As filed with the Securities and Exchange Commission on July 30, 2018
Registration No. 333-226173
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
M ESA A IR G ROUP , I NC .
(Exact name of registrant as specified in its charter)
Nevada | 4512 | 85-0302351 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
410 North 44th Street, Suite 700
Phoenix, Arizona 85008
(602) 685-4000
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Jonathan G. Ornstein
Chairman and Chief Executive Officer
Mesa Air Group, Inc.
410 North 44th Street, Suite 700
Phoenix, Arizona 85008
(602) 685-4000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Gregory R. Hall DLA Piper LLP (US) 2525 East Camelback Road, Suite 1000 Phoenix, Arizona 85016 (480) 606-5100 |
Brian S. Gillman Executive Vice President, General Counsel and Secretary Mesa Air Group, Inc. 410 North 44th Street, Suite 700 Phoenix, Arizona 85008 (602) 685-4000 |
Anna T. Pinedo Mayer Brown LLP 1221 Avenue of the Americas New York, New York 10020-1001 (212) 506-2275 |
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, as amended, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||
Non-accelerated filer | ☒ | (do not check if a smaller reporting company) | Smaller reporting company | ☐ | ||||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☒
CALCULATION OF REGISTRATION FEE
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Title Of Each Class Of Securities To Be Registered |
Amount to be Registered (1) |
Proposed
Offering Price Per Share |
Proposed
Aggregate
|
Amount Of Registration Fee (3) |
||||
Common stock, no par value per share |
$ 184,575,000 | $ 22,980 | ||||||
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|
(1) |
Includes shares of common stock that may be issuable upon exercise of an option to purchase additional shares granted to the underwriters. |
(2) |
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes the aggregate offering price of additional shares that the underwriters have the option to purchase. |
(3) |
A registration fee of $18,675 was previously paid in connection with the Registration Statement, and the additional amount of $4,305 is being paid herewith. |
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 the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 30, 2018.
PRELIMINARY PROSPECTUS
10,700,000 Shares
Mesa Air Group, Inc.
Common Stock
This is the initial public offering of our common stock. We are offering 10,700,000 shares.
We estimate that the initial public offering price per share will be between $14.00 and $16.00. Currently, no public market exists for our common stock. Our common stock has been approved for listing on the Nasdaq Global Select Market under the symbol MESA.
We are an emerging growth company as defined under the federal securities laws, and, as such, we are subject to reduced public company reporting requirements. See Prospectus SummaryImplications of Being an Emerging Growth Company .
Investing in our common stock involves risks. See Risk Factors beginning on page 18 to read about factors you should consider before buying shares of our common stock.
Per
Share |
Total | |||||||
Initial public offering price |
$ | $ | ||||||
Underwriting discounts and commissions (1) |
$ | $ | ||||||
Proceeds to us (before expenses) |
$ | $ |
(1) |
See the Underwriting section beginning on page 148 for additional information regarding underwriting compensation. |
We and the selling shareholders identified in this prospectus have granted the underwriters the right to purchase up to an additional 1,605,000 shares of common stock at the initial public offering price, less underwriting discounts and commissions. The underwriters can exercise this option within 30 days from the date of this prospectus. If the overallotment option is exercised, an aggregate of up to 938,333 shares will be purchased directly from us, and an aggregate of up to 666,667 shares will be purchased directly from the selling shareholders. We will not receive any of the proceeds from the sale of any shares sold by the selling shareholders if the overallotment option is exercised.
Neither the Securities and Exchange Commission, nor any state securities commission, nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares to the purchasers on or about , 2018.
RAYMOND JAMES | BofA Merrill Lynch |
Cowen | Stifel | Imperial Capital |
Prospectus dated , 2018.
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS |
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156 | ||||
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F-1 |
We are responsible for the information contained in this prospectus or contained in any free writing prospectus prepared by or on behalf of us to which we have referred you. Neither we, the underwriters, nor the selling shareholders have authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission and we take no responsibility for any other information that others may give you. We and the selling shareholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, operating results or financial condition may have changed since such date.
Until , 2018 (25 days after the date of this prospectus), all dealers that buy, sell, or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
For investors outside the United States: Neither we nor any of the underwriters have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
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We have obtained federal registration of the Mesa Airlines ® trademark. American ® and American Eagle ® are trademarks of American Airlines, Inc. United ® and United Express ® are trademarks of United Airlines, Inc. All other trade names, trademarks, and service marks appearing in this prospectus are the property of their respective holders. We have omitted the ® and designations, as applicable, for the trademarks used in this prospectus.
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This summary highlights information contained elsewhere in this prospectus. This summary sets forth the material terms of the offering, but does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully before making an investment decision, especially the risks of investing in our common stock described under Risk Factors. Unless the context otherwise requires, the terms we, us, our, the Company and Mesa refer to Mesa Air Group, Inc. and its predecessors, direct and indirect subsidiaries and affiliates. Our airline operations are conducted through our subsidiary, Mesa Airlines, Inc. (Mesa Airlines). Certain terms related to the airline industry are described under Glossary of Airline Terms at the end of this prospectus.
Our Company
Mesa Airlines is a regional air carrier providing scheduled passenger service to 110 cities in 38 states, the District of Columbia, Canada, Mexico, Cuba and the Bahamas. All of our flights are operated as either American Eagle or United Express flights pursuant to the terms of capacity purchase agreements we entered into with American Airlines, Inc. (American) and United Airlines, Inc. (United) (each, our major airline partner). We have a significant presence in several of our major airline partners key domestic hubs and focus cities, including Dallas, Houston, Phoenix and Washington-Dulles. We have been the fastest growing regional airline in the United States over our last five fiscal years, based on fleet growth, with a cumulative increase in aircraft of 137%.
As of March 31, 2018, we operated a fleet of 145 aircraft with approximately 610 daily departures. We operate 64 CRJ-900 aircraft under our capacity purchase agreement with American (our American Capacity Purchase Agreement) and 20 CRJ-700 and 60 E-175 aircraft under our capacity purchase agreement with United (our United Capacity Purchase Agreement). Over the last five calendar years, our share of the total regional airline fleet of American and United has increased from 7% to 11% and from 4% to 15%, respectively. Driven by this fleet growth, our total operating revenues have grown by 55% from $415.2 million in fiscal 2013 to $643.6 million in fiscal 2017, respectively. We believe we have expanded our share with our major airline partners because of our competitive cost structure, access to pilots under our labor agreements and track record of reliable performance. All of our operating revenue in our 2017 fiscal year and the six months ended March 31, 2018 was derived from operations associated with our American and United Capacity Purchase Agreements.
Our long-term capacity purchase agreements provide us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour and flight flown, and reimbursement of certain direct operating expenses, in exchange for providing regional flying on behalf of our major airline partners. Our capacity purchase agreements shelter us from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of passengers. In providing regional flying under our capacity purchase agreements, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of our major airline partners. Our major airline partners control route selection, pricing, seat inventories, marketing and scheduling, and provide us with ground support services, airport landing slots and gate access, allowing us to focus all of our efforts on delivering safe, reliable and cost-competitive regional flying.
Regional aircraft are optimal for short and medium-haul scheduled flights that connect outlying communities with larger cities and act as feeders for domestic and international hubs. In addition, regional aircraft are well suited to serve larger city pairs during off-peak times when load factors on larger jets are low. The lower trip costs and operating efficiencies of regional aircraft, along with the
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competitive nature of the capacity purchase agreement bidding process, provide significant value to major airlines. According to the Regional Airline Association, we were the fifth largest regional airline company in the United States in 2016, as measured by passenger enplanements, and our flights accounted for approximately 8.4% of all passengers carried on U.S. regional airlines.
Regional airlines play a daily, essential role in the U.S. air travel system. According to the Regional Airline Association, 42% of all scheduled passenger flights in the United States in 2016 were operated by regional airlines. Of all the U.S. airports with passenger airline service, 64% are served exclusively by regional airlines. Some of the most popular U.S. airports have more than half of all their flights on regional airlines, including New York-LaGuardia, Philadelphia, Washington-Dulles, Charlotte, Houston-Bush and Chicago-OHare.
Our Competitive Strengths
We believe that our primary strengths are:
Low-Cost Operator. We believe that we are among the lowest cost operators of regional jet service in the United States. There are several key elements that contribute to our cost efficiencies:
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Efficient Fleet Composition . We exclusively operate large regional aircraft with 70+ passenger seats on a single FAA certificate. Operating large regional aircraft allows us to enjoy unit cost advantages over smaller regional aircraft. Larger regional aircraft require less fuel and crew resources per passenger carried, and may also have maintenance cost efficiencies. |
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Cost Effective, Long-Term Collective Bargaining Agreements . Our pilots and flight attendants ratified new four-year collective bargaining agreements effective as of July 13, 2017 and October 1, 2017, respectively, which are among the longest in the regional airline industry and include labor rate structures through 2023 for our pilots and 2022 for our flight attendants. We believe that our collective bargaining agreements and favorable labor relationships are critical for pilot retention and will provide more predictable labor costs into 2023. We derive cost advantages from efficient work rules and the relatively low average seniority of our pilots. |
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Low Corporate Overhead. Our general and administrative expenses per block hour have decreased by more than 35% over the five-year period ended September 30, 2017. We have significantly reduced our overhead costs by operating with a modest administrative and corporate team, offering cost-effective benefit programs and implementing automated solutions to improve efficiency. |
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Competitive Procurement of Certain Operating Functions. We have long-term maintenance agreements with expirations extending from December 2020 to December 2027 with AAR Aircraft Services, Inc. (AAR), GE Engine Services, LLC (GE), StandardAero Limited (StandardAero), Aviall Services, Inc. (Aviall) and Bombardier Aerospace (Bombardier), respectively, to provide parts procurement, inventory and engine, airframe and component overhaul services. We expect that our long-term agreements with these and other strategic vendors will provide predictable high-quality and cost-effective solutions for most maintenance categories over the next several years. In prior periods, we also invested in long-term engine overhauls on certain aircraft, which we believe will reduce related maintenance obligations in future periods. |
Advantages in Pilot Recruitment and Retention. We believe that we are well positioned to attract and retain qualified pilot candidates. Following the ratification of our collective bargaining agreements in July 2017, the average number of new pilot applications per month has increased by 45.3%
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compared to the six months prior to such ratification. In addition, our average pilot attrition has decreased by 16.2% over the same period.
The following chart presents our cumulative increase in new pilots who have completed training, net of attrition, from July 2017 through June 2018:
We believe that the increased number of new pilot applications per month will continue with the introduction of our Career Path Program (CPP) with United. In addition to offering competitive compensation, bonuses and benefits, we believe the following elements contribute to our recruiting advantage:
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Career Path Program. We recently announced our CPP with United, which is designed to provide our qualified current and future pilots a path to employment as a pilot at United. We believe that our CPP will help us continue to attract qualified pilots, manage natural attrition and further strengthen our decades-long relationship with United. |
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Modern, Large-Gauged Regional Jets . We exclusively operate large regional aircraft with advanced flight deck avionics. We believe that pilot candidates prefer advanced flight deck avionics because they are similar to those found in the larger commercial aircraft types flown by major airlines. |
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Opportunities for Advancement. We believe that our career progression is among the most attractive in the regional airline industry. During fiscal 2017, our pilots had the opportunity to be promoted from first officer to captain in as little as 12 months. |
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Stable Labor Relations. Throughout our long operating history, we believe that we have had constructive relationships with our employees and their labor representatives. We have never been the subject of a labor strike or labor action that impacted our operations. |
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Enthusiastic and Supportive Culture. Our pilots helping pilots philosophy helps us attract, retain and inspire our next generation of pilots. Our team-oriented culture, as demonstrated by the mentorship of our senior pilots, is both encouraged and expected. We strive to create an environment for our personnel where open communication is customary and where we celebrate our successes together. |
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Stable, Long-Term Revenue-Guarantee Capacity Purchase Agreements . We have long-term capacity purchase agreements with American and United that extend beyond 2020 for 94 of our 144 aircraft in scheduled service (with 34 aircraft expiring between June and December 2019 and 16 aircraft expiring between January and August 2020, if not extended prior to contract expiration). Both of our capacity purchase agreements are capacity purchase, rather than revenue sharing arrangements. This contractual structure provides us with a predictable revenue stream and allows us to increase our profit margin to the extent that we are able to lower our operating costs below the costs anticipated by the agreements. In addition, we are not exposed to price fluctuations for fuel, certain insurance expenses, ground operations or landing fees as those costs are either reimbursed under our capacity purchase agreements or paid directly to suppliers by our major airline partners.
Fleet Exclusively Comprised of Large, Efficient Regional Jets . We exclusively operate large regional aircraft with 70+ passenger seats. These aircraft are the highest in demand across the regional airline industry and provide us with best-in-class operating efficiencies, providing our major airline partners greater flexibility in route structuring and increased passenger revenues. As of March 31, 2018, we had 145 aircraft (owned and leased) consisting of the following:
Embraer
Regional Jet-175 (76 seats) (1) |
Canadair
Regional Jet-700 (70 seats) |
Canadair
Regional Jet-900 (76-79 seats) |
Canadair
Regional Jet-200 (50 seats) (2) |
Total | ||||||||||||||||
American Eagle |
| | 64 | | 64 | |||||||||||||||
United Express |
60 | 20 | | | 80 | |||||||||||||||
Subtotal |
60 | 20 | 64 | | 144 | |||||||||||||||
Unassigned |
| | | 1 | 1 | |||||||||||||||
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Total |
60 | 20 | 64 | 1 | 145 |
(1) |
In February 2018, we mutually agreed with United to temporarily remove two aircraft from service under our United Capacity Purchase Agreement. These aircraft were placed back in service in July 2018 and are reflected here. |
(2) |
CRJ-200 is an operational spare not assigned for service under our capacity purchase agreements. |
Longstanding Relationships with American and United . We began flying for United in 1991 and American, through its predecessor entities, in 1992. Since 2013, we have added 26 aircraft to our American Capacity Purchase Agreement and 60 aircraft to our United Capacity Purchase Agreement.
Strong Recent Record of Operational Performance. We were ranked the number one regional airline for on-time performance by DOT Air Travel Consumer Report for three of the first four months of 2018. In addition, we believe that we were the number one regional airline for on-time performance in 2016 and 2017 based on a comparison of our internal data to publicly available DOT data for reporting airlines. Under our capacity purchase agreements, we may receive financial incentives or incur penalties based upon our operational performance, including controllable on-time departures and controllable completion percentages.
Experienced, Long-Tenured Management Team . Our senior management team has extensive operating experience in the regional airline industry. Our Chief Executive Officer and President/Chief Financial Officer have served us in senior officer positions since 1998, and our management team has helped us navigate through and emerge successfully from bankruptcy in early 2011. From 2013 to September 30, 2017, we have significantly grown the business in the following ways:
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achieved revenue growth of 55%; |
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expanded the number of aircraft flown under our American Capacity Purchase Agreement from 38 to 64; |
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expanded the number of aircraft flown under our United Capacity Purchase Agreement from 20 to 80; |
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closed the first enhanced equipment trust certificate (EETC) financing by a regional airline; and |
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improved our operating efficiencies and maintained our cost advantage. |
Our Business Strategy
Our business strategy consists of the following elements:
Maintain Low-Cost Structure. We have established ourselves as a low-cost, efficient and reliable provider of regional airline services. We intend to continue our disciplined cost control approach through responsible outsourcing of certain operating functions, by flying large regional aircraft with associated lower maintenance costs and common flight crews across fleet types, and through the diligent control of corporate and administrative costs. Additionally, we expect our long-term collective bargaining agreements to protect us from significant labor cost increases over the next five years. These efficiencies, coupled with the low average seniority of our pilots, has enabled us to compete aggressively on price in our capacity purchase agreement negotiations.
Attractive Work Opportunities. We believe our employees have been, and will continue to be, a key to our success. Our ability to attract, recruit and retain pilots has supported our industry-leading fleet growth. We intend to continue to offer competitive compensation packages, foster a positive and supportive work environment and provide opportunities to fly state-of-the-art, large-gauged regional jets to differentiate us from other carriers and make us an attractive place to work and build a career.
Maintain a Prudent and Conservative Capital Structure. We intend to continue to maintain a prudent capital structure. We believe that the strength of our balance sheet and credit profile will enable us to optimize terms with lessors and vendors and, when preferred by our major airline partners, allow us to procure and finance aircraft on competitive terms. Also, once we complete this offering, our financial resources and publicly traded securities may allow us to take advantage of attractive acquisition opportunities should they arise. We may use a portion of the offering proceeds to purchase some of our leased aircraft. The purchase of leased aircraft would allow us to lower our operating costs and avoid lease-related use restrictions and return conditions.
Minimize Tail Risk. We have structured our aircraft leases and financing arrangements to minimize or eliminate, as much as possible, so-called tail risk, which is the amount of aircraft-related lease obligations or projected negative equity existing beyond the term of that aircrafts corresponding capacity purchase agreement. We currently have 18 aircraft with leases extending past the term of their corresponding capacity purchase agreements with an aggregate exposure of less than $33.0 million and no financing arrangements with projected negative equity. We intend to continue to align the terms of our aircraft leases and financing agreements with the terms of our capacity purchase agreements in order to maintain low tail risk.
Our Growth Opportunities
During our last five fiscal years, our total operating revenues grew at a compounded annual rate of 11.6% and our fleet size increased from 59 to 140 regional aircraft, a cumulative growth rate of 137%. We believe that our cost discipline, strong operational performance and financial resources will provide additional opportunities to expand our operations, including:
Expand Flying With New and Existing Airline Partners. We enjoy strong relationships with our major airline partners and have significantly expanded our fleet size and flight operations with
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American and United over the last five years. As the demand for air travel among our major airline partners continues to grow, we expect to have the opportunity to increase our flight services for each major airline partner. In addition, over the next five years, we expect that capacity purchase agreements representing up to 300 aircraft currently flown by our competitors on behalf of major airlines will expire by their terms and be subject to rebidding or replacement by more desirable types of aircraft. We believe that our cost structure and operational efficiencies position us well to compete for this flying. Additionally, we intend to pursue opportunities to provide regional flying to other major airlines with hub cities that do not overlap with our existing major airline partners. In addition, if a market for regional flying on behalf of low-cost and ultra low-cost carriers materializes, we believe that we are well positioned to partner with them, as one of the lowest cost regional airlines in the United States.
Acquisitions of Other Regional Airlines . In the future, we may evaluate the strategic acquisition of other regional air carriers. The opportunity to make an acquisition may arise if, for example, a major airline makes a divestiture of a captive regional airline, as major airlines have done in the past.
Opportunities in the Air Cargo and Express Package Sector . We believe that our cost structure and business model may be successfully deployed in the burgeoning air cargo and express shipping sectors. Amazon.com, Inc. and several of the largest integrated logistics companies, including United Parcel Service, Inc., FedEx Corporation and DHL International GmbH, utilize contractual arrangements similar to our capacity purchase agreements with regional air cargo carriers to service outlying areas. We intend to explore future regional air cargo opportunities.
Regulatory Relief. We actively support the efforts of trade organizations, industry leaders, policymakers and other airlines to encourage regulatory reforms related to the current shortage of qualified pilots, lowering the cost of pilot training and providing access to air service for small communities. While the regulatory reform agenda and policies of the current administration are not fully known, it is possible that favorable regulatory changes may take place. We believe that favorable regulatory changes by the current administration, were they to occur, could increase the number of qualified pilots, lower our operating costs and create incremental opportunities for us with our existing and other potential future major airline partners.
Recent Developments
Buyout of Leased Aircraft and Refinancing
On June 27, 2018, we refinanced $16.0 million of debt on six CRJ-900 aircraft (due in 2019), with $27.5 million of debt, resulting in net cash proceeds to us of $10.4 million after transaction related fees. The notes payable require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus 3.50%. We expect that these new borrowings will increase our interest expense by approximately $1.0 million per year through fiscal 2021.
On June 28, 2018, we purchased nine CRJ-900 aircraft, which were previously leased under the GECAS Lease Facility (as defined below), for $76.5 million. We financed the aircraft purchase with $69.6 million in new debt and proceeds from the June 27, 2018 aircraft refinancing. The notes payable of $69.6 million require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus a spread ranging from 3.50% for the Senior Promissory Notes to 7.50% for the Subordinated Promissory Notes (those notes, the Subordinated GECAS Notes). We recorded non-cash lease termination expense of $15.1 million in connection with the lease buyout. Also, as part of the transaction, we (i) received $4.5 million of future goods and services credits and $5.6 million of loan
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forgiveness for loans with a maturity date in 2027 from the aircraft manufacturer, and (ii) mutually agreed with GE Capital Aviation Services LLC to terminate a warrant to purchase 250,000 shares of our common stock with an exercise price of $3.20 per share and a five-year maturity (the GE Warrant). We expect that this lease buyout and aircraft acquisition will increase our pre-tax income by approximately $5.5 million per year through fiscal 2021.
Third Quarter 2018 Outlook
Our condensed consolidated financial statements for the quarter ended June 30, 2018 are not yet available. We have presented preliminary estimated ranges of certain of our financial results and operating data below for the quarter ended June 30, 2018 based on information currently available to management. Our financial closing procedures for the quarter ended June 30, 2018 are not yet complete. As a result, our actual results for the quarter ended June 30, 2018 may differ materially from the preliminary estimated financial results set forth below upon the completion of our financial closing procedures, final adjustments, and other developments that may arise prior to the time our financial results are finalized. You should not place undue reliance on these estimates. The preliminary estimated financial results and operating data set forth below have been prepared by, and are the responsibility of, management and are based on a number of assumptions. Our independent registered certified public accounting firm, Deloitte & Touche LLP, has not audited, reviewed, compiled, or performed any procedures with respect to the preliminary estimated financial results. Accordingly, Deloitte & Touche LLP does not express an opinion or provide any other form of assurance with respect thereto. See Risk Factors , Managements Discussion and Analysis of Financial Condition and Results of Operations , and Cautionary Note Regarding Forward-Looking Statements for additional information regarding factors that could result in differences between the preliminary estimated ranges of certain of our financial results and operating data presented below and the actual financial results we will report for the quarter ended June 30, 2018.
Our preliminary estimated ranges of certain of our financial results include a one-time, non-cash lease termination expense of $15.1 million related to our acquisition of nine CRJ-900 aircraft, which were previously leased under our GECAS Lease Facility, for $76.5 million. See Buyout of Leased Aircraft and Refinancing and Managements Discussion and Analysis of Financial Condition and Results of Operations Commitments and Contractual Obligations for additional information regarding the aircraft acquisition and refinancing.
Our preliminary estimated ranges of certain of our financial results reflect a one-time, non-cash increase in accrued compensation of approximately $14.2 million related to an increase in the value of our stock appreciation rights (SARs) associated with an increase in fair value of our common stock as well as a change in accounting methodology from the intrinsic value method to the fair value method as described in Managements Discussion and Analysis of Financial Condition and Results of OperationsAccounting Methodology for Stock Appreciation Rights . These changes will result in a general and administrative expense of approximately $11.7 million as well as an offset of approximately $2.5 million to retained earnings as a result of the change in accounting methodology.
The preliminary estimated financial results set forth below should not be viewed as a substitute for full financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP). We will not publicly file our actual condensed consolidated financial statements and related notes for the quarter ended June 30, 2018 with the U.S. Securities and Exchange Commission (the SEC) until after completion of this offering. In addition, the preliminary estimated financial results set forth below are not necessarily indicative of results we may achieve in any future period. While we currently expect that our actual results will be within the ranges described below, it is possible that our actual results may not be within the ranges we currently estimate. Refer to
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Managements Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding our historical financial results.
We have presented the following preliminary estimated ranges of certain of our financial results for the quarter ended June 30, 2018:
Quarter Ended
June 30, 2018 |
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Low | High | |||||||
(in thousands) | ||||||||
Consolidated Statements of Operations Data: |
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Operating revenues: |
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Contract revenue |
$ | 159,700 | $ | 159,700 | ||||
Pass-through and other |
11,800 | 11,800 | ||||||
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Total operating revenues |
171,500 | 171,500 | ||||||
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Total operating expenses |
174,300 | 171,300 | ||||||
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Operating (loss) income |
(2,800 | ) | 200 | |||||
Total other expense |
(14,100 | ) | (14,100 | ) | ||||
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Loss before taxes |
(16,900 | ) | (13,900 | ) | ||||
Non-GAAP financial data: |
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Loss before taxes |
(16,900 | ) | (13,900 | ) | ||||
Revaluation of liability awards |
12,000 | 10,000 | ||||||
Lease termination costs |
15,100 | 15,100 | ||||||
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Income before taxes, excluding lease termination costs and revaluation of liability awards |
$ | 10,200 | $ | 11,200 | ||||
Adjusted EBITDA(1) |
$ | 40,300 | $ | 41,300 | ||||
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Adjusted EBITDAR(1) |
$ | 58,200 | $ | 59,200 | ||||
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(1) |
We define Adjusted EBITDA as earnings before interest, income taxes, and depreciation and amortization, adjusted for the impact of revaluation of liability awards and lease termination costs. We define Adjusted EBITDAR as earnings before interest, income taxes, depreciation and amortization and aircraft rent, adjusted for the impact of revaluation of liability awards and lease termination costs. The most directly comparable GAAP measure is income before taxes. |
We present Adjusted EBITDA and Adjusted EBITDAR, which are not recognized financial measures under GAAP, because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA and Adjusted EBITDAR, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in our presentation of Adjusted EBITDA and Adjusted EBITDAR. Our presentation of Adjusted EBITDA and Adjusted EBITDAR should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA or Adjusted EBITDAR following this offering, and any such modification may be material. |
Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools. Some of the limitations applicable to these measures include: (i) Adjusted EBITDA and Adjusted EBITDAR do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; (ii) Adjusted EBITDA and Adjusted EBITDAR do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (iii) Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, our working capital needs; (iv) Adjusted EBITDA and Adjusted EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future; and (vi) Adjusted EBITDA and Adjusted EBITDAR do not reflect any cash requirements for such replacements and other companies in our industry may calculate Adjusted EBITDA and Adjusted EBITDAR differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as a substitute for |
8
performance measures calculated in accordance with GAAP. In addition, Adjusted EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. For the foregoing reasons, each of Adjusted EBITDA and Adjusted EBITDAR has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information. |
The following table presents a reconciliation of income before taxes to estimated Adjusted EBITDA and Adjusted EBITDAR for the period presented. |
Quarter Ended
June 30, 2018 |
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Low | High | |||||||
(in thousands) | ||||||||
Reconciliation: |
||||||||
Loss before taxes |
$ | (16,900 | ) | $ | (13,900 | ) | ||
Revaluation of liability awards |
12,000 | 10,000 | ||||||
Lease termination costs |
15,100 | 15,100 | ||||||
Interest expense |
14,100 | 14,100 | ||||||
Depreciation and amortization |
16,000 | 16,000 | ||||||
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Adjusted EBITDA |
40,300 | 41,300 | ||||||
Aircraft rent |
17,900 | 17,900 | ||||||
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Adjusted EBITDAR |
58,200 | 59,200 | ||||||
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Quarter Ended
June 30, 2018 |
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Low | High | |||||||
(in thousands) | ||||||||
Balance Sheet Data: |
||||||||
Cash and cash equivalents |
$ | 41,700 | $ | 41,700 | ||||
Accrued compensation |
24,000 | 22,000 | ||||||
Long-term debt, including current portion |
994,100 | 994,100 |
Quarter Ended
June 30, 2018 |
||||
Operating Data |
||||
Block hours |
102,939 | |||
Departures |
57,782 |
Approval of Stock Split and Increase in Authorized Shares
In July 2018, our Board of Directors and shareholders approved a 2.5-for-1 stock split of our common stock, which will occur immediately prior to the completion of this offering. Except as otherwise noted, all references to share and per share amounts related to common stock equity awards and non-equity awards in this prospectus, our consolidated financial statements and our condensed consolidated financial statements reflect the stock split. Additionally, in connection with the stock split, our Board of Directors and shareholders approved an increase in the authorized number of shares of our common stock and preferred stock to 125,000,000 and 5,000,000, respectively. This increase will become effective immediately prior to the completion of this offering upon the filing of our second amended and restated articles of incorporation.
9
Risks Affecting Us
Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this prospectus titled Risk Factors immediately following this prospectus summary. These risks include, but are not limited to:
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the supply and retention of qualified airline pilots; |
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the volatility of pilot attrition; |
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dependence on, changes to, or non renewal of, our capacity purchase agreements; |
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increases in our labor costs; |
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reduced utilization under our capacity purchase agreements; |
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the financial strength of our major airline partners; |
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direct operation of regional jets by our major airline partners; |
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limitations on our ability to expand regional flying within the flight systems of our major airline partners and those of other major airlines; |
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our significant amount of debt and other contractual obligations; |
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our compliance with ongoing financial covenants under our credit facilities; and |
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our ability to keep costs low and execute our growth strategies. |
Corporate Information
We are a Nevada corporation with our principal executive office in Phoenix, Arizona. We were founded in 1982 and reincorporated in Nevada in 1996. In addition to operating Mesa Airlines, we also wholly own Mesa Air GroupAirline Inventory Management, LLC, (MAG-AIM), an Arizona limited liability company, which was established to purchase, distribute and manage Mesa Airlines inventory of spare rotable and expendable parts. MAG-AIMs financial results are reflected in our consolidated financial statements.
Our principal executive offices are located at 410 North 44th Street, Suite 700, Phoenix, Arizona 85008, and our telephone number is (602) 685-4000. Our website is located at www.mesa-air.com. The information on, or accessible through, our website does not constitute part of, and is not incorporated into, this prospectus.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act (the JOBS Act), enacted in April 2012. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
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being permitted to present only two years of audited financial statements and only two years of related Managements Discussion and Analysis of Financial Condition and Results of Operations in this prospectus; |
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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley Act); |
10
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reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and |
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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a large accelerated filer, our annual gross revenue exceeds $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than you might receive from other public reporting companies in which you hold equity interests.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
11
Common stock offered by us |
10,700,000 shares. |
Common stock to be outstanding after the offering |
35,201,142 shares (or 36,139,475 shares, if the underwriters exercise in full their overallotment option as described below). |
Underwriters option to purchase additional shares |
We and the selling shareholders may sell up to an aggregate of 1,605,000 additional shares if the underwriters exercise their option to purchase additional shares. |
Use of proceeds |
We estimate that we will receive net proceeds from this offering of approximately $145.9 million (or approximately $158.3 million if the underwriters exercise their overallotment option) based on an assumed initial public offering price of $15.00 per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions and estimated expenses of this offering payable by us. |
We intend to use the net proceeds from this offering to: (i) repay all outstanding indebtedness under our CIT Revolving Credit Facility in the amount of $25.7 million; (ii) repay from $20.0 to $40.0 million of existing indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes; and (iii) in connection with the repayment, refinance the remaining portion of indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes. For a further description of our CIT Revolving Credit Facility, Spare Engine Facility and Subordinated GECAS Notes, see Managements Discussion and Analysis of Financial Condition and Results of OperationsCommitments and Contractual Obligations elsewhere in this prospectus. We intend to use any remaining proceeds for general corporate purposes, which may include the repayment or refinancing of indebtedness, working capital and capital expenditures, including flight equipment acquisitions and lease buyouts. See Use of Proceeds . |
We will not receive any of the proceeds from the sale of any shares sold by the selling shareholders if the underwriters exercise their option to purchase additional shares. See Principal and Selling Shareholders . |
Risk factors |
See Risk Factors beginning on page 18 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock. |
NASDAQ trading symbol |
MESA |
12
The number of shares of our common stock outstanding after this offering is based on 12,394,215 shares outstanding as of March 31, 2018, 10,890,905 shares issuable upon exercise of warrants with an exercise price of $0.004 per share, 250,000 shares issuable upon exercise of warrants with an exercise price of $3.20 per share (which were terminated in June 2018) and 966,022 shares of restricted common stock to be issued under our 2018 Equity Incentive Plan (the 2018 Plan) immediately following the completion of this offering in exchange for vested SARs previously issued under the Mesa Air Group, Inc. Amended and Restated Stock Appreciation Rights Plan (the SAR Plan), and excludes:
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744,497 awarded and unvested shares of common stock under the Mesa Air Group, Inc. 2011 Stock Incentive Plan (the 2011 Plan) as of March 31, 2018; |
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20,843 awarded and unvested shares of common stock under the Mesa Air Group, Inc. 2017 Stock Plan (the 2017 Plan) as of March 31, 2018; |
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323,048 awarded and unvested restricted stock units under the Mesa Air Group, Inc. Restricted Phantom Stock Units Plan (the RSU Plan) as of March 31, 2018; and |
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300,012 shares of restricted common stock to be issued under our 2018 Plan, in exchange for unvested SARs previously issued under our SAR Plan. |
We expect that an aggregate of 105,275 shares will vest under our 2011 Plan, 2017 Plan and RSU Plan, net of new awards granted, between March 31, 2018 and the completion of this offering. In addition, immediately following the completion of this offering, the remaining unvested equity awards then outstanding under the 2011 Plan, 2017 Plan and RSU Plan will be cancelled and exchanged for 983,113 shares of restricted common stock under our 2018 Plan, and will remain subject to vesting on the same terms set forth in the prior vesting schedules. The SARs previously issued under our SAR Plan, which currently settle only in cash, will be cancelled and exchanged for an aggregate of 1,266,035 shares of restricted common stock under our 2018 Plan (collectively, the 2018 Plan Issuances), of which 966,022 will be fully vested upon issuance and are included in the number of shares of our common stock outstanding after this offering. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances elsewhere in this prospectus.
Except as otherwise indicated, information in this prospectus reflects or assumes the following:
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the filing and effectiveness of our second amended and restated articles of incorporation in Nevada and the adoption of our amended and restated bylaws, each of which will occur immediately prior to the consummation of this offering; |
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no exercise of the underwriters option to purchase up to 1,605,000 additional shares of our common stock from us and the selling shareholders; and |
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a 2.5-for-1 forward stock split, which will occur immediately prior to the completion of this offering. |
13
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables summarize the financial and operating data for our business for the periods presented. You should read this summary consolidated financial data in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes, all included elsewhere in this prospectus.
The summary historical consolidated statement of operations data for our fiscal years ended September 30, 2016 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary historical consolidated balance sheet data for the six months ended March 31, 2018 has been derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The summary historical consolidated statements of operations data for our fiscal years ended September 30, 2013, 2014 and 2015 have been derived from our consolidated financial statements that are not included in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and results for the six months ended March 31, 2018 are not indicative of the results expected for the full year.
