<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995 Commission File
Number 0-15495
MESA AIR GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Mexico 85-0302351
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2325 East 30th Street, Farmington, New Mexico 87401
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 327-0271
--------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
On May 12, 1995, the Registrant had outstanding 32,859,261 shares of Common
Stock.
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PART I. FINANCIAL INFORMATION
Item 1.
MESA AIR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues:
-------------------------- -------------------------
Passenger $ 103,323 $ 90,747 $ 201,838 $ 180,197
Freight and other 1,817 1,705 3,753 3,288
Public service 1,295 1,341 2,672 2,771
--------- -------- --------- ---------
Total operating revenues 106,435 93,793 208,263 186,256
--------- -------- --------- ---------
Operating expenses:
Flight operations 41,693 30,608 79,549 61,616
Maintenance 17,465 14,458 35,307 28,691
Aircraft and traffic servicing 15,625 11,426 28,674 21,965
Promotion and sales 18,331 14,600 35,170 29,244
General and administrative 6,439 6,347 12,739 12,461
Depreciation and amortization 4,618 4,203 8,782 7,037
--------- -------- --------- ---------
Total operating expenses 104,171 81,642 200,221 161,014
--------- -------- --------- ---------
Operating income 2,264 12,151 8,042 25,242
========= ======== ========= =========
Non-operating income (expenses):
Interest expense (1,772) (1,680) (2,982) (3,192)
Interest income 377 1,282 1,093 2,279
Other (768) (1,603) (1,625) (1,522)
--------- -------- --------- ---------
Total non-operating expenses (2,163) (2,001) (3,514) (2,435)
--------- -------- --------- ---------
Earnings before income taxes 101 10,150 4,528 22,807
Income tax expense 38 3,857 1,720 8,677
--------- -------- --------- ---------
Earnings before extraordinary item 63 6,293 2,808 14,130
Extraordinary item - gain on extinguishment
of debt (net of income taxes of $252) -- -- -- 412
--------- -------- --------- ---------
Net earnings $ 63 $ 6,293 $ 2,808 $ 14,542
--------- -------- --------- ---------
Average common and common
equivalent shares outstanding 33,282 37,331 33,281 37,216
--------- -------- --------- ---------
Earnings per common and common
equivalent share:
Earnings before extraordinary item $ 0.00 $ 0.17 $ 0.08 $ 0.38
Extraordinary item -- -- -- 0.01
--------- -------- --------- ---------
Net earnings $ .00 $ 0.17 $ 0.08 $ 0.39
--------- -------- --------- ---------
</TABLE>
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MESA AIR GROUP, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
March 31 September 30
1995 1994
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 26,199 $ 35,567
Marketable securities 30,940 63,044
Receivables, principally traffic 48,670 50,857
Expendable parts and supplies, net 23,619 19,401
Prepaid expenses and other current assets 10,129 9,037
-------- --------
Total current assets 139,557 177,906
Property and equipment, net 186,174 198,062
Non-compete agreement, net 1,500 1,650
Lease and equipment deposits 17,973 13,319
Intangibles, net 54,405 22,459
Other assets 4,411 6,506
-------- --------
Total assets $404,020 $419,902
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt and capital leases $ 8,236 $ 8,474
Accounts payable 13,514 10,720
Income taxes payable -- 616
Air traffic liability 3,553 3,926
Accrued compensation 3,315 8,140
Other accrued expenses 10,697 11,844
-------- --------
Total current liabilities 39,315 43,720
Long-term debt and capital leases, excluding current portion 86,979 91,772
Deferred credits 26,838 24,845
Deferred income taxes 20,499 25,249
Stockholders' equity:
Preferred stock of no par value, 2,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock of no par value, 75,000,000
shares authorized; 32,859,261 and 32,704,042
shares issued and outstanding 148,667 147,695
Unrealized gain on marketable securities, net 2,049 9,757
Retained earnings 79,673 76,864
-------- --------
Total stockholders' equity 230,389 234,316
-------- --------
Total liabilities and stockholders' equity $404,020 $419,902
======== ========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
(in thousands)
Six Months Ended March 31
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,808 $ 14,542
Adjustments to reconcile net earnings to
net cash flows from operating activities:
Depreciation and amortization 8,782 6,735
(Gain) Loss on disposal of property & equipment (29) --
Extraordinary gain on extinguishment of debt -- (664)
Stock bonus plan 385 --
Changes in assets and liabilities:
Receivables 2,187 (8,365)
Inventories (4,218) (7,335)
Prepaid expenses and other current assets (1,093) 1,004
Accounts payable 2,794 (2,445)
Other accrued liabilities (6,961) 4,207
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 4,655 7,679
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (32,372) (27,120)
Proceeds from sale of property and equipment 28,696 11,670
Proceeds from sale of marketable securities 24,397 --
Purchases of marketable securities, net -- (3,425)
Purchase of subsidiary, net of cash acquired -- (4,890)
Intangibles (31,113) --
Other assets 1,671 (1,246)
Lease and equipment deposits (3,155) 32
Collection of notes receivable 466 324
-------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES (11,410) (24,655)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and
obligations under capital leases (5,032) (6,687)
Proceeds from issuance of common stock 152 1,493
Proceeds from deferred credits 2,267 1,147
-------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES (2,613) (4,047)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (9,368) (21,023)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 35,567 36,121
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 26,199 $ 15,098
-------- --------
</TABLE>
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended March 31
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
Cash paid during the period for: 1995 1994
---- ----
<S> <C> <C>
Interest $ 2,932 $ 4,704
Income taxes 3,108 5,892
</TABLE>
Mesa purchased fixed assets during the periods ended March 31 upon which debt
was assumed or incurred as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assets purchased $ 32,372 $ 78,253
Debt assumed or incurred -- 51,133
----------- ----------
Net cash $ 32,372 $ 27,120
========== =========
</TABLE>
-5-
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the six-month period ended March 31,
1995 are not necessarily indicative of the results that may be expected
for the year ending September 30, 1995.
2. The consolidated financial statements include the accounts of Mesa Air
Group, Inc. and its wholly owned subsidiaries WestAir Holding, Inc.,
Air Midwest, Inc., San Juan Pilot Training, Inc., and Four Corners
Aviation, Inc. All significant intercompany balances and transactions
have been eliminated in consolidation. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and related disclosures contained in Mesa's Annual
Report on Form 10-K for the year ended September 30, 1994, filed with
the Securities and Exchange Commission.
3. Income tax expense is based upon Mesa's annual effective tax rate of
38 percent.
4. Legal Proceedings
See Part II. Item 1
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
GENERAL
Mesa Air Group, Inc., ("Mesa") maintains six regional airline operations
utilizing low-cost high frequency "hub-and-spoke" route systems.
The Mesa Airlines unit operates within the Mountain West division independent of
any code-sharing agreement with a major carrier from a hub airport at
Albuquerque, New Mexico. In addition, the Mountain West division operates as
United Express and America West Express. United Express is operated by the
Mountain West division in the Rocky Mountain and in Western regions of the
United States pursuant to code-sharing arrangements with United Airlines, Inc.
("United") utilizing hubs in Denver and Los Angeles. The Southwest region of the
United States is operated by the Mountain West division as "America West
Express" pursuant to a code-sharing arrangement with America West Airlines, Inc.
utilizing a hub in Phoenix, Arizona. (See Subsequent Events regarding the
Columbus hub.)
WestAir Commuter Airlines, Inc., a wholly-owned subsidiary of WestAir Holding,
Inc. serves the West Coast region as a "United Express" carrier with hubs in San
Francisco, Portland and Seattle. WestAir Holding, Inc. is a wholly-owned
subsidiary of Mesa. (See Liquidity and Capital Resources-WestAir.)
Mesa operates as "USAir Express" in the Northeast, Southeast, Midwest and
Central regions of the United States pursuant to code-sharing arrangements with
USAir, Inc. ("USAir"). Mesa provides USAir Express service in the Northeast and
Southeast regions of the United States by its FloridaGulf Airlines division,
and expanded into the Northeast operations in the summer of 1993 utilizing hubs
in Boston, Philadelphia, Baltimore, Orlando, New Orleans and Tampa. The Midwest
and Central regions are served by Air Midwest, Inc., from a hub in Kansas City
and by the Liberty Express division acquired in February 1994, from a hub in
Pittsburgh, Pennsylvania.
Mesa has recently established a new division known as Desert Sun Airlines to
operate two Fokker 70 jet aircraft capable of carrying 78 passengers. The
aircraft are to be delivered in the spring of 1995. Passenger service is
scheduled to commence in June 1995. Desert Sun Airlines has options to acquire
six additional Fokker 70 aircraft.
The following table sets forth selected operating data of Mesa for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
March 31 March 31
-------- --------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Data Category:
- ------------------------
Passengers 1,402,019 1,170,361 2,827,651 2,359,228
Available seat miles (ASMs) (000) 555,038 460,730 1,088,316 913,630
Revenue passenger miles (000) 264,743 227,943 529,477 458,150
Load factor 47.7% 49.5% 48.7% 50.1%
Yield per revenue passenger mile 39.0 cent(s) 39.8 cent(s) 38.1 cent(s) 39.3 cent(s)
Operating cost per available seat mile 18.8 cent(s) 17.7 cent(s) 18.3 cent(s) 17.6 cent(s)
Revenue per available seat mile 19.2 cent(s) 20.4 cent(s) 19.1 cent(s) 20.4 cent(s)
Average stage length 161 164 161 165
Number of aircraft in fleet 182 163 182 163
</TABLE>
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<PAGE> 8
Three Months Ended March 31, 1995 Versus Three Months Ended March 31, 1994
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
---- ----
Percent of Percent of
Cost total operating Cost total operating
per ASM revenues per ASM revenues
------- -------- ------- --------
<S> <C> <C> <C> <C>
Operating Expense Category:
- ---------------------------
Flight operations 7.5 cent(s) 39.2% 6.6 cent(s) 32.6%
Maintenance 3.2 cent(s) 16.4% 3.1 cent(s) 15.4%
Aircraft and traffic servicing 2.8 cent(s) 14.7% 2.5 cent(s) 12.2%
Promotion and sales 3.3 cent(s) 17.2% 3.2 cent(s) 15.6%
General and administrative 1.2 cent(s) 6.0% 1.4 cent(s) 6.8%
Depreciation and amortization 0.8 cent(s) 4.3% 0.9 cent(s) 4.5%
Total operating expenses 18.8 cent(s) 97.8% 17.7 cent(s) 87.1%
Interest expense 0.3 cent(s) 1.7% 0.4 cent(s) 1.8%
</TABLE>
Mesa generated a 13.4 percent growth in revenues from $93.8 million during the
three-month period ended March 31, 1994 to $106.4 million during the three-month
period ended March 31, 1995. This growth in revenue can be attributed to the
addition of Liberty Express, a division of Mesa, in February 1994 as a USAir
Express carrier with a hub in Pittsburgh. In addition, the expansion of the
FloridaGulf Airlines division, which encompassed new routes obtained with the
purchase of certain assets from USAir Allegheny Commuter subsidiary operating
hubs in Boston, Philadelphia and Baltimore, contributed to an increase in
revenue over the same period in the prior year. Additional passengers from the
Denver hub resulting from reduced service by Continental and Continental Express
in Denver also contributed to the increased revenues.
Passengers carried during the quarter increased by 19.8 percent, but revenue
increased by only 13.4 percent as a result of a five percent decrease in the
average ticket price from $77.54 to $73.70. In addition to competitive
conditions in local markets, ticket prices are affected by Mesa's share of fares
set by its code-sharing partners. The primary causes of the decrease in average
ticket price was fare discounting in the Eastern region of the United States by
USAir in response to competition from Continental Lite and Continental Express
and in the Western region in response to increased competition between United
Airlines Shuttle by United and Southwest Airlines, Inc. Additionally, extensive
negative publicity regarding the safety of regional airlines following the crash
of a USAir jet in September 1994 and crashes of two turboprop airliners in late
1994 caused a significant decline in the number of passengers carried. Extensive
air fare discounting resulted in order to stimulate traffic which further
contributed to the decline in average ticket price.
Operating costs increased from 17.7 cent(s) to 18.8 cent(s) per ASM resulting in
an increase of approximately $22.5 million in operating expenses for the current
period over the same period in 1994. Mesa believes that the primary reasons for
the increase in operating expenses were increases in flight operations expense
from 6.6 cent(s) per ASM to 7.5 cent(s) per ASM due to de Havilland Dash 8 and
Fokker 70 fleet integration costs all of which are being expensed as they are
incurred along with an increase in lease expense resulting from expansion of the
aircraft fleet. Aircraft and traffic service costs have increased from 2.5
cent(s) per ASM to 2.8 cent(s) per ASM due in part to additional expenses
resulting from obtaining FAR Part 121 certification and operating costs of the
new airport in Denver, Colorado. Depreciation and amortization expense has
decreased from .9 cent(s) per ASM to 0.8 cent(s) per ASM as a result of the sale
and leaseback of 17 Beech 1900D aircraft. Interest expense has decreased from
0.4 cent(s) per ASM to .3 cent(s) per ASM as a result of fleet refinancing.
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<PAGE> 9
Operating profits decreased from $12.2 million in the three-month period ended
March 31, 1994 to $2.3 million in the three-month period ended March 31, 1995.
This decrease is the result of the effects of negative publicity discussed
above and various one-time costs such as integration costs of de Havilland Dash
8 and Fokker 70 aircraft and resolution of pending disputes at Mesa's WestAir
subsidiary.
Six Months Ended March 31, 1995 Versus Six Months Ended March 31, 1994
<TABLE>
<CAPTION>
Six Months Ended
March 31
----------------
1995 1994
---- ----
Percent of Percent of
Cost total operating Cost total operating
per ASM revenues per ASM revenues
------- -------- ------- --------
<S> <C> <C> <C> <C>
Operating Expense Category:
- ---------------------------
Flight operations 7.3 cent(s) 38.2% 6.7 cent(s) 33.1%
Maintenance 3.2 cent(s) 17.0% 3.1 cent(s) 15.4%
Aircraft and traffic servicing 2.6 cent(s) 13.8% 2.4 cent(s) 11.8%
Promotion and sales 3.2 cent(s) 16.9% 3.2 cent(s) 15.7%
General and administrative 1.2 cent(s) 6.1% 1.4 cent(s) 6.7%
Depreciation and amortization 0.8 cent(s) 4.2% 0.8 cent(s) 3.8%
Total operating expenses 18.3 cent(s) 96.2% 17.6 cent(s) 86.4%
Interest expense 0.3 cent(s) 1.4% 0.3 cent(s) 1.7%
</TABLE>
Mesa generated 11.8% growth in revenues from $186.3 million during the
six-month period ended March 31, 1994 to $208.3 million during the six-month
period ended March 31, 1995.
Passengers carried during the six months ended March 31, 1995 increased
approximately 19.9% relative to the six months ended March 31, 1994, while
revenues grew approximately 11.8%, reflecting a decrease in the average ticket
price from $76.38 to $71.38. In addition to competitive conditions affecting the
industry discussed previously, ticket prices were affected by Mesa's share of
the fares set by its code-sharing partners.
Operating expenses incurred for the six months ended March 31, 1995 were 18.3
cent(s) per ASM compared to 17.6 cent(s) per ASM for the six months ended March
31, 1994. An increase in flight operation expenses from 6.7 cent(s) per ASM to
7.3 cent(s) per ASM is the major component of the increase in operating
expenses. The increase is primarily a result of the sale and leaseback of 17
1900D aircraft and de Havilland Dash 8 and Fokker 70 aircraft integration costs.
Operating income decreased from approximately $25.2 million in the six-month
period ended March 31, 1994 to approximately $8.0 million for the same period in
1995 due to decreased average fares and increased operating expenses discussed
in the three-month comparison.
Consolidated net earnings for the six-month period ended March 31, 1995
decreased to $2.8 million from $14.5 million during the six- month period ended
March 31, 1994 as a result of factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Mesa's cash and marketable securities at March 31, 1995 were $57.1 million as
compared to $98.6 million at September 30, 1994. This decrease is the result of
approximately $32 million in expenditures to United in conjunction with the
acquisition of aircraft and the extension of its code-sharing agreement with the
Mountain West division. In addition, deposits on aircraft of
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<PAGE> 10
approximately $3.2 million were paid during the first six months of the fiscal
year. The remainder of the decrease is related to rotable and expendable
inventory purchases in conjunction with de Havilland Dash 8 fleet and other
airplane operating requirements. For the six-month period ended March 31, 1995,
net cash flows generated from operations was $4.7 million as compared to $7.7
million for the same period in 1994. At March 31, 1995 approximately $7.4
million of cash was pledged to secure a note payable.
As of March 31, 1995, Mesa had aggregate indebtedness of $95.2 million payable
to various entities under promissory notes issued in connection with the
purchase of aircraft and related equipment. The notes have maturities ranging up
to 2006 with monthly installments of approximately $1.4 million. Mesa also has a
$5 million line of credit with Norwest Bank New Mexico. No amounts were advanced
against this line of credit at March 31, 1995. The $5 million line of credit
expired on April 30, 1995 and was renewed in the amount of $11 million.
As of March 31, 1995, Mesa had 49 Beechcraft 1900D aircraft on order. These
aircraft are to be delivered at the rate of approximately 18 per year. The
purchase agreement between Beech and Mesa allows Mesa to trade in existing
Beechcraft 1900C aircraft in an "as-is" condition for new 1900D aircraft. Beech
Acceptance Corporation has agreed to finance the purchase or lease of each new
aircraft. Mesa's WestAir division has 15 Embraer EMB-120 Brasilia aircraft on
order. (See WestAir)
During March 1995, Mesa entered into an agreement with Bombardier, Inc. to
acquire 25 de Havilland Dash 8-200 aircraft with deliveries beginning in
February 1996 through March 1997. Based on current market conditions, the
monthly lease payments are anticipated to be approximately $72,000 per plane.
Mesa will trade in seven Dash 8-300 aircraft, five Dash 8-100 aircraft and 13
Embraer Brasilia aircraft in exchange for the 25 Dash 8-200 aircraft. Bombardier
will participate as needed to finance the new aircraft deliveries. Mesa also
has an option to acquire 25 additional de Havilland Dash 8-200 aircraft.
Mesa has significant lease obligations on existing aircraft operated by Mesa.
These leases are classified as operating leases and therefore are not reflected
as liabilities on the balance sheet. At March 31, 1995, 153 aircraft were leased
by Mesa with remaining terms ranging up to 14 years. Future minimum lease
payments due under all aircraft operating leases were approximately $589 million
at March 31, 1995.
The FAA has issued a Notice of Proposed Rule making, which, if enacted, would
require commuter airlines with aircraft with 30 passenger seats or less
operating under FAR Part 135 rules to begin operating those aircraft under FAR
Part 121 regulations. Mesa is unable to determine the expense to be incurred in
implementation of these changes until the final rules are issued. The new rules
will apply to all commuter airlines and Mesa management anticipates the entire
industry will attempt to recover such cost increases through increased fares.
WESTAIR
Increased competition on the West Coast between the Shuttle by United and
Southwest Airlines, Inc., in addition to extensive negative publicity regarding
the safety of regional airlines has resulted in lower airfares, decreased
passenger traffic, negative operating results and negative operating cash flow
at Mesa's WestAir subsidiary. Many routes operated by WestAir have become
unprofitable as a result of this increased competition from jet carriers and it
is unknown if the market will return to prior service levels. Although
management cannot predict how long WestAir will remain unprofitable, management
is committed to restoring the long-term earnings potential of WestAir.
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<PAGE> 11
WestAir's management is in the process of making significant operational
changes it believes necessary to attain profitable operations and generate
sufficient cash flow to meet its obligations. There can be no assurance that
such changes will be sufficient to return WestAir to profitability and generate
the cash flow necessary to meet its obligations.
Mesa has agreed to provide WestAir an advance of up to 85% of qualifying
accounts receivable; based primarily upon airline ticket stock with the
outstanding balance payable at the end of each calendar month to meet its
operating needs. The remaining balance of 15% will be held by Mesa for 90 days
to secure itself against non-payment or rejection of accounts receivable by the
Airline Clearing House or other parties. This loan will replace a $4,000,000
line of credit from a bank which expired on April 30, 1995 and will bear
interest at the rate of prime plus 1/2%.
WestAir has agreed with United, its code-sharing partner, to convert certain of
its markets to a fee per departure, which is based upon cost plus a fixed profit
margin. WestAir has also arranged with United to terminate service in several
markets resulting in the withdrawal from WestAir's fleet of seven Embraer
Brasilia aircraft by June 1, 1995. It is the present intention of Mesa to assist
WestAir by including the seven aircraft to be parked by WestAir in the aircraft
to be traded in under Mesa's order from one of its aircraft suppliers.
WestAir's management is also in the process of executing extensive work force
and overhead reductions sufficient to match or exceed the reduction in size of
the WestAir fleet. Work rules under the amendable Airline Pilots Association
contract (ALPA) are being renegotiated to provide for a reduction in the number
of crews per plane from four to three and one quarter crews per plane. Such
targeted work rules would be comparable to present work rules in other unionized
Mesa divisions. Although it is possible that a strike may result before the
issues are resolved, Mesa and WestAir management believe it preferable to avoid
a strike. However, both Mesa and WestAir management are prepared to deal with
the consequences of a strike or a lockout if necessary.
WestAir has notified British Aerospace of its intent to exercise its early lease
termination rights on twenty-one Jetstream 31 aircraft currently under lease. If
the early termination rights are exercised, WestAir will incur approximately
$1.8 million in termination costs plus aircraft refurbishment expenses. As an
alternative, WestAir is willing to renegotiate the Jetstream 31 leases to reduce
monthly lease expense to an economically feasible level. If economically
feasible monthly lease payments cannot be renegotiated with British Aerospace
and WestAir exercises it turnback rights, alternative aircraft may be placed in
service which could result in aircraft integration costs.
WestAir has an outstanding order with Embraer Aircraft Corporation for fifteen
new Embraer Brasilia aircraft to be delivered at the rate of approximately four
per year through 1998. Embraer has been informed that Mesa has no obligation to
and is unwilling to guarantee WestAir's obligations under the order, and that
WestAir management believes its fleet cannot absorb additional aircraft because
of competitive factors in its operating environment. Embraer and WestAir are
presently discussing ways to resolve these issues. Embraer has agreed to defer
two of the four scheduled 1995 deliveries until 1997, assist with or provide
financing for two 1995 deliveries, consider assuming the obligation for two used
WestAir Brasilia aircraft and to continue to negotiate a resolution for the
remaining aircraft on order. If WestAir is forced to take delivery of and make
payments on the remaining thirteen aircraft on order, this could have a material
adverse affect on the operations of WestAir.
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<PAGE> 12
SUBSEQUENT EVENTS
The flight attendants of the Mountain West operating division of Mesa voted to
join AFA (Association of Flight Attendants) during April 1995. The pilots of the
Mountain West operating division are still in initial contract negotiations with
ALPA.
During April 1995, Mountain West Airlines, a division of Mesa, announced the
discontinuation of its America West Express operations at the Columbus, Ohio hub
effective May 31, 1995. The Columbus-based fleet will be redeployed to the West
Coast as United Express under a fixed fee per departure contract effective June
1, 1995. Mesa does not anticipate a material cost to the Mountain West division
related to discontinuation of the Columbus-based operation.
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<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The contents of Item 3. Legal Proceedings from the Form 10-K
filed for the fiscal year ended September 30, 1994 has been
incorporated by reference.
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
a. At the Annual meeting of Shareholders held on March
14, 1995, the following was approved:
-- All directors were elected as listed in the 1995
Proxy Statement for the 1994 fiscal year.
<TABLE>
<CAPTION>
Voted for Abstain/Withhold
--------- ------- --------
<S> <C> <C>
Larry L. Risley 25,000,219 1,502,031
E. Janie Risley 24,941,947 1,560,303
Blaine M. Jones 25,050 943 1,451,307
George W. Pennington 25,029,996 1,472,254
Richard C. Poe 25,012,311 1,489,939
Jack Braly 24,915,896 1,586,354
</TABLE>
-- Ratification of an amendment to the Restated
Articles of Incorporation changing the Company name
from Mesa Airlines, Inc., to Mesa Air Group, Inc.
Voted for: 24,805,478; voted against: 144,916;
abstain: 1,551,856.
-- Approval of the Additional Outside Directors Stock
Option Plan dated December 9, 1994. Voted for:
22,658,269; voted against: 2,148,701; abstain:
1,695,280.
-- Approval of selection of KPMG Peat Marwick LLP as
independent auditors for Mesa during fiscal 1995.
Voted for: 25,388,749; voted against: 63,554;
abstain: 1,049,947.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Form 8-K filed January 17, 1995 and Form 8-K filed April 5,
1995.
Exhibit 10.79 - Purchase Agreement B95-7701-PA-299
between Bombardier, Inc. and Mesa
Airlines, Inc.
Exhibit 27 - Financial Data Schedule
-13-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mesa Air Group, Inc.
Registrant
Date: 5/12/95 /s/ W. Stephen Jackson
--------------------------------------
W. Stephen Jackson
Chief Financial Officer, Treasurer and
Vice President of Finance
(Principal Accounting Officer)
-14-
<PAGE> 15
MESA AIR GROUP
COMMISSION FILE NO. 0-15495
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --- -----------
<S> <C>
10.79 BOMBARDIER PURCHASE AGREEMENT
27 FINANCIAL DATA SCHEDULE
</TABLE>
<PAGE> 1
EXHIBIT 10.79
BOMBARDIER REGIONAL AIRCRAFT DIVISION PURCHASE AGREEMENT
B95-7701-PA-299 BETWEEN BOMBARDIER INC.AND MESA AIRLINES, INC.
Relating to the Purchase of
Twenty-five (25)de Havilland DHC-8 aircraft
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE
- -------
<S> <C>
1 INTERPRETATION
2 SUBJECT MATTER OF SALE
3 CUSTOMER SUPPORT SERVICES AND WARRANTY
4 PRICE
5 PAYMENT
6 DELIVERY PROGRAM
7 BUYER INFORMATION
8 CERTIFICATION FOR EXPORT
9 ACCEPTANCE PROCEDURE
10 TITLE AND RISK
11 CHANGES
12 BUYER'S REPRESENTATIVES AT MANUFACTURE SITE
13 EXCUSABLE DELAY
14 NON-EXCUSABLE DELAY
15 LOSS OR DAMAGE
16 TERMINATION
17 NOTICES
18 INDEMNITY AGAINST PATENT INFRINGEMENT
19 [CONFIDENTIAL PORTION DELETED]
20 ASSIGNMENT
21 SUCCESSORS
22 APPLICABLE LAWS
23 CONFIDENTIAL NATURE OF AGREEMENT
24 AGREEMENT
APPENDIX
--------
I ECONOMIC ADJUSTMENT FORMULA
II DELIVERY SCHEDULE
III SPECIFICATION
IV BUYER SELECTED OPTIONAL FEATURES
V ESTIMATED AIRCRAFT DELIVERY PRICES
EXHIBIT
-------
I CERTIFICATE OF ACCEPTANCE
II BILL OF SALE
III CERTIFICATE OF RECEIPT OF AIRCRAFT
IV CHANGE ORDER
</TABLE>
1
<PAGE> 3
This Agreement is made on the 24th day of March, 1995.
BY AND BETWEEN: BOMBARDIER INC., a Canadian Corporation represented by
its BOMBARDIER REGIONAL AIRCRAFT DIVISION (BRAD)
having an office at Garratt Boulevard, Downsview,
Ontario, Canada.
Unless the context requires otherwise, references made
herein to BRAD herein also include de Havilland Inc.and
its subsidiaries and Canadair Division,
(collectively "BRAD")
AND: MESA AIRLINES, INC.
2325 East 30th
Farmington, New Mexico
U.S.A. 87401
("Buyer")
WHEREAS de Havilland Inc., an affiliate of BRAD, is
engaged in the manufacture of the Dash-8 aircraft
products; and BRAD has been created for the
purpose of providing marketing, sales and
customer support services for the de Havilland
Dash-8 aircraft and related products;
WHEREAS Buyer desires to purchase twenty-five (25)
Aircraft, (as later defined), and related data,
documents, and services according to this
Agreement, (as later defined), and BRAD desires
to arrange he sale of such Aircraft, data,
documents and services to Buyer,
NOW THEREFORE, in consideration of the mutual covenants herein contained, Buyer
and BRAD agree as follows:
ARTICLE 1. INTERPRETATION
1.1 The recitals above have been inserted for convenience only and do not form
part of the Agreement.
1.2 The headings of the Articles of this Agreement are included for
convenience only and shall not be used in the construction and
interpretation of this Agreement.
1.3 In this Agreement, unless otherwise expressly provided, the
singular includes the plural and vice-versa.
2
<PAGE> 4
1.4 In this Agreement the following expressions shall, unless otherwise
expressly provided, mean:
a. "Acceptance Period" shall have the meaning attributed
to it in Article 9.3;
b. "Acceptance Date" shall have the meaning attributed to it in
Article 9.7.(a);
c. "Agreement" means this Agreement, including its
Exhibits, Annexes, Appendices and Letter Agreements, if
any, attached hereto (each of which is incorporated in the
Agreement by this reference), as they may be amended pursuant
to the provisions of the Agreement;
d. "Aircraft" shall have the meaning attributed to it in Article
2.1;
e. "Aircraft Purchase Price" shall have the meaning
attributed to it in Article 4.2;
f. "BFE" shall have the meaning attributed to it in Article
11.1;
g. "Delivery Date" shall have the meaning attributed to it in
Article 9.7.(c);
h. "DOT" shall have the meaning attributed to it in Article 8.1;
i. "Excusable Delay" shall have the meaning attributed to it in
Article 13.1;
j. "FAA" shall have the meaning attributed to it in Article 8.1;
k. "Notice" shall have the meaning attributed to it in Article
17.1;
l. "Permitted Change" shall have the meaning attributed to it in
Article 11.2;
m. "Readiness Date" shall have the meaning attributed to it in
Article 9.1;
n. "Regulatory Change" shall have the meaning attributed
to it in Article 8.4;
o. "Specification" shall have the meaning attributed to it in
Article 2.1; and
p. "Taxes" shall have the meaning attributed to it in Article
4.3.
1.5 All dollar amounts in this Agreement are in United States Dollars.
3
<PAGE> 5
ARTICLE 2 - SUBJECT MATTER OF SALE
2.1 Subject to the provisions of this Agreement, BRAD will sell and Buyer
will purchase twenty-five (25) de Havilland Dash-8 aircraft
manufactured pursuant to specification no. DS8-200, dated February
1994, as that specification may be modified from time to time in
accordance with this Agreement (the "Specification"), as supplemented
by the Buyer selected optional features ("Buyer Selected Optional
Features") set forth in Appendix IV hereto (collectively the
"Aircraft). The Specification is incorporated by reference as Appendix
III hereto.
ARTICLE 3 - CUSTOMER SUPPORT SERVICES AND WARRANTY
(a) BRAD shall provide to Buyer the Customer Support Services pursuant to
the provisions of letter agreement MJR-009.
(b) BRAD shall provide to Buyer the warranty and the service life policy
described in letter agreement MJR-009 which shall be the exclusive
warranty applicable to the Aircraft.
(c) Unless expressly stated otherwise, the services referred to in (a) and
(b) above are incidental to the sale of the Aircraft and are included
in the Aircraft Purchase Price.
ARTICLE 4 - PRICE
4.1.1 The base price for each of the Aircraft (excluding Buyer Selected
Optional Features), flyaway BRAD's facilities in Downsview, Ontario, is
[CONFIDENTIAL PORTION DELETED]
4.1.2 The base price of the Buyer Selected Optional Features is One Hundred
and [CONFIDENTIAL PORTION DELETED]
4.2.1 The price of the Aircraft (the "Aircraft Purchase Price") shall be
[CONFIDENTIAL PORTION DELETED], adjusted to the Delivery Date to
reflect economic fluctuations during the period from February 1, 1995
to the Delivery Date of each Aircraft. Such adjustments shall be based
on the formula attached as Appendix I.
4.2.2 As the Aircraft Purchase Price cannot be established at this time due
to the effect of price escalation, an estimated delivery price has been
established for the Aircraft pursuant to Appendix I (the "Estimated
Delivery Price"). However, these prices are not to exceed the prices
set out in the such Appendix I which are based on a maximum
[CONFIDENTIAL PORTION DELETED] per year.
4.3 The Aircraft Purchase Price does not include any taxes, fees or duties
including, but not limited to, sales, use, value added (including the
Canadian Goods and Services Tax), personal property, gross receipts,
franchise, excise taxes, assessments or duties, (hereafter "Taxes")
which are or may be imposed by law upon BRAD, any affiliate of BRAD,
Buyer or the Aircraft whether or not there is an obligation for BRAD to
collect same from Buyer, by any taxing authority or jurisdiction
occasioned by, relating to or as a result of the sale, lease, delivery,
storage, use or other consumption of any Aircraft, BFE or any other
matter, good or service provided under or in connection with this
Agreement. According to current legislation, Canadian taxes, duties and
Goods and Services Tax are not applicable to aircraft sold and
immediately exported from Canada.
4.4 If any Taxes (other than Canadian income taxes charged on the
income of BRAD) are imposed upon Buyer or become due or are to be
collected from BRAD by any taxing
4
<PAGE> 6
authority, that may result from execution of this Agreement,
[CONFIDENTIAL PORTION DELETED], as the case may be, [CONFIDENTIAL
PORTION DELETED],. However, [CONFIDENTIAL PORTION DELETED]
4.5 Upon BRAD's request, Buyer shall execute and deliver to BRAD any
documents that BRAD deems necessary or desirable in connection with
any exemption from or reduction of or the contestation of or the
defence against any imposition of Taxes.
ARTICLE 5 - PAYMENT
5.1 Buyer shall make payment or cause payment to be made for each Aircraft
based on the provisions set forth in letter Agreement B95-7701-MJR-004
which forms part of the present Agreement.
5.2 Subject to the provisions of Article 9.9 hereof, should Buyer fail to
make any of the aforementioned payments on or before the stipulated
date and Buyer does not correct the default [CONFIDENTIAL PORTION
DELETED]. BRAD shall have the option (but not the obligation)
[CONFIDENTIAL PORTION DELETED] should Buyer make arrangements
satisfactory to BRAD [CONFIDENTIAL PORTION DELETED]
5.3 Buyer shall pay BRAD [CONFIDENTIAL PORTION DELETED] the day prior to
receipt of payment, [CONFIDENTIAL PORTION DELETED].
5.4 Buyer shall make all payments due under this Agreement in immediately
available United States Dollars by deposit on or before the due date to
BRAD's account at:
Morgan Guarantee Trust Co.
New York, New York, United States of America
ABA # 021000238
To pay:
Canadian Imperial Bank of Commerce
Head Office
Toronto, Ontario, Canada
Account # 64101470
For the credit of the beneficiary bank:
Canadian Imperial Bank of Commerce
Main Branch Transit # 00002
Toronto, Ontario, Canada
Account # 64101470
For the further credit of the beneficiary:
de Havilland Inc.
Account # 03-51717
5.5 All other amounts due with respect to each Aircraft shall
be paid on or prior to the Delivery Date of the respective Aircraft.
5.6 All payments provided for under this Agreement shall be made so as to
be received in [CONFIDENTIAL PORTION DELETED] by BRAD on the dates
stipulated herein.
5.7 BRAD shall remain the exclusive owner of the Aircraft, free and clear
of all rights, liens, charges or encumbrances, until such time as all
payments referred to in this Article 5 have been made.
5
<PAGE> 7
ARTICLE 6 - DELIVERY PROGRAM
6.1 The Aircraft shall be offered for acceptance to Buyer at BRAD's
facility in Toronto, Ontario during the months set forth in Appendix II
attached hereto (the "Scheduled Delivery Dates").
ARTICLE 7 - BUYER INFORMATION
7.1 During the manufacture of the Aircraft, Buyer shall provide to BRAD on
or before the date required by BRAD, all information as BRAD may
reasonably request to manufacture the Aircraft including, without
limitation, the selection of furnishings, internal and external colour
schemes.
Within sixty (60) days of signing this Agreement, Buyer shall:
(a) Provide BRAD with an external paint scheme agreed on by the
parties;
(b) select interior colours (from BRAD's standard colours);and
(c) Provide to BRAD, on drawings which will be forwarded to Buyer,
language translations for interior and exterior Aircraft labels.
Failure of Buyer to comply with these requirements may result in an
increase in price, a delay in delivery of the Aircraft, or both.
7.2 On or before execution of this Agreement Buyer shall notify BRAD in
writing of the BFE (if any) that Buyer wishes to have incorporated into
each Aircraft. Buyer shall also provide details of:
a. weights and dimensions of the BFE;
b. test equipment or special tools required to incorporate the
BFE; and
c. any other information BRAD may reasonably require.
Within one hundred and twenty (120) calendar days thereafter, BRAD
shall advise Buyer of its acceptance or rejection of the BFE and of the
dates by which each item of BFE is required by BRAD. If required the
parties hereto shall execute a Change Order in accordance with Article
9.1 to cover those BFE accepted by BRAD.
7.3 The BFE accepted by BRAD pursuant to this Article shall be
incorporated in the manufacturing process of the Aircraft subject to
the following conditions:
a. Title to the BFE shall remain at all times with Buyer and
risk of loss of the BFE shall remain at all times with Buyer
except for damages caused by BRAD's gross negligence.
b. The BFE must be received F.O.B. BRAD's plant or such other
place as BRAD may designate, no later than the date agreed
upon between Buyer and BRAD, free and clear of any taxes,
duties, licenses, charges, liens or other similar claims;
c. The BFE shall meet:
1) the standards of quality of BRAD, and
6
<PAGE> 8
2) the requirements of the applicable
airworthiness certification agency;
d. The BFE shall be delivered to BRAD in good condition and
ready for immediate incorporation into the Aircraft. BRAD
shall, upon receipt, inspect the BFE as to quantity and
apparent defects and inform Buyer of any discrepancies and
the required corrective actions to be taken;
e. [CONFIDENTIAL PORTION DELETED]
Buyer shall also furnish information necessary for
its proper storage, fitment, servicing, maintenance
and operation and availability of test equipment or
special tools;
f. [CONFIDENTIAL PORTION DELETED]
7.4 If at any time between receipt of the BFE by BRAD and the Delivery
Date, it is determined by BRAD that an item of BFE supplied does not
meet the standards and requirements described above or its fitment,
integration and testing in the Aircraft or Aircraft systems create
delays in the manufacturing or certification process, then such BFE may
be removed and replaced by other BFE or by BRAD's equipment.
[CONFIDENTIAL PORTION DELETED].
7.5 In the event that the Scheduled Delivery Date is delayed due to any
delay caused by Buyer's failure to:
a. deliver, or have BFE delivered by the date required;
b. ensure satisfactory design, suitability, use or operation
of the BFE;
c. furnish or obtain applicable BFE data;
d. perform any adjusting, calibrating, retesting or updating
of BFE;
e. furnish or obtain any approvals in compliance with the
provisions of this Article; or
f. comply with the conditions of this Article.
BRAD agrees to discuss with Buyer on the steps to be taken to minimize, cure,
eliminate or work around the delay [CONFIDENTIAL PORTION DELETED]
7.6 Should there be a delay caused by an event to which reference is made
in Article 13.0 in connection with the BFE and if such delay cannot
reasonably be minimized, cured, eliminated or worked around by
agreement of the parties, [CONFIDENTIAL PORTION DELETED]
7.7 If this Agreement is terminated in whole or in part in accordance with
the provisions thereof BRAD may elect to, by written notice to Buyer,
either:
a. purchase the BFE ordered by Buyer and/or
received by BRAD at the invoice price paid by Buyer;
or
7
<PAGE> 9
b. return the BFE to Buyer FOB BRAD's plant, or such
other place that BRAD may designate.
ARTICLE 8 - CERTIFICATION
8.1 BRAD has obtained from Transport Canada, the Canadian Department of
Transportation ("DOT"), a DOT Type Approval (Transport Category) and
will obtain from the Federal Aviation Administration of the United
States ("FAA") an FAA Type Certificate for the type of aircraft
purchased under this Agreement.
8.2 BRAD shall provide to Buyer a DOT Certificate of Airworthiness For
Export (Transport Category) on or before the Delivery Date.
8.3 BRAD shall not be obligated to obtain any other certificates or
approvals as part of this Agreement. The obtaining of any import
licence or authority required to import or operate the Aircraft into
any country outside of Canada shall be the responsibility of Buyer.
BRAD shall, to the extent permitted by law, and with Buyer's
assistance, seek the issuance of a Canadian export licence to enable
Buyer to export the Aircraft from Canada subject to prevailing export
control regulations in effect on the Delivery Date.
8.4 If any addition or change to, or modification or testing of the
Aircraft is required by any law or governmental regulation or
requirement or interpretation thereof by any governmental agency having
jurisdiction in order to meet the requirements of Article 8.2, (a
"Regulatory Change") such Regulatory Change shall be made to the
Aircraft prior to Delivery Date, or at such other time after the
Delivery Date as the parties may agree upon.
8.5 The Regulatory Change shall be made without additional charge to Buyer
unless such Regulatory Change is:
(a) necessary to comply with any requirement of the United States,
the country of import, which varies from or is in addition to
its requirements in effect on the date hereof for the issuance
of a Certificate of Airworthiness, in which case Buyer shall pay
BRAD's reasonable charges for such Regulatory Change, or
(b) required by any governmental law or regulations or
interpretation thereof promulgated by DOT or the FAA which is
effective subsequent to the date of this Agreement but before
the Delivery Date and is applicable to all aircraft in general
or to all aircraft of the same category as the Aircraft, in
which case Buyer shall pay BRAD's reasonable charges for such
Regulatory Change incorporated in any such Aircraft.
8.6 If delivery of the Aircraft is delayed by the incorporation of any
Regulatory Change, such delay shall be an Excusable Delay within the
meaning of Article 13.
8
<PAGE> 10
8.7 BRAD shall issue a Change Order, reflecting any Regulatory Change
required to be made under this Article 8, which shall set forth in
detail the particular changes to be made and the effect, if any, of
such changes on design, guaranteed performance, weight, balance, time
of delivery, Base Price and estimated Purchase Price. Any Change Orders
issued pursuant to this Article shall be effective and binding upon the
date of BRAD's transmittal of such Change Order.
8.8 If the use of any of the certificates identified in this Article 8 are
discontinued during the performance of this Agreement, reference to
such discontinued certificate shall be deemed a reference to any other
certificate or instrument which corresponds to such certificate or, if
there should not be any such other certificate or instrument, then BRAD
shall be deemed to have complied with such discontinued Certificate(s)
upon demonstrating that the Aircraft complies substantially with the
Specification.
ARTICLE 9 - ACCEPTANCE PROCEDURE
9.1.1 BRAD shall give Buyer at least thirty (30) days advance notice, by
facsimile or telegraphic communication or other expeditious means, of
the projected date of readiness of each Aircraft for inspection and
delivery.
9.1.2 BRAD shall give Buyer at least ten (10) working days advance
notice, by facsimile or telegraphic communication or other expeditious
means, of the date on which an Aircraft will be ready for Buyer's
inspection, flight test and acceptance (the "Readiness Date").
9.2 Within two (2) days following receipt by Buyer of the notice of
Readiness Date Buyer shall:
(a) provide notice to BRAD as to the source and method of
payment of the balance of the Aircraft Purchase Price;
(b) identify to BRAD the names of Buyer's representatives who
will participate in the inspection and/or acceptance flight
and Aircraft acceptance and provide evidence of the
authority of the designated persons to execute the
Certificate of Acceptance and other delivery documents on
behalf of Buyer.
9.3 Buyer shall have three (3) consecutive working days commencing on the
Readiness Date in which to complete said inspection and acceptance
flight (such three (3) working day period being the "Acceptance
Period").
9.4 Up to four (4) representatives of Buyer may participate in Buyer's
inspection of the Aircraft and two (2) representatives of Buyer may
participate in the acceptance flight . BRAD shall, if requested by
Buyer, perform an acceptance flight of not less than one (1) and not
more than three (3) hours duration. Ground inspection and acceptance
flight shall be conducted in accordance with BRAD's acceptance
procedures (a copy of which shall be provided to Buyer at least 30 days
prior to the
Scheduled Delivery Date of the Aircraft hereunder) and at BRAD's
expense. BRAD shall retain care, custody and control over the Aircraft.
9.5 If no Aircraft defect or discrepancy is revealed during the inspection
and/or flight test, Buyer shall accept the Aircraft, on or before the
last day of the Acceptance Period in accordance with the provisions of
this Article 9.7.
9.6 If any defect or discrepancy in the Aircraft is revealed by Buyer's
ground inspection and/or flight test, the defect or discrepancy will
promptly be corrected by BRAD, at no cost to Buyer,
9
<PAGE> 11
which correction may occur during or after the Acceptance Period
depending on the nature of the defect or discrepancy and of the time
required for correction. To the extent necessary to verify such
correction, BRAD shall perform one (1) or more further acceptance
flights.
9.7 Upon completion of the ground inspection and acceptance flight of
the Aircraft and correction of any defects or discrepancies:
(a) Buyer will sign a Certificate of Acceptance (in the form of
Exhibit I hereto) for the Aircraft. Execution of the
Certificate of Acceptance by or on behalf of Buyer shall be
evidence of and Buyer will be deemed to have examined the
Aircraft and found it in accordance with the provisions of
this Agreement. The date of signature of the Certificate of
Acceptance shall be the "Acceptance Date";
(b) BRAD will supply a DOT Certificate of Airworthiness for
Export and
(c) Buyer shall pay BRAD the balance of the Aircraft Purchase
Price and any other amounts due, at which time BRAD shall
cause a bill of sale to be issued (in the form of Exhibit II
hereto) passing to Buyer good title to the Aircraft free and
clear of all liens, claims, charges and encumbrances except
for those liens, charges or encumbrances created by or
claimed through Buyer (the "Bill of Sale"). The date on
which BRAD delivers the Bill of Sale and Buyer takes
delivery of the Aircraft shall be the "Delivery Date".
Delivery of the Aircraft shall be evidenced by the execution of the Bill of Sale
and of the Certificate of Receipt of Aircraft (in the form of Exhibit III
hereto).
9.8 Provided that BRAD has met all of its obligations under this
Article 9, should Buyer [CONFIDENTIAL PORTION DELETED]
9.9 Buyer shall promptly, upon demand, [CONFIDENTIAL PORTION DELETED]
Provided that BRAD has met all of its obligations under this Article 9,
should Buyer not accept, pay for and/or take delivery of any one of the
Aircraft [CONFIDENTIAL PORTION DELETED], make arrangements satisfactory
to BRAD to accept delivery and provide payment for all amounts owing or
to become due pursuant to this Agreement.
ARTICLE 10 - TITLE AND RISK
10.1 Title to the Aircraft passes to Buyer when BRAD presents the Bill of
Sale to Buyer on the Delivery Date. Except as provided in Article 9.7
(c), risk of loss of or damage to the Aircraft passes to Buyer on the
Delivery Date.
10.2 If, after transfer of title on the Delivery Date, the Aircraft remains
in or is returned to the care, custody or control of BRAD, Buyer shall
retain risk of loss of, or damage to the Aircraft and for itself and on
behalf of its insurer(s) hereby waives and renounces to, and releases
BRAD and any of BRAD's affiliates from any claim whether direct,
indirect or by way of subrogation for damages to or loss of the
Aircraft arising out of, or related to, or by reason of such care,
custody or control.
10
<PAGE> 12
ARTICLE 11 - CHANGES
11.1 Other than a Permitted Change as described in Article 11.2, or a
Regulatory Change as described in Articles 8.4 and 8.5, any change to
this Agreement (including without limitation the Specification) or any
features or Buyer Furnished Equipment ("BFE"), if any, changing the
Aircraft from that described in the Specification attached hereto,
requested by Buyer, and as may be mutually agreed upon by the parties
hereto, shall be made using a change order ("Change Order")
substantially in the format of Exhibit IV hereto. Should Buyer request
a change, BRAD shall advise Buyer of the effect, if any, of such change
request on:
(a) the Scheduled Delivery Date;
(b) the price and payment terms applicable to the Change
Order; and
(c) any other material provisions of this Agreement which will
be affected by the Change Order.
Such Change Order shall become effective and binding on the parties
hereto when signed by a duly authorized representative of each party.
11.2 BRAD, prior to the Delivery Date and without a Change Order or Buyer's
consent, may:
(a) substitute the kind, type or source of any material, part,
accessory or equipment with any other material, part, accessory or
equipment of like, equivalent or better kind or type; or
(b) make such change or modification to the Specification as it
deems appropriate to:
1) improve the Aircraft, its maintainability or
appearance, or
2) to prevent delays in manufacture or delivery, or
3) to meet the requirements of Articles 2 and 8,
other than for a Regulatory Change to which the
provisions of Articles 8.4 and 8.5 shall apply,
provided that such substitution, change or modification shall not
affect the Aircraft Purchase Price or materially affect the Scheduled
Delivery Date, interchangeability or replaceability of spare parts or
performance characteristics of the Aircraft. Any change made in
accordance with the provisions of this Article 11.2 shall be deemed to
be a "Permitted Change" and the cost thereof shall be borne by BRAD.
ARTICLE 12 - BUYER'S REPRESENTATIVES AT MANUFACTURE SITE
12.1 From time to time, commencing with the date of this Agreement and
ending with the Delivery Date of the last Aircraft purchased hereunder,
BRAD shall furnish, without charge, office space at BRAD's facility for
one (1) representative of Buyer. Buyer shall be responsible for all
expenses of its representative and shall notify BRAD at least thirty
(30) calendar days prior to the first scheduled visit of such
representative and three (3) days for each subsequent visit.
12.2 BRAD's and BRAD's affiliates facilities shall be accessible to Buyer's
representative during normal working hours. Buyer's representative
shall have the right to periodically observe the work at BRAD's or
BRAD's affiliates' facilities where the work is being carried out
provided there shall be no disruption in the performance of the work.
11
<PAGE> 13
12.3 BRAD shall advise Buyer's representative of BRAD's or BRAD's
affiliates' rules and regulations applicable at the facilities being
visited and Buyer's representative shall conform to such rules and
regulations.
12.4 At any time prior to delivery of the Aircraft, Buyer's representative
may request, in writing, correction of parts or materials which they
reasonably believe are not in accordance with the Specification. BRAD
shall provide a written response to any such request. Communication
between Buyer's representative and BRAD shall be solely through BRAD's
Contract Department or its designate.
12.5 [CONFIDENTIAL PORTION DELETED]
ARTICLE 13 - EXCUSABLE DELAY
13.1 In the event of a delay on the part of BRAD in the performance of its
obligations or responsibilities under the provisions of this Agreement
due directly or indirectly to a cause which is beyond the reasonable
control or without the fault or negligence of BRAD (an "Excusable
Delay"), BRAD shall not be liable for, nor be deemed to be in default
under this Agreement on account of such delay in delivery of the
Aircraft or other performance hereunder and the time fixed or required
for the performance of any obligation or responsibility in this
Agreement shall be extended for a period equal to the period during
which any such cause or the effect thereof persist. Excusable Delay
shall include, without limitation, delays occasioned by the following
causes:
(a) force majeure or acts of God;
(b) war, warlike operations, act of the enemy, armed aggression,
civil commotion, insurrection, riot or embargo;
(c) fire, explosion, earthquake, lightning, flood, draught,
windstorm or other action of the elements or other catastrophic
or serious accidents;
(d) epidemic or quarantine restrictions;
(e) any legislation, act, order, directive or regulation of
any governmental or other duly constituted authority;
(f) strikes, lock-out, walk-out, and/or other labour troubles
causing cessation, slow-down or interruption of work;
(g) lack or shortage or delay in delivery of supplies, materials,
accessories, equipment, tools or parts;
(h) delay or failure of carriers, subcontractors or suppliers for
any reason whatsoever; or
(i) delay in obtaining any airworthiness approval or certificate, or
any equivalent approval or certification, by reason of any law
or governmental order, directive or regulation or any change
thereto, or interpretation thereof, by a governmental agency,
the effective date of which is subsequent to the date of this
Agreement, or by reason of any change or addition made by BRAD
or its affiliates or requested by a governmental agency to the
compliance program of BRAD or of its affiliate, or any part
thereof, as same may have been approved by DOT, or change to the
interpretation thereof to obtain any such airworthiness approval
or certificate.
13.2 (a) If BRAD concludes, based on its appraisal of the facts and
normal scheduling procedures, that due to Excusable Delay
delivery of any Aircraft will be delayed for more than nine (9)
months after the originally Scheduled Delivery Date or any
revised date agreed to in writing by the parties, BRAD shall
promptly notify Buyer in writing and either party may then
terminate this Agreement with respect to such Aircraft by giving
written notice to the other within fifteen (15) days after
receipt by Buyer of BRAD's notice.
12
<PAGE> 14
(b) If, due to Excusable Delay, delivery of any Aircraft is
delayed for more than twelve (12) months after the
Scheduled Delivery Date, either party may terminate this
Agreement with respect to such Aircraft by giving written
notice to the other within fifteen (15) days after the
expiration of such twelve (12) month period.
13.3 Termination under Article 13.2 shall discharge all obligations and
liabilities of Buyer and BRAD hereunder with respect to such delayed
Aircraft and all related undelivered items and services, except that
BRAD shall promptly repay to Buyer, and BRAD's sole liability and
responsibility shall be limited to the repayment to Buyer, of all
advance payments for such Aircraft received by BRAD [CONFIDENTIAL
PORTION DELETED], less any amount due by Buyer to BRAD.
13.4 The termination rights set forth in Article 13.2 are in substitution
for any and all other rights of termination or contract lapse arising
by operation of law in connection with Excusable Delays.
ARTICLE 14 - NON-EXCUSABLE DELAY
14.1 If delivery of the Aircraft is delayed by causes not excused under
Article 13.1 (a "Non-Excusable Delay"), BRAD shall pay Buyer,
[CONFIDENTIAL PORTION DELETED] of Non-Excusable Delay in excess of a
grace period of [CONFIDENTIAL PORTION DELETED], to a [CONFIDENTIAL
PORTION DELETED] of [CONFIDENTIAL PORTION DELETED] for any such delayed
Aircraft.
14.2 [CONFIDENTIAL PORTION DELETED]
14.3 Any right Buyer might otherwise have to refuse to accept delivery of an
Aircraft when offered by BRAD for inspection and acceptance following a
Non-Excusable Delay [CONFIDENTIAL PORTION DELETED]Buyer will not have
the right to refuse to take delivery of any Aircraft because of a
Non-Excusable Delay unless and until the aggregate duration of the
Non-Excusable Delay for such Aircraft [CONFIDENTIAL PORTION DELETED].
If BRAD has not offered such Aircraft for inspection and acceptance
during the Non-Excusable Delay Period, Buyer may [CONFIDENTIAL PORTION
DELETED]. If, no such notice having been given, BRAD offers such
Aircraft for inspection and acceptance after the Non-Excusable Delay
Period and Buyer refuses to take delivery of such Aircraft because of
Non-Excusable Delay, [CONFIDENTIAL PORTION DELETED],the [CONFIDENTIAL
PORTION DELETED] calculated under Article 14.1 to the date of
termination. In addition BRAD shall promptly repay to Buyer all advance
payments for such Aircraft [CONFIDENTIAL PORTION DELETED]
ARTICLE 15 - LOSS OR DAMAGE
15.1 In the event that prior to the Delivery Date of any of the Aircraft,
the Aircraft is lost, destroyed or damaged beyond repair due to any
cause, BRAD shall promptly notify Buyer in writing. Such notice shall
specify the earliest date reasonably possible, consistent with BRAD's
other contractual commitments and production schedule, by which BRAD
estimates it would be able to deliver a replacement for the lost,
destroyed or damaged Aircraft. This Agreement shall automatically
terminate as to such Aircraft unless Buyer gives BRAD written notice,
within thirty (30) days of BRAD's notice, that Buyer desires a
replacement for such Aircraft. If Buyer gives such notice to BRAD, the
parties shall execute an amendment to this Agreement which shall set
forth the Delivery Date for such replacement aircraft and corresponding
new replacement Aircraft Purchase Price; provided, however, that
nothing herein shall obligate BRAD to manufacture and deliver such
replacement aircraft if it would require the reactivation or
acceleration of its production line for the model of aircraft
13
<PAGE> 15
purchased hereunder. The terms and conditions of this Agreement
applicable to the replaced Aircraft shall apply to the replacement
aircraft.
15.2 In the event that one of the first seven Aircraft is lost or damaged,
as per this section, Buyer may nonetheless return the Dash 8 Series 300
aircraft leased from BRAD as per the scheduled delivery, and thus
advance in sequence the one-for one trade-in obligation.
ARTICLE 16 - TERMINATION
16.1 This Agreement may be terminated, in whole or in part, with respect to
any or all of the Aircraft before the Delivery Date by BRAD or Buyer by
notice of termination to the other party upon the occurrence of any of
the following events:
(a) a party makes an assignment for the benefit of
creditors or admits in writing its inability to pay
its debts or generally does not pay its debts as they
become due; or
(b) a receiver or trustee is appointed for a party or for
substantially all of such party's assets and, if
appointed without such party's consent, such
appointment is not discharged or stayed within thirty
(30) calendar days thereafter; or
(c) proceedings or action under any law relating to
bankruptcy, insolvency or the reorganization or
relief of debtors are instituted by or against a
party, and, if contested by such party, are not
dismissed or stayed within thirty (30) calendar days
thereafter; or
(d) [CONFIDENTIAL PORTION DELETED]
16.2 In addition, this Agreement may be terminated, in whole or in part,
before the Delivery Date with respect to any or all undelivered
Aircraft:
(a) as otherwise provided in this Agreement; or
(b) if Buyer is in default or breach of any material term or condition
of this Agreement and Buyer does not cure such default or breach within
forty-five (45) calendar days after receipt of notice from BRAD
specifying such default or breach.
16.3 Buyer may terminate this Agreement, in whole or in part, before the
Delivery Date, with respect to any undelivered Aircraft, if BRAD is in
default or breach of any material term or condition of this Agreement
and such breach remains uncured for a period of forty-five (45)
calendar days following receipt of a notice from Buyer specifying the
nature of default or breach.
16.4 In case of termination of this Agreement by BRAD pursuant to Articles
16.1 or 16.2:
(a) all rights (including property rights), if any, which Buyer may
have or may have had in or to this Agreement or any or all of
the undelivered Aircraft shall become null and void with
immediate effect;
(b) all rights (including property rights and the right to sell the
Aircraft to another party, if any) in and to any or all of the
undelivered Aircraft shall be vested with BRAD free and clear of
any ownership or title rights, if any, liens, charges or
encumbrances; and
14
<PAGE> 16
(c) all amounts paid by Buyer shall be retained by BRAD and, with
respect to the applicable undelivered Aircraft, shall be applied
against the costs, expenses, losses and damages incurred by
BRAD as a result of Buyer's default and/or the termination of
this Agreement. Buyer hereby acknowledges and recognizes that
BRAD shall have all rights permitted by law to recover from
Buyer such costs, expenses, losses and damages and, in any
event, such costs, expenses, losses and damages will aggregate
not less than the amount retained by BRAD pursuant to this
Article 16.4 (c).
16.5 Subject to Article 14.1, in the event of termination of this Agreement
by Buyer, Buyer's sole rights, remedies and recourses against BRAD and
BRAD's obligations to Buyer shall be limited to [CONFIDENTIAL PORTION
DELETED]
ARTICLE 17 - NOTICES
17.1 Any notice, request, approval, permission, consent or other
communication ("Notice"), to be given or required under this Agreement
shall be provided in writing, by registered mail, facsimile, courier,
telegraphic or other electronic communication providing reasonable
proof of transmission, except that no notice shall be sent by mail if
disruption of postal service exists or is threatened either in the
country of origin or of destination, by the party giving the Notice and
shall be addressed as follows:
(a) Notice to BRAD shall be addressed to:
Bombardier Inc.
Bombardier Regional Aircraft Division Garratt Boulevard
Downsview, Ontario Canada M3K 1Y5
Attention: Walter A. Galloway, Director, Contracts
Telex: 06-22128
Facsimile: (416) 375-4533
(b) Notice to Buyer shall be addressed to:
Attention: Mr. Larry Risley, Chairman
Mesa Airlines, Inc.
2325 East 30th
Farmington, New Mexico
U.S.A. 87401
Facsimile: 505-326-4485
17.2 Notice given in accordance with Article 17.1 shall be deemed
sufficiently given to and received by the addressees:
(a) if delivered by hand, on the day when the same shall have been
so delivered; or
(b) if mailed or sent by courier on the day indicated on the
corresponding acknowledgement of receipt; or
(c) if sent by telex or facsimile on the day indicated by the
acknowledgement or the answer back of the receiver in provable form.
ARTICLE 18 - INDEMNITY AGAINST PATENT INFRINGEMENT
15
<PAGE> 17
18.1 In the case of any actual or alleged infringement of any Canadian or
United States patent or, subject to the conditions and exceptions set
forth below, any patent issued under the laws of any other country in
which Buyer from time to time may lawfully operate the Aircraft ("Other
Patents"), by the Aircraft, or by any system, accessory, equipment or
part installed in such Aircraft at the time title to such Aircraft
passes to Buyer, BRAD shall indemnify, protect and hold harmless Buyer
from
and against all claims, suits, actions, liabilities, damages and costs
resulting from the infringement, excluding any incidental or
consequential damages (which include without limitation loss of revenue
or loss of profit) and BRAD shall, at its option and expense:
(a) procure for Buyer the right under such patent to use such
system, accessory, equipment or part; or
(b) replace such system, accessory, equipment or part with
one of the similar nature and quality that is
non-infringing; or
(c) modify such system, accessory, equipment or part to make
same non-infringing in a manner such as to keep it otherwise
in compliance with the requirements of this Agreement.
BRAD's obligation hereunder shall extend to Other Patents only if from
the time of design of the Aircraft, system, accessory, equipment or
part until the alleged infringement claims are resolved:
(a) such other country and the country in which the Aircraft is
permanently registered have ratified and adhered to and are
at the time of the actual or alleged infringement
contracting parties to the Chicago Convention on
International Civil Aviation of December 7, 1944 and are
fully entitled to all benefits of Article 27 thereof; and
(b) such other country and the country of registration shall
each have been a party to the International Convention for
the Protection of Industrial Property (Paris Convention) or
have enacted patent laws which recognize and give adequate
protection to inventions made by the nationals of other
countries which have ratified, adhered to and are
contracting parties to either of the forgoing conventions.
18.2 The foregoing indemnity does not apply to BFE, or to avionics, engines
or any system, accessory, equipment or part that was not manufactured
to BRAD's detailed design or to any system, accessory, equipment or
part manufactured by a third party to BRAD's detailed design without
BRAD's authorization.
18.3 Buyer's remedy and BRAD's obligation and liability under this Article
are conditional upon (i) Buyer giving BRAD written notice within ten
(10) days after Buyer receives notice of a suit or action against Buyer
alleging infringement or within twenty (20) days after Buyer receives
any other written claim of infringement (ii) Buyer uses reasonable
efforts in full cooperation with BRAD to reduce or mitigate any such
expenses, damages, costs or royalties involved, and (iii) Buyer
furnishes promptly to BRAD all data, papers and records in its
possession or control necessary or useful to resist and defend against
such claim or suit. BRAD may at its option conduct negotiations with
any party claiming infringement and may intervene in any suit or
action. Whether or not BRAD intervenes, BRAD shall be entitled at any
stage of the proceedings to assume or control the defence. Buyer's
remedy and BRAD's obligation and liability are further conditional
judgment upon BRAD's prior
16
<PAGE> 18
approval of Buyer's payment or assumption of any liabilities, expenses,
damages, royalties or costs for which BRAD may be held liable or
responsible for.
18.4 THE INDEMNITY, OBLIGATIONS AND LIABILITIES OF BRAD AND REMEDIES OF
BUYER SET OUT IN THIS ARTICLE ARE EXCLUSIVE AND ACCEPTED BY BUYER TO BE
IN LIEU OF AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES
AND RENOUNCES, ALL OTHER INDEMNITIES, OBLIGATIONS AND LIABILITIES OF
BRAD AND OF ITS AFFILIATES AND ALL OTHER RIGHTS, REMEDIES AND CLAIMS,
INCLUDING CLAIMS FOR DAMAGES, DIRECT, INCIDENTAL OR CONSEQUENTIAL, OF
BUYER AGAINST BRAD AND ITS AFFILIATES EXPRESS OR IMPLIED, ARISING BY
LAW OR OTHERWISE, WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT
INFRINGEMENT BY THE AIRCRAFT OR ANY INSTALLED SYSTEM, ACCESSORY,
EQUIPMENT OR PART.
ARTICLE 19 [CONFIDENTIAL PORTION DELETED]
19.1 [CONFIDENTIAL PORTION DELETED]
19.2 [CONFIDENTIAL PORTION DELETED]
19.3 BUYER AND BRAD AGREE THAT THIS AGREEMENT, HAS BEEN THE SUBJECT OF
DISCUSSION AND NEGOTIATION AND IS FULLY UNDERSTOOD BY THE PARTIES
HERETO AND THAT THE PRICE OF THE AIRCRAFT AND THE OTHER MUTUAL
AGREEMENTS OF THE PARTIES SET FORTH HEREIN WERE ARRIVED AT IN
CONSIDERATION OF THE PROVISIONS CONTAINED IN ARTICLE 19.2.
19.4 LETTER AGREEMENT MJR-009 EXCLUSIVELY SETS FORTH BRAD's POST DELIVERY
OBLIGATIONS WITH RESPECT TO ANY NON-CONFORMANCE OF THE AIRCRAFT WITH
THE SPECIFICATION OR ANY DEFECT IN THE AIRCRAFT.
EXCEPT AS SET FORTH IN SIDE LETTERS MJR-006, MJR-007 , MJR-008 AND
MJR-009 THERE ARE NO UNDERSTANDINGS, REPRESENTATIONS, CONDITIONS OR
WARRANTIES, EXPRESS OR IMPLIED, BETWEEN THE PARTIES WITH RESPECT TO ANY
NON-CONFORMANCE OF THE AIRCRAFT WITH THE SPECIFICATION, OR ANY DEFECT
IN THE AIRCRAFT, OR ANY DEFECT IN ANY OTHER THING DELIVERED UNDER THIS
AGREEMENT.
19.5 [CONFIDENTIAL PORTION DELETED]
ARTICLE 20 - ASSIGNMENT
20.1 Either party may assign, sell, transfer or dispose of (in whole or in
part) any of its rights and obligations hereunder to a wholly owned
subsidiary or affiliate provided that there is no increase to the
liability and/or responsibility of the non-assigning party and that the
assigning party remains jointly and severally liable with any assignee
for the performance of its obligation under this Agreement.
17
<PAGE> 19
20.2 Except as provided in Article 20.1, Buyer shall not assign, sell,
transfer or dispose of (in whole or in part) any of its rights or
obligations hereunder without BRAD's prior written consent, such
consent not to be unreasonably withheld. In the event of such
assignment, sale, transfer or disposition Buyer shall remain jointly
and severally liable with any assignee for the performance of all and
any of Buyer's obligations under this Agreement and BRAD reserves the
right to amend one or more of the terms and conditions of this
Agreement.
20.3 Notwithstanding Article 20.2 above, Buyer may assign, after transfer of
title of the Aircraft, its rights under the Agreement to a third party
purchaser of any one of the Aircraft, provided said third party
acknowledges in writing to be bound by the applicable terms and
conditions of this Agreement, including but not limited to the
provisions and limitations as detailed Annex A, Customer Support
Services, Annex B, Warranty and Service Life Policy and of the
provisions and limitations in Limitation of Liability as defined in
Article 19 hereof and Indemnity Against Patent Infringement as defined
in Article 18 hereof and any other on-going obligations of Buyer, which
shall apply to it to the same extent as if said third party was Buyer
hereunder and provided that there is no increase to the liability
and/or responsibility of BRAD and provided Buyer shall remain jointly
and severally liable with the assignee for the performance of any and
all of Buyer's obligations under this Agreement.
20.4 BRAD may assign any of its rights to receive money hereunder without
the prior consent of Buyer.
20.5 Notwithstanding the other provisions of this Article 20, BRAD shall, at
Buyer's cost and expense, if so requested in writing by Buyer take any
action reasonably required for the purpose of causing any of the
Aircraft to be subjected (i) to, after the Delivery Date, an equipment
trust, conditional sale or lien, or (ii) to another arrangement for the
financing of the Aircraft by Buyer, providing, however, there shall be
no increase to the liability and/or responsibility of BRAD arising
through such financing and provided Buyer shall remain jointly and
severally liable with the assignee for the performance of any and all
of Buyer's obligations under this Agreement.
ARTICLE 21 - SUCCESSORS
This Agreement shall inure to the benefit of and be binding upon each
of BRAD and Buyer and their respective successors.
ARTICLE 22 - APPLICABLE LAWS
22.1 THIS AGREEMENT SHALL BE SUBJECT TO AND CONSTRUED IN ACCORDANCE WITH AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY THE DOMESTIC LAWS OF THE
STATE OF NEW YORK, U.S.A., EXCLUDING THE CHOICE OF LAW RULES, AND THE
PARTIES HAVE AGREED THAT THE APPLICATION OF THE UNITED NATIONS
CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS IS HEREBY
EXCLUDED.
22.2 BRAD's obligations under this Agreement shall be subject to and apply
only to the extent permitted by applicable laws, regulations,
directives and/or orders regarding export controls.
ARTICLE 23 - CONFIDENTIAL NATURE OF AGREEMENT
23.1 This Agreement is confidential between the parties and shall not,
without the prior written consent of the other party, be disclosed by
either party in whole or in part to any other person or body except as
may be necessary for either party to carry out its obligations under
this Agreement and fulfill its obligations under the applicable
securities laws governing each
18
<PAGE> 20
party. The parties shall however only disclose those parts of the
agreement which are expressly required by such securities laws..
23.2 Except as may be reasonably required for the normal operation,
maintenance, overhaul and repair of the Aircraft, Buyer shall hold
confidential all technical data and information supplied by or on
behalf of BRAD. Buyer shall not reproduce any technical data or
information or divulge the same to any third party without the prior
written consent of BRAD.
23.3 Either party may announce the signing of this Agreement by means of a
notice to the press provided that the content and date of the notice
has been agreed to by the other party.
ARTICLE 24 - AGREEMENT
24.1 This Agreement and the matters referred to herein constitute the
entire Agreement between BRAD and Buyer and supersede and cancel all
prior representations, brochures, alleged warranties, statements,
negotiations, undertakings, letters, memorandum of Agreement,
acceptances, agreements, understandings, contracts and
communications, whether oral or written, between BRAD and Buyer or
their respective agents, with respect to or in connection with the
subject matter of this Agreement and no agreement or understanding
varying the terms and conditions hereof shall be binding on either
BRAD or Buyer hereto unless an amendment to this Agreement is issued
and duly signed by their respective authorized representatives
pursuant to the provisions of this Article hereof. All Appendices,
Exhibits and Annexes referred to herein and attached hereto are made
part of this Agreement by reference. In the event of any
inconsistencies between this Agreement and any of the Appendices,
Exhibits and Annexes or other documents referred to herein, the
provisions of this Agreement shall prevail.
24.2 If any of the provisions of this Agreement are for any reason
declared by judgement of a court of competent jurisdiction to be
unenforceable or ineffective, those provisions shall be deemed
severable from the other provisions of this Agreement and the
remainder of this Agreement shall remain in full force and effect.
24.3 THE OBLIGATIONS AND LIABILITIES OF BRAD, INCLUDING THE WARRANTY AND
SERVICE LIFE POLICY ATTACHED [CONFIDENTIAL PORTION DELETED], HAVE
BEEN EXPRESSED, DISCUSSED, UNDERSTOOD AND AGREED TO BETWEEN BUYER AND
BRAD IN CONSIDERATION OF THE PURCHASE PRICE OF THE AIRCRAFT AND OTHER
PROVISIONS OF THIS AGREEMENT.
24.4 BRAD and Buyer confirm to each other they have each obtained the
required authorizations and fulfilled any conditions applicable to
enable each of them to enter into this Agreement.
In witness whereof this Agreement was signed on the date written hereof:
For and on behalf of For an on behalf of
BUYER: BRAD.:
Per: ____________________ Per:____________________
Title: ___________________ Title:____________________
19
<PAGE> 21
APPENDIX I
DHC-8 AIRCRAFT
ECONOMIC ADJUSTMENT FORMULA
[CONFIDENTIAL PORTION DELETED]
20
<PAGE> 22
APPENDIX II
DELIVERY SCHEDULE
First Aircraft February 1996
Second Aircraft March 1996
Third Aircraft March 1996
Fourth Aircraft April 1996
Fifth Aircraft April 1996
Sixth Aircraft May 1996
Seventh Aircraft May 1996
Eighth Aircraft June 1996
Ninth Aircraft June 1996
Tenth Aircraft July 1996
Eleventh Aircraft August 1996
Twelfth Aircraft August 1996
Thirteenth Aircraft September 1996
Fourteenth Aircraft September 1996
Fifteenth Aircraft October 1996
Sixteenth Aircraft October 1996
Seventeenth Aircraft November 1996
Eighteenth Aircraft November 1996
Nineteenth Aircraft December 1996
Twentieth Aircraft December 1996
Twenty-First Aircraft January 1997
Twenty-Second Aircraft January 1997
Twenty-Third Aircraft February 1997
Twenty-Fourth Aircraft February 1997
Twenty-Fifth Aircraft March 1997
21
<PAGE> 23
APPENDIX III
SPECIFICATION
DHC-8-100:
DETAIL SPECIFICATION
NUMBER DS8-200 ISSUE 2
AUGUST 1994
22
<PAGE> 24
APPENDIX IV BUYER SELECTED OPTIONAL FEATURES
<TABLE>
<CAPTION>
Number Descrption Price in Feb. 1, 1995 U.S. Dollars
- ------ ----------- ----------------------------------
<S> <C> <C>
803SO00073 Dash 8 Series 200 (Model 202) [CONFIDENTIAL PORTIONS DELETED]
825CH01152 Interior Configuration - United Express (Mesa)
811CH00029 Exterior Paint Scheme United Express (Mesa)
821CH00029 Ground Air Conditioning RH Side
823CH00032 Selcal System (Frederickson Jetcal 5 Compatible
with VHF Comm
823SO08041 VHF Comm Dual-Collins Proline II (VHF 22)
824CH82066 Batteries On line with Ground Power
824SO08070-1 Two 40 Amp\hour SAFT NICAD Batteries ILO Standard
825CH01077 ELT (Pointer C-4000) Post Mod 8\2100
834CH00098 Audible Altitude Alert
834CH00375 Dual Collins Mode S & TCAS II
834CH00379 Replacement of EFIS with Electro-Mechanical
Instruments
834SO08042-1 VHF Nav. Dual Collins Proline II (VIR 32)
834SO08043-1 ADF Single Collins Proline II (ADF 60)
834SO08045 DME No. 1 Collins Proline II (DME 42)
834SO08048-1 DME No. 2 Collins Proline II (DME 42)
835CH00011 Automatic Drop Down Oxygen
825S001076-1 Equipment\Furnishings SU for Galley Series 200
825CH02001 Additional SU
TOTAL
</TABLE>
23
<PAGE> 25
APPENDIX V ESTIMATED AIRCRAFT DELIVERY PRICE
<TABLE>
<CAPTION>
Aircraft Purchase Aircraft Price
-------- -----------------------
<S> <C>
First Aircraft [CONFIDENTIAL PORTIONS DELETED]
Second Aircraft
Third Aircraft
Fourth Aircraft
Fifth Aircraft
Sixth Aircraft
Seventh Aircraft
Eighth Aircraft
Ninth Aircraft
Tenth Aircraft
Eleventh Aircraft
Twelfth Aircraft
Thirteenth Aircraft
Fourteenth Aircraft
Fifteenth Aircraft
Sixteenth Aircraft
Seventeenth Aircraft
Eighteenth Aircraft
Nineteenth Aircraft
Twentieth Aircraft
Twenty-First Aircraft
Twenty-Second Aircraft
Twenty-Third Aircraft
Twenty-Fourth Aircraft
Twenty-Fifth Aircraft
</TABLE>
24
<PAGE> 26
EXHIBIT I
CERTIFICATE OF ACCEPTANCE
The undersigned hereby acknowledges on behalf of Buyer acceptance of
the Aircraft bearing manufacturer's serial number fitted with two (2) Pratt &
Whitney of Canada, Ltd. PWC-120/123/ engines bearing serial number and as being
in accordance with the terms and conditions of this Agreement signed on the
day of , 19 between Bombardier Regional Aircraft Division and Buyer.
Place: Date:
------------------------- ------------------------------
SIGNED FOR AND ON BEHALF OF
[BUYER'S NAME] WITNESSED
Per: Per:
------------------------- ------------------------------
Title: Title:
------------------------- ------------------------------
25
<PAGE> 27
EXHIBIT II
BILL OF SALE
1. FOR VALUABLE CONSIDERATIONS, DE HAVILLAND INC., OWNER OF THE FULL
LEGAL AND BENEFICIAL TITLE OF THE AIRCRAFT DESCRIBED AS FOLLOWS:
ONE DE HAVILLAND DHC-8-200 AIRCRAFT BEARING:
MANUFACTURER'S SERIAL NO.: WITH:
PWC-/120/123/ ENGINES SERIAL NOS.: AND
AUXILIARY POWER UNIT NO.:
DOES THIS DAY OF 19 HEREBY SELL, GRANT, TRANSFER AND DELIVER ALL
RIGHTS, TITLE AND INTEREST IN AND TO SUCH AIRCRAFT UNTO:
[BUYER's NAME].
BY VIRTUE OF THE EXECUTION OF THIS BILL OF SALE, DE HAVILLAND INC.
HEREBY DIVESTS ITSELF OF ALL ITS RIGHTS, INTERESTS AND/OR LIEN OF ANY
KIND IN THE AIRCRAFT, IN FAVOUR OF BUYER.
BUYER:
PLACE: TIME:
----------------------------- -------------------------
For and on behalf of
DE HAVILLAND INC.:
Per:
--------------------------------
Title:
------------------------------
26
<PAGE> 28
EXHIBIT III
CERTIFICATE OF RECEIPT OF AIRCRAFT
THE UNDERSIGNED HEREBY ACKNOWLEDGES TO HAVE RECEIVED FROM BOMBARDIER
REGIONAL AIRCRAFT DIVISION, AT THE DOWNSVIEW AIRPORT, ADJACENT TO BRAD'S PLANT
IN THE CITY OF DOWNSVIEW, PROVINCE OF ONTARIO, CANADA, ON THE DAY OF , AT
THE HOUR OF O'CLOCK, ONE (1) de HAVILLAND DHC-8-/100/200/300/ AIRCRAFT,
BEARING SERIAL NUMBER , INCLUDING WITH THE AIRCRAFT TWO (2)
PWC-/120/123/ ENGINES BEARING MANUFACTURER'S SERIAL NUMBERS &
AND OTHER MAJOR REPLACEABLE ACCESSORIES ATTACHED TO THE AIRCRAFT
AND ENGINES.
Signed for and on behalf of
[Buyer's name]:
Per:
-------------------------------
Title:
-----------------------------
27
<PAGE> 29
EXHIBIT IV
CHANGE ORDER
(PRO FORMA)
CONTRACT CHANGE ORDER
PURCHASER:
PURCHASE AGREEMENT NO.: AIRCRAFT TYPE:
C.C.O. NO.: DATED:
PAGES AFFECTED: PAGE __ of __
REASON FOR CHANGE:
DESCRIPTION OF CHANGE:
PAGES TO BE SUBSTITUTED NEW/REVISED PAGES
CHANGES TO THE AFFECTED PAGES ARE AS FOLLOWS:
ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT WILL REMAIN UNCHANGED
FOR AND ON BEHALF OF: FOR AND ON BEHALF OF:
BRAD
-------------------------------
Signed: Signed:
---------------------------- ---------------------------
Date: Date:
---------------------------- ---------------------------
28
<PAGE> 30
March 24, 1995
Our Ref: B95-7701-MJR-002
Attention: Mr. Larry Risley
Chairman,
Mesa Airlines, Inc.
2325 East 30th
Farmington, New Mexico
U.S.A. 87401.
Gentlemen,
RE: LETTER AGREEMENT NO. B95-7701-MJR-002
(RE: OPTION AIRCRAFT)
In consideration of your agreement to purchase 25 DHC-8 Series 200 aircraft (the
"Firm Aircraft") under Purchase Agreement No. B-95-7701-PA-299 (the
"Agreement"), Bombardier Inc., represented by its Bombardier Regional Aircraft
Division ("BRAD"), is pleased to offer to Mesa Airlines, Inc.("Buyer") the
option to purchase Twenty Five (25) DHC-8 Series 200 aircraft (the "Option
Aircraft") on the following terms and conditions.
1.1 The Option Aircraft will be as described in Article 2 of the Agreement.
1.2 The Option Aircraft shall be in two (2) blocks, the first of thirteen
(13) (the "First Option Aircraft Block") and the second of twelve (12)
(the "Second Option Aircraft Block") respectively.
1.3 BRAD will deliver the Option Aircraft to Buyer during the following
months:
FIRST OPTION BLOCK DELIVERY DATES
First Option Aircraft [CONFIDENTIAL PORTIONS DELETED]
Second Option Aircraft
Third Option Aircraft
Fourth Option Aircraft
Fifth Option Aircraft
Sixth Option Aircraft
Seventh Option Aircraft
Eighth Option Aircraft
Ninth Option Aircraft
Tenth Option Aircraft
Eleventh Option Aircraft
Twelfth Option Aircraft
Thirteenth Option Aircraft
SECOND OPTION BLOCK DELIVERY DATE
Fourteenth Option Aircraft [CONFIDENTIAL PORTIONS DELETED]
Fifteenth Option Aircraft
Sixteenth Option Aircraft
Seventeenth Option Aircraft
Eighteenth Option Aircraft
Nineteenth Option Aircraft
Twentieth Option Aircraft
Twenty-First Option Aircraft
Twenty-Second Option Aircraft
Twenty-Third Option Aircraft
Twenty-Fourth Option Aircraft
Twenty-Fifth Option Aircraft
<PAGE> 31
1.4.1 The base price [CONFIDENTIAL PORTION DELETED].
1.4.2. The price of Buyer selected optional features as described at Appendix
IV of the Agreement is [CONFIDENTIAL PORTION DELETED]..
1.4.3. These base prices are subject to escalation in accordance with the
Economic Adjustment Formula set out in Appendix I of the Agreement.
For Buyer's information, the estimated delivery prices of the Option
Aircraft are set forth below:
FIRST OPTION BLOCK ESTIMATED DELIVERY PRICE
First Option Aircraft [CONFIDENTIAL PORTIONS DELETED].
Second Option Aircraft
Third Option Aircraft
Fourth Option Aircraft
Fifth Option Aircraft
Sixth Option Aircraft
Seventh Option Aircraft
Eighth Option Aircraft
Ninth Option Aircraft
Tenth Option Aircraft
Eleventh Option Aircraft
Twelfth Option Aircraft
Thirteenth Option Aircraft
SECOND OPTION BLOCK ESTIMATED DELIVERY PRICE
Fourteenth Option Aircraft [CONFIDENTIAL PORTIONS DELETED].
Fifteenth Option Aircraft
Sixteenth Option Aircraft
Seventeenth Option Aircraft
Eighteenth Option Aircraft
Nineteenth Option Aircraft
Twentieth Option Aircraft
Twenty-First Option Aircraft
Twenty-Second Option Aircraft
Twenty-Third Option Aircraft
Twenty-Fourth Option Aircraft
Twenty-Fifth Option Aircraft
1.5 The above prices exclude [CONFIDENTIAL PORTION DELETED].
1.6 As consideration for this option, Buyer will pay to BRAD, upon exercise
of each Option Aircraft Block , the non-refundable sum of [CONFIDENTIAL
PORTION DELETED]., such non-refundable sum to be treated as a deposit
against [CONFIDENTIAL PORTION DELETED].
1.7 All dollar amounts in this Letter Agreement are in U.S. dollars.
1.8 To exercise its option to purchase the First Option block, Buyer shall
notify BRAD in writing on or before the first day of the fifteenth
(15th) month prior to the month of scheduled delivery of the First
Option Aircraft. To exercise its option to purchase the Second Block of
Option Aircraft, Buyer shall also notify BRAD in writing on or before
the first day of the fifteenth (15th) month prior to the delivery of
the Fourteenth Option Aircraft.
<PAGE> 32
1.9 Buyer and BRAD will negotiate a definitive agreement for the purchase
of each Option Aircraft block within thirty (30) days of notice of
exercise of the respective Option Aircraft block. The definitive
agreements for the Option Aircraft will be based on the terms of the
Agreement, excluding the provisions of any letter agreements forming
part of the Agreement, and will include additional provisions to be
mutually agreed upon. If the definitive agreements are not signed by
the end of the thirty (30) day period either party may, within ten (10)
days of the end of such period, cancel the option for such Option
Aircraft by written notice. Upon execution of such definitive
agreements, the Option Aircraft so exercised shall become firm and the
terms of payment per letter agreement B95-7701-MJR-004 shall become
applicable to such Aircraft.
1.10 If Buyer fails to take delivery of and pay for any Firm Aircraft, BRAD
may cancel this option and terminate any unperformed definitive
agreements for the purchase of the Option Aircraft.
If Buyer fails to exercise its option to purchase the First Option
Aircraft Block , then the option to purchase the Second Optiona
Aircraft Block is cancelled.
1.11 If Buyer does not exercise either option, if an option is canceled, or
if BRAD terminates a definitive agreement under 1.9 or 1.10 above, BRAD
will retain all payments received for both blocks of Option Aircraft.
1.12 The options in this Letter Agreement are not assignable to third
parties without the written consent of BRAD.
Yours truly,
BOMBARDIER INC.
- -------------------------
Paul H. Francoeur,
Vice-President, Contracts
ACCEPTED AND AGREED TO
this day of March, 1995
Mesa Airlines, Inc.
By:
----------------------
Title:
-------------------
<PAGE> 33
Mesa Airlines, Inc.,
2325 East 30th,
Farmington, New Mexico.
U.S.A. 87401
Attention: Mr. Larry Risley, Chairman
Gentlemen,
RE: LETTER AGREEMENT NO. B95-7701-MJR-014
(RE: TRADE-IN OF DASH-8 SERIES 100 AIRCRAFT)
Reference is made to Purchase Agreement No. B95-7701-PA-299 (the "Agreement")
between Bombardier Inc., represented by its Bombardier Regional Aircraft
Division ("BRAD") and Mesa Airlines, Inc. ("Buyer") for the sale of twenty-five
(25) DHC-8 Series 200 aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
SERIES 100 TRADE IN AIRCRAFT
Quantity and Price
- -BRAD will take in [CONFIDENTIAL PORTION DELETED].
Other Conditions
[CONFIDENTIAL PORTION DELETED]
Payment and Delivery Schedule
[CONFIDENTIAL PORTION DELETED]. It is currently envisaged that these aircraft
are to be available in March 1995.
If the foregoing correctly sets forth your understanding of our agreement with
respect to the above matters, please indicate your acceptance and agreement
below.
Yours truly
Bombardier Regional Aircraft Division
- -------------------------------------
Paul H. Francoeur
Vice-President, Contracts
ACCEPTED AND AGREED TO:
this day of March, 1995
Mesa Airlines, Inc.
By:
----------------------------------
Title:
-------------------------------
<PAGE> 34
March 24, 1995
Mesa Airlines, Inc.,
2325 East 30th,
Farmington, New Mexico.
U.S.A. 87401
Attention: Mr. Larry Risley, Chairman
Gentlemen,
RE: LETTER AGREEMENT NO. B95-7701-MJR-015
(RE: TRADE-IN OF DASH-8 SERIES 300 AIRCRAFT)
Reference is made to Purchase Agreement No. B95-7701-PA-299 (the "Agreement")
between Bombardier Inc., represented by its Bombardier Regional Aircraft
Division ("BRAD") and Mesa Airlines, Inc. ("Buyer") for the sale of twenty-five
(25) DHC-8 Series 200 aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
SERIES 300 TRADE-IN AIRCRAFT
Quantity and Price
BRAD will take in [CONFIDENTIAL PORTION DELETED].
Maintenance Reserves
[CONFIDENTIAL PORTION DELETED]
Return Conditions
It is understood that these aircraft will meet the following return standards:
[CONFIDENTIAL PORTION DELETED]
Other Conditions
The trade-in commitment is subject to BRAD receiving all other documents for the
completion of BRAD's due diligence of the lease of Serial Number 279,
[CONFIDENTIAL PORTION DELETED] and that such due diligence does not adversely
affect BRAD.
Payment and Delivery Schedule
[CONFIDENTIAL PORTION DELETED]
On-Going Support
[CONFIDENTIAL PORTION DELETED]
Return Schedule
[CONFIDENTIAL PORTION DELETED]
<PAGE> 35
If the foregoing correctly sets forth your understanding of our agreement with
respect to the above matters, please indicate your acceptance and agreement
below.
Yours truly
Bombardier Regional Aircraft Division
- -------------------------------------
Paul H. Francoeur
Vice-President, Contracts
ACCEPTED AND AGREED TO:
this ...... day of March, 1995
Mesa Airlines, Inc.
By:
-----------------------------------
Title:
-----------------------------------
<PAGE> 36
Date: March 24, 1995
Our Ref: B95-7701-MJR-001
Mesa Airlines, Inc.
2325 East 30th
Farmington, New Mexico
U.S.A. 87401
Attention: Mr. Larry Risley, Chairman
Gentlemen:
RE: LETTER AGREEMENT NO. B95-7701-MJR-001
(RE: FUTURE TRADE-IN RIGHTS)
Reference is made to Purchase Agreement No. B95-7701-PA-299 (the "Agreement")
between Bombardier Inc., represented by its Bombardier Regional Aircraft
Division ("BRAD") and Mesa Airlines, Inc. (Mesa) for the sale of Twenty-Five
(25) DHC-8- 200 aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement and not defined herein, shall have
the same meanings as in the Agreement.
Future Trade-in Rights
Buyer will be entitled to trade-in any of its Aircraft against the acquisition
of any of BRAD's current products, including the de Havilland Dash-8 will be
entitled to trade-in any of its Aircraft against the acquisition of any of
BRAD's current products, including the de Havilland Dash-8 Series 400 aircraft
or Canadair CRJX aircraft, if either or both of such programs proceed. The
trade-in of Aircraft and the acquisition of any of BRAD's products shall be
subject to mutual agreement on terms and conditions prevailing at the time of
trade-in.
If the foregoing correctly sets forth your understanding of our agreement with
respect to the above matters, please indicate your acceptance and agreement
below.
Yours truly,
Bombardier Regional Aircraft Division
- -------------------------------
Paul H. Francoeur,
Vice-President, Contracts
ACCEPTED AND AGREED TO:
this ...... day of March, 1995
Mesa Airlines, Inc.
By:
-----------------------------------
Title:
-----------------------------------
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<S> <C>
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<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1995
<PERIOD-END> MAR-31-1995
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0
0
<OTHER-SE> 81,722
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<SALES> 208,263
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<OTHER-EXPENSES> 1,625
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<INTEREST-EXPENSE> 2,982
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<INCOME-TAX> 1,720
<INCOME-CONTINUING> 2,808
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,808
<EPS-PRIMARY> .08
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</TABLE>
