<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4, 1997
REGISTRATION NUMBER 333-37375
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MIDWAY AIRLINES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4512 36-3915637
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
</TABLE>
------------------------
300 WEST MORGAN STREET
SUITE 1200
DURHAM, NORTH CAROLINA 27701
(919) 956-4800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------
JONATHAN S. WALLER, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
MIDWAY AIRLINES CORPORATION
300 WEST MORGAN STREET, SUITE 1200
DURHAM, NORTH CAROLINA 27701
(919) 956-4800 (PHONE)
(919) 956-4801 (FAX)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
HOWARD WOLF, ESQ. JOEL S. KLAPERMAN, ESQ.
Fulbright & Jaworski L.L.P. Shearman & Sterling
1301 McKinney, Suite 5100 599 Lexington Avenue
Houston, Texas 77010-3095 New York, New York 10022
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- --------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- --------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Amendment No. 5 to the Registration Statement on Form S-1 (File No.
333-37375) (the "Registration Statement") is being filed solely for the purpose
of filing or refiling certain exhibits, and no changes or additions are being
made hereby to the prospectus (the "Prospectus") that forms a part of this
Registration Statement. Accordingly, the Prospectus has been omitted from this
filing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the Offering, all of which shall
be borne by the Company, are:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 21,467
NASD Filing Fee................................................... 6,500
Nasdaq National Market Listing Fee................................ 1,000
Legal Fees and Expenses........................................... 200,000
Accounting Fees and Expenses...................................... 350,000
Blue Sky Fees and Expenses (including legal fees)................. 25,000
Printing Expenses................................................. 200,000
Transfer Agent and Registrar Fees................................. 15,000
Miscellaneous..................................................... 31,033
---------
TOTAL......................................................... $ 850,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 145 of the GCL, the Company generally has the power to
indemnify its current and former directors, officers, employees and agents
against expenses and liabilities incurred by them in connection with any suit to
which they are, or threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
Company, and with respect to any criminal action, they had not reasonable cause
to believe their conduct was lawful. With respect to suits by or in the right of
the Company, however, indemnification is generally limited to attorneys' fees
and other expenses and is not available if such person is adjudged to be liable
to the Company unless the court determines that indemnification is appropriate.
The statute expressly provides that the power to indemnify authorized thereby is
not exclusive of any rights granted under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise. The Company also has the
power to purchase and maintain insurance for such persons.
The above discussion of Section 145 of the GCL is not intended to be
exhaustive and is qualified in its entirety by such statute.
Reference is made to the form of the Underwriting Agreement, filed as
Exhibit 1.1 hereto, which contains provisions for indemnification of the
Company, its directors, officers and any controlling persons by the Underwriters
against certain liabilities for information furnished by the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since September 30, 1994, the Company has sold unregistered securities in
the amounts, at the time and for the aggregate amounts of consideration listed
below. With respect to sales of preferred stock, all shares and amounts and per
share prices described below have been adjusted to reflect the conversion of
such shares into Common Stock immediately prior to the closing of the Offering
and a 682.9108392-to-1 stock split effected prior to the Offering. The
securities were sold to purchasers directly by the Company, and such sales did
not involve any underwriter. The Company considers these securities to have been
II-1
<PAGE>
offered and sold in transactions not involving a public offering and therefore,
to be exempted from registration under Section 4(2) of the Securities Act of
1933, as amended.
<TABLE>
<CAPTION>
AGGREGATE
AMOUNT OF
SECURITIES AGGREGATE
PURCHASER TYPE DATE ISSUED CONSIDERATION
- -------------------------------- ---------------------------- ------------------ ---------- -------------
<S> <C> <C> <C> <C>
Zell/Chilmark Fund L.P.......... Common Stock Warrant May 1995 3,912,750 $ 5,217,000(1)
Debt Group(2)................... Common Stock Warrants May 1995 587,250 $ 783,000(3)
Zell/Chilmark Fund L.P.......... Common Stock Warrant February 1996 1,500,000 $ 2,000,000(4)
Zell/Chilmark Fund L.P.......... Common Stock Warrant September 1996 750,000 $ 1,000,000(5)
Zell/Chilmark Fund L.P.......... Common Stock Warrant October 1996 750,000 $ 1,000,000(6)
AMR Corporation................. Common Stock Warrant February 1997 390,625 (7)
James H. Goodnight, Ph.D........ Senior Convertible Preferred
Stock February 1997 2,509,697 $ 10,096,143
John P. Sall.................... Senior Convertible Preferred
Stock February 1997 1,218,995 $ 4,903,841
Zell/Chilmark Fund L.P.......... Common Stock February 1997 1,740,056 $ 7,000,000
debis AirFinance B.V............ Common Stock February 1997 260,189 (7)
Wings Aircraft Finance, Inc..... Common Stock February 1997 130,435 (7)
</TABLE>
- ------------------------
(1) Consideration represents subordinated debt financing provided by
Zell/Chilmark to the Company. For each $1,000 of financing provided, the
Company issued to Zell/Chilmark a warrant to purchase 750 shares of Class C
Common Stock of the Company. This warrant was canceled on February 11, 1997.
(2) The Debt Group includes 17 different individuals or trusts and one
partnership.
(3) Consideration represents subordinated debt financing provided by the Debt
Group to the Company in the aggregate amount of $783,000. For each $1,000 of
financing provided, the Company issued to the members of the Debt Group a
warrant to purchase of 750 shares of Class C Common Stock of the Company.
These warrants were canceled on February 11, 1997.
(4) Consideration represents subordinated debt financing provided by
Zell/Chilmark to the Company. For each $1,000 of financing provided, the
Company issued to Zell/Chilmark a warrant to purchase 750 shares of Class C
Common Stock of the Company. This warrant was canceled on February 11, 1997.
(5) See note 4 above.
(6) See note 4 above.
(7) Consideration received included the conversion of certain short term
liabilities into long term debt and the reduction of certain recurring
expenses of the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1+ --Form of Underwriting Agreement.
3.1+ --Amended and Restated Certificate of Incorporation.
3.2+ --Amended and Restated By-laws.
4.1+ --Form of Common Stock Certificate.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
4.2+ --See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws of Midway defining the rights of the holders of Common Stock.
5.1+ --Opinion of Fulbright & Jaworski L.L.P.
10.1 --[Intentionally omitted]
10.2 --[Intentionally omitted]
10.3*+ --Aircraft Operating Lease Agreement No. AOLAF-111 dated as of November 11, 1993 between First Security
Bank of Utah, N.A. ("FSBU") and Midway, with amendments attached thereto.
10.4*+ --Aircraft Operating Lease Agreement No. AOLAF-112 dated as of November 11, 1993 between FSBU and
Midway, with amendments attached thereto.
10.5*+ --Aircraft Operating Lease Agreement No. AOLAF-113 dated as of November 11, 1993 between FSBU and
Midway, with amendments attached thereto.
10.6*+ --Aircraft Operating Lease Agreement No. AOLAF-114 dated as of November 11, 1993 between FSBU and
Midway, with amendments attached thereto.
10.7*+ --Aircraft Operating Lease Agreement No. AOLAF-115-A dated as of July 10, 1995 between Wings Aircraft
Finance, Inc. ("Wings") and Midway, with amendments attached thereto.
10.8*+ --Aircraft Operating Lease Agreement No. AOLAF-116-A dated as of July 10, 1995 between Wings and
Midway, with amendments attached thereto.
10.9*+ --Aircraft Operating Lease Agreement No. AOLAF-117-A dated as of July 10, 1995 between Wings and
Midway, with amendments attached thereto.
10.10*+ --Aircraft Operating Lease Agreement No. AOLAF-118-A dated as of July 10, 1995 between Wings and
Midway, with amendments attached thereto.
10.11*+ --Aircraft Operating Lease Agreement No. AOLAF-135 dated as of July 20, 1995 between FSBU and Midway,
with amendments attached thereto.
10.12*+ -- Aircraft Operating Lease Agreement No. AOLAF-524 dated as of August 1, 1995 between FSBU and Midway,
with amendments attached thereto.
10.13*+ --Aircraft Operating Lease Agreement No. AOLAF-525 dated as of October 15, 1995 between FSBU and
Midway, with amendments attached thereto.
10.14*+ --Aircraft Operating Lease Agreement No. AOLAF-136 dated as of December 15, 1995 between FSBU and
Midway, with amendments attached thereto.
10.15*+ --Aircraft Lease Agreement dated as of May 24, 1995 between Wilmington Trust Company and Midway.
10.16*+ --Airbus A-320-200 Purchase Agreement dated as of March 17, 1995 between AVSA. S.A.R.L. ("AVSA") and
Midway with Amendment Nos. 1 through 6 attached thereto.
Letter Agreement No. 2 Re: Purchase Incentives and Miscellaneous Matters, as amended
Letter Agreement No. 3 Re: Option Aircraft, as amended
Letter Agreement Re: Financial Matters with Amendment No. 4 attached thereto.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.17*+ --Agreement of Sublease dated as of January 18, 1995 between American Airlines, Inc. ("AA") and Midway,
with amendments attached thereto.
10.18* --AAdvantage-Registered Trademark- Participating Carrier Agreement dated as of January 18, 1995 between
AA and Midway, with amendments attached thereto.
10.19* --Secured Promissory Note dated February 7, 1997 from Midway to AA.
10.20* --February 10, 1997 Letter Agreement between American Airlines, Inc. and Midway with Exhibits A and C
through I attached thereto.
10.21*+ --Agreement Relating to Repair and Overhaul of Rolls Royce Engines dated as of May 10, 1996 between
Rolls Royce Aero Engine Services Limited and Midway.
10.22* --Purchase Agreement between Bombardier Inc. and Midway dated September 17, 1997 with Letter Agreements
001 through 011.
10.23*+ --Services and Licenses Agreement between Midway and Airline Management Services, Inc. dated as of
December 7, 1995 with Annex A attached thereto.
10.24*+ --Letter Agreement dated as of July 1, 1996 between Fokker Services, Inc. and Midway.
10.25*+ --Aircraft Maintenance Services Agreement dated August 27, 1997 between Time Air Inc. doing business as
Canadian Regional Airlines and Midway.
10.26 --Warrant to Purchase Shares of Common Stock of Midway Airlines Corporation dated February 11, 1997
issued by Midway in favor of AMR Corporation.
10.27+ --Stockholders Agreement dated as of February 11, 1997.
10.28*+ --General Terms of Sale between IAE International Aero Engines AG and Midway dated May 17, 1995 with
Side Letter Number 1 and Side Letter Number 2 attached thereto.
10.29* --Promissory Note dated February 11, 1997 made by Midway to debis AirFinance B.V.
10.30* --Promissory Note dated February 11, 1997 made by Midway to Daimler Benz Aerospace A.G.
10.31+ --Severance Agreement and Other Matters made as of February 11, 1997 between Robert R. Ferguson III and
Midway.
10.32+ --Employment Agreement dated as of July 15, 1996 between Steven Westberg and Midway, with amendments
attached thereto.
10.33+ --Employment Agreement dated as of July 15, 1996 between Jonathan S. Waller and Midway, with amendments
attached thereto.
10.34+ --Employment Agreement dated as of July 15, 1996 between Joanne Smith and Midway, with amendments
attached thereto.
10.35 [Intentionally Omitted.]
10.36+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Robert R. Ferguson III.
10.37+ --Agreement and Plan of Merger dated as of January 17, 1997 by and among Midway, GoodAero, Inc., James
H. Goodnight, Ph.D, John P. Sall and the Zell/Chilmark Fund L.P., with amendments attached thereto.
10.38*+ --Letter Agreement dated September 12, 1997 between GE Aircraft Engines and Midway.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.39 --Sublease dated June 30, 1995 between Peoples Security Life Insurance Company and Midway.
10.40*+ --Sublease Agreement dated May 1, 1995 between Page Avjet Corporation and Midway.
10.41*+ --AAirpass Agreement dated as of March 2, 1995 between American Airlines Inc. and Midway.
10.42*+ --Engine Lease Agreement dated September 11, 1997 between RRPF Engine Leasing Limited and Midway.
10.43+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Steven Westberg.
10.44+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Jonathan S. Waller.
10.45+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Joanne Smith.
10.46+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Thomas Duffy, Jr.
10.47+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of David Vance.
10.48*+ --Agreement, executed September and November 1997, between Rolls-Royce Canada Limitee and Midway.
11.1+ --Statement of Computation of per share earnings.
16.1+ --Letter from Arthur Andersen LLP regarding change in independent public accountants.
23.1+ --Consent of Ernst & Young LLP.
23.2+ --Consent of Arthur Andersen LLP.
23.3+ --Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
24.1+ --Powers of Attorney from certain members of the Board of Directors of the Company.
</TABLE>
- ------------------------
* Portions have been omitted pursuant to a request for confidential treatment.
The confidential portions have been separately filed with the Securities and
Exchange Commission.
+ Previously filed.
As permitted by Item 601(b)(4) of Regulation S-K, the Company has not filed
with this Registration Statement certain instruments defining the rights of
holders of long-term debt of the Company, if any, because the total amount of
securities authorized under any of such instruments does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis. The
Company agrees to furnish a copy of any such agreements to the Securities and
Exchange Commission upon request.
(b) Financial Statement Schedules:
[Not applicable]
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Company hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as a part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Midway Airlines
Corporation has duly caused this Amendment No. 4 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Durham, State of North Carolina, on December 3, 1997.
<TABLE>
<S> <C> <C>
MIDWAY AIRLINES CORPORATION
By: /s/ JONATHAN S. WALLER
-----------------------------------------
Jonathan S. Waller
SENIOR VICE PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
*
- ------------------------------
Robert R. Ferguson III Chairman December 3, 1997
of the
Board,
President
and
Chief
Executive
Officer
(Principal
Executive
Officer)
*
- ------------------------------
Steven Westberg Senior December 3, 1997
Vice
President
and
Chief
Financial
Officer
(Principal
Financial
and
Accounting
Officer)
*
- ------------------------------
W. Greyson Quarles, Jr. Director December 3, 1997
*
- ------------------------------
Howard Wolf Director December 3, 1997
*
- ------------------------------
Gregory J. Robitaille Director December 3, 1997
*/s/ JONATHAN S. WALLER
- ------------------------------
Jonathan S. Waller
ATTORNEY-IN-FACT
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1+ --Form of Underwriting Agreement.
3.1+ --Amended and Restated Certificate of Incorporation.
3.2+ --Amended and Restated By-laws.
4.1+ --Form of Common Stock Certificate.
4.2+ --See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws of Midway defining the rights of the holders of Common Stock.
5.1+ --Opinion of Fulbright & Jaworski L.L.P.
10.1 --[Intentionally omitted]
10.2 --[Intentionally omitted]
10.3*+ --Aircraft Operating Lease Agreement No. AOLAF-111 dated as of November 11, 1993 between First Security
Bank of Utah, N.A. ("FSBU") and Midway, with amendments attached thereto.
10.4*+ --Aircraft Operating Lease Agreement No. AOLAF-112 dated as of November 11, 1993 between FSBU and
Midway, with amendments attached thereto.
10.5*+ --Aircraft Operating Lease Agreement No. AOLAF-113 dated as of November 11, 1993 between FSBU and
Midway, with amendments attached thereto.
10.6*+ --Aircraft Operating Lease Agreement No. AOLAF-114 dated as of November 11, 1993 between FSBU and
Midway, with amendments attached thereto.
10.7*+ --Aircraft Operating Lease Agreement No. AOLAF-115-A dated as of July 10, 1995 between Wings Aircraft
Finance, Inc. ("Wings") and Midway, with amendments attached thereto.
10.8*+ --Aircraft Operating Lease Agreement No. AOLAF-116-A dated as of July 10, 1995 between Wings and
Midway, with amendments attached thereto.
10.9*+ --Aircraft Operating Lease Agreement No. AOLAF-117-A dated as of July 10, 1995 between Wings and
Midway, with amendments attached thereto.
10.10*+ --Aircraft Operating Lease Agreement No. AOLAF-118-A dated as of July 10, 1995 between Wings and
Midway, with amendments attached thereto.
10.11*+ --Aircraft Operating Lease Agreement No. AOLAF-135 dated as of July 20, 1995 between FSBU and Midway,
with amendments attached thereto.
10.12*+ -- Aircraft Operating Lease Agreement No. AOLAF-524 dated as of August 1, 1995 between FSBU and Midway,
with amendments attached thereto.
10.13*+ --Aircraft Operating Lease Agreement No. AOLAF-525 dated as of October 15, 1995 between FSBU and
Midway, with amendments attached thereto.
10.14*+ --Aircraft Operating Lease Agreement No. AOLAF-136 dated as of December 15, 1995 between FSBU and
Midway, with amendments attached thereto.
10.15*+ --Aircraft Lease Agreement dated as of May 24, 1995 between Wilmington Trust Company and Midway.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.16*+ --Airbus A-320-200 Purchase Agreement dated as of March 17, 1995 between AVSA. S.A.R.L. ("AVSA") and
Midway with Amendment Nos. 1 through 6 thereto.
Letter Agreement No. 2 Re: Purchase Incentives and Miscellaneous Matters, as amended
Letter Agreement No. 3 Re: Option Aircraft, as amended
Letter Agreement Re: Financial Matters with Amendment No. 4 thereto.
10.17*+ --Agreement of Sublease dated as of January 18, 1995 between American Airlines, Inc. ("AA") and Midway,
with amendments attached thereto.
10.18* --AAdvantage-Registered Trademark- Participating Carrier Agreement dated as of January 18, 1995 between
AA and Midway, with amendments attached thereto.
10.19* --Secured Promissory Note dated February 7, 1997 from Midway to AA.
10.20* --February 10, 1997 Letter Agreement between American Airlines, Inc. and Midway with Exhibits A and C
through I thereto.
10.21*+ --Agreement Relating to Repair and Overhaul of Rolls Royce Engines dated as of May 10, 1996 between
Rolls Royce Aero Engine Services Limited and Midway.
10.22* --Purchase Agreement between Bombardier Inc. and Midway dated September 17, 1997 with Letter Agreements
001 through 011.
10.23*+ --Services and Licenses Agreement between Midway and Airline Management Services, Inc. dated as of
December 7, 1995 with Annex A thereto.
10.24*+ --Letter Agreement dated as of July 1, 1996 between Fokker Services, Inc. and Midway.
10.25*+ --Aircraft Maintenance Services Agreement dated August 27, 1997 between Time Air Inc. doing business as
Canadian Regional Airlines and Midway.
10.26 --Warrant to Purchase Shares of Common Stock of Midway Airlines Corporation dated February 11, 1997
issued by Midway in favor of AMR Corporation.
10.27+ --Stockholders Agreement dated as of February 11, 1997.
10.28*+ --General Terms of Sale between IAE International Aero Engines AG and Midway dated May 17, 1995 with
Side Letter Number 1 and Side Letter Number 2 thereto.
10.29* --Promissory Note dated February 11, 1997 made by Midway to debis AirFinance B.V.
10.30* --Promissory Note dated February 11, 1997 made by Midway to Daimler Benz Aerospace A.G.
10.31+ --Severance Agreement and Other Matters made as of February 11, 1997 between Robert R. Ferguson III and
Midway.
10.32+ --Employment Agreement dated as of July 15, 1996 between Steven Westberg and Midway, with amendments
attached thereto.
10.33+ --Employment Agreement dated as of July 15, 1996 between Jonathan S. Waller and Midway, with amendments
attached thereto.
10.34+ --Employment Agreement dated as of July 15, 1996 between Joanne Smith and Midway, with amendments
attached thereto.
10.35 [Intentionally Omitted.]
10.36+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Robert R. Ferguson III.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.37+ --Agreement and Plan of Merger dated as of January 17, 1997 by and among Midway, GoodAero, Inc., James
H. Goodnight, Ph.D, John P. Sall and the Zell/Chilmark Fund L.P., with amendments attached thereto.
10.38*+ --Letter Agreement dated September 12, 1997 between GE Aircraft Engines and Midway.
10.39 --Sublease dated June 30, 1995 between Peoples Security Life Insurance Company and Midway.
10.40*+ --Sublease Agreement dated May 1, 1995 between Page Avjet Corporation and Midway.
10.41*+ --AAirpass Agreement dated as of March 2, 1995 between American Airlines Inc. and Midway.
10.42*+ --Engine Lease Agreement dated September 11, 1997 between RRPF Engine Leasing Limited and Midway.
10.43+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Steven Westberg.
10.44+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Jonathan S. Waller.
10.45+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Joanne Smith.
10.46+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of Thomas Duffy, Jr.
10.47+ --Option to Purchase Shares of Common Stock of Midway Airlines Corporation dated as of February 11,
1997 issued by Midway in favor of David Vance.
10.48*+ --Agreement, executed September and November 1997, between Rolls-Royce Canada Limitee and Midway.
11.1+ --Statement of Computation of per share earnings.
16.1+ --Letter from Arthur Andersen LLP regarding change in independent public accountants.
23.1+ --Consent of Ernst & Young LLP.
23.2+ --Consent of Arthur Andersen LLP.
23.3+ --Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
24.1+ --Powers of Attorney from certain members of the Board of Directors of the Company.
</TABLE>
- ------------------------
* Portions have been omitted pursuant to a request for confidential treatment.
The confidential portions have been separately filed with the Securities and
Exchange Commission.
+ Previously filed.
As permitted by Item 601(b)(4) of Regulation S-K, the Company has not filed
with this Registration Statement certain instruments defining the rights of
holders of long-term debt of the Company, if any, because the total amount of
securities authorized under any of such instruments does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis. The
Company agrees to furnish a copy of any such agreements to the Securities and
Exchange Commission upon request.
(b) Financial Statement Schedules:
[Not applicable]
<PAGE>
EXHIBIT 10.18
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF
THIS EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND
ARE DENOTED BY {***}. THE CONFIDENTIAL PORTIONS HAVE BEEN
SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
AADVANTAGE(1) PARTICIPATING
CARRIER AGREEMENT
This AAdvantage(1) Participating Carrier Agreement ("Agreement"), dated as
of the 18th day of January, 1995 is made by and between American Airlines, Inc.,
a Delaware corporation having its principal place of business at 4333 Amon
Carter Boulevard, Fort Worth, Texas 76155 ("American"), and Midway Airlines
Corporation, a Delaware corporation, having its principal place of business at
5713 S. Central Avenue, Chicago, Illinois 60638 ("Carrier").
WHEREAS, American has developed a promotional program hereinafter known as
the "AAdvantage Program" (as defined below);
WHEREAS, Carrier desires to participate in American's AAdvantage Program
to allow "Members" (as defined below) to earn "AAdvantage Miles" (as defined
below) for travel on Carrier and to provide "Award Travel" (as defined below) to
Members; and
WHEREAS, contemporaneously herewith, Carrier and American have entered
into an Agreement of Sublease regarding certain gates at Raleigh-Durham Airport;
NOW, THEREFORE, in consideration of the mutual covenants and promises in
this Agreement, American and Carrier hereby agree as follows:
Section 1. Definitions
For all purposes of this Agreement, the following capitalized terms shall
have the following meanings:
"AAdvantage Account" means the record maintained by American of a
Member's AAdvantage Program activity, including, without limitation, the accrual
and redemption of AAdvantage Miles by such Member.
"AAdvantage Awards" means the awards or benefits (established by American
from time to time) which Members can receive under the AAdvantage Program in
exchange for the redemption of accrued AAdvantage Miles, and if applicable,
other consideration, which awards includes, among other items, Award Travel.
"AAdvantage Gold and Platinum Member Guides" means the publications
entitled, respectively, "AAvantage Gold(R) Member Guide" and "AAdvantage
Platinum(R) Member Guide," or any successor publications thereto, which set
forth the particular AAdvantage Program Rules applicable to Top Tier Members, as
from time to time modified and issued by American, at its discretion.
- --------------
1 AAdvantage is a registered trademark of American Airlines, Inc.
1 CONFIDENTIAL
<PAGE>
"AAdvantage Miles" means the points or "miles" (including bonus points or
"miles") earned by Members pursuant to the AAdvantage Program Rules for (i)
travel on American, (ii) travel on, and/or the purchase of goods or services
from, AAdvantage Participants, or (iii) any other reason authorized by American.
"AAdvantage Participant" means any Person which (i) provides goods or
services to Members in exchange for AAdvantage Miles, or (ii) in connection with
the sale of goods or services by such Person to a Member, offers AAdvantage
Miles to such Member, in each instance pursuant to the AAdvantage Program Rules
and the agreement between American and such Person regarding the AAdvantage
Program.
"AAdvantage Program" means the frequent traveler program established and
maintained by American, as such program may from time to time be changed or
modified, pursuant to which Members (i) receive AAdvantage Miles for travel on
American, for certain transactions with an AAdvantage Participant, or for any
other reason authorized by American, and (ii) may exchange accrued AAdvantage
Miles for AAdvantage Awards.
"AAdvantage Program Rules" means the rules, regulations, terms and
conditions established or modified, from time to time, by American, in its sole
judgment and discretion, which shall govern the AAdvantage Program.
"AAdvantage Summary" means the summary Of AAdvantage Program activity
sent to Members from time to time, at intervals determined by American.
"Accrual Miles" means the AAdvantage Miles accrued by a Member for Revenue
Travel on a Carrier Flight, consisting of the AAdvantage Miles calculated as
described in Section 2.a. below on the basis of Actual Miles flown, together
with, if applicable, any Class of Service Bonus Miles, any AAdvantage Miles
earned under the Minimum Mileage Guarantee, or any Promotional Bonus Miles, all
as awarded in accordance with this Agreement and the AAdvantage Program Rules.
"Actual Miles" means the United States Department of Transportation
approved non-stop mileage between origination and destination cities of each
Carrier Flight.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling or controlled by or under common control with such
Person. For purposes of this definition, "control" (including, without
limitation "controlled by" and "under common control with") shall mean the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether through the ownership of voting
securities or by contract or otherwise; provided, however, that, notwithstanding
the foregoing, in the case of Carrier, (i) the above definition of "Affiliate"
shall apply for the purposes of Section 6 and only Section 6 of this Agreement,
and (ii) an "Affiliate" of Carrier for all other purposes of this Agreement
shall be any Person controlled by Carrier.
"Agreement" means this AAdvantage Participating Carrier Agreement, as it
may, from time to time, be amended or modified in writing in accordance
herewith.
"American" has the meaning assigned to such term in the preamble to this
Agreement.
2 CONFIDENTIAL
<PAGE>
"Applicable Law" means all applicable laws of any jurisdiction,
including, without limitation, securities laws, tax laws, tariff and trade laws,
ordinances, judgments, decrees, injunctions, writs and orders or like actions of
any Competent Authority and the rules, regulations, orders, interpretations,
licenses and permits of any Competent Authority.
"Award Certificate" means the document issued to a Member by American,
that entities such Member to an Award Ticket or other benefits obtained by such
Member in accordance with this Agreement and the AAdvantage Program Rules.
"Award Document" means, with respect to any request by a Member for Award
Travel, either (i) an Award Certificate, or (ii) an Award Ticket which is not
issued from an Award Certificate tendered by a Member, but may be issued from a
pro-forma Award Certificate.
"Award Flight" means (i) any on-line, regularly scheduled, passenger air
travel service operated by Carrier under the "JI" designator code between the
destinations specified on Attachment B, as amended from time to time, and (ii)
each Codeshare Flight specified on Attachment B, if any.
"Award Ticket" means the non-endorsable, non-reroutable ticket issued to
a Member, either directly or in exchange for an Award Certificate, by American
or American's authorized agents, which entities such Member to Award Travel.
"Award Travel" means the roundtrip passenger air transportation received
or obtained by a Member on Award Flights in exchange for the redemption of a
specified number of AAdvantage Miles (and, if applicable, other consideration),
pursuant to this Agreement and the AAdvantage Program Rules, which travel shall
be subject to the Blackout Dates and to other terms and conditions set forth on
Attachment B, as amended from time to time.
"Blackout Dates" shall have the meaning set forth in Section 3.d. below.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Fort Worth, Texas are required or authorized by law,
regulation or executive order to close.
"Carrier" has the meaning assigned to such term in the preamble to this
Agreement.
"Carrier Flight" means (i) any on-line, regularly scheduled, passenger
air travel service operated by Carrier under the "JI" designator code on any one
of the 0 & D city pairs specified in Attachment A, as amended from time to time,
and (ii) any Codeshare Flight specified on Attachment A, if any.
"Carrier Report" means the report to be delivered to American by Carrier
pursuant to Section 5.a., which report shall be substantially in the form of,
and shall have the information specified in and requested by, the Data Flow and
Input/Output Specifications attached hereto as Attachment D.
3 CONFIDENTIAL
<PAGE>
"Class of Service Bonus Miles" means Accrual Miles in excess of Actual
Miles flown accrued by a Member for Revenue Travel in First Class (if available)
on a Carrier Flight which are equal in number to the product of the Actual Miles
flown on such flight multiplied by the applicable percentage specified in
Section 2.a. hereof; Class of Service Bonus Miles will not be awarded if Accrual
Miles are awarded pursuant to the Minimum Mileage Guarantee.
"Codeshare Flights" means flights operated by third party air carriers
providing regularly scheduled, commercial passenger air transportation services
and marketed under Carrier's "JI" designator code.
"Competent Authority" means any national, federal, state, county, local
or municipal government body, bureau, commission, board, board of arbitration,
instrumentality, authority, agency, court, department, inspectorate, minister,
ministry, official or public or statutory person (whether autonomous or not)
having jurisdiction over this Agreement or any of the parties to this Agreement.
"Effective Date" means 00:01 Coordinated Universal Standard Time (UTC) on
the later to occur of (1) March 2, 1995, or (ii) the date which is the
"Commencement Date" under the RDU Sublease.
"Expiration Date" means 23:59 Coordinated Universal Standard Time (UTC)
on March 1, 2000, unless extended in accordance with the terms of this
Agreement.
"First Class" means a class of service higher and better than Coach Class
on an aircraft which offers two distinct classes of service, regardless of the
actual name Carrier may assign to such higher class of service.
"Material Adverse Effect" means, with respect to either Carrier or
American, a material adverse effect on (i) the business, assets, operations,
performance, properties, condition or prospects (financial or otherwise, taken
as a whole) of the party, or (ii) the ability of such party to perform its
obligations under this Agreement.
"Member" means, as of any date, any individual who is a member in good
standing of the AAdvantage Program.
"Minimum Mileage Guarantee" means the number of Accrual Miles guaranteed
to be earned by Members on a short haul Carrier Flight which shall be five
hundred (500) Accrual Miles and shall be earned as follows and as otherwise set
forth in Section 2.a.
below:
Actual Miles and Class
Minimum of Service Bonus Miles (if any)
Mileage Guarantee for Carrier Flight
----------------- -------------------------------
500 1-499
"0 & D" when used in the context of city pairs means origination and
destination.
"Original 0 & D City Pair" shall have the meaning described in Section
11.k.
4 CONFIDENTIAL
<PAGE>
"Paid Upgrade Sticker" means an Upgrade Sticker for which a Member has
paid consideration, and which complies with such other requirements as American
may provide to Carrier at the time Carrier introduces a First Class service.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any group or political subdivision thereof.
"Promotional Bonus Miles" means AAdvantage Miles in excess of Actual
Miles, Class of Service Bonus Miles (if any), and Accrual Miles earned under the
Minimum Mileage Guarantee, accrued by a Member pursuant to a special promotion
offered by Carrier and approved by American pursuant to Section 2.b. hereof.
"RDU Sublease" means that certain Agreement of Sublease, dated as of
January 18, 1995, by and between American and Carrier.
"Redeemed Miles" means AAdvantage Miles redeemed under the AAdvantage
Program by Members in exchange for an Award Certificate or Award Ticket, in each
case for Award Travel.
"Revenue Travel" means all travel on a Carrier Flight made by Members for
which monetary payment is made as the sole and complete form of consideration
and which otherwise complies with the terms and conditions set forth in
Attachment A.
"Top Tier Members" means, as of any date, any Member who is enrolled in
American's AAdvantage Gold(R) or AAdvantage Platinum(R) recognition programs for
Members who have achieved certain AAdvantage Mile accrual levels within a
specified period of time, as such requirements may, from time to time, be
determined and modified by American.
"Upgrade Sticker" means a sticker (i) issued by American to Members, on
either a complimentary basis or for consideration, which complies with such
other requirements as American may provide to Carrier at the time Carrier
introduces a First Class service, and (ii) which sticker may be exchanged by a
Member at the time of check-in for a reserved or instantaneous (depending on the
sticker) one-class class of service upgrade from Coach Class on, among other
flights designated by American, any Carrier Right with more than one class of
service, or any two or more such Carrier Flights to be flown consecutively under
a single flight coupon. Upgrade Stickers are further subject to the AAdvantage
Program Rules, and American may discontinue the use of Upgrade Stickers by
Members at any time at its discretion.
"US AAdvantage Summary" means the AAdvantage Summary sent to Members with
mailing addresses in the United States, Canada, Mexico and the Caribbean (and
such other countries as American may determine to include from time to time, at
its discretion).
"$" or "$U.S." means United States Dollars. Unless otherwise specifically
indicated, all such references herein shall refer to United States Dollars.
5 CONFIDENTIAL
<PAGE>
Section 2. AAdvantage Mileage Accrual For Travel on Carrier
a. Accrual Miles. Provided that (i) accumulation of Accrual Miles is
otherwise permitted by Applicable Law, and (ii) the Member has not elected to
accrue credits in any other frequent flyer or travel program for the travel,
then, subject to the terms and conditions of this Agreement (including, without
limitation, the additional criteria specified in Attachment A), on and after the
Effective Date and continuing until this Agreement terminates or expires,
American will award each Member Accrual Miles for Revenue Travel of such Member
on a Carrier Flight, as follows:
Class of Service Accrual Miles Credited
Coach Class {***} of Actual Miles
provided, however, that the total Accrual Miles credited for Coach Class
Revenue Travel shall in no event be less than the number of Accrual Miles to
be earned under the Minimum Mileage Guarantee. In addition, if Carrier
introduces a First Class service during the term of this Agreement, American
will award a bonus of {***} more Accrual Miles for Revenue Travel in such
class of service for a total of {***} of Actual Miles under criteria to be
mutually agreed between the parties and to be specified in Attachment A;
provided, however, that the total Actual Miles credited for First Class
Revenue Travel (i.e. the sum of the Actual Miles and Class of Service Bonus
Miles (if any)) shall in no event be less than the number of Accrual Miles to
be earned under the Minimum Mileage Guarantee.
b. Promotional Bonus Miles. Carrier may, from time to time, offer
Promotional Bonus Miles to Members for Revenue Travel on Carrier Flights with
the prior written consent of American.
c. Selection of Program; No Changes. On any particular Carrier Flight,
Carrier passengers can designate only one frequent flyer program for mileage.
Once the Carrier Flight departs, American will not allow a Member who has
elected to accrue mileage in the AAdvantage Program to transfer Accrual Miles to
another frequent flyer program in which American or Carrier participates.
Section 3. AAdvantage Awards For Travel an Carrier
a. Award Travel. Subject to the terms and conditions of this Agreement
(including, without limitation, the additional criteria specified in Attachment
B), on and after January 24, 1995, American may issue Award Certificates and/or
Award Tickets for Award Travel on and after the Effective Date, and subject to
the Blackout Dates, in exchange for a specified number of AAdvantage Miles or to
reaccommodate Members booked for travel on an award under the AAdvantage Program
between destinations listed on Attachment B. All Award Certificates are
non-transferable after issuance pursuant to the terms and conditions of the
AAdvantage Program and are valid for use only as specified in the AAdvantage
Program Rules which, as of the date hereof, provide for use only by (i) the
Member; (ii) the individual whose name is specified on such Award Certificate;
(iii) a family member with the same surname as, or a spouse with a different
surname than, the individual identified in (i) or (ii); or (iv) if and only if
an issued Award Certificate is personally presented to an American ticket
6 CONFIDENTIAL
<PAGE>
counter or city ticket office by the claiming Member, a passenger with a
different surname who is designated by the Member. Award Tickets are
non-transferable after issuance. As provided in the current AAdvantage Program
Rules, a Member may have Award Certificates or Award Tickets issued in the name
of another individual, provided that the Member does not sell, barter or
otherwise transfer (in each case, as determined by American) the Award
Certificates or Award Tickets for consideration.
b. Award Reservations. All reservations for Award Travel shall be made by
American, or American's authorized agents, via SABRES(R) Direct Access or any
other reasonable method designated by American.
c. Award Seat Availability.
i. Carrier will make available for Award Travel {***} Coach
Class seats on each Award Flight. Carrier will reserve and maintain the
availability of such seats solely for Award Travel on each Award Flight
until the later of (A) {***} days prior to departure of such flight or
(B) such time as the Coach Class booked load factor for such flight
exceeds {***}; at the later to occur of the events specified in clauses
(A) or (B) of this Subsection, any so reserved which have not been booked
for Award Travel will then become available for other Carrier passengers.
ii. From time to time and upon either party's request, Carrier and
American will, if mutually agreed, specify alternative arrangements
whereby Carrier will provide, for certain 0 & D city pairs or time
periods, more or fewer seats than the number of seats specified in
Subsection 3.c.i above for particular Award Flights.
iii. In the event that a seat for Award Travel specified in
Subsection 3.c.i. above is not available for the specific date and
destination requested by a Member, Carrier will accommodate the Member for
the requested travel within the period of fifteen (15) days before or
fifteen (15) days after the date originally requested. In the event no
such seats are available during such thirty-one (31) day period, Carrier
will accommodate such Member's request on the first Award Flight on or
after the date originally requested on which the desired destination is
available from non-capacity controlled seat inventory, excluding flights
on Blackout Dates.
iv. If Carrier introduces a First Class service during the term of
this Agreement, then Carrier will also make available Award Travel
pursuant to this Agreement certain First Class seats as mutually agreed
upon by Carrier and American.
d. Blackout Dates. Award Travel will not be permitted during the blackout
dates set forth in Attachment C and as established for subsequent periods
pursuant to this Section 3.d. (the "Blackout Dates"). The Blackout Dates set
forth in Attachment C are, and the Blackout Dates for calendar 1997 and
thereafter shall be, the blackout dates established for the AAdvantage Program
PlanAAhead(R) Awards; provided, however, if American changes the blackout dates
for the AAdvantage Program PlanAAhead Awards at any time during the term of this
Agreement, Carrier agrees that the Blackout Dates under this Agreement will be
changed to correspond with those of the AAdvantage Program PlanAAhead Awards,
and
7 CONFIDENTIAL
<PAGE>
Attachment C will be amended to reflect all such changes without further action
on the part of either party. For calendar 1997 and thereafter, American shall
inform Carrier of time dates which shall be the Blackout Dates for the purposes
of this Agreement no later than fifteen (15) months prior to January 1 of the
calendar year to which the dates apply. In addition, Carrier and American may,
from time to time, mutually agree on additional blackout dates for certain time
periods on specified 0 & D city pairs. Notwithstanding the foregoing, Carrier,
in its own discretion, may allow Award Travel on any Blackout Date.
e. Award Certificates and Award Tickets. Unless otherwise mutually agreed
upon by American and Carrier, and regardless of any termination or expiration of
this Agreement, (i) all Award Certificates issued by American in accordance with
the terms of this Agreement shall be valid and shall be honored by American and
Carrier, in accordance with the terms of the Award Certificate, for a period of
one (1) year from the date of issuance, and (ii) all Award Tickets issued in
accordance with the terms of this Agreement shall be valid and shall be honored
by Carrier for a period of one (1) year from the date of issuance. In the event
that Carrier is unable to honor any valid Award Ticket on a flight operated by
Carrier for any reason, Carrier will accommodate Members holding such ticket on
a third party air carrier at Carrier's expense. The provisions of this Section
3e. shall survive the termination or expiration of this Agreement.
f. Non-Discrimination. Carrier shall offer all Members when traveling on
Award Travel the same rights and privileges afforded to revenue passengers of
Carrier traveling in the same class of service. Members shall have at least an
equal right to book capacity controlled inventory on Carrier as do members of
any other program (whether a frequent traveler program of Carrier or another
carrier, or any other program or arrangement) in which Carrier may participate
in the future; and the Blackout Dates under this Agreement shall be no more
restrictive for Members utilizing Award Travel than for such other members.
g. OSI Codes. Consistent with current practice in all reservations for
Award Travel made by American, American will make reasonable efforts to append
the following OSI codes to all Award Travel passenger reservation records:
Free Ticket OSIJIAAAD
American will make commercially reasonable efforts to provide these instructions
to American's authorized agents, but will not be responsible for the omission of
such codes by its agents.
h. Upgrade Stickers
i. If Carrier introduces a First Class service during the term of
this Agreement, and for as long as American permits Members to use Upgrade
Stickers, Carrier will accept all Upgrade Stickers and upgrade the Member
tendering such Upgrade Sticker by one class of service for Carrier Flights
with First Class service, if space is available, pursuant to the
procedures described in Subsection 3.h.ii below; provided, however, that
for the purposes of this Agreement, Accrual Miles for Revenue Travel made
in conjunction with an Upgrade Sticker shall be awarded based only on the
class of service paid for. Carrier will not charge Members for the use of
Upgrade Stickers.
8 CONFIDENTIAL
<PAGE>
Carrier will permit American (upon American's providing to Carrier at
least two Business Days' prior written notice) to inspect Carrier's
relevant books and records to verify the numbers and types of Upgrade
Stickers honored by Carrier and the amount owing by American to Carrier
therefor.
ii. If Carrier introduces a First Class service during the term of
this Agreement, Carrier shall accept Upgrade Stickers, in accordance with
the provisions of applicable Upgrade Sticker booklets, the terms and
conditions set forth in the AAdvantage Gold and Platinum Member Guides and
other applicable AAdvantage Program Rules, and such other procedural
guidelines as shall be mutually agreed upon by Carrier and American at the
time Carrier introduces a First Class service.
Section 4. Program Administration
a. Check-in Procedures. To assure minimum inconvenience to Members,
Carrier will establish and maintain procedures whereby Members need only provide
a valid AAdvantage Account number to a reservation agent or to a ticket agent at
check-in for the Carrier Flight to earn Accrual Miles. Carrier will not require
Members to carry or fill out coupons, stickers, or other documentation, or
otherwise employ inconvenient or cumbersome procedures, in order for Members to
receive Accrual Miles.
b. Membership In AAdvantage Program. Members will be enrolled in the
AAdvantage Program in accordance with American's standard procedures, as it
currently exists or as modified from time to time, at the time of Revenue Travel
on the Carrier Flight. No Member will accumulate Accrual Miles for Revenue
Travel until an AAdvantage Account number has been assigned by American.
c. Administration By American. Subject to the terms and conditions of
this Agreement, administration of the AAdvantage Program shall be performed by
American, and all AAdvantage Program Rules shall apply to Carrier's
participation in the AAdvantage Program. American shall issue all Award
Certificates, Award Tickets, AAdvantage Summaries and AAdvantage Program
newsletters in accordance with its procedures (as now existing or which American
may, in its sole discretion, modify from time to time in the future) and at its
sole expense. Inquiries or complaints addressed to Carrier regarding the
AAdvantage Program, Carrier's participation in the AAdvantage Program, and
record keeping in connection therewith shall be referred by Carrier to
American's AAdvantage Customer Service Department which shall be responsible for
resolving such complaints. Inquiries or complaints addressed to American
regarding specific travel in progress or completed on Carrier on an Award Ticket
shall be referred to Carrier which shall be responsible for responding to either
American or the Member regarding such complaints. Inquiries or complaints
addressed to American or Carrier regarding specific travel scheduled on Carrier
on an Award Ticket will be responded to through mutual cooperation of Carrier
and American. Unless specifically agreed to by American, Carrier shall not use
its own records to respond directly to Members' general inquiries regarding the
AAdvantage Program.
d. Carrier Customer Service. At its sole expense, Carrier will designate
customer service individuals in Chicago, Illinois, and Raleigh, North Carolina,
to be available during normal business hours on normal business days in each
city, to assist American's
9 CONFIDENTIAL
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AAdvantage Customer Service and Reservation Sales Departments in resolving
Member complaints. For the purposes of this Section 4.d. "normal business days"
in any city shall mean any day other than a Saturday, Sunday, or other day on
which banking institutions in such city are required by law, regulation,
executive order, or common custom to be closed. Such designated customer service
group will be staffed and supported by Carrier so that, in American's opinion,
American will be able to effectively address Members' complaints relating to
Carrier, especially concerning Award Travel. With respect to any customer
dispute, American shall not have authority to make on behalf of Carrier any
monetary commitment or other commitment which would require any action by
Carrier, or to compromise or some any dispute involving Carrier without the
prior consent of Carrier in each instance; provided however, that such consent
shall not be unreasonably withheld or delayed and Carrier shall cooperate with
American to resolve any such dispute.
e. Accrual Miles Credit. Carrier will be responsible for documenting
qualifying travel and incorporating that information into the Carrier Report to
be furnished by Carrier to American pursuant to this Agreement. Carrier
understands and agrees that American will rely on the accuracy of the Carrier
Reports submitted by Carrier to invoice Carrier and to post Accrual Miles credit
to a Members AAdvantage Account, subject to any adjustments provided for in the
balance of this paragraph and in Section 5 below. In addition, American shall
have the right to credit Accrual Miles to a Member's AAdvantage Account for
Revenue Travel on a Carrier Flight for a period of twelve (12) months following
the conclusion of such flight which credit shall be accorded as follows: (i) if
a Member with a valid AAdvantage Account number at the time of Revenue Travel on
a Carrier Flight who has not received Accrual Miles for such travel applies to
American within twelve (12) months after the conclusion of the flight and
submits documentation acceptable to American, and (ii) if American, in its sole
judgment, finds the documentation submitted is acceptable, American will credit
the Member's AAdvantage Account with the Accrual Miles corresponding to such
flight American will then bill Carrier for such Accrual Miles credited. Claims
for Accrual Miles credit on flights operated by Carrier which are not between an
O & D city pair listed on Attachment A or do not comply with the other
requirements specified on Attachment A will be rejected by American's AAdvantage
Customer Service Department and reported back to either Carrier or the Member,
whichever initiated the claim or request, that the travel is not eligible to
receive Accrual Miles. American and Carrier agree to cooperate, and will
establish procedures, to ensure that Members are not claiming Accrual Miles in
more than one frequent flyer program or travel program, whether operated by
American or Carrier, or in which American or Carrier now participates or may in
the future participate.
f. Transfer or Combining Mileage. Mileage accrued in a Members AAdvantage
Account at any time shall not be transferred to such individual's account under
Carrier's own frequent flyer program nor shall mileage from an individual's
account in Carrier's own frequent flyer program be combined with AAdvantage
Miles from his or her AAdvantage Account under any circumstance.
g. Ticketing. Pursuant to ticketing instructions issued by American and
approved in advance by Carrier, American or American's duly appointed and
authorized agents will ticket Award Travel on American's ticket stock in
accordance with American's ticketing rules.