Year Ended September 30, |
Six Months Ended
March 31, |
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2013 (1) | 2014 (1) | 2015 | 2016 | 2017 | 2017 | 2018 | ||||||||||||||||||||||
(in thousands, except per share data) |
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Operating revenues: |
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Contract revenue |
$ | 382,125 | $ | 407,408 | $ | 481,168 | $ | 569,373 | $ | 618,698 | $ | 309,711 | $ | 310,904 | ||||||||||||||
Pass-through and other |
33,131 | 28,617 | 24,931 | 18,463 | 24,878 | 9,619 | 21,420 | |||||||||||||||||||||
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Total operating revenues |
415,256 | 436,025 | 506,099 | 587,836 | 643,576 | 319,330 | 332,324 | |||||||||||||||||||||
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Operating expenses: |
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Flight operations |
78,685 | 93,092 | 118,600 | 141,422 | 155,516 | 72,349 | 103,807 | |||||||||||||||||||||
Fuel |
13,531 | 6,092 | 1,017 | 753 | 766 | 400 | 198 | |||||||||||||||||||||
Maintenance |
102,473 | 123,506 | 142,643 | 225,130 | 210,729 | 117,422 | 105,756 | |||||||||||||||||||||
Aircraft rent |
77,243 | 80,942 | 69,083 | 71,635 | 72,551 | 36,060 | 36,582 | |||||||||||||||||||||
Aircraft and traffic servicing |
28,363 | 20,817 | 13,274 | 3,936 | 3,676 | 1,580 | 1,744 | |||||||||||||||||||||
Promotions and sales (2) |
5,406 | 2,795 | 11 | | | | | |||||||||||||||||||||
General and administrative |
31,598 | 34,501 | 39,940 | 42,182 | 38,996 | 20,676 | 21,267 | |||||||||||||||||||||
Depreciation and amortization |
32,945 | 33,425 | 42,296 | 46,020 | 61,048 | 29,600 | 31,598 | |||||||||||||||||||||
Asset impairment |
7,942 | | | | | | | |||||||||||||||||||||
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Total operating expenses |
378,186 | 395,170 | 426,864 | 531,078 | 543,282 | 278,087 | 300,952 | |||||||||||||||||||||
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Operating income |
37,070 | 40,855 | 79,235 | 56,758 | 100,294 | 41,243 | 31,372 | |||||||||||||||||||||
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Other (expense) income, net: |
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Interest expense |
(9,043 | ) | (9,881 | ) | (16,984 | ) | (32,618 | ) | (46,110 | ) | (21,840 | ) | (27,474 | ) | ||||||||||||||
Interest income |
71 | 14 | 21 | 325 | 32 | 15 | 19 | |||||||||||||||||||||
Other income (expense), net |
2,458 | (475 | ) | 975 | 381 | (514 | ) | (394 | ) | (102 | ) | |||||||||||||||||
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Total other (expense) income, net |
(6,514 | ) | (10,342 | ) | (15,988 | ) | (31,912 | ) | (46,592 | ) | (22,219 | ) | (27,557 | ) | ||||||||||||||
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Income before taxes |
30,556 | 30,513 | 63,247 | 24,846 | 53,702 | 19,024 | 3,815 | |||||||||||||||||||||
Income tax (benefit) expense |
(11,078 | ) | 11,749 | 24,248 | 9,926 | 20,874 | 7,110 | (21,181 | ) | |||||||||||||||||||
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Net income |
$ | 41,634 | $ | 18,764 | $ | 38,999 | $ | 14,920 | $ | 32,828 | $ | 11,914 | $ | 24,996 | ||||||||||||||
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Net income per share attributable to common shareholders: |
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Basic (3) |
$ | 5.83 | $ | 2.53 | $ | 5.03 | $ | 1.56 | $ | 3.01 | $ | 1.11 | $ | 2.18 | ||||||||||||||
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Diluted (3) |
$ | 1.81 | $ | 0.82 | $ | 1.61 | $ | 0.62 | $ | 1.40 | $ | 0.51 | $ | 1.06 | ||||||||||||||
Pro forma net income per share attributable to common shareholders (unaudited) (4) : |
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Basic |
$ | 1.56 | $ | 1.00 | ||||||||||||||||||||||||
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Diluted |
$ | 1.16 | $ | 0.78 | ||||||||||||||||||||||||
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Weighted-average common shares outstanding: |
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Basic |
7,146,165 | 7,425,165 | 7,749,665 | 9,558,242 | 10,918,527 | 10,780,678 | 11,441,271 | |||||||||||||||||||||
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Diluted |
23,029,960 | 22,983,286 | 24,161,935 | 24,082,114 | 23,385,775 | 23,443,541 | 23,562,884 | |||||||||||||||||||||
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Non-GAAP financial data: |
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EBITDA (5) |
$ | 72,473 | $ | 73,805 | $ | 122,506 | $ | 103,159 | $ | 160,828 | $ | 70,449 | $ | 62,868 | ||||||||||||||
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EBITDAR (5) |
$ | 149,716 | $ | 154,747 | $ | 191,589 | $ | 174,794 | $ | 233,379 | $ | 106,509 | $ | 99,450 | ||||||||||||||
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14
(1) |
Our operations data for our fiscal years ended September 30, 2013 and 2014 include results from our historical go! operations. We operated go! as an inter-island air carrier in Hawaii from 2006 to 2014. |
(2) |
Promotion and sales primarily consists of reservations and marketing costs related to our historical go! operations. We do not pay promotion and sales expenses under our capacity purchase agreements. |
(3) |
See Note 10 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted earnings per share. |
(4) |
Pro forma net income per share attributable to common shareholders data is presented for our fiscal year ended September 30, 2017 and the six months ended March 31, 2018 to give effect to: (i) the issuance of 10,700,000 shares of our common stock pursuant to this offering; (ii) our application of the net proceeds from this offering as set forth under Use of Proceeds , assuming an initial public offering price of $15.00 per share (which is the mid-point of the estimated price range set forth on the cover page of this prospectus) and a repayment of $30 million of existing indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes (which is the mid-point of the estimated range set forth in Use of Proceeds ); and (iii) the issuance of shares of restricted common stock under our 2018 Plan immediately following the completion of this offering as part of the 2018 Plan Issuances. For a description of the method used to calculate the number of shares of restricted common stock to be issued under the 2018 Plan immediately after this offering, see Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances elsewhere in this prospectus. This pro forma net income per share attributable to common shareholders data is presented for informational purposes only and does not purport to represent what our pro forma net income (loss) or net income (loss) per share attributable to common shareholders actually would have been had this offering or the 2018 Plan Issuances been completed on October 1, 2016, or to project our net income or net income per share attributable to common shareholders for any future period. |
(5) |
We define EBITDA as earnings before interest, income taxes, and depreciation and amortization. We define EBITDAR as earnings before interest, income taxes, depreciation and amortization and aircraft rent. EBITDA and EBITDAR are included as supplemental disclosure because our senior management believes that they are well recognized valuation metrics in the airline industry that are frequently used by companies, investors, securities analysts and other interested parties in comparing companies in our industry. |
EBITDA and EBITDAR have limitations as analytical tools. Some of the limitations applicable to these measures include: (i) EBITDA and EBITDAR do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; (ii) EBITDA and EBITDAR do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (iii) EBITDA and EBITDAR do not reflect changes in, or cash requirements for, our working capital needs; (iv) EBITDA and EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future; and (vi) EBITDA and EBITDAR do not reflect any cash requirements for such replacements and other companies in our industry may calculate EBITDA and EBITDAR differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, EBITDA and EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. In addition, EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. For the foregoing reasons, each of EBITDA and EBITDAR has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information.
The following table presents the reconciliation of net income to EBITDA and EBITDAR for the periods presented below:
Year Ended September 30, |
Six Months
Ended March 31, |
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2013 | 2014 | 2015 | 2016 | 2017 | 2017 | 2018 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Reconciliation: |
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Net income |
$ | 41,634 | $ | 18,764 | $ | 38,999 | $ | 14,920 | $ | 32,828 | $ | 11,914 | $ | 24,996 | ||||||||||||||
Interest expense |
9,043 | 9,881 | 16,984 | 32,618 | 46,110 | 21,840 | 27,474 | |||||||||||||||||||||
Interest income |
(71 | ) | (14 | ) | (21 | ) | (325 | ) | (32 | ) | (15 | ) | (19 | ) | ||||||||||||||
Income tax expense (benefit) |
(11,078 | ) | 11,749 | 24,248 | 9,926 | 20,874 | 7,110 | (21,181 | ) | |||||||||||||||||||
Depreciation and amortization |
32,945 | 33,425 | 42,296 | 46,020 | 61,048 | 29,600 | 31,598 | |||||||||||||||||||||
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EBITDA |
72,473 | 73,805 | 122,506 | 103,159 | 160,828 | 70,449 | 62,868 | |||||||||||||||||||||
Aircraft rent |
77,243 | 80,942 | 69,083 | 71,635 | 72,551 | 36,060 | 36,582 | |||||||||||||||||||||
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EBITDAR |
149,716 | 154,747 | 191,589 | 174,794 | 233,379 | 106,509 | 99,450 | |||||||||||||||||||||
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15
The following table presents our historical balance sheet data as of March 31, 2018:
As of March 31, 2018 | ||||||||
Actual | Pro Forma (1) | |||||||
(in thousands) | ||||||||
Balance Sheet Data: |
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Cash and cash equivalents |
$ | 52,699 | $ | 142,968 | ||||
Total assets |
1,342,638 | 1,342,638 | ||||||
Long-term debt, including current portion |
929,029 | 873,379 | ||||||
Shareholders equity |
248,705 | 395,682 |
(1) |
The unaudited adjusted pro forma consolidated balance sheet gives effect to: (i) the issuance of 10,700,000 shares of our common stock pursuant to this offering; (ii) our application of the net proceeds from this offering as set forth under Use of Proceeds , assuming an initial public offering price of $15.00 per share (which is the mid-point of the estimated price range set forth on the cover page of this prospectus); and (iii) the issuance of 966,022 shares of restricted common stock under our 2018 Plan immediately following the completion of this offering as part of the 2018 Plan Issuances. For a description of the method used to calculate the number of shares of restricted common stock to be issued under the 2018 Plan immediately after this offering, see Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances elsewhere in this prospectus. |
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The following table summarizes certain operating data that we believe are useful indicators of our operating performance for our fiscal years ended September 30, 2013, 2014, 2015, 2016 and 2017, respectively, and the six months ended March 31, 2017 and 2018. The definitions of certain terms related to the airline industry used in the table can be found under Glossary of Airline Terms at the end of this prospectus.
Year Ended September 30, |
Six Months Ended
March 31, |
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2013 (1) | 2014 (1) | 2015 | 2016 | 2017 | 2017 | 2018 | ||||||||||||||||||||||
Operating Data |
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Block hours |
206,431 | 225,720 | 308,681 | 368,468 | 395,083 | 199,303 | 195,559 | |||||||||||||||||||||
Departures |
134,805 | 140,165 | 172,033 | 208,399 | 221,990 | 109,419 | 107,043 | |||||||||||||||||||||
Passengers |
7,872,574 | 8,520,917 | 10,632,903 | 12,497,424 | 13,005,844 | 6,393,651 | 6,332,521 | |||||||||||||||||||||
Available seat milesASMs (thousands) |
4,283,272 | 4,932,516 | 7,356,450 | 8,823,595 | 9,471,911 | 4,828,892 | 4,621,380 | |||||||||||||||||||||
Revenue passenger milesRPMs (thousands) |
3,703,837 | 4,103,834 | 6,019,316 | 7,019,586 | 7,392,688 | 3,759,481 | 3,640,092 | |||||||||||||||||||||
Contract revenue per available seat mileCRASM (in cents) |
¢ | 8.92 | ¢ | 8.26 | ¢ | 6.54 | ¢ | 6.45 | ¢ | 6.53 | ¢ | 6.41 | ¢ | 6.73 | ||||||||||||||
Operating cost per available seat mileCASM (in cents) |
¢ | 8.83 | ¢ | 8.01 | ¢ | 5.80 | ¢ | 6.02 | ¢ | 5.74 | ¢ | 5.76 | ¢ | 6.51 | ||||||||||||||
Average stage length (miles) |
452 | 475 | 565 | 557 | 561 | 580 | 567 | |||||||||||||||||||||
Regional aircraft |
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Owned |
23 | 40 | 47 | 64 | 66 | 66 | 66 | |||||||||||||||||||||
Leased |
48 | 37 | 37 | 37 | 37 | 37 | 37 | |||||||||||||||||||||
Leased from United |
| 7 | 30 | 30 | 37 | 30 | 42 | |||||||||||||||||||||
Total aircraft |
71 | 84 | 114 | 131 | 140 | 133 | 145 | |||||||||||||||||||||
E-175 |
0 | 7 | 30 | 46 | 55 | 48 | 60 | |||||||||||||||||||||
CRJ-900 |
47 | 57 | 63 | 64 | 64 | 64 | 64 | |||||||||||||||||||||
CRJ-700 |
20 | 20 | 20 | 20 | 20 | 20 | 20 | |||||||||||||||||||||
CRJ-200 |
4 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||||||||||||||||
Employees (FTE) |
1,819 | 2,186 | 2,766 | 3,102 | 3,132 | 3,073 | 3,229 |
(1) |
Our operations data for our fiscal years ended September 30, 2013 and 2014 include results from our historical go! operations. We operated go! as an inter-island air carrier in Hawaii from 2006 to 2014. |
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Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below may not be the only ones we face. If any of these risks should occur, our business, results of operations, financial condition or growth prospects could be adversely affected. In those cases, the trading price of our common stock could decline and you may lose all or part of your investment.
Risks Related to Our Business
The supply of pilots to the airline industry is limited and may negatively affect our operations and financial condition.
In July 2013, as directed by the U.S. Congress, the FAA issued more stringent pilot qualification and crew member flight training standards, which increased the required training time for new airline pilots (the FAA Qualification Standards). The FAA Qualification Standards, which became effective in August 2013, require first officers to hold an Airline Transport Pilot (ATP) certificate, requiring 1,500 hours total flight time as a pilot. Previously, first officers were required to have only a commercial pilot certificate, which required 250 hours of flight time. The rule also mandates stricter rules to minimize pilot fatigue. The FAA Qualification Standards (and associated regulations) have dramatically reduced the supply of qualified pilot candidates and has had a negative effect on pilot scheduling, work hours and the number of pilots required to be employed for our operations. To address the diminished supply of qualified pilot candidates, regional airlines, including us, implemented significant pilot wage and bonus increases. The impact of the FAA Qualification Standards (and associated regulations) has substantially increased our labor costs and may continue to negatively impact our operations and financial condition.
In prior periods, the FAA Qualification Standards have negatively impacted our ability to hire pilots at a rate sufficient to support required utilization levels under our American Capacity Purchase Agreement, and, as a result, we have issued credits to American pursuant to the terms of our American Capacity Purchase Agreement. For our fiscal year ended September 30, 2017, and the six-month period ended March 31, 2018, we issued credits of approximately $6.0 million and $3.9 million, respectively, under the American Capacity Agreement. Also, in February 2018, we mutually agreed with United to temporarily remove two aircraft from service under our United Capacity Purchase Agreement. In July 2018, we were able to fully staff flight operations and these aircraft were placed back into service under our United Capacity Purchase Agreement. See BusinessCapacity Purchase Agreements . If we are unable to maintain a sufficient number of qualified pilots to operate our scheduled flights, we may need to request reduced flight schedules with our major airline partners and incur monetary performance penalties under our capacity purchase agreements.
In addition, our operations and financial condition may be negatively impacted if we are unable to train pilots in a timely manner. Due to the industry-wide shortage of qualified pilots, driven by the increased flight hours requirements under the FAA Qualification Standards and attrition resulting from the hiring needs of other airlines, pilot training timelines have significantly increased and stressed the availability of flight simulators, instructors and related training equipment. As a result, the training of our pilots may not be accomplished in a cost-efficient manner or in a manner timely enough to support our operational needs.
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Pilot attrition may continue to negatively affect our operations and financial condition.
In recent years, we have experienced significant volatility in our attrition as a result of pilot wage and bonus increases at other regional air carriers, the growth of cargo, low-cost and ultra low-cost carriers and the number of pilots at major airlines reaching the statutory mandatory retirement age of 65 years. Following the ratification of our new collective bargaining agreement in July 2017, our average pilot attrition per month has decreased by 16.2% compared to the six months prior to the ratification. We believe that we will maintain our pilot attrition rates at this level during our 2018 fiscal year. However, if our actual pilot attrition is materially different than our projections, our operations and financial results could be materially and adversely affected.
We are highly dependent on our agreements with our major airline partners.
We derive all of our operating revenue from our capacity purchase agreements with our major airlines partners. As of March 31, 2018, our American Capacity Purchase Agreement accounted for 54% of our total revenue and our United Capacity Purchase Agreement accounted for 46% of our total revenue. In addition, as of March 31, 2018, all of our aircraft available for scheduled service were operating under a capacity purchase agreement with either American or United.
Our American Capacity Purchase Agreement expires with respect to different tranches of aircraft between 2021 and 2025, unless otherwise extended or amended. In addition, our American Capacity Purchase Agreement is subject to termination prior to expiration, subject to our right to cure, in various circumstances including if our controllable flight completion factor falls below certain levels for a specified period of time.
Our United Capacity Purchase Agreement expires between June and December 2019 with respect to 34 CRJ-700 and E-175 aircraft, between January and August 2020 with respect to 16 E-175 aircraft, and between 2021 and 2028 with respect to 30 of our E-175 aircraft. We are currently in negotiations with United with respect to the 20 CRJ-700 aircraft expiring between August and December 2019. We cannot predict the outcome of these negotiations and there can be no assurance that we will be able to extend these aircraft at acceptable rates, on acceptable terms, or at all. United is also permitted, subject to certain conditions, to terminate the agreement early in its discretion by giving us notice of 90 days or more. Our United Capacity Purchase Agreement is also subject to termination prior to expiration, subject to our right to cure, in various circumstances including if our controllable flight completion factor or departure performance falls below certain levels for a specified period of time.
If our capacity purchase agreements with American or United were terminated or not renewed, we would be significantly impacted and likely would not have an immediate source of revenue or earnings to offset such loss. Neither American nor United are under any obligation to renew their respective capacity purchase agreements with us. A termination or expiration of either of these agreements would likely have a material adverse effect on our financial condition, cash flows, ability to satisfy debt and lease obligations, operating revenues and net income unless we are able to enter into satisfactory substitute arrangements for the utilization of the affected aircraft by other major airline partners, or, alternatively, obtain the airport facilities, gates, ticketing and ground services and make the other arrangements necessary to fly as an independent airline. We may not be able to enter into substitute capacity purchase arrangements, and any such arrangements we might secure may not be as favorable to us as our current agreements. Operating an airline independently from our major airline partners would be a significant departure from our business plan and would likely require significant time and resources, which may not be available to us at that point.
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Increases in our labor costs, which constitute a substantial portion of our total operating costs, may adversely affect our business, results of operations and financial condition.
Our business is labor intensive, with labor costs representing approximately 28%, 30% and 34% of our total operating costs for the fiscal years ended September 30, 2016 and 2017 and the six months ended March 31, 2018, respectively. We are responsible for our labor costs above certain pre-determined reimbursement levels, and we may not be entitled to receive increased payments under our capacity purchase agreements if our labor costs increase above the reimbursement levels. As a result, a significant increase in our labor costs above the reimbursement levels could result in a material reduction in our earnings.
As a result of the 2013 FAA Qualification Standards, the supply of qualified pilots has been dramatically reduced. This shortage of pilots has driven up our pilot salaries and sign-on bonuses and resulted in a material increase in our labor costs. A continued shortage of pilots could require us to further increase our labor costs, which would result in a material reduction in our earnings.
Reduced utilization levels of our aircraft under our capacity purchase agreements would adversely impact our financial results.
Historically, our major airline partners have utilized our flight operations at levels at or near the maximum capacity of our fleet allocations under our capacity purchase agreements, but there can be no assurance that they will continue utilizing our aircraft at that level. If our major airline partners schedule the utilization of our aircraft below historical levels (including taking into account the stage length and frequency of our scheduled flights), we may not be able to maintain operating efficiencies previously obtained, which would negatively impact our operating results and financial condition.
Our American Capacity Purchase Agreement establishes minimum levels of flight operations. In prior periods, the FAA Qualification Standards have negatively impacted our ability to hire pilots at a rate sufficient to support required utilization levels, and, as a result, we have issued credits to American pursuant to the terms of our American Capacity Purchase Agreement. For our fiscal year ended September 30, 2017, and the six-month period ended March 31, 2018, we issued credits of approximately $6.0 million and $3.9 million, respectively, under the American Capacity Agreement.
Our United Capacity Purchase Agreement does not require United to schedule any specified minimum level of flight operations for our aircraft. Additionally, United may remove aircraft from our United Capacity Purchase Agreement with 90 days prior notice to us. While United pays us a fixed monthly revenue amount for each aircraft under contract, a significant reduction in the utilization levels of our fleet in the future or removal of aircraft from our United Capacity Purchase Agreement at Uniteds election could reduce our revenues based on the number of flights and block hours flown for United. In February 2018, we mutually agreed with United to temporarily remove two aircraft from service under our United Capacity Purchase Agreement. In July 2018, we were able to fully staff flight operations and these aircraft were placed back into service under our United Capacity Purchase Agreement. See BusinessCapacity Purchase Agreements .
Continued challenges with hiring, training and retaining replacement pilots may lead to reduced utilization levels of our aircraft and additional penalties under our capacity purchase agreements and our operations and financial results could be materially and adversely terminated. Additionally, our major airline partners may change routes and frequencies of flights, which can negatively impact our operating efficiencies. Changes in schedules may increase our flight costs, which could exceed the reimbursed rates paid by our major airline partners. Reduced utilization levels of our aircraft or other changes to our schedules under our capacity purchase agreements would adversely impact our financial results.
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If our major airline partners experience events that negatively impact their financial strength or operations, our operations also may be negatively impacted.
We may be directly affected by the financial and operating strength of our major airline partners. Any events that negatively impact the financial strength of our major airline partners or have a long-term effect on the use of our major airline partners by airline travelers would likely have a material adverse effect on our business, financial condition and results of operations. In the event of a decrease in the financial or operational strength of any of our major airline partners, such partner may seek to reduce, or be unable to make, the payments due to us under their capacity purchase agreement. In addition, in some cases, they may reduce utilization of our aircraft. Although we receive guaranteed monthly revenue for each aircraft under contract and a fixed fee for each block hour or flight actually flown, there are no minimum levels of utilization specified in our capacity purchase agreements. If any of our other current or future major airline partners become bankrupt, our capacity purchase agreement with such partner may not be assumed in bankruptcy and could be terminated. This and other events, which are outside of our control, could have a material adverse effect on our business, financial condition and results of operations. In addition, any negative events that occur to other regional carriers and that affect public perception of such carriers generally could also have a material adverse effect on our business, financial condition and results of operations.
Our major airline partners may expand their direct operation of regional jets thus limiting the expansion of our relationships with them.
We depend on our major airline partners electing to contract with us instead of operating their own regional jets or operating their own captive regional airlines through wholly owned subsidiaries. Currently, the captive regional airlines include Endeavor Air, Inc. (Endeavor) (owned by Delta Airlines, Inc.), Envoy Air Inc. (Envoy) (owned by American), PSA Airlines, Inc. (PSA) (owned by American), Piedmont Airlines (Piedmont) (owned by American) and Horizon Air Industries, Inc. (Horizon) (owned by Alaska Air Group, Inc.). These major airlines possess the financial and other resources to acquire and operate their own regional jets, create or grow their own captive regional airlines or acquire other regional air carriers instead of entering into contracts with us. In particular, American, which procures approximately 40% of its regional flying from its wholly owned regional subsidiaries, has expressed a goal of increasing their share to a majority of Americans regional flying over time. We have no guarantee that in the future our major airline partners will choose to enter into contracts with us, or renew their existing agreements with us, instead of operating their own regional jets, allocating flying to their captive regional airlines or entering into relationships with competing regional airlines. A decision by American or United to phase out or limit our capacity purchase agreements or to enter into similar agreements with our competitors could have a material adverse effect on our business, financial condition or results of operations.
We may be limited from expanding our flying within our major airline partners flight systems and there are constraints on our ability to provide services to airlines other than American and United.
Additional growth opportunities within our major airline partners flight systems are limited by various factors, including a limited number of independent regional aircraft that each such major airline partner can operate in its regional network due to scope clauses in the current collective bargaining agreements with their pilots that restrict the number and size of regional jets that may be operated in their flight systems not flown by their pilots. Except as contemplated by our existing capacity purchase agreements, we cannot be sure that our major airline partners will contract with us to fly any additional aircraft.
We may not have additional growth opportunities, or may agree to modifications to our capacity purchase agreements that reduce certain benefits to us in order to obtain additional aircraft, or for other
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reasons. Given the competitive nature of the airline industry, we believe limited growth opportunities may result in competitors accepting reduced margins and less favorable contract terms in order to secure new or additional capacity purchase operations. Even if we are offered growth opportunities by our major airline partners, those opportunities may involve economic terms or financing commitments that are unacceptable to us. Additionally, our major airline partners may reduce the number of regional jets in their system by not renewing or extending existing flying arrangements with regional operators or transitioning those flying arrangements to their own captive regional carriers. Any one or more of these factors may reduce or eliminate our ability to expand our flight operations with our existing major airline partners.
Additionally, our capacity purchase agreements limit our ability to provide regional flying services to other airlines in certain major airport hubs of American and United. These restrictions may make us a less attractive partner to other major airlines whose regional flying needs do not align with our geographical restrictions.
We have a significant amount of debt and other contractual obligations and that could impair our liquidity and thereby harm our business, results of operations and financial condition.
The airline business is capital intensive and, as a result, we are highly leveraged. As of March 31, 2018, we had approximately $942.3 million in total long-term debt including $10.3 million of capital lease obligations. Substantially all of our long-term debt was incurred in connection with the acquisition of aircraft and aircraft engines. We also have significant long-term lease obligations primarily relating to our aircraft fleet. These leases are classified as operating leases and are therefore not reflected in our consolidated balance sheets. During our fiscal years ended September 30, 2016 and 2017 and the six months ended March 31, 2018, our principal debt service payments totaled $75.5 million, $153.0 million and $110.8 million, respectively, and our principal aircraft lease payments totaled approximately $70.0 million, $107.0 million and $20.4 million, respectively.
We have significant lease obligations with respect to our aircraft, which aggregated to approximately $316.1 million and $295.6 million at September 30, 2017 and March 31, 2018, respectively. At March 31, 2018, we had 37 aircraft under lease (excluding aircraft leased from United), with an average remaining term of 4.25 years. As of March 31, 2018, future minimum lease payments due under all long term operating leases were approximately $307.0 million and debt service obligations were $1,156.4 million, respectively, including capital lease obligations.
We are subject to various financial covenants under our financing agreements and leases with, among others, CIT Bank, N.A. (CIT), Export Development Canada (EDC) and RASPRO Trust 2005, a pass-through trust, (RASPRO) that are typical for credit facilities and leases of this size, type, and tenor. Our ability to make additional borrowings under our credit facility depends upon satisfaction of these covenants. Our ability to comply with these covenants and requirements may be affected by events beyond our control. Our failure to comply with obligations under our credit facility could result in an event of default under the facilities. A default, if not cured or waived, could prohibit us from obtaining further loans under our credit facilities and permit the lenders thereunder to accelerate payment of their loans. In addition, the lenders would have the right to proceed against the collateral we granted to them, which consists of substantially all of our assets. If our debt is accelerated, we cannot be certain that we will have funds available to pay the accelerated debt or that we will have the ability to refinance the accelerated debt on terms favorable to us, or at all. If we could not repay or refinance the accelerated debt, we could be insolvent and could seek to file for bankruptcy protection. Any such default, acceleration, or insolvency would likely have a material and adverse effect on our business. See We are required to comply with certain ongoing financial and other covenants under certain credit facilities, and if we fail to meet those covenants or otherwise suffer a default thereunder, our lenders may accelerate the payment of such indebtedness for a discussion of our financial and other covenants.
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We cannot assure you that our operations will generate sufficient cash flow to make our required payments, or that we will be able to obtain financing to acquire additional aircraft or make other capital expenditures necessary for expansion. Our ability to pay the high level of fixed costs associated with our contractual obligations will depend on our operating performance, cash flow and our ability to secure adequate financing, which will in turn depend on, among other things, the success of our current business strategy, the U.S. economy, availability and cost of financing, as well as general economic and political conditions and other factors that are, to some extent, beyond our control. The amount of our fixed obligations could have a material adverse effect on our business, results of operations and financial condition and could:
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require that a substantial portion of our cash flow from operations be used for operating lease and maintenance reserve payments, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; |
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limit our ability to obtain additional financing to support our expansion plans and for working capital and other purposes on acceptable terms or at all; |
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make it more difficult for us to pay our other obligations as they become due during adverse general economic and market industry conditions because any related decrease in revenues could cause us to not have sufficient cash flows from operations to make our scheduled payments; and |
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reduce our flexibility in planning for, or reacting to, changes in our business and the airline industry and, consequently, place us at a competitive disadvantage to our competitors with lower fixed payment obligations. |
Additionally, a failure to pay our operating leases, debt or other fixed cost obligations or a breach of our contractual obligations could result in a variety of further adverse consequences, including the exercise of remedies by our creditors and lessors. In such a situation, it is unlikely that we would be able to cure our breach, fulfill our obligations, make required lease payments or otherwise cover our fixed costs, which would have a material adverse effect on our business, results of operations and financial condition.
We are required to comply with certain ongoing financial and other covenants under certain credit facilities, and if we fail to meet those covenants or otherwise suffer a default thereunder, our lenders may accelerate the payment of such indebtedness.
As of March 31, 2018, we had $924.7 million of long-term secured debt, including capital lease obligations, comprised of the following: (i) the CIT Revolving Credit Facility; (ii) the Spare Engine Facility (as defined below); (iii) the EDC 2015 Credit Facility (as defined below), the EDC January 2016 Credit Facility (as defined below) and the EDC June 2016 Credit Facility (as defined below) (and, together with the EDC 2015 Credit Facility and the EDC January 2016 Credit Facility, the EDC Credit Facilities); (iv) the MidFirst Credit Facility (as defined below) and (v) the Aircraft Notes (as defined below). This amount consisted of $778.4 million in notes payable related to owned aircraft used in continuing operations, $110.3 million of notes payable related to spare engines and engine kits, $25.7 million of our working capital line of credit and $10.3 million of capital lease obligations. The obligations under these credit facilities are secured primarily by a first priority lien on certain engines, equipment, spare parts and related collateral, including engine warranties and proceeds of the foregoing, and the aircraft acquired with the proceeds of such indebtedness. As of March 31, 2018, we had $17.6 million of long-term unsecured debt.
Under (i) the CIT Revolving Credit Facility (as defined below), we are required to comply with a minimum consolidated interest and rental coverage ratio at the end of each fiscal quarter during the term of such credit facility, (ii) the EDC January 2016 Credit Facility, we are required to comply with a
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minimum fixed charge coverage ratio at the end of each fiscal quarter during the term of such credit facility, and (iii) the RASPRO Lease Facility (as defined below), we are required to comply with minimum current ratio and debt ratio covenants and a minimum available cash covenant until all amounts outstanding thereunder have been paid in full.
Failure to comply with the terms of these credit facilities and financing arrangements and the ongoing financial and other covenants thereunder would result in an event of default (as defined in the applicable credit facility and financing agreement) and, to the extent the applicable lenders so elect, an acceleration of our existing indebtedness following the expiration of any applicable cure periods, causing such debt to be immediately due and payable. Acceleration of such indebtedness would also trigger cross-default clauses under our other indebtedness. It could also result in the termination of all commitments to extend further credit under our CIT Credit Facility. We currently do not have sufficient liquidity to repay all of our outstanding debt in full if such debt were accelerated. If we are unable to pay our debts as they come due, or obtain waivers for such payments, our secured lenders could foreclose on any of our assets securing such debt. These events could materially adversely affect our business, results of operations and financial condition.
The residual value of our owned aircraft may be less than estimated in our depreciation policies.
As of March 31, 2018, we had approximately $1,182.8 million of property and equipment and related assets, net of accumulated depreciation, of which, $1,001.6 million relates to owned aircraft. In accounting for these long lived assets, we make estimates about the expected useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long lived assets, a significant change in the condition of the long lived assets and operating cash flow losses associated with the use of the long lived assets. In the event the estimated residual value of any of our aircraft types is determined to be lower than the residual value assumptions used in our depreciation policies, the applicable aircraft type in our fleet may be impaired and may result in a material reduction in the book value of applicable aircraft types we operate or we may need to prospectively modify our depreciation policies. An impairment on any of our aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material negative impact to our financial results.
The amounts we receive under our capacity purchase agreements may be less than the corresponding costs we incur.
Under our capacity purchase agreements with American and United, a portion of our compensation is based upon pre-determined rates typically applied to production statistics (such as departures and block hours flown). The primary operating costs intended to be compensated by the pre-determined rates include labor costs, including crew training costs, certain aircraft maintenance expenses and overhead costs. During the year ended September 30, 2017 and the six months ended March 31, 2018, approximately $24.5 million and $21.5 million, or 4.2% and 6.7%, of our operating costs under our capacity purchase agreements were pass-through costs, excluding fuel which is paid directly to suppliers by our major airline partners. If our operating costs for labor, aircraft maintenance and overhead costs exceed the compensation earned from our pre-determined rates under our revenue-guarantee arrangements, our financial position and operating results will be negatively affected.
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Strikes, labor disputes and increased unionization of our workforces may adversely affect our ability to conduct our business and reduce our profitability.
As of March 31, 2018, approximately 76.7% of our workforce was represented by labor unions, including the Air Line Pilots Association, International (ALPA) and the Association of Flight Attendants (AFA). On July 13, 2017, our pilots, represented by the ALPA, ratified a new four-year collective bargaining agreement. Similarly, on October 1, 2017, our flight attendants, represented by the AFA, ratified a new four-year collective bargaining agreement. The terms and conditions of our future collective bargaining agreements may be affected by the results of collective bargaining negotiations at other airlines that may have a greater ability, due to larger scale, greater efficiency or other factors, to bear higher costs than we can. In addition, if we are unable to reach agreement with any of our unionized work groups in future negotiations regarding the terms of their collective bargaining agreements, we may be subject to work interruptions, stoppages or shortages. We may also become subject to additional collective bargaining agreements in the future as non-unionized workers may unionize. We are also subject to various ongoing employment disputes outside of the collective bargaining agreements. We consider these to not be material, but any current or future dispute could become material.
Relations between air carriers and labor unions in the United States are governed by the Railway Labor Act (RLA). Under the RLA, collective bargaining agreements generally contain amendable dates rather than expiration dates, and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board (NMB). This process continues until either the parties have reached agreement on a new collective bargaining agreement, or the parties have been released to self-help by the NMB. In most circumstances, the RLA prohibits strikes; however, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes.
Any strike, labor dispute or increased unionization among our employees could disrupt our operations, reduce our profitability or interfere with the ability of our management to focus on executing our business strategies. For example, if a labor strike were to continue for several consecutive days, United may have cause to terminate our United Capacity Purchase Agreement. As a result, our business, results of operations and financial condition may be materially adversely affected.
