EX-10.10.15 5 mesa-ex101015_201.htm EX-10.10.15 mesa-ex101015_201.htm

Exhibit 10.10.15

 

*Certain confidential information contained in this agreement has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.

SECOND AMENDED AND RESTATED

 

CAPACITY PURCHASE AGREEMENT

 

Among

 

United Airlines, Inc.,

 

Mesa Airlines, Inc.

and

 

Mesa Air Group, Inc.

 

 

Dated as of November 4, 2020

 

 

 

 


 

 

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

 

5

2.3

 

Pass Travel

 

6

2.4

 

Removal Events

 

6

2.5

 

CRJ Aircraft Election

 

9

 

 

 

 

 

 

 

ARTICLE III

 

 

CONTRACTOR COMPENSATION

 

17

 

3.1

 

Compensation for Carrier Controlled Costs

 

17

3.2

 

Incentive Program

 

18

3.3

 

Manufacturer Support

 

19

3.4

 

Expenses

 

20

3.5

 

Audit Rights; Financial Information

 

22

3.6

 

Billing and Payment

 

23

3.7

 

Government Assistance

 

38

 

 

 

 

 

 

 

ARTICLE IV

 

 

CONTRACTOR OPERATIONS AND AGREEMENTS WITH UNITED

 

38

i

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY


 

 

 

 

 

 

4.1

 

Crews, Etc

 

38

4.2

 

Governmental Regulations; Maintenance

 

40

4.3

 

Quality of Service

 

40

4.4

 

Regulatory Complaints

 

42

4.5

 

DOD Approval

 

42

4.6

 

Aircraft Ground Movement

 

43

4.7

 

Incidents or Accidents

 

43

4.8

 

Emergency Response

 

43

4.9

 

Safety Matters

 

44

4.10

 

Facilities

 

44

4.11

 

Codeshare Terms

 

47

4.12

 

Fuel Procurement and Fuel Services

 

47

4.13

 

Slots and Route Authorities

 

48

4.14

 

Code Share Limitation

 

49

4.15

 

Use of United Marks

 

49

4.16

 

Use of Contractor Marks

 

49

4.17

 

Catering Standards

 

49

4.18

 

Fuel Efficiency Program

 

50

4.19

 

Environmental

 

50

4.20

 

Early Brake Release

 

54

4.21

 

Ground Handling

 

54

4.22

 

IT Requirements

 

55

4.23

 

Maintenance Right to Bid

 

55

4.24

 

Landing Fees

 

55

4.25

 

Ground Support Equipment (GSE)

 

55

4.26

 

Ozone Monitoring

 

56

4.27

 

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

 

56

4.28

 

Operational Improvement Plan

 

58

4.29

 

Additional Maintenance Base

 

59

 

 

 

 

 

 

 

ARTICLE V

 

 

CERTAIN RIGHTS OF UNITED

 

59

ii

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY


 

 

 

 

 

 

5.1

 

Use of Covered Aircraft

 

59

5.2

 

Prohibited Transaction

 

59

5.3

 

Performance Discussions

 

59

 

 

 

 

 

 

 

ARTICLE VI

 

 

INSURANCE

 

60

 

 

 

6.1

 

Minimum Insurance Coverages

 

60

6.2

 

Endorsements

 

61

6.3

 

Evidence of Insurance Coverage

 

61

 

 

 

 

 

 

 

ARTICLE VII

 

 

INDEMNIFICATION

 

61

 

 

 

 

 

7.1

 

Contractor Indemnification of United

 

61

7.2

 

United Indemnification of Contractor

 

62

7.3

 

Indemnification Claims

 

63

7.4

 

Employer’s Liability; Independent Contractors; Waiver of Control

 

64

7.5

 

No Double Recovery

 

65

 

 

 

 

 

 

 

ARTICLE VIII

 

 

TERM, TERMINATION AND DISPOSITION OF AIRCRAFT

 

65

 

 

 

 

 

8.1

 

Term

 

65

8.2

 

Early Termination

 

65

8.3

 

Disposition of Aircraft During Wind-Down Period

 

67

8.4

 

Certain Other Remedies

 

69

 

 

 

 

 

 

 

ARTICLE IX

 

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

74

 

 

 

9.1

 

Representations and Warranties of Contractor

 

74

9.2

 

Representations, Warranties and Covenants of United

 

76

 

 

 

 

 

 

 

ARTICLE X

 

 

CERTAIN AIRCRAFT-RELATED PROVISIONS

 

77

 

 

 

 

 

10.1

 

Right to Call

 

77

10.2

 

Extension of E175 Aircraft Term.

 

84

10.3

 

Alternative Aircraft

 

84

10.4

 

Additional Aircraft

 

84

10.5

 

Covered Aircraft Leases

 

85

10.6

 

Lien; Subordination

 

85

10.7

 

New Aircraft Configuration

 

88

10.8

 

E175LL Covered Aircraft Call Option

 

88

 

 

 

 

 

 

 

ARTICLE X

 

 

MISCELLANEOUS

 

90

 

 

 

11.1

 

Notices

 

90

11.2

 

Binding Effect; Assignment

 

91

11.3

 

Amendment and Modification

 

91

iii

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY


 

11.4

 

Waiver

 

91

11.5

 

Interpretation

 

91

11.6

 

Confidentiality

 

92

11.7

 

Counterparts

 

93

11.8

 

Severability

 

93

11.9

 

Relationship of Parties

 

93

11.10

 

Entire Agreement; No Third Party Beneficiaries

 

93

11.11

 

Governing Law

 

94

11.12

 

Right of Set-Off

 

94

11.13

 

Cooperation with Respect to Reporting

 

94

11.14

 

Parent Guarantee

 

95

11.15

 

Arbitration

 

95

11.16

 

Unauthorized Payments

 

98

 

SCHEDULE 1:

 

Covered Aircraft

SCHEDULE 2A:

 

E175 Covered Aircraft Compensation for Carrier Controlled Costs

SCHEDULE 2B:

 

CRJ700 Covered Aircraft Compensation for Carrier Controlled Costs

SCHEDULE 2C:

 

CRJ550 Covered Aircraft Compensation for Carrier Controlled Costs

SCHEDULE 3:

 

Pass-Through Costs

SCHEDULE 4:

 

On-Time Adjustment

SCHEDULE 5:

 

Ownership Rate Schedule

SCHEDULE 6:

 

Reserved.

SCHEDULE 7:

 

Loan Payment Amounts

 

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:

 

CRJ Lease Return Conditions

EXHIBIT S:

 

United Wi-Fi

EXHIBIT T:

 

Operational Improvement Plan

EXHIBIT U:

 

Prepayment Agreement

 

 

iv

[***]=[CONFIDENTIAL PORTION HAS BEEN OMITTED BECAUSE IT (I) IS NOT MATERIAL AND (II) WOULD BE COMPETITIVELY


 

 

Second AMENDED AND RESTATED

CAPACITY PURCHASE AGREEMENT

 

This Second Amended and Restated Capacity Purchase Agreement (this “Agreement”), dated as of November 4, 2020 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, 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 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 set forth on Table 2 in Schedule 1 (for the CRJ700 Covered Aircraft), the E175LL Committed In-Service Date set forth on Table 4 in Schedule 1 (for the E175LL Covered Aircraft) or, if a CRJ550 Conversion Notice is delivered pursuant to Section 2.5, the CRJ550 Committed In-Service Date (for the CRJ550 Covered Aircraft), as the case may be, 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 hereof, in each case unless such aircraft is earlier withdrawn from the terms of this Agreement or this Agreement is earlier

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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-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 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

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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, other than with respect to any calendar month during the Interim Period, 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 United  shall  pay  Contractor  in accordance with the rates set forth in Schedule 2A or 2B, as applicable, for each  United  Cancelled  Flight,  as  if  each  such  United  Cancelled  Flight  had  been  operated  as contemplated  in  the  Final  Monthly  Schedule as the sole compensation for such flight.  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 sixty (60) 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 two (2) 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 forty-five (45) 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; provided, however, that with respect to any calendar month in the Interim Period, notwithstanding anything to the contrary in the foregoing, United shall have the right to deliver the Final Monthly Schedule for such month no later than thirty calendar days prior to the beginning of such month.   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 Contractor’s request or (y) because United reasonably determines, in good faith, that (I) (after having

3

 


 

 

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 [***] 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), at any time from time to time, (A) with respect to E175 Covered Aircraft, Contractor shall maintain the number of spare regional jet aircraft equal to the quotient obtained by dividing (w) the sum of the number E175 Covered Aircraft at such time by (x) [***], and (B) with respect to CRJ Covered Aircraft, Contractor shall maintain the number of spare regional jet aircraft equal to the quotient obtained by dividing (y) the sum of the number CRJ Covered Aircraft at such time by (z) [***], and, in each case of the foregoing clauses (A) and (B), rounding the quotient to the nearest whole number; provided that a quotient ending in [***] shall be rounded down; and provided further that, at any time at which more than [***] Covered Aircraft are in service and Contractor bases the Covered Aircraft at [***] or more Hub Airports, then, for each Hub Airport, Contractor shall be allocated the following spare regional jet aircraft in such Hub Airport: (i) [***] spare regional jet aircraft with either an “E175” or “E175LL” aircraft type, if Contractor operates E175 Covered Aircraft or E175LL Covered Aircraft at such Hub Airport, and (ii) [***] spare regional jet aircraft with either a “CRJ700” or “CRJ550” aircraft type, if Contractor operates CRJ700 Covered Aircraft or CRJ550 Covered Aircraft at such Hub Airport.  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

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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.

