services requirements and employee conduct, appearance and training policies in place as of the Commencement Date, and shall handle customer-related services in a professional, businesslike and courteous manner. In connection therewith, Contractor shall maintain aircraft cleaning cycles and policies, shall comply with the provisions set forth in Exhibit J and shall maintain adequate staffing levels, to ensure at least a comparable level of customer service and operational efficiency that United

achieves, including without limitation in respect of customer complaint response, ticketing and boarding timing, oversales, baggage services and handling of irregular operations. In addition, at the request of United, Contractor shall comply with all such airline customer service commitments, policies and standards of care of United as adopted, amended or supplemented after the Commencement Date.

 

(b)
Contractor shall make such interior and exterior design and product-related changes as may be required by United from time to time, including both those for which the

33


Exhibit 10.2

cost is borne by United pursuant to Section 3.4(a)(ix), and those that occur within Contractor’s normal aircraft and facility refurbishment program.

 

(c)
Contractor shall ensure that all Covered Aircraft are equipped with an ARINC aircraft communications addressing and reporting system (or such other system as is designated by United), the cost of which will be borne by Contractor with respect to CRJ900 Covered Aircraft. Contractor shall make such interior and exterior design and product-related changes as may be required by United from time to time, including both those for which the cost is borne by United pursuant to Section 3.4(a)(ix), and those that occur within Contractor’s normal aircraft and facility refurbishment program.

 

(d)
Contractor shall provide United with timely communication regarding the status of all flights. Contractor shall, at its own expense, ensure that each Covered Aircraft is equipped with the software capability of providing ACARS-based data requested by United from time to time in United’s sole discretion, including without limitation as provided in Exhibit H hereto and relating to automated weight and balance procedures for each Scheduled Flight, and shall accurately and timely perform such automated weight and balance procedures.

 

(e)
Contractor shall maintain and utilize Contractor’s passenger and bag weight program approved by the FAA and existing on the Commencement Date (unless and until otherwise directed by the FAA).

 

(f)
United shall timely inform Contractor of the required seat layouts of the E175 Covered Aircraft (for SHARES Seat Map). Contractor shall ensure that all Scheduled Flights using E175 Covered Aircraft are capable of operating in Category 2 conditions (with respect to instrument landing systems), crew training and other requirements to provide such capability.

 

(g)
Contractor will use United’s standard procedures for processing and adjudicating all claims for which Contractor is responsible in an effort to avoid such matters becoming the subject of claims, litigation or an investigation by a governmental agency or authority. At either party’s request, Contractor and United will meet to discuss and review Contractor’s customer service and handling procedures and policies and its employees’ conduct, appearance and training standards and policies.
(h)
Contractor acknowledges that United may implement programs to evaluate the delivery of customer service and adherence to customer service standards established by United and Contractor hereby agrees to fully comply with all aspects of any such programs. Contractor acknowledges that pursuant to such programs United may directly observe customer service delivery and provide Contractor with findings and corrective actions. Contractor acknowledges that Contractor’s required compliance with such programs shall include without limitation (i) Contractor’s provision of certain data to United, as requested, for customer service quality evaluations and assessments by United and (ii) Contractor’s compliance with

34


Exhibit 10.2

corrective actions required by United. United shall give Contractor written notice of any non-safety-related alleged breach of this Section 4.3, identifying with reasonable specificity such alleged breach, not less than fifteen (15) days prior to exercising any remedy regarding such alleged breach.

 

(i)
Contractor agrees to participate in the United Cargo Program.

 

4.4
Regulatory Complaints.

 

Contractor agrees, to the extent permitted by law, to accept as an air carrier any and all regulatory complaints issued by a governmental or regulatory authority having competent jurisdiction for any reason or cause. Contractor agrees that any such complaint, regardless of whether the basis for such complaint is within Contractor’s control, shall be accepted as a Contractor complaint for such regulatory authority purposes. For the avoidance of doubt, no complaint recorded on a Contractor flight, inclusive of station origin and destination, will count against United’s complaint rate for such applicable regulatory authority. Notwithstanding the provisions of Sections 7.1 and 7.2, United shall be liable for and hereby agrees to indemnify and hold harmless Contractor from and against regulatory fines and penalties arising from any such regulatory complaints accepted by Contractor to the extent resulting from the negligence of United, or any ground handler or other party acting pursuant to a contract with United and directly interfacing with passengers on Scheduled Flights (e.g. wheelchair providers); provided that, for the avoidance of doubt, the provisions of Sections 7.3, 7.4, 7.5 and 7.6 shall apply with respect to Contractor’s right to indemnification as provided in this Section 4.4.

 

4.5
DOD Approval.

 

Contractor must maintain Department of Defense air carrier approval per 32 CFR Part 861 and agrees to notify United immediately if changes to such status occur.

 

4.6
Aircraft Ground Movement.

 

(a)
With respect to all Covered Aircraft, Contractor agrees to provide aircraft ground movement (towing teams) at all Applicable Airports, as and when requested by United from time to time, for ground movements of Covered Aircraft required to accommodate United’s flight schedule (each such movement, an “Accommodating Aircraft Movement”).
(b)
If (x) the number of Accommodating Aircraft Movements at a Hub Airport during any calendar month is greater than (y) the result of (I) the aggregate number of Covered Aircraft available to schedule during such month, multiplied by (II) 1.1 (such number determined by this clause (y), the “Towing Baseline”), then United shall reimburse Contractor pursuant to Section 3.6(b)(ii)(A)(14).

 

(c)
In all cases, Contractor shall provide, at its cost, aircraft ground movement (towing teams) where movement is due to circumstances within Contractor’s control, including without limitation due to IT systems, flight crew, maintenance or

35


Exhibit 10.2

movement of overnight aircraft to or from remote hangar locations.

 

4.7
Incidents or Accidents.

 

Contractor shall promptly notify United of all irregularities involving a Scheduled Flight or Covered Aircraft operated by Contractor, including, without limitation, aircraft accidents and incidents, which result in any damage to persons and/or property or may otherwise result in a complaint or claim by passengers or an investigation by a governmental agency or authority. Contractor shall furnish to United as much detail as practicable concerning such irregularities and shall cooperate with United at Contractor’s own expense in any appropriate investigation.

 

4.8
Emergency Response.

 

Contractor shall adopt United’s Emergency Response Plan for aircraft accidents or incidents and shall be responsible for United’s direct costs resulting from United’s management of emergency response efforts on Contractor’s behalf. In the event of an accident or incident involving a Covered Aircraft or Scheduled Flight, United will have the right, but not the obligation, exercised in United’s sole discretion, to manage the emergency response efforts on behalf of Contractor with full cooperation from Contractor. Contractor shall be liable for and will indemnify, defend and hold harmless United, United’s Parent, their respective subsidiaries and their respective directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses, including but not limited to, reasonable attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to or recoverable from United, United’s Parent, their respective subsidiaries or their respective directors, officers, employees or agents arising out of, connected with, or attributable to any act, error, omission, operation, performance or failure of performance of United, regardless of any negligence whether it be active, passive or otherwise on the part of United (but excluding the gross negligence or willful misconduct of United or its directors, officers, agents or employees), which in any way relates to United’s provision of post-accident or post-incident emergency response management efforts. The provisions of the foregoing indemnification obligation shall survive the termination of this Agreement for a period of [***]

4.9
Safety Matters.

 

In the event of a reasonable safety concern, United shall have the right, at its own cost, to inspect, review, and observe Contractor’s operations of Scheduled Flights. Notwithstanding the conduct or absence of any such review, Contractor is and shall remain solely responsible for the safe operation of its aircraft and the safe provision of Regional Airline Services, including all Scheduled Flights, in each case in accordance with the standards, agreements, representations and warranties set forth in Exhibit N. Contractor represents and warrants that it has successfully undergone an IATA Operational Safety Audit (“IOSA”). Contractor hereby covenants (i) to comply and maintain compliance with the requirements of such audits within the timeframe required by IATA and (ii) maintain its membership in the IOSA registry. Any failure to maintain compliance shall immediately be brought to United’s attention along with corrective actions taken or a corrective action plan. Although the IOSA is to be completed biennially, United in its sole

36


Exhibit 10.2

discretion may require, and Contractor shall comply with, additional safety review audits. Nothing in Exhibit N, this Section 4.9, or otherwise in this Agreement is intended or shall be interpreted to make United responsible for such safety matters.

 

4.10
Facilities.

 

(a)
Lease, Use and Modification of Airport Facilities.