We face tail risk in that we have aircraft lease commitments that extend beyond our existing capacity purchase agreement contractual term on certain aircraft.
We currently have 18 aircraft with leases extending past the term of their corresponding capacity purchase agreement with an aggregate exposure of less than $33.0 million. We may not be successful in extending the flying contract terms on these aircraft with our major airline partners. In that event, we intend to pursue alternative uses for those aircraft over the remaining portions of their leases including, but not limited to, operating the aircraft with another major airline under a negotiated capacity purchase agreement, subleasing the aircraft to another operator or marketing them for sale. Additionally, we may negotiate an early lease return agreement with an aircrafts lessor. In connection with this, we may incur cash and non-cash early lease termination costs that would negatively impact our operations and financial condition. Additionally, if we are unable to extend a flying contract with an existing major airline partner, but reach an agreement to place an aircraft into service with a different major airline partner, we likely will incur inefficiencies and incremental costs, such as changing the aircraft livery, which would negatively impact our financial results.
We may incur substantial maintenance costs as part of our leased aircraft return obligations.
Our aircraft lease agreements contain provisions that require us to return aircraft airframes and engines to the lessor in a specified condition or pay an amount to the lessor based on the actual return
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condition of the equipment. These lease return costs are recorded in the period in which they are incurred, and may be materially different than our projections. Any unexpected increase in maintenance return costs may negatively impact our financial position and results of operations.
We may become involved in litigation that may materially adversely affect us.
From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including employment, commercial, product liability, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert managements attention and resources, cause us to incur significant expenses or liability and/or require us to change our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, results of operations and financial condition.
Disagreements regarding the interpretation of our capacity purchase agreements with our major airline partners could have an adverse effect on our operating results and financial condition.
To the extent that we experience disagreements regarding the interpretation of our capacity purchase or other agreements, we will likely expend valuable management time and financial resources in our efforts to resolve those disagreements. Those disagreements may result in litigation, arbitration, settlement negotiations or other proceedings. Furthermore, there can be no assurance that any or all of those proceedings, if commenced, would be resolved in our favor or that we would be able to exercise sufficient leverage in any proceeding relative to our major airline partner to achieve a favorable outcome. An unfavorable result in any such proceeding could have adverse financial consequences or require us to modify our operations. Such disagreements and their consequences could have an adverse effect on our operating results and financial condition.
We rely on third-party suppliers as the sole manufacturers of our aircraft and aircraft engines.
We depend upon Bombardier and Embraer S.A. (Embraer) as the sole manufacturers of our aircraft and GE as the sole manufacturer of our aircraft engines. Our operations could be materially and adversely affected by the failure or inability of Bombardier, Embraer or GE to provide sufficient parts or related maintenance and support services to us in a timely manner, or the interruption of our flight operations as a result of unscheduled or unanticipated maintenance requirements for our aircrafts or engines.
Maintenance costs will likely increase as the age of our regional jet fleet increases.
The average age of our E-175, CRJ-900 and CRJ-700 type aircraft is approximately 2.4, 11.5 and 14.2 years, respectively. We have incurred relatively low maintenance expenses on our E-175 aircraft because most of the parts are under multi-year warranties and a limited number of heavy airframe checks and engine overhauls have occurred. Our maintenance costs will increase significantly, both on an absolute basis and as a percentage of our operating expenses, as our fleet ages and the E-175 warranties expire. In addition, because our current aircraft were acquired over a relatively short period of time, significant maintenance events scheduled for these aircraft will occur at roughly the same intervals, meaning we will incur our most expensive scheduled maintenance obligations across our present fleet at approximately the same time. These more significant maintenance activities result in out-of-service periods during which aircraft are dedicated to maintenance activities and unavailable for
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flying under our capacity purchase agreements. Any unexpected increase in our maintenance costs as our fleet ages or decreased revenues resulting from out-of-service periods could have an adverse effect on our cash flows, operating results and financial condition.
If we face problems with any of our third-party service providers, our operations could be adversely affected.
Our reliance upon others to provide essential services on behalf of our operations may limit our ability to control the efficiency and timeliness of contract services. We have entered into agreements with contractors to provide various facilities and services required for our operations, including aircraft maintenance, ground facilities and IT services, and expect to enter into additional similar agreements in the future. In particular, we rely on AAR and Aviall to provide fixed-rate parts procurement and component overhaul services for our aircraft fleet and GE to provide engine support. Our agreement with AAR, and other service providers, are subject to termination after notice. If our third-party service providers terminate their contracts with us, or do not provide timely or consistently high-quality service, we may not be able to replace them in a cost-efficient manner or in a manner timely enough to support our operational needs, which could have a material adverse effect on our business, financial condition and results of operations. In addition, our operations could be materially and adversely affected by the failure or inability of AAR, Aviall or GE to provide sufficient parts or related maintenance and support services to us in a timely manner.
Regulatory changes or tariffs could negatively impact our business and financial condition.
We import a substantial portion of the equipment we need. For example, the sole manufacturers of our aircraft, Bombardier and Embraer, are headquartered in Canada and Brazil, respectively. We cannot predict the impact of potential regulatory changes or action by U.S. regulatory agencies, including the potential impact of tariffs or changes in international trade treaties on the cost and timing of parts and aircraft. Our business may be subject to additional costs as a result of potential regulatory changes, which could have an adverse effect on our operations and financial results.
The issuance of operating restrictions applicable to one of the fleet types we operate could negatively impact our business and financial condition.
We rely on a limited number of aircraft types, including CRJ-700s, CRJ-900s and E-175s. The issuance of FAA or manufacturer directives restricting or prohibiting the use of the aircraft types we operate could negatively impact our business and financial results.
If we have a failure in our technology or security breaches of our information technology infrastructure our business and financial condition may be adversely affected.
The performance and reliability of our technology, and the technology of our major airline partners, are critical to our ability to compete effectively. Any internal technological error or failure or large scale external interruption in the technological infrastructure we depend on, such as power, telecommunications or the internet, may disrupt our internal network. Any individual, sustained or repeated failure of our technology or that of our major airline partners could impact our ability to conduct our business, lower the utilization of our aircraft and result in increased costs. Our technological systems and related data, and those of our major airline partners, may be vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues.
In addition, as a part of our ordinary business operations, we collect and store sensitive data, including personal information of our employees and information of our major airline partners. Our information
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systems are subject to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to our systems or information through fraud or other means of deception. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving, and may be difficult to anticipate or to detect for long periods of time. We may not be able to prevent all data security breaches or misuse of data. The compromise of our technology systems resulting in the loss, disclosure, misappropriation of, or access to, employees or business partners information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disruption to our operations and damage to our reputation, any or all of which could adversely affect our business and financial condition.
Our business could be materially adversely affected if we lose the services of our key personnel.
Our success depends to a significant extent upon the efforts and abilities of our senior management team and key financial and operating personnel. In particular, we depend on the services of Jonathan G. Ornstein, our Chairman and Chief Executive Officer, and Michael J. Lotz, our President and Chief Financial Officer. Competition for highly qualified personnel is intense, and the loss of any executive officer, senior manager, or other key employee without an adequate replacement, or the inability to attract new qualified personnel, could have a material adverse effect on our business, results of operations and financial condition.
We are subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition.
We are subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to the protection of the environment and noise, including those relating to emissions to the air, discharges (including storm water discharges) to surface and subsurface waters, safe drinking water and the use, management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. We are or may be subject to new or proposed laws and regulations that may have a direct effect (or indirect effect through our third-party specialists or airport facilities at which we operate) on our operations. In addition, U.S. airport authorities are exploring ways to limit de-icing fluid discharges. Any such existing, future, new or potential laws and regulations could have an adverse impact on our business, results of operations and financial condition.
Similarly, we are subject to environmental laws and regulations that require us to investigate and remediate soil or groundwater to meet certain remediation standards. Under certain laws, generators of waste materials, and current and former owners or operators of facilities, can be subject to liability for investigation and remediation costs at locations that have been identified as requiring response actions. Liability under these laws may be strict, joint and several, meaning that we could be liable for the costs of cleaning up environmental contamination regardless of fault or the amount of wastes directly attributable to us.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
As of September 30, 2017, we had aggregate federal and state net operating loss carryforwards of approximately $299.8 million and $172.3 million, which expire in 2027-2036 and 2018-2037, respectively, with approximately $20.1 million of state net operating loss carryforwards expiring in 2018. Our unused losses generally carry forward to offset future taxable income, if any, until such unused losses expire. We may be unable to use these losses to offset income before such unused losses expire. In addition, if a corporation undergoes an ownership change (generally defined as a
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greater than 50% cumulative change in the equity ownership of certain shareholders over a rolling three-year period) under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), the corporations ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset future taxable income or taxes may be limited. We have experienced ownership changes in the past and may experience ownership changes in connection with this offering or as a result of future changes in our stock ownership (some of which changes may not be within our control). This, in turn, could materially reduce or eliminate our ability to use our losses or tax attributes to offset future taxable income or tax and have an adverse effect on our future cash flows. See Our corporate charter limits certain transfers of our stock, which limits are intended to preserve our ability to use our net operating loss carryforwards, and these limits could have an effect on the market price of our common stock.
We may not be able to successfully implement our growth strategy.
Our growth strategy includes, among other things, providing regional flying to other major airlines and/or entering into the cargo and express shipping business. We face numerous challenges in implementing our growth strategy, including our ability to:
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provide regional flying to other major airlines with hub cities that overlap with our existing major airline partners; and |
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enter into relationships with third-parties to carry their cargo on terms that are acceptable to us. |
Our capacity purchase agreements limit our ability to provide regional flying services to other airlines in certain major airport hubs of American and United. These restrictions may make us a less attractive partner to other major airlines whose regional flying needs do not align with our geographical restrictions.
The potential benefits of entering the air cargo and express shipping sector will depend substantially on our ability to enter into relationships with integrated logistics companies and transition our existing business strategies into a new sector. We may be unsuccessful in entering into relationships with integrated logistics companies to carry cargo on terms that are acceptable to us. Additionally, our ability to transition our existing business strategies into a new sector may be costly, complex and time-consuming, and our management will have to devote substantial time and resources to such effort. Should we transition into this new sector, we may experience difficulties or delays in securing gate access and other airport services necessary to operate in the air cargo and express shipping sector. Our inability to successfully implement our growth strategies, could have a material adverse effect on our business, financial condition and results of operations and any assumptions underlying estimates of expected cost savings or expected revenues may be inaccurate.
We may not be able to make opportunistic acquisitions should we elect to do so as part of our growth strategy.
If we elect to pursue an acquisition, our ability to successfully implement this transaction would depend on a variety of factors, including the approval of our acquisition targets major airline partners, obtaining financing on acceptable terms and compliance with the restrictions contained in our debt agreements. If we need to obtain our lenders consent prior to an acquisition, they may refuse to provide such consent or condition their consent on our compliance with additional restrictive covenants that limit our operating flexibility. Acquisition transactions involve risks, including those associated with integrating the operations or (as applicable) separately maintaining the operations, financial reporting, disparate technologies and personnel of acquired companies; managing geographically dispersed operations; the diversion of managements attention from other business concerns; unknown risks; and the
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potential loss of key employees. We may not successfully integrate any businesses we may acquire in the future and may not achieve anticipated revenue and cost benefits relating to any such transactions. Strategic transactions may be expensive, time consuming and may strain our resources. Strategic transactions may not be accretive to our earnings and may negatively impact our results of operations as a result of, among other things, the incurrence of debt, one-time write-offs of goodwill and amortization expenses of other intangible assets. In addition, strategic transactions that we may pursue could result in dilutive issuances of equity securities.
Our ability to obtain financing or access capital markets may be limited.
There are a number of factors that may limit our ability to raise financing or access capital markets in the future, including our significant debt and future contractual obligations, our liquidity and credit status, our operating cash flows, the market conditions in the airline industry, U.S. and global economic conditions, the general state of the capital markets and the financial position of the major providers of commercial aircraft financing. We cannot assure you that we will be able to source external financing for our planned aircraft acquisitions or for other significant capital needs, and if we are unable to source financing on acceptable terms, or unable to source financing at all, our business could be materially adversely affected. To the extent we finance our activities with additional debt, we may become subject to financial and other covenants that may restrict our ability to pursue our business strategy or otherwise constrain our growth and operations.
Negative publicity regarding our customer service could have a material adverse effect on our business, results of operations and financial condition.
Our business strategy includes the implementation of our major airline partners brand and product in order to increase customer loyalty and drive future ticket sales. In addition, we also receive certain amounts under our United Capacity Purchase Agreement based upon the results of passenger satisfaction surveys. However, we may experience a high number of passenger complaints related to, among other things, our customer service. These complaints, together with delayed and cancelled flights, and other service issues, are reported to the public by the DOT. If we do not meet our major airline partners expectations with respect to reliability and service, our and our major airline partners brand and product could be negatively impacted, which could result in customers deciding not to fly with our major airline partners or with us. If we are unable to provide consistently high-quality customer service, it could have an adverse effect on our relationships with our major airline partners.
Risks associated with our presence in international emerging markets, including political or economic instability, and failure to adequately comply with existing legal requirements, may materially adversely affect us.
Some of our target growth markets include countries with less developed economies, legal systems, financial markets and business and political environments are vulnerable to economic and political disruptions, such as significant fluctuations in gross domestic product, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets, trafficking and the imposition of taxes or other charges by governments. The occurrence of any of these events in markets served by us now or in the future and the resulting instability may have a material adverse effect on our business, results of operations and financial condition.
We emphasize compliance with all applicable laws and regulations and have implemented and continue to implement and refresh policies, procedures and certain ongoing training of our employees, third-party specialists and partners with regard to business ethics and key legal requirements; however, we cannot assure you that our employees, third-party specialists or partners will adhere to our code of ethics, other policies or other legal requirements. If we fail to enforce our policies and
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procedures properly or maintain adequate recordkeeping and internal accounting practices to record our transactions accurately, we may be subject to sanctions. In the event we believe or have reason to believe our employees, third-party specialists or partners have or may have violated applicable laws or regulations, we may incur investigation costs, potential penalties and other related costs which in turn may materially adversely affect our reputation and could have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Our Industry
The airline industry is highly competitive and has undergone a period of consolidation and transition leaving fewer potential major airline partners.
The airline industry is highly competitive. We compete primarily with other regional airlines, some of which are owned by or operated by major airlines. In certain instances, our competitors are larger than us and possess significantly greater financial and other resources than we do. The airline industry has undergone substantial consolidation, including the mergers between Alaska Airlines and Virgin America Inc. in 2016, American and US Airways in 2013, Southwest Airlines Co. and AirTran Airways in 2011, United and Continental Airlines in 2010 and Delta and Northwest Airlines in 2008. Any additional consolidation or significant alliance activity within the airline industry could further limit the number of potential partners with whom we could enter into capacity purchase agreements.
We are subject to significant governmental regulation.
All interstate air carriers, including us, are subject to regulation by the DOT, the FAA and other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA requires operating, air worthiness and other certificates; approval of personnel who may engage in flight, maintenance or operation activities; record keeping procedures in accordance with FAA requirements; and FAA approval of flight training and retraining programs. We cannot predict whether we will be able to comply with all present and future laws, rules, regulations and certification requirements or that the cost of continued compliance will not have a material adverse effect on our operations. We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and regulations to which we are subject. A decision by the FAA to ground, or require time consuming inspections of or maintenance on, all or any of our aircraft for any reason may have a material adverse effect on our operations. In addition to state and federal regulation, airports and municipalities enact rules and regulations that affect our operations and require that we incur substantial on-going costs.
Airlines are often affected by factors beyond their control including: air traffic congestion at airports; air traffic control inefficiencies; adverse weather conditions, such as hurricanes or blizzards; increased security measures; new travel related taxes or the outbreak of disease, any of which could have a material adverse effect on our business, results of operations and financial condition.
Like other airlines, our business is affected by factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, increased security measures, new travel-related taxes and fees, adverse weather conditions, natural disasters and the outbreak of disease. Factors that cause flight delays frustrate passengers and increase operating costs and decrease revenues, which in turn could adversely affect profitability. The federal government singularly controls all U.S. airspace, and airlines are completely dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The air traffic control system, which is operated by the FAA, faces challenges in managing the growing demand for U.S. air travel, U.S. and foreign air-traffic controllers often rely on outdated technologies that routinely overwhelm the system and compel airlines to fly inefficient, indirect
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routes resulting in delays. In addition, there are currently proposals before Congress that could potentially lead to the privatization of the United States air traffic control system, which could adversely affect our business. Further, implementation of the Next Generation Air Transport System by the FAA would result in changes to aircraft routings and flight paths that could lead to increased noise complaints and lawsuits, resulting in increased costs. There are additional proposals before Congress that would treat a wide range of consumer protection issues, including, among other things, proposals to regulate seat size, which could increase the costs of doing business.
Adverse weather conditions and natural disasters, such as hurricanes, winter snowstorms or earthquakes, can cause flight cancellations or significant delays. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect us to a greater degree than other, larger airlines that may be able to recover more quickly from these events, and therefore could have a material adverse effect on our business, results of operations and financial condition to a greater degree than other air carriers. Any general reduction in airline passenger traffic could have a material adverse effect on our business, results of operations and financial condition.
Terrorist activities or warnings have dramatically impacted the airline industry, and will likely continue to do so.
The terrorist attacks of September 11, 2001 and their aftermath have negatively impacted the airline industry in general, including our operations. If additional terrorist attacks are launched against the airline industry, there will be lasting consequences of the attacks, which may include loss of life, property damage, increased security and insurance costs, increased concerns about future terrorist attacks, increased government regulation and airport delays due to heightened security. We cannot provide any assurance that these events will not harm the airline industry generally or our operations or financial condition in particular.
The occurrence of an aviation accident involving our aircraft would negatively impact our operations and financial condition.
An accident or incident involving our aircraft could result in significant potential claims of injured passengers and others, as well as repair or replacement of a damaged aircraft and its consequential temporary or permanent loss from service. In the event of an accident, our liability insurance may not be adequate to offset our exposure to potential claims and we may be forced to bear substantial losses from the accident. Substantial claims resulting from an accident in excess of our related insurance coverage would harm our operational and financial results. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that our operations are less safe or reliable than other airlines.
An outbreak of a disease or similar public health threat could have a material adverse impact on our business, financial position and results of operations.
An outbreak of a disease or similar public health threat that affects travel demand, travel behavior, or travel restrictions could have a material adverse impact on our business, financial condition and results of operations.
Risks Related to Owning Our Common Stock
The market price of our common stock may be volatile, which could cause the value of an investment in our stock to decline.
Prior to this offering, there has been no public market for shares of our common stock, and an active public market for these shares may not develop or be sustained after this offering. We and the
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representatives of the underwriters determined the initial public offering price of our common stock through negotiation. This price does not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. In addition, the market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including:
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announcements concerning our major airline partners, competitors, the airline industry or the economy in general; |
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strategic actions by us, our major airline partners, or our competitors, such as acquisitions or restructurings; |
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media reports and publications about the safety of our aircraft or the aircraft type we operate; |
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new regulatory pronouncements and changes in regulatory guidelines; |
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announcements concerning the availability of the type of aircraft we use; |
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significant volatility in the market price and trading volume of companies in the airline industry; |
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changes in financial estimates or recommendations by securities analysts or failure to meet analysts performance expectations; |
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sales of our common stock or other actions by insiders or investors with significant shareholdings, including sales by our principal shareholders; and |
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general market, political and other economic conditions. |
The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. Broad market fluctuations may materially adversely affect the trading price of our common stock.
In the past, shareholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert managements attention and resources and have a material adverse effect on our business, results of operations and financial condition.
If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities and industry analysts may publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, the trading price of our common stock would likely decline. If one or more of these analysts ceases to cover our company or fails to publish reports on us regularly, demand for our stock could decrease, which may cause the trading price of our common stock and the trading volume of our common stock to decline.
Purchasers of our common stock in this offering will experience immediate and substantial dilution in the tangible net book value of their investment.
If you purchase common stock in this offering, you will incur immediate and substantial dilution of $4.32 per share, representing the difference between the assumed initial public offering price of $15.00 per share, which is the mid-point of the estimated offering price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and estimated offering expenses payable by us, and our pro forma net tangible book value per share after giving effect to this offering and the issuance of 966,022 shares of restricted common stock under our 2018 Plan immediately following the completion of this offering. The future vesting of our restricted stock awards (including
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unvested restricted shares issued in connection with the 2018 Plan Issuances) and the exercise of outstanding warrants to purchase our common stock will result in further future dilution. See the section titled Dilution elsewhere in this prospectus for a further description of the dilution you will experience immediately after this offering.
The value of our common stock may be materially adversely affected by additional issuances of common stock by us or sales by our principal shareholders.
Any future issuances or sales of our common stock by us will be dilutive to our existing common shareholders. We had 12,394,215 shares of common stock outstanding as of March 31, 2018. All of the shares of common stock sold in this offering will be freely tradeable without restrictions or further registration under the Securities Act of 1933, as amended (the Securities Act). The holders of 98% of our outstanding shares of our common stock have signed lock-up agreements with the underwriters of this offering, under which they have agreed, subject to certain exceptions, not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock, enter into a transaction which would have the same effect, without the prior written consent of certain of the underwriters, for a period of 180 days after the date of this prospectus. Sales of substantial amounts of our common stock in the public or private market, a perception in the market that such sales could occur, or the issuance of securities exercisable or convertible into our common stock, could adversely affect the prevailing price of our common stock.
The value of our common stock may be materially adversely affected by additional issuances of common stock underlying our outstanding warrants.
As of March 31, 2018, we had outstanding warrants to purchase an aggregate of 11,140,905 shares of our common stock, 250,000 of which were terminated in June 2018. Of this amount, 10,890,905 were originally issued to non-U.S. citizens who were claimholders in our bankruptcy proceedings in order to maintain compliance with restrictions imposed by federal law on foreign ownership of U.S. airlines. Any future warrant exercises by our existing warrant holders will be dilutive to our existing common shareholders. All of the shares of common stock issuable upon exercise of our warrants will be freely tradeable without restrictions or further registration under the Securities Act. The holders of substantially all of our outstanding warrants have signed lock-up agreements with the underwriters of this offering, under which they have agreed, subject to certain exceptions, not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock, enter into a transaction which would have the same effect, without the prior written consent of certain of the underwriters, for a period of 180 days after the date of this prospectus. Sales of substantial amounts of our common stock in the public or private market, a perception in the market that such sales could occur, or the issuance of securities exercisable or convertible into our common stock, could adversely affect the prevailing price of our common stock.
Provisions in our charter documents might deter acquisition bids for us, which could adversely affect the price of our common stock.
Our articles of incorporation and bylaws contain provisions that, among other things:
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authorize our Board of Directors, without shareholder approval, to designate and fix the voting powers, designations, preferences, limitations, restrictions and relative rights of one or more series of preferred stock and to issue shares of one or more series of preferred stock so designated, or rights to acquire such preferred stock, that could dilute the interest of, or impair the voting power of, holders of our common stock and could also have the effect of discouraging, delaying or preventing a change of control; |
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establish advance notice procedures that shareholders must comply with in order to nominate candidates to our Board of Directors and propose matters to be brought before an annual or special meeting of our shareholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to obtain control of our company; |
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authorize a majority of our Board of Directors to appoint a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which may prevent shareholders from being able to fill vacancies on our Board of Directors; |
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restrict the number of directors constituting our Board of Directors to within a set range, and give our Board of Directors exclusive authority to increase or decrease the number of directors within such range, which may prevent shareholders from being able to fill vacancies on our Board of Directors; and |
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restrict the ability of shareholders to call special meetings of shareholders. |
Our corporate charter includes provisions limiting ownership by non-U.S. citizens.
To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our second amended and restated articles of incorporation to be in effect immediately prior to the consummation of this offering restrict the ownership and voting of shares of our common stock by people and entities who are not citizens of the United States as that term is defined in 49 U.S.C. § 40102(a). That statute defines citizen of the United States as, among other things, a U.S. corporation, of which the president and at least two-thirds of the board of directors and other managing officers are individuals who are citizens of the United States, which is under the actual control of citizens of the United States and in which at least 75% of the voting interest is owned or controlled by persons who are citizens of the United States. Our second amended and restated articles of incorporation prohibit any non-U.S. citizen from owning or controlling more than 24.9% of the aggregate votes of all outstanding shares of our common stock or 49.0% of the total number of outstanding shares of our capital stock. The restrictions imposed by the above-described ownership caps are applied to each non-U.S. citizen in reverse chronological order based on the date of registration on our foreign stock record. At no time may shares of our capital stock held by non-U.S. citizens be voted unless such shares are reflected on the foreign stock record. The voting rights of non-U.S. citizens having voting control over any shares of our capital stock are subject to automatic suspension to the extent required to ensure that we are in compliance with applicable law. In the event any transfer or issuance of shares of our capital stock to a non-U.S. citizen would result in non-U.S. citizens owning more than the above-described cap amounts, such transfer or issuance will be void and of no effect.
As of March 31, 2018, there were 10,890,905 outstanding warrants to purchase shares of our common stock, with an exercise price of $0.004 per share and 250,000 outstanding warrants to purchase shares of our common stock with an exercise price of $3.20 per share (which were terminated in June 2018). The warrants are not exercisable in violation of the ownership restrictions described above. We are currently in compliance with all applicable foreign ownership restrictions. See BusinessForeign Ownership and Description of Capital StockAnti-Takeover Provisions of Our Articles of Incorporation, Bylaws and Nevada LawLimited Ownership and Voting by Foreign Owners .
Our corporate charter limits certain transfers of our stock, which limits are intended to preserve our ability to use our net operating loss carryforwards, and these limits could have an effect on the market price and liquidity of our common stock.
To reduce the risk of a potential adverse effect on our ability to use our net operating loss carryforwards for federal income tax purposes, our second amended and restated articles of incorporation to be in effect immediately prior to the consummation of this offering prohibit the transfer
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of any shares of our capital stock that would result in (i) any person or entity owning 4.75% or more of our then-outstanding capital stock, or (ii) an increase in the percentage ownership of any person or entity owning 4.75% or more of our then-outstanding capital stock. These transfer restrictions expire upon the earliest of (i) the repeal of Section 382 of the Code or any successor statute if our Board of Directors determines that such restrictions are no longer necessary to preserve our ability to use our net operating loss carryforwards, (ii) the beginning of a fiscal year to which our Board of Directors determines that no net operating losses may be carried forward, or (iii) such other date as determined by our Board of Directors. These transfer restrictions apply to the beneficial owner of the shares of our capital stock. The clients of an investment advisor are treated as the beneficial owners of stock for this purpose if the clients have the right to receive dividends, if any, the power to acquire or dispose of the shares of our capital stock, and the right to proceeds from the sale of our capital stock. Certain transactions approved by our Board of Directors, such as mergers and consolidations meeting certain requirements set forth in our articles of incorporation, are exempt from the above-described transfer restrictions. Our Board of Directors also has the ability to grant waivers, in its discretion, with respect to transfers of our stock that would otherwise be prohibited. Our Board of Directors has agreed to waive the above-referenced restrictions in our second amended and restated articles of incorporation to those persons or entities that acquire shares of our common stock in excess of the 4.75% threshold in this offering. Any transfer of common stock in violation of these restrictions will be void and will be treated as if such transfer never occurred.
The transfer restrictions contained in our second amended and restated articles of incorporation may impair or prevent a sale of common stock by a shareholder and may adversely affect the price at which a shareholder can sell our common stock. In addition, this limitation may have the effect of delaying or preventing a change in control of the Company, creating a perception that a change in control cannot occur or otherwise discouraging takeover attempts that some shareholders may consider beneficial, which could also adversely affect the market price of the our common stock. We cannot predict the effect that this provision in our second amended and restated articles of incorporation may have on the market price of the our common stock.
We currently do not intend to pay dividends on our common stock and, consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.
We have not historically paid dividends on shares of our common stock and do not expect to pay dividends on such shares in the foreseeable future. Additionally, our Investor Rights Agreement with US Airways, Inc., dated March 1, 2011, which was later assigned to American following the merger of US Airways, Inc. and American (the Investor Rights Agreement), RASPRO Lease Facility and GECAS Lease Facility (each as defined below) contain restrictions that limit our ability to or prohibit us from paying dividends to holders of our common stock. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our results of operations, financial condition, capital requirements, restrictions contained in current or future leases and financing instruments, business prospects and such other factors as our Board of Directors deems relevant, including restrictions under applicable law. Consequently, your only opportunity to achieve a positive return on your investment in us will be if the market price of our common stock appreciates.
We have broad discretion over the use of the net proceeds from this offering and we may not use them effectively.
We cannot specify with any certainty the particular uses of the net proceeds that we will receive from this offering. Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in Use of Proceeds, and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used
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appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these proceeds effectively could adversely affect our business, results of operations, and financial condition. Pending their use, we may invest our proceeds in a manner that does not produce income or that loses value. Our investments may not yield a favorable return to our investors and may negatively impact the price of our common stock.
We are an emerging growth company, and the reduced disclosure and regulatory requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We qualify as an emerging growth company as defined in the JOBS Act, and therefore we may take advantage of reduced disclosure and regulatory requirements that are otherwise generally applicable to public companies. As an emerging growth company:
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We may present only two years of audited financial statements and related Selected Financial Data and Managements Discussion and Analysis of Financial Condition and Results of Operations; |
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We are not required to obtain an attestation and report from our independent registered public accounting firm on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act; |
|
We may present reduced disclosure regarding executive compensation in our periodic reports and proxy statements; and |
|
We are not required to hold nonbinding advisory shareholder votes on executive compensation or golden parachute arrangements. |
We may take advantage of these reduced requirements until we are no longer an emerging growth company, which will occur upon the earliest of (i) the last day of the fiscal year following the fifth anniversary of this offering, (ii) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more, (iii) the date on which we have, during the previous rolling three-year period, issued more than $1.0 billion in non-convertible debt securities and (iv) the date on which we are deemed to be a large accelerated filer as defined in the Securities Exchange Act of 1934, as amended (the Exchange Act). Investors may find our common stock less attractive or our company less comparable to certain other public companies because we will rely on these reduced requirements.
In addition, the JOBS Act permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards. This effectively permits the delayed adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are electing to opt out of such extended transition period and, as a result, we will comply with new or revised accounting standards on the dates for which compliance is required for non-emerging growth companies. This election is irrevocable.
The requirements of being a public company may strain our resources, increase our operating costs, divert managements attention and affect our ability to attract and retain qualified board members or executive officers.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the Nasdaq Global Select Market, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial
37
compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources, particularly after we are no longer an emerging growth company. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. To maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, managements attention may be diverted from other business concerns, which could harm our business and results of operations. We will need to hire additional employees or engage outside consultants to comply with these requirements, increasing our costs and expenses.
In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of managements time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may suffer.
We also expect that being a public company will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our Board of Directors, particularly to serve on our board committees, and qualified executive officers.
As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could suffer, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, financial condition and results of operations.
We will be required to assess our internal control over financial reporting on an annual basis, and any future adverse findings from such assessment could result in a loss of investor confidence in our financial reports, result in significant expenses to remediate any internal control deficiencies and have a material adverse effect on our business, results of operations and financial condition.
We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the closing of this offering. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on our internal control over financial reporting, provided that our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control
38
over financial reporting until our first annual report required to be filed with the SEC following the later of the date we are deemed to be an accelerated filer or a large accelerated filer, each as defined in the Exchange Act, or the date we are no longer an emerging growth company, as defined in the JOBS Act. We will be required to disclose changes made in our internal control and procedures on a quarterly basis. To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff. We are beginning the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, and we may not be able to complete our evaluation, testing, and any required remediation in a timely fashion or at all.
In future periods, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the regulatory investigations, civil or criminal sanctions and litigation, any of which would have a material adverse effect on our business, results of operations and financial condition.
39
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or managements good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
|
the supply and retention of qualified airline pilots; |
|
the volatility of pilot attrition; |
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dependence on, and changes to, or non renewal of, our capacity purchase agreements; |
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increases in our labor costs; |
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reduced utilization under our capacity purchase agreements; |
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the financial strength of our major airline partners; |
|
direct operation of regional jets by our major airline partners; |
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limitations on our ability to expand regional flying within the flight systems of our major airline partners and those of other major airlines; |
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our significant amount of debt and other contractual obligations; |
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our compliance with ongoing financial covenants under our credit facilities; |
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our ability to keep costs low and execute our growth strategies; and |
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other risk factors included under Risk Factors in this prospectus. |
In addition, in this prospectus, the words believe, may, estimate, continue, anticipate, intend, expect, predict, potential and similar expressions, as they relate to our company, business or management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.
We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Further, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date of this prospectus. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
40
We estimate that the net proceeds to us from this offering will be approximately $145.9 million, or approximately $158.3 million if the overallotment option is exercised in full, based on an assumed initial public offering price of $15.00 per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Pursuant to an overallotment option, we and the selling shareholders have offered an aggregate of up to 1,605,000 shares of our common stock for sale in this offering. We will not receive any proceeds from the sale of shares by the selling shareholders.
We intend to use the net proceeds from this offering to: (i) repay all outstanding indebtedness under our CIT Revolving Credit Facility in the amount of $25.7 million; (ii) repay from $20.0 to $40.0 million of existing indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes; and (iii) in connection with the repayment, refinance the remaining portion of indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes. Our CIT Revolving Credit Facility permits revolving borrowings of up to $35.0 million and bears interest at LIBOR plus a margin of 4.25%. Following our repayment of funds drawn under our CIT Revolving Credit Facility, the $35.0 million commitment amount will remain available for future borrowing through the maturity date of August 12, 2019. As of March 31, 2018, $92.3 million of borrowings were outstanding under our Spare Engine Facility. Funds drawn under this facility bear interest at the rate of 7.25% per annum plus the greater of (a) 0.5% or (b) the Eurodollar rate. There are four tranches of debt under our Spare Engine Facility, which mature between January 2022 and February 2023. As of June 28, 2018, the date of issuance, we had an aggregate of $29.4 million of borrowings outstanding under our Subordinated GECAS Notes, each of which bear interest at LIBOR plus 7.50% and mature on February 1, 2022. We can give no assurance that we will be able to refinance the Spare Engine Facility or the Subordinated GECAS Notes at acceptable rates, on acceptable terms, or at all. For a further description of our CIT Revolving Credit Facility, Spare Engine Facility and Subordinated GECAS Notes, see Managements Discussion and Analysis of Financial Condition and Results of OperationsCommitments and Contractual Obligations elsewhere in this prospectus. Imperial Capital, LLC or its affiliates may receive a restructuring fee in connection with our repayment of debt. For a further discussion, see UnderwritingRelationships and Conflicts of Interest .
We intend to use any remaining proceeds for general corporate purposes, which may include the repayment of other indebtedness, working capital and capital expenditures, including flight equipment acquisitions and lease buyouts. Currently, we do not know the amounts that we intend to use for each of these general corporate activities. Accordingly, our management will have broad discretion over the uses of the net proceeds in this offering.
