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***TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTION 200.80(b)(4),
200.83 AND 240.24b-2
CODE SHARE AND REVENUE SHARING AGREEMENT
This CODE SHARE AND REVENUE SHARING AGREEMENT (the "Agreement") is made and
entered into as of March 20, 2001, to be effective retroactive to February 1,
2001 (the "Contract Date"), by and between AMERICA WEST AIRLINES, INC., a
Delaware corporation ("AWA"), and MESA AIRLINES, INC., a Nevada corporation
("Mesa").
RECITALS
A. AWA holds a certificate of public convenience and necessity issued by the
Department of Transportation ("DOT") authorizing AWA to engage in the interstate
and overseas air transportation of persons, property and mail between all points
in the United States, its territories and possessions.
B. Mesa holds a certificate of public convenience and necessity issued by the
DOT authorizing Mesa to engage in the interstate transportation of persons,
property and mail in the United States, its territories and possessions.
C. AWA owns various trademarks, service marks and logos, including "America West
Airlines," "America West Express," and distinctive exterior color decor and
patterns on its aircraft, hereinafter referred to individually and collectively
as the "AWA Service Marks."
D. AWA and Mesa entered into that certain Code Share and Revenue Sharing
Agreement, dated July 15, 1998, as amended by those certain First and Second
Amendments to Code Share and Revenue Sharing Agreement, dated January 4, 2000
and May 10, 2000, respectively (the "Original Agreement"), in order to provide
scheduled air transportation services as America West Express and to share in
revenue and costs of such services.
E. AWA and Mesa desire to terminate the Original Agreement and replace the
Original Agreement, in its entirety, with the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the promises, covenants, representations and
warranties hereinafter set forth, and for other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, AWA and Mesa agree as
set forth below.
AGREEMENT
1. Effectiveness. This Agreement replaces the Original Agreement effective upon
the date (the "Effective Date") that Mesa executes a binding agreement to
acquire the CRJ Aircraft required to be provided by Mesa pursuant to Section
2.2.2 of this Agreement (the "Aircraft Contract"). Mesa shall provide AWA with
written notice of the date the Aircraft Contract is executed together with
copies of the Aircraft Contract. On the date of execution of the Aircraft
Contract, all of the terms and provisions of this Agreement shall be effective
retroactive to the Contract Date. On the Effective Date, the Original Agreement
shall be terminated in its entirety. All sums payable pursuant to Section 6 of
the Original Agreement between the Contract Date and Effective Date shall be
recalculated pursuant to the terms of Section 7 of this Agreement, and AWA,
subject to the rights regarding disputed amounts contained in Section 7.8, shall
pay
<PAGE> 2
additional and undisputed sums payable within 30 days after receipt of a written
invoice for such recalculation. Until the Effective Date, AWA and Mesa shall
continue to perform pursuant to the Original Agreement. If the Aircraft Contract
is not executed by May 1, 2001, then this Agreement shall automatically
terminate and the terms and conditions of the Original Agreement shall remain in
full force and effect. Simultaneously with the execution of this Agreement, AWA
and Mesa shall enter into an amendment to the Original Agreement providing for
the addition of 3 CRJs under the Original Agreement if this Agreement is
terminated pursuant to this Section.
As of the Contract Date, AWA and Mesa dispute certain amounts that are payable
between AWA and Mesa under the Original Agreement (the "Disputed Amounts"). Mesa
and AWA shall continue to work to resolve their respective obligations
concerning the Disputed Amounts pursuant to the terms of the Original Agreement.
This is a new and separate agreement from the Original Agreement. The terms of
this Agreement shall not be used by either Mesa or AWA to determine or interpret
the respective payment obligations of the parties for the Disputed Amounts. The
respective obligations for the Disputed Amounts and other matters and disputes
arising under the Original Agreement prior to the Contract Date shall be
resolved pursuant to the terms, covenants, rights and remedies of the Original
Agreement, shall not affect the rights, duties and obligations of AWA or Mesa
under this Agreement and shall not permit AWA or Mesa to exercise any remedies
under this Agreement. The intent of AWA and Mesa is to resolve any disputes
concerning the Disputed Amounts or any other matters and disputes under the
Original Agreement under the Original Agreement and not pursuant to this
Agreement.
2. Rights, Responsibilities and Obligations of Mesa:
2.1 Flight Service. During the term of this Agreement, Mesa shall
operate America West Express air transportation services (the
"Flight Services"), using the Fleet of Aircraft established
pursuant to Section 2.2, to and from the cities and based upon
the schedule established from time to time by AWA (the
"Schedule") in written notice to Mesa (a "Schedule Notice").
For purposes of this Agreement, "Flights" means flights
operated pursuant to the Schedule. AWA may change the Schedule
by issuance of a Schedule Notice at any time. When creating a
Schedule, AWA shall: (i) take into account Mesa's aircraft
maintenance requirements; (ii) create a Schedule which will
permit Mesa to schedule flight crews in a manner consistent
with industry operational practices; (iii) schedule block
times based on AWA's internal block time policy; (iv) provide
for the following turn times: (a) in a hub location: 20
minutes for Beech 1900s and Dash 8s and 25 minutes for CRJs;
and (b) in other stations: 10 minutes for Beech 1900s, 15
minutes for Dash 8s and 20 minutes for CRJs; (v) take into
account airport facilities available for Aircraft handling;
(vi) provide for maintenance as required by Section 2.6.3 and
scheduled heavy maintenance on Aircraft as required from time
to time; and (vii) provide for at least 45 days prior notice
of any holiday cancellations. Mesa shall implement all changes
in the Schedule contained in a Schedule Notice in accordance
with AWA'S scheduling requirements within 60 days after
receipt of a Schedule Notice. Mesa or any of its affiliates
shall not provide any flight service for any other airline for
flights that originate in or end in Phoenix, Arizona.
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<PAGE> 3
So long as Air Midwest ("AM") is a wholly-owned subsidiary of Mesa Air Group,
Inc., Mesa may subcontract with AM for the performance of those Flight Services,
Other Services (as hereinafter defined), and other related obligations under
this Agreement, which are to be performed by Mesa using the Beech 1900s (the "AM
Services"). Mesa has delivered to AWA an assumption agreement pursuant to which
AM agrees to perform all the duties and obligations of Mesa under this Agreement
relating to the AM Services and to be bound by all of the liabilities,
obligations, and duties of Mesa under this Agreement applicable to the AM
Services, including, without limitation, the providing of flights, maintenance
of aircraft, compliance with laws, maintenance of insurance and indemnification
of AWA (the "Assumption Agreement"). AWA shall have no duty, obligation or
liability to AM under this Agreement. All payments for the use and operation of
the Beech 1900 Subfleet to be made by AWA under this Agreement shall be paid to
Mesa. Mesa shall pay all sums payable to AM for the operation of the Beech 1900
Subfleet pursuant to a separate agreement between AM and Mesa to which AWA is
not a party. Notwithstanding the foregoing, Mesa shall not be released,
discharged, or relieved from any duties, liabilities or obligations set forth in
this Agreement, including those arising from the AM Services performed by AM. AM
shall be deemed a subcontractor of Mesa, and Mesa shall cause AM's performance
of the AM Services to comply with all relevant terms and conditions of this
Agreement. If either: (i) AM ceases to be a wholly-owned subsidiary of Mesa Air
Group, Inc.; or (ii) AM fails to comply with the terms and conditions of this
Agreement as required by the Assumption Agreement, then Mesa, within thirty (30)
days after receipt of written notice from AWA, shall terminate the subcontractor
relationship with AM, acquire the Beech 1900 Subfleet and perform the duties and
obligations applicable to the Beech 1900 Subfleet pursuant to this Agreement.
Mesa, with the prior written consent of AWA, which consent shall not be
unreasonably withheld, delayed or conditioned, may subcontract with a
wholly owned subsidiary of Mesa Air Group, Inc. for the performance of certain
Flight Services, Other Services and other related obligations under this
Agreement, which are to be performed by Mesa using certain Aircraft on terms and
conditions similar to the terms and conditions applicable to the subcontracting
of the AM Services (the "Subcontracting of Services"). If AWA consents to the
Subcontracting of Services, then AWA and Mesa shall execute an amendment to this
Agreement permitting the Subcontracting of Services and setting forth the terms
and conditions pursuant to which the Subcontracting of Services may occur (the
"Subcontracting Amendment"). The Subcontracting of Services shall not occur
until the Subcontracting Amendment and any documents required from the
wholly-owned subsidiary have been executed by Mesa and the affiliate and
delivered by AWA.
AM and any other affiliate to which services are subcontracted under this
Agreement are referred to as the "Affiliated Service Providers."
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<PAGE> 4
2.2 Fleet.
2.2.1 Initial Fleet. As of the Contract Date, Mesa and AM provide
the Flight Services using the following aircraft
(collectively, the "Fleet"; with respect to any one aircraft
type, the "Subfleet"; and individually, the "Aircraft"):
<TABLE>
<CAPTION>
Number Aircraft Type ("Subfleet")
------ --------------------------
<S> <C>
12 deHavilland DHC-8-200 ("Dash 8")
5 Hawker-Beech 1900 ("Beech 1900")
22 Canadair Regional Jet-50 ("CRJ")
</TABLE>
2.2.2 CRJ Fleet Expansion. Pursuant to the Aircraft Contract, Mesa
shall have the right to acquire an additional 83 CRJ Aircraft,
43 by virtue of firm orders (the "Firm Aircraft") and 40 by
virtue of options (the "Option Aircraft"), in the
configuration, with the seating capacity and at the times set
forth on Exhibit A, attached hereto. The Firm Aircraft and
Option Aircraft will consist of CRJ Models 200s, 700s and 900s
as set forth in Exhibit A. For purposes of this Agreement, the
CRJ Model 200s shall be a "CRJ Subfleet" and the CRJ Model
700s and 900s shall be a "CRJ Subfleet".
(a) Each of the Firm Aircraft shall be placed into Flight
Services by Mesa in the calendar months set forth on
Exhibit A (the "Delivery Schedule"). The Firm
Aircraft to be delivered in each of the calendar
months from and including October, 2003 to and
including June, 2004 may be either CRJ Model 700s or
900s (the "Convertible Firm Aircraft"). AWA, by
written notice to Mesa, given on or before the last
day of the 18th calendar month prior to the delivery
of each Convertible Firm Aircraft, shall advise Mesa
as to which model is to be added to the Fleet (the
"Firm Selection Notice"). For example, for the CRJ to
be delivered in October, 2003, AWA must provide the
Firm Selection Notice by April 31, 2002. If AWA does
not provide the Firm Selection Notice timely, then
AWA shall be deemed to have elected to have a CRJ
Model 700 added to the Fleet. Mesa shall provide AWA
with at least 90 days' prior written notice of the
week each of the Firm Aircraft will be placed into
Flight Service under this Agreement and at least 60
days' prior written notice of the date on which each
of the Firm Aircraft will be placed into Flight
Service under this Agreement (each, a "Scheduled
Delivery Date").