10 CONFIDENTIAL
<PAGE>
h. Changes to Program. Except for matters specifically provided for in
this Agreement, American has the absolute right in its sole judgment and
discretion to determine, establish, and/or change the AAdvantage Program and the
AAdvantage Program Rules, at any time and from time to time, without any
liability, compensation or additional obligation to Carrier. This means that
American may in its sole discretion initiate changes to the AAdvantage Program,
including, but not limited to, changes to the rules governing: (i) AAdvantage
Participant affiliations, (ii) the earning of AAdvantage Miles, (iii) the number
of AAdvantage Miles necessary to qualify for, and the rules for use of,
AAdvantage Awards, Upgrade Stickers, and any special AAdvantage privileges, (iv)
the continued availability of AAdvantage Awards, Upgrade Stickers, and any
special AAdvantage privileges, (v) AAdvantage Program blackout dates, (vi)
limited seating for Award Travel on American, (vii) the terms or features of
special offers, and (viii) the award levels at which Award Travel on Carrier
will be offered.
i. Minimum Market Presence. Carrier acknowledges that American's
willingness to enter into this Agreement, and other agreements with Carrier, is
based on Carrier's commitment to maintain a minimum market presence at the
Raleigh-Durham Airport. Accordingly, Carrier hereby covenants that it will
maintain the applicable minimum flight activity levels set forth in Part I of
Attachment E during the times prescribed therein.
j. Carrier New Routes: Discontinued Routes.
i. In the event that Carrier desires to introduce new
Carrier-operated service on an 0 & D city pair or to a destination, or a
new Codeshare Flight, which is not included in Attachments A and/or B of
this Agreement, as applicable, Carrier may request, in writing, that such
now 0 & D city pair or Codeshare Flight be eligible as a Carrier Flight,
or that such new destination or Codeshare Flight be eligible for Award
Flights under this Agreement and added to Attachments A and/or B, as
applicable. American shall have thirty (30) days from the receipt of the
request to evaluate Carrier's request and American shall, at its sole
discretion, decide whether or not to add the 0 & D city pair, destination
or Codeshare Flight to Attachments A and/or B, and under what conditions
(including, without limitation, if an addition to Attachment A, what
price will be paid by Carrier for each Accrual Mile earned by a Member on
such 0 & D city pair or Codeshare Flight); if American approves Carrier's
request, such 0 & D city pair, destination or Codeshare Right would be
made subject to this Agreement, provided, however, that any 0 & D city
pair or Codeshare Flight added to Attachment A pursuant to this Section
4.j. shall not be an Original 0 & D City Pair for the purposes of Section
11.k. without the express written approval of American. Neither party,
however, shall be obligated to make any changes to Attachment A or B to
this Agreement unless mutually agreed to in writing.
ii. In the event that Carrier introduces new Carrier-operated
service on an 0 & D city pair or to a destination, or a new Codeshare
Flight, which is not included in Attachments A and/or B of this Agreement
as applicable, Carrier shall promptly give American written notice
thereof.
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iii. Notwithstanding anything to the contrary in this
Agreement, Carrier shall have the right at any time, in its sole judgment
and discretion, to cease to operate service between any of the 0 & D city
pairs on Attachment A or which includes a destination listed on
Attachment B; provided however, that Carrier shall provide American at
least sixty (60) days prior written notice of the scheduled termination
and the termination date for service between such 0 & D city pair or to
such destination. For the purposes of this Section 4.j.iii., the
off-season suspension of service for seasonal service between an 0 & D
city pair, which service has not otherwise been permanently terminated,
shall not be considered a cessation of service for which notice must be
given.
k. Carrier Participation in Other Frequent Flyer Programs. In the event
that Carrier commences a new frequent flyer program, or enters into an agreement
or other arrangement by which it becomes or will become a participant in another
frequent flyer program, or by which another commercial passenger air carrier
becomes or will become a participant in Carrier's frequent flyer program,
Carrier shall promptly give American written notice thereof, which notice shall
include the name of Carriers new program, the program in which Carrier will
participate, or the new participant in Carrier's program.
l. Principal Place of Business. If either Carrier or American shall
change its principal place of business during the term of this Agreement, such
party shall promptly notify the other party of its new address.
Section 5. Reports
a. Carrier Reports. Carrier will provide American for each semi-monthly
period with a report (the "Carrier Report") consisting of computer tapes or
transmissions listing all Revenue Travel on Carrier by Member name, AAdvantage
Account number, Carrier Flight number, origin and destination, date, class of
service and other items as specified in the Data Flow and Input/Output
Specifications attached hereto as Attachment D. Carrier shall deliver the
Carrier Report to American for the periods ending the 10th and the 26th of each
month. The Carrier Report must be received by American no later than four (4)
Business Days following the last day of the prior reporting period, and must
include all data through the end of such reporting period. Carrier understands
and agrees that all data contained in the Carrier Reports may be merged with
other information contained in the Member database maintained by American.
b. American Reports. American will provide Carrier, on a monthly basis,
with the following reports for use solely in administering the transactions
contemplated by this Agreement.
i. A report summarizing the total Accrual Miles posted by American for
Member Revenue Travel on Carrier Flights during a given calendar month
and any prior Revenue Travel not previously credited to, but submitted
by, a Member and eligible for Accrual Miles credit if any; and
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ii. Until Carrier has elected to convert to the alternative fee
structure described in Section 8.a.ii., a report summarizing the total
number of Award Documents issued and the total number reinstated to
Members' AAdvantage Accounts during a given calendar month, categorized by
award code.
c. Report Procedures. All data exchanged by American and Carrier will be
subject to the procedures outlined in Attachment D, which may be modified upon
the written agreement of the parties.
d. Additional Reports. American will be under no obligation to provide
additional reports, but will consider any request by Carrier for such reports,
and will determine, in its sole discretion, whether to honor such requests.
American may bill Carrier, and if so Carrier will pay American, for any such
additional reports a mutually agreed upon fee.
e. Origin and Destination Table Prior to February 1, 1995, Carrier will
provide to American, in a medium and format mutually acceptable to American and
Carrier, a complete table of all 0 & D city pairs set forth on Attachment A and
any combinations of such 0 & D city pairs to be serviced consecutively and
available for travel on a single flight coupon, which table shall be approved by
American, and once so approved shall be eligible for Accrual Miles as of the
Effective Date. Carrier understands that claims for Accrual Miles credit on
flights between 0 & D city pairs not listed in the then current table will be
rejected by American's AAdvantage Customer Service department and such rejection
will either be reported back to Carrier or to the Member. During the term of
this Agreement, Carrier will promptly, but no later than sixty (60) days prior
to any change relevant to this Agreement and the transactions contemplated
hereunder which has been noticed and approved or agreed upon in accordance with
this Agreement, provide to American an update to the 0 & D city pairs table as
necessary to reflect such changes, which update shall be in a medium and format
mutually acceptable to American and Carrier.
f. Additional Reports by Carrier. During the term of this Agreement,
Carrier shall furnish to American the financial statements, certificates and
other information specified in Part II of Attachment E.
Section 6. Confidentiality
a. Confidential Information. For purposes of this Agreement, confidential
information shall mean any and all (i) trade secrets, (ii) confidential or other
proprietary information of a party or its Affiliates concerning past, present or
future research, development, business activities or affairs, finances,
properties, methods of operation, processes and systems, (iii) customer lists,
(iv) other customer information, or (v) computer procedures and access codes
disclosed by one party hereto to the other at any time in connection with this
Agreement, whether the foregoing is oral or written in form or contained in any
magnetic, electronic or other media ("Confidential Information"); provided,
however, that in order for a party's information to be considered confidential
information hereunder, such information, if non-oral, must be marked or
otherwise indicated by the disclosing party as confidential; and provided,
further, that oral information must be specified as confidential at the time of
disclosure. The parties expressly acknowledge and agree that the terms and
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conditions of this Agreement (other than information which is necessary and
customarily publicized in order to make Members aware of the opportunity to
accrue AAdvantage Miles) and any reports, invoices, or other communications
between American and Carrier given hereunder or in connection herewith
(excluding names, addresses, AAdvantage Account numbers and other information
relating to specific Members) constitute Confidential Information of both
parties, whether or not marked or expressly indicated as confidential, and
American and Carrier agree to keep such information confidential and not to
disclose such information to any third party, except as permitted in Section
6.b. below. Carrier also expressly acknowledges and agrees that American's
Confidential Information also includes all procedures regarding the AAdvantage
Program and any names, addresses, AAdvantage Account numbers and other
information regarding any Member disclosed or made available to Carrier pursuant
to this Agreement whether or not marked or expressly indicated as confidential.
The party which receives Confidential Information agrees to maintain such
information in secrecy at all times, using the same degree of care with respect
to such Confidential Information as it uses in protecting its own proprietary
information, trade secrets and similar terms. Information of either party which
would otherwise be considered Confidential Information shall not be considered
Confidential Information if such information is in the public domain, is placed
in the public domain, through no violation of this Agreement, or is lawfully
obtained from another source free of restriction.
b. Use of Confidential Information. Except as expressly provided below,
neither party shall sell, transfer, publish, disclose, display or otherwise make
available the Confidential Information of the other party to any third party
(and third parties shall be deemed also to include Affiliates of the party so
restricted), except as may be required by Applicable Law (including, without
limitation, requirement by oral questions, interrogatories, subpoenas, civil
investigative demands or similar processes), in which case the party from whom
disclosure is sought (or, if applicable, who is seeking to make disclosure as
required by Applicable Law) shall promptly notify the other party and shall
provide the other party (if the other party so requests) with a copy of the
information proposed to be disclosed and all related descriptions thereof within
a reasonable period (which period shall generally be at least five days) in
advance of the proposed disclosure. To the extent that the other party objects
to disclosure of such Confidential Information, the party from which disclosure
is sought (or, if applicable, who is seeking to make disclosure as required by
Applicable Law) shall (i) use reasonable and lawful efforts to resist making any
disclosure of such Confidential Information, (ii) use reasonable and lawful
efforts to limit the amount of such Confidential Information to be disclosed
(and, in connection therewith, shall reasonably consider all modifications,
deletions and additions to such information, and related descriptions, proposed
by the other party), and (iii) use all reasonable efforts to obtain a protective
order or other appropriate relief to minimize the further dissemination of any
Confidential Information to be disclosed. In addition, neither party shall
disclose the Confidential Information received to any of its directors,
officers, employees, Affiliates, or professional advisors (collectively,
"Representatives") except on a need-to-know basis for the purposes of
implementing and administering this Agreement; provided, however, that prior to
any such disclosure, the party shall inform all such Representatives of the
confidential nature of the information, and that it is subject to this
non-disclosure obligation, and shall further instruct such Representatives to
treat such information confidentially. American and Carrier each agrees to be
responsible for any breach of this Section 6 by their respective
Representatives. Furthermore, neither party shall use the
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Confidential Information of the other party for any purpose other than as
expressly provided in this Agreement.
c. Termination. Upon termination of this Agreement for any cause or
reason, each party shall promptly, but no later than ninety (90) days after
termination, either deliver to the other party, or if instead so instructed by
the other party, shall destroy all of such other party's Confidential
Information (including all copies thereof other than copies of this Agreement)
then in its possession and shall purge any copies thereof encoded or stored on
magnetic or other electronic media or processors; provided, however, that
neither American nor Carrier shall be required to purge or destroy any
Confidential Information that is (i) in the case of American, necessary for the
continued administration and operation of the AAdvantage Program, or (ii)
reasonably necessary in connection with the resolution of any disputes which may
have at the time arisen pursuant to the terms of this Agreement.
d. No Adequate Remedy. Each party acknowledges and agrees that the party
disclosing Confidential Information under this Agreement will have no adequate
remedy at law if there is a breach or threatened breach of this Section 6 and,
accordingly, that the disclosing party shall be entitled to an injunction or
other equitable or preventative relief against the other party or its
Representatives for such breach or threatened breach. Nothing herein shall be
construed as a waiver of any other legal or equitable remedies which may be
available to the disclosing party in the event of a breach or threatened breach
of this Section 6 and the disclosing party may pursue any other such remedy,
including, without limitation, the recovery of damages.
e. Survival. The provisions of this Section 6 shall survive the
termination or expiration of this Agreement.
f. Prior Confidentiality Agreement. Carrier and American have previously
entered into a Non-Disclosure and Confidentiality Agreement dated as of November
11, 1994 (the "1994 Confidentiality Agreement") in connection with the
commencement of exploratory discussions concerning this Agreement and proposed
related transactions. The provisions of Sections 6.a. through e. of this
Agreement are intended by the parties to cover information which may be
communicated from one party to the other in connection with this Agreement and
the implementation and administration of Carrier's participation in the
AAdvantage Program, and, to the extent that any other unrelated information is
covered by both Sections 6.a. through 6.e. of this Agreement and the 1994
Confidentiality Agreement, the provisions of the 1994 Confidentiality Agreement
(including, without limitation, the termination provisions of the 1994
Confidentiality Agreement) shall govern to the exclusion of the provisions set
forth in Sections 6.a. though 6.e. of this Agreement.
Section 7. Promotional Activities and Advertising
a. Materials. Carrier will be identified as an AAdvantage Participant in
appropriate (as determined by American) AAdvantage Program materials as soon as
practicable after the Effective Date at no additional cost to Carrier except as
set forth below. Except as provided in Section 7.h. below, the content of any
AAdvantage newsletter or other promotional materials shall be subject to the
sole discretion, and the sole responsibility, of American.
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b. Announcements. Carrier will be identified as an Advantage Participant
in appropriate (as determined by American) AAdvantage announcements.
c. Inserts. Subject to the guidelines established by American, the
existence of sufficient space to place the insert in the U.S. AAdvantage Summary
envelope, and American's mailing schedule, Carrier may have the option to
include insert(s) in the U.S. AAdvantage Summary pursuant to the terms and
conditions set forth in this Section 7.c. If, in response to request, American
informs Carrier that space is available for a Carrier insert in a specific U. S.
AAdvantage Summary mailing, Carrier, at its sole cost and expense, shall create,
produce and deliver to American any insert(s) no less than five (5) Business
Days prior to the proposed date of mailing of the relevant U.S. AAdvantage
Summary. American shall have the right to approve the form and content of each
Carrier insert. American shall pay the costs associated with incorporating the
proposed Carrier insert into the U.S. AAdvantage Summary envelope, provided the
insert does not increase postal charges or require special handling by the
mailing vendor. In the event that such insert will require extra postage or any
additional or special handling charges (collectively "Extra Charges"), Carrier
shall have the option (i) to pay such Extra Charges, (ii) to reschedule the
insert to another U.S. AAdvantage Summary mailing when no Extra Charges will be
required (provided space is available in such mailing), or (iii) to cancel the
insert in the event Carrier decides to proceed and pay the Extra Charges,
American will provide Carrier with an invoice, itemizing the Extra Charges, and
the total amount of such invoice will be due and payable by Carrier to American
no later than thirty (30) days following the date of the invoice. In the event
Carrier chooses not to include any insert previously requested and accepted for
mailing, then Carrier shall provide American with written notice of such
cancellation not less than sixty (60) days prior to the previously requested
mailing date. Nothing herein shall be construed as giving Carrier the right to
include an insert in any, or any particular, U.S. AAdvantage Summary mailing.
d. Direct Mail. Subject to the terms of this Section 7.d., Carrier may,
from time to time at its option and sole expense, create, produce, and
distribute direct mail promotional materials related to special AAdvantage
Program offers. American will, upon Carrier's request and at Carrier's sole
expense, use reasonable efforts to identify, from among the AAdvantage
membership, recipients for such mailings pursuant to criteria provided by
Carrier. The form and content of all such direct mailings will comply with
American's guidelines therefor and will be further subject to (i) American's
prior written consent and approval, (ii) the terms of this Agreement, and (iii)
American's prior approval of the mailing vendor. Any Member names and addresses
provided hereunder to Carrier shall be deemed Confidential Information of
American, subject to the provisions of Section 6 of this Agreement. All mailing
tapes provided by American to Carrier under this Section 7.d. must be returned
to American within ten (10) days of the direct mailing, and Carrier and its
agents shall simultaneously purge and destroy any and all information obtained
or derived from all copies of such mailing tape(s). The obligation of Carrier
under this Section 7.d. shall be deemed an obligation of confidentiality
described in Section 6 of this Agreement and subject to the same obligation,
rights, and remedies as set forth in Section 6.
e. Special Offers. All special offers made by Carrier through any
AAdvantage Program promotional material, including, but not limited to, articles
or inserts in the applicable AAdvantage Program newsletter or the U.S.
AAdvantage Summary, as well as Carrier direct
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mail promotions, (i) may only be made for the AAdvantage Program, (ii) must
enable the Member to earn Accrual Miles or claim Award Travel as a part of such
offer or promotion, and (iii) must have the AAdvantage logo prominently
displayed, along with the statement that "AAdvantage is a registered trademark
of American Airlines, Inc."
f. Cancellation. Notwithstanding anything in this Agreement to the
contrary, American shall have the right to limit, delay or cancel any AAdvantage
Program materials or mailings at any time, without liability or compensation to
Carrier.
g. Prior Approval - American. Notwithstanding any provision of this
Agreement to the contrary, Carrier shall submit to American, and American shall
have the right to review and approve or disapprove, prior to publication, the
portion of any and all art work, copy, advertising, promotional materials,
direct mail, press releases, newsletters or other public or promotional
communications, or any other publicity published or distributed by Carrier (or
at its direction or authorization) that references this Agreement, the
AAdvantage Program, or American (or any of its Affiliates), or uses any
trademark, service mark or trade name of American or any of its Affiliates,
including but not limited to the name "AAdvantage". American will review and
approve or disapprove such publicity materials within five (5) Business Days
after receipt from Carrier, and If requested to do so by Carrier from time to
time under unusual circumstances, will use its reasonable efforts to approve or
disapprove such publicity materials on a more time sensitive basis.
Notwithstanding any provision to this Agreement, Carrier acknowledges and agrees
that all trademarks, service marks, or trade names of American or any of its
Affiliates, including but not limited to the trademark "AAdvantage", are and
shall remain the sole property of American.
h. Prior Approval - Carrier. American shall submit to Carrier, and Carrier
shall have the right to review and approve or disapprove, prior to publication,
the portion of any and all art work, copy, advertising, promotional materials,
direct mail, press releases, Award Certificates, AAdvantage newsletters or other
public or promotional communications, or any other publicity published or
distributed by American (or at its direction or authorization) that specifically
references this Agreement or Carrier (or any of its Affiliates), or uses any
trademark, service mark or trade name of Carrier or any of its Affiliates.
Carrier will review and approve or disapprove such publicity materials within
(5) Business Days after receipt from American, and if requested to do so by
American, from time to time under unusual circumstances, will use its reasonable
efforts to approve or disapprove such publicity materials on a more time
sensitive basis; provided, however, that no such approval is required for merely
listing Carrier as an AAdvantage Participant in any publication or promotional
material distributed by American. Notwithstanding any provision of this
Agreement, American acknowledges and agrees that all trademarks, service marks,
or trade names of Carrier or any of its Affiliates are and shall remain the sole
property of Carrier.
Section 8. Charges
a. Fees Payable to American.
{***}
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{***}
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{***}
c. Billing Payments. Regardless of which fee structure applies, if
Carrier has delivered the Carrier Report and other items set forth in Section
5 above, fees will be billed by American monthly by a debit invoice and
supported by detailed transaction reports described in Section 5 of this
Agreement and the information required for the Carrier Report. In the event
that Carrier fails to provide the Carrier Report and American is unable to
post date from either the mid-month or final month-end Carrier Report in time
for the processing of AAdvantage Summaries, then American will be entitled to
bill Carrier Two Hundred Thousand Dollars ($200,000 U.S.) for such month.
This amount shall be credited by American against the subsequent Accrual
Miles Invoice(s) after Carrier provides the appropriate Carrier Report. In
addition to the debit invoice described above in this Section 8.c., American
will bill Carrier monthly by a credit invoice (a "Credit Invoice") for the
fees owed on account of Award Documents issued. Payments under Sections 8.a.
and 8.b. shall be made as follows:
{***}
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{***}
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{***}
d. Payments. All payments to be made under this Agreement shall be
made in United States Dollars, and made by wire transfer or any other method
mutually agreed upon by the parties no later than the due date for payment.
In the case of wire transfer, payment will be made to the applicable party's
account in accordance with the instructions provided by that party. In the
event the date for any payment required under this Agreement is not a
Business Day, such payment shall be due and payable on the next succeeding
Business Day.
{***}
f. Offset
1. Notwithstanding any other provision of this Agreement to the
contrary, if, at any time during the term of this Agreement and the
reconciliation period after termination contemplated by Section 9.d below any
monies are past due and owing under and only under this Agreement from one
party hereto (the "Owing Party") to the other party hereto (the "Owed
Party"), the Owed Party may withhold any monies it may owe to the Owing
Party (whether such monies are owing pursuant to this Agreement or another
agreement between the parties hereto) and may apply all or a portion of such
withheld monies in partial offset and satisfaction (or, if such withheld
monies are sufficient, in total offset and satisfaction) of the monies owed
under this Agreement to the Owed Party by the Owing Party; provided, however,
that the Owed Party shall give written notice to the other party immediately
upon taking such action, which notice shall include a statement of the
amounts so offset.
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ii. Notwithstanding any other provision of this Agreement to the
contrary, if, at any time during the term of this Agreement and the
reconciliation period after termination contemplated by Section 9.d. below,
any monies are past due and owing under and only under the RDU Sublease from
Carrier to American. American may withhold any monies it may owe to Carrier
pursuant to this Agreement and may apply all or a portion of such withheld
monies in partial offset and satisfaction (or, if such withheld monies are
sufficient, in total offset and satisfaction) of the monies owed to American
under the RDU Sublease; provided, however, that American shall give written
notice to Carrier immediately upon taking such action, which notice shall
include a statement of the amounts so offset.
Section 9. Term of Agreement
a. Term. Unless sooner terminated in accordance with this Agreement, this
Agreement shall continue for an initial term extending through the Expiration
Date; provided, however, that so long as the RDU Sublease remains in effect and
no notice (which is then in effect) of termination has been given for that
agreement, this Agreement may thereafter be renewed for one or more successive
two (2) year periods, in each instance only upon the mutual agreement of Carrier
and American. Expiration of this Agreement or termination on any date
established as a termination date pursuant to this Agreement shall be effective
at 23:59 Coordinated Universal Standard Time (UTC) on such date (except for such
liabilities, obligations, duties, rights and powers of the parties which
expressly survive the termination of this Agreement).
b. Public Notice. All required notices to the general public and Members
of the termination of Carrier's participation in the AAdvantage Program will be
the sole responsibility of American and shall be undertaken at American's sole
cost and expense.
c. Effect of Termination. On and after expiration or termination for any
reason of this Agreement:
i. American will not credit, and Carrier will not indicate to any
Member that he or she will receive credit for, Accrual Miles for Revenue
Travel taken after the date on which termination or expiration of this
Agreement becomes effective (except for Accrual Miles earned prior to such
termination or expiration date and credited pursuant to Sections 4.d. or
e.);
ii. American will no longer issue Award Certificates for Award
Travel, except those which have been requested by Members prior to the
termination or expiration date and processed after such date. American
will, however, continue to issue Award Tickets from unexpired, outstanding
Award Certificates which have been issued in accordance with this
Agreement;
iii. American may, at its sole discretion, reinstate Redeemed Miles
to Members' AAdvantage Accounts for unused and unexpired Award
Certificates or Award Tickets tendered by Members for reinstatement;
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iv. Carrier will continue to honor any Award Ticket Issued by
American pursuant to this Agreement for a period of one (1) year from the
date of issuance of such document; and
v. Other than in the case of a termination under Section 11 of this
Agreement, all monies due from or owed by one party to the other through
the date of termination shall become immediately due and payable, and all
monies which may become due from or owed by a party after the termination
date shall be immediately due and payable as such obligations arise.
Termination or expiration of this Agreement shall be without prejudice to
any rights or remedies available to a party resulting from breach of this
Agreement by the other party.
d. Survival. Without limiting the effectiveness of any other provision
hereof which expressly states that it shall survive the termination of this
Agreement, the provisions of Sections 5 and 8 shall survive the termination or
expiration of this Agreement and remain in effect following the effective date
of termination or expiration of this Agreement for a period of three (3) years
(or such shorter period as may be mutually agreed upon by the parties) to permit
final reconciliation of the transactions hereunder.
e. Termination of AAdvantage Program. Carrier agrees that, notwithstanding
any other provisions of this Agreement, American has the right, for whatever
reason and in American's sole discretion, to terminate the AAdvantage Program
upon providing at least ninety (90) days prior written notice to Carrier, in
which event this Agreement will terminate in accordance with the foregoing
provisions effective upon the termination of the AAdvantage Program, and without
any liability, compensation or obligation by American to Carrier.
f. Termination of Other Agreements.
i. In the event the RDU Sublease is terminated for any reason,
American shall have the option, exercisable for ninety (90) days
following termination of such agreement, to terminate this Agreement
upon at least ninety (90) days prior written notice to Carrier of
such election.
ii. In the event the RDU Sublease is terminated by American for any
reason, Carrier shall have the option, exercisable for ninety (90)
days following termination of such agreement, to terminate this
Agreement upon at least ninety (90) days prior written notice to
American of such election.
Section 10. Indemnification
a. Carrier Indemnity. Carrier shall indemnify, defend and hold harmless
American, its Affiliates and each of their respective directors, officers,
employees and agents (individually, an "American Indemnified Party") from all
liabilities, losses, damages, claims, suits, actions, recoveries, awards,
judgments or executions of any nature or kind whatsoever (including, without
limitation, costs of investigation, litigation costs, court costs, expert
witness fees, litigation support services costs, settlement costs and reasonable
attorneys' fees) which may be made, asserted, had, brought, or recovered by any
third party against an American
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Indemnified Party by reason of or in any way arising out of (i) travel on
Carrier or any Codeshare Flight, (ii) use of Carrier's facilities, (iii)
Carrier's performance, failure to perform or improper performance of this
Agreement, or (iv) any claims or statements made by Carrier in its advertising
or promotional activities which are in conflict or inconsistent with the terms
of this Agreement.
b. American Indemnity. American shall indemnify, defend and hold harmless
Carrier, its Affiliates and each of their respective directors, officers,
employees and agents (individually, a "Carrier Indemnified Party") from all
liabilities, losses, damages, claims, suits, actions, recoveries, awards,
judgments or executions of any nature or kind whatsoever (including, without
limitation, costs of investigation, litigation costs, court costs, expert
witness fees, litigation support services costs, settlement costs and reasonable
attorneys' fees) which may be made, asserted, had, brought or recovered by any
third party against a Carrier Indemnified Party by reason of or in any way
arising out of (i) travel on American, (ii) use of American's facilities
(excluding the facilities subject to the RDU Sublease),(iii) American's
performance, failure to perform or improper performance of this Agreement, (iv)
any claim or statements made by American in its advertising or promotional
activities which are in conflict or inconsistent with the terms of this
Agreement, or (v) any claim that the use of "AAdvantage" infringes any existing
trademark or other property right.
Hereinafter, any claim which gives rise to a right to indemnification under
Sections 10.a. or 10.b. is referred to as a "10.0 Claim".
c. 10.0 Claims Against American. In the event a 10.0 Claim is made or
asserted, or any action with respect thereto is brought, against an American
Indemnified Party, the appropriate American Indemnified Party shall promptly,
but no later than twenty (20) days after the receipt of any such claim or demand
(including but not limited to notice of any action, suit or proceeding) give
Carrier written notice thereof; provided, however, that the failure to so notify
Carrier shall not relieve Carrier of any liability that Carrier may have to the
American Indemnified Party under Section 10, except to the extent that Carrier
demonstrates that the defense of such 10.0 Claim is prejudiced by such failure
to notify. Upon receipt of such notice (i) Carrier shall assume all
responsibility for such defense, and (ii) the American Indemnified Party shall
provide reasonable assistance and cooperation during the defense or settlement
of such 10.0 Claim; provided, however, that if Carrier does not notify the
American Indemnified Party in writing that it has assumed such defense within
ten (10) Business Days of receipt of such notice of the 10.0 Claim, the American
Indemnified Party may proceed to defend against the 10.0 Claim, the expense of
which defense shall in turn also be deemed an obligation of and an amount due
and payable as incurred to the American Indemnified Party by Carrier if the
claim is ultimately found to be a 10.0 Claim. Except as limited as provided
below, if Carrier assumes the defense, Carrier shall have complete control of
the defense or settlement of such 10.0 Claim; provided, however, that counsel
selected by Carrier shall be reasonably acceptable to American. No compromise or
settlement of any 10.0 Claim may be effected by Carrier without the prior
written consent of the relevant American Indemnified Party, which consent shall
not be unreasonably withheld or delayed; provided, however, such consent shall
not be required if (x) there is no finding or admission of any violation of any
law by any American Indemnified Party or of any violation by any American
Indemnified Party of the rights of any person, (y) such compromise or settlement
does not otherwise adversely affect any claim that may be made by American or
any American Indemnified Party, and (z) such
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compromise or settlement does not provide for any relief from any American
indemnified Party (other than any monetary relief that Carrier expressly agrees
in writing to pay contemporaneously with such compromise or settlement). In the
event Carrier assumes the defense of a 10.0 Claim, each American indemnified
Party shall have the right, but not the duty, at its own expense, to participate
in the defense and settlement of any 10.0 Claim with counsel of its own choosing
without relieving Carrier of any obligations hereunder. Carrier shall cooperate
with the American indemnified Party's or Parties' counsel, but control of the
matter shall remain with Carrier.
d. Claims Against Carrier. In the event a 10.0 Claim is made or asserted,
or any action with respect thereto is brought against a Carrier indemnified
Party, the appropriate Carrier Indemnified Party shall promptly, but no later
than twenty (20) days after the receipt of any such claim or demand (including
but not limited to notice of any action, suit or proceeding) give American
written notice therewith; provided, however, that the failure to so notify
American shall not relieve American of any liability that American may have to
the Carrier Indemnified Party under Section 10, except to the extent that
American demonstrates that the defense of such 10.0 Claim is prejudiced by such
failure to notify. Upon receipt of such notice (i) American shall assume all
responsibility for such defense, and (ii) the Carrier Indemnified Party shall
provide reasonable assistance and cooperation during the defense or settlement
of such 10.0 Claim; provided, however, that if American does not notify the
Carrier Indemnified Party in writing that it has assumed such defense within ten
(10) Business Days of receipt of such notice of the 10.0 Claim, the Carrier
indemnified Party may proceed to defend against the 10.0 Claim, the expense of
which defense shall in turn also be deemed an obligation of and an amount due
and payable as incurred to the Carrier Indemnified Party by American if the
claim is ultimately found to be a 10.0 Claim. Except as limited as provided
below, if American assumes the defense, American shall have complete control of
the defense or settlement of such 10.0 Claim or action; provided, however, that
counsel selected by American shall be reasonably acceptable to Carrier. No
compromise or settlement of any 10.0 Claim may be effected by American without
the prior written consent of the relevant Carrier Indemnified Party, which
consent shall not be unreasonably withheld or delayed; provided, however, such
consent shall not be required if (x) there is no finding or admission of any
violation of any law by any Carrier Indemnified Party or of any violation by any
Carrier Indemnified Party, of the rights of any person, (y) such compromise or
settlement does not otherwise adversely affect any claim that may be made by
Carrier or any Carrier Indemnified Party, and (z) such compromise or settlement
does not provide for any relief from any Carrier Indemnified Party (other than
any monetary relief that American expressly agrees in writing to pay
contemporaneously with such compromise or settlement). In the event American
assumes the defense of a 10.0 Claim, each Carrier Indemnified Party shall have
the right, but not the duty, at its own expense, to participate in the defense
and settlement of any 10.0 Claim with counsel of its own choosing without
relieving American of any obligations hereunder. American shall cooperate with
the Carrier Indemnified Party's or Parties' counsel, but control of the matter
shall remain with American.
e. Survival. The provisions of this Section 10 shall survive the
termination or expiration of this Agreement.
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Section 11. Default and Termination for Cause.
a. Breach.
i. General. In the event of a breach of any term, representation, or
warranty of this Agreement by American or Carrier (other than a breach of
a payment obligation under Section 8 hereof, the failure to pay any other
sums owed hereunder, or any other event separately covered elsewhere in
this Section 11), the non-breaching party may terminate this Agreement
without further liability on pending at least thirty (30) days prior
written notice to the other party, which notice shall describe, with as
much particularity as reasonably practicable, the alleged breach.
Termination under this Section 11.a.i., shall not be effective, however,
if the allegedly breaching party shall, within fifteen (15) days following
receipt of such notice, completely cure such breach.
ii. Payment Obligations. In the event of a breach of a payment
obligation under Section 8 or the failure to pay any other sums owed
hereunder, the non-breaching party may terminate this Agreement without
further liability on providing at least fifteen (15) days prior written
notice to the other party, which notice shall describe, with as much
particularity as reasonably practicable, the alleged breach and the total
sums due and owing. Termination under this Section 11.a.ii. shall not be
effective, however, if the allegedly breaching party shall, within seven
(7) days following receipt of such notice, cure the breach by making the
full payment described in the notice.
iii. Cross Defaults.
(1) If (A) any material breach or default (including, without
limitation, the failure to pay any indebtedness or obligations as they
become due) occurs under the RDU Sublease, and (B) such breach or default
is not cured within the applicable cure period (if any) specified in the
relevant agreement or any other cure period which may be permitted or
mutually agreed upon by the parties to the agreement, then and in any such
event, for a period of thirty (30) days following a party's receipt of
notice of such event or at any time thereafter that such breach or default
may be continuing, Carrier or American, whichever is the non-breaching
party, may elect to terminate this Agreement upon providing at least
thirty (30) days prior written notice to the other party.
(2) If (A) any breach or default occurs under any other agreements
(not described in Subsection 11.a.iii.(1) above) under which Carrier may
be obligated, directly or indirectly, as borrower, installment purchaser,
lessee, sublessee, guarantor or otherwise, and which agreements involve:
(y) the borrowing of money or the extension of credit in excess of Two
Hundred Fifty Thousand Dollars ($250,000) in the aggregate, or (z) any
lease or sublease of real or personal property pursuant to which Carrier's
monetary obligations in the nature of rent or similar obligations exceed
either Twenty Thousand Dollars ($20,000) per month in the aggregate or Two
Hundred Fifty Thousand Dollars ($250,000) in the aggregate for the
remaining term of the affected lease and/or sublease, (B) such breach or
default consists of failure to pay any
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indebtedness or other obligation when due or if such breach or default
permits or causes (or upon notice or lapse of time or both would permit or
cause) the acceleration of any indebtedness or other obligation, or the
termination of any lease, agreement or commitment to lend, and (C) such
breach or default is not cured within the applicable cure period (if any)
specified in the relevant agreement then, in any such event and at any
time thereafter, American may elect to terminate this Agreement upon
providing at least thirty (30) days prior written notice to Carrier.
b. Carrier Assignment to Benefit Creditors. If Carrier either (i) makes an
assignment for the benefit of its creditors, (ii) suspends the payment of,
admits in writing its inability to pay, or generally fails to pay its debts as
they become due, (iii) has suspended its transactions with banks and other
financial institutions (iv) has issued against it any writ, execution, process,
or abstract of judgment which may have a Material Adverse Effect on Carrier and
which is not dismissed, satisfied or stayed within sixty (60) days, or (v) files
a petition for bankruptcy, corporate reorganization, corporate liquidation,
arrangement or special liquidation proceedings under any Applicable Law, then
American may, at its option, immediately terminate this Agreement upon written
notice to Carrier.
c. American Assignment to Benefit Creditors. If American either (i) makes
an assignment for the benefit of its creditors, (ii) suspends the payment of,
admits in writing its inability to pay, or generally fails to pay its debts as
they become due, (iii) has suspended its transactions with banks and other
financial institutions, (iv) has issued against it any writ, execution, process,
or abstract of judgment which may have a Material Adverse Effect on American and
which is not dismissed, satisfied or stayed within sixty (60) days, or (v) files
a petition for bankruptcy, corporate reorganization, corporate liquidation,
arrangement or special liquidation proceedings under any Applicable Law, then
Carrier may, at its option, immediately terminate this Agreement upon written
notice to American; provided, however, that notwithstanding any provision to the
contrary contained herein, Carrier shall continue to honor any Award Tickets for
Award Travel issued in accordance with the terms of this Agreement for a period
of one (1) year from the date of issuance.
d. Bankruptcy Petition. In the event (i) other party petitions for or is
granted relief under Title 11 of the United States Code (the "Bankruptcy Code")
or files a petition or initiates analogous proceedings under any similar
Applicable Law, (ii) an involuntary bankruptcy petition is commenced or any
comparable proceeding initiated against either party under the Bankruptcy Code
or any Applicable Law, or (iii) either party exercises its rights under or is
made subject to any federal, state or other bankruptcy, reorganization,
insolvency or analogous laws of any applicable jurisdiction. and if this
Agreement has not otherwise terminated, then the other party may suspend all
further performance of this Agreement until such party assumes or rejects this
Agreement pursuant to Section 365 of the Bankruptcy Code or any successor
statute, or otherwise acknowledges its obligations under this Agreement under
any similar (or successor) provision of Applicable Law. Any such suspension of
further performance by the other party pending assumption, rejection, or other
acknowledgment shall not be deemed a breach of this Agreement and shall not
affect the other party's right to pursue or enforce any of its rights under this
Agreement or otherwise.
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e. Carrier Corporate Changes. If, during the term of this Agreement:
(i) Carrier ceases its operations or a substantial portion thereof; (ii)
merges with or into or is acquired, in whole or in part, by any other Person
(except any merger in which each of the following conditions is satisfied:
(A) Carrier is the surviving corporation in such merger, (B) the shareholders
of Carrier, as of immediately prior to such merger, receive or retain 80% or
more of the equity securities of Carrier as of immediately after such merger,
and (C) such merger does not cause or result in any other event or condition
specified in this Agreement which would give American the right to terminate
this Agreement); (iii) Carrier sells or otherwise transfers all or
substantially all of its assets to any other Person; (iv) Carrier makes
material changes to Carrier's frequent flyer program, or sells, transfers, or
disposes of any part or all of such program, or merges or otherwise
integrates such program with or into another frequent flyer program(s) (other
than the AAdvantage Program) which is not wholly owned and operated by
Carrier; (v) Carrier commences a new frequent flyer program, or enters into
an agreement or other arrangement by which it becomes or will become a
participant in another frequent flyer program, or by which another commercial
passenger air carrier becomes or will become a participant in Carrier's
frequent flyer program; (vi) any Person (or group of two or more Persons who
have agreed to act or are acting in concert becomes (by stock purchase,
merger or otherwise) the beneficial owner of 20% or more of the outstanding
voting securities of Carrier (for purposes of this Section 11.e.(vi) and
11.e.(vii) below, the terms "group" and "beneficial ownership" shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations of the
Securities and Exchange Commission ("SEC") promulgated thereunder); (vii) any
Disqualified Investor (as defined below) becomes (by stock purchase, merger
or otherwise) the beneficial owner of ten percent (10%) or more of the
outstanding voting securities of Carrier; (viii) Carrier makes an
acquisition (whether through a stock purchase, asset acquisition, merger or
otherwise) of any business of another Person ("Acquired Business") if (x)
revenues for the four then most recently completed quarters attributable to
the Acquired Business exceed ten percent (10%) of Carrier's revenues for the
comparable period, or (y) the book value of the assets of the Acquired
Business as of the end of the most recently completed quarter exceed ten
percent (10%) of the total assets of Carrier as of the end of the comparable
period, or (z) the total value of the consideration paid or to be paid in
such acquisition by Carrier exceeds Ten Million Dollars ($10,000,000); or
(viii) Carrier, without the prior written approval of American, enters into
or commits to enter into any marketing-oriented collaborative agreement with
another airline (including, without limitation, a frequent traveler program
or codesharing arrangement, but excluding normal Interline agreements) which
American reasonably believes would likely materially adversely affect
American's interests or objectives under any agreements between American (or
any of its Affiliates) and Carrier, then, in each such case, Carrier shall
immediately give American written notice of such event, addressed to the
American officer and given in accordance with the procedure specified below,
and American shall have the right, exercisable for forty five (45) days
following the receipt of such written notice by the American officer
specified below (the "Written Notice Period") (or, if American elects,
following American's actual knowledge gained through pubic information or
otherwise of the occurrence of any such event), to terminate this Agreement
upon providing at least thirty (30) days advance written notice to Carrier;
provided, however, that if Carrier, at its sole option, elects to request in
advance of any contemplated transaction a waiver from American of American's
right to terminate under this Section 11.e. (which request must be submitted
to American according to the procedures filed below), American will notify
Carrier, no later than ten (10) Business Days following the receipt of the
request by the American officer
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specified below, whether it will (i) waive such right, or (ii) require
additional time to decide on the requested waiver, in which case American will
have an additional forty five (45) days to determine and notify Carrier whether
it will waive its right to terminate or whether it would exercise such right if
the proposed transaction were to be undertaken as described; any waiver by
American of this Section 11.e. shall be valid only with respect to the
transaction as described in the written request for waiver. If American has not
responded to Carrier by the end of the forty five day period which is the
Written Notice Period described above, or by the end of the forty five day
period described in clause (ii) of the foregoing sentence, whichever is
applicable, such lack of response shall be deemed to be a waiver of American's
right to terminate with respect to the particular transaction described in
Carrier's written notice or request, as applicable.
If American so elects to terminate this Agreement, American may, at
Carrier's expense, take any and all reasonable actions necessary in American's
sole judgment and discretion to provide for air fare and related incidental
travel expenses to ensure that Members at the time holding or traveling on Award
Tickets are able to conclude their planned trip, and all amounts so incurred by
American on Carrier's behalf shall be immediately due and payable to American as
incurred.
As used in Section 11.e. (vii), above, "Disqualified Investor" means
(i) any other airline or airline-related service company, (ii) any Person
offering a frequent traveler program; (iii) any Person that American believes
would likely, by virtue of such person's affiliation with Carrier, materially
adversely affect American's interests or objectives under any agreements
between American (or any of the Affiliates) and Carrier, or (iv) any
Affiliate of a Person identified in clauses (i), (ii) or (iii) of this
paragraph.
For the purposes of this Section 11.e., Carrier's request for a waiver
must be in writing, describing with reasonable specificity the contemplated
transaction and the proposed participating parties. To be effective, any such
request and any other written notice of an event described in this Section 11.e.
must be sent by facsimile with (i) a contemporaneous telephone call by Carrier
to the American officer to whom the request is addressed (or his or her
secretary) confirming receipt by the American officer, and (ii) a hard copy sent
the same day by certified or registered United States Mail, first class postage
prepaid, return receipt requested, addressed to:
American Airlines, Inc.
P.O. Box 619616, MD 5359
Dallas/Ft. Worth Airport, Texas 75261-9616
Attention: Henry C. Joyner
Vice President - Marketing Planning
Phone: (817) 967-2803
Facsimile: (817) 967-9697
or to such other person, address, fax or phone number as American may from time
to time provide Carrier in a written notice given in accordance with the
provisions of Section 17 below. Any forty five day Written Notice Period or ten
Business Day period described above in this
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Section 11.e. shall commence as of the day the request is completely faxed and
the confirming telephone call successfully made.
f. American Corporate Changes. If American: (i) permanently ceases its
operations or a substantial portion thereof; (ii) merges with or into or is
acquired, in whole or in part, by any Person (other than an Affiliate) (except
any merger in which (A) American is the surviving entity; or (B) American is not
the surviving corporation, but as a result of the merger the shareholders of
American, as of immediately prior to such merger, receive or retain 80% or more
of the equity securities of American as of immediately after such merger); or
(iii) sells or otherwise transfers all or substantially all of its assets to any
Person (other than an Affiliate), American shall immediately give Carrier
written notice of such event, and Carrier shall have the right in its sole
judgment and discretion to terminate this Agreement upon at least ninety (90)
days written notice to American.
g. Compliance with Start Up Schedule. In the event Carrier has not
complied with any of the following requirements by the date indicated, and
American and Carrier have not otherwise agreed to an extension of the applicable
deadline, American may, at its option, terminate this Agreement, upon giving
five (5) days notice to Carrier of such election to terminate:
i. No later than February 10, 1995, Carrier will provide American
with adequate test data for simulated Accrual Mile postings to demonstrate
to the satisfaction of American functional integration into American's
automated customer service system.
ii. No later than March 15, 1995, Carrier will be capable of
automated transmissions through American's customer service system of
posting information for Accrual Miles.
h. Carrier Performance Requirements.
i. In the event of a failure by Carrier to maintain at all times the
applicable minimum flight activity levels as set forth in Part I of
Attachment E, then, upon the occurrence of such event and at any time
thereafter, American may elect to terminate this Agreement upon providing
at least ninety (90) days prior written notice to Carrier, which notice
shall describe the grounds upon which such election to terminate is based.
Termination under this Section 11.h.i. shall not be effective, however, if
Carrier shall, within sixty (60) days following receipt of such notice,
completely cure such breach.
ii. In the event Carrier, on two or more occasions in any twelve
(12) month period during the term of this Agreement, fails to maintain the
applicable minimum flight activity levels as set forth in Part I of
Attachment E (regardless of whether such breaches are ultimately cured),
then American may elect to terminate this Agreement upon providing at
least thirty (30) days prior written notice to Carrier.
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i. Additional Reports by Carrier. In the event that Carrier fails to
comply with any of the provisions of Section 5.f above in a timely manner,
American may elect to terminate this Agreement upon providing at least ten (10)
days prior written notice to Carrier; provided, however, that such termination
shall not be effective if Carrier cures such noncompliance within five (5) days
after receipt of American's notice.
j. Governmental Approvals. In the event that Carrier fails to obtain and
maintain the authorizations, licenses, approvals, certificates, permits,
registrations and filings from all governmental and regulatory authorities
necessary to conduct its business as an authorized air carrier, American may
elect to terminate this Agreement upon providing at least thirty (30) days prior
written notice to Carrier; provided, however, that such termination shall not be
effective if Carrier cures such noncompliance within fifteen (15) days after
receipt of American's notice.
k. AAdvantage Miles Opportunities. If (i) American enters into an
agreement or other final arrangement by which it agrees to award AAdvantage
Miles for travel on another commercial passenger air carrier (other than
American, American Eagle, or any carrier that is an AAdvantage Participant as of
the date hereof) for non-stop service between any of the O & D city pairs listed
on Attachment A as of the date hereof and designated as an "Original O & D City
Pair" (which shall exclude any O & D city pair which may be added as a Carrier
Flight to Attachment A in the future unless the same is expressly designated as
an Original O & D City Pair by American), and (ii) such Original O & D City Pair
is, at that time, still a Carrier Flight for which Accrual Miles will be
awarded, American shall give Carrier written notice of such event at least
thirty (30) days prior to the first date on which AAdvantage Miles may be
accrued for travel on the other air carrier, and Carrier shall have the right in
its sole judgment and discretion to terminate this Agreement upon at least one
hundred twenty (120) days written notice to American.
l. Payments upon Termination. In the event of termination under this
Section 11 (other than Section 11.k.), all monies owed, or due and payable to
the terminating party from the other party through the date of termination shall
become immediately due and payable, and all monies which may become due or owed
to the terminating party from the other party after the termination date shall
be immediately due and payable as such obligations arise.
Section 12. Representations and Warranties by American
In order to induce Carrier to enter into this Agreement, American makes
the following representations and warranties to Carrier, such representations
and warranties to be effective as of the date hereof:
a. Organization and Qualification. American is a duly incorporated and
validly existing corporation, in good standing under the laws of the State of
Delaware with its principal place of business as reflected in the preamble to
this Agreement, is an air carrier duly authorized to act as such by the
government of the United States of America, holds all licenses, certificates and
permits from all governmental and regulatory authorities necessary to conduct
its business (except where the failure to obtain such licenses and permits would
not have a Material Adverse Effect on American), and has the requisite corporate
power and
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authority to own, operate and lease the properties and assets it now owns,
operates and leases (except where the failure to have such authority would not
have a Material Adverse Effect on American), to conduct its business as it is
now being conducted, and to enter into and perform its obligations under this
Agreement. American is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the nature of its
activities makes such qualification or license necessary, other than in any
jurisdiction where the failure to so qualify would not have a Material Adverse
Effect on American or its operations.
b. Authority. The execution and delivery of, and the performance by
American of its obligations under, this Agreement have been duly authorized by
all necessary corporate action and no other corporate proceedings are necessary
in conjunction therewith. This Agreement has been duly executed and delivered by
American, and, assuming due authorization, execution and delivery by Carrier,
this Agreement constitutes the legal, valid and binding obligation of American,
enforceable against American in accordance with the terms and conditions hereof,
except as the same may be limited or modified by the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, and the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or law).
c. No Violation. Neither the execution, delivery or performance by
American of this Agreement nor the consummation by American of any of the
transactions contemplated hereby, will (i) contravene or conflict with or cause
default under (A) any Applicable Law binding on American, or (B) any provision
of the Certificate of Incorporation or the Bylaws of American, (ii) result in
the creation of any lien, mortgage, claim, pledge, or other encumbrance on any
asset of American, or (iii) result in the breach of any agreement or instrument
to which American is a party or by which it is bound.
d. No Approvals. Neither the execution, delivery or performance by
American of this Agreement, nor the consummation by American of any of the
transactions described herein, requires the consent or approval of, or the
giving of notice to, the registration with, the recording or filing of any
documents with, or the taking of any other action in respect of, any Competent
Authority, any trustee or holder of any indebtedness or obligation of American,
any stockholder of American, or any other Person.
e. No Defaults. American is (i) not in default, and no condition exists
that with notice or lapse of time or both would constitute a default, under any
mortgage, deed of trust, indenture, or other instrument or agreement to which it
is a party, or by which it or any of its properties or assets may be bound, and
(ii) not in breach of any Applicable Law, where such default or breach would
have a Material Adverse Effect on it, or a material adverse effect on any of the
transactions described in this Agreement.
f. No Proceedings. American is not involved as a debtor in any bankruptcy,
receivership, insolvency or similar proceeding before any Competent Authority.
g. AAdvantage Participants. As of the date of this Agreement, American
does not award AAdvantage Miles for travel on a commercial passenger air carrier
which is an AAdvantage Participant as of the date hereof (other than American
Eagle) for non-stop service
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on any of the Original O & D City Pairs (as defined in Section 11.k.); provided,
however, that nothing in this Agreement shall be construed as limiting
American's right, or a commitment by American to limit its right, and American
hereby expressly reserves the right, to award AAdvantage Miles for such travel
at any time after the date hereof. American acknowledges that the foregoing
reservation is not intended to limit Carrier's right to terminate this Agreement
pursuant to Section 11.k. above upon the occurrence of an event described in
Section 11.k.
h. Survival. Each of the foregoing representations and warranties shall
survive the execution and delivery of this Agreement, and the termination or
expiration of this Agreement.
Section 13. Representations and Warranties by Carrier
In order to induce American to enter into this Agreement Carrier makes the
following representations and warranties to American, such representations and
warranties to be effective as of the date hereof:
a. Organization and Qualification. Carrier is a duly incorporated and
validly existing corporation, in good standing under the laws of the State of
Delaware with its principal place of business, as of the date hereof, as
reflected in the preamble to this Agreement, is an air carrier duly authorized
to act as such by the government of the United States of America, holds all
licenses, certificates and permits from all governmental and regulatory
authorities necessary to conduct its business, and has the requisite corporate
power and authority to own, operate and lease the properties and assets it now
owns, operates and leases (except where the failure to have such authority would
not have a Material Adverse Effect on Carrier), to conduct its business as it is
now being conducted, and to enter into and perform its obligations under this
Agreement. Carrier is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the nature of its
activities makes such qualification or license necessary, other than in any
jurisdiction where the failure to so qualify would not have a Material Adverse
Effect on Carrier.
b. Authority. The execution and delivery of, and the performance by
Carrier of its obligations under this Agreement have been duly authorized by all
necessary corporate action and no other corporate proceedings are necessary in
conjunction therewith. This Agreement has been duly executed and delivered by
Carrier, and, assuming due authorization, execution and delivery by American,
this Agreement constitutes the legal, valid and binding obligation of Carrier,
enforceable against Carrier in accordance with the terms and conditions hereof,
except as enforcement may be limited by bankruptcy, insolvency, moratorium or
other laws affecting creditor' rights generally, and the application of general
principles of equity (regardless of whether such enforceability is considered a
proceeding in equity or law).
c. No Violation. Neither the execution, delivery or performance by Carrier
of this Agreement nor the consummation by Career of any of the transactions
contemplated hereby, will (i) contravene or conflict with or cause a default
under (A) any Applicable Law binding on Carrier, or (B) any provision of the
Certificate of Incorporation or the Bylaws of Carrier, (ii) result in the
creation of any lien, mortgage, claim, pledge, or other encumbrance on any asset
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of Carrier, or (iii) result in the breach of any agreement or instrument to
which Carrier is a party or by which it is bound.
d. No Approvals. Neither the execution, delivery or performance by Carrier
of this Agreement, nor the consummation by Carrier of any of the transactions
described herein, requires the consent or approval of, or the giving of notice
to, the registration with, the recording or filing of any documents with, or the
taking of any other action in respect of, any Competent Authority, any trustee
or holder of any indebtedness or obligation of Carrier, any stockholder of
Carrier, or any other Person.
e. No Defaults. Carrier is (i) not in default and no condition exists that
with notice or lapse of time or both would constitute a default, under any
mortgage, deed of trust, indenture, or other instrument or agreement to which it
is a party, or by which it or any of its properties or assets may be bound, and
(ii) not in breach of any Applicable Law, where such default or breach would
have a Material Adverse Effect on it, or a material adverse effect on any of the
transactions described in this Agreement.
f. No Proceedings. Carrier is not involved as a debtor in any bankruptcy,
receivership, insolvency or similar proceeding before any Competent Authority.
g. No Other Program Participation. Carrier has established only one
frequent traveler program (or any other similar program or arrangement), the
"Midway Merits" Program, in which Carrier is the sole participant. Carrier is
not a participant in, nor has it agreed to be a participant in, any frequent
traveler program (or other similar program or arrangement) of any other Person.
h. No Codeshare Flights. As of the date hereof, Carrier currently has no
Codeshare Flights and has not entered into any agreement or arrangement for any
future Codeshare Flights.
i. Survival. Each of the foregoing representations and warranties shall
survive the execution and delivery of this Agreement, and the termination or
expiration of this Agreement
Section 14. Notice to Personnel
American and Carrier will each use reasonable efforts to make all
appropriate personnel of each carrier aware of the fact that Carrier is an
AAdvantage Participant. All necessary and appropriate personnel of Carrier shall
be made fully aware of the contents of Section 3.f. above.
Section 15. AAdvantage Program Abuse
Carrier will cooperate with all reasonable requests of American concerning
any investigation and/or prosecution of anyone engaging in AAdvantage Program
abuse or fraud, including but not limited to verification of AAdvantage Member
status, passenger interviews, Member interviews, ticket confiscation, and
cooperating with any civil or criminal prosecution.
34 CONFIDENTIAL
<PAGE>
Section 16. Assignment
Neither party may assign or otherwise convey this Agreement, or any of
such party's rights under this Agreement, or delegate any of its duties
hereunder, without the prior written consent of the other party; provided,
however, that without Carrier's consent, American may assign any and all of its
rights and delegate its obligations hereunder to an Affiliate of American which
(i) is American's wholly-owned subsidiary corporation, or a wholly-owned
subsidiary of American's parent corporation, (ii) has reasonably sufficient or
comparable resources to perform under this Agreement, and (iii) assumes all of
the obligations of American hereunder; provided, however, that such assignment
or delegation shall not relieve American of any of its obligations under this
Agreement. Any attempted assignment or delegation which violates the terms of
this Section 16 shall be null and void.
Section 17. Notices
Except as otherwise expressly set forth in this Agreement, all notices,
reports, invoices and other communications required or permitted hereunder to be
given to or made upon any party hereto shall be in writing, and shall be
considered as properly given if addressed as provided below and either (i)
delivered in person; (ii) sent by a commercial express or overnight courier
delivery service which provides a signed acknowledgment of receipt; (iii)
deposited in the U.S. mail, certified or registered first-class mail, postage
prepaid, return receipt requested (provided, however, that invoices may be sent
by first-class mail alone); or (iv) transmitted by facsimile (upon receipt by
sender thereof of evidence that a complete transmission of such copy was made to
the recipient thereof) and, if sent by facsimile, confirmed by (a) telephone
call contemporaneously made to the person entitled to receive such notice or to
such person's secretary, or (b) dispatching a hard copy of such notice by
first-class U.S. mail, postage prepaid, or any of the methods set forth in (i),
(ii) or (iii) above. Unless otherwise expressly set forth in this Agreement, all
notices shall be effective upon receipt. For the purposes of notice, the
addresses of the parties shall be as set forth below; provided, however, that
either party shall have the right to change its address for notice to any other
location by giving at least thirty (30) days prior written notice to the other
party in the manner set forth above.
By Mail & By Hand: Midway Airlines Corporation
5713 S. Central Avenue
Chicago, IL 60638
Attention: President
Phone: (312) 838-2036
Facsimile: (312) 838-2069
With a copy to: Jonathan S. Waller
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, IL 60606
35 CONFIDENTIAL
<PAGE>
Phone: (312) 466-3649
Facsimile: (312) 454-0335
By Mail: American Airlines, Inc.
Managing Director - Marketing Programs
P.O. Box 619616, MD 5321
Dallas/Ft. Worth Airport, Texas 75261-9616
By Hand: 4333 Amon Carter Boulevard, MD 5321
Fort Worth, Texas 76155
Phone: (817) 967-2777
Facsimile: (817) 967-3037
Section 18. Governing Law and Dispute Resolution
a. Choice of Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Texas, without regard to choice of law principles.
b. Jurisdiction. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in Tarrant County for the purposes of any suit, action or
other proceeding arising out of this Agreement or the subject matter hereof
brought by any other party. American and Carrier each agrees that neither of
them will bring any suit, action or other proceeding arising out of this
Agreement the subject matter herein, or any of the transactions described
hereof, in any jurisdiction other than the jurisdiction described above.
c. Waiver of Defenses. To the extent permitted by applicable law, each
party hereby waives and agrees not to assert, by way of motion, as a defense or
otherwise, in any such suit, action or proceeding, any claim (i) that it is not
personally subject to the jurisdiction of the above-named courts, (ii) that the
suit, action or proceeding is brought in an inconvenient forum, (iii) that it is
immune from any legal process with respect to itself or its property, (iv) that
the venue of the suit, action or proceeding is improper, or (v) that this
Agreement or the subject matter hereof may not be enforced in or by such courts.
d. Service of Process. Each party agrees that, even if at any time during
the term of this Agreement Carrier is not qualified to do business as a foreign
corporation in the State of Texas, Carrier shall and does hereby irrevocably
designate and appoint the Secretary of State of the State of Texas as its agent
for service of process in any action, suit or proceeding with respect to any
matter as to which it submits to jurisdiction as set forth above, it being
agreed that any method of service upon such agent, with a copy sent to Carrier
in the manner set forth in Section 17 above, shall constitute valid service upon
Carrier. American designates CT Corporation as its agent for service of process
in Texas. American and Carrier each agrees that submission to jurisdiction and
designation of an agent for service of process set
36 CONFIDENTIAL
<PAGE>
forth above is made for the express benefit of the other party and is effective
solely for purposes of this Agreement.
e. Enforcement of Judgment. Final judgment against a party in any suit in
any court of competent jurisdiction shall be conclusive, and may be enforced in
other jurisdictions, to the extent permitted by Applicable Law, by suit on the
judgment, a certified and true copy of which, to the extent permitted by
Applicable Law, shall be conclusive evidence of the fact and the amount of any
indebtedness or liability of the party therein described.
f. Waiver of Immunity. To the extent that any party or any of its property
is or becomes entitled at any time to any immunity on the grounds of sovereignty
or otherwise, from any legal action, suit, arbitration or other proceeding, from
setoff or counterclaim, from the jurisdiction of any competent court (including
the courts referred to above), from service of process, from attachment prior to
judgment, from attachment in aid of execution, from execution prior to judgment,
from judgment, from jurisdiction, or from other legal process in any
jurisdiction, that party for itself and its property does hereby irrevocably and
unconditionally waives, and agrees not to plead or claim, any such immunity with
respect to its obligations, liabilities or any other matter arising out of or in
connection with this Agreement or the subject matter hereof. Such waiver and
agreement regarding immunity shall be irrevocable and not subject to withdrawal
in any and all jurisdictions including under the Foreign Sovereign immunities
Act of 1976 of the United States of America.
Section 19. No Waiver
No failure to exercise and no delay in exercising, on the part of any
party, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law. The failure of
any party to insist upon a strict performance of any of the terms or provisions
of this Agreement, or to exercise any option, right or remedy herein contained,
shall not be construed as a waiver or as a relinquishment for the future of such
term, provision, option, right or remedy, but the same shall continue and remain
in full force and effect. No waiver by any party of any term or provision of
this Agreement shall be deemed to have been made unless expressed in writing and
signed by an officer of the waiving party.
Section 20. Captions
The captions appearing in this Agreement have been inserted as a matter of
convenience and in no way define, limit or enlarge the scope of this Agreement
or any of the provisions hereto.
Section 21. Compliance with Applicable Laws
a. Compliance. Each party will comply with all Applicable Laws with
respect to this Agreement, the performance of its obligations hereunder, its
respective role in connection with the AAdvantage Program, and the products and
services to be provided by such party
37 CONFIDENTIAL
<PAGE>
hereunder. Each party will, at its expense. obtain and maintain the governmental
authorizations, licenses, approvals, certificates, permits, registrations and
filings that may be required of it under Applicable Law to execute or perform
this Agreement, which, in the case of Carrier shall include all licenses,
certificates and permits from all governmental and regulatory authorities
necessary to conduct its business as an authorized air carrier.
b. Unlawful Payments. Neither party hereto will offer, promise or pay any
money, gift or any other thing of value to any person for the purpose of
influencing official actions or decisions affecting this Agreement or the
transactions contemplated hereby. while knowing or having reason to know that
any portion of such money, gift, or thing will, directly or indirectly, be
given, offered or promised to (i) an employee, officer or other person acting in
an official capacity for any government or its agencies or instrumentalities, or
(ii) any political party, party official or candidate for political office.
Section 22. Force Majeure
Except with respect to the performance of a party's payment obligations
under this Agreement, neither party shall be liable for delays or failure in its
performance hereunder to the extent that such delay or failure of performance
(i) is caused by any act of God, war, strike, natural disaster, lockout, labor
dispute, work stoppage, fire, act of government, or any other cause, whether
similar or dissimilar, beyond the control of that party, and (ii) is not the
result of that party's lack of reasonable diligence.
Section 23. Independent Contractor
Each of Carrier and American is an independent contractor. Nothing in this
Agreement is intended or shall be construed to create or establish any agency,
partnership, joint venture or fiduciary relationship between the parties.
Neither Carrier nor any of its Affiliates has any authority to act for or to
incur any obligations on behalf of or in the name of American or any of its
Affiliates.
Section 24. Successor and Assigns
This Agreement shall be binding upon and shall inure to the benefit of the
permitted successors and assigns of each party hereto.
Section 25. Entire Agreement
This Agreement constitutes the entire agreement between the parties
relating to the AAdvantage Program and, as of the date first written above,
terminates and supersedes all prior or contemporaneous agreements, discussions,
undertakings, and understandings, whether written or oral, express or implied,
between the parties covering the AAdvantage Program. The attachments, exhibits
and schedules (if any) to this Agreement are incorporated into this Agreement
and form a part hereof for all intents and purposes. This Agreement may not be
amended or modified except in writing signed by an authorized officer of each
party hereto.
38 CONFIDENTIAL
<PAGE>
American and Carrier each expressly acknowledges and agrees that the
subject matter of this Agreement is Carriers participation in the AAdvantage
Program, and that this Agreement is in no way intended to limit or affect the
right of either American or Carrier to provide air transportation service on
such routes and to such destinations as each carrier independently determines to
be appropriate for its respective business.
Section 26. Title
Title and full and complete ownership rights to AAdvantage Program
membership data and information developed by American, wherever located, shall
remain the property of American and constitute Confidential information under
Section 6 above. Carrier understands and agrees that all such data and
information constitute American's proprietary information whether or not any
portion thereof is or may be validly copyrighted. Carrier agrees that any
membership lists, labels, reports, data or other compiled membership information
supplied to Carrier in any form by American and any and all copies thereof will
be used by Carrier exclusively in its performance of its obligations under this
Agreement and will not be sold, licensed, leased, transferred, stored in a
retrieval system, duplicated, or transmitted, in any form or by any means, or
used for any other purpose without the prior written consent of American. All
such information is subject to the provisions of Section 6.c. of this Agreement.
Nothing in this Agreement, however, shall prevent Carrier from independently
compiling information regarding its revenue passengers so long as (i) the status
of being an AAdvantage Member, AAdvantage Account numbers, any other AAdvantage
membership data, or any reference to or other association with American is not
identified in, or used as a factor or criteria in compiling, such information,
and (ii) any promotions or communications directed at such revenue passengers,
or any partial grouping thereof, by Carrier or by Carrier jointly with another
Person or Persons, are not directed exclusively to such individuals, and will
not reference such individuals, as Members or travelers on American.
Section 27. No Third Party Beneficiaries
All rights, remedies and obligations of the parties under this Agreement,
shall accrue or apply solely to the parties hereto or their permitted successors
or assigns and there is no intent to benefit any third parties, including,
without limitation, Members.
Section 28. Time
Time is of the essence with respect to the performance of the material
provisions hereunder.
39 CONFIDENTIAL
<PAGE>
Section 29. Further Assurances
Each party hereto shall do and perform such further acts and execute and
deliver such further instruments at such party's expense as may be required by
Applicable Law or reasonably requested by any other party to carry out and
effectuate this Agreement and the transactions contemplated hereunder.
Section 30. Severability
If any indication is received in writing by either party from any
Competent Authority to the effect that any part of this Agreement contravenes
any Applicable Law and cannot qualify for any applicable clearance or exemption,
or if any part of this Agreement is, or shall become, or shall be declared
illegal, invalid or unenforceable in any jurisdiction for any reason whatsoever
(including both by reason of the provisions of any legislation and also by
reason of any decision of any Competent Authority, either having jurisdiction
over this Agreement or any party to this Agreement), such part shall be severed
from this Agreement in the jurisdiction in question and such contravention,
illegality, invalidity or unenforceability shall not in any way whatsoever
prejudice or effect the remaining parts of this Agreement which shall continue
in full force and effect provided, always, that if, in the reasonable opinion of
any party to this Agreement, any such severance affects the commercial basis of
this Agreement, such party shall so inform the other party, whereupon the
parties shall negotiate to agree upon an amendment to the Agreement which will
maintain the balance of the commercial interests of the parties under this
Agreement. If, however, such negotiations shall not be successfully concluded
within thirty (30) days, either party shall have the right to terminate this
Agreement upon giving at least ninety (90) days written notice to the other
party.
Section 31. Legal Representation
Each party hereto hereby acknowledges that this Agreement has been
negotiated at arms-length through legal counsel of its own choosing. If a party
has not been represented by legal counsel, it hereby acknowledges that it was
given the opportunity to engage legal counsel and decided to waive that right.
Section 32. Effective Data
The effectiveness of this Agreement and the obligations of Carrier and
American hereunder are subject to, and shall be conditioned upon, the RDU
Sublease becoming effective and commencing.
Section 33. Counterparts
The Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
40 CONFIDENTIAL
<PAGE>
Section 34. Exclusion of Consequential Damages
EXCEPT FOR INDEMNIFICATION OBLIGATIONS, NEITHER PARTY WILL BE LIABLE FOR
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOST
REVENUES, LOST PROFITS, OR LOST PROSPECTIVE ECONOMIC ADVANTAGE, ARISING FROM ANY
PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, EVEN IF SUCH PARTY KNEW
OR SHOULD HAVE KNOWN OF THE EXISTENCE OF SUCH DAMAGES, AND EACH PARTY HEREBY
RELEASES AND WAIVES ANY CLAIMS AGAINST THE OTHER PARTY FOR SUCH DAMAGES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ John Selvaggio By: /s/ M. W. Gunn
------------------------ -------------------
John Selvaggio M. W. Gunn
President Senior Vice President - Marketing
41 CONFIDENTIAL
<PAGE>
ATTACHMENT A
ACCRUAL MILES
Only regularly scheduled, on-line air travel service operated by Carrier
on each of the following O & D city pairs, in both directions ("Carrier
Flights"), are eligible for Accrual Miles credit for Revenue Travel by Members:
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
The foregoing fourteen (14) O & D city pairs shall each be an
Original O & D City Pair for the purposes of Section 11.k. of
the Agreement
RDU-MDW Provided, however, that on and after July 1, 1995, Carrier
shall pay to {***} Accrual Mile posted for Revenue
Travel on the {***} city pair, which shall be the
applicable fee for the purposes of Section 8.a. of the
Agreement, whether or not Carrier has elected to convert to
the alternative fee structure described in that Section.
A-1 CONFIDENTIAL
<PAGE>
No Codeshare Flights shall be eligible for Accrual Miles credit as a Carrier
Flight unless approved for such credit by American pursuant to Section 4.j. of
the Agreement.
Accrual Mile Guidelines
American will award Accrual Miles for Revenue Travel in the following
booking classes pursuant to the terms of Section 2.a. of the Agreement:
Coach Class: Y, B, H, Q, V, K, M (or any surviving codes designated
by Carrier from time to time).
If Carrier introduces a First Class:
F (or any surviving codes designated by Carrier from time to time).
For Revenue Travel which involves consecutive travel under a single flight
coupon on any two or more of the O & D city pairs listed in this Attachment A,
and only the O & D city pairs listed on this Attachment A, Actual Miles and
Accrual Miles will be calculated based on the United States Department of
Transportation approved non-stop mileage between the city were the Member
commenced such travel on the coupon and the city where the Member finished such
travel on the coupon.
Accrual Miles will not be awarded for any travel on free AAdvantage
Awards, Midway Merits Program awards or other free ticket promotions, including
free or reduced rate companion tickets, any industry or agency discount tickets
or passes, charter flight tickets, infant and unpublished fare tickets, or
tickets issued subject to special provisions.
In the case of upgraded travel through the use of an Upgrade Sticker,
Accrual Miles will be awarded based on the paid class of service.
A-2 CONFIDENTIAL
<PAGE>
ATTACHMENT B
AWARD TRAVEL
Only regularly scheduled, on-line air travel service operated by Carrier
between any of the following destinations, in any direction ("Award Flights"),
are available to all Members for Award Travel:
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
{***}
The following Codeshare Flights between the following destinations, in any
direction, are available to all Members for Award Travel, so long as such
Codeshare Flights are operated are marketed under Carrier's "JI" designator
code:
None.
Provided, however, that the above described travel is not available for
Award Travel during the Blackout Dates, or for First Class travel (if offered)
or any other class other than Coach Class.
B-1 CONFIDENTIAL
<PAGE>
Award Prices
(The following prices are applicable only until Carrier elects (if over) to
convert to the alternative fee structure described in Section 8.a. of the
Agreement)
The following zone definitions apply for Award Travel on Carrier:
ZONE 1: {***}
ZONE 2: {***}
For each Award Document issued pursuant to this Agreement, American shall
owe Carrier the applicable amount set forth below (all prices are stated and
shall be paid in U.S. Dollars):
Award Price
One Free Round Trip Ticket
------------------------------
Coach First
Class Class
Travel between any destination
within Zone 1 {***} N/A
-----
Travel between Zone 1 {***} N/A
destinations and Zone 2 -----
destinations
All of the above Award Travel is valid for round trip travel between the
applicable destinations, but may be used for one way travel if desired; however,
the award will not be reduced based on a one way trip.
B-2 CONFIDENTIAL
<PAGE>
ATTACHMENT C
AWARD TRAVEL BLACKOUT DATES
Blackout dates for Award Travel:
1995 1996
---- ----
January l, 2 January l
November 22, 26 March 8-10, 15-17
December 23, 24, 31 April 5-7
November 27, December 1, 2
December 20-22, 24, 27-29
C-1 CONFIDENTIAL
<PAGE>
ATTACHMENT D
DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
Table of Contents
Data Flow:
1.0 Data Posting-AAdvantage Transactions
2.0 Data Reconciliation
3.0 Definitions and Record Layouts
4.0 Monthly Billing-Mileage Postings
5.0 Monthly Billing-Mileage Redemption
6.0 Allowable Characters
7.0 Check Digit Routine
8.0 Transmittal Form
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
1.0 Data Posting - AAdvantage Transactions
1.1 Carrier will provide transmissions listing by AAdvantage number,
Members with qualified flights for posting to the AAdvantage
database. The transmission will include the following data elements:
(See Section 3.0 for record format and definitions)
Transaction Type Board Point
Partner ID Off-point
Partner Service Term Code Scheduled Departure Time
Member ID Scheduled Arrival Time
Member Last Name Cabin Purchased
Member First initial Booking Class
Flight Date Input Record Number
Carrier ID Flight Number
1.1.1 Accurate name and AAdvantage number data transfer is
paramount. See Sections 6 and 7 of Data Flow.
1.2 Carrier will provide weekly transmissions to the AAdvantage
department.
1.2.1 Each transmission will include the previous period's data and
any corrected data from earlier posting tapes.
1.2.2 The weekly transmission must be delivered by the Tuesday
following the reporting period.
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<PAGE>
DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
2.0 Data Reconciliation
2.1 All Member flight information that is rejected during the
autoposting procedure (outlined in Section 1.0) will be displayed in
an error file. The report will list only Carrier data.
2.2 The AAdvantage Customer Service Department will review this error
file and make any reasonable corrections on a manual basis to the
Member name and/or AAdvantage number only. The error report of
uncorrected errors will be sent to Carrier for reconciliation.
2.3 The error report will include the following data elements:
AAdvantage Number Flight Number
Last Name Class of Service
First Initial Board Point
Transaction Code Off Point
Flight Date Type of Error
2.4 Carrier will research any records that the AAdvantage department is
unable to manually correct. These records will be retransmitted on a
subsequent transmissions within a thirty (30) day period.
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
3.0 Data Element Definitions - AAdvantage Transactions
Transaction Type One character (alpha).
The allowable transaction codes is "A".
Partner ID Three characters (alpha).
Industry standard airline code ("{XX}").
Left justified, blank filled.
Partner Service Five characters (alpha/numeric).
Term Code Value provided by American ("{XX001}").
Member ID Seven character AAdvantage number
(alpha/numeric).
Member Last Name Twenty characters
Left justified, blank filled.
See Allowable Characters in Section 6.
Member First One character (alpha).
Flight Date Eight characters (numeric).
Formatted YYYYMMDD.
Carrier ID Three characters (alpha).
Industry standard airline code.
Left justified, blank filled.
Flight Number Four characters (numeric).
Right justified, leading zeroes.
Board Point Three characters (alpha).
IATA Airport Code
Off-point Three characters (alpha).
IATA Airport Code.
Scheduled Departure Four characters (numeric).
24 - Time hour clock (Optional).
Scheduled Arrival Four characters (numeric).
24 - Time hour clock. (Optional).
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
3.0 Data Element Definitions - AAdvantage Transactions (cont.)
Cabin Purchased Four characters (alpha).
Left justified, trailing spaces.
Booking Class One character (alpha).
Input Record Five characters (numeric).
Number
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<PAGE>
DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
3.1 Flight Posting Transmission Format
Field No. Field Title Length From - To Type Notes
- --------- ----------- ------ --------- ---- -----
1 Trans. Type 1 001-001 Char 'A'
2 Partner ID 3 002-004 Char '{XX}'
3 Part. Svc Term 5 005-009 Char '{XX001}'
Code
4 Member ID 7 010-016 Char AAdvantage Number
5 Member Last 20 017-036 Char Left justified;
Name trailing spaces
6 Member First 1 037-037 Char
Initial
7 Flight Date 8 038-045 Num YYYYMMDD
8 Carrier ID 3 046-048 Char '{XX}'
9 Flight Number 4 049-052 Num Right justified;
leading zeroes.
10 Board Point 3 053-055 Char IATA Airport Code
11 Filler 2 056-057 Char Reserved: spaces.
12 Off Point 3 058-060 Char IATA Airport Code
13 Filler 2 061-062 Char Reserved; spaces.
14 Scheduled 4 063-066 Num 24-hour clock
Departure Time
15 Scheduled 4 067-070 Num 24-hour clock
Arrival Time
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DATA PLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
3.1 Flight Posting Transmission Format (cont.)
Field No. Field Title Length From - To Type Notes
- --------- ----------- ------ --------- ---- -----
16 Class of Svc 4 071-074 Char Y=Coach;
C=Business;
F=First
17 Filler 1 075-075 Char Reserved; spaces.
18 Filler 1 076-076 Char Reserved; spaces.
19 Filler 1 077-077 Char Reserved; spaces.
20 Input Record 5 078-082 Num Batch Sequence
Number Number
21 Filler 16 083-098 Char Reserved; spaces
22 Filler 7 099-105 Char Reserved; spaces
23 Filler 5 106-110 Char Reserved; spaces
Transmission LRECL=110 BLKSIZE=27940 RECFM=FB
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<PAGE>
DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
4.0 Monthly Billing - Mileage Posting
4.1 On a monthly basis, American will provide supporting detail
for all transactions for which Carrier is being billed,
including all data provided by Carrier and data posted
manually by the AAdvantage department.
4.2 An invoice and a mileage posting summary report (hard copy)
are sent monthly. The mileage posting detail is provided via
transmission..
4.2.1 The billing detail includes the following
Member Information
o AAdvantage number (sorted in numeric sequence)
o Last Name
o First Initial
Flight Information
o Flight Date
o Flight Number
o Transaction Code
o Board Point
o Off Point
o Class of Service
o Base Miles
o Bonus Miles (Class of Service, and Promotional)
o Total Miles
o Source code (V,D) (V=Vendor or {XX} and
D=Manual or AA)
4.2.2 The summary report (hard copy) includes the following by
Class of Service
o Base Miles
o Class of Service Bonus Miles
o Promotional Bonus Miles
o Credited miles for each of the four mileage
categories listed above.
4.2.3 Additionally the summary report includes a trip grid by
Class of Service
o Number of accounts with trips
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o Number of trips
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DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
4.0 Monthly Billing - Mileage Postings (continued)
4.3 Mileage fields may be negative values if credits are posted.
4.4 No other mileage posting reports will be generated.
4.5 All paper reports will include totals for all applicable
columns.
5.0 Monthly Billing - Mileage Redemption
5.1 On a monthly basis, American will provide a summary of all the
AAdvantage awards claimed for travel on Carrier.
5.2 The awards summary report (hard copy) includes the following
data:
o Award Code
o Award Description
o Awards Issued
o Awards Reinstated
o Net Awards Issued
5.3 No other mileage redemption reports will be generated
6.0 Allowable characters with the Name Fields
The only acceptable characters within the name fields are:
- All alpha characters.
- ' (apostrophe).
- # (pound sign) [used only to designate blanks
embedded in the name field].
- - (hyphen).
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<PAGE>
DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
7.0 Check Digit Routine
7.1 The last digit of the AAdvantage number is a check digit to be
used by Carrier to verify the validity of the number before
providing it to American. American will also perform a last
name/number match before posting mileage to a Member's
account.
7.2 The check digit is equal to the first digit of the remainder
of the following q calculation.
(A1 + A3) x 2 +(A3 + A5) x 2 + (A4 + A6) x 2
--------------------------------------------
10
Where Al is the value of the first position of the AAdvantage
number and A3 is the value of the third position, etc. The
value of a position is determined using the decimal equivalent
of the EBCDIC code as defined in the IBM system 370 reference
summary code translation table, as shown below.
Character Value Character Value
--------- ----- --------- -----
0 240 I 201
1 241 J 209
2 242 K 210
3 243 L 211
4 244 M 212
5 245 N 213
6 246 O 214
7 247 P 215
8 248 Q 216
9 249 R 217
A 193 S 226
B 194 T 227
C 195 U 228
D 196 V 229
E 197 W 230
F 198 X 231
G 199 Y 232
H 200 Z 233
D-11
01/17/95
CONFIDENTIAL
<PAGE>
DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
7.0 Check Digit Routine (continued)
7.2 (continued)
Example: For the AAdvantage number AX65266 the calculation is
(193 + 246) x 2 + (246 + 242) x 2 + (245 + 246) x 2
---------------------------------------------------
10
=283.6
Therefore, the check digit is 6, confirming that the AAdvantage
number is valid as it equals the last digit of the AAdvantage
number.
7.3 The following parameters are also applicable in determining
the validity of an AAdvantage number:
o The letters G and S may appear only in the first
position of a valid AAdvantage number.
o The letters I, O, Q and Z never appear in any position
of a valid AAdvantage number.
D-12
01/17/95
CONFIDENTIAL
<PAGE>
DATA FLOW AND INPUT/OUTPUT SPECIFICATIONS
Carrier
8.0 Transmittal Form
Transaction/Bonus Transmission
To be completed by Carrier
Starting Flight Date:_______
Ending Flight Date:_____
Record Count:___________
Submitted by:
Date:______
Telephone number:_______
Fax copy of this form to:
American Airlines
Manager AAdvantage Administration
MD 1395 CP2
4200 Amon Carter Blvd.
Fort Worth, TX 76155
Fax Number: (817) 963-7702
Phone number: (817) 963-7718 - Mr. Tom Reilly
D-13
01/17/95
CONFIDENTIAL
<PAGE>
ATTACHMENT E
SUPPLEMENTAL PROVISIONS
Part I. Minimum Flight Activity Levels:
The following minimum flight activity level shall be required of Carrier
during the term of this Agreement:
(i) From the Effective Date through and including July 15, 1995,
Carrier will operate a minimum of twenty (20) daily non-stop jet
departures (in the aggregate) from Raleigh/Durham International Airport
(RDU) on the O & D city pair routes set forth on Attachment A.
(ii) From July l6,1995 through and including the date the Agreement
expires or terminates, Carrier will operate a minimum of thirty-five (35)
daily non-stop jet departures (in the aggregate) from Raleigh/Durham
International Airport (RDU) on the O & D city pair routes set forth on
Attachment A.
Part II. Additional Reports by Carrier:
During the term of this Agreement, Carrier shall furnish to American (to
4333 Amon Carter Boulevard, MD 5566, Fort Worth, Texas 76155, Attention: Vice
President - Corporate and Fleet Planning) the following:
A. As soon as available and in any event within one hundred eighty
(180) days after the close of each fiscal year of Carrier, copies of
the financial statements of Carrier for the fiscal year then ended
including, without limitation, a balance sheet of Carrier as of the
close of such fiscal year and statements of income, shareholders
equity and cash flows for such fiscal year.
B. As soon as available, and in any event within fifty (50) days after
the end of each fiscal quarter of Carrier, copies of the financial
statements of Carrier for the fiscal quarter then ended including,
without limitation, a balance sheet of Carrier as of the end such
quarter and statements of income, shareholders equity and cash flows
for such quarter and for the portion of the fiscal year ending with
such quarter, all in reasonable detail, and certified by the chief
financial officer of Carrier as being true and correct and as having
been prepared in accordance with generally accepted accounting
principles ("GAAP") and as fairly presenting the assets,
liabilities, financial condition and results of operations of
Carrier.
Each such financial statement shall be accompanied by a certificate signed
by the chief financial officer of Carrier certifying as to whether Carrier is in
default under this Agreement any other agreement with American or its
Affiliates, or any material agreement to which Carrier is a party or by which it
or any of its properties are bound. Further, each of the
E-1 CONFIDENTIAL
<PAGE>
annual financial statements shall be accompanied by a certificate from Arthur
Anderson & Co., Carrier's independent certified public accountants, or such
other "Big Six" independent certified public accounting firm chosen by Carrier,
stating that (x) such financial statements have been prepared in accordance with
GAAP and fairly present the financial position, results of operations and cash
flows of Carrier, (y) the examinations of Carrier's accounts in connection with
such financial statements have been made in accordance with generally accepted
auditing standards and included such tests of the accounting records and such
other auditing procedures as were considered necessary in the circumstances and
(z) nothing has come to the attention of such accountants in the course of their
audit that caused them to believe there exists any set of circumstances which
would constitute a default by Carrier under this Agreement, any other agreement
with American or its Affiliates, or any material agreement to which Carrier is a
party or by which it or any of its properties are bound, (and, with respect to
this Subparagraph (z), such certificate may also state that such accountants
have not expanded the scope of the procedures performed in the course of their
audit in order to deliver such certificate).
If at any time any monies owed by Carrier under this Agreement are past
due and owing, then upon the request of American, Carrier shall also furnish to
American, as soon as available on a continuing basis, and in any event within
twenty (20) days after the end of each calendar month, copies of the summary
financial statements of Carrier as of the end of in month most recently
completed which are produced for the use of management of Carrier, including,
without limitation, a balance sheet of Carrier as of the end of such month and
statements of income, shareholders equity and cash flows for such month and for
the portion of the fiscal year ending with such month, all in reasonable detail,
and certified by the chief financial officer of Carrier as being true and
correct and as having been prepared in accordance with GAAP and as fairly
presenting the assets, liabilities, financial condition and results of
operations of Carrier.
Carrier shall be required to give American immediate notice of any
default, event of default, right of termination, suspension, acceleration,
breach or other similar event (or any event or set of circumstances which with
notice or the lapse of time or both, would constitute any of the foregoing)
under this Agreement or with respect to any material indebtedness of Carrier.
Carrier's chief financial officer shall be required to provide a certificate
with each set of annual and quarterly financial statements and, if provided,
monthly financial statements that (i) Carrier has not received any notice of a
default, event of default, right of termination, suspension, acceleration,
breach or similar event (or any event or set of circumstances which with notice
or the lapse of time or both, would constitute any of the foregoing) regarding
this Agreement, any other agreement with American or its Affiliates, or any
agreement or instrument involving any material indebtedness of Carrier, and (ii)
there exists no set of circumstances which would constitute or give rise to any
event or set of circumstances specified in claim (i) above.
E-2 CONFIDENTIAL
<PAGE>
CONFIDENTIAL
FIRST AMENDMENT TO
AADVANTAGE(R) PARTICIPATING CARRIER AGREEMENT
This First Amendment to AAdvantage Participating Carrier Agreement (this
"Amendment"), dated as of October 1, 1995, is made by and between American
Airlines, Inc., a Delaware corporation having its principal place of business at
4333 Amon Carter Boulevard, Fort Worth, Texas 76155 ("American"), and Midway
Airlines Corporation, a Delaware corporation, having its principal place of
business at 300 W. Morgan Street, 12th Floor, Durham, North Carolina 27701
("Carrier")
WHEREAS, American and Carrier are parties to that certain AAdvantage
Participating Carrier Agreement, dated as of January 18, 1995 (the "Agreement");
and
WHEREAS, American and Carrier desire to amend the Agreement to provide for
(i) an expanded description of the reports required to be provided by Carrier in
connection with the acceptance of Upgrade Stickers; (ii) the addition of certain
O & D city pairs as Carrier Flights and Award Flights: and (iii) the addition of
certain Codeshare Rights as Carrier Flights and Award Flights, all upon the
terms and subject to the conditions of this Amendment;
NOW THEREFORE, in consideration of the mutual covenants and promises in
this Amendment, American and Carrier agree as follows:
1. The definition of "Paid Upgrade Sticker" in Section 1 of the Agreement
is hereby amended and restated in its entirety to read as follows:
"Paid Upgrade Sticker" means an Upgrade Sticker for which a Member
has paid consideration to American and which bears one of the following
sticker codes: AP, SG, GP or SR.
2. The first sentence of Section 3.c.i. of the Agreement is hereby amended
and restated in its entirety as follows:
{***}
3. Section 3.h.i. of the Agreement is hereby amended and restated in its
entirety to read as follows:
"i. If Carrier offers a First Class service during the term of this
Agreement, and for as long as American permits Members to use Upgrade
Stickers, Carrier will accept all Upgrade Stickers and upgrade the Member
tendering such Upgrade Sticker by one class
1 CONFIDENTIAL
<PAGE>
of service for Carrier Flights with First Class service, if space is
available, pursuant to the procedures described in Subsection 3.h.ii
below; provided, however, that for the purposes of this Agreement, Accrual
Miles for Revenue Travel made in conjunction with an Upgrade Sticker shall
be awarded based only on the class of service paid for. Carrier will not
charge Members for the use of Upgrade Stickers. Carrier will permit
American (upon American's providing to Carrier at least two Business Days'
prior written notice) to inspect Carrier's relevant books and records to
verify the numbers and types of Upgrade Stickers honored by Carrier and
the amount owing by American to Carrier therefor."
4. Section 8.c.iii. of the Agreement is hereby amended and restated in its
entirety to read as follows:
"iii. American will pay Carrier for Paid Upgrade Stickers accepted
and honored by Carrier (if any) in a given month, no later than thirty
(30) days following receipt of an invoice (if any) from Carrier for the
month in question, which invoice shall be supported by a detailed report
listing, for each segment for which a Paid Upgrade Sticker was accepted
and an upgrade provided, (i) the date of travel, (ii) the Carrier Flight
number, (iii) the O&D city pair flown, (iv) the ticket number, (v) the
sticker code of the Paid Upgrade Sticker used, and (vi) the applicable
price (as set forth in Section 8.b. above) for the Paid Upgrade Sticker
being reported. The report will present such information grouped and
totaled by Paid Upgrade Sticker code, and will also show the total due for
all Paid Upgrade Stickers being reported."
5. Section 17 of the Agreement is hereby amended by deleting the address
of Midway Airlines Corporation and that of Jonathan S. Waller in their entirety
and by inserting in lieu thereof the following information:
Midway Airlines Corporation
300 W. Morgan Street, 12th Floor
Durham, North Carolina 27701
Attention: President (and)
Attention: General Counsel
Phone: (919) 956-4800
Fax: (919) 956-4801
6. Attachment A and Attachment B of the Agreement are hereby amended and
restated in their entireties to read as set forth in Exhibit A and Exhibit B to
this Amendment.
7. The Agreement is hereby amended to add a new Attachment F which reads
as set forth in Exhibit C to this Amendment.
8. Unless the context otherwise requires, all capitalized terms used in
this Amendment but not herein defined shall have the meanings ascribed such
terms in the Agreement. Carrier and American agree that, except for those
modifications expressly set forth in this Amendment, all terms and provisions of
the Agreement shall remain unchanged and in full force and effect. No waiver or
modification of the terms or provisions of the Agreement is
2 CONFIDENTIAL
<PAGE>
intended or is to be inferred, except as expressly provided in this Amendment.
This Amendment and the Agreement shall hereafter be read and construed together
as a single document, and all references in the Agreement to the Agreement shall
hereafter refer to the Agreement as amended by this Amendment. This Amendment is
intended for the sole benefit and use of Carrier and American or their permitted
successors or assigns and is not intended to confer rights upon any third
parties, including, without limitation, Members.
9. This Amendment may be executed by Carrier and American in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument. Confirmation of the execution of this Agreement by a telefax of a
facsimile signature page or pages executed by Carrier and American shall be
binding upon the parties hereto.
IN WITNESS WHEREOF, American and Carrier have executed this Amendment as
of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Joanne Smith By: /s/ Henry C. Joyner
-------------------------- ------------------------------------
Name: Joanne Smith Name: Henry C. Joyner
------------------------ ----------------------------------
Title: Senior Vice President Title: Vice President Marketing Planning
------------------------ ---------------------------------
3 CONFIDENTIAL
<PAGE>
EXHIBIT A
{***}
A-1 CONFIDENTIAL
<PAGE>
Effective as of October 1,1995, and subject to the terms and conditions of
this Agreement (including, without limitation, the terms and conditions set
forth in Attachment F to this Agreement), the Codeshare Flights operated between
each of the following O & D city pairs (in both directions) by Great Lakes
Aviation, Ltd. or its wholly-owned subsidiary, d/b/a Midway Connection
("Commuter"), will be Carrier Flights eligible for Accrual Miles credit for
Revenue Travel by Members, all according to the terms of this Agreement: All O &
D city-pairs listed above as eligible for Accrual Miles credit for Revenue
Travel by Members.
Carrier will be solely responsible for, and will pay American for, Accrual
Miles awarded for Member's Revenue Travel on the above Codeshare Flights, all in
accordance with the terms and conditions of this Agreement. For the purposes of
the transactions contemplated by the Agreement, Carrier will be responsible for
all of the above Codeshare Flights as if they were flights operated by Carrier.
Except as otherwise provided in this Agreement, the above Codeshare Rights will
be treated in accordance with the terms and conditions of this Agreement as
Carrier Flights.
Except for the Codeshare Flights listed above, no other Codeshare Flights
shall be eligible for Accrual Miles credit as a Carrier Flight unless approved
for such credit by American pursuant to Section 4.j. of the Agreement.
Accrual Mile Guidelines
American will award Accrual Miles for Revenue Travel in the following
booking classes pursuant to the terms of Section 2.a. of the Agreement:
Coach Class: Y, B, H, Q, V, K, M, Z
(or any surviving codes designated by Carrier from time to time).
First Class (where available): F
(or any surviving codes designated by Carrier from time to time).
For Revenue Travel which involves consecutive travel under a single flight
coupon on any two or more of the O & D city pairs listed in this Attachment A,
and only the O & D city pairs listed on this Attachment A, Actual Miles and
Accrual Miles will be calculated based on the United States Department of
Transportation approved non-stop mileage between the city were the Member
commenced such travel on the coupon and the city where the Member finished such
travel on the coupon.
Accrual Miles will not be awarded for any travel on free AAdvantage
Awards, Midway Merits Program awards or other free ticket promotions, including
free or reduced rate companion tickets, any industry or agency discount tickets
or passes, charter flight tickets, infant and unpublished fare tickets, or
tickets issued subject to special provisions.
In the case of upgraded travel through the use of an Upgrade Sticker or
any similar promotions, Accrual Miles will be awarded based on the paid class of
service."
A-2 CONFIDENTIAL
<PAGE>
EXHIBIT B
"ATTACHMENT B
AWARD TRAVEL
Only regularly scheduled, on-line air travel service operated by Carrier
between any of the following destinations, in any direction, either connecting
through RDU or as a non-stop to or from RDU ("Award Flights"), are available to
all Members for Award Travel: All O & D city-pairs listed on Attachment A as
eligible for Accrual Miles credit for Revenue Travel by Members.
Effective as of October 1,1995, and subject to the terms and conditions of
this Agreement (including, without limitation, the terms and conditions set
forth in Attachment F to this Agreement). the Codeshare Flights operated between
the following destinations, in any direction either connecting through RDU or as
a non-stop to or from RDU by Commuter (as defined in Attachment A of this
Agreement), will be Award Flights for the purposes of the Agreement, available
to all Members for Award Travel according to the terms of this Agreement: All O
& D city-pairs listed on Attachment A as eligible for Accrual Miles credit for
Revenue Travel by Members.
Provided, however, that the above described travel is not available for
Award Travel during the Blackout Dates, or for First Class travel (if offered)
or any other class other than Coach Class.
Award Prices. (The following prices are applicable only until Carrier elects
(if ever) to convert to the alternative fee structure described
in Section 8.a. of the Agreement.)
The following zone definitions apply for Award Travel on Carrier and Commuter:
ZONE 1: All O & D city-pairs eligible for Award Travel on Carrier and
Commuter that are not listed under Zone 2 below.
ZONE 2: {***}
For each Award Document issued pursuant to this Agreement, American shall
owe Carrier the applicable amount set forth below (all prices are stated and
shall be paid in U.S. Dollars):
Award Price
One Free Round Trip Ticket
--------------------------
Coach First
Class Class
Travel between any destination
within Zone 1 $50 N/A
-----
Travel between Zone 1 $60 N/A
destinations and Zone 2 -----
destinations
B-1 CONFIDENTIAL
<PAGE>
All of the above Award Travel is valid for round trip travel between the
applicable destinations, but may be used for one way travel if desired; however,
the award price will not be reduced based on a one way trip."
B-2 CONFIDENTIAL
<PAGE>
EXHIBIT C
ATTACHMENT F
TERMS AND CONDITIONS REGARDING THE INCLUSION
OF CERTAIN CODESHARE FLIGHTS
In addition to all other rights of termination and cancellation provided
under this Agreement, American may terminate the inclusion of all of the
Codeshare Flights operated by Commuter (as defined in Attachment A of this
Agreement) ("Commuter Codeshare Flights") as Carrier Flights or Award Flights
under this Agreement, at any time, for any reason (with or without cause), and
without any liability or obligation to Carrier or Commuter (except for payment
of amounts due and owing and performance of obligations accrued, in each case on
or prior to the date of termination of inclusion of the above Codeshare Flights)
by providing at least thirty (30) days prior written notice to Carrier.
In addition to all other rights of termination and cancellation provided
under this Agreement, inclusion of the above Codeshare Flights as Carrier
Flights or Award Flights under this Agreement may be canceled by either American
or Carrier (at their respective options), for all purposes under this Agreement,
simultaneously with the termination or expiration of (i) the Airline Services
Agreement, dated as of August 8, 1995, between Carrier and Commuter and (ii) the
Agreement of Sublease, dated as of January 18, 1995, between American and
Commuter relating to RDU.
American and Carrier (i) acknowledge and agree that Commuter is not a
third party beneficiary under this Agreement (pursuant to Section 27 or
otherwise), and (ii) acknowledge receipt of the letter, dated effective October
1, 1995 signed by Commuter and confirming Commuter's agreement to and acceptance
of the same.
C-1 CONFIDENTIAL
<PAGE>
October 26, 1995
Great Lakes Aviation, Ltd.
190 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, Minnesota 55431
Re: First Amendment to AAdvantage Participating Carrier Agreement (the
"Amendment") between American Airlines, Inc. ("American") and Midway
Airlines Corporation ("Midway")
Dear Sir or Madam:
As you know, the Amendment addresses coverage of certain Codeshare Flights
of Great Lakes Aviation, Ltd. or any wholly-owned subsidiary thereof, d/b/a
Midway Connection ("MC"), under the AAdvantage Participating Carrier Agreement,
dated as of January 18, 1995, between American and Midway, as amended (the
"Agreement"). Prior to entering into the Amendment, American will require that
MC confirm the following points:
1. MC has read and understands the Amendment (in the attached form);
and
2. MC is not a third party beneficiary of any kind to or under the
Agreement or the Amendment.
Please confirm your agreement to and acceptance of the foregoing by
countersigning the enclosed originals of this letter and returning one such
original to the undersigned.
Sincerely,
AMERICAN AIRLINES, INC.
By: /s/ Henry C. Joyner
---------------------------
Name: Henry C. Joyner
Title: Vice President Marketing Planning
CONFIRMED (as of the date first written above):
GREAT LAKES AVIATION, LTD., on its own behalf and on behalf of and as authorized
agent for Northern Star Airlines, Inc., a wholly owned subsidiary of Great Lakes
Aviation, Ltd., and for RDU, Inc., a wholly-owned subsidiary of Great Lake
Aviation, Ltd.
By: /s/ George A. Rasmusson
---------------------------------
Name: George A. Rasmusson
-------------------------------
Title: Exec. V.P. Cust Svc & Admin.
------------------------------
<PAGE>
cc: Midway Airlines Corporation
300 West Morgan Street
Suite 1200
Durham, North Carolina 27701
ATTN: Joanne Smith
<PAGE>
SECOND AMENDMENT TO
AADVANTAGE PARTICIPATING CARRIER AGREEMENT
This Second Amendment to AAdvantage Participating Carrier Agreement (this
"Second Amendment"), dated as of December 10,1996, is by and between AMERICAN
AIRLINES, INC., a Delaware corporation having its principal place of business at
4333 Amon Carter Boulevard, Fort Worth, Texas 76155 ("American"), and Midway
Airlines Corporation, a Delaware corporation, having its principal place of
business at 300 W. Morgan Street, 12th Floor, Durham, North Carolina, 27701
("Carrier").
WHEREAS, American and Carrier are parties to that certain AAdvantage
Participating Carrier Agreement, dated January 18, 1995 ("the Agreement"), as
amended; and
WHEREAS, American and Carrier desire to amend the Agreement to provide for
an alternative fee structure upon the terms and subject to the conditions of
this Second Amendment; and
NOW, THEREFORE, in consideration of the mutual covenants and promises in
this Second Amendment, the parties hereto agree as follows:
1. Carrier will exercise the option (per Section 8a.ii.A. of the Agreement) to
convert on a permanent basis (without retroactive application) to the following
alternative fee structure in lieu of the fees set forth in Section 8.a.i.
effective December 1,1996.
A. Carrier shall pay American on a monthly basis, for every Accrual
Mile posted to a Member's AAdvantage Account as follows:
{***}
{***}
{***}
B. American shall not owe Carrier any amounts for Award Documents
issued for Award Travel.
<PAGE>
2. Except for the modifications expressly set forth in this Second Amendment,
all provisions of the Agreement will remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as of the date first written above.
Signed for and on behalf of Signed for and on behalf of
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Joanne Smith By: /s/ Henry C. Joyner
----------------------- ------------------------
Joanne Smith Henry C. Joyner
Senior Vice President Vice President
Marketing Marketing Planning
<PAGE>
EXHIBIT E
THIRD AMENDMENT TO AADVANTAGE
PARTICIPATING CARRIER AGREEMENT
This Third Amendment to AAdvantage Participating Carrier Agreement ("Third
Amendment"), dated as of February 10, 1997, by and between American Airlines,
Inc. ("American") and Midway Airlines Corporation ("Carrier).
WHEREAS, American and Carrier have entered into an AAdvantage
Participating Carrier Agreement (the "Agreement") dated as of the 18th day of
January, 1995, amended pursuant to the Amendment to AA Agreements dated as of
April 25,1996 (the "First Amendment") and as of December 10,1996 (the "Second
Amendment") (for ease in drafting the Agreement, the First Amendment and the
Second Amendment are collectively referred to herein as the Agreement), pursuant
to which Carrier participates in American's AAdvantage Program; and
WHEREAS, concurrently herewith, American and Carrier are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Carrier; and
WHEREAS, in connection with such restructuring, Carrier has requested and
American has agreed to make certain Amendments to the Agreement, subject to the
terms and conditions set forth in this Third Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Carrier agree to amend the Agreement as follows:
1. Section 1 is amended to change the definition of "Expiration Date" in its
entirety to read as follows:
"Expiration Date" means 23.59 Coordinated Universal Standard Time (UTC) on
April 30, 2001, unless this Agreement is extended or terminated earlier in
accordance with the terms of this Agreement, in which case the last day of
the extended term of the date on which this Agreement is earlier
terminated shall be the Expiration Date."
2. Section 8.a.ii.A. shall be amended in its entirety to read as follows:
"Carrier shall pay to American on a monthly basis, for every Accrual Mile
posted to a Member's AAdvantage Account as follows (except as otherwise
specified on Attachment A attached hereto):
<PAGE>
{***}
{***}
{***}
In addition, Carrier shall pay American, on a monthly basis, for the
reinstatement in a given month of any Award Certificate and/or Award
Ticket which was issued prior to the effective date of Carrier's
conversion (if any) to the alternative fee structure."
3. This Third Amendment, together with the Agreement, First Amendment and Second
Amendment, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior agreements or understandings, whether
written or oral, if any, concerning the subject matter. All defined terms used
herein without definition shall have the meanings set forth in the Agreement. As
modified hereby, the Agreement is ratified and confirmed and shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A. Cuomo
-------------------------- -----------------------------
Andrew A. Cuomo
Its: Senior Vice President Managing Director
------------------------- Airline Management Services, Inc.
2
<PAGE>
EXHIBIT 10.19
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
EXHIBIT C
SECURED PROMISSORY NOTE
Forth Worth, Texas
$9,450,000 February 7, 1997
FOR VALUE RECEIVED, the undersigned MIDWAY AIRLINES CORPORATION, a
Delaware corporation (the "Maker") hereby promises to pay to the order of
AMERICAN AIRLINES, INC. ("American") or its assigns (the "Payee") at Payee's
address set forth in the Mortgage referred to below, or at such other place
as the holder (the "Holder") of this Promissory Note (the "Note") may from
time to time designate in writing, in lawful money of the United States and
in immediately available funds, at the times and in the manner provided
hereinbelow, the principal sum of NINE MILLION FOUR HUNDRED AND FIFTY
THOUSAND DOLLARS ($9,450,000) together with interest in accordance with the
terms stated below.
1. Calculations of Interest. Interest shall accrue from the date hereof on
the outstanding principal balance of, and accrued unpaid interest on, this
Note at a fixed rate per annum of eight percent (8.0%) until such
principal and interest amount shall be paid. Interest hereunder shall be
calculated on the basis of the number of days in the relevant period
compared to the actual number of days in the annual period, at the rate
aforesaid, and shall accrue on balances of principal and interest
outstanding from time to time from and after the date hereof.
2. Time for Payment. Principal and interest under this Note shall be due and
payable in equal installments of {***} the principal sum hereof, together
with all accrued but unpaid interest due and payable on the date
specified by the Holder in such notice (which date may be the date of
such notice by the Maker). The principal sum hereof, together with all
accrued but unpaid interest, may be prepaid by Maker at any time in whole
or in part without premium or penalty. All prepayments hereunder shall
be applied as follows: first, to any and all costs, fees or expenses
(if any) due and owing hereunder and/or under the Mortgage; second, to
any and all accrued and unpaid interest hereunder; and third, to
outstanding principal hereunder.
From and after maturity (whether by acceleration or otherwise), the entire
principal balance and (to the extent permitted by law) all accrued and
unpaid interest and all other sums (if any) due and owing hereunder shall
be payable on demand and shall bear interest until paid at a fixed rate of
eighteen percent (18%) per annum.
If any payment of principal, interest or other charges is stated hereunder
to be due and payable on a day which is not a Business Day (as defined
hereinbelow), then the due date for such payment shall be extended to the
next succeeding Business Day.
<PAGE>
provided that, in any such event, such payment shall include interest
accruing during such extension in accordance with the terms of this Note.
As used herein, the term "Business Day" means any day other than any
Saturday, Sunday or other day on which commercial banking institutions in
Fort Worth, Texas are authorized or required by law, regulation or
executive order to be closed.
All agreements between Maker and the Holder hereof are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason
of deferment, acceleration of maturity of the principal amount evidenced
hereby, payment of interest, fees or other charges hereunder, or
otherwise, shall the amount paid or agreed to be paid to the Holder
hereunder exceed the maximum permissible under applicable law. If, from
any circumstance whatsoever, fulfillment of any provision hereof or of any
other agreement between the undersigned and the Holder, at the time
performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to
be fulfilled shall be reduced to the limit of such validity. If,
notwithstanding the foregoing limitations, any excess interest shall be
determined to have been received, the same shall be deemed to have been
held as additional security for repayment of the indebtedness evidenced
hereby. This provision shall never be superseded or waived and shall
control every other provision of this Note and all agreements between
Maker and the Holder.
For purposes of this Note, a "Change of Control" means the acquisition by
any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or other form of
entity (including but not limited to a governmental entity) or 13D Group
of beneficial ownership (within the meaning of Rule 13-d-3 of the
Securities Exchange Act of 1934, as amended) of any securities of the
Maker entitled to vote generally in the election of directors, or
securities convertible into or exercisable or exchangeable for such
securities (the "Voting Securities"), representing 30% or more of the
outstanding Voting Securities, except for any change of control associated
with the merger of GoodAero, Inc. into Maker pursuant to the Agreement and
Plan of Merger between the parties dated January 17, 1997. A 13D Group
shall mean any partnership, limited partnership syndicate or other
"group", as such term is used in Section 13(d)(3) of the Exchange Act.
3. Supporting Documents. {***} be secured by certain property of Maker
pursuant to the Mortgage, which is incorporated herein by reference
{***}.
4. Acceleration. In the event that an Event of Default (as defined
hereinbelow) shall occur and be continuing, then, and in any such event
and at any time thereafter, so long as such Event of Default shall then be
continuing, (i) all amounts of principal, interest and
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<PAGE>
other sums and charges hereunder and under the Mortgage may, at the option
of the Holder, be declared (by written notice to the Maker at its address
set forth in the Mortgage but without presentment, demand, protest, notice
or any other formality, all of which are hereby waived; provided, that if
an Event of Default referred to in Section 5(e) or (f) shall have
occurred, then in every such case, all amounts of principal, interest, and
other charges hereunder and the Mortgage shall immediately, and without
further act, become due and payable) to be, whereupon the same shall
become, immediately due and payable, anything herein to the contrary
notwithstanding and (ii) Holder may pursue all remedies available under
applicable law or agreement, including remedies available under the
Mortgage.
If the Maker shall default in any of its payment obligations hereunder,
Maker further promises to pay (to the extent permitted by law) reasonable
internal and external attorneys' fees and costs and expenses incurred by
the Holder in connection with any such default or in any action or other
proceeding brought to enforce any of the provisions of this Note and/or
the Mortgage.
5. Events of Default. As used herein, the term "Event of Default" shall mean
each and any of the following events:
(a) Maker shall fail to make any payment under this Note on the date
when due; or
(b) Maker shall default in any of its obligations under the American
Agreements (as defined in the Letter Agreement between the parties
dated February 10, 1997) and in case of defaults with respect to
matters other than payment obligations, such default shall continue
for a period of thirty (30) days after notice from Payee to Maker
specifying such default and requiring that the same be remedied; or
(c) Any material representation or warranty made by Maker in or
pursuant to this Note, the Mortgage or the American Agreements shall
prove to have been incorrect in any material respect when made; or
(d) All or substantially all of Maker's airline operations are
suspended for more than two days unless resulting from any act of
God, war, strike, natural disaster, lockout, labor dispute, work
stoppage, fire, act of government, or any other cause beyond Maker's
reasonable control; or
(e) Maker shall consent to the appointment of a custodian, receiver,
trustee or liquidator (or other similar official) of itself or of a
substantial part of its property, or Maker shall be unable to pay
its debts generally as they become due, or shall make a general
assignment for the benefit of creditors, or Maker shall file a
voluntary petition in bankruptcy or a voluntary petition or an
answer seeking reorganization in a proceeding under any bankruptcy
law (as now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against Maker in any such
proceeding, or Maker by voluntary petition, answer or consent shall
seek relief as debtor under the provisions of any other present or
future bankruptcy or other similar law providing for the
reorganization or winding-up of corporations, or providing for an
agreement, composition,
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<PAGE>
extension or adjustment with its creditors or Maker shall take any
corporate action to authorize any of the foregoing;
(f) A petition against Maker in a proceeding under any bankruptcy or
other insolvency law (as now or hereafter in effect) shall be filed,
and any decree or order adjudging Maker a bankrupt or insolvent in
such proceeding shall remain in force undismissed and unstayed for a
period of sixty (60) days after such adjudication or, in the case
the approval of such petition by a court of competent jurisdiction
is required, the petition as filed or amended shall be approved by
such a court as properly filed and such approval shall not be
withdrawn and the proceeding shall not be dismissed within sixty
(60) days thereafter, or if, under the provisions of any law
providing for reorganization or winding-up of corporations which may
apply to Maker, any court of competent jurisdiction shall enter an
order or decree assuming custody or control of Maker or of any
substantial part of its property and such custody or control remains
in force unrelinquished, unstayed and unterminated for a period of
thirty (30) days; or
(g) Maker shall pay any dividends or make any other cash or asset
distributions to its shareholders without Holder's prior written
consent.
6. Choice of Law. This Note shall be governed by and construed in accordance
with the laws of the State of Texas, without regard to its conflicts of
laws principles.
IN WITNESS WHEREOF, this Note has been duly executed as of the date first
above written.
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
-------------------------------
Name: Jonathan S. Waller
Title: Senior Vice President
4
<PAGE>
EXHIBIT 10.20
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY {***}. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
CONFIDENTIAL
February 10, 1997
Midway Airlines Corporation
300 West Morgan Street
Suite 1200
Durham, NC 27701
Attention: John Selvaggio, President
Re: Participation in the Restructuring of Midway Airlines
Corporation
Dear Mr. Selvaggio:
This letter agreement sets forth the general terms and conditions under
which American Airlines, Inc. ("American") is prepared to waive its right to
accelerate payment under the Notes and waive its right to terminate certain of
the American Agreements as a result of, and to participate in, the financial
restucturing of Midway Airlines Corporation ("Midway").
In consideration of the mutual covenants contained herein, we agree as
follows:
1. Conversion of Previously Deferred Notes. Simultaneously with
completion of the Equity Investment, as defined in Section 8(a) below (the
"Closing Date"), American will convert approximately $9.45 million of
previously deferred amounts owed to American by Midway and consisting of (a)
the Secured Promissory Note dated April 25, 1996 ("Note 1") in the principal
amount of approximately $6,000,000 and all accrued interest thereon, (b) the
Second Promissory Note dated October 28, 1996 ("Note 2") in the principal
amount of $2,000,000 and all accrued interest thereon, and (c) the Third
Promissory Note dated December 5, 1996 ("Note 3") in the principal amount of
$1,000,000 (Note 1, Note 2 and Note 3 are collectively herein referred to as
the "Notes") and all accrued interest thereon, into a new promissory note
which shall:
(i) be secured by American's existing liens on Midways assets (the
"Collateral") as described in the Chattel Mortgage and Security Agreement
between the parties dated as of April 25, 1996;
(ii) accrue interest at a rate of 8.00% per annum;
(iii) have a final maturity date seven (7) years from the execution
thereof;
<PAGE>
(iv) defer all principal payments and interest (which shall continue to
accrue notwithstanding any deferral) for twelve (12) months following the
execution of the note;
(v) provide for monthly principal and interest payments on an amortized
basis following the initial twelve (12) months of the note;
(vi) provide that in the event of a change in control of Midway involving
the acquisition of more than 30% by a third party (other than a change in
control associated with the Equity Investment). American may immediately
accelerate the maturity of the note requiring repayment in full of all unpaid
principal and accrued interest due thereunder; and
(vii) otherwise be in the form of Exhibit C attached hereto.
Midway will pay to American in cash on the Closing Date the balance of
the principal and accrued interest of the Notes which exceeds $9.45 million.
In the event the Closing Date does not occur on or before February 10,
1997, the promissory notes referenced above and all accrued interest thereon
shall be due and payable immediately without demand.
2. Agreement of Sublease Modification. On the Closing Date, American
will agree to amend the Agreement of Sublease between American and Midway
dated as of January 18, 1995 (the "Sublease") in the form set forth in
Exhibit D attached hereto.
3. AAdvantage and AAirpass Agreement Modifications.
American will agree to (a) amend the AAdvantage Agreement with Midway dated
as of January 18, 1995, as amended, to extend the term thereof until April
30, 2001 at the rates as set forth in the attached Exhibit E and (b) amend
the AAirpass Agreement dated March 2, 1995 to extend the term until April
30, 2001 as set forth in the attached Exhibit F.
4. Aircraft Maintenance Agreement Modifications. American will agree to
amend the Aircraft Maintenance Agreement dated November 1, 1993 in accordance
with John Frame's letter dated February 7, 1997 and addressed to Tom Duffy,
Vice President of Maintenance and Engineering for Midway, a copy of which is
attached hereto as Exhibit H.
5. Chattel Mortgage and Security Agreement Modifications. American will
agree to amend the Chattel Mortgage and Security Agreement dated April 25,
1996 in accordance with the attached Exhibit G.
2
<PAGE>
6. AMR Warrants. On the Closing Date, Midway will issue to AMR, or any
of its affiliates as designated, warrants to purchase five percent (5%) on a
fully diluted basis, of Midway's Common Stock by executing and delivering to
American the Warrant to Purchase Shares of Common Stock of Midway Airlines
Corporation attached hereto as Exhibit B.
7. {***}
3
<PAGE>
8. Conditions Precedent. American's and its affiliates' participation in,
and its agreement to waive its right to accelerate payment under the {***} and
waive its right to terminate certain of the American Agreements as a result of
the Equity Investment shall be subject to the following conditions precedent:
(a) Equity Investment. Midway shall successfully complete the proposed
merger with GoodAero, Inc. in substantially the same manner as set forth in the
Agreement and Plan of Merger between the companies dated January 17, 1997 (the
"Plan of Merger") a copy of which has been provided to American, resulting in a
minimum of $22,000,000 in gross proceeds to be available as working capital for
Midway as of the Closing Date (the "Equity Investment").
(b) Creditor Participation. Prior to or as of the Closing Date, Midway
shall have entered into agreements with the Aircraft Creditors and Ameritech
Corporation substantially consistent with Exhibit 6.02(k) attached hereto,
pertaining to their participation in Midway's restructuring, on terms reasonably
satisfactory to American. Further, Midway shall have resolved obligations owed
to AVSA, S.A.R.L. in accordance with Jon Waller's letter dated February 10, 1997
addressed to Andrew Cuomo.
(c) Other Conditions Precedent. The agreements of American set forth in
this Letter Agreement are subject to the satisfaction or waiver by American on
or before the Closing Date of the following conditions:
(1) The receipt by AMR Corporation of warrants (the "AMR Warrants") in
the form of Exhibit B for the purchase of shares of Common Stock of
Midway equal to 5% of Midway's total Common Stock on a fully diluted
offerings basis, in accordance with Section 6 above.
(2) The receipt by American of an executed Promissory Note consistent
with the provisions of Section 1 above from Midway in the form of
Exhibit C hereto.
(3) The receipt by American from Midway of the amendments to the
Sublease Agreement. AAdvantage Agreement, AAirpass Agreement, Chattel
Mortgage and Security Agreement, consistent with the provisions hereof
and in the form of Exhibits D, E, F, and G, respectively.
(4) The receipt by American on or prior to the Closing Date, a final
Certificate of Merger of GoodAero, Inc. and Midway, a Restated Certificate
of Incorporation of Midway certified by the Secretary of State of Delaware,
and bylaws of Midway, all in substantially the same form as attached to the
Plan of Merger, certified to be true and up to date by a duly authorized
officer thereof or certifying no changes or amendments to
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<PAGE>
such documents since the date they were last certified to American or
attaching copies of such amendments.
(5) The receipt by American on or prior to the Closing Date, a fully
executed Stockholders Agreement among Midway, Zell/Chilmark Fund L.P.,
AMR Corporation, Fokker Aircraft B.V., Wings Aircraft Finance, Inc.,
Stockholm Aircraft Finance V.B.V., DASA Netherlands XVI B.V., debis Air
Finance B.V., James H. Goodnight and John P. Sall.
(6) Copies of resolutions of the board of directors of Midway authorizing
Midway to enter into and perform the transactions contemplated by the Plan
of Merger, certified to be true and up to date copies by a duly authorized
officer of Midway.
(7) A closing certificate and an incumbency certificate of duly authorized
officers of Midway setting out the names and signatures of the person or
persons authorized to sign the documents contemplated by this agreement.
(8) The receipt by American of opinions of counsel to Midway, which may be
internal counsel, dated as the Closing Date, in the form of the attached
Exhibit I.
(9) No Event of Default shall have occurred and be continuing under any of
the American Agreements.
9. Waiver. American hereby waives any rights it might have to terminate the
American Agreement identified as items (i), (ii), (iv), (v) and (viii) in
Exhibit A attached hereto or to accelerate payments under the {***} arising
solely from the Change of Control (as defined in such identified American
Agreements) resulting from the Equity Investment.
10. Expenses. American and Midway shall bear their respective costs,
expenses and charges incurred by them in connection with the negotiations
contemplated herein, including, but not limited to, fees of their respective
counsel, advisors and accountants.
11. Governing Law and Dispute Resolution. This Letter Agreement and the
rights and obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
choice of law principles. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Northern
District of Texas and, if such court does not have jurisdiction, of the courts
of the State of Texas in Tarrant County for the purposes of any suit, action or
other proceeding arising out of this Letter Agreement or the subject matter
hereof or
5
<PAGE>
thereof brought by any other party. American and Midway each agrees that neither
of them will bring any suit, action or other proceeding arising out of this
Letter Agreement or any of the transactions described herein or therein, in any
jurisdiction other than the jurisdiction described above. To the extent
permitted by applicable law, each party hereby waives and agrees not to assert,
by way of motion, as a defense or otherwise, in any such suit, action or
proceeding, any claim (i) that it is not personally subject to the jurisdiction
of the above-named courts, (ii) that the suit, action or proceeding is brought
in an inconvenient forum, (iii) that it is immune from any legal process with
respect to itself or its property, (iv) that the venue of the suit, action or
proceeding is improper, or (v) that this Letter Agreement or the subject matter
hereof or thereof may not be enforced in or by such courts. Each party agrees
that, even if at any time during the term of this Agreement Midway is not
qualified to do business as a foreign corporation in the State of Texas, Midway
shall and does hereby irrevocably designate and appoint the Secretary of State
of the State of Texas as its agent for service of process in any action, suit or
proceeding with respect to any matter as to which it submits to jurisdiction as
set forth above, it being agreed that any method of service upon such agent,
with a copy sent to Midway's address as reflected in the records of American
shall constitute valid service upon Midway. American designates CT Corporation
as its agent for service of process in Texas.
12. Confidentiality. Midway and American expressly acknowledge and agree
that the terms and conditions of this Letter Agreement constitute confidential
information of both parties (the "Confidential Information"), whether or not
marked or expressly indicated as confidential, and American and Midway each
agrees to keep such information confidential, using the same degree of care with
respect to such Confidential Information as it uses in protecting its own
proprietary information, trade secrets and similar items, and not to disclose
such information to any third party, except as permitted hereby. Notwithstanding
the foregoing, Confidential Information shall not include any information which
is in the public domain; is placed in the public domain, through no violation of
the this Letter Agreement; or is lawfully obtained from another source free of
restriction. Except as expressly provided below, neither party shall sell,
transfer, publish, disclose, display or otherwise make available the
Confidential Information to any third party (and third parties shall be deemed
also to include Affiliates of the party so restricted), except as may be
required by applicable law (including, without limitation, requirement by oral
questions, interrogatories, subpoenas, civil investigative demands or similar
processes), in which case the party from whom disclosure is sought (or, if
applicable, who is seeking to make disclosure as required by applicable law)
shall promptly notify the other party and shall provide the other party (if the
other party so requests) with a copy of the information proposed to be disclosed
and all related descriptions thereof within a reasonable period (which period
shall generally be at least five days) in advance of the proposed disclosure. To
the extent that the other party objects to disclosure of such Confidential
Information, the party from which disclosure is
6
<PAGE>
sought (or, if applicable, who is seeking to make disclosure as required by
Applicable Law) shall (i) use reasonable and lawful efforts to resist making any
disclosure of such Confidential Information, (ii) use reasonable and lawful
efforts to limit the amount of such Confidential Information to be disclosed
(and, in connection therewith, shall reasonably consider all modifications,
deletions and additions to such information, and related descriptions, proposed
by the other party), and (iii) use all reasonable efforts to obtain a protective
order or other appropriate relief to minimize the further dissemination of any
Confidential Information to be disclosed. In addition, neither party shall
disclose the Confidential Information received to any of its directors,
officers, employees, Affiliates, or professional advisors (collectively,
"Representatives") except on a need-to-know basis for the purposes of
implementing and giving effect to the transactions contemplated by this Letter
Agreement; provided, however, that prior to any such disclosure, the party shall
inform all such Representatives of the confidential nature of the information,
and that it is subject to this non-disclosure obligation, and shall further
instruct such Representatives to treat such information confidentially. American
and Midway each agrees to be responsible for any breach of this Section by their
respective Representatives. Each party acknowledges and agrees that the other
party will have no adequate remedy at law if there is a breach or threatened
breach of this Section and, accordingly, that such other party shall be entitled
to an injunction or other equitable or preventative relief against the allegedly
breaching party or its Representatives for such breach or threatened breach.
Nothing herein shall be construed as a waiver of any other legal or equitable
remedies which may be available to the non-breaching party in the event of a
breach or threatened breach of this Section, and the non-breaching party may
pursue any other such remedy, including, without limitation, the recovery of
damages. Notwithstanding anything herein to the contrary, American hereby
permits Midway to disclose the Confidential Information to Zell/Chilmark Fund
L.P., debis AirFinance B.V., Wings Aircraft Finance, Inc., DASA Aircraft Finance
XVI, B.V., Ameritech Services Corporation, AVSA, S.A.R.L., GoodAero, Inc.,
Stockholm Aircraft Finance V, B.V. and/or International Aero Engines; provided,
however, that upon any such parties receipt of such confidential information it
shall be deemed to have accepted the terms of confidentiality set forth in this
provision and Midway shall be liable for any breach of such obligation, unless
otherwise agreed in a separate agreement between American and any such other
party; provided, however, that the terms of the new promissory note referred to
in paragraph 1 of this letter may be disclosed by any holder of the promissory
note executed by Midway Airlines corporation in favor of Daimler-Benz Aerospace
A.G. or the promissory note executed by Midway Airlines Corporation in favor of
debis AirFinance B.V., each dated as of January 31, 1997, in connection with any
action taken to enforce such notes; and may otherwise be disclosed to any person
with a need to know the terms thereof, provided that such person agrees to keep
such information confidential in accordance with the terms hereof; and provided,
further, that the terms and conditions of this Letter Agreement may be
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<PAGE>
disclosed to affiliates of the holders of those Notes, provided that such
persons agree to keep such information confidential in accordance with the terms
hereof. The provisions of this Section shall survive the execution, expiration
or termination of this Letter Agreement and the consummation of the transactions
contemplated hereby.
13. Entirety and Amendments. This Letter Agreement contains the entire
agreement between the parties with respect to the subject matter hereof. This
Letter Agreement may be amended only by an instrument in writing executed by the
party against whom such amendment is sought to be enforced. The parties
acknowledge that nothing herein shall in any manner be construed to be a
novation of the Security Agreement.
14. Parties Bound. This Letter Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns and
legal representatives; provided however, that Midway may not, without the prior
written consent of American, assign any rights, powers, duties or obligations
hereunder.
The foregoing sets forth American's agreement in respect to the subject
matter hereof. If the terms of this Letter Agreement are satisfactory to Midway,
an authorized officer of Midway should execute this Letter Agreement in the
space provided below and return the executed counterpart to the attention of Mr.
Andrew Cuomo by telefax at 817-963-1924, with the manually executed original
counterpart to be delivered promptly thereafter.
AMERICAN AIRLINES, INC.
By: /s/ Andrew A. Cuomo
------------------------------
Andrew A. Cuomo
Managing Director
Airline Management Services, Inc.
AGREED AND ACCEPTED AS OF THE
10th DAY OF FEBRUARY, 1997.
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
---------------------------
Name: Jonathan S. Waller
Senior Vice President
8
<PAGE>
EXHIBIT A
"American Agreements" means all of the following agreements, as they may be
amended from time to time and all replacement or renewal agreements:
(i) Agreement of Sublease between American and Midway, dated as of January 18,
1995;
(ii) AAdvantage Participating Carrier Agreement between American and Midway,
dated as of January 18, 1995 (as amended on December 10, 1996);
(iii) AAirpass Agreement between American and Midway, dated March 2, 1995;
(iv) Aircraft Maintenance Agreement between American and Midway, dated as of
November 1, 1993 (as amended on February 17, 1995);
(v) SABRE Multihost Agreement executed by SABRE Decision Technologies, a
division of The SABRE Group, Inc., on March 20, 1995 and executed by Midway on
February 24, 1995;
(vi) SABRE Participating Carrier Distribution and Services Agreement between
American and Jet Express, Inc. (now known as Midway Airlines Corporation), dated
as of May 14, 1993;
(vii) Inbound Reservations Services Agreement between American Airlines Direct
Marketing Corporation (now known as Teleservice Resources, Inc.) and Jet
Express, Inc. (now known as Midway Airlines Corporation) dated April 13, 1993,
as renewed under the Services and Licenses Agreement Annex B dated on or about
February 1, 1997;
(viii) Services and Licenses Agreement between Airline Management Services, Inc.
and Midway dated December 7, 1995;
(ix) Standard Ground Handling Agreement between American and Midway, dated
effective November 15, 1993, and all Annexes thereto including without
limitation B7.0 (BOS), B4.1 (DCA), B6.0 (EWR), B1.1 (LGA), B8.0 (MCO), B1.0
(CUN), B10.0 (PHL), B18.0 (RDU-Facility Maintenance and Facility Services), B8.0
(RDU-City Ticket Offices), and B10.0 (RDU-Admirals Club);
(x) Bilateral Traffic Agreement between American and Jet Express, Inc. d/b/a
Midway Airlines, dated July 12, 1993;
(xi) Chattel Mortgage and Security Agreement between American and Midway, dated
April 25,1996; and
(xii) all other agreements in effect as of January 31, 1997 of any nature
between Midway or any of Midway's affiliates and American or any of American's
affiliates.
<PAGE>
EXHIBIT B
See final Warrant issued on 2/11/97
<PAGE>
EXHIBIT C
{***} (4 pages omitted)
<PAGE>
EXHIBIT D
THIRD AMENDMENT TO AGREEMENT OF SUBLEASE
This Third Amendment to Agreement of Sublease (the "Third Amendment"),
dated as of February 10, 1997, by and between American Airlines, Inc.
("American") and Midway Airlines Corporation ("Sublessee").
WHEREAS, American and Sublessee have entered into an Agreement of Sublease
(the "Sublease") dated as of the 18th day of January, 1995, amended pursuant to
a First Amendment of Agreement of Sublease dated on or about February 6, 1996
(the "First Amendment") and Amendment to AA Agreements dated April 25, 1996 (the
"Second Amendment)(for ease in drafting the Sublease, First Amendment and Second
Amendment are collectively referred to herein as the Sublease), pursuant to
which American has subleased a portion of the Base Lease Premises and the
Improvements located thereon; and
WHEREAS, concurrently herewith, American and Sublessee are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Sublessee; and
WHEREAS, in connection with such restructuring, Sublessee has requested and
American has agreed to make certain amendments to the Sublease, subject to the
terms and conditions set forth in this Third Amendment.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Sublessee hereby agree to amend the Sublease as
follows:
1. Section 1.D. shall be amended by changing the reference to "August 31, 1997"
in the last sentence of the first paragraph to read "August 31, 1999".
2. Section 1.D. shall further be amended by adding the following to the end
thereof:
"From the effective date of this Third Amendment until May 1, 1997,
Sublessee shall have the option to sublease from American a portion of the
additional space in the Base Lease Premises (including the Improvements
located therein), other than ticket counters and gates, identified by
American to be surplus, unused space (the "Surplus Space"). American shall
identify such Surplus Space to Sublessee by written notice on or before
March 15, 1997. The Rental Rate for any Surplus Space subleased by
Sublessee pursuant to this paragraph shall be {***} per square foot per
annum, subject to the yearly increases of 2%
<PAGE>
(compounded annually) on January 1 of each year during the Term. Sublessee
may exercise the option for Surplus Space by delivering to American, at any
time prior to the termination date of this option, an unconditional written
notice of exercise ("Notice") in substantially the form of Exhibit C
attached to the Sublease. Any sublease of Surplus Space shall be subject to
the terms and conditions set forth in the Sublease, unless terminated by
either party upon six (6) months prior written notice to the other party.
If Sublessee should sublease Surplus Space under this paragraph, Sublessee
and American will execute an amendment to the Sublease effective as of the
Additional Premises Commencement Date specified in the Notice which will
amend and restate Exhibit A to the Sublease. If there shall have occurred
and be continuing on the date of the Notice or on the Additional Premises
Commencement Date an Event of Default by Sublessee under the Sublease,
American may, at is option, refuse to sublease to Sublessee any Surplus
Space until and unless the breach giving rise to such Event of Default has
been cured in accordance with the Sublease.
3. Section 5.A.(i) shall be amended by adding the following to the end thereof:
"Commencing with the rental payment due on March 1, 1997, the rent for the
Demised Premises payable or common use charges, at American's sole
discretion, hereunder shall be reduced by {***} per month (the
"Rental Discount") for the remainder of the term of this Sublease;
provided, however, the Rental Discount shall immediately end if (i)
Sublessee terminates its participation in American's frequent flier mileage
program (currently, the "AAdvantage Program"), (ii) American terminates the
AAdvantage Participating Carrier Agreement (the "AAdvantage Agreement")
dated January 18, 1995, as amended, between American and Sublessee pursuant
to Section 11 (a)(ii) or Section 11(e) thereof, or (iii) Sublessee fails to
renew its participation in the AAdvantage Program upon the expiration of
the AAdvantage Agreement after American has offered, in writing, the
renewal of Sublessee's participation in the AAdvantage Program on
substantially the same terms as those included in the AAdvantage Agreement,
subject to an increase in the rates payable by Sublessee under Section
8(a)(ii) thereof not to exceed the percentage change between (a) the
average of American's (including AMR Eagle) passenger revenue per ASM
(RASM) and operating cost per ASM (CASM) for the year 1996 and (b) the
average of American's (including AMR Eagle) RASM and CASM for the 12 months
immediately preceding the expiration of the AAdvantage Agreement (or the
most recent 12 months for which data is available). Nothing herein shall,
however, be construed to impose any obligation on American to renew
Sublessee's current AAdvantage Agreement upon substantially the same terms
or
2
<PAGE>
otherwise, or to offer a renewal rate for Sublessee's AAdvantage Agreement
as described above.
Should Midway exercise its Option to sublease the Option Premises as
described in Section 1.D. above, the rent for such Option Premises shall be
{***}
4 Section 6 shall be amended by deleting everything after the end of the
first sentence thereof.
5. Section 38 shall be amended in its entirety to read as follows:
"On or before the fifteenth day following each calendar quarter during the
Term of the Sublease (i.e., January 15, April 15, July 15 or October 15, as
applicable) and on the first such date following the expiration or earlier
termination hereof, American shall provide Sublessee with a report showing
the amount spent by American pursuant to Section 5.A.(ii)(b) of this
Sublease or received by American pursuant to Article 15 of the Base Lease,
in each case shown on a monthly basis during the most recently concluded
calendar quarter, or portion thereof (along with such supporting documents
as Sublessee shall reasonably request from time to time hereunder) and also
showing American's calculations on a monthly basis, of the amounts payable
by or owing to Sublessee pursuant to Section 5.A.(ii)(b) and Section 5.D.
of this Sublease. If such report shows that an adjustment to any amount
paid by or owed to Sublessee is proper then the party shown to be owing
amounts (as a reimbursement or otherwise) to the other party shall promptly
make such payment to the other within five (5) business days following
receipt of written notice of such adjustment. American shall give Sublessee
and its agents access during normal business hours to documents and/or
personnel as may be reasonably necessary for Sublessee to review the report
submitted by American to Sublessee pursuant to this Section 38. The terms
of this Section 38 shall survive the termination of the Sublease for a
period of six (6) months.
6. This Third Amendment, together with the Sublease, First Amendment and Second
Amendment, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior agreements or understandings, whether
written or oral, if any, concerning such subject matter. All defined terms used
herein without definition shall have the meanings set forth in the Sublease. As
modified hereby, the Sublease is ratified and confirmed and shall remain in full
force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A/ Cuomo
----------------------------- -----------------------------
Jonathan S. Waller Andrew A. Cuomo
Managing Director
Its: Senior Vice President Airline Management Services, Inc.
Agreed to by Landlord this ___ day of _________________, 1997.
RALEIGH-DURHAM AIRPORT AUTHORITY
By:
------------------------------
Its:
-----------------------------
4
<PAGE>
EXHIBIT E
THIRD AMENDMENT TO AADVANTAGE
PARTICIPATING CARRIER AGREEMENT
This Third Amendment to AAdvantage Participating Carrier Agreement ("Third
Amendment"), dated as of February 10, 1997, by and between American Airlines,
Inc. ("American") and Midway Airlines Corporation ("Carrier").
WHEREAS, American and Carrier have entered into an AAdvantage Participating
Carrier Agreement (the "Agreement") dated as of the 18th day of January, 1995,
amended pursuant to the Amendment to AA Agreements dated as of April 25, 1996
(the "First Amendment") and as of December 10, 1996 (the "Second Amendment")
(for ease in drafting the Agreement, the First Amendment and the Second
Amendment are collectively referred to herein as the Agreement), pursuant to
which Carrier participates in American's AAdvantage Program; and
WHEREAS, concurrently herewith, American and Carrier are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Carrier; and
WHEREAS, in connection with such restructuring, Carrier has requested and
American has agreed to make certain Amendments to the Agreement, subject to the
terms and conditions set forth in this Third Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Carrier agree to amend the Agreement as follows:
1. Section 1 is amended to change the definition of "Expiration Date" in its
entirety to read as follows:
"Expiration Date" means 23.59 Coordinated Universal Standard Time (UTC) on
April 30, 2001, unless this Agreement is extended or terminated earlier in
accordance with the terms of this Agreement, in which case the last day of
the extended term of the date on which this Agreement is earlier terminated
shall be the Expiration Date."
2. Section 8.a.ii.A. shall be amended in its entirety to read as follows:
"Carrier shall pay to American on a monthly basis, for every Accrual Mile
posted to a Member's AAdvantage Account as follows (except as otherwise
specified on Attachment A attached hereto):
<PAGE>
{***}
In addition, Carrier shall pay American, on a monthly basis, for the
reinstatement in a given month of any Award Certificate and/or Award Ticket
which was issued prior to the effective date of Carrier's conversion (if
any) to the alternative fee structure."
3. This Third Amendment, together with the Agreement, First Amendment and Second
Amendment, constitutes the entire agreement of the parties with respect to its
subject matter and supersedes all prior agreements or understandings, whether
written or oral, if any, concerning the subject matter. All defined terms used
herein without definition shall have the meanings set forth in the Agreement. As
modified hereby, the Agreement is ratified and confirmed and shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A. Cuomo
----------------------------- -----------------------------
Jonathan S. Waller Andrew A. Cuomo
Its: Senior Vice President Managing Director
Airline Management Services, Inc.
2
<PAGE>
EXHIBIT F
FIRST AMENDMENT TO AAIRPASS
AGREEMENT
This First Amendment to AAirpass Agreement ("First Amendment"), dated as of
February 10, 1997, by and between American Airlines, Inc. ("American") and
Midway Airlines Corporation ("Carrier").
WHEREAS, American and Carrier have entered into an AAirpass Agreement (the
"Agreement") dated as of the March 2, 1995, pursuant to which American has
granted Carrier the right to carry AAirpass members and their companions on
Carrier Flights in accordance with the terms of the Agreement; and
WHEREAS, concurrently herewith, American and Carrier are entering into a
certain Letter Agreement providing the terms and conditions under which American
has agreed to participate in a financial restructuring of Carrier; and
WHEREAS, in connection with such restructuring, Carrier has requested and
American has agreed to make certain amendments to the Agreement, subject to the
terms and conditions set forth in this First Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, American and Carrier agree to amend the Agreement as follows:
1. Section 7 is amended in its entirety to read as follows:
"Unless sooner terminated in accordance with this Agreement, this Agreement
shall terminate on April 30, 2001."
2. This First Amendment together with the Agreement constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
prior agreements or understandings, whether written or oral, if any, concerning
the subject matter. All defined terms used herein without definition shall have
the meanings set forth in the Agreement. As modified hereby, the Agreement is
ratified and confirmed and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A. Cuomo
------------------------------ ------------------------------
Jonathan S. Waller Andrew A. Cuomo
Managing Director
Its: Senior Vice President Airline Management Services, Inc.
<PAGE>
EXHIBIT G
FIRST AMENDMENT TO CHATTEL MORTGAGE
AND SECURITY AGREEMENT
This First Amendment to Chattel Mortgage and Security Agreement ("First
Amendment"), dated as of February 10, 1997, by and between American Airlines,
Inc. ("Secured Party") and Midway Airlines Corporation ("Grantor").
WHEREAS, Secured Party and Grantor have entered into a Chattel Mortgage and
Security Agreement (the "Agreement) dated as of the April 25, 1996, pursuant to
which Grantor has granted Secured Party as security interest and lien to certain
Collateral and the proceeds therefrom to secure the Note and other Obligations
owed to the American Entities; and
WHEREAS, concurrently herewith, Secured Party and Grantor are entering into
a certain Letter Agreement providing the terms and conditions under which
Secured Party has agreed to participate in a financial restructuring of Grantor;
and
WHEREAS, in connection with such restructuring, Grantor has requested and
Secured Party has agreed to make certain amendments to the Agreement, subject to
the terms and conditions set forth in this First Amendment.
NOW, THEREFORE, in consideration of the mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Secured Party and Grantor agree to amend the Agreement as follows:
1. Section 2.6 shall be amended by changing the last sentence thereof in its
entirety to read as follows:
"In addition, the Secured Party will release from the Lien of this Security
Agreement items of Collateral specified by the Grantor in the event Grantor
is able to obtain additional cash financing utilizing such Collateral."
2. This First Amendment together with the Agreement constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
prior agreements or understandings, whether written or oral, if any, concerning
the subject matter. All defined terms used herein without definition shall have
the meanings set forth in the Agreement. As modified hereby, the Agreement is
ratified and confirmed and shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed and delivered as of the date and year first above written.
MIDWAY AIRLINES CORPORATION AMERICAN AIRLINES, INC.
By: /s/ Jonathan S. Waller By: /s/ Andrew A. Cuomo
------------------------------ ------------------------------
Jonathan S. Waller Andrew A. Cuomo
Managing Director
Its: Senior Vice President Airline Management Services, Inc.
2
<PAGE>
February 7, 1997
EXHIBIT H
Mr. John Selvaggio
President
Midway Airlines
300 W. Morgan Street, Suite 1200
Durham, NC 27701
Subject: AA / JI Agreement
Reference 1) T. Duffy memo to J. Frame dated 12/20/96
2) J. Frame letter to T. Duffy dated January 16, 1997 Proposal
Revision 1
3) J. Frame letter to T. Duffy dated February 4,1997 Proposal
Revision 2
4) S. Westberg letter to J. Frame dated February 6, 1997 Proposal
Revision 3
Dear John:
{***}
Page 1 of 6
<PAGE>
Mr. Tom Duffy
February 7, 1997
{***}
Page 2 of 6
<PAGE>
Mr. Tom Duffy
February 7, 1997
The new agreement would end at the completion of the last JI C4 aircraft check
or May 1, 1999, whichever occurs first.
If you are in agreement with the above proposals, please sign and return. This
offer expires February 28, 1997. Nothing herein shall be considered as legally
binding upon either party until a definitive agreement pertaining to the subject
matter hereof has been duly executed by both parties.
Please contact myself or Jim Martin should you have any questions on any of the
information above.
Sincerely,
/s/ John Frame
John Frame
Managing Director
Finance and Planning
office 918-292-3158
fax 918-292-2717
cc: Steven Westberg
Tom Duffy
/gm
Attachments
/s/ John N. Selvaggio
- -------------------------------
Accepted by Midway Airlines
John N. Selvaggio
President
Page 3 of 6
<PAGE>
Attachment I
February 7, 1997
{***}
Page 4 of 6
<PAGE>
Attachment II
February 7, 1997
Tay Engine Lease Rates
AA's current Tay engine lease rates are:
Daily {***}
Hourly {***}
Transaction Fee {***}
Note: These rates are subject to change.
Page 5 of 6
<PAGE>
Attachment III
February 7, 1997
Exhibit A-1
{***}
Page 6 of 6
<PAGE>
RIDER
to February 7, 1997 Letter Agreement
between Midway Airlines Corporation and American Airlines, Inc.
{***}
AGREED:
American Airlines, Inc. Midway Airlines Corporation
By: /s/ John K. Frame By: John Selvaggio
-------------------------- --------------------------
Name: John K. Frame Name: John Selvaggio
Title: Mang. Dir. M&E Fin. & Plng. Title: Chief Financial Officer
<PAGE>
[Letterhead of Midway Airlines]
Exhibit I
(919) 956-4810 (Direct Dial)
(919) 956-7568 (Direct FAX)
February 11, 1997
American Airlines, Inc.
4333 Amon Carter Blvd.
Ft. Worth, Texas 76155
Re: Letter Agreement dated February 10, 1997 (the "Letter Agreement")
between Midway Airlines Corporation ("Midway") and American Airlines,
Inc. ("American")
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Midway and as such have
acted as an attorney for Midway in connection with the execution and delivery by
Midway of by following:
(A) The Letter Agreement;
(B) $9,450,000 Secured Promissory Note dated as of February 7, 1997
issued to American by Midway;
(C) Third Amendment to Agreement of Sublease dates as of February 10, 1997
between Midway and American;
(D) Third Amendment to AAdvantage Participating Carrier Agreement dated as
of February 10, 1997 between Midway and American;
(E) First Amendment to AAirpass Agreement dated as of February 10, 1997
between Midway and American; and
(F) First Amendment to Chattel Mortgage and Security Agreement dated as
of February 10, 1997 between Midway and American.
Such documents are referred to collectively herein as the "Agreements".
In connection with this opinion, I have examined originals or copies
certified or otherwise identified to my satisfaction as being true copies of the
Agreements and I have examined or I am familiar with the original or a copy, the
authenticity of which has been established to my satisfaction, of such other
documents, corporate records, agreements and instruments and certificates of
public officials and officers of Midway as I have deemed necessary or
appropriate to enable me to express the opinions set forth below. As to
questions of fact material to such opinions, I have, when relevant facts were
not independently established, relied upon certifications by officers of Midway
which I believe to be reliable.
The opinions hereinafter expressed are subject to the following
qualifications:
A. I have assumed, without investigation, that the parties (other than
Midway) to the Agreements, or any document or oral agreement relating thereto,
are not subject to any statute, rule, or
<PAGE>
[Letterhead of Midway Airlines]
February 11, 1997
Page 2
regulations, or to any impediment to which contracting parties are generally not
subject; which requires Midway to obtain the consent of or to make a declaration
or filing with any governmental entity.
B. The validity, binding effect and enforceability of the Agreements (or
any portion of such documents) and the rights and remedies of the parties
thereunder are subject to, and limited by, the following: (a) the effect of the
federal and state bankruptcy laws, (the "Bankruptcy Code"), insolvency,
reorganization, receivership, moratorium, and other similar laws; (b) principles
of equity and the doctrine of commercial reasonableness (and I express no
opinion as to the availability of any equitable remedies); (c) the power of
federal and state courts to refuse to enforce (or to stay enforcement of) any
provision of the Agreements which purports to: (i) establish evidentiary
standards, (ii) waive the right of Midway to due notice and hearing, (iii) waive
the right of Midway to assert defenses available to Midway by statute, common
law or in equity, (iv) declare the Lessee to be in default in the event of the
institution of any proceeding in bankruptcy (whether voluntary or involuntary)
pursuant to the Bankruptcy Code, (v) waive the right of personal service of
process, or (vi) provide for self-help remedies.
C. Intentionally Omitted.
D. The opinions set forth above are based upon and limited to the laws of
the State of Illinois, and the Federal laws of the United States applicable
therein, the Bankruptcy Code of 1978, as amended (11 U.S.C. ss.101 et. seq.) and
the general corporate law of the State of Delaware. I note that the Agreements
are stated to be governed by the laws of the State of Texas and I am not
familiar with those laws and render no opinion about them.
E. This letter is limited to the matters expressly set forth herein; no
statements or opinions may be inferred beyond such matters.
F. The opinions set forth herein are based upon and limited to the law as
is in effect on the date of this letter and my knowledge of the facts relevant
to such opinions on the date of this letter. I assume no obligation to update
the opinions set forth in this letter.
Based upon the foregoing and having regard to legal considerations which I
have deemed relevant, it is my opinion that:
1) Midway is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to own and operate its assets and to carry on and conduct its business as
now conducted and is qualified as a foreign corporation authorized to conduct
business and is in good standing in all jurisdictions where qualification is
necessary except where the failure to be so qualified would not have a material
adverse effect on the business, assets or financial condition of Midway.
2) Midway has the full right, power and authority to execute and deliver
the Agreements and to perform its obligations thereunder; and the execution,
delivery and performance of the Agreements by Midway will not contravene any
articles of incorporation or bylaw provision of Midway or any provision of any
contract to which Midway is a party. The Agreements have been duly authorized,
executed and delivered by Midway and constitute the legal, valid and binding
obligation of Midway, enforceable against
<PAGE>
[Letterhead of Midway Airlines]
February 11, 1997
Page 3
Midway in accordance with their terms. There is no law, rule or regulation that
would be contravened by the execution, delivery or performance by Midway of the
Agreements.
3) Neither the execution and delivery by Midway of the Agreements, the
performance by Midway of its respective obligations thereunder nor the
consummation of the transactions contemplated thereby constitute (or will
constitute, as the case may be) a violation of any applicable Federal law,
governmental rule or regulation or, to my actual knowledge, any order of any
court or governmental authority that is applicable to Midway.
4) No consent, approval or authorization of; and no registration,
declaration or filing with any administrative, governmental or other public
authority of the United States of America is required by law to be obtained or
made in connection with the execution, delivery and performance by Midway, or
for the validity or enforceability against Midway, of any of the Agreements
other than (i) such consents, approvals, authorizations, registrations,
declarations and filings that have been made or obtained on or prior to the data
hereof and remain in full force and effect, and (ii) such consents, approvals,
authorizations, registrations, declarations and filings, the failure to make or
obtain (a) which would not have a material adverse effect on the business,
condition or results of operation of Midway, and (b) which would not adversely
affect the validity or enforceability of any of the Agreements or the right as
or remedies of American or its affiliates.
This opinion is rendered to American and its affiliates in connection with
the Agreements and may not be relied upon by any person in any other context,
provided that American and its affiliates may provide this opinion (i) to
regulatory authorities should they so request or in connection with their normal
examinations, (ii) to their respective independent auditors and attorneys, (iii)
pursuant to order or legal process of any court or governmental agency, or (iv)
in connection with any legal action to which American or any of its affiliates
is a party arising out of the transactions contemplated by the Agreements.
Very truly yours,
MIDWAY AIRLINES CORPORATION
/s/ Jonathan S. Waller
Jonathan S. Waller
Senior Vice President and General Counsel
<PAGE>
EXHIBIT 10.22
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
BOMBARDIER REGIONAL AIRCRAFT DIVISION
PURCHASE AGREEMENT
PA-0393
BETWEEN
BOMBARDIER INC.
AND
MIDWAY AIRLINES CORPORATION
Relating to the Purchase of
Ten (10) Canadair Regional Jet aircraft
Including related Customer Support Services
1
<PAGE>
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
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
2
<PAGE>
INDEX OF LETTER AGREEMENTS
B97-7701-RJTL-CRJ0393-001 Option Aircraft
B97-7701-RJTL-CRJ0393-002 Shadow Option Aircraft
B97-7701-RJTL-CRJ0393-003 Financing
B97-7701-RJTL-CRJ0393-004 Deposit
B97-7701-RJTL-CRJ0393-005 Customer Support
B97-7701-RJTL-CRJ0393-006 Spares
B97-7701-RJTL-CRJ0393-007 Airworthiness Directives
B97-7701-RJTL-CRJ0393-008 Airframe Direct Maintenance Cost
B97-7701-RJTL-CRJ0393-009 Dispatch Reliability
B97-7701-RJTL-CRJ0393-010 Performance
B97-7701-RJTL-CRJ0393-011 Configuration
3
<PAGE>
This Agreement is made on the 17th day of September 1997.
BY AND BETWEEN: BOMBARDIER INC., a Canadian corporation represented by its
BOMBARDIER REGIONAL AIRCRAFT DIVISION ("BRAD") having an
office at 123 Garratt Boulevard, Downsview, Ontario, Canada.
AND: MIDWAY AIRLINES CORPORATION, with offices at 300 West Morgan
Street, Suite 1200, Durham, North Carolina, United States of
America ("Buyer")
WHEREAS Bombardier Inc. through its Canadair Manufacturing Division,
is engaged in the manufacture of the Canadair Regional Jet
aircraft products; and
BRAD 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 ten (10) Aircraft (as later defined)
and related data, documents, and services under this Agreement
(as later defined), and BRAD desires to arrange the sale of
such Aircraft, data, documents and services to Buyer,
NOW THEREFORE, in consideration of the mutual covenants herein contained, Buyer
and BRAD agree as follows:
4
<PAGE>
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;
(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);
5
<PAGE>
(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;
(n) N/A
(o) "Non-Excusable Delay" shall have the meaning attributed to it in
Article 14.1;
(p) "Notice" shall have the meaning attributed to it in Article 17.1;
(q) "Other Patents" shall have the meaning attributed to it in Article
18.1;
(r) "Permitted Change" shall have the meaning attributed to it in
Article 11.2;
(s) "Readiness Date" shall have the meaning attributed to it in Article
9.1;
(t) "Regulatory Change" shall have the meaning attributed to it in
Article 8.4;
(u) "Scheduled Delivery Dates" shall have the meaning attributed to it
in Article 6;
(v) "Specification" shall have the meaning attributed to it in Article
2.1;
(w) "Taxes" shall have the meaning attributed to it in Article 4.3: and
(x) "TC" shall have the meaning attributed to it in Article 8.1.
1.5 All dollar amounts in this Agreement are in United States Dollars.
6
<PAGE>
ARTICLE 2 - SUBJECT MATTER OF SALE
2.1 Subject to the provisions of this Agreement, BRAD will sell and Buyer will
purchase ten (10) Canadair Regional Jet aircraft model CL600-2B19 Version
200ER manufactured pursuant to specification no. RAD-601R-153 issue NC
dated September, 1997, 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").
7
<PAGE>
ARTICLE 3 - CUSTOMER SUPPORT SERVICES AND WARRANTY
3.1 BRAD shall provide to Buyer the customer support services pursuant to the
provisions of Annex A attached hereto.
3.2 BRAD shall provide to Buyer the warranty and the service life policy
described in Annex B attached hereto which except as otherwise expressly
set forth in this Agreement, including without limitation the letter
agreements that supplement this Agreement, shall be the exclusive warranty
applicable to the Aircraft.
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.
8
<PAGE>
ARTICLE 4 - PRICE
4.1 The base price for each of the Aircraft (including the Buyer Selected
Optional Features listed in Appendix IV but excluding any other available
optional features) Ex Works (Incoterms 1990) BRAD's facilities in
Montreal, Quebec, (the "Base Price") is [***] expressed in
November 1997 dollars.
4.2 The price of the Aircraft shall be the Base Price adjusted for changes
made pursuant to Article 11 and any Regulatory Changes pursuant to Article
8.4, and further adjusted to the Delivery Date to reflect economic
fluctuations during the period from November 1, 1997 to the Delivery Date
of each Aircraft ("Aircraft Purchase Price"). Such adjustments shall be
based on the economic adjustment formula attached as Appendix I ("Economic
Adjustment Formula").
4.3 The Aircraft Purchase Price does not include any taxes, fees or duties
including, but not limited to, sales, use, value added (including the
Canadian Goods and Services Tax), personal property, gross receipts,
franchise, excise taxes, assessments or duties ("Taxes") which are or may
be imposed by law upon BRAD, any affiliate of BRAD, Buyer or the Aircraft
whether or not there is an obligation for BRAD to collect same from Buyer,
by any taxing authority or jurisdiction occasioned by, relating to or as a
result of the 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. According to current legislation, Canadian taxes, duties and
Goods and Services Tax are not applicable to aircraft sold and immediately
exported from Canada. If changes to Canadian tax legislation result in
taxes being imposed on Buyer, BRAD will cooperate with Buyer to mitigate
the effect of such taxes on Buyer, at Buyer's expense
4.4 Notwithstanding any of the above, if any Taxes (other than Canadian income
taxes charged on the income of BRAD) are imposed upon Buyer or become due
or are to be collected from BRAD by any taxing authority, BRAD 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 BRAD for such Taxes, as the case may be, including
interest and penalties, so long as such interest or penalties are not
attributable to the gross negligence or willful misconduct of BRAD. Buyer
retains the right to contest, at Buyer's expense and by appropriate lawful
proceedings, the imposition of such Taxes.
4.5 Upon BRAD's request, Buyer shall execute and deliver to BRAD any documents
that BRAD reasonably 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.
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ARTICLE 5 - PAYMENT
5.1 BRAD acknowledges having previously received from Buyer
[***] per Aircraft, totaling [***]. Such amount shall be
applied against the balance of the Aircraft Purchase Price in accordance
with the provisions of Article 5.2.
5.2 Buyer shall make payment or cause payment to be made for each Aircraft
(expressed below as a percentage of the Base Price adjusted for changes
made pursuant to Article 11 and any Regulatory Changes pursuant to
Article 8.4 escalated at an assumed escalation factor of [***] per year
(the "Estimated Purchase Price")) as follows:
(a) [***] of the Estimated Purchase Price, less the amounts previously
received referred to in Article 5.1, [***] months prior
to its Scheduled Delivery Date;
(b) [***] of the Estimated Purchase Price [***] months prior to
its Scheduled Delivery Date; and
(c) [***] of the Estimated Purchase Price [***] months prior to its
Scheduled Delivery Date;
(d) the Aircraft Purchase Price less the payments referred to in Article
5.1 and subparagraphs (a), (b) and (c) above, on or before the
Delivery Date of such Aircraft to Buyer.
Receipt of payment in full of all amounts referred to in Articles 5.1 and
5.2 shall constitute payment in full of the Aircraft Purchase Price for
the relevant Aircraft.
All payments referred to in paragraphs (a) to (c) above are to be made on
the first day of the applicable month.
Any payments for which, upon execution of the Agreement, the time of
payment has already passed, will be made within ten (10) business days of
execution of the Agreement.
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5.3 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 (BRAD
will use reasonable efforts to provide timely notice of Buyer's failure to
make payments, for information purposes only) and Buyer does not correct
the failure within a period of thirty (30) days after such stipulated
date, Buyer shall be in default of the Agreement and this Agreement shall
automatically terminate and BRAD 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. Notwithstanding the preceding sentence BRAD
shall have the option (but not the obligation) of waiving such termination
should Buyer make arrangements satisfactory to BRAD for such payment and
all future payments within ten (10) calendar days of Buyer's default.
5.4 Buyer shall pay BRAD 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 prime rate
charged by the Chase Manhattan Bank, New York Branch, or its successor,
from time to time, calculated and compounded monthly.
5.5 Buyer shall make all payments due under this Agreement in immediately
available funds by deposit on or before the due date to BRAD's account in
the following manner:
(a) Transfer to: [***]
(b) For credit to: [***]
(c) For further credit to: [***]
5.6 All other amounts due from Buyer with respect to each Aircraft shall be
paid on or prior to the Delivery Date of the respective Aircraft.
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5.7 All payments provided for under this Agreement shall be made so as to be
received in immediately available funds on or before the dates stipulated
herein.
5.8 BRAD shall remain the exclusive owner of each 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, with
respect to that Aircraft, have been made.
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ARTICLE 6 - DELIVERY PROGRAM
6.1 The Aircraft shall be offered for inspection and acceptance to Buyer at
BRAD's facility in Montreal, Quebec during the months set forth in
Appendix 11 attached hereto (the "Scheduled Delivery Dates").
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ARTICLE 7 - BUYER INFORMATION
7.1 During the manufacture of the Aircraft, Buyer shall provide to BRAD on or
before the date required by BRAD, all information as BRAD may reasonably
request to manufacture the Aircraft including, without limitation, the
selection of furnishings, internal and external colour schemes.
Within seven (7) calendar days following the signing this Agreement, Buyer
will:
(a) provide BRAD with an external paint scheme agreed on by the parties;
and
(b) select interior colours (from BRAD's standard colours).
Failure of Buyer to comply with these requirements may result in an
increase in price, a delay in delivery of the Aircraft, or both.
7.2 On or before execution of this Agreement Buyer shall notify BRAD in
writing of the BFE (if any) that Buyer wishes to have incorporated into
each Aircraft. Buyer shall also provide details of:
a. weights and dimensions of the BFE;
b. test equipment or special tools required to incorporate the BFE; and
c. any other information BRAD may reasonably require.
Within one hundred and twenty (120) calendar days thereafter, BRAD shall
advise Buyer of its acceptance or rejection of the BFE and of the dates by
which each item of BFE is required by BRAD. If required the parties hereto
shall execute a Change Order in accordance with Article 11.1 to cover
those BFE accepted by BRAD.
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7.3 The BFE accepted by BRAD pursuant to this Article shall be incorporated in
the manufacturing process of the Aircraft subject to the following
conditions:
a. Title to the BFE shall remain at all times with Buyer and risk of
loss of the BFE shall remain at all times with Buyer except for
damages caused by BRAD's gross negligence.
b. The BFE must be received Carriage Paid To (Incoterms 1990) BRAD's
plant or such other place as BRAD may designate, no later than the
date notified pursuant to Article 7.2, free and clear of any taxes,
duties, licenses, charges, liens or other similar claims;
c. The BFE shall meet:
1) customary industry standards of quality (with the exception of
any paint to be supplied by Buyer, which must meet BRAD's
requirements and specifications), and
2) the requirements of the applicable airworthiness certification
agency;
d. The BFE shall be delivered to BRAD in good condition and ready for
immediate incorporation into the Aircraft. BRAD shall, upon receipt,
inspect the BFE as to quantity and apparent defects and inform Buyer
of any discrepancies and the required corrective actions to be
taken;
e. BRAD shall only be responsible for the fitment and testing of the
BFE in the Aircraft using reasonable care and good manufacturing
practices, in accordance with Buyer's written detailed description
of the dimensions and weight of such BFE. Buyer shall also furnish
information necessary for its proper storage, fitment, servicing,
maintenance and operation and availability of test equipment or
special tools;
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f. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH, BRAD SHALL HAVE NO
LIABILITY OR OTHER OBLIGATIONS AND IS HEREBY RELIEVED OF ANY
LIABILITY, WARRANTY OR OTHER OBLIGATION WITH RESPECT TO THE BFE AND
BUYER HEREBY WAIVES ALL EXPRESS OR IMPLIED WARRANTIES OR CONDITIONS
INCLUDING THOSE OF MERCHANTABILITY OR FITNESS OR OTHERWISE AND ALL
OTHER LIABILITY (STRICT OR OTHERWISE) ON THE PART OF BRAD, BE IT IN
FACT, IN LAW, IN CONTRACT, OR IN TORT (INCLUDING WITHOUT LIMITATION
THE ACTIVE, PASSIVE OR IMPUTED NEGLIGENCE OR STRICT PRODUCTS
LIABILITY OF BRAD OR ITS AFFILIATES), OR OTHERWISE, IN CONNECTION
WITH THE BFE OR ITS DESIGN, SUITABILITY, USE OR OPERATION.
7.4 If at any time between receipt of the BFE by BRAD and the Delivery Date,
it is determined by BRAD that an item of BFE supplied does not meet the
standards and requirements described above or its fitment, integration and
testing in the Aircraft or Aircraft systems create delays in the
manufacturing or certification process, then such BFE may be removed and
replaced by other BFE or by BRAD's equipment. Any costs associated with
the removal, refitment, replacement, testing, certification and/or delays
in the Delivery Date of the Aircraft shall be borne by Buyer.
7.5 In the event that the delivery of an Aircraft is delayed due to any delay
caused by Buyer's failure to:
a. deliver or have BFE delivered by the date required;
b. ensure satisfactory design, suitability, use or operation of the
BFE;
c. furnish or obtain applicable BFE data;
d. perform any adjusting, calibrating, retesting or updating of BFE;
e. furnish or obtain any approvals in compliance with the provisions of
this Article; or
f. comply with the conditions of this Article.
BRAD agrees to discuss with Buyer the steps to be taken to minimize, cure,
eliminate or work around the delay, but any delay incurred shall be the
responsibility of Buyer and Buyer shall pay to BRAD any costs and expenses
reasonably incurred by BRAD due to such delay.
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7.6 Should there be a delay in delivery caused either by a failure of Buyer
described in Article 7.5, or by an event to which reference is made in
Article 13.0 in connection with the BFE, and if such delay cannot
reasonably be minimized, cured, eliminated or worked around by agreement
of the parties, Buyer agrees that BRAD may deliver the Aircraft without
installing the unapproved, delayed or nonconforming BFE, and Buyer agrees
to take delivery of and pay for the Aircraft.
7.7 If this Agreement is terminated in whole or in part in accordance with the
provisions hereof BRAD may elect to, by written notice to Buyer, either:
a. purchase the BFE ordered by Buyer and/or received by BRAD at the
invoice price paid by Buyer; or
b. return the BFE to Buyer Free Carrier (Incoterms 1990) BRAD's plant,
or such other place that BRAD may designate.
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ARTICLE 8 - CERTIFICATION FOR EXPORT
8.1 BRAD has obtained from Transport Canada ("TC"), a 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 For each Aircraft, BRAD shall provide to Buyer a TC Certificate of
Airworthiness (Transport Category) for export, on or before the Delivery
Date of such Aircraft.
8.3 BRAD shall not be obligated to obtain any other certificates or approvals
as part of this Agreement. 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. BRAD will, to the
extent permitted by law, and with Buyer's assistance, seek 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.
8.4 If any addition or change to, or modification or testing of the Aircraft
is required by any law or governmental regulation or requirement or
interpretation thereof by any governmental agency having jurisdiction in
order to meet the requirements of Article 8.2 (a "Regulatory Change"),
such Regulatory Change shall be made to the Aircraft prior to Delivery
Date, or at such other time after the Delivery Date as the parties may
agree upon.
8.5 [***]
8.6 If delivery of the Aircraft is delayed by the incorporation of any
Regulatory Change, such delay shall be an Excusable Delay within the
meaning of Article 13.
8.7 BRAD shall issue a Change Order, reflecting any Regulatory Change required
to be made under this Article 8, which shall set forth in detail the
particular changes to be made and the effect, if any, of such changes on
design, performance, weight, balance, time of delivery, Base Price and
Aircraft Purchase Price. Any Change Orders issued pursuant to this Article
shall be effective and binding upon the date of BRAD's transmittal of such
Change Order.
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8.8 If the use of any of the certificates identified in this Article 8 are
discontinued during the performance of this Agreement, reference to such
discontinued certificate shall be deemed a reference to any other
certificate or instrument which corresponds to such certificate or, if
there should not be any such other certificate or instrument, then BRAD
shall be deemed to have obtained such discontinued certificate(s) upon
demonstrating that the Aircraft complies substantially with the
Specification.
8.9 Reference to a regulatory authority shall include any succeeding
department or agency then responsible for the duties of said regulatory
authority.
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ARTICLE 9 - ACCEPTANCE PROCEDURE
9.1 No earlier than [***] prior to the first day of the Scheduled
Delivery Date, Buyer may request from BRAD, by facsimile or telegraphic
communication or other expeditious means, [***]
No later than [***] prior to the first day of the Scheduled
Delivery Date, BRAD shall inform Buyer by facsimile or telegraphic
communication or other expeditious means, [***].
BRAD shall give Buyer at least thirty (30) days advance notice, by
facsimile or telegraphic communication or other expeditious means, of the
projected date of readiness of each Aircraft for inspection and delivery.
BRAD shall give Buyer at least ten (10) working days advance notice, by
facsimile or telegraphic communication or other expeditious means, of the
date on which an Aircraft will be ready for Buyer's inspection, flight
test and acceptance (the "Readiness Date").
9.2 Within two (2) days following receipt by Buyer of the notice of Readiness
Date Buyer shall:
(a) provide notice to BRAD as to the source and method of payment of the
balance of the Aircraft Purchase Price;
(b) identify to BRAD the names of Buyer's representatives who will
participate in the inspection, 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").
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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. BRAD shall, if requested by Buyer, perform
an acceptance flight of not less than one (1) and not more than three (3)
hours duration. Ground inspection and flight test shall be conducted in
accordance with BRAD's acceptance procedures (a copy of which shall be
provided to Buyer at least 30 days prior to the Scheduled Delivery Date of
the First Aircraft hereunder) and at BRAD's expense. At all times during
ground inspection and flight test, BRAD 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 BRAD, at no cost to Buyer, which correction may
occur during the Acceptance Period (in which case the Acceptance Period
will be extended accordingly) or after the Acceptance Period depending on
the nature of the defect or discrepancy and of the time required for
correction. To the extent necessary to verify such correction, BRAD shall
perform one (1) or more further acceptance flights
9.7 Upon completion of the ground inspection and acceptance flight of the
Aircraft and correction of any defects or discrepancies:
(a) Buyer will sign a Certificate of Acceptance (in the form of Exhibit
I hereto) for the Aircraft. Execution of the Certificate of
Acceptance by or on behalf of Buyer shall be evidence of 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) BRAD will supply a TC Certificate of Airworthiness for Export; and
(c) Buyer shall pay BRAD the balance of the Aircraft Purchase Price and
any other amounts due, at which time BRAD shall issue a bill of sale
(in the form of Exhibit 11 hereto) passing to Buyer good title to
the Aircraft free and clear of all liens, claims, charges and
encumbrances except for those liens, charges or encumbrances created
by or claimed through Buyer (the "Bill of Sale"). The date on which
BRAD delivers the Bill of Sale and Buyer takes delivery of the
Aircraft shall be the "Delivery Date".
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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 BRAD 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 Buyer shall promptly, upon demand, reimburse BRAD for all costs and
expenses reasonably incurred by BRAD as a result of 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. Provided that BRAD has met all of its
obligations under this Article 9, should Buyer not accept, pay for and/or
take delivery of any one of the Aircraft within thirty (30) calendar days
following the end of the Acceptance Period, the present Agreement shall
automatically terminate. BRAD 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 BRAD to accept delivery and provide payment for all amounts owing or to
become due pursuant to this Agreement.
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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 BRAD 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 BRAD, Buyer shall retain
risk of loss of; or damage to the Aircraft and for itself and on behalf of
its insurer(s) hereby waives and renounces to, and releases BRAD and any
of BRAD's affiliates from any claim, whether direct, indirect or by way of
subrogation, for damages to or loss of the Aircraft arising out of, or
related to, or by reason of such care, custody or control, except in the
case of BRAD's willful misconduct or gross negligence.
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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, requested by Buyer,
and as may be mutually agreed upon by the parties hereto, shall be made
using a change order ("Change Order") substantially in the format of
Exhibit IV hereto. Should Buyer request a change, BRAD shall advise Buyer,
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 BRAD, prior to the Delivery Date and without a Change Order or Buyer's
consent, may:
(a) substitute the kind, type or source of any material, part, accessory
or equipment with any other material, part, accessory or equipment
of like, equivalent or better kind or type; or
(b) make such change or modification to the Specification as it deems
appropriate to:
1) improve the Aircraft, its maintainability or appearance, or
2) to prevent delays in manufacture or delivery, or
3) to meet the requirements of Articles 2 and 8, other than for a
Regulatory Change to which the provisions of Articles 8.4 and
8.5 shall apply,
provided that such substitution, change or modification shall not affect
the Aircraft Purchase Price or materially affect the Scheduled Delivery
Date, interchangeability or replaceability of spare parts or performance
characteristics of the Aircraft. Any change made in accordance with the
provisions of this Article 11.2 shall be deemed to be a "Permitted Change"
and the cost thereof shall be borne by BRAD.
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ARTICLE 12 - BUYER'S REPRESENTATIVES AT MANUFACTURE SITE
12.1 From time to time, commencing with the date of this Agreement and ending
with the Delivery Date of the last Aircraft purchased hereunder, BRAD
shall furnish, without charge, office space at BRAD's facility for one (1)
representative of Buyer. Buyer shall be responsible for all expenses of
its representative and shall notify BRAD at least thirty (30) calendar
days prior to the first scheduled visit of such representative and three
(3) days for each subsequent visit.
12.2 BRAD's and BRAD's affiliates' facilities shall be accessible to Buyer's
representative during normal working hours. Buyer's representative shall
have the right to periodically observe the work at BRAD's or BRAD's
affiliates' facilities where the work is being carried out provided there
shall be no disruption in the performance of the work.
12.3 BRAD shall advise Buyer's representative of BRAD's or BRAD's affiliates'
rules and regulations applicable at the facilities being visited and
Buyer's representative shall conform to such rules and regulations.
12.4 At any time prior to delivery of the Aircraft, Buyer's representative may
request, in writing, correction of parts or materials which they
reasonably believe are not in accordance with the Specification. BRAD
shall provide a written response to any such request. Communication
between Buyer's representative and BRAD shall be solely through BRAD's
Contract Department or its designate.
12.5 BUYER HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BRAD, 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 OR LOSS
OF OR DAMAGE TO PROPERTY OF BUYER OR BUYER'S REPRESENTATIVES WHILE AT
BRAD'S OR BRAD'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 BRAD, ITS ASSIGNEES, AFFILIATES OR THEIR OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES OR CONTRACTORS.
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12.6 BRAD HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BUYER, 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 OR LOSS
OF OR DAMAGE TO PROPERTY OF BRAD OR BRAD'S REPRESENTATIVES WHILE AT
BUYER'S OR BUYER'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 BUYER, ITS ASSIGNEES, AFFILIATES OR THEIR OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES OR CONTRACTORS.
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ARTICLE 13 - EXCUSABLE DELAY
13.1 In the event of a delay on the part of BRAD in the performance of its
obligations or responsibilities under the provisions of this Agreement due
directly or indirectly to a cause which is beyond the reasonable control
or without the fault or negligence of BRAD (an "Excusable Delay"), BRAD
shall not be liable for, nor be deemed to be in default under this
Agreement on account of such delay in delivery of the Aircraft or other
performance hereunder and the time fixed or required for the performance
of any obligation or responsibility in this Agreement shall be extended
for a period equal to the period during which any such cause or the effect
thereof persist. Excusable Delay shall 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, slowdown or interruption of work;
(g) delay or inability to procure supplies, materials, components,
accessories, equipment, tools or parts after due and timely
diligence by BRAD;
(h) delay or failure of common carriers; or
(i) delay in obtaining any airworthiness approval or certificate, or any
equivalent approval or certification, by reason of any law or
governmental order, directive or regulation or any change thereto,
or interpretation thereof, by a governmental agency, the effective
date of which is subsequent to the date of this Agreement, or by
reason of any change or addition made by BRAD or its affiliates or
requested by a governmental agency to the compliance program of BRAD
or of its affiliate, or any part thereof, as same may have been
approved by TC, or change to the interpretation thereof to obtain
any such airworthiness approval or certificate.
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13.2 (a) If BRAD concludes, based on its appraisal of the facts and normal
scheduling procedures, that due to Excusable Delay delivery of the
Aircraft will be delayed for more than twelve (12) months after the
originally Scheduled Delivery Date or any revised date agreed to in
writing by the parties, BRAD shall promptly notify Buyer in writing
and either party may then terminate this Agreement with respect to
the Aircraft by giving written notice to the other within fifteen
(15) days after receipt by Buyer of BRAD's notice.
(b) If, due to Excusable Delay, delivery of any Aircraft is delayed for
more than twelve (12) months after the Scheduled Delivery Date,
either party may terminate this Agreement with respect to such
Aircraft by giving written notice to the other within fifteen (15)
days after the expiration of such twelve (12) month period.
13.3 Termination under Article 13.2 shall discharge all obligations and
liabilities of Buyer and BRAD hereunder with respect to such delayed
Aircraft and all related undelivered items and services, except that BRAD
shall promptly repay to Buyer, and BRAD's sole liability and
responsibility shall be limited to the repayment to Buyer, of all advance
payments for such Aircraft received by BRAD less any amount due by Buyer
to BRAD.
13.4 The termination rights set forth in Article 13.2 are in substitution for
any and all other rights of termination or contract lapse arising by
operation of law in connection with Excusable Delays.
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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").
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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, BRAD shall
promptly notify Buyer in writing. Such notice shall specify the earliest
date reasonably possible, consistent with BRAD's other contractual
commitments and production schedule, by which BRAD estimates it would be
able to deliver a replacement for the lost, destroyed or damaged Aircraft.
This Agreement shall automatically terminate as to such Aircraft unless
Buyer gives BRAD written notice, within thirty (30) days of BRAD's notice,
that Buyer desires a replacement for such Aircraft. If Buyer gives such
notice to BRAD, the parties shall execute an amendment to this Agreement
which shall set forth the Delivery Date for such replacement aircraft and
corresponding new replacement Aircraft Purchase Price; provided, however,
that nothing herein shall obligate BRAD to manufacture and deliver such
replacement aircraft if it would require the reactivation or acceleration
of its production line for the model of aircraft purchased hereunder. The
terms and conditions of this Agreement applicable to the replaced Aircraft
shall apply to the replacement aircraft.
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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 BRAD or Buyer by notice
of termination to the other party upon the occurrence of any of the
following events:
(a) a party makes an assignment for the benefit of creditors or admits
in writing its inability to pay its debts or the other party has
reasonable evidence that it generally does not pay its debts as they
become due; or
(b) a receiver or trustee is appointed for a party or for substantially
all of such party's assets and, if appointed without such party's
consent, such appointment is not discharged or stayed within thirty
(30) calendar days thereafter; or
(c) proceedings or action under any law relating to bankruptcy,
insolvency or the reorganization or relief of debtors are instituted
by or against a party, and, if contested by such party, are not
dismissed or stayed within thirty (30) calendar days thereafter; or
(d) any writ of attachment or execution or any similar process, that has
the effect of materially affecting the business or operations of a
party, is issued or levied against a parry or any significant part
of its property and is not released, stayed, bonded or vacated
within forty-five (45) calendar days after its issue or levy.
(e) Buyer shall fail to hold an effective air carrier operating
certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of the Federal Aviation Act (or successor provision of
law) for aircraft capable of carrying ten (10) or more individuals
or 6000 pounds or more of cargo.
16.2 In addition, this Agreement may be terminated, in whole or in part, before
the Delivery Date with respect to any or all undelivered Aircraft:
(a) as otherwise provided in this Agreement; or
(b) by BRAD, if Buyer is in default or breach of any material term or
condition of this Agreement and Buyer does not cure such default or
breach within forty-five (45) calendar days after receipt of notice
from BRAD specifying such default or breach; or
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<PAGE>
(c) by Buyer, if BRAD is in default or breach of any material term or
condition of this Agreement and such breach remains uncured for a
period of forty-five (45) calendar days following receipt of a
notice from Buyer specifying the nature of default or breach; or
(d) by Buyer, as to all affected Aircraft in the event that the
financing contemplated in Letter Agreement 003 is not made
available to Buyer due to the failure to satisfy the conditions
set forth in paragraph 1.6 thereof and by BRAD in the event that
Buyer shall not within sixty (60) days after BRAD shall have
notified Buyer that such financing by BRAD will not be made
available, confirm to BRAD that Buyer has alternative financing
available to it.
16.3 In case of termination of this Agreement under Articles 5.3 or 9.9, or
by BRAD pursuant to Articles 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 any or all of the
undelivered Aircraft and any rights of Buyer hereunder (including
property rights) with respect to any or all undelivered Aircraft
shall become null and void with immediate effect;
(b) BRAD may sell, lease or otherwise dispose of such Aircraft to
another party free of any claim by Buyer; and
(c) all amounts paid by Buyer with respect to the applicable undelivered
Aircraft shall be retained by BRAD and shall be applied against the
costs, expenses, losses and damages incurred by BRAD as a result of
Buyer's default and/or termination of this Agreement. To the extent
that the amount so retained by BRAD exceeds such damages, such
excess shall be returned to Buyer. if such amount so retained by
BRAD is insufficient to cover such damages BRAD shall have all
rights permitted by law to recover from Buyer the full amount of
such damages.
In the event of termination of this Agreement by Buyer or BRAD pursuant to
Article 16.2(d) hereof, Buyer's sole rights, remedies and recourses
against BRAD and BRAD's obligations to Buyer shall be limited to only the
return by BRAD of those amounts paid by Buyer to BRAD hereunder on account
of the undelivered Aircraft.
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<PAGE>
ARTICLE 17 - NOTICES
17.1 Any notice, request, approval, permission, consent or other communication
("Notice"), to be given or required under this Agreement shall be provided
in writing, by registered mail, facsimile, courier, telegraphic or other
electronic communication providing reasonable proof of transmission,
except that no notice shall be sent by mail if disruption of postal
service exists or is threatened either in the country of origin or of
destination, by the party giving the Notice and shall be addressed as
follows:
(a) Notice to BRAD shall be addressed to:
Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario
Canada
M3K 1Y5
Attention: Director of Contracts
Facsimile: (416) 375-4533
(b) Notice to Buyer shall be addressed to:
Midway Airlines Corporation
300 W. Morgan Street, Suite 1200
Durham, NC 27701
Attention: Chief Financial Officer Attention: General Counsel
Facsimile: 919-956-8619 Facsimile: 919-956-7568
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.
33
<PAGE>
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 a under the laws of any other country in
which Buyer from time to time may lawfully operate the Aircraft ("Other
Patents"), by the Aircraft, or by any system, accessory, equipment or part
installed in such Aircraft at the time title to such Aircraft passes to
Buyer, BRAD shall indemnify, protect and hold harmless Buyer from and
against all claims, suits, actions, liabilities, damages and costs
resulting from the infringement, excluding any incidental or consequential
damages (which include without limitation loss of revenue or loss of
profit) and BRAD shall, at its option and expense:
(a) procure for Buyer the right under such patent to use such system,
accessory, equipment or part; or
(b) replace such system, accessory, equipment or part with one of the
similar nature and quality that is non-infringing; or
(c) modify such system, accessory, equipment or part to make same non-
infringing in a manner such as to keep it otherwise in compliance
with the requirements of this Agreement.
BRAD's obligation hereunder shall extend to Other Patents only if from the
time of design of the Aircraft, system, accessory, equipment or part until
the alleged infringement claims are resolved:
[6~
(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 Rally 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 or other countries which have ratified, adhered to and
are contracting parties to both of the forgoing conventions.
34
<PAGE>
18.2 The foregoing indemnity does not apply to BFE, or to avionics, engines or
any system, accessory, equipment or part that was not manufactured to
BRAD's detailed design or to any system, accessory, equipment or part
manufactured by a third party to BRAD's detailed design without BRAD's
authorization. In the event of a patent or alleged patent infringement on
avionics, engine or other system mentioned above, BRAD shall, if
permitted by its procurement contract, assign to Buyer any rights it
may have against vendors in connection with such infringement and
otherwise will cooperate reasonably to enforce such rights as it may
have for Buyer's benefit.
18.3 Buyer's remedy and BRAD's obligation and liability under this Article are
conditional upon (i) Buyer giving BRAD written notice within ten (10) days
after Buyer receives notice of a suit or action against Buyer alleging
infringement or within twenty (20) days after Buyer receives any other
written claim of infringement (ii) Buyer uses reasonable efforts in full
cooperation with BRAD to reduce or mitigate any such expenses, damages,
costs or royalties involved, and (iii) Buyer furnishes promptly to BRAD
all data, papers and records in its possession or control necessary or
useful to resist and defend against such claim or suit. BRAD may at its
option conduct negotiations with any party claiming infringement and may
intervene in any suit or action. Whether or not BRAD intervenes, BRAD
shall be entitled at any stage of the proceedings to assume or control the
defense. Buyer's remedy and BRAD's obligation and liability are further
conditional upon BRAD's prior approval of Buyer's payment or assumption of
any liabilities, expenses, damages, royalties or costs for which BRAD may
be held liable or responsible.
18.4 THE INDEMNITY, OBLIGATIONS AND LIABILITIES OF BRAD AND REMEDIES OF BUYER
SET OUT IN THIS ARTICLE ARE EXCLUSIVE AND ACCEPTED BY BUYER TO BE IN LIEU
OF AND IN SUBSTITUTION FOR, AND BUYER HEREBY WAIVES, RELEASES AND
RENOUNCES, ALL OTHER INDEMNITIES, OBLIGATIONS AND LIABILITIES OF BRAD AND
OF ITS AFFILIATES AND ALL OTHER RIGHTS, REMEDIES AND CLAIMS, INCLUDING
CLAIMS FOR DAMAGES, DIRECT, INCIDENTAL OR CONSEQUENTIAL, OF BUYER AGAINST
BRAD AND ITS AFFILIATES EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE,
WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT INFRINGEMENT BY THE AIRCRAFT
OR ANY INSTALLED SYSTEM, ACCESSORY, EQUIPMENT OR PART.
35
<PAGE>
ARTICLE 19 - LIMITATION OF LIABILITY AND INDEMNIFICATION
19.1 BRAD SHALL HAVE NO OBLIGATION OR LIABILITY (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 BRAD 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, FOR ANY LOSSES OR DAMAGES FOR OR
ARISING OUT (I) OF ANY NON-CONFORMANCE OR DEFECT IN OR DESIGN OR CONDITION
OF ANY AIRCRAFT, EQUIPMENT, BRAD PARTS, VENDOR PARTS, SPARE PART, GROUND
SUPPORT EQUIPMENT, TECHNICAL PUBLICATION OR DATA OR ANY SERVICES TO BE
PROVIDED HEREUNDER, OR (II) ANY OTHER FAILURE BY BRAD TO PERFORM ANY
OBLIGATION HEREUNDER.
19.2 ANNEX B HERETO EXCLUSIVELY SETS FORTH BRAD'S OBLIGATIONS WITH RESPECT TO
ANY NON-CONFORMANCE OF THE AIRCRAFT WITH THE SPECIFICATION OR ANY DEFECT
IN THE AIRCRAFT.
EXCEPT AS SET FORTH IN ANNEX B THERE ARE NO UNDERSTANDINGS,
REPRESENTATIONS, CONDITIONS OR WARRANTIES, EXPRESS OR IMPLIED, BETWEEN THE
PARTIES WITH RESPECT TO ANY NON-CONFORMANCE OF THE AIRCRAFT WITH THE
SPECIFICATION OR ANY DEFECT IN THE AIRCRAFT OR ANY OTHER THING DELIVERED
UNDER THIS AGREEMENT.
19.3 THE WARRANTY AND SERVICE LIFE POLICY PROVIDED IN ANNEX B, ARTICLE 18 OF
THE AGREEMENT, AND THE GUARANTEES CONTAINED IN LETTER AGREEMENTS NO. 007,
008, 009 AND 010 TO THIS AGREEMENT AND THE OBLIGATIONS AND LIABILITIES OF
BRAD UNDER THE AFORESAID WARRANTY, SERVICE LIFE POLICY, ARTICLE 18, AND
GUARANTEES 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 BRAD 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,
36
<PAGE>
A. ANY IMPLIED WARRANTY OR CONDITION OF 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 BRAD 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 BRAD PARTS, ANY POWER
PLANT PARTS, ANY VENDOR PARTS, ANY SPARE PARTS OR ANY TECHNICAL
DATA.
19.4 BUYER HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BRAD, ITS SUBSIDIARIES, AFFILIATES, SUBCONTRACTORS AND LESSORS, AND THEIR
RESPECTIVE EMPLOYEES, DIRECTORS, OFFICERS AND AGENTS, AND EACH OF THEM,
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 BRAD'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 BRAD, ITS SUBSIDIARIES, AFFILIATES, SUBCONTRACTORS AND
LESSORS, OR THE EMPLOYEES, DIRECTORS, OFFICERS AND AGENTS OF ANY OF THEM.
37
<PAGE>
ARTICLE 20 - ASSIGNMENT
20.1 Either party may assign, sell, transfer or dispose of(in whole or in part)
any of its rights and obligations hereunder to a wholly owned subsidiary
or affiliate provided that there is no increase to the liability and/or
responsibility of the non-assigning party and that the assigning party
remains jointly and severally liable with any assignee for the performance
of its obligation under this Agreement.
20.2 Except as provided in Article 20.1, Buyer shall not assign, sell, transfer
or dispose of (in whole or in part) any of its rights or obligations
hereunder without BRAD's prior written consent. In the event of such
assignment, sale, transfer or disposition Buyer shall remain jointly and
severally liable with any assignee for the performance of all and any of
Buyer's obligations under this Agreement and BRAD reserves the right as a
condition of its consent to amend one or more of the terms and conditions
of this Agreement.
20.3 Notwithstanding Article 20.2 above, Buyer may assign, after transfer of
title of the Aircraft, its rights under the Agreement to a third-party
purchaser of any one of the Aircraft, provided said third party
acknowledges in writing to be bound by the applicable terms and conditions
of this Agreement, including but not limited to the provisions and
limitations as detailed Annex A, Customer Support Services, Annex B,
Warranty and Service Life Policy and of the provisions and limitations in
Limitation of Liability as defined in Article 19 hereof and Indemnity
Against Patent Infringement as defined in Article 18 hereof and any other
on-going obligations of Buyer, which shall apply to it to the same extent
as if said third party was Buyer hereunder and provided that there is no
increase to the liability and/or responsibility of BRAD.
20.4 BRAD may assign any of its rights to receive money hereunder without the
prior consent of Buyer.
20.5 Notwithstanding the other provisions of this Article 20, BRAD shall, at
Buyer's cost and expense, if so requested in writing by Buyer, take any
action reasonably required for the purpose of causing any of the Aircraft
to be subjected (i) to, after the Delivery Date, an equipment trust,
conditional sale or lien, or (ii) to another arrangement whether before,
on or after the Delivery Date, for the financing (including lease
financing) of the Aircraft by Buyer, providing, however, there shall be no
increase to the liability and/or responsibility of BRAD arising through
such financing.
38
<PAGE>
ARTICLE 21 - SUCCESSORS
This Agreement shall inure to the benefit of and be binding upon each of
BRAD and Buyer and their respective successors and permitted assignees.
39
<PAGE>
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, 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 party's obligations under this Agreement shall be subject to and
apply only to the extent permitted by applicable laws, regulations,
directives and/or orders regarding export controls.
40
<PAGE>
ARTICLE 23 - CONFIDENTIAL NATURE OF AGREEMENT
23.1 This Agreement and all information furnished or obtained pursuant to this
Agreement is confidential. Each party hereto agrees to keep confidential
this Agreement and all information so furnished to or so obtained by it
pursuant to this Agreement and not to disclose the same, in whole or in
part, to third parties; provided, however, that a party (the "Disclosing
Party") may disclose this Agreement, its contents and any such
information:
(a) as has become public (other than as a result of disclosure by or on
behalf of the Disclosing Party) or has become known to such
Disclosing Party other than pursuant to this Agreement and without
any breach of any confidentiality obligation being known to such
Disclosing Party; and
(b) to the independent auditors and attorneys of the Disclosing Party
(who shall be advised of the confidential nature of this Agreement
and such information); and
(c) with respect to technical data or similar information received by
Buyer, as such may be used by Buyer for the normal operation,
maintenance, overhaul and repair of the Aircraft; and
(d) in response to any summons or subpoena or in connection with any
litigation, provided that, if practicable and not in violation of
any applicable law, rule, regulation or order, notice of such
disclosure shall be given to the other party hereto, and (if
applicable and not so in violation) in advance of such disclosure,
and such other party shall be permitted to resist such disclosure by
the appropriate legal proceedings, provided such resistance does not
materially adversely affect the Disclosing Party; and
(e) to the extent that such Disclosing Party reasonably believes it is
required in order to comply with any law, rule, regulation or order
applicable to such party, provided that, if practicable and not in
violation of any such applicable law, rule, regulation or order,
notice of such disclosure shall be given to the other party, and (if
practicable and not so in violation) in advance of such disclosure,
and such other party shall be permitted (if practicable and not so
in violation) to resist or seek confidential treatment of such
disclosure and the Disclosing Party shall use all reasonable efforts
to cooperate with and assist the other party in resisting or seeking
confidential treatment of such disclosure, including undertaking the
appropriate proceedings or making the appropriate applications or
requests (at the cost of the other party) for such purpose where
such other party is not entitled to do so on its own behalf; and
41
<PAGE>
(f) as may be reasonably necessary for either party to carry out its
obligations or enforce or protect its rights under this Agreement or
other agreements related to this Agreement to which it is a party
and provided that to the extent practicable such disclosure shall be
made under a confidentiality undertaking; and
(g) as may be required by financial institutions or arrangers involved
with the financing of the Aircraft, which financial institutions or
arrangers shall be advised of the confidential nature of this
Agreement and such information and shall undertake to keep same
confidentially; and
(h) as may be reasonably required by BRAD for purposes of analytical or
technical product support or improvement or enhancement of customer
support services or otherwise in the ordinary course of its aircraft
manufacturing, marketing or service business and operations; and
(i) as may be required by financial institutions or arrangers engaged in
extending or considering extension of credit or other financing to
Buyer, which institutions or arrangers shall be advised of the
confidential nature of this Agreement and such information, and such
disclosure being made under a confidentiality undertaking; and
(j) as Buyer may be advised by its counsel is necessary or advisable to
be filed with the Securities & Exchange Commission (the
"Commission") in connection with any offering of securities by Buyer
or as to which the Commission shall have denied a request by Buyer
for confidential treatment. Provided that BRAD shall have five (5)
business days after receipt of Buyer's proposed redacted version of
this Agreement to be submitted to the Commission to submit its
comments and recommendations to Buyer, provided that Buyer or its
counsel shall notify BRAD prior to filing with the Commission of any
decision made on the advice of Buyer's counsel to file any portion
of the Agreement which BRAD has proposed to be redacted without
seeking confidential treatment from the Commission for such portion
which advice and decision shall take into consideration BRAD's
request for confidential treatment.
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23.2 Without limiting the provisions of Article 23.1(j) with respect to a
securities offering by Buyer, in connection with any other filing as part
of a reporting requirement of the Commission, the provisions of this
Article 23.2 shall apply.
Promptly following the execution and delivery hereof, BRAD and Buyer will
consult and cooperate reasonably with each other in order to prepare and
file a request for confidential treatment pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934 covering this Agreement in any filing with
the Commission in which this Agreement would be a "material contract" of
Buyer required to be filed pursuant to Item 601 of Commission Regulation
S-K. In particular, BRAD shall have ten (10) business days after the
receipt from Buyer of its proposed redacted version of this Agreement to
be submitted to the Commission to provide its comments and recommendation
thereon. Buyer shall use commercially reasonable efforts to work with BRAD
to agree on a final form of confidentiality request and redacted form of
this Agreement and to file and appropriately pursue the same with the
Commission as part of any filing in which this Agreement would otherwise
be required to be filed with the Commission. BRAD acknowledges that Buyer
shall not be in breach of any confidentiality obligation hereunder should
all or any portion of such request for confidential treatment not be
granted by the Commission.
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.
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ARTICLE 24 - AGREEMENT
24.1 This Agreement and the matters referred to herein constitute the entire
Agreement between BRAD and Buyer and supersede and cancel all prior
representations, brochures, alleged warranties, statements, negotiations,
undertakings, letters, memoranda of agreement, proposal, acceptances,
agreements, understandings (including the Memorandum of Understanding
between BRAD and Buyer dated August 29, 1997), contracts and
communications, whether oral or written, between BRAD and Buyer or their
respective agents, with respect to or in connection with the subject
matter of this Agreement and no agreement or understanding varying the
terms and conditions hereof shall be binding on either BRAD or Buyer
hereto unless an amendment to this Agreement is issued and duly signed by
their respective authorized representatives pursuant to the provisions of
this Article hereof. In the event of any inconsistencies between this
Agreement and any of the Appendices, Exhibits and Annexes or other
documents referred to herein, the provisions of this Agreement shall
prevail.
24.2 If any of the provisions of this Agreement are for any reason declared by
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 hill force and effect.
24.3 THE BENEFIT OF THE WAIVER, RELEASE, RENUNCIATION AND EXCLUSION OF
LIABILITY IN EACH OF ARTICLES 7.3(f), 12.5, 18.4, 19, ANNEX A ARTICLE
2.9.4.5 AND ANNEX B ARTICLE 5.1 EXTENDS ALSO TO THE OTHER DIVISIONS, OTHER
SUBSIDIARIES, AND OTHER AFFILIATES OF BOMBARDIER INC., INCLUDING DE
HAVILLAND INC. (COLLECTIVELY THE "BOMBARDIER GROUP") AND TO THE OFFICERS,
DIRECTORS, EMPLOYEES AND REPRESENTATIVES OF THE BOMBARDIER GROUP, ON WHOSE
BEHALF AND FOR WHOSE BENEFIT BRAD IS, FOR PURPOSES OF THIS ARTICLE 24.3,
ACTING AS AGENT AND TRUSTEE.
24.4 BRAD and Buyer confirm to each other they have each obtained the required
authorizations and fulfilled any conditions applicable to enable each of
them to enter into this Agreement.
24.5 Buyer and BRAD agree that this Agreement has been the subject of
discussion and negotiation and is fully understood by the parties hereto
and that the price of the Aircraft and the other mutual agreements of the
parties set forth herein were arrived at in consideration of the
provisions contained in Article 19.
44
<PAGE>
In witness whereof this Agreement was signed on the date written hereof
For and on behalf of For and on behalf of
MIDWAY AIRLINES CORPORATION: BOMBARDIER, INC.:
Per: /s/[SIGNATURE ILLEGIBLE] Per: /s/[SIGNATURE ILLEGIBLE]
---------------------------- ----------------------------
Title: CEO Title: MANAGER, CONTRACTS
---------------------------- ----------------------------
45
<PAGE>
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 following 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
where:
Pp = Aircraft Purchase Price;
PO = Basic Price expressed in November 1, 1997 US dollars;
LD = the Canadian labour index based upon the indices for the last full
month preceding the month of delivery of the relevant Aircraft;
LO = the Canadian labour index which, as at November 1, 1997 is TBD;
ED = the U.S. labour index based upon the indices for the last full month
preceding the month of delivery of the relevant Aircraft;
EO = the U.S. labor index which, as at November 1, 1997 is TBD;
CD = the Industrial Commodities index based upon the indices for the last
full month preceding the month of delivery of the relevant Aircraft;
CO = the Industrial Commodities index which, as at November 1, 1997 is
TBD;
MD = the material index based upon the indices for the last full month
preceding the month of delivery of the relevant Aircraft;
MO = the material index which, as at November 1, 1997 is TBD;
FD = the fuel index based on the indices for the last full month
preceding the month of delivery of the relevant Aircraft; and
FO = the fuel index which, as at November 1, 1997 is TBD.
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<PAGE>
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 BRAD shall be prevented from calculating the
Aircraft Purchase Price of each Aircraft due to any delay in the
publication of the required indices, BRAD shall use the last
provisionally published indices, and in the event that provisional
indices are not available, BRAD 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, BRAD 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 represent the projection by BRAD of the
manner in which BRAD will incur cost in the production of the
Aircraft. In the event there is a change in circumstances which
materially affects the indices chosen or the weighting assigned to
them, the indices and/or the weighting shall be amended accordingly.
The change in circumstances referred to above shall include but not
be limited to:
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<PAGE>
1) Any 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 BRAD, so long as this does
not represent any duplication with other indeces; 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 used to the
second decimal place,
(b) The Economic Adjustment Formula shall be calculated to four decimal
places, and
(c) The Aircraft Purchase Price resulting from the Economic Adjustment
Formula shall be corrected to the nearest dollar.
48
<PAGE>
APPENDIX II
DELIVERY SCHEDULE
Aircraft Scheduled Delivery Date
First Aircraft November 1997
Second Aircraft December 1997
Third Aircraft February 1998*
Fourth Aircraft March 1998
Fifth Aircraft June 1998
Sixth Aircraft September 1998
Seventh Aircraft September 1998
Eighth Aircraft November 1998
Ninth Aircraft November 1998
Tenth Aircraft December 1998
** This Aircraft shall have a grace period of 15 days
49
<PAGE>
APPENDIX III
SPECIFICATION
TYPE SPECIFICATION
Number RAD-601R-153 Issue NC
September 1997
50
<PAGE>
APPENDIX IV
BUYER SELECTED OPTIONAL FEATURES
Price
(in July 1,
1995
CR No. Description US $)
00-008 Extended Range Version (51,000 lb MTOW) - ER [***]
00-009 Centre Wing Fuel Tank [***]
00-012 Take-off Flap Setting (8 deg) [***]
00-013 FAA Collins Strapping [***]
21-009 Ground Air Conditioning Connection [***]
23-005 Single SELCAL System [***]
23-012 Third VHF Comm. Radio - Full Provisions [***]
25-093 Customized Cabin Interior - Midway Airlines [***]
- 50 pax with FAA Type III exit
- GI Galley - Cold Snack, Hot beverage, two (2)
Coffeemakers and two (2) Carafes, provisions for two
half size carts and five (5) standard containers
- life vest pouches under seat
25-083 Exterior Paint - Midway Airlines [***]
25-099 Reclining Seats [***]
25-108 Leather Seat Covers [***]
25-350 Structure for Universal provisions [***]
25-351 Second Flight Attendant position [***]
30-001 Red anti ice warning light (FAA) [***]
51
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33-002 Logo Lights [***]
33-003 Red Strobe Lights [***]
33-004 Cargo Door Light [***]
34-013 Collins FMS - provisions only [***]
34-019 On Board Data Loader [***]
34-026 Ground Proximity Warning System audio Call-out [***]
34-027 Altimeter Reset Auto Flash [***]
34-035 Single Collins FMS 4200 [***]
34-037a Single Collins GPS 4000 - not certified until 3Q 1997 [***]
35-004 EROS Magic Mask - installation only [***]
35-XXX Additional oxygen mask on LHS [***]
72-001 General Electric CF34-3B1 Engine Series 200 [***]
Total Technical Features [***]
All prices listed above are expressed in July 1,1995 US dollars, and are subject
to economic adjustment to the date of aircraft delivery. This list and all
prices are subject to change without notice
52
<PAGE>
EXHIBIT I
CERTIFICATE OF ACCEPTANCE
The undersigned hereby acknowledges on behalf of Buyer acceptance of the
Aircraft bearing manufacturer's serial number ______________________ fitted with
two (2) General Electric CF-34-3B1 turbofan engines bearing serial numbers
_______________________ and ____________________ as being in accordance with the
terms and conditions of this Agreement signed on the ____ day of ________, 19___
between Bombardier Regional Aircraft Division and Midway Airlines Corporation.
Place:_____________________________ Date:_____________________________
Signed for and on behalf of
Midway Airlines Corporation
Per: _______________________
Title: _______________________
53
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EXHIBIT II
WARRANTY BILL OF SALE
1. For valuable consideration, Bombardier Inc., represented by its Bombardier
Regional Aircraft Division, owner of the full and beneficial title of the
aircraft described as follows:
One (1) Canadair Regional Jet Model CL-600-2B19 aircraft bearing:
Manufacturer's serial number: XXXX
with:
Two (2) CF34-3B1 engine serial numbers: XXXXXX AND XXXXXX
together with all avionics, appliances, instruments, appurtenances,
accessories, furnishings and/or other equipment or property incorporated
in or installed on or attached to said aircraft and engines (hereinafter
referred to as the 'Aircraft').
does this ____ day of ________ 199___ hereby convey, sell, grant, transfer,
bargain and deliver and send over to _________________ (hereinafter referred to
as 'Buyer'), and unto its successors and assigns forever all of Bombardier
Inc.'s rights, title and interest in and to the Aircraft.
2. Bombardier Inc. represents and warrants to Buyer:
(i) that Bombardier Inc. has good and marketable title to the Aircraft
and the good and lawful right to the Aircraft and the good and
lawful right to sell the same; and
(ii) the good and marketable title to the Aircraft is hereby duly vested
in Buyer free and clear of all claims, liens, encumbrances and
rights of others of any nature. Bombardier Inc. hereby covenants and
agrees to defend such title forever against all claims and demands
whatsoever.
This full Warranty Bill of Sale is governed by the laws of the state of New
York, United States of America.
IN WITNESS WHEREOF, Bombardier Inc. has caused this instrument to be executed
and delivered by its duly authorized personnel.
BOMBARDIER INC.
- -------------------------
Name:
- -------------------------
Title
54
<PAGE>
EXHIBIT III
CERTIFICATE OF RECEIPT OF AIRCRAFT
THE UNDERSIGNED HEREBY ACKNOWLEDGES TO HAVE RECEIVED FROM BOMBARDIER INC., AT
THE DORVAL AIRPORT, ADJACENT TO BRAD'S PLANT IN MONTREAL, PROVINCE OF QUEBEC,
CANADA, ON THE _________ DAY OF __________, AT THE HOUR OF _________ O'CLOCK,
ONE (1) CANADAIR REGIONAL JET AIRCRAFT MODEL CL-600-2B19, BEARING SERIAL NUMBER
__________, INCLUDING WITH THE AIRCRAFT TWO (2) CF34-3B1 TURBOFAN ENGINES
BEARING MANUFACTURER'S SERIAL NUMBERS _________ & _____________ AND OTHER MAJOR
REPLACEABLE ACCESSORIES ATTACHED TO THE AIRCRAFT AND ENGINES.
Signed for and on behalf of
Midway Airlines Corporation:
Per:______________________________________
Title:____________________________________
55
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EXHIBIT IV
CHANGE ORDER
(PRO FORMA)
56
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- --------------------------------------------------------------------------------
CONTRACT CHANGE ORDER
================================================================================
PURCHASER:
PURCHASE AGREEMENT NO.: AIRCRAFT TYPE:
C.C.O. NO.: DATED:
PAGE __ of __
REASON FOR CHANGE:
- --------------------------------------------------------------------------------
DESCRIPTION OF CHANGE:
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 consolidation
and this CCO, this CCO shall prevail.
- --------------------------------------------------------------------------------
FOR AND ON BEHALF OF: FOR AND ON BEHALF OF:
Bombardier Regional Aircraft Division Midway Airlines Corporation
Signed:________________________ Signed:___________________________
Date:__________________________ Date:_____________________________
- --------------------------------------------------------------------------------
57
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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 repetitive 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 commence approximately one (1) month prior
to the Delivery Date of the first Aircraft and continue until
October 1999. 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").
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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.
1.2.5 Office Facilities
Buyer shall furnish the FSR, at no charge to BRAD, 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 BRAD (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 BRAD or
the FSR or other BRAD employee as a result of or in connection with
the rendering of the services.
1.2.7 Right to Stop Work
BRAD 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 BRAD employee; or
d.) the Government of the country where Buyer's facilities are
located or where Buyer desires the FSR to travel refuses the
BRAD employee permission to enter said country or Buyer's base
of operations.
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1.2.8 Work Permits and Clearances
Buyer shall arrange for all necessary work permits and airport
security clearances required for the FSR or other BRAD 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, BRAD shall provide Buyer
BRAD's standard format scheduled maintenance task cards that shall
conform to the Aircraft at the Delivery Date. At Buyer's request
BRAD shall provide a proposal for task cards produced to Buyer's
format.
1.3.2 In-Service Maintenance Data
Buyer agrees to provide to BRAD in-service maintenance data in order
to provide updates to BRAD's recommended maintenance program. Buyer
and BRAD shall agree on standards and frequency for communication of
such data.
1.4 Additional Services
At Buyer's request BRAD 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.
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ARTICLE 2- SPARE PARTS, GSE, TOOLS AND TEST EQUIPMENT
2.1.1 Definitions
a. "BRAD Parts":
any spare parts, ground support equipment, tools and test
equipment which bear an inhouse Cage Code number in the BRAD
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 BRAD 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 BRAD. The term Spare
Parts includes BRAD Parts, Power Plant Part and Vendor Parts.
e. "Order":
any order for Spare Parts issued by Buyer to BRAD; and
f. "Technical Data":
shall have the meaning attributed to it in Annex A Article
4.1.
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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
BRAD 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
BRAD 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, BRAD shall also
maintain a shelf stock of certain BRAD Parts selected by BRAD to
ensure reasonable re-order lead times and emergency support. BRAD
shall maintain a reasonable quantity of BRAD insurance parts.
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 BRAD Parts
2.4.1 Purchase of BRAD Parts
In consideration of BRAD's obligation under Annex A Article 2.3.1,
during the term stated in Annex A Article 2.1., Buyer agrees to
purchase BRAD Parts only from BRAD or from airlines operating the
same type aircraft purchased herein, or from any source provided
that such source is approved by BRAD and/or the FAA. Where Buyer
selects another source, BRAD shall have no liability or obligation
whatsoever of any kind with respect to or arising from any parts
purchased from such other sources. Buyer may however purchase BRAD
Parts from any source whatsoever, redesign BRAD Parts, or have them
redesigned, manufacture BRAD Parts, or have them manufactured, under
the following conditions:
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a) when less than ten (10) aircraft of the type purchased
hereunder are operated in scheduled commercial air transport
service;
b) Any time BRAD Parts are needed to effect emergency repairs on
the Aircraft, provided that such purchase, redesign or
manufacture by or from sources other than BRAD allows Buyer to
obtain BRAD Parts in less time than BRAD requires to furnish
them; or
c) if Buyer has notified BRAD in writing that any BRAD Parts are
defective or unsatisfactory in use and if within a reasonable
period thereafter BRAD has not provided a satisfactory
resolution or made redesigned BRAD Parts available.
2.4.2 Buyer's Right to Purchase, Redesign or Manufacture
Buyer's right to purchase, redesign or to have redesigned or
manufacture or to have manufactured BRAD Parts under the preceding
Article shall not be construed as a granting of a license by BRAD
and shall not obligate BRAD 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 BRAD and BRAD 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 BRAD 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 BRAD of Redesigned Parts
BRAD reserves the right to negotiate with Buyer the access to
redesigned parts, drawings and the exclusive manufacturing rights of
the redesigned part, if Buyer redesigns or has had any BRAD parts
redesigned.
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2.5 Purchase of Vendor Parts & Power Plant Parts
BRAD shall not be obligated to maintain a stock of Vendor Parts or Power
Plant Parts. BRAD may elect to maintain a spares stock of selected Vendor
Parts at its own discretion to support provisioning and replenishment
sales. BRAD agrees to use 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 BRAD's internal processing time.
2.6 Spare Parts Pricing
2.6.1 Spare Parts Price Catalogue
Prices for commonly used BRAD Parts stocked by BRAD shall be
published in the spare parts price catalogue ("Spare Parts Price
Catalogue"). BRAD 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 BRAD prices for Vendor Parts
If Buyer orders Vendor Parts from BRAD, 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 BRAD.
Price quotations will be held firm for a period of ninety (90)
calendar days or as otherwise specified by BRAD. Responses to
quotation requests will be provided within ten (10) calendar days.
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2.6.4 Price Applicability
The purchase price of BRAD Parts shall be the applicable price set
forth in the Spare Parts Price Catalogue at time of receipt by BRAD
of Buyer's Order or as quoted by BRAD to Buyer upon request. If
Buyer requests accelerated delivery or special handling for BRAD
Parts not included in the Spare Parts Price Catalogue, BRAD may
increase the price from the original quotation to cover any
additional costs to BRAD.
2.6.5 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 BRAD 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 BRAD as a result of any sale, use, delivery,
storage or transfer of any Spare Parts. If BRAD has reason to
believe that any such tax is applicable, BRAD shall separately state
the amount of such tax in its invoice. if a claim is made against
BRAD for any such tax, BRAD shall promptly notify Buyer.
In addition, Buyer shall pay to BRAD on demand the amount of any
customs duties required to be paid by BRAD with respect to the
importation by Buyer of any Spare Parts.
2.6.6 Vendor Pricing
BRAD 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.
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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 BRAD in order to:
(i) discuss the operational parameters to be provided by Buyer to
BRAD which BRAD considers necessary for preparing its quantity
recommendations for initial provisioning of Spare Parts to be
purchased from BRAD 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 BRAD 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 on or before September 21, 1997.
The time and location of the pre-provisioning conference shall be
mutually agreed upon between the parties; however, BRAD 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 BRAD Parts and Vendor Parts shall
be provided by BRAD as follows:
a) BRAD shall provide, as applicable to Buyer, no later than eighteen
(18) months prior to the Scheduled Delivery Date of the first
Aircraft, or as may be mutually agreed, the initial issue of
provisioning files as required by ATA Specification 2000, Chapter 1
(as may be amended by BRAD);
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Revisions to this provisioning data shall be issued by BRAD every
ninety (90) calendar days until ninety (90) calendar days following
the Delivery Date of the last Aircraft or as may be mutually agreed;
b) BRAD shall provide, as required by Buyer, all data files defined in
Chapter 1 of ATA Specification 2000; and
c) 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 BRAD 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), BRAD 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 BRAD by Buyer. BRAD shall credit Buyer's
account with BRAD 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 BRAD at its plant in Ontario
or Quebec, or such other destination as BRAD may reasonably
designate. Spare Parts substituted for such returned obsolete or
unusable Spare Parts shall be delivered to Buyer from BRAD's plant
in Ontario or Quebec, or such other BRAD shipping point as BRAD may
reasonably designate. BRAD shall pay the freight charges for the
shipment from Buyer to BRAD of any such obsolete or unusable Spare
Part and for the shipment from BRAD to Buyer of any such substitute
Spare Part.
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2.8.3 Obligation to Repurchase Surplus Provisioning Items
During a period commencing one (1) year after the Delivery Date of
the first Aircraft, and ending five (5) years after such Delivery
Date, BRAD shall, upon 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 BRAD as initial provisioning for the Aircraft, (ii) were
purchased by Buyer from BRAD, and (iii) are surplus to Buyer's
needs.
2.8.4 Exceptions
BRAD 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 BRAD 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 (a) Buyer's modification of the
Aircraft or (b) design improvement by the Aircraft manufacturer or
the vendor (other than Provisioning Items which have become obsolete
because of a defect in design if such defect has not been remedied
by an offer by BRAD or the vendor to provide no charge retrofit kits
or replacement parts which correct such defect), and (iv)
Provisioning Items which become surplus as a result of a change in
Buyer's operating parameters provided to BRAD pursuant to Annex A
Article 2.7, which were the basis of BRAD's initial provisioning
recommendations for the Aircraft.
2.8.5 Notification and Format
Buyer shall notify BRAD, in writing, when Buyer desires to return
Provisioning Items which Buyer's review indicates are eligible for
repurchase by BRAD 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 BRAD and Buyer, and shall include part number,
nomenclature, purchase order number, purchase order date and
quantity to be returned.
Within five (5) business days after receipt of Buyer's notification
BRAD shall advise Buyer, in writing, when BRAD's review of such
summary from Buyer will be completed.
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2.8.6 Review and Acceptance by BRAD
Upon completion of BRAD's review of any detailed summary submitted
by Buyer pursuant to Annex A Article 2.8.5., BRAD shall issue to
Buyer a Material Return Authorization notice ("MRA") for those
Provisioning Items BRAD agrees are eligible for repurchase in
accordance with Annex A Article 2.8.3. BRAD 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 BRAD and Buyer shall arrange for shipment of such
Provisioning Items accordingly.
2.8.7 Price and Payment
The price of each Provisioning Item repurchased by BRAD pursuant to
Annex A Article 2.8.6 will be the original invoice price thereof
BRAD shall pay the repurchase price by issuing a credit memorandum
in favour of Buyer which may be applied against amounts due BRAD for
the purchase of Spare Parts and services.
2.8.8 Return of Surplus Provisioning Items
Provisioning Items repurchased by BRAD pursuant to Annex A Article
2.8.6 shall be delivered to BRAD Free Carrier (Incoterms), at its
plant in Ontario or Quebec, or other such destination as BRAD may
reasonably designate.
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 BRAD pursuant to Annex A Article 2.8.8 shall pass to
BRAD upon delivery thereof to BRAD. 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 BRAD pursuant to Annex A Article 2.8.3 shall
pass to BRAD upon delivery thereof to BRAD.
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With respect to the obsolete or unusable Spare Parts which may be
returned to BRAD and the Spare Parts substituted therefor, pursuant
to Annex A Article 2.8.1, and the Provisioning Items which may be
repurchased by BRAD, 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 BRAD 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 BRAD's price, if available. Buyer agrees that
orders placed with BRAD shall conform to the requirements and
procedures contained in ATA Specification 2000, as applicable to
Buyer.
2.9.2 Processing of Orders
Upon acceptance of any Order, unless otherwise directed by Buyer,
BRAD shall, if the Spare Parts are in stock, proceed immediately to
prepare the Spare Parts for shipment to Buyer. If BRAD does not have
the Spare Parts in stock, BRAD 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 and the
applicable portions of ATA Specification 2000, as applicable to
Buyer.
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2.9.3 Changes
BRAD 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 and the unit price is not
increased by more than 10% or $50.00, whichever is less. BRAD 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 consent, which consent shall
conclusively be deemed to have been given unless Buyer gives BRAD
written notice of objection within fifteen (15) business days after
receipt of BRAD's notice. In case of any objection, the affected
Spare Part will be deemed to be deleted from Buyer's Order.
2.9.4 Electronic Data Interchange
2.9.4.1 Use of Electronic Data Interchange (EDI)
The SPEC 2000 Protocol shall be used for any EDI
transaction. Buyer and BRAD shall implement security
procedures to ensure proper use of this communication. A
message will be considered received only at the point where
it is in a format which can be accepted by the receiving
computer according to ATA SPEC 2000 rules on transmissions.
If garbled transmissions are received, the receiver shall
promptly notify the sender through use of the S1REJECT
command.
2.9.4.2 Acceptance of EDI Transactions
The SIBOOKED transaction creates an obligation on the part
of Buyer to purchase the material and quantities as
specified in the transmission. BRAD is obliged to sell the
material and quantities as specified except as may be
identified in a subsequent SIORDEXC message. With respect to
a S1QUOTES transaction, Buyer and BRAD are bound to respect
the prices quoted in the transmission in any resultant
S1BOOKED order transaction based upon that S1QUOTES message
within the validity period of the S1QUOTES message. An
S1NVOICE message will be considered as the official
commercial invoice for the goods shipped. An S1STOCKS,
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S1SHIPPD, S1POSTAT or S1PNSTAT message creates no
obligations on either the Buyer or BRAD.
If an S1BOOKED acknowledgment is not sent within 24 hours by
BRAD then Buyer shall resend the original message.
Any document which has been properly received shall not give
rise to any obligation unless and until the party receiving
such document has properly transmitted in return an
acknowledgment document according to SPEC 2000 Protocol.
2.9.4.3 Systems Operations
Buyer and BRAD, at their own expense, shall provide and
maintain the equipment, software, services and testing
necessary to effectively and reliably transmit and receive
documents.
2.9.4.4 Validity of Documents
Annex A Article 2.9.4 has been agreed to by Buyer and BRAD
to evidence their mutual intent to create binding purchase
and sale obligations pursuant to the electronic transmission
and receipt of documents as described herein.
Such documents properly transmitted pursuant to this Annex A
Article 2.9.4 shall be considered, in connection with any
transaction or any other agreement, to be a "writing" or "in
writing" and shall be deemed for all purposes (a) to have
been "signed" and (b) to constitute an "original" when
printed from electronic files or records established and
maintained in the normal course of business.
[6~ Buyer and BRAD agree not to contest the validity or
enforceability of signed documents under the provisions of
any applicable law relating to whether certain agreements
are to be in writing or signed by either party to be bound
thereby. Signed documents, if introduced as evidence on
paper in any judicial, arbitration, mediation or
administrative proceedings, will be admissible as between
Buyer and BRAD to the same extent and under the same
conditions as other business records originated and
maintained in documentary form. Neither Buyer nor BRAD shall
contest the admissibility of copies of signed documents
under either the business records exception to the
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<PAGE>
hearsay rule or the best evidence rule on the basis that the
signed documents were not originated or maintained in
documentary form.
2.9.4.5 Limitation of Liability
NEITHER BUYER NOR BRAD SHALL BE LIABLE TO THE OTHER FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES ARISING FROM OR AS A RESULT OF ANY
DELAY, OMISSION OR ERROR IN THE ELECTRONIC TRANSMISSION OR
RECEIPT OF ANY DOCUMENTS PURSUANT TO THIS ANNEX A ARTICLE
2.9.4, EVEN IF EITHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
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
BRAD shall insert in each shipment a packing list/release note itemized to
show:
(i) the contents of the shipment,
(ii) the approved signature of BRAD'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 BRAD shall, upon request, include in
the markings: gross weight and cubic measurements.
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<PAGE>
2.13 Delivery, Title and Risk of Loss
2.13.1 Delivery Point
Spare Parts shall be delivered to Buyer in one of the
following manners at BRAD's sole option:
(i) Free Carrier (Incoterms 1990) BRAD's plant in either Ontario
or Quebec, Canada; or
(ii) Free Carrier (Incoterms 1990) other BRAD depots or shipping
points; or
(iii) Free Carrier (Incoterms 1990) vendor's or subcontractor's
plant.
2.13.2 Delivery Time
BRAD shall use reasonable efforts so that shipment of BRAD 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
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<PAGE>
e) Other Orders
Shipment of stock items shall be approximately thirty (30)
calendar days after BRAD'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 BRAD, charges for
shipment, insurance, prepaid freight charges and all other costs paid by
BRAD 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 BRAD 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 BRAD 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 Reimbursement of Expenses
If BRAD gives Buyer written notice that an Order is ready for shipment and
shipment is delayed more than thirty (30) days at Buyer's request or
without BRAD's fault or responsibility, Buyer shall promptly reimburse
BRAD upon demand for all costs and expenses, including but not limited to
reasonable amounts for storage, handling, insurance and taxes, incurred by
BRAD as a result of such delay.
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) BRAD maintains a purchase money
security interest in them. Risk of loss of the Spare Parts will pass to
the Buyer upon delivery by BRAD. 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 BRAD.
BRAD agrees to notify Buyer when material is shipped and shall provide
carrier's reference information (i.e., waybill number)
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<PAGE>
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
thirty (30) 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 BRAD concurs with a rejection, BRAD shall,
at its option, correct, repair or replace the rejected Spare Parts. Buyer
shall, upon receipt of BRAD's written instructions and Material Return
Authorization ("MRA") number, return the rejected Spare Parts to BRAD at
its specified plant, or other destination as may be mutually agreeable.
The return of the rejected Spare Parts to BRAD 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 BRAD'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 BRAD 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 shall be made by Buyer as follows:
a) a deposit of [***] 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.
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<PAGE>
2.22 Modified Terms of Payment
BRAD reserves the right to alter the terms of payment:
(i) at any time by giving Buyer thirty (30) days' prior written notice
of the new terms, provided Buyer is not adversely discriminated
against with respect to other customers of BRAD currently operating
the Canadair Regional Jet aircraft, and
(ii) without prior notice if Buyer fails to pay when due an amount Buyer
owes under any agreement with BRAD.
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
ANNEX B HERETO EXCLUSIVELY SETS FORTH BRAD'S WARRANTY OBLIGATIONS WITH
RESPECT TO SPARE PARTS. EXCEPT AS EXPRESSLY SET OUT IN ANNEX B, THERE ARE
NO UNDERSTANDINGS, REPRESENTATIONS, CONDITIONS OR WARRANTIES, EXPRESS OR
IMPLIED, BETWEEN THE PARTIES WITH RESPECT TO ANY DEFECT IN THE SPARE PARTS
2.25 Cancellation of Orders
Except as otherwise may apply to initial provisioning, if Buyer cancels an
Order, BRAD, 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 BRAD Spares
Department, or the part has been identified as "shelf stock" in the
Spare Parts Price Catalogue, no cancellation charges shall be made;
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<PAGE>
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 BRAD's
inventory without increasing BRAD's normal maximum stock level, no
cancellation charges shall be made.
2.26 Lease
BRAD shall select and make available certain parts for lease, subject to
availability. Buyer has the option to negotiate a lease agreement with
BRAD separate from this Agreement.
2.27 Additional Terms and Conditions
BRAD'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 (i) such
terms and conditions do not conflict with the terms and conditions
provided herein, and (ii) Buyer is not adversely discriminated against
with respect to other customers of BRAD currently operating the Canadair
Regional Jet aircraft. Such additional terms and conditions shall be
provided to Buyer at least ninety (90) calendar days prior to their
effective date.
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<PAGE>
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.
BRAD shall offer to the Buyer the Programs in the English language
at a BRAD designated facility; the Programs shall be completed prior
to the Delivery Date of the last Aircraft purchased herein.
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
twelve (12) 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, BRAD will provide with each delivered
Aircraft, a TC or FAA approved transition training for [***] of
Buyer's crews ([***] pilots) who meet the minimum entry
requirement provided in the applicable training manual. Each course
shall consist of up to [***] hours of classroom instruction
which may include part task trainer, Computer Based Training (CBT),
and/or Flight Training Device (FTD). BRAD shall furnish each of
Buyer's licensed pilots attending the course one copy of the Flight
Crew Operating Manual.
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<PAGE>
3.2.2 Pilot Simulator Training
BRAD shall provide access to a TC or FAA approved flight simulator
for the crew trained under Annex A Article 3.2.1. BRAD shall provide
a simulator instructor for [***] missions for the crew trained
on BRAD's designated simulator in Montreal; each mission shall
consist of [***] 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. BRAD 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 [***] 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.
BRAD 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 BRAD in the development of the Flight Attendant
Training Guide to incorporate Buyer's specific equipment and
procedures.
3.2.5 Flight Dispatcher Course
A course for up to [***] of Buyer's flight dispatch personnel
shall be conducted. Each course shall be for a maximum of [***]
working days duration. The course shall consist of classroom
instruction covering general Aircraft familiarization, coverage of
performance, flight planning, weight and balance and the Minimum
Equipment List. BRAD shall furnish for each participant in this
course [***] copy of the Flight Crew Operating Manual which shall
not be revised.
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<PAGE>
3.2.6 Recurrent Pilot Training
BRAD 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.
3.2.7 Course Training Material
BRAD 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 Customized Maintenance Course
[***]
3.3.2 Engine Run-up Course
[***]
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<PAGE>
3.3.3 Specialist Courses
At Buyer's request, BRAD shall make a proposal for specialist
courses which will be derived from BRAD's standard courses detailed
herein.
3.3.4 Recurrent Training
At Buyer's request, BRAD shall make a proposal for a Regulatory
Authority approved training plan for maintenance recurrent training.
3.3.5 Vendor Training
At Buyer's request, BRAD shall assist Buyer to obtain vendor
maintenance training.
3.3.6 Course Training Material
BRAD, upon Buyer's request, shall present a proposal to provide one
(1) set of the training materials (without revision service) used to
conduct BRAD'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
3.4.1 Buyer 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 not less than three
hundred million U.S. dollars ($300,000,000) for any single
occurrence;
b) all risk aircraft hull and engine insurance for an amount
which is not less than its then fair market value.
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<PAGE>
3.4.2 The liability policy shall name BRAD (and its affiliates) as
additional insured. The hull policy shall contain a waiver of
subrogation in favour of BRAD (and its affiliates). 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 BRAD except that Buyer shall not be
required to provide insurance with respect to the manufacturing,
repair and maintenance activities of BRAD (and of its affiliates)
and the related potential liability (product or otherwise) arising
therefrom.
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<PAGE>
ARTICLE 4 - TECHNICAL DATA
4.1 Technical Data Provided
BRAD 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
BRAD'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. BRAD will provide all of its
technical publications in a medium designated by Buyer (e.g., CD-ROM
(applicable to the IPC, AMM and WM only), hardcopy, or microfilm), if BRAD
makes such medium available to the market.
[***]
4.2 Shipment
All Technical Data provided hereunder shall be delivered to Buyer Free
Carrier (Incoterms) BRAD's designated facilities and at the time indicated
in Attachment A.
4.3 Proprietary Information
It is understood and Buyer acknowledges that the Technical Data
provided herein [***] (the "Proprietary Information") is proprietary to
BRAD and all rights to copyright belong to BRAD and the Proprietary
Information shall be kept confidential by Buyer. Buyer agrees to use
the Proprietary Information solely to maintain, operate, overhaul or
repair the Aircraft or to make installation or alteration thereto
allowed by BRAD.
Proprietary Information shall not be disclosed to third parties without
BRAD's prior written consent, which shall not be unreasonably withheld, or
used by Buyer or furnished by Buyer for the design or manufacture of any
aircraft or Spare Parts including BRAD Parts or items of equipment, except
when manufacture or redesign is permitted under the provisions of Annex A
Article 2.4 hereof and then only to the
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<PAGE>
extent and for the purposes expressly permitted therein, and provided
further the recipient shall provide a non-disclosure undertaking
acceptable to BRAD. Notwithstanding the foregoing, Buyer may disclose
Proprietary Information to any government authority, provided that (i)
Buyer will notify BRAD of any government request for Proprietary
Information, (ii) Buyer will mark such Proprietary Information as being
confidential, and (iii) Buyer will not give permission to such receiving
government authority to release such Proprietary Information.
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<PAGE>
ATTACHMENT A
LIST OF TECHNICAL DATA
COLUMN HEADING AND EXPLANATION OF CODES
ITEM
1 DOC DOCUMENT
Title of Technical Data provided.
2 CONFIG CONFIGURATION
G = Contains data common to all aircraft of the same type
(Generic).
C = Contains data unique to Buyer's Aircraft (Customized).
3 MEDIUM Buyer selects one of the following media specified in the table:
1 = Print two sides
2 = Microfilm
3 = Print one side
4 = Laminated Cardboard
4 REVISION Y = Periodic revision service applies
N = Revision service not applicable
S = Revised as required by BRAD
5 QUANTITY
(Number) = Quantity per the Agreement
(Number) PER = Quantity per Aircraft
6 DELIVERY
ATD = At time of the Delivery Date of the first Aircraft.
PTD = Prior to the Delivery Date of each or the first
Aircraft (as applicable).
7 ATA Y = Document is per ATA Specification 100, Revision
26.
N = Document is to BRAD's existing commercial
practices.
With the delivery of the first Aircraft, BRAD will provide to Buyer at no
additional charge one set of the technical manuals listed below
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<PAGE>
TECHNICAL DATA
REGIONAL JET
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
ITEM DOC CONF MEDIUM QTY REV DEL ATA REMARKS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. AIRCRAFT MAINTENANCE MANUAL (AMM) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
2. ILLUSTRATED PARTS MANUAL/CATALOG (IPC) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
3. STRUCTURAL REPAIR MANUAL (SRM) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
4. COMPONENT MAINTENANCE MANUAL (CMM) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
5. POWER PLANT BUILD-UP MANUAL G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
6. WIRING DIAGRAM MANUAL C 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
7. ILLUSTRATED TOOL & EQUIPMENT MANUAL G 1 [***] Y PTD Y
(ITEM)
- ----------------------------------------------------------------------------------------------------------
8. SERVICE BULLETINS G 1 [***] S PTD Y SEE NOTE 2
- ----------------------------------------------------------------------------------------------------------
9. NON DESTRUCTIVE TEST MANUAL (NDT) G 1 [***] Y PTD Y
- ----------------------------------------------------------------------------------------------------------
10. MAINTENANCE PROGRAM DOCUMENT (MPD) G 1 [***] S PTD Y SEE NOTE 3
- ----------------------------------------------------------------------------------------------------------
11. FAA OR DOT AIRPLANE FLIGHT MANUAL C 1 [***] S ATD N
(AFM)
- ----------------------------------------------------------------------------------------------------------
12. WEIGHT & BALANCE MANUAL G 1 [***] Y ATD Y
- ----------------------------------------------------------------------------------------------------------
13. MASTER MINIMUM EQUIPMENT LIST (MMEL) G 1 [***] S ASAP N
- ----------------------------------------------------------------------------------------------------------
14. QUICK REFERENCE HANDBOOK C 1 [***] S ATD N
- ----------------------------------------------------------------------------------------------------------
15. FLIGHT CREW OPERATING MANUAL (FCOM) C 1 [***] S ATD N SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------
16. MAINTENANCE TASK CARDS C 3 [***] S PTD N
- ----------------------------------------------------------------------------------------------------------
17. FLIGHT PLANNING & CRUISE CONTROL G 1 [***] S ASAP N
MANUAL
- ----------------------------------------------------------------------------------------------------------
18. AIRCRAFT CHARACTERISTICS FOR AIRPORT G 1 [***] N ASAP N SEE NOTE 4
PLANNING
- ----------------------------------------------------------------------------------------------------------
19. MAINTENANCE FACILITIES & EQUIPMENT G 1 [***] S ASAP N
PLANNING MANUAL
- ----------------------------------------------------------------------------------------------------------
20. SYSTEM SCHEMATIC MANUAL (SSM) G 1 [***] Y ATD Y SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------
21. PASSENGER INFORMATION SHEET G 3 [***] S ATD N SEE NOTE 6
- ----------------------------------------------------------------------------------------------------------
22. PILOT CHECKLIST C 4 [***] S ATD N
- ----------------------------------------------------------------------------------------------------------
23. CRASH CREW CHART G 4 [***] S ATD N
- ----------------------------------------------------------------------------------------------------------
24. DISPATCH DEVIATION GUIDE G 1 [***] S PTD N
- ----------------------------------------------------------------------------------------------------------
25. POWERPLANT GROUND RUN MANUAL G 1 [***] N ATD N
- ----------------------------------------------------------------------------------------------------------
26. FAULT ISOLATION MANUAL G 1 [***] N ATD N
- ----------------------------------------------------------------------------------------------------------
27. COMPUTER SELFTEST/BITE/RESET USER G 1 [***] N PTD N
GUIDE
- ----------------------------------------------------------------------------------------------------------
28. REFUEL/DEFUEL HANDBOOK G 1 [***] N PTD N
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 1: REVISION SERVICE
A. Revision services shall only be available for [***]
following the Delivery Date of Buyer's last Aircraft.
Subsequent revision service shall be provided dependent upon
incorporation of BRAD issued Service Bulletins.
B. Revisions to the Technical Data to reflect the Aircraft at
Delivery Date shall be provided to Buyer within six (6) months
following the Delivery Date of each of the Aircraft,
respectively.
C. Provided the revision service is being supplied under the
terms of this Agreement or by subsequent purchase order, BRAD
shall incorporate in the applicable documents all applicable
BRAD originated Service Bulletins in a regular revision
following formal notification by Buyer that such Service
Bulletins shall be accomplished on the Buyer's Aircraft. The
manuals shall then contain both original and revised
configuration until Buyer advises BRAD in writing that one
configuration is no longer required.
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<PAGE>
NOTE 2: SERVICE BULLETINS
Aperture cards of the service drawing(s) will be provided in lieu of
drawings when practical.
NOTE 3: MAINTENANCE PROGRAM DOCUMENT
This manual provides the basis for Buyer's initial maintenance
program.
NOTE 4: AIRCRAFT CHARACTERISTICS FOR AIRPORT PLANNING
This manual contains data on Aircraft ground maneuver and handling.
NOTE 5: ON-BOARD WIRING DIAGRAM BOOK
This book contains wiring diagrams for interim reference until the
Wiring Diagram Manual is revised to reflect the Aircraft at the
Delivery Date.
NOTE 6: PASSENGER INFORMATION CARDS
BRAD will provide one (1) reproducible master for the preparation of
passenger information cards. For an additional cost, subject to
negotiation, BRAD will provide full colour laminated passenger
information cards in quantities required.
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<PAGE>
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 2.0, BRAD warrants that,
at the date of delivery of the Aircraft or BRAD 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 BRAD to install a Vendor Part or Powerplant Part in
accordance with reasonable instructions of the vendor;
c) the BRAD Parts shall be free from defects in material or
workmanship; and
d.) the BRAD Parts 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 BRAD Parts purchased as Spare Parts.
1.1.3 BRAD 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;
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<PAGE>
b) for those Defects in material or workmanship in BRAD Parts
referred to in Annex B Article 1.1.1(c) and 1.1.2, [***]
from the date of delivery of such parts;
c) for those Defects in design referred to in Annex B Article
1.1.1 (d), [***] from the date of delivery of such parts; and
d) for errors in the Technical Data referred to in Annex B
Article 1.1.3, [***] from the date of delivery of the
applicable Technical Data.
1.3 Repair, Replacement or Rework
As to each matter covered by this Warranty BRAD's sole obligation and
liability under this Warranty is expressly limited to, at BRAD'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, BRAD shall correct that Defect in the equipment item or
part in which the Defect appears, except that BRAD will not be obligated
to correct any Defect which has no material adverse effect on the
maintenance, use or operation of the Aircraft.
1.4 Claims Information
BRAD's obligations hereunder are subject to a Warranty claim to be
submitted in writing to BRAD'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
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e) a description of the claimed Defect and the circumstances pertaining
thereto.
1.5 BRAD's Approval
Within ten (10) working days following receipt of Buyer's Warranty claim
for a Defect accompanied by Buyer's request for permission as applicable
to correct a Defect, BRAD shall notify Buyer of its decision on the
request. Approval under this Article shall not constitute a determination
as to the existence of a Defect as described in Annex B Article 1.1 above.
1.6 Timely Corrections
BRAD shall make the repair, replacement or rework, following receipt of
the defective part or item, with reasonable care and dispatch.
1.7 Labour Reimbursement
For correction of Defects BRAD shall establish a reasonable estimate for
the labour hours required for the repair, replacement or rework of the
defective BRAD Part and, if the repair, replacement or rework is performed
by Buyer, BRAD shall reimburse Buyer for BRAD estimated hours or for
Buyer's actual labour hours, whichever is less, for the repair,
replacement or rework of the defective BRAD Part excluding any work
necessary to gain access to said BRAD Part. Such reimbursement shall be
based upon Buyer's direct labour rate per man-hour plus burden rate of
[***] subject to annual review and adjustment of such labour
rate as mutually agreed; provided, however, that this amount shall not
exceed [***] of the BRAD published selling labour rate.
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<PAGE>
1.8 Approval, Audit, Transportation and Waiver
All Warranty claims shall be subject to audit and approval by BRAD. BRAD
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 BRAD Part to BRAD's
designated facility. BRAD shall notify Buyer of BRAD's disposition of each
claim.
Buyer shall pay all costs of transportation of the defective part from
Buyer to BRAD, and BRAD shall pay all costs of transportation of the
repaired, corrected or replacement parts back to Buyer.
1.9 Limitations
1.9.1 BRAD 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 BRAD, unless Buyer furnishes
reasonable evidence acceptable to BRAD 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 BRAD 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 BRAD that
such operation was not a cause of the Defect; or
d) Buyer does not
1) report the Defect in writing to BRAD's Warranty
administrator within thirty (30) calendar days following
such Defect becoming apparent, and
C-35
<PAGE>
2) retain the BRAD Part claimed to be defective until
advised by BRAD to return such BRAD Part to BRAD's
designated facility in order for BRAD to finalize its
evaluation of the Warranty claim or to otherwise dispose
of such BRAD Part; or
e) Buyer does not submit reasonable proof to BRAD within thirty
(30) 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 BRAD reasonable opportunity to be present
during the disassembly and inspection of the BRAD 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
BRAD's liability for a BRAD 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 BRAD Part returned under a Warranty claim is
subsequently established to be serviceable then BRAD shall be entitled to
charge and recover from Buyer any reasonable costs incurred by BRAD in
connection with such Warranty claim. Providing, however, in the event that
repetitive in-service failure occurs on the particular BRAD Part which is
subsequently identified by BRAD on a repeated basis to be "no fault
found," then BRAD and Buyer shall discuss and mutually agree a course of
further action to help identity the problem. In the event the fault is
ultimately confirmed to be a legitimate Warranty claim then the above
mentioned costs incurred by BRAD and charged to Buyer shall be waived.
C-36
<PAGE>
ARTICLE 2 - VENDOR WARRANTIES
2.1 Warranties from Vendors
The Warranty provisions of this Annex B apply to BRAD Parts only. However,
BRAD 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, BRAD
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 BRAD, 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 BRAD 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 BRAD Part,
except that the warranty period shall be the Warranty Period as set forth
herein or by the vendor's warranty, whichever is shorter and all
transportation costs associated with the Vendor Parts shall be borne by
Buyer.
2.3 BRAD's Interface Commitment
In the event of a dispute in the application of a Vendor Part warranty, at
Buyer's request addressed to BRAD's warranty administrator, BRAD 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 BRAD all data and information in Buyer's
possession relevant to the interface problem and shall cooperate with BRAD
in the conduct of its investigation and such tests as may be required.
BRAD, at the conclusion of its investigation, shall advise Buyer in
writing of BRAD's opinion as to the cause of the problem and BRAD's
recommended corrective action.
C-37
<PAGE>
ARTICLE 3- SERVICE LIFE POLICY
3.1 Applicability
The Service Life Policy ("SLP") described in this Annex B Article 3 shall
apply if fleetwide and repetitive failures occur 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 [***]
following delivery of the Aircraft containing such Covered
Component, BRAD 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 BRAD is required to furnish under this SLP
shall be provided for at a price calculated in accordance with the
following formula:
P = CxT
---
144
Where:
P = Price of Covered Component to Buyer;
C = BRAD'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 BRAD
C-38
<PAGE>
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 BRAD's designated
facility, if practicable, of any failed Covered Component
necessary for failure investigation or redesigning studies
shall be borne by Buyer;
b) BRAD's obligations under this SLP are Conditional upon the
submission of reasonable proof acceptable to BRAD that the
failure is Covered hereby;
c) Buyer shall report any failure of a Covered Component in
writing to BRAD's Warranty administrator within two (2) months
after such failure becomes evident. Failure to give this
required notice shall excuse BRAD 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 BRAD's obligations under
this SLP with respect to any Covered Component;
e) BRAD'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 BRAD from Buyer of any notice of an occurrence
which constitutes a failure in a Covered Component. The
provisions of this subparagraph shall not apply in the event
that Buyer furnishes reasonable evidence acceptable to BRAD
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 BRAD determines that such failure may not reasonably be
expected to occur on a fleetwide and repetitive basis; and
C-39
<PAGE>
g) this SLP shall not apply to a Covered Component where the
failure results from an accident, abuse, misuse, degradation,
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. BRAD'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 Assignment
Buyer's rights under this SLP shall not be assigned, sold, leased,
transferred or otherwise alienated by contract, operation of law or
otherwise, without BRAD's prior written consent. Any unauthorized
assignment, sale, lease, transfer, or other alienation of Buyer's rights
under the SLP shall immediately void all of BRAD's obligations under the
SLP.
3.7 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 BRAD 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.
C-40
<PAGE>
Annex B - Attachment A
COVERED COMPONENTS
1. WING
a. Upper and lower integral stringer machined wing planks.
b. Machined spar, including auxiliary spars.
c. Caps, webs and stiffeners on fabricated spars.
d. Front spar to rear spar wing box ribs.
e. Main landing gear (MLG) machined trunnion rib.
f. MLG side stay machined attachment fittings.
g. Wing/fuselage machined attachment fittings.
2. FUSELAGE
a. Window and windshield frame structure, but excluding the windows and
windshield. Exterior skins, doublers, circumferential frames but
excluding all Systems, fairings, insulation, lining and decorative
clips and brackets.
b. Engine mount support box structure and machined pylon attachment
fittings. Primary structure frames around body openings for
passenger door, baggage door, avionics door, flying control access
door, APU access door and emergency exits.
c. Nose landing gear well structure, including wheel well walls,
ceiling, pressure bulkheads and pressure floor structural components
at fuselage wing cutout.
C-41
<PAGE>
3. VERTICAL STABILIZER
a. All spars.
b. Horizontal to vertical stabilizer machined attachment fillings.
c. Front spar to fuselage frame machined attachment fittings.
d. Exterior skins, ribs, stringers between front and rear spars and
machined closing rib.
4. HORIZONTAL STABILIZER
Front and rear spars and exterior skins, rib and stringers between front
and rear spars.
C-42
[6~<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-001
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 001 (Re: Option Aircraft)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Option Aircraft
1.0 In consideration of Buyer having entered into the above referenced
Agreement, BRAD agrees to reserve ten (10) additional aircraft (the
"Option Aircraft") (in two (2) blocks of three (3) and one (1) block
of four (4)), becoming upon exercise, the eleventh (11th) through
twentieth (20th) Firm Aircraft, under the following general conditions:
1
<PAGE>
1.1 The Shadow Option Aircraft will be as described in Article 2 of the
Agreement.
1.2 The base price (the "Base Price") for each of the Option Aircraft
including the Buyer Selected Optional Features listed in Appendix IV to
the Agreement, Ex Works (Incoterms 1990) BRAD's facilities in Montreal,
Quebec shall be [***] expressed in November 1, 1997 dollars.
This Base Price does not include any Taxes, fee or duties and is subject
to escalation in accordance with the Economic Adjustment Formula attached
as Appendix I to the Agreement for the period from November 1, 1997 to the
date of delivery of each Option Aircraft ("Option Aircraft Purchase Price.
1.3 Buyer shall exercise its right to purchase the Option Aircraft by
providing written notice to BRAD of its intention to do so in accordance
with the following schedule: (i) the first Option Block may be exercised
[***] months prior to the first day of the Scheduled Delivery Date of
the first Option Aircraft in the first Option Block, (ii) the second
Option Block may be exercised [***] months prior to the first day of
the Scheduled Delivery Date of the first Option Aircraft in the second
Option Block, and (iii) the third Option Block may be exercised
[***] prior to the first day of the Scheduled Delivery Date of the
first Option Aircraft in the third Option Block.
[***]
2
<PAGE>
1.4 The Scheduled Delivery Dates of the Option Aircraft are as follows:
Block 1 [***]
[***]
[***]
Block 2 [***]
[***]
[***]
Block 3 [***]
[***]
[***]
[***]
1.5 As consideration for this option, Buyer shall make or cause to make
payment to BRAD a non-refundable deposit of [***] per Option Aircraft
(the "Option Deposit") in each block totaling [***] upon execution of
the Agreement.
1.6 Upon exercise of an Option Block, Buyer will make or cause to make the
progress payments specified in Articles of the Agreement within [***]
business days of the exercise of the option.
2.0 [***]
2.1 [***]
3
<PAGE>
2.2 Unless expressly provided for in this Agreement, the terms and conditions
of the Agreement shall apply mutatis mutandis to the Option Aircraft, with
the exception Annex A Technical Support as specified in Article 1.2 (Field
Service Representative, except as noted in Article 2.0 of this Letter
Agreement), Annex A training courses as specified in Article 3.2.4 (flight
attendant), Article 3.2.5 (flight dispatch), Article 3.3.1 (customized
maintenance course), Article 3.3.2 (engine run-up)); the Technical Data
identified in Article 4 Attachment A (except for Aircraft specific manuals
only), and the courses specified in the following Articles of Letter
Agreement No. 005: Article 1.1.2 (flight attendant), Article 1.3 (training
materials), Article 1.4 (dispatcher training) and Article 2.0 (start up
support).
Furthermore, the following Letter Agreements are also not applicable to
the Option Aircraft and are hereby excluded:
[***]
[***]
[***]
[***]
[***]
3.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void.
4.0 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.
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 BRAD.
4
<PAGE>
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 NC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: CEO
---------------------------------
5
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-002
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 002 [***]
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Shadow Option Aircraft
1.0 In consideration of Buyer having entered into the above referenced
Agreement and having exercised its right to Option Aircraft
under Letter Agreement No. 001, for each exercised Option
Block, BRAD will grant
1
<PAGE>
Midway a corresponding number of additional option positions on a one
for one basis (the "Shadow Option Aircraft").
1.1 The Shadow Option Aircraft will be as described in Article 2 of the
Agreement.
1.2 [***] This Base Price does not include any Taxes, and is subject to
escalation in accordance with the Economic Adjustment Formula attached
as Appendix I to the Agreement for the period from November 1, 1997 to
the date of delivery of each [***].
1.3 [***] Should Buyer choose to exercise the right to purchase to
purchase a [***], Buyer and BRAD agree to make all reasonable efforts
to execute a definitive agreement within twenty-one (21) days of notice
having been given.
2
<PAGE>
1.4 [***]
1.5 As consideration for this [***], Buyer shall make or cause to make
payment to BRAD a refundable deposit of [***] upon execution of the
Agreement. Upon receipt of the [***], BRAD agrees to [***] set forth in
paragraph 1.4 pending receipt of Buyers conditional notice of intention
to exercise fifteen (15) months prior to [***] in the applicable [***],
as set forth in paragraph 1.3.
1.6 Upon exercise of a [***], Buyer will make or cause to make the [***]
specified in Article 5 of the Agreement within ten (10) business days
of the [***].
2.0 [***], and provided Buyer continues to operate a minimum of ten (10)
Canadair Regional Jet aircraft, BRAD will [***].
3
<PAGE>
2.1 With the exercise of a [***], BRAD will also provide airframe,
powerplant, avionics and electrical training for a total of [***]
of Buyer's personnel per Shadow Option Aircraft exercised, which could
be a combination of maintenance technicians and avionic technicians.
2.2 Unless expressly provided for in this Agreement, the terms and conditions
of the Agreement shall apply mutatis mutandis to the [***],
with the exception Annex A Technical Support as specified in
Article 1.2 (Field Service Representative, except as noted in Article 2.0
of this Letter Agreement), Annex A training courses as specified in
Article 3.2.4 (flight attendant), Article 3.2.5 (flight dispatch), Article
3.3.1 (customized maintenance course), Article 3.3.2 (engine run-up); the
Technical Data identified in Article 4 Attachment A (except for Aircraft
specific manuals only) and the courses specified in the following Articles
of Letter Agreement No. 005: Article 1.1.2 (flight attendant), Article 1.3
(training materials), Article 1.4 (dispatcher training) and Article 2.0
(start up support).
Furthermore, the following Letter Agreements are also not applicable to
the [***] and are hereby excluded:
[***]
[***]
[***]
[***]
[***]
3.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void.
4.0 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
[***] in accordance with the terms and conditions thereof.
4
<PAGE>
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 BRAD.
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.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By:
---------------------------------
Title:
---------------------------------
5
<PAGE>
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 BRAD.
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.
By:
---------------------------------
Title:
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: CEO
5
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-003
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 003 [***]
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: [***]
1
<PAGE>
1.0 FINANCING ASSISTANCE
1.1 [***]
1.2 [***]
1.3 [***]
1.4 [***]
2
<PAGE>
[***]
1.5 [***]
3
<PAGE>
1.6 BRAD's obligation to provide [***] in accordance with
this Letter Agreement will be contingent upon the satisfaction of the
following conditions:
(a) Buyer shall continue to be an entity of the type referred to
in Section 1110 of The United States Bankruptcy Code (or any
successor provision to such Section 1110) so that the
financing parties in such financing will be entitled to the
benefits thereof;
(b) None of the events referred to in Section 16.1 of the Purchase
Agreement shall have occurred and be continuing (and such
obligation of BRAD shall be suspended during any grace period
referred to therein);
(c) Buyer shall not be in default of or breach under any material
term or condition of this Purchase Agreement;
(d) Buyer shall hold an effective air carrier operating
certificate issued by the Secretary of Transportation pursuant
to Chapter 447 of the Federal Aviation Act (or successor
provision of law) for aircraft capable of carrying ten (10) or
more individuals or 6000 pounds or more of cargo; or
(e) no other material adverse event or condition of a magnitude
similar to any of the foregoing clauses (a) to (d) shall have
occurred.
Terms of BRAD's backdrop lease financing support will correspond to
commercially available terms customary in leveraged lease transactions
for airlines of similar creditworthiness, including terms which
substantially provide for the following:
(a) end of lease term fixed price fair market value purchase
options as determined prior to closing;
(b) optimized early buyout options; and
(c) termination and stipulated loss values corresponding to
economic terms including assumed residual value not in excess
of 40%.
4
<PAGE>
1.7 [***]
1.8 [***]
1.9 [***]
5
<PAGE>
2.0 [***]
2.1 [***]
2.2 [***]
(a) [***]
(b) [***]
(c) [***]
(d) [***]
(e) [***]
6
<PAGE>
2.3 [***]
2.4 [***]
2.5 [***]
3.0 [***]
4.0 [***]
7
<PAGE>
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 BRAD.
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.
By: /s/ Robert Ferguson
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
---------------------------------
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-004
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 004 (Re: Deposit)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
1
<PAGE>
Subject: Deposit
1.0 [***]
2.0 [***]
3.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void.
4.0 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.
2
<PAGE>
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.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
---------------------------------
3
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-005
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 005 (Re: Customer Support)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
1
<PAGE>
Subject: Customer Support
1.0 [***]
1.1 [***]
1.1.1 [***]
[***]
1.1.2 [***]
[***]
1.3 Training Materials
For Buyer's in-house Flight Attendant and dispatcher courses, BRAD shall
provide one set of the training materials (without revision service) used
to conduct BRAD's standard training.
1.4 Dispatcher Training
The course referred to in Annex A Article 3.2.5 will be formatted as a
"Train the trainer" course, and BRAD will assist these two dispatchers (as
part of the Start Up Support outlined in paragraph 2.0) in the formulation
of an in-house course for the balance of Buyer's dispatchers.
2
<PAGE>
1.3 [***]
[***]
2.0 [***]
2.1 [***]
3.0 [***]
3.1 [***]
4.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft.
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 BRAD.
3
<PAGE>
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.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
---------------------------------
4
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-006
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 006 (Re: Spares)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Spares
1.0 In consideration of Buyer having entered into the above referenced
Agreement, BRAD shall issue to Buyer, at the time of delivery of each of
1
<PAGE>
[***]
2.0 [***]
(i) [***]
a.) [***]
b.) Parts on consignment will not be replenished.
c.) [***]
d.) [***]
e.) This program will cover rotables and repairables, but will
exclude ground support equipment (GSE), consumables,
expendables, engines, APUs, and engine and APU related
spares.
f.) Buyer will provide a segregated area meating industry for
storage of the consigned spare parts.
g.) Buyer shall notify BRAD in writing as the spare parts are
withdrawn from the consignment store, and shall pay for such
parts at the end of the month in which they are withdrawn; or
2
<PAGE>
(ii) [***]
c.) Any taxes, duties or fees will be to Buyer's account.
d.) Consumables and expendables are excluded, and the spare
parts (rotables and repairables) will be the security for
such financing.
3.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void.
4.0 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.
3
<PAGE>
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.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title:
---------------------------------
4
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-007
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 007 (Re: Airworthiness Directives)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
1
<PAGE>
Subject: Airworthiness Directives
1.0 [***]
2.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft.
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 BRAD.
2
<PAGE>
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.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
---------------------------------
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
---------------------------------
3
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-008
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 008 (Re: Airframe Direct Maintenance Cost)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Airframe Direct Maintenance Cost
1.0 Intent
1.1 The intent of the Airframe direct maintenance cost guarantee is to achieve
the full potential of the maintainability of the Aircraft through the
joint
1
<PAGE>
efforts of BRAD and Buyer. To that end, BRAD agrees to provide credits
under the terms and conditions hereof and Buyer agrees to provide data
defined below.
1.2 The "Airframe" shall mean the Aircraft excluding Power Plant Parts and
related maintenance activities (such as overhaul, hot section inspection,
basic unscheduled repairs, LCF components, scheduled and unscheduled line
replaceable unit repair and overhaul), Auxiliary Power Unit (APU), Buyer
Furnished Equipment (BFE) and Ground Support Equipment (GSE).
2.0 [***]
2.1 [***]
2.1.1 [***]
2.1.2 Appropriate reductions shall be made in labour man-hours per flight
hour and material costs per flight hour for the following:
a) Labour and material costs resulting from maintenance not
performed in accordance with approved written procedures or
from configuration changes made by Buyer without BRAD's
written agreement, or because recommended Service Bulletins
which cause a reduction in direct maintenance cost have not
been incorporated, provided Buyer has had sufficient time to
incorporate said Service Bulletins consistent with Buyer's
maintenance program. BRAD shall not make reductions when Buyer
has demonstrated that such change is not cost effective for
Buyer. In the event of a disagreement between BRAD and Buyer
as to the cost-effectiveness of a recommended Service
Bulletin change proposed by BRAD, Buyer will explain its
financial analysis used to evaluate the implementation of such
Service Bulletin change;
2
<PAGE>
b) Labour and material costs incurred to repair damages resulting
from accidents, foreign object damage (FOD) or negligence in
maintaining the Aircraft, or for modification of the Aircraft,
which may be capitalized by Buyer (except for actions on
Airworthiness Directives);
c) Credits, warranty payments, guarantee payments or other
payments such as parts or services at reduced cost that BRAD
or vendors have made that compensate Buyer for or reduce
Buyer's direct maintenance cost;
d) Aircraft that have not been maintained in accordance with
Buyer's regulatory agency approved initial maintenance program
unless mutually agreed to by Buyer and BRAD; and
e) Scheduled maintenance checks which are not accomplished
consistent with Buyer's standard maintenance practices.
f) Labour and material costs incurred due to shipping,
transportation and handling delays.
3.0 Calculation of Cost
3.1 Airframe Direct Maintenance Labour Cost ("ADML")
The ADML man-hours shall be defined as the annual man-hours in Buyer
cost allocation system assigned to collect direct labour charges,
without burden, expended in direct maintenance of the Aircraft.
Notwithstanding Buyer's internal cost allocation system all elements
of indirect labour such as shop cleaning, workplace maintenance,
material handling, overtime premium, idle time and inventory control
or labour resulting from damage, misdiagnosis (no fault found) or
misuse shall be excluded from the calculation of Airframe direct
maintenance man-hours; and
3
<PAGE>
3.2 Airframe Direct Maintenance Material Cost ("ADMMC")
The ADMMC is defined as the annual 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, sealant, paints, protective coatings, adhesives or
material resulting from damage, misdiagnosis (no fault found) or
misuse are excluded from the calculation of ADMMC.
3.3 Airframe Direct Outside Service Cost ("ADOSC")
The ADOSC is defined as the annual cost expended in outside services
for direct airframe maintenance of the aircraft. The ADOSC shall
include the total outside service charges of both labour and
material costs, but excluding transportation and taxes.
3.4 Hourly Airframe Direct Maintenance Cost ("ADMC")
The following formula shall be used to calculate the annual hourly
ADMC:
ADMC = (ADML)(LC) + ADMMC + ADOSC
--------------------------
T
where:
ADML = Airframe Direct Maintenance Labour
expressed in man-hours,
LC = Labour cost from Appendix A, item 4,
ADMMC = Airframe Direct Maintenance Material
Service Cost,
ADOSC = Airframe Direct Outside Service Cost,
T = Total flight hours for the Aircraft
recorded for the applicable year.
4
<PAGE>
4.0 Credit Calculation
4.1 The actual hourly Airframe Direct Maintenance Cost (ADMC) shall be
compared by BRAD against the ADMCG on an annual basis.
4.2 If the ADMC exceeds the ADMCG by more than ten percent (10%) Buyer's
balance account will be credited with a compensation credit
calculated in accordance with the formula in Article 4.3.
Qb = 0.6 (ADMC-ADMCG) T
where:
Qb = Buyer's compensation credit in dollars when Qb is positive,
ADMC = The average of the ADMC values on an annual basis,
G = Airframe Direct Maintenance Cost Guarantee,
T = As per 3.4
4.3 If the ADMC is less than the ADMCG, BRAD shall accrue an incentive
credit which shall be used as an offset against any potential
liabilities of BRAD during the term of this ADMCG in accordance with
the following formula:
Qs = 0.4 (ADMCG - ADMC) T
where:
Qs = BRAD's incentive credit in dollars when Qs is positive.
ADMC, ADMCG and T shall have the same meaning as used in Article 4.2
above.
5
<PAGE>
5.0 Credit Payment
5.1 At the end of the term of this Letter Agreement, Buyer's total
compensation credit calculated under Article 4.2 above, and BRAD's
total incentive credit calculated in Article 4.3 above, shall be
compared by the following formula to determine if a credit is due to
Buyer.
Credit due Buyer = Qb - Qs
Qb and Qs shall have the same meaning as used in Article 4.2 and
Article 4.3 above.
5.2 If the credit due to Buyer is positive, BRAD shall issue to Buyer a
credit memorandum for the purchase of BRAD goods and services for an
amount up to a maximum of [***] per Aircraft, and up to a
maximum credit equal to the product of the following:
[***]
the Agreement
for the term of this Letter Agreement.
5.3 If the credit due to Buyer is negative, Buyer will be under no
obligation to compensate BRAD, nor shall BRAD owe any compensation
to Buyer.
6.0 Audit
Upon five (5) business days prior written notification by BRAD to Buyer
and at BRAD's expense, BRAD shall have the right during normal business
hours to audit all charges reported under this Letter Agreement, Buyer's
applicable maintenance practices and procedures, and applicable Aircraft
records, where normally and customarily maintained, relative to
maintenance, Service Bulletin incorporation and modification of the
Aircraft. Such audit shall not interfere with the conduct of business by
Buyer nor shall Buyer be required to undertake or incur additional
liability or obligations with respect to the audit.
6
<PAGE>
7.0 Reporting
7.1 BRAD shall provide a quarterly report to Buyer on the status of the
Airframe direct maintenance cost based on data submitted by Buyer
and approved by BRAD. Failure of Buyer to provide the required data,
in spite of BRAD'S notice and within thirty (30) days thereof, shall
void this Airframe direct maintenance cost guarantee.
7.2 The ADMCG was based upon the assumption outline in Appendix 2 to
this Letter Agreement. Any deviation from the assumptions outlined
in Appendix 2 shall cause a modification in the ADMCG by BRAD.
8.0 Limitation of Liability
THE AIRFRAME DIRECT MAINTENANCE COST GUARANTEE PROVIDED IN THIS LETTER
AGREEMENT AND THE OBLIGATIONS AND LIABILITIES ON THE PART OF BRAD UNDER
THE AFORESAID GUARANTEE ARE ACCEPTED BY BUYER AND ARE EXCLUSIVE AND IN
LIEU OF, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER
REMEDIES, WARRANTIES, GUARANTEES OR LIABILITIES, EXPRESSED OR IMPLIED,
WITH RESPECT TO THE MATTERS COVERED BY THIS GUARANTEE CONCERNING EACH
AIRCRAFT DELIVERED UNDER THE AGREEMENT, ARISING IN FACT, CONTRACT, LAW,
TORT, STRICT PRODUCTS LIABILITY OR OTHERWISE INCLUDING, WITHOUT
LIMITATION, ANY OBLIGATION, LIABILITY, CLAIM OR REMEDY WHETHER OR NOT
ARISING FROM NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED) OF BRAD, ITS
OFFICERS, EMPLOYEES, AGENTS OR ASSIGNEES, OR WITH RESPECT TO ANY IMPLIED
WARRANTY OF FITNESS OR MERCHANTABILITY, ANY IMPLIED CONDITION, ANY IMPLIED
WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF
TRADE, LOSS OF USE, REVENUE OR PROFIT.
9.0 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.
7
<PAGE>
8.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft and
the guarantee value and assumptions will be revised to reflect the actual
number of Aircraft delivered under the Agreement.
10.0 This Letter Agreement constitutes an integral part of the Agreement and
subject to the terms and conditions contained therein.
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.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
8
<PAGE>
Appendix 1
ADMCG Economic Adjustment Formula
The Airframe Direct Maintenance Cost Guarantee (ADMCG) Adjustment will be
calculated using the following Guarantee Adjustment (GA) Formula. The ADMCG term
is specified in Section 2.1.1 of the Letter Agreement.
GA = G1 - G0
where G1 = G0 [0.60 (L1/L0) + 0.40 (M1/M0)]
GA = ADMCG Value Adjustment
G0 = ADMCG Value
G1 = ADMCG Value adjusted to the final year
L1 = the final year index for labour obtained by calculating the
arithmetic average of the labour indexes published by the United
States Department of Labour Statistics - Employer and Earnings Index
for the fourth, fifth and sixth months prior to the month in the
final year which completes the ADMCG term.
L0 = the delivery year index for labour obtained by calculating the
arithmetic average of the labour indexes published by the United
States Department of Labour Statistics - Employer and Earnings Index
for the fourth, fifth and sixth months prior to the month of the
delivery of the Aircraft which begins the ADMCG term.
M1 = the final year index for material obtained by calculating the
arithmetic average of the material indexes published by the United
States Department of Labour - Material Industrial Commodities,
Producer Price Index, for the fourth, fifth and sixth months prior
to the month in the final year which completes the ADMCG term.
M0 = the delivery year index for material obtained by calculating the
arithmetic average of the material indexes published by the United
States Department of Labour - Material Industrial Commodities,
Producer Price Index, for the fourth, fifth and sixth months prior
to the month of the delivery of the Aircraft which begins the ADMCG
term.
In the event that either or both indices decline during the term of
the guarantee, negative indices will be assumed to equal delivery
year indices.
9
<PAGE>
Appendix 2
Airframe Direct Maintenance Cost Guarantee
Guarantee Value Assumptions
The following is a listing of all assumptions used to determine the ADMCG per
flight hour. It Is understood by the parties that these assumptions may change
in which case the parties, with mutual agreement, will adjust the ADMCG.
1. M1 costs are based upon Specification.
2. All costs are based on the maintenance inspection intervals in the Buyer's
regulatory agency approved initial maintenance program.
3. All costs expressed in July 1, 1997 United States Dollars and are rounded
to the nearest whole dollar subject to escalation in accordance with
Appendix 1.
4. Buyer's in-house airframe labour rate per man-hour is Thirty United States
Dollars ($30.00 U.S.).
5. Buyer's subcontract airframe labour rate per man-hour is Sixty United
States Dollars ($60.00 U.S.).
6. All component repair and overhaul is subcontracted.
7. Annual average Aircraft utilization is not less than three thousand
(3,000) flight hours per year.
8. Buyer's average annual flight duration for the Aircraft will be seventy
eight (78) minutes per departure.
10
<PAGE>
Annex A
Yearly Airframe Direct Maintenance Costs
For information purposes only, the following [***]
comprise the final guaranteed value for the guarantee term:
YEARLY FLEET
AVERAGE
YEAR ($/hr)
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
Note that these [***].
11
<PAGE>
Annex B
Average flight time adjustment formula
Should Buyer's average annual flight duration change throughout the ten year
term of this guarantee, a new Airframe Direct Maintenance Cost Guarantee value
will be generated as per the following formula:
ADMCG (new) = [***]
---------------------
T
where:
ADMCG (new) = Revised Airframe Direct Maintenance Cost
Guarantee (US Dollars/FH) for years one (1)
through [***]
T = Average flight time (in hours) at new
average stage length
12
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-009
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 009 (Re: Dispatch Reliability)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Dispatch Reliability
1
<PAGE>
1.0 Intent
The intent of the Dispatch Reliability Guarantee ("DRG") is to achieve the
full potential of the inherent technical reliability of the Aircraft
through the joint efforts of BRAD and Buyer. To that end, BRAD agrees to
take action as specified below and Buyer agrees to set its Aircraft fleet
dispatch reliability target equal to or greater than the sum of the
Guarantee Value plus four tenths of a point so that both Buyer and BRAD's
technical staff can pursue attainment of the Guarantee Value.
2.0 Definition
As defined in World Airlines Technical Operations Glossary (W.A.T.O.G.), a
chargeable technical delay shall be any delay greater than fifteen (15)
minutes beyond scheduled revenue departure time caused by malfunction of
equipment affecting any of the Aircraft ("Chargeable Technical Delay") and
a cancellation shall be the deletion of the flight from Buyer's operating
schedule, provided that no more than one (1) delay or cancellation shall
be charged to a specific malfunction ("Cancellation").
3.0 Guarantee Value
BRAD guarantees that the Aircraft dispatch reliability with respect to
avoidance of Chargeable Technical Delays or Cancellations shall, at the
end of the period indicated below, meet the guarantee value percentages
specified below ("Guarantee Value"):
Period Guarantee Value (%)
------ -------------------
First six months N/A
[***] [***]
[***] [***]
[***] [***]
4.0 Term of Guarantee
The term of this guarantee shall commence on the date of start of revenue
service of Buyer's first delivered Aircraft and shall expire [***]
years thereafter or whenever the six month rolling average is equal to or
exceeds [***] dispatch reliability for [***], whichever comes first.
2
<PAGE>
5.0 Formula
As the term is used herein, "dispatch reliability" shall be a six (6)
month moving average numerical value (expressed as a percentage) which
shall be calculated by application of the following formula:
DR = 100(1 - CD/SD)
Where:
DR = Dispatch Reliability (expressed as percentage)
CD = Total Chargeable Technical Delays and Cancellations.
SD = Total Scheduled Revenue Departures
6.0 Assumptions
[***]
7.0 Conditions and Limitations
7.1 Any delay or cancellation due to any one or more of the following
causes shall not be considered a Chargeable Technical Delay or
Cancellation in computing compliance with this DRG:
a) Delay or cancellation due to operation or maintenance of
equipment in the Aircraft not being in accordance with the
approved Technical Data;
b) Delay or cancellation due to acts or omissions of Buyer
including but not limited to unavailability of serviceable
spare parts, ground support equipment or personnel, and not
dispatching in accordance with the approved Minimum Equipment
List;
3
<PAGE>
c) Delay or cancellation caused by problems that have had
relevant recommended Service Bulletins or Airworthiness
Directives issued against them, if Buyer has not incorporated
the bulletin on the Aircraft in question, provided that Buyer
has had reasonable time to incorporate said bulletin or
directive consistent with Buyer's maintenance program;
d) Delay or cancellation caused by BFE of Buyer or Buyer
designated equipment (equipment designated by Buyer and
purchased by BRAD on behalf of Buyer);
e) Delay or cancellation caused by Power Plant Parts;
f) Delay or cancellation due to any modifications to the Aircraft
made by Buyer without BRAD's written approval unless Buyer
furnishes reasonable evidence that such modification was not a
prime cause of the delay; or
g) Any delay or cancellation due to acts of God or acts of third
parties or force majeure.
7.2 Reporting
Buyer shall provide to BRAD not later than thirty (30) days after
the last day of each month all reports as required by Buyer's
regulatory authority. Buyer shall also provide a report to BRAD of
the corrective action for such Chargeable Technical Delays or
Cancellations, and the information on modifications or Service
Bulletins relevant to such Chargeable Technical Delays or
Cancellations accomplished during each month. Buyer shall also
provide BRAD such other information and data as BRAD may reasonably
request for the purpose of analyzing Chargeable Technical Delays or
Cancellations. BRAD shall respond to the data in a timely manner and
shall provide Buyer with a summary of fleetwide reliability reports
on a monthly basis.
4
<PAGE>
7.3 Master Record
The master record of dispatch reliability will be maintained by BRAD
based upon information provided by Buyer's maintenance control
program as requested herein.
BRAD shall format the data into BRAD's format.
8.0 Corrective Action
8.1 In the event the achieved dispatch reliability, as reported to Buyer
by BRAD, fails to equal the Guarantee Value for the applicable
period, BRAD and Buyer will jointly review the performance for that
period to identify improvement changes required. BRAD shall also
provide, at no charge, if requested by Buyer:
a) Technical service support to analyze Buyer's operating
procedures, maintenance practices, training programs, manuals
and publications and related procedures, practices, policies
and programs that can have an adverse effect on dispatch
reliability and recommend any changes in such procedures,
practices, policies and programs reasonably indicated to
improve the dispatch reliability;
b) Review of data related to parts, material, components,
accessories and equipment incorporated in, and used in
connection with, the Aircraft and furnish technical advice and
information to Buyer for the purpose of improving the dispatch
reliability of the Aircraft;
c) Corrective BRAD engineering design changes and modification
kits of BRAD Parts and material for the Aircraft which will,
in the joint opinion of Buyer and BRAD, cause the performance
of the Aircraft upon Buyer's installation, to meet or exceed
the dispatch reliability guarantee. The modification kits and
design changes supplied by BRAD which provide added value to
Buyer beyond that required to reach the specified guarantee
value will be negotiated by BRAD and Buyer to define the cost
allocation of the "Added Value". BRAD will pay for direct
labour hours incurred based on BRAD's estimated labour hours
or Buyer's actual labour hours, whichever is less, for the
percentage as determined above of the installation cost
necessary to meet the Guarantee Value. Buyer and BRAD agree
that Buyer's obligations to install such modification kits
shall be
5
<PAGE>
consistent with Buyer's maintenance program. Thereafter,
failure by Buyer to install a BRAD change shall result in the
exclusion of the associated malfunction from the dispatch
reliability computation, unless Buyer can demonstrate to
BRAD's reasonable satisfaction that the change would not have
eliminated the malfunction; and
d) BRAD shall use its reasonable efforts to require its suppliers
to provide corrective action at no charge to Buyer to the
extent required when Chargeable Technical Delays or
Cancellations exceed the guaranteed dispatch reliability as a
direct result of failure of equipment designed by such
suppliers.
8.2 BRAD's liability to investigate and provide corrective action under
the terms of this DRG shall be dependent upon the quality, extent
and regularity of information and data reported to BRAD by Buyer.
9.0 Implementation of Changes
Buyer may, at its option, decline to implement any change proposed by BRAD
under Article 8.0 above. If Buyer so declines, BRAD may adjust the number
of Chargeable Technical Delays or Cancellations by an amount consistent
with the expected reduction in Chargeable Technical Delays or
Cancellations based on reasonable substantiation to Buyer and on other
operator experience, if any, as if such change has been incorporated. BRAD
shall not make adjustments when Buyer has demonstrated to BRAD's
reasonable satisfaction that such change is not cost effective to Buyer.
10.0 Duplicate Remedies
It is agreed that BRAD shall not be obligated to provide to Buyer any
remedy which is a duplicate of any other remedy which has been provided to
Buyer elsewhere under the Agreement, by the Power Plant manufacturer or by
any vendor.
6
<PAGE>
11.0 Limitation of Liability
THE DISPATCH RELIABILITY GUARANTEE PROVIDED IN THIS LETTER AGREEMENT AND
THE OBLIGATIONS AND LIABILITIES ON THE PART OF BRAD UNDER THE AFORESAID
GUARANTEE ARE ACCEPTED BY BUYER AND ARE EXCLUSIVE AND IN LIEU OF, AND
BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER REMEDIES,
WARRANTIES, GUARANTEES OR LIABILITIES, EXPRESS OR IMPLIED, WITH RESPECT TO
THE MATTERS COVERED BY THIS GUARANTEE CONCERNING EACH AIRCRAFT DELIVERED
UNDER THE AGREEMENT, ARISING IN FACT, CONTRACT, LAW, TORT, STRICT PRODUCTS
LIABILITY OR OTHERWISE INCLUDING, WITHOUT LIMITATION, ANY OBLIGATION,
LIABILITY, CLAIM OR REMEDY WHETHER OR NOT ARISING FROM NEGLIGENCE (WHETHER
ACTIVE, PASSIVE OR IMPUTED) OF BRAD, ITS OFFICERS, EMPLOYEES, AGENTS OR
ASSIGNEES, OR WITH RESPECT TO ANY IMPLIED WARRANTY OF FITNESS OR
MERCHANTABILITY, ANY IMPLIED CONDITION, ANY IMPLIED WARRANTY ARISING FROM
COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OR TRADE, LOSS OF USE,
REVENUE OR PROFIT.
12.0 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.
13.0 This Letter Agreement constitutes an integral part of the Agreement and
subject to the terms and conditions contained therein.
14.0 In the event of the termination of the Agreement, this Letter Agreement
shall become automatically null and void except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft and
the guarantee value and assumptions will be revised to reflect the actual
number of Aircraft delivered under the Agreement.
7
<PAGE>
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.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
8
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-010
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 010 (Re: Performance)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
Subject: Performance
1
<PAGE>
1.0 AIRCRAFT CONFIGURATION
The [***] listed below are based on the CRJ-200-ER Aircraft
configuration as defined in Canadair Customized Specification
RAD-601R-153, issue NC, and equipped with GE GF34-3B1 engines as defined
in GE Engines Specification E1271A. The weight data corresponds to the
51000 lb (23133 kg) MTOW design weight option and includes the weight
changes associated with the centre-wing fuel tank. Appropriate adjustments
shall be made for changes in configuration approved by the Buyer and BRAD
or otherwise allowed by the Purchase Agreement which cause changes to the
performance of the Aircraft.
2.0 AIRPORT CONDITIONS
2.1 RDU - Raleigh/Durham
Runway: 05L
Elevation: 436 ft
Ambient temperature: ISA+15 degrees C
Runway available-take-off: 10000 ft (3048 m)
Clearway: 0 ft (0 m)
Stopway: 0 ft (0 m)
Line-up allowance: 82 ft (25 m)
Runway available-landing: 8114 ft (2473 m)
Wind: none
Slope: 0.4% (uphill)
Obstacles (relative to brake release point)
dist(ft/m) height(ft)
11474/3497 48
12556/3827 81
12848/3916 94
2.2 [***]
Page 2
<PAGE>
[***]
(13 pages omitted)
Page 3
<PAGE>
[***]
6.0 GUARANTEE COMPLIANCE
6.1
Compliance with take-off and landing performance guarantees shall be
demonstrated by reference to the approved D.O.T. Aircraft Flight Manual
adjusted to reflect any differences due to change in certification
requirements or interpretation thereof.
6.2
Compliance with speed, specific air range and mission performance guarantees
shall be established by calculations based on flight test data obtained for
an aircraft configuration similar to that defined by this specification and
should be demonstrated by reference to the Flight Planning and Cruise Control
Manual.
6.3
Data derived from tests shall be adjusted as required by conventional methods
of correction, interpolation or extrapolation in accordance with established
industrial practices to show compliance with the performance guarantees.
Page 16
<PAGE>
[***]
9.0 Limitation of Liability
THE PERFORMANCE GUARANTEES PROVIDED IN THIS LETTER AGREEMENT AND THE
OBLIGATIONS AND LIABILITIES ON THE PART OF BRAD UNDER THE AFORESAID
GUARANTEES ARE ACCEPTED BY BUYER AND ARE EXCLUSIVE AND IN LIEU OF,
AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER REMEDIES,
WARRANTIES, GUARANTEES OR LIABILITIES, EXPRESSED OR IMPLIED, WITH
RESPECT TO THE MATTERS COVERED BY THESE GUARANTEES CONCERNING EACH
AIRCRAFT DELIVERED UNDER THE AGREEMENT, ARISING IN FACT, CONTRACT,
LAW, TORT, STRICT PRODUCTS LIABILITY OR OTHERWISE INCLUDING, WITHOUT
LIMITATION, ANY OBLIGATION, LIABILITY, CLAIM OR REMEDY WHETHER OR NOT
ARISING FROM NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED) OF BRAD,
ITS OFFICERS, EMPLOYEES, AGENTS OR ASSIGNEES, OR WITH RESPECT TO ANY
IMPLIED WARRANTY OF FITNESS OR MERCHANTABILITY, ANY IMPLIED
CONDITION, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE, LOSS OF USE, REVENUE OR PROFIT.
Page 17
<PAGE>
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.
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 except that the provisions of
this Letter Agreement shall survive with respect to delivered 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 truly
BOMBARDIER INC.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
18
<PAGE>
[LOGO] Bombardier Inc.
Bombardier Regional Aircraft Division
123 Garratt Boulevard
Downsview, Ontario, Canada M3K 1Y5
Telephone (416) 633-7310
Contracts Facsimile (416) 375-4533
September 17th, 1997
Our Ref: B97-7701-RJTL-CRJ0393-011
Midway Airlines Corporation
300 West Morgan Street, Suite 1200
Durham, NC 27701
USA
Attention: Mr. Robert Ferguson, Chairman, President & CEO
Gentlemen,
Re: Letter Agreement No. 011 (Re: Configuration)
Reference is made to Purchase Agreement No. PA-0393 (the "Agreement") between
Bombardier Inc., represented by its Bombardier Regional Aircraft Division
("BRAD") and Midway Airlines Corporation ("Buyer") for the sale of ten (10)
Canadair Regional Jet Aircraft (the "Aircraft").
This letter, when accepted and agreed to by Buyer contemporaneously with
execution of the Agreement, will become part of the Agreement and will evidence
our further agreement with respect to the matters set forth below.
All terms used herein and in the Agreement not defined herein, shall have the
same meaning as in the Agreement.
1
<PAGE>
Subject: Configuration
1.0 [***]
2.0 [***]
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 BRAD.
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 except that the provisions of
this Letter Agreement shall survive with respect to delivered Aircraft.
2
<PAGE>
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.
By: /s/[SIGNATURE ILLEGIBLE]
---------------------------------
Title: Manager, Contracts
ACCEPTED AND AGREED TO:
this 17th day of September, 1997
Midway Airlines Corporation
By: /s/ Robert Ferguson
---------------------------------
Title: CEO
3
<PAGE>
ANNEX A
CONFIGURATION DIFFERENCES FOR FIRST FOUR AIRCRAFT
Option No. Description Comments
25-108 [***] [***]
25-093 [***] [***]
25-351 [***] [***]
25-TBD [***] [***]
34-019 [***] [***]
34-350 [***] [***]
35-TBD [***] [***]
4
<PAGE>
EXHIBIT 10.26
EXECUTION COPY
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS,
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION IS AVAILABLE.
Void After 5:00 p.m., New York City Time,
on February 11, 2002
----------------------------
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF MIDWAY AIRLINES CORPORATION
Midway Airlines Corporation, a Delaware corporation (the "Company"),
hereby certifies that in consideration of amendments to certain agreements
and/or deferral of payments thereunder and other good and valuable
consideration, AMR Corporation is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant, at any time
or times up to 5:00 p.m., New York City time, on February 11, 2002, the
expiration date of this Warrant, Five Hundred Seventy Two (572) fully paid and
non-assessable shares of the common stock, $0.01 par value per share (the
"Common Stock") of the Company at an initial purchase price of $1.00 per share,
payable in lawful money of the United States of America, as the same may be
adjusted in accordance with the provisions hereof (the "Exercise Price") .
As used herein, the term "Company" includes any corporation which
shall succeed to or assume the obligations of the Company hereunder, and the
term "Shares" includes all stock of any class, classes or series whether now or
hereafter authorized, (however designated) of the Company, the holders of which
shall have the right (without limitation as to amount) either to all or to a
share of the balance of current dividends and liquidating distributions after
the payment of dividends and distributions on any shares entitled to preference.
The number and character of the Shares which may be purchased upon
exercise of this Warrant and the purchase price per share in effect from time to
time are subject to adjustment from time to time as hereinafter provided.
<PAGE>
1. Compliance with the Securities Act of 1933.
The Shares issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "Act"). The holder
hereof, by acceptance hereof, agrees that this Warrant and all Shares purchased
upon exercise hereof will be disposed of only in accordance with the Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder. The Shares shall bear an appropriate legend to such effect.
2. Adjustments of Exercise Price and Number of Shares Issuable upon Exercise
of Warrants.
(a) Adjustment of Exercise Price. Subject to the provisions of this
Section 2, the Exercise Price in effect from time to time shall be subject to
adjustment, as follows:
(i) Without the prior written consent of the holder of the Warrant,
the Company shall not at any time or from time to time (i) issue or sell
any Shares without consideration, or for consideration per share less than
the Fair Market Value (as hereinafter defined), or (ii) issue or sell any
securities convertible into, or exchangeable for, Shares ("Convertible
Securities") at a conversion price per Share of less than the Fair Market
Value, or (iii) issue or sell any warrants or other rights to subscribe to
or purchase, or any options for the purchase of Shares or Convertible
Securities ("Rights or Options") at an exercise price per share of less
than the Fair Market Value (aa) to employees of the Company beyond that
number of Shares reserved for issuance to such employees pursuant to that
certain Merger Agreement dated as of January 17, 1997, as amended as of
January 31, 1997 and February 7, 1997, by and among the Company, GoodAero,
Inc., Zell/Chilmark Fund L.P., James H. Goodnight and John P. Sall or (bb)
to Zell/Chilmark Fund L.P., James H. Goodnight or John P. Sail or any
Affiliate (as hereafter defined) of any of them. As used herein, an
"Affiliate" shall mean (x) in the case of an individual, the spouse or an
immediate family member of such individual, a trust for the benefit of
such individual, spouse or immediate family member or any partnership,
corporation or other entity controlled by such individual, spouse or
immediate family member, (y) in the case of a partnership, any of its
limited or general partners, and any other partnership, corporation or
other entity controlled, controlling or under common control with such
partnership or general partners thereof; and (z) in the case of a
corporation, any corporation, partnership or other entity controlled,
controlling or under common control with such corporation.
(ii) In case the Company at any time or from time to time shall
distribute to holders of Shares, as such, (i) evidences of indebtedness or
assets (excluding regular cash dividends or cash distributions payable out
of consolidated retained earnings) of the Company or any corporation or
other legal entity a majority of the voting equity securities or equity
interests of which are owned, directly or indirectly, by the Company (a
"Subsidiary"), (ii) shares of capital stock of any Subsidiary, (iii)
securities convertible into or exchangeable
<PAGE>
for capital stock of any Subsidiary, or (iv) any rights, options or
warrants to purchase any of the foregoing, then and thereafter
successively upon each such distribution, the Exercise Price in effect
immediately prior to such issue or sale (the "Current Exercise Price")
shall, simultaneously with such distribution, be reduced to a price
(calculated to the nearest cent) determined by multiplying, (x) the
Current Exercise Price by (y) a fraction, the numerator of which will be
the Current Exercise Price less the fair value (as determined in good
faith by the Board of Directors of the Company, whose determination will
be conclusive if based on the financial advice of a nationally recognized
investment banking firm) of the portion of the evidences of indebtedness,
assets, securities or rights, options or warrants so distributed on
account of one Share on the record date of such distribution, and the
denominator of which will be such Current Exercise Price. Such adjustment
will be made whenever any such distribution is made, and will become
effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(iii) In case the Company shall (i) subdivide or reclassify the
outstanding shares of its Common Stock into a greater number of shares, or
(ii) combine or reclassify the outstanding shares of its Common Stock into
a smaller number of shares, the Exercise Price in effect immediately after
the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so
that it shall equal the price determined by multiplying the Current
Exercise Price by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding immediately before such subdivision,
combination or reclassification, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after such
subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any event specified above shall occur.
(iv) Notwithstanding the foregoing, no adjustment to the Current
Exercise Price will be made in any case in which the Company shall issue
(i) Shares upon conversion or exchange of any Convertible Securities, (II)
Shares or Convertible Securities upon exercise of any Rights or Options or
(iii) in consideration of the acquisition by the Company of all or
substantially all of the stock of another company or all or substantially
all of the assets of another company (whether by merger, acquisition of
assets or otherwise), any Shares or any Convertible Securities or any
Rights or Options.
(v) Calculations pursuant to this Section 2(a) shall be made in
accordance with the following provisions:
(i) "Fair Market Value" of the Common Stock on any day shall
be determined as follows:
(x) If the Common Stock is not then regularly traded in
the securities markets, the Fair Market Value thereof shall
be determined in good faith by the Board of Directors of the
Company, and the Company shall deliver to the holder of the
Warrant a
-3-
<PAGE>
certificate of the Company's Secretary as to the adoption of
the Board resolution making such determination.
(y) If the Common Stock is then traded on a national
securities exchange or in the over-the-counter market, the
Fair Market Value thereof shall mean the average of the daily
closing prices of the Common Stock for the 30 consecutive
business days before the date of determination. The closing
price for each day shall be the last reported sale price
regular way or, in case no such reported sale takes place on
such date, the average of the bid and asked prices regular
way, on the principal national securities exchange on which
such stock is then listed or admitted to trading, or, if not
listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices in
the over-the-counter market, as furnished by any national
brokerage firm selected from time to time by the Company for
that purpose.
(ii) In case of the issuance or sale of any securities of the
Company for cash, the consideration received by the Company therefor
shall be deemed to be the amount of cash received by the Company for
such security (or if such securities are sold to underwriters or
dealers for public offering without a subscription offer, the
initial public offering price), without deducting therefrom any
compensation or discount paid or allowed to underwriters or dealers
or others performing similar services or for any expenses incurred
in connection therewith.
(iii) In case of the issuance or sale of any securities of the
Company for consideration other than cash or a consideration a part
of which is other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair
value of such consideration as determined by its Board of Directors,
which determination may be inconsistent with the accounting
treatment thereof.
(iv) In the case of the issuance or sale of Convertible
Securities, the aggregate consideration therefor shall be deemed to
be the consideration, if any, received at the time of such issuance
or sale, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange of such Convertible Securities at the time such Convertible
Securities first become convertible or exchangeable.
(v) In case of the issuance or sale of Rights or Options, the
aggregate consideration therefor shall be deemed to be the
consideration, if any, received at the time of such issuance or
sale, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of such Rights or
Options plus in the case of Rights or Options to purchase
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the
-4-
<PAGE>
Company upon the conversion or exchange of such Convertible
Securities at the time such Convertible Securities first become
convertible or exchangeable.
(vi) In case of the issuance or sale of Convertible Securities
or Rights or Options, the conversion or exercise price per Share
shall be determined by dividing the aggregate consideration for such
Convertible Securities or Rights or Options by the maximum number of
Shares issuable with respect to such Convertible Securities or
Rights or Options.
(vii) The maximum number of Shares issuable with respect to
Convertible Securities or Rights or Options shall include the number
of Shares issuable upon conversion or exchange of such Convertible
Securities or exercise of such Rights or Options, plus, in the case
of Rights or Options to purchase Convertible Securities, the number
of Shares issuable upon conversion or exchange of such Convertible
Securities.
(viii) In case of the issuance of additional Shares as a
dividend or as the distribution on any capital stock of the Company,
the aggregate number of Shares issued in payment of such dividend or
distribution shall be deemed to have been issued on the record date
for the determination of the stockholders entitled to receive such
dividends or distributions and shall be deemed to have been issued
without consideration.
(ix) The reclassification of securities other than Shares into
securities including Shares shall be deemed to involve the issuance
for consideration other than cash of such Shares on the record date
for the determination of stockholders entitled to receive such
Shares.
(x) The number of Shares at any time outstanding shall include
the maximum number of Shares issuable at such time with respect to
all Convertible Securities and Rights or Options then outstanding
and unconverted or exchanged or unexercised.
(b) No Adjustments to Exercise Price. No adjustment in the Exercise Price
in accordance with the provisions of paragraph (a) hereof need be made if such
adjustment would amount to a change in such Exercise Price of less than $.05;
provided, however, that the amount by which any adjustment is not made by reason
thereof shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
(c) Adjustment to Number of Shares. Upon each adjustment of the Current
Exercise Price pursuant to paragraph (a), each Warrant shall thereupon evidence
the right to purchase that number of shares of Common Stock (calculated to the
nearest hundredth of a share) obtained by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment upon exercise of
the Warrant by the Current Exercise Price and dividing the product so obtained
by the Exercise Price in effect immediately after such adjustment.
-5-
<PAGE>
(d) Reorganizations. In case of any capital reorganization, other than in
the cases referred to in paragraph (a) hereof, or the consolidation or merger of
the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock or
the conversion of such outstanding shares of Common Stock into shares of other
stock or other securities or property), (collectively such actions being
hereinafter referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of any Warrant (in lieu of the number of shares of
Common Stock theretofore deliverable) the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
which would otherwise have been deliverable upon the exercise of such Warrant
would have been entitled upon such Reorganization if such Warrant had been
exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Warrant holders so
that the provisions set forth herein shall thereafter be applicable, as nearly
as possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants. Any such adjustment shall be made by and set forth in
a supplemental agreement between the Company, or any successor thereto, and the
Warrant holders and shall for all purposes hereof conclusively be deemed to be
an appropriate adjustment. The Company shall not effect any such Reorganization,
unless upon or prior to the consummation thereof the successor corporation, or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the registered holder of any Warrant Certificate such
shares of stock, securities, cash or other property as such holder shall be
entitled to purchase in accordance with the foregoing provisions. In the event
of sale or conveyance or other transfer of all or substantially all of the
assets of the Company as a part of a plan for liquidation of the Company, all
rights to exercise any Warrant shall terminate thirty (30) days after the
Company gives written notice to each registered holder of a Warrant Certificate
that such sale or conveyance or other transfer has been consummated.
(e) Exercise Price Not Less Than Par Value. In no event shall the Exercise
Price be adjusted below the par value per share of the Common Stock.
(f) Notice of Certain Actions. In the event the Company shall:
(i) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to
the holders of its Common Stock; or
(ii) offer to the holders of its Common Stock rights to subscribe
for or purchase any shares of any class of stock or any other rights or
options; or
(iii) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of
outstanding
-6-
<PAGE>
shares of Common Stock), any capital reorganization, any consolidation or
merger (other than a merger in which no distribution of securities or
other property is made to holders of Common Stock), or any sale, transfer
of all or substantially all of the assets of the Company, or the
liquidation, dissolution or winding up of the Company; or
(iv) issue any shares of Common Stock in exchange for shares of
preferred stock of the Company, other than upon conversion of such shares
of preferred stock;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to each Warrant holder. Such notice shall specify the date on which
the books of the Company shall close, or a record be taken, for determining
holders of Common Stock entitled to receive such stock dividend or other
distribution or such rights or options, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer, other
disposition, liquidation, dissolution, winding up or exchange shall take place
or commence, as the case may be, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to receive securities or
other property deliverable upon such action, if any such date has been fixed.
Such notice shall be mailed in the case of any action covered by Subsection
(f)(i) or (f)(11) above, at least ten (10) days prior to the record date for
determining holders of the Common Stock for purposes of receiving such payment
or offer, and in the case of any action covered by Subsection (f)(iii) or
(f)(iv) above, at least ten (10) days prior to the earlier of the date upon
which such action is to take place or any record date to determine holders of
Common Stock entitled to receive such securities or other property.
(g) Notice of Adjustments. Whenever the Exercise Price shall be adjusted
as herein provided, and from time to time, at the reasonable request of a holder
of the Warrant, the Company, will forthwith deliver to such holder a certificate
signed by the President or a Vice President and by the Treasurer or an Assistant
Treasurer of the Company, showing in reasonable detail the facts requiring any
such adjustment and stating the Exercise Price in effect on the date of such
certificate after giving effect to any such adjustment and the number of shares
of Common Stock or other securities then purchasable upon the exercise hereof.
The Company may retain, but shall not be required to retain, a firm of
independent public accountants of recognized standing to make any computation
required under this Section 2(g), and the certificate signed by such firm shall
be conclusive evidence of the correctness of any such computation.
(h) Warrant Certificate Amendments. Irrespective of any adjustments
pursuant to this Section 2, Warrant Certificates theretofore or thereafter
issued need not be amended or replaced, but certificates thereafter issued shall
bear an appropriate legend or other notice of any adjustments.
(i) Fractional Shares. The Company shall not be required upon the exercise
of any Warrant to issue fractional shares of Common Stock which may result from
adjustments in accordance with this Section 2 to the Exercise Price or number of
shares of Common Stock purchasable under each Warrant. If more than one Warrant
is
-7-
<PAGE>
exercised at one time by the same registered holder, the number of full shares
of Common Stock which shall be deliverable shall be computed based on the number
of shares deliverable in exchange for the aggregate number of Warrants
exercised. With respect to any final fraction of a share called for upon the
exercise of any Warrant or Warrants, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the same fraction of the
market value of a share of Common Stock, as determined by the Company on the
basis of the market price per share of Common Stock on the business day next
preceding the date of such exercise. The registered holder of each Warrant
Certificate, by his acceptance of the Warrant Certificate, shall expressly waive
any right to receive any fractional share of Common Stock upon exercise of the
Warrants. For the purposes hereof, the market price share of Common Stock at any
date shall mean the last reported sale price regular way or, in case no such
reported sale takes place on such date, the average of the last reported bid and
asked prices regular way, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or listed if that is
the principal market for the Common Stock or if not listed or admitted to
trading on any national securities exchange or if such national securities
exchange is not the principal market for the Common Stock, the closing bid price
as reported by the NASDAQ System or its successor, if any. If the price of the
Common Stock is not so reported, then such market price shall mean the last
known price paid per share by a purchaser of such stock in an arms-length
transaction. All calculations made hereunder shall be to the nearest 1/100th of
a share.
(j) The Company shall at all times reserve and keep available, out of its
treasury stock or authorized and unissued stock, solely for the purpose of
effecting the exercise of this Warrant, such number of shares of Common Stock
and other securities of the Company as shall, from time to time, be sufficient
to effect the exercise of this Warrant. All shares of Common Stock issued on
exercise of this Warrant shall be validly issued, fully paid and nonassessable.
3. Expiration.
This Warrant shall be void after 5:00 p.m., New York City time, on
February 11,2002, and no rights herein given to the holder of this Warrant shall
exist thereafter.
4. Warrant Holder Not Deemed a Stockholder.
No holder of this Warrant as such shall be entitled to vote or
receive dividends or be deemed the holder of shares of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance of
record to the holder of this Warrant of the Shares which he is then entitled to
receive upon the due exercise of this Warrant.
-8-
<PAGE>
5. No Limitation on Corporate Action.
Except as otherwise provided herein, no provisions of this Warrant
and no right or option granted or conferred hereunder shall in any way limit,
affect or abridge the exercise by the Company of any of its corporate rights or
powers to recapitalize, amend its Certificate of Incorporation, reorganize,
consolidate or merge with or into another corporation, or to transfer all or any
part of its property or assets, or the exercise of any other of its corporate
rights and powers.
6. Exercise of Warrant.
(a) Full Exercise. This Warrant may be exercised as a whole by the
holder hereof by surrendering this Warrant, with the form of subscription at the
end hereof duly executed by such holder, to the Company at any time before 5:00
p.m., New York City time, on February 11, 2002, at the principal office of its
transfer agent accompanied by payment in cash or by certified or official bank
check, payable to the order of the Company, of the product obtained by
multiplying the number of Shares called for on the face of this Warrant (giving
effect to any adjustments therein) by the purchase price then in effect.
(b) Partial Exercise. This Warrant also may be exercised in part by
surrendering this Warrant in the manner specified in subsection (a) of this
Section 6, except that the number of Shares or other securities or property
receivable upon the exercise of this Warrant as a whole shall be proportionately
reduced. Upon any such partial exercise, the Company, at its expense, will
forthwith issue to the holder hereof a new Warrant or Warrants (herein
collectively referred to as "this Warrant") of like tenor evidencing the rights
of such holder to purchase a number of shares with respect to which the Warrant
shall not have been exercised (as such number would be constituted on the date
hereof.)
(c) Delivery of Stock Certificates, etc. As soon as practicable
alter any exercise of this Warrant and payment of the sum payable upon such
exercise, and in any event within 10 days thereafter, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of and delivered to the holder hereof, or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully paid and
non-assessable Shares or other securities or property to which such holder shall
be entitled upon such exercise, plus, in lieu of any fractional Shares to which
such holder would otherwise be entitled, cash equal to such fraction multiplied
by the Fair Market Value of a Share. Issuance and delivery of the Shares
deliverable on the due exercise of this Warrant may be postponed by the Company
and its transfer agent during any period, not exceeding forty days, for which
the transfer books of the Company for the Shares are closed between (1) the
record date set by the Board of Directors for the determination of stockholders
entitled to vote at or to receive notice of any stockholders' meeting, or
entitled to receive payment of any dividends or to any allotment of rights or to
exercise rights in respect of any change, conversion or exchange of capital
stock, and (2) the date of such meeting of stockholders, the date for the
payment of such dividends, the date for such allotment of rights, or the date
when
-9-
<PAGE>
any such change or conversion or exchange of capital stock shall go into effect,
as the case may be.
7. Exchange and Transfer of Warrants.
Subject to the provisions of Section 1 hereof, upon surrender for
exchange of this Warrant (in negotiable form, if not surrendered by the holder
named on the face thereof) to the Company or its transfer agent's principal
office, the Company, at its expense, will issue and deliver new Warrants of like
tenor, calling in the aggregate for the same dollar value of Shares, in the
denomination or denominations requested, to or on the order of such holder and
in the name of such holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct; provided that the Warrant may be
transferred solely to Permitted Transferees as such term is defined in the
Stockholders Agreement referred to in Section 9 below. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered
holder of this Warrant as absolute owner for all purposes without being affected
by any notice to the contrary.
8. Notices.
All communications hereunder shall be in writing and, if sent to the
holder hereof shall be mailed by registered or certified mail or delivered or
telegraphed and confirmed in writing to such holder at such holder's address as
set forth below, and if sent to the Company, shall be mailed by registered or
certified mail or delivered or telegraphed and confirmed in writing to the
Company at its address as set forth below.
to the Company:
Midway Airlines Corporation
300 West Morgan Street, 12th Floor
Durham, North Carolina 27701
Attention: Chief Executive Officer
to AMR Corporation:
American Airlines, Inc.
MD 5675 HDQ
P.O. Box 619616
DFW Airport, EC 75261-9616
Attention: Corporate Secretary
with a required copy to:
Airline Management Services, Inc.
MD 5220
P.O. Box 619616
DFW Airport, TX 75261-9616
Attention: Managing Director
-10-
<PAGE>
9. STOCKHOLDERS AGREEMENT.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WARRANT AND
THE SHARES REPRESENTED BY THIS WARRANT ARE SUBJECT TO THAT CERTAIN STOCKHOLDERS
AGREEMENT DATED AS OF FEBRUARY 11, 1997 BY AND AMONG THE COMPANY, AMR
CORPORATION, ZELL/CHILMARK FUND L.P., WINGS AIRCRAFT FINANCE, INC., DEBIS
AIRFINANCE B.V., JAMES H. GOODNIGHT AND JOHN P. SALL.
Dated: February 11, 1997
MIDWAY AIRLINES CORPORATION
By: /s/ Robert R. Ferguson
--------------------------------
Name: Robert R. Ferguson III
Title: President and Chief Executive
Officer
Attest:
By: /s/ Tina M. Gerlach
------------------------------
Name Tina M. Gerlach
Title Assistant Secretary
-11-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _____________ hereby sells, assigns and
transfers unto ________ the within Warrant and does hereby irrevocably
constitute and appoint ________________ , Attorney, to transfer the said Warrant
on the books of the within named corporation with MI power of substitution in
the premises.
Dated: ______________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Certificate, in every
particular, without alteration or
enlargement or any change whatever.
-12-
<PAGE>
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IF HE
DESIRES TO EXERCISE THIS WARRANT
----------------------------------
The undersigned hereby exercises the right to purchase Shares
covered by this Purchase Warrant according to the conditions thereof and
herewith makes payment of the purchase of such Shares in full.
______________________________
Signature
______________________________
Address
______________________________
Number of Shares to Be
Purchased
Dated: _____________
-13-
<PAGE>
EXHIBIT 10.29
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF
THIS EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND
DENOTED BY [***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
debis
PROMISSORY NOTE
Dated as of January 31, 1997
FOR VALUE RECEIVED, Midway Airlines Corporation, a corporation duly organized
and existing under the laws of the State of Delaware ("Borrower"), with its
principal office at 300 W. Morgan Street, Suite 1200, Durham, North Carolina
27701, hereby unconditionally promises to pay to the order of debis
AirFinance B.V. ("Lender") at its office at Triport 1, ruimte 7140, Evert van
de Beekstraat 22, 1118 CL Luchthaven Schiphol, Amsterdam Airport Schiphol,
The Netherlands, the principal sum of U.S. Dollars Two Million Six Hundred
Thirty-Four Thousand Three Hundred Seventy-Seven and Six Cents (U.S.
$2,634,377.06) together with, to the extent permitted by applicable law,
interest of 8% percent per annum thereon ("Interest Rate") from the date
hereof until its payment to Lender in full, computed on the basis of a
365-day year and the actual number of days elapsed.
1. Payments. Each payment due under this Note shall be made in immediately
available funds at the office of Lender or to such account as Lender may
designate to Borrower without any setoff, withholding or deduction of any
kind. [***]Thereafter, principal and interest shall be paid in installments
of [***]or the first Business Day of each month, [***] until the entire
indebtedness evidenced hereby is fully paid, except that any remaining
indebtedness, if not sooner paid, shall be due and payable on [***]. For the
purposes hereof, Business Day shall mean a day (other than a Saturday or
Sunday) on which banks are open for business in New York. This Note together
with interest accrued thereon may be prepaid in whole or in part at any time
before it is payable under this Note.
2. Representations. Borrower represents and warrants that (a) Borrower has full
power and authority, not restricted by any law or governmental regulation, to
execute and deliver this Note to perform its obligations as contemplated hereby,
(b) upon execution and delivery of this Note to Lender, it will evidence a valid
and legally binding obligation of Borrower, enforceable in accordance with its
terms, and (c) the execution and delivery of this Note is not in violation
<PAGE>
debis
of, nor is it an event of default, or an event which with the passage of time or
service of notice may become an event of default, under any agreement or
instrument to which Borrower is a party.
3. Acceleration. If any of the following events ("Events of Default") shall
occur, namely
(a) Borrower fails to pay to Lender any amount due hereunder within five (5)
Business Days after the date when such payment is due and payable hereunder;
(b) Any event of default (however defined) occurs under any aircraft operating
lease agreement between Borrower, as lessee, and a lessor, for the benefit,
directly or indirectly, of debis AirFinance B.V., Daimler-Benz Aerospace A.G.,
or any affiliate of either of them, or any successor or assign of either of
them, which event of default results in termination of such aircraft operating
lease agreement, either automatically or after the giving of notice thereof to
the lessee; or
(c) Any Event of Default (as defined therein) occurs under the Promissory Note
dated as of January 31, 1997 in the principal amount of $3,264,719.80 which has
been executed by Borrower in favor of Daimler-Benz Aerospace A.G.; or
(d) If Borrower makes any prepayment in respect of the Secured Promissory
Note dated February 7, 1997 in the principal amount of $9,450,000 payable by
Midway to American Airlines, Inc. ("American"), or any note given in
substitution therefor, whether held by American or any successor or assign
thereof (the "American Note"), or amends the American Note to provide for
terms more favorable to the payee therof (including, without limitation, any
increase in the interest rate or acceleration of payment), or if any
obligation evidenced by the American Note shall become due before its originally
stated due date, whether because of a Change in Control or an Event of Default
(as those terms are defined in the American Note, or for any other reason;
thereupon, without the necessity of any service of notice thereof upon Borrower,
(i) every liability of Borrower to Lender of whatever kind, whether absolute or
contingent, shall forthwith become payable, both as to principal and interest,
and (ii) interest shall accrue on the outstanding principal balance of this Note
until the date of its payment in full (A) at a rate of 18% per annum, or (B) if
it shall be less, to the maximum extent as may be allowed by applicable law.
-2-
<PAGE>
debis
4. Governing Law; Resolutions of Disputes. This Note shall be construed in
accordance with and governed by the internal laws of the State of New York
without regard to any conflict of law rules. In connection with any dispute
which may arise under this Note, Borrower hereby irrevocably submits to,
consents to, and waives any objection to, the non-exclusive jurisdiction of the
courts of the United States and of the State of New York located in the County
of New York, waives any objection to the laying of venue in such a court, and
waives any right to trial by jury.
5. Other Provisions. Borrower waives demand, presentment, protest, notice of
dishonor and all forms of notice required to hold Borrower liable on this Note.
Borrower shall reimburse Lender upon request for any out-of-pocket expenses,
including reasonable fees and disbursements of legal counsel, incurred in
connection with the enforcement of, or maintenance of its rights under, this
Note.
Borrower has not relied upon any representation of Lender in giving this Note.
This Note may not be amended except by an instrument or instruments in writing
signed by the person or entity against whom enforcement of any such amendment is
sought; the waiver by Lender of any condition of, or any breach of any term or
provision of, this Note shall be limited to such instance and shall not be
construed as a waiver of the conditions generally or of any subsequent breach.
In the event any one or more of the provisions contained in this Note shall be
invalid, illegal or unenforceable in any respect, the remaining provisions shall
not for that reason be affected or impaired in any way.
This Note shall inure to the benefit of, and shall be binding upon, Lender and
Borrower, their respective successors and Lender's assigns.
MIDWAY AIRLINES CORPORATION
Borrower
By: /s/ Jonathan S. Waller
--------------------------
Name: Jonathan S. Waller
Title: Senior Vice President
-3-
<PAGE>
EXHIBIT 10.30
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY
[***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
DASA
PROMISSORY NOTE
Dated as of January 31, 1997
FOR VALUE RECEIVED, Midway Airlines Corporation, a corporation duly organized
and existing under the laws of the State of Delaware ("Borrower"), with its
principal office at 300 W. Morgan Street, Suite 1200, Durham, North Carolina
27701, hereby unconditionally promises to pay to the order of Daimler-Benz
Aerospace A.G., Project and Sales Finance, Postal Code 81663, Postfach 80 11
09, 81663 Munich, Germany, the principal sum of U.S. Dollars Three Million
Two Hundred Sixty-Four Thousand Seven Hundred Nineteen and Eighty Cents (U.S.
$3,264,719.80) together with, to the extent permitted by applicable law,
interest of 8% percent per annum thereon ("Interest Rate") from the date
hereof until its payment to Lender in full, computed on the basis of a
365-day year and the actual number of days elapsed.
1. Payments. Each payment due under this Note shall be made in immediately
available funds at the office of Lender or to such account as Lender may
designate to Borrower without any setoff, withholding or deduction of any
kind. [***] be added to the principal balance of the Note, with the result
that the principal balance of the Note, on the date which is one year from
the date of this Note, shall be [***] on the first Business Day of each
month, [***], until the entire indebtedness evidenced hereby is fully
paid, except that any remaining indebtedness, if not sooner paid, shall be
due and payable on [***]. For the purposes hereof, Business Day shall mean a
day (other than a Saturday or Sunday) on which banks are open for business in
New York. This Note together with interest accrued thereon may be prepaid in
whole or in part at any time before it is payable under this Note.
2. Representations. Borrower represents and warrants that (a) Borrower has
full power and authority, not restricted by any law or governmental
regulation, to execute and deliver this Note to perform its obligations as
contemplated hereby, (b) upon execution and delivery of this Note to Lender,
it will evidence a valid and legally binding obligation of Borrower,
enforceable in accordance with its terms, and (c) the execution and delivery
of this Note is not in violation
<PAGE>
DASA
of, nor is it an event of default, or an event which with the passage of time
or service of notice may become an event of default, under any agreement or
instrument to which Borrower is a party.
3. Acceleration. If any of the following events ("Events of Default") shall
occur, namely
(a) Borrower fails to pay to Lender any amount due hereunder within five (5)
Business Days after the date when such payment is due and payable hereunder;
(b) Any event of default (however defined) occurs under any aircraft
operating lease agreement between Borrower, as lessee, and a lessor, for the
benefit, directly or indirectly, of debis AirFinance B.V., Daimler-Benz
Aerospace A.G., or any affiliate of either of them, or any successor or
assign of either of them, which event of default results in termination of
such aircraft operating lease agreement, either automatically or after the
giving of notice thereof to the lessee; or
(c) Any Event of Default (as defined therein) occurs under the Promissory
Note dated as of January 31, 1997 in the principal amount of [***] which has
been executed by Borrower in favor of debis AirFinance B.V.; or
(d) If Borrower makes any prepayment in respect of the Secured Promissory
Note dated February 7, 1997 in the principal amount of $9,450,000 payable by
Midway to American Airlines, Inc. ("American"), or any note given in
substitution therefor, whether held by American or any successor or assign
thereof (the "American Note"), or amends the American Note to provide for
terms more favorable to the payee therof (including, without limitation, any
increase in the interest rate or acceleration of payment), or if any
obligation evidenced by the American Note shall become due before its
originally stated due date, whether because of a Change in Control or an
Event of Default (as those terms are defined in the American Note), or for
any other reason;
thereupon, without the necessity of any service of notice thereof upon
Borrower, (i) every liability of Borrower to Lender of whatever kind, whether
absolute or contingent, shall forthwith become payable, both as to Principal
and interest, and (ii) interest shall accrue on the outstanding principal
balance of this Note until the date of its payment in full (A) at a rate of
18% per annum, or (B) if it shall be less, to the maximum extent as may be
allowed by applicable law.
-2-
<PAGE>
DASA
4. Governing Law; Resolutions of Disputes. This Note shall be construed in
accordance with and governed by the internal laws of the State of New York
without regard to any conflict of law rules. In connection with any dispute
which may arise under this Note, Borrower hereby irrevocably submits to,
consents to, and waives any objection to, the non-exclusive jurisdiction of
the courts of the United States and of the State of New York located in the
County of New York, waives any objection to the laying of venue in such a
court, and waives any right to trial by jury.
5. Other Provisions. Borrower waives demand, presentment, protest, notice of
dishonor and all forms of notice required to hold Borrower liable on this
Note.
Borrower shall reimburse Lender upon request for any out-of-pocket expenses,
including reasonable fees and disbursements of legal counsel, incurred in
connection with the enforcement of, or maintenance of its rights under, this
Note.
Borrower has not relied upon any representation of Lender in giving this
Note. This Note may not be amended except by an instrument or instruments in
writing signed by the person or entity against whom enforcement of any such
amendment is sought; the waiver by Lender of any condition of, or any breach
of any term or provision of, this Note shall be limited to such instance and
shall not be construed as a waiver of the conditions generally or of any
subsequent breach.
In the event any one or more of the provisions contained in this Note shall
be invalid, illegal or unenforceable in any respect, the remaining provisions
shall not for that reason be affected or impaired in any way.
This Note shall inure to the benefit of, and shall be binding upon, Lender
and Borrower, their respective successors and Lender's assigns.
MIDWAY AIRLINES CORPORATION
Borrower
By: /s/ Jonathan S. Waller
--------------------------
Name: Jonathan S. Waller
Title: Senior Vice President
-3-
<PAGE>
EXHIBIT 10.39
OFFICE SPACE
DURHAM SUBLEASE AGREEMENT
<PAGE>
SUBLEASE
THIS SUBLEASE is dated as of June 30, 1995 by and between Peoples Security
Life Insurance Company, a North Carolina corporation, 300 West Morgan Street,
Durham, North Carolina 27702 ("Sublessor"), and Midway Airlines Corporation, a
Delaware Corporation, 5713 S. Central Avenue, Chicago, Illinois 60638
("Sublessee").
RECITALS
A. Sublessor is the lessee of certain premises (the "Leased Premises") at
the real property more particularly described on Exhibit A attached hereto as a
part hereof (the "Property") pursuant to a lease dated July 18, 1986, as amended
by a First Amendment to Office Lease dated as of June 2, 1992 a copy of which
lease, and the amendment is attached hereto as a part hereof as Exhibit B
(collectively the "Master Lease") between Sublessor, as tenant, and DCV Limited
Partnership (formerly known as Webb/Whittenberg Ventures), as landlord (the
"Prime Landlord").
B. Sublessor and Sublessee desire to enter into this Sublease pursuant to
which Sublessor shall lease 28974 rentable square feet of space being the 11th
and 12th floors at the Property ("Subleased Premises") to Sublessee, subject to
the terms and conditions of this Sublease.
ARTICLE I
TERMS AND CONDITIONS
1.1 Sublease of Property. Sublessor hereby leases the Subleased Premises
to Sublessee, and Sublessee hereby leases the Subleased Premises from Sublessor,
pursuant to the terms and conditions of this Sublease. The Subleased Premises
will be delivered by Sublessor and accepted by Sublessee in "as is" condition
with no fit up or build out required. The Sublessor
<PAGE>
also hereby grants Sublessee a right to use 120 parking spaces at the parking
lot bounded by Foster Street, Hunt Street, Seminary Street, and Rigsbee Street
in Durham, N.C. throughout the Term of this Sublease.
1.2 Term. The initial term of this Sublease shall begin on August 1, 1995
and shall end on July 31, 1998 (the "Initial Term"). Sublessee shall have the
option to extend the Initial Term of this Sublease two times for consecutive
extended terms of one year each ("Extended Term"). The Initial Term and, if
applicable, any Extended Term, shall be deemed the "Term" of this Sublease. Such
options may be exercised by written notice to Sublessor at least 120 days prior
to the next scheduled expiration date of the Term of this Sublease. Sublessor
will deliver 1000 square feet on the 12th floor of the Subleased Premises to
Sublessee on June 1, 1995, the use of which space by Sublessee will be rent free
until August 1, 1995.
1.3 Rent. During the Term of this Sublease, Sublessee shall pay rent
("Rent") to Sublessor on the first of each month at the address set out above in
accordance with the following schedule:
August 1, 1995 to January 31, 1997, the sum of $30,181.25 per month
($12.50 per square foot)
February 1,1997 to July 31, 1998, the sum of $31,388.50 per month ($13.00
per square foot)
First Extended Term, the sum of $31,388.50 per month
Second Extended Term, the sum of $32,595.75 per month (13.50 per square
foot)
ARTICLE II
UTILITIES AND INSURANCE
2.1 Utilities. Sublessor shall make available to the Sublessee in the
Subleased Premises the use of all necessary utility services including
electrical service, telephone service, water and
2
<PAGE>
sewer services, heating, ventilating and air conditioning services, gas and
other similar services. Sublessee shall also be responsible for paying for, any
and all electrical, gas, heating, ventilating and air conditioning usage or
service in connection with the Subleased Premises or Sublessee's use thereof,
[***] but subject to 4.2 and 5.1 below Sublessee shall not be responsible for
any costs to operate or maintain the common areas or any other portion of the
Property or the improvements thereon.
2.2 Insurance. Sublessee shall be responsible for obtaining the insurance
policies/coverages now required of the tenant under the Master Lease at its own
cost and shall name Sublessor as an additional insured on such policies.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBLESSOR
Sublessor makes the following representations, warranties and covenants
for the benefit of and reliance on by Sublessee during the Term of this
Sublease:
(a) There are no existing or unexpired subleases, conveyances of any kind
or description affecting Sublessor's leasehold interest in the Subleased
Premises.
(b) The Master Lease is in full force and effect and there is no existing
event of default by Sublessor or the Prime Landlord under the Master Lease.
(c) Sublessor shall not enter into any amendment or modification of the
Master Lease or its terms with respect to the Subleased Premises without the
prior written consent of Sublessee, which consent will not be unreasonably
withheld if such amendment or modification is unrelated to the length of the
term of the Master Lease, the property covered hereby or the rent payable
thereunder
3
<PAGE>
(d) At all times prior to expiration or other termination of this Sublease
when an event of Default has not occurred and is continuing hereunder, Sublessor
shall ensure the Sublessee's peaceable and quiet possession and enjoyment of the
Subleased Premises. Sublessor shall deliver to Sublessee non-disturbance
agreements from the Prime Landlord and any party holding a mortgage on the
Property or entitled to the benefits of an assignment of rents and/or Leases, in
each case consistent with the terms of this clause (d).
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification of Sublessor. Sublessee shall indemnify, and save and
hold harmless Sublessor against any and all claims asserted by or on behalf of
any person, firm, or corporation incurred without negligence or bad faith on the
part of Sublessor, arising out of, resulting from, or in any way connected with,
the act or omission of Sublessee, or the violation by Sublessee of any law,
ordinance, or statute, or resulting or arising out of any accident or other
occurrence arising from the use and occupancy of the Subleased Premises by
Sublessee, its agents, employees, tenants or invitees.
4.2 Indemnification of Sublessee. Sublessor shall indemnify, and save and
hold harmless Sublessee against any and all claims asserted by or on behalf of
any person, firm, or corporation incurred without negligence or bad faith on the
part of Sublessee, arising out of, resulting from, or in any way connected with,
the act or omission of Sublessor, or the violation by Sublessor of any law,
ordinance, or statute, or resulting or arising out of any accident or other
occurrence arising from the use and occupancy of the Subleased Premises by
Sublessor, its agents, employees, tenants or invitees.
4
<PAGE>
ARTICLE V
MAINTENANCE
5.1 Maintenance. Sublessor shall, at its own expense, enforce the Master
Lease so as to cause the Prime Landlord to maintain the Subleased Premises in
good condition, repair, and working order as required by the Master Lease, and
shall, at its own expense, cause the Prime Landlord to make or cause to be made
from time to time all necessary repairs, renewals, and replacements thereof,
ordinary wear and tear and obsolescence excepted; provided, however, in the
absence of such maintenance performance by the Prime Landlord, Sublessor shall
cause the Subleased Premises to be so maintained and further provided that
Sublessor shall not be responsible for any maintenance or repairs made necessary
by the negligence of Sublessee.
ARTICLE VI
RIGHT OF FIRST REFUSAL FOR ADDITIONAL SPACE
6.1 In the event Sublessor decides to offer for Sublease or accept an
offer to sublease any of the Leased Premises, Sublessor shall first notify
Sublessee of its intent to sublease all or part of the Leased Premises and
Sublessee shall have 20 days from the date it is notified by Sublessor of
Sublessor's intent to sublease all or part of the Leased Premises to elect to
sublease the said portion of the Leased Premises at the same rental rate and
upon the same terms and conditions as are contained in this Sublease. The terms
of this Section 6.1 shall also apply to any attempted assignment of Sublessor's
interest in the Leased Premises.
5
<PAGE>
ARTICLE VII
SECURITY
7.1 Security Guard. Sublessor has employed a security guard to escort its
employees to their cars between 5 p.m. and 7 p.m. each workday. Sublessor will
provide the same service to employees of Sublessee as long as Sublessor is
providing this service to its own employees.
ARTICLE VIII
TRAINING FACILITIES
8.1 Temporary Training Facilities. Sublessor will provide to Sublessee for
its use a temporary training area on the 10th floor of the Leased Premises so
long as provision of such space is consistent with Sublessor's training and
space needs. Sublessor makes no guarantee of the availability of the temporary
training space and reserves the right to retake possession of said space at any
time. Sublessor will entertain any reasonable proposal Sublessee may wish to
make for a more permanent and definitive subletting of training space.
ARTICLE IX
SECURITY DEPOSIT
Sublessee shall deposit with Sublessor the sum of $31,388.00 as security
for the performance of Sublessees obligations under this Sublease. Sublessee
shall retain said security deposit, with interest, throughout the term of this
Sublease. After any uncured default by Sublessee under this Sublease, Sublessor
may at its option apply said deposit to cure Sublessee's default, but, if prior
to the expiration of this Sublease, Sublessor depletes the deposit, in
accordance with this Sublease, Sublessee shall immediately restore the amount so
used by
6
<PAGE>
Sublessor. Unless the Sublessor uses the deposit to cure a default, or at the
conclusion of the Term of this Sublease, or Extended Term uses the deposit to
restore the Subleased Premises to substantially the same condition as of the
commencement of this Sublease, reasonable wear and tear excepted, Sublessor
shall, within thirty (30) days of the expiration of this Sublease, refund to
Sublessee the balance of the deposit held by Sublessor plus interest earned
thereon at the rate of 5.5% per annum.
ARTICLE X
ACTIONS AFFECTING TITLE TO PROPERTY
AND SUBLEASEHOLD ESTATE
10.1 Liens by Sublessee. Sublessee shall not create or permit the creation
of any lien, encumbrance, or charge upon the Subleased Premises or the Property
arising through Sublessee. Any liens, encumbrances, or charges so created or
permitted by Sublessee shall be immediately discharged by Sublessee.
10.2 Assignment and Subleasing. Sublessee may not assign this Sublease or
sublet the Subleased Premises or any portion thereof without the written consent
of Sublessor, which consent shall not be unreasonably withheld or delayed.
10.3. At the expiration of the Sublease Term or any Extended Term,
Sublessee shall return the Subleased Premises to Sublessor in substantially the
same condition as the Subleased Premises was on the date of Sublessee's initial
occupancy, ordinary wear and tear excepted.
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ARTICLE XI
FURTHER OBLIGATIONS OF SUBLESSEE
11.1 Compliance with Laws. Sublessee shall promptly comply or cause
compliance with all laws applicable in any way to the Subleased Premises for
which the Sublessor as "Tenant" is responsible under Section 18.01 of the Master
Lease.
11.2 Hazardous or Toxic Materials. Sublessee shall not permit any
hazardous or toxic wastes or materials to be located or stored on the Subleased
Premises in violation of applicable law.
ARTICLE XII
EVENTS OF DEFAULT AND REMEDIES
12.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default":
(a) Failure by Sublessee to pay any Rent within three (3) business days
following the time provided in this Sublease.
(b) Any breach by Sublessee of any representation, warranty, or covenant
made in this Sublease or failure by Sublessee to perform, within thirty (30)
days following notice from Sublessor, any obligation or observe any covenant or
condition on its part to be performed or observed pursuant to this Sublease.
12.2 Remedies upon Event of Default. Whenever any Event of Default shall
have occurred and be continuing, Sublessor shall have the right (i) to take
immediate possession of the Subleased Premises and the possession and estate of
Sublessee under this Sublease shall terminate forthwith, or (ii) re-enter and
take possession of the Subleased Premises without terminating this
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Sublease and re-let the Subleased Premises for the account of Sublessee, holding
Sublessee liable for the difference between the Rent and other amounts payable
by any Sublessee in such subleasing and the Rent payable by Sublessee hereunder.
12.3 Payment of Expenses After Event of Default. Upon an Event of Default
by Sublessee, Sublessee shall pay to Sublessor upon demand therefor all costs
and expenses, including reasonable counsel fees, lawfully incurred in obtaining
possession of the Subleased Premises, or in enforcing the performance or
observance of any obligation or condition by Sublessee under this Sublease.
12.4 Waivers and Limitation on Waivers. In the event any Event of Default
by Sublessee under this Sublease should be waived by Sublessor, such waiver
shall be limited to the particular Event of Default so waived and shall not be
deemed to waive any other Event of Default hereunder nor be deemed a waiver of
the same Event of Default on another occasion.
12.5 Delay in Exercise of Rights. No delay or omission to exercise any
right occurring upon any Event of Default shall impair any such right or shall
be construed to be a waiver thereof, but any such right may be exercised from
time to time as often as may be deemed expedient. In order to exercise any
remedy reserved to the Sublessor in this Sublease, it shall not be necessary to
give any notice other than such notice as may be herein expressly required.
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ARTICLE XIII
SUBLEASE SUBJECT TO MASTER LEASE
This Sublease is subject to the Master Lease. Except as may be
inconsistent with the terms hereof, all of the terms, covenants and conditions
in the Master Lease shall be applicable to this Sublease with the same force and
effect as if Sublessor was the lessor under the Master Lease and Sublessee was
the lessee thereunder. Sublessee shall not take, or fail to take, any action
that that if taken or not taken by the Sublessor as "Tenant" under the Master
Lease would constitute a default by Sublessor as "Tenant" under the Master
Lease, and Sublessee shall indemnify and hold Sublessor harmless from and
against all claims whatsoever by reason of any such action or failure to act by
Sublessee; provided, however the foregoing shall in no event apply in connection
with Sublessees' failure to pay Rent hereunder, the remedies for which are
provided in Section 12.2 above.
ARTICLE IX
MISCELLANEOUS
14.1 Notices. All notices, certificates, or other communications hereunder
shall be sufficiently given and shall be deemed given when mailed by registered
or certified mail, postage prepaid, return receipt requested, addressed to
Sublessee, or the Sublessor, as the case may be, at their respective addresses
as shown in the preamble to this Sublease, or hand delivered to the parties at
their respective addresses. Sublessor and Sublessee may by notice designate any
further or different addresses to which subsequent notices, certificates, or
communications shall be sent.
14.2 Amendment. No amendment to this Sublease shall be binding upon either
party hereto until such amendment is in writing and executed by both parties
thereto.
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14.3 Entire Agreement. This Sublease contains all agreements between the
parties and there are no other representations, warranties, promises,
agreements, or understandings, oral, written or inferred, between the parties,
unless reference is made thereto in this Sublease.
14.4 Binding Effect. This Sublease shall be binding upon the parties
hereto and upon their respective successors and assigns, and the words
"Sublessor" and "Sublessee" shall include the parties hereto and their
respective successors and assigns.
14.5 Severability. If any clause, provision, or section of this Sublease
be ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision, or section shall not
affect any of the remaining clauses, provisions, or sections.
14.6 Captions. The captions or headings in this Sublease are for
convenience of reference only and in no way define, limit, or describe the scope
or intent of any provisions of this Sublease.
14.7 Governing Law. This Sublease shall be governed by and construed in
accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
duly executed on the day and year first above written.
SUBLESSOR:
PEOPLES SECURITY LIFE INSURANCE COMPANY
By: /s/ [ILLEGIBLE]
--------------------------------------
Its:
-------------------------------------
Date Executed:
---------------------------
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SUBLESSEE
MIDWAY AIRLINES CORPORATION
By: /s/ Jonathan S. Waller
--------------------------------------
Its: Senior Vice President
Date Executed: August 21, 1995
Date:
THIS SUBLEASE IS ACKNOWLEDGED AND CONSENTED TO BY PRIME LANDLORD ON THIS 30 DAY
OF JUNE, 1995.
DCV Limited Partnership, a North Carolina limited partnership
By: DCV Property Company, general partner
By: /s/ Charles W. Henne
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Charles W. Henne, Vice President
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