Each $1.00 increase (decrease) in the assumed public offering price of $15.00 per share would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $10.0 million. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $14.0 million, assuming that the assumed offering price stays the same. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may impact the amount of time prior to which we may need to seek additional capital.
41
We have never paid cash dividends on our common stock and we do not presently anticipate paying cash dividends after the completion of this offering. In addition, our Investor Rights Agreement, RASPRO Lease Facility and GECAS Lease Facility (each as defined below) contain negative covenants prohibiting us from paying dividends to our shareholders and future financing arrangements may similarly restrict us from paying dividends. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board of Directors and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, covenant compliance, capital requirements, business prospects and other factors our Board of Directors may deem relevant, including restrictions imposed under applicable law.
42
The following table sets forth our cash and cash equivalents, current maturities of long-term debt and capitalization as of March 31, 2018:
|
on an actual basis; and |
|
on a pro forma basis to give effect to: (i) the issuance of 10,700,000 shares of our common stock pursuant to this offering; (ii) our application of the net proceeds from this offering as set forth under Use of Proceeds , assuming an initial public offering price of $15.00 per share (which is the mid-point of the estimated price range set forth on the cover page of this prospectus) and a repayment of $30 million of existing indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes (which is the mid-point of the estimated range set forth in Use of Proceeds ); and (iii) the issuance of 966,022 shares of restricted common stock under our 2018 Plan immediately following the completion of this offering as part of the 2018 Plan Issuances. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances . |
The information in the following table also reflects a 2.5-for-1 forward stock split and the filing and effectiveness of our second amended and restated articles of incorporation, each of which will occur immediately prior to the consummation of this offering. You should read this capitalization table together with our financial statements and the related notes appearing at the end of this prospectus, the Managements Discussion and Analysis of Financial Condition and Results of Operations section, and other financial information included in this prospectus.
As of March 31, 2018 | ||||||||
Actual | Pro Forma (1) | |||||||
(in thousands, except per share data) | ||||||||
Cash and cash equivalents |
$ | 52,699 | $ | 142,968 | ||||
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|
|
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Long-term debt, including current portion |
929,029 | 873,379 | ||||||
Shareholders equity: |
||||||||
Preferred stock, no par value, 5,000,000 shares authorized; no shares issued and outstanding |
| | ||||||
Common stock of no par value and additional paid-in capital, 125,000,000 shares of common stock authorized, 12,394,215 shares issued and outstanding and 11,140,905 warrants issued and outstanding; 125,000,000 shares of common stock authorized pro forma, 24,060,237 shares issued and outstanding pro forma and 11,140,905 warrants issued and outstanding pro forma |
115,275 | 262,252 | ||||||
Retained earnings |
133,430 | 133,430 | ||||||
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|
|
|
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Total shareholders equity |
248,705 | 395,682 | ||||||
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|
|
|
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Total capitalization |
$ | 1,177,734 | $ | 1,269,061 | ||||
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|
|
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(1) |
Each $1.00 increase or decrease in the assumed initial public offering price of $15.00 per share would increase or decrease, respectively, the amount of cash and cash equivalents, additional paid-in capital, total shareholders equity and total capitalization by $10.0 million (assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 in the number of shares we are offering would increase or decrease, respectively, the amount of cash and cash equivalents, shareholders equity and total capitalization by approximately $14.0 million (based on an assumed initial public offering price of $15.00 per share, the mid-point of the price range as set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. |
43
The number of shares of our common stock outstanding after this offering is based on 12,394,215 shares outstanding as of March 31, 2018, 10,890,905 shares issuable upon exercise of warrants with an exercise price of $0.004 per share, 250,000 shares issuable upon exercise of warrants with an exercise price of $3.20 per share (which were terminated in June 2018) and 966,022 shares of restricted common stock to be issued under our 2018 Plan immediately following the completion of this offering in exchange for vested SARs previously issued under our SAR Plan, and excludes:
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744,497 awarded and unvested shares of common stock under our 2011 Plan as of March 31, 2018; |
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20,843 awarded and unvested shares of common stock under our 2017 Plan as of March 31, 2018; |
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323,048 awarded and unvested restricted stock units under our RSU Plan as of March 31, 2018; and |
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300,012 shares of restricted common stock to be issued under our 2018 Plan, in exchange for unvested SARs previously issued under our SAR Plan. |
We expect that an aggregate of 105,275 shares will vest under our 2011 Plan, 2017 Plan and RSU Plan, net of new awards granted, between March 31, 2018 and the completion of this offering. In addition, immediately following the completion of this offering, the remaining unvested equity awards then outstanding under the 2011 Plan, 2017 Plan and RSU Plan will be cancelled and exchanged for 983,113 shares of restricted common stock under our 2018 Plan, and will remain subject to vesting on the same terms set forth in the prior vesting schedules. The SARs previously issued under our SAR Plan, which currently settle only in cash, will be cancelled and exchanged for an aggregate of 1,266,035 shares of restricted common stock under our 2018 Plan, of which 966,022 will be fully vested upon issuance and are included in the number of shares of our common stock outstanding after this offering. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances elsewhere in this prospectus.
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If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock immediately after the offering, giving effect to the 2018 Plan Issuances.
The historical net tangible book value (deficit) of our common stock as of March 31, 2018 was $237.2 million, or $19.14 per share on an outstanding shares basis and $10.07 per share on a fully-diluted basis. Historical net tangible book value per share is determined by dividing the net tangible book value by the number of shares of outstanding common stock. If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock.
After giving effect to (i) our issuance of 10,700,000 shares of common stock at an assumed initial public offering price of $15.00 per share of common stock, the mid-point of the range of the estimated initial offering price as set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and estimated offering expenses payable by us, and (ii) the 2018 Plan Issuances. Our pro forma net tangible book value as adjusted as of March 31, 2018 would have been approximately $384.1 million, or approximately $15.97 per pro forma share of common stock ($10.68 per share on a fully-diluted basis). This represents an immediate increase in pro forma net tangible book value of $0.61 per share to our existing shareholders and an immediate dilution of $4.32 per share to new investors in this offering, each on a fully-diluted basis.
The following table illustrates this dilution on a fully-diluted per share basis to new investors, after giving effect to (i) the completion of the 2.5-for-1 forward stock split, which will occur immediately prior to the completion of this offering, and (ii) the 2018 Plan Issuances, which will occur immediately following the completion of this offering:
Assumed initial public offering price |
$ | 15.00 | ||||||
Historical net tangible book value per share as of March 31, 2018 |
10.07 | |||||||
Increase in pro forma net tangible book value per share attributable to this offering, giving effect to the 2018 Plan Issuances |
0.61 | |||||||
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Pro forma net tangible book value per share, as adjusted (1) |
10.68 | |||||||
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Dilution in pro forma net tangible book value per share to new investors in this offering |
$ | 4.32 | ||||||
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(1) |
Pro forma net tangible book value per share, as adjusted, gives effect to this offering, and the 2018 Plan Issuances. |
Each $1.00 increase or decrease in the assumed public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase or decrease, respectively, our pro forma net tangible book value, as adjusted to give effect to this offering, and the proposed 2018 Plan Issuances, by $10.0 million, or $0.28 per share on a fully-diluted basis, and the dilution per share to investors participating in this offering by $0.72 per share (assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same), after deducting estimated underwriting discounts and commissions and estimated offering expenses
45
payable by us. We may also increase or decrease the number of shares we are offering. At the assumed public offering price per share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, an increase of 1,000,000 in the number of shares we are offering would increase our pro forma net tangible book value, as adjusted to give effect to this offering, by approximately $14.0 million, or $0.09 per share on a fully-diluted basis, and decrease the dilution per share to investors participating in this offering by $0.09 per share, and a decrease of 1,000,000 in the number of shares we are offering would decrease our pro forma net tangible book value, as adjusted to give effect to this offering, by approximately $14.0 million, or $0.09 per share on a fully-diluted basis, and increase the dilution per share to investors participating in this offering by $0.09 per share. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. We will not receive any of the proceeds from the sale of any shares by the selling shareholders if the overallotment option is exercised; accordingly, there is no dilutive impact as a result of these sales.
The table below summarizes as of March 31, 2018, on a pro forma as adjusted basis described above, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by existing shareholders, and (ii) to be paid by new investors purchasing our common stock in this offering at an assumed initial public offering price of $15.00 per share (in thousands except per share and percentage data) and giving effect to the 2018 Plan Issuances.
Shares Purchased | Total Consideration |
Average Price
Per Share |
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Number | Percent | Amount | Percent | |||||||||||||||||
Existing shareholders (1) |
13,360 | 55.5 | % | $ | 12.52 | 0.01 | % | $ | 0.001 | |||||||||||
New investors |
10,700 | 44.5 | % | $ | 160,500 | 99.99 | % | $ | 15.000 | |||||||||||
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Total |
24,060 | 100.00 | % | $ | 160,512 | 100.00 | % | $ | 6.671 |
(1) |
The number of shares purchased by existing shareholders is based upon the exercise of warrants to purchase shares of our common stock over the past five years, each with an exercise price of $0.004 per share. The remaining shares held by existing shareholders, listed at zero cost, were either (i) issued to claimholders in our bankruptcy proceedings, or (ii) issued in connection with the vesting of equity awards under our 2011 Plan, 2017 Plan or RSU Plan. |
The number of shares of our common stock outstanding after this offering is based on 12,394,215 shares outstanding as of March 31, 2018, 10,890,905 shares issuable upon exercise of warrants with an exercise price of $0.004 per share, 250,000 shares issuable upon exercise of warrants with an exercise price of $3.20 per share (which were terminated in June 2018) and 966,022 shares of restricted common stock to be issued under our 2018 Plan immediately following the completion of this offering in exchange for vested SARs previously issued under our SAR Plan.
If the underwriters exercise in full their option to purchase additional shares of our common stock from us, our existing shareholders would own 50.8% and our new investors would own 49.2% of the total number of shares of our common stock outstanding upon completion of this offering. The total consideration paid by our existing shareholders would be approximately $12.52, or 0.001%, and the total consideration paid by investors purchasing shares in this offering would be $184,575 million, or 99.9%.
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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
You should read the following selected consolidated historical financial and operating data below in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements, related notes and other financial information included in this prospectus. The selected consolidated financial data in this section are not intended to replace the consolidated financial statements and are qualified in their entirety by the financial statements and related notes included in this prospectus.
The selected consolidated statement of operations data for our fiscal years ended September 30, 2016 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated balance sheet data for the six months ended March 31, 2018 has been derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The selected consolidated statements of operations data for our fiscal years ended September 30, 2013, 2014 and 2015 have been derived from our consolidated financial statements that are not included in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and results for the six months ended March 31, 2018 are not indicative of the results expected for the full year.
Year Ended September 30, |
Six Months Ended
March 31, |
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2013 (1) | 2014 (1) | 2015 | 2016 | 2017 | 2017 | 2018 | ||||||||||||||||||||||
(in thousands, except per share data) |
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Operating revenues: |
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Contract revenue |
$ | 382,125 | $ | 407,408 | $ | 481,168 | $ | 569,373 | $ | 618,698 | $ | 309,711 | $ | 310,904 | ||||||||||||||
Pass-through and other |
33,131 | 28,617 | 24,931 | 18,463 | 24,878 | 9,619 | 21,420 | |||||||||||||||||||||
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Total operating revenues |
415,256 | 436,025 | 506,099 | 587,836 | 643,576 | 319,330 | 332,324 | |||||||||||||||||||||
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Operating expenses: |
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Flight operations |
78,685 | 93,092 | 118,600 | 141,422 | 155,516 | 72,349 | 103,807 | |||||||||||||||||||||
Fuel |
13,531 | 6,092 | 1,017 | 753 | 766 | 400 | 198 | |||||||||||||||||||||
Maintenance |
102,473 | 123,506 | 142,643 | 225,130 | 210,729 | 117,422 | 105,756 | |||||||||||||||||||||
Aircraft rent |
77,243 | 80,942 | 69,083 | 71,635 | 72,551 | 36,060 | 36,582 | |||||||||||||||||||||
Aircraft and traffic servicing |
28,363 | 20,817 | 13,274 | 3,936 | 3,676 | 1,580 | 1,744 | |||||||||||||||||||||
Promotions and sales (2) |
5,406 | 2,795 | 11 | | | | | |||||||||||||||||||||
General and administrative |
31,598 | 34,501 | 39,940 | 42,182 | 38,996 | 20,676 | 21,267 | |||||||||||||||||||||
Depreciation and amortization |
32,945 | 33,425 | 42,296 | 46,020 | 61,048 | 29,600 | 31,598 | |||||||||||||||||||||
Asset impairment |
7,942 | | | | | | | |||||||||||||||||||||
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Total operating expenses |
378,186 | 395,170 | 426,864 | 531,078 | 543,282 | 278,087 | 300,952 | |||||||||||||||||||||
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Operating income |
37,070 | 40,855 | 79,235 | 56,758 | 100,294 | 41,243 | 31,372 | |||||||||||||||||||||
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Other (expense) income, net: |
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Interest expense |
(9,043 | ) | (9,881 | ) | (16,984 | ) | (32,618 | ) | (46,110 | ) | (21,840 | ) | (27,474 | ) | ||||||||||||||
Interest income |
71 | 14 | 21 | 325 | 32 | 15 | 19 | |||||||||||||||||||||
Other income (expense), net |
2,458 | (475 | ) | 975 | 381 | (514 | ) | (394 | ) | (102 | ) | |||||||||||||||||
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Year Ended September 30, |
Six Months Ended
March 31, |
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2013 (1) | 2014 (1) | 2015 | 2016 | 2017 | 2017 | 2018 | ||||||||||||||||||||||
(in thousands, except per share data) |
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Total other (expense) income, net |
(6,514 | ) | (10,342 | ) | (15,988 | ) | (31,912 | ) | (46,592 | ) | (22,219 | ) | (27,557 | ) | ||||||||||||||
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Income before taxes |
30,556 | 30,513 | 63,247 | 24,846 | 53,702 | 19,024 | 3,815 | |||||||||||||||||||||
Income tax (benefit) expense |
(11,078 | ) | 11,749 | 24,248 | 9,926 | 20,874 | 7,110 | (21,181 | ) | |||||||||||||||||||
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Net income |
$ | 41,634 | $ | 18,764 | $ | 38,999 | $ | 14,920 | $ | 32,828 | $ | 11,914 | $ | 24,996 | ||||||||||||||
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Net income per share attributable to common shareholders: |
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Basic (3) |
$ | 5.83 | $ | 2.53 | $ | 5.03 | $ | 1.56 | $ | 3.01 | $ | 1.11 | $ | 2.18 | ||||||||||||||
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Diluted (3) |
$ | 1.81 | $ | 0.82 | $ | 1.61 | $ | 0.62 | $ | 1.40 | $ | 0.51 | $ | 1.06 | ||||||||||||||
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Pro forma net income per share attributable to common shareholders (unaudited) (4) : |
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Basic |
$ | 1.56 | $ | 1.00 | ||||||||||||||||||||||||
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Diluted |
$ | 1.16 | $ | 0.78 | ||||||||||||||||||||||||
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Weighted-average common shares outstanding: |
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Basic |
7,146,165 | 7,425,165 | 7,749,665 | 9,558,242 | 10,918,527 | 10,780,678 | 11,441,271 | |||||||||||||||||||||
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Diluted |
23,029,960 | 22,983,286 | 24,161,935 | 24,082,114 | 23,385,778 | 23,443,541 | 23,562,884 | |||||||||||||||||||||
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Non-GAAP financial data: |
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EBITDA (5) |
$ | 72,473 | $ | 73,805 | $ | 122,506 | $ | 103,159 | $ | 160,828 | $ | 70,449 | $ | 62,868 | ||||||||||||||
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EBITDAR (5) |
$ | 149,716 | $ | 154,747 | $ | 191,589 | $ | 174,794 | $ | 233,379 | $ | 106,509 | $ | 99,450 | ||||||||||||||
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(1) |
Our operations data for our fiscal years ended September 30, 2013 and 2014 include results from our historical go! operations. We operated go! as an inter-island air carrier in Hawaii from 2006 to 2014. |
(2) |
Promotion and sales primarily consists of reservations and marketing costs related to our historical go! operations. We do not pay promotion and sales expenses under our capacity purchase agreements. |
(3) |
See Note 10 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted earnings per share. |
(4) |
Pro forma net income per share attributable to common shareholders data is presented for our fiscal year ended September 30, 2017 and the six months ended March 31, 2018 to give effect to: (i) the issuance of 10,700,000 shares of our common stock pursuant to this offering; (ii) our application of the net proceeds from this offering as set forth under Use of Proceeds , assuming an initial public offering price of $15.00 per share (which is the mid-point of the estimated price range set forth on the cover page of this prospectus) and a repayment of $30 million of existing indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes (which is the mid-point of the estimated range set forth in Use of Proceeds ); and (iii) the issuance of shares of restricted common stock under our 2018 Plan immediately following the completion of this offering as part of the 2018 Plan Issuances. For a description of the method used to calculate the number of shares of restricted common stock to be issued under the 2018 Plan immediately after this offering, see Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances elsewhere in this prospectus. This pro forma net income per share attributable to common shareholders data is presented for informational purposes only and does not purport to represent what our pro forma net income (loss) or net income (loss) per share attributable to common shareholders actually would have been had this offering or the 2018 Plan Issuances been completed on October 1, 2016, or to project our net income or net income per share attributable to common shareholders for any future period. |
(5) |
We define EBITDA as earnings before interest, income taxes, and depreciation and amortization. We define EBITDAR as earnings before interest, income taxes, depreciation and amortization and aircraft rent. EBITDA and EBITDAR are included as supplemental disclosure because our senior management believes that they are well recognized valuation metrics in the airline industry that are frequently used by companies, investors, securities analysts and other interested parties in comparing companies in our industry. |
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EBITDA and EBITDAR have limitations as analytical tools. Some of the limitations applicable to these measures include: (i) EBITDA and EBITDAR do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; (ii) EBITDA and EBITDAR do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (iii) EBITDA and EBITDAR do not reflect changes in, or cash requirements for, our working capital needs; (iv) EBITDA and EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future; and (vi) EBITDA and EBITDAR do not reflect any cash requirements for such replacements and other companies in our industry may calculate EBITDA and EBITDAR differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, EBITDA and EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. In addition, EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. For the foregoing reasons, each of EBITDA and EBITDAR has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information.
The following table presents the reconciliation of net income to EBITDA and EBITDAR for the periods presented below:
Year Ended September 30, |
Six Months
Ended March 31, |
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2013 | 2014 | 2015 | 2016 | 2017 | 2017 | 2018 | ||||||||||||||||||||||
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Reconciliation: |
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Net income |
$ | 41,634 | $ | 18,764 | $ | 38,999 | $ | 14,920 | $ | 32,828 | $ | 11,914 | $ | 24,996 | ||||||||||||||
Interest expense |
9,043 | 9,881 | 16,984 | 32,618 | 46,110 | 21,840 | 27,474 | |||||||||||||||||||||
Interest income |
(71 | ) | (14 | ) | (21 | ) | (325 | ) | (32 | ) | (15 | ) | (19 | ) | ||||||||||||||
Income tax expense (benefit) |
(11,078 | ) | 11,749 | 24,248 | 9,926 | 20,874 | 7,110 | (21,181 | ) | |||||||||||||||||||
Depreciation and amortization |
32,945 | 33,425 | 42,296 | 46,020 | 61,048 | 29,600 | 31,598 | |||||||||||||||||||||
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EBITDA |
72,473 | 73,805 | 122,506 | 103,159 | 160,828 | 70,449 | 62,868 | |||||||||||||||||||||
Aircraft rent |
77,243 | 80,942 | 69,083 | 71,635 | 72,551 | 36,060 | 36,582 | |||||||||||||||||||||
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EBITDAR |
149,716 | 154,747 | 191,589 | 174,794 | 233,379 | 106,509 | 99,450 | |||||||||||||||||||||
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The following table presents our historical balance sheet data as of March 31, 2018:
As of March 31, 2018 | ||||||||
Actual | Pro Forma (1) | |||||||
(in thousands) | ||||||||
Balance Sheet Data: |
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Cash and cash equivalents |
$ | 52,699 | $ | 142,968 | ||||
Total assets |
1,342,638 | 1,342,638 | ||||||
Long-term debt, including current portion |
929,029 | 873,379 | ||||||
Shareholders equity |
248,705 | 395,682 |
(1) |
The unaudited adjusted pro forma consolidated balance sheet gives effect to: (i) the issuance of 10,700,000 shares of our common stock pursuant to this offering; (ii) our application of the net proceeds from this offering as set forth under Use of Proceeds , assuming an initial public offering price of $15.00 per share (which is the mid-point of the estimated price range set forth on the cover page of this prospectus); and (iii) the issuance of 966,022 shares of restricted common stock under our 2018 Plan immediately following the completion of this offering as part of the 2018 Plan Issuances. For a description of the method used to calculate the number of shares of restricted common stock to be issued under the 2018 Plan immediately after this offering, see Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances elsewhere in this prospectus. |
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The following table summarizes certain operating data that we believe are useful indicators of our operating performance for our fiscal years ended September 30, 2013, 2014, 2015, 2016 and 2017, respectively, and the six months ended March 31, 2017 and 2018. The definitions of certain terms related to the airline industry used in the table can be found under Glossary of Airline Terms at the end of this prospectus.
Year Ended September 30, |
Six Months Ended
March 31, |
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Operating Data |
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Block hours |
206,431 | 225,720 | 308,681 | 368,468 | 395,083 | 199,303 | 195,559 | |||||||||||||||||||||
Departures |
134,805 | 140,165 | 172,033 | 208,399 | 221,990 | 109,419 | 107,043 | |||||||||||||||||||||
Passengers |
7,872,574 | 8,520,917 | 10,632,903 | 12,497,424 | 13,005,844 | 6,393,651 | 6,332,521 | |||||||||||||||||||||
Available seat milesASMs (thousands) |
4,283,272 | 4,932,516 | 7,356,450 | 8,823,595 | 9,471,911 | 4,828,892 | 4,621,380 | |||||||||||||||||||||
Revenue passenger milesRPMs (thousands) |
3,703,837 | 4,103,834 | 6,019,316 | 7,019,586 | 7,392,688 | 3,759,481 | 3,640,092 | |||||||||||||||||||||
Contract revenue per available seat mileCRASM (in cents) |
¢ | 8.92 | ¢ | 8.26 | ¢ | 6.54 | ¢ | 6.45 | ¢ | 6.53 | ¢ | 6.41 | ¢ | 6.73 | ||||||||||||||
Operating cost per available seat mileCASM (in cents) |
¢ | 8.83 | ¢ | 8.01 | ¢ | 5.80 | ¢ | 6.02 | ¢ | 5.74 | ¢ | 5.76 | ¢ | 6.51 | ||||||||||||||
Average stage length (miles) |
452 | 475 | 565 | 557 | 561 | 580 | 567 | |||||||||||||||||||||
Regional aircraft |
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Owned |
23 | 40 | 47 | 64 | 66 | 66 | 66 | |||||||||||||||||||||
Leased |
48 | 37 | 37 | 37 | 37 | 37 | 37 | |||||||||||||||||||||
Leased from United |
| 7 | 30 | 30 | 37 | 30 | 42 | |||||||||||||||||||||
Total aircraft |
71 | 84 | 114 | 131 | 140 | 133 | 145 | |||||||||||||||||||||
E-175 |
0 | 7 | 30 | 46 | 55 | 48 | 60 | |||||||||||||||||||||
CRJ-900 |
47 | 57 | 63 | 64 | 64 | 64 | 64 | |||||||||||||||||||||
CRJ-700 |
20 | 20 | 20 | 20 | 20 | 20 | 20 | |||||||||||||||||||||
CRJ-200 |
4 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||||||||||||||||
Employees (FTE) |
1,819 | 2,186 | 2,766 | 3,102 | 3,132 | 3,073 | 3,229 |
(1) |
Our operations data for our fiscal years ended September 30, 2013 and 2014 include results from our historical go! operations. We operated go! as an inter-island air carrier in Hawaii from 2006 to 2014. |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with the annual consolidated financial statements, condensed consolidated interim financial statements and the notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in Risk Factors.
Overview
We are a regional air carrier providing scheduled passenger service to 110 cities in 38 states, the District of Columbia, Canada, Mexico, Cuba and the Bahamas. All of our flights are operated as either American Eagle or United Express flights pursuant to the terms of capacity purchase agreements we entered into with American and United. We have a significant presence in several of our major airline partners key domestic hubs and focus cities, including Dallas, Houston, Phoenix and Washington-Dulles.
As of March 31, 2018, we operated a fleet of 145 aircraft with approximately 610 daily departures. We operate 64 CRJ-900 aircraft under our American Capacity Purchase Agreement and 20 CRJ-700 and 60 E-175 aircraft under our United Capacity Purchase Agreement. For the six months ended March 31, 2018, approximately 55% of our aircraft in scheduled service were operated for United and approximately 45% were operated for American. All of our operating revenue in our 2017 fiscal year and the six months ended March 31, 2018 was derived from operations associated with our American and United Capacity Purchase Agreements.
Our long-term capacity purchase agreements provide us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour and flight actually flown, and reimbursement of certain direct operating expenses in exchange for providing regional flying on behalf of our major airline partners. Our capacity purchase agreements also shelter us from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of passengers. Our major airline partners control route selection, pricing, seat inventories, marketing and scheduling, and provide us with ground support services, airport landing slots and gate access.
Trends and Uncertainties Affecting Our Business
We believe our operating and business performance is driven by various factors that typically affect regional airlines and their markets, including trends which affect the broader airline and travel industries, though our capacity purchase agreements reduce our exposure to fluctuations in certain trends. The following key factors may materially affect our future performance:
Availability and Training of Qualified Pilots . On July 8, 2013, as directed by the U.S. Congress, the FAA issued more stringent pilot qualification and crew member flight training standards, which, among other things, increased the required training time for new airline pilots from 250 hours to 1,500 hours of flight time. With these changes, the supply of qualified pilot candidates eligible for hiring by the airline industry has been dramatically reduced. To address the diminished supply of qualified pilot candidates, regional airlines implemented significant pilot wage and bonus increases.
In prior periods, these factors caused our pilot attrition rates to be higher than our ability to hire and retain replacement pilots and we have been unable to provide flight services at or exceeding the
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minimum flight operating levels expected by our major airline partners. See BusinessCapacity Purchase Agreements . However, on July 13, 2017, we reached a new four-year collective bargaining agreement with our pilots that provides increases in our pilots wages, premium pay for flying on scheduled days off and competitive signing bonuses for prospective new pilots. See BusinessEmployees . Following the ratification of our new collective bargaining agreement in July 2017, the average number of new pilot applications per month has increased by 45.3%.
We believe that our average number of new pilot applications per month will continue to exceed pilot attrition during our 2018 fiscal year. However, we face a significant training backlog for our new pilot candidates before we are able to resume flight services at or exceeding the minimum flight operating levels expected by our major airline partners. We are carefully optimizing pilot scheduling and providing premium pay to incentivize our pilots to fly on scheduled days off to maintain the flight schedules expected by our major airline partners. We have also negotiated increased access to flight simulators with our vendors and hired additional instructors to streamline our backlog of pilot training, but our results of operations may be negatively impacted if we are unable to hire and train our pilots in a timely manner.
Pilot Attrition. In recent years, we have experienced significant volatility in our attrition as a result of pilot wage and bonus increases at other regional air carriers, the growth of cargo, low-cost and ultra low-cost carriers and the number of pilots at major airlines reaching the statutory mandatory retirement age of 65 years. Following the ratification of our new collective bargaining agreement in July 2017, our average pilot attrition per month has decreased by 16.2%. If our actual pilot attrition rates are materially different than our projections, our operations and financial results could be materially and adversely affected.
Labor . The airline industry is heavily unionized. The wages, benefits and work rules of unionized airline industry employees are determined by collective bargaining agreements. As of March 31, 2018, approximately 76.7% of our workforce was represented by the ALPA and AFA. Our pilots and flight attendants ratified new four-year collective bargaining agreements during calendar 2017. The agreements include rate increases for three years and two years, respectively, after the amendable dates. The new agreements are amendable following their four-year term and include labor rate structures for two years (flight attendants) and three years (pilots), respectively, after the amendable dates. The terms and conditions of our future collective bargaining agreements may be affected by the results of collective bargaining negotiations at other airlines that may have a greater ability, due to larger scale, greater efficiency or other factors, to bear higher costs than we can. In addition, conflicts between airlines and their unions can lead to work slowdowns or stoppages. A strike or other significant labor dispute with our unionized employees may adversely affect our ability to conduct business.
Competition . The airline industry is highly competitive. We compete principally with other regional airlines. Major airlines typically award capacity purchase agreements to regional airlines based on the following criteria: ability to fly contracted schedules, availability of labor resources, including pilots, low operating cost, financial resources, geographical infrastructure, overall customer service levels relating to on-time arrival and flight completion percentages and the overall image of the regional airline. We expect that, over the next five years, capacity purchase agreements representing up to 300 aircraft currently flown by our competitors on behalf of our major airline partners will expire by their terms and be subject to rebidding. In addition, our United Capacity Purchase Agreement expires with respect to 50 aircraft between June 2019 and August 2020. Our ability to renew our existing agreements and earn additional flying opportunities in the future will depend, in significant part, on our ability to maintain a low-cost structure competitive with other regional air carriers. See BusinessCompetition .
Market Volatility . The airline industry is volatile and affected by economic cycles and trends. Consumer confidence and discretionary spending, fear of terrorism or war, weakening economic conditions, fare
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initiatives, fluctuations in fuel prices, labor actions, changes in governmental regulations on taxes and fees, weather and other factors have contributed to a number of reorganizations, bankruptcies, liquidations and business combinations among major and regional airlines. The effect of economic cycles and trends may be somewhat mitigated by our reliance on capacity purchase agreements. If, however, any of our major airline partners experiences a prolonged decline in the number of passengers or is negatively affected by low ticket prices or high fuel prices, it may seek rate reductions in future capacity purchase agreements, or materially reduce our scheduled flights in order to reduce its costs. Our financial performance could be negatively impacted by any adverse changes to the rates, number of aircraft or utilization under our capacity purchase agreements.
Maintenance Contracts, Costs and Timing . Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at their respective maintenance facilities. We also use third-party vendors, such as AAR, Aviall, Bombardier, GE and StandardAero, for certain heavy airframe and engine maintenance work, along with parts procurement and component overhaul services for our aircraft fleet. As of March 31, 2018, $58.9 million of parts inventory was consigned to us by AAR and Aviall under long-term contracts that is not reflected on our balance sheet.
The average age of our E-175, CRJ-900 and CRJ-700 type aircraft is approximately 2.4, 11.5 and 14.2 years, respectively. Due to the relatively young age of our E-175 aircraft, they require less maintenance now than they will in the future. Over the past five years, we have incurred relatively low maintenance expenses on our E-175 aircraft because most of the parts are under multi-year warranties and a limited number of heavy airframe checks and engine overhauls have occurred. As our E-175 aircraft age and these warranties expire, we expect that maintenance costs will increase in absolute terms and as a percentage of revenue. In addition, because our current aircraft were acquired over a relatively short period of time, significant maintenance events scheduled for these aircraft will occur at roughly the same intervals, meaning we will incur our most expensive scheduled maintenance obligations across our present fleet at approximately the same time. These more significant maintenance activities result in out-of-service periods during which aircraft are dedicated to maintenance activities and unavailable for flying under our capacity purchase agreements.
We use the direct expense method of accounting for our maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance wherein we recognize the expense when the maintenance work is completed, or over the repair period, if materially different. While we keep a record of expected maintenance events, the actual timing and costs of major engine maintenance expense are subject to variables such as estimated usage, government regulations and the level of unscheduled maintenance events and their actual costs. Accordingly, we cannot reliably quantify the costs or timing of future maintenance-related expenses for any significant period of time. For more information, see Critical Accounting PoliciesMaintenance elsewhere in this prospectus.
Aircraft Leasing and Finance Determinations . We have generally funded aircraft acquisitions through a combination of operating leases and debt financing. Our determination to lease or finance the acquisition of aircraft may be influenced by a variety of factors, including the preferences of our major airline partners, the strength of our balance sheet and credit profile and those of our major airline partners, the length and terms of the available lease or financing alternatives, the applicable interest rates, and any lease return conditions. When possible, we prefer to finance aircraft through debt rather than operating leases, due to lower operating costs, extended depreciation period, opportunity for aircraft equity, absence of lease return conditions and greater flexibility in renewing the aircraft under our capacity purchase agreements with our major airline partners after paying off the principal balance.
Subsequent to the initial acquisition of an aircraft, we may also refinance the aircraft or convert one form of financing to another (e.g., replacing an aircraft lease with debt financing). The purchase of leased aircraft allows us to lower our operating costs and avoid lease-related use restrictions and return conditions.
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As of March 31, 2018, we had 79 aircraft in our fleet under lease, including 42 E-175 aircraft owned by United and leased to us at nominal amounts. In order to determine the proper classification of our leased aircraft as either operating leases or capital leases, we must make certain estimates at the inception of the lease relating to the economic useful life and the fair value of an asset as well as select an appropriate discount rate to be used in discounting future lease payments. These estimates are utilized by management in making computations as required by existing accounting standards that determine whether the lease is classified as an operating lease or a capital lease. All of our aircraft leases have been classified as operating leases, which results in rental payments being charged to expense over the terms of the related leases.
We are also subject to lease return provisions that require a minimum portion of the life of an overhaul remain on the engine at the lease return date. We estimate the cost of maintenance lease return obligations and accrue such costs over the remaining lease term when the expense is probable and can be reasonably estimated. Additionally, operating leases are not reflected on our consolidated balance sheet and, accordingly, neither a lease asset nor an obligation for future lease payments is reflected in our consolidated balance sheets. See Recent Accounting Pronouncements below for a discussion of a new accounting standard that is likely to have an impact on our aircraft lease accounting beginning in our 2020 fiscal year.
Seasonality . Our results of operations for any interim period are not necessarily indicative of those for the entire year, since the airline industry is subject to seasonal fluctuations and general economic conditions. Our operations are somewhat favorably affected by increased utilization of our aircraft, historically occurring in the summer months, and are unfavorably affected by increased fleet maintenance during the months from November through January and by inclement weather which occasionally results in cancelled flights, principally during the winter months.
Key Components of Consolidated Statements of Operations
The following discussion summarizes the key components of our consolidated statements of operations and consolidates historical components.
Operating Revenues
Our consolidated operating revenues consist primarily of contract revenue flight services as well as pass-through and other revenues.
Contract Revenue . Contract revenue consists of the fixed monthly amounts per aircraft received pursuant to our capacity purchase agreements with our major airline partners, along with the additional amounts received based on the number of flights and block hours flown. Contract revenues we receive from our major airline partners are paid and recognized by us on a weekly basis.
Pass-Through and Other. Pass-through and other revenue consists of passenger and hull insurance, aircraft property taxes, landing fees, catering and certain maintenance costs related to our E-175 aircraft that we equally recognize as both a revenue and expense.
Operating Expenses
Our operating expenses consist of the following items:
Flight Operations. Flight operations expense includes costs related to salaries, bonuses and benefits earned by our pilots, flight attendants, and dispatch personnel, as well as costs related to technical publications, lodging of our flight crews and pilot training expenses.
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Fuel. Fuel expense includes fuel and related fueling costs for flying we undertake outside of our capacity purchase agreements, including aircraft repositioning and maintenance. As of March 31, 2018, all aircraft fuel and related fueling costs for flying under our capacity purchase agreements were directly paid and supplied by our major airline partners. Accordingly, we do not record an expense or the related revenue for fuel supplied by American and United for flying under our capacity purchase agreements.
Maintenance. Maintenance includes costs related to engine overhauls, airframe, landing gear and normal recurring maintenance, which includes pass-through maintenance costs related to our E-175 aircraft, as well as maintenance lease return obligations on our leased aircraft when the expense is probable and can be reasonably estimated. We record these expenses using the direct expense method of accounting, wherein the expense is recognized when the maintenance work is completed, or over the repair period, if materially different. As a result of using the direct expense method, the timing of maintenance expense reflected in the financial statements may vary significantly period to period.
Aircraft Rent. Aircraft rent includes costs related to leased engines and aircraft.
Aircraft and Traffic Servicing. Aircraft and traffic servicing includes expenses related to our capacity purchase agreements, including aircraft cleaning, passenger disruption reimbursements, international navigation fees and wages of airport operations personnel, a portion of which are reimbursable by our major airline partners.
General and Administrative. General and administrative expense includes insurance and taxes, non-operational administrative employee wages and related expenses, building rents, real property leases, utilities, legal, audit and other administrative expenses.
Depreciation and Amortization. Depreciation expense is a periodic non-cash charge primarily related to aircraft, engine and equipment depreciation. Amortization expense is a periodic non-cash charge related to our customer relationship intangible asset.
Other Expense
Interest Expense. Interest expense is related to interest on our debt to finance purchases of aircraft, engines, equipment as well as debt financing costs amortization.
Interest Income. Interest income includes interest income on our cash and cash equivalent balances.
Other Income (Expense). Other income includes income derived from activities not classified in any other area of the consolidated statements of income, including write-offs of miscellaneous third-party fees.
Segment Reporting
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. In consideration of Accounting Standards Codification (ASC) 280, Segment Reporting, we are not organized around specific services or geographic regions. We currently operate in one service line providing scheduled passenger services in accordance with our capacity purchase agreements.
While we operate under two separate capacity purchase agreements, we do not manage our business based on any performance measure at the individual contract level. Additionally, our chief operating
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decision maker uses consolidated financial information to evaluate our performance, which is the same basis on which he communicates our results and performance to our Board of Directors. He bases all significant decisions regarding the allocation of our resources on a consolidated basis. Based on the information described above and in accordance with the applicable literature, management has concluded that we are organized and operated as one operating and reportable segment.
Results of Operations
Six Months Ended March 31, 2017 Compared to Six Months Ended March 31, 2018
We had operating income of $41.2 million in our six months ended March 31, 2017 compared to operating income of $31.4 million in our six months ended March 31, 2018. Our operating results for the six months ended March 31, 2018 reflected an increase in contract revenue primarily related to the addition of 10 E-175 aircraft under our United Capacity Purchase Agreement, which was partially offset by reduced flying in our CRJ fleet. We also experienced an increase in flight operations expense driven by an increase in pilot training and related expenses and an increase in premium pilot pay to incentivize pilots to fly additional routes until additional pilots complete their training.
Our maintenance expense decreased due to the timing of significant maintenance events, including engine overhauls, which occurred more frequently during the six months ended March 31, 2017 than during the six months ended March 31, 2018.
In our six months ended March 31, 2017, we had net income of $11.9 million compared to net income of $25.0 million in our six months ended March 31, 2018. Our six months ended March 31, 2018 results reflected an increase in net income of $13.1 million primarily related to income tax benefits resulting from changes in tax laws.
Operating Revenues
Six Months Ended March 31, | ||||||||||||||||
2017 | 2018 | Change | ||||||||||||||
Operating revenues: |
||||||||||||||||
Contract |
$ | 309,711 | $ | 310,904 | $ | 1,193 | 0.4 | % | ||||||||
Pass-through and other |
9,619 | 21,420 | 11,801 | 122.7 | % | |||||||||||
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Total operating revenues |
$ | 319,330 | $ | 332,324 | $ | 12,994 | 4.1 | % | ||||||||
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Operating data: |
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Available seat milesASMs (thousands) |
4,828,892 | 4,621,380 | (207,512 | ) | (4.3 | )% | ||||||||||
Block hours |
199,303 | 195,559 | (3,744 | ) | (1.9 | )% | ||||||||||
Revenue passenger milesRPMs (thousands) |
3,759,481 | 3,640,092 | (119,389 | ) | (3.2 | )% | ||||||||||
Average stage length (miles) |
580 | 567 | (13 | ) | (2.2 | )% | ||||||||||
Contract revenue per available seat mileCRASM (in cents) |
¢ | 6.41 | ¢ | 6.73 | ¢ | 0.32 | 5.0 | % | ||||||||
Passengers |
6,393,651 | 6,332,521 | (61,130 | ) | (1.0 | )% |
Total operating revenue increased by $13.0 million, or 4.1%, from our six months ended March 31, 2017 to our six months ended March 31, 2018. Contract revenue increased by $1.2 million, or 0.4%, primarily due to an increase in flying with our expanded E-175 fleet and higher block hour compensation from our major airline partners, partially offset by reduced flying in our CRJ fleet and the net impact of incentives earned and credits given to our major airline partners based on contractual utilization levels. Our block hours flown during our six months ended March 31, 2018 decreased 1.9% compared to the six months ended March 31, 2017 due to reduced flight schedules caused by
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increased pilot training times. Our pass-through and other revenue increased during our six months ended March 31, 2018 by $11.8 million, or 122.7%, primarily due to pass-through maintenance costs related to our E-175 fleet.
Operating Expenses
Six Months Ended March 31, | ||||||||||||||||
2017 | 2018 | Change | ||||||||||||||
Operating expenses ($ in thousands): |
||||||||||||||||
Flight operations |
$ | 72,349 | $ | 103,807 | $ | 31,458 | 43.5 | % | ||||||||
Fuel |
400 | 198 | (202 | ) | (50.5 | )% | ||||||||||
Maintenance |
117,422 | 105,756 | (11,666 | ) | (9.9 | )% | ||||||||||
Aircraft rent |
36,060 | 36,582 | 522 | 1.4 | % | |||||||||||
Aircraft and traffic servicing |
1,580 | 1,744 | 164 | 10.4 | % | |||||||||||
General and administrative |
20,676 | 21,267 | 591 | 2.9 | % | |||||||||||
Depreciation and amortization |
29,600 | 31,598 | 1,998 | 6.8 | % | |||||||||||
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Total operating expenses |
$ | 278,087 | $ | 300,952 | $ | 22,865 | 8.2 | % | ||||||||
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Operating data: |
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Available seat milesASMs (thousands) |
4,828,892 | 4,621,380 | (207,512 | ) | (4.3 | )% | ||||||||||
Block hours |
199,303 | 195,559 | (3,744 | ) | (1.9 | )% | ||||||||||
Revenue passenger milesRPMs (thousands) |
3,759,481 | 3,640,092 | (119,389 | ) | (3.2 | )% | ||||||||||
Average stage length (miles) |
580 | 567 | (13 | ) | (2.2 | )% | ||||||||||
Departures |
109,419 | 107,043 | (2,376 | ) | (2.2 | )% | ||||||||||
Operating cost per available seat mileCASM (in cents) |
¢ | 5.76 | ¢ | 6.51 | ¢ | 0.75 | 13.0 | % |
Flight Operations . Flight operations expense increased $31.5 million, or 43.5%, to $103.8 million for our six months ended March 31, 2018 compared to the prior year period. The increase was primarily driven by an increase in pilot training related expenses, an increase in premium pilot pay to incentivize pilots to fly additional routes until additional pilots complete their training, additional pilot wages and a one-time, $2.5 million non-cash vacation accrual related to our new collective bargaining agreements.
Fuel . Fuel expense decreased $0.2 million, or 50.5%, to $0.2 million for our six months ended March 31, 2018 compared to the prior year period. The decrease was primarily driven by a smaller number of ferry flights and maintenance fuel in our Phoenix hub. All fuel costs related to flying under our capacity purchase agreements during our six months ended March 31, 2017 and 2018 were directly paid to suppliers by our major airline partners.
Maintenance . Aircraft maintenance costs decreased $11.7 million, or 9.9%, to $105.8 million for our six months ended March 31, 2018 compared to the prior year period. This decrease was primarily driven by a decrease in engine overhaul events and expenses and partially offset by an increase in C-check expense. During our six months ended March 31, 2018, $5.2 million of engine overhaul expenses were reimbursable by our major airline partners. Total pass-through maintenance expenses reimbursed by our major airline partners increased by $12.1 million during our six months ended March 31, 2018.
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The following table presents information regarding our maintenance costs during our six months ended March 31, 2017 and 2018:
Six Months Ended March 31, | ||||||||||||||||
2017 | 2018 | Change | ||||||||||||||
(in thousands) | ||||||||||||||||
Engine overhaul |
$ | 45,111 | $ | 27,939 | $ | (17,172 | ) | (38.1 | )% | |||||||
Pass-through engine overhaul |
0 | 5,201 | 5,201 | 0.0 | % | |||||||||||
C-check |
9,710 | 7,804 | (1,906 | ) | (19.6 | )% | ||||||||||
Pass-through C-check |
483 | 5,711 | 5,228 | 1082.4 | % | |||||||||||
Component contracts |
16,473 | 15,275 | (1,198 | ) | (7.3 | )% | ||||||||||
Rotable and expendable parts |
14,704 | 11,690 | (3,014 | ) | (20.5 | )% | ||||||||||
Other pass-through |
2,120 | 3,765 | 1,645 | 77.6 | % | |||||||||||
Labor and other |
28,821 | 28,371 | (450 | ) | (1.6 | )% | ||||||||||
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Total |
$ | 117,422 | $ | 105,756 | $ | (11,666 | ) | (9.9 | )% | |||||||
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Aircraft Rent . Aircraft rent expense increased $0.5 million, or 1.4%, to $36.6 million from $36.1 million for our six months ended March 31, 2018, compared to the prior year period. The increase is attributable to a $0.5 million increase in engine rent.
Aircraft and Traffic Servicing. Aircraft and traffic servicing expense increased $0.1 million, or 10.4%, to $1.7 million from $1.6 million for our six months ended March 31, 2018, compared to the prior year period. The increase is primarily due to an increase in pass-through regulatory charges and partially offset by lower interrupted trip expense. For our six months ended March 31, 2017 and 2018, 41.8% and 53.5%, respectively, of our aircraft and traffic servicing expenses were reimbursed by our major airline partners.
General and Administrative . General and administrative expense increased $0.6 million, or 2.9%, to $21.3 million from $20.7 million for our six months ended March 31, 2018, compared to the prior year period. The increase is primarily related to legal expenses associated with preparing for this offering and partially offset by a decrease in wages and employee related expense.
Depreciation and Amortization . Depreciation and amortization expense increased $2.0 million, or 6.8%, to $31.6 million from $29.6 million for our six months ended March 31, 2018, compared to the prior year period. The increase is attributable to a $2.0 million increase in depreciation expense related to our purchase of spare engines.
Other Expense
Other expense increased $5.4 million, or 24.0%, to $27.6 million from $22.2 million for our six months ended March 31, 2018, compared to the prior year period. The increase is primarily due to an increase in interest expense of $2.7 million related to the financing of 23 spare engines, $0.3 million in costs related to refinancing nine aircraft and higher LIBOR rates. Our expenses related to debt financing amortization were also higher by $1.4 million, attributable to legal and commitment fees incurred in connection with our aircraft engine financing and aircraft debt refinancing. The remainder of the increase is primarily due to an increase in interest expenses related to our line of credit with CIT, a deferment of certain payments under our RASPRO Lease Facility and engine overhaul financing.
Income Taxes
In our six months ended March 31, 2017, our effective tax rate was 37.4% compared to (555.2)% in our six months ended March 31, 2018. Our tax rate can vary depending on changes in tax laws, adoption of
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accounting standards, the amount of income we earn in each state and the state tax rate applicable to such income, as well as any valuation allowance required on our state net operating losses.
We recorded an income tax provision of $7.1 million and an income tax benefit of $21.2 million for the six months ended March 31, 2017 and 2018, respectively.
The income tax provision for the six months ended March 31, 2017 results in an effective tax rate of 37.4%, which differs from the U.S. federal statutory rate of 35% primarily due to state taxes, changes in the valuation allowance against state net operating losses, expired state attributes, and the benefit resulting from changes in state apportionment and statutory rates.
The income tax provision for the six months ended March 31, 2018 results in an effective tax rate of (555.2)%, which differs from the U.S. federal statutory rate of 35% through December 31, 2017 and 21% as of January 1, 2018 primarily due to a remeasurement of our net deferred tax liability due to federal tax law changes and the adoption of Accounting Standards Update (ASU) 2016-09. Other factors include changes in the valuation allowance against state net operating losses, expired state attributes and state apportionment and statutory rates.
On December 22, 2017, the President signed into law the legislation colloquially known as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act incorporates several new provisions that will have an impact on our financial statements. Most notably, the Tax Act decreased the federal statutory rate to 24.5% for the year ending September 30, 2018, and 21% for the years ending September 30, 2019 and forward. The decrease in federal statutory rate resulted in a net tax benefit due to the remeasurement of our net deferred tax liability. The change in our future effective tax rate is not anticipated to have an effect on our taxes until all of our U.S. federal net operating losses and credits have been utilized.
Additional provisions of the Tax Act that may impact our financial statements include 100% expensing of qualified property placed in service after September 27, 2017 and before January 1, 2023, refundable minimum tax credits over a four year period, net interest expense deductions limited to 30% of earnings before interest, taxes, depreciation, and amortization through 2021 and of earnings before interest and taxes thereafter, and net operating losses incurred in tax years beginning after December 31, 2017 are only allowed to offset up to 80% of a taxpayers taxable income. These net operating losses are allowed to be carried forward indefinitely.
We continue to maintain a valuation allowance on a portion of our state net operating losses in jurisdictions with shortened carryforward periods or in jurisdictions where our operations have significantly decreased as compared to prior years in which the net operating losses were generated.
Fiscal Year 2016 Compared to Fiscal Year 2017
We had operating income of $56.8 million in our 2016 fiscal year compared to operating income of $100.3 million in our 2017 fiscal year. In our 2016 fiscal year, we had net income of $14.9 million compared to net income of $32.8 million in our 2017 fiscal year. Our 2017 fiscal year results reflected an increase in contract revenue primarily related to the addition of seven E-175 aircraft under our United Capacity Purchase Agreement, along with a reduction in maintenance expense due to the timing of significant maintenance events, including engine overhauls, which occurred less frequently in our 2017 fiscal year than in our 2016 fiscal year.
Our 2017 fiscal year financial results reflect the execution of our strategy to add additional aircraft pursuant to our capacity purchase agreements while maintaining cost discipline. In fiscal year 2017 we were able to increase our block hour compensation from our partners and add seven E-175 aircraft to our fleet. We also ratified a new four-year collective bargaining agreement, which allows us to maintain competitive labor costs, which are consistently among our largest expenses.
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Operating Revenues
Year Ended September 30, | ||||||||||||||||
2016 | 2017 | Change | ||||||||||||||
Operating revenues ($ in thousands): |
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Contract |
$ | 569,373 | $ | 618,698 | $ | 49,325 | 8.7 | % | ||||||||
Pass-through and other |
$ | 18,463 | $ | 24,878 | $ | 6,415 | 34.7 | % | ||||||||
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Total operating revenues |
$ | 587,836 | $ | 643,576 | $ | 55,740 | 9.5 | % | ||||||||
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Operating data: |
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Available seat milesASMs (miles in thousands) |
8,823,595 | 9,471,911 | 648,316 | 7.3 | % | |||||||||||
Block hours |
368,468 | 395,083 | 26,615 | 7.2 | % | |||||||||||
Revenue passenger milesRPMs (miles in thousands) |
7,019,586 | 7,392,688 | 373,102 | 5.3 | % | |||||||||||
Average stage length (miles) |
557 | 561 | 4 | 0.7 | % | |||||||||||
Contract revenue per available seat mileCRASM (in cents) |
¢ | 6.45 | ¢ | 6.53 | ¢ | 0.08 | 1.2 | % | ||||||||
Passengers |
12,497,424 | 13,005,844 | 508,420 | 4.1 | % |
Total operating revenue increased by $55.7 million, or 9.5%, from our 2016 fiscal year to our 2017 fiscal year. Contract revenue increased by $49.3 million, or 8.7%, primarily due to the addition of seven new E-175 aircraft to our fleet in 2017 and higher block hour compensation, primarily driven by the aircraft added to our fleet. In addition, we added 16 E-175 aircraft to our fleet between our second and fourth quarters of our 2016 fiscal year, which more directly impacted our contract revenue during our 2017 fiscal year. Our block hours flown during our fiscal 2017 increased 7.2% over our 2016 fiscal year, primarily due to the additional E-175 aircraft. Likewise, our pass-through and other revenue increased during our fiscal 2017 by $6.4 million, or 34.7%, primarily due to pass-through maintenance costs related to our E-175 fleet.
Operating Expenses
Year Ended September 30, | ||||||||||||||||
2016 | 2017 | Change | ||||||||||||||
Operating expenses ($ in thousands): |
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Flight operations |
$ | 141,422 | $ | 155,516 | $ | 14,094 | 10.0 | % | ||||||||
Fuel |
753 | 766 | 13 | 1.7 | % | |||||||||||
Maintenance |
225,130 | 210,729 | (14,401 | ) | (6.4 | )% | ||||||||||
Aircraft rent |
71,635 | 72,551 | 916 | 1.3 | % | |||||||||||
Aircraft and traffic servicing |
3,936 | 3,676 | (260 | ) | (6.6 | )% | ||||||||||
General and administrative |
42,182 | 38,996 | (3,186 | ) | (7.6 | )% | ||||||||||
Depreciation and amortization |
46,020 | 61,048 | 15,028 | 32.7 | % | |||||||||||
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Total operating expenses |
$ | 531,078 | $ | 543,282 | $ | 12,204 | 2.3 | % | ||||||||
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Operating data: |
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Available seat milesASMs (miles in thousands) |
8,823,595 | 9,471,911 | 648,316 | 7.3 | % | |||||||||||
Block hours |
368,468 | 395,083 | 26,615 | 7.2 | % | |||||||||||
Average stage length (miles) |
557 | 561 | 4 | 0.7 | % | |||||||||||
Departures |
208,399 | 221,990 | 13,591 | 6.5 | % | |||||||||||
Operating cost per available seat mileCASM (in cents) |
¢ | 6.02 | ¢ | 5.74 | ¢ | (0.28 | ) | (4.7 | )% |
Flight Operations . In our 2017 fiscal year, flight operations expense increased $14.1 million, or 10.0%, to $155.5 million from $141.4 million for our 2016 fiscal year. The increase is primarily driven by $11.5 million in additional wages, taxes, and benefits under our new collective bargaining agreements and an increase in our block hours flown.
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Fuel . Fuel expense remained relatively consistent from our 2016 fiscal year to our 2017 fiscal year. In our 2016 fiscal year and our 2017 fiscal year, all fuel costs related to flying under our capacity purchase agreements were directly paid to suppliers by our major airline partners.
Maintenance . Aircraft maintenance costs decreased by $14.4 million, or 6.4%, from our 2016 fiscal year to our 2017 fiscal year. This decrease was primarily driven by a $26.9 million decrease in engine overhaul expense, due to the timing of significant maintenance events, including engine overhauls, which occurred less frequently in our 2017 fiscal year than in our 2016 fiscal year. That decrease was partially offset by an increase of $9.5 million related to performing more C maintenance checks than in our 2016 fiscal year. Total pass-through maintenance expense reimbursed by our major airline partners increased by $7.4 million from our 2016 fiscal year to our 2017 fiscal year.
The following table presents information regarding our maintenance costs during our 2016 and 2017 fiscal years:
Year Ended September 30, | ||||||||||||||||
(in thousands) | 2016 | 2017 | Change | |||||||||||||
Engine overhaul |
$ | 90,890 | $ | 63,719 | $ | (27,171) | (29.9)% | |||||||||
Pass-through engine overhaul |
| 270 | 270 | 0.0% | ||||||||||||
C-check |
13,185 | 17,755 | 4,570 | 34.7% | ||||||||||||
Pass-through C-check |
| 4,889 | 4,889 | 0.0% | ||||||||||||
Component contracts |
31,702 | 31,671 | (32) | (0.1)% | ||||||||||||
Rotable and expendable parts |
27,160 | 26,098 | (1,062) | (3.9)% | ||||||||||||
Other pass-through |
3,728 | 6,003 | 2,275 | 61.0% | ||||||||||||
Labor and other |
58,464 | 60,324 | 1,860 | 3.2% | ||||||||||||
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Total |
$ | 225,130 | $ | 210,729 | $ | (14,401) | (6.4)% | |||||||||
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Aircraft Rent . In our 2017 fiscal year, aircraft rent expense increased $0.9 million, or 1.3%, to $72.6 million from $71.6 million for our 2016 fiscal year. The increase is attributable to a $1.5 million manufacturer lease credit that expired in December 2015, which was partially offset by a $0.6 million increase in engine rent.
Aircraft and Traffic Servicing . In our 2017 fiscal year, aircraft and traffic servicing expense decreased by $0.3 million, or 6.6%, to $3.7 million from $3.9 million for our 2016 fiscal year. The decrease is primarily due to a reduction in interrupted trip expenses and international navigation fees as compared to our 2016 fiscal year. For our fiscal years ended September 30, 2016 and 2017, 42.6% and 46.5% respectively, of our aircraft and traffic servicing expense were reimbursed by our major airline partners.
General and Administrative. In our 2017 fiscal year, general and administrative expense decreased $3.2 million, or 7.6%, to $39.0 million from $42.2 million for our 2016 fiscal year. The decrease is primarily related to a decrease in insurance costs of $1.1 million and a decrease in wages and employee related expense of $2.1 million.
Depreciation and Amortization . Depreciation and amortization expense increased by $15.0 million, or 32.7%, from our 2016 fiscal year to our 2017 fiscal year. This increase was due to an increase of $9.8 million in aircraft depreciation due to placing 16 E-175 aircraft into service during 2016, which resulted in partial depreciation in 2016. The increase is also attributable to an increase of $4.4 million in spare engine depreciation due to purchasing additional spare engines during our 2017 fiscal year.
Other Expense
Other expense increased by $14.7 million, or 46.1%, from $31.9 million in our 2016 fiscal year to $46.6 million in our 2017 fiscal year due to an increase in aircraft interest expense of $7.3 million
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related to the financing of 16 E-175 aircraft between the second and fourth quarter of 2016, along with an increase in interest expense of $5.5 million related to the financing of 20 spare engines. Expenses related to debt financing amortization was also higher, by $0.8 million, for legal and commitment fees incurred in connection with the financing of aircraft engines and acquisition of E-175 aircraft.
Income Taxes
In our 2017 fiscal year, our effective tax rate was 38.9% compared to 40.0% in our 2016 fiscal year. Our tax rate can vary depending on the amount of income we earn in each state and the state tax rate applicable to such income, as well as any valuation allowance required on our state net operating losses.
We recorded an income tax provision of $20.9 million and an income tax provision of $9.9 million for the years ended September 30, 2017 and 2016, respectively.
This income tax provision for the year ended September 30, 2017 results in an effective tax rate of 38.9%, which differs from the U.S. federal statutory rate of 35% primarily due to state taxes, changes in the valuation allowance against state net operating losses, expired state attributes, and the benefit from changes in state apportionment and statutory rates.
This income tax provision for the year ended September 30, 2016 results in an effective tax rate of 40.0%, which differs from the U.S. federal statutory rate of 35% primarily due to state taxes, changes in the valuation allowance against state net operating losses, expired state attributes, and the benefit resulting from changes in state apportionment and statutory rates.
We continue to maintain a valuation allowance on a portion of our state net operating losses in jurisdictions with shortened carryforward periods or in jurisdictions where our operations have significantly decreased as compared to prior years in which the net operating losses were generated.
On December 22, 2017, the President signed into law the legislation colloquially known as the Tax Act. The Tax Act incorporates several new provisions that will have an impact on our financial statements going forward. Most notably, the Tax Act will decrease the federal statutory rate to 24.5% for the year ending September 30, 2018, and 21% for years ending September 30, 2019 and forward. This decrease in federal statutory rate will result in a net tax benefit due to the remeasurement of our net deferred tax liability. The change in our future effective tax rate is not anticipated to have an effect on our cash tax until all of our U.S. federal net operating losses and credits have been utilized.
Additional provisions of the Tax Act that may impact our financial statements include 100% expensing of qualified property placed in service after September 27, 2017 and before January 1, 2023, refundable minimum tax credits over a four year period, net interest expense deductions limited to 30% of earnings after interest, taxes, depreciation, and amortization through 2021 and of earnings before interest and taxes thereafter, and net operating losses incurred in tax years beginning after December 31, 2017 are only allowed to offset up to 80% of a taxpayers taxable income. These net operating losses are allowed to be carried forward indefinitely.
See Note 12: Income Taxes in the notes to the audited consolidated financial statements included elsewhere in this prospectus.
Quarterly Results of Operations and Operating Statistics
The following table sets forth our unaudited quarterly condensed consolidated statements of operations data for each of the 10 quarters ended March 31, 2018. In managements opinion, the data below have been prepared on the same basis as the audited consolidated financial statements included elsewhere
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in this prospectus, and reflect all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of this data. The results of historical periods are not necessarily indicative of the results to be expected for a full year or any future period. The following quarterly financial data should be read in conjunction with our audited financial statements and related notes included elsewhere in this prospectus.
Our financial results can vary materially from quarter to quarter due to the timing of engine overhauls and major airframe inspections and maintenance events. Our quarterly results may also be favorably impacted by higher rates of flight activity and utilization in the June and September calendar quarters compared to the December and March calendar quarters. During our fiscal 2018, we expect that our June and September calendar quarters will benefit from relatively low levels of engine and airframe maintenance costs.
Year Ending September 30, 2018 | ||||||||
First
Quarter |
Second
Quarter |
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(in thousands) | ||||||||
Operating revenues : |
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Contract |
$ | 154,389 | $ | 156,515 | ||||
Pass-through and other |
10,295 | 11,125 | ||||||
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Total operating revenues |
164,684 | 167,640 | ||||||
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Operating expenses: |
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Engine overhaul |
17,181 | 10,758 | ||||||
Engine overhaul pass-through |
2,327 | 2,874 | ||||||
All other |
130,151 | 137,659 | ||||||
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Total operating expenses |
149,661 | 151,291 | ||||||
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Total other (expense) income |
(14,188 | ) | (13,369 | ) | ||||
Income tax (benefit) expense |
(21,789 | ) | 608 | |||||
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Net income |
$ | 22,624 | $ | 2,372 | ||||
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Net income per share attributable to common shareholders: |
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Basic (1) |
$ | 2.00 | $ | 0.20 | ||||
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Diluted (1) |
$ | 0.96 | $ | 0.10 | ||||
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Weighted-average common shares outstanding: |
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Basic |
11,294 | 11,592 | ||||||
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Diluted |
23,559 | 23,563 | ||||||
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Operating data: (2) |
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Block hours |
97,705 | 97,853 | ||||||
Departures |
55,364 | 51,679 | ||||||
Passengers |
3,311,007 | 3,021,514 | ||||||
Available seat milesASMs (thousands) |
2,308,312 | 2,313,068 | ||||||
Revenue passenger milesRPMs (thousands) |
1,833,459 | 1,806,633 | ||||||
Contract revenue per available seat mileCRASM (in cents) |
¢ | 6.69 | ¢ | 6.77 | ||||
Operating cost per available seat mileCASM (in cents) |
¢ | 6.48 | ¢ | 6.54 |
(1) |
See Note 10 to our quarterly condensed consolidated statements of operations data included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted earnings per share. |
(2) |
The definitions of certain terms related to the airline industry used in the table can be found under Glossary of Airline Terms at the end of this prospectus. |
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Year Ended September 30, 2017 | ||||||||||||||||
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
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(in thousands) | ||||||||||||||||
Operating revenues: |
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Contract |
$ | 155,502 | $ | 154,210 | $ | 157,411 | $ | 151,575 | ||||||||
Pass-through and other |
4,733 | 4,886 | 9,541 | 5,718 | ||||||||||||
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Total operating revenues |
160,235 | 159,096 | 166,952 | 157,293 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Operating expenses: |
||||||||||||||||
Engine overhaul |
23,930 | 21,181 | 8,436 | 10,171 | ||||||||||||
Engine overhaul pass-through |
| | | 270 | ||||||||||||
All other |
115,467 | 117,510 | 122,156 | 124,161 | ||||||||||||
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|
|
|
|
|
|
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Total operating expenses |
139,397 | 138,691 | 130,592 | 134,602 | ||||||||||||
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|
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|
|
|
|||||||||
Total other (expense) income |
(10,281 | ) | (11,938 | ) | (11,862 | ) | (12,511 | ) | ||||||||
Income tax (benefit) expense |
3,947 | 3,163 | 9,066 | 4,698 | ||||||||||||
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|
|
|
|
|
|||||||||
Net income |
$ | 6,610 | $ | 5,304 | $ | 15,432 | $ | 5,482 | ||||||||
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|
|
|
|
|||||||||
Net income per share attributable to common shareholders: |
||||||||||||||||
Basic (1) |
$ | 0.62 | $ | 0.48 | $ | 1.40 | $ | 0.49 | ||||||||
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|
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|
|
|
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Diluted (1) |
$ | 0.28 | $ | 0.23 | $ | 0.66 | $ | 0.23 | ||||||||
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|
|
|
|
|
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Weighted-average common shares outstanding |
||||||||||||||||
Basic |
10,593 | 10,973 | 10,993 | 11,117 | ||||||||||||
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|
|
|
|
|
|
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Diluted |
23,409 | 23,407 | 23,223 | 23,459 | ||||||||||||
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|
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|
|
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Operating data: (2) |
||||||||||||||||
Block hours |
100,784 | 98,519 | 100,671 | 95,109 | ||||||||||||
Departures |
55,373 | 54,046 | 57,054 | 55,517 | ||||||||||||
Passengers |
3,273,813 | 3,119,838 | 3,364,121 | 3,248,072 | ||||||||||||
Available seat milesASMs (thousands) |
2,452,657 | 2,376,234 | 2,384,960 | 2,258,060 | ||||||||||||
Revenue passenger milesRPMs (thousands) |
1,930,489 | 1,828,991 | 1,875,934 | 1,757,274 | ||||||||||||
Contract revenue per available seat mileCRASM (in cents) |
¢ | 6.34 | ¢ | 6.49 | ¢ | 6.60 | ¢ | 6.71 | ||||||||
Operating cost per available seat mileCASM (in cents) |
¢ | 5.68 | ¢ | 5.84 | ¢ | 5.48 | ¢ | 5.96 |
(1) |
See Note 10 to our quarterly condensed consolidated statements of operations data included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted earnings per share. |
(2) |
The definitions of certain terms related to the airline industry used in the table can be found under Glossary of Airline Terms at the end of this prospectus. |
64
Year Ended September 30, 2016 | ||||||||||||||||
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
|||||||||||||
(in thousands) | ||||||||||||||||
Operating revenues : |
||||||||||||||||
Contract |
$ | 133,219 | $ | 137,598 | $ | 143,078 | $ | 155,478 | ||||||||
Pass-through and other |
4,432 | 4,346 | 4,713 | 4,972 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Total operating revenues |
137,651 | 141,944 | 147,791 | 160,450 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Operating expenses: |
||||||||||||||||
Engine overhaul |
20,883 | 16,115 | 28,724 | 25,169 | ||||||||||||
Engine overhaul pass-through |
| | | | ||||||||||||
All other |
104,461 | 106,831 | 110,935 | 117,960 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
125,344 | 122,946 | 139,659 | 143,129 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other (expense) income |
(5,832 | ) | (7,975 | ) | (8,222 | ) | (9,883 | ) | ||||||||
Income tax (benefit) expense |
2,404 | 4,140 | (259 | ) | 3,641 | |||||||||||
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|
|
|
|
|
|
|
|||||||||
Net income |
$ | 4,071 | $ | 6,883 | $ | 169 | $ | 3,797 | ||||||||
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|
|
|
|
|
|
|||||||||
Net income per share attributable to common shareholders: |
||||||||||||||||
Basic (1) |
$ | 0.46 | $ | 0.77 | $ | 0.02 | $ | 0.37 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted (1) |
$ | 0.17 | $ | 0.28 | $ | 0.01 | $ | 0.16 | ||||||||
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|
|
|
|
|
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Weighted-average common shares outstanding |
||||||||||||||||
Basic |
8,847 | 8,932 | 10,108 | 10,345 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
24,405 | 24,380 | 24,079 | 24,204 | ||||||||||||
|
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|
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|
|
|
|||||||||
Operating data: (2) |
||||||||||||||||
Block hours |
87,911 | 87,737 | 93,050 | 99,771 | ||||||||||||
Departures |
50,329 | 49,610 | 52,416 | 56,044 | ||||||||||||
Passengers |
3,111,047 | 2,875,459 | 3,165,759 | 3,345,159 | ||||||||||||
Available seat milesASMs (thousands) |
2,070,485 | 2,102,082 | 2,229,331 | 2,421,697 | ||||||||||||
Revenue passenger milesRPMs (thousands) |
1,693,066 | 1,618,158 | 1,788,910 | 1,919,453 | ||||||||||||
Contract revenue per available seat mileCRASM (in cents) |
¢ | 6.43 | ¢ | 6.55 | ¢ | 6.42 | ¢ | 6.42 | ||||||||
Operating cost per available seat mileCASM (in cents) |
¢ | 6.05 | ¢ | 5.85 | ¢ | 6.26 | ¢ | 5.91 |
(1) |
See Note 10 to our quarterly condensed consolidated statements of operations data included elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted earnings per share. |
(2) |
The definitions of certain terms related to the airline industry used in the table can be found under Glossary of Airline Terms at the end of this prospectus. |
Liquidity and Capital Resources
Sources and Uses of Cash
We require cash to fund our operating expenses and working capital requirements, including outlays for capital expenditures, aircraft pre-delivery payments, maintenance, aircraft rent and to pay debt service obligations, including principal and interest payments. Our cash needs vary from period to period primarily based on the timing and costs of significant maintenance events. Our principal sources of liquidity are cash on hand, cash generated from operations and funds from external borrowings. In
65
the near term, we expect to fund our primary cash requirements through cash generated from operations and cash and cash equivalents on hand. We also have the ability to utilize our CIT Revolving Credit Facility.
We believe that the key factors that could affect our internal and external sources of cash include:
|
Factors that affect our results of operations and cash flows, including the impact on our business and operations as a result of changes in demand for our services, competitive pricing pressures, and our ability to achieve further reductions in operating expenses; and |
|
Factors that affect our access to bank financing and the debt and equity capital markets that could impair our ability to obtain needed financing on acceptable terms or to respond to business opportunities and developments as they arise, including interest rate fluctuations, macroeconomic conditions, sudden reductions in the general availability of lending from banks or the related increase in cost to obtain bank financing, and our ability to maintain compliance with covenants under our debt agreements in effect from time to time. |
Our ability to service our long-term debt obligations, including our equipment notes and CIT Revolving Credit Facility, to remain in compliance with the various covenants contained in our debt agreements and to fund working capital, capital expenditures and business development efforts will depend on our ability to generate cash from operating activities, which is subject to, among other things, our future operating performance, as well as to other factors, some of which may be beyond our control.
If we fail to generate sufficient cash from operations, we may need to raise additional equity or borrow additional funds to achieve our longer-term objectives. There can be no assurance that such equity or borrowings will be available or, if available, will be at rates or prices acceptable to us.
We believe that cash flow from operating activities coupled with existing cash and cash equivalents, short-term investments and existing credit facilities will be adequate to fund our operating and capital needs, as well as enable us to maintain compliance with our various debt agreements, through at least the next 12 months. To the extent that results or events differ from our financial projections or business plans, our liquidity may be adversely impacted.
During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust operating and capital expenditures to reflect the current market conditions and our projected demand. Our capital expenditures are primarily directed toward our aircraft fleet and flight equipment. During 2016, we paid $490.1 million for capital expenditures, primarily related to the purchase of 18 E-175 aircraft and four spare engines, or $7.3 million net of aircraft and spare engine financing. In 2017 we paid $84.5 million in capital expenditures, primarily related to the purchase of 15 spare engines, or $7.6 million of capital expenditures net of aircraft and spare engine financing. In our six months ended March 31, 2018, we paid $17.0 million in capital expenditures primarily related to the purchase of three spare engines. Our capital expenditures for the six months ended March 31, 2018 were $1.6 million net of aircraft and spare engine financing. Our capital expenditures, net of aircraft and spare engine financing, have historically been approximately 1.2% of annual revenues and we expect to continue to incur capital expenditures to support our business activities. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.
As of March 31, 2018, our principal sources of liquidity were cash and cash equivalents of $52.7 million. In addition, we had restricted cash of $3.8 million as of March 31, 2018. Restricted cash includes certificates of deposit that secure letters of credit issued for particular airport authorities as required in certain lease agreements. Furthermore, as of March 31, 2018, we also had $778.4 million in secured indebtedness incurred in connection with our financing of 65 total aircraft. Primary uses of liquidity are capital expenditures, aircraft pre-delivery payments and debt repayments. As of March 31,
66
2018, we had $143.4 million of short-term debt, excluding capital leases, and $788.6 million of long-term debt excluding capital leases. As set forth in Use of Proceeds , we intend to use the net proceeds from this offering to, among other things (i) repay all outstanding indebtedness under our CIT Revolving Credit Facility in the amount of $25.7 million, (ii) repay from $20.0 to $40.0 million of existing indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes and (iii) in connection with the repayment, refinance the remaining portion of indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes. We estimate that a refinancing of our existing indebtedness under our Spare Engine Facility and the Subordinated GECAS Notes could decrease our interest expense by an aggregate of approximately $13.7 to $16.1 million from our 2019 fiscal year to our 2021 fiscal year, assuming a refinanced interest rate of 4.0%. Following our repayment of all funds drawn under our CIT Revolving Credit Facility, the $35.0 million commitment amount will remain available for future borrowing through the maturity date. Assuming no additional borrowings, we expect that repayment of all funds drawn under our CIT Revolving Credit Facility will decrease our annual interest expense by approximately $1.6 million, beginning in our 2019 fiscal year.
Sources of cash for the six months ended March 31, 2018 were primarily cash flows from operations of $41.2 million. This positive cash flow was driven by receipts from performance under our capacity purchase agreements.
As of March 31, 2018, we had net receivables of approximately $17.0 million, compared to net receivables of approximately $8.9 million as of September 30, 2017. The amounts due consist primarily of receivables and reimbursable pass-through maintenance costs from our major airline partners under our capacity purchase agreements. Accounts receivable from our major airline partners were 71.6% and 81.8% of total gross accounts receivable at September 30, 2017 and March 31, 2018, respectively.
Restricted Cash
As of March 31, 2018, we had $3.8 million in restricted cash. We have an agreement with a financial institution for a $6.0 million letter of credit facility and to issue letters of credit for landing fees, workers compensation insurance and other business needs. Pursuant to the agreement, $3.8 million of outstanding letters of credit are required to be collateralized by amounts on deposit.
Cash Flows
The following table presents information regarding our cash flows during our two most recent fiscal years and for the six months ended March 31, 2017 and 2018:
Year Ended September 30, | Six Months Ended March 31, | |||||||||||||||
2016 | 2017 | 2017 | 2018 | |||||||||||||
(in thousands) |
||||||||||||||||
Net cash provided by operating activities |
$ | 104,492 | $ | 74,727 | $ | 16,543 | $ | 41,208 | ||||||||
Net cash used in investing activities |
(491,127 | ) | (84,122 | ) | (66,026 | ) | (17,224 | ) | ||||||||
Net cash provided by (used in) financing activities |
365,848 | 28,497 | 37,067 | (28,073 | ) | |||||||||||
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Net (decrease) increase in cash and cash equivalents |
(20,787 | ) | 19,102 | (12,416 | ) | (4,089 | ) | |||||||||
Cash and cash equivalents at beginning of period |
58,473 | 37,686 | 37,686 | 56,788 | ||||||||||||
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Cash and cash equivalents at end of period |
$ | 37,686 | $ | 56,788 | $ | 25,270 | $ | 52,699 | ||||||||
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67
Net Cash Flow Provided By Operating Activities
During our six months ended March 31, 2018, cash flow provided by operating activities of $41.2 million reflects our growth and execution of our strategic initiatives. We had net income of $25.0 million adjusted for the following significant non-cash items: depreciation and amortization of $31.6 million, amortization of stock-based compensation of $0.8 million, deferred income taxes of $(18.7) million, amortization of unfavorable lease liabilities and deferred credits of $(5.6) million and amortization of debt financing costs and accretion of interest on non-interest bearing subordinated notes of $2.6 million. We had net inflows of $5.1 million within other net operating assets and liabilities largely driven by the timing of aircraft lease payments during our six months ended March 31, 2018.
During our six months ended March 31, 2017, cash flow provided by operating activities of $16.5 million reflects our growth and execution of our strategic initiatives. We had net income of $11.9 million adjusted for the following significant non-cash items: depreciation and amortization of $29.6 million, amortization of stock-based compensation of $0.6 million, deferred income taxes of $7.1 million, amortization of unfavorable lease liabilities and deferred credits of $(5.1) million and amortization of debt financing costs and accretion of interest on non-interest bearing subordinated notes of $0.7 million. We had net outflows of $(29.0) million within other net operating assets and liabilities largely driven by aircraft lease payments during our six months ended March 31, 2017.
During our 2017 fiscal year, cash flow provided by operating activities of $74.7 million reflects our growth and execution of our strategic initiatives. We had net income of $32.8 million adjusted for the following significant non-cash items: depreciation and amortization of $61.0 million, amortization of stock-based compensation of $1.3 million, deferred income taxes of $20.5 million, amortization of unfavorable lease liabilities and deferred credits of $(10.6) million and amortization of debt financing costs and accretion of interest on non-interest bearing subordinated notes of $2.7 million. We had net outflows of $33.9 million within other net operating assets and liabilities largely driven by aircraft leases payments and payments for acquired spare engines during our 2017 fiscal year.
During our 2016 fiscal year, net cash flow provided by operating activities was approximately $104.5 million driven by our growth, execution of strategic initiatives and improved credit position. We had net income of approximately $14.9 million adjusted for the following non-cash items: depreciation and amortization of $46.0 million, amortization of stock-based compensation of $1.5 million, deferred income taxes of $9.5 million, amortization of unfavorable lease liabilities and deferred credits of $(9.6) million and amortization of debt financing costs and accretion of interest on non-interest bearing subordinated notes of $2.0 million. We had a net increase of $39.1 million within other net operating assets and liabilities largely driven by timing of payments made on aircraft leases, engine repair work and other payables during our 2016 fiscal year.
Net Cash Flows Used In Investing Activities
During our six months ended March 31, 2018, net cash flow used in investing activities totaled $(17.2) million. We invested $17.0 million in three spare engines and aircraft improvements.
During our six months ended March 31, 2017, net cash flow used in investing activities totaled $(66.0) million. We invested $63.3 million in 12 spare engines and aircraft improvements, offset partially by returns of equipment deposits.
During our 2017 fiscal year, net cash flow used in investing activities totaled $(84.1) million. We invested $84.5 million in purchase of 15 spare engines and aircraft improvements, offset partially by returns of equipment deposits.
During our 2016 fiscal year, net cash flow used in investing activities totaled $(491.1) million. We invested $490.1 million in 18 E-175 aircraft, four spare engines and aircraft improvements.
68
Net Cash Flows Provided By Financing Activities
During our six months ended March 31, 2018, net cash flow used in financing activities was $(28.1) million. We received $85.4 million in proceeds from long-term debt primarily related to refinancing debt on aircraft, as well as spare aircraft engine and aircraft engine kit financing. We made $110.8 million of principal repayments on long-term debt during the year. We also incurred $2.7 million of costs related to debt financing.
During our six months ended March 31, 2017, net cash flow provided by financing activities was $37.1 million. We received $127.7 million in proceeds from long-term debt primarily related to spare aircraft engine and aircraft engine kit financing. We made $87.8 million of principal repayments on long-term debt and incurred $2.3 million of costs related to debt financing during the six months ended March 31, 2017.
During our 2017 fiscal year, net cash flow provided by financing activities was $28.5 million. We received $185.9 million in proceeds from long-term debt primarily related to spare aircraft engine and aircraft engine kit financing. We made $153.0 million of principal repayments on long-term debt during the year. We also incurred $3.4 million of costs related to debt financing and $1.0 million of costs related to the repurchase of shares of our common stock.
During our 2016 fiscal year, net cash flow provided by financing activities was $365.9 million. We received $452.8 million in proceeds from long-term debt primarily related to aircraft financing. We made $75.5 million of principal repayments on long-term debt during the year. We also incurred $10.1 million of costs related to debt financing and $1.4 million of costs related to the repurchase of our stock.
Commitments and Contractual Obligations
As of September 30, 2017, we had $1,514.8 million of long-term debt (including principal and projected interest obligations) and operating lease obligations (including current maturities). This amount consisted of $994.5 million in notes payable related to owned aircraft used in continuing operations, $162.4 million of our notes payable related to spare engines and engine kits, and $28.8 million of our working capital line of credit. We also had $329.1 million of operating lease obligations primarily related to aircraft used under our capacity purchase agreements. Our long-term debt reflected below includes an aggregate of $221.7 million in projected interest costs through our 2028 fiscal year.
The following table sets forth our cash obligations as of September 30, 2017:
Payment Due by Period | ||||||||||||||||||||
Total |
Less than
1 Year |
1 - 3 Years | 3 - 5 Years |
More than
5 Years |
||||||||||||||||
(in thousands) | ||||||||||||||||||||
Aircraft notes |
$ | 994,539 | $ | 146,325 | $ | 249,292 | $ | 211,277 | $ | 387,645 | ||||||||||
Engine notes |
162,405 | 39,558 | 68,831 | 54,016 | | |||||||||||||||
Operating lease obligations |
329,121 | 97,185 | 121,297 | 82,359 | 28,280 | |||||||||||||||
Working capital line of credit |
28,768 | 1,544 | 27,224 | | | |||||||||||||||
|
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|
|
|
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Total |
$ | 1,514,833 | $ | 284,612 | $ | 466,644 | $ | 347,652 | $ | 415,925 | ||||||||||
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|
Operating Leases
We have significant long-term lease obligations primarily relating to our aircraft fleet. The leases are classified as operating leases and are therefore excluded from our consolidated balance sheets. At
69
September 30, 2017, we have 37 aircraft on lease (excluding aircraft leased from United) with remaining lease terms ranging from approximately 2 to 6.5 years. Future minimum lease payments due under all long-term operating leases were approximately $329.1 million at September 30, 2017.
RASPRO Lease Facility . On September 23, 2005, Mesa Airlines, as lessee, entered into an aircraft lease facility with RASPRO as lessor, for 15 of our CRJ-900 aircraft (the RASPRO Lease Facility). The obligations under the RASPRO Lease Facility are guaranteed by us, and basic rent is paid quarterly on each aircraft. On each of March 10, 2014, June 5, 2014 and December 8, 2017, the RASPRO Lease Facility was amended to defer certain payments of basic rent (the Deferred Amounts). Until the principal of and accrued interest on the Deferred Amounts are paid in full, (i) we and Mesa Airlines are prohibited from paying any dividends to holders of our common stock, (ii) we are prohibited from repurchasing any of our warrants or other equity interests, (iii) Mesa Airlines must maintain available a minimum of $10 million of cash, cash equivalents and availability under lines of credit, (iv) Mesa Airlines must provide RASPRO with periodic monthly, quarterly and annual reports containing certain financial information and forecasted engine repair costs and (v) we must maintain a minimum debt-to-assets ratio.
Pursuant to the December 2017 amendment referenced above, we deferred $29.3 million of payments originally due in December 2017 through March 2018. The deferred amounts are charged 7.5% interest per annum and due for repayment in December 2021. As of March 31, 2018, we were in compliance with these covenants.
GECAS Lease Facility . On May 27, 2014, Mesa Airlines, as lessee, entered into an aircraft lease facility with Wells Fargo Bank Northwest, National Association, as owner trustee and lessor, governing the lease of 17 of our CRJ-700 and CRJ-900 aircraft (the GECAS Lease Facility). The obligations under the GECAS Lease Facility are guaranteed by us, and basic rent is paid monthly on each aircraft. In consideration for the lease, we issued the GE Warrant to GE Capital Aviation Services LLC, which we mutually agreed to terminate in connection with our purchase of nine CRJ-900 aircraft that we previously leased under the GECAS Lease Facility. The GECAS Lease Facility requires Mesa Airlines and us to maintain a balance of unrestricted cash of not less than $10 million and prohibits us from paying dividends to holders of our common stock prior to September 30, 2018 without the prior written consent of the GECAS Lease Facility parties. As of March 31, 2018, we were in compliance with these covenants.
As more fully described under Aircraft Notes below, on June 26, 2018, we purchased nine CRJ-900 aircraft, which were previously leased under the GECAS Lease Facility, for $76.5 million and terminated the GE Warrant.
Capital Leases
On February 7, 2018, Mesa Airlines, as lessee, entered into two agreements for the lease of two spare aircraft engines (the Engine Leases). Basic rent on the engines is paid monthly and at the end of the lease term, November 2022, Mesa Airlines has the option to purchase the engines for $935,230 each. The Engine Leases are reflected as debt obligations of $10.3 million on our balance sheet as of March 31, 2018. The Engine Leases set forth specific redelivery requirements and conditions, but do not contain operational or financial covenants.
Working Capital Line of Credit
In August 2016, we, as guarantor, our wholly owned subsidiaries, Mesa Airlines and MAG-AIM, as borrowers, CIT, as administrative agent, and the lenders party thereto, entered into a credit and guaranty agreement (the CIT Revolving Credit Facility) pursuant to which the CIT
70
Lenders committed to lend to Mesa Airlines and MAG-AIM revolving loans in the aggregate principal amount of up to $35.0 million. The borrowers and guarantors obligations under the CIT Revolving Credit Facility are secured primarily by a first priority lien on certain engines, spare parts and related collateral, including engine warranties and proceeds of the foregoing. The CIT Revolving Credit Facility contains affirmative, negative and financial covenants that are typical in the industry for similar financings, including, but not limited to, covenants that, subject to exceptions described in the CIT Revolving Credit Facility, restrict our ability and the ability of Mesa Airlines and MAG-AIM and their subsidiaries to: (i) enter into, create, incur, assume or suffer to exist any liens; (ii) merge, dissolve, liquidate, consolidate or sell or transfer substantially all of its assets; (iii) sell assets; (iv) enter into transactions with affiliates; (v) amend certain material agreements and organizational documents; (vi) make consolidated unfinanced capital expenditures; or (viii) maintain a consolidated interest and rental coverage ratio above the amount specified in the CIT Revolving Credit Facility. On April 27, 2018, we entered into an amendment to our CIT Revolving Credit Facility to lower the consolidated interest and rental coverage ratio through the end of the term of the agreement. As of March 31, 2018, we were in compliance with the financial covenants under the CIT Revolving Credit Facility. The CIT Revolving Credit Facility also includes customary events of defaults, including, but not limited to: (i) payment defaults; (ii) breach of covenants; (iii) breach of representations and warranties; (iv) cross-defaults; (v) certain bankruptcy-related defaults; (vi) change of control; and (vii) revocation of instructions with respect to certain controlled accounts.
The loan under the CIT Revolving Credit Facility matures on August 12, 2019. As of September 30, 2017, $25.7 million of borrowings were outstanding under this facility. Funds available under the CIT Revolving Credit Facility are subject to certain administrative and commitment fees, and funds drawn under the facility bear interest at LIBOR plus a margin of 4.25%.
Engine Notes
Spare Engine Facility. In December 2016, Mesa Airlines, as borrower, Obsidian Agency Services, Inc., as security trustee, Cortland Capital Market Services LLC, as administrative agent, and the lenders party thereto (the Engine Financing Lenders) entered into a credit agreement (the Spare Engine Facility) pursuant to which the Engine Financing Lenders committed to lend to Mesa Airlines term loans in the aggregate principal amount of up to approximately $99.1 million. In February 2018, the parties amended the Spare Engine Facility to increase the commitment of the Engine Financing Lenders by an additional aggregate principal amount of up to approximately $4.1 million.
Mesa Airlines obligations under the Spare Engine Facility are secured primarily by a first priority lien on certain engines acquired with the proceeds of the Spare Engine Facility and related collateral, including engine warranties and proceeds of the foregoing. The Spare Engine Facility contains affirmative and negative covenants that are typical in the industry for similar financings, including, but not limited to, covenants that, subject to exceptions described in the Spare Engine Facility, restrict the ability of Mesa Airlines to: (i) enter into, create, incur, assume or suffer to exist any liens; and (ii) merge, dissolve, liquidate, consolidate or sell or transfer substantially all of its assets. As of March 31, 2018, we were in compliance with these covenants. The Spare Engine Facility also includes customary events of defaults, including, but not limited to: (i) payment defaults; (ii) breach of covenants; (iii) breach of representations and warranties; and (iii) material adverse changes.
There are four tranches of debt under our Spare Engine Facility, which mature between January 2022 and February 2023. As of March 31, 2018, $92.3 million of borrowings were outstanding under our Spare Engine Facility. Funds drawn under this facility bear interest at the rate of 7.25% per annum plus the greater of (a) 0.5% or (b) the Eurodollar rate. The facility will be repaid periodically according to amortization schedules, with the entire remaining outstanding principal balance to be paid on the applicable maturity date. As of September 30, 2017, $93.0 million of borrowings were outstanding under this facility, and $94.7 million of Mesa Airlines equipment is pledged under this facility.
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EDC Credit Facilities. In August 2015, Mesa Airlines, as borrower, and EDC, as lender entered into a credit and agreement (the EDC 2015 Credit Facility) pursuant to which EDC committed to purchase notes from Mesa Airlines from time to time in the aggregate principal amount of up to $11.0 million. The borrowers obligations under the EDC 2015 Credit Facility are unsecured and guaranteed by us. The EDC 2015 Credit Facility contains affirmative and negative covenants that are typical in the industry for similar financings, including, but not limited to, covenants that, subject to exceptions described in the EDC 2015 Credit Facility, restrict the ability of Mesa Airlines and the Company to: (i) merge, dissolve, liquidate, consolidate or sell or transfer substantially all of its assets; or (ii) sell assets. The EDC 2015 Credit Facility also includes customary events of defaults, including, but not limited to: (i) payment defaults; (ii) breach of covenants; (iii) breach of representations and warranties; (iv) cross-defaults; (v) certain bankruptcy-related defaults of Mesa Airlines or of specified carriers; and (vi) termination or material adverse change in the terms of any code sharing agreement. Each note matures on the date that is five years after such note was issued. As of September 30, 2017, $6.4 million of borrowings were outstanding under this facility. As of March 31, 2018, we were in compliance with these covenants.
Funds drawn under the EDC 2015 Credit Facility are subject to certain arrangement and commitment fees, and funds drawn under the facility bear interest at (i) LIBOR plus a margin of 2.66% plus a margin benchmark of 0.41% or (ii) a fixed amount based on a swap rate of floating rate debt to fixed rate debt plus a margin of 2.66% plus a margin benchmark of 0.58%. Installment payments must be made on each note issued under this facility.
In January 2016, Mesa Airlines, as borrower, and EDC entered into a credit and agreement (the EDC January 2016 Credit Facility) pursuant to which EDC committed to purchase notes from Mesa Airlines from time to time in the aggregate principal amount of up to $37.0 million. The borrowers obligations under the EDC January 2016 Credit Facility are secured by the underlying equipment and guaranteed by us. The EDC January 2016 Credit Facility contains affirmative and negative covenants that are typical in the industry for similar financings, including, but not limited to, covenants that, subject to exceptions described in the EDC January 2016 Credit Facility, restrict our ability to: (i) merge, dissolve, liquidate, consolidate or sell or transfer substantially all of its assets; or (ii) sell assets. The EDC January 2016 Credit Facility also contains a financial covenant that requires us to maintain a fixed charge coverage ratio at the end of each fiscal quarter above the amount specified in the agreement. As of March 31, 2018, we were in compliance with these covenants.
The EDC January 2016 Credit Facility also includes customary events of defaults, including, but not limited to: (i) payment defaults; (ii) breach of covenants; (iii) breach of representations and warranties; (iv) cross-defaults; (v) certain bankruptcy-related defaults of Mesa Airlines or of specified carriers; (vi) termination or material adverse change in the terms of any code sharing agreement; and (vii) breach or termination of our agreement with StandardAero. Each note matures on the date that is three to four years after such note was issued. As of September 30, 2017, $9.2 million of borrowings were outstanding under this facility.
Funds drawn under the EDC January 2016 Credit Facility are subject to certain arrangement and commitment fees, and funds drawn under the facility bear interest at (i) LIBOR plus a margin of, initially, 2.49% plus a margin benchmark of 0.47% or (ii) a fixed amount based on a swap rate of floating rate debt to fixed rate debt plus a margin of, initially, 2.49% plus a margin benchmark of 0.68%. Installment payments must be made on each note issued under this facility.
On April 30, 2018, Mesa Airlines and EDC amended the EDC January 2016 Credit Facility to, among other things, lower the required fixed charge ratio covenant through the end of the term of the agreement and provide for mandatory principal prepayments of $1 million per quarter over the next five fiscal quarters, beginning on September 30, 2018.
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In June 2016, Mesa Airlines, as borrower, and EDC entered into a credit and agreement (the EDC June 2016 Credit Facility) pursuant to which EDC committed to purchase notes from Mesa Airlines from time to time in the aggregate principal amount of up to $25.0 million. The borrowers obligations under the EDC June 2016 Credit Facility are unsecured and guaranteed by us. The EDC June 2016 Credit Facility contains affirmative and negative covenants and events of default that are typical in the industry for similar financings. Each note matures on the date that is two years after such note was issued. As of September 30, 2017, $18.5 million of borrowings were outstanding under this facility.
The EDC June 2016 Credit Facility contains an affirmative covenant that requires us to maintain a consolidated interest and rental coverage ratio above the amount specified in the agreement. As of March 31, 2018, we were in compliance with these covenants.
Funds drawn under the EDC June 2016 Credit Facility are subject to certain arrangement and commitment fees, and funds drawn under the facility bear interest at (i) LIBOR plus a margin of 2.81% plus a margin benchmark of 0.49% or (ii) a fixed amount based on a swap rate of floating rate debt to fixed rate debt plus a margin of 2.81% plus a margin benchmark of 0.71%. Installment payments must be made on each note issued under this facility.
Midfirst Engine Facility . In May 2015, Mesa Airlines, as borrower, and MidFirst Bank entered into a business loan agreement and accompanying promissory note (the MidFirst Credit Facility) pursuant to which MidFirst Bank committed to lend to Mesa Airlines the principal amount of $8.5 million. The borrowers obligations under the MidFirst Credit Facility are guaranteed by us and are secured primarily by a lien on certain spare engines acquired with the proceeds of the MidFirst Credit Facility and related collateral. The MidFirst Credit Facility contains affirmative and negative covenants and events of default that are typical in the industry for similar financings. The promissory note matures on September 21, 2020. As of September 30, 2017, $5.0 million of borrowings were outstanding under this facility. As of March 31, 2018, we were in compliance with these covenants.
Funds drawn under the MidFirst Credit Facility bear interest at the rate of 5.163% per annum. Installment payments of principal must be made on the promissory note issued under this facility.
Aircraft Note s
As of September 30, 2017, we had 65 aircraft in our fleet financed with debt (collectively, the Aircraft Notes):
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In fiscal year 2004, we permanently financed five CRJ-700 and six CRJ-900 aircraft with $254.7 million in debt and in our fiscal 2005, we permanently financed five CRJ-900 aircraft with $118 million in debt. The debt bears interest at the monthly LIBOR plus 3% (4.232% at September 30, 2017) and requires monthly principal and interest payments. As of September 30, 2017, we had $58.3 million outstanding under these notes. |
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In fiscal year 2007, we permanently financed three CRJ-900 and three CRJ-700 aircraft for $120.3 million. The debt bears interest at the monthly LIBOR plus 2.25% (3.482% at September 30, 2017) and requires monthly principal and interest payments. As of September 30, 2017, we had $48.8 million outstanding under these notes. |
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In fiscal year 2014, we permanently financed 10 CRJ-900 aircraft for $88.4 million. The debt bears interest at the monthly LIBOR, plus a spread ranging from 1.95% to 7.25% (3.182% to 8.482% at September 30, 2017) and requires monthly principal and interest payments. As of September 30, 2017, we had $64.8 million outstanding under these notes. |
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In fiscal year 2014, we permanently financed eight CRJ-900 aircraft with $114.5 million in debt. The debt bears interest at 5% and requires monthly principal and interest payments. As of September 30, 2017, we had $82.8 million outstanding under these notes. |
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In fiscal year 2015, we financed seven CRJ-900 aircraft with $170.2 million in debt. The senior notes payable of $151 million bear interest at monthly LIBOR plus 2.71% (3.942% at September 30, 2017) and require monthly principal and interest payments. The subordinated notes payable are noninterest-bearing and become payable in full on the last day of the term of the notes. We have imputed an interest rate of 6.25% on the subordinated notes payable and recorded a related discount of $8.1 million, which is being accreted to interest expense over the term of the notes. As of September 30, 2017, we had $144.0 million outstanding under these notes. |
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In fiscal year 2016, we financed 10 E-175 aircraft with $246 million in debt under an EETC financing arrangement. The debt bears interest ranging from 4.75% to 6.25% and requires semi-annual principal and interest payments. As of September 30, 2017, we had $226.4 million outstanding under these notes. |
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In fiscal year 2016, we financed eight E-175 aircraft with $195.3 million in debt. The senior notes payable of $172 million bear interest at the three-month LIBOR plus a spread ranging from 2.20% to 2.32% (3.533% to 3.654% at September 30, 2017) and require quarterly principal and interest payments. The subordinated notes payable bear interest at 4.50% and require quarterly principal and interest payments. As of September 30, 2017, we had $181.1 million outstanding under these notes. |
In December 2017, we refinanced $41.9 million of debt on nine CRJ-900 aircraft (due between 2019 and 2022) with $74.9 million of debt, resulting in net cash proceeds to us of $30.5 million after transaction related fees. The senior notes payable of $46.9 million bear interest at monthly LIBOR plus 3.5%. The subordinated notes payable bear interest at monthly LIBOR plus 4.5%. The refinanced debt requires quarterly payments of principal and interest through fiscal 2022.
On June 27, 2018, we refinanced $16.0 million of debt on six CRJ-900 aircraft (due in 2019), with $27.5 million of debt, resulting in net cash proceeds to us of $10.4 million after transaction related fees. The notes payable require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus 3.50%.
On June 28, 2018, we purchased nine CRJ-900 aircraft, which were previously leased under the
GECAS Lease Facility, for $76.5 million. We financed the aircraft purchase with $69.6 million in new debt and proceeds from the June 2018 aircraft refinancing. The notes payable of $69.6 million require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus a spread ranging from 3.50% for the senior promissory notes to 7.50% for the Subordinated GECAS Notes. We recorded non-cash lease termination expense of $15.1 million in connection with the lease buyout. Also, as part of the transaction, we (i) received $4.5 million of future goods and services credits and $5.6 million of loan forgiveness for loans with a maturity date in 2027 from the aircraft manufacturer, and (ii) mutually agreed with GE Capital Aviation Services LLC to terminate the GE Warrant.
The Aircraft Notes are secured by the respective aircraft, which had a net book value of $1,023.8 million as of September 30, 2017. The weighted-average effective interest rate of the fixed and floating rate aircraft and equipment notes at September 30, 2017 and March 31, 2018, was 4.89% and 5.32%, respectively.
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Maintenance Commitments
In August 2005, we entered into a ten-year agreement with AAR, for the maintenance and repair of certain of our CRJ-200, CRJ-700 and CRJ-900 aircraft. The agreement has been amended since with a term through 2021, also to include certain E-175 aircraft rotable spare parts with a term through December 2027. Under the agreements, we pay AAR a monthly access fee per aircraft for certain consigned inventory as well as a fixed cost per flight hour fee on a monthly basis for repairs on certain repairable parts during the term of the agreement, which fees are subject to annual adjustment based on increases in the cost of labor and component parts.
In July 2012, we entered into a heavy check maintenance contract with Bombardier, to perform heavy check maintenance on all CRJ-700 and CRJ-900 aircraft, which has been extended through November 2020. We are charged on a time and materials basis by Bombardier for the heavy check maintenance work performed under this agreement.
In July 2013, we entered into an engine maintenance contract with GE to perform heavy maintenance on certain CRJ-700, CRJ-900 and E-175 engines based on a fixed pricing schedule. The pricing may escalate annually in accordance with GEs spare parts catalog for engines. The engine maintenance contract extends through 2024.
In 2014, we entered into a ten-year contract with Aviall to provide maintenance and repair services on the wheels, brakes and tires of our CRJ-700 and CRJ-900 aircraft. Under the agreement, we pay Aviall a fixed cost per landing fee for all landings of our aircraft during the term of the agreement, which fee is subject to annual adjustment based on increases in the cost of labor and component parts.
We entered into an engine maintenance contract with StandardAero, which became effective on June 1, 2015, to perform heavy maintenance on certain CRJ-700 and CRJ-900 engines based on a fixed pricing schedule. The pricing may escalate annually in accordance with the GEs spare parts catalog for engines. The engine maintenance contract extends through 2020.
Our employees perform routine airframe and engine maintenance along with periodic inspections of equipment at their respective maintenance facilities. We also use third-party vendors, such as AAR, Aviall and GE, for certain heavy airframe and engine maintenance work, along with parts procurement and component overhaul services for our aircraft fleet. As of September 30, 2017, $57.8 million of parts inventory was consigned to us by AAR and Aviall under long-term contracts that is not reflected on our balance sheet.
We use the direct expense method of accounting for our maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance wherein we recognize the expense when the maintenance work is completed, or over the repair period, if materially different. While we keep a record of expected maintenance events, the actual timing and costs of major engine maintenance expense are subject to variables such as estimated usage, government regulations and the level of unscheduled maintenance events and their actual costs. Accordingly, we cannot reliably quantify the costs or timing of future maintenance-related expenses for any significant period of time.
Off-Balance Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (i) made guarantees, (ii) a retained or a contingent interest in transferred assets, (iii) an obligation under derivative instruments classified as equity or (iv) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company.
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We have no off-balance sheet arrangements of the types described in the four categories above that we believe may have material current or future effect on financial condition, liquidity or results of operations.
A majority of our leased aircraft are leased through trusts formed for the sole purpose of purchasing, financing and leasing aircraft to us. Because these are single-owner trusts in which we do not participate, we are not at risk for losses and we are not considered the primary beneficiary. We believe that our maximum exposure under the leases are the remaining lease payments.
Quantitative and Qualitative Disclosure About Market Risk
We are subject to market risks in the ordinary course of our business. These risks include interest rate risk and, on a limited basis, commodity price risk with respect to foreign exchange transactions. The adverse effects of changes in these markets could pose a potential loss as discussed below. The sensitivity analysis provided does not consider the effects that such adverse changes may have on overall economic activity, nor does it consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.
Interest Rates . We are subject to market risk associated with changing interest rates on our variable rate long-term debt; the variable interest rates are based on LIBOR. The interest rates applicable to variable rate notes may rise and increase the amount of interest expense on our variable rate long-term debt. We do not purchase or hold any derivative instruments to protect against the effects of changes in interest rates.
As of September 30, 2017, we had $613.0 million of variable rate debt including current maturities. A hypothetical 50 basis point change in interest rates would have affected interest expense by approximately $3.1 million in the year ended September 30, 2017. As of March 31, 2018, we had $603.5 million of variable-rate debt including current maturities. A hypothetical 50 basis point change in market interest rates would have affected interest expense by approximately $1.5 million in the six months ended March 31, 2018.
As of September 30, 2017, we had $343.9 million of fixed-rate debt, including current maturities. A hypothetical 50 basis point change in market interest rates would not impact interest expense or have a material effect on the fair value of our fixed-rate debt instruments as of September 30, 2017 or March 31, 2018.
Foreign Exchange. We have de minimis foreign currency risks related to our station operating expenses denominated in currencies other than the U.S. dollar, primarily the Canadian dollar. Our revenue is U.S. dollar denominated.
Unlike other airlines, our capacity purchase agreements largely shelter us from volatility related to fuel prices, which are directly paid and supplied by our major airline partners.
Inflation
We do not believe that inflation had a material effect on our business, financial condition, or results of operations in the last two fiscal years. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with generally accepted accounting principles in U.S. GAAP. In doing so, we have to make estimates and assumptions that affect our
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reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting estimates, which we discuss below.
We have identified the accounting policies discussed below as critical to us. The discussion below is not intended to be a comprehensive list of our accounting policies. Our significant accounting policies are more fully described in Note 2 to the consolidated financial statements.
Revenue Recognition
Under our capacity purchase agreements, our major airline partners generally pay a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown. The contracts also include reimbursement of certain costs that we incur in performing flight services. These costs, known as pass-through costs, may include passenger and hull insurance, aircraft property taxes, as well as landing fees and catering. Additionally, for the E-175 aircraft owned by United, our United Capacity Agreement provides that United will reimburse us for heavy airframe and engine maintenance, landing gear, auxiliary power units (APU) and component maintenance, which are treated as pass-through and will increase revenue (and expense for the same amount) upon completion of the work. We also receive compensation under our capacity purchase agreements for heavy maintenance expenses at a fixed hourly rate or per-aircraft rate for all aircraft in scheduled service, other than the E-175 aircraft owned by United. We record reimbursement of pass-through costs as other revenue in the consolidated statements of operations as service is provided. In addition, our major airline partners also provide, at no cost to us, certain ground handling and customer service functions, as well as airport-related facilities and gates at their hubs and other cities. Services and facilities provided by major airline partners at no cost to us are presented net in our consolidated financial statements; hence, no amounts are recorded for revenue or expense for these items. The contracts also include a profit margin on certain reimbursable costs, as well as a profit margin, incentives and penalties based on certain operational benchmarks. We recognize revenue under our capacity purchase agreements when the transportation is provided, including an estimate of the profit component based upon the information available at the end of the accounting period. All revenue recognized under these contracts is presented as the gross amount billed to our major airline partners.
Under our capacity purchase agreements with American and United, we are reimbursed under a fixed rate per-block hour, plus an amount per aircraft designed to reimburse us for certain aircraft ownership costs.
We have concluded that a component of our revenue under our capacity purchase agreements is rental income, as these agreements identify the right of use of a specific type and number of aircraft over a stated period of time. We calculate the amount of rental income using the contractual ownership rates set forth in our capacity purchase agreements. The amount deemed to be rental income during our fiscal 2016, 2017 and the six months ended March 31, 2017 and 2018 were $190.1 million, $217.6 million, $108.6 million and $108.5 million, respectively, and has been included in contract revenue on our consolidated statements of income. We have not separately stated aircraft rental income and aircraft rental expense in the consolidated statements of operations because the use of the aircraft is not a separate activity of the total service provided.
Our capacity purchase agreements contain an option that allows our major airline partners to assume the contractual responsibility for procuring and providing the fuel necessary to operate the flights that we operate for them. Both airlines have exercised this option. Accordingly, we do not record an expense or revenue for fuel and related fueling costs for flying under our capacity purchase agreements.
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Our capacity purchase agreements contain provisions pursuant to which the parties could terminate their respective agreements, subject to certain conditions. Our revenues could be impacted by a number of factors, including amendment or termination of our capacity purchase agreements, contract modifications resulting from contract renegotiations and our ability to earn incentive payments contemplated under applicable agreements. In the event contracted rates are not finalized at a quarterly or annual financial statement date, we record that periods revenues based on the lower of the prior periods approved rates or our estimate of rates that will be implemented upon completion of negotiations. Also, in the event we have a reimbursement dispute with a major airline partner at a quarterly or annual financial statement date, we evaluate the dispute under established revenue recognition criteria and, provided the revenue recognition criteria have been met, we recognize revenue for that period based on our estimate of the resolution of the dispute. Accordingly, we are required to exercise judgment and use assumptions in the application of our revenue recognition policy. See Recent Accounting Pronouncements set forth below for a discussion of a new accounting standard that we anticipate implementing beginning in our 2019 fiscal year.
Maintenance
We operate under an FAA-approved continuous inspection and maintenance program. We use the direct expense method of accounting for our maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance wherein we recognize the expense when the maintenance work is completed, or over the repair period, if materially different. For leased aircraft, we are subject to lease return provisions that require a minimum portion of the life of an overhaul be remaining on the engine at the lease return date. We estimate the cost of maintenance lease return obligations and accrue such costs over the remaining lease term when the expense is probable and can be reasonably estimated.
Under our aircraft operating lease agreements and FAA operating regulations, we are obligated to perform all required maintenance activities on our fleet, including component repairs, scheduled air frame checks and major engine restoration events. We estimate the timing of the next major maintenance event based on assumptions including estimated usage, FAA-mandated maintenance intervals and average removal times as recommended by the manufacturer. The timing and the cost of maintenance are based on estimates, which can be impacted by changes in utilization of our aircraft, changes in government regulations and suggested manufacturer maintenance intervals. Major maintenance events consist of overhauls to major components.
Engine overhaul expense totaled $90.9 million, $64.0 million, for the years ended September 30, 2016 and 2017, respectively, of which $0 and $0.3 million was pass-through expense. Airframe C-check expense totaled $13.2 million and $22.6 million for the years ended September 30, 2016 and 2017, respectively, of which $0 and $4.9 million was pass-through expense.
Engine overhaul expense totaled $45.1 million and $33.1 million, for the six months ended March 31, 2017 and March 31, 2018, respectively, of which $0 and $5.2 million was pass-through expense. Airframe C-check expense totaled $10.2 million and $13.5 million for the six months ended March 31, 2017 and March 31, 2018, respectively, of which $0.5 million and $5.7 million was pass-through expense.
Aircraft Leases
In addition to the aircraft we receive from United, approximately 19% of our aircraft are leased from third parties. In order to determine the proper classification of a lease as either an operating lease or a capital lease, we must make certain estimates at the inception of the lease relating to the economic useful life and the fair value of an asset as well as select an appropriate discount rate to be used in discounting future lease payments. These estimates are utilized by management in making
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computations as required by existing accounting standards that determine whether the lease is classified as an operating lease or a capital lease. All of our aircraft leases have been classified as operating leases, which results in rental payments being charged to expense over the term of the related leases. Additionally, operating leases are not reflected in our consolidated balance sheets and accordingly, neither a lease asset nor an obligation for future lease payments is reflected in our consolidated balance sheets. In the event that we or one of our major airline partners decide to exit an activity involving leased aircraft, losses may be incurred. In the event that we exit an activity that results in exit losses, these losses are accrued as each aircraft is removed from operations for early termination penalties, lease settle up and other charges. See Recent Accounting Pronouncements set forth below for a discussion of a new accounting standard that is likely to have an impact on our aircraft lease accounting beginning in 2019.
Income Taxes
Income taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for those deferred tax assets for which we cannot conclude that it is more likely than not that such deferred tax assets will be realized.
In determining the amount of the valuation allowance, estimated future taxable income, as well as feasible tax planning strategies for each taxing jurisdiction, are considered. If we determine it is more likely than not that all or a portion of the remaining deferred tax assets will not be realized, the valuation allowance will be increased with a charge to income tax expense. Conversely, if we determine it is more likely than not to be able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been provided, the related portion of the valuation allowance will be recorded as a reduction to income tax expense.
We recognize and measure benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that is it more likely than not that the tax positions will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Significant judgment is required to evaluate uncertain tax positions. Evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of tax audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in income tax expense in the period in which the change is made, which could have a material impact to our effective tax rate. See Note 12: Income Taxes in the notes to our audited consolidated financial statements included elsewhere in this Form S-1 for additional information. See also Managements Discussion and AnalysisResults of OperationsIncome Taxes for additional information.
For a further listing and discussion of our accounting policies, see Note 2: Summary of Significant Accounting Policies in the notes to our audited consolidated financial statements included elsewhere in this prospectus.
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Accounting Methodology for Stock Appreciation Rights
We have historically accounted for compensation expense related to our liability-classified SARs using the intrinsic value method, as permitted by ASC 718 for nonpublic entities, with changes to the value of the SARs recognized as compensation expense at each quarterly reporting date. Upon becoming a public company, as defined in ASC 718, we are required to change our methodology for valuing the SARs. While the SARs will continue to be re-measured at each quarterly reporting date, the SARs are required to be accounted for prospectively at fair value using a fair value pricing model, such as Black-Scholes. We plan to record the impact of the change in valuation methods as a cumulative effect of a change in accounting principle, as permitted by ASC 250. The effect of the change will be to increase or decrease the SAR liability by the difference in compensation cost measured using the intrinsic value method and the fair value method with an equal and offsetting change to retained earnings in the consolidated balance sheet. Any changes in fair value after the initial adoption will be recorded as compensation expense in the consolidated statement of operations.
Emerging Growth Company Status
The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to opt out of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The standard establishes a new recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. We may adopt the requirements of ASU 2014-09 using either of two acceptable methods: (i) retrospective adoption to each prior period presented with the option to elect certain practical expedients; or (ii) adoption with the cumulative effect recognized at the date of initial application and providing certain disclosures. In July 2015, the FASB approved a one-year deferral of the effective date of the new standard, making it effective for our reporting periods beginning October 1, 2018. We are currently evaluating the potential impact of the adoption of this new guidance on our financial position or results of operations, including the method of adoption to be used.
In August 2014, The FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern: Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (Topic 205), which provides guidance on determining when and how to disclose going-concern uncertainties in the condensed consolidated financial statements. The new standard requires management to perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the consolidated financial statements are issued. An entity must provide certain disclosure if conditions or events raise substantial doubt about the entitys ability to continue as a going concern. The update applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter. We adopted this ASU in fiscal year 2017, and the adoption did not have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02), which provides guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases. Leases will be classified as either financing or operating, with classification affecting the pattern of expense
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recognition in the statement of income. The guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the potential impact of the adoption of this new guidance on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting, which simplifies several areas of accounting for share-based compensation arrangements, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 requires that the tax impact related to the difference between share-based compensation for book and tax purposes be recognized as income tax benefit or expense in the reporting period in which such awards vest. ASU 2016-09 also required a modified retrospective adoption for previously unrecognized excess tax benefits. The guidance in ASU 2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, including interim periods within those annual reporting periods. We adopted ASU 2016-09 in the first quarter of fiscal 2018 on a modified retrospective basis, recognizing all excess tax benefits previously unrecognized, as a cumulative-effect adjustment increasing deferred tax assets by $0.4 million, increasing income tax expense by $0.3 million, and increasing retained earnings by $0.7 million. Adoption of ASU 2016-09 did not have any other material effect on our results of operations, financial position or cash flows.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force) , which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the impact that the standard will have on the consolidated statements of cash flows. Further, in November 2016, the FASB issued ASU No. 2016-18 that requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We have restricted cash of $3.8 million as of March 31, 2018 and intend to adopt the new guidance in our 2019 fiscal year.
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Overview of the Passenger Airline Industry
According to the FAA, the number of total paying passengers in the United States that traveled on scheduled domestic and international flights, commonly referred to as total revenue passenger enplanements, was 842.4 million in 2017, up 3.0% from 817.6 million in 2016, and enplanements in 2016 were up 3.95% from 786.5 million in 2015. Historically, airline passenger growth depends upon, but has occurred at a rate in excess of, GDP growth. The 2017 Current Market Outlook , a 20-year forecast of The Boeing Company, foresees average annual growth in North American enplanements of 3.0% per year over the 2017-2036 timeframe, assuming a 2.1% annual GDP growth rate.
As a result of a series of merger transactions between 2008 and 2016, there are currently five major airlines in the United States: American, Delta, United, Alaska and Southwest, which collectively control in excess of 85% of U.S. industry passenger capacity when including both flights operated themselves and flights operated under contract by their regional airline partners. The major airlines offer scheduled flights to many large cities within the United States and to cities in other parts of the world. These carriers benefit from wide name recognition and long operating histories. In recent years, major airlines have enjoyed sustained profitability achieved through scale efficiencies, disciplined capacity planning, profit-oriented management and increased passenger demand. The revenues of the U.S. regional airline sector are derived overwhelmingly from these financially strong major airlines, in particular American, Delta and United.
Most major airlines have adopted a hub and spoke system of operations. This arrangement permits travelers to fly from their point of origin to more destinations without switching airlines. Hub airports permit carriers to transport passengers between large numbers of destinations with substantially more frequent service than if each city-pair were served nonstop. The hub and spoke system also allows the airline to add service to a new destination from a large number of cities using only one or a limited number of aircraft. Regional airlines play a vital role in the major airlines hub and spoke networks by serving markets that would be too small for the major airline to serve economically with the major carriers larger aircraft. In addition, regional aircraft are well suited to serve larger city pairs during off-peak times when load factors on larger jets are low. Flights by regional airlines help build schedule density and feed passenger traffic to major airlines hub airports that is essential for the economic viability of the entire hub operation. Regional airlines have added importance to their major airline partners because the city pairs served by regional airlines often have traffic levels and other attributes that make them very difficult to contest by the low-cost airlines that otherwise compete with major carriers on much of their route networks.
Low-cost airlines, such as jetBlue Airways, typically offer fewer classes of service and have lower cost structures than major airlines, thus permitting them to offer flights to many of the same destinations as the major airlines, but at lower prices. Ultra low-cost airlines, including Allegiant Travel Company, Spirit Airlines and Frontier Airlines, expanded upon the low-cost airline model by adding a focus on increased aircraft utilization, increased seat density and the unbundling of revenue sources by charging fees for multiple products and services previously provided free to passengers. Some ultra low-cost airlines utilize a hub and spoke strategy, while others offer predominantly point-to-point service between designated city pairs, a strategy that increases efficiency and lowers fares, but often results in less convenient flight schedules and service to fewer markets. In recent years, the business models of ultra low-cost, low-cost and major airlines have become increasingly blurred, with major airlines offering inexpensive basic economy fares with fewer amenities to compete for price-sensitive travelers, and some low-cost carriers now offering premium seating and classes of service. At present, none of the business models of the ultra low-cost or low-cost airlines or Southwest Airlines include affiliation with regional air carriers, and there is no expectation that this will occur in the
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near term. However, if in the future we are invited to provide regional flying to new partners in this segment, we expect to experience incremental growth.
Regional airlines operate smaller aircraft, with seating for 50-76 passengers, that have far lower trip costs than the larger aircraft operated by the major, low-cost and ultra low-cost airlines, which typically have seating for 120 passengers or more. Independent regional airlines, such as us and SkyWest (as defined below), typically provide service to more than one major airline. Conversely, captive regional airlines, including Envoy (owned by American), Endeavor (owned by Delta), PSA (owned by American), Piedmont (owned by American) and Horizon (owned by Alaska), are wholly owned subsidiaries of major airlines and tend to fly exclusively in cooperation with their respective parent airlines. In contrast to low-cost and ultra low-cost airlines, regional airlines generally work cooperatively with major airlines and do not try to establish an independent route system or brand to compete with the major airlines. Regional airlines typically enter into capacity purchase agreements with one or more major airline partners under which the regional airline agrees to use its lower-cost aircraft to carry passengers booked and ticketed by the major airline between city pairs selected by the major airline partner. In exchange for such services, the regional airline is either paid a fixed-fee per flight by the major airline or receives a pro-rata portion of the total fare generated for a given passenger itinerary.
Regional Airline Industry
Regional airlines play a daily, essential role in the U.S. air travel system. According to the Regional Airline Association, 42% of all scheduled airline flights in the United States in 2016 were performed by regional airlines. Of all the U.S. airports with scheduled airline service, 64% of them are served exclusively by regional airlines. Some of the most popular U.S. airports have more than half of all their flights on regional airlines, including New York-LaGuardia, Philadelphia, Washington-Dulles, Charlotte, Houston-Bush and Chicago-OHare.
The regional airline industry grew rapidly from the mid-1990s until the 2007-2010 timeframe, driven by the introduction of regional jet aircraft, which were a significant aerospace advancement over previous regional aircraft and broadly adopted due to their high speed, range, cabin class comfort, and low noise levels. In the 2007-2010 timeframe, growth of the regional sector stalled due to a confluence of factors, including: bankruptcy filings by several U.S. major airlines that were large purchasers of regional airline capacity; rising fuel prices, which challenged the economics of small regional jet aircraft; the 2008 financial crisis; and a wave of major airline mergers that drove fleet rationalization and a reduction in the number of hub airports. These industry changes adversely affected the regional airline sector, and three of the then-largest regional airlines restructured under bankruptcy protection (us and Pinnacle Airlines) or sold their business under duress (ExpressJet Holdings).
In our case, we filed for protection under Chapter 11 of the federal bankruptcy laws on January 5, 2010 and successfully emerged from bankruptcy on March 1, 2011. We filed for protection under Chapter 11 primarily to address an excess of 50-seat CRJ-200 aircraft that were not extended by certain of our major airline partners under our prior capacity purchase agreements. The lease terms of the excess CRJ-200 aircraft extended four or more years beyond the expiration date of their related capacity purchase agreements. At the time of our Chapter 11 filing, higher fuel prices had caused the 50-seat CRJ-200 to be uneconomical for major airlines to fly, making it untenable for us to renew our capacity purchase agreements with respect to these aircraft or place them into service with other major airlines. Our restructuring did not seek to renegotiate the terms of our then-existing labor agreements, which we believe has contributed to our strong ongoing relationship with our employees and their labor representatives.
Since 2007, depending on the metric used, the overall size of the U.S. regional airline industry has been largely unchanged. The first reason for this relates to mergers, hub consolidation, and route
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network rationalization among the major airlines that were the primary purchasers of regional airline capacity: Deltas combination with Northwest, Uniteds combination with Continental, Americans combination with US Airways, and US Airways previous combination with America West. The second reason has been a pilot shortage resulting from new federal regulations implemented in August 2013 which dramatically increased minimum pilot training time. According to the Regional Airline Association, from 2007 until 2016, U.S. regional air carriers collectively grew revenue passenger miles from 72.9 billion to 75.5 billion, though passenger enplanements declined from 160.2 million to 154.9 million over the same period. The industry has changed in important ways since 2007, including: growth in average aircraft size from 51 seats to 62 seats, growth in average passenger trip length from 456 miles to 488 miles, near complete elimination of aircraft under 50-seat capacity from U.S. scheduled airline service, attrition of many smaller carriers, and significant reductions in flight frequencies and served destinations for many small and medium-sized cities across the United States.
We believe the effects of the pilot shortage and major airline consolidation are now fully reflected in the structure and trade practices of the regional airline sector, and that our sector is poised to grow again as the significant recent increases in regional airline pilot compensation draw additional qualified individuals into the profession, and once again permit fleet expansion. For the 2018-2038 timeframe, the FAA has projected revenue passenger miles for U.S. regional carriers to grow by 2.1% per year, with average aircraft size continuing to climb to 75 seats per aircraft. We believe the intensity of competition among regional air carriers for capacity-purchase contracts has lessened in recent years, due to the scarcity of pilots, and we do not expect this competitive characteristic to change in the near term. See BusinessOur Growth Opportunities .
Relationship Between Regional and Major Airlines
Regional airlines typically operate short- and medium-haul scheduled airline service, often connecting smaller cities with major airline hubs. Regional airlines generally enter into capacity purchase agreements with one or more major airline partners under which the regional airline uses the major airlines logos, service marks and aircraft paint schemes in providing regional flying services. Under these agreements, the major airline typically controls route selection, marketing, scheduling, pricing and seat inventories, and provides the regional airline with ground support services, airport landing slots and gate access. The regional airline, in turn, provides flight crews, flight services, maintenance and other operational functions. In most cases, the regional airline itself owns or leases the aircraft used, but there are many instances where the major airline partner will provide the aircraft.
The commercial relationship between the regional airline and its major airline partner usually involves either a capacity purchase agreement or revenue sharing arrangement, as explained below. All of our revenues are derived under capacity purchase agreements, and the overwhelming majority of revenues for the regional airline sector today are from capacity purchase agreements rather than revenue sharing arrangements.
Capacity Purchase Agreements. Under a capacity purchase agreement (also referred to as a revenue guarantee agreement, fixed fee contract or contract flying), the major airline generally pays the regional airline a fixed fee for each departure, flight hour (measured from takeoff to landing, excluding taxi time) or block hour (measured from takeoff to landing, including taxi time) incurred, and an amount per aircraft in service each month with additional incentives based on completion of flights, on-time performance and other operating metrics. In exchange for that, the major airline keeps all of the revenue paid by the passengers travelling on that regional airline flight leg. Under these agreements the major airline bears the risk of changes in the price of fuel and certain other costs that are passed through dollar-for-dollar to the major airline partner. Regional airlines benefit from a capacity purchase agreement because they are sheltered from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of
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passengers. Correspondingly, regional airlines in capacity purchase agreements generally do not benefit from positive trends in ticket prices (including ancillary revenue programs), the number of passengers enplaned or fuel prices.
Revenue-Sharing Arrangements. Under a revenue-sharing arrangement (also referred to as prorate flying), the major airline and regional airline negotiate a passenger fare proration formula, pursuant to which the regional airline receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on the regional airline and the other portion of their trip on the major airline. Substantially all costs associated with the regional airline flight are borne by the regional airline. In a revenue-sharing arrangement, the regional airline may realize increased profits as ticket prices and passenger loads increase or fuel prices decrease and, correspondingly, the regional airline may realize decreased profits as ticket prices and passenger loads decrease or fuel prices increase.
We currently have capacity purchase agreements with United, where we operate under the United Express banner, and American, where we operate under the American Eagle banner.
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Overview
Mesa Airlines is a regional air carrier providing scheduled passenger service to 110 cities in 38 states, the District of Columbia, Canada, Mexico, Cuba and the Bahamas. All of our flights are operated as either American Eagle or United Express flights pursuant to the terms of capacity purchase agreements we entered into with American and United. We have a significant presence in several of our major airline partners key domestic hubs and focus cities, including Dallas, Houston, Phoenix and Washington-Dulles. We have been the fastest growing regional airline in the United States over our last five fiscal years, based on fleet growth, with a cumulative increase in aircraft of 137%.
As of March 31, 2018, we operated a fleet of 145 aircraft with approximately 610 daily departures. We operate 64 CRJ-900 aircraft under our American Capacity Purchase Agreement and 20 CRJ-700 and 60 E-175 aircraft under our United Capacity Purchase Agreement. Over the last five calendar years, our share of the total regional airline fleet of American and United has increased from 7% to 11% and from 4% to 15%, respectively. Driven by this fleet growth, our total operating revenues have grown by 55% from $415.2 million in fiscal 2013 to $643.6 million in fiscal 2017, respectively. We believe we have expanded our share with our major airline partners because of our competitive cost structure, access to pilots under our labor agreements and track record of reliable performance. All of our operating revenue in our 2017 fiscal year and the six months ended March 31, 2018 was derived from operations associated with our American and United Capacity Purchase Agreements.
Our long-term capacity purchase agreements provide us guaranteed monthly revenue for each aircraft under contract, a fixed fee for each block hour and flight flown, and reimbursement of certain direct operating expenses, in exchange for providing regional flying on behalf of our major airline partners. Our capacity purchase agreements shelter us from many of the elements that cause volatility in airline financial performance, including fuel prices, variations in ticket prices, and fluctuations in number of passengers. In providing regional flying under our capacity purchase agreements, we use the logos, service marks, flight crew uniforms and aircraft paint schemes of our major airline partners. Our major airline partners control route selection, pricing, seat inventories, marketing and scheduling, and provide us with ground support services, airport landing slots and gate access, allowing us to focus all of our efforts on delivering safe, reliable and cost-competitive regional flying.
Regional aircraft are optimal for short and medium-haul scheduled flights that connect outlying communities with larger cities and act as feeders for domestic and international hubs. In addition, regional aircraft are well suited to serve larger city pairs during off-peak times when load factors on larger jets are low. The lower trip costs and operating efficiencies of regional aircraft, along with the competitive nature of the capacity purchase agreement bidding process, provide significant value to major airlines. According to the Regional Airline Association, we were the fifth largest regional airline company in the United States in 2016, as measured by passenger enplanements, and our flights accounted for approximately 8.4% of all passengers carried on U.S. regional airlines.
Regional airlines play a daily, essential role in the U.S. air travel system. According to the Regional Airline Association, 42% of all scheduled passenger flights in the United States in 2016 were operated by regional airlines. Of all the U.S. airports with scheduled passenger service, 64% are served exclusively by regional airlines. Some of the most popular U.S. airports have more than half of all their flights on regional airlines, including New York-LaGuardia, Philadelphia, Washington-Dulles, Charlotte, Houston-Bush and Chicago-OHare.
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Our Competitive Strengths
We believe that our primary strengths are:
Low-Cost Operator. We believe that we are among the lowest cost operators of regional jet service in the United States. There are several key elements that contribute to our cost efficiencies:
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Efficient Fleet Composition . We exclusively operate large regional aircraft with 70+ passenger seats on a single FAA certificate. Operating large regional aircraft allows us to enjoy unit cost advantages over smaller regional aircraft. Larger regional aircraft require less fuel and crew resources per passenger carried, and may also have maintenance cost efficiencies. |
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Cost Effective, Long-Term Collective Bargaining Agreements . Our pilots and flight attendants ratified new four-year collective bargaining agreements effective as of July 13, 2017 and October 1, 2017, respectively, which are among the longest in the regional airline industry and include labor rate structures through 2023 for our pilots and 2022 for our flight attendants. We believe that our collective bargaining agreements and favorable labor relationships are critical for pilot retention and will provide more predictable labor costs into 2023. We derive cost advantages from efficient work rules and the relatively low average seniority of our pilots. |
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Low Corporate Overhead. Our general and administrative expenses per block hour have decreased by more than 35% over the five-year period ended September 30, 2017. We have significantly reduced our overhead costs by operating with a modest administrative and corporate team, offering cost-effective benefit programs and implementing automated solutions to improve efficiency. |
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Competitive Procurement of Certain Operating Functions. We have long-term maintenance agreements with expirations extending from December 2020 to December 2027 with AAR, GE, StandardAero, Aviall and Bombardier, respectively, to provide parts procurement, inventory and engine, airframe and component overhaul services. We expect that our long-term agreements with these and other strategic vendors will provide predictable high-quality and cost-effective solutions for most maintenance categories over the next several years. In prior periods, we also invested in long-term engine overhauls on certain aircraft, which we believe will reduce related maintenance obligations in future periods. |
Advantages in Pilot Recruitment and Retention. We believe that we are well positioned to attract and retain qualified pilot candidates. Following the ratification of our collective bargaining agreements in July 2017, the average number of new pilot applications per month has increased by 45.3% compared to the six months prior to the ratification. In addition, our average pilot attrition has decreased by 16.2% over the same period.
The following chart presents our cumulative increase in new pilots who have completed training, net of attrition, from July 2017 through June 2018:
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We believe that the increased number of new pilot applications per month will continue with the introduction of our CPP with United. In addition to offering competitive compensation, bonuses and benefits, we believe the following elements contribute to our recruiting advantage:
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Career Path Program. We recently announced our CPP with United, which is designed to provide our qualified current and future pilots a path to employment as a pilot at United. We believe that our CPP will help us continue to attract qualified pilots, manage natural attrition and further strengthen our decades-long relationship with United. |
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Modern, Large-Gauged Regional Jets . We exclusively operate large regional aircraft with advanced flight deck avionics. We believe that pilot candidates prefer advanced flight deck avionics because they are similar to those found in the larger commercial aircraft types flown by major airlines. |
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Opportunities for Advancement. We believe that our career progression is among the most attractive in the regional airline industry. During fiscal 2017, our pilots had the opportunity to be promoted from first officer to captain in as little as 12 months. |
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Stable Labor Relations. Throughout our long operating history, we believe that we have had constructive relationships with our employees and their labor representatives. We have never been the subject of a labor strike or labor action that impacted our operations. |
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Enthusiastic and Supportive Culture. Our pilots helping pilots philosophy helps us attract, retain and inspire our next generation of pilots. Our team-oriented culture, as demonstrated by the mentorship of our senior pilots, is both encouraged and expected. We strive to create an environment for our personnel where open communication is customary and where we celebrate our successes together. |
Stable, Long-Term Revenue-Guarantee Capacity Purchase Agreements . We have long-term capacity purchase agreements with American and United that extend beyond 2020 for 94 of our 144 aircraft in scheduled service (with 34 aircraft expiring between June and December 2019 and 16 aircraft expiring between January and August 2020, if not extended prior to contract expiration). Both of our capacity purchase agreements are capacity purchase, rather than revenue sharing arrangements. This contractual structure provides us with a predictable revenue stream and allows us to increase our profit margin to the extent that we are able to lower our operating costs below the costs anticipated by the agreements. In addition, we are not exposed to price fluctuations for fuel, certain insurance expenses, ground operations or landing fees as those costs are either reimbursed under our capacity purchase agreements or paid directly to suppliers by our major airline partners.
Fleet Exclusively Comprised of Large, Efficient Regional Jets . We exclusively operate large regional aircraft with 70+ passenger seats. These aircraft are the highest in demand across the regional airline industry and provide us with best-in-class operating efficiencies, providing our major airline partners greater flexibility in route structuring and increased passenger revenues. As of March 31, 2018, we had 145 aircraft (owned and leased) consisting of the following:
Embraer
Regional Jet-175 (76 seats) (1) |
Canadair
Regional Jet-700 (70 seats) |
Canadair
Regional Jet-900 (76-79 seats) |
Canadair
Regional Jet-200 (50 seats) (2) |
Total | ||||||||||||||||
American Eagle |
| | 64 | | 64 | |||||||||||||||
United Express |
60 | 20 | | | 80 | |||||||||||||||
Subtotal |
60 | 20 | 64 | | 144 | |||||||||||||||
Unassigned |
| | | 1 | 1 | |||||||||||||||
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Total |
60 | 20 | 64 | 1 | 145 |
(1) |
In February 2018, we mutually agreed with United to temporarily remove two aircraft from service under our United Capacity Purchase Agreement. These aircraft were placed back in service in July 2018 and are reflected here. |
(2) |
CRJ-200 is an operational spare not assigned for service under our capacity purchase agreements. |
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Longstanding Relationships with American and United . We began flying for United in 1991
and American, through its predecessor entities, in 1992. Since 2013, we have added 26 aircraft to
our American Capacity Purchase Agreement and 60 aircraft to our United Capacity Purchase
Agreement.
Strong Recent Record of Operational Performance. We were ranked the number one regional airline for on-time performance by DOT Air Travel Consumer Report for three of the first four months of 2018. In addition, we believe that we were the number one regional airline for on-time performance in 2016 and 2017 based on a comparison of our internal data to publicly available DOT data for reporting airlines. Under our capacity purchase agreements, we may receive financial incentives or incur penalties based upon our operational performance, including controllable on-time departures and controllable completion percentages.
Experienced, Long-Tenured Management Team . Our senior management team has extensive operating experience in the regional airline industry. Our Chief Executive Officer and President/Chief Financial Officer have served us in senior officer positions since 1998, and our management team has helped us navigate through and emerge successfully from bankruptcy in early 2011. From 2013 to September 30, 2017, we have significantly grown the business in the following ways:
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achieved revenue growth of 55%; |
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expanded the number of aircraft flown under our American Capacity Purchase Agreement from 38 to 64; |
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expanded the number of aircraft flown under our United Capacity Purchase Agreement from 20 to 80; |
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closed the first EETC financing by a regional airline; and |
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improved our operating efficiencies and maintained our cost advantage. |
Our Business Strategy
Our business strategy consists of the following elements:
Maintain Low-Cost Structure. We have established ourselves as a low cost, efficient and reliable provider of regional airline services. We intend to continue our disciplined cost control approach through responsible outsourcing of certain operating functions, by flying large regional aircraft with associated lower maintenance costs and common flight crews across fleet types, and through the diligent control of corporate and administrative costs implementing company-wide efforts to improve our cost position. Additionally, we expect our long-term collective bargaining agreements to protect us from significant labor cost increases over the next five years. These efficiencies, coupled with the low average seniority of our pilots, has enabled us to compete aggressively on price in our capacity purchase agreement negotiations.
Attractive Work Opportunities. We believe our employees have been, and will continue to be, a key to our success. Our ability to attract, recruit and retain pilots has supported our industry-leading fleet growth. We intend to continue to offer competitive compensation packages, foster a positive and supportive work environment and provide opportunities to fly state-of-the-art, large-gauged regional jets to differentiate us from other carriers and make us an attractive place to work and build a career.
Maintain a Prudent and Conservative Capital Structure. We intend to continue to maintain a prudent capital structure. We believe that the strength of our balance sheet and credit profile will enable us to optimize terms with lessors and vendors and, when preferred by our major airline partners, allow us to procure and finance aircraft on competitive terms. Also, once we complete this
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offering, our financial resources and publicly traded securities may allow us to take advantage of attractive acquisition opportunities should they arise. We may use a portion of the offering proceeds to purchase some of our leased aircraft. The purchase of leased aircraft would allow us to lower our operating costs and avoid lease-related use restrictions and return conditions.
Minimize Tail Risk . We have structured our aircraft leases and financing arrangements to minimize or eliminate, as much as possible, so-called tail risk, which is the amount of aircraft-related lease obligations or projected negative equity existing beyond the term of that aircrafts corresponding capacity purchase agreement. We currently have 18 aircraft with leases extending past the term of their corresponding capacity purchase agreements with an aggregate exposure of less than $33.0 million and no financing arrangements with projected negative equity. We intend to continue to align the terms of our aircraft leases and financing agreements with the terms of our capacity purchase agreements in order to maintain low tail risk.
Our Growth Opportunities
During our last five fiscal years, our total operating revenues grew at a compounded annual rate of 11.6% and our fleet size increased from 59 to 140 regional aircraft, a cumulative growth rate of 137%. We believe that our cost discipline, strong operational performance and financial resources will provide additional opportunities to expand our operations, including:
Expand Flying With New and Existing Airline Partners. We enjoy strong relationships with our major airline partners and have significantly expanded our fleet size and flight operations with American and United over the last five years. As the demand for air travel among our major airline partners continues to grow, we expect to have the opportunity to increase our flight services for each major airline partner. In addition, over the next five years, we expect that capacity purchase agreements representing up to 300 aircraft currently flown by our competitors on behalf of major airlines will expire by their terms and be subject to rebidding or replacement by more desirable types of aircraft. We believe that our cost structure and operational efficiencies position us well to compete for this flying. Additionally, we intend to pursue opportunities to provide regional flying to other major airlines with hub cities that do not overlap with our existing major airline partners. In addition, if a market for regional flying on behalf of low-cost and ultra low-cost carriers materializes, we believe that we are well positioned to partner with them, as one of the lowest cost regional airlines in the United States.
Acquisitions of Other Regional Airlines . In the future, we may evaluate the strategic acquisition of other regional air carriers. The opportunity to make an acquisition may arise if, for example, a major airline makes a divestiture of a captive regional airline, as major airlines have done in the past.
Opportunities in the Air Cargo and Express Package Sector . We believe that our cost structure and business model may be successfully deployed in the burgeoning air cargo and express shipping sectors. Amazon.com, Inc. and several of the largest integrated logistics companies, including United Parcel Service, Inc., FedEx Corporation and DHL International GmbH, utilize contractual arrangements similar to our capacity purchase agreements with regional air cargo carriers to service outlying areas. We intend to explore future regional air cargo opportunities.
Regulatory Relief. We actively support the efforts of trade organizations, industry leaders, policymakers and other airlines to encourage regulatory reforms related to the current shortage of qualified pilots, lowering the cost of pilot training and providing access to air service for small communities. While the regulatory reform agenda and policies of the current administration are not fully known, it is possible that favorable regulatory changes may take place. We believe that favorable regulatory changes by the current administration, were they to occur, could increase the number of qualified pilots, lower our operating costs and create incremental opportunities for us with our existing and other potential future major airline partners.
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Aircraft Fleet
We fly only large regional jets manufactured by Bombardier and Embraer. Operating large regional aircraft allows us to enjoy operational, recruiting and cost advantages over other regional airlines that operate smaller regional aircraft.
The following table lists the aircraft we own and lease as of March 31, 2018:
Number of Aircraft | ||||||||||||||||
Type of Aircraft | Owned | Leased | Total |
Passenger
Capacity |
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E-175 Regional Jet |
18 | 42 | (1) | 60 | 76 | |||||||||||
CRJ-900 Regional Jet |
39 | 25 | 64 | 76/79 | ||||||||||||
CRJ-700 Regional Jet |
8 | 12 | 20 | 70 | ||||||||||||
CRJ-200 Regional Jet |
1 | | 1 | 50 | ||||||||||||
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Total |
66 | 79 | 145 | |||||||||||||
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(1) |
These aircraft are owned by United and leased to us at nominal amounts. |
The Bombardier and Embraer regional jets are among the quietest commercial jets currently available and offer many of the amenities of larger commercial jet aircraft, including flight attendant service, a stand-up cabin, overhead and under seat storage, lavatories and in-flight snack and beverage service. The speed of Bombardier and Embraer regional jets is comparable to larger aircraft operated by major airlines, and they have a range of approximately 1,600 miles and 2,100 miles, respectively. We do not currently have any existing arrangements with Bombardier or Embraer to acquire additional aircraft.
Route Network
As of March 31, 2018, we served 110 airports throughout the United States, Canada, Mexico and the Bahamas. Our flight schedules are structured to facilitate the connection of our passengers with the flights of our major airline partners at their hub airports and to maximize local and connecting service to other carriers. Under our American and United Capacity Purchase Agreements, market selection, pricing and yield management functions are performed by our respective major airline partners.
Capacity Purchase Agreements
Our capacity purchase agreements consist of the following:
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Operation of CRJ-900 aircraft under our American Capacity Purchase Agreement; and |
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Operation of CRJ-700 and E-175 aircraft under our United Capacity Purchase Agreement. |
The financial arrangement underlying our American and United Capacity Purchase Agreements includes a revenue-guarantee arrangement. Under the revenue-guarantee provisions of our capacity purchase agreements, our major airline partners pay us a fixed minimum monthly amount per aircraft under contract, plus additional amounts related to departures and block hours flown. We also receive direct reimbursement of certain operating expenses, including landing fees and insurance. Other expenses, including fuel and ground operations are directly paid to suppliers by our major airline partners. We are in good standing under and in material compliance with the terms of our capacity purchase agreements and enjoy good relationships with our major airline partners.
We benefit from our capacity purchase agreements and revenue guarantees because we are sheltered, to an extent, from some of the elements that cause volatility in airline financial performance, including variations in ticket prices, fluctuations in number of passengers and fuel prices. However, we do not benefit from positive trends in ticket prices (including ancillary revenue programs), the number of passengers enplaned or reductions in fuel prices. Our major airline partners retain all revenue collected
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from passengers carried on our flights. In providing regional flying under our capacity purchase agreements, we use the logos, service marks and aircraft paint schemes of our major airline partners.
The following table summarizes our ASMs flown and passenger revenue recognized under our capacity purchase agreements for the years ended September 30, 2016 and 2017, and six months ended March 31, 2018, respectively:
Year Ended September 30, 2016 | Year Ended September 30, 2017 | Six Months Ended March 31, 2018 | ||||||||||||||||||||||||||||||||||
Available
Seat Miles |
Contract
Revenue |
Contract
Revenue per ASM |
Available
Seat Miles |
Contract
Revenue |
Contract
Revenue per ASM |
Available
Seat Miles |
Contract
Revenue |
Contract
Revenue per ASM |
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(in thousands) | (in thousands) | (in thousands) | ||||||||||||||||||||||||||||||||||
American |
4,702,987 | $ | 366,911 | ¢ | 7.80 | 4,427,870 | $ | 354,614 | ¢ | 8.01 | 2,110,731 | $ | 175,204 | ¢ | 8.30 | |||||||||||||||||||||
United |
4,120,608 | $ | 202,462 | ¢ | 4.91 | 5,044,041 | $ | 264,084 | ¢ | 5.24 | 2,510,649 | $ | 135,700 | ¢ | 5.40 | |||||||||||||||||||||
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Total |
8,823,595 | $ | 569,373 | ¢ | 6.45 | 9,471,911 | $ | 618,698 | ¢ | 6.53 | 4,621,380 | $ | 310,904 | ¢ | 6.73 | |||||||||||||||||||||
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American Capacity Purchase Agreement
As of March 31, 2018, we operated 64 CRJ-900 aircraft for American under our American Capacity Purchase Agreement. In exchange for providing flight services under our American Capacity Purchase Agreement, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown during each month. In addition, we may also receive incentives or incur penalties based upon our operational performance, including controllable on-time departures and controllable completion percentages. American also reimburses us for certain costs on an actual basis, including passenger liability and hull insurance and aircraft property taxes, all as set forth in our American Capacity Purchase Agreement. Other expenses, including fuel and certain landing fees, are directly paid to suppliers by American. In addition, American also provides, at no cost to us, certain ground handling and customer service functions, as well as airport-related facilities and gates at American hubs and cities where we operate.
Our American Capacity Purchase Agreement establishes minimum levels of flight operations. In prior periods, the FAA Qualification Standards have negatively impacted our ability to hire pilots at a rate sufficient to support required utilization levels, and, as a result, we have issued credits to American pursuant to the terms of our American Capacity Purchase Agreement. For our fiscal year ended September 30, 2017, and the six-month period ended March 31, 2018, we issued credits of approximately $6.0 million and $3.9 million, respectively, under the American Capacity Agreement.
Our American Capacity Purchase Agreement will terminate with respect to different tranches of aircraft between 2021 and 2025, unless otherwise extended or amended. American has the option to unilaterally extend the term of our American Capacity Purchase Agreement up to three times for one year each (on the same terms) with respect to certain aircraft by providing us prior written notice. Our American Capacity Purchase Agreement is subject to termination prior to that date, subject to our right to cure, in various circumstances including:
|
If either American or we become insolvent, file for bankruptcy or fail to pay our debts as they become due, the non-defaulting party may terminate the agreement; |
|
Failure by us or American to perform the covenants, conditions or provisions of our American Capacity Purchase Agreement, subject to 15 days notice and cure rights; |
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If we are required by the FAA or the DOT to suspend operations and we have not resumed operations within three business days, except as a result of an emergency airworthiness directive from the FAA affecting all similarly equipped aircraft, American may terminate the agreement; |
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If our controllable flight completion factor falls below certain levels for a specified period of time, subject to our right to cure; or |
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Upon a change in our ownership or control without the written approval of American. |
In the event that American has the right to terminate our American Capacity Purchase Agreement, American may, in lieu of termination, withdraw up to an aggregate of 14 aircraft from service under our American Capacity Purchase Agreement. Upon any such withdrawal, Americans payments to us would be correspondingly reduced by the number of withdrawn aircraft.
As of March 31, 2018, American held 20.2% of our outstanding common stock (or 10.6% on a fully-diluted basis), which interest American received in exchange for its claims in our bankruptcy proceeding. We entered into a Shareholders Agreement and an Investor Rights Agreement on March 1, 2011 with US Airways, Inc., which later assigned its rights and obligations thereunder by operation of law to American following the merger of US Airways, Inc. and American. See Certain Relationships and Related Party TransactionsShareholders Agreement and Description of Capital StockRegistration Rights.
United Capacity Purchase Agreement
As of March 31, 2018, we operated 20 CRJ-700 and 58 E-175 aircraft for United under our United Capacity Purchase Agreement. In exchange for providing the flight services under our United Capacity Purchase Agreement, we receive a fixed monthly minimum amount per aircraft under contract plus certain additional amounts based upon the number of flights and block hours flown and the results of passenger satisfaction surveys. United also reimburses us for certain costs on an actual basis, including property tax per aircraft and passenger liability insurance. Other expenses, including fuel and certain landing fees, are directly paid to suppliers by United. We also receive a minimum profit margin based upon our operational performance. Under our United Capacity Purchase Agreement, United has purchased 42 of the 60 E-175 aircraft and leases them to us at nominal amounts. United reimburses us on a pass-through basis for all costs related to heavy airframe and engine maintenance, landing gear, APUs and component maintenance for the 42 E-175 aircraft owned by United.
Our United Capacity Purchase Agreement permits United, subject to certain conditions, including the payment of certain costs tied to aircraft type, to terminate the agreement in its discretion, or remove aircraft from service, by giving us notice of 90 days or more. In February 2018, we mutually agreed with United to temporarily remove two aircraft from service under our United Capacity Purchase Agreement. In July 2018, we were able to fully staff flight operations and these aircraft were placed back into service under our United Capacity Purchase Agreement. During the temporary removal, we agreed to pay the lease costs associated with the two E-175 aircraft, which totaled $0.6 million as of March 31, 2018. If United elects to terminate our United Capacity Purchase Agreement in its entirety or permanently remove select aircraft from service, we are permitted to return any of the affected E-175 aircraft leased from United at no cost to us. In addition, if United removes any of our 18 owned E-175 aircraft from service at its direction, United would remain obligated to assume the debt with respect to such aircraft through the end of the term of the agreement.
Our United Capacity Purchase Agreement expires between June and December 2019 with respect to 34 CRJ-700 and E-175 aircraft, between January and August 2020 with respect to 16 E-175 aircraft, and between 2021 and 2028 with respect to 30 of our E-175 aircraft, subject to Uniteds early termination rights and right to extend (on the same terms) for a total of four additional two-year terms. We intend to work with United to extend our United Capacity Purchase Agreement with respect to these aircraft, but there can be no assurance that we will be able to extend the agreement at acceptable rates, on acceptable terms, or at all.
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Our United Capacity Purchase Agreement is subject to early termination under various circumstances including:
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By United if certain operational performance factors fall below a specified percentage for a specified time, subject to notice under certain circumstances; |
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By United if we fail to perform the material covenants, agreements, terms or conditions of our United Capacity Purchase Agreement or similar agreements with United, subject to thirty (30) days notice and cure rights; |
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If either United or we become insolvent, file bankruptcy or fail to pay debts when due, the non-defaulting party may terminate the agreement; or |
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By United if we merge with, or if control of us is acquired by another air carrier or a corporation directly or indirectly owning or controlling another air carrier. |
Maintenance and Repairs
A key element of our business and low-cost strategy is the responsible outsourcing of certain aircraft maintenance and other operating functions. We use competitive bidding among qualified vendors to procure these services on the best possible terms. In March 2014, August 2015 and January 2017, we entered into long-term maintenance contracts with AAR to provide fixed-rate parts procurement and component overhaul services for our aircraft fleet. Under these agreements, AAR provides maintenance and engineering services on any aircraft that we designate during the term of the agreement, along with access to spare parts inventory pool in exchange for a fixed monthly fee. Our agreements with AAR expire in 2026, unless earlier terminated for cause. We have not experienced difficulty obtaining spare parts on a timely basis for our aircraft fleet. As of September 30, 2017, $50.8 million of parts inventory was consigned to us by AAR under long-term contracts that is not reflected on our balance sheet.
In July 2012, we entered into a heavy check maintenance contract with Bombardier, to perform heavy check maintenance on our CRJ-700 and CRJ-900 aircraft, which extends through November 2020.
In July 2013, we entered into an engine maintenance contract with GE to perform heavy maintenance on certain CRJ-700 and CRJ-900 engines based on a fixed pricing schedule. The pricing may escalate annually in accordance with GEs spare parts catalog for engines. The engine maintenance contract extends through 2024.
In 2014, we entered into a ten-year contract with Aviall to provide maintenance and repair services on the wheels, brakes and tires of our CRJ-700 and CRJ-900 aircraft. Under the agreement, we pay Aviall a fixed cost per landing fee for all landings of our aircraft during the term of the agreement, which fee is subject to annual adjustment based on increases in the cost of labor and component parts. As of September 30, 2017, $7.0 million of parts inventory was consigned to us by Aviall under long-term contracts that is not reflected on our balance sheet.
We entered into an engine maintenance contract with StandardAero, which became effective on June 1, 2015, to perform heavy maintenance on certain CRJ-700 and CRJ-900 engines based on a fixed pricing schedule. The pricing may escalate annually in accordance with GEs spare parts catalog for engines. The engine maintenance contract extends through 2020.
Apart from our outsourcing of certain maintenance functions, we have a FAA mandated and approved maintenance program. Our maintenance technicians undergo extensive initial and recurrent training. Aircraft maintenance and repair consists of routine and non-routine maintenance, and work performed is divided into three general categories: line maintenance, heavy maintenance and component service.
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Line maintenance consists of routine daily and weekly scheduled maintenance checks on our aircraft. We categorize our line maintenance into four stations and each line maintenance station is categorized by the scope and complexity of work performed. Line maintenance is performed in Dallas, Houston, Phoenix and Washington, D.C. and represents the majority of and most extensive maintenance we perform.
Major airframe maintenance checks consist of a series of more complex tasks that can take from one to four weeks to accomplish and typically are required approximately every 28 months, on average across our fleet. Engine overhauls and engine performance restoration events are quite extensive and can take two months. We maintain an inventory of spare engines to provide for continued operations during engine maintenance events. We expect to begin the initial planned engine maintenance overhauls on our new engine fleet approximately four to six years after the date of manufacture and introduction into our fleet, with subsequent engine maintenance every four to six years thereafter. Due to our current fleet size, we believe outsourcing all of our heavy maintenance, engine restoration and major part repair, is more economical than performing this work using our internal maintenance team.
Competition
We consider our competition to be those U.S. regional airlines that currently hold or compete for capacity purchase agreements with major airlines. Our competition includes, therefore, nearly every other domestic regional airline, including Air Wisconsin Airlines Corporation (Air Wisconsin); Endeavor (owned by Delta); Envoy, PSA and Piedmont (Envoy, PSA and Piedmont are owned by American); Horizon (owned by Alaska Air Group, Inc.); SkyWest Inc., parent of SkyWest Airlines, Inc. and ExpressJet Airlines, Inc. (collectively, SkyWest); Republic Airways Holdings Inc. (Republic); and Trans States Airlines, Inc. (Trans States). Our primary competitors are listed below:
Regional Airline (1) |
2016
Passengers Enplaned |
Ownership |
Estimated Large
Regional Aircraft in Service (greater than 50 seats) |
Estimated Small
Regional Aircraft in Service (50 seats or less) |
||||||||||
SkyWest, parent of SkyWest Airlines and ExpressJet Airlines | 53,518,235 | Publicly traded | 288 | 307 | ||||||||||
American Airlines Group, parent of PSA, Envoy and Piedmont | 26,161,882 | Captive subsidiaries of American | 159 | 173 | ||||||||||
Republic | 17,090,399 | Private; majority owned by American, Delta and United | 189 | | ||||||||||
Trans States Holdings, parent of Compass, GoJet and Trans States regional airlines | 14,688,699 | Privately owned | 110 | 51 | ||||||||||
Mesa Air Group | 13,065,404 | Publicly traded, following this transaction; 10.6% owned by American (2) | 144 | | ||||||||||
Endeavor | 10,977,002 | Captive subsidiary of Delta | 93 | 50 | ||||||||||
Horizon | 7,801,880 | Captive subsidiary of Alaska | 59 | 0 | ||||||||||
Air Wisconsin | 5,395,587 | Privately owned | 0 | 65 | ||||||||||
CommutAir | 1,341,379 | Private, 40% owned by United | 0 | 22 |
(1) |
Certain smaller independent regional airlines with some code-share or capacity purchase relationships with major airlines have been excluded due to size. |
(2) |
Reflects Americans ownership of common stock on a fully-diluted basis as of March 31, 2018. |
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Major airlines typically offer capacity purchase arrangements to regional airlines on the basis of the following criteria: availability of labor resources; proposed contract economic terms; reliable and on-time flight operations; corporate financial resources including ability to procure and finance aircraft; customer service levels; and other factors.
Certain of our competitors are larger and have significantly greater financial and other resources than we do. Moreover, economic downturns, combined with competitive pressures, have contributed to a number of reorganizations, bankruptcies, liquidations and business combinations among major and regional carriers. The effect of economic downturns is somewhat mitigated by our reliance on capacity purchase agreements with revenue-guarantee provisions, but the renewal and continued profitability of these partnerships with our major airline partners is not guaranteed.
Aircraft Fuel
Our capacity purchase agreements provide that our major airline partners source, procure and directly pay third-party vendors for all fuel used in the performance of those agreements. Accordingly, we do not recognize fuel expenses or revenues for flying under our capacity purchase agreements and we face very limited exposure to fuel price fluctuations.
Insurance
We maintain insurance policies we believe are of types customary in the airline industry and as required by the DOT, lessors and other financing parties and our major airline partners under the terms of our capacity purchase agreements. The policies principally provide liability coverage for public and passenger injury; damage to property; loss of or damage to flight equipment; fire; auto; directors and officers liability; advertiser and media liability; cyber risk liability; fiduciary; workers compensation and employers liability; and war risk (terrorism). Although we currently believe our insurance coverage is adequate, we cannot assure you that the amount of such coverage will not be changed or that we will not be forced to bear substantial losses from accidents.
Employees
As of March 31, 2018, we employed approximately 3,229 employees, consisting of 1,317 pilots or pilot recruits, 1,159 flight attendants, 53 flight dispatchers, 411 mechanics and 289 employees in administrative roles. Our continued success is partly dependent on our ability to continue to attract and retain qualified personnel. We have never been the subject of a labor strike or labor action that materially impacted our operations.
FAA regulations require pilots to have an ATP license with specific ratings for the aircraft to be flown, and to be medically certified as physically fit to fly. FAA and medical certifications are subject to periodic renewal requirements including recurrent training and recent flying experience. Mechanics, quality-control inspectors, and flight dispatchers must be certificated and qualified for specific aircraft. Flight attendants must have initial and periodic competency training and qualification. Training programs are subject to approval and monitoring by the FAA. Management personnel directly involved in the supervision of flight operations, training, maintenance, and aircraft inspection must also meet experience standards prescribed by FAA regulations. All safety-sensitive employees are subject to pre-employment, random, and post-accident drug testing.
The airline industry has from time to time experienced a shortage of qualified personnel, particularly with respect to pilots and maintenance technicians. In addition, as is common with most of our competitors, we have faced considerable turnover of our employees. Regional airline pilots, flight attendants and maintenance technicians often leave to work for larger airlines, which generally offer
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higher salaries and better benefit programs than regional airlines are financially able to offer. During fiscal 2017, we experienced higher than average turnover as a result of pilot wage increases at certain other regional air carriers and expanded hiring by major carriers. Should the turnover of employees, particularly pilots, sharply increase, the result will be significantly higher training costs than otherwise would be necessary and we may need to request a reduced flight schedule with our major airline partners, which may result in operational performance penalties under our capacity purchase agreements. We cannot assure you that we will be able to recruit, train and retain the qualified employees that we need to carry out our expansion plans or replace departing employees.
As of March 31, 2018, approximately 76.7% of our employees were represented by labor unions under collective-bargaining agreements, as set forth below. No other employees of ours or our subsidiaries are parties to any other collective bargaining agreement or union contracts.
Employee Groups |
Number of
Employees |
Representative |
Labor
Agreement Expiration |
|||||||
Pilots |
1,317 | Air Line Pilots Association | 7/13/2021 | (1) | ||||||
Flight Attendants |
1,159 | Association of Flight Attendants | 10/1/2021 | (2) | ||||||
Dispatchers |
53 | N/A | ||||||||
Mechanics |
411 | N/A | ||||||||
Administrative |
289 | N/A |
(1) |
On July 13, 2017, our pilots ratified a new four-year collective bargaining agreement. |
(2) |
On October 1, 2017, our flight attendants also ratified a new four-year collective bargaining agreement. |
The RLA governs our relations with labor organizations. Under the RLA, the collective bargaining agreements generally do not expire, but instead become amendable as of a stated date. If either party wishes to modify the terms of any such agreement, they must notify the other party in the manner agreed to by the parties. Under the RLA, after receipt of such notice, the parties must meet for direct negotiations, and if no agreement is reached, either party may request the NMB to appoint a federal mediator. The RLA prescribes no set timetable for the direct negotiation and mediation process. It is not unusual for those processes to last for many months, and even for a few years. If no agreement is reached in mediation, the NMB in its discretion may declare at some time that an impasse exists, and if an impasse is declared, the NMB proffers binding arbitration to the parties. Either party may decline to submit to arbitration. If arbitration is rejected by either party, a 30-day cooling off period commences. During that period (or after), a Presidential Emergency Board (PEB) may be established, which examines the parties positions and recommends a solution. The PEB process lasts for 30 days and is followed by another cooling off period of 30 days. At the end of a cooling off period, unless an agreement is reached or action is taken by Congress, the labor organization may strike and the airline may resort to self-help, including the imposition of any or all of its proposed amendments and the hiring of new employees to replace any striking workers. Congress and the President have the authority to prevent self-help by enacting legislation that, among other things, imposes a settlement on the parties. The table above sets forth our employee groups and status of the collective bargaining agreements.
Safety and Security
We are committed to the safety and security of our passengers and employees. We have taken many steps, both voluntarily and as mandated by governmental authorities, to increase the safety of our operations. Some of the safety and security measures we have taken with our major airline partners include: aircraft security and surveillance, positive bag matching procedures, enhanced passenger and baggage screening and search procedures, and securing of cockpit doors. We are committed to complying with future safety and security requirements.
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Our ongoing focus on safety relies on training our employees to proper standards and providing them with the tools and equipment they require so they can perform their job functions in a safe and efficient manner. Safety in the workplace targets several areas of our operation including: dispatch, flight operations and maintenance.
The TSA and the U.S. Customs and Border Protection, each a division of the U.S. Department of Homeland Security, are responsible for certain civil aviation security matters, including passenger and baggage screening at U.S. airports, and international passenger prescreening prior to entry into or departure from the U.S. international flights are subject to customs, border, immigration and similar requirements of equivalent foreign governmental agencies. We are currently in compliance with all directives issued by such agencies. We maintain active, open lines of communication with the TSA at all of our locations to ensure proper standards for security of our personnel, equipment and facilities are exercised throughout the operation.
Facilities
In addition to aircraft, we have office and maintenance facilities to support our operations. Each of our facilities are summarized in the following table:
Type |
Location |
Ownership |
Approximate
Square Feet |
|||||||
Corporate Headquarters |
Phoenix, Arizona | Leased | 33,770 | |||||||
Office, Hangar and Warehouse |
El Paso, Texas | Leased | 31,292 | |||||||
Warehouse |
Dulles, Washington | Leased | 1,475 | |||||||
Hangar |
Houston, Texas | Leased | 74,524 | |||||||
Parts/Stores |
Phoenix, Arizona | Leased | 12,000 | |||||||
Training Center |
Phoenix, Arizona | Leased | 23,783 | |||||||
Hangar |
Phoenix, Arizona | Leased | 22,467 | |||||||
Warehouse |
Tucson, Arizona | Leased | 4,676 | |||||||
Warehouse |
Dallas, Texas | Leased | 3,420 | |||||||
Hangar |
Dulles, Washington | Leased | 27,235 | |||||||
Crew Lounge |
Louisville, Kentucky | Leased | 1,171 | |||||||
Crew Lounge |
Dulles, Washington | Leased | 1,834 |
Our corporate headquarters and training facilities in Phoenix, Arizona are subject to long-term leases expiring on November 30, 2025 and May 31, 2025, respectively.
We believe our facilities are suitable and adequate for our current and anticipated needs.
Foreign Ownership
Under DOT regulations and federal law, we must be owned and controlled by U.S. citizens. The restrictions imposed by federal law and regulations currently require that at least 75% of our voting stock must be owned and controlled, directly and indirectly, by persons or entities who are U.S. citizens, as defined in the Federal Aviation Act, that our president and at least two-thirds of the members of our Board of Directors and other managing officers be U.S. citizens, and that we be under the actual control of U.S. citizens. In addition, at least 51% of our total outstanding stock must be owned and controlled by U.S. citizens and no more than 49% of our stock may be held, directly or indirectly, by persons or entities who are not U.S. citizens and are from countries that have entered into open skies air transport agreements with the U.S. which allow unrestricted access between the United States and the applicable foreign country and to points beyond the foreign country on flights serving the foreign country. We are currently in compliance with these ownership provisions. As of
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March 31, 2018, there were outstanding warrants to purchase 10,890,905 shares of our common stock, with an exercise price of $0.004 per share and warrants to purchase 250,000 shares of our common stock with an exercise price of $3.20 per share (which were terminated in June 2018). The warrants are not exercisable in violation of the restrictions imposed by federal law requiring that no more than 24.9% of our stock be voted, directly or indirectly, or controlled by persons who are not U.S. citizens. For a discussion of the procedures we instituted to ensure compliance with these foreign ownership rules, see Description of Capital StockAnti-Takeover Provisions of Our Articles of Incorporation, Bylaws and Nevada LawLimited Ownership and Voting by Foreign Owners.
Government Regulation
Aviation Regulation
The DOT and FAA have regulatory authority over air transportation in the United States and all international air service is subject to certain U.S. federal requirements and approvals, as well as the regulatory requirements of the appropriate authorities of the foreign countries involved. The DOT has authority to issue certificates of public convenience and necessity, exemptions and other economic authority required for airlines to provide domestic and foreign air transportation. International routes and international code-sharing arrangements are regulated by the DOT and by the governments of the foreign countries involved. A U.S. airlines ability to operate flights to and from international destinations is subject to the air transport agreements between the United States and the foreign country and the carriers ability to obtain the necessary authority from the DOT and the applicable foreign government.
The U.S. government has negotiated open skies agreements with many countries, which allow broad access between the United States and the applicable foreign country. With certain other countries, however, the United States has a restricted air transportation agreement. Our international flights to Mexico are governed by a recently implemented liberalized bilateral air transport agreements which the DOT has determined has all of the attributes of an open skies agreement. Our flights to Canada, Cuba and the Bahamas are governed by bilateral air transport agreements between the United States and such countries. Changes in U.S., Mexican, Canadian, Cuban or Bahamian aviation policies could result in the alteration or termination of the corresponding air transport agreement, or otherwise affect our operations to and from these countries. In particular, there is still a degree of uncertainty about the future of scheduled commercial flight operations between the United States and Cuba as a result of changes in diplomatic relations between the two governments, as well as travel and trade restrictions implemented by the U.S. government in 2017. We are largely sheltered from the economic impact changes to existing open skies agreements or volatility in U.S., Mexican, Canadian, Cuban or Bahamian aviation polices because our major airline partners control route selection and scheduling under our capacity purchase agreements.
The FAA is responsible for regulating and overseeing matters relating to the safety of air carrier flight operations, including the control of navigable air space, the qualification of flight personnel, flight training practices, compliance with FAA airline operating certificate requirements, aircraft certification and maintenance requirements and other matters affecting air safety. The FAA requires each commercial airline to obtain and hold an FAA air carrier certificate. We currently hold an FAR-121 air carrier certificate.
Airport Access
Flights at three major domestic airports are regulated through allocations of landing and takeoff authority (i.e., slots and operating authorizations) or similar regulatory mechanisms, which limit
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take-offs and landings at those airports. Each slot represents the authorization to land at or take off from the particular airport during a specified time period. In the United States, the FAA currently regulates the allocation of slots, slot exemptions, operating authorizations or similar capacity allocation mechanisms at two of the airports we serve, Ronald Reagan Washington National Airport (DCA) in Washington, D.C. and New Yorks LaGuardia Airport (LGA). In addition, John Wayne Airport (SNA) in Orange County, California, has a locally imposed slot system. Our operations at these airports generally require the allocation of slots or analogous regulatory authorizations, which are obtained by our major airline partners.
Consumer Protection Regulation
The DOT also has jurisdiction over certain economic issues affecting air transportation and consumer protection matters, including unfair or deceptive practices and unfair methods of competition, lengthy tarmac delays, air carriers, airline advertising, denied boarding compensation, ticket refunds, baggage liability, contracts of carriage, customer service commitments, customer complaints and transportation of passengers with disabilities. The DOT frequently adopts new consumer protection regulations, such as rules to protect passengers addressing lengthy tarmac delays, chronically delayed flights, capacity purchase disclosure and undisclosed display bias, and is reviewing new guidelines to address the transparency of airline non-ticket fees and refunding baggage fees for delayed checked baggage. The DOT also has authority to review certain joint venture agreements, code-sharing agreements (where an airline places its designator code on a flight operated by another airline) and wet-leasing agreements (where one airline provides aircraft and crew to another airline) between carriers and regulates other economic matters such as slot transactions.
Environmental Regulation
We are subject to various federal, state, local and foreign laws and regulations relating to environmental protection matters. These laws and regulations govern such matters as environmental reporting, storage and disposal of materials and chemicals and aircraft noise. We are, and expect in the future to be, involved in various environmental matters and conditions at, or related to, our properties. We are not currently subject to any environmental cleanup orders or actions imposed by regulatory authorities. We are not aware of any active material environmental investigations related to our assets or properties.
Other Regulations
Airlines are also subject to various other federal, state, local and foreign laws and regulations. For example, the U.S. Department of Justice has jurisdiction over certain airline competition matters. Labor relations in the airline industry are generally governed by the RLA. The privacy and security of passenger and employee data is regulated by various domestic and foreign laws and regulations.
The U.S. government and foreign governments may consider and adopt new laws, regulations, interpretations and policies regarding a wide variety of matters that could directly or indirectly affect our results of operations. We cannot predict what laws, regulations, interpretations and policies might be considered in the future, nor can we judge what impact, if any, the implementation of any of these proposals or changes might have on our business.
Legal Proceedings
We are subject to commercial and employment litigation claims and to administrative and regulatory proceedings and reviews. We currently believe that the ultimate outcome of such claims, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on our financial position, liquidity or results of operations. Additionally, from time to time we are subject to legal proceedings and regulatory oversight in the ordinary course of our business.
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The following table provides information regarding the individuals who currently serve as our directors and executive officers:
Name |
Age |
Position(s) |
||||
Executive Officers and Employee Directors |
||||||
Jonathan G. Ornstein |
61 | Chairman of the Board and Chief Executive Officer | ||||
Michael J. Lotz |
58 | President and Chief Financial Officer | ||||
Brian S. Gillman |
49 | Executive Vice President, General Counsel and Secretary | ||||
Michael L. Ferverda |
74 | Chief Operating Officer | ||||
Non-Employee Directors |
||||||
Daniel J. Altobello (2) (3) |
77 | Director | ||||
Ellen N. Artist (1) |
62 | Director | ||||
Mitchell Gordon (1) |
61 | Director | ||||
Dana J. Lockhart (1) |
71 | Director | ||||
G. Grant Lyon (2) |
55 | Director | ||||
Giacomo Picco (3) |
41 | Director | ||||
Harvey Schiller (2) |
79 | Director | ||||
Don Skiados (3) |
72 | Director |
(1) |
Member of the Audit Committee. |
(2) |
Member of the Compensation Committee. |
(3) |
Member of the Corporate Governance/Nominating Committee. |
The following are brief biographies for each current executive officer and employee director and each non-employee director. When we refer to any of such persons service to our company we are referring to service to Mesa Air Group, Inc. as well as our wholly owned subsidiaries, Mesa Airlines and MAG-AIM.
Executive Officers and Employee Directors
Jonathan G. Ornstein serves as our Chairman and Chief Executive Officer, and has been with us since being named President in 1998, and Chairman of the Board in 1999. Mr. Ornstein co-founded Virgin Express S.A./N.V., an airline in Brussels, Belgium, where he served as chief executive officer and chairman from 1995 until 1999. In 1994, Mr. Ornstein served as chief executive officer of Continental Express, and was later named senior vice president of airport services for Continental Airlines. Mr. Ornsteins first tenure with us was from 1988 to 1994, serving as our Executive Vice President and President of our then-wholly owned subsidiary. Mr. Ornstein began his career in aviation in 1986 with AirLA, a commuter airline in Los Angeles. Mr. Ornstein attended the University of Pennsylvania.
Michael J. Lotz serves as our President and Chief Financial Officer, and has been with us since 1998, serving as President since 2000. In 1999, Mr. Lotz was named our Chief Operating Officer and served as Chief Financial Officer during that time, after joining us in 1998 as a consultant. From 1995 to 1998, Mr. Lotz worked with Mr. Ornstein, first at Continental Express as senior director of purchasing, later as vice president of airport operations, and then at Virgin Express S.A./N.V.in Brussels as chief operating officer, where the two eventually took the company public. From 1987 to 1995, Mr. Lotz served in various roles at Continental Airlines, ultimately serving as senior director of contract services and airport administration. Mr. Lotz received a B.B.A in financial accounting from Iona College.
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Brian S. Gillman has served as our Executive Vice President, General Counsel and Secretary since 2013. From February 2011 to September 2013, Mr. Gillman served as executive vice president and general counsel at Global Aviation Holdings Inc. From 2001 to February 2011, Mr. Gillman served as our Executive Vice President and General Counsel. From 1996 to 2001, Mr. Gillman was vice president, general counsel and secretary at Vanguard Airlines, Inc. in Kansas City, Missouri. From 1994 to 1996, Mr. Gillman practiced corporate and securities law at Stinson, Mag & Fizzell, P.C. (now known as Stinson Leonard Street LLP) in Kansas City, Missouri. Mr. Gillman received his J.D. and B.B.A. in accounting from the University of Iowa.
Michael L. Ferverda serves as our Chief Operating Officer, and has served in a wide range of capacities across our senior management team. From 2007 to 2009, Mr. Ferverda served as chief operating officer, director of operations and chief pilot of Kunpeng Airlines, which was, at the time, our joint venture with Shenzhen Airlines, in China. Mr. Ferverda previously served as president of Freedom Airlines in 2002 and senior vice president of West Coast operations in February 2003. From 1973 to 1989, after serving as an aviator in the United States Navy, Mr. Ferverda was a pilot for Eastern Airlines. Mr. Ferverda received a B.A. in political science from Indiana University.
Non-Employee Directors
Daniel J. Altobello has served as a member of our Board of Directors since January 1998. Mr. Altobello is the retired director and chairman of Onex Food Services, Inc., the parent corporation of Caterair International, Inc., and LSG/SKY Chefs. From 1989 to 1995, Mr. Altobello served as chairman, president and chief executive officer of Caterair International Corporation. From 1979 to 1989, he held various managerial positions with the food service management and in-flight catering divisions of Marriott Corporation, including executive vice president of Marriott Corporation and president of Marriott Airport Operations Group. Mr. Altobello began his management career at Georgetown University as vice president of administration services. He is a member of the board of directors of Arlington Asset Investment Corporation (NYSE: AI), DiamondