SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission file number 0-21976
ATLANTIC COAST AIRLINES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3621051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515-A Shaw Road, Dulles, Virginia 20166
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (703) 925-6000
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 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
As of November 10, 1999, there were 18,550,758 shares of common stock,
par value $.02 per share, outstanding.
THIS DOCUMENT IS A COPY OF THE FORM 10Q FILED ON NOVEMBER 16,1999
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
<PAGE> 2
Part I. Financial Information
Item 1. Financial Statements
Atlantic Coast Airlines Holdings, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION
(In thousands except for share data and par December 31, September 30,
values) 1998 1999
(Unaudited)
Assets
Current:
<S> <C> <C>
Cash and cash equivalents $ 64,412 $43,272
Short term investments 63 65
Accounts receivable, net 30,210 36,143
Expendable parts and fuel inventory, 3,377 4,078
net
Prepaid expenses and other current 3,910 14,271
assets
Deferred tax asset 2,534 2,534
Total current assets 104,506 100,363
Property and equipment at cost, net of
accumulated depreciation and amortization 88,326 111,819
Preoperating costs, net of accumulated
amortization 1,486 -
Intangible assets, net of accumulated 2,382 2,296
amortization
Debt issuance costs, net of accumulated
amortization 3,420 3,528
Aircraft deposits 21,060 39,453
Other assets 6,446 8,002
Total assets $ 227,626 $265,461
Liabilities and Stockholders' Equity
Current:
Accounts payable $ 5,262 $ 5,454
Current portion of long-term debt 3,450 4,110
Current portion of capital lease 1,334 1,824
obligations
Accrued liabilities 26,330 34,940
Total current liabilities 36,376 46,328
Long-term debt, less current portion 63,289 74,130
Capital lease obligations, less current 1,446 5,909
portion
Deferred tax liability 6,238 6,238
Deferred credits, net 9,900 15,486
Total liabilities 117,249 148,091
Stockholders' equity:
Common stock: $.02 par value per share;
shares authorized 65,000,000; shares issued
20,821,001 and 21,004,690 respectively;
shares outstanding 19,348,501 and 416 419
18,549,024 respectively
Additional paid-in capital 85,215 86,788
Less: Common stock in treasury, at cost,
1,472,500 and 2,455,666 shares respectively (17,069) (34,046)
Retained earnings 41,815 64,209
Total stockholders' equity 110,377 117,370
Total liabilities and stockholders' $ 227,626 $265,461
equity
</TABLE>
See accompanying notes to the condensed consolidated financial
statements.
<PAGE> 3
Atlantic Coast Airlines Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended September 30,
(In thousands, except for per share data) 1998 1999
Operating revenues:
<S> <C> <C>
Passenger $ 76,890 $ 89,758
Other 1,210 1,264
Total operating revenues 78,100 91,022
Operating expenses:
Salaries and related costs 17,598 21,763
Aircraft fuel 6,434 8,715
Aircraft maintenance and materials 5,982 5,272
Aircraft rentals 9,543 11,625
Traffic commissions and related fees 10,641 14,633
Facility rents and landing fees 3,768 4,590
Depreciation and amortization 1,532 2,350
Other 5,547 7,542
Total operating expenses 61,045 76,490
Operating income 17,055 14,532
Other income (expense):
Interest expense (712) (1,408)
Interest income 1,079 882
Other, net (28) (27)
Total other income (expense) 339 (553)
Income before income tax provision 17,394 13,979
Income tax provision 6,781 5,628
Net income $10,613 $8,351
Income per share:
Basic $0.55 $0.45
Diluted $0.49 $0.40
Weighted average shares used in computation:
-basic 19,198 18,655
-diluted 22,244 21,632
</TABLE>
See accompanying notes to the condensed consolidated financial
statements.
<PAGE> 4
Atlantic Coast Airlines Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended September 30,
(In thousands, except for per share data) 1998 1999
Operating revenues:
<S> <C> <C>
Passenger $208,398 $252,571
Other 3,516 3,851
Total operating revenues 211,914 256,422
Operating expenses:
Salaries and related costs 48,776 62,074
Aircraft fuel 17,237 23,335
Aircraft maintenance and materials 17,579 17,638
Aircraft rentals 26,760 33,344
Traffic commissions and related fees 31,154 40,459
Facility rents and landing fees 9,698 13,171
Depreciation and amortization 4,380 6,461
Other 16,042 21,231
Total operating expenses 171,626 217,713
Operating income 40,288 38,709
Other income (expense):
Interest expense (2,860) (3,905)
Interest income 3,016 2,777
Debt conversion expense (1,410) -
Other, net 33 (106)
Total other income (expense) (1,221) (1,234)
Income before income tax provision and cumulative effect
of accounting change 39,067 37,475
Income tax provision 16,380 14,293
Income before cumulative effect of
accounting change 22,687 23,182
Cumulative effect of accounting change, net of income - (888)
tax
Net income $22,687 $22,294
Income per share:
Basic
Income before cumulative effect of accounting $1.28 $1.21
change
Cumulative effect of accounting change - (0.04)
Income per share $1.28 $1.17
Diluted
Income before cumulative effect of accounting
change $1.07 $1.07
Cumulative effect of accounting change - (0.04)
Income per share $1.07 $1.03
Weighted average shares used in computation:
-basic 17,737 19,089
-diluted 22,143 22,159
</TABLE>
See accompanying notes to the condensed consolidated financial
statements.
<PAGE> 5
Atlantic Coast Airlines Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
(In thousands) 1998 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 22,687 $ 22,294
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,858 6,511
Write off of preoperating costs - 1,486
Amortization of intangibles and 522 132
preoperating costs
Provision for uncollectible accounts and
inventory obsolescence 50 55
Amortization of deferred credits (550) (581)
ESOP termination costs - 214
Gain on disposal of fixed assets 211 380
Amortization of debt discount and finance 37 52
cost
Debt conversion expense 1,410 -
Interest on debt conversion 162 -
Interest on credit due from manufacturer (442) (247)
Capitalized interest (1,241) (1,190)
Gain on ineffective hedge position - (211)
Other 708 171
Changes in operating assets and
liabilities:
Accounts receivable (8,273) (3,181)
Expendable parts and fuel inventory (615) (700)
Prepaid expenses and other current assets (6,764) (8,753)
Preoperating costs (5) -
Accounts payable 649 1,163
Accrued liabilities 8,653 8,560
Net cash provided by operating activities 21,057 26,155
Cash flows from investing activities:
Purchases of property and equipment (32,194) (26,249)
Note receivable from executive officer - (1,260)
Maturities of short term investments 10,678 -
Funding provided for regional terminal - (10,801)
Reimbursement of regional terminal funding - 7,751
Refund of aircraft lease deposits and other 120 3
Payments for aircraft deposits and other (500) (17,270)
Net cash used in investing activities (21,896) (47,826)
Cash flows from financing activities:
Proceeds from bridge loan - 7,751
Stock repurchases - (17,192)
Proceeds from spare engine financing 1,318 6,546
Proceeds from issuance of long-term debt 16,767 14,708
Payments of long-term debt (1,787) (3,162)
Payments on the bridge loan - (7,751)
Payments of capital lease obligations (2,320) (1,275)
Deferred financing costs (1,529) (284)
Proceeds from exercise of stock options 1,653 1,190
Net cash provided by financing activities 14,102 531
Net increase (decrease) in cash and cash 13,263 (21,140)
equivalents
Cash and cash equivalents, beginning of period 39,167 64,412
Cash and cash equivalents, end of period $ 52,430 $ 43,272
</TABLE>
See accompanying notes to the condensed consolidated financial
statements.
<PAGE> 6
ATLANTIC COAST AIRLINES HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Atlantic Coast Airlines Holdings, Inc. ("ACAI") and its
subsidiaries, Atlantic Coast Airlines ("ACA") and Atlantic Coast Jet,
Inc. ("ACJet"), (ACAI, ACA and ACJet, together, the "Company"), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished in the condensed
consolidated financial statements includes normal recurring adjustments
and reflects all adjustments which are, in the opinion of management,
necessary for a fair presentation of such condensed consolidated
financial statements. Results of operations for the three and nine month
periods presented are not necessarily indicative of the results to be
expected for the year ending December 31, 1999. Certain amounts as
previously reported have been reclassified to conform to the current year
presentation. Certain information and footnote disclosures normally
included in the consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements, and the notes thereto, included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
2. OTHER - COMMITMENTS
On May 4, 1999, the Company entered into two interest rate swap contracts
having an aggregate notional amount of $13 million to hedge its exposure
by approximately 37%, to interest rate changes until permanent financing
for two RJ aircraft scheduled for delivery in October and November 1999,
is secured. On July 2, 1999, the Company entered into an interest rate
swap contract having an aggregate notional amount of $7 million to hedge
its exposure by approximately 40%, to interest rate changes until
permanent financing for the RJ aircraft scheduled for delivery in
December 1999, is secured. On August 25, 1999, the Company entered into
three interest rate swap contracts having an aggregate notional amount of
$23 million to hedge its exposure by approximately 44%, to interest rate
changes until permanent financing for three RJ aircraft scheduled for
delivery in March, April and May 2000, is secured.
In April 1999, the Company entered into commodity swap transactions to
hedge price changes on approximately 18,700 barrels of jet fuel per month
during the period from July through September 1999. The contracts
provided for an average fixed price of 45.5 cents per gallon of jet fuel.
In June 1999, the Company entered into commodity swap transactions to
hedge price
<PAGE> 7
changes on approximately 36,700 barrels of jet fuel per month during the
period from July through September 1999. The contracts provide for an
average fixed price of 41.55 cents per gallon of jet fuel. During the
third quarter 1999, the Company recognized gains of approximately
$950,000 as a reduction of fuel expense. Also in April 1999, the Company
entered into a call option contract to hedge price changes on
approximately 19,300 barrels of crude oil per month during the period
from October through December 1999. The contract provides for a premium
payment of approximately $75,400 and sets a cap on the maximum price
equal to approximately 42 cents per gallon of jet fuel excluding taxes
and into-plane fees with the premium and any gains on this contract to be
recognized as a component of fuel expense during the period in which the
Company purchases fuel. With this transaction, the Company has hedged
approximately 20% of its projected jet fuel requirements for the fourth
quarter of 1999.
The Metropolitan Washington Airport Authority ("MWAA"), in coordination
with the Company, has built an approximately 69,000 square foot regional
passenger concourse at Washington Dulles International Airport,
("Washington-Dulles"). The facility opened on May 2, 1999. The Company
has agreed to obtain its own interim financing from a third party lender
to fund a portion of the total program cost of the regional concourse for
approximately $15 million. The Company's remaining obligation as of
September 30, 1999 is approximately $1.9 million. MWAA has agreed to
replace the Company's interim financing with the proceeds of bonds or, if
obtained, Passenger Facility Charges ("PFC") funds, no later than one
year following the substantial completion date of the project.
In February 1999, the Company entered into an asset-based lending
agreement with two financial institutions that provides the Company with
a $15 million bridge loan for the construction of the regional terminal
at Washington-Dulles and a line of credit for up to $35 million depending
on the amount of assigned ticket receivables and the value of certain
rotable spare parts. The $35 million line of credit replaces a previous
$20 million line of credit. The interest rate on this line is LIBOR plus
.75% to 1.75% depending on the Company's fixed charges coverage ratio.
During the first nine months of 1999, the Company borrowed $7.8 million
on the bridge loan and recorded a receivable from MWAA for $10.9 million.
In May 1999, MWAA paid the Company $7.8 million, and the Company repaid
its borrowings on the bridge loan. As of September 30, 1999 there are no
outstanding borrowings on the bridge loan. A note receivable from MWAA of
$3.1 million is recorded at September 30, 1999. No additional amounts
were drawn on the bridge loan for this additional $3.1 million funding.
However, the Company may do so in the future as desired.
The Company has firm orders for 45 RJs in addition to the 21 previously
delivered, and options for an additional 27 RJs. The delivery schedule
for the 45 firm orders is as follows: two are scheduled for the fourth
quarter of 1999, fifteen in 2000, eighteen in 2001, and ten in 2002.
Twenty-two of the 45 firm ordered aircraft are for the United Express
operation, 20 for the Delta Connection operation (see footnote 9), and
<PAGE> 8
three remain unallocated as of November 1, 1999. The value of the
remaining 45 undelivered aircraft on firm order is approximately $830
million.
The Company also has a firm order for 25 328JET feeder jet aircraft and a
conditional order for 55 328JET and 428JET feeder jet aircraft, and
options for an additional 85 feeder jet aircraft, from Fairchild
Aerospace Corporation. The delivery schedule for the 25 firm orders for
the Delta Connection operation is as follows: fourteen in 2000 and eleven
in 2001. The value of the aircraft on firm order is approximately $275
million and the value of the aircraft in the conditional order (excluding
the option aircraft) is approximately $700 million. The Company requires
United's approval to operate more than 43 jet aircraft as United Express.
The conditional portion of the Fairchild order is contingent on the
Company receiving United's approval to operate the feeder jets as United
Express. The Company at its option may waive the condition and enter into
commitments for firm delivery positions under the Fairchild agreement.
During the third quarter of 1999, the Company executed a seven year
engine services agreement with GE Engine Services, Inc. ("GE") covering
the scheduled and unscheduled repair of ACA's CF34-3B1 jet engines
operated on the 43 RJs already delivered or on order for the United
Express operation. Under the terms of the agreement, the Company will pay
a set dollar amount per engine hour flown on a monthly basis to GE and GE
assumes the responsibility to repair the engines when required at no
additional expense to the Company, subject to certain exclusions. The
Company intends to expense the amount due based on the monthly rates
stipulated in the agreement, as engine hours are flown.
3. NOTE RECEIVABLE
Included in prepaid expenses and other current assets as of September 30,
1999 is a promissory note from an executive officer of the Company dated
as of May 24, 1999 with a balance including accrued interest of $1.26
million. The note accrues interest on the outstanding balance at 7.75%
payable quarterly. The note is payable in full no later than May 25,
2000. The Company has the right to offset the balance due on the note by
certain amounts that may be payable if the officer's employment
terminates.
4. INCOME TAXES
For the third quarter 1999, the Company had a combined effective tax rate
for state and federal taxes of 40.3%. The Company's combined statutory
tax rate for state and federal taxes is approximately 40%. The Company's
annualized 1999 effective tax rate is positively affected by the
application of certain 1998 and prior, state tax credits that were
determined realizable in 1999.
<PAGE> 9
5. STOCK PURCHASE PLAN
On April 21, 1999, the Company's Board of Directors approved a plan to
purchase up to $20 million or five percent of its then current
outstanding shares in open market or private transactions over a twelve-
month period. The Company purchased 871,500 shares of its common stock
during the second quarter of 1999 at an average price of $17.17 per
share, and an additional 125,000 shares during the third quarter of 1999
at an average price of $17.81 per share.
6. INCOME PER SHARE
The computation of basic income per share is determined by dividing net
income by the weighted average number of common shares outstanding.
Diluted income per share is computed by dividing net income by the
weighted average number of common shares outstanding and common stock
equivalents, which consist of shares subject to stock options computed
using the treasury stock method. In addition, under the if-converted
method, dilutive convertible securities are included in the denominator
while related interest expense, net of tax, for convertible debt is added
to the numerator. A reconciliation of the numerator and denominator used
in computing basic and diluted income per share is as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
(in thousands) 1998 1999 1998 1999
<S> <C> <C> <C> <C>
Income (basic) $10,613 $8,351 $22,687 $22,294
Interest expense on 7%
Convertible Notes net of tax 183 208 979 623
effect
Income (diluted) $10,796 $8,559 $23,666 $22,917
Weighted average shares
outstanding (basic) 19,198 18,655 17,737 19,089
Incremental shares related to
stock options 844 775 894 868
Incremental shares related to 7%
Convertible Notes 2,202 2,202 3,512 2,202
Weighted average shares
outstanding (diluted) 22,244 21,632 22,143 22,159
</TABLE>
7. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
The American Institute of Certified Public Accountants issued Statement
of Position 98-5 on accounting for start-up costs, including preoperating
costs related to the introduction of new fleet types by airlines. The new
accounting guidelines became effective January 1, 1999. The Company had
previously deferred certain start-up costs related to the introduction of
the RJs and was amortizing such costs to expense ratably over four years.
In January 1999, the Company recorded an after tax charge for the
remaining unamortized balance of approximately $888,000, ($1,486,000
pretax), associated with previously deferred preoperating costs.
<PAGE> 10
8. EMPLOYEE STOCK OWNERSHIP PLAN
Effective June 1, 1998, the Board of Directors of the Company voted to
terminate the Employee Stock Ownership Plan (the "ESOP"). The Company
received a determination letter from the IRS on March 15, 1999 which
notified the Company that the termination of the ESOP does not adversely
affect the qualifications of the plan for federal tax purposes. In
preparing for the final distribution of ESOP shares to participants, it
was discovered that a misallocation of shares had occurred in years 1993
through 1997 resulting in a few of the eligible participants not
receiving some of their entitled shares. The Company contributed the
required number of additional shares to the ESOP during the second and
third quarters of 1999 when the final calculation was determined and
recognized approximately $250,000 in expense. The Company has filed a
request for a compliance statement under the IRS's Voluntary Compliance
Resolution Program to obtain Service approval of the Company's response
to the share misallocation issue. In September 1999, the ESOP trustee
distributed the ESOP assets per participant's direction. The ESOP will
continue until all participants are located and any remaining assets are
properly distributed.
9. DELTA CONNECTION AGREEMENT
The Company has reached a ten year agreement with Delta Air Lines, Inc.
to operate regional jet aircraft as part of the Delta Connection program
on a fee-per-departure basis. Under the fee-per-departure structure, the
Company bears the risk to operate the flight schedule, and Delta assumes
the risk of marketing and selling seats to the traveling public. Delta
may terminate the agreement at any time if the Company fails to maintain
certain performance standards, and may terminate without cause, effective
no earlier than two years after commencement of operations, by providing
180 days notice to the Company. The Delta Connection Agreement provides
the Company with certain rights in the event of termination without
cause. The Company has ordered 20 50-seat Canadair regional jets from
Bombardier Aerospace of Montreal and 25 328JET feeder jets from Fairchild
for this new venture. The Company has established a new subsidiary,
Atlantic Coast Jet, Inc. ("ACJet"), d.b.a. Delta Connection, which is now
in the application and approval process with the applicable federal
agencies to obtain authority to conduct scheduled passenger air
transportation of jet aircraft. Initial Delta Connection service to
various destinations in the Northeast United States is expected to begin
no sooner than April 2000, subject to satisfactory resolution of
regulatory requirements and other start-up considerations. The Company
can make no assurances that its ACJet subsidiary will receive all
necessary regulatory approvals by this date.
<PAGE> 11
10. SUBSEQUENT EVENTS
In October 1999, the Company entered into commodity swap transactions to
hedge price changes on approximately 13,300 barrels of crude oil per
month for the period April to June 2000, and on approximately 23,300
barrels of crude oil per month for the period July through September
2000. The contracts provide for an average fixed price equal to
approximately 52.6 cents per gallon for the second quarter of 2000 and 51
cents per gallon for the third quarter of 2000. With these transactions
and taking into account that Delta Air Lines, Inc. bears the economic
risk of fuel price fluctuations for future fuel requirements associated
with the Delta Connection program, the Company has hedged approximately
20% of its anticipated jet fuel requirements for the fourth quarter of
1999; 11% for the second quarter 2000; 22% for the third quarter 2000;
and 15%, for the fourth quarter of 2000.
In October 1999, the Company funded an additional $870,000 to MWAA as
part of its obligation for the construction of the regional passenger
concourse at Washington Dulles Airport. The Company's remaining
obligation is approximately $1.0 million.
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Third Quarter Operating Statistics
<TABLE>
<CAPTION>
Increase
Three months ended September 30, 1998 1999 (Decrease
)
<S> <C> <C> <C>
Revenue passengers carried 712,556 879,748 23.5%
Revenue passenger miles ("RPMs") 221,746 280,186 26.3%
(000's)
Available seat miles ("ASMs") (000's) 381,503 456,899 19.8%
Passenger load factor 58.1% 61.3% 3.2 pts
Break-even passenger load factor 1 45.2% 51.4% 6.2 pts
Revenue per ASM (cents) 20.2 19.6 (3.0%)
Yield (cents) 34.7 32.0 (7.8%)
Cost per ASM (cents) 16.0 16.7 (4.4%)
Average passenger fare $107.91 $102.03 (5.4%)
Average passenger segment (miles) 311 318 2.3%
Revenue departures - scheduled 46,085 49,575 7.6%
Revenue departures - completed 44,884 47,379 5.6%
Revenue block hours 59,264 63,339 6.9%
Aircraft utilization (block hours) 9.6 8.9 (7.3%)
Average cost per gallon of fuel (cents) 2 67.9 74.2 9.3%
Aircraft in service (end of period) 72 80 11.1%
</TABLE>
Comparison of three months ended September 30, 1999, to three months
ended September 30, 1998.
Results of Operations
The following Management's Discussion and Analysis contains
forward-looking statements and information that are based on management's
current expectations as of the date of this document. When used herein,
the words "anticipate", "believe", "estimate" and "expect" and similar
expressions, as they relate to the Company's management, are intended to
identify such forward-looking statements. Such forward-looking statements
are subject to risks, uncertainties, assumptions and other factors that
may cause the actual results of the Company to be materially different
from those reflected in such forward-looking statements. Such factors
include, among others, the costs of implementing jet service, the
response of the Company's competitors to the Company's business strategy,
the amount and timing of Delta Connection start-up costs, obtaining
regulatory approval for ACJet to conduct air transportation, the ability
of the Company to obtain favorable financing terms for its aircraft, the
<PAGE> 13
ability of aircraft manufacturers to deliver aircraft on schedule, market
acceptance of the Company's jet service, routes and schedules offered by
the Company, the ability to identify, implement and profitably operate
new business opportunities, the success of the Company's and other third
party's Year 2000 remediation efforts, the cost of fuel, the weather,
general economic conditions, changes in and satisfaction of regulatory
requirements, aircraft remarketing and fleet rationalization costs, and
the factors discussed below and in the Company's Annual Report on Form 10-
K for the year ended December 31, 1998. The Company does not intend to
update these forward-looking statements prior to its next required filing
with the Securities and Exchange Commission.
General
In the third quarter of 1999 the Company posted net income of
$8.4 million compared to net income of $10.6 million for the third
quarter of 1998. In the three months ended September 30, 1999, the
Company earned pretax income of $14.0 million compared to $17.4 million
in the three months ended September 30, 1998. Unit revenues, revenue per
ASM ("RASM"), decreased 3.0% to 19.6 cents year over year, while unit
costs, operating cost per ASM ("CASM"), increased 4.4% to 16.7 cents year
over year. This resulted in operating margin decreasing to 16% for the
third quarter of 1999 from 21.8% for the third quarter of 1998. Total
passengers increased 23.5% in the third quarter of 1999 compared to the
third quarter of 1998 to 879,748 passengers.
Operating Revenues
The Company's operating revenues increased 16.5% to $91.0
million in the third quarter of 1999 compared to $78.1 million in the
third quarter of 1998. The increase resulted from a 19.8% increase in
ASMs and an increase in load factor of 3.2 percentage points, partially
offset by a 7.8% decrease in yield (ratio of passenger revenue to revenue
passenger miles). Operating revenues were negatively affected by severe
hurricane weather during the third quarter of 1999, while operating
revenues during the third quarter of 1998 were positively impacted by a
work stoppage by labor at Northwest Airlines.
The increase in ASMs is the result of service expansion
utilizing additional Canadair 50 seat Regional Jets ("RJs"). The Company
was operating in revenue service 20 RJs as of September 30, 1999 as
compared to eleven as of September 30, 1998. The scheduling in 1999 of
RJs on routes previously flown by turboprop aircraft has led to the
average aircraft stage length for all aircraft in the fleet remaining
essentially unchanged on a year over year basis at 272 miles as compared
to 271 miles. The average aircraft stage length of the RJ decreased 8.6%
to 433 miles for the third quarter of 1999 as compared to 474 miles for
the third quarter of 1998.
The year over year percentage reduction in yield is
attributable to additional competition at the Company's Washington-Dulles
<PAGE> 14
hub, general industry yield weakness, and an increase of 2.3% in the
average passenger trip length to 318 miles.
Operating Expenses
The Company's operating expenses increased 25.3% in the third
quarter of 1999 compared to the third quarter of 1998 due primarily to a
19.8% increase in ASMs, a 23.5% increase in passengers carried and a 9.3%
increase in the price per gallon of jet fuel coupled with a 16.1%
increase in the average fuel burn rate to 186 gallons per block hour. The
increase in ASMs reflects the net addition of nine RJs into scheduled
service since the end of the third quarter of 1998. A summary of
operating expenses as a percentage of operating revenues and cost per ASM
for the three months ended September 30, 1998, and 1999 is as follows:
<TABLE>
<CAPTION>
Three Months ended September 30
1998 1999
Percent Cost Percent Cost
of of
Operating Per ASM Operating Per ASM
Revenues (cents) Revenues (cents)
<S> <C> <C> <C> <C>
Salaries and related costs 22.5% 4.6 23.9% 4.8
Aircraft fuel 8.2% 1.7 9.6% 1.9
Aircraft maintenance and 7.7% 1.6 5.8% 1.2
materials
Aircraft rental 12.2% 2.5 12.8% 2.5
Traffic commissions and related 13.6% 2.8 16.1% 3.2
Facility rents and landing fees 4.8% 1.0 5.0% 1.0
Depreciation and amortization 2.1% 0.4 2.6% 0.5
Other 7.1% 1.4 8.2% 1.6
Total 78.2% 16.0 84.0% 16.7
</TABLE>
Cost per ASM increased 4.4% on a year-over-year basis to 16.7
cents during the third quarter of 1999 even though the Company added nine
RJs in revenue service since the end of the third quarter of 1998. The
RJ produces approximately 4.5 times more ASM's on a daily basis than one
of the Company's average-sized turboprops. The increase in CASM was
partially due to our flight completion factor decreasing by 1.8 points
principally the result of severe hurricane weather during the third
quarter and scheduled aircraft utilization decreasing 4.1% to 9.3 hours
primarily as a result of new aircraft banking operations at IAD. Aircraft
utilization was positively impacted in the third quarter of 1998 by the
work stoppage by labor at Northwest Airlines, which enabled the Company
to schedule extra flights in certain markets.
Salaries and related costs per ASM increased 4.3% to 4.8 cents
in the third quarter of 1999 compared to 4.6 cents in the third quarter
of 1998. In absolute dollars, salaries and related costs increased 23.7%
from $17.6 million in the third quarter of 1998 to $21.8 million in the
third quarter of 1999. The increase resulted primarily from additional
flight crews, customer service personnel and maintenance personnel to
support the Company's increased level of operations.
<PAGE> 15
The cost per ASM of aircraft fuel increased 11.8% to 1.9 cents
for the third quarter of 1999 as compared to 1.7 cents for the third
quarter of 1998. In absolute dollars, aircraft fuel expense increased
35.5% from $6.4 million in the third quarter of 1998 to $8.7 million, net
of gains on fuel hedges, in the third quarter of 1999. The increased fuel
expense resulted from the 6.9% increase in revenue block hours, a 9.3%
increase in the average cost per gallon of fuel from 67.9 cents to 74.2
cents including applicable taxes and into-plane fees, and the delivery of
additional RJ aircraft which burn more fuel than the J-41 and J-32
turboprop aircraft on a per ASM basis. The Company had hedged
approximately 60% of its anticipated jet fuel requirements for the third
quarter of 1999 at an average price, excluding taxes and into-plane fees,
of approximately 43.5 cents per gallon. The Company realized
approximately $950,000 in fuel expense savings during the third quarter
of 1999 as a result of its fuel hedging activity. There can be no
assurance that future increases in fuel prices will not adversely affect
the Company's operating expenses. The Company has entered into additional
hedge transactions to minimize its exposure to fuel price increases for
the remainder of 1999 and the year 2000. See "Other Commitments".
The cost per ASM of aircraft maintenance and materials
decreased 25% to 1.2 cents in the third quarter of 1999 compared to 1.6
cents in the third quarter of 1998. The large decrease in per ASM cost is
due to the addition of nine 50-seat RJs, which are currently covered by
manufacturer's warranties, since the third quarter of 1998 and the
reversal in the third quarter of 1999 of approximately $1.5 million of
maintenance accruals for major RJ engine repairs which are no longer
required as a result of the Company's new long-term maintenance agreement
with GE Engine Services. This agreement, entered into in September 1999,
provides for GE to perform all required maintenance on the RJ engine
fleet covered by the agreement. In absolute dollars, aircraft maintenance
and materials expense decreased 11.9% from $6.0 million in the third
quarter of 1998 to $5.3 million in the third quarter of 1999. Without the
reversal of the engine repair accrual, aircraft maintenance and materials
expense increased 13.2% in absolute dollars to $6.8 million.
The cost per ASM of aircraft rentals remained the same at 2.5
cents for the third quarter of 1999. In absolute dollars, aircraft
rentals increased 21.8% from $9.5 million in the third quarter of 1998 to
$11.6 million in the third quarter of 1999, reflecting the addition of
seven leased RJ aircraft.
The cost per ASM of traffic commissions and related fees
increased to 3.2 cents in the third quarter of 1999 compared to 2.8 cents
in the third quarter of 1998. In absolute dollars, traffic commissions
and related fees increased 37.5% from $10.6 million in the third quarter
of 1998 to $14.6 million in the third quarter of 1999. Approximately
$600,000 of costs relating to the third quarter of 1998 was not billed
until 1999 as a result of a billing error related to a third party
software program's inability to properly process electronic tickets.
These costs were expensed in 1999 when the error was identified,
investigated and resolved. The remaining increase results from a 16.7%
<PAGE> 16
increase in passenger revenues and a 23.5% increase in revenue
passengers.
The cost per ASM of facility rents and landing fees remained
unchanged at 1.0 cents. In absolute dollars, facility rents and landing
fees increased 21.8% from $3.8 million in the third quarter of 1998 to
$4.6 million in the third quarter of 1999. The increased costs result
primarily from the 5.6% increase in the number of departures and the
Company's occupancy of its new regional terminal at Washington Dulles on
May 2, 1999.
The cost per ASM of depreciation and amortization increased by
25% to 0.5 cents for the third quarter of 1999 from 0.4 cents for the
third quarter of 1998. In absolute dollars, depreciation and amortization
increased 53.4% from $1.5 million in the third quarter of 1998 to $2.4
million in the third quarter of 1999 primarily as a result of the
purchase of two RJs in the last four months of 1998 and one RJ in the
second quarter of 1999 and additional rotable spare parts and engines
associated with the RJs.
The cost per ASM of other operating expenses increased to 1.6
cents in the third quarter of 1999 from 1.4 cents in the third quarter of
1998. In absolute dollars, other operating expenses increased 36% from
$5.5 million in the third quarter of 1998 to $7.5 million in the third
quarter of 1999. The increased costs result primarily from one time costs
associated with the Company's replacement of core information systems and
legal settlements, the Company beginning to incur start-up costs
associated with the new Delta Connection agreement, and the 23.5%
increase in revenue passengers which results in higher passenger handling
costs.
As a result of the foregoing changes in operating expenses, and
a 19.8% increase in ASMs, total cost per ASM increased to 16.7 cents in
the third quarter of 1999 compared to 16.0 cents in the third quarter of
1998. In absolute dollars, total operating expenses increased 25.3% from
$61 million in the third quarter of 1998 to $76.5 million in the third
quarter of 1999.
The Company's combined effective tax rate for state and federal
taxes during the third quarter of 1999 was approximately 40.3% as
compared to 39% for the third quarter of 1998. The Company anticipates
its effective tax rate for the remainder of 1999 to be approximately 40%.
<PAGE> 17
Nine Months Operating Statistics
<TABLE>
<CAPTION>
Increase
(Decrease)
Nine months ended September 30, 1998 1999 % Change
<S> <C> <C> <C>
Revenue passengers carried 1,823,766 2,390,975 31.1%
Revenue passenger miles ("RPMs") 564,661 767,221 35.9%
(000's)
Available seat miles ("ASMs") (000's) 1,001,072 1,307,999 30.7%
Passenger load factor 56.4% 58.7% 2.3 pts
Break-even passenger load factor 1 45.5% 49.7% 4.2 pts
Revenue per ASM (cents) 20.8 19.3 (7.2%)
Yield (cents) 36.9 32.9 (10.8%)
Cost per ASM (cents) 17.1 16.6 (2.9%)
Average passenger fare $114.27 $105.64 (7.6%)
Average passenger segment (miles) 310 321 3.6%
Revenue departures - scheduled 130,541 145,369 11.4%
Revenue departures - completed 124,684 138,770 11.3%
Revenue block hours 165,921 184,705 11.3%
Aircraft utilization (block hours) 9.4 9.1 (3.2%)
Average cost per gallon of fuel (cents)2 68.2 69.5 1.9%
Aircraft in service (end of period) 72 80 11.1%
</TABLE>
Comparison of nine months ended September 30, 1998, to nine months ended
September 30, 1999.
Results of Operations
General
For the first nine months of 1999, the Company posted net
income of $22.3 million compared to net income of $22.7 million for the
first nine months of 1998. For the nine months ended September 30, 1999,
the Company earned pretax income of $37.5 million compared to $39.1
million for the nine months ended September 30, 1998. Unit revenues,
RASM, decreased 7.2% to 19.3 cents period over period, while unit costs,
CASM, decreased 2.9% to 16.6 cents period over period. This resulted in
the operating margin decreasing to 15.1% for the first nine months of
1999 from 19.0% for the first nine months of 1998.
<PAGE> 18
Operating Revenues
The Company's operating revenues increased 21% to $256.4
million for the first nine months of 1999 compared to $211.9 million in
the first nine months of 1998. The increase resulted from a 30.7%
increase in ASMs and an increase in load factor of 2.3 percentage points,
partially offset by a 10.8% decrease in yield.
The increase in ASM's is the result of service expansion
utilizing the RJ. The Company was operating 20 RJs in revenue service as
of September 30, 1999 as compared to eleven as of September 30, 1998.
The longer stage length of the RJ results in the average aircraft stage
length for the first nine months of 1999 increasing 2.3% over the first
nine months of 1998 to 272 miles.
The year over year percentage reduction in yield is primarily
the result of the 3.6% increase in the average passenger trip length to
321 miles, issues associated with utilizing United's Orion yield
management system during the first half of 1999, additional competition
at the Company's Washington-Dulles hub, general industry yield weakness,
and the unusually high number of weather cancellations during the first
and third quarters of 1999 that particularly disrupted high yield
business travelers. Total passengers increased 31.1% in the first nine
months of 1999 compared to the first nine months of 1998.
Operating Expenses
The Company's operating expenses increased 26.9% for the first
nine months of 1999 compared to the first nine months of 1998 due
primarily to a 30.7% increase in ASMs and a 31.1% increase in passengers
carried. The increase in ASMs reflects the net addition of nine RJs into
scheduled service since the end of the third quarter of 1998.
A summary of operating expenses as a percentage of operating revenues and
cost per ASM for the nine months ended September 30, 1998, and 1999 is as
follows:
<TABLE>
<CAPTION>
1998 1999
Percent Cost Percent Cost
of of
Operating Per ASM Operating per ASM
Revenues (cents) Revenues (cents)
<S> <C> <C> <C> <C>
Salaries and related costs 23.0% 4.9 24.2% 4.7
Aircraft fuel 8.1% 1.7 9.1% 1.8
Aircraft maintenance and 8.3% 1.7 6.9% 1.3
materials
Aircraft rentals 12.6% 2.7 13.0% 2.6
Traffic commissions and related 14.7% 3.1 15.8% 3.1
fees
Facility rents and landing fees 4.6% 1.0 5.1% 1.0
Depreciation and amortization 2.2% 0.4 2.5% 0.5
Other 7.5% 1.6 8.3% 1.6
Total 81.0% 17.1 84.9% 16.6
</TABLE>
<PAGE> 19
Cost per ASM decreased 2.9% to 16.6 cents during the first nine
months of 1999 compared to 17.1 cents during the first nine months of
1998 primarily due to the introduction of nine RJs in revenue service
since the end of the third quarter of 1998. The RJ produces
approximately 4.5 times more ASM's on a daily basis than one of the
Company's average-sized turboprops.
Salaries and related costs per ASM decreased 4.1% to 4.7 cents
in the first nine months of 1999 compared to the first nine months of
1998. In absolute dollars, salaries and related costs increased 27.3%
from $48.8 million in the first nine months of 1998 to $62.1 million in
the first nine months of 1999. The increase resulted primarily from
additional flight crews, customer service personnel and maintenance
personnel to support the Company's increased level of operations.
The cost per ASM of aircraft fuel increased 5.9% to 1.8 cents
for the first nine months of 1999 as compared to 1.7 cents for the first
nine months of 1998. In absolute dollars, aircraft fuel expense increased
35.4% from $17.2 million in the first nine months of 1998 to $23.3
million in the first nine months of 1999. The increased fuel expense
resulted from the 11.3% increase in revenue block hours, a 1.9% increase
in the average cost per gallon of fuel from 68.2 cents to 69.5 cents
including taxes and into-plane fees, and the delivery of additional RJ
aircraft which burn more fuel than the J-41 and J-32 turboprop aircraft
on a per ASM basis. The Company had hedged approximately 70% of its jet
fuel requirements for the first nine months of 1999 at an average price,
excluding taxes and into-plane fees, of approximately 43.8 cents per
gallon. The Company realized net savings of approximately $355,000 in
fuel costs during the first nine months of 1999 as a result of its fuel
hedging activity. There can be no assurance that future increases in
fuel prices will not adversely affect the Company's operating expenses.
The Company has entered into additional hedge transactions to minimize
its exposure to fuel price increases during the remainder of 1999 and the
year 2000. See "Other Commitments".
The cost per ASM of aircraft maintenance and materials
decreased 23.5% to 1.3 cents in the first nine months of 1999 compared to
the first nine months of 1998. In absolute dollars, aircraft maintenance
and materials expense increased 0.3% in the first nine months of 1999 to
$17.6 million.
The cost per ASM of aircraft rentals decreased to 2.6 cents for
the first nine months of 1999 compared to 2.7 cents for the first nine
months of 1998. This decrease is the result of leasing six additional RJ
aircraft which generally have lower per ASM ownership costs than the
turboprop aircraft and the purchase of three RJ aircraft during this
period which reduce aircraft rental expense per ASM. In absolute dollars,
aircraft rentals increased 24.6% from $26.8 million in the first nine
months of 1998 to $33.3 million in the first nine months of 1999
reflecting the addition of the six leased RJ aircraft.
<PAGE> 20
The cost per ASM of traffic commissions and related fees
remained the same at 3.1 cents in the first nine months of 1999 and 1998,
respectively. In absolute dollars, traffic commissions and related fees
increased 29.9% from $31.2 million in the first nine months of 1998 to
$40.5 million in the first nine months of 1999. The increase resulted
from a 21.2% increase in passenger revenues and a 31.1% increase in
passengers.
The cost per ASM of facility rents and landing fees remained
the same at 1.0 cents. In absolute dollars, facility rents and landing
fees increased 35.8% from $9.7 million in the first nine months of 1998
to $13.2 million in the first nine months of 1999. The increased costs
result primarily from the 11.3% increase in the number of departures
which includes the addition of the Chicago-O'Hare hub operation and the
Company's occupancy of the new regional terminal at Washington-Dulles on
May 2, 1999.
The cost per ASM of depreciation and amortization increased to
0.5 cents for the first nine months of 1999 compared to 0.4 cents for the
first nine months of 1998. In absolute dollars, depreciation and
amortization increased 47.5% from $4.4 million in the first nine months
of 1998 to $6.5 million in the first nine months of 1999 primarily as a
result of additional rotable spare parts and engines associated with the
RJs and the purchase of two RJs in the last four months of 1998 and one
in the second quarter of 1999.
The cost per ASM of other operating expenses remained the same
at 1.6 cents in the first nine months of 1999 and 1998. In absolute
dollars, other operating expenses increased 32.3% from $16.0 million in
the first nine months of 1998 to $21.2 million in the first nine months
of 1999. The increased costs result primarily from the 31.1% increase in
revenue passengers which resulted in higher passenger handling costs, one
time expenses incurred for closure of the Company's ESOP, replacement of
core information systems and legal fees, and the beginning of start-up
costs for the Delta Connection agreement.
As a result of the foregoing changes in operating expenses, and
a 30.7% increase in ASMs, total cost per ASM decreased to 16.6 cents in
the first nine months of 1999 compared to 17.1 cents in the first nine
months of 1998. In absolute dollars, total operating expenses increased
26.9% from $171.6 million in the first nine months of 1998 to $217.7
million in the first nine months of 1999.
The Company's combined effective tax rate for state and federal
taxes during the first nine months of 1999 was approximately 38.1% as
compared to 41.9% for the first nine months of 1998. This decrease is due
to the non deductibility for taxes of a one time non-cash, non-operating
charge recorded in the second quarter of 1998 related to the temporary
reduction in the conversion price for holders of the Company's 7%
Convertible Subordinated Notes and the application of certain 1998 and
prior, state tax credits that were determined realizable in 1999. The
<PAGE> 21
Company anticipates its effective tax rate for the remainder of 1999 to
be approximately 40%.
Outlook
This outlook section contains forward-looking statements which
are subject to the risks and uncertainties set forth above on pages 12
and 13.
On October 21, 1999, the Company announced that effective
January 1, 2000, President and CEO Kerry Skeen will become Chairman of
the Board of Directors while retaining his role as Chief Executive
Officer. C. Edward Acker will retire as Chairman on that date, but will
remain a member of the Board. Thomas Moore, presently Executive Vice-
president and Chief Operating Officer, will become President and COO on
January 1, 2000.
As of November 12, 1999, the Company's Atlantic Coast Airlines
("ACA") subsidiary, DBA United Express, was operating a fleet of 81
aircraft comprised of 21 RJs, 32 J41's and 28 J32's. The Company has
United approval to operate, as United Express, 43 regional jets. The
Company has also placed a conditional aircraft order with Fairchild
Aerospace Corporation ("Fairchild") to acquire 15 32-seat 328JET and 40
44-seat 428JET feeder jet aircraft. The Company requires United's
approval to operate these additional jet aircraft as United Express. The
Fairchild order is conditioned on the Company receiving United's approval
to operate the feeder jets as United Express. The Company at its option
may waive the condition and enter into commitments for firm delivery
positions under the Fairchild agreement. Deliveries of the conditionally
ordered 328JET could begin in the first quarter of 2001, if the Company
receives United's approval or otherwise waives the contract condition.
The Company has reached a ten year agreement with Delta Air
Lines, Inc. to operate regional jet aircraft as part of the Delta
Connection program on a fee-per-departure basis. Under the fee-per-
departure structure, the Company bears the risk to operate the flight
schedule, and Delta assumes the risk of marketing and selling seats to
the traveling public. Delta may terminate the agreement at any time if
the Company fails to maintain certain performance standards, and may
terminate without cause, effective no earlier than two years after
commencement of operations, by providing 180 days notice to the Company.
The Delta Connection Agreement provides the Company with certain rights
in the event of termination without cause. The Company has ordered 20 50-
seat Canadair regional jets from Bombardier Aerospace of Montreal and 25
328JET feeder jets from Fairchild for this new venture. The Company has
established a new subsidiary, Atlantic Coast Jet, Inc. ("ACJet"), d.b.a.
Delta Connection, which is now in the application and approval process
with the applicable federal agencies to obtain authority to conduct
scheduled passenger air transportation of jet aircraft. Initial Delta
Connection service to various destinations in the Northeast United States
is expected to begin no sooner than April 2000, subject to satisfactory
resolution of regulatory requirements and other start-up considerations.
The Company can make no assurances that its ACJet subsidiary will
<PAGE> 22
receive all necessary regulatory approvals by this date or that aircraft
will be delivered on time. The Company expects to incur approximately
$3.0 million in additional start-up expenses for ACJet during the next
six months.
The continued introduction of these additional RJ aircraft
will expand ACA's current business into new markets and may increase
capacity in existing markets. In general, service to new markets and
increased capacity to existing markets will result in increased operating
expense that may not be immediately offset by increases in operating
revenues. ACJet will incur start-up expenses and will require DOT and FAA
approvals to conduct scheduled air transportation. Initially, the Company
will incur expenses in excess of the expected revenues from the fee-per-
departure structure until additional aircraft enter the fleet. There can
be no assurances that ACJet will be able to operate profitably.
The Company continues to assess plans to phase out the 28
leased 19 seat J32 aircraft used in the United Express operation by the
end of 2001. The Company continues to analyze its phase-out plan,
including quantification of expected costs related to the removal of the
J32 from the fleet. The timing of approval by United to operate the
feeder jet aircraft as United Express will also be a factor in analyzing
the J32 phase-out plan.
During the first half of 1999 US Airways announced and began to
implement new service from Washington-Dulles to various cities. New and
announced service includes operations as mainline US Airways, MetroJet,
Shuttle, and US Airways Express. As of November 1, 1999, the Company
served 44 cities out of Washington-Dulles. US Airways service existed in
7 of the Company's markets as of December 31, 1998 and 20 as of November
1, 1999. Generally this service has utilized fare structures similar to
that implemented by the Company. Two of the implemented markets are
served by MetroJet, which offers fares lower than that which has
typically been offered by the Company. The increased competition by US
Airways and other airlines in the Company's markets could adversely
affect the Company's results of operations or financial position. The
Company continually monitors and responds to the effects competition has
on its routes, fares and frequencies, and believes that it can compete
effectively with US Airways and other competitors. However, there can be
no assurances that US Airways' and other competitors' continued expansion
at Washington-Dulles will not have a material adverse effect on the
Company's future results of operations or financial position in the
current or any future quarters.
During April and May, 1999, United significantly increased the
number of flights it operated at Washington-Dulles. In July, 1999, United
and the Company revised their Dulles flight schedules to increase
connections and to thereby take greater advantage of United's increased
capacity. As of November 1, 1999, United operated 112 daily departures
from Washington Dulles, a 62% increase from December 31, 1998. During
1999, the Company and United have either increased frequencies or
<PAGE> 23
upgraded equipment, or both, in markets affected by the US Airways
expansion.
During the third quarter of 1999, the Company executed a seven
year engine services agreement with GE Engine Services, Inc. ("GE")
covering the scheduled and unscheduled repair of ACA's CF34-3B1 jet
engines operated on the 43 RJs already delivered or on order for the
United Express operation. Under the terms of the agreement, the Company
will pay a set dollar amount per engine hour flown on a monthly basis to
GE and GE assumes the responsibility to repair the engines when required
at no additional expense to the Company, subject to certain exclusions.
The Company intends to expense the amount due based on the monthly rates
stipulated in the agreement, as engine hours are flown. During the third
quarter, the Company reversed approximately $1.5 million in life limited
parts repair expense accruals related to these engines that are no longer
required based on the maintenance services and terms contained in the new
engine maintenance agreement. The Company's future maintenance expense on
regional jet engines covered under the new agreement will escalate based
on contractual rate increases, intended to match the timing of actual
maintenance events that are due pursuant to the terms. Accordingly,
maintenance costs recognized on these RJ engines during 2000 will be
greater than those recorded historically.
Liquidity and Capital Resources
As of September 30, 1999, the Company had cash, cash
equivalents and short-term investments of $43.3 million and working
capital of $54.0 million compared to $64.5 million and $68.1 million
respectively as of December 31, 1998. During the first nine months of
1999, cash and cash equivalents decreased by $21.1 million, reflecting
net cash provided by operating activities of $26.2 million, net cash used
in investing activities of $47.8 million, and net cash provided by
financing activities of $0.5 million. The net cash provided by operating
activities is primarily the result of net income for the period of $22.3
million, an increase of $8.6 million in accrued liabilities resulting
from increased operations and non cash depreciation and amortization
expenses of $6.5 million, offset by an $8.8 million increase in prepaid
expenses related to aircraft rent and a $3.2 million increase in
receivables due to the increase in passenger revenues. In order to
minimize total aircraft rental expense over the entire life of the
related aircraft leveraged lease transactions, the Company has uneven
semiannual lease payment dates generally occurring on January 1 and July
1. Approximately 33% of the Company's annual lease payments are due in
January and 30% in July. The net cash used in investing activities
consisted primarily of the purchase of one regional jet and spare engines
and parts, and payments of $17.3 million of additional aircraft deposits
related to the Bombardier and Fairchild aircraft orders. Financing
activities consisted primarily from the issuance of long term debt for
the acquisition of an RJ aircraft and spare engines, and proceeds from
the exercise of stock options, offset by the repurchase of the Company's
<PAGE> 24
stock under the stock repurchase program and payments on long term debt
and capital lease obligations.
Other Financing
In February 1999, the Company entered into an asset-based
lending agreement with two financial institutions that provides the
Company with a $15 million bridge loan to fund the Company's obligation
to MWAA for construction costs on the Company's regional terminal at
Washington-Dulles International Airport and a line of credit for up to
$35 million depending on the amount of assigned ticket receivables and
the value of certain rotable spare parts. The $35 million line of credit
replaces a previous $20 million line of credit. The interest rate on this
line is LIBOR plus from .75% to 1.75% depending on the Company's fixed
charges coverage ratio. During the first nine months of 1999, the Company
drew $7.8 million of the $15 million bridge loan. Upon reimbursement
from MWAA, the Company repaid the loan. As of September 30, 1999 the
outstanding balance on the bridge loan was zero. Subsequent to the
initial reimbursement from MWAA, the Company has loaned to MWAA an
additional $3.9 million and recorded a note receivable from MWAA. No
additional amounts were drawn on the bridge loan for this additional
funding. However, the Company may do so in the future as desired. The
Company's remaining obligation to MWAA for interim financing of the
regional terminal is approximately $1.0 million.
The Company has pledged $2.9 million of the line of credit as
collateral to secure letters of credit issued on behalf of the Company by
a financial institution. As of September 30, 1999, the available amount
of credit under the $35 million line was $32.1 million.
Other Commitments
In April 1999, the Company entered into a call option contract
to hedge price changes on approximately 19,300 barrels of crude oil per
month during the period from October through December 1999. The contract
provides for a premium payment of approximately $75,400 and sets a cap on
the maximum price equal to approximately 42 cents per gallon of jet fuel
excluding taxes and into-plane fees with the premium and any gains on
this contract to be recognized as a component of fuel expense during the
period in which the Company purchases fuel. In October, the Company
entered into commodity swap transactions to hedge price changes on
approximately 13,300 barrels of crude oil per month for the period April
to June 2000 and on approximately 23,300 barrels of crude oil per month
for the period July through September 2000. The contracts provide for an
average fixed price equal to approximately 52.6 cents per gallon for the
second quarter of 2000 and 51 cents per gallon for the third quarter of
2000. With these transactions and taking into account that Delta Air
Lines, Inc. bears the economic risk of fuel price fluctuations for future
fuel requirements associated with the Delta Connection program, the
Company has hedged approximately 20% of its anticipated jet fuel
requirements for the fourth quarter of 1999; 11% for the second quarter
2000; 22% for the third quarter 2000; and 15%, for the fourth quarter of
2000. Had these
<PAGE> 25
contracts and transactions settled on September 30, 1999 the
counterparties would have been required to pay the Company approximately
$494,000.
On May 4, 1999, the Company entered into two interest rate swap
contracts having an aggregate notional amount of $13 million to hedge its
exposure by approximately 37%, to interest rate changes until permanent
financing for two RJ aircraft scheduled for delivery in October and
November 1999, is secured. On July 2, 1999, the Company entered into
interest rate swap contracts having an aggregate notional amount of $7
million to hedge its exposure by approximately 40%, to interest rate
changes until permanent financing for the RJ aircraft scheduled for
delivery in December 1999 is secured. On August 25, 1999, the Company
entered into three interest rate swap contracts having an aggregate
notional amount of $23 million to hedge its exposure by approximately
44%, to interest rate changes until permanent financing for three RJ
aircraft scheduled for delivery in March, April and May 2000, is secured.
The contracts entered into on May 4, 1999 relating to the aircraft
delivered in October and November 1999 have been closed out with the
counterparty paying the Company approximately $274,000. Neither the
counterparty nor the Company would have been obligated to pay any amounts
had the remaining contracts settled on September 30, 1999.
Aircraft
The Company now has firm orders for 45 RJs in addition to the
21 previously delivered, and options for an additional 27 RJs. The
delivery schedule for the 45 firm orders is as follows: two are scheduled
for the fourth quarter of 1999, fifteen in 2000, eighteen in 2001, and
ten in 2002. Twenty-two of the 45 firm ordered aircraft are for the
United Express operation, 20 are for the Delta Connection operation, and
three remain unallocated at this time. The value of the remaining 45
undelivered aircraft on firm order is approximately $810 million.
The Company also has a firm order for 25 328JET feeder jet
aircraft and a conditional order for 55 328JET and 428JET feeder jet
aircraft, and options for an additional 85 feeder jet aircraft, from
Fairchild Aerospace Corporation. The value of the aircraft on firm order
is approximately $275 million and the value of the aircraft in the
conditional order (excluding the option aircraft) is approximately $700
million. The Company requires United's approval to operate more than 43
jet aircraft as United Express. The conditional portion of the Fairchild
order is contingent on the Company receiving United's approval to operate
the feeder jets as United Express. The Company at its option may waive
the condition and enter into commitments for firm delivery positions
under the Fairchild agreement.
The Company has approximately $36.7 million on deposit with the
aircraft manufacturers related to its aircraft orders. The deposit
amounts totaling $11.0 million related to the conditional order with
Fairchild is fully refundable if the order is cancelled due to lack of
<PAGE> 26
United's approval. The Company intends to use a combination of debt and
lease financing to acquire these aircraft.
Capital Equipment and Debt Service
Capital expenditures for the first nine months of 1999 were
$26.2 million compared to $32.2 million for the same period in 1998.
Capital expenditures for 1999 have consisted primarily of the purchase of
one regional jet, spare jet engines, rotable spare parts for the RJ and J-
41 aircraft, facility leasehold improvements, ground equipment, and
computer and office equipment. For the remainder of 1999, the Company
anticipates spending approximately $22 million for: one RJ aircraft, (a
portion of the purchase price to be mortgage debt financed), rotable
spare parts related to the RJ and J-41 aircraft, ground service
equipment, facilities, computers and software.
Debt service including capital leases, but excluding the
Regional Terminal bridge loan, for the nine months ended September 30,
1999 was $4.4 million compared to $4.1 million in the same period of
1998.
The Company believes that, in the absence of unusual
circumstances, its cash flow from operations, the asset-based credit
facility including the bridge loan, and other available equipment
financing, will be sufficient to meet its working capital needs, capital
expenditures, and debt service requirements for the next twelve months.
YEAR 2000
Background
The "Year 2000 problem" refers to the potential disruptions
arising from the inability of computer and embedded microprocessor
systems to process or operate with data inputs involving the years
beginning with 2000 and, to a lesser extent, involving the year 1999. As
used by the Company, "year 2000 ready" means that a system will function
in the year 2000 without modification or adjustment, or with a one-time
manual adjustment.
State of Readiness
The Company is highly reliant on information technology ("IT")
systems and non-IT embedded technologies of third party vendors and
contractors and governmental agencies, such as the CRS systems, United,
aircraft and parts manufacturers, the FAA, the DOT, and MWAA and other
local airport authorities. The Company sent questionnaires to these
third party vendors, contractors and government agencies. All mission
critical and key vendors have stated they are year 2000 compliant. The
Company is in constant contact with all of these mission critical vendors
and is closely monitoring their status. In cases where the Company has
not received assurances from non critical third parties that their
systems are year 2000 ready, it is continuing mail or phone
correspondence and has
<PAGE> 27
developed a contingency plan to handle these non critical situations. The
Company also has surveyed its internal IT and non-IT systems and embedded
operating systems to evaluate and prioritize those which are not year
2000 ready. The Company had completed remediation and testing of all of
its internal IT and non-IT systems as of April 30, 1999.
Costs
The Company has utilized existing resources and has not
incurred any significant costs to evaluate or remediate year 2000 issues
to date. The Company does not utilize older mainframe computer
technology in any of its internal IT systems. In addition, most of its
hardware and software were acquired within the last few years, and many
functions are operated by third parties or the government. Because of
this, the Company's cost to modify its own non-year 2000 ready systems or
applications did not have a material effect on its financial position or
the results of its operations.
Risks
The Company's final year 2000 compliance efforts are heavily
dependent on year 2000 compliance by governmental agencies, United, CRS
vendors and other critical vendors and suppliers. The failure of any one
of these mission critical vendors and suppliers to become year 2000
compliant or for one to experience a year 2000 failure in one or more
systems (which the Company believes to be the most likely worst case
scenario), such as a shut-down of the air traffic control system, could
result in the reduction or suspension of the Company's operations and
could have a material adverse effect on the Company's financial position
and results of its operations
Contingency Plans
The Company continues to develop its year 2000 contingency
plans and continues to refine them as more information is received from
third parties upon which it is heavily reliant. The Company continues to
closely monitor the completed year 2000 compliance efforts of the third
parties and its own internal remediation efforts. While certain of the
Company's systems could be handled manually, under certain scenarios the
Company may not be able to operate in the absence of certain systems, in
which cases the Company would need to reduce or suspend operations until
such systems were restored to operational status. Any such reduction or
suspension could have a material adverse effect upon the Company's
financial condition and results of operations.
<PAGE> 28
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This Statement
establishes accounting and reporting standards for derivative instruments
and all hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities at their fair values.
Accounting for changes in the fair value of a derivative depends on its
designation and effectiveness. For derivatives that qualify as effective
hedges, the change in fair value will have no impact on earnings until
the hedged item affects earnings. For derivatives that are not designated
as hedging instruments, or for the ineffective portion of a hedging
instrument, the change in fair value will affect current period earnings.
In July 1999, the FASB issued Statement No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133, an Amendment of FASB Statement
No. 133" which defers the effective date of Statement No. 133 by one
year. Therefore, the Company will adopt Statement No. 133 during its
first quarter of fiscal 2001 and is currently assessing the impact this
statement will have on interest rate swaps and any future hedging
contracts that may be entered into by the Company.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For the remainder of 1999 and into 2000, the Company has hedged
a portion of ACA's exposure to jet fuel price fluctuations by entering
into jet fuel option contracts for approximately 20% of its estimated
fuel requirements for the fourth quarter of 1999 and 11% and 18%,
respectively for the second and third quarters of 2000. The Company bears
no fuel price risk for the ACJet operation per the terms of the Delta
Connection Agreement. Based on the Company's projected fuel consumption
for 2000, a one-cent increase in the average price of jet fuel would
increase the Company's aircraft fuel expense for 2000 by approximately
$620,000.
The Company's exposure to market risk associated with changes
in interest rates relates to the Company's commitment to acquire regional
jets. As of November 01, 1999, the Company has outstanding, four interest
rate swap contracts having an aggregate notional amount of $30 million to
hedge its exposure by approximately 43%, to interest rate changes until
permanent financing for four RJ aircraft scheduled for delivery in
December 1999, and March, April and May, 2000 are secured. A one basis
point decrease in interest rates from the strike price of the Company's
call contracts would increase the Company's annual aircraft lease or
ownership costs associated with these contracts by approximately $90,000.
<PAGE> 29
ATLANTIC COAST AIRLINES HOLDINGS, INC.
FISCAL QUARTER ENDED September 30, 1999
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is a party to routine litigation incidental to its
business, none of which the Company believes is likely to have a material
effect on the Company's financial position.
ITEM 2. Changes in Securities.
None to report.
ITEM 3. Defaults Upon Senior Securities.
None to report.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None to report.
ITEM 5. Other Information.
None to report.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.8 Delta Connection Agreement, dated as of September 9, 1999
among Delta Air Lines, Inc., Atlantic Coast Airlines Holdings,
Inc. and Atlantic Coast Jet, Inc.
10.12(b)(1) Amendment Number One to Severance
Agreement, dated as of August 12, 1999, amending the Severance
Agreement, dated as of January 20, 1999, between the Company
and Thomas J. Moore.
<PAGE> 30
10.12(c)(1) Amendment Number One to Severance
Agreement, dated as of August 17, 1999, amending the Restated
Severance Agreement, dated as of January 20, 1999, between the
Company and Kerry B. Skeen.
10.40A(1) Contract Change Orders No. 13, 14, and 15, dated
April 28, 1999, July 29, 1999, and September 24, 1999,
respectively, amending the Purchase Agreement between
Bombardier Inc. and Atlantic Coast Airlines relating to the
purchase of Canadair Regional Jet Aircraft dated January 8,
1997.
10.41 Purchase Agreement between Bombardier Inc. and
Atlantic Coast Airlines relating to the Purchase of Canadair
Regional Jet Aircraft dated July 29, 1999, as amended through
September 30, 1999.
10.45(1) First Amendment dated effective September 10,
1999, to the Aircraft Purchase Agreement between Dornier
Luftfahrt GmbH and Atlantic Coast Airlines dated effective
March 31, 1999.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None to report.
<PAGE> 31
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.
ATLANTIC COAST AIRLINES HOLDINGS, INC.
November 15, 1999 By: /S/ Paul H. Tate
Paul H. Tate
Senior Vice President and Chief
Financial Officer
November 15, 1999 By: /S/ Kerry B. Skeen
Kerry B. Skeen
President and Chief Executive
Officer
_______________________________
1 "Break-even passenger load factor" represents the percentage of ASMs
which must be flown by revenue passengers for the airline to break-even
at the operating income level.
2 Average cost per gallon of fuel is inclusive of all taxes, into plane
and flowage fees, and gains and losses from fuel hedge transactions.
EXHIBIT 10.8
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST.
DELTA CONNECTION
AGREEMENT
This Agreement (this "Agreement"), dated and effective
the 9th day of September, 1999, is between Delta Air Lines,
Inc., Hartsfield Atlanta International Airport, Atlanta,
Georgia 30320 ("Delta"), and Atlantic Coast Airlines
Holdings, Inc. ("Holdings") and ACA Management, Inc.
("Operator"), each located at 515A Shaw Road, Dulles, Virginia
20166.
WHEREAS, Delta operates the Delta Connection program;
and
WHEREAS, Holdings has agreed to establish and maintain
Operator as a separate business entity, and for Operator to
obtain authority to conduct scheduled passenger air
transportation of jet aircraft; and
WHEREAS, Holdings desires for Operator to exclusively
(except as otherwise provided herein) manage the operations of
the Aircraft (as defined below) as a Delta Connection carrier
under the Delta Connection program; and
WHEREAS, Operator desires for Delta to perform and
provide various marketing, schedule and fare related, and
other services for Operator in connection with the Delta
Connection program; and
WHEREAS, Delta is willing to perform and provide
various marketing, schedule and fare related, and other
services for Operator in connection with the Delta Connection
program; and
WHEREAS, this Agreement will enhance the ability of
Operator and Delta to serve the public and the communities
that they serve or may choose to serve; and
WHEREAS, unless otherwise specified, references in
this Agreement to ACA are to Atlantic Coast Airlines, a
subsidiary of Holdings, and Operator and any affiliate of
Holdings; and
NOW, THEREFORE, for and in consideration of the mutual
undertakings set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Delta and Holdings and Operator, intending to be
legally bound, hereby agree as follows:
ARTICLE 1. FARES AND RULES PUBLICATION.
A. Delta Connection Program and Appointment of Delta as Agent.
Delta hereby grants Operator the authority to operate as a Delta
Connection carrier, and Operator hereby accepts such grant, to
conduct air transportation operating the Aircraft utilizing
certain services together with certain trademarks and service
marks owned by Delta, all as provided herein. In connection
herewith, Operator appoints Delta as its agent to publish its
fares, schedules and related information under Delta's two letter
designator code in city pairs specified by Delta (which shall not
include ---------- unless agreed by Operator) on the twenty (20)
Canadair Regional Jets and twenty-five (25) Dornier 328 regional
jet aircraft set forth on Exhibit A attached hereto and any other
aircraft subsequently agreed to be operated by Operator as Delta
Connection Flights (as such term is defined herein) (the aircraft
identified on Exhibit A, and such subsequently agreed aircraft,
collectively, "Aircraft"), and Delta hereby accepts such
appointment.
B. Fares, Rules and Seat Inventory.Delta shall establish and
publish all fares and related tariff rules for all seats on the
Aircraft, including fares and rules for local traffic in city
pairs served by such Aircraft. Operator shall not publish any
fares, tariffs, or related information for the Aircraft. In
addition, Delta will control all seat inventory and revenue
management decisions for the Aircraft.
C.Schedules Publication. Delta shall establish and publish all
schedules for the Aircraft, including city-pairs served,
frequencies, utilization and timing of scheduled departures.
Schedules shall conform to Operator's reasonable operational
requirements. Operator shall operate the Aircraft in the city-
pairs designated by Delta, subject to the frequency,
scheduling and other requirements established by Delta from
time to time and in a manner at least comparable to ACA's
operational standards as of the date hereof.
Delta will notify Operator of schedule times, frequencies and
related information for the Aircraft at least ---------- days
in advance of the schedule publication date so that the
information can be properly disseminated to Operator for pilot
and flight attendant staffing, and related operational
requirements. Block times for the Aircraft shall be
established by Delta in cooperation with Operator, and -------
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ARTICLE 2. EXCLUSIVITY.
A. With the exception of (i) flights operated by ACA with
United Airlines, Inc. or its successors ("United"), (ii) code
share flights with any non-U.S. carrier with which United has
a code-share agreement, and (iii) flights operated solely
under the "DH" and Operator two letter designator code, ACA
agrees to list its flights only under Delta's code during the
term of this Agreement (the "Delta Connection Flights").
B. ACA must obtain Delta's approval if it chooses to enter into
a code-sharing arrangement with another carrier (other than
United or a non-U.S. carrier with which United has a code share
arrangement).
C. Other than with United or a non-U.S. carrier with which
United has a code share arrangement, ACA (or any affiliated
company) may not operate flights for any other carrier without
Delta's prior written approval other -------------------------
- --------------------------------------------------- and other
than in connection with the disposition of ACA's turboprop
aircraft.
D. ACA shall not publish or operate any other scheduled flights
in any city pair that includes -------------------------------
without Delta's prior written consent.
ARTICLE 3. COMPENSATION.
A. Base Compensation.
In exchange for the flying and operation of the Aircraft,
Delta will pay Operator ----------------- percent ------ of the
Cost Recovery Amount (the "Base Compensation").
The "Cost Recovery Amount", which shall be mutually agreed
by Delta and Operator on an annual basis, is ---------------
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B. Incentive Compensation.
In addition to the Base Compensation, Operator shall have an
opportunity to earn additional compensation ("Incentive
Compensation") ---------------------------------------------
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C. Accounting Provisions.
Delta shall retain all revenues for all ticket sales on the
Aircraft for Delta Connection Flights. Operator shall forward to
Delta all monies with respect to all airline ticket sales, on-
board sales, baggage charges, passenger charges, and all other
revenue collected in connection with the operation of the
Aircraft (including credit card transactions).
On each Monday, or if a not a business day, on the following
business day, Delta will advance monies to Operator by wire
transfer using the Base Compensation Amount for Delta Connection
flights to be operated during the period beginning that Monday
through the following Sunday. ----------------------------------
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Ninety (90) days following the end of each month, Delta and
Operator will reconcile actual costs incurred for certain cost
items with the estimated costs identified as part of the Cost
Recovery Amount. These items are: ------------------------------
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- ------------- The reconciliation will include any applicable
Incentive Compensation based on Operator's operating statistics
for the applicable month of its actual completion rate. Within
two (2) business days of completing such reconciliation, Delta or
Operator, as the case may be, shall wire transfer to an account
designated by the other party, monies equal to the reconciled
amount.
D. Audit.
Operator and ACA (to the extent ACA's expenses are shared by
Operator) shall maintain complete and accurate records to support
and document all costs related to the Aircraft hereunder, in
accordance with generally accepted accounting principles
consistently applied to past periods in all material respects.
Prior to the annual negotiation of the Cost Recovery Amount,
Delta's in-house accounting staff and any independent accountants
selected by Delta shall be entitled, following reasonable notice
to ACA, to audit Operator's and, to the extent ACA's expenses are
shared by Operator, ACA's records with respect to services
provided in prior periods, the service levels achieved, and the
determination of charges due pursuant to this Agreement for the
purpose of prospectively adjusting the Cost Recovery Amount. Any
such audit will be conducted during regular business hours at
ACA's offices at a mutually agreed time.
ARTICLE 4. AIRPORT RELATED AND TICKETING SERVICES.
A. Ticketing Services. Delta
will provide its own airport ticketing services, and, if
requested by Delta and agreed by Operator, Operator will
provide ticketing services for Delta Connection Flights at
Operator airport ticketing locations and will use Delta ticket
stock for such purposes.
B. Signage. Delta will design, provide
and pay for appropriate airport and other signage to reflect
the Delta Connection relationship between Operator and Delta.
The nature and type of such signage will be in the sole
discretion of Delta, subject to any airport, governmental or
quasi-governmental restrictions or requirements. Delta will
be responsible for installing and maintaining all such
signage, but the parties will mutually determine which party
will obtain any necessary formal or informal approvals from
appropriate airport or other authorities to install such
signage. The parties will fully cooperate with each other in
all endeavors relating to such signage and any necessary
approvals.
ARTICLE 5. CUSTOMER SERVICES.
A. During the in-flight operation of any and all Delta
Connection Flights and at any location where Operator is
performing customer related services in connection with any
Delta Connection Flight at the request of Delta, ACA will
handle all customer related services in connection with the
Delta Connection Flights in a professional, businesslike and
courteous manner. In order to insure a high level of customer
satisfaction Operator will:
1. establish and maintain customer handling
procedures and policies that are similar to those
utilized by Delta; and
2. establish, maintain and enforce employee conduct,
appearance and training standards and policies that
are similar to those utilized by Delta.
Delta shall provide Operator a reasonable number of copies of all
such Delta policies, training standards and procedures.
B. Operator and Delta will periodically meet to discuss and
review Operator's customer service and handling procedures and
policies and Operator's employee conduct, appearance and
training standards and policies to insure compliance with this
Article 5. Each party will seek to set forth concerns and
complaints under this Article 5 in writing to the other party.
To the extent Delta advises Operator in writing of any
deviation from Article 5(A), the parties will meet to mutually
determine appropriate solutions and to agree to the terms of a
corrective action plan and the timing of its implementation.
In the event Operator shall fail, in any material respect, to
adopt or implement any such agreed corrective action plan in
the time period described therein, any such failure may be
deemed a material breach of this Agreement.
C. Operator shall adopt as its own Delta's Terms and
Conditions of Contract of Carriage ("Contract of Carriage"),
as amended from time to time, and be bound by its terms with
respect to its operation of Delta Connection Flights. Delta
will supply Operator an adequate number of its Contract of
Carriage for distribution as required.
D. At no cost to Operator, Delta's customer affairs
department shall process and adjudicate (including paying cash
or in kind compensation as appropriate in a manner not
inconsistent with its Contact of Carriage) any claims
submitted to Delta or to Operator with respect to the conduct
of any Delta Connection Flights or services provided in
connection therewith, except claims of compensation for
property damage, injury or death of passengers on Delta
Connection Flights arising out of any action or inaction of
Operator. Any claims for such property damage, injury or
death shall be processed by Operator. Each party will
undertake to use Delta's standard procedures for processing
and adjudicating all claims for which it is responsible in
accordance with this Article 5(D) in order to avoid the matter
being the subject of either a law suit or a claim on either
party's insurance policy. At either party's request, the
other party shall reasonably assist the requesting party,
including providing available information, in the processing
or adjudication of any such claims handled by the requesting
party.
E. At any stations agreed to be handled by Operator, Delta
will provide Operator with local in-kind compensation to be
offered to inconvenienced customers in accordance with Delta's
policies and procedures. In addition, in the event Operator
incurs any out of pocket expenses in connection with providing
passenger handling services at the request of Delta, Delta
shall reimburse Operator for any and all such expenses
provided such expenses are in accordance with Delta's Contract
of Carriage and /or customer service procedures, in effect at
such time. Such reimbursement will be made as incurred,
separate and apart from the Cost Recovery Amount, without
markup, provided that should Operator agree, upon Delta's
written request, to provide services in this area on a regular
basis, then the said services would be included in the Cost
Recovery Amount pursuant to Article 8(B) herein.
ARTICLE 6. TRAFFIC DOCUMENTS AND RELATED PROCEDURES.
To the extent that the parties subsequently agree that
Operator will handle traffic documents or passenger handling
services in connection with Delta Connection Flights, the
following terms shall apply, at Delta's cost except as
specifically provided:
A. Pursuant to mutually acceptable procedures, Delta will
periodically provide Operator with Delta machine and manual
ticket stock, miscellaneous charges orders, credit card refund
drafts, FIMs, expense vouchers, expense checks, travel credit
vouchers, credit card refund vouchers and other related
documents (collectively referred to as "Traffic Documents").
Delta will maintain a supply of Traffic Documents at a
suitable location and, upon written request from Operator,
will provide Operator with appropriate supplies of Traffic
Documents.
B. Unless otherwise agreed to by Delta in writing, Traffic
Documents may be used, completed, validated and issued only by
Operator and only in connection with transactions related to
Delta Connection Flights and for no other purpose.
C. Operator will promptly surrender and return all Traffic
Documents to Delta upon Delta's written request.
D. Operator will maintain records of the Traffic Documents in
a manner and format acceptable to Delta. Operator will
acknowledge receipt in writing of all Traffic Documents in the
manner prescribed by Delta.
E. Operator will conform with and abide by all of Delta's
rules and regulations regarding the Traffic Documents.
F. Operator will take all reasonable and necessary measures
to safeguard the Traffic Documents as of the time of receipt
and thereafter and will maintain the Traffic Documents in
accordance with mutually agreed upon security procedures.
Operator shall be responsible for all risk of loss, use,
misuse, misappropriation or theft of Traffic Documents as of
the time Operator takes possession of the Traffic Documents,
provided that Delta has timely audited the use of Traffic
Documents and has provided Operator with prompt notice of any
irregularities.
G. Reporting and Remitting With Respect to Traffic Documents.
1. On a daily basis, Operator will provide Delta with a
report for each Operator ticketing location of all ticketing
and related transactions on Traffic Documents for the prior
day. Such report will be in a format determined by Delta and
will include, without limitation, all credit card transactions
and supporting documentation.
2. Operator will issue all Traffic Documents, and will
collect appropriate charges, in accordance with the tariffs,
fares, rates, rules and regulations of Delta and other
applicable carriers.
H. Refund Vouchers.
1. Delta will use Delta refund vouchers for all refund
transactions handled by Delta involving Operator.
2. Operator will use Delta refund vouchers and credit
card sales refunds and will comply with Delta's rules and
regulations for handling and processing such refunds. Delta
will supply Operator with an adequate supply of refund
vouchers and credit card refund vouchers.
ARTICLE 7. FREQUENT FLYER PARTICIPATION. During the term of this
Agreement, the parties agree that passengers on Operator's Delta
Connection Flights will be eligible to participate in the Delta
SkyMiles frequent flyer program or any other similar program
developed by Delta (the "Program") and all Program award tickets
will be honored for travel on Delta Connection Flights on the
following terms and conditions:
A. Administration. Administration of the Program shall be
performed by and at the cost of Delta. Delta will promote and
administer the Program.
B. Program Information. Title and full and complete ownership
rights to Program membership data and information developed by
Delta, wherever located, shall remain with Delta. ACA
understands and agrees that such data and information constitutes
Delta's proprietary information. Any membership lists, labels,
data, or other compiled membership information supplied to ACA in
any form and any and all copies thereof are to be used by
Operator exclusively in the performance of its obligations under
this Agreement and will not be otherwise used, sold, licensed,
leased, transferred, stored, duplicated or transmitted, in any
form or by any means, without Delta's prior written consent. All
such information will either be returned to Delta or destroyed at
Delta's request.
ARTICLE 8. SUPPORT SERVICES.
A. Services. Delta shall provide certain support services to
Operator, including all customer reservations, customer service,
ground handling, station operations, pricing, scheduling, revenue
accounting, revenue management, frequent flyer, advertising and
other passenger, aircraft and traffic servicing functions in
connection with the operation of the Aircraft other than as
allocated to Operator as described in Exhibit B, and Delta will
be responsible for all taxes and fees associated therewith. Any
and all such services provided by Delta to Operator pursuant to
this Article 8(A) shall be at cost and not be included in the
Cost Recovery Amount as described in Exhibit B.
B. Additional Services. --------------------------------------
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and Operator agree that Operator or Holdings, or its designees,
will provide services that are anticipated to be provided by
Delta in accordance with Article 8(A) hereof, the cost of such
services will be included in the Cost Recovery Amount.
C. Certain Regulatory Compliance. The parties acknowledge that
Operator is responsible for various aspects of airport and
aircraft security pursuant to certain FAA regulations, and to
other applicable regulations in connection with the operation of
Delta Connection Flights. The parties further acknowledge that
Delta will provide airport and aircraft handling of Operator's
Delta Connection Flights in accordance with the terms of this
Agreement including providing airport and aircraft security
functions. To facilitate operations contemplated herein,
Operator will adopt as its own Delta's FAA-approved air carrier
security plan subject to any FAA required modifications as
approved by the FAA ("Security Plan"). Delta shall adhere to the
terms and provisions of Operator's Security Plan at all airports
at which Delta handles or will handle Operator's Delta Connection
Flights. -------------------------------------------------------
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Operator shall diligently defend any allegations of violations of
the above, and Delta will cooperate with Operator in
investigating any such claim and to reasonably assistant
Operator, if requested to do so, in defending the matter. If
there are any differences between Operator's Security Plan and
Delta's security plan, Operator will provide to Delta's employees
and contractors any necessary differences training to the extent
required by the FAA and the cost of such training will be
included in the Cost Recovery Amount.
ARTICLE 9. AUTOMATION SERVICES. Delta agrees to provide
Operator, at Delta's sole cost, the following automation and
related services for the Delta Connection Flights, and Operator
agrees to participate in such services in the manner described
below.
A. Internal Reservations and Communications Equipment. Delta
shall provide or arrange for the provision to Operator of an
electronic reservations system (currently referred to as
"Deltamatic" but including any successor reservations system
adopted by Delta) which shall provide Operator with: (i) the
ability to access passenger name records, (ii) automated
ticketing capabilities, (iii) operational message switching
capabilities, (iv) the ability to update Delta Connection Flight
information, (v) the ability to distribute flight releases and
weather packages, and (vi) perform other reservations-related or
operational functions for the Delta Connection Flights
(Deltamatic and any successor system are hereinafter referred to
as the "Res System"). Delta reserves the right to modify the
functionality of the Res System at any time. Operator will use
the Res System made available by Delta for the Delta Connection
Flights only.
B. Delta's Rights and Obligations.
1. Delta will install or cause to be installed the
equipment requested by Operator at the locations set forth on
Exhibit C to this Agreement and shall provide Operator connection
to the Res System. The equipment described on Exhibit C and any
software installed on such Equipment are hereinafter referred to
as the "Equipment." Operator understands and agrees that: (i)
all Equipment shall remain the sole property of Delta; (ii)
Operator shall not remove any identifying marks from the
Equipment; (iii) Operator shall not subject the Equipment to any
lien; (iv) Operator shall not install any computer programs,
software or similar materials on the Equipment; and (v) Delta may
enter Operator's premises to remove the Equipment immediately
upon termination of this Agreement. Exhibit C may be amended
from time to time by mutual agreement of the parties to reflect
the installation, removal or relocation of Equipment and the
corresponding charges therefor.
2. Delta will provide initial and recurrent training to
Operator training staff and other key designated personnel in the
use of the Res System, at Delta's training centers unless
otherwise agreed. Delta may remove from a training program any
Operator employee who is not satisfactorily participating
therein.
3. Delta will provide, or arrange to provide, all
equipment upgrades, repairs and maintenance services required for
the Equipment and will use reasonable business efforts to keep
the Equipment and the Res System in good repair, condition, and
upgrade status consistent with Delta's standard for maintaining
its own equipment. Operator will not perform or attempt to
perform repairs or maintenance of any kind on the Equipment
without prior consultation with Delta and will promptly contact
Delta regarding the need for repairs or maintenance.
C. Operator's Rights and Obligations.
1. The Equipment initially selected by Operator is set
forth by location on Exhibit C. Operator will pay all costs
associated with preparing the location for the Equipment, which
location must conform with the specifications of both Delta and
the Equipment manufacturer and must include adequate electrical
power and in-house voice/data wiring. Delta shall be responsible
for backbone data lines and related communications equipment.
Operator will not for any reason relocate or remove any of the
Equipment without Delta's prior written consent. Delta will pay
all costs associated with, and be responsible for, the
installation, relocation or removal of Equipment.
2. Operator will use the Equipment and the Res System in
strict conformity with the training and operating instructions
provided by, or arranged to be provided by, Delta. Without
limiting the generality of the foregoing, Operator will not use
the Res System to develop or publish any reservation, ticketing,
sales, cargo, tariff or other guide, to provide services not
authorized by this Agreement to third parties, to train persons
other than Operator's employees in the use of the Equipment or
the Res System, or for other uses designated by Delta in writing
as prohibited. Operator may not publish, disclose or otherwise
make available to any third party the compilations of air carrier
service or fares obtained from the Res System; provided, however,
that Operator may use specific air carrier service and fare data
for the benefit of its customers.
3. Operator will encourage and allow its employees to
attend training sessions related to the Res System, and it is
Operator's responsibility to insure that each employee receives
full and adequate training on the Res System.
4. Operator will protect the Equipment from loss, damage
or theft and shall prevent its unauthorized use or improper
operation. Operator will make no alterations to the Equipment
and will return the Equipment to Delta upon the termination of
this Agreement in the same condition as received, excepting only
ordinary wear and tear in the normal course of Operator's
operations. Operator will obtain and maintain insurance for the
Equipment against all risks of damage and loss, including without
limitation loss by fire, theft and such other risks of loss as
are customarily insured in a standard all-risk policy. Such
insurance shall also provide the following:
(a) Full replacement value coverage for the Equipment
(subject to policy deductibles);
(b) An endorsement naming Delta as the loss payee to
the extent of its interest in the Equipment; and
(c) An endorsement requiring the insurer to give Delta
at least thirty (30) days prior written notice of any intended
cancellation, nonrenewal or material change of coverage; provided
that only ten (10) days prior written notice of cancellation,
nonrenewal or material change of coverage need be given in the
event that such cancellation, nonrenewal or material change in
coverage is caused solely by failure to make a premium payment.
Upon request by Delta, Operator will promptly provide
satisfactory evidence of the insurance required pursuant to this
Article 9(C)(4). Notwithstanding the foregoing, Operator shall
be liable to Delta for any loss or damage to the Equipment,
regardless of cause, occurring while the Equipment is in the
possession, custody or control of Operator.
5. Operator waives any proprietary rights that it may have
with respect to information entered into the Res System.
D. Entry and Inspection. Delta personnel and persons
designated or authorized by Delta may enter Operator's premises
during normal business hours for the purposes of (a) monitoring,
inspecting, and reviewing Operator's use of and operations with
respect to the Res System, (b) performing repairs or maintenance
on the Equipment, (c) installing, removing, replacing or
relocating the Equipment (unless otherwise permitted by this
Agreement), or (d) training or retraining Operator's employees in
the use of the Res System; provided that such activities may not
unreasonably interfere with Operator's business.
E. Limitations on Liability. In addition to any other
limitations on liability set forth herein:
1. Delta is not responsible for errors or inaccuracies in
the availability records, fare quotes, or other information
contained in the Res System at any time, for any planned or
unplanned interruptions, delays or malfunctions in the operation
of the Res System or the Equipment.
2. OPERATOR HEREBY WAIVES AND RELEASES DELTA AND ITS
AFFILIATES AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS FROM ANY AND ALL OBLIGATIONS AND LIABILITIES AND ALL
RIGHTS, CLAIMS AND REMEDIES OF OPERATOR AGAINST DELTA OR ITS
AFFILIATES OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES OR AGENTS, EXPRESS OR IMPLIED, ARISING BY LAW OR
OTHERWISE, DUE TO ANY DEFECTS OR INTERRUPTIONS OF SERVICE IN, OR
ERRORS OR MALFUNCTIONS BY, SOFTWARE, THE EQUIPMENT OR THE RES
SYSTEM, INCLUDING ALL LIABILITY, OBLIGATION, RIGHT, CLAIM, OR
REMEDY IN TORT, AND INCLUDING ALL LIABILITY, OBLIGATION, RIGHT,
CLAIM OR REMEDY FOR LOSS OF REVENUE OR PROFIT OR ANY OTHER
DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES.
FURTHER, DELTA DISCLAIMS AND OPERATOR HEREBY WAIVES ANY
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR INTENDED USE RELATING
TO THE RES SYSTEM, THE EQUIPMENT, DATA, OR SERVICES FURNISHED
UNDER THIS ARTICLE 9.
F. Patent and Copyright Indemnity. Delta will defend or
settle, at its own expense, any action brought against Operator
to the extent that it is based on a claim that the Res System
provided by Delta pursuant to this Agreement, in its normal use,
or any part thereof, infringes any U.S. copyright or patent; and
Delta will pay those costs, damages and attorney's fees finally
awarded against Operator in any such action attributable to any
such claim, but such defense, settlements and payments are
conditioned on the following: (1) that Delta shall be notified
promptly in writing by Operator of any such claim; (2) that Delta
shall have sole control of the defense of any action on such
claim and of all negotiations for its settlement or compromise;
(3) that Operator shall cooperate with Delta in a reasonable way
to facilitate the settlement or defense of such claim, provided
that Delta shall pay all of Operator's reasonable expenses in
connection with any such cooperation requested by Delta; and (4)
should such Res System become, or in Delta's opinion be likely to
become, the subject of such claim of infringement, then Operator
shall permit Delta, at Delta's option and expense, either to (a)
procure for Operator the right to continue using the Res System,
or (b) replace or modify the same so that it becomes
noninfringing and functionally equivalent, or (c) upon failure of
(a) and (b) above despite the reasonable efforts of Delta, accept
immediate termination of this Agreement as it relates to such
system. This paragraph (F) states the entire liability of Delta
with respect to the infringement of copyrights and patents by the
Res System provided hereunder or the operation thereof.
ARTICLE 10. OPERATIONAL PERFORMANCE.
A. Operator agrees to provide to Delta, for each month during
the term of this Agreement, within 10 days of the last day of
each such month, the completion rate (actual) of the Delta
Connection Flights during such month. Operator understands that
it is Delta's goal that participants in the Delta Connection
Program maintain a completion rate (actual) of ---- or greater --
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B. If Operator fails to meet the standard set forth in Article
10(A) above for any---- calendar months in any ----month --------
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- ------------ Delta may advise Operator that it considers said
failure to be a "Performance Deficiency", and Operator agrees to
discuss with Delta such Performance Deficiency and potential ways
to improve such Performance Deficiency. If Operator does not
meet said standard during any of the ----- calendar months
following said discussion, then Delta shall have the right to
terminate this Agreement immediately upon the expiration of such
- ------calendar month period ------------------------. Should
Operator meet said standard for any month during said ------month
period, ---------------------------------------------------------
- -------------------------------- (in either case, a "Performance
Cure"), Delta shall no longer have the right to terminate this
Agreement for the previously discussed Performance Deficiency, or
to provide a new Performance Deficiency based in part on any
months occurring prior to the Performance Cure.
ARTICLE 11. TERM AND TERMINATION.
A. This Agreement is effective on the date first written above
and will continue thereafter until March 31, 2010. At the end of
such initial term, Delta shall have the right to extend the term
of the Agreement for an additional five (5) years on the same
terms and conditions. In the event of a Merger (as defined
below) or Change of Control (as defined below) of Holdings or
Operator, Delta shall have the right to extend the term of the
Agreement for an additional ten (10) years beyond the applicable
termination date of this Agreement pursuant to this Article
11(A).
B. Either party may terminate this Agreement immediately if
the other party files a voluntary petition in bankruptcy,
makes an assignment for the benefit of creditors, fails to
secure dismissal of any involuntary petition in bankruptcy
within sixty (60) days after the filing thereof, or petitions
for reorganization, liquidation, or dissolution under any
federal or state bankruptcy or similar law.
C. In the event of a material breach of this Agreement by
either party remaining uncured for more than thirty (30) days
after receipt of written notification of such breach by the
nonbreaching party, then the nonbreaching party may terminate
this Agreement at its sole option.
D. Notwithstanding the provisions of Articles 11(B) and (C),
Delta shall have the right to terminate this Agreement
immediately and at its sole option upon the occurrence of one
or more of the following:
(i) Holdings or Operator agrees to merge into or with
any entity, to be acquired by any entity, to sell all or
substantially all of its assets to another entity, or enters
into a letter of intent, or similar document, to merge into or
with any entity or to be acquired by any entity or to sell all
or substantially all of its assets to another entity (unless
any such letter of intent or similar document in contains a
provision whereby Delta's prior approval is a condition
precedent to the merger or acquisition), unless Holdings or
Operator, as applicable, is the acquiring or surviving entity
(each such event, a "Merger");
(ii) The acquisition by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than --- of either (a) the then
outstanding shares of common stock of Holdings or Operator, or
(b) the combined voting power of the then outstanding voting
securities of either Holdings or Operator entitled to vote
generally in the election of such party's directors (each such
event, a "Change of Control");
(iii) Operator's level of safety
with respect to its operation of the Aircraft is not
reasonably satisfactory to Delta;
(iv) pursuant to Article 10(B)
hereof;
(v) if Operator fails to maintain any material
insurance pursuant to Articles 13 and 14 of this Agreement.
E. Notwithstanding the provisions of Articles 11(A), (B), (C)
and (D) hereof, Delta may terminate this Agreement, with or
without cause, in its sole discretion, on not less than one
hundred eighty (180) days' prior written notice to ACA; ------
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F. Termination of this Agreement for any reason shall not
relieve either party of rights and obligations incurred prior
to the effective date of termination.
ARTICLE 12. LIABILITY PROVISIONS.
A. Except as otherwise provided in Articles 5(D), 5(E), and
8(C) of this Agreement, Holdings and Operator, jointly and
severally, shall be liable for and each hereby agrees fully to
defend, release, discharge, indemnify, and hold harmless
Delta, its directors, officers, employees and agents from and
against any and all claims, demands, damages, liabilities,
suits, judgments, actions, causes of action, losses, costs and
expenses of any kind, character or nature whatsoever (in each
case whether groundless or otherwise), including attorneys'
fees, costs and expenses in connection therewith and expenses
of investigation and litigation thereof, which may be suffered
by, accrued against, charged to, or recoverable from Delta or
its directors, officers, employees or agents in any manner
arising out of, connected with, or attributable to this
Agreement, the performance, improper performance, or
nonperformance of any and all obligations to be undertaken by
ACA pursuant to this Agreement, the loss, theft, use, misuse
or misappropriation of Traffic Documents, or the operation,
non-operation, or improper operation of the Aircraft or ACA's
equipment or facilities at any location, excluding only
claims, demands, damages, liabilities, suits, judgments,
actions, causes of action, losses, costs and expenses
resulting from the gross negligence or willful misconduct of
Delta, its directors, officers, agents or employees. ACA will
do all things necessary to cause and assure, and will cause
and assure, that ACA will at all times be and remain in
custody and control of all aircraft, equipment, and facilities
of ACA, and Delta, its directors, officers, employees and
agents shall not, for any reason, be deemed to be in custody
or control, or a bailee, of ACA's aircraft, equipment or
facilities.
B. Delta shall be liable for and hereby agrees fully to
defend, release, discharge, indemnify, and hold harmless each
of Holdings and Operator, their directors, officers,
employees, and agents from and against any and all claims,
demands, damages, liabilities, suits, judgments, actions,
causes of action, losses, costs and expenses of any kind,
character or nature whatsoever, including attorneys' fees,
costs and expenses in connection therewith and expenses of
investigation and litigation thereof, which may be suffered
by, accrued against, charged to, or recoverable from Holdings
or Operator, or their directors, officers, employees or agents
in any manner arising out of, connected with, or attributable
to this Agreement, the performance, improper performance or
nonperformance of any and all obligations to be undertaken by
Delta pursuant to this Agreement, or the operation, non-
operation or improper operation of Delta's aircraft, equipment
or facilities at any location, in each case to the extent, but
only to the extent, caused by Delta's gross negligence or
willful misconduct. Delta will do all things necessary to
cause and assure, and will cause and assure, that Delta will
at all times be and remain in custody and control of any
aircraft, equipment and facilities of Delta, and Holdings or
Operator, their directors, officers, employees and agents
shall not, for any reason, be deemed to be in the custody or
control, or a bailee, of Delta's aircraft, equipment or
facilities.
C. ACA and Delta agree to comply with all rules, regulations,
directives and similar instructions of appropriate
governmental, judicial and administrative entities including,
but not limited to, airport authorities, the Federal Aviation
Administration and the Department of Transportation (and any
successor agencies).
D. OTHER THAN ANY WARRANTIES SPECIFICALLY CONTAINED IN THIS
AGREEMENT, EACH PARTY DISCLAIMS AND THE OTHER PARTY HEREBY
WAIVES ANY WARRANTIES, EXPRESS OR IMPLIED, ORAL OR WRITTEN,
WITH RESPECT TO THIS AGREEMENT OR ITS PERFORMANCE OF ITS
OBLIGATIONS HEREUNDER INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR INTENDED USE
RELATING TO ANY EQUIPMENT, DATA, INFORMATION OR SERVICES
FURNISHED HEREUNDER. EACH PARTY AGREES THAT THE OTHER PARTY
IS NOT LIABLE TO IT OR ANY OTHER PERSONS FOR CONSEQUENTIAL OR
PUNITIVE DAMAGES UNDER ANY CIRCUMSTANCES.
E. Indemnification Claims. A party
(the "Indemnified Party") entitled to indemnification from the
other party under the terms of this Agreement (the
"Indemnifying Party") shall provide the Indemnifying Party
with prompt written notice (an "Indemnity Notice") of any
third party claim which the Indemnified Party believes gives
rise to a claim for indemnity against the Indemnifying Party
hereunder, and the Indemnifying Party shall be entitled, if it
accepts financial responsibility for the third party claim, to
control the defense of or to settle any such third party claim
at its own expense and by its own counsel; provided that the
Indemnified Party's prior written consent (which may not be
unreasonably withheld or delayed) must be obtained prior to
settling any such third party claim. No consent will be
required for claims defended or settled by an Indemnifying
Party's insurance carrier. If the Indemnifying Party does not
accept financial responsibility for the third party claim or
fails to defend against the third party claim that is the
subject of an Indemnity Notice within thirty (30) days of
receiving such notice (or sooner if the nature of the third
party claim so requires), or otherwise contests its obligation
to indemnify the Indemnified Party in connection therewith,
the Indemnified Party may, upon providing written notice to
the Indemnifying Party, pay, compromise or defend such third
party claim. The Indemnified Party shall provide the
Indemnifying Party with such information as the Indemnifying
Party shall reasonably request to defend any such third party
claim and shall otherwise cooperate with the Indemnifying
Party in the defense of any such third party claim. Except as
set forth above in this Article 12(E), the Indemnified Party
shall not enter into any settlement or other compromise or
consent to a judgment with respect to a third party claim as
to which the Indemnifying Party has an indemnity obligation
hereunder without the prior written consent of the
Indemnifying Party (which may not be unreasonably withheld or
delayed), and the entering into any settlement or compromise
or the consent to any judgment in violation of the foregoing
shall constitute a waiver by the Indemnified Party of its
right to indemnity hereunder to the extent the Indemnifying
Party was prejudiced thereby. Any Indemnifying Party shall be
subrogated to the rights of the Indemnified Party to the
extent that the Indemnifying Party pays for any Loss suffered
by the Indemnified Party hereunder. Notwithstanding anything
contained in this Article 12(E) to the contrary, Operator,
Holdings, and Delta will cooperate in the defense of any claim
imposed jointly against them or as the result of the conduct
of the other.
ARTICLE 13. WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY
INSURANCE PROVISIONS.
A. For purposes of worker's compensation insurance, Delta's
employees, agents and independent contractors under no
circumstances shall be deemed to be, or shall be, employees,
agents or independent contractors of ACA.
B. For purposes of worker's compensation insurance, ACA's
employees, agents and independent contractors under no
circumstances shall be deemed to be, or shall be, the
employees, agents or independent contractors of Delta.
C. Each party assumes full responsibility for, and liability
to, its own employees on account of injury, or death resulting
therefrom, sustained in the course of their employment. Each
party, with respect to its own employees, accepts full and
exclusive liability for the payment of applicable workers'
compensation and employers' liability insurance premiums with
respect to such employees, and for the payment of all taxes,
contributions or other payments for unemployment compensation
and old age benefits, and other similar benefits now or
hereafter imposed upon employers by any government or agency
thereof having jurisdiction in respect of such employee. Each
party also agrees to make such payments and to make and file
all reports and returns and to do all things necessary to
comply with all applicable laws at any time imposing such
taxes, contributions, or payments.
D. Each party will have their workers compensation carrier
endorse their policy to provide a waiver of subrogation
against the other party.
ARTICLE 14. INSURANCE PROVISIONS.
A. Operator shall procure and maintain in full force and
effect during the term of this Agreement policies of insurance
of the types and in the minimum amounts set forth below, with
insurers of recognized reputation and responsibility:
1. All risk hull insurance.
2. Comprehensive airline liability including
premises, products, baggage, cargo, contractual, and
completed operations, covering bodily injury, personal
injury and property damage in an amount not less than
------------ per occurrence; provided, however, that
non-passenger personal injury coverage may be limited
to ----------- per occurrence.
3. Workers' compensation for statutory limits.
4. Employer's liability in an amount not less than --
-------
5. Automobile liability in an amount not less than ------
- ------
B. The policies of insurance described in Article 14(A) above
shall include:
1. As to the policies of insurance described in Articles
14(A)(1) and (A)(3), to provide that any waiver of
rights of subrogation against other parties by
Operator will not affect the coverage provided
hereunder with respect to Delta, its directors,
officers, employees and agents; and with respect to
Articles 14(A)(1) and (A)(2), to provide that
Operator's underwriters shall provide breach of
warranty coverage to Delta, its directors, officers,
employees and agents, regardless of any breach or
violation by Operator.
2. As to the policies of insurance described in
Articles 14(A)(2) and A(5): (a) to provide that
Delta, its directors, officers, employees and agents
shall be named as additional insured parties
thereunder; and (b) to provide that such insurance
shall be primary insurance.
3. As to the policies of insurance described in
Articles 14(A)(2) and A(5): (a) to provide a cross-
liability clause as though separate policies were
issued for Delta and Operator and their respective
directors, officers, employees and agents.
4. As to any insurance obtained from foreign underwriters, to
provide that Delta may maintain against such underwriters a
direct action in the United States upon such insurance policies
and, to this end, to include a standard service of process clause
designating a United States attorney in New York, New York.
C. Operator shall cause each of the insurance policies to be
duly and properly endorsed to provide that such policy or
policies or any part or parts thereof shall not be canceled,
terminated or materially altered, changed or amended by
Operator's insurance underwriters until after thirty (30)
days' written notice to Delta, which thirty (30) days' notice
shall commence to run from the date such notice is actually
received by Delta.
D. Not later than the date of delivery of the first Aircraft,
and from time to time thereafter upon request by Delta,
Operator shall furnish Delta evidence satisfactory to Delta of
the aforesaid insurance coverages and endorsements, including
certificates certifying that the aforesaid insurance policy or
policies with the aforesaid limits are duly and properly
endorsed as required and are in full force and effect.
E. In the event Operator fails to maintain in full force and
effect any of the insurance and endorsements required to be
maintained by Operator pursuant to Article 14(A), Delta shall
have the right (but not the obligation) to procure and
maintain such insurance or any part thereof on behalf of
Operator. The cost of such insurance shall be payable by
Operator to Delta upon demand by Delta. The procurement of
such insurance or any part thereof by Delta does not discharge
or excuse Operator's obligation to comply with the provisions
set out herein. Operator agrees not to cancel, terminate or
materially alter, change or amend any of the policies until
after providing thirty (30) days' advance written notice to
Delta of Operator's intent to so cancel, terminate or
materially alter, change or amend such policies of insurance,
which thirty (30) day notice period shall commence to run from
the date notice is actually received by Delta.
F. During the term of this Agreement, Operator agrees to
maintain on deposit with the Department of Transportation a
signed counterpart of the interim "Montreal Agreement"
(Agreement CAB 18900), which has the effect of increasing the
limits of liability under the Warsaw Convention to seventy-
five thousand dollars ($75,000.00). Operator further agrees
to be bound by Agreement CAB 18900 and any subsequent
amendment thereto or any subsequent order of the Department of
Transportation or protocol ratified by the United States
government which relates to or modifies the limit of liability
under the Warsaw Convention.
G. With respect to all claims against Operator (but not
against Delta) with respect to which Operator is not entitled
to be indemnified by Delta pursuant to Article 12(B), whether
or not covered by the insurance policies set forth in this
Article 14 or otherwise, Delta is responsible only for filing
an initial report and will reasonably cooperate with Operator
with respect to discovery to the extent information is
available to it, and has no other obligations with respect to
such claims, and Operator is fully responsible for handling
all adjustments, settlements, negotiations, litigation and
similar activities in any way related to or connected with
such claims.
ARTICLE 15. OPERATIONS OF OPERATOR AS A DELTA CONNECTION CARR
IER.
A. Delta and Operator and Holdings agree that, subject to the
provisions of this Agreement, Operator will be operated
exclusively as a Delta Connection carrier.
B. Operator acknowledges and agrees that participation in the
Delta Connection program obligates Operator to offer and maintain
a professional, high quality level of service in terms of
schedules, customer service and the like. Accordingly, not less
than once each year during the term of this Agreement, the
parties will: (a) meet to mutually review and discuss the
services, operations and plans of Operator and Delta for the
Delta Connection program; and (b) jointly develop a business plan
for the Delta Connection operations and services of Operator.
Holdings and Operator will reasonably comply with the business
plans so developed and all reasonable recommendations of Delta in
carrying out the material provisions of the business plan.
C. During the last quarter of each calendar year, Delta shall
develop an advertising budget and program for the next
succeeding calendar year (or portion thereof) during the term
of this Agreement for promoting the Delta Connection and the
relationship between Delta and Operator established by this
Agreement. Delta shall be responsible for the development and
production of all promotional materials for the program.
ARTICLE 16. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of Holdings and Operator.
Holdings and Operator, jointly and severally, represent and
warrant to Delta as of the date hereof as follows:
(1)
Organization and Qualification. Each of Holdings and Operator
is a duly organized and validly existing corporation in good
standing under the laws of the State of Delaware and has the
corporate power and authority to own, operate and use its
assets and operate the Delta Connection Flights.
(2)
Authority Relative to this Agreement. Each of Holdings and
Operator has the corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby in accordance with the terms hereof. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of
Holdings and Operator. This Agreement has been duly and
validly executed and delivered by Holdings and Operator and
is, assuming due execution and delivery thereof by Delta, a
valid and binding obligation of Holdings and Operator,
enforceable against each of Holdings and Operator in
accordance with its terms.
(3)
Conflicts; Defaults. Neither the execution or delivery of
this Agreement nor the performance by each of Holdings and
Operator of the transactions contemplated hereby will (i)
violate, conflict with, or constitute a default under any of
the terms of either of Holdings' or Operator's articles of
incorporation, by-laws, or any provision of, or result in the
acceleration of any obligation under, any contract, sales
commitment, license, purchase order, security agreement,
mortgage, note, deed, lien, lease, agreement or instrument,
including without limitation, any order, judgment or decree
relating to the Delta Connection Flights, (ii) result in the
creation or imposition of liens in favor of any third person
or entity, (iii) violate any law, statute, judgment, decree,
order, rule or regulation of any governmental authority, or
(iv) constitute any event which, after notice or lapse of time
or both, would result in such violation, conflict, default,
acceleration or creation or imposition of liens.
(4) Broker.
Neither Holdings or Operator has retained or agreed to pay any
broker or finder with respect to this Agreement and the
transactions contemplated hereby.
B. Representations and Warranties of Delta. Delta represents
Holdings and Operator as of the date hereof as follows:
(1)
Organization and Qualification. Delta is a duly incorporated
and validly existing corporation in good standing under the
laws of the State of Delaware.
(2)
Authority Relative to this Agreement. Delta has the corporate
power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby in
accordance with the terms hereof. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Delta. This Agreement has
been duly and validly executed and delivered by Delta and is,
assuming due execution and delivery thereof by Holdings and
Operator and that Holdings and Operator each has full legal
power and right to enter into this Agreement, a valid and
binding obligation of Delta, enforceable against Delta in
accordance with its terms.
(3)
Conflicts; Defaults. Neither the execution or delivery of
this Agreement nor the performance by Delta of the
transactions contemplated hereby will (i) violate, conflict
with, or constitute a default under any of the terms of
Delta's articles of incorporation, by-laws, or any provision
of, or result in the acceleration of any obligation under, any
contract, sales commitment, license, purchase order, security
agreement, mortgage, note, deed, lien, lease, agreement or
instrument, including without limitation, any order, judgment
or decree relating to the Delta Connection Flights, (ii)
result in the creation or imposition of any liens in favor of
any third person or entity, (iii) violate any law, statute,
judgment, decree, order, rule or regulation of any
governmental authority, or (iv) constitute any event which,
after notice or lapse of time or both, would result in such
violation, conflict, default, acceleration or creation or
imposition of liens.
(4) Broker. Delta has not retained or
agreed to pay any broker or finder with respect to this
Agreement and the transactions contemplated hereby.
ARTICLE 17. AIRCRAFT.
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B. Future Dornier Regional Jets. In addition to the Aircraft,
as of the date hereof, ACA also has options for eighty five (85)
new Dornier 328 or 428 regional jets (the "Option Dorniers") and
fifty-five (55) additional 328/428 Dornier aircraft on
conditional (subject to approval by United to operate said
aircraft as United Express) order (the "Conditional Dorniers").
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The above aircraft orders assume that ACA is able to compete
definitive amendments to its aircraft acquisition agreement to
allow it to acquire additional Dornier aircraft. The terms of
said amendments are subject to a signed Memorandum of
Understanding as of the date hereof. Should said definitive
agreements not be completed to allow for the acquisition of
additional contemplated aircraft, the above terms will be
adjusted to reflect a lesser number of aircraft orders on
terms described in the Annex A Term Sheet that was attached to
the Memorandum of Understanding between ACAH and Delta dated
August 23, 1999.
C. Additional Regional Aircraft. In order to assure competitive
regional jet growth between United and Delta beyond the aircraft
(whether delivered or not yet delivered) that are allocated by
ACA as of the date hereof to either their United Express or Delta
operations, -----------------------------------------------------
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ARTICLE 18. AIRPORT FACILITIES.
A. Right of First Refusal. If, at any time during the term
of this Agreement, ACA receives an offer, bid, inquiry or other
expression of interest ("Facilities Offer") to purchase, lease,
sublease, encumber or otherwise acquire any interest in any of
its airport facilities where the Aircraft are operated,
including any slots, gates or other facilities (the "Airport
Facilities"), which Facilities Offer ACA desires to accept, ACA
will, within thirty (30) days of receiving such Facilities Offer,
notify Delta in writing of such Facilities Offer and the material
terms and conditions thereof (the " Facilities Offer Notice").
Upon receipt of a Facilities Offer Notice, Delta will have thirty
(30) days to either (i) notify ACA that it wishes to consummate
the transaction for or in connection with the Airport Facilities
set forth in the Facilities Offer (the "Offered Airport
Facilities") on the same financial terms and conditions as are in
such Facilities Offer, or (ii) notify ACA that it does not wish
to consummate such transaction (failure to reply in such 30 day
period shall be deemed to be an election by Delta not to
consummate such transaction). If Delta elects to consummate the
transaction involving the Offered Airport Facilities, ACA and
Delta shall consummate the transaction contemplated in the
Facilities Offer as soon as reasonably practicable but no later
than 30 days after any and all governmental approvals required
for such transaction have been obtained (Delta and ACA agree to
use their reasonable best efforts to obtain such approvals as
soon as practicable). If Delta elects not to consummate the
transactions contemplated in the Facilities Offer Notice, ACA may
consummate such transaction with the third party or parties
making the Facilities Offer.
B. Exclusions. The right of first refusal with respect to
Airport Facilities set forth in Article 18(A) shall not apply
to the extent any such Airport Facilities are used by ACA for
business purposes other than in connection with the Aircraft
operations, and shall apply only to the extent permitted in
applicable leases; provided, however, that Holdings or ACA, as
applicable, shall use its commercially reasonable efforts to
assign such assets and leases to Delta, at no additional cost
to Delta, Holdings or ACA; provided, if there are any costs
imposed by the airport authority or slot holder with the
transfer, such costs shall be paid by Delta.
ARTICLE 19. CONTRACT INTERPRETATION.
A. This Agreement is subject to, and will be governed by and
interpreted in accordance with, the laws of the State of New
York and of the United States of America.
B. The descriptive headings of the several articles and
sections of this Agreement are inserted for convenience only,
confer no rights or obligations on either party, and do not
constitute a part of this Agreement.
C. Time is of the essence in interpreting and performing this
Agreement.
D. Except as provided in Article 17(B), if applicable, this
Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or
oral, are expressly superseded hereby.
E. If any part of any provision of this Agreement shall be
invalid or unenforceable under applicable law, such part shall
be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the
remaining parts of such provision or the remaining provisions.
F. This Agreement may be executed by a facsimile and in any
number of counterparts, each of which shall be deemed to be an
original and all of which, taken together, shall constitute
one and the same instrument.
ARTICLE 20. CIRCUMSTANCES BEYOND THE PARTIES' CONTROL.
With the exception of outstanding rights and obligations, each
party will be relieved of its obligations under this Agreement
in the event, to the extent and for the period of time that
performance is delayed or prevented by any cause reasonably
beyond that party's control, including specifically non-
delivery or delay in delivery of aircraft to ACA, delay in
completion of required training of Operator's employees by the
aircraft manufacturer, or delay in receipt of any necessary
government approvals.
ARTICLE 21. TRADEMARKS AND CORPORATE IDENTIFICATION.
A. TRADEMARKS.
1. Each of Delta and ACA acknowledges for all purposes that any
and all logos, trademarks, service marks and trade names of the
other, whether registered or not, are and shall at all times
remain the exclusive property of the other and may not be used
without the prior written consent of such party, except as set
forth herein. Each of Delta and ACA further acknowledges that
any goodwill or other rights which arise as a result of the use
by it of the other party's marks as permitted under this
Agreement shall accrue solely to the benefit of the party or
affiliate of the party owning such marks, whether registered or
not. Should any right, title or interest in the logos,
trademarks, service marks or trade names of a party become vested
in the other party, the latter party shall hold such right, title
and interest in trust for the benefit of the former party and
shall, at the request of the former party, promptly and
unconditionally assign such right, title and interest to the
former party without royalties or compensation of any kind.
2. Each of Delta and ACA hereby grants to the other, a limited
non-exclusive, non-transferable, royalty-free license for the
term of this Agreement to use their respective service marks as
identified to each other from time to time (including Delta's
marks "Delta" and "Delta Connection") (each a "Licensed
Trademark"), subject to the terms and conditions set forth in
this Article 21. This license is limited to the use of the
Licensed Trademarks in connection with the (i) advertising and
promotion of the Delta Connection Flights and (ii) the Livery (as
defined in Article 21(B)(1) below) of the Aircraft as
contemplated by this Agreement.
3. Each party agrees to use the Licensed Trademarks only in a
manner permitted herein or as approved in advance and in writing
by the party owning or possessing the right to license such
Licensed Trademarks. Each Licensed Trademark shall be marked
with an r or SM or other symbol, as appropriate.
4. Each party agrees that all Livery, advertising and
promotional materials bearing the Licensed Trademarks in relation
to air transport services contemplated by this Agreement shall
meet the quality and presentation standards as set forth by the
party owning the relevant Licensed Trademark.
5. Each party agrees that all advertising, promotional and
other materials with the other party's name or Licensed
Trademark, shall be submitted for such other party's prior review
and approval before painting, printing, publishing, or
distributing any such material. Each party's Licensed Trademark
must appear exactly as set forth in specifications provided by
such party. Once a party has approved a specific type of
advertisement the other party may continue to use such party's
name or Licensed Trademark in the same format during the term of
this Agreement. At either party's direction, the other party
shall cause the withholding, discontinuance, recall or
cancellation, as appropriate, of any advertising or promotional
material not approved by such party that differs significantly
from that approved by such party or that is put to a use or used
in a media not approved by such party. Each party reserves the
right to refuse to participate in any advertising or promotional
materials proposed by the other party.
6. Each party has sole discretion to determine the
acceptability of both the quality and presentation of advertising
and promotional materials using its Licensed Trademark.
B. BRANDING.
1. Livery. Each of the Aircraft shall be in the color
scheme, including exterior paint and interior upholstery and
appointments ("Livery") of the Delta Connection Livery, as
provided to Operator by Delta from time to time.
2. On Board Branding. Delta shall control all on board
branding and in-flight materials including, without limitation,
in-flight publications, food and beverage products, paper goods,
service ware and flight attendant uniforms.
22. CONFIDENTIALITY
A. Except as otherwise provided below, each party shall,
and shall ensure that its directors, officers, employees,
affiliates and professional advisors (collectively, the
"Representatives"), at all times, maintain strict confidence and
secrecy in respect of all Confidential Information (as defined
below) of the other party (including its affiliates) received
directly or indirectly as a result of this Agreement. If a party
(the "Disclosing Party") in good faith determines that it is
required to disclose any Confidential Information of other party
(the "Affected Party") in order to comply with any applicable law
or government regulation, or under the terms of a subpoena or
order issued by a court or governmental body, it shall (a) notify
the Affected Party immediately of the existence, terms and
circumstances surrounding such request, (b) consult with the
Affected Party on the advisability of taking legally available
steps to resist or narrow such request and (c) if any disclosure
of Confidential Information is required to prevent the Disclosing
Party from being held in contempt or subject to other legal
penalty, furnish only such portion of the Confidential
Information as it is legally compelled to disclose and use
commercially reasonable efforts (at the cost of the party whose
Confidential Information is being protected) to obtain an order
or other reliable assurance that confidential treatment shall be
accorded to the disclosed Confidential Information. Each party
agrees to transmit Confidential Information only to such of its
Representatives as required for the purpose of implementing and
administering this Agreement, and shall inform such
Representatives of the confidential nature of the Confidential
Information and instruct such Representatives to treat such
Confidential Information in a manner consistent with this Article
22.
For purposes of this Agreement, "Confidential Information"
shall mean (a) all confidential or proprietary information of a
party, including, without limitation, trade secrets, information
concerning past, present and future research, development,
business activities and affairs, finances, properties, methods of
operation, processes and systems, customer lists, customer
information (such as passenger name record or "PNR" data) and
computer procedures and access codes; and (b) the terms and
conditions of this Agreement and any reports, invoices or other
communications between the parties given in connection with the
negotiation or performance of this Agreement; and (c) excludes
(i) information already in a party's possession prior to its
disclosure by other party; (ii) information obtained from a third
person or entity that is not prohibited from transmitting such
information to the receiving party as a result of a contractual,
legal or fiduciary obligation to the party whose information is
being disclosed; (iii) information that is or becomes generally
available to the public, other than as a result of disclosure by
a party in violation of this Agreement; or (iv) information that
has been or is independently acquired or developed by a party, or
its Affiliate, without violating any of its obligations under
this Agreement.
B. Each party acknowledges and agrees that in the event of
any breach of this Article 22, the Affected Party shall be
irreparably and immediately harmed and could not be made whole by
monetary damages. Accordingly, it is agreed that, in addition to
any other remedy at law or in equity, the Affected Party shall be
entitled to an injunction or injunctions (without the posting of
any bond and without proof of actual damages) to prevent breaches
or threatened breaches of this Article 22 and/or to compel
specific performance of this Article 22.
C. The confidential obligations of the parties under this
Article 22 shall survive the termination or expiration of this
Agreement.
ARTICLE 23. MODIFICATION AND WAIVER.
No amendment, modification, supplement, termination or waiver
of any provision of this Agreement, and no consent to any
departure by either party therefrom, shall in any event be
effective unless in writing signed by authorized
representatives of both parties, and then only in the specific
instance and for the specific purpose given.
ARTICLE 24. NOTICES.
Unless otherwise provided herein, all notices, requests
and other communications required or provided for hereunder
shall be in writing (including telecopy or similar
teletransmission or writing) and shall be given at the
following addresses:
(1) If to Delta:
Delta Air Lines, Inc.
Hartsfield Atlanta International Airport
Atlanta, Georgia 30320
Attention: Senior Vice President, Network
Management
Telecopy: (404) 715-6018
(2) If to ACA:
Atlantic Coast Airlines Holdings, Inc.
515A Shaw Road
Dulles, Virginia 20166
Attention: President
Telecopy: 703-925-6288
Any such notice, request or other communication shall be
effective (i) if given by mail, upon the earlier of receipt or
the third business day after such communication is deposited
in the United States mails, registered or certified, with
first class postage prepaid, addressed as aforesaid or (ii) if
given by any other means including, without limitation, by air
courier, when delivered at the address specified herein.
Delta or ACA may change its address for notice purposes by
notice to the other party in the manner provided herein.
ARTICLE 25. ASSIGNMENT.
This Agreement shall bind and inure to the benefit of Delta
and ACA and their respective successors and assigns; provided,
however, neither party may assign or transfer this Agreement
or any portion hereof to any person or entity without the
express written consent of the other party. Any assignment or
transfer, by operation of law or otherwise, without such
consent shall be null and void and of no force or effect.
ARTICLE 26. ADDITIONAL DOCUMENTS.
The parties hereby covenant and agree, prior to the
commencement of Delta Connection services by Operator, to
execute and deliver the following additional documents in
connection with this Agreement:
A. A ground handling agreement, providing for ground
handling by Delta at stations operated by Delta-----------
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ARTICLE 27. MISCELLANEOUS.
A. TRAVEL BENEFITS.
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ACA further reserves the right to enter into interline
agreements with other carriers to provide free and reduced
rate travel for ACA's employees, and to provide reciprocal
benefits for employees of such carriers on Delta Connection
Flights on a space available basis.
B. CARGO.
Delta Connection Flights will initially provide small package
services as typically provided under Delta's "Delta Dash"
service. Operator and Delta agree to meet and discuss the
implementation of expanded cargo operations on the Delta
Connection Flights at an appropriate time to be agreed.
C. TRAINING PROVIDED BY OPERATOR.
Operator will train Delta's personnel on aircraft and ground
handling operations as necessary and required with regard to
Delta's handling of the Aircraft.
ARTICLE 28. GOOD FAITH.
Each party shall exercise good faith in its dealings with the
other parties hereto and in performance of its obligations
under this Agreement.
{The remainder of this page intentionally left blank}
IN WITNESS WHEREOF, the parties have executed this
Agreement by their undersigned duly authorized
representatives:
Atlantic Coast Airlines Holdings, Inc. Delta Air
Lines, Inc.
By: By:
Name: ____________________ Name:
__________________
Title: _____________________ Title:
___________________
ACA Management, Inc.
By: ______________________
Name: ____________________
Title: _____________________
EXHIBIT A
The Aircraft
No. of Aircraft Scheduled
Aircraft Type Delivery Date
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Exhibit B
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Exhibit C
RES SYSTEM EQUIPMENT
Equipment, as defined in Article 9(B)(1), will be provided to
Operator by Delta at the following of Operator's locations:
Headquarters
Dispatch
Training
Maintenance base for the Aircraft
Operator handled stations
Exhibit D
OUTLINE OF EMERGENCY RESPONSE PROGRAM
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EXHIBIT 10.12(b)(1)
AMENDMENT NUMBER ONE
TO
SEVERANCE AGREEMENT
This Amendment Number One to
Severance Agreement ("Amendment Number One")
is made and entered into as of this 17th day
of August, 1999 (the "Effective Date"), by
and between ATLANTIC COAST AIRLINES HOLDINGS,
INC., a Delaware corporation ("ACAH"),
ATLANTIC COAST AIRLINES, a California
corporation ("ACA") (ACAH and ACA are herein
collectively referred to as the "Company")
and KERRY B. SKEEN ("Skeen").
Witnesseth That:
Whereas, Skeen and the Company are
parties to a Severance Agreement dated as of
January 20, 1999 (the "Severance Agreement");
and
Whereas, the Compensation Committee
of the Board of Directors of the Company has
determined that the best interests of the
Company would be served by entering into this
amended and restated Agreement with Skeen;
Now, Therefore, the parties, for
and in consideration of the mutual and
reciprocal covenants and agreements
hereinafter contained, and intending to be
legally bound hereby, do contract and agree
that the Severance Agreement be and hereby is
amended as follows:
I. Paragraph 5.A of the Agreement is hereby
amended and restated to read as follows:
A. An annual base
salary of Two-Hundred Ninety Five
Thousand Dollars ($295,000) shall
be paid to Skeen. Commencing
October 1, 1999, an annual base
salary of Three-Hundred Ninety Five
Thousand Dollars ($395,000) shall
be paid to Skeen. Commencing
October 1, 2000 and each October 1
thereafter, the amount of Skeen's
base salary shall be increased as
determined by the Compensation
Committee of the Board of Directors
of the Company; provided, however,
that in no event shall Skeen's
annual base salary be less than the
previous year's annual base salary.
Skeen's base salary for each year
shall be payable to him in
accordance with the reasonable
payroll practices of the Company as
from time to time in effect for
executive employees (but in no
event less often than monthly).
II. A new Paragraph 6.D is hereby added to
the Agreement to read as follows:
D. The Company agrees
to reimburse Skeen for the cost of
investment and tax planning
services up to $5,000 incurred
during 1999. Thereafter, any such
reimbursement shall be subject to
the discretion of the Compensation
Committee of the Board of
Directors. If such payments are
taxable to Skeen, the Company shall
pay Skeen a gross-up equal to the
estimated income, FICA and Medicare
taxes due with respect to such
reimbursement, with federal and
state income taxes being estimated
at the highest marginal rates.
III. Paragraph 8.A of the Agreement is hereby
amended and restated to read as follows:
A. Company agrees to
continue in force a stock option
plan or one which is substantially
similar to the existing plan
("Stock Option Plan"), which has
been approved by the shareholders
of the Company and, on the first
business day in each October
commencing in October, 2000, and
(subject to the provisions of
Paragraph 10.A.(vii)) continuing so
long as Skeen is employed by the
Company to grant Skeen options
under the Stock Option Plan to
purchase not less than 100,000
shares of the common stock of ACAH
at the price per share at the
closing of the trading market on
the last business date prior to
such grant. The Company also
agrees to approve the issuance of
such additional shares as are
necessary to enable Skeen to
exercise such options. The Company
will not be required to reserve
shares from existing plans to cover
future obligations under this
paragraph, but will use reasonable
efforts to obtain shareholder
approval as necessary from time to
time to make a sufficient number of
additional shares available on a
timely basis, and will provide
Skeen with equivalent alternative
compensation should approval not be
obtained. The terms of the grant
of such options granted after
January 1, 1998 shall provide that
(a) Skeen's right to exercise such
options shall vest and become
exercisable over the five-year
period beginning on the date of
each grant at the rate of one-fifth
per year (i.e., one-fifth shall
vest and become exercisable on the
first anniversary of the grant) so
long as Skeen is employed by the
Company, (b) Skeen's right to
exercise such options to purchase
the entire number of shares covered
thereby shall become immediately
100% vested in the event there is a
Change in Control (as hereinafter
defined) or in the event Company
shall otherwise become obligated to
provide Skeen with Severance
Compensation as provided in
Paragraph 10.e. herein, (c) such
options shall be exercisable for
ten (10) years after the date of
the grant so long as Skeen is
employed by the Company and (d)
Skeen shall have the right to
exercise such vested options within
ninety (90) days following any
termination of Skeen's employment
except that in the case of
termination of employment for which
Skeen is entitled to "Severance
Compensation" as provided herein,
in which case the terms of
Paragraph 10.E.(iii) shall apply.
Notwithstanding the above, the
terms of the grant of such options
shall be no less favorable to Skeen
than the terms of options granted
as of the time of the grant to
other senior executive officers.
IV. A new Paragraph 8.D is hereby added to
the Agreement to read as follows:
D. The Company has
granted to Skeen options, under the
Stock Option Plan and pursuant to a
Company Stock Option Agreement, to
purchase 100,000 shares of the
common stock of ACAH, effective as
of July 21, 1999 at the price per
share at the closing of the trading
market on July 20, 1999. Skeen
acknowledges that said grant is in
lieu of grants that were to be made
to him effective January 1, 2000
pursuant to the terms of this
Agreement as existed prior to the
execution of Amendment Number One.
In Witness Whereof, the Company has
hereunto caused this Amendment Number One to
be executed by a duly authorized officer and
Skeen has hereunto set his hand as of the day
and year first above written.
WITNESS:
/s/_____________________________
/s/__________________________
Kerry B.
Skeen
COMPANY:
ATTEST: ATLANTIC
COAST AIRLINES
/s/____________________________ BY:
/s/_________________________
Richard J. Kennedy,
C. Edward Acker,
Secretary
Chairman of the Board
ATTEST:
ATLANTIC
COAST
AIRLINES
HOLDINGS,
INC.
/s/____________________________ BY:
/s/_________________________
Richard J. Kennedy,
C. Edward Acker,
Secretary
Chairman of the Board
EXHIBIT 10.12(c)(1)
AMENDMENT NUMBER ONE
TO
SEVERANCE AGREEMENT
This Amendment Number One to
Severance Agreement (the "Amendment") is made
and entered into as of this 12th day of
August, 1999 (the "Effective Date"), by and
between ATLANTIC COAST AIRLINES HOLDINGS,
INC., a Delaware corporation ("ACAH"),
ATLANTIC COAST AIRLINES, a California
corporation ("ACA") (ACAH and ACA are herein
collectively referred to as the "Company")
and THOMAS J. MOORE ("Moore").
Witnesseth That:
Whereas, Moore and the Company are
parties to a Severance Agreement dated as of
January 20, 1999 (the "Severance Agreement");
and
Whereas, the Compensation Committee
of the Board of Directors of the Company has
determined that the best interests of the
Company would be served by entering into this
amended and restated Agreement with Moore;
Now, Therefore, the parties, for
and in consideration of the mutual and
reciprocal covenants and agreements
hereinafter contained, and intending to be
legally bound hereby, do contract and agree
that the Severance Agreement be and hereby is
amended as follows:
I. Paragraph 5.A of the Agreement is hereby
amended and restated to read as follows:
A. An annual base
salary of Two-Hundred Thousand
Dollars ($200,000) shall be paid to
Moore. Commencing on January 1,
2000, Moore's annual base salary
shall be increased to Two Hundred
Fifty Thousand Dollars ($250,000).
Commencing on October 1, 2000 and
on each October 1 thereafter, the
amount of Moore's base salary shall
be increased as determined by the
Compensation Committee of the Board
of Directors of the Company.
Moore's base salary for each year
shall be payable to him in
accordance with the reasonable
payroll practices of the Company as
from time to time in effect for
executive employees (but in no
event less often than monthly).
II. A new Paragraph 6.D is hereby added to
the Agreement to read as follows:
D. The Company agrees
to reimburse Moore for the cost of
investment and tax planning
services up to $5,000 incurred
during 1999. Thereafter, any such
reimbursement shall be subject to
the discretion of the Compensation
Committee of the Board of
Directors.
III. Paragraph 8.A of the Agreement is hereby
amended and restated to read as follows:
A. Mandatory Stock
Options. Company agrees to
continue in force a stock option
plan or one which is substantially
similar to the existing plan
("Stock Option Plan"), which has
been approved by the shareholders
of the Company and, on the first
business day in each October
commencing in October, 2000, and
(subject to the provisions of
Paragraph 10.A.(vii)) continuing so
long as Moore is employed by the
Company to grant Moore options
under the Stock Option Plan to
purchase not less than 50,000
shares of the common stock of ACAH
at the price per share at the
closing of the trading market on
the last business date prior to
such grant. The Company also
agrees to approve the issuance of
such additional shares as are
necessary to enable Moore to
exercise such options. The Company
will not be required to reserve
shares from existing plans to cover
future obligations under this
Paragraph, but will use reasonable
efforts to obtain shareholder
approval as necessary from time to
time to make a sufficient number of
additional shares available on a
timely basis, and will provide
Moore with equivalent alternative
compensation should approval not be
obtained. The terms of the grant
of such options shall be consistent
with the terms of options granted
as of the time of the grant to
other senior executive officers at
or below Moore's position with the
Company.
IV. A new Paragraph 8.E is hereby added to
the Agreement to read as follows:
E. The Company has
granted to Moore options, under the
Stock Option Plan and pursuant to a
Company Stock Option Agreement, to
purchase 100,000 shares of the
common stock of ACAH effective as
of July 21, 1999 at the price per
share at the closing of the trading
market on July 20, 1999.
V. Paragraph 10.E.(i) of the Agreement is
hereby amended and restated to read as
follows:
(i) Severance Pay.
Throughout the Severance Period, Moore will
receive severance pay at the rate of 100% of
his annual base salary in effect at the time
of his termination, to be paid on the
Company's regular payroll payment dates at
the same time and in the same fashion as the
Company's regular payroll payments. In the
event that a Termination Date occurs on or
before December 31, 1999 such that Moore is
entitled to Severance Compensation as
provided herein, severance pay will be at the
rate of 100% of his annual base salary that
would have been in effect beginning January
1, 2000 as provided herein.
In Witness Whereof, the Company has
hereunto caused this Amendment to be executed
by a duly authorized officer and Moore has
hereunto set his hand as of the day and year
first above written.
WITNESS:
/s/_____________________________
/s/__________________________
Thomas J.
Moore
COMPANY:
ATTEST: ATLANTIC
COAST AIRLINES
/s/____________________________
BY: /s/_________________________
Richard J. Kennedy,
Kerry B. Skeen,
Secretary
President & Chief Executive Officer
ATTEST:
ATLANTIC
COAST
AIRLINES
HOLDINGS,
INC.
/s/____________________________
BY: /s/_________________________
Richard J. Kennedy,
Kerry B. Skeen,
Secretary
President & Chief Executive Officer
EXHIBIT 10.40A(1)
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.
CONTRACT CHANGE ORDER
PURCHASER: Atlantic Coast Airlines
PURCHASE AGREEMENT NO.: P.A.-0350 AIRCRAFT TYPE:CRJ-200
C.C.O. NO.: 13 DATED: 28/04/99
PAGES AFFECTED: N/A Page 1 of 2
____________________________________________________________
_________________________
1.0 REASON FOR CHANGE - Agreed Change
2.0DESCRIPTION OF CHANGE - To amend the Purchase Agreement with the
incorporation of the Letter Agreement No. 0350-25 for the change in
delivery month of the -----------Aircraft from-----------------------.
3.0 PRICE - Not Applicable
4.0 PAYMENT - Not Applicable
5.0 CUSTOMER SERVICES - Not Applicable
6.0 TECHNICAL MATTERS - Not Applicable
7.0 OTHER -
7.1 Letter Agreement No. 0372-25 attached hereto is
hereby created and made a part of the Agreement.
ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT WILL REMAIN
UNCHANGED
For administrative purposes only, a consolidation of the
amendments contained in this CCO is attached. In the event
of inconsistencies between the attached pages and this CCO,
this CCO shall prevail.
____________________________________________________________
_________________________
FOR AND ON BEHALF OF: FOR AND ON BEHALF
OF:
Bombardier Inc. Atlantic Coast
Airlines
Signed: _______________________________
Signed:_____________________
Date: ___28/04/98__ Date:
__28/04/99_
April 28, 1999
Our Ref: B99-7701-MD-RJ0350-025
Atlantic Coast Airlines
1 Export Drive,
Dulles, Virginia,
U.S.A. 20166
Letter Agreement No. 025 to Purchase Agreement No. RJ-0350
dated January 8, 1997 (the "Agreement" between Bombardier
Inc. ("BRAD") and Atlantic Coast Airlines ("Buyer") relating
to the purchase of forty-three (43) Canadair Regional Jet
Aircraft (the "Aircraft")
Subject: Change in Delivery Month
Gentlemen:
This letter constitutes an integral part of the Agreement
and evidences our further agreement with the matter set
forth below. All terms used herein and in the Agreement and
not defined herein, shall have the same meaning as in the
Agreement.
1. Bombardier has requested that Buyer start the delivery
and acceptance process of the ---------- Aircraft -----
----- on --------------, with the closing and
execution of the interim lease agreement ACL-332 on ---
-----------. -----------------------------------------
----, Bombardier will issue to Buyer a credit memo in
the amount of -----------------------------------------
------------------------------------------ upon the
execution of such lease agreement for the ----------
Aircraft.
2. The provisions of this Letter Agreement are personal to
Buyer and shall not be assigned or otherwise disposed
of by Buyer without the prior written consent of
Bombardier.
3. This Letter Agreement constitutes an integral part of
the Agreement and is subject to the terms and
conditions contained therein. To the extent of any
inconsistency or conflict between this Letter Agreement
and the Agreement, this Letter Agreement shall prevail.
Yours truly,
BOMBARDIER INC.
________________________ Date:_____________
Name: Marianella de la Barrera
Title: Account Executive, Contracts
Bombardier Regional Aircraft Division
Acknowledged and Accepted:
this________day of April, 1999
ATLANTIC COAST AIRLINES
________________________ Date:_____________
Name:
Title:
Atlantic Coast Airlines
CONTRACT CHANGE ORDER
PURCHASER: ATLANTIC COAST AIRLINES
PURCHASE AGREEMENT NO.: CRJ-0350 AIRCRAFT TYPE: CRJ
C.C.O. NO.: 14 DATED: July 29, 1999
PAGES AFFECTED: See below PAGE 1 of 38
REASON FOR CHANGE
1. To amend the Purchase Agreement to (i) give effect to the exercise by
Buyer of 17 Option Aircraft and thereby increase the order to 60 Firm
Aircraft, (ii) to provide Buyer with interim aircraft in the event of
a delay in delivery of those Aircraft scheduled to deliver in the-----
------ (iii) to introduce a new Maintenance Cost Guarantee Letter
Agreement to reflect the current order of 60 Aircraft and to include
within the Letter Agreement the 3 CRJ aircraft purchased by Buyer
pursuant to purchase agreement PA-0454, (iv) to revise the Completion
Rate Guarantee Letter Agreement and the Operational Restrictions
Letter Agreement to include the CRJ aircraft purchased by Buyer
pursuant to purchase agreement PA-0454, and (v) to give Buyer the
conditional right to assign its right to purchase and lease up to
seventeen (17) Aircraft to a new corporation to be formed in the
United States.
PAGES TO BE SUBSTITUTED NEW/REVISED PAGES
Purchase Agreement pages no. 56 & 56A Attachment 1 to CCO #14 dated
July 29, 1999
Purchase Agreement page no. C-1 Attachment 2 to CCO #14 dated July 29,
1999
Letter Agreement No. 006 page no. 2 Attachment 3 to CCO #14 dated
July 29, 1999
Letter Agreement No. 008A Attachment 4 to CCO #14
dated July 29, 1999
Letter Agreement No. 009C Attachment 5 to CCO #14
dated July 29, 1999
Letter Agreement No. 026 Attachment 6 to CCO #14 dated July 29,
1999
Letter Agreement No. 027 Attachment 7 to CCO #14 dated July 29,
1999
DESCRIPTION OF CHANGE:
P.A. and all Letter Agreements
All references to forty-three (43) Aircraft are hereby changed to refer
to sixty (60) Aircraft.
P.A. Pages 56 & 56A - DELIVERY SCHEDULE
The delivery schedule is amended to add Aircraft forty-four (44)
through sixty (60).
P.A. Page C-1 - FSR TERM
The term for the FSR is amended from ----------------------------------
-----------------------, due to the exercise of the seventeen (17)
Option Aircraft.
Letter Agreement No. 003B - (OPTION AIRCRAFT)
Letter Agreement No. 003B is no longer applicable and is hereby
canceled
Letter Agreement No. 006 - (OPERATIONAL RESTRICTIONS)
Letter Agreement is revised to include the CRJ aircraft to be delivered
under purchase agreement PA-0454 between Buyer and Bombardier.
Letter Agreement No. 008A (SCHEDULE COMPLETION RATE)
Letter Agreement No. 008 is hereby deleted and replaced with Letter
Agreement No. 008A to
include the CRJ aircraft to be delivered under purchase agreement PA-
0454 between Buyer and Bombardier.
Letter Agreement No. 009C (AIRFRAME DIRECT MAINTENANCE COST)
Letter Agreement No. 009B is hereby deleted and replaced with Letter
Agreement No. 009C to
incorporate changes to reflect a new guarantee value for the Airframe
Direct Maintenance Cost Guarantee ("ADMCG") which takes into account
Buyer's current order of sixty (60) Aircraft, and to include under the
Letter Agreement CRJ aircraft to be delivered to Buyer pursuant to
purchase agreement PA-0454 between Bombardier and Buyer.
The guarantee value shall be ------------------------------------------
-----------------------------------------------------------------------
--------
Letter Agreement No. 026 - INTERIM AIRCRAFT
Letter Agreement No. 026 is introduced to provide Buyer with interim
CRJ aircraft for lease in the event Bombardier requires these to meet
the year 2000 aircraft deliveries.
Letter Agreement No. 027 - ASSIGNMENT
Letter Agreement No. 027 is introduced to provide Bombardier's
conditional consent to Buyer with respect to Buyer's request to assign
its right to purchase and to lease up to seventeen (17) of the Aircraft
being exercised via this Contract Change Order to a new corporation to
be formed in the United States.
ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT WILL REMAIN UNCHANGED
___________________________________________________________________________
_____
FOR AND ON BEHALF OF: FOR AND ON BEHALF OF:
BOMBARDIER INC. ATLANTIC COAST AIRLINES
Signed: __________________________ Signed:__________________________
Date: __________________________ Date:
__________________________
APPENDIX II
DELIVERY SCHEDULE
First Aircraft ---------
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----------
Twenty-sixth Aircraft-----------
Twenty-seventh Aircraft--------
Twenty-eighth Aircraft---------
Twenty-ninth Aircraft----------
Thirtieth Aircraft-------------
Thirty-first Aircraft---------------**
Thirty-second Aircraft---------------**
Thirty-third Aircraft-------------**
Thirty-fourth Aircraft--------------**
Thirty-fifth Aircraft--------------
Thirty-sixth Aircraft--------------
APPENDIX II
DELIVERY SCHEDULE (CONTINUED)
Thirty-seventh Aircraft-------------
Thirty-eighth Aircraft-------------
Thirty-nine Aircraft-------------
Fortieth Aircraft-------------
Forty-first Aircraft--------------
Forty-second Aircraft -----------
Forty-third Aircraft -------------
Forty-fourth Aircraft --------------
Forty-fifth Aircraft --------------**
Forty-sixth Aircraft -----------
Forty-seventh Aircraft ---------------**
Forty-eighth Aircraft ---------------
Forty-ninth Aircraft ----------------**
Fiftieth Aircraft ----------------**
Fifty-first Aircraft --------------**
Fifty-second Aircraft ---------------**
Fifty-third Aircraft ---------------**
Fifty-fourth Aircraft --------------
** Fifty-fifth Aircraft --------------**
Fifty-sixth Aircraft -------------**
Fifty-seventh Aircraft -----------**
Fifty-eighth Aircraft --------------**
Fifty-ninth Aircraft ----------------**
Sixtieth Aircraft ------------------
CUSTOMER SUPPORT SERVICES
ANNEX A - TECHNICAL SUPPORT, SPARE PARTS, TRAINING AND
TECHNICAL DATA
The following Customer Support Services are those services
to which reference is made in Article 3 of the Agreement.
ARTICLE 1 - TECHNICAL SUPPORT
1.1 Factory Service
BRAD agrees to maintain or cause to be maintained the
capability to respond to Buyer's technical inquiries,
to conduct investigations concerning maintenance
problems and to issue findings and recommend action
thereon. This service shall be provided for as long as
ten (10) CL-600-2B19 aircraft remain in commercial air
transport service.
1.2 Field Service Representative
1.2.1 Services
BRAD shall assign one (1) Field Service
Representative ("FSR") to Buyer's main base of
operation or other location as may be mutually
agreed.
1.2.2 Term
*** Such assignment shall be for ---------------------
-------------- based on the purchase and delivery
of sixty (60) Aircraft to Buyer (should Buyer
eventually take delivery of less than sixty (60)
Aircraft, the term shall be accordingly amended as
per Letter Agreement No. 003B Article 3.0), and
shall commence approximately one (1) month prior
to the Delivery Date of the first Aircraft. The
FSR assignment may be extended on terms and
conditions to be mutually agreed.
1.2.3 Responsibility
The FSR's responsibility shall be to provide
technical advice to Buyer for the line maintenance
and operation of the Aircraft systems and
troubleshooting during scheduled and unscheduled
maintenance by Buyer's designated personnel ("FSR
Services").
(vi) not operating the Aircraft in normal commercial
airline service.
** 5.0 The term of this Letter Agreement shall commence on the
date of start of revenue service of Buyer's first Aircraft
and shall expire five (5) years thereafter and pertains to
the Aircraft included in the Agreement and the aircraft to
be delivered under purchase agreement PA-0454 between Buyer
and Bombardier dated July 29, 1999.
6.0 Without limitation to the foregoing, during any period of
grounding or operational restrictions, BRAD will diligently
work to correct the cause(s) relating thereto and Buyer will
provide all reasonable assistance, if required.
7.0 Limitation
7.1 --------------------------------------------------
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July 29, 1999
Our Ref: B96-7701-RJTL-RJ0350-008A
Atlantic Coast Airlines
515A Shaw Road,
Sterling, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 008A to Purchase Agreement No. RJ-0350 dated
January 8, 1997 (the "Agreement" between Bombardier Inc. ("BRAD")
and Atlantic Coast Airlines ("Buyer") relating to the purchase of
sixty (60) Canadair Regional Jet Aircraft (the "Aircraft")
This Letter Agreement No. 008A dated July 29, 1999 cancels and
supersedes Letter Agreement No. 008 dated January 8, 1997.
Subject: Schedule Completion Rate
1.0 This letter constitutes an integral part of the Agreement
and evidences our further agreement with the matters set
forth below. All terms used herein and in the Agreement and
not defined herein, shall have the same meaning as in the
Agreement.
2.0 Intent
The intent of the Schedule Completion Rate ------------
---------- is to achieve the full potential of the
inherent technical reliability of Buyer's sixty 60
Aircraft exercised by Contract Change Order No. 14 to
the Agreement together with Buyer's three (3) CRJ
aircraft purchased by Buyer pursuant to purchase
agreement PA-0454 dated July 29, 1999 between Buyer and
Bombardier Inc. (together redefined as the "Aircraft"
for purposes of this Letter Agreement only) -----------
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3.0 Definition
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4.0 --------------------------------------------------
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5.0 -------------------------------------------------------
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7.0 Assumptions
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8.0 Conditions and Limitations
8.1 ----------------------------------------
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8.2 Reporting
Buyer shall provide to BRAD not later than --
--------------------------------------------------
--- all reports as required by Buyer's regulatory
authority relating to dispatch reliability and
schedule completion. ----------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
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----- Buyer shall also provide BRAD such other
information and data as BRAD may reasonably
request for the purpose of analyzing -------------
--------------. BRAD shall respond to the data in
a timely manner and shall provide Buyer with a
summary of fleetwide dispatch reliability reports
--------------------------------------------------
-------------------------
8.3 Master Record
The master record of Schedule Completion Rate
will be maintained by BRAD in its format based
upon information provided by Buyer's maintenance
control program as requested herein.
BRAD will provide a copy to Buyer of the
data. Buyer shall review the data and if it is
not in agreement with Buyer's records, Buyer and
BRAD will consult to resolve any differences.
9.0 Corrective Action
9.1 In the event the achieved schedule
completion rate, as reported to Buyer by
BRAD, ---------------------------------------
---------------------- BRAD and Buyer will
jointly review the performance for that
period to identify improvement changes
required. ----------------------------------
----------------------------
a) ---------------------------------------------
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9.2 ---------------------------------------------
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shall be dependent upon the quality, extent and
regularity of information and data reported to
BRAD by Buyer.
10.0 Implementation of Changes
Buyer may, at its option, decline to implement any
change proposed by BRAD under Article 9.0 above. If
Buyer so declines, ------------------------------------
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11.0 --------------------------------------------------
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12.0 -------------------------------------------------------
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13.0 Limitation of Liability
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14.0 The provisions of this Letter Agreement are personal to
Buyer and shall not be assigned or otherwise disposed of by Buyer
without the prior written consent of BRAD, which consent shall
not be unreasonably withheld. Should Buyer request to assign this
Letter Agreement to another entity, BRAD reserves the right to
revise the ------------------to reflect any deviation in any of
the underlying assumptions used to generate the------------------
- --- and to revise the maximum compensation credit to reflect any
changes in the number of Aircraft covered
15.0 This Letter Agreement constitutes an integral part of
the Agreement and subject to the terms and conditions
contained therein.
16.0 In the event of the Termination of the Agreement, this
Letter Agreement shall become automatically null and void.
Should there be any inconsistency between this Letter Agreement
and the Agreement with respect to the subject matter covered by
the terms hereof, then this Letter Agreement shall prevail.
Yours truly,
BOMBARDIER INC.
________________________ Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________ Date:_____________
Kerry B. Skeen
President and C.E.O.
LETTER AGREEMENT NO. 009C SUPERSEDED
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road,
Sterling, Virginia,
U.S.A. 20166
Letter Agreement No. 026 to Purchase Agreement No. RJ-0350
dated January 8, 1997 (the "Agreement" between Bombardier
Inc. ("BRAD") and Atlantic Coast Airlines ("Buyer") relating
to the purchase of sixty (60) Canadair Regional Jet Aircraft
(the "Aircraft")
Subject: Interim Aircraft
Gentlemen:
This letter constitutes an integral part of the Agreement
and evidences 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
meaning as in the Agreement.
1.0 --------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--- BRAD shall have the flexibility to provide
interim Canadair Regional Jet Aircraft (the
"Interim Aircraft") on lease for periods not
exceeding ------------------ under the following
general conditions:
BRAD shall provide written notice to Buyer of its
intention to substitute Interim Aircraft for the -
---------- Aircraft deliveries and a form of short
term lease no later than ---------------- prior to
the first day of the Scheduled Delivery Date of
each of the ------------- Aircraft deliveries.
After notice to Buyer of BRAD's intention to
provide the first Interim Aircraft, Buyer shall
have-------------------------- to review the form
of lease and to negotiate with BRAD with respect
to the form of lease, unless the parties mutually
agree to extend the lease negotiation period. The
parties shall negotiate such lease terms in good
faith. Thereafter, Buyer shall advise BRAD if it
elects to accept the Interim Aircraft or to defer
the corresponding ------------- Aircraft delivery
to a Scheduled Delivery Date when Bombardier will
have Aircraft available (within the three (3)
month period identified in this paragraph 1.0).
The Interim Aircraft shall;
i)be in a neutral paint scheme;
ii) require no additional crew training
(other than what is currently required for
Buyer's flight and maintenance personnel);
iii) be leased at a lease rate -----------
------------------------------------------
------------------------------------------
------------------------------------------
----------------
iv) require maintenance reserves --------
------------------------------ and
v)have a lease period which shall end on the
day Buyer obtains FAA approval to add the
applicable --------- Aircraft on Buyer's
operations specifications, which will
occur no later than ---------------- after
the initial day of the lease, unless the
parties mutually agree otherwise to extend
the term of the Interim Aircraft lease.
1.1 With respect to the Interim Aircraft other
than the first Interim Aircraft accepted by
Buyer, Buyer shall have the right, within ---
--------------------- following notice from
BRAD of a substitution of a ------------
Aircraft with an Interim Aircraft, to elect
not to take the Interim Aircraft and to defer
the corresponding -------------- Aircraft
delivery to a Scheduled Delivery Date when
Bombardier will have Aircraft available
(within the --------------------- period
identified in paragraph 1.0).
1.2 BRAD shall use reasonable efforts to minimize
use of the Interim Aircraft as substitute
aircraft for Buyer's ------------- Aircraft,
so as to minimize slip of Buyer's -----------
---- Aircraft in the following calendar year.
1.3 The form of lease for the Interim Aircraft
shall conform to this Letter Agreement and
will contain reasonable terms which shall be
subject to the mutual agreement of the
parties.
2.0 In the event of the termination of the Agreement,
this Letter Agreement shall become automatically
null and void.
3.0 The provisions of this Letter Agreement are
personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer without the prior
written consent of Bombardier.
4.0 This Letter Agreement constitutes an integral part of
the Agreement and is subject to the terms and
conditions contained therein. To the extent of any
inconsistency or conflict between this Letter Agreement
and the Agreement, this Letter Agreement shall prevail.
Yours truly,
BOMBARDIER INC.
________________________ Date:_____________
Michel Bourgeois
Vice-President, Contracts
Acknowledged and Accepted
ATLANTIC COAST AIRLINES
________________________ Date:_____________
Kerry B. Skeen
President and C.E.O.
July 29 1999
Atlantic Coast Airlines
515A Shaw Road,
Sterling, Virginia,
U.S.A. 20166
Letter Agreement No. 027 to Purchase Agreement No. RJ-0350
dated January 8, 1997 (the "Agreement" between Bombardier
Inc. ("BRAD") and Atlantic Coast Airlines ("Buyer") relating
to the purchase of sixty (60) Canadair Regional Jet Aircraft
(the "Aircraft")
Subject: Assignment
Gentlemen:
This letter constitutes an integral part of the Agreement
and evidences 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
meaning as in the Agreement.
1.0 Buyer shall have the right to assign its right to
purchase and to lease up to seventeen (17) Aircraft
being exercised by Contract Change Order No. 14
(Aircraft 44-60) to a new corporation to be formed in
the U.S. ("Newco") subject to:
(i) Newco shall be a U.S. citizen;
(ii) section 1110 of the U.S. Bankruptcy Code applies;
(iii) the provisions of Articles 20.1, 20.2, 20.3 of
the Agreement and Article 4.0 of Letter Agreement
No. 005b;
(iv) financing shall be based on Buyer's credit; and
(v) additional reasonable terms and conditions required
due to the different structure of the transaction
and aircraft operations following disclosure and
due diligence of the transaction envisaged.
3.0 Subject to the satisfaction of the foregoing, the
assignment shall then be an assignment permitted
pursuant to the terms of Article 20 of the
Agreement, such that Newco will be entitled to all
benefits (including FIPP) as contained in the
Agreement.
4.0 In the event of the termination of the Agreement,
this Letter Agreement shall become automatically
null and void.
5.0 The provisions of this Letter Agreement are
personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer without the prior
written consent of Bombardier.
Yours truly,
BOMBARDIER INC.
________________________ Date:_____________
Michel Bourgeois
Vice-President, Contracts
Acknowledged and Accepted
ATLANTIC COAST AIRLINES
________________________ Date:_____________
Kerry B. Skeen
President and C.E.O.
CONTRACT CHANGE ORDER
PURCHASER: Atlantic Coast Airlines
PURCHASE AGREEMENT NO.: RJ-350 AIRCRAFT TYPE: CRJ
C.C.O. NO.: 15 DATED: September 10,
1999
PAGES: 21
REASON FOR CHANGE:
To amend the Purchase Agreement to (i) revise the Scheduled
Delivery Dates for the Twenty-fourth, the Twenty-sixth through
Thirty-first and Thirty-Third through Sixtieth Aircraft, and (ii)
introduce a new Airframe Direct Maintenance Cost Guarantee Letter
Agreement to reflect the current order of sixty (60) Aircraft and
to include within the Letter Agreement the six (6) CRJ aircraft
purchased by Buyer pursuant to purchase agreement PA-0454.
PAGES TO BE SUBSTITUTED: NEW/REVISED PAGES
Purchase Agreement pages 56 and 56A Attachment No. 1 to CCO
No. 15
Letter Agreement No. 009C Attachment No. 2 to CCO No. 15
DESCRIPTION OF CHANGE:
P.A. Pages 56 & 56A - Appendix II (Delivery Schedule)
The Delivery Schedule is amended by revising the Scheduled
Delivery Dates for the Twenty-fourth, the Twenty-sixth through
Thirty-first and the Thirty-Third through Sixtieth Aircraft.
Letter Agreement No. 009D (Airframe Direct Maintenance Cost)
Letter Agreement No. 009C is hereby deleted and replaced with
Letter Agreement No. 009D to incorporate changes to reflect a new
guarantee value for the Airframe Direct Maintenance Cost Guarantee
("ADMCG") which takes into account Buyer's current order of Sixty
(60) Aircraft, and to include under the Letter Agreement CRJ
aircraft to be delivered to Buyer pursuant to purchase agreement
No. PA-0454 between Bombardier and Buyer.
The guarantee value shall be --------------------------------------
- --------------------------------------------------------------------
- -------------
ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT WILL REMAIN
UNCHANGED
____________________________________________________________________
____________________
FOR AND ON BEHALF OF: FOR AND ON BEHALF OF:
Bombardier Inc. Atlantic Coast Airlines
Bombardier Aerospace
Regional Aircraft
Signed: __________________________
Signed:__________________________
Date: ____________________________ Date:
___________________________
APPENDIX II
DELIVERY SCHEDULE
First Aircraft-------------
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------------
* Twenty-sixth Aircraft---------------*
Twenty-seventh Aircraft--------------
* Twenty-eighth Aircraft------------
* Twenty-ninth Aircraft-------------*
Thirtieth Aircraft---------------
* Thirty-first Aircraft----------------
Thirty-second Aircraft--------------
* Thirty-third Aircraft--------------
* Thirty-fourth Aircraft---------------
* Thirty-fifth Aircraft-------------
* Thirty-sixth Aircraft-------------
APPENDIX II
DELIVERY SCHEDULE (CONTINUED)
* Thirty-seventh Aircraft--------------*
Thirty-eighth Aircraft----------------*
Thirty-nine Aircraft----------------
* Fortieth Aircraft----------------
* Forty-first Aircraft----------------*
Forty-second Aircraft --------------
* Forty-third Aircraft --------------
* Forty-fourth Aircraft ---------------
* Forty-fifth Aircraft ---------------*
Forty-sixth Aircraft --------------
* Forty-seventh Aircraft -----------*
Forty-eighth Aircraft --------------
* Forty-ninth Aircraft ---------------*
Fiftieth Aircraft ---------------
* Fifty-first Aircraft ---------------*
Fifty-second Aircraft ---------------
* Fifty-third Aircraft ----------------*
Fifty-fourth Aircraft ----------------
* Fifty-fifth Aircraft ---------------*
Fifty-sixth Aircraft ----------------
* Fifty-seventh Aircraft --------------
* Fifty-eighth Aircraft ------------*
Fifty-ninth Aircraft ---------------
* Sixtieth Aircraft -----------------
September 10, 1999
Our Ref: B96-7701-RJTL-RJ0350-009D
Atlantic Coast Airlines
515A Shaw Road,
Sterling, Virginia,
U.S.A. 20166
Dear Sirs,
Letter Agreement No. 009D to Purchase Agreement No. RJ-
0350 dated January 8, 1997 (the "Agreement" between
Bombardier Inc. ("BRAD") and Atlantic Coast Airlines,
Inc. ("Buyer") relating to the purchase of sixty (60)
Canadair Regional Jet Aircraft (the "Aircraft")
This Letter Agreement No. 009D dated September 10, 1999
cancels and supersedes Letter Agreement No. 009C dated
July 29, 1999.
Subject: Airframe Direct Maintenance Cost
1.0 This letter constitutes an integral part of the
Agreement and evidences our further agreement with
the matters set forth below. All terms used
herein and in the Agreement and not defined
herein, shall have the same meaning as in the
Agreement.
2.0 Intent
2.1 The intent of the Airframe direct
maintenance cost ----------- is to achieve
the full potential of the maintainability of
the Buyer's sixty 60 Aircraft exercised by
Contract Change Order No. 14 to the Agreement
together with Buyer's six (6) CRJ aircraft
purchased by Buyer pursuant to purchase
agreement PA-0454 dated July 29, 1999 between
Buyer and Bombardier Inc. (together redefined
as the "Aircraft" for purposes of this Letter
Agreement only) -----------------------------
------------------- ------------------------
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2.2 The "Airframe" shall mean the Aircraft
excluding Power Plant Parts, APU parts,
seatcovers and carpets, Collins Avionics
Components, Buyer Furnished Equipment (BFE)
and Ground Support Equipment (GSE).
3.0 Airframe Direct Maintenance Cost ----------
3.1 ----------------------------------------
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3.1.1 The term of this
Letter Agreement shall commence on
the first day of the month following
delivery of the first Aircraft and
shall end seven (7) years thereafter;
3.1.2 ----------------------
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4.0 Calculation of Cost
4.1 Airframe Direct Maintenance Material
Cost ("ADMMC")
The ADMMC is defined as the cost of
material consumed, which excludes initial
provisioning purchases, for the direct
airframe maintenance of the aircraft, less
any transportation, duties, taxes or license
fees. Notwithstanding Buyer's internal cost
allocation system all elements of indirect
material such as cleaning supplies,
consumable tools, hydraulic fluids, oils and
greases, welding supplies and adhesives are
excluded from the calculation of ADMMC.
4.2 Airframe Direct Outside Service Cost
("ADOSC")
The ADOSC is defined as the cost
expended in outside services for direct
airframe and component maintenance of the
aircraft. The ADOSC shall include the total
outside service charges of both labour and
material costs, but excluding transportation
and taxes.
4.3 Hourly Airframe Direct Maintenance Cost ("ADMC")
The following formula shall be used to
calculate the hourly ADMC:
ADMC = ADMMC + ADOSC
T
Where:
ADMMC = Airframe Direct
Maintenance Material Cost,
ADOSC = Airframe Direct Outside
Service Cost,
T = Total flight hours for the
Aircraft recorded for the
applicable period.
4.4 Exclusion of In-House Labour Costs
For more certainty, the parties agree
that all labour costs incurred in-house by
Buyer in maintaining the Aircraft, including
but not limited to scheduled and routine
maintenance, troubleshooting, removal and
installation of parts, is excluded-----------
-----------
5.0 ------------------
5.1 --------------------------------
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6.0 Final Adjustment
6.1 ----------------------------------------
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7.0 ---------------------------------------------
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8.0 Reporting
8.1 Buyer will furnish data to BRAD to allow
BRAD to carry out its analysis and tracking
of Buyer's maintenance costs with respect to
-----------------. If Buyer is not in
agreement with BRAD's request for specific
data and format, Buyer and BRAD will consult
to resolve any differences.
8.2 BRAD shall provide a quarterly report to
Buyer on the status of the Airframe direct
maintenance cost based on the data submitted
by Buyer and approved by BRAD. BRAD shall
review the report and, if the supporting data
is not in agreement with Buyer's records,
Buyer and BRAD will consult to resolve any
differences. -------------------------------
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8.3 BRAD shall not contest any data, as
supplied by Buyer, once the -----------------
------ has been agreed to.
8.4 ----------------------------------------
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9.0 Limitation of Liability
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10.0 The provisions of this Letter Agreement are
personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer without the prior
written consent of BRAD, which shall not be
unreasonably withheld. Should Buyer request to
assign this Letter Agreement to another entity,
BRAD reserves the right to revise the ------------
--------- to reflect any deviation in any of the
underlying assumptions used to generate the ------
--------------------, and to revise the maximum
compensation credit to reflect any changes in the
number of Aircraft covered.
11.0 This Letter Agreement constitutes an integral part
of the Agreement and subject to the terms and
conditions contained therein.
12.0 In the event of the termination of the Agreement,
this Letter Agreement shall become automatically null
and void unless this Agreement is terminated by Buyer
pursuant to Article 16.1 or 16.2 as a result of a
default or breach of this Agreement by BRAD, or as a
result of an Excusable Delay or -----------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- --------------------------------------
Should there be any inconsistency between this Letter
Agreement and the Agreement with respect to the subject
matter covered by the terms hereof, then this Letter
Agreement shall prevail.
Yours very truly,
BOMBARDIER INC.
________________________ Date:_____________
Scott Preece
Manager, Contracts
Acknowledged and Accepted
ATLANTIC COAST AIRLINES
________________________ Date:_____________
Kerry B. Skeen
President and C.E.O.
APPENDIX A
AIRFRAME DIRECT MAINTENANCE COST ----------
- ---------------------------
The following is a listing of all assumptions used to
determine --------- per flight hour. It is understood
by the parties that these assumptions may change in
which case the parties, with mutual agreement, will
adjust -----------
1. All costs are based upon Specification.
2. All costs are based on the maintenance inspection
intervals in the Buyer's regulatory agency
approved maintenance program.
3. All costs are expressed in July 1, 1997 United
States Dollars subject to escalation in accordance
with the terms of Appendix B of this Letter
Agreement, and are rounded to the nearest whole
dollar.
5. Buyer's subcontract airframe labour rate per man-
hour is ------------------------------------------
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6. --------------------------------------------------
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7. Annual average Aircraft utilization is not more
than -------------------------------------- flight
hours per year.
8. Buyer's average annual flight duration for the
Aircraft will be -------------------- minutes per
departure.
9. Total number of Aircraft Buyer has on firm order
from BRAD (including delivered Aircraft under the
Agreement and Aircraft purchased by Buyer pursuant
to purchase agreement PA-0454 between Buyer and
Bombardier) --------------------------------
Should Buyer's average annual flight duration
change throughout the ----------------------------
--------, a new Airframe Direct Maintenance Cost -
--------------- value will be generated as per the
following formula:
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9. Buyer's subcontracted maintenance cost levels are:
ATA CHAPTER PERCENT
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APPENDIX B
ADMCG Economic Adjustment Formula
The ADMCG economic adjustment will be calculated using
the ----------------------------------- Formula. The ---
- --------- term is specified in Section 3.1.1 of the
Letter Agreement.
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EXHIBIT 10.41
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.
BOMBARDIER REGIONAL AIRCRAFT DIVISION
PURCHASE AGREEMENT
PA-0454
BETWEEN
BOMBARDIER INC.
AND
ATLANTIC COAST AIRLINES
Relating to the Purchase of
SIX (6) Canadair Regional Jet aircraft
Including related Customer Support
Services
TABLE OF CONTENTS
ARTICLE
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 LIMITATION OF LIABILITY
20 ASSIGNMENT
21 SUCCESSORS
22 APPLICABLE LAWS
23 CONFIDENTIAL NATURE OF AGREEMENT
24 AGREEMENT
25 DISPUTES
APPENDIX
I ECONOMIC ADJUSTMENT FORMULA
II DELIVERY SCHEDULE
III SPECIFICATION
IV BUYER SELECTED OPTIONAL FEATURES
EXHIBIT
I CERTIFICATE OF ACCEPTANCE
II BILL OF SALE
III CERTIFICATE OF RECEIPT OF AIRCRAFT
IV CHANGE ORDER
ANNEX A
CUSTOMER SUPPORT SERVICES
ANNEX B
WARRANTY AND SERVICE LIFE POLICY
LETTER AGREEMENTS
Letter Agreement No. 001 Credit
Memorandum
Letter Agreement No. 002 Assignment
Letter Agreement No. 003 Option
Aircraft
Letter Agreement No. 004 Financing
Letter Agreement No. 005 Additional
Customer Support
Letter Agreement No. 006 Spares
Credit
Letter Agreement No. 007 Taxes,
Duties and Licenses
Letter Agreement No. 008
Airworthiness Directives
Letter Agreement No. 009
Reconciliation
Letter Agreement No. 010 Spares
Parts Price Catalogue
Letter Agreement No. 011 Cargo
Floor Boards
This Agreement is made on the 29th day of July
1999.
BY AND BETWEEN: BOMBARDIER INC., a Canadian
corporation represented by
Bombardier Aerospace, Regional
Aircraft having an office
located at 123 Garratt
Boulevard, Downsview, Ontario,
Canada. (hereafter called
"Bombardier")Bombardier
AND: ATLANTIC COAST AIRLINES, a
California Company, having
offices at 515A Shaw Road,
Dulles,, Virginia 20166, U.S.A.
("Buyer")
WHEREAS Bombardier Inc. through its
Canadair Manufacturing Division,
is engaged in the manufacture of
the Canadair Regional Jet
aircraft products; and
Bombardier has been created for
the purpose of providing
marketing, sales and customer
support services for the
Canadair Regional Jet aircraft
and related products;
WHEREAS Buyer desires to purchase six
(6) Aircraft (as later defined)
and related data, documents, and
services under this Agreement
(as later defined), and
Bombardier desires to arrange
the sale of such Aircraft, data,
documents and services to Buyer,
WHEREAS Atlantic Coast Airlines Holdings
Inc., a Delaware Corporation,
the parent of Buyer, is prepared
to provide a guarantee of
Buyer's obligations hereunder,
in a form acceptable to the
parties and the financiers.
NOW THEREFORE, in consideration of the
mutual covenants herein contained,
Buyer and Bombardier 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 in 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.
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) "Base Price" shall have the meaning
attributed to it in Article 4.1;
(g) "Bill of Sale" shall have the meaning
attributed to it in Article 9.7 (c);
(h) "BFE" shall have the meaning attributed
to it in Article 11.1;
(h.1) "Bombardier Group" shall have the
meaning attributed to it in Article
24.3;
(h.2) ----------------------------------
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(i) "Buyer Selected Optional Features"
shall have the meaning attributed to it
in Article 2.1;
(j) "Delivery Date" shall have the meaning
attributed to it in Article 9.7.(c);
(k) "Economic Adjustment Formula" shall have
the meaning attributed to it in Article
4.2;
(l) "Excusable Delay" shall have the meaning
attributed to it in Article 13.1;
(m) "FAA" shall have the meaning attributed
to it in Article 8.1;
(m.1) "Grace Period" shall have the
meaning attributed to it in Article 14.1;
(n) "Non-Excusable Delay" shall have the
meaning attributed to it in Article
14.1;
(o) "Notice" shall have the meaning
attributed to it in Article 17.1;
( p)"Other Patents" shall have the meaning
attributed to it in Article 18.1;
( q)"Permitted Change" shall have the
meaning attributed to it in Article 11.2;
( r)"Readiness Date" shall have the meaning
attributed to it in Article 9.1;
( s)"Regulatory Change" shall have the
meaning attributed to it in Article 8.4;
( t)"Scheduled Delivery Dates" shall have
the meaning attributed to it in Article
6;
( u)"Specification" shall have the meaning
attributed to it in Article 2.1;
( v)"Taxes" shall have the meaning
attributed to it in Article 4.3.;
( w)"TC" shall have the meaning attributed
to it in Article 8.1;
( x)"Net Aircraft Purchase Price" shall have
the meaning attributed to it in
Article 5.3.;
( y)"Technical Data" shall have the meaning
attributed to it in Annex A Article 4.1;
1.5 All dollar amounts in this
Agreement are in United States
Dollars.
ARTICLE 2 - SUBJECT MATTER OF SALE
2.1 Subject to the provisions of this
Agreement, Bombardier will sell and
Buyer will purchase six (6)
Canadair Regional Jet aircraft
model CL600-2B19 Version 200ER,
manufactured pursuant to
specification Number RAD-601R-146
Issue B dated
June 11, 1999, attached hereto as
Appendix III, as that specification
may be modified from time to time
in accordance with this Agreement
(the "Specification"), as
supplemented to reflect the
incorporation of the Buyer selected
optional features ("Buyer Selected
Optional Features") set forth in
Appendix IV hereto (collectively
the "Aircraft").
With the exception of Permitted Changes
as defined in Section 11.2 (a) and
(b) of the Agreement, and
notwithstanding wording and or
description changes, the
Specification for the Aircraft is
the same as the aircraft
specification for the aircraft
subject to Aircraft Purchase
Agreement between Bombardier and
Buyer dated January 8, 1997, as
amended, except with respect to any
systems and related components in
connection with the EICAS 2000 (CR
Ref No. 31-120), DFDR 88 Parameters
(CR Ref No. 31-340), EGPWS (CR Ref
No. 34-328) and AMI Pilot and co-
pilot seats.
ARTICLE 3 - CUSTOMER SUPPORT SERVICES AND WARRANTY
3.1 Bombardier shall provide to Buyer
the customer support services
pursuant to the provisions of Annex
A attached hereto.
3.2 Bombardier shall provide to Buyer
the warranty and the service life
policy described in Annex B
attached hereto.
3.3 Unless expressly stated otherwise,
the services referred to in 3.1 and
3.2 above are incidental to the
sale of the Aircraft and are
included in the Aircraft Purchase
Price.
ARTICLE 4 - PRICE
4.1 (a) The base price for each of the
Aircraft (excluding the Buyer Selected
Optional Features) Ex Works (Incoterms
1990) Bombardier's offices or premises
in Montreal, Province of Quebec, Canada,
is -------------------------------------
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-------- expressed in January 1, 1999
dollars.
(b) The base price of the Buyer
Selected Optional Features is ----------
----------------------------------------
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-------- expressed in January 1, 1999
dollars.
The Aircraft base price (the
"Aircraft Base Price") shall be the
base price for the Aircraft as
stated in paragraph (a), plus the
base price of the Buyer Selected
Optional Features as stated in
paragraph (b) ("Base Price").
4.2 The price of the Aircraft (the "Aircraft
Purchase Price") shall be the Base Price
adjusted to the date of delivery to
reflect economic fluctuations during the
period from January 1, 1999 to the
respective delivery date of the
Aircraft. Such adjustments shall be
based on the formula as found in
Appendix I ("Economic Adjustment
Formula"), but when adjusted, the
Aircraft Purchase Price shall in no case
be lower than the Aircraft Base Price,
as stipulated in Article 4.1 herein.
4.3 Upon the occurrence of events as
described in this paragraph 4.3, there
will be adjustments as follows:
4.3.1 In the event that Bombardier
and Buyer agree to any changes in the
Specification or selected optional
features, or should changes in the
Specification or selected optional
features be made pursuant to Article
11.1 or as a result of any Regulatory
Changes pursuant to Article 8.4 which
are chargeable to Buyer pursuant to
Article 8.5, or in the event that
Bombardier and Buyer agree to any ------
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4.3.2 The Credit Memorandum
adjustment shall be in accordance with
the terms of Letter Agreement No. 1.
4.3.3 ------------------------------
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4.3.4 In the event of a Non-
Excusable Delay, the provisions of
Article 14.2 shall apply.
4.4 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
("Taxes") which are or may be imposed by
law upon Bombardier, any affiliate of
Bombardier, Buyer or the Aircraft
whether or not there is an obligation
for Bombardier to collect same from
Buyer, by any taxing authority or
jurisdiction occasioned by, relating to
or as a result of the execution of this
Agreement or 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.
4.5 If any Taxes (other than income taxes
charged on the income of Bombardier
Group) are imposed upon Buyer or become
due or are to be collected from
Bombardier Group by any taxing authority
resulting from, relating to or in
connection with the execution of this
Agreement, the sale, lease, delivery,
storage, use or other consumption of any
Aircraft, BFE or any other matter, goods
or services provided for under this
Agreement, Bombardier shall notify Buyer
and Buyer shall promptly, but no later
than ten (10) working days after
receiving such notice, pay such Taxes
directly to the taxing authority, or
reimburse Bombardier for such Taxes, as
the case may be, including interest and
penalties. Buyer shall only reimburse
Bombardier for interest and penalties if
Bombardier notifies Buyer in writing of
the imposition of these Taxes within ten
(10) working days of the member of
Bombardier Group receiving written
notification of such Taxes.
4.6 Upon Bombardier's request, Buyer shall
execute and deliver to Bombardier any
documents that Bombardier deems
necessary or desirable in connection
with any exemption from or reduction of
or the contestation of or the defense
against any imposition of Taxes.
4.7 Upon Buyer's request, Bombardier shall
execute and deliver to Buyer any
documents that Buyer deems necessary or
desirable in connection with any
exemption from or reduction of or the
contestation of or the defense against
any imposition of Taxes.
ARTICLE 5 - PAYMENT
5.1 Bombardier acknowledges having
previously received a deposit of --
-----------------------------------
----------------------per Aircraft,
totaling --------------------------
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5.2 Buyer shall make payment or cause
payment to be made for each
Aircraft as follows:
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All payments referred to in
paragraphs a., b. and c. above are
to be made on the first day of the
applicable month.
5.3 Payment Terms
On or before the Delivery Date
Bombardier shall have received in
full the amount of the Aircraft
Purchase Price of such Aircraft
less the amount of the applicable
Credit Memorandum as set out in
Letter Agreement No. 1, which will
be credited by Bombardier toward
the Aircraft Purchase Price (said
amount being the "Net Aircraft
Purchase Price").
5.4 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
within a period of thirty (30) days
thereafter, this Agreement shall
automatically terminate and
Bombardier shall have no further
obligation to Buyer under this
Agreement, including the obligation
to proceed further with the
manufacture of the Aircraft on
behalf of Buyer or the sale and/or
delivery of the Aircraft to Buyer.
Bombardier shall have the option
(but not the obligation) of waiving
such termination should Buyer make
arrangements satisfactory to
Bombardier for such payment and all
future payments within ten (10)
calendar days of Buyer's default.
5.5 Buyer shall pay Bombardier daily
interest on late payments, from the
date that any payment becomes due up
to and including the day prior to
receipt of payment, at a rate of two
per cent (2 %) per annum over the
U.S. prime rate charged by the Chase
Manhattan Bank, New York Branch, or
its successor, from time to time,
calculated and compounded monthly.
Bombardier's right to receive such
interest is in addition to any other
right or remedy Bombardier has at
law as a result of Buyer's failure
to make payments when due.
5.6 If under any terms of the Agreement
Bombardier is obligated to return
any of the payments or make other
payments if applicable to Buyer,
with or without interest as provided
for herein, Bombardier shall do so
within five (5) working days, and if
Bombardier fails to do so,
Bombardier shall pay Buyer daily
interest on late payments from the
date any payment becomes due up to
and including the day prior to
receipt of payment, at a rate of two
per cent (2 %) per annum over the
U.S. prime rate charged from time to
time by the Chase Manhattan Bank,
New York Branch, or its successor,
calculated and compounded monthly. .
The five (5) day grace period
mentioned above shall not apply to
return of any excess payments, if
any, received by Bombardier toward
the payment of the Net Aircraft
Purchase Price, which shall be paid
to Buyer on the Delivery Date.
5.7 Buyer shall make all payments due
under this Agreement in immediately
available funds by deposit on or
before the due date to Bombardier's
account in the following manner:
(a) Transfer to: ----------
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(b) To pay: ------
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(c) For credit to: ------
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(d) For further credit to: -----
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-----------------------------------
-----------------------------------
------- Bombardier shall make all
payments due under this Agreement
in immediately available funds by
deposit on or before the due date
to Buyer's account as specified
below:
Account Name: -------------------
----
Bank Name: -------------------
-
------------
Account No.: -----------
Bank ABA: -----------
5.8 All other amounts due with respect
to each Aircraft shall be paid on
or prior to the Delivery Date of
the respective Aircraft.
5.9 All payments provided for under
this Agreement to either party
shall be made so as to be received
in immediately available funds on
or before the dates stipulated
herein. Neither party shall incur
interest charges for any delay
which occurs after provision of a
proof of transfer from that party's
bank.
5.10 Bombardier, or its affiliate to
whom the Aircraft may have been
sold, shall remain the exclusive
owner of the Aircraft, free and
clear of all rights, liens, charges
or encumbrances created by or
through Buyer, until such time as
all payments referred to in this
Article 5 have been made.
ARTICLE 6 - DELIVERY PROGRAM
6.1 The Aircraft shall be offered for
inspection and acceptance to Buyer
at Bombardier's facility in
Montreal, Quebec 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
Bombardier on or before the date
required by Bombardier, all
information as Bombardier may
reasonably request to manufacture
the Aircraft including, without
limitation, the selection of
furnishings, internal and external
colour schemes.
Nine (9) months prior to delivery
of the First Aircraft Buyer will:
(a) provide Bombardier with an
external paint scheme agreed on by
the parties; and
(b) select interior colours (from
Bombardier's standard colours).
Failure of Buyer to substantially
comply with these requirements may
result in a reasonable increase in
price, as applicable, a delay in
delivery of the Aircraft, or both.
ARTICLE 8 - CERTIFICATION FOR EXPORT
8.1 Bombardier has obtained and will
continue to have on each Delivery
Date from Transport Canada ("TC"),
a valid TC Type Approval
(Transport Category) and 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 Bombardier shall provide to Buyer a
TC Certificate of Airworthiness
(Transport Category) for export, on
or before the Delivery Date with
respect to each Aircraft.
8.3 The obtaining of any import license
or authority required to import or
operate the Aircraft into any
country outside of Canada shall be
the responsibility of Buyer.
Bombardier will, assist Buyer in
obtaining import permits and
licenses. Bombardier shall, with
Buyer's assistance, obtain the
issuance of a Canadian export
license to enable Buyer to export
the Aircraft from Canada, subject
to prevailing export control
regulations in effect on the
Delivery Date. Except as provided
in Articles 8.1, 8.2 and 8.3
Bombardier shall not be obligated
to obtain any other certificates or
approvals as part of this
Agreement.
8.4 If any addition or change to, or
modification or testing of the
Aircraft is required or will be
required by the passage of time by
any law or governmental regulation
or requirement or interpretation
thereof by any governmental agency
having jurisdiction subsequent to
the date of this Agreement but
prior to the Delivery Date 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 taking into account
the terminating action deadline.
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
regulation, requirement or
interpretation in effect on the
date hereof for the issuance of a
Certificate of Airworthiness in
said country of import (unless such
requirement has been imposed to
correct a defect specific to the
Aircraft or to the Canadair
Regional Jet fleet of aircraft), in
which case Buyer shall pay
Bombardier's reasonable charges for
such Regulatory Change, or
(b) required by any governmental
law or regulations or
interpretation thereof promulgated
by TC or the FAA which is effective
subsequent to the date of this
Agreement but before the Delivery
Date and which is applicable to all
aircraft in general or to all
aircraft of the same category as
the Aircraft, in which case Buyer
shall pay Bombardier'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 subject to
the limitations therein.
Notwithstanding the provision of
Article 13.2(b), should the
Regulatory Change be required to
correct a defect specific to the
Aircraft or to the Canadair
Regional Jet fleet of aircraft, ---
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-----------------------------------
-----------------------------------
----------------
8.7 Bombardier 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,
performance, weight, balance, time
of delivery, Base Price, the
Aircraft Purchase Price, ----------
-----------------------------------
-------------- all in accordance
with this Agreement. Any Change
Orders issued pursuant to this
Article shall be effective and
binding upon the date of
Bombardier's transmittal of such
Change Order, all in accordance
with this Agreement. Although
Buyer's consent to said Change
Order is not required, Bombardier
agrees to consult with Buyer
regarding the change proposed by
Bombardier to implement such
Regulatory Change.
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
Bombardier shall be deemed to have
obtained such discontinued
certificate(s) upon demonstrating
that the Aircraft complies
substantially with the
Specification.
ARTICLE 9 - ACCEPTANCE PROCEDURE
9.1 No later than ----------------
-----------------------------------
---------- Bombardier shall inform
Buyer by facsimile or telegraphic
communication or other expeditious
means, of the projected week of
delivery within the delivery month
Bombardier shall give Buyer at
least ---------------- advance
notice, by facsimile or telegraphic
communication or other expeditious
means, of the projected date of
readiness of each Aircraft for
inspection and delivery.
Bombardier and Buyer shall then
agree on a mutually acceptable
targeted delivery schedule within
the delivery month.
Bombardier shall give Buyer at
least ----------------------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"),
which Readiness Date shall take
into account the targeted delivery
schedule mentioned above or such
other date as the parties may have
agreed upon.
9.2 Within two (2) days following
receipt by Buyer of the notice of
Readiness Date Buyer shall:
(a) provide notice to Bombardier
as to the source and method of
payment of the balance of the
Aircraft Purchase Price;
(b) identify to Bombardier the
names of Buyer's representatives
who will participate in the
inspection, flight test and
acceptance; and
(c) 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 the inspection and flight
test (such three (3) working day
period being the "Acceptance
Period"). This three (3) day
period may be extended in the event
of any delay by Bombardier in
making the Aircraft available for
inspection and flight test.
9.4 Up to four (4) representatives of
Buyer may participate in Buyer's
ground inspection of the Aircraft
and two (2) representatives of
Buyer may participate in the flight
test. Bombardier 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,
in accordance with procedures to be
mutually agreed to, and flight test
shall be conducted in accordance
with Bombardier's acceptance
procedures (a copy of which shall
be provided to Buyer at least 30
days prior to the Scheduled
Delivery Date of the First Aircraft
hereunder), as may be amended by
mutual agreement of Buyer and
Bombardier, and at Bombardier's
expense. At all times during ground
inspection and flight test,
Bombardier shall retain control
over the Aircraft.
9.5 If no Aircraft defect or
discrepancy is revealed during the
ground inspection or flight test,
Buyer shall accept the Aircraft on
or before the last day of the
Acceptance Period in accordance
with the provisions of Article 9.7.
9.6 If any material defect or
discrepancy in the Aircraft is
revealed by Buyer's ground
inspection or flight test, the
defect or discrepancy will promptly
be corrected by Bombardier, at no
cost to Buyer, 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, Bombardier shall
perform one (1) or more further
acceptance flights or ground
inspections as applicable.
Notwithstanding the provisions of
Article 4.2, should the Delivery
Date of an Aircraft occur in the
month subsequent to the Scheduled
Delivery Date due to the correction
of defects or discrepancies, ------
-----------------------------------
-----------------------------------
--------------------------------
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 Buyer having
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) Bombardier will supply a TC
Certificate of Airworthiness for
Export; and
(c) Buyer shall pay Bombardier the
balance of ------------------------
------- and any other amounts due,
at which time Bombardier shall
issue an FAA bill of sale and a
warranty bill of sale in a form
acceptable to Bombardier and
financiers (substantially in
accordance with the forms attached
as Exhibit II(a) and Exhibit II(b)
hereto), passing to Buyer, or
approved assignee pursuant to
Article 20, 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 Bombardier 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 and
delivery of the Bill of Sale and of
the Certificate of Receipt of
Aircraft (in the form of Exhibit
III hereto).
9.8 Provided that Bombardier has met
all of its obligations under this
Article 9, should Buyer not accept,
pay for () and take delivery of any
of the Aircraft within ten (10)
calendar days after the end of the
Acceptance Period of such Aircraft,
Buyer shall be deemed to be in
default of the terms of this
Agreement -------------------------
-----------------------------------
-----------------------------------
-----------------------------------
----------------------------
9.9 Should the Buyer be in default
pursuant to Article 9.8 hereof,
Buyer shall promptly, upon demand,
reimburse Bombardier for all costs
and expenses reasonably incurred by
Bombardier as a result of such
Buyer's failure to accept or take
delivery of the Aircraft, including
but not limited to reasonable
amounts for storage, insurance,
taxes, preservation or protection
of the Aircraft, and provided that
Bombardier 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 within ---------------
-------------- following the end of
the Acceptance Period, Bombardier
may, at its option, terminate the
present Agreement with respect to
any of the undelivered Aircraft.
Bombardier shall however, have the
option (but not the obligation) of
waiving such termination should
Buyer, within ten (10) calendar
days following such termination,
make arrangements satisfactory to
Bombardier 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 and risk of
loss of or damage to the Aircraft
passes to Buyer when Bombardier
presents the Bill of Sale 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 Bombardier,
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
Bombardier and any of Bombardier'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 ----------
-----------------------------------
-------------------
ARTICLE 11 - CHANGES
11.1 Other than a Permitted Change as
described in Article 11.2, or a
Regulatory Change as described in
Article 8.4, 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,
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, Bombardier shall
advise Buyer, to the extent
reasonably practical, 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 Bombardier, 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, -----
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
-------------- 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
Bombardier.
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, Bombardier shall
furnish, without charge, office
space at Bombardier's facility for
one (1) representative of Buyer.
Buyer shall be responsible for all
expenses of its representative and
shall notify Bombardier 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 Bombardier's and Bombardier'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
Bombardier's or Bombardier's
affiliates' facilities where the
work is being carried out provided
there shall be no disruption in the
performance of the work.
12.3 Bombardier shall advise Buyer's
representative of Bombardier's or
Bombardier'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. Bombardier
shall provide a written response to
any such request. Communication
between Buyer's representative and
Bombardier shall be solely through
Bombardier's Contract Department or
its designate.
12.5 BUYER HEREBY RELEASES AND AGREES TO
DEFEND, INDEMNIFY AND HOLD HARMLESS
BOMBARDIER, ITS ASSIGNEES AND
AFFILIATES AND THEIR OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES AND
CONTRACTORS FROM AND AGAINST ALL
LIABILITIES, DAMAGES, LOSSES, COSTS
AND EXPENSES RESULTING FROM
INJURIES TO OR DEATH OF BUYER'S
REPRESENTATIVES WHILE AT
BOMBARDIER'S OR BOMBARDIER'S
AFFILIATES OR SUBCONTRACTOR'S
FACILITIES AND/OR DURING
INSPECTION, FLIGHT TEST OR
ACCEPTANCE OF THE AIRCRAFT, WHETHER
OR NOT CAUSED BY THE ACTIVE,
PASSIVE OR IMPUTED NEGLIGENCE OR
STRICT PRODUCTS LIABILITY OF
BOMBARDIER, ITS ASSIGNEES,
AFFILIATES OR THEIR OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES OR
CONTRACTORS -----------------------
-----------------------------------
----------------------
12.6 ----------------------------------------
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-------------------ARTICLE 13 -
EXCUSABLE DELAY
13.1.1 In the event of a delay on the
part of Bombardier 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 Bombardier (an
"Excusable Delay"), Bombardier
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 be deemed to 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 Bombardier or its
affiliates or requested by a
governmental agency to the
compliance program of Bombardier or
of its affiliate, or any part
thereof, as same may have been
approved by TC, or change to the
interpretation thereof to obtain
any such airworthiness approval or
certificate; or
(j) the incorporation of a
Regulatory Change as set out in
Article 8.
13.1.2-----------------------------
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13.2 (a) If Bombardier concludes, based on
its appraisal of the facts and normal
scheduling procedures, that due to
Excusable Delay it can be reasonably
anticipated that delivery of the Aircraft
will be delayed, Bombardier shall give
prompt written notice to Buyer of such
delay. Bombardier and Buyer agree to
collaborate and to use their reasonable
efforts to mitigate the impact of such
delays upon the parties.
(b) If, as a result of an Excusable
Delay, delivery of the Aircraft will be
delayed to a date beyond the originally
Scheduled Delivery Date or any revised
date previously agreed to in writing by
the parties, Buyer and Bombardier agree,
-----------------------------------------
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------------------------------
(c) In the event of an Excusable
Delay-------------------------, or
an anticipated Excusable Delay ----
-----------------------------------
---- shall conduct an appraisal of
the facts and normal scheduling
procedures, and if it concludes
that delivery of one or more of the
Aircraft will be delayed ----------
------------------- after the
originally Scheduled Delivery Date
or any revised date agreed to in
writing by the parties-------------
-----------------------------------
-----------------------------------
----------------- may then
terminate this Agreement with
respect to such delayed Aircraft by
giving written notice -------------
-----------------------------------
-----------------------------------
------------------
(d) If, due to Excusable Delay ---------
---------------- delivery of any Aircraft
is delayed -----------------------------
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) business days after the
expiration of such -------------- period.
13.3 Termination under Article 13.2 shall
discharge all obligations and liabilities of
Buyer and Bombardier hereunder with respect
to such delayed Aircraft and all related
undelivered items and services, except that
Bombardier shall, within --------------------
- of such termination, repay to Buyer, and
Bombardier's sole liability and
responsibility shall be limited to the
repayment to Buyer, of all advance payments
for such Aircraft received by Bombardier less
any amount due by Buyer to Bombardier.
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 beyond the end of the
Scheduled Delivery Date, by causes
not excused under Article 13.1,
this shall constitute a non-
excusable delay (a "Non-Excusable
Delay").
14.2 If as a result of an Non-Excusable
Delay, delivery of the Aircraft
will be delayed to a date beyond
the originally Scheduled Delivery
Date or any revised date previously
agreed to in writing by the
parties, the Aircraft Purchase
Price of the Aircraft at delivery,
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
----------------
ARTICLE 15 - LOSS OR DAMAGE
15.1 In the event that prior to the Delivery Date
of any Aircraft, the Aircraft is lost,
destroyed or damaged beyond repair due to any
cause, Bombardier shall promptly notify Buyer
in writing. Such notice shall specify the
earliest date reasonably possible, consistent
with Bombardier's other contractual
commitments and production schedule, by which
Bombardier 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 Bombardier written notice,
within thirty (30) days of Bombardier's
notice, that Buyer desires a replacement for
such Aircraft. If Buyer gives such notice to
Bombardier, 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 Bombardier
to manufacture and deliver such replacement
aircraft if it would require the reactivation
or acceleration of its production line for
the model of aircraft purchased hereunder.
The terms and conditions of this Agreement
applicable to the replaced Aircraft shall
apply to the replacement aircraft.
15.2 If an Aircraft is lost, destroyed or damaged
beyond repair as contemplated under this
Article, due to a cause to which reference is
made in Article 13.1, and Buyer elects to
purchase a replacement Aircraft, then -------
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-----------------------------
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
Bombardier 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 ------------------------
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 --------------
---------- thereafter; or
(d) any writ of attachment or execution
or any similar process is issued or
levied against a party or any significant
part of its property and is not released,
stayed, bonded or vacated within --------
---------------- after its issue or levy.
16.2 In addition, this Agreement may be
terminated, with respect to any or all
undelivered Aircraft, in whole or in part,
before the Delivery Date
(a) as otherwise provided in this
Agreement; and
(b) by Bombardier ----------------------
------------ default or breach of any
material term or condition of this
Agreement and such party does not cure
such default or breach within forty-five
(45) calendar days after receipt of
Notice from Bombardier ------------------
-----, specifying such default or breach.
16.3 In case of termination of this
Agreement under Articles 5.4, 9.9,
16.1 or 16.2:
(a) all rights (including property
rights), if any, which Buyer or its
assignee may have or may have had in or
to (i) this Agreement or portion thereof
with respect to the undelivered Aircraft,
or (ii) any or all of the undelivered
Aircraft, shall become null and void with
immediate effect;
(b) Bombardier may sell, lease or
otherwise dispose of such Aircraft to
another party free of any claim by Buyer;
(c) in the event of termination by
Bombardier, all amounts paid by Buyer
with respect to the applicable
undelivered Aircraft shall be retained by
Bombardier and shall be applied against
the costs, expenses, losses and damages
incurred by Bombardier as a result of
Buyer's default and/or the termination of
this Agreement, to which Bombardier shall
be entitled, ----------------------------
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------------------ and
(d) ------------------------------------
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----
16.4 Notwithstanding the foregoing, nothing herein
contained shall, in the event of termination
of this Agreement, limit -----------------
ongoing rights and obligations with respect
to Aircraft delivered prior to the
termination date, such as the after sale
support obligations described in Annex A, the
warranty provisions and Service Life Policy
of Annex B and the obligation contained in
Letters of Agreement where it is expressly
provided that said obligations (or part
thereof) shall survive termination, subject
to any adjustments of said rights or
obligations required to reflect the number of
Aircraft in service, if applicable.
16.5 -----------------------------------
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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 until
changed by notice in writing:
(a)Notice to Bombardier shall be
addressed to:
Bombardier Inc.
123 Garratt Boulevard
Downsview, Ontario
Canada
M3K 1Y5
Attention: Director Contracts
Telephone: (416)375-
4052
Facsimile: (416) 375-4533
(b)Notice to Buyer shall be addressed
to:
ATLANTIC COAST AIRLINES
515A Shaw Road,
Dulles , Virginia
20166
U.S.A.
Attention: General Counsel
Telephone: 703-925-6000
Facsimile: 703-925-6294
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
acknowledgment of receipt; or
(c) if sent by telex or facsimile on the
day indicated by the acknowledgment or
the answer back of the receiver in
provable form.
ARTICLE 18 - INDEMNITY AGAINST PATENT
INFRINGEMENT
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, Bombardier shall indemnify, protect,
hold harmless and defend (subject to
applicable court procedures) Buyer from and
against all claims, suits, actions,
liabilities, damages and costs (including
reasonable attorney fees --------------------
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resulting from the infringement, excluding
any incidental or consequential damages
(which include without limitation loss of
revenue or loss of profit) and Bombardier
shall and as promptly as possible under the
circumstances, 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.
Bombardier'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:
(d) 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
(e) 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 foregoing
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 Bombardier's detailed design
or to any system, accessory, equipment or
part manufactured by a third party to
Bombardier's detailed design without
Bombardier's authorization. ----------------
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18.3 Buyer's remedy and Bombardier's obligation
and liability under this Article are
conditional upon (i) Buyer giving Bombardier
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 Bombardier to reduce or
mitigate any such expenses, damages, costs or
royalties involved, and (iii) Buyer furnishes
promptly to Bombardier all data, papers and
records in its possession or control
necessary or useful to resist and defend
against such claim or suit. Bombardier may
at its option conduct negotiations with any
party claiming infringement and may intervene
in any suit or action. Whether or not
Bombardier intervenes, Bombardier shall be
entitled at any stage of the proceedings to
assume or control the defense. Buyer's
remedy and Bombardier's obligation and
liability are further conditional upon
Bombardier's prior approval of Buyer's
payment or assumption of any liabilities,
expenses, damages, royalties or costs for
which Bombardier may be held liable or
responsible.
18.4 THE INDEMNITY, OBLIGATIONS AND LIABILITIES OF
BOMBARDIER 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 BOMBARDIER AND OF ITS
AFFILIATES AND ALL OTHER RIGHTS, REMEDIES AND
CLAIMS, INCLUDING CLAIMS FOR DAMAGES, DIRECT,
INCIDENTAL OR CONSEQUENTIAL, OF BUYER AGAINST
BOMBARDIER 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 - LIMITATION OF LIABILITY AND
INDEMNIFICATION
19.1 ANNEX B, EXCEPT AS OTHERWISE PROVIDED IN
LETTER OF AGREEMENT NO. 008 HERETO,
EXCLUSIVELY SETS FORTH BOMBARDIER'S
OBLIGATIONS WITH RESPECT TO ANY NON-
CONFORMANCE OF THE AIRCRAFT WITH THE
SPECIFICATION OR ANY DEFECT IN THE AIRCRAFT
AND THE OBLIGATIONS AND LIABILITIES OF
BOMBARDIER UNDER THE AFORESAID ARE ACCEPTED
BY BUYER TO BE EXCLUSIVE AND IN LIEU OF, AND
BUYER HEREBY WAIVES, RELEASES AND RENOUNCES
ALL OTHER REMEDIES, WARRANTIES, GUARANTEES,
OBLIGATIONS, REPRESENTATIONS OR LIABILITIES,
EXPRESS OR IMPLIED, OF BOMBARDIER AND ITS
AFFILIATES WITH RESPECT TO DEFECTS IN EACH
AIRCRAFT OR PART THEREOF, PRODUCT, DOCUMENT
OR SERVICE DELIVERED OR PROVIDED UNDER THIS
AGREEMENT, ARISING IN FACT, IN LAW, IN
CONTRACT, IN TORT, OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION,
A. ANY IMPLIED WARRANTY OF CONDITION
OR MERCHANTABILITY OR FITNESS;
B. ANY IMPLIED WARRANTY OR CONDITION
ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE;
C. ANY OBLIGATION, LIABILITY, RIGHT, CLAIM
OR REMEDY IN TORT, WHETHER OR NOT
ARISING FROM THE ACTIVE, PASSIVE OR
IMPUTED NEGLIGENCE OR STRICT PRODUCTS
LIABILITY OF BOMBARDIER OR ITS
AFFILIATES, BY REASON OF THE DESIGN,
MANUFACTURE, SALE, REPAIR, LEASE OR USE
OF THE AIRCRAFT OR PRODUCT AND SERVICES
DELIVERED HEREUNDER; AND
D. ANY OBLIGATION, LIABILITY, RIGHT, CLAIM
OR REMEDY FOR LOSS OF OR DAMAGE TO ANY
AIRCRAFT OR PART THEREOF, ANY BOMBARDIER
PARTS, ANY POWER PLANT PARTS, ANY VENDOR
PARTS, ANY SPARE PARTS OR ANY TECHNICAL
DATA.
19.2 BUYER HEREBY RELEASES AND AGREES TO DEFEND,
INDEMNIFY AND HOLD HARMLESS BOMBARDIER, ITS
SUBSIDIARIES, AFFILIATES, SUBCONTRACTORS AND
LESSORS, AND THEIR RESPECTIVE EMPLOYEES,
DIRECTORS, OFFICERS AND AGENTS, AND EACH OF
THEM (THE "INDEMNIFIED PARTIES"), FROM AND
AGAINST ALL LIABILITIES, CLAIMS, DAMAGES,
LOSSES, COSTS AND EXPENSES FOR LOSS OF OR
DAMAGE TO PROPERTY INCLUDING ANY AIRCRAFT,
AND LOSS OF USE THEREOF, OR INJURIES TO OR
DEATH OF ANY AND ALL PERSONS (INCLUDING
BUYER'S DIRECTORS, OFFICERS, AGENTS AND
EMPLOYEES BUT EXCLUDING BOMBARDIER'S
DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES),
ARISING DIRECTLY OR INDIRECTLY OUT OF OR IN
CONNECTION WITH ANY SERVICE PROVIDED UNDER
ANNEX A WHETHER OR NOT CAUSED BY THE ACTIVE,
PASSIVE OR IMPUTED NEGLIGENCE OR STRICT
PRODUCTS LIABILITY OF THE INDEMNIFIED
PARTIES. THE FOREGOING SHALL NOT APPLY WHERE
SUCH LOSSES OR DAMAGES ARE CAUSED BY THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
INDEMNIFIED PARTIES.
19.3 NOTHING CONTAINED IN ARTICLE 19.1 OR 19.2
ABOVE SHALL CONSTITUTE A WAIVER OR RELEASE OR
RENUNCIATION OF, OR INDEMNITY FOR, ANY
LOSSES, DAMAGES OR CLAIMS, BY BUYER AGAINST
BOMBARDIER FOR CONTRIBUTION TOWARD THIRD-
PARTY BODILY INJURY OR PROPERTY DAMAGE CLAIMS
BASED ON PRODUCT LIABILITY THEORIES TO THE
EXTENT OF BOMBARDIER'S RELATIVE PERCENTAGE OF
THE TOTAL FAULT OR OTHER LEGAL RESPONSIBILITY
OF PERSONS CAUSING SUCH BODILY INJURY OR
PROPERTY DAMAGE.
19.4 IN THE EVENT OF ANY LOSSES OR DAMAGES
SUFFERED BY ANYONE FOR OR ARISING OUT OF (I)
ANY LACK OR LOSS OF USE OF ANY AIRCRAFT,
EQUIPMENT, BOMBARDIER PARTS, VENDOR PARTS,
SPARE PARTS, GROUND SUPPORT EQUIPMENT,
TECHNICAL PUBLICATIONS OR DATA OR (II) ANY
SERVICES TO BE PROVIDED HEREUNDER, OR (III)
FOR ANY FAILURE TO PERFORM ANY OBLIGATIONS
HEREUNDER, NEITHER PARTY SHALL HAVE ANY
OBLIGATION FOR LIABILITY TO THE OTHER (AT LAW
OR IN EQUITY), WHETHER ARISING IN CONTRACT
(INCLUDING WITHOUT LIMITATION, WARRANTY), IN
TORT (INCLUDING THE ACTIVE, PASSIVE OR
IMPUTED NEGLIGENCE OR STRICT PRODUCTS
LIABILITY OF BOMBARDIER OR ITS AFFILIATES),
OR OTHERWISE, FOR LOSS OF USE, REVENUE OR
PROFIT OR FOR ANY OTHER INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND
OR NATURE.
ARTICLE 20 - ASSIGNMENT
This Agreement may be assigned only as follows:
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.
20.2 With the other party's prior written consent
not to be unreasonably withheld, either party
may assign, sell, transfer or dispose of (in
whole or in part) any of its rights and
obligations hereunder to another entity only
provided that (i) -------------------------
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-------------------- (ii) there is no
increase to the liability and/or
responsibility of the non assigning party,
(iii) assigning party remains jointly and
severally liable with any assignee for the
performance of its obligation under this
Agreement, (iv) the assignment is made only
for operational and financial considerations,
(v) the assignee shall execute a
confidentiality agreement prohibiting the
disclosure of confidential information, and
(vi) ----------------------------------------
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20.3 With Bombardier's prior written consent, not
to be unreasonably withheld, Buyer may
assign, sell, transfer or dispose of (in
whole or in part) any of its rights and
obligations hereunder to another entity to
which Buyer does not hold majority interest
provided that (i) there is no increase to
the liability and/or responsibility of
Bombardier, (ii) the Buyer remains jointly
and severally liable with any assignee for
the performance of its obligation under this
Agreement, (iii) the assignment is made
only for operational and financial
considerations, (iv) the shareholders
(other than shareholders purchasing stock
through arms length, publicly traded
transactions) or owners of assignee, other
than Buyer, are not engaged in air
transportation, (v) the assignee operates or
is to operate its business in a fashion that
is generally held out and structured to be
perceived by people knowledgeable in the
industry to be closely affiliated with Buyer
or Buyer's parent, (vi) the assignee shall
execute a confidentiality agreement
prohibiting the disclosure of confidential
information, and (vii) the assignee does not
compete with the Bombardier Group with
respect to the manufacture of aircraft.
20.4 Except as provided in Articles 20.1, 20.2 and
20.3, Buyer shall not assign, sell, transfer
or dispose of (in whole or in part) any of
its rights or obligations hereunder without
Bombardier'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
Bombardier reserves the right as a condition
of its consent to amend one or more of the
terms and conditions of this Agreement.
20.5 Notwithstanding Article 20.4 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 Bombardier.
20.6 Bombardier may assign any of its rights to
receive money hereunder without the prior
consent of Buyer.
20.7 Notwithstanding the other provisions of this
Article 20, Bombardier 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, at or after
the Delivery Date, an equipment trust,
conditional sale or lien, leases and
mortgages, 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 Bombardier arising through
such financing.
ARTICLE 21 - SUCCESSORS
21.1 This Agreement shall inure to the benefit of
and be binding upon each of Bombardier and
Buyer and their respective successors and
permitted assignees.
21.2 As used herein, reference to an airworthiness
authority such as Transport Canada and the
FAA, to a regulation or directive issued by
such airworthiness authority or other
governmental authority, shall include any
successor to such authority then responsible
for the duties of such authority and
regulation or directive covering the same
subject matters.
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 Each of Buyer and Bombardier agrees that any
legal action or proceeding with respect to
this Agreement may be brought in the Federal
Courts of the United States of America in the
Southern District Courts of New York or in
the Supreme Courts of the State of New York
in the County of New York and by the
execution and delivery of this Agreement
irrevocably consents and submits to the
nonexclusive jurisdiction of each of the
aforesaid court in personam with respect to
any such action or proceeding and irrevocably
waive any objection either party may have as
to venue or any such suit, action or
procedure brought in such court or that such
court is an inconvenient forum. Nothing in
this paragraph shall affect the right of any
party hereto or their successors or assigns
to bring any action or proceeding against the
other party hereto or their property in the
courts of other jurisdictions.
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:
i) as may be necessary for either party to
carry out its obligations under this
Agreement or other agreements related to
this Agreement to which it is a party,
and
ii)as may be required by law, and
iii)-----------------------------------------
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23.2 Except as may be reasonably required for the
operation, maintenance, overhaul,
modification, storage and repair of the
Aircraft by Buyer or any third party, Buyer
shall hold confidential all Technical Data
and other proprietary information (and so
marked by Bombardier) supplied by or on
behalf of Bombardier, and shall not reproduce
any such Technical Data or proprietary
information or divulge the same to any third
party unless such disclosure requires the
third party to hold same in confidence and
use it only for the purposes stated above.
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.
23.4 In the event Buyer now or hereafter has a
class of securities registered under Section
12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or
is subject to the reporting requirements of
Section 15(d) thereof, or Buyer proposes to
effect an offering of securities registered
under the Securities Act of 1933, as amended
(the "Securities Act"), and in any such case,
Buyer reasonably determines that this
Agreement is a "material contract" as
described in Item 601 of Regulations S-K, and
is required to be filed as an exhibit to a
registration statement under the Securities
Act or a periodic report under the Exchange
Act, Buyer shall notify Bombardier prior to
the date of such anticipated filing of such
determination and the reasons therefor, and
shall use its reasonable efforts to prepare
and file with the Securities and Exchange
Commission (the "Commission") a request for
confidential treatment pursuant to Rule 24b-2
under the Exchange Act or Rule 406 under the
Securities Act, as the case may be, with
respect to information in this Agreement,
which Buyer reasonably believes to be
eligible for confidential treatment. Buyer
agrees to provide Bombardier with advance
notice of the information selected for
inclusion in its request for confidential
treatment and to reasonably consider
recommendations made by Bombardier for the
inclusion of any additional information. .
Subject to compliance with the foregoing, and
notwithstanding the other provisions of this
Article, portions of this Agreement may be
filed as exhibits to such registration
statement or periodic report to the extent
determined to be appropriate to comply with
applicable law and such filing shall not
constitute a breach hereof by Buyer.
23.5 Bombardier hereby acknowledges that Buyer is
sensitive with respect to the public
disclosure of its operating data provided to
Bombardier pursuant to this Agreement.
Although Bombardier shall have no
confidentiality undertaking with respect to
such data, Bombardier agrees to consider
Buyer's sensitivity in its public use of said
data.
ARTICLE 24 - AGREEMENT
24.1 This Agreement and the matters referred to
herein constitute the entire Agreement
between Bombardier and Buyer and supersede
and cancel all prior representations,
brochures, alleged warranties, statements,
negotiations, undertakings, letters,
memoranda of agreement, acceptances,
agreements, understandings, contracts and
communications, whether oral or written,
between Bombardier 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 Bombardier 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. In the event of any
inconsistencies between any provisions of
this Agreement and those of any Letter
Agreements, the provisions of the Letter
Agreements shall prevail.
24.2 If any of the provisions of this Agreement
are for any reason declared by judgment 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 BENEFIT OF THE WAIVER, LIMITATION,
RELEASE, RENUNCIATION AND/OR EXCLUSION OF
LIABILITY CONTAINED IN THIS AGREEMENT
EXTENDS TO THE OTHER DIVISIONS, OTHER
SUBSIDIARIES, AND OTHER AFFILIATES OF
BOMBARDIER INC (COLLECTIVELY THE
"BOMBARDIER GROUP") AND TO THE OFFICERS,
DIRECTORS, EMPLOYEES AND REPRESENTATIVES OF
THE BOMBARDIER GROUP, ON WHOSE BEHALF AND
FOR WHOSE BENEFIT BOMBARDIER IS, FOR
PURPOSES OF THIS ARTICLE 24.3, ACTING AS
AGENT AND TRUSTEE.
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24.4 Buyer and Bombardier 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 limitation provisions contained in
Article 19 and the other similar provisions
contained in this Agreement.
ARTICLE 25 - DISPUTES
25.1 Any dispute, difference, controversy or claim
arising out of or relating to this Agreement,
the breach, or non-performance thereof shall
first be attempted to be resolved by
Bombardier and Buyer through mutual
negotiations, consultation and discussions.
25.2 Should the parties hereto be unable to settle
their differences or disputes which may arise
between them with respect to the
interpretation or application of this
Agreement (a "Dispute"), by mutual agreement
as provided in Article 25.1 above, the
parties agree to each appoint two (2)
representatives to constitute a joint
commission (the "Joint Commission") to
jointly hear the representations of each
party regarding the Dispute. One
representative will be appointed as chair of
the Joint Commission on an alternate basis.
At least one (1) representative of each party
shall have knowledge in technical or
contractual matters depending on the nature
of the Dispute. The Joint Commission shall,
following representations by each party,
issue non-binding written recommendations to
the parties as to how best settle the
Dispute. If the representatives do not agree
on joint recommendations, the representatives
of each party shall issue their own
recommendations.
25.3 Either party may request the formation of the
Joint Commission if a dispute is not settled
within forty-five (45) days following a
written notice from either party to the other
detailing the nature of the Dispute and the
resolution sought. The request for a Joint
Commission shall be made in writing and shall
contain the names of the representatives
appointed by the party requesting its
formation. The other party shall then
provide the names of its representatives
within thirty (30) days following the receipt
of the request for a Joint Commission.
25.4 The Joint Commission shall have forty-five
(45) days from its formation to agree on the
procedure to be followed, including the place
of hearing, if any. The Joint Commission
shall have sixty (60) days from the
completion of the representations by each
party to issue its recommendations.
25.5 If, despite the recommendations of the Joint
Commission, the parties are unable to resolve
the Dispute, either party may, except where
the remedies sought include termination of
the Agreement in whole or in part or
injunctive relief, or other controversy
involving an amount claimed in good faith in
excess of Five Million United States Dollars
( $5,000,000 U.S.) unless otherwise agreed,
request by sixty (60) days prior notice that
the Dispute be settled by arbitration in
accordance with arbitration rules to be
agreed upon before delivery of the first
Aircraft.
25.6 Within thirty (30) days of the demand to
refer the Dispute to arbitration, each party
shall appoint one (1) arbitrator, who in turn
will appoint the third arbitrator, within
thirty (30) days of their appointments. This
third arbitrator shall act as the chairman of
the Arbitral Tribunal so constituted.
25.7 The venue of arbitration shall be Toronto,
Ontario, New York City, or Washington, DC,
U.S.A., as agreed between the parties.
25.8 The arbitrators shall not act as "Amiable
Compositeur" and shall decide according to
the terms of the agreement and to the laws of
New York.
25.9 The award of the arbitration shall be final
and shall not be called in question in any
court or tribunal.
25.10 It is expressly agreed that any
statement, representation or document made or
produced to or in connection with, or as a
result of the formation of a Joint Commission
shall be without prejudice and without
admission of liability by either party and
shall not be used as such by the other party.
25.11 Each party shall be responsible for its
own costs and expenses incurred as a result
of, or in connection with the Joint
Commission and arbitration including the
cost, fees and expenses of its own
representatives.
In witness whereof this Agreement was signed on
the date written hereof:
For and on behalf of For an on
behalf of
Atlantic Coast Airlines: Bombardier
Inc.:
_______________________
______________________
Kerry Skeen Michel
Bourgeois
President and C.E.O. Vice
President, Contracts
APPENDIX I
REGIONAL JET AIRCRAFT
ECONOMIC ADJUSTMENT FORMULA
Pursuant to the provision of Article 4
of the Agreement, economic
adjustment will be calculated using
the lesser amount of those
generated by the following two
calculations:
(i) The Economic Adjustment Formula:
PP = PO (0.28 LD + 0.35 ED +
0.20 CD + 0.15 MD + 0.02 FD)
LO EO CO MO FO
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Where:
PP =Aircraft Purchase Price;
PO =Base Price;
LD =the Canadian labour index obtained by
calculating the arithmetic average of
the labour indices for the fifth, sixth,
and seventh months prior to the month of
delivery of the Aircraft;
LO =the Canadian labour index obtained by
calculating the arithmetic average of
the labour indices for the fifth, sixth,
and seventh months prior to the month of
the Base Price of the Aircraft, which
is 20.52;
ED =the U.S. labour index obtained by
calculating the arithmetic average of
the U.S. labour indices for the fifth,
sixth, and seventh months prior to the
month of delivery of the Aircraft;
EO =the U.S. labor index obtained by
calculating the arithmetic average of
the U.S. labour indices for the fifth,
sixth, and seventh months prior to the
month of the Base Price of the Aircraft,
which is 19.11;
CD =the Industrial Commodities index
obtained by calculating the arithmetic
average of the Industrial Commodities
indices for the fifth, sixth, and
seventh months prior to the month of
delivery of the Aircraft;
CO =the Industrial Commodities index
obtained by calculating the arithmetic
average of the Industrial Commodities
indices for the fifth, sixth, and
seventh months prior to the month of the
Base Price of the Aircraft, which is
124.97;
MD =the material index obtained by
calculating the arithmetic average of
the material indices for the fifth,
sixth, and seventh months prior to the
month of delivery of the Aircraft;
MO =the material index obtained by
calculating the arithmetic average of
the material indices for the fifth,
sixth, and seventh months prior to the
month of the Base Price of the Aircraft,
which is 127.93;
FD =the fuel index obtained by calculating
the arithmetic average of the fuel
indices for the fifth, sixth, and
seventh months prior to the month of
delivery of the Aircraft; and
FO = the fuel index obtained by
calculating the arithmetic average of
the fuel indices for the fifth, sixth,
and seventh months prior to the month of
the Base Price of the Aircraft, which is
76.13.
For the purpose of the Economic
Adjustment Formula and the
calculation of the economic
adjustment:
(a) the Canadian labour index shall be the
index provided in the Standard
Industrial Classification (S.I.C.) Code
321 for Average Hourly Earnings for the
Aircraft and Parts Industry (Canada)
published by Statistics Canada in
"Employment Earnings and Hours" Table
3.1.
(b) the U.S. labour index shall be the index
provided in the Bureau of Labor
Statistics (B.L.S.) Code 372 Gross
Hourly Earnings of production and non-
supervisory workers in the Aircraft and
Aircraft Parts Industry as published by
the U.S. Department of Labor, Bureau of
Labor Statistics in "Employment and
Earnings" Table C-2.
(c) the Industrial Commodities index shall
be the index provided in the Producer
Price Index as Industrial Commodities as
published by the U.S. Department of
Labor, Bureau of Labor Statistics in
"Producer Prices and Price Indexes"
Table 6.
(d) the material index shall be the index
provided in the Producer Price Index for
Code 10 Metals and Metals Products as
published by the U.S. Department of
Labor, Bureau of Labor Statistics in
"Producer Prices and Price Indexes"
Table 6.
(e) the fuel index shall be the index
provided in the Bureau of Labor
Statistics (B.L.S.) Code 5 "Fuel and
Related Products and Power" Table 6 as
published by the U.S. Department of
Labor.
(f) in the event that Bombardier shall be
prevented from calculating the Aircraft
Purchase Price of each Aircraft due to
any delay in the publication of the
required indices, Bombardier shall use
the last provisionally published
indices, and in the event that
provisional indices are not available,
Bombardier shall extrapolate from the
last three (3) months of published
indices and where the balance of the
Aircraft Purchase Price payable is
calculated on the provisionally
published indices, and/or extrapolation,
Bombardier will amend such installment
on publication of the final indices and
will submit supplementary claims or
provide credit notes in respect of any
adjustment so caused.
(g) the indices used in the Economic
Adjustment Formula and the weighting
assigned to them, as well as the various
indices quoted here, are based on the
information known to date and represent
the projection by Bombardier of the
manner in which Bombardier will incur
cost in the production of the Aircraft.
In the event there is a change in the
indices published or in circumstances
which materially affects the indices
chosen or the weighting assigned to
them, the indices and/or the weighting
shall be amended accordingly by mutual
agreement of the parties. The change in
circumstances referred to above shall
include but not be limited to:
1) Any material change in the basis upon
which the chosen indices have been
calculated or if any of said indices are
discontinued or withdrawn from
publication,
2) Any change in manufacturing plan
involving the letting of a new sub-
contract or the termination of an
existing sub-contract, and
3) Any change in the escalation or Economic
Adjustment Formula used in a Vendor or
sub-contractor contract with Bombardier;
and
In the calculation of the Aircraft
Purchase Price the following guidelines
in respect of decimal places shall
apply:
(a) All indices in the Economic Adjustment
Formula shall be rounded to the second
decimal place,
(b) The Economic Adjustment Formula shall be
calculated and rounded to four decimal
places, and
(c) The Aircraft Purchase Price resulting
from the Economic Adjustment Formula
shall be rounded to the nearest dollar.
APPENDIX II
DELIVERY SCHEDULE
* First Aircraft ---------
* Second Aircraft------------* Third
Aircraft---------------**Fourth Aircraft
-------------**Fifth Aircraft --------
------
**Sixth Aircraft --------------
APPENDIX III
SPECIFICATION
TYPE SPECIFICATION
--------------------------------------------
APPENDIX IV
BUYER SELECTED OPTIONAL FEATURES
CR Ref. # Option Description Price in
Jan. 1999 US
Dollars
00-008 PERFORMANCE - EXTENDED ---
RANGE
00-312 ADDITIONAL FLAP SETTING, 8 -------
DEG TAKE-OFF
00-313 CERTIFICATION - FAA ---
STRAPPING
11-300 PAINT SCHEME ** ----
25-22-301 IN-ARM MEAL TRAYS IN ROW 1 ------
25-22-302 UNDERSEAT LIFE VEST POUCHES ------
25-22-304 RECLINING PASSENGER SEATS -------
25-24-301 ENTRANCE STORAGE ----
COMPARTMENT
25-26-301 PARTITION - LHD WINDSCREEN ----
25-26-302 PARTITION - RHD WINDSCREEN ----
25-31-320 G1 GALLEY: PROVISIONS FOR ------
SNACK & HOT BEVERAGE
SERVICE
25-34-310 STANDARD BEVERAGE MAKER - -------
COFFEE (QTY 2)
30-001 ICE DETECTION - RED WARNING ---
LIGHT
31-320 EICAS 2000 ---
31-340 DFDR 88 PARAMETERS -------
33-003 RED BEACON LIGHTS -------
33-310 TAIL LOGO LIGHTS -------
33-320 CARGO DOOR FLOODLIGHTS -------
34-328 EGPWS - ENHANCED GROUND -------
PROXIMITY WARNING SYSTEM
34-330 FMS - SINGLE COLLINS FMS- -------
4200 -
34-350 GPS - SINGLE COLLINS GPS- -------
4000
34-353 VHF NAV - FM IMMUNITY (VIR- ------
432+)
34-362 ALTIMETER - BARO SETTING ----
REMINDER
35-004 EROS MAGIC MASK (THREE) -------
38-313 8 US GAL. GALLEY -------
WATER/WASTE TANK SYSTEM
(WITH G1 GALLEY SELECTION)
AMI PILOT & CO-PILOT SEAT ---
Total Technical Features -------
-
-------------------------------------------------------------
---------
** ------------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- --
All prices listed above are expressed in January 1,
1999 US dollars, and are subject to economic
adjustment to the date of aircraft delivery as
provided in the Agreement.
CUSTOMER SUPPORT SERVICES
ANNEX A - TECHNICAL SUPPORT, SPARE PARTS,
TRAINING AND
TECHNICAL DATA
The following Customer Support Services are those
services to which reference is made in Article 3 of
the Agreement.
ARTICLE 1 - TECHNICAL SUPPORT
1.1 Factory Service
Bombardier agrees to maintain or cause to be maintained
the capability to respond to Buyer's technical inquiries,
to conduct investigations concerning maintenance problems
and to issue findings and recommend action thereon. This
service shall be provided for as long as ten (10) CL-600-
2B19 aircraft remain in commercial air transport service.
1.2 Field Service Representative
1.2.1 Services
Bombardier shall assign one (1) Field Service
Representative ("FSR") to Buyer's main base of
operation or other location as may be mutually
agreed.
1.2.2 Term
Such assignment shall be for ------------------- and
shall commence approximately one (1) month prior to
the Delivery Date of the first Aircraft. The FSR
assignment may be extended on terms and conditions to
be mutually agreed.
1.2.3 Responsibility
The FSR's responsibility shall be to provide
technical advice to Buyer for the line maintenance
and operation of the Aircraft systems and
troubleshooting during scheduled and unscheduled
maintenance by Buyer's designated personnel ("FSR
Services").
1.2.4 Travel
If requested by Buyer, the FSR may, at Buyer's
expense, travel to another location to provide
technical advice to Buyer. The FSR must fly on
Buyer's airline, if such service is available.
1.2.5 Office Facilities
Buyer shall furnish the FSR, at no charge to
Bombardier, suitable and private office facilities
and related equipment including desk, file cabinet,
access to two telephone lines, facsimile and
photocopy equipment conveniently located at Buyer's
main base of operation or other location as may be
mutually agreed.
1.2.6 Additional Expenses
Buyer shall reimburse Bombardier (net of any
additional taxes on such reimbursement) the amount of
any and all taxes (except Canadian taxes on the
income of the FSR) and fees of whatever nature,
including any customs duties, withholding taxes or
fees together with any penalties or interest thereon,
paid or incurred by Bombardier or the FSR or other
Bombardier employee as a result of or in connection
with the rendering of the services.
1.2.7 Right to Stop Work
Bombardier shall not be required to commence or
continue the FSR Services when:
a.) there is a labour dispute or work stoppage in
progress at Buyer's facilities;
b.) there exist war, risk of war or warlike
operations, riots or insurrections;
c.) there exist conditions that are dangerous
to the safety or health of the FSR or other
Bombardier employee; or
d.) the Government of the country where Buyer's
facilities are located or where Buyer desires
the FSR to travel refuses the Bombardier
employee permission to enter said country or
Buyer's base of operations.
1.2.8 Work Permits and Clearances
Buyer shall assist in arranging for all necessary
airport security clearances required for the FSR or
other Bombardier employee to permit timely
accomplishment of the FSR services.
1.3 Maintenance Planning Support
1.3.1 Scheduled Maintenance Task Cards
As described in Annex A Attachment A, Bombardier
shall provide Buyer Bombardier's standard format
scheduled maintenance task cards that shall conform
to the Aircraft at the Delivery Date. At Buyer's
request Bombardier shall provide a proposal for task
cards produced to Buyer's format.
1.3.2 In-Service Maintenance Data
Buyer agrees to provide to Bombardier in-service
maintenance data in order to provide updates to
Bombardier's recommended maintenance program. Buyer
and Bombardier shall agree on standards and frequency
for communication of such data.
1.4 Additional Services
At Buyer's request Bombardier shall provide a
proposal to provide such additional support
services as the parties may agree upon, which
may include special investigations, maintenance
and repair of the Aircraft.
ARTICLE 2 - SPARE PARTS, GSE, TOOLS AND TEST
EQUIPMENT
2.1.1 Definitions
a."Bombardier Parts":
any spare parts, ground support equipment, tools and
test equipment which bear an inhouse Cage Code number
in the Bombardier Provisioning Files (as that
expression is defined in ATA Specification 2000).
b."Power Plant Parts":
any power plant or power plant part or assembly
carrying the power plant manufacturer's part number or
any part furnished by the power plant manufacturer for
incorporation on the Aircraft.
c."Vendor Parts":
any spare parts, ground support equipment, tools and
test equipment for the Aircraft which are not
Bombardier Parts or Power Plant Parts.
d."Spare Parts":
all materials, spare parts, assemblies, special tools
and items of equipment, including ground support
equipment, ordered for the Aircraft by Buyer from
Bombardier. The term Spare Parts includes Bombardier
Parts, Power Plant Part and Vendor Parts.
e."Order":
any order for Spare Parts issued by Buyer to
Bombardier; and
f."Technical Data":
shall have the meaning attributed to it in Annex A
Article 4.1.
2.1 Term and Applicability
The term of this Annex A Article 2 shall become effective
on the date hereof and shall remain in full force and
effect with respect to the purchase and sale of Spare
Parts for each Aircraft so long as at least ten (10) of
the CL-600-2B19 aircraft remain in commercial air
transport service. The provisions of Annex A Articles
2.2, 2.6.5, 2.24 and Annex B Article 5.0 shall survive
expiration or termination of this Agreement.
2.2 Order Terms
Terms and conditions hereof shall apply to all Orders
placed by Buyer with Bombardier in lieu of any terms and
conditions in Buyer's purchase orders.
2.3 Purchase and Sale of Spare Parts
2.3.1 Agreement to Manufacture and Sell
Bombardier shall manufacture, or procure, and make
available for sale to Buyer suitable Spare Parts in
quantities sufficient to meet the reasonably
anticipated needs of Buyer for normal maintenance and
normal spares inventory replacement for each
Aircraft. During the term specified in Annex A
Article 2.1 above, Bombardier shall also maintain, or
cause to be maintained, a shelf stock of certain
Bombardier Parts selected by Bombardier to ensure
reasonable re-order lead times and emergency support.
Bombardier shall maintain, or cause to be maintained,
a reasonable quantity of Bombardier insurance parts
at a U.S. distribution centre. Insurance parts as
used herein shall include, but not be limited to,
dispatch-essential parts such as major flight control
surfaces.
2.4 Agreement to Purchase Bombardier Parts
2.4.1 -----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
----------
2.4.2 Buyer's Right to Purchase, Redesign or
Manufacture
-----------------------------------------------------
-----------------------------------------------------
----------------------------------- shall not be
construed as a granting of a license by Bombardier
and shall not obligate Bombardier to disclose to
anyone Technical Data or other information nor to the
payment of any license fee or royalty or create any
obligation whatsoever to Bombardier and Bombardier
shall be relieved of any obligation or liability with
respect to patent infringement in connection with any
such redesigned part. Buyer shall be responsible for
obtaining all regulatory authority approvals required
by Buyer to repair the Aircraft using redesigned or
manufactured Bombardier Parts as described in the
preceding Article. Any such redesigned part shall be
identified with Buyer's part number only.
2.4.3 Notice to Bombardier of Redesigned Parts
Bombardier reserves the right to negotiate with Buyer
the access to redesigned parts, drawings and the non-
exclusive manufacturing rights of the redesigned
part, if Buyer redesigns or has had any Bombardier
parts redesigned.
2.5 Purchase of Vendor Parts & Power Plant Parts
Bombardier shall not be obligated to maintain a stock
of Power Plant Parts. Bombardier maintains a spares
stock of selected Vendor Parts at its own discretion
to support provisioning and replenishment sales.
Bombardier agrees to use all reasonable efforts to
require its vendors to comply with the terms and
conditions of this Annex A Article 2 as they apply to
Vendor Parts. Vendor Parts shall be delivered in
accordance with the vendor's quoted lead time plus
Bombardier's internal processing time.
2.6 Spare Parts Pricing
2.6.1 Spare Parts Price Catalogue
Prices for commonly used Bombardier Parts
stocked by Bombardier shall be published in the
spare parts price catalogue ("Spare Parts Price
Catalogue"). Bombardier shall hold the
published prices firm for catalogue stock class
items for a period of twelve (12) months and
shall provide at least ninety (90) calendar days
notice prior to changing the published price.
2.6.2 Bombardier prices for Vendor Parts
If Buyer orders Vendor Parts from Bombardier,
the price shall be as published in the Spare
Parts Price Catalogue.
2.6.3 Quotations
Price and delivery quotations for items not
included in the Spare Parts Price Catalogue
shall be provided at Buyer's request by
Bombardier. Price quotations will be held firm
for a period of ninety (90) calendar days or as
otherwise specified by Bombardier. Responses to
quotation requests will be provided within ten
(10) calendar days.
2.6.4 Currency and Taxes
All Spare Parts Price Catalogue and quotation
prices shall be in U.S. dollars and exclusive of
transportation, taxes, duties and licenses.
Buyer shall pay to Bombardier upon demand the
amount of any sales, use, value-added, excise or
similar taxes imposed by any federal, provincial
or local taxing authority within Canada, and the
amount of all taxes imposed by any taxing
authority outside Canada, required to be paid by
Bombardier as a result of any sale, use,
delivery, storage or transfer of any Spare
Parts. If Bombardier has reason to believe that
any such tax is applicable, Bombardier shall
separately state the amount of such tax in its
invoice. If a claim is made against Bombardier
for any such tax, Bombardier shall promptly
notify Buyer.
In addition, Buyer shall pay to Bombardier on
demand the amount of any customs duties required
to be paid by Bombardier with respect to the
importation by Buyer of any Spare Parts.
2.6.5 Vendor Pricing
Bombardier shall use reasonable efforts to
require its major vendors to maintain any
published price for their parts for a period of
at least twelve (12) months with a ninety (90)
calendar day notice period prior to changing a
published price.
2.7 Provisioning
2.7.1 Pre-provisioning/Provisioning Conference
Pre-provisioning and provisioning conferences shall
be convened on dates to be mutually agreed between
Buyer and Bombardier in order to:
(i) discuss the operational parameters to be
provided by Buyer to Bombardier which Bombardier
considers necessary for preparing its quantity
recommendations for initial provisioning of Spare
Parts to be purchased from Bombardier or vendors
("Provisioning Items");
(ii) review Buyer's ground support equipment and
special tool requirements for the Aircraft;
(iii) discuss the format of the provisioning
documentation to be provided to Buyer from
Bombardier for the selection of Provisioning
Items; and
(iv) arrive at a schedule of events for the
initial provisioning process, including the
establishment of a date for the initial
provisioning conference ("Initial Provisioning
Conference") which shall be scheduled where
possible at least six (6) months prior to delivery
of the first Aircraft.
The time and location of the pre-provisioning
conference shall be mutually agreed upon between the
parties; however, Bombardier and Buyer shall use
their best efforts to convene such meeting within
thirty (30) days after execution of the Agreement.
2.8 Initial Provisioning Documentation
Initial provisioning documentation for Bombardier Parts
and Vendor Parts shall be provided by Bombardier as
follows:
a)Bombardier shall provide, as applicable to Buyer, no
later than six (6) months prior to the Scheduled
Delivery Date of the first Aircraft, or as may be
mutually agreed, the initial issue of provisioning
files.
Revisions to this provisioning data shall be issued by
Bombardier every ninety (90) calendar days until ninety
(90) calendar days following the Delivery Date of the
last Aircraft or as may be mutually agreed; and
b)the Illustrated Parts Catalogue designed to support
provisioning shall be issued concurrently with
provisioning data files and revised at ninety (90)
calendar day intervals.
2.8.1 Obligation to Substitute Obsolete Spare Parts
In the event that, prior to delivery of the first
Aircraft, any Spare Part purchased by Buyer from
Bombardier is rendered obsolete or unusable due to
the redesign of the Aircraft or of any accessory,
equipment or part thereto (other than a redesign at
Buyer's request), Bombardier shall deliver to Buyer
new and usable Spare Parts in substitution for such
obsolete or unusable Spare Parts upon return of such
Spare Parts to Bombardier by Buyer. Bombardier shall
credit Buyer's account with the price paid by Buyer
for any such obsolete or unusable Spare Part and
shall invoice Buyer for the purchase price of any
such substitute Spare Part delivered to Buyer.
2.8.2 Delivery of Obsolete Spare Parts and Substitutes
Obsolete or unusable Spare Parts returned by Buyer
pursuant to Annex A Article 2.8.1. shall be delivered
to Bombardier at its plant in Ontario or Quebec, or
such other destination as Bombardier may reasonably
designate. Spare Parts substituted for such returned
obsolete or unusable Spare Parts shall be delivered
to Buyer from Bombardier's plant in Ontario or
Quebec, or such other Bombardier shipping point as
Bombardier may reasonably designate. Bombardier
shall pay the freight charges for the shipment from
Buyer to Bombardier of any such obsolete or unusable
Spare Part and for the shipment from Bombardier to
Buyer of any such substitute Spare Part.
2.8.3 Obligation to Repurchase Surplus Provisioning
Items
During a period -------------------------------------
-----------------------------------------------------
-----------------------------------------------------
----------------------------------------------------
receipt of Buyer's written request and subject to the
exceptions in Annex A Article 2.8.4, repurchase
unused and undamaged Provisioning Items which: (i)
were recommended by Bombardier as initial
provisioning for the Aircraft, (ii) were purchased by
Buyer from Bombardier or Vendor at Bombardier's
recommendation, and (iii) are surplus to Buyer's
needs.
2.8.4 Exceptions
Bombardier shall not be obligated under Annex A
Article 2.8.3 to repurchase any of the following:
(i) quantities of Provisioning Items in excess of
those quantities recommended by Bombardier in its
Recommended Spare Parts List ("RSPL") for the
Aircraft, (ii) Power Plant Parts, QEC Kits, standard
hardware, bulk and raw materials, ground support
equipment and special tools, (iii) Provisioning Items
which have become obsolete or have been replaced by
other Provisioning Items as a result of Buyer's
modification of the Aircraft and (iv) Provisioning
Items which become surplus as a result of a change in
Buyer's operating parameters provided to Bombardier
pursuant to Annex A Article 2.7, which were the basis
of Bombardier's initial provisioning recommendations
for the Aircraft.
2.8.5 Notification and Format
Buyer shall notify Bombardier, in writing, when Buyer
desires to return Provisioning Items which Buyer's
review indicates are eligible for repurchase by
Bombardier under the provisions of Annex A Article
2.8.3. Buyer's notification shall include a detailed
summary, in part number sequence, of the Provisioning
Items Buyer desires to return. Such summary shall be
in the form of listings as may be mutually agreed
between Bombardier and Buyer, and shall include part
number, nomenclature, purchase order number, purchase
order date and quantity to be returned.
Within sixty (60) calendar days after receipt of
Buyer's notification and detailed summary Bombardier
shall complete the review of such summary.
2.8.6 Review and Acceptance by Bombardier
Upon completion of Bombardier's review of any
detailed summary submitted by Buyer pursuant to Annex
A Article 2.8.5., Bombardier shall within sixty
calendar days issue to Buyer a Material Return
Authorization notice ("MRA") for those Provisioning
Items Bombardier agrees are eligible for repurchase
in accordance with Annex A Article 2.8.3. Bombardier
will advise Buyer of the reason that any Provisioning
Items included in Buyer's detailed summary are not
eligible for return. The MRA notice shall state the
date by which Provisioning Items listed in the MRA
notice must be redelivered to Bombardier as agreed
between the parties, and Buyer shall arrange for
shipment of such Provisioning Items accordingly, to
the U.S. distribution centre.
2.8.7 Price and Payment
The price of each Provisioning Item repurchased by
Bombardier pursuant to Annex A Article 2.8.6 will be
the original invoice price thereof. Bombardier shall
pay the repurchase price by issuing a credit
memorandum in favour of Buyer which may be applied
against amounts due Bombardier for the purchase of
Spare Parts and services.
2.8.8 Return of Surplus Provisioning Items
Provisioning Items repurchased by Bombardier pursuant
to Annex A Article 2.8.6 shall be delivered to
Bombardier's ----------------------------------------
-----------------------------------------------------
-----------------------
2.8.9 Obsolete Spare Parts and Surplus Provisioning
Items - Title and Risk of Loss
Title to and risk of loss of any obsolete or unusable
Spare Parts returned to Bombardier pursuant to Annex
A Article 2.8.8 shall pass to Bombardier upon
delivery thereof to Bombardier. Title to and risk of
loss of any Spare Parts substituted for an obsolete
or unusable Spare Part pursuant to Annex A Article
2.8.1 shall pass to Buyer upon delivery thereof to
Buyer. Title to and risk of loss of any Provisioning
Items repurchased by Bombardier pursuant to Annex A
Article 2.8.3 shall pass to Bombardier upon delivery
thereof to Bombardier.
With respect to the obsolete or unusable Spare Parts
which may be returned to Bombardier and the Spare
Parts substituted therefor, pursuant to Annex A
Article 2.8.1, and the Provisioning Items which may
be repurchased by Bombardier, pursuant to Annex A
Article 2.8.3, the party which has the risk of loss
of any such Spare Part or Provisioning Item shall
have the responsibility of providing any insurance
coverage thereon desired by such party.
2.9 Procedure for Ordering Spare Parts
Orders for Spare Parts may be placed by Buyer to
Bombardier by any method of order placement (including but
not limited to SITA, ARINC, telecopier, letter, telex,
facsimile, telephone or hard copy purchase order).
2.9.1 Requirements
Orders shall include at a minimum order number, part
number, nomenclature, quantity, delivery schedule
requested, shipping instructions and Bombardier's
price, if available.
2.9.2 Processing of Orders
Upon acceptance of any Order, unless otherwise
directed by Buyer, Bombardier shall, if the Spare
Parts are in stock, proceed immediately to prepare
the Spare Parts for shipment to Buyer. If Bombardier
does not have the Spare Parts in stock, Bombardier
shall proceed immediately to acquire or manufacture
the Spare Parts. Purchase order status and actions
related to the shipment of Spare Parts shall be
generally consistent with the provisions of the World
Airline Suppliers Guide, as applicable to Buyer.
2.9.3 Changes
Bombardier reserves the right, without Buyer's
consent, to make any necessary corrections or changes
in the design, part number and nomenclature of Spare
Parts covered by an Order, to substitute Spare Parts
and to adjust prices accordingly, provided that
interchangeability is not affected ------------------
-----------------------------------------------------
------------ unless Buyer's order specifically and
reasonably prohibits such substitution. Bombardier
shall promptly give Buyer written notice of
corrections, changes, substitutions and consequent
price adjustments. Corrections, changes,
substitutions and price adjustments which affect
interchangeability or exceed the price limitations
set forth above may be made only with Buyer's written
consent, which consent shall conclusively be deemed
to have been given unless Buyer gives Bombardier
written notice of objection within thirty (30)
calendar days after receipt of Bombardier's notice.
In case of any objection, the affected Spare Part
will be deemed to be deleted from Buyer's Order.
2.10 Packing
All Spare Parts ordered shall receive standard commercial
packing suitable for export shipment via air freight.
Such standard packing will generally be to ATA 300
standards as amended from time to time. All AOG orders
will be handled, processed, packed and shipped separately.
2.11 Packing List
Bombardier shall insert in each shipment a packing
list/release note itemized to show:
(i) the contents of the shipment,
(ii) the approved signature of Bombardier's TC authority
attesting to the airworthiness of the Spare Parts.
(iii) value of the shipment for customs clearance if
required.
2.12 Container Marks
Upon Buyer's request each container shall be marked with
shipping marks as specified on the Order. In addition
Bombardier shall, upon request, include in the markings:
gross weight and cubic measurements.
2.13 Delivery, Title and Risk of Loss
2.13.1 Delivery Point
Spare Parts, other than AOG and Critical Orders,
shall be delivered to Buyer FOB Bombardier's U.S.
distribution centre. AOG and Critical Orders shall
be delivered FOB point of origin.
2.13.2 Delivery Time
Bombardier shall use reasonable efforts so that
shipment of Bombardier Parts to Buyer be as follows:
a)AOG Orders
Ship AOG Orders within four (4) hours of receipt
of Order. Buyer's affected Aircraft factory
production number shall be required on AOG Orders;
b)Critical Orders (A1)
Ship critical Orders within twenty-four (24) hours
of order receipt;
c)Expedite Orders (A2)
Ship expedite Orders within seven (7) calendar
days of order receipt;
d)Initial Provisioning Orders
Prior to the Delivery Date of the first Aircraft
or as may be mutually agreed; and
e.) Other Orders
Shipment of stock items shall be approximately
thirty (30) calendar days after Bombardier's
receipt of Buyer's Order. Shipment of non-stock
items shall be in accordance with quoted lead
times or lead times published in the current Spare
Parts Price Catalogue, procurement data, or
provisioning data.
2.14 Collect Shipments
Where collect shipments are not deemed
practicable by Bombardier, charges for shipment,
insurance, prepaid freight charges and all other
costs paid by Bombardier shall be paid by Buyer
promptly upon presentation to Buyer of invoices
covering the same.
2.15 Freight Forwarder
If Buyer elects to use the services of a freight
forwarder for the onward movement of Spare
Parts, Buyer agrees to release Bombardier from
and indemnify it for any liability for any fines
or seizures of Spare Parts imposed under any
governmental Goods in Transit regulations. Any
such fines levied against Bombardier will be
invoiced to Buyer and any Spare Parts seized
under such regulations will be deemed to be
received, inspected, and accepted by Buyer at
the time of seizure.
2.16 Intentionally Left Blank
2.17 Title and Risk of Loss
Property and title to the Spare Parts will pass
to Buyer upon payment for the Spare Parts in
full. Until payment in full for Spare Parts,
(a) title to them will not pass to Buyer, and
(b) Bombardier maintains a purchase money
security interest in them. Risk of loss of the
Spare Parts will pass to the Buyer upon delivery
by Bombardier. With respect to Spare Parts
rejected by Buyer pursuant to Annex A Article
2.19, risk of loss shall remain with Buyer until
such Spare Parts are re-delivered to Bombardier
.
Bombardier agrees to notify Buyer when material
is shipped and shall provide carrier's reference
information (i.e., waybill number).
2.18 Inspection and Acceptance
All Spare Parts shall be subject to inspection
by Buyer at destination. Use of Spare Parts or
failure of Buyer to give notice of rejection
within forty-five (45) days after receipt shall
constitute acceptance. Acceptance shall be
final and Buyer waives the right to revoke
acceptance for any reason, whether or not known
to Buyer at the time of acceptance. Buyer's
remedies for defects discovered before
acceptance are exclusively provided for in Annex
A Article 2.19 herein.
2.19 Rejection
Any notice of rejection referred to in Annex A
Article 2.18 shall specify the reasons for
rejection. If Bombardier concurs with a
rejection, Bombardier shall, at its option,
either correct, repair or replace the rejected
Spare Parts. Buyer shall, upon receipt of
Bombardier's written instructions and Material
Return Authorization ("MRA") number, which
Bombardier shall issue in a timely manner,
return the rejected Spare Parts to Bombardier at
its specified plant, or other destination as may
be mutually agreeable. The return of the
rejected Spare Parts to Bombardier and the
return or delivery of a corrected or repaired
rejected Spare Part or any replacement for any
such Spare Part to Buyer shall be at
Bombardier's expense. Any corrected, repaired
or replacement Spare Parts shall be subject to
the provisions of this Agreement.
2.20 Payment
Except as provided in Annex A Article 2.22
below, payment terms shall be net thirty (30)
calendar days of invoice date for established
open accounts. Any overdue amount shall bear
interest from the due date until actual payment
is received by Bombardier at an annual rate of
interest equal to the U.S. prime interest rate
as established from time to time by the Chase
Manhattan Bank, New York Branch, or its
successor,,, plus two percent (2%) calculated
and compounded monthly.
2.21 Payment for Provisioning Items
Payment for Provisioning Items purchased by
Buyer as contemplated by Paragraph 2.7.1(i)
shall be made by Buyer as follows:
a) a deposit of 7.5% of the total price of the
Provisioning Items as selected by Buyer, upon
signature of the spares provisioning document;
and
b) the balance of the total price of
Provisioning Items upon their delivery.
2.22 Modified Terms of Payment
Bombardier reserves the right to alter the terms
of payment without prior notice if Buyer fails
to pay when due an amount Buyer owes under any
agreement with Bombardier, unless such failure
relates to a good faith dispute of an invoice.
2.23 Regulations
Buyer shall comply with all applicable monetary
and exchange control regulations and shall
obtain any necessary authority from the
governmental agencies administering such
regulations to enable Buyer to make payments at
the time and place and in the manner specified
herein.
2.24 Warranty
The warranty applicable to Spare Parts is set forth
in Annex B hereto.
2.25 Cancellation of Orders
Except as otherwise may apply to initial
provisioning, if Buyer cancels an Order,
Bombardier, at its option, shall be entitled to
recover actual damages, but not less than the
following cancellation charges or more than the
purchase price of the Spare Parts covered by the
Order:
a) if work accomplished on the Order has been
limited to Bombardier Spares Department, or the
part has been identified as "shelf stock" in the
Spare Parts Price Catalogue, no cancellation
charges shall be made;
b) if production planning has been completed
on the Order and shop orders have been written,
but no shop time or material charges have been
made against the Order, the cancellation charge
shall be 10% of the price but not to exceed $100
per unit;
c) if shop time or material charges have been
made against the Order, the cancellation charge
shall be based on the cost of such time and
materials, plus overhead; and
d) if the Spare Parts covered by the Order can
be absorbed into Bombardier's inventory without
increasing Bombardier's normal maximum stock
level, no cancellation charges shall be made.
2.26 Lease
Bombardier shall select and make available
certain parts for lease, subject to availability
Buyer has the option to negotiate a lease
agreement with Bombardier separate from this
Agreement.
2.27 Additional Terms and Conditions
Bombardier's conditions of sale are deemed to
incorporate the terms and conditions stated
herein. Additional terms and conditions
applicable at time of receipt of each order from
Buyer may be added providing such terms and
conditions do not conflict with the terms and
conditions provided herein. Such additional
terms and conditions shall be provided to Buyer
at least ninety (90) calendar days prior to
their effective date.
ARTICLE 3 - TRAINING
3.1 General Terms
3.1.1 The objective of the training programs (the
"Programs"), as described herein, shall be to
familiarize and assist Buyer's personnel in the
introduction, operation, and maintenance of the
Aircraft.
Bombardier shall offer to the Buyer the Programs in
the English language at a Bombardier designated
facility.
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3.1.2 Buyer shall be responsible for all travel and
living expenses, including local transportation, of
Buyer's personnel incurred in connection with the
Programs.
3.1.3 The Programs shall be designed to reflect the
model and/or configuration of the Aircraft and may
include differences training to identify such
configuration or model. Manuals which are provided
during the Programs exclude revision service.
3.1.4 A training conference shall be held where
possible no later than six (6) months prior to the
Scheduled Delivery Date of the first Aircraft to the
Buyer, or as may be otherwise agreed, to establish
the Programs' content and schedule.
3.2 Flight Crew Training
3.2.1 Flight Crew Ground Training
At no additional charge, Bombardier will provide with
each delivered Aircraft, a TC or FAA approved
transition training for ------- (--) of Buyer's
pilots who meet the minimum entry requirement
provided in the applicable training manual. Each
course shall consist of up to eighty (80) hours of
classroom instruction which may include part task
trainer, Computer Based Training (CBT), and/or Flight
Training Device (FTD). Bombardier shall furnish each
of Buyer's licensed pilots attending the course one
copy of the Flight Crew Operating Manual.
3.2.2 Pilot Simulator Training
Bombardier shall provide access at Buyer's expense to
a TC or FAA approved flight simulator for the crew
trained under Annex A Article 3.2.1. Bombardier
shall provide a simulator instructor for eight (8)
missions for the crew trained on Bombardier's
designated simulator in Montreal; each mission shall
consist of four (4) hours in the simulator and
required briefing/debriefing sessions.
3.2.3 In-flight Training
Should Buyer require aircraft flight training, such
training shall be conducted in Buyer's Aircraft after
the Delivery Date for up to a maximum of ---- (--) of
Buyer's pilots. Bombardier shall provide an
instructor pilot at no additional charge; Buyer shall
be responsible for the cost of fuel, oil, landing
fees, taxes, insurance, maintenance, and other
associated operating expenses required for the
Aircraft during such training.
3.2.4 Flight Attendant Course
A familiarization course for up to ---- (--) of
Buyer's flight attendant personnel shall be
conducted. Each course shall be for a maximum of
five (5) working days duration. This course shall
present general information on the Aircraft and
detailed information on the operation of the
passenger safety equipment and emergency equipment.
Bombardier shall furnish for each participant in this
course one (1) copy of the Flight Attendant Training
Guide which shall not be revised. Buyer shall assist
Bombardier in the development of the Flight Attendant
Training Guide to incorporate Buyer's specific
equipment and procedures.
3.2.5 Recurrent Pilot Training
Bombardier shall, upon Buyer's request, provide a
proposal for a TC or FAA approved course for type
rated pilots, customized in content to meet the
recurrent training of Buyer's pilots.
3.2.6 Course Training Material
Bombardier shall, upon Buyer's request, present a
proposal to provide one (1) set of the materials
(without revision service) used to conduct the Flight
Crew Ground Training course, as follows:
i)35 mm slides;
ii) Instructional Narrative and/or Instruction
Guides;
iii) Overhead Projection Transparencies;
iv) Motion picture and/or Video tapes; and
v)Audio cassettes tapes.
3.3 Maintenance Training
3.3.1 Airframe and Powerplant Systems Maintenance
Course
Bombardier shall, at no additional charge, train up
to ---- (--) of Buyer's qualified personnel per
Aircraft. This course shall emphasize detailed
systems description, operation, and routine line
maintenance practices. The course material shall be
principally mechanical with electrical and avionics
information for overall systems comprehension. The
course duration shall be for a maximum of twenty-
five (25) working days.
3.3.2 Electrical and Avionics Systems Maintenance
Course
Bombardier shall, at no additional charge, train up
to ---- (--) of Buyer's qualified personnel per
Aircraft. The course shall emphasis detailed systems
description, operation and routine line maintenance
practices. The course material shall be principally
electrical and avionic but shall include mechanical
information for overall systems comprehension. The
course duration shall be for a maximum of twenty-five
(25) working days.
3.3.3 Specialist Courses
At Buyer's request, Bombardier shall make a proposal
for specialist courses which will be derived from
Bombardier's standard courses detailed herein.
3.3.4 Recurrent Training
At Buyer's request, Bombardier shall make a proposal
for a Regulatory Authority approved training plan
for maintenance recurrent training.
3.3.5 Vendor Training
At Buyer's request, Bombardier shall assist Buyer to
obtain vendor maintenance training.
3.3.6 Course Training Material
Bombardier, upon Buyer's request, shall present a
proposal to provide one (1) set of the training
materials (without revision service) used to conduct
Bombardier's standard training as detailed herein:
i)35 mm slides;
ii) Lesson Guides;
iii) Overhead Projection Transparencies;
iv) Motion picture and/or Video tapes; and
v)Audio cassettes tapes.
3.4 Insurance
3.4.1Buyer shall at all times during flight training
in Buyer's Aircraft secure and maintain in
effect, at its own expense, insurance policies
covering the Aircraft including without limitation:
a) liability insurance covering public liability,
passenger, crew, property and cargo damage in
amounts ----------------------------------------
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-------------
b) all risk aircraft hull and engine insurance for
an amount which is not less than its then fair
market value.
3.4.2 The liability policy shall name Bombardier (and
its affiliates) as additional insured. The hull
policy shall contain a waiver of subrogation in
favour of Bombardier (and its affiliates); ----------
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--------------------------------------- All
insurance policies shall provide for payments despite
any misrepresentations or breach of warranty by any
person (other than the assured receiving payments)
and shall not be subject to any offset by any other
insurance carried by Bombardier except that Buyer
shall not be required to provide insurance with
respect to the manufacturing, repair and maintenance
activities of Bombardier (and of its affiliates) and
the related potential liability (product or
otherwise) arising therefrom.
ARTICLE 4 - TECHNICAL DATA
4.1 Technical Data Provided
Bombardier shall furnish to Buyer the Technical
Data described in Attachment A hereto (the
"Technical Data"). The Technical Data shall be
in the English language and shall provide
information on items manufactured according to
Bombardier's detailed design and in those units
of measures used in the Specification or as may
otherwise be required to reflect Aircraft
instrumentation as may be mutually agreed.
4.2 Shipment
All Technical Data provided hereunder shall be
delivered to Buyer Free Carrier (Incoterms)
Bombardier's designated facilities and at the
time indicated in Attachment A.
4.3 Proprietary Technical Data
It is understood and Buyer acknowledges that the
Technical Data provided herein is proprietary to
Bombardier and all rights to copyright belong to
Bombardier and the Technical Data shall be kept
confidential by Buyer. Buyer agrees to use the
Technical Data solely to maintain, operate,
overhaul or repair the Aircraft or to make
installation or alteration thereto allowed by
Bombardier.
Technical Data shall not be disclosed to third
parties or used by Buyer or furnished by Buyer
for the design or manufacture of any aircraft or
Spare Parts including Bombardier Parts or items
of equipment, except when manufacture or
redesign is permitted under the provisions
Article 23.2 of the Agreement or of Annex A
Article 2.4 hereof and then only to the extent
and for the purposes expressly permitted
therein.
ANNEX B - WARRANTY AND SERVICE LIFE POLICY
ARTICLE 1 - WARRANTY
The following warranty is that to which reference is made in
Article 3 of the Agreement.
1.1 Warranty
1.1.1 Subject to Annex B Articles 1.9, 1.10, and 2,
Bombardier warrants that, at the date of delivery
of the Aircraft or Bombardier Part, as applicable
:
a)the Aircraft shall conform to the
Specification, except that any matter stated in
the Specification as type characteristics,
estimates or approximations is excluded from
this Warranty;
b)the Aircraft shall be free from defects caused
by the failure of Bombardier to install a
Vendor Part or Powerplant Part in accordance
with reasonable instructions of the vendor;
c)the Aircraft, excluding however Vendor Parts
and Powerplant Parts which shall be governed by
Article 2 hereof, shall be free from defects in
material or workmanship------------------------
------------ and
d.) the Aircraft, excluding however Vendor
Parts and Powerplant Parts which shall be
governed by Article 2 hereof, shall be free
from defects in design, having regard to the
state of the art as of the date of such design.
1.1.2 The Warranty set forth in Annex B Article
1.1.1 (c) and (d) above shall also be applicable
to Bombardier Parts purchased as Spare Parts.
1.1.3 Bombardier further warrants that, at the time
of delivery, the Technical Data shall be free from
error.
1.2 Warranty Period
1.2.1 The Warranty set forth in Annex B Article 1.1
shall remain in effect for any defect covered by
the Warranty (a "Defect") becoming apparent during
the following periods (individually, the "Warranty
Period"):
a)for failure to conform to the Specification and
in the installation referred to in Annex B
Article 1.1.1 (a) and 1.1.1 (b), thirty-six
(36) months from the Delivery Date;
b)for those Defects in material or workmanship
referred to in Annex B Article 1.1.1 (c) and
1.1.2, thirty-six (36) months from the date of
delivery of the Aircraft or Bombardier Parts,
as applicable;
c)for those Defects in design referred to in
Annex B Article 1.1.1 (d), thirty-six (36)
months from the date of delivery of the
Aircraft or Bombardier Parts, as applicable;
and
d)for errors in the Technical Data referred to in
Annex B Article 1.1.3, twelve (12) months from
the date of delivery of the applicable
Technical Data.
1.3 Repair, Replacement or Rework
As to each matter covered by this Warranty Bombardier's
sole obligation and liability under this Warranty is
expressly limited to, at Bombardier's election,
correction by the repair, replacement or rework of the
defective part or item of Technical Data. The
repaired, replaced or reworked part or item of
Technical Data which is the subject of the Warranty
claim shall then be warranted under the same terms and
conditions for the then unexpired portion of the
Warranty Period.
In the case of a Defect relating to non-conformance
with the Specification, Bombardier shall correct that
Defect in the equipment item or part in which the
Defect appears, except that Bombardier will not be
obligated to correct any Defect which has no material
adverse effect on the maintenance, use or operation of
the Aircraft or the image of Buyer as a reputable
airline operator.
1.4 Claims Information
Bombardier's obligations hereunder are subject to a
Warranty claim to be submitted in writing to
Bombardier's warranty administrator, which claim shall
include but not be limited to the following
information:
a)the identity of the part or item involved, including
the Part number, serial number if applicable
nomenclature and the quantity claimed to be
defective;
b)the manufacturer's serial number of the Aircraft
from which the part was removed;
c)the date the claimed Defect became apparent to
Buyer;
d)the total flight hours (and cycles if applicable)
accrued on the part at the time the claimed Defect
became apparent to Buyer; and
e)a description of the claimed Defect and the
circumstances pertaining thereto.
1.5 Intentionally Left Blank .
1.6 Timely Corrections
Bombardier shall make the repair, replacement or
rework, following receipt of the defective part or
item, with reasonable care and dispatch.
In the event that Bombardier does not respond or
confirm receipt of a warranty claim from Buyer --------
-------------------------------------------------------
------- subject to Buyer and Bombardier agreeing on a
non-receipt of a confirmation from Bombardier within --
-------- from the date of submittal of claim.
1.7 Labour Reimbursement
For correction of Defects Bombardier shall establish a
reasonable estimate for the labour hours required for
the repair, replacement or rework of the defective
Bombardier Part and, if the repair, replacement or
rework is performed by Buyer or by third party on
behalf of Buyer, Bombardier shall reimburse Buyer for
Bombardier estimated hours or for Buyer's or third
party's actual labour hours, whichever is less, for the
repair, replacement or rework of the defective
Bombardier Part excluding any work necessary to gain
access to said Bombardier Part. Such reimbursement
shall be based upon Buyer's direct labour rate per
manhour plus burden rate of fifty percent (50%),
subject to annual review and adjustment of such labour
rate as mutually agreed; provided, however, that this
amount shall not exceed fifty percent (50%) of the
Bombardier published selling labour rate.
1.8 Approval, Audit, Transportation and Waiver
All Warranty claims shall be subject to audit and
approval by Bombardier. Bombardier will use reasonable
efforts to advise in writing the disposition of Buyer's
Warranty claim within thirty (30) days following the
receipt of the claim and (if requested) return of the
defective Bombardier Part to Bombardier's designated
facility. Bombardier shall notify Buyer of
Bombardier's disposition of each claim.
Buyer shall pay all costs of transportation of the
defective part from Buyer to Bombardier's U.S.
distribution centre and Bombardier shall pay all costs
of transportation of the repaired, corrected or
replacement parts back to Buyer.
1.9 Limitations
1.9.1 Bombardier shall be relieved of and shall
have no obligation or liability under this
Warranty if:
a)the Aircraft was operated with any products or
parts not specifically approved by Bombardier,
unless Buyer furnishes reasonable evidence
acceptable to Bombardier that such products or
parts were not a cause of the Defect; or
b)the Aircraft was not operated or maintained in
accordance with the Technical Data listed in
Attachment A of Annex A and the manufacturer's
documentation furnished to Buyer (including
Service Bulletins and airworthiness directives)
unless Buyer furnishes reasonable evidence
acceptable to Bombardier that such operation or
maintenance was not a cause of the Defect; or
c)the Aircraft was not operated under normal
airline use, unless Buyer furnishes reasonable
evidence acceptable to Bombardier that such
operation was not a cause of the Defect; or
d)Buyer does not
1)report the Defect in writing to Bombardier's
Warranty administrator within forty-five (45)
calendar days following such Defect becoming
apparent, and
2)retain the Bombardier Part claimed to be
defective until advised by Bombardier to
return such Bombardier Part to Bombardier's
designated facility in order for Bombardier
to finalize its evaluation of the Warranty
claim or to otherwise dispose of such
Bombardier Part; or
e)Buyer does not submit reasonable demonstration
to Bombardier within forty-five (45) calendar
days after the Defect becomes apparent that the
Defect is due to a matter covered within this
Warranty; or
f)Buyer does not allow Bombardier reasonable
opportunity (taking into account Buyer's wish
to replace Aircraft back in service) to be
present during the disassembly and inspection
of the Bombardier Part claimed to be defective.
1.9.2 The above warranties do not apply to Buyer
Furnished Equipment.
1.10 Normal Usage
Normal wear and tear and the need for regular
maintenance and overhaul shall not constitute a Defect
or failure under this Warranty.
1.11 Overhaul of Warranty Parts
Bombardier's liability for a Bombardier Part which has
a Defect and is overhauled by Buyer within the Warranty
Period shall be limited only to that portion of the
labour and material replacement related to the Defect.
1.12 No Fault Found
In the event that a Bombardier Part returned under a
Warranty claim is subsequently established to be
serviceable then Bombardier shall be entitled to charge
and recover from Buyer any reasonable inspection,
transportation, repair and other costs of a similar
nature incurred by Bombardier in connection with such
Warranty claim. Providing, however, in the event that
repetitive in-service failure occurs on the particular
Bombardier Part which is subsequently identified by
Bombardier on a repeated basis to be "no fault found,"
then Bombardier and Buyer shall discuss and mutually
agree a course of further action to help identify the
problem. In the event the fault is ultimately
confirmed to be a legitimate Warranty claim then the
above mentioned costs, if incurred by Bombardier will
be borne by Bombardier, and any such costs already paid
by Buyer will be reimbursed by Bombardier.
ARTICLE 2 - VENDOR WARRANTIES
2.1 Warranties from Vendors
The Warranty provisions of this Annex B apply to
Bombardier Parts only. However, Bombardier has made
or shall make reasonable efforts to obtain favourable
warranties from vendors, with respect to Vendor Parts
and Power Plant Parts. Except as specifically
provided under this Annex B Article 2, Bombardier
shall have no liability or responsibility for any such
Vendor Parts and Power Plant Parts and the warranties
for those Vendor Parts and Power Plant Parts shall be
the responsibility of the vendor and a matter as
between Buyer and vendor.
2.2 Vendor Warranty Backstop
For those Vendor Parts installed on the Aircraft at
the Delivery Date or subsequently purchased through
Bombardier, excluding the Powerplant or the Power
Plant Parts, in the event the parties agree that a
vendor is in default in the performance of any
material obligation under any applicable warranty
obtained by Bombardier from such vendor pursuant to
Annex B Article 2.1 above, the warranties and all
other terms and conditions of Annex B Article 1 shall
become applicable as if the Vendor Parts had been a
Bombardier Part, except that the warranty period shall
be the Warranty Period as set forth herein or by the
vendor's warranty, whichever is shorter.
2.3 Bombardier's Interface Commitment
In the event of a dispute in the application of a
Vendor Part warranty, at Buyer's request addressed to
Bombardier's warranty administrator, Bombardier shall,
without charge, conduct an investigation and analysis
of any such dispute resulting from a technical
interface problem to determine, if possible, the cause
of the interface problem and then recommend feasible
corrective action. Buyer shall furnish to Bombardier
all data and information in Buyer's possession
relevant to the interface problem and shall cooperate
with Bombardier in the conduct of its investigation
and such tests as may be required. Bombardier, at the
conclusion of its investigation, shall advise Buyer in
writing of Bombardier's opinion as to the cause of the
problem and Bombardier's recommended corrective
action.
ARTICLE 3 - SERVICE LIFE POLICY
3.1 Applicability
The Service Life Policy ("SLP") described in this Annex
B Article 3 shall apply if ------------------------- in
any Covered Component which is defined in Annex B
Article 3.7 below.
3.2 Term
3.2.1 Should such failures occur in any Covered
Component within one hundred and forty-four (144)
months following delivery of the Aircraft
containing such Covered Component, Bombardier
shall, as promptly as practicable and at its
option;
a)design and/or furnish a correction for such
failed Covered Component; or
b)furnish a replacement Covered Component
(exclusive of standard parts such as bearings,
bushings, nuts, bolts, consumables and similar
low value items).
3.3 Price
Any Covered Component which Bombardier is required to
furnish under this SLP shall be provided for at a price
calculated in accordance with the following formula:
P = C x T
144
Where:
P = Price of Covered Component to Buyer;
C = Bombardier's then current price for the
Covered Component;
T = The total time to the nearest month
since the Aircraft containing the
Covered Component, ------------------------------
---------------------- was delivered by
Bombardier
3.4 Conditions and Limitations
3.4.1 The following general conditions and
limitations shall apply to the SLP:
a)the transportation cost for the return to
Bombardier's designated facility, if
practicable, of any failed Covered Component
necessary for failure investigation or
redesigning studies shall be borne by
Bombardier but Buyer agrees to use reasonable
efforts to ship the Covered Component on
Buyer's aircraft to a scheduled destination
closest to Canadair's designated facility at no
cost to Bombardier;
b)Bombardier's obligations under this SLP are
conditional upon the submission of reasonable
proof acceptable to Bombardier that the failure
is covered hereby;
c)Buyer shall report any failure of a Covered
Component in writing to Bombardier`s Warranty
administrator within two (2) months after such
failure becomes evident -----------------------
-- Failure to give this required notice shall
excuse Bombardier from all obligations with
respect to such failure;
d)the provisions of Annex B Article 1.9 of the
Warranty (except for subparagraphs (d) and (e)
thereof) are incorporated by this reference and
shall condition Bombardier's obligations under
this SLP with respect to any Covered Component;
e)Bombardier's obligations under this SLP shall
not apply to any Aircraft which has not been
correctly modified in accordance with the
specifications or instructions contained in the
relevant Service Bulletins which are furnished
to Buyer prior to receipt by Bombardier from
Buyer of any notice of an occurrence which
constitutes a failure in a Covered Component,
subject to Buyer having had reasonable time to
i) obtain parts required for the installation
of the Service Bulletin and ii) incorporate the
Service Bulletin into the Aircraft. The
provisions of this subparagraph shall not apply
in the event that Buyer furnishes reasonable
evidence acceptable to Bombardier that such
failure was not caused by Buyer's failure to so
modify the Aircraft;
f)this SLP shall not apply to a failure of a
Covered Component if Bombardier determines that
such failure may not reasonably be expected to
occur on a repetitive basis unless subsequently
demonstrated to be; and
g)this SLP shall not apply to a Covered Component
where the failure results from an accident,
abuse, misuse, degradation, except for normal
wear and tear, negligence or wrongful act or
omission, unauthorized repair or modification
adversely affecting a Covered Component, impact
or foreign object damage, to any Covered
Component.
3.5 Coverage
This SLP is neither a warranty, performance guarantee
nor an agreement to modify the Aircraft to conform to
new developments in design and manufacturing art.
Bombardier's obligation is only to provide correction
instructions to correct a Covered Component or furnish
replacement at a reduced price as provided in this SLP.
3.6 Covered Component
Only those items or part thereof listed in Attachment A
to this Annex B shall be deemed to be a Covered
Component, and subject to the provisions of this SLP.
ARTICLE 4 - GENERAL
4.1 It is agreed that Bombardier shall not be obligated to
provide to Buyer any remedy which is a duplicate of any
other remedy which has been provided to Buyer under any
other part of this Annex B.
September 10, 1999
Atlantic Coast Airlines
515A Shaw Road,
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 001A to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement" between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of six (6)
Canadair Regional Jet Aircraft (the "Aircraft")
This Letter Agreement No. 001A dated September 10, 1999
cancels and supersedes Letter Agreement No. 001 dated
July 29, 1999.
Subject: Credit Memoranda
1.0 This letter constitutes an integral part of the
Agreement and evidences our further agreement with the
matters set forth below. All terms used herein and in
the Agreement and not defined herein, shall have the
same meaning as in the Agreement.
2.0 In consideration of Buyer having entered into the
above referenced Agreement for the purchase of six (6)
Aircraft (and for the exercise of any Option Aircraft
(as defined in Letter Agreement No. 003)), Bombardier
will issue to Buyer, upon delivery and payment of the
price of the Aircraft in accordance with the Agreement,
(i) for each of the -------------------
Aircraft (including any delivered Option
Aircraft), a credit memorandum in the amount
of -----------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
-----------------
- -------------------------------------------------------
- -------------------------------------------------------
- ----------
3.0 In consideration of Buyer having entered into the
above referenced Agreement, Bombardier will issue to
Buyer, upon delivery and payment of the price of the
Aircraft in accordance with the Agreement, for each of
the -----------------------------, a ----------- credit
memorandum in the amount of ---------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- ------------- -----------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -----------------------------------------------
4.0 ---------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- ------------- The credit memorandum will ---- be
adjusted on the same pro-rata percentage calculation as
other aircraft price changes due to changes in the
Specification or Buyer selected optional features as
otherwise provided for in this Agreement. The credit
memorandum, as adjusted, will collectively be known as
the "Credit Memoranda".
5.0 In the event of the Termination of the Agreement,
this Letter Agreement shall become automatically null
and void with respect to any undelivered Aircraft.
6.0 The provisions of this Letter Agreement are
personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer, except as required for
financing purposes in accordance with Letter Agreement
No. 004 (Financing) and except as part of an assignment
of the Agreement as expressly permitted in Article 20
of the Agreement, without the prior written consent of
Bombardier.
Should there be any inconsistency between this Letter
Agreement and the Agreement with respect to the subject
matter covered by the terms hereof, then this Letter
Agreement shall prevail.
Yours truly,
BOMBARDIER INC.
________________________
Date:_____________
Scott Preece
Manager, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________
Date:_____________
Kerry B. Skeen
President & C.E.O.
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 002 to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement" between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of six (6)
Canadair Regional Jet Aircraft (the "Aircraft")
Subject: Assignment
Gentlemen:
This letter constitutes an integral part of the
Agreement and evidences 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 meaning as in the Agreement.
1.0 Buyer shall have the right to assign its right to
purchase and to lease up to six (6) of the
Aircraft (Aircraft 1-6) to a new corporation to be
formed in the U.S. ("Newco") subject to:
(i) Newco shall be a U.S. citizen;
(ii) section 1110 of the U.S. Bankruptcy Code
applies;
(iii) the provisions of Articles 20.1, 20.2, 20.3
of the Agreement;
(iv) financing shall be based on Buyer's
credit; and
(v) additional reasonable terms and conditions
required due to the different structure of the
transaction and aircraft operations following
disclosure and due diligence of the transaction
envisaged.
3.0 Subject to the satisfaction of the foregoing, the
assignment shall then be an assignment permitted
pursuant to the terms of Article 20 of the
Agreement, such that Newco will be entitled to all
benefits as contained in the Agreement.
4.0 In the event of the termination of the Agreement,
this Letter Agreement shall become automatically
null and void.
5.0 The provisions of this Letter Agreement are
personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer without the prior
written consent of Bombardier.
Yours very truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________
Date:_____________
Kerry B. Skeen
President & C.E.O.
Atlantic Coast Airlines
515A Shaw Road,
Sterling, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 003 to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement") between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of Six
(6) Canadair Regional Jet Aircraft (the
"Aircraft")
Subject: Option Aircraft
1.0 This letter constitutes an integral part of the
Agreement and evidences our further agreement with
the matters set forth below. All terms used
herein and in the Agreement and not defined
herein, shall have the same meaning as in the
Agreement.
2.0 In consideration of Buyer having entered into the
above referenced Agreement, Bombardier will grant
to Buyer the right to purchase seventeen (17)
additional Aircraft (the "Option Aircraft") in
accordance with the following general conditions:
(a) Number of Option Aircraft
The Scheduled Delivery Dates of the Option
Aircraft are follows:
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(b) Terms
(i) The Option Aircraft will be as described
in Article 2 of the Agreement.
(ii) (a) The base price for each of the
Option Aircraft (excluding the Buyer
Selected Optional Features) Ex Works
(Incoterms 1990) Bombardier's offices or
premises in Montreal, Province of
Quebec, Canada, is ---------------------
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(b) The base price of the Buyer
Selected Optional Features is ----------
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The Option Aircraft base price shall be
the base price for the Option Aircraft
as stated in paragraph (b)(ii)(a), plus
the base price of the Buyer Selected
Optional Features as stated in paragraph
(b)(ii)(b) (the "Option Aircraft Base
Price").
The price of the Option Aircraft (the
"Option Aircraft Purchase Price") shall
be the Option Aircraft Base Price
adjusted to ----------------------------
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---------------- of the Option Aircraft.
Such adjustments shall be based on the
Economic Adjustment Formula as found in
Appendix I of the Agreement.
(ii) As consideration for this option, Buyer
shall make or cause to make payment to
Bombardier -----------------------------
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----- per Option Aircraft (the "Option
Deposit") upon execution of the
Agreement, for a total amount of -------
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(iii) Unless expressly provided for in
the Agreement, the terms and conditions
of the Agreement (including Letter
Agreements, except as noted below) shall
apply mutatis mutandis to the Option
Aircraft, with the exception that the
provisions with respect to Annex A
training courses as specified in Article
3.2.4 of the Agreement (Flight Attendant
Courses), shall not apply to the Option
Aircraft.
(iv) The following Letter Agreement shall not
apply to the Option Aircraft and is
hereby excluded:
Letter Agreement No. 003 (Option
Aircraft)
(v) Letter Agreement No. 008A (Schedule
Completion Rate), Letter Agreement No.
009C (Airframe Direct Maintenance Cost)
and Letter Agreement No. 006
(Operational Restrictions) of purchase
agreement no. RJ-0350 dated January 8,
1997, as amended through contract change
order no. 14 to such purchase agreement,
shall apply mutatis mutandis to the
Option Aircraft, with specific terms for
Option Aircraft as set out therein.
(c) Option Aircraft Payment Terms
Terms of payment for each of the Option Aircraft
shall be based upon the Option Aircraft Base Price
of such aircraft and will be as follows:
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All payments referred to in paragraphs a., b. and
c. above are to be made on the first day of the
applicable month.
(d) Exercise Procedures
Timing and procedures for the exercise of
Option Aircraft shall be as follows:
(i) The Option Aircraft will be exercised as
individual aircraft, with Buyer
providing written notice of its
intention to do so ("Notice of
Intention") -------------------- prior
to the first day of the month of the
Scheduled Delivery Date of the
applicable Option Aircraft, at which
point the Option Deposit for the
applicable Option Aircraft will become
non-refundable, and a definitive
irrevocable, written exercise-----------
--------- prior to the first day of the
month of the Scheduled Delivery Date of
the applicable Option Aircraft.
(ii) At any time prior to the Notice of
Intention of an Option Aircraft, Buyer
may elect (on one occasion only as to
any such Option Aircraft) to reschedule
the Scheduled Delivery Date for such
Option Aircraft to a date up to --------
---------- after its original Scheduled
Delivery Date, subject to Bombardier
having position(s) available for the
requested rescheduled delivery date(s),
taking into account Bombardier's then
production rate and commitments.
In the event Bombardier cannot offer an
aircraft delivery position in the month
requested by Buyer, Bombardier shall use
its reasonable efforts (taking into
account Bombardier's production and
commitments), to offer a delivery
position in the calendar quarter next
succeeding the requested rescheduled
delivery date, failing which Bombardier
shall offer to Buyer the available
positions, if any, ---------------------
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(iv) The following process shall be utilized
to provide notices (with notice
provisions in accordance with Article 17
of the Agreement):
Buyer may provide notice of its desire
to reschedule ("Notice of Reschedule")
the Scheduled Delivery Date for an
Option Aircraft (on one occasion only as
to any such Option Aircraft) at any time
up to and including --------------------
prior to the first day of the Scheduled
Delivery Date of such option Aircraft.
Following receipt of Buyer's notice to
reschedule, Bombardier shall have ------
---------------- within which to respond
to Buyer's notice, providing alternative
delivery date(s), where available and as
applicable as per paragraph d(ii) above.
Buyer shall use its reasonable efforts
to notify Bombardier of its definitive
intentions regarding the postponement
requested within ---------------- of its
request for postponement.
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(v) In all cases, prior to notice being
received by Bombardier from Buyer of
Buyer's formal acceptance of the
rescheduled delivery position(s), any
rescheduled delivery position(s)
provided from Bombardier to Buyer will
be subject to prior sale, commitment or
other disposition of the applicable
aircraft.
(vi) Buyer's failure to exercise its rights
with respect an Option Aircraft shall
result in the cancellation of such
Option Aircraft.
(vii) The price of any of the Option
Aircraft which have been rescheduled by
Buyer (including as a result of a Buyer
Excusable Delay, as defined in Article
13 of the Agreement) to a delivery month
beyond October 2003 will increase to
reflect price changes to the aircraft
standard base price (list price), if
any, as a result of value added
modifications incorporated as standard
into the Option Aircraft from the date
of the execution of the Agreement to the
date of exercise of the applicable
Option Aircraft.
(viii) Buyer will endeavor to keep
Bombardier informed as to its intentions
regarding rescheduling of Option
Aircraft.
3.0 Bombardier will, upon payment for and
delivery of each Option Aircraft, at no
additional charge to Buyer, extend the
term of Article 1.2.2 of Annex A of the
Agreement (the Field Service
Representative ("FSR")) by two (2)
additional months.
4.0 In the event of the Termination of the
Agreement, this Letter Agreement shall
become automatically null and void.
5.0 Upon exercise of Buyer's rights to
purchase in accordance with this Letter
Agreement, the parties shall amend the
Agreement or enter into an additional
purchase agreement in order to give
effect to the purchase of Option
Aircraft in accordance with the terms
and conditions thereof.
6.0 The provisions of this Letter Agreement
are personal to Buyer and, except as
part of an assignment of the Agreement
as expressly permitted by the provisions
in Article 20 of the Agreement, shall
not be assigned or otherwise disposed of
by Buyer without the prior written
consent of Bombardier.
Should there be any inconsistency between
this Letter Agreement and the Agreement with
respect to the subject matter covered by the
terms hereof, then this Letter Agreement
shall prevail.
Yours truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
ATLANTIC COAST AIRLINES
________________________
Date:_____________
Kerry B. Skeen
President and C.E.O.
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road,
Sterling, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 004 to Purchase
Agreement No. PA-0454 dated July 29, 1999
(the "Agreement") between Bombardier Inc.
("Bombardier") and Atlantic Coast Airlines
("Buyer") relating to the purchase of six (6)
Canadair Regional Jet Aircraft (the
"Aircraft")
Subject: Financing
1.0 This letter constitutes an integral part of
the Agreement and evidences our further
agreement with the matters set forth below.
All terms used herein and in the Agreement
and not defined herein, shall have the same
meaning as in the Agreement.
1.1 This Letter Agreement describes the
general terms and conditions of the
financing assistance to be provided by
Bombardier to Buyer. ------------------
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2.0 Financing Assistance
2.1 Financing assistance referred to in this
Letter Agreement No. 004 shall apply
only to the Financed Aircraft.
Financing for the Financed Aircraft will
be arranged by Buyer working in
coordination with Bombardier. The form
of any support which may be provided by
Bombardier is to be treated as
confidential and is not to be provided
by Buyer to any third party without the
third party executing Bombardier's
confidentiality agreement. It is
Buyer's responsibility to have such form
executed with any third party prior to
Buyer's disclosure of any such
information and to provide such form to
Bombardier for approval. The above does
not apply where Buyer or the applicable
third party is required to disclose such
information by law or compelled by court
order to do so.
2.2 ----------------------------------------
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2.3 ----------------------------------------
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3.0 ----------------------------------------
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4.0 ----------------------------------------
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5.0 In the event of the termination of the
Agreement pursuant to Article 16.1 or
16.2 as a result of a default or breach
of this Agreement by Buyer, this Letter
Agreement shall become automatically
null and void.
6.0 The provisions of this Letter Agreement
are personal to Buyer and shall not be
assigned or otherwise disposed of by
Buyer except as part of an assignment of
the Agreement expressly permitted by
Article 20 of the Agreement.
Should there be any inconsistency between
this Letter Agreement and the Agreement with
respect to the subject matter covered by the
terms hereof, then this Letter Agreement
shall prevail.
Yours truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________
Date:_____________
Kerry B. Skeen
President and C.E.O.
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 005 to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement" between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of six
(6) Canadair Regional Jet Aircraft (the
"Aircraft")
Subject: Additional Customer Support
1.0 This letter constitutes an integral part of the
Agreement and evidences our further agreement with
the matters set forth below. All terms used
herein and in the Agreement and not defined
herein, shall have the same meaning as in the
Agreement.
2.0 Manuals on CD-ROM
2.1 Bombardier and Buyer are aware that
Bombardier is currently in the process of
investigating and bringing on-line CD-ROM
versions of various manuals. Bombardier
hereby commits that in the event that it is
able to successfully and cost-effectively
complete this program, it will provide Buyer
with CD-ROM versions of Buyer's technical
publications --------------------------------
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3.0 ---------------------------------------------
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4.0 --------------------------------------------------
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5.0 The provisions of this Letter Agreement are
personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer except as part of
an assignment of the Agreement expressly permitted
by Article 20 of the Agreement.
6.0 This Letter Agreement constitutes an integral part
of the Agreement and subject to the terms and
conditions contained therein.
7.0 In the event of the Termination of the Agreement,
this Letter Agreement shall become automatically
null and void.
Should there be any inconsistency between this Letter
Agreement and the Agreement with respect to the subject
matter covered by the terms hereof, then this Letter
Agreement shall prevail.
Yours very truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________
Date:_____________
Kerry B. Skeen
President & C.E.O.
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road,
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 006 to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement" between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of six (6)
Canadair Regional Jet Aircraft (the "Aircraft")
Subject: Spares Credit
1.0 This letter constitutes an integral part of the
Agreement and evidences our further agreement with
the matters set forth below. All terms used
herein and in the Agreement and not defined
herein, shall have the same meaning as in the
Agreement.
2.0 --------------------------------------------------
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3.0 The provisions of this Letter Agreement are
personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer except as part of
an assignment of the Agreement expressly permitted
in Article 20 of the Agreement.
4.0 This Letter Agreement constitutes an integral part
of the Agreement and subject to the terms and
conditions contained therein.
5.0 In the event of the Termination of the Agreement,
this Letter Agreement shall become automatically
null and void with respect to any undelivered
Aircraft.
Should there be any inconsistency between this Letter
Agreement and the Agreement with respect to the subject
matter covered by the terms hereof, then this Letter
Agreement shall prevail.
Yours very truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________
Date:_____________
Kerry B. Skeen
President & C.E.O.
http://www.aerospace.bombardier.com
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 007 to Purchase Agreement No. PA-0454
dated July 29, 1999 (the "Agreement" between Bombardier Inc.
("Bombardier") and Atlantic Coast Airlines ("Buyer")
relating to the purchase of three (3) Canadair Regional Jet
Aircraft (the "Aircraft")
Subject: Taxes, Duties And Licenses
1.0 This letter constitutes an integral part of the
Agreement and evidences our further agreement with the
matters set forth below. All terms used herein and in
the Agreement and not defined herein, shall have the
same meaning as in the Agreement.
2.0 The parties contemplate that at time of delivery, the
Aircraft will be sold to a United States company or
other USA entity (the "Lessor"), and directly exported
from Canada and subsequently leased to Buyer. --------
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4.0 -------------------------------------------------------
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5.0 The provisions of this Letter Agreement are personal to
Buyer and shall not be assigned or otherwise disposed
of by Buyer except as part of an assignment of the
Agreement expressly permitted by Article 30 of the
Agreement without the prior written consent of
Bombardier.
6.0 This Letter Agreement constitutes an integral part of
the Agreement and subject to the terms and conditions
contained therein.
7.0 In the event of the Termination of the Agreement, this
Letter Agreement shall become automatically null and
void.
Should there be any inconsistency between this Letter
Agreement and the Agreement with respect to the subject
matter covered by the terms hereof, then this Letter
Agreement shall prevail.
Yours very truly,
BOMBARDIER INC.
____________________________ Date:__________________________
Michel Bourgeois ___
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
____________________________ Date:__________________________
Kerry B. Skeen ___
President & C.E.O.
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 008 to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement" between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of six (6)
Canadair Regional Jet Aircraft (the "Aircraft")
Subject: Airworthiness Directives
1.0Intent
In consideration of Buyer entering into the above-
referenced Agreement, Bombardier states that it is its
intention to incorporate before delivery of the Aircraft
any Mandatory Modification Service Bulletins outstanding
on the Aircraft. --------------------------------------
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2.0Applicability
The provisions of this Letter Agreement will apply to
mandatory Airworthiness Directives ("AD"), and resulting
service bulletins, issued by the DOT and/or the FAA
pursuant to applicable regulations prior to the time of
delivery of any Aircraft ("Mandatory Modification
Service Bulletin").
3.0Conditions
For any Mandatory Modification Service Bulletin not
incorporated on the Delivery Date, as defined in Article
2.0 above, Bombardier shall, subject to the provisions
of Article 8.5 of the Agreement, -----------------------
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---------------------- as provided in Article 4 hereof.
4.0----------------------------------------------------
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5.0 This letter constitutes an integral part
of the Agreement and evidences our
further agreement with the matters set
forth below. All terms used herein and
in the Agreement and not defined herein,
shall have the same meaning as in the
Agreement.
6.0 The provisions of this Letter Agreement
are personal to Buyer and shall not be
assigned or otherwise disposed of by
Buyer except as part of an assignment of
the Agreement expressly permitted in
Article 20 of the Agreement.
7.0 In the event of the termination of the
Agreement, this Letter Agreement shall
become automatically null and void
unless this Agreement is terminated by
Buyer pursuant to Article 16.1 or 16.2
as a result of a default or breach of
this Agreement by Bombardier, in which
event the terms and conditions of this
Letter Agreement will continue to apply
to the Aircraft delivered prior to the
date of termination.
Should there be any inconsistency between
this Letter Agreement and the Agreement with
respect to the subject matter covered by the
terms hereof, then this Letter Agreement
shall prevail.
Yours very truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________
Date:_____________
Kerry B. Skeen
President & C.E.O.
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 009 to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement" between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of six (6)
Canadair Regional Jet Aircraft (the "Aircraft")
Subject: Reconciliation
1.0The parties recognize that in the course of the
administration of this Agreement, ----------------------
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4.0This letter constitutes an integral part of the
Agreement and evidences our further agreement with the
matters set forth below. All terms used herein and in
the Agreement and not defined herein, shall have the
same meaning as in the Agreement.
5.0The provisions of this Letter Agreement are personal to
Buyer and shall not be assigned or otherwise disposed of
by Buyer except as part of an assignment of the
Agreement (in whole not in part) expressly permitted
under Article 20 of the Agreement and otherwise such
consent shall not be unreasonably withheld.
6.0In the event of the Termination of the Agreement, this
Letter Agreement shall become automatically null and
void.
7.0Should there be any inconsistency between this Letter
Agreement and the Agreement with respect to the subject
matter covered by the terms hereof, then this Letter
Agreement shall prevail.
Yours very truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________
Date:_____________
Kerry B. Skeen
President & C.E.O.
July 29, 1999
Atlantic Coast Airlines
515A Shaw Road,
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 10 to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement") between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of six
(6) Canadair Regional Jet Aircraft (the
"Aircraft")
Subject: Spare Parts Price Catalogue
This letter constitutes an integral part of the
Agreement and evidences our further agreement with
the matters set forth below. All terms used herein
and in the Agreement and not defined herein, shall
have the same meaning as in the Agreement.
1.0 In consideration of Buyer having entered into the
above referenced Agreement, Bombardier hereby
confirms, ----------------------------------------
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2.0 In the event that during -------------------------
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3.0 In reference to Article 2 above, Bombardier and
Buyer shall mutually agree on the ----------------
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4.0 Except as provided for in Article 20.1 of the
Agreement, the provisions of this Letter Agreement
are personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer without the prior
written consent of Bombardier.
5.0 This Letter Agreement constitutes an integral part
of the Agreement and is subject to the terms and
conditions contained therein. To the extent of
any inconsistency or conflict between this Letter
Agreement and the Agreement, this Letter Agreement
shall prevail.
Yours truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
Atlantic Coast Airlines
________________________
Date:_____________
Kerry B. Skeen
President & C.E.O.
SCHEDULE 1
ECONOMIC ADJUSTMENT FORMULA IN RESPECT OF
Bombardier PARTS
The rate of published escalation applicable between
succeeding periods for which the Spare Parts Price
Catalogue is published to which reference is made in
Letter Agreement No. 017 will be calculated using the
following formula:
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July 29, 1999
Atlantic Coast Airlines
515A Shaw Road,
Dulles, Virginia,
U.S.A. 20166
Gentlemen,
Letter Agreement No. 011 to Purchase Agreement No. PA-
0454 dated July 29, 1999 (the "Agreement" between
Bombardier Inc. ("Bombardier") and Atlantic Coast
Airlines ("Buyer") relating to the purchase of six (6)
Canadair Regional Jet Aircraft (the "Aircraft")
Subject: Cargo Floorboards
Gentlemen:
This letter constitutes an integral part of the
Agreement and evidences our further agreement with the
matters set forth below. All terms used herein and in
the Agreement and not defined herein, shall have the
same meaning as in the Agreement.
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5. The provisions of this Letter Agreement are
personal to Buyer and shall not be assigned or
otherwise disposed of by Buyer except as part of an
assignment of the Agreement expressly permitted by
Article 20 of the Agreement.
6. This Letter Agreement constitutes an integral part
of the Agreement and subject to the terms and
conditions contained therein.
7. In the event of the Termination of the Agreement,
this Letter Agreement shall become automatically null
and void.
Should there be any inconsistency between this Letter
Agreement and the Agreement with respect to the subject
matter covered by the terms hereof, then this Letter
Agreement shall prevail.
Yours very truly,
BOMBARDIER INC.
________________________
Date:_____________
Michel Bourgeois
Vice President, Contracts
Acknowledged and Accepted
ATLANTIC COAST AIRLINES
________________________
Date:_____________
Kerry B. Skeen
President & C.E.O.
EXHIBIT 10.45(1)
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST.
FIRST AMENDMENT
TO THE AIRCRAFT PURCHASE AGREEMENT
BETWEEN
DORNIER LUFTFAHRT GMBH
AND
ATLANTIC COAST AIRLINES
Dornier Luftfahrt GmbH ("Seller") and Atlantic Coast
Airlines ("Purchaser"), have entered into an Aircraft Purchase
Agreement dated March 31, 1999 (the "Agreement"), concerning the
sale of certain Dornier 328-300 and 428 aircraft. The Capitalized
Terms used without definition in this First Amendment shall have
the meaning ascribed to them in the Agreement.
WHEREAS, the parties hereto wish to amend certain
provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises and
mutual covenants hereinafter contained, the parties hereto agree as
follows:
1. The Agreement is hereby amended by:
a. Definitions - ----------------------------
--------------------------------------------
b. Definitions - inserting the following new
definitions between "FAT" and "Insurance Items":
"Group A Aircraft - The Aircraft identified as
Group A Aircraft to be delivered to Purchaser
in accordance with the delivery schedule set
forth in Exhibit III."
"Group B Aircraft - The Aircraft identified as
Group B Aircraft to be delivered to Purchaser
in accordance with the delivery schedule set
forth in Exhibit III."
c. Article 1.1, replacing the words "fifty-
five (55)" with "eighty (80)".
d. Article 1.2, replacing (i) the words
"twenty-five (25)" in the first sentence with "forty
(40)", (ii) ------------------- in the second sentence
with--------- and (iii) the words -----------------------
- in the third sentence with ----------------------------
---------------------------------------------------------
------------------------
e. Article 2.1b, replacing the numbers "26-
55" in the second sentence with "41-80".
f. Article 2.2, replacing the date "February
2003" and the numbers "26-55" with "September 2002" and
"41-80", respectively.
g. Article 2.2a, replacing ------------------
------------------------------------------------------
with -----
h. Article 2.2c, replacing (i) the year
"2003" in the first sentence with "2002", (ii) the date
"December 31, 2001" in the second sentence with "July 31,
2001", and (iii) the date "June 2004" in the third
sentence with "January 2004".
i. Article 2.2, inserting the following at
the end of the article as Article 2.2e:
"e. -------------------------------------
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----------------
j. Article 2.3, replacing ---------------
with -----
k. Article 2.5, replacing the numbers "26-55"
with "41-80".
l. Article 4.1b, deleting the second sentence
in its entirety and replacing it with the following:
"The Initial Deposit of ----------, the
Additional Deposit of ------------- and the
deposit paid in connection with the first
amendment in the amount of ------------ will be
held by Seller for a total deposit of ---------
---- ("Deposit") representing a ----------
deposit with respect to each Aircraft."
m. Article 8.2, replacing the words "In the
event Purchaser elects to change the Aircraft
configuration or its selected Optional Equipment, the"
with "Purchaser shall provide Seller with its interior
selections for the Group A Aircraft by no later than
October 1, 1999, Group A paint scheme for the Group A
Aircraft by no later than October 31, 1999, and the
interior/exterior selections for the Group B Aircraft by
no later than May 31, 2000. Any".
n. Article 11.1a.(iii), adding the following
sentence at the end of the article:
"A delay of delivery of the 2002 428JETs, as
defined below, pursuant to Article 12.5 shall
also constitute an Excusable Delay."
o. Article 12, inserting the following at the
end of the article as Article 12.5:
"12.5 Notwithstanding the provisions of Article 12, any late
delivery penalties under Article 12 will not apply to the four (4)
428JET Aircraft scheduled for delivery during 2002 ("2002 428JETs")
until such time as Seller has reconfirmed the delivery date of the
2002 428JETs. Seller shall reconfirm the delivery dates ("428JET
Delivery Reconfirmation") for the 2002 428JETs no later than one
hundred twenty (120) days prior to the scheduled delivery date,
provided however, if Seller determines, prior to the dates required
for 428JET Delivery Reconfirmation, that it will be unable to
deliver said aircraft on the delivery dates set forth herein, then,
no later than the date by which Delivery Reconfirmation is due,
Seller shall notify Purchaser of a delay in delivery and provide
Purchaser with a new revised delivery schedule. The Parties will
work together to complete the delivery of the aircraft at the
earliest possible time, provided that Purchaser will not be
required to accept delivery on less than 120 days notice, or to
accept delivery of more than two Aircraft in any one month. A
delay in delivery of a 2002 428JET may be resolved by deferring
said delivery to a month to be mutually agreed, but no later than
November 2005. Any delay in delivery of a 2002 428JET pursuant to
this paragraph 12.5 shall be considered an Excusable Delay. ------
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p. Article 19.1, replacing ------------------
---------------------------------.
q. Article 19.2, replacing ------------------
with ----------------------------.
r. Article 20.1, replacing ------------------
--------- with --------------
s. Article 20.2 and 20.2a, second paragraph,
replacing ----------------with -----
t. Article 20.2i, replacing -----------------
-------- with ---------------
u. Article 20.3, second paragraph, inserting
the following at the end of the second sentence:
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v. Article 20.4, replacing-------------------
-------------------------------------- with -------------
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w. Article 20.9, inserting (i) the ----------
----------------------after -----------------------------
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x. Article 21.1, replacing the words "fifty-
five (55)" with "eighty-five (85)."
y. Article 21.9, replacing ------------------
--------- with -------------------
z. Article 21.11, replacing -----------------
-----------------------------------------with-----------
aa. Article 23, inserting -------------------
prior to ------------------------------------------------
-----------------
bb. Article 25.1, replacing the words "this
Agreement" in the first sentence with "the sale to
Purchaser of the Group B Aircraft."
cc. Article 25.2, deleting subparagraphs a, b,
c and d in their entirety and replacing with the
following subparagraphs:
"a. If Purchaser receives the United
Approval on or before April 30, 2000,
the Group B 328-300 Aircraft will be
delivered according to the Delivery
Schedule.
b. If Purchaser receives
United Approval after April 30, 2000,
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------------The remaining -----------
---328-300 Group B Aircraft will be
delivered as scheduled. Seller will
advise Purchaser of any rescheduling
decision within -----------------of
the United Approval receipt.
c. If Purchaser does not receive the
United Approval on or before --------
-----, the entire fifteen (15) 328-
300 Group B Aircraft scheduled in
Exhibit III may, at Seller's sole
option, be delayed by up to ---------
--------- from the date the United
Approval is received, unless Seller
and Purchaser agree on earlier
deliveries. Seller will advise
Purchaser of any rescheduling
decision within ---------------- of
the United Approval receipt.
Purchaser shall not be required to
accept an Aircraft delivery with less
than ---------------advance notice.
d. Any 328-300 Group B Aircraft Delivery
Schedule adjustments addressed above
will not cause the rescheduling of
428JET Aircraft deliveries under the
Group B Aircraft Delivery Schedule in
Exhibit III.
e. If any of the 328-300 Aircraft in
Group B are rescheduled beyond
February 2003, Purchaser may, at its
sole option, replace such 328-300
Aircraft with a firm order for 428JET
Aircraft. Purchaser shall advise
Seller, within -----------------after
receipt of Seller's notice to
Purchaser of the rescheduling, that
Purchaser has elected to replace 328-
300 Aircraft with a firm order for
428JET Aircraft. -------------------
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f. If Seller shall have the right to
reschedule any of the delivery
positions, as set forth in this
Article 25 upon receipt of the United
Approval, it shall not reschedule any
328-300 Aircraft that has not been
sold to a third party buyer prior to
Seller's --------------- notice to
Seller as required in Articles 25.b
and c. above."
dd. Article 25.3, (i) replacing the words
"twenty-five (25)" with "the" and (ii) inserting the
words "Group B Aircraft" after the numbers "328-300."
ee. Article 25.5, inserting the words --------
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ff. Article 28.1, replacing ------------------
--- with -----------
gg. Article 28.1c., replacing the number
"fifty-five (55)" with "eighty (80)".
hh. Article 28.2, replacing ------------------
--- with -----------
ii. Article 29.1, replacing ------------------
--------------- with ----------
jj. Article 29.2, subparagraphs a. and b.,
replacing ------------------- with ----------------------
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kk. Article 29.2c, replacing -----------------
---------------- with --------------------------------
ll. Article 29.3b, replacing -----------------
---with --------
mm. Article 35.12, (I) replacing the word
"events" with "event" and (ii) deleting the words "and
removal of the Condition Precedent set forth in Article
25", from the first paragraph.
nn. Exhibit III, Delivery Schedule, replacing
the exhibit in its entirety with Exhibit III, Delivery
Schedule attached hereto as Attachment 1.
oo. Exhibit IX, Clause IX.1.1(i), inserting
(i) "and at such time as the total number of Aircraft on
firm order (without condition for United Approval) is at
least 56, a second set of Job Instruction Cards" after
the word "Cards" and (ii) the following sentence after
the fourth sentence:
"At such time as the total number of Aircraft
on firm order (without condition for United
Approval) is at least --, Seller will ---------
---------- of Seller's Technical Publications
and Documentation to be delivered to Purchaser
in accordance with Annex A, except for those
Technical Publications and Documentation
identified in Annex A to be provided on a per-
Aircraft basis."
pp. Exhibit IX, Clause IX.1.4.d, replacing the
words "Upon Purchaser providing its first Notice of
Exercise, as that term is defined in Article 21.2c," with
"At such time as Aircraft number ---is delivered to
Purchaser."
qq. Exhibit IX, Clause IX.2.2g(iv), replacing
the third sentence in its entirety with the following two
sentences:
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rr. Exhibit IX, Clause IX.2.2g(iv), replacing
the last sentence in its entirety with the following:
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ss. Exhibit IX, Clause 2.6, replacing the
words "Not later than thirty (30) days after Purchaser's
receipt of the United Approval" with "By no later than
October 10, 1999."
tt. Exhibit IX, Clause IX.2.9 and IX.2.9b,
replacing the with -----
uu. Exhibit IX, inserting the following at the
end of Clause 2 as Clause 2.11:
"IX.2.11 -------------------------------------
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vv. Exhibit IX, Clause IX.3.5c, amending the
table by adding the following at the end of the table:
----------------------
ww. Exhibit IX, Clause IX.3.6, (i) replacing -
---------------------------with ------------- in the
first sentence of subparagraph a., (ii) replacing -------
-------------------" in subparagraph b. with ------------
------- and (iii) inserting a new subparagraph c. as
follows:
"c. -------------------------------------
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xx. Exhibit IX, Clause 4.a, inserting the
following sentence after the first sentence:
"The period of assignment will be extended
by ---------------for each Aircraft of
Aircraft numbers -----delivered to
Purchaser."
yy. Exhibit XIII, (i) replacing the number
"fifty-five (55)" with "eighty (80)" in the definitions
for "Eligible Aircraft" and "Guaranteed Amount", (ii)
replacing ------------------------------------- with ----
-----------------------------------, and (iii) deleting
the chart included with the definition for "Guaranteed
Reconciliation Period Amount" in its entirety and
replacing with the Guaranteed Reconciliation Period
Amount Chart attached hereto as Attachment 2.
2. Purchaser has paid to Seller, in connection
with the purchase of fifteen (15) Dornier 328-300 Aircraft and
ten (10) 428JET Aircraft as outlined in the Memorandum of
Understanding dated September 3, 1999, between the parties, a
cash deposit in the amount of ---------------------- for a
total deposit of ---------- ("MOU Deposit"). The MOU Deposit
will become non-refundable upon execution of this Amendment,
except as otherwise provided for in the Agreement. An
additional deposit of ------------ shall be paid to Seller
upon execution of this First Amendment ("Amendment Deposit").
Paragraph 1.k above amends the Agreement accordingly.
3. Purchaser will be permitted to execute Option
Aircraft during any such time that the Condition Precedent for
United Approval may not have been met.
4. Except as specifically amended above, the
Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
5. This First Amendment may be executed in any
number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which
taken together shall constitute but one and the same
instrument.
[NEXT PAGE IS SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have entered into
this First Amendment to the Aircraft Purchase Agreement effective
this 10th day of September 1999.
DORNIER LUFTFAHRT GMBH
BY:
TITLE:
ATLANTIC COAST AIRLINES
BY:
TITLE:
ATTACHMENT 1
EXHIBIT III
DELIVERY SCHEDULE
GROUP A
Number of 328-300
Aircraft/428JET Year
Aircraft
-- ---- -----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-------------------
-- ---- -----------------------------------
-----------------------------------
----------------
GROUP B
Number of 328-300
Aircraft/428JET Year
Aircraft
- ---- -----------------------------------
-----------------------------------
---------------------------
- --- ---- -----------------------------------
-----------------
- ---- ---- -----------------------------------
----------------------
- --- ---- -----------------------------------
-------------------
- --- ---- ---------------------------
- --- ---- -----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
----------------
ATTACHMENT 2
GUARANTEED RECONCILIATION PERIOD AMOUNT CHART
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 43,272
<SECURITIES> 65
<RECEIVABLES> 36,143
<ALLOWANCES> 0
<INVENTORY> 4,078
<CURRENT-ASSETS> 100,363
<PP&E> 111,819
<DEPRECIATION> 0
<TOTAL-ASSETS> 265,461
<CURRENT-LIABILITIES> 46,328
<BONDS> 0
0
0
<COMMON> 419
<OTHER-SE> 116,951
<TOTAL-LIABILITY-AND-EQUITY> 265,461
<SALES> 252,571
<TOTAL-REVENUES> 256,422
<CGS> 0
<TOTAL-COSTS> 217,713
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,905
<INCOME-PRETAX> 37,475
<INCOME-TAX> 14,293
<INCOME-CONTINUING> 37,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 888
<NET-INCOME> 22,294
<EPS-BASIC> 1.17
<EPS-DILUTED> 1.03
</TABLE>