 

(i)
United and Contractor agree that the use by Contractor of all Terminal Facilities at all Applicable Airports for the provision of Contractor Services shall be at the direction of United. In furtherance of this Section 4.10(a)(i), from time to time, and notwithstanding the execution of any license, lease, sublease or other agreement pursuant to this Section 4.10, at the request and direction of United and subject to Section 4.10(a)(ii), Contractor shall take the following actions, in each case as and when directed by United:

 

(A)
use its commercially reasonable efforts to enter into a lease, sublease or other appropriate agreement with any Airport Authority at any Applicable Airport for the lease, sublease or use of any Terminal Facilities used or to be used in connection with the provision of Contractor Services;

 

(B)
use its commercially reasonable efforts to amend, modify or terminate any agreement with any Airport Authority at any Applicable Airport for the lease, sublease or use of any Contractor Terminal Facilities;

 

(C)
use its commercially reasonable efforts to obtain the consent of any relevant Airport Authority at any Applicable Airport for the Transfer to United or its designee of any lease, sublease or other agreement in respect of any Contractor Terminal Facility, or for the

right of United or its designee to use any Contractor Terminal Facility;

 

(D)
enter into a mutually agreed sublease for the sublease to United or its designee of Contractor’s interest in any Contractor Terminal Facility;

 

(E)
enter into an assignment substantially in the form of Exhibit O hereto (or as otherwise agreed) for the assignment to United or its designee of Contractor’s interest in any Contractor Terminal Facility;

 

(F)
enter into a sublease or license using United’s standard form in regard to the use of any Terminal Facility owned, leased or

37


Exhibit 10.2

otherwise controlled by United and used or to be used in connection with the provision of Contractor Services;

 

(G)
enter into an assignment substantially in the form of Exhibit O hereto (or as otherwise agreed) for the assignment to Contractor of United’s interest in any Terminal Facility used or to be used in connection with the provision of Contractor Services;

 

(H)
in each case as and when directed in writing by United, (a) Parent shall become, or shall cause Contractor to become, if such carrier is not already, a signatory carrier at any of the following locations: [***] provided,

however, that with regard to this clause (a), if (i) United directs Contractor to become a signatory at any such airport and (ii) there are any direct costs required by such airport to become a signatory carrier, then United agrees to pay such direct costs that are required by the airport to become a signatory carrier, and (b) Parent shall vote, or shall cause Contractor to vote, as directed in writing by United, on any matters submitted to carriers for a vote if such matters concern, or may result in, any costs, direct or indirect, to be paid for and/or reimbursed by United at any of the following locations: [***] and

 

(I)
take any other action reasonably requested by United in furtherance of this Section 4.10(a)(i).

 

For the avoidance of doubt, United’s direction to Contractor with respect to the foregoing actions shall extend to the action itself (e.g., use commercially reasonable efforts to enter into an agreement) as well as to the substance underlying the action (e.g., directions as to the terms and conditions of such agreement).

(ii)
The licenses, assignments and subleases to be entered into pursuant to Section 4.10(a)(i) shall be subject to the rights of the Applicable Airports in such Terminal Facilities and to the receipt of all necessary consents from Airport Authorities and other third parties to such sublease or assignment.

 

(iii)
Each of Contractor and United shall pay for all landing fees for its respective flights at all Applicable Airports, and to the extent that the other party is obligated to make such payments under any applicable lease or other agreement, the first party hereby indemnifies and agrees to hold harmless the other party for all such amounts. Contractor agrees that any landing fee credits given to Contractor in respect of Scheduled Flights or other flights involving the Covered Aircraft as are permitted hereunder, shall be for the account of United (and if any such credits are applied by Contractor to the payment of any landing fees applicable to flights other than Scheduled

38


Exhibit 10.2

Flights or other flights involving the Covered Aircraft as are permitted hereunder, Contractor shall pay the amount of any such credits to United).

 

(iv)
Contractor shall perform in a timely manner all obligations under all leases, subleases and other agreements to which Contractor is or becomes a party for the use of Terminal Facilities, including without limitation making in a timely manner all payments of rent and other amounts due under such agreement, and shall use commercially reasonable efforts to keep such agreements in effect (or to promptly renew or extend such agreements on substantially similar terms as directed by United). Contractor shall adhere to United’s space standards with respect to all Terminal Facilities.

 

(v)
Contractor shall obtain the written consent of United prior to entering into an agreement to lease, sublease, assign, dispose of or otherwise transfer (each, a “Transfer”) or any other agreement for the use or modification of, or otherwise relating to, any Contractor Terminal Facilities (or other airport facilities which would become Contractor Terminal Facilities), or amending or modifying in any manner any such agreement, or consenting to any of the same. Any purported Transfer of any interest in a Contractor Terminal Facility in violation of this Section 4.10 shall be void ab initio, and any rent or other amounts payable under any such Transfer or other agreement shall not be considered a Pass-Through Cost for purposes of this Agreement, and Contractor shall be obligated to follow United’s direction with respect to the disposition of such Transfer or other agreement.

 

(vi)
Contractor shall give United at least [***] prior written notice before ceasing to use any Contractor Terminal Facilities; provided, that no such notice shall be required where such use is ceasing because United has informed Contractor that no Scheduled Flights will be scheduled in or out of such location.
(b)
Exclusivity. Each Passenger- Related Terminal Facility used by Contractor for the provision of Regional Airline Services shall be used by Contractor exclusively for the provision of Contractor Services, and may not be used by Contractor in connection with any other flights, including any flights using any aircraft that is not a Covered Aircraft, or for any other purpose, without United’s prior written approval; provided that the foregoing limitation shall not apply to:

 

(i)
baggage claim and other similar facilities that are leased or otherwise made available to all air carriers at such airport on a common-use or joint-use basis; or

 

(ii)
any facilities that are properly required by an Airport Authority to be made available for use by others in accordance with any applicable agreement that is in place as of the date hereof or has been approved by United under Section 4.10(a)(v).

39


Exhibit 10.2

 

Each Contractor Terminal Facility that is not a Passenger-Related Terminal Facility used for the provision of Contractor Services, and each other facility used by Contractor for the provision of Contractor Services, may be used by Contractor in connection with other flights or for other purposes; provided, that Contractor shall use such facilities for the provision of Contractor Services in priority to any such other use, and any such other use of such facilities shall be subordinate to Contractor’s use for the provision of Contractor Services.

 

4.11
Codeshare Terms.

 

Contractor agrees to operate all Scheduled Flights using the United flight codes and flight numbers assigned by United, or such other flight codes and flight numbers as may be assigned by United (to accommodate, for example, a United alliance partner), and otherwise under the codeshare terms set forth in Exhibit B.

 

4.12
Fuel Procurement and Fuel Services.

 

(a)
The parties will cooperate in identifying (i) fuel savings opportunities, (ii) providers of aircraft fuel and (iii) providers of Fuel Services. Contractor shall enter into agreements with any such providers as shall be directed by United. Contractor shall use its best efforts to document Fuel Services agreements using substantially the form attached hereto as Exhibit D (which form may be replaced, amended, or otherwise modified by United from time to time). Contractor shall provide any data or analysis of its fuel procurement and Fuel Services as reasonably requested by United.

 

(b)
Notwithstanding the foregoing, United, by or through its subsidiaries, agents, or affiliates, shall have the option (but shall not have any obligation) in its sole

discretion (i) to procure or arrange for the procurement of fuel and/or (ii) procure or arrange for the procurement of Fuel Services for or on behalf of Contractor.

 

(c)
If United elects to procure, or arrange for the procurement of, fuel for or on behalf of Contractor pursuant to clause (i) of Section 4.12(b) above, then the costs of such procurement, or such arranging for procurement, as applicable (in each case including without limitation the cost of procuring the aircraft fuel) shall be incurred directly by United, pursuant to Section 3.4(a)(iv). If United does not so elect, then Contractor shall procure, or arrange for the procurement of fuel, and such costs shall be incurred directly by Contractor and reconciled pursuant to Section 3.6(b)(ii)(A)(7).

 

(d)
If United elects to procure, or arrange for the procurement of, Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.12(b) above, then the costs of such procurement, or such arranging for procurement, as applicable shall be incurred directly by United pursuant to Section 3.4(a)(iv). If United does not so elect,

40


Exhibit 10.2

then Contractor shall procure, or arrange for the procurement of Fuel Services, and such costs shall be incurred directly by Contractor and reconciled pursuant to Section 3.6(b)(ii)(A)(7).

 

(e)
United and Contractor acknowledge and agree that any fuel provided to Contractor pursuant to an agreement between United and a fuel supplier is provided “as is” and without warranty of any kind, including without limitation the warranties of merchantability and fitness for a particular purpose, by, through or under United, and that no warranties by, through or under United shall be implied by law.

 

(f)
United and Contractor acknowledge and agree that any aircraft fuel procured, or arranged for procurement, for on behalf of Contractor by United shall not be deemed to have been procured, purchased or otherwise acquired for on behalf of Contractor, and Contractor shall in no event have any claim to or interest in, any fuel procured by United or its agents, unless and until such fuel is delivered into a Covered Aircraft, except as otherwise may be provided in a Fuel Services agreement, if any, between United and Contractor.

 

4.13
Slots and Route Authorities.

 

At the request of United made during the Term or upon termination of this Agreement, Contractor shall use its commercially reasonable efforts to transfer to United or its designee, to the extent permitted by law, any airport takeoff or landing slots, route authorities or other similar regulatory authorizations transferred to Contractor by United for use in connection with Scheduled Flights, or held by Contractor and used for Scheduled Flights, in consideration of the payment to Contractor of the net book value, if any, of such slot, authority or authorization on Contractor’s books. Contractor’s obligations pursuant to the immediately preceding sentence shall survive the termination of this Agreement for so long as any transfer requested pursuant to this Section 4.13 shall not have been completed. Contractor hereby agrees that all of Contractor’s contacts or

communications with any applicable regulatory authority concerning any airport takeoff or landing slots, route authorities or other similar regulatory authorizations used for Scheduled Flights will be coordinated through United. If any airport takeoff or landing slot, route authority or other similar regulatory authorization transferred to Contractor by United for use in connection with Scheduled Flights, or held by Contractor and used for Scheduled Flights is withdrawn or otherwise forfeited as a result of Controllable Cancellations or any other reason within Contractor’s reasonable control, then Contractor agrees to pay to United promptly upon demand an amount equal to the fair market value of such withdrawn or forfeited slot, authority or authorization.

 

4.14
Code Share Limitation.

 

As of the date of this Agreement, but subject to Contractor’s existing contractual codeshare relationships as in effect on the Effective Date, Contractor represents that it does not plan, nor will it, operate pursuant to a marketing or code share relationship in a hub operation with any party other than United at the following airports during the Term: [***]. Contractor may, however, fly to aforementioned airports under codeshare or marketing relationships from another carrier’s hub

41


Exhibit 10.2

(other than from aforementioned airports) as a “spoke service”. In the event that Contractor acquires another entity during the course of this agreement with marketing or codeshare operations at any of the aforementioned airports, United agrees to allow Contractor to continue operations at such airports at levels of operations consistent with the acquiree’s right of operation at the time of acquisition. In addition, Contractor will use commercially reasonable efforts to amend its existing contractual commitments to provide for the codeshare limitations set forth in this Section 4.14. [***]

 

4.15
Use of United Marks.

 

United hereby grants to Contractor the right to and a personal, non-exclusive, non- transferable, non-sublicenseable, fully paid-up, and royalty-free license to use the United Marks and other Identification as provided in, and Contractor shall use the United Marks and other Identification in accordance with the terms and conditions of, Exhibit E.

 

4.16
Use of Contractor Marks.

 

Contractor hereby grants to United the right to and a personal, non-exclusive, non- transferable, non-sublicenseable, fully paid-up, and royalty-free license to use the Contractor

Marks as provided in, and United shall use the Contractor Marks in accordance with the terms and conditions of, Exhibit F.

 

4.17
Catering Standards.

 

(a)
United and Contractor shall comply with the catering requirements set forth on Exhibit G hereto. The parties agree that, in the event of a conflict between the provisions of Exhibit G and any ground handling agreement with Contractor, the provisions of Exhibit G shall control as it applies to Regional Airline Services.

 

(b)
Sales of Alcoholic Beverage Products. Contractor agrees that it shall comply with all federal, state, and local laws, rules and regulations and Contractor shall obtain and maintain all permits, certifications and licenses necessary for the full and proper conduct of its operations relating to the purchase, sale, distribution, storage, or service of any Alcoholic Beverage Product by Contractor. Contractor hereby assumes liability for and agrees to indemnify, defend and hold harmless United and its officers, directors, agents, affiliates, and employees from and against any and all liabilities, damages, expenses, losses, claims, demands, suits, fines or judgments, including, but not limited to, attorneys’ and witnesses’ fees, costs and expenses incident thereto, which may be suffered by, accrue against, be charged to or be recovered from United or its officers, directors, employees or agents, arising out of or in connection with or in any way related to any non-compliance by Contractor with the procedures set forth in Exhibit G or any non-compliance by Contractor with any federal, state, or local law, rule or regulation or any failure of Contractor to obtain or maintain any permit, certification or license necessary for the full and proper conduct of its operations relating to the purchase, sale, distribution, storage,

42


Exhibit 10.2

or service of any Alcoholic Beverage Product by Contractor. Contractor also agrees to comply with the Alcoholic Beverage Handling Procedures as outlined in Exhibit G hereto.

 

4.18
Fuel Efficiency Program.

 

Contractor shall use its commercially reasonable efforts to promptly adopt and adhere to a fuel efficiency program as described on Exhibit H hereto.

 

4.19
Environmental.

 

(a)
Definitions.

 

(i)
The term “Environmental Laws” means all applicable federal, state, local and foreign laws and regulations, guidance documents and policy statements of the Centers for Disease Control, the Occupational Health and Safety Administration, the Department of Transportation, and the Federal Aviation Administration, airport or United rules, and any other applicable regulations, policies, or lease requirements relating to the prevention of

pollution, protection of the environment or occupational health and safety, or remediation of environmental contamination, including, without limitation, laws, regulations and rules relating to emissions to the air, discharges to surface and subsurface soil and waters, regulation of potable or drinking water, the use, storage, release, disposal, transport or handling of Hazardous Materials, protection of endangered species, and aircraft noise, vibration, exhaust and over flight.

 

(ii)
The term “Hazardous Materials” means any substances, whether solid, liquid or gaseous, which are listed and/or regulated as hazardous, toxic, or similar terminology under any Environmental Laws or which otherwise cause or pose threat or hazard to human health, safety or the environment, including, but not limited to, petroleum and petroleum products.

 

(b)
Contractor Obligations.

 

(i)
Contractor shall conduct its operations in a prudent manner, taking reasonable preventative measures to avoid liabilities under any Environmental Laws or harm to human health or the environment, including, without limitation, measures to prevent unpermitted releases of Hazardous Materials to the environment, adverse environmental impacts to on-site or off-site properties and the creation of any public nuisance. If, in the course of conducting services under this Agreement, Contractor encounters adverse environmental conditions that could reasonably be expected to give rise to liability for United under any Environmental Laws or which otherwise could reasonably be expected to result in harm to human

43


Exhibit 10.2

health or the environment, Contractor shall promptly notify United of such conditions.

 

(ii)
Contractor shall, at its own expense, conduct its operations in compliance with applicable Environmental Laws, including obtaining any needed permits or authorizations for Contractor’s operations. If United provides any information, instruction, or materials to Contractor relating to its obligations under any Environmental Laws, Contractor agrees that this shall not in any way relieve Contractor of its obligation to comply with Environmental Laws. Contractor further agrees that it shall otherwise preserve the proprietary nature of any such information that is identified by United as proprietary and confidential and shall use its commercially reasonable efforts to ensure that the information is not disclosed to any third parties without first obtaining the written consent of United.

 

(iii)
Contractor shall use its commercially reasonable efforts to perform its services under this Agreement so as to minimize the unnecessary generation of waste materials, including consideration of source reduction and re-use or recycling options, and coordination with United on a cabin service

recycling program; provided that United will reimburse Contractor for any reasonable and documented incremental expense associated with complying with any cabin service recycling program requested by United. If requested by United, Contractor shall replace specific products used in its operations with less toxic products, as long as there is a reasonable replacement available at a similar cost, or if the product is not at a similar cost, provide United the option to agree to pay the difference. If requested by United, Contractor will undertake reasonable efforts to provide quantitative data on materials recycled and waste disposed of to facilitate coordination and enhancement of cabin service recycling where feasible. Contractor shall ensure that any waste materials generated in connection with the services performed by Contractor under this Agreement are managed in accordance with all applicable Environmental Laws, with Contractor assuming responsibility as the legal generator of such wastes; provided, however, this provision does not apply should United or another vendor of United be the entity who has, in fact, independently generated the wastes.

 

(iv)
For any leased areas or other equipment that are jointly used or operated by Contractor and United (and/or other United contractors), Contractor shall use its commercially reasonable efforts to coordinate its activities with United and/or United contractors and otherwise perform such activities to ensure compliance with applicable Environmental Laws.

 

(v)
Except for de minimis amounts of Hazardous Materials which are immediately and fully remediated to pre-existing conditions, Contractor

44


Exhibit 10.2

shall promptly notify United of any spills or leaks of Hazardous Materials arising out of Contractor’s provision of services under this Agreement, and, if requested, shall provide copies to United of any written reports provided to any governmental agencies and airport authorities under any Environmental Laws regarding same. Contractor shall promptly undertake all reasonable commercial actions to remediate any such spills or leaks to the extent Contractor is required to do so by applicable Environmental Laws, by the relevant airport authority, or in order to comply with a lease obligation. In the event that Contractor fails to fulfill its remediation obligations under this paragraph and United may otherwise be prejudiced or adversely affected (such as involving United leased property), United may undertake such actions as are reasonable at the cost and expense of Contractor. Such costs and expenses shall be promptly paid upon Contractor’s receipt of a written request for reimbursement for them by United.

 

(vi)
Contractor shall promptly provide United with written copies of any notices of violation issued or other claims from a third party asserted pursuant to Environmental Laws or associated with a potential release of Hazardous

Materials and related to or associated with the provision of services by Contractor under this Agreement. Contractor shall promptly undertake all actions necessary to resolve such matters, including, without limitation, the payment of fines and penalties, and promptly addressing any noncompliance identified; provided, however, that Contractor may contest any notice of violation or other alleged violation and defend any claim that it believes is untrue, improper or invalid. In the event that Contractor fails to fulfill its obligations under this paragraph and United may otherwise be prejudiced or adversely affected, United may undertake such actions as are reasonable or legally required at the cost and expense of Contractor. Such costs and expenses shall be promptly paid upon Contractor’s receipt of a written request for reimbursement for them by United.

 

(vii)
If requested by United upon United’s reasonable suspicion of environmental noncompliance, Contractor shall retain a third party, at Contractor’s sole expense, to conduct an environmental compliance audit of Contractor’s activities and/or an environmental site assessment. If, pursuant to such audit, Contractor is found to have been in material compliance with the applicable provisions of this Agreement, then United shall reimburse Contractor for its reasonable costs actually incurred to obtain such audit. Contractor will provide United with the draft audit report, provide United the ability to comment on the draft audit report, and will promptly use its commercially reasonable efforts to address any noncompliance or liability identified in any such report.

 

(viii)
In the event that Contractor Services include providing bulk (non-bottled)

45


Exhibit 10.2

potable water for crew or passenger consumption, Contractor shall ensure compliance with the Aircraft Drinking Water Regulation, FDA requirements, and other similar applicable laws (collectively, the “Drinking Water Requirements”), including without limitation using its commercially reasonable efforts to ensure all water handling equipment is properly and regularly disinfected and kept in sanitary condition. If Contractor relies upon another contractor to load water onto its aircraft or to maintain water handling equipment, it shall inquire with such contractors to ensure they meet these Drinking Water Requirements as well. Contractor shall immediately notify United if it becomes aware of practices or conditions that may negatively impact potable water quality, regardless of the provider or the source of such potable water (including whether such source is an airport, ground handler or aircraft water system). Contractor shall maintain records relating to its compliance with Environmental Laws under this Agreement for the longer of three (3) years or such period of time as is required by Environmental Laws. Contractor shall, at the request of United and with reasonable advance notice, provide United with reasonable access to Contractor’s operations, documents, and employees for the sole purpose of allowing United to assess Contractor’s compliance with its obligations

with this Section 4.19, including responding to reasonable information requests. Upon the termination of operations at a space used to support the provision of Contractor Services under this Agreement, Contractor shall use its commercially reasonable efforts to ensure the removal and proper management of any and all Hazardous Materials associated with Contractor’s operations (including its subcontractors) and will comply with any other applicable Environmental Laws applicable to the provision of Contractor Services.

 

(ix)
Contractor has reviewed United’s Environmental Commitment Statement (found at www.united.com/ecoskies) and agrees to use reasonable efforts to cooperate with United in connection with these commitments in effect as of the date hereof and in responding to reasonable information requests.

 

(x)
Contractor shall be responsible for and will indemnify, defend, and hold harmless United, including its officers, agents, servants and employees, from and against any and all claims, liabilities, damages, costs, losses, penalties, and judgments, including costs and expenses incident thereto under Environmental Laws or due to the release of a Hazardous Material, which may be suffered or incurred by, accrue against, be charged to, or recoverable from United or its officers, agents, servants and employees arising out of an act or omission of Contractor (or its subcontractor) related to Contractor’s provision of services under this Agreement, excluding willful misconduct, or the gross negligence, of United. Notwithstanding anything to the contrary set forth in this Agreement, such damages may include the payment of consequential, special or exemplary damages for

46


Exhibit 10.2

claims under Environmental Laws or due to the release of Hazardous Materials to the extent an applicable lease agreement, sublease or other similar agreement requires the payment of such damages. Any indemnification claims arising under this Section 4.19 shall be administered pursuant to the procedures set forth in Section 7.3 hereto.

 

(xi)
All notices to be provided by Contractor to United under this Section 4.19 shall be provided as indicated in Section 11.2 of this Agreement, with a copy to Managing Director–Environmental Affairs, United Airlines, Inc., 233 South Wacker Drive-WHQSE, Chicago, IL 60606.

 

4.20
Early Brake Release.

 

[***]

United shall gather all data relating to the measurement of the time periods elapsed between aircraft brake release and aircraft wheel movement for departures of all Scheduled Flights for E175 Covered Aircraft as measured by the electronic systems included on all in-service E175 Covered Aircraft (and such systems shall meet the requirements of Section 4.3(c), Section 4.3(d), Exhibit H and Exhibit I hereto including without limitation in respect of ACARS-based data capture). Contractor’s early brake release performance relating to E175 Covered Aircraft for each calendar month (the “EBR Performance”) shall be determined by calculating the simple average of the EBR Periods for all Scheduled Flights.

 

If, in any given calendar month, Contractor’s average EBR Period for Scheduled Flight departures is greater than the EBR Goal, United shall provide Contractor with notice that Contractor has not met the EBR Goal, following which Contractor shall [***] the “EBR Cure Period”) following receipt of such notice, during which to reduce its average EBR Period to an observed average EBR Period less than or equivalent to the EBR Goal. If Contractor has not reduced its average EBR Period to an observed average EBR Period that is less than or equivalent to the EBR Goal as of the end of the EBR Cure Period, then Contractor shall owe a payment (the “EBR Payment”) to United equal to the product of (x) for all Scheduled Flights of E175 Covered Aircraft included in the EBR Performance calculation whose recorded EBR Period exceeds the EBR Goal, the aggregate number of minutes by which such recorded EBR Periods exceeded the EBR Goal, multiplied by (y) [***] of the block hour rate set forth on Schedule 2A, as applicable. The EBR Payment will be made by Contractor to United as provided in Section 3.6(c)(ii). Contractor’s average EBR Period shall be continuously calculated in successive EBR Cure Periods and Contractor shall pay the applicable EBR Payment with respect to each such EBR Cure Period, until Contractor meets the EBR Goal with respect to an EBR Cure Period.

 

4.21
Ground Handling.

 

(a)
United or United’s designee (for the purposes of this Section 4.21(a), references to United shall be interpreted to include United’s designee, as applicable) shall be responsible for all Ground Handling Services at all cities identified from time to time by United to which Contractor shall provide Regional Airline Services. To

47


Exhibit 10.2

effect the performance of the Ground Handling Services, United at its sole option and in its sole discretion may from time to time (i) perform all Ground Handling Services directly, (ii) contract with Contractor pursuant to a separate ground handling agreement, or (iii) sub-contract with an affiliate of United or a third party vendor, or any combination of any of the foregoing.

 

(b)
Contractor shall use commercially reasonable efforts to cooperate with any provider of Ground Handling Services in order to facilitate efficient, cost effective, and safe operations and to ensure compliance with all applicable laws.

 

(c)
In connection with Contractor’s provision of Contractor Services to United under this Agreement, Contractor shall adopt and comply with, and shall cause its employees to adopt and comply with, and shall be responsible for United’s direct

costs resulting from Contractor’s compliance with, all applicable procedures, including without limitation training procedures, as required by United’s provision of Ground Handling Services as provided in Section 4.21(a) above.

 

4.22
IT Requirements.

 

Contractor shall comply with the IT Requirements, as set forth on Exhibit I.

 

4.23
Maintenance Right to Bid.

 

If Contractor intends to engage in any maintenance, repair or overhaul of the Covered Aircraft, and intends to engage a third party (rather than performing such maintenance, repair or overhaul using its own employees), then Contractor shall invite United to match the most favorable, last and final bona fide offer received by Contractor from a third party for such maintenance, repair or overhaul work on a “right of last offer” basis, and shall engage United to perform such maintenance, repair or overhaul work if United matches such offer.

 

4.24
Landing Fees.

 

(a)
United, directly or by or through its subsidiaries, agents, or affiliates, shall pay on behalf of Contractor landing fees incurred for Scheduled Flights, unless, in United’s sole discretion exercised from time to time, it notifies Contractor in writing that Contractor shall pay such landing fees at an Applicable Airport.

 

(b)
If United pays for landing fees on behalf of Contractor pursuant to Section 4.24(a) above, then the costs of such landing fees shall be incurred directly by United, pursuant to Section 3.4(a)(x). If United elects to have Contractor pay for such landing fees, then such costs shall be incurred directly by Contractor and reconciled pursuant to Section 3.6(b)(ii)(A)(4).

 

4.25
Ground Support Equipment (GSE).

48


Exhibit 10.2

 

At United’s direction, and to the extent permitted by applicable federal law and regulations, mainline ground support equipment (“GSE”) and GSE processes shall be used in connection with Contractor’s performance of Regional Airline Services; provided that such GSE and GSE processes shall be modified to be compatible with the Covered Aircraft if necessary, such determination to be made by United.

 

4.26
Ozone Monitoring.

 

Contractor agrees to mitigate the risk of passenger ozone exposure on the E175 Covered Aircraft and CRJ900 Covered Aircraft through the use of a dispatcher product that detects the presence of ozone and adjusts to a higher altitude when ozone is absent. All costs incurred to achieve this mitigation shall be borne by Contractor. Product is to be installed not later than November 30, 2015.

4.27
Block-Hour Requirement; Pilot Requirement; Designation of Non-Comp Aircraft.

 

(a)
Block-Hour Requirement.

 

(i)
At any time from time to time, Contractor shall maintain sufficient capability to operate (A) the number of block-hours per day per Available to Schedule E175 Covered Aircraft corresponding to [***] applicable to the then-current Initial Proposed Monthly Schedule or Final Monthly Schedule, as the case may be, in each case issued pursuant to Section 2.1(c) and (B) the number of block-hours per day per Available to Schedule CRJ Covered Aircraft corresponding to the average scheduled stage length applicable to the then-current Initial Proposed Monthly Schedule or Final Monthly Schedule, as the case may be, in each case issued pursuant to Section 2.1(c); provided that, in each of the foregoing clauses (A) and (B), the number of block hours per day corresponding to a particular [***]shall be determined by applying [***] to the table set forth under clause (a)(ii) below (subject to linear interpolation between the data points in such table) (the requirements set forth in the foregoing clauses
(A)
and (B), collectively, the “Block-Hour Requirement”).

 

(ii)
If, based on any combination of past, current or future performance (such future performance as determined by United in good faith), in each case for a one calendar month period, Contractor does not meet the Block-Hour Requirement, then United may, in its sole discretion, designate as many Covered Aircraft as Non-Comp Aircraft (any date on which United designates a Non-Comp Aircraft, a “Designation Date”) as is necessary to cure such condition; provided that, with respect to any past calendar month period, United must make such designation no later than the [***] following the last day of such calendar month; and provided further that, for any such estimate of future performance in respect of a particular Designation Date,

49


Exhibit 10.2

(A) such estimate shall not include any period beyond the [***] calendar month following such Designation Date, and (B) the Block-Hour Requirement as of the Designation Date relevant to such estimate shall be calculated using the [***] for the relevant future period of performance derived from the then-current Initial Proposed Monthly Schedule or Final Monthly Schedule, as the case may be, in each case issued pursuant to Section 2.1(c), as of such Designation Date, by applying such [***] pursuant to the table set forth below in this clause (a)(ii) (subject to linear interpolation between the data points in such table); provided, however, that if the requirement in one of, but not both of, clauses (A) and (B) of the Block-Hour Requirement has not been satisfied (or, in United’s good faith determination, will not be satisfied), then United’s right to designate Covered Aircraft as Non-Comp

Aircraft shall be limited to the applicable fleet with respect to which the applicable requirement has not been satisfied.

 

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

50


Exhibit 10.2

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

(b)
Pilot Requirement. If, based on any combination of past, current or United’s good faith estimate of future performance, for any [***] calendar months,

Contractor does not meet both (i) [***] available pilots per Available to Schedule E175 Covered Aircraft and (ii) [***] available pilots per Available to Schedule CRJ Covered Aircraft (the “Pilot Requirement” and, together, with the Block-Hour Requirement, the “Utilization Requirements”), then United may, in its sole discretion, designate as many Covered Aircraft as Non-Comp Aircraft as is necessary to cure such condition, provided that this requirement will not become effective until the [***] day following the date of this Agreement. [***]

 

(c)
[***]

 

(i)
[***]

 

(ii)
[***]

 

(A)
[***]

 

4.28
[***][***]Training. The parties acknowledge and agree that, notwithstanding the potential induction of CRJ900 Covered Aircraft pursuant to the provisions set forth in Table 2 to Schedule 1, a material inducement to United’s execution and delivery of this Agreement is the potential transition of Regional Airline Services [***] In furtherance thereof, Contractor shall at all times use commercially reasonable efforts to (i) procure and maintain the E175 Resources [***] (ii) accommodates any good faith projections delivered by United to Contractor from time to time for the allocation of Regional Airline Services between E175 Covered Aircraft operations and CRJ900 Covered Aircraft operations, (iii) recruit and retain pilots and flight attendants for the operation of E175 Covered Aircraft, and (iv) maximize the availability of training resources such as flight simulators and related flight simulator time (whether or not leased) for the operation of E175 Covered Aircraft. Contractor shall at all times maintain adequate records to document its compliance with this Section 4.28, and all such records shall be subject to United’s audit rights set forth in Section 3.5. Without limiting the foregoing,

51


Exhibit 10.2

Contractor shall in good faith consider, and use commercially reasonable efforts to implement promptly, all suggestions submitted in good faith by United as to Contractor’s obligations in this Section 4.28, and shall meet and confer promptly upon United’s requests from time to time in connection therewith.
4.29
Crew Base Locations. At any time from time to time, United shall have the right, exercisable in its sole discretion by delivery of written notice to Contractor (upon reasonable advance notice of at least [***] to cause Contractor to add or change crew base locations; [***]

 

4.30
Block Hour Floor. Without limiting any of Contractor’s other obligations under this Agreement, Contractor shall at all times ensure that it maintains the operational capacity (including as to pilots, flight attendants, mechanics, other personnel, and use of third party resources) to operate under this Agreement a number of block hours on completed Scheduled Flights per calendar month at least equal to the lesser (such lesser amount, the “Block Hour Floor”) of (x) for any particular calendar month, the product obtained by multiplying (A) [***] by (B) the number of Available to Schedule Aircraft during such calendar month, by (C) the number of days in such calendar month, and (y) [***].

 

ARTICLE V CERTAIN RIGHTS OF UNITED

 

5.1
Use of Covered Aircraft.

 

Contractor agrees that, except as expressly permitted hereby or as otherwise directed in writing by United, the Covered Aircraft and the Engines may be used only to provide Regional Airline Services. Without the written consent of United, the Covered Aircraft may not be used by Contractor for any other purpose, including without limitation flying for any other airline or on Contractor’s own behalf. In addition, with respect to any Engine, Contractor shall not discriminate against United with respect to Contractor’s operation, use or maintenance of such Engine (x) as compared to other similar engines in Contractor’s fleet, or (y) in the provision of Regional Airline Services as compared to Contractor’s operations for other airlines or for its own use.

 

5.2
Prohibited Transaction.

 

Contractor shall not permit or undertake any Prohibited Transaction without the prior written consent of United.

5.3
Performance Discussions.

 

Upon United’s request delivered at any time and from time to time, Contractor’s chief executive officer (the “CEO”) and/or, at United’s option, if Contractor’s Controllable Completion Factor for the most recent [***] months is below [***] Contractor’s independent lead director (or

52


Exhibit 10.2

in the absence of a designated independent lead director, any independent director of Contractor selected by United) (the “Lead Director”) shall meet in person with United at its headquarters to discuss such operational performance as soon as reasonably practicable after United’s request, but in any event not more than [***] days following such request; provided that if the CEO and/or the Lead Director, as applicable, do not meet in person with United upon United’s request as provided above, then Contractor shall pay United, no later than the [***] Day following the end of a calendar month, [***] per Covered Aircraft for [***] (or pro-rated portion thereof, as the case may be) that occurs following United’s request until either the CEO and/or the Lead Director, as applicable, meets in person with United or this Agreement is earlier terminated. For the avoidance of doubt, nothing in this Section 5.3 shall limit Contractor’s obligations hereunder and under any Ancillary Agreement to provide Contractor Services, including without limitation its obligations under Section 4.8, and Contractor is and shall remain solely responsible for the safe operation of its aircraft and the safe provision of Regional Airline Services, including all Scheduled Flights.

 

ARTICLE VI INSURANCE

 

6.1
Minimum Insurance Coverages.

 

During the Term, in addition to any insurance required to be maintained by Contractor pursuant to the terms of any aircraft lease, or by any applicable governmental or airport authority, Contractor shall maintain, or cause to be maintained, in full force and effect policies of insurance with insurers of recognized reputation and responsibility, in each case to the extent available on a commercially reasonable basis, as follows:

 

(a)
Comprehensive aircraft hull and liability insurance, including aircraft third party, passenger liability (including passengers’ baggage and personal effects), cargo and mail legal liability, personal injury and all-risk ground and flight physical damage, with a combined single limit of not less than [***] per occurrence and a minimum limit in respect of personal injury for non-passengers of [***] per occurrence and in the aggregate, and hull and liability war risk and other perils insurance with a combined single limit no less than [***] per occurrence and in the aggregate; provided that with respect to war risk insurance acquired from the United States government, the commercial general liability coverage (crew and passengers) of such policy may have such lower combined single limit as is the maximum limit issued by the government from time to time;

 

(b)
Workers’ compensation at statutory limits and employer’s liability with a limit of not less than [***];
(c)
Automobile liability covering all owned, non-owned, leased and hired automobiles, trucks and trailers in an amount not less than [***] combined single limit per occurrence; and

 

(d)
All risk property insurance at replacement cost, including flood, and earthquake if located in an earthquake zone, and placed with commercially reasonable deductibles

53


Exhibit 10.2

not to exceed [***] of the insured values. United shall be named as a loss payee, as their interests may appear.

 

United shall retain the right at any time to review the coverage, form, and amount of the insurance required hereby. If, in the opinion of United, the insurance provisions in this Agreement do not provide adequate protection for United and/or the aviation operations of Contractor associated with the Covered Aircraft, United may require Contractor to obtain insurance sufficient in coverage, form, and amount to provide adequate protection. United’s requirement shall be commercially reasonable but shall be designed to assure protection from and against the kind and extent of risk which exists at the time a change in insurance is required (provided such protection is available on commercially reasonable terms), and Contractor agrees to provide same within thirty (30) days of receiving notice from United.

 

6.2
Endorsements.

 

Contractor shall cause the policies described in Section 6.1 to be duly and properly endorsed by Contractor’s insurance underwriters with respect to Contractor’s flights and operations as follows:

 

(a)
To provide that the underwriters shall waive subrogation rights against United, its affiliates, directors, officers, agents, employees and other authorized representatives, except for the war risk hull insurance as provided by the U.S. government pursuant to Chapter 443, Premium War Risks Insurance;

 

(b)
To provide that United, UCH, and their respective directors, officers, agents, employees and other authorized representatives shall be endorsed as additional insured parties as respects operations of the named insured and liability coverage (other than as to workers’ compensation, employers liability and property insurance);

 

(c)
To provide that insurance shall be primary to and without right of contribution from any other insurance which may be available to the additional insureds;

 

(d)
To include a breach of warranty provision in favor of the additional insureds;

 

(e)
To accept and insure Contractor’s hold harmless and indemnity undertakings set forth in this Agreement, but only to the extent of the coverage afforded by the policy or policies; and
(f)
To provide that such policies shall not be canceled, terminated or adversely materially altered, changed or amended until thirty (30) days (but seven (7) days or such lesser period as may be available in respect of war risk and other perils and ten

(10) days in the case of a cancellation for nonpayment of premium) after written notice shall have been sent to United.

 

6.3
Evidence of Insurance Coverage.

54


Exhibit 10.2

 

At the commencement of this Agreement, and upon each renewal, Contractor shall furnish to United evidence reasonably satisfactory to United of such insurance coverage and endorsements, including certificates certifying that such insurance and endorsements are in full force and effect. If Contractor fails to acquire or maintain insurance as herein provided, United may at its option secure such insurance on Contractor’s behalf at Contractor’s expense.

 

ARTICLE VII INDEMNIFICATION

 

7.1
Contractor Indemnification of United.

 

Contractor shall be liable for and hereby agrees to fully defend, release, discharge, indemnify and hold harmless United, UCH, and their respective directors, officers, employees and agents from and against any or all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses of any kind, character or nature whatsoever, including attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from United, UCH or their respective directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses arising out of the execution or delivery of this Agreement, or performance by Contractor under this Agreement brought by a third party, or involving (i) death or injury (including claims of emotional distress and other non- physical injury by passengers) to any person, including without limitation any of Contractor’s or United’s directors, officers, employees or agents, (ii) loss of, damage to, or destruction of property (including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights), including any loss of use of such property, or (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to (w) any act or omission by Contractor or any of its directors, officers, employees or agents relating to the provision of Contractor Services, (x) the performance, improper performance, non-performance or breach of any or all obligations to be undertaken by Contractor or any of its directors, officers, employees or agents pursuant to this Agreement or any Ancillary Agreement, (y) the operation, non-operation, or improper operation of the Covered Aircraft or Contractor’s equipment or facilities at any location, in each case excluding only claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses, or (z) the breach of any or all representations and warranties of Contractor or Parent pursuant to this Agreement or any Ancillary Agreement except to the extent (A) resulting from the gross negligence or willful misconduct of United, UCH or their respective directors, officers, agents or employees (other than gross negligence or willful misconduct imputed to such

indemnified person by reason of its interest in a Covered Aircraft, and excluding Contractor acting as United’s agent pursuant to Section 10.12), or (B) directly caused by a breach by United of this Agreement or any Ancillary Agreement.

 

7.2
United Indemnification of Contractor.

 

United shall be liable for and hereby agrees to fully defend, release, discharge, indemnify,

55


Exhibit 10.2

and hold harmless Contractor, Parent, and their respective directors, officers, employees and agents from and against any or all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses of any kind, character or nature whatsoever, including attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from Contractor, Parent or their respective directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person, including without limitation any of Contractor’s or United’s directors, officers, employees or agents (excluding Contractor as such an agent), (ii) loss of, damage to, or destruction of property including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights, including any loss of use of such property or (iii) damages due to delays in any manner, in each case arising out of, connected with or attributable to (x) the performance, improper performance, nonperformance or breach of any or all obligations to be undertaken by United or any of its directors, officers, employees or agents (excluding Contractor as such an agent) pursuant to this Agreement, but only to the extent that such performance, improper performance or nonperformance is due to gross negligence or willful misconduct, or (y) the operation, non-operation or improper operation of United’s aircraft, equipment or facilities (excluding, for the avoidance of doubt, Covered Aircraft and any equipment or facilities leased or subleased by United to Contractor or otherwise used by Contractor for the provision of Contractor Services to United) at any location, in each case excluding only claims, demands, damages, liabilities, suits judgments, actions, causes of action, losses, fines, penalties, costs and expenses (A) to the extent resulting from the negligence or willful misconduct of Contractor (including in its capacity as an agent of United, UCH or their respective directors, officers, agents or employees), Parent or their respective directors, officers, employees or agents,

(B) for which Contractor is obligated to indemnify or otherwise reimburse United pursuant to this Agreement or any Ancillary Agreement, (C) directly caused by a breach by Contractor of this Agreement or any Ancillary Agreement, or (D) to the extent resulting from acts or omissions of any ground handler, fuel supplier or servicer, or caterer (including without limitation, for purposes of this clause (D), United and its affiliates where any of them is acting in the capacity as a ground handler pursuant to this Agreement); provided that if United or any of its affiliates is acting directly in the capacity of a ground handler pursuant to this Agreement, then unless superseded by another agreement between United or such affiliate, on the one hand, and Contractor, on the other, the indemnity provisions set forth in Exhibit Q shall govern the indemnification obligations of United or such affiliate to Contractor, its directors, officers, employees and agents with respect to the actions of United or such affiliate in its capacity as a ground handler; and provided further that in the event of a conflict between the provisions of this Section 7.2 and the provisions of Section 4.4, the provisions of Section 4.4 shall control. For the avoidance of doubt, the indemnification

obligations of United under this Section 7.2 shall not be interpreted to require United to defend, release, discharge, indemnify, or hold harmless Contractor, Parent, or any of their respective directors, officers, employees and agents from and against any claims brought by a third party arising out of the execution or delivery of this Agreement by Contractor or Parent.

 

7.3
Indemnification Claims.

 

56


Exhibit 10.2

A party (the “Indemnified Party”) entitled to indemnification from another party under the terms of this Agreement (the “Indemnifying Party”) shall provide the Indemnifying Party with prompt written notice (an “Indemnity Notice”) of any third party claim or other claim which the Indemnified Party believes gives rise to a claim for indemnity against the Indemnifying Party hereunder. Notwithstanding the foregoing, the failure of an Indemnified Party to promptly provide an Indemnity Notice shall not constitute a waiver by the Indemnified Party to any right to indemnification or otherwise relieve such Indemnifying Party from any liability hereunder unless and only to the extent that the Indemnifying Party is materially prejudiced as a result thereof, and in any event shall not relieve such Indemnifying Party from any liability which it may have otherwise than on account of this Article VII. With respect to third party claims, the Indemnifying Party shall be entitled, if it accepts financial responsibility for the third party claim, to control the defense of or to settle any such third party claim at its own expense and by its own counsel; provided that no settlement by the Indemnifying Party of such a claim will be binding on the Indemnified Party for purposes of the indemnification provisions hereof without the prior written consent of such Indemnified Party to such settlement, which consent may not be unreasonably withheld, conditioned or delayed. The Indemnified Party shall provide the Indemnifying Party with such information as the Indemnifying Party shall reasonably request to defend any such third party claim and shall otherwise cooperate with the Indemnifying Party in the defense of any such third party claim. Except as set forth in this Section 7.3, no settlement or other compromise or consent to a judgment by the Indemnified Party with respect to a third party claim as to which the Indemnifying Party is asserted to have an indemnity obligation hereunder will be binding on the Indemnifying Party for purposes of the indemnification provisions hereof without the prior written consent of such Indemnifying Party to such settlement, which consent may not be unreasonably withheld, conditioned or delayed, it being agreed however that it shall be reasonable for the Indemnifying Party to withhold or delay its consent if the Indemnifying Party reasonably asserts that the claim is not fully covered by the indemnity provided hereunder, and the entering into of any settlement or compromise or the consent to any judgment in violation of the foregoing shall constitute a waiver by the Indemnified Party of its right to indemnity hereunder to the extent the Indemnifying Party was prejudiced thereby. Any Indemnifying Party shall be subrogated to the rights of the Indemnified Party to the extent that the Indemnifying Party pays for any loss, damage or expense suffered by the Indemnified Party hereunder. If the Indemnifying Party does not accept financial responsibility for the third party claim or fails to defend against the third party claim that is the subject of an Indemnity Notice within thirty (30) days of receiving such notice (or sooner if the nature of the third party claim so requires), or otherwise contests its obligation to indemnify the Indemnified Party in connection therewith, the Indemnified Party may, upon providing written notice to the Indemnifying Party, pay, compromise or defend such third party claim without the prior consent of the (otherwise) Indemnifying Party. In the latter event, the Indemnified Party, by proceeding to defend itself or settle the matter, does not waive any of its rights hereunder to later

seek reimbursement from the Indemnifying Party. With respect to all other claims, the Indemnifying Party shall promptly make payment of such claim upon receipt of reasonably sufficient evidence supporting such claim; provided, that if the Indemnifying Party in good faith disputes all or part of its obligation to indemnify the Indemnified Party hereunder or the amount involved, the senior management of each party shall meet to discuss and attempt to resolve such dispute between the parties and, if such dispute is not resolved within forty-five (45) days of such claim being made, then the parties may pursue other remedies.

57


Exhibit 10.2

 

7.4
Employer’s Liability; Independent Contractors; Waiver of Control.

 

(a)
Employer’s Liability and Workers’ Compensation. Each party, with respect to its own employees, accepts full and exclusive liability for the payment of workers’ compensation premiums and 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 or retirement benefits, pensions or annuities now or hereafter imposed upon employers by the government of the United States or any other governmental body, including state, local or foreign, with respect to such employees measured by the wages, salaries, compensation or other remuneration paid to such employees, or otherwise.

 

(b)
Employees, etc., of Contractor. The employees, agents, and independent contractors of Contractor engaged in performing any of the services Contractor is to perform pursuant to this Agreement are employees, agents, and independent contractors of Contractor for all purposes, and under no circumstances will be deemed to be employees, agents or independent contractors of United. In its performance under this Agreement, Contractor will act, for all purposes, as an independent contractor and not as an agent for United. Notwithstanding the fact that Contractor has agreed to follow certain procedures, instructions and standards of service of United pursuant to this Agreement, United will have no supervisory power or control over any employees, agents or independent contractors engaged by Contractor in connection with its performance hereunder, and all complaints or requested changes in procedures made by United will, in all events, be transmitted by United to Contractor’s designated representative. Nothing contained in this Agreement shall be construed as joint employment or is intended to limit or condition Contractor’s control over its operations or the conduct of its business as an air carrier.

 

(c)
Employees, etc., of United. The employees, agents, and independent contractors of United engaged in performing any of the services United is to perform pursuant to this Agreement are employees, agents, and independent contractors of United for all purposes, and under no circumstances will be deemed to be employees, agents, or independent contractors of Contractor. Contractor will have no supervision or control over any such United employees, agents and independent contractors and any complaint or requested change in procedure made by Contractor will be transmitted by Contractor to United’s designated representative. In its performance

under this Agreement, United will act, for all purposes, as an independent contractor and not as an agent for Contractor.

 

(d)
Contractor Flights. The fact that Contractor’s operations are conducted under United’s Marks and listed under the UA designator code will not affect their status as flights operated by Contractor for purposes of this Agreement or any other agreement between the parties, and Contractor and United agree to advise all third parties, including passengers, of this fact.

58


Exhibit 10.2

 

7.5
No Double Recovery.

 

Notwithstanding anything to the contrary contained in this Agreement, no party shall be entitled to indemnification or reimbursement under any provisions of this Agreement for any amount to the extent such party has been indemnified or reimbursed for such amount under any other provision of this Agreement.

 

7.6
Survival.

 

The provisions of this Article VII shall survive the termination of this Agreement.

 

ARTICLE VIII

TERM, TERMINATION AND DISPOSITION OF AIRCRAFT

 

8.1
Term.

 

The Term of this Agreement shall commence on the date that the first Covered Aircraft is placed into service under the terms and conditions of this Agreement (the “Commencement Date”) and, unless earlier terminated or extended as provided herein, shall continue until the last Scheduled Exit Date for any Covered Aircraft as set forth on Schedule 1, as such date may be extended pursuant to Section 10.2 or Section 10.10, as applicable, hereof (the “Term”).

 

8.2
Early Termination.

 

(a)
By United for Cause or Special Cause. United may terminate this Agreement, immediately upon providing written notice of termination to Contractor following the occurrence of any event that constitutes Cause or Special Cause. Any termination pursuant to this Section 8.2(a) shall supersede any other termination pursuant to any other provision of this Agreement (even if such other right of termination shall already have been exercised), and the date of such notice of termination for Cause or Special Cause shall be the Termination Date for purposes of this Agreement (and such Termination Date pursuant to this Section 8.2(a) shall supersede any other Termination Date that may have been previously established pursuant to another termination).

 

(b)
By United for Breach. United may terminate this Agreement, by providing written notice to Contractor, upon the occurrence of a material breach of this Agreement by

Contractor as described in clause (i) below which breach shall not have been cured within [***] days after notice of such breach is delivered by United to Contractor. United may terminate this Agreement, by providing written notice of termination to Contractor, upon the occurrence of any other material breach of this Agreement by Contractor, which breach shall not have been cured within [***] days after written notice of such breach is delivered by United to Contractor (which [***] day notice period may run concurrently with the [***] day notice period, if any, provided

59


Exhibit 10.2

pursuant to Section 4.3 for quality of service-related breaches). Any such written notice of termination delivered pursuant to the foregoing sentences shall specify the Termination Date (subject to the provisions of this Article VIII) and describe in reasonable detail the events giving rise to the material breach claim. The parties hereto agree that, without limiting the circumstances or events that may constitute a material breach, each of the following shall constitute a material breach of this Agreement by Contractor: (i) a reasonable and good faith determination by United, using recognized standards of safety, that there is a material safety concern with the operation of any Scheduled Flights, (ii) a carrier-specific grounding of more than [***] Covered Aircraft by regulatory or court order or other governmental action, (iii) a failure to meet the terms of Section 9.1(j) hereof, (iv) the occurrence of a material breach by Contractor of any Ancillary Agreement, which breach shall not have been cured during the applicable cure period, (v) the failure of Contractor to cure, within [***] days following written notice to Contractor from United, any material failure of [***] or more Covered Aircraft to meet United’s standards set forth in Exhibit J, [***]

 

(c)
By Contractor for Breach. Contractor may terminate this Agreement, by providing written notice of termination to United, upon (i) failure by United to make any payment or payments under this Agreement aggregating in excess of [***] including, without limitation, any payments which become due during any Wind- Down Period, but excluding any amounts which are the subject of a good faith dispute between the parties, which failure shall not have been cured within [***] Business Days after written notice of such breach is delivered by Contractor to United or (ii) the occurrence of any other material breach of this Agreement by United, including without limitation, any breach during any Wind-Down Period, which breach shall not have been cured within [***] days after written notice of such breach is delivered by Contractor to United. Such written notice of termination shall specify the Termination Date (subject to the provisions of this Article VIII).

 

(d)
By United for Breach of Other CPA. United may terminate this Agreement, by providing written notice of termination to Contractor upon the early termination by United of any other capacity purchase or similar arrangement between United and

Contractor or Contractor’s affiliate; provided, that the foregoing termination right in this Section 8.2(d) shall not apply in the event such other capacity purchase or similar arrangement between United and Contractor or Contractor’s affiliate is terminated solely as a result of events or actions similar to those described in clauses (i), (ii) or (iii) of the definition of Cause herein. Such written notice of termination shall specify the Termination Date (subject to the provisions of this Article VIII).

 

(e)
Survival During Wind-Down Period. Upon any termination hereunder, the Term shall continue, and this Agreement shall survive in full force and effect, beyond the Termination Date until the end of the Wind-Down Period, if any, and the rights and obligations of the parties under this Agreement, including without limitation remedies available upon the occurrence of events constituting Cause, Special Cause

60


Exhibit 10.2

or material breach, shall continue with respect to each Covered Aircraft until it is withdrawn from this Agreement and otherwise until the later of the Termination Date and the end of the Wind-Down Period, if any.

 

(f)
Terminations for Non-Carrier Specific Groundings. United may terminate this Agreement, by providing written notice to Contractor, upon (i) the non-carrier specific grounding of more than [***] Covered Aircraft by regulatory or court order or other governmental action for [***] days or (ii) the non- carrier specific grounding of [***] or fewer Covered Aircraft by regulatory or court order or other governmental action for [***] consecutive days. Such a termination shall be effective upon Contractor’s receipt of such termination notice.

 

8.3
Disposition of Aircraft During Wind-Down Period.

 

(a)
Termination by United for Cause or Special Cause. If this Agreement is terminated pursuant to Section 8.2(a), then at United’s election at the time of such termination, either (x) such termination shall be treated as a termination pursuant to Section 8.2(b) and the provisions of Section 8.3(b) shall apply or (y) the Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following schedule: (i) within [***] days of delivery of any notice of termination, United shall deliver to Contractor a revocable written Wind-Down Schedule which shall (A) provide for the withdrawal of such Covered Aircraft from the capacity purchase provisions of this Agreement and (B) delineate the number of each aircraft type to be withdrawn by month, (ii) United may amend or modify such Wind-Down Schedule in its sole discretion by providing [***] written notice to Contractor of such amendment or modification, and (iii) the Wind- Down Schedule (A) may begin immediately upon its delivery, and (B) may not provide for the withdrawal of any Covered Aircraft beyond the earlier of (a) the date that is [***] after the date of delivery of the Wind-Down Schedule, and (b) the date on which the head lease applicable to the Covered Aircraft terminates. United shall have the right to designate any specific Covered Aircraft purchased or to be purchased by United to be withdrawn on a specific date in

accordance with the Wind-Down Schedule; otherwise, Contractor shall determine which specific Covered Aircraft shall be withdrawn on all other dates as required by, and in accordance with, the Wind-Down Schedule. The provisions of this Section 8.3(a) shall supersede any Wind-Down Schedule delivered pursuant to any other provision of this Agreement in accordance with a Wind-Down Schedule to be delivered by United to Contractor on the Termination Date.

 

(b)
Termination by United for Breach, etc. If this Agreement is terminated by United under Section 2.4, Section 8.2(b), Section 8.2(d) or Section 8.2(f), then the Covered Aircraft (or in the event of a partial termination, the applicable Covered Aircraft) shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following terms and conditions.

 

61


Exhibit 10.2

(i)
Within [***] days of delivery of any notice of termination delivered pursuant to Section 8.2(b), Section 8.2(d) or Section 8.2(f), United shall deliver to Contractor an irrevocable written Wind-Down Schedule, providing for the withdrawal of such Covered Aircraft from the capacity purchase provisions of this Agreement, and delineating the number of each aircraft type to be withdrawn by month. United shall deliver to Contractor the Wind-Down Schedule within [***] days of providing the applicable Notice pursuant to Section 2.4.

 

(ii)
Such Wind-Down Schedule (x) may not commence until the Termination Date, (y) may not provide for the withdrawal of any Covered Aircraft prior to the date that is [***] days after the date of delivery of the Wind- Down Schedule and (z) may not provide for the withdrawal of any Covered Aircraft beyond the earlier of (A) the date that is [***] after the date of delivery of the Wind-Down Schedule, and (B) the date on which the head lease applicable to the Covered Aircraft terminates. Except with respect to United Owned E175 Covered Aircraft and E175LL Covered Aircraft, Contractor shall have the right to designate any specific Covered Aircraft purchased or to be purchased by United to be withdrawn on a specific date in accordance with the Wind-Down Schedule.

 

(c)
Termination by Contractor for Breach. If this Agreement is terminated by Contractor under Section 8.2(c), then the Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following terms and conditions:

 

(i)
The notice of termination delivered by Contractor to United pursuant to Section 8.2(c)(i) shall be irrevocable and shall contain a Termination Date that is not more than [***] days after the date of such notice; provided that such termination notice shall be void and of no further effect automatically upon the payment by United prior to such Termination Date of all unpaid amounts giving rise to the default under Section 8.2(c)(i). As

of the Termination Date set forth in such notice of termination delivered pursuant to Section 8.2(c)(i), all of the Covered Aircraft shall automatically be withdrawn from the capacity purchase provisions of this Agreement and shall cease to be Covered Aircraft as of such date.

 

(ii)
The notice of termination delivered by Contractor to United pursuant to Section 8.2(c)(ii) shall be irrevocable and shall contain a Termination Date that is at least [***] days after the date of such notice. Prior to the [***] day after receipt of such termination notice, United shall deliver to Contractor a Wind-Down Schedule beginning on such Termination Date. The Wind- Down Schedule may not provide for the withdrawal of more than [***] Covered Aircraft per month (excluding the withdrawal of any Covered Aircraft upon the termination of the head lease relating to such Covered Aircraft), and may

62


Exhibit 10.2

not provide for the withdrawal of any Covered Aircraft on any date more than [***] months after the Termination Date. Contractor shall determine which specific Covered Aircraft shall be withdrawn on all dates as required by, and in accordance with, the Wind- Down Schedule.

 

(d)
Termination at End of Term. If the Agreement is terminated at the end of the Term (other than pursuant to Section 8.2), then each Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement on the Scheduled Exit Date set forth for such Covered Aircraft on Schedule 1, as amended.

 

8.4
Certain Other Remedies.

 

In addition to the remedies contemplated above in this Article VIII, United shall be entitled to the following remedies:

 

(a)
Certain Remedies for Labor Strike and Groundings. In the event of (i) the occurrence of a Labor Strike or (ii) the mandatory grounding of any portion of the Covered Aircraft by the FAA due to any action or inaction of Contractor, then for so long as such Labor Strike or mandatory grounding shall continue and thereafter until the number of Scheduled Flights that are On-Time Departures (including any delays resulting from a Labor Strike or mandatory grounding) on any day of the week equals or exceeds the number of Scheduled Flights that were On-Time Departures on the same day of the week prior to such Labor Strike or mandatory grounding, [***] The rights set forth in this Section 8.4(a) are in addition to, and not in limitation of, any other right of United arising hereunder.

 

(b)
Certain Remedies During Wind-Down Operations. Upon a material breach of this Agreement by Contractor (including without limitation, those described in Section 8.2(b) and Section 8.2(d)), which breach, if such breach has a cure period

thereunder, shall not have been cured during such cure period, then from the date of such breach, or the end of such cure period, as applicable, until (i) such breach is cured or (ii) if this Agreement is otherwise terminated by United pursuant to Section 8.2(b) or Section 8.2(d), then until the end of any applicable Wind-Down Period, as consideration for United’s forbearance in exercising its termination remedies and damages incurred with respect to the portion of the Regional Airline Services that continue to be provided prior to and during such Wind-Down Period (the parties having agreed that the value of such forbearance and damages may be difficult to calculate) and without any further action by any party, each item of Compensation for Carrier Controlled Costs set forth in Section 3.1(a)