 

(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. United shall be required to make in respect of each Non-Comp Aircraft all payments required by this Agreement in respect of Covered Aircraft, other than the “[*]” amount set forth on Schedules 2A, 2B and 2C.

 

(f)

Interim Period Communication.  During the Interim Period, United shall use commercially reasonable efforts to provide reasonable advance notice to Contractor of material deviations to flight schedules that United, in its sole discretion, expects to be implemented for the remainder of the Interim Period; provided that United’s failure to provide such notice shall in no way limit United’s discretion to establish all flight schedules for the Covered Aircraft.

 

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 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.

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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 CRJ700 Covered Aircraft, at any time prior to November 30, 2019, United shall have the right, in its sole discretion, to remove from this Agreement any or all of the CRJ700 Covered Aircraft as provided in this Section 2.4 by delivering a written notice (a “2.4(a) Notice”) to Contractor, which 2.4(a) Notice shall specify the number of CRJ700 Covered Aircraft to be removed (each such removed aircraft, a “CRJ700 Removed Aircraft”) and a Termination Date for each such aircraft not earlier than ninety (90) days following the date of such 2.4(a) Notice.  Contractor shall have the right to designate which CRJ700 Covered Aircraft shall be removed pursuant to a 2.4(a) Notice by providing written notice of the same to United within thirty (30) days following receipt of a 2.4(a) Notice.  For clarification purposes, CRJ700 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 CRJ700 Removed Aircraft and, at end of the applicable Wind-Down Period for such aircraft, (i) the provisions of Section 10.1 shall apply to each CRJ700 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) [***]  Notwithstanding anything in this Section 2.4(a) (or applicable reference to Section 10.1) to the contrary, the determination of “Fair Market Value” with respect to CRJ700 Removed Aircraft shall be based solely on the referenced appraisals (and not Outstanding Debt Balance), and United shall not be entitled to receive copies of any lease agreements and/or financing and related agreements referenced in Section 10.1(b)(iv).  Further, if, with respect to [***] CRJ700 Covered Aircraft currently leased by Contractor as of the date of this Agreement, if both (A) such aircraft becomes a CRJ700 Removed Aircraft and (B) the purchase price for such aircraft (as set forth in the definitive purchase agreement for such aircraft by and between Contractor and [***] exceeds the Fair Market Value of such aircraft as of the date of delivery of the applicable 2.4(a) Notice (determined in accordance with the preceding sentence), then United and Contractor shall enter into a sublease in accordance with the applicable provisions of Section 10.1(b)(vi), mutatis mutandis. Notwithstanding anything in this Section 2.4(a) to the contrary, if United elects to purchase the CRJ700 Covered Aircraft pursuant to Section 2.5(a) of this Agreement (or is deemed to have made such purchase election pursuant the last sentence of Section 2.5(a)), United shall be obligated to purchase all, and not less than all, of the CRJ700 Covered Aircraft.  

 

(b)

(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 the number of aircraft to be removed (each such removed aircraft, an “E175 Removed Aircraft”) and a Termination Date not earlier than

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ninety (90) days following the date of such 2.4(b)(i) Notice; 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, [***] for each 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 thirty (30) 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 the specific aircraft to be removed (each such removed aircraft, an “Contractor Owned E175 Removed Aircraft”) and a Termination Date for each such aircraft not earlier than [***] days following the date of such 2.4(b)(ii) Notice.  Contractor shall have the right to designate which Contractor Owned E175 Covered Aircraft shall be removed pursuant to a 2.4(b)(ii) Notice by providing written notice of the same to United within thirty (30) 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, (ii) [***] relating to each Contractor Owned E175 Removed Aircraft and (iii) [***] for each Contractor Owned E175 Removed Aircraft; provided that, notwithstanding 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 thirty (30) 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.

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Notwithstanding anything to the contrary in this Agreement, (i) any 2.4(b)(ii) Notice given by United with respect to the EETC Aircraft must be given with respect to all of the EETC Aircraft and (ii) the provisions of clause (i) and the two provisos of the immediately preceding sentence shall not apply to any 2.4(b)(ii) Notice with respect to the EETC 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 from time to time following the [***] anniversary of the Actual In-Service Date set forth on Table 4 to 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 the number of aircraft to be removed (each such removed aircraft, an “E175LL Removed Aircraft”) and a Termination Date not earlier than [***] the date of such 2.4(c)(i) Notice. 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, [***]

 

(ii)

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 from time to time from and after the [***] anniversary of the Actual In-Service Date set forth on Table 4 to Schedule 1 of such aircraft, United shall have the right, exercisable in its sole discretion by delivery of a written notice to Contractor (an “E175LL 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 Termination Notice shall specify the number of aircraft to be removed and a Termination Date not earlier than [***] days following the date of such E175LL Termination Notice.  [***]

 

(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

8

 


 

 

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 the number of aircraft to be removed and a Termination Date not earlier than [***] days following the date of such E175LL Liquidity Termination Notice. 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.  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.  [***]

 

(d)

If United delivers a CRJ550 Conversion Notice pursuant to Section 2.5, then, with respect to each CRJ550 Covered Aircraft, at any time and from time to time, United shall have the right, in its sole discretion, to remove from this Agreement such aircraft as provided in this Section 2.4(d) by delivering a notice (a “2.4(d) Notice”) to Contractor, which 2.4(d) Notice shall specify the number of aircraft to be removed (each such removed aircraft, a “CRJ550 Removed Aircraft”) and a Termination Date not earlier than ninety (90) days following the date of such 2.4(d) Notice. Contractor shall have the right to designate which CRJ550 Covered Aircraft shall be removed pursuant to a 2.4(d) Notice by providing written notice of the same to United within thirty (30) days following receipt of a 2.4(d) Notice.  For clarification purposes, CRJ550 Covered Aircraft that are not the subject of a 2.4(d) 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(d) Notice that is delivered by United, the provisions of Section 8.3(b)(i) and (ii) shall apply to such CRJ550 Removed Aircraft, and (A) the provisions of Section 10.1 shall apply to such CRJ550 Removed Aircraft that is owned or leased by Contractor except that United must irrevocably exercise the Call Option with respect to such aircraft and (B) no later than the tenth Business Day following the date on which a CRJ550 Removed Aircraft ceases to be operated in scheduled service pursuant to the capacity purchase provisions of this Agreement, [***]

 

2.5

CRJ Aircraft Election.

 

(a)

Delivery of Notice. No later than [***], United shall deliver written notice to Contractor electing to require Contractor to do one of the following with respect to all of the CRJ700 Covered Aircraft: (i) to convert all of the CRJ700 Covered Aircraft (the “Replaced CRJ Covered Aircraft”) into newly certified CRJ550 Covered Aircraft, and to operate such aircraft in accordance with the provisions of Section 2.5(b) and the other applicable provisions of this Agreement (such notice

9

 


 

 

electing this clause (i), a “CRJ550 Conversion Notice”, which notice shall contain a “Transition Exit Date” identifying, with respect to each Replaced CRJ Covered Aircraft, the anticipated withdrawal date from operations under this Agreement as a CRJ700 Covered Aircraft), (ii) to lease all of the CRJ700 Covered Aircraft to a third party regional airline service provider (the “CRJ Third Party Lessee”) designated in such notice by United in its sole discretion in accordance with the provisions of Section 2.5(c) (such notice electing this clause (ii), a “CRJ Lease Notice”) or (iii) to sell to United all of the CRJ700 Covered Aircraft in accordance with the provisions of Section 10.1 (such notice electing this clause (iii), a “CRJ Purchase Notice”).  If United does not deliver any such notice by [***], then United shall be deemed to have delivered a CRJ Purchase Notice. If United delivers a CRJ Lease Notice and the consents required by Section 2.5(c) have not been obtained within 60 days following delivery of such CRJ Lease Notice (the “Consent Period”), then United shall have 30 days following the end of the Consent Period to deliver (i) a CRJ550 Conversion Notice or (ii) a CRJ Purchase Notice; provided that, if United does not deliver a notice by such date, then United shall be deemed to have delivered a CRJ Purchase Notice.

 

(b)

CRJ550 Conversion Notice. If United delivers a CRJ550 Conversion Notice, then the following provisions shall apply:

 

(i)

With respect to a Replaced CRJ Covered Aircraft, (A) from and after the time at which a Replaced CRJ Covered Aircraft exits scheduled service for United as a CRJ700 Covered Aircraft, such aircraft shall no longer be operated for United as a CRJ700 Covered Aircraft, and (B) commencing as promptly as practicable, Contractor shall take all actions necessary to cause the wind-down of such aircraft and the introduction of such aircraft as a CRJ550 Covered Aircraft (the “Transition”), each in accordance with a mutually agreed upon schedule (subject to reasonable adjustments by United from time to time), it being understood that such schedule shall provide that each CRJ550 Covered Aircraft will be in-service as soon as practicable, and use commercially reasonable efforts to place such Aircraft in-service within [***] days following the “Transition Exit Date” for such aircraft set forth in the CRJ550 Conversion Notice (such [***] day following the “Transition Exit Date”, the “CRJ550 Committed In-Service Date”, and the aggregate period from and after the “Transition Exit Date” for a CRJ700 Covered Aircraft until the Actual In-Service Date pursuant to such mutually agreed schedule, the “Estimated Idle Aircraft Time”).

 

(ii)

Contractor shall procure services from third parties to obtain certification of the CRJ550 Covered Aircraft with a “CRJ-550” aircraft type and to configure such aircraft in a 50-seat configuration; provided that the final configuration of all CRJ550 Covered Aircraft will be subject to United’s prior written approval.  Provided that both of the following two conditions precedent have been satisfied: (A) neither Contractor nor Parent is in material breach of this Agreement and (B) [***]

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(iii)

For each Replaced CRJ Covered Aircraft that is subject to a CRJ550 Conversion Notice, [***]

 

(iv)

Contractor and Parent shall coordinate the Transition with United in accordance with the applicable requirements of United’s collective bargaining agreements with the Air Line Pilots Association, the Association of Flight Attendants and any other union of United’s employees.

 

(v)

With respect to each CRJ550 Covered Aircraft, from and after the Actual In-Service Date of such aircraft, such aircraft shall be operated by Contractor under this Agreement for the term set forth on Table 5 to Schedule 1 with respect to such aircraft, and pursuant to the payment terms set forth on Schedule 2C with respect to such aircraft.

 

(c)

CRJ Lease Notice.  If United delivers a CRJ Lease Notice, then Contractor shall be required, subject to any consents required in order to effectuate the provisions set forth in this Section 2.5(c) (as well as the exercise of rights and enforcement of obligations thereunder) under applicable financing or lease documentation relating to the relevant aircraft, to lease, in an “AS-IS, WHERE-IS” condition as promptly as practicable pursuant to a form of lease (or sublease in the case of currently leased aircraft) mutually agreed by United and Contractor, the CRJ700 Covered Aircraft subject to the CRJ Lease Notice to the CRJ Third Party Lessee for a term of [***]; provided that Contractor shall use commercially reasonable efforts to obtain any consents required to effectuate the provisions set forth in this Section 2.5(c) (as well as the exercise of rights and enforcement of obligations thereunder) (including amending any agreements, providing assurances and taking any other commercially reasonable actions) and, so long as United [***] shall also take all other actions in order to obtain such required consents; provided, further, that, with respect to each leased CRJ700 Covered Aircraft, such lease will also:

 

(i)

[***]

 

(ii)

provide that, if any portion of the Rent Obligation (but not any other obligation) is not timely paid by the CRJ Third Party Lessee, then United shall be obligated to pay such portion to Contractor (it being understood that Contractor shall in no event be entitled to duplicate payments, and that Contractor will remit to the appropriate person any excess amounts paid to it under any such lease) reasonably promptly following United’s receipt of good faith notice of non-payment from Contractor, which notice must contain reasonably sufficient supporting detail identifying the amount and basis of the unmet Rent Obligation;

 

(iii)

provide that, in addition to the Rent Obligation, the CRJ Third Party Lessee shall pay certain charges related to certain maintenance events, in each case in accordance with the following provisions of this Section 2.5(c)(iii) (all payments required to be paid by the CRJ Third Party Lessee being “Supplemental Rent”):

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(A)

no later than 10 calendar days following the end of each month, CRJ Third Party Lessee shall pay Supplemental Rent for each of the maintenance categories set forth in the table below, at the rates corresponding to such maintenance categories as set forth in the table below, with the respective payment amounts for Supplemental Rent being calculated based on applying the applicable rate set forth in the table below to the applicable unit of measure set forth in the table below:

Maintenance

Category

Unit of Measure

Rate

Airframe C - Check

A/C Flight Hour

[***]

APU Restoration

A/C Flight Hour

[***]

Main Landing Gear Assembly Restoration (each assembly)

A/C Cycle

[***] per assembly

Nose Landing Gear Assembly Restoration

A/C Cycle

[***]

Engine Restoration (each engine)

Engine Flight Hour

[***] per engine

Engine LLP Replacement (each engine)

Engine Cycle

[***] per engine

 

provided that (v) the Supplemental Rent rates (for CRJ Third Party Lessee) shall be adjusted annually by the applicable Annual Supplemental Rent Adjustment (as defined below) commencing on the January 1, 2021 and on January 1 of each year thereafter, (w) Supplemental Rent related to airframes will be calculated using aircraft flight hours, (x) Supplemental Rent related to APUs will be calculated using aircraft flight hours, (y) Supplemental Rent related to landing gear will be calculated using aircraft cycles, and (z) Supplemental Rent related to engines will be driven by the engine flight hours and engine cycles accrued on the engines associated with the CRJ700 Covered Aircraft under the applicable aircraft lease; and provided further, that Supplemental Rent related to each APU and each landing gear assembly will be attributable to a generic APU or landing gear assembly position for such leased CRJ700 Covered Aircraft, respectively, regardless of the individual identity of any such APU or landing gear assembly then-currently installed on such aircraft.

Annual Supplemental Rent Adjustment” - means

 

(1)

[***]

 

 

(2)

[***]

 

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(3)

[***]

 

 

(4)

[***]

 

 

(B)

No later than 10 days following the completion of the first Qualifying Event during the lease term and reasonably satisfactory evidence of payment therefor by CRJ Third Party Lessee, with respect to each airframe, APU, landing gear assembly and engine, Contractor shall pay the First Event Settlement Amount to the CRJ Third Party Lessee.

Qualifying Event” - means,

 

(1)

with respect to an airframe C-check, the completion of the airframe maintenance tasks included in Contractor’s ‘C-Check’ maintenance package for CRJ700 aircraft, as specified in Contractor’s FAA approved maintenance program; provided, however, that, if any such maintenance tasks are not all completed during the same maintenance event (collectively, the “Uncompleted Maintenance Tasks”), then, notwithstanding the completion of such maintenance event, such Qualifying Event will not be deemed to be completed for the purposes of this Agreement until the first point in time at which all of the Uncompleted Maintenance Tasks have been completed; and provided further that the determination of the total costs associated with a Qualifying Event will include all of the costs associated with the performance of the tasks necessary to complete such Qualifying Event, regardless of whether such tasks were performed during a single maintenance event or over the course of multiple maintenance events;

 

(2)

with respect to an APU restoration, the completion of an APU overhaul with a workscope that meets the minimum standard for an overhaul, as defined in the APU manufacturer’s applicable maintenance manual or other applicable publication, provided that for purposes of determining the quantity of or settlement amounts described in this Section 2.5(c)(iii) relating to Qualifying Events for the APU, such APU will be deemed to be whichever APU is installed on such aircraft at the time of such event;

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(3)

with respect to a main or nose landing gear assembly restoration, the overhaul of such main landing gear assembly in accordance with the applicable aircraft maintenance manual provided that for purposes of determining the quantity of or settlement amounts described in this Section 2.5(c)(iii) relating to Qualifying Events for each landing gear assembly (nose, main-right and main-left), such landing gear assembly will be deemed to be whichever landing gear assembly is installed on such aircraft at the time of such event;

 

(4)

with respect to an engine restoration, the completion of an engine overhaul with a workscope that meets the minimum standard for a performance restoration, as defined in the engine manufacturer’s workscope planning guide or other applicable publication; and

 

(5)

with respect to engine LLP replacement, the complete replacement of all of the life limited parts installed on the applicable engine; provided that the Qualifying Event related to LLP replacement for an engine will not be deemed to have been completed until the first point in time at which there are no LLPs on such engine that have not been replaced; and provided further that the determination of the total costs associated with such a Qualifying Event will include all of the costs associated with the replacement of LLPs, regardless if such LLP replacements occur during a single maintenance event or over the course of multiple maintenance events.

First Event Settlement Amount” – means, with respect to each maintenance category described in the table above, the following amount:

[***]

Where:

[***]

Lessor Time” = [***]

Total Time” = [***]

SR” = the amount of Supplemental Rent attributable to such airframe, APU, landing gear assembly or engine that has been paid by CRJ Third Party Lessee.

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(C)

From and after the completion of the first Qualifying Event during the lease term, no later than [***] days following the completion of each subsequent Qualifying Event and reasonably satisfactory evidence of payment therefore by CRJ Third Party Lessee, with respect to each airframe, APU, landing gear assembly and engine, Contractor shall pay to the CRJ Third Party Lessee the amount of Supplemental Rent attributable to such airframe, APU, landing gear assembly or engine in the same manner set forth in clause (A) above.  

 

(iv)

provide that, prior to performing any Qualifying Event, CRJ Third Party Lessee shall submit to Contractor for approval the relevant workscope, for such Qualifying Event; provided that (x) Contractor’s approval shall not be unreasonably withheld or delayed, and (y) Contractor shall be entitled, but not obligated, to observe the performance of such maintenance;

 

(v)

[***]

 

(vi)

provide that, with respect to aircraft engines, in lieu of paying the First Event Settlement Amount, Contractor will have the right, exercisable by delivery of written notice (an “Engine Swap Notice”) to CRJ Third Party Lessee no later than [***] calendar days following the date on which Contractor is notified by CRJ Third Party Lessee of CRJ Third Party Lessee’s intent to conduct, or to cause to be conducted, a performance restoration on such engine, to deliver to CRJ Third Party Lessee an aircraft engine to replace the aircraft engine that is due for the shop visit that would otherwise constitute a Qualifying Event; provided that, if Contractor delivers an Engine Swap Notice with respect to any aircraft engine, then the following provisions will apply:

 

(A)

such replacement engine must be delivered promptly following the delivery of such notice (but in no event later than [***] days thereafter),

 

(B)

such replacement engine must have both (x) the same or better value and utility as the engine being replaced (without regard to the current state of repair of the engine being replaced) and (y) at least [***] cycles estimated to remain until the next performance restoration,

 

(C)

[***] (without any obligation of Contractor to remit any portion thereof to CRJ Third Party Lessee),

 

(D)

from and after the delivery of such replacement engine, (x) Contractor will be responsible for all maintenance events relating to such replacement engine that would otherwise meet the requirements necessary to constitute a Qualifying Event with respect to such engine, (y) Contractor will be responsible for providing all replacement engine LLPs with respect to such replacement engine,

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and (z) CRJ Third Party Lessee’s only obligation with respect to such replacement engine will be to pay Supplemental Rent in respect of such replacement engine.

 

(vii)

provide that, with respect to engine LLPs, in lieu of paying the [***], Contractor will have the right, exercisable by delivery of written notice (an “LLP Swap Notice”) to CRJ Third Party Lessee no later than [***] calendar days following the date on which Contractor is notified by CRJ Third Party Lessee of CRJ Third Party Lessee’s intent to conduct, or to cause to be conducted, a performance restoration on such engine LLP, to deliver to CRJ Third Party Lessee an engine LLP to replace the engine LLP that is due for the shop visit that would otherwise constitute a Qualifying Event; [***]

 

(A)

such replacement engine LLP must be delivered promptly following the delivery of such notice (but in no event later than [***] calendar days thereafter),

 

(B)

such replacement engine LLP must have at least a number of cycles remaining equal to the lesser of (x) [***], and (y) a number of cycles reasonably projected to be flown for the period of the remainder of the lease term plus an additional [***] months,

 

(C)

all payments of Supplemental Rent made by CRJ Third Party Lessee in respect of the replaced engine LLP shall remain the property of Contractor (without any obligation of Contractor to remit any portion thereof to CRJ Third Party Lessee),

 

(D)

from and after the delivery of such replacement engine LLP, (x) Contractor will be responsible for all maintenance events relating to such replacement engine LLP that are necessary components of the next Qualifying Event, and (y) CRJ Third Party Lessee’s only obligation with respect to such replacement engine LLP will be to pay Supplemental Rent in respect of such replacement engine.

 

(viii)

provide that CRJ Third Party Lessee and not Contractor shall be responsible for any difference between the actual cost of any Qualifying Event (even if such Qualifying Event is the first Qualifying Event during the Lease Term) and the amounts contributed by Contractor as either First Event Settlement Amount (if applicable) and the amount of Supplemental Rent available to CRJ Third Party Lessee for any such Qualifying Event pursuant to the terms of this Agreement; and

 

(ix)

provide United the right to purchase any CRJ700 Covered Aircraft subject to the lease in accordance with the provisions of Section 10.1.

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(d)

United’s Exercise of the CRJ Lease Option.  The parties acknowledge and agree that, on [***], United delivered a valid CRJ Lease Notice to Contractor, and that, as of the date of this Agreement, Contractor is in negotiations with the CRJ Third Party Lessee for the execution and delivery of one or more leases for the CRJ700 Covered Aircraft.  In connection therewith, the parties have amended Schedule 1 to this Agreement (as reflected in this Second and Amended and Restated Capacity Purchase Agreement) to reflect the removal of the CRJ700 Covered Aircraft from the capacity purchase provisions of this Agreement.  For each CRJ700 Covered Aircraft, from and after the “CRJ Scheduled Exit Date” for such aircraft as set forth on Table 3 to Schedule 1, (x) [***]

ARTICLE III
CONTRACTOR COMPENSATION

For and in consideration of the services to be provided by Contractor pursuant to the terms and conditions of this Agreement, and subject to the terms and conditions set forth herein, (i) United shall be responsible for (a) paying to Contractor Compensation for Carrier Controlled Costs (as adjusted by the Monthly Incentive Adjustments), (b) reimbursing Contractor for the Pass-Through Costs, and (c) incurring directly the expenses described in Section 3.4(a), and United shall not be responsible for any other costs or expenses incurred by Contractor hereunder, and (ii) Contractor shall be responsible for incurring directly the expenses described in Section 3.4(b), in each case as more specifically provided below in this Article III, such amounts to be paid and reconciled as set forth in Section 3.6 below.  

 

3.1

Compensation for Carrier Controlled Costs.  

For and in consideration of the services to be provided by Contractor pursuant to the terms and conditions of this Agreement, United shall make payments to Contractor, subject to the terms and conditions set forth in this Article III and elsewhere in this Agreement (including, but not limited to, Section 2.1(e)), for the following measurements, in each case as applicable with respect to the Covered Aircraft depending on the measurements set forth on Schedules 2A, 2B and 2C with respect to the Covered Aircraft: (i) aircraft per month, (ii) block hours flown on completed Scheduled Flights, (iii) flight hours flown on completed Scheduled Flights, (iv) the number of departures for completed Scheduled Flights, and (v) the number of aircraft in schedule, in each case in accordance with the rates set forth on Schedules 2A (with respect to the E175 Covered Aircraft and the E175LL Covered Aircraft), 2B (with respect to the CRJ700 Covered Aircraft) and 2C (with respect to the CRJ550 Covered Aircraft) (all such compensation, collectively, the “Compensation for Carrier Controlled Costs”), as applicable. Compensation for Carrier Controlled Costs shall be paid in accordance with Section 3.6. Notwithstanding anything to the contrary in this Agreement, the parties acknowledge and agree that, solely with respect to the Interim Period, the Compensation for Carrier Controlled Costs shall be pursuant to the rates set forth on Attachment 1 to the First Amendment.

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3.2

Incentive Program.  

United and Contractor shall adhere to the following provisions regarding a monthly incentive payment program (the “Incentive Program”) under which Contractor’s monthly compensation under this Agreement shall be adjusted (the aggregate monthly adjustment for any given calendar month, the “Monthly Incentive Adjustment”) as more fully set forth below (it being understood that, if the Monthly Incentive Adjustment is a positive number, then Contractor’s monthly compensation payable under this Agreement pursuant to Section 3.6 shall be increased by the Monthly Incentive Adjustment, and, if the Monthly Incentive Adjustment is a negative number, then Contractor’s monthly compensation payable under this Agreement pursuant to Section 3.6 shall be reduced by the Monthly Incentive Adjustment); provided, however, that notwithstanding anything to the contrary in this Agreement, solely with respect to calendar months during the Interim Period, Section 3.2 (together with all references to other sections, exhibits or appendices in this Agreement directly related to the payment of Monthly Incentive Adjustments), as applicable, (a) shall be disregarded with respect to the E175 Covered Aircraft if the ERJ Incentive Program Waiver Condition is satisfied, and (b) shall be disregarded with respect to the Bombardier Covered Aircraft if the CRJ Incentive Program Waiver Condition is satisfied:

 

(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 Bombardier Covered Aircraft, on the other hand (the “Bombardier CCF Adjustment”); provided that, for each calendar month, for each of the E175 CCF Adjustment and the Bombardier CCF Adjustment, such adjustment shall equal the product of (x) the Target (as defined below) minus Controllable Cancellations for the applicable fleet during such month, multiplied by (y) [***] (provided that such figure 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 [***]); and the “Target” means, for each calendar month with respect to the applicable fleet, the product of (x) [***], multiplied by (y) the total quantity of Scheduled Flights during such month for such fleet.  For all purposes of this Section 3.2(a), the number of Controllable Cancellations for E175 Covered Aircraft or Bombardier Covered Aircraft, as the case may be, in any calendar month shall be deemed to be reduced by the product of (x) [***], multiplied by (y) the number of consecutive 24-hour periods, , that any E175 Covered Aircraft or Bombardier Covered Aircraft, as the case may be, is not in scheduled service due solely to the [***]; provided, however, that such product will in no event exceed [***] calendar month for the applicable fleet, and the E175 CCF Adjustment or the Bombardier CCF Adjustment, as the case may be, shall be re-computed in accordance with the applicable deemed reduction pursuant to this sentence (such re-computed adjustment, the “Deemed E175 CCF Adjustment” or the “Deemed Bombardier CCF Adjustment”).  Subject to Section 4.1(g), if the sum of (A) the E175 CCF Adjustment (or, if applicable, the Deemed E175 CCF Adjustment) plus (B) the Bombardier CCF Adjustment (or, if applicable, the Deemed Bombardier CCF Adjustment) is a negative number for a

18

 


 

 

calendar month, then the Monthly Incentive Adjustment shall be reduced by the absolute value of such sum for such month.  If the sum of (A) the E175 CCF Adjustment (or, if applicable, the Deemed E175 CCF Adjustment) plus (B) the Bombardier CCF Adjustment (or, if applicable, the Deemed Bombardier CCF Adjustment) is a positive number for a calendar month, then the Monthly Incentive Adjustment shall be increased by the absolute value of such sum for such month. Notwithstanding anything to the contrary in the foregoing, for each calendar month during the Term, with respect to the E175 Covered Aircraft or the CRJ Covered Aircraft, each calculated separately, if the applicable schedule for Scheduled Flights for such calendar month does not meet the applicable minimum parameters for both [***] parameters for the applicable time period for CRJ Covered Aircraft for each Base Location).

 

All covered aircraft calculated by each fleet type*

 

 

Average Aircraft Age [***] years

Average Aircraft Age [***] years

Average Aircraft Age [***] years

Average Aircraft Age [***] years

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

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

 

(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; provided that the On-Time Adjustment Amount shall be calculated separately for the E175 Covered Aircraft, on the one hand, and Bombardier Covered Aircraft, on the other hand.  If the sum of the On-Time Adjustment Amount for the E175 Covered Aircraft plus the On-Time Adjustment Amount for the Bombardier Covered Aircraft is a negative number for a calendar month, then the Monthly Incentive Adjustment shall be reduced by the absolute value of such sum for such month.  If the sum of the On-Time Adjustment Amount for the E175 Covered Aircraft plus the On-Time Adjustment Amount for the Bombardier Covered Aircraft is a positive number for a calendar month, then the Monthly Incentive Adjustment shall be increased by the absolute value of such sum for such month.

 

3.3

Manufacturer Support and Delivery Expenses for E175LL Covered Aircraft.

 

(a)

Manufacturer Support.  Solely with respect to the E175LL Covered Aircraft, United shall use its reasonable commercial efforts to cause Embraer to provide Contractor with all other manufacture support available pursuant to the applicable purchase agreement at no cost to Contractor or United (for example, possibly including Check Airmen and Field Service Reps).  

 

(b)

Delivery Expenses.  United shall reimburse Contractor in an amount equal to the product of (x) [***] and (y) the amount of [***]; provided that Contractor shall provide written notice to United [***].

19

 


 

 

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 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)

passenger and cargo revenue-related expenses, including but not limited to commissions, taxes and fees related to the transportation of passengers or cargo, food and beverage costs, charges for fare or tariff filings, sales and 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 CRJ  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;

20

 


 

 

(vii)

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

 

(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 CRJ 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

21

 


 

 

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).

 

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 90 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 45 days after the end of each of the first three quarterly 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 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,

22

 


 

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.  Notwithstanding anything in this Section 3.5 to the contrary (but subject to the immediately succeeding proviso), in no event shall Contractor be required to provide information to United or any of its representatives pursuant to the requirements of this Section 3.5 if such information relates to any other code share partner of Contractor or includes data that is not specific to United and Contractor’s provision of services under this Agreement; provided, however that the foregoing in this sentence shall not relieve Contractor of the obligation to provide United information that is generally applicable to an entire cadre of Contractor pilots, flight attendants, or other resources related to the operation of regional jet aircraft or an entire fleet of regional jet aircraft (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, but not limited to, total pilot headcount, total flight attendant headcount, mechanic headcount, dispatch headcount and facility lease terms.

 

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)

for each Covered Aircraft for such month, calculated separately, the “per aircraft per month” amount set forth on Schedule 2A, 2B or 2C, as the case may be, for such Covered Aircraft, as the case may be (it being understood that, solely for the E175LL Covered Aircraft and CRJ550 Covered Aircraft, there shall be a “per aircraft per month” amount and a “per aircraft per month (fixed)” amount); provided, that for any calendar month in which such Covered Aircraft enters or exits service hereunder, such amounts shall be multiplied by a fraction, the numerator of which is the actual number of days in such month such aircraft constituted a Covered Aircraft, and the denominator of which is the total number of days in such month; plus

 

(ii)

the number of block hours set forth on the Final Monthly Schedule for such month, multiplied by [***]; plus

 

(iii)

the number of flight hours set forth on the Final Monthly Schedule for such month, multiplied by [***]; plus

 

(iv)

the number of departures set forth on the Final Monthly Schedule for such month, multiplied by [***]; plus

 

(v)

the average number of aircraft available to schedule during such month, multiplied by the [***]; plus

23

 


 

 

 

(vi)

the allocation of Pass-Through Costs calculated as set forth in Section 3.6(b)(ii)(B).

 

(b)

Reconciliation.

 

(i)

Reconciliation of Certain Compensation for Carrier Controlled Costs.

 

(A)

With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) Contractor’s actual block hours flown, multiplied by (II) the rate “for each block hour” set forth on Schedule 2A, 2B or 2C, as the case may be, exceeds (y) the amount invoiced pursuant to Section 3.6(a)(ii) for such block hours during such calendar month, then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference.

 

(B)

With respect to Scheduled Flights, for any calendar month for which (x) the amount invoiced for block hours pursuant to Section 3.6(a)(ii) exceeds (y) the product of (I) Contractor’s actual block hours flown in such calendar month, multiplied by (II) the rate “for each block hour” set forth on Schedule 2A, 2B or 2C, as the case may be, then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference.

 

(C)

With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) Contractor’s actual flight hours flown, multiplied by (II) the rate “for each flight hour” set forth on Schedule 2A exceeds (y) the amount invoiced pursuant to Section 3.6(a)(iii) for such flight hours during such calendar month, then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference.

 

(D)

With respect to Scheduled Flights, for any calendar month for which (x) the amount invoiced for flight hours pursuant to Section 3.6(a)(iii) exceeds (y) the product of (I) Contractor’s actual flight hours flown in such calendar month, multiplied by (II) the rate “for each flight hour” set forth on Schedule 2A, then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference.

 

(E)

With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) Contractor’s actual Scheduled Flight departures, multiplied by (II) the rate “for each Scheduled Flight departure” set forth on Schedule 2A, 2B or 2C, as the case may be, exceeds (y) the amount invoiced pursuant to Section 3.6(a)(iv) for such departures during such calendar month, then the reconciliation

24

 


 

 

for such period shall include a payment by United to Contractor in an amount equal to such difference.

 

(F)

With respect to Scheduled Flights, for any calendar month in which (x) the amount invoiced for departures pursuant to Section 3.6(a)(iv) exceeds (y) the product of (I) Contractor’s actual Scheduled Flight departures for such month, multiplied by (II) the rate “for each Scheduled Flight departure” set forth on Schedule 2A, 2B or 2C, as the case may be, then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference.

 

(G)

With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) for the average number of aircraft available to schedule during such month, multiplied by (II) the rate “for each aircraft in schedule” set forth on Schedule 2A, 2B or 2C exceeds (y) the amount invoiced for aircraft in schedule pursuant to Section 3.6(a)(v), then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference.

 

(H)

With respect to Scheduled Flights, for any calendar month in which (x) the amount invoiced for aircraft in schedule pursuant to Section 3.6(a)(v) exceeds (y) the product of (I) the average number of aircraft available to schedule during such month, multiplied by (II) the rate “for each aircraft in schedule” set forth on Schedule 2B, then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference.

 

(I)

Contractor’s “actual block hours flown,” “actual flight hours flown” and “actual Scheduled Flight departures” shall include block hours, flight hours and departures for, and “completed Scheduled Flights” shall include, all completed Scheduled Flights, including those resulting from any unscheduled stop required prior to the completion of a Scheduled Flight; however, “actual block hours flown,” “actual flight hours flown” and “actual Scheduled Flight departures” shall not include any block hours, flight hours or departures resulting from or attributable to, and  “completed Scheduled Flights” shall not include, (x) uncompleted ground returns or uncompleted air returns or (y) flights referenced in Section 3.6(c)(v) or (z) Excess Delayed Flights referenced in Section 3.6(c)(vi) below.

 

(J)

In the event of any United Directed Cancelled Flights [***], the reconciliation for such month shall include a payment by United to Contractor in an amount equal to the rates set forth in Schedule 2B for each United Directed Cancelled  Flight.

25

 


 

 

(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)

common use charges paid by Contractor under any lease agreement with any Applicable Airport, such charges to be allocated at an Applicable Airport between the Regional Airline Services, on the one hand, and Contractor’s services provided to other customers, if any, on the other hand, with such allocation to be proportionate at an Applicable Airport based on the number of enplaned passengers for Regional Airline Services and Contractor’s other customers;

 

(2)

Aircraft Property Taxes; provided that Contractor shall provide United with an annual reconciliation of all tax bills paid and reasonably allocated to United, in a format directed by United and including documentation of assessments, tax bills, and the allocation of such Aircraft Property Taxes among United, Contractor’s other business partners and relationships, and Contractor’s own business; and provided further that Contractor shall use commercially reasonable efforts to ensure that aircraft values and assessments and all allocated costs are correct and accurate, and shall use, at its own cost and expense, property tax professionals to ensure accurate and timely reporting of property tax Pass-Through Costs; and provided further that, notwithstanding the immediately preceding proviso, in the event that Contractor’s engagement of property tax professionals results in an economic benefit to United, then the cost of such engagement shall be treated as a Pass-Through Cost to the extent of such economic benefit conferred to United;

 

(3)

passenger liability insurance and war risk insurance costs; provided that United shall not pay to Contractor any amount in respect of this clause (3) reflecting an insurance rate which is greater than the sum of (x) the Insurance Baseline and (y) the cumulative Average Peer Group Rate Increase for a given year; provided further that Average Peer Group Rate Increase shall be provided by Contractor to United at least once annually; and provided further that United shall only pay to Contractor amounts in respect of this clause (3) for fees and expenses of insurance brokers, if any, that are reasonable and customary.  For the avoidance of doubt, Contractor’s 2013 passenger liability and war risk insurance costs shall be the baseline for any cumulative adjustment to

26

 


 

 

the annual rates as set forth herein (the “Insurance Baseline”);

 

(4)

if United elects to have Contractor pay for landing fees pursuant to Section 4.24(b), landing fees paid for by Contractor;

 

(5)

passenger-related interrupted trip costs (including hotel, meal and ground transportation vouchers) incurred by United related to Controllable Delays and Controllable Cancellations; provided that United will present Contractor interrupted trip expense costs by way of detailed report each month;

 

(6)

Navigation Fees and Foreign Costs paid by Contractor;

 

(7)

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;

 

(8)

the actual and reasonable out-of-pocket costs incurred by Contractor in order for the E175 Covered Aircraft to comply with outstanding airworthiness directives issued by the FAA applicable to the E175 Covered Aircraft that by their terms require compliance during the Term; provided that United shall pay to Contractor (w) [***] per United Owned E175 Covered Aircraft per month toward the costs of compliance with airworthiness directives, (x) the excess above [***] of the cost of parts required to comply with any single airworthiness directive in respect of a single United Owned E175 Covered Aircraft, (y) the excess above [***] of the cost of parts and direct out-of-pocket costs for third-party labor, in each case required to comply with any single airworthiness directive in respect of a single United Owned E175 Covered Aircraft and (z) the excess above [***] of the cost of parts and direct out-of-pocket costs for third-party labor required to comply with any single airworthiness directive in respect of a single Contractor Owned E175 Covered Aircraft; provided further, that Contractor shall use its reasonable commercial efforts to minimize all costs described in this Section 3.6(b)(ii)(A)(8);

27

 


 

 

(9)

only with respect to United Owned E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for the repair and/or replacement of non-expendable parts pursuant to the Parts Support Agreement;

 

(10)

only with respect to United Owned E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for the maintenance of engines pursuant to the Engine Maintenance Support Agreement; [***]

 

(11)

only with respect to United Owned E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for Airframe Heavy Maintenance, the aircraft cleaning functions to be completed at C Check intervals and any associated ferry costs pursuant to the Airframe Heavy Maintenance Support Agreement; [***]

 

(12)

only with respect to United Owned E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for the maintenance of landing gear pursuant to the Landing Gear Support Agreement;

 

(13)

only with respect to United Owned E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for the maintenance of APUs pursuant to the APU Support Agreement;

 

(14)

pursuant to Section 4.6(b) towing expenses incurred by Contractor with respect to the excess, if any, of the number of Accommodating Aircraft Movements during such month over the number calculated pursuant to Section 4.6(b)(y);

 

(15)

only with respect to the CRJ Covered Aircraft, the actual and reasonable out of pocket third party Aerodata variable mach speed cruise program fees paid by Contractor; (the “Aerodata Fees”); and

 

(16)

Mexico Regulatory Rendered Services for on-call maintenance services under any maintenance agreement.

 

(B)

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

 

(1)

The amount of both passenger liability insurance and war risk insurance costs referred to in Section 3.6(b)(ii)(A)(3) included in the Pass-Through Costs for any particular month will be equal to the product of (1) the applicable insurance

28

 


 

 

rate per completed passenger set forth on Schedule 3 multiplied by (2) the Forecasted Passengers for such month.

 

(2)

The amount of Landing Fees referred to in Section 3.6(b)(ii)(A)(4) included in the Pass-Through Costs for any particular month will be equal to the aggregate sum of the following products: (1) the landing fee rate set forth in Schedule 3, multiplied by (2) the number of scheduled departures set forth in the Final Monthly Schedule for airports where Contractor pays landing fees directly, multiplied by (3) [***]. For avoidance of doubt, United will not allocate to the reconciliation of Pass-Through Costs landing fees which are directly paid by United.

 

(3)

The amount of Navigation Fees referred to in Section 3.6(b)(ii)(A)(6) included in the Pass-Through Costs for any particular month will be equal to the aggregate sum of the following products: (1) the air navigation rates set forth in Schedule 3, multiplied by (2) the number of scheduled departures set forth in the Final Monthly Schedule for flying to destinations in Canada or Mexico, multiplied by (3) [***].

 

(4)

[***] for any particular month (pursuant to Section 3.6(b)(ii)(A)(7)), if any, will be equal to the aggregate sum of the following products: (1) the rate set forth in Schedule 3 for Fuel Services, multiplied by (2) the number of scheduled departures set forth in the Final Monthly Schedule, multiplied by (3) [***].

 

(5)

The amount of Aircraft Property Taxes included in the Pass-Through Costs for any particular month (pursuant to Section 3.6(b)(ii)(A)(2)) will be a fixed amount, as reasonably agreed to between United and Contractor based on historical tax costs allocated under this Agreement.

 

(6)

The amount of Aerodata Fees included in the Pass-Through Costs for any particular month (pursuant to Section 3.6 (b)(ii)(A)(15)) will be equal to the product: (1) the applicable Aerodata fee of [***] per departure set forth on Schedule 3 multiplied by (2) the number of scheduled CRJ Covered Aircraft departures set forth in the Final Monthly Schedule.

 

(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), then United shall pay to

29

 


 

 

Contractor an amount equal to such difference, and (ii) if in any month the amount of Pass-Through Costs included in the Prepayment in respect of Pass-Through Costs as described in Section 3.6(b)(ii)(B) exceeds Contractor’s actual Pass-Through Costs for such month, then Contractor shall pay to United an amount equal to such difference.

 

(iii)

Reconciliation for Scheduled Block-Hours. With respect to any Final Monthly Schedule for any calendar month from time to time, but in all events excluding the calendar months during the period commencing [***] and ceasing on [***], with respect to each of the E175 Covered Aircraft, on the one hand, and the Bombardier 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) as applicable, either (A) for any calendar month during the Interim Period, [***] or (B) for any calendar month that is not during the Interim Period, [***]; provided that the figure in the foregoing clause (B) shall be adjusted on 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 each of the E175 Covered Aircraft, on the one hand, and the Bombardier 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.  Solely for illustrative purposes, an example calculation of is provided below:

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If the Block-Hour Adjustment Amounts are as set forth below during the Interim Period,

Calendar Month

Block-Hour Adjustment Amount

 

Bombardier Covered Aircraft

E175 Covered Aircraft

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

then, with respect to the E175 Covered Aircraft, the Block-Hour Adjustment Amount will only be paid by United for the months of [***], and, with respect to the Bombardier Covered Aircraft, the Block-Hour Adjustment Amount will only be paid by United for the months of [***], and, as such, the aggregate Block-Hour Adjustment Amount payable by United will be equal to [***] (in respect of the E175 Covered Aircraft) plus [***] (in respect of the Bombardier Covered Aircraft)), and such amount will be due and payable on [***].

For further illustrative purposes, the figures below would generate the figures in the table set forth above for [***]:

E175 Covered Aircraft

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

Bombardier Covered Aircraft

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

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Block-Hour Monthly Threshold” – means, with respect to any calendar month, the product obtained by multiplying (x) the product obtained by multiplying (1) the number of block-hours per day per Available to Schedule Covered Aircraft corresponding to the average stage length applicable to the Final Monthly Schedule for such calendar month, by (2) the total number of Available to Covered Aircraft applicable to the Final Monthly Schedule for such calendar month, by (y) the number of days in such calendar month; provided that the Block-Hour Monthly Threshold shall be calculated separately for each of the E175 Covered Aircraft, on the one hand, and the Bombardier Covered Aircraft, on the other hand; and provided further that the number of block-hours per day corresponding to a particular [***] for a particular fleet as referenced in the foregoing clause (x) shall be determined by applying the average scheduled stage length in the applicable Final Monthly Schedule to the table set forth below (subject to linear interpolation between the data points in such table).

 

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

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[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

 

 

(c)

Payment.

 

(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 [***] days 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

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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 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 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, 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

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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.

 

(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 loadfactor of less than [***], or (b) more than [***] hours 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.

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(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.

 

(viii)

Prepayment Agreement.  Notwithstanding anything to the contrary in this Agreement, the parties hereby agree that (x) from and after the execution and delivery of the Prepayment Agreement and until the termination of the Prepayment Agreement, all amounts payable by United pursuant to Section 2.5(d) and pursuant to Section 3.6 for the services rendered by Contractor under this Agreement shall be reduced by an amount equal to the Discounted Amount (as defined below), and (y) United shall not have any obligation to make any payment to Contractor or Parent whatsoever pursuant to this Agreement until the Prepayment Balance Amount (as defined in the Prepayment Agreement) has been reduced to [***] pursuant to the terms and conditions set forth in the Prepayment Agreement.  As used herein, the “Discounted Amount” means, as of any date any amount is payable by United pursuant to Section 2.5(d) or Section 3.6, an amount equal to the product of (i) the Prepayment Balance Amount (as defined in the Prepayment Agreement) as of such date, multiplied by (ii) the Applicable Discount Rate (as defined below) as of such date, multiplied by (iii) by the lesser of (A) the number of days that have elapsed since the last payment required to be made pursuant to Section 3.6(c)(i) and (B) the number of days that have elapsed since the execution and delivery of the Prepayment Agreement.  As used herein, the “Applicable Discount Rate” means, as of any date of determination, the quotient obtained by dividing (A) an amount equal to either (I) if such date of determination occurs during the first [***] calendar days following the execution and delivery of the Prepayment Agreement, [***], or (II) if such date of determination occurs thereafter, [***], by (B) [***]; provided, however, that, as applicable, if United elects for clause (i) of Section 2.4(d) of the Prepayment Agreement, then the Applicable Discount Rate shall automatically be increased to the quotient obtained by dividing [***]; and provided further, however, that, if all remaining portions of the CARES Act Loan (as defined in the Prepayment Agreement) are not fully funded on or before the Specified Closing Date (as defined in the Prepayment Agreement), then, subject to the immediately preceding proviso, the Applicable Discount Rate shall automatically be increased to the quotient obtained by dividing [***] until the earlier to occur of (x) the termination of the Prepayment Agreement and (y) the date that the aggregate amount funded under the CARES Act Loan (as defined in the Prepayment Agreement) equals or exceeds [***].  Further, the parties acknowledge and agree that it is their mutual intent that the Prepayment Agreement and the subject matter therein is integral to the entirety of this Agreement, is not severable from this Agreement, and that the execution and delivery of the Prepayment is a material inducement to

36

 


 

 

the parties’ execution and delivery of this Agreement and a material inducement for United to agree to pay the Actual Prepayment Amount (as defined in the Prepayment Agreement).

 

(d)

Ownership Rate. As compensation for the cost of ownership of the ten (10) Contractor Owned E175 Covered Aircraft financed pursuant to the EETC Transaction as listed by expected U.S. registration number (“Reg. No.”) in Schedule 5 hereto (the “EETC Aircraft”), United shall pay to Contractor during the calendar month of the payment date set forth in Schedule 5 hereto on the Table therein applicable to such EETC Aircraft  the amount set forth opposite such payment date on such Table (the “Ownership Rate”), in [***] equal 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 EETC Aircraft 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 EETC Aircraft not previously financed pursuant to the EETC Transaction, the date that such EETC Aircraft is no longer able to be financed pursuant to the EETC Transaction, (ii) the date of withdrawal of such EETC Aircraft from the capacity purchase provisions of this Agreement, (iii) the date of purchase of such EETC Aircraft by United and (iv) the date that all equipment notes issued in the EETC Transaction with respect to such EETC Aircraft shall have been paid in full, and such EETC Aircraft shall cease to be an EETC 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 [***] equal 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

37

 


 

 

Secured Loan Transaction for which United has not been reimbursed as of the date such Secured Loan Ownership Rate payment is due.

 

(f)

Notwithstanding anything to the contrary in this Agreement, with respect to each calendar month during the Interim Period, the Prepayment for such month and any reconciliation pursuant to Section 3.6(b) for such month shall both be calculated based upon the base compensation rates set forth on Attachment 1 to the First Amendment applicable to Average Monthly Utilization (as such term is defined in Attachment 1 to the First Amendment) for such month.

 

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 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.

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

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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.

 

(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,

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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.

 

(g)

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 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

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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 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 CRJ 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.  

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(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 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.

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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 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

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response management efforts. The provisions of the foregoing indemnification obligation shall survive the termination of this Agreement for a period of seven years.

 

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 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

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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 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).

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(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 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 thirty (30) days’ 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.

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(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).

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.

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(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, 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

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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 (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,

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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, 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

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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 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.

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(v)

Except for deminimis amounts of Hazardous Materials which are immediately and fully remediated to pre-existing conditions, Contractor 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.

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(viii)

In the event that Contractor Services include providing bulk (non-bottled) 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 claims under Environmental Laws or due to the release of Hazardous

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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 have a [***], (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 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

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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).

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.

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4.26

Ozone Monitoring.

Contractor agrees to mitigate the risk of passenger ozone exposure on the E175 Covered Aircraft and CRJ 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 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) 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 case of the foregoing clauses (A) and (B), the number of block hours per day corresponding to a particular [***] shall be determined by applying such [***] 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 [***] day 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, (A) such estimate shall not include any period beyond the fourth 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 average scheduled stage length 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

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Date, by applying such average scheduled stage length 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.

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[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

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(b)

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

[***]

 

(B)

with respect to the Pilot Requirement applicable to a particular fleet type, the first point in time, which will be no earlier than the last day of the second consecutive calendar month following the last day of the calendar month in which United made such designation for such fleet type, such that, during the period of such designation, had such aircraft been Available to Schedule, there would have been sufficient available pilots to satisfy all of the Pilot Requirements during such period of designation.

 

(d)

[***]

 

4.28

Operational Improvement Plan.

With respect to each fiscal quarter, if, as of the end of such fiscal quarter, Contractor has not fully satisfied all Unsatisfied Operational Improvement Metrics (as defined below), then Contractor shall pay United [***] no later than [***] Business Days following the completion of such fiscal quarter; provided, however, that the first payment due under this sentence, if any, shall instead be in the amount of [***] (it being understood that any subsequent payment required under this sentence shall be in the amount of [***]. The determination of whether Contractor has fully satisfied the “Operational Improvement Metrics” set forth on Exhibit T shall be made by United in its reasonable discretion.  “Unsatisfied Operational Improvement Metric” means, with respect to any applicable fiscal quarter, each Operational Improvement Metric set forth on Exhibit T that has not been fully satisfied (x) by the Target Completion Date applicable to such metric set forth on Exhibit T falling in such quarter or (y) with respect to any Operational Improvement Metric that was not fully satisfied in the immediately prior quarter, by the completion of such quarter.  As of the date hereof, Contractor represents and warrants that each Operational Improvement Metric marked as “Complete” in the column applicable to such Operational Improvement Metric in Exhibit T has been fully satisfied in accordance with the requirements set forth in Exhibit T. For purposes of clarification only, once an Operational Improvement Metric has been satisfied, such Operational Improvement Metric is not subject to re-measurement in subsequent quarters, i.e.,

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once an Operational Improvement Metric has been satisfied it is complete for all purposes of this Section 4.28.    

 

4.29

Additional Maintenance Base.

At Contractor’s sole cost and expense, Contractor will (a) open a new maintenance base in a station to be determined by mutual agreement between the parties, and (b) open a new base at IAD for E175 hub operations at IAD, which includes crew domicile.

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.  

Upon the occurrence of a Prohibited Transaction without the prior written consent of United, then the provisions of Section 8.2(a) shall apply.

 

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 [***] consecutive months is below [***], Contractor’s independent lead director (or 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 thirty (30) 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 [***] Business Day following the end of a calendar month, [***] per Covered Aircraft for each month (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.

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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 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.

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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.  

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 and all claims, demands, damages, liabilities, suits, judgments,

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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 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 and all obligations to be undertaken by Contractor or any of its directors, officers, employees or agents pursuant to this Agreement or any Ancillary Agreement, or (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 (A) to the extent 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 10.8), 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, and hold harmless Contractor, Parent, 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 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 and 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

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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.

 

7.3

Indemnification Claims.  

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

63

 


 

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.

 

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

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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.

 

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.  

This Agreement shall be effective as of the date hereof (the “Effective Date”).  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 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

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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 [***] 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 [***] after written notice of such breach is delivered by United to Contractor (which [***] notice period may run concurrently with the [***] day notice period, if any, provided 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 [***] 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).

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(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 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 [***] consecutive 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 [***] months 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

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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.  

 

(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 [***] months 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.  [***], 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

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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 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, United shall not be required to pay or otherwise reimburse Contractor for any of the “per aircraft per month”  or “per aircraft in schedule” rates set forth on Schedules 2A, 2B and 2C.  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

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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) and Schedules 2A, 2B, and 2C shall be decreased to an amount equal to such item of Compensation for Carrier Controlled Costs (per hour, departure, passenger or other unit of measurement, as applicable) divided by [***]; provided that the parties specifically acknowledge that the foregoing liquidated damages are in respect of Regional Airline Services for such period of time as they continue to be provided and are without regard to, and not in limitation of, any recourse or remedy available to United at law or in equity for damages suffered in respect of Regional Airline Services that are terminated; and provided further that the provisions of this Section 8.4(b) are not intended to be duplicative of the provisions of Section 8.4(e), and in the event of any conflict between such provisions, the provisions of Section 8.4(e) are intended to override the provisions of this Section 8.4(b).

 

(c)

Liquidated Damages for Failure to Place E175LL Covered Aircraft in Service by E175LL Committed In-Service Date.  If Contractor shall fail to place in-service an E175LL Covered Aircraft by the E175LL Committed In-Service Date for such aircraft, as such El75LL Committed In-Service Date may be delayed by, and only to the extent such date is delayed by an Act of God or such delay is attributable solely to the manufacturer of the delayed E175LL Covered Aircraft, then, with respect to each such aircraft:

(x) Contractor shall pay to United as liquidated damages for United’s lost revenue related to such delay, [***] per aircraft per calendar day for each calendar day that delivery of such aircraft is so delayed from performing Regional Airline Services, such payment to be made in accordance with Section 3.6(c)(ii), and

(y) if Contractor has failed to place such aircraft in-service by the [***] day after the E175LL Committed In-Service Date for such aircraft, then United shall have the unilateral right to terminate this Agreement as to such Covered Aircraft immediately by written notice to Contractor.

For the avoidance of doubt, none of a delay attributable solely to the manufacturer of the delayed E175LL Covered Aircraft or a delay due to an Act of God that continues for fewer than [***] days shall be deemed a default by Contractor for purposes of this Agreement.

 

(d)

Liquidated Damages for Reduction in the Number of Covered Aircraft.  If, after delivery of all of the Covered Aircraft, the number of Covered Aircraft available to operate in Regional Airline Services (accounting for Spare Aircraft and aircraft undergoing scheduled maintenance) falls below the total number of Covered Aircraft listed in Schedule 1 for a period of time exceeding [***] days, then

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Contractor will pay to United, as liquidated damages for United’s lost revenue related to such unavailability of each such Covered Aircraft and not as a penalty, the following amounts within [***] business days from the receipt of United’s calculations of such amounts (which may be sent together or separately):

 

(i)

[***]

 

(ii)

any prepayment made pursuant to Section 3.6(a) in respect of such unavailable aircraft for the period of such unavailability; plus

 

(iii)

the total denied boarding compensation and passenger-related interrupted trip costs paid or otherwise incurred by United (including without limitation hotel, meal and ground transportation costs and the face value of any travel certificates issued) in respect of any Scheduled Flights delayed or canceled as a result of the unavailability of such aircraft.

 

(e)

Liquidated Damages for Termination by United.  If United terminates this Agreement as a result of Contractor’s breach, then Contractor will pay to United, as liquidated damages for United’s prospective losses related to the loss of the benefit of the bargain for the remainder of the term of this Agreement and not as a penalty, within [***] business days from the receipt of the calculation from United, the Daily United Damages (as described below), for each day remaining during the period commencing with the date of termination through the end of the then current term of this Agreement; provided, however, that if, within two years of the date of the applicable termination notice delivered by United to Contractor, United secures and begins operations with another carrier to replace Contractor’s Regional Airline Services provided by the Covered Aircraft, then the Daily United Damages will be offset by an amount calculated by United to reasonably correspond to the Daily United Damages calculation described below but calculated with regard to such operations with such other carrier.  As used herein, “Daily United Damages” shall equal (W) United’s aggregate revenue received from the operation of all Covered Aircraft under this Agreement during the [***] full calendar months immediately preceding the event constituting such breach (including but not limited to revenues from passenger sales, cargo and mail services as well as any “beyond revenue” (constituting revenue from transfers to other United flights)), minus (X) the aggregate revenue received by Contractor from United pursuant to the terms of this Agreement with regard to the operation of all Covered Aircraft under this Agreement during such twelve (12) calendar months (including all payments received pursuant to Section 3.6 in respect of such operations), minus (Y) the United incurred expenses referred to in Section 3.4(a) incurred in respect of such operations, and divided by (Z) 365. Where applicable, dollar amounts used in the calculations described in this Section 8.4(e) shall be as reported in United’s Financial Profitability System.

 

(f)

If a Termination Event shall have occurred, then notwithstanding anything contained in this Agreement to the contrary, [***] to Contractor that would otherwise have been required pursuant to Section 2.4 (but for this Section 8.4(f)).  

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(g)

The parties agree that the damages to be suffered by United in the scenarios described in each of the foregoing paragraphs of this Section 8.4 would be difficult to calculate, and that the liquidated damages set forth in each of such foregoing paragraphs are a good faith and reasonable estimate of such damages, and that such liquidated damages are not intended to be a penalty.  The inclusion of liquidated damages in this Section 8.4 is not intended to modify, waive or restrict United’s rights to exercise any and all remedies available at law or in equity for Contractor’s breach of this Agreement, other than the recovery of monetary damages for the losses and damages described herein, for which these liquidated damages are intended to be the sole and exclusive remedy; provided that United’s right to indemnification pursuant to Article VII for claims brought by third parties shall not be limited in any way by this Section 8.4.

 

(h)

Damages.

 

(i)

NO PARTY TO THIS AGREEMENT OR ANY OF ITS AFFILIATES SHALL BE LIABLE TO ANY OTHER PARTY HERETO OR ANY OF ITS AFFILIATES FOR CLAIMS FOR CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHETHER A CLAIM IS BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, VIOLATION OF ANY APPLICABLE DECEPTIVE TRADE PRACTICES ACT OR SIMILAR LAW OR ANY OTHER LEGAL OR EQUITABLE PRINCIPLE, AND EACH PARTY RELEASES THE OTHERS AND THEIR RESPECTIVE AFFILIATES FROM LIABILITY FOR ANY SUCH DAMAGES; PROVIDED THAT THE FOREGOING LIMITATION SHALL NOT APPLY TO LIMIT THE LIABILITY OF ANY PARTY FOR THE CONSEQUENTIAL DAMAGES SUFFERED BY ANY OTHER PARTY IF THE FIRST PARTY ACTED IN BAD FAITH; PROVIDED FURTHER THAT THE PARTIES AGREE THAT ANY LIQUIDATED DAMAGES PAYABLE TO UNITED PURSUANT TO THIS SECTION 8.4 (OR, IF FOR ANY REASON DIRECT OR ACTUAL DAMAGES ARE AWARDED, THE COSTS INCURRED BY UNITED FOR ARRANGING AND PROVIDING FOR ANY REGIONAL AIRLINE, GROUND HANDLING AND OTHER SERVICES TO REPLACE THE CONTRACTOR SERVICES (OR ANY PORTION THEREOF) FOLLOWING A TERMINATION OF THIS AGREEMENT) SHALL BE CONSIDERED DIRECT AND ACTUAL DAMAGES SUFFERED BY UNITED, AND SHALL NOT BE CONSIDERED CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES FOR PURPOSES OF THIS AGREEMENT.  NO PARTY SHALL BE ENTITLED TO RESCISSION OF THIS AGREEMENT AS A RESULT OF BREACH OF ANY OTHER PARTY’S REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS, OR FOR ANY OTHER MATTER; PROVIDED FURTHER THAT NOTHING IN THIS SECTION 8.4(h) SHALL

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RESTRICT THE RIGHT OF ANY PARTY TO EXERCISE ANY RIGHT TO TERMINATE THIS AGREEMENT PURSUANT TO THE TERMS HEREOF.