(b) AWA shall have the options to expand the CRJ Fleet by
up to 40 additional CRJs from the Option Aircraft. On
or before each option "Exercise Date" (as set forth
on Exhibit A), AWA, by written notice to Mesa (the
"Option Notice"), shall have the option to require
Mesa to increase the CRJ Subfleet by the addition of
the applicable CRJ Aircraft in the applicable "In
Service Months" (as set for on Exhibit A)(each, a
"Fleet Expansion Option"). Each Option Notice shall
specify whether AWA is selecting either a CRJ Model
700 or 900. If
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<PAGE> 5
the Option Notice does not specify the CRJ Model,
then AWA shall be deemed to have selected a CRJ Model
700. The Fleet Expansion Options are separate and
individual options and may be exercised or not
exercised on a separate and individual basis. The
Aircraft that are the subject of each Fleet Expansion
Option shall be added to the Fleet by Mesa in the
applicable In Service Months. Mesa shall provide AWA
with at least 90 days prior written notice of the
week each Option Aircraft will be placed into Flight
Service under this Agreement and at least 60 days'
prior written notice of the Scheduled Delivery Date
for each Option Aircraft that is the subject of each
exercised Fleet Expansion Option.
(c) Mesa shall not be liable to AWA for the failure to
deliver any Firm Aircraft or Option Aircraft on the
Scheduled Delivery Date (a "Failed Delivery") if (i)
the failure to deliver is the result of the
manufacturer's failure to deliver the Aircraft to
Mesa as a result of acts of terrorism, hostilities,
war, strikes, labor disputes, work stoppages beyond
the manufacturer's control, fire, act of government
or court order; (ii) Mesa uses commercially
reasonable efforts to acquire a replacement aircraft
for the Aircraft that was not delivered; and (iii)
Mesa pays to AWA any compensation, damages or award
obtained by Mesa from the manufacturer as a result of
the Failed Delivery (an "Excused Failure"). In the
event of a Failed Delivery, Mesa shall use
commercially reasonable efforts to obtain the
applicable Aircraft as soon as practicable after the
Scheduled Delivery Date. If the Aircraft that is the
subject of a Failed Delivery is not delivered within
90 days after the Scheduled Delivery Date, then AWA
shall have the option to elect not to include such
Aircraft under this Agreement by providing written
notice to Mesa at any time prior to the actual
delivery of such Aircraft. If a Failed Delivery is
not the result of an Excused Failure, then AWA shall
have all rights and remedies under this Agreement for
such Failed Delivery.
2.2.3 Intentionally Omitted.
2.2.4 Fleet Reduction. Except as otherwise permitted by Section
2.2.5, upon 180 days' prior written notice from AWA, AWA,
subject to limitations set forth below, may require Mesa to
reduce the number of Aircraft in any Subfleet. AWA shall not
require Mesa to reduce: (i) the number of Aircraft in the Dash
8 Subfleet, Beech 1900 Subfleet or the combined CRJ Subfleets
by more than one Aircraft in any Six Calendar Month Period.
For purposes of this Agreement, "Six Calendar Month Period"
means each period during the Term (as defined below)
commencing on January l and ending on June 30 and commencing
on July 1 and ending on December 30, with the first Six
Calendar Month Period commencing on January 1, 2002; (ii) the
number of CRJ Model 200s for a period of 1 year measured from
the last date that a CRJ Model 200 is added to the CRJ
Subfleet; provided, however, that the Scheduled Delivery Date
shall be used to
5
<PAGE> 6
measure the date each CRJ Model 200 is added to the CRJ
Subfleet; (iii) the number of CRJ Model 700s and 900s for a
period of 1 year measured from the last date that a CRJ Model
700 or 900 is added to the CRJ Subfleet; provided, however,
that the Scheduled Delivery Date shall be used to measure the
date such CRJ Model 700 or 900 is added to the CRJ Subfleet;
and (iv) the Dash 8 Subfleet below 6 Aircraft.
2.2.5 Elimination of Beech 1900s and Dash 8s. Notwithstanding the
provisions of Section 2.2.4, AWA, at any time during the Term
after August 25, 2004, may require the Subfleet of Beech 1900s
to be reduced to zero by providing Mesa with at least 180 days
prior written notice of AWA's election to eliminate the Beech
1900s on or after such date (the "1900 Elimination Notice").
Notwithstanding the provisions of Section 2.2.4, AWA, at any
time during the Term after August 25, 2006, may require Mesa
to reduce the Subfleet of Dash 8s to zero by providing Mesa
with at least 180 days' prior written notice of AWA's election
to eliminate the Dash 8s on or after such date (the "Dash 8
Elimination Notice"). The 1900 Elimination Notice may be given
at any time during the Term on or after February 27, 2004. The
Dash 8 Elimination Notice may be given at any time during the
Term on or after February 27, 2006.
2.2.6 Spares. Mesa shall have available at least 1 spare Aircraft
available for Flight Services under this Agreement at any time
there are 35 or more CRJ Aircraft and at least 2 spare
Aircraft available for Flight Services under this Agreement at
any time there are 65 or more CRJ Aircraft. AWA shall pay the
Actual Costs, Guaranteed Non-Maintenance Costs (other than
overhead) and Guaranteed Maintenance Costs actually incurred
by or payable to Mesa for each spare Aircraft as provided in
Section 7.
2.2.7 Transition Costs. As of the Contract Date, all of the CRJ
Aircraft are 50 seat Aircraft. The Firm Aircraft and Option
Aircraft include CRJ-700 and CRJ-900 seat configurations (the
"New CRJ Types"). AWA shall reimburse Mesa for actual out-of
pocket costs and expenses incurred by Mesa in connection with
the induction of the New CRJ Types into Flight Services for a
period of 180 days after the induction of the first of each of
the New CRJ Types, not to exceed [...***...] for each of the
New CRJ Types (the "Transition Reimbursement"). The Transition
Reimbursement shall be paid by AWA within 30 days after
receipt of monthly written invoices together with commercially
reasonable evidence of the costs actually incurred by Mesa.
2.3 Other Services. In addition to the Flight Services, Mesa, subject to
AWA's payment of costs pursuant to Section 7.1.8, shall provide the
following services in connection with the Flight Services (the "Other
Services"): (i) curb-side service, other than at AWA Service Locations
(as defined below), in all locations where it is normal and customary
or where another airline offers curbside check-in; (ii) check-in
service with automated baggage tags and boarding pass printers in all
locations, other than AWA Service Locations; (iii) ticketing and
security services
***CONFIDENTIAL TREATMENT REQUESTED
6
<PAGE> 7
in accordance with the Federal Aviation Administration ("FAA") and AWA
directives and guidelines, as may be issued from time to time, and any
other directives or guidelines as Mesa and AWA may mutually approve, in
all locations, other than the AWA Service Locations; (iv) Qik-Check
service, to the extent used and supplied by AWA, at all gates used by
Mesa; (v) transfer of all baggage for passengers connecting from
Flights to AWA flights in a timely manner to ensure all baggage is
placed on those connecting flights; and (vi) transportation of mail and
other cargo (other than hazardous materials) on Flights, at the order
of AWA, to the extent of available aircraft capacity. Mesa, at its
expense, shall provide all facilities, machinery, equipment and
inventory required to efficiently, timely and in a manner consistent
with best airline industry practices provide the Other Services. Mesa
shall require personnel providing the Other Services to comply with all
rules, regulations and directives promulgated for all AWA operations
from time to time.
Mesa may outsource the Other Services performed by Mesa at any station
with the prior written consent of AWA, which consent shall not be
unreasonably withheld or delayed. Mesa shall cause any subcontractor to
which the Other Services are outsourced to comply with and perform all
of the duties and obligations imposed on Mesa in this Agreement
applicable to the Other Services that have been outsourced.
Notwithstanding the foregoing, AWA shall provide the services set forth
in subsections (i) - (iii) above at Phoenix Sky Harbor International
Airport, McCarron International Airport and any other airport that AWA
designates with at least 90 days' prior written notice to Mesa (the
"AWA Service Locations"). In the event AWA elects to convert any
airport to an AWA Service Location, then AWA shall: (i) either assume
Mesa's lease at the airport or reimburse Mesa for the actual
out-of-pocket costs and expenses incurred by Mesa in terminating the
lease, at AWA's election; (ii) reimburse Mesa for up to one week's
compensation actually paid to airport employees that are not offered
employment by AWA; and (iii) offer to purchase from Mesa or assume the
lease of any equipment owned or leased by Mesa at the airport that may
be used by AWA in AWA's operations and is in good condition and repair
for a price equal to the fair market value of such equipment at the
time of such offer.
2.4 Personnel; Training. Mesa shall hire, engage, employ and maintain a
sufficient number of competent, trained personnel and subcontractors,
including, but not limited to pilots, flight attendants, ground crew,
maintenance and cleaning personnel, baggage handling personnel and
customer service personnel necessary to provide the Flight Services and
Other Services as required by this Agreement. Subject to FAA approval,
CRJ pilots shall be qualified to fly all models of CRJs providing
Flight Services pursuant to this Agreement. CRJ pilots shall not be
scheduled or dedicated to any particular model line of CRJs without the
prior written consent of AWA. In addition, Mesa shall employ and
maintain a commercially reasonable number of reserve pilots and flight
attendants based in the Phoenix Metropolitan area based on the Flight
Services to be provided
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<PAGE> 8
pursuant to this Agreement. Mesa shall cause all Mesa personnel
providing Flight Services or Other Services to wear uniforms approved
by AWA and shall comply with all appearance guidelines required of all
AWA personnel.
Mesa shall provide initial training, recurrent training and customer
service training to personnel and subcontractors reasonably identified
by AWA at programs approved by AWA. AWA shall provide applicable
training materials. In the event AWA becomes a hazardous materials
carrier, Mesa, at AWA's expense, shall conduct all hazardous materials
training required by AWA or AWA's other code share partners.
2.5 Service Quality and Level. All Flight Services and Other Services shall
be provided by Mesa at a service quality and level of service equal to
or greater than the service quality and level of service provided by
AWA to the extent applicable to the type of Aircraft used to provide
the Flight Services. All Aircraft shall be equipped with service
amenities necessary to provide the service quality and level of service
required by this Section. If AWA changes AWA's service requirements and
as a result Mesa will be required to make any capital upgrades to any
Aircraft, Mesa, in writing, shall advise AWA of the need for such
upgrades together with the estimated cost to complete such upgrades
(the "Upgrade Notice"). If, after receipt of the Upgrade Notice, AWA,
in writing, elects to require Mesa to comply with such changes in
service requirements, then AWA, within 30 days after receipt of a
written notice, shall reimburse Mesa for the actual out-of-pocket
capital costs incurred by Mesa in making such capital upgrades. If AWA
does not approve the making of the capital upgrades, then Mesa shall
not be required to meet the new AWA service requirements.
2.6 Maintenance.
2.6.1 Obligation. Mesa, at its own cost and expense, shall be
responsible for the service, repair, maintenance, overhauling
and testing of each Aircraft: (i) in compliance with the
maintenance program for each Aircraft as approved by the FAA
and pursuant to all applicable aircraft maintenance manuals
applicable to each Aircraft; (ii) so as to keep each Aircraft
in good and safe operating condition; and (iii) so as to keep
the Aircraft in such operating condition as may be necessary
to enable the airworthiness certification of the Aircraft to
be maintained in good standing. Mesa shall retain full
authority and control over the service, repair, maintenance,
overhauling and testing of each Aircraft. AWA shall have no
obligations or duties with respect to the service, repair,
maintenance, overhauling or testing of any Aircraft.
2.6.2 Ground Equipment. Mesa, at its sole cost and expense, shall
service, repair, maintain and clean (or cause to be serviced,
repaired, maintained or cleaned) all ground equipment and
facilities in accordance with AWA guidelines, provided by AWA
to Mesa, for cleaning, maintenance and appearance.
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<PAGE> 9
2.6.3 Location. Mesa shall maintain three maintenance bases,
currently located in Fresno, California for CRJs, Grand
Junction, Colorado for Dash 8s, and Farmington, New Mexico for
Beech 1900s. Each Schedule prepared by AWA shall provide for
not less than 20% of the Dash 8s and CRJs and 1 of the Beech
1900s to remain overnight at the applicable maintenance base
each night. AWA acknowledges that a separate maintenance base
shall be maintained by Mesa for each CRJ Subfleet. One
Aircraft shall remain overnight for 10 hours and the remainder
for at least 8 hours. Mesa shall not relocate any maintenance
base, without the prior written consent of AWA, which consent
may be withheld if the new location fails to meet AWA's
maintenance base requirements. Each CRJ maintenance base shall
be staffed and equipped to maintain a fleet of up to 25
Aircraft. Mesa shall add maintenance bases as necessary to
provide the Flight Services and Other Services at locations
which meet AWA's maintenance base requirements and are
approved by AWA. AWA, by providing Mesa with at least 180
days' prior written notice, may require Mesa to close any
maintenance base. Upon Mesa assigning to AWA all of its right,
title and interest in the lease of the maintenance base that
is closed (together with any required landlord consent), AWA
shall reimburse Mesa for all actual out-of-pocket costs and
expenses incurred by Mesa in closing such maintenance bases.
2.7 Emergency Operations. Mesa and AWA shall coordinate to develop a plan
that complies with applicable Regulations (as defined below) to be
implemented in the event of any incident involving personal injury or
death to a passenger or crew member on a Flight. The emergency response
teams of AWA and Mesa shall coordinate their efforts and shall
cooperate fully in response to such emergency.
2.8 Fleet Configuration, Cleanliness and Appearance.
2.8.1 Configuration. All Dash 8 and Beech 1900 Aircraft in the Fleet
on the Contract Date and Dash 8 and Beech 1900 Aircraft added
to the Fleet shall have a passenger seating configuration and
seating capacity as provided on the Aircraft in the Fleet on
the Contract Date. Each CRJ in the Fleet on the Contract Date
shall retain the seating configuration and capacity as exists
on the Contract Date. Each CRJ added to the Fleet pursuant to
Section 2.2 shall have the seating configuration and capacity
as provided for such Aircraft on Exhibit A. AWA, at AWA,s cost
and expense, may require Mesa to reconfigure or change the
seating capacity of an Aircraft. All such requested changes
shall be implemented within 180 days after Mesa's receipt of
written request from AWA.
2.8.2 Cleanliness. Mesa, at its sole cost and expense, shall cause
all Aircraft to be cleaned and maintained in an appearance in
accordance with cleaning standards, requirements and
guidelines promulgated by AWA from time to time and provided
to Mesa in writing.
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2.9 Post-Departure Procedures. Mesa shall perform airport post-departure
procedures (as defined in AWA's Customer Service Manual) and be
responsible for securing and controlling all the contents in the ticket
lift envelopes. All ticket lift envelopes should be forwarded and
co-mailed to ELP/NPC within 24 hours after flight operations. Mesa
shall be liable for losses to AWA as a result of the loss, misuse,
theft or forgery of AWA passenger tickets (including lifted flight
coupons and auditor's coupons for sold tickets) in Mesa's possession or
control or the associated cash receipts. If actual documented losses to
AWA resulting from erroneous or fraudulent system transactions due to
Mesa's or its employees' failure to adhere to AWA policies and
procedures exceed the actual documented losses incurred by AWA from
erroneous or fraudulent system transactions, calculated monthly on a
rate per passenger per month basis for each airline (the "Excess
Losses"), then Mesa, within 10 days after receipt of written demand
together with the calculation of Excess Losses, shall pay to AWA an
amount equal to the Excess Losses times the number of passengers flown
on Flights during the applicable calendar month.
2.10 Other Aircraft Handling and Ground Services. Mesa, at AWA's request,
shall provide the Other Services and aircraft ground handling services
for flights and aircraft operated by AWA and its code share partners at
stations at which Mesa provides the Other Services pursuant to Section
2.3. The costs and expenses of providing such Other Services and
aircraft ground handling shall be charged to the airline (other than
AWA) at market rates and in the case of AWA at actual out-of-pocket
cost to Mesa plus 8%.
2.11 Airport Slots. Upon each written request by AWA to Mesa, Mesa or the
Affiliated Service Providers, as applicable, shall transfer the rights
to airport slots operated by Mesa and used for America West Express
service at New York LaGuardia (LGA), Chicago O'Hare (ORD), Ronald
Reagan Washington National (DCA) and any other slot controlled airports
to any carrier(s) designated by AWA; provided, however, that Mesa or
the Affiliated Service Providers, as applicable, shall not be required
to transfer any slots at slot controlled airports acquired by Mesa or
the Affiliated Service Providers, as applicable, and used for flights
other than Flights pursuant to this Agreement. Upon receiving such
request from AWA, Mesa shall prepare and process, within thirty (30)
days, all documentation necessary to execute the transfer of the
airport slots requested by AWA in its notice.
2.12 MAPPER System. AWA and Mesa, at AWA's cost and expense, shall use
commercially reasonable efforts to install AWA's internal MAPPER System
("MAPPER System") at all airport stations to and from which Flight
Services are provided by September 1, 2001. AWA, at AWA's cost and
expense, shall train Mesa personnel on the use of the MAPPER System.
The MAPPER System shall be installed in all new stations when such
stations are activated. Mesa shall cause its employees and
subcontractors to input all flight and other operational and passenger
data and information that the MAPPER System is capable of receiving as
soon as such data and information is available. All operational
statistics for each Flight shall be input into the MAPPER System within
1 hour after each
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departure. Commencing on the 90th day after the MAPPER System is
installed at a station, if Mesa fails to input any information or data
into the MAPPER System, then Mesa, within 10 days after receipt of
written demand, shall pay to AWA an amount equal to $100.00 for each
entry not made. Mesa shall not be required to pay a penalty for any
data not entered into the MAPPER System as a result of a system
failure. Absent manifest error, MAPPER System data, information and
records shall be the controlling data, information and records for all
statistics used for purposes of calculation of penalties, payments and
bonuses under this Agreement. No penalty for failure to input data
shall be assessed more than 180 days after the date the data was to be
entered.
3. Rights, Responsibilities and Obligations of AWA.
3.1 Flight Management Items. AWA, in its sole discretion, shall:
(i) designate from time to time, pursuant to each Schedule
Notice, the routes on and destinations to which Mesa is to
provide the Flight Services and the times of departure for the
Flights; (ii) set the fares to be paid for such Flights by the
passengers; and (iii) be responsible for the passenger
booking, yield management and overbooking of Flights, limited
only by the Fleet required to be maintained by Mesa pursuant
to this Agreement.
3.2 Marketing/Revenue. AWA, in its sole discretion and at its sole
cost, shall market, advertise and sell tickets on all Flights.
AWA shall provide all reservation services for the Flight
Services and shall pay all ticketing and advertising expenses,
credit card charges, travel agent commissions and CRS fees
applicable to such services. AWA shall be entitled to retain,
and Mesa shall pay to AWA, all revenue and income generated by
the Flight Services. Mesa shall provide to AWA all tickets and
other revenue documentation collected or lifted by Mesa. Mesa,
on a daily basis, shall remit to AWA any revenue collected by
Mesa in connection with the Flight Services and Other Services
into bank accounts established by AWA. Mesa shall be
responsible for any revenue shortfall not remitted to AWA and
shall pay such shortfall within 10 days after receipt of
written demand from AWA which demand shall document the
shortfall in reasonable detail. AWA shall process Mesa lifted
passenger lift documents using standard industry pricing
procedures. Mesa agrees to cooperate with AWA on any special
pricing or reporting requirements. Mesa shall supply AWA with
specific traffic reporting requirements.
3.3 Airport Services. AWA, at its sole cost and expense, shall:
(i) provide curb-side service, check-in service, ticketing and
security services at AWA Service Locations for all Flights;
(ii) transfer all baggage for passengers connecting from AWA
flights to Flights in a timely manner to ensure all baggage is
placed on those connecting Flights; and (iii) provide such
other ground services selected by AWA at locations selected by
AWA in writing to Mesa. To the extent Other Services are
provided by AWA, the costs of such services shall not be
included in the Actual Costs or Guaranteed Non-Maintenance
Costs. AWA shall pay the rent for the terminal and gates at
Sky Harbor Airport.
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3.4 Other Code Share Partners. AWA shall have the right to enter
into code share, joint marketing, charter or other
alliance-type agreements with any other flight service
commuter operator to provide flight services to any
destinations or for any routes. AWA may permit any of AWA's
other code share partners to place their code on any Flight.
AWA or its code share partners shall pay all costs and
expenses incurred by Mesa in placing such other code on such
Flights.
3.5 Charters. AWA, at its sole discretion, may market charter
flights on the Aircraft. Mesa shall operate such charter
flights provided flight crews and Aircraft are available and
not otherwise subject or committed to maintenance
requirements. Mesa is required to operate the charters in a
manner consistent with the terms of this Agreement. In respect
of any charter flight, AWA and Mesa, in good faith, shall
negotiate the costs and expenses to be paid by AWA for such
services. Mesa, upon 90 days' prior written notice to AWA, may
use any Aircraft for company business; provided, however, that
no such trips may disrupt scheduled Flights. If such trips
disrupt scheduled Flights, Mesa, within 10 days after receipt
of written demand, shall pay to AWA an amount equal to
[...***...] times the number of Flights disrupted (the
"Disruption Fee"). If the Disruption Fee is not paid timely,
then AWA may offset the Disruption Fee against the next
amounts due by AWA to Mesa.
3.6 Executive Travel. AWA shall provide Mesa with travel cards for
the five top executives of Mesa for business travel and
personal travel on AWA flights on the same terms and
conditions as provided to AWA officers. Mesa is not permitted
to offer barter travel on AWA flights or Flights in exchange
for goods or services. In the event of any breach of the terms
of this Section, Mesa, within 10 days after receipt of written
request, shall pay to AWA the full coach fare for the
flight(s) taken in violation of the terms of this Section.
4. Compliance with Regulations.
4.1 Regulations. Mesa shall perform its obligations and duties
under this Agreement, including, without limitation, all
Flight Services and Other Services in full compliance with any
and all applicable laws, ordinances, codes, statutes, orders,
directives, mandates, requirements, rules and regulations,
whether now in effect or hereafter adopted or promulgated, of
all governmental agencies having jurisdiction over Mesa's
operations, including but not limited to the FAA and the DOT
(collectively, "Regulations").
4.2 Flight Operations. Mesa shall be responsible for the operation
of each Aircraft and the safe performance of the Flights in
accordance with the Regulations and airline industry standard
practice and shall retain full authority, operational control
and possession of the Aircraft to do so. Mesa, its agents or
employees, for the purpose of the safe performance of the
Flights, shall have absolute discretion in and shall have sole
responsibility for all matters concerning the preparation of
each Aircraft for its Flights, and all other matters relating
to the technical operation of the Aircraft. Mesa, insofar as
such relates to the safe operation of a Flight, shall have
sole and absolute discretion as to the load carried and its
***CONFIDENTIAL TREATMENT REQUESTED
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distribution and as to the decision whether such Flight shall
be taken. Mesa shall be solely responsible for and AWA shall
have no obligations or duties with respect to the dispatch of
all Flights.
4.3 Registration. All Aircraft shall remain registered in the
United States of America in accordance with the Regulations.
4.4 Disclosure. Mesa, upon 2 business days' prior written request,
shall provide AWA the opportunity to review all operating
specifications, operational regulations, manuals and
calculations with respect to all Aircraft and flight
statistics with respect to all Flights at Mesa's corporate or
other relevant offices where such records are located.
4.5 Review/Audit. AWA or its independent accountants, upon 2
business days' prior written notice, may review, at Mesa's
corporate office, airport ticket offices and other relevant
offices, all records, books, logs, files, documentation and
information maintained by Mesa, or any of its maintenance or
service contracts, in connection with Flight operation, safety
and regulatory compliance, employee training, Flight dispatch,
Aircraft use, operation, maintenance and repair, Flight
incidents and governmental orders, mandates and requirements.
AWA, to the extent AWA deems necessary, may make unannounced
visits and inspections at airport ticket offices and stations
to insure Mesa's and its employees', agents' and contractors'
compliance with the terms and conditions of this Agreement.
4.6 Reporting. This Agreement shall be treated as a code share for
DOT reporting requirements. AWA shall provide Mesa with such
information necessary for Mesa to make the DOT reports and
disclosures.
5. Operational Performance Criteria, Incentives and Penalties.
5.1 DOT Complaint Rate Criteria. Mesa shall not permit its annual
DOT Complaint Rate (defined below) for Flight Services to
exceed the annual DOT Complaint Rate of AWA. The "DOT
Complaint Rate" is defined as the number of consumer
complaints received by the DOT for a given calendar year
expressed in terms of the number of complaints per 100,000
passengers flown during that calendar year by Mesa and AWA;
provided, however, that the DOT Complaint Rate shall exclude
consumer complaints relating solely to (i) overbooking; (ii)
fares; (iii) Aircraft size or suitability; (iv) schedule; and
(v) food service. For purposes of this Agreement, "AWA's DOT
Complaint Rate" shall mean AWA's actual DOT Complaint Rate
multiplied by [...***...]. DOT complaints made against AWA for
America West Express service shall be allocated to Mesa for
the purpose of calculating Mesa's and AWA's DOT Complaint
Rates. If Mesa's DOT Complaint Rate exceeds AWA's DOT
Complaint Rate in any calendar year during the Term of this
Agreement, Mesa, within 10 days after receipt of written
demand from AWA, shall pay to AWA a penalty equal to
[...***...] multiplied by the amount by which Mesa's DOT
Complaint Rate exceeds AWA's DOT Complaint Rate. For example,
if AWA's DOT Complaint Rate for a given year is [...***...]
per 100,000 passengers and Mesa's is [...***...] per 100,000
passengers, Mesa
***CONFIDENTIAL TREATMENT REQUESTED
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would pay AWA the product of [...***...] x [...***...]
or [...***...]. On each anniversary date of the Contract Date,
the penalty payment amount shall be increased by the increase
in the CPI, as determined in accordance with Section 7.4.
5.2 Mishandled Baggage Rate Criteria. Commencing January 1, 2002,
Mesa shall not permit its monthly MBR (defined below) for
Flight Services to exceed the monthly MBR of AWA. The "MBR" is
defined as the number of lost baggage claims entered into the
world tracer system for a given month expressed in the terms
of the number of entries per 1,000 bags handled during that
calendar month by Mesa and AWA. Mesa shall enter all lost
baggage claims into the world tracer system within 2 hours
after the lost baggage claim is made by a passenger. If Mesa's
MBR exceeds AWA's MBR by [...***...] or more in any calendar
month during the Term of this Agreement, Mesa, within 10 days
after receipt of written demand from AWA, shall pay to AWA a
penalty equal to [...***...]. If Mesa's MBR exceeds AWA's MBR
for three consecutive calendar months, Mesa, within 10 days
after receipt of written demand, shall pay to AWA an
additional penalty of [...***...] for such three-month period
and for each consecutive month thereafter that Mesa's MBR
exceeds AWA's MBR, the penalty shall be [...***...] per month.
On each anniversary date of the Contract Date, the penalty
payment amount shall be increased by the increase in the CPI,
as determined in accordance with Section 7.4.
5.3 On Time Performance Rate Criteria. Mesa shall not permit
Mesa's OTP Rate (as defined below) for any Six Month Period
(as defined below) to fall below: (i) [...***...] percentage
points above AWA's OTP Rate for Schedules operated by Mesa out
of the Phoenix Sky Harbor International hub; and (ii)
[...***...] percentage points below the AWA's OTP Rate for
Schedules operated out of the Columbus, Ohio hub (the "OTP
Rate Threshold"). The Phoenix Sky Harbor International hub and
Columbus hub are each referred to as a "Hub." The "OTP Rate"
is defined as the percentage determined by dividing the number
of flight segments not Delayed (as defined below) by the total
number of flight segments during the applicable Six Month
Period. For purposes of this Agreement, "Delayed" means a
flight segment that does not arrive at the destination within
15 minutes after the scheduled arrival time. All Flights will
be included for calculating the OTP Rate. A canceled flight
(except ones cancelled because of no passengers and the
reasons set out in Section 5.4(v)) is a Delayed flight. To the
extent that Mesa's OTP Rate for either Hub Schedule falls
below the applicable OTP Rate Threshold for any Six Month
Period, Mesa, within 10 days after receipt of written demand,
shall pay to AWA the OTP Penalty Amount (as defined below) for
each percentage point, or portion thereof, by which Mesa's OTP
Rate for either Hub Schedule falls below the OTP Rate
Threshold for such Six Month Period. The "OTP Penalty Amount"
for each Hub is an amount equal to [...***...] times a
fraction, the numerator of which is the daily average of
Aircraft providing Flight Services to and from the Hub during
the applicable Six Month Period and the denominator of which
is the daily average of all Aircraft providing Flight Services
during the applicable Six Month Period. On each anniversary
date of the Contract Date the dollar amounts used for
calculating the OTP Penalty Amount shall be increased
***CONFIDENTIAL TREATMENT REQUESTED
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by the increase in the CPI, as determined in accordance with
Section 7.4. AWA, within 10 days after receipt of written
demand, shall pay to Mesa [...***...] for each percentage
point, or portion thereof, by which Mesa's OTP Rate system
wide exceeds [...***...] for any Calendar Quarter. On each
anniversary date of the Contract Date, the bonus amount shall
be increased by the increase in CPI, as determined in
accordance with Section 7.4. "Six Month Period" means each
January 1 - June 30 and July 1 - December 31 and "Calendar
Quarter" means each 3 calendar month period commencing January
1 of each year.
5.4 Flight Completion Factor. Mesa shall not permit its FCF
(defined below) for any Calendar Quarter to fall below: (i)
[...***...] for Schedules operated out of the Phoenix Sky
Harbor International Airport Hub; and (ii) [...***...] for
Schedules operated out of the Columbus, Ohio Hub (each, an
"FCF Threshold"). "FCF" is defined as the percentage of
published, scheduled Flights completed for a Calendar Quarter.
Flights not completed due to: (i) weather; (ii) cancellation
or overflight because of no passengers; (iii) air traffic
control cancellations; (iv) cancellations resulting from an
emergency airworthiness directive from the FAA affecting all
aircraft similarly equipped to the Aircraft in any Subfleet
(not just those owned or operated by Mesa); or (v)
cancellations resulting from the sole acts or omissions of AWA
or its employees, including, without limitation, damage to an
Aircraft, will not be included in either the numerator or
denominator for calculating the FCF. Mesa, within 10 days
after receipt of written demand, shall pay to AWA the FCF
Penalty Amount for each tenth of a percentage point, or
portion thereof, by which Mesa's FCF for either Hub Schedule
falls below the applicable FCF Threshold. The "FCF Penalty
Amount" for each Hub is an amount equal to [...***...] times a
fraction, the numerator of which is the daily average of
Aircraft providing Flight Services to and from the Hub during
the Calendar Quarter and the denominator of which is the daily
average of all Aircraft providing Flight Services under this
Agreement during the Calendar Quarter. On each anniversary
date of the Contract Date the dollar amount used for
calculating the FCF Penalty Amount shall be increased by the
increase in the CPI, as determined in accordance with Section
7.4. AWA, within 10 days after receipt of written demand,
shall pay to Mesa [...***...] for each tenth of a percentage
point by which Mesa's FCF system wide exceeds [...***...] in
any Calendar Quarter. On each anniversary date of the Contract
Date, the bonus amount shall be increased by the increase in
CPI, as determined in accordance with Section 7.4.
5.5 Records. Within 5 days after the end of each calendar month
Mesa shall provide to AWA statements certified by Mesa's chief
financial officer as to Mesa's OTP Rate and FCF for the prior
calendar month and, as applicable, the prior Calendar Quarter
and Six Month Period, together with such supporting
documentation and information as AWA may request. AWA or its
designee, upon 2 business days' prior written notice, may
review, at Mesa's corporate or other relevant offices, all
records and files maintained by Mesa in connection with
on-time performance and flight completions. If AWA's or its
designee's review of the records or files reveals that Mesa
has under or overstated, as applicable, Mesa's OTP Rate or
FCF, then Mesa, upon demand, shall pay all sums due based on
the accurate calculations, the actual out-of-pocket costs and
expenses of AWA in completing
***CONFIDENTIAL TREATMENT REQUESTED
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such review and the applicable penalties payable based on such
new calculation. If such under or overstatement is willful
or intentional, then Mesa, within 10 days after receipt
of written demand, shall pay to AWA an amount equal to
[...***...] per occurrence.
5.6 Limitation on Applicability of Standards, Criteria,
Incentives, and Penalties. AWA acknowledges that Mesa and the
Affiliated Service Providers operate flights and provide
flight services and other services under their own names
and/or under names or service marks other than America West
Express using aircraft that are not included in the Fleet and
that are not subject to this Agreement. Notwithstanding any
other term, condition or provision hereof to the contrary, the
standards, criteria, incentives and penalties set forth above
in this Section 5 apply only to Flight Services, Flights and
Other Services performed by Mesa and the Affiliated Service
Providers hereunder operating as America West Express and not
to any other flights, flight services or other services
performed by Mesa and the Affiliated Service Providers under
their own names or under a name or service mark other than
America West Express. Thus, in calculating Mesa's DOT
Complaint Rate, the MBR, the OTP rate, the FCF, and all
incentives and penalties set forth above, only Flight Services
and Other Services performed by Mesa and the Affiliated
Service Providers under the service mark America West Express
shall be taken into account in calculating such rates and
assessing such incentives and penalties.
6. Irregular Operations. The misconnect and denied boarding benefits provided by
Mesa to passengers (each, a "Misconnect Benefit Package") shall be similar in
amount and scope to those offered by AWA in similar circumstances and geographic
areas (the "AWA Standards"). AWA shall not be required to reimburse Mesa for any
Misconnect Benefit Package which is in excess of the AWA Standards.
7. Payment of Fees/Revenue Sharing. Commencing on the Effective Date and
retroactive to the Contract Date, Mesa and AWA hereby agree to pay the following
sums as consideration for this Agreement and the provision of the Flight
Services and Other Services provided for herein:
7.1 Mesa Actual Costs. AWA, in accordance with Section 7.5, shall
reimburse to Mesa the following actual costs and expenses
actually paid by Mesa in connection with performing the Flight
Services and Other Services ("Actual Costs"):
7.1.1 Hull insurance premiums and commissions paid by Mesa
for each Aircraft for the prior calendar month.
Insurance shall be allocated and paid by AWA on a
monthly basis equally over the applicable premium
period for which the insurance is paid. Insurance
shall be prorated by Mesa in any premium period
during which an Aircraft is added or deleted from
this Agreement. If the monthly insurance payments
made by AWA are less than the actual premiums paid by
Mesa, then AWA shall pay such excess in the month
Mesa pays the insurance premiums. If the monthly
payments made by AWA exceed the actual insurance
premiums, then AWA shall be entitled to a credit
against the next payment of the Actual Costs in an
***CONFIDENTIAL TREATMENT REQUESTED
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amount equal to such overpayment. Mesa, within 10
days after receipt, shall provide AWA with copies of
all premium notices received for insurance premiums.
7.1.2 Liability insurance premiums and commissions paid by
Mesa for the Flight Services on a revenue passenger
mile basis. Insurance shall be allocated and paid on
a monthly basis equally over the applicable premium
period for which the insurance is paid. Insurance
shall be prorated by Mesa in any premium period
during which this Agreement commences, terminates or
expires. If the monthly insurance payments made by
AWA are less than the actual premiums paid by Mesa,
then AWA shall pay such excess in the month Mesa pays
the insurance premiums. If the monthly payments made
by AWA exceed the actual insurance premiums, then AWA
shall be entitled to a credit against the next
payment of the Actual Costs in an amount equal to
such overpayment. Mesa, within 10 days after receipt,
shall provide AWA with copies of all premium notices
received for insurance premiums.
7.1.3 Property taxes paid by Mesa for each Aircraft or the
Fleet. Property taxes shall be allocated and paid on
a monthly basis equally over the applicable tax
period for which the property taxes are assessed and
paid. If an Aircraft is added to the Fleet after
property taxes are assessed for a tax period and Mesa
does not owe taxes for such Aircraft for such tax
period, then AWA shall not pay property taxes on the
Aircraft for such tax period. AWA shall pay the full
year property taxes for the year in which an Aircraft
is deleted from the Fleet in the manner provided
herein if such Aircraft is not placed in revenue
service outside this Agreement (in which case such
taxes shall be prorated). If the monthly tax payments
made by AWA are less than the actual property taxes
assessed and paid by Mesa, then AWA shall pay such
excess in the month Mesa pays the property taxes. If
the monthly payments made by AWA exceed the actual
property taxes assessed, then AWA shall be entitled
to a credit against the next payment of Actual Costs
in an amount equal to such overpayment. Mesa, within
10 days after receipt, shall provide AWA with copies
of all tax notices received for property taxes
assessed against any portion of the Fleet.
7.1.4 De-Icing expenses paid by Mesa for each Aircraft for
the prior calendar month.
7.1.5 Fuel costs paid by Mesa during the prior calendar
month, calculated as gallons of fuel burned per hour.
If in any calendar month Mesa's estimated fuel costs
exceed the Actual Costs for fuel for such calendar
month by more than 3%, then thereafter, for the
purpose of calculating Estimated Costs pursuant to
Section 7.5 below, Mesa shall use AWA's fuel forecast
for the fuel costs.
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7.1.6 Landing fees calculated per Flight departure incurred
during the prior calendar month.
7.1.7 Security outside AWA Service Locations calculated per
America West Express passenger.
7.1.8 Passenger and ground handling costs incurred at
stations maintained by Mesa more particularly
described on Exhibit B ("Station Costs"), not to
exceed in each calendar year the amount set forth in
the budget for each calendar year (the "Station
Budget"); provided, however, that if AWA changes a
Schedule and such change in the Schedule directly
results in any Station Costs exceeding the amount set
forth in the Station Budget, then Station Costs shall
include such costs in excess of the Station Budget to
the extent directly attributable to the Schedule
change. The Station Budget for each calendar year,
together with such backup information requested by
AWA, shall be prepared and provided to AWA by Mesa on
or before October 1 of the prior calendar year. The
Station Budget shall be based on Mesa's commercially
reasonable estimate of the actual costs that are to
be incurred during the next calendar year. If AWA
does not approve the Station Budget for any station,
then AWA may convert such station to an AWA Service
Location pursuant to Section 2.3.
Mesa shall not enter into any contract with an affiliate to
provide the services or materials for which AWA pays the
Actual Costs unless such contract is on commercially
reasonable terms substantially similar to those available in
the market place for arms-length transactions with third
parties. In the event any of the services or materials for
which AWA pays the Actual Costs are purchased for the Flight
Services and Other Services provided by this Agreement and for
other services provided by Mesa and its affiliates, then the
costs of such services and materials shall be equitably
allocated to Actual Costs payable by AWA such that AWA only
pays for the portion of such costs attributable to the Flight
Services or Other Services provided by this Agreement. Mesa
shall use commercially reasonable efforts to operate the
Flight Services and Other Services in an efficient and cost
effective manner to minimize the Actual Costs payable by AWA
while maintaining the quality and quantity of services
required by this Agreement. Mesa shall take all commercially
reasonable actions to minimize the taxes imposed on the Fleet.
If requested by AWA, in writing, AWA on behalf of Mesa may
pursue any tax protest or contest for property taxes imposed
on the Fleet or any Aircraft in the Fleet in the manner
prescribed by applicable law. An "affiliate" of Mesa means any
person or entity controlling, controlled by or under common
control with Mesa.
7.2 Mesa Guaranteed Costs. AWA, in accordance with Section 7.5,
shall pay to Mesa:
(a) the lesser of (i) the actual costs and expenses
associated with certain of the Flight Services and
Other Services (the "Guaranteed Non-Maintenance
Costs") set forth in the cost and expense categories
set forth in Exhibit C, attached hereto (the
"Guaranteed Non-Maintenance Costs Schedule"), or
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(ii) the amounts set forth in the Guaranteed
Non-Maintenance Costs Schedule for each cost and
expense category set forth in Exhibit C, attached
hereto (the "Guaranteed Non-Maintenance Costs Caps");
and
(b) an amount for maintenance costs and expenses equal to
the amounts set forth on Exhibit D (the "Guaranteed
Maintenance Costs").
The Guaranteed Non-Maintenance Costs Caps and Guaranteed
Maintenance Costs shall be adjusted on each anniversary of the
Contract Date in accordance with Section 7.4 below. If the
Term of this Agreement commences or expires or an Aircraft is
added or eliminated from the Fleet on other than the first or
last day of a calendar month, then the Guaranteed
Non-Maintenance Costs and Guaranteed Maintenance Costs payable
by AWA under this Agreement or for such Aircraft shall be
prorated based on the actual number of days this Agreement is
in effect or the Aircraft is in the Fleet during such month
and the actual number of days in such month. Payment of
Guaranteed Non-Maintenance Costs and Guaranteed Maintenance
Costs for an Aircraft shall commence on the Aircraft Scheduled
Delivery Date unless the Aircraft is delivered late in which
case payment will begin on the actual delivery date. If an
Aircraft, at AWA's written request, is placed into Flight
Services prior to the Scheduled Delivery Date, then payment of
the Guaranteed Non-Maintenance Costs and Guaranteed
Maintenance Costs for such Aircraft shall commence on the date
requested by AWA.
7.3 Contract Negotiation. AWA may assist Mesa in the negotiation
of contracts for the provision of materials or services
subject to the Actual Costs, Guaranteed Non-Maintenance Costs
and Guaranteed Maintenance Costs provided Mesa is not subject
to an existing contract for such services or materials.
7.4 Guaranteed Costs Adjustment.
7.4.1 CPI Adjustment. For the purposes of calculating CPI
increases in Guaranteed Non-Maintenance Costs Caps,
increases in the Guaranteed Maintenance Costs,
increases in bonuses or penalties pursuant to Section
5 or increases in the base EAS Subsidies pursuant to
Section 7.7 the following definitions and formulas
shall be applied:
(a) Definition. "CPI" shall mean the Consumer
Price Index, U.S. City Average, Urban Wage
Earners and Clerical Workers, All Items
(base index year 1982-84 = 100) as published
by the United States Department of Labor,
Bureau of Labor Statistics. If the manner in
which the Consumer Price Index as determined
by the Bureau of Labor Statistics shall be
substantially revised, including, without
limitation, a change in the base index year,
an adjustment shall be made by the parties
in such revised index which would produce
results equivalent, as nearly as possible,
to those which would have been obtained if
such Consumer Price Index had not been so
revised. If the Consumer Price Index shall
become unavailable to the public because
publication is not readily available to
enable the
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parties to make the adjustment referred to
in this Section, then the parties shall
mutually agree to substitute therefor a
comparable index based upon changes in the
cost of living or purchasing power of the
consumer dollar published by any other
governmental agency or, if no such index
shall be available, then a comparable index
published by a major bank or other financial
institution or by a university or a
recognized financial publication.
(b) Adjustment Formula. On each anniversary of
the Contract Date (each an "Adjustment
Date"), to determine the amount of
adjustment or increase based on CPI, the
applicable Guaranteed Non-Maintenance Costs
Caps, the Guaranteed Maintenance Costs,
bonuses or penalties and EAS Subsidies, as
applicable, in effect for the prior year,
shall be adjusted by multiplying the
Guaranteed Non-Maintenance Costs Caps on the
Guaranteed Non-Maintenance Costs Schedule,
the Guaranteed Maintenance Costs, bonuses or
penalties and EAS Subsidies, as applicable,
in effect for the prior year, by a fraction,
the numerator which shall be the CPI for the
third full calendar month immediately
preceding the Adjustment Date, and the
denominator of which shall be the CPI for
the same calendar month in the immediately
preceding calendar year (the "Adjustment").
7.4.2 Governmental Requirements. If any governmental rule,
order, regulation or requirement affecting: (i) all
aircraft similarly equipped as the Aircraft in any
Subfleet (not just those owned by Mesa); or (ii) all
airlines flying similar equipment as the Aircraft
(not just Mesa), results in an increase in any of the
Guaranteed Non-Maintenance Costs or Guaranteed
Maintenance Costs such that the actual Guaranteed
Non-Maintenance Costs or Guaranteed Maintenance Costs
will exceed the then applicable Guaranteed
Non-Maintenance Costs Cap or amounts set forth on
Exhibit _D for the Guaranteed Maintenance Costs, then
the applicable Guaranteed Non-Maintenance Costs Cap
or Guaranteed Maintenance Costs shall be increased by
such amount, as of the effective date of such
governmental regulation, rule, order or requirement.
7.4.3 Amendment. Mesa and AWA shall execute an amendment to
Exhibit C and Exhibit D within 10 days after each
adjustment occurs pursuant to this Section 7.4. The
failure to execute such an amendment shall not affect
the effectiveness of any adjustment or the bases for
any subsequent adjustment. Each adjusted Guaranteed
Non-Maintenance Costs Cap and Guaranteed Maintenance
Costs shall be effective until the next adjustment of
such Guaranteed Non-Maintenance Costs Cap and
Guaranteed Maintenance Costs pursuant to this Section
7.4.
7.4.4 Guaranteed Maintenance Costs Reconciliation. Within
180 days after the expiration or termination of this
Agreement, AWA, by written notice to Mesa, may review
and audit Mesa's records and files relevant to the
actual
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maintenance costs paid by Mesa in the categories set
forth on Exhibit D. If AWA's review of the records
and files reveals that the actual maintenance costs
paid by Mesa during the term of this Agreement was
less than the sum of all the Guaranteed Maintenance
Costs paid by AWA during the term of this Agreement
(the "Excess Maintenance Payments"), then Mesa,
within 30 days after receipt of written demand, shall
pay to AWA an amount equal to the Excess Maintenance
Payments. The terms and conditions of this Section
shall survive the termination or expiration of this
Agreement. Mesa shall maintain and retain all
maintenance cost and expense records and files for
the entire Term of this Agreement and for at least
one year after the expiration or termination of this
Agreement.
7.5 Payment of Actual and Guaranteed Non-Maintenance Costs.
7.5.1 Estimates. AWA shall pay to Mesa the estimated Actual
Costs, Guaranteed Non-Maintenance Costs (using the
Guaranteed Maintenance Costs Caps) and Guaranteed
Maintenance Costs for each calendar month based on a
98% FCF (the "Estimated Costs") as follows: By the
20th day of each calendar month, Mesa shall provide
AWA with a good faith statement of the Estimated
Costs for the following calendar month. On or before
the 7th, 14th, 21s' and 28th day of each calendar
month (or next business day thereafter if any such
dates is other than a business day), AWA shall pay
25% of the Estimated Costs for such calendar month.
7.5.2 Monthly Reconciliation. On or before the 120th day
after the last day of each calendar month, Mesa shall
submit to AWA a statement of the actual Guaranteed
Non-Maintenance Costs (using for each monthly
statement the applicable Guaranteed Non-Maintenance
Costs Caps), the Guaranteed Maintenance Costs and
Actual Costs incurred by Mesa (the "Incurred Costs")
and payable by AWA for such calendar month (the
"Incurred Costs Statement"). If the Estimated Costs
paid by AWA in any calendar month exceed the Incurred
Costs in any calendar month, then Mesa, together with
the Incurred Costs Statement for such calendar month,
shall reimburse AWA the amount by which the Estimated
Costs paid by AWA exceeded the Incurred Costs. If the
Incurred Costs in any calendar month exceed the
Estimated Costs paid by AWA in any calendar month,
then AWA, subject to the rights and procedures set
forth in Section 7.8, within 45 days after receipt of
the Incurred Costs Statement, shall reimburse and pay
to Mesa the amount by which the Incurred Costs exceed
the Estimated Costs paid by AWA for the subject
calendar month.
7.5.3 Annual Reconciliation. At any time within 120 days
after the expiration of each Contract Year (as
defined below), AWA, upon 2 Business Days prior
written notice to Mesa, may review and audit, or
cause its independent accountants to review and
audit, all records and files (including computer
databases) maintained by Mesa and relevant to the
calculation of the actual Guaranteed Non-Maintenance
Costs incurred by Mesa during the prior Contract Year
(the "GNMC Audit"). If the GNMC
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<PAGE> 22
Audit reveals that the actual Guaranteed
Non-Maintenance Costs actually paid by Mesa during
the prior Contract Year was less than the sum of all
the Guaranteed Non-Maintenance Costs Caps paid by AWA
during such Contract Year (the "Excess
Non-Maintenance Payments"), then Mesa, within 30 days
after receipt of written demand from AWA, shall pay
AWA an amount equal to the Excess Non-Maintenance
Payment. If Mesa does not pay the Excess
Non-Maintenance Payments to AWA timely, then AWA
shall have the setoff rights contained in Section 7.9
below. For the purposes of this section, "Contract
Year" means each one year period commencing on April
1 of each calendar year and expiring on March 31 of
the next calendar year. For the purposes of the first
"Contract Year", the year shall commence on the
Contract Date and expire on March 31, 2002. For
purposes of the last Contract Year, the Contract Year
shall commence on April 1 and expire on the
Expiration Date. For the purpose of determining the
actual Guaranteed Non-Maintenance Costs incurred in
providing the Flight Services and Other Services,
Guaranteed Non-Maintenance Costs subject to
allocation to the Flight Services and Other Services
shall be allocated to this Agreement by Mesa using
the same methodology used by Mesa in establishing the
Guaranteed Non-Maintenance Costs Caps.
7.5.4 Finality. The Incurred Costs Statement issued by Mesa
shall include all and be the final statement for the
Guaranteed Non-Maintenance Costs and Actual Costs
payable by AWA for the period covered by each
Incurred Costs Statement. AWA shall not be obligated
to pay any Guaranteed Non-Maintenance Costs or Actual
Costs for a period that are not included in the
applicable Incurred Costs Statement when initially
issued by Mesa to AWA.
7.6 Revenue Sharing. Commencing in the first calendar month after
the month in which the Effective Date occurs, AWA shall pay to
Mesa, by the 20th day of each calendar month, an amount equal
to the product obtained by multiplying the Segment Revenue
Percentage by the Segment Revenue generated during the prior
calendar month. For purposes of this Agreement, the following
terms have the following definitions:
"Segment Revenue" means the portion of the total fares paid by
passengers allocated to the Flights flown by Mesa or the
Affiliated Service Providers pursuant to this Agreement, less
all taxes, assessments, airport charges and other governmental
and quasi-governmental charges included in the fares. For
calculating Segment Revenue, the portion of the revenue
attributed to the Mesa Flight segment shall be determined in
accordance with Straight Prorate Rule 11B of the Passenger
Tariff Manual produced by the Airline Tariff Publishing
Company.
"Segment Revenue Percentage" means the following percentages
based on the type of Aircraft used to fly the Flight which
creates the Segment Revenue allocable to Mesa Flight segment:
22
<PAGE> 23
<TABLE>
<CAPTION>
Aircraft Segment Revenue Percentage
------------ --------------------------
<S> <C>
Beech 1900 [...***...]
Dash 8 [...***...]
CRJ Model 200 [...***...]
CRJ Model 700 [...***...]
CRJ Model 900 [...***...]
</TABLE>
7.7 Subsidies. Mesa, within 30 days after receipt, shall rebate to
AWA all EAS subsidies paid to Mesa by any governmental
entities for Flights (the "EAS Subsidies"). Notwithstanding
the foregoing to the contrary, if Mesa causes any EAS
Subsidies to be increased to an amount in excess of the EAS
Subsidies in effect on the Contract Date, increased annually
on the anniversary of each Contract Date by an amount equal to
an increase in the CPI as calculated pursuant to Section
7.4.1, then AWA shall pay to Mesa 50% of any such increase
within 30 days after receipt of written demand. AWA shall not
be responsible to the DOT for continuing service in any EAS
market. Notwithstanding the foregoing, if AWA directs Mesa to
bid to provide flight service to any EAS market, then AWA
shall be responsible for all liabilities incurred in
connection with discontinuing such service prior to the
expiration of any DOT hold-in order. AWA shall be entitled to
retain all payments, subsidies, revenue guarantees or other
similar payments generated from the Flight Services flown
under this Agreement and negotiated by AWA.
7.8 Records, Statements and Audit Rights. Mesa shall maintain
separate accounting books and records for the Flight Services
and Other Services performed by Mesa under this Agreement. All
Incurred Costs Statements and other requests for payment made
by Mesa pursuant to this Section 7 shall be accompanied by
such supporting information, documentation and calculations
described on Exhibit E, attached hereto, and as AWA may
reasonably request from time to time (the "Backup
Information"). If AWA disputes the amount set forth in any
statement or the Backup Information is inadequate, incomplete
or inaccurate, then AWA shall pay the undisputed portion of
such statement and the portions for which the Backup
Information is adequate, complete and accurate, timely, and
together with such payment provide Mesa with a written
statement of any disputed amount and the amounts for which the
Backup Information is inadequate, incomplete or inaccurate.
AWA and Mesa shall meet and confer to resolve any disputed
amount and inadequate, incomplete or inaccurate Backup
Information within 30 days after AWA provides notice of the
dispute. Disputed amounts and amounts for which the Backup
Information is inadequate, incomplete or inaccurate shall not
be payable until the dispute is resolved and then shall be
payable within 10 days after the dispute is resolved.
AWA, upon 2 business days' prior written notice, may review
and audit, or cause its independent accountants to review and
audit, all records and files (including computer data bases)
maintained by Mesa and relevant to the calculation of the
payments required to be made by AWA pursuant to this
Agreement. If AWA's review of the records and files reveals
that Mesa has overcharged AWA or
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 24
underpaid AWA, then Mesa shall pay to AWA, upon demand, the
overpayments and/or underpayments and the costs and expenses
of AWA incurred in completing such review and audit and, if
such overcharge or underpayment is willful or intentional or
exceeds more than 10% of the sums actually payable or
receivable by AWA, then Mesa, within 10 days after receipt of
written demand, shall pay to AWA an amount equal to 3 times
the overcharge or underpayment. Mesa shall maintain all
records, files, information, data and documentation (including
computer data bases) used in calculating the sums payable or
receivable by AWA under this Agreement in good condition and
order at Mesa's corporate headquarters. AWA shall not be
required to pay any sums, and shall be entitled to receive a
refund of any sum paid, for which Mesa is unable to provide
supporting information, documentation or data.
7.9 Setoff. All undisputed sums payable by Mesa to AWA pursuant to
this Agreement may, at AWA's election, be setoff against
amounts next due by AWA to Mesa pursuant to this Agreement.
8. Term and Termination.
8.1 Term. The term of this Agreement (the "Term") commences on the
Effective Date retroactive to the Contract Date (the
"Commencement Date") and shall expire ("Expiration Date") on
the 8th anniversary of the date that the last CRJ Aircraft is
added to the Fleet pursuant to Section 2.2.2 of the Agreement
(the "Last Delivery Date), unless earlier terminated as
provided in this Agreement. AWA, by written notice to Mesa at
least 180 days prior to the Expiration Date, may extend the
Expiration Date to the 10th anniversary of the Last Delivery
Date.
8.2 Early Termination. If (i) Mesa's OTP Rate for the Phoenix Hub
falls below AWA's OTP Rate for the Phoenix Hub for five of any
six calendar months or (ii) Mesa's FCF for the Phoenix Hub
falls below 96% for five of any of six consecutive calendar
months (each, a "Cancellation Event"), AWA, at its election,
may by written notice (a "Performance Notice") inform Mesa
that if the Cancellation Event is not cured within one hundred
twenty (120) days from receipt of such Performance Notice (the
"Cure Period"), AWA, at its option may give a Termination
Notice (as defined below). If the Cancellation Event relates
to Mesa's OTP Rate, the cure shall be effected by Mesa
bringing its OTP Rate for such Hub to a rate that is equal to
or above AWA's OTP Rate at the Phoenix Hub during the Cure
Period. If the Cancellation Event relates to the Mesa's FCF
for the Phoenix Hub, the cure shall be effected by Mesa
bringing its FCF at the Phoenix Hub to 97% or higher during
the Cure Period. If, after the Cure Period has expired and
Mesa has not cured the Cancellation Event as set forth above,
then AWA at any time during the thirty (30) day period
following the lapse of the Cure Period without cure may; upon
90 days' prior written notice to Mesa ("Termination Notice"),
terminate this Agreement. Such termination right shall be in
addition to any penalty payments set forth in Section 5 and
termination rights for an Event of Default pursuant to Section
13.
24
<PAGE> 25
8.3 Change of Control. This Agreement may be terminated by either AWA or
Mesa providing the other party with at least 90 days' prior written
notice (the "Change Termination Notice") in the event of a change of
control of the other party or a sale of substantially all of the
other party's assets. "Change of Control" means any "person" or
"group" (each as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act) either becomes the beneficial owner (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of voting
securities of either party (or securities converted into or
exchangeable for such voting securities) representing 50% or more of
the combined voting power of all voting securities of the party (on
a fully diluted basis) or otherwise has the ability, directly or
indirectly, to elect a majority of the board of directors of the
party or any person or two or more persons acting in concert shall
have acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation thereof, will result
in its or their acquisition of the power to exercise, directly or
indirectly, a controlling influence on the management or policies of
the party.
8.4 Effect of Termination. If AWA elects to terminate this Agreement
pursuant to this Section 8, AWA, in the Termination Notice, shall
establish as the termination date any date between 90 and 180 days
after delivery of the Termination Notice or Change Termination
Notice, as applicable. Mesa shall continue to provide the Flight
Services and Other Services required by this Agreement until the
termination date set forth in the Termination Notice or Change
Termination Notice, as applicable. AWA and Mesa shall make all
payments as required by this Agreement for the period through and
including the termination date set forth in the Termination Notice
or Change Termination Notice, as applicable.
9. Service Mark License For Services Provided By Mesa.
9.1 Grant of License. For the payment of $1.00, AWA hereby grants to
Mesa a non exclusive, non-transferable license to use such AWA
Service Marks as AWA may designate, in writing, from time to time in
connection with the Flight Services and Other Services to be
rendered by Mesa; provided, however, that at any time prior to
expiration or termination of this Agreement AWA may alter, amend or
revoke the license hereby granted and require Mesa's use of any new
or different AWA Service Mark in conjunction with the Flight
Services and Other Services provided hereunder as AWA may determine
in its sole discretion and judgment.
9.2 Operation under AWA Service Marks/Aircraft Decor. Mesa, at its
expense (subject to reimbursement in the next sentence), shall cause
the Fleet and any replacement or additional Aircraft utilized by
Mesa, or any of the Affiliated Service Providers, to provide the
Flight Services, to be painted, marked and decorated to bear AWA
Service Marks, consisting of AWA aircraft exterior and interior
color decor and pattern provided by AWA and the name "America West
Express." AWA shall reimburse Mesa for 50% of the costs of painting,
decorating or marking any new CRJ added to the Fleet pursuant to
Section 2.2. Upon written notice from AWA, which shall include the
specifications for any such changes in AWA Service Marks and
exterior or interior aircraft decor and patterns, Mesa shall effect
changes in the aircraft decor and patterns within 12
25
<PAGE> 26
months from the date of such notice. AWA shall reimburse Mesa for
the cost of repainting the Fleet in the event that AWA changes its
logo and color decor and pattern from the design existing as of the
Effective Date. Mesa shall use and display suitable signs on the
interior and exterior of each Aircraft identifying Mesa as the
operator of the Services, such signs shall be subject to the prior
written consent of AWA as to nature, size and location provided that
the signs shall comply with all Regulations. AWA shall reimburse
Mesa for the actual costs and expenses of repainting any Aircraft
eliminated from the Fleet pursuant to Section 2.2. All
announcements, displays or literature used or viewed by Mesa
customers on Flights shall highlight "America West Express." No such
announcements, displays or literature shall reference "Mesa
Airlines," other than to identify Mesa or the operator of the
Services, on briefing cards or as required by the Regulations.
9.3 Terms and Conditions Governing Service Mark License.
9.3.1 Mesa hereby acknowledges AWA's ownership of the AWA Service
Marks, further acknowledges the validity of the AWA Service
Marks, and agrees that it shall not do anything in any way to
infringe or abridge upon AWA's rights in the AWA Service Marks
or directly or indirectly to challenge the validity of the AWA
Service Marks.
9.3.2 To assure that the production, appearance and quality of the
AWA Service Marks is consistent with AWA's reputation for high
quality and the goodwill associated with the AWA Service
Marks, Mesa agrees to maintain a level of quality consistent
with AWA's quality in the Flight Services and Other Services
it provides pursuant to this Agreement and to follow AWA's
written instructions regarding use of AWA's Service Marks, as
they may be amended from time to time.
9.3.3 Mesa agrees that, in providing the Flight Services and Other
Services, it shall not advertise or make use of the AWA
Service Marks without the prior written consent of AWA. AWA
shall have absolute discretion to withhold its consent
concerning any and all such advertising and use of the AWA
Service Marks in any advertising by Mesa. In the event AWA
approves the use of such AWA Service Marks in any advertising,
such advertising shall identify AWA as the owner of such
Service Marks and conform with any additional requirements
specified by AWA.
9.3.4 To the extent that Mesa is licensed to use the AWA Service
Marks, the AWA Service Marks shall be used only in connection
with the Flight Services and Other Services specifically
covered by this Agreement and not in connection with any other
business or activity of Mesa or any other entity.
9.3.5 Nothing in this Agreement shall be construed to give Mesa the
exclusive right to use the AWA Service Marks or abridge AWA's
right to use and license the AWA Service Marks, and AWA hereby
reserves the right to
26
<PAGE> 27
continue to use the AWA Service Marks and to license such
other uses of the AWA Service Marks as AWA may desire.
9.3.6 No term or provision of this Agreement shall be construed to
preclude the use of the AWA Service Marks, including "America
West Express," or the aircraft exterior color decor and
patterns by other individuals or entities not covered by this
Agreement.
9.3.7 Upon the termination or expiration of this Agreement, the
license and use of the AWA Service Marks by Mesa shall cease
and such use shall not thereafter occur.
10. Liability and Indemnification.
10.1 Relationship Between the Parties. Nothing contained in this
Agreement will be deemed to create any agency or partnership or
similar relationship between AWA and Mesa. Nothing contained in this
Agreement will be deemed to authorize either AWA. or Mesa to bind or
obligate the other. Mesa and the Affiliated Service Providers and
their employees engaged in performing the Flight Services and Other
Services shall be employees of Mesa or the Affiliated Service
Providers for all purposes, and under no circumstances shall be
deemed to be employees, agents or independent contractors of AWA.
AWA and its employees engaged in performing the obligations of AWA
under this Agreement shall be employees, agents and independent
contractors of AWA for all purposes, and under no circumstances
shall be deemed to be employees, agents or independent contractors
of Mesa. Pursuant to this Agreement, Mesa and the Affiliated Service
Providers shall act, for all purposes, as independent contractors
and not as agents for AWA. AWA shall have no supervisory power or
control over any employees engaged by Mesa and the Affiliated
Service Providers in connection with their performance hereunder,
and all complaints or requested changes in procedures shall be
transmitted by AWA to a designated officer of Mesa. Nothing
contained in this Agreement shall be intended to limit or condition
Mesa's and the Affiliated Service Providers' control over their
operations or the conduct of their business as air carriers, and
Mesa and the Affiliated Service Providers and their principals
assume all risks of financial losses which may result from the
operation of the Flight Services and Other Services to be provided
by Mesa and the Affiliated Service Providers hereunder.
10.2 Indemnification by Mesa. Mesa agrees to indemnify, defend and hold
harmless AWA, its directors, officers, employees, agents, parent
corporation, subsidiaries and affiliates for, from and against any
and all loss, liability, claim, damage, penalty, fine, charge, cause
of action, demand, cost and expense (including attorneys' and
consultants' fees and costs) whatsoever (collectively, "Damages"),
as incurred, arising out of, resulting from or incurred in
connection with: (i) the provision of the Flight Services and Other
Services by Mesa and the Affiliated Service Providers or any of
their employees, agents, licensees, contractors, suppliers, officers
or directors; (ii) Mesa's or the Affiliated Service Providers'
breach of this Agreement; (iii) damage or destruction of property of
any person,
27
<PAGE> 28
or injury or death of any person, caused by, arising out of, or in
connection with any act or omission of Mesa or the Affiliated
Service Providers, their employees, agents, licensees, contractors,
suppliers, officers or directors; (iv) any taxes, impositions,
assessments or other governmental charges incurred by Mesa in
providing the Flight Services or Other Services or imposed on any
revenue generated by this Agreement (except as set forth in Section
7.1.3); (v) passenger complaints or claims by passengers using the
Flight Services; (vi) the failure or discontinuance of service to
any EAS market (except as specified in Section 7.7); and (vii)
failure to comply with any Regulations. Mesa agrees to indemnify,
defend and hold harmless AWA, its officers, directors, employees,
agents, parent corporation, subsidiaries and affiliates for, from
and against any and all Damages as incurred, arising out of,
resulting from or incurred in connection with any claims for
consideration for performance by the Affiliated Service Providers.
Mesa shall reimburse AWA or other Indemnified Party (as defined
below) for any legal and any other expenses reasonably incurred in
investigating, preparing or defending against any claim or action
arising out of or relating to any of the foregoing.
10.3 Indemnification by AWA. AWA agrees to indemnify, defend and hold
harmless Mesa, its directors, officers, employees, agents, parent
corporation, subsidiaries and affiliates for, from and against any
and all Damages, as incurred, arising out of, resulting from or
incurred in connection with: (i) AWA's breach of this Agreement;
(ii) damage or destruction of property of any person, or injury or
death of any person, caused by, arising out of, or in connection
with any act or omission of AWA, its employees, agents, licensees,
contractors, suppliers, officers or directors in performing AWA's
obligations under this Agreement to the extent not covered by Mesa's
or the Affiliated Service Providers' insurance required to be
maintained by this Agreement; and (iii) any taxes, impositions,
assessments or other governmental charges incurred by AWA for
revenue received by AWA under this Agreement. AWA shall reimburse
Mesa or other Indemnified Party (as defined below) for any legal and
any other expenses reasonably incurred in investigating, preparing
or defending against any claim or action arising out of or relating
to any of the foregoing.
10.4 Conduct of Indemnification Proceedings. The person or entity
claiming indemnification hereunder is referred to as the
"Indemnified Party" and the party against whom such claims are
asserted hereunder is referred to as the "Indemnifying Party". Each
Indemnified Party shall give reasonably prompt notice to the
Indemnifying Party of any action or proceeding or assertion or
threat of claim commenced against it in respect of which indemnity
may be sought hereunder, but failure to so notify the Indemnifying
Party (i) shall not relieve the Indemnifying Party from any
liability which it may have under the indemnity agreement provided
in this Agreement, unless and to the extent it did not otherwise
learn of such action, threat or claim and the lack of notice by the
Indemnified Party results in the forfeiture by the Indemnifying
Party of substantial rights and defenses and (ii) shall not, in any
event, relieve the Indemnifying Party from any obligations to the
Indemnified Party other than the indemnification obligation provided
under Sections 10.2 and 10.3 above. If the
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<PAGE> 29
Indemnifying Party elects within a reasonable time after receipt of
notice, the Indemnifying Party may assume the defense of the action
or proceeding at Indemnifying Party's own expense with counsel
chosen by the Indemnifying Party and approved by the Indemnified
Party; provided, however, that, if the Indemnified Party reasonably
determines upon advice of counsel that a conflict of interest exists
where it is advisable for the Indemnified Party to be represented by
separate counsel or that, upon advice of counsel, there may be legal
defenses available to it which are different from or in addition to
those available to the Indemnifying Party, then the Indemnified
Party shall be entitled to separate counsel at the Indemnifying
Party's expense, which counsel shall be chosen by the Indemnified
Party in its sole discretion. If the Indemnifying Party does not
assume the defense, after having received the notice referred to in
the second sentence of this Section, the Indemnifying Party will pay
the reasonable fees and expenses of counsel for the Indemnified
Party. Unless and until a final judgment that an Indemnified Party
is not entitled to the costs of defense under the foregoing
provision, the Indemnifying Party shall reimburse, promptly as they
are incurred, the Indemnified Party's costs of defense. The
Indemnifying Party shall not settle or compromise any claim for
which an Indemnified Party is entitled to indemnity without the
prior written consent of the Indemnified Party.
10.5 Insurance.
10.5.1 Mesa, at all times during the Term of this Agreement, shall
have and maintain and shall cause the Affiliated Service
Providers to have and maintain in full force and effect,
policies of insurance satisfactory to AWA, of the types of
coverage, and in the minimum amounts stated below with
insurance companies satisfactory to AWA and under terms and
conditions satisfactory to AWA, including insurance coverage
on all Aircraft used to provide Flight Services. Unless
otherwise specified, the minimum amounts of insurance
coverage required hereunder shall be per occurrence,
combined single limit for all insurance coverage required
hereunder.
<TABLE>
<S> <C>
1. Aircraft Liability and Ground $250,000,000 per Occurrence Combined
Liability Insurance (including Single Limit of Liability for CRJs and
Commercial General Liability) Dash 8s and $150,000,000 per Occurrence
Combined Single Limit of Liability for
Beech 1900s
a. Bodily Injury and Personal Included in Combined Single Limit
Injury - Passengers
b. Bodily Injury and Personal Included in Combined Single Limit
Injury - Third Parties
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C>
c. Property Damage Included in Combined Single
Limit Per Accident
2. Worker's Compensation Insurance Statutory
(Company Employees)
3. Employers' Liability (Company $500,000
Employees)
4. All Risk Hull Insurance on Aircraft Replacement Cost or Such
Performing Services Hereunder Lesser Amount as may be
Consented to by AWA, in writing
5. Baggage Liability $2,500 (per Passenger)
6. Cargo Liability $100,000 any One Aircraft
$100,000 any One Disaster with Terms,
Limitations and Conditions Acceptable to AWA
</TABLE>
10.5.2 The parties hereby agree that from time to time during the
Term of this Agreement, AWA may require Mesa and the
Affiliated Service Providers to have and maintain amounts of
insurance coverage different from those amounts set forth in
Section 10.5.1, should AWA, in its reasonable judgment, deem
the circumstances and conditions of the Flight Services and
Other Services to require increases in any or all of the
foregoing minimum insurance coverages.
10.5.3 Mesa shall cause all policies of insurance which it and the
Affiliated Service Providers maintain pursuant to this
Agreement, to be duly and properly endorsed by Mesa's and
the Affiliated Service Providers' insurance underwriters as
follows:
10.5.3.1 To provide that any waiver of rights of
subrogation against other parties by Mesa or
the Affiliated Service Providers shall not
affect the coverage provided hereunder with
respect to AWA.
10.5.3.2 To provide that Mesa's and the Affiliated
Service Providers' underwriters shall waive
any and all subrogation rights against AWA,
its directors, officers, agents and
employees without regard to any breach of
warranty by Mesa or the Affiliated Service
Providers or to provide other evidence of
such waiver of recourse against AWA, its
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<PAGE> 31
directors, officers, agents, or employees as
shall be acceptable to AWA.
10.5.3.3 Be duly and properly endorsed to provide
that each such policy or policies or any
part or parts thereof shall not be canceled,
terminated, or materially altered, changed
or amended by Mesa's and the Affiliated
Service Providers' insurance underwriters,
until after 30 days' written notice to AWA
which 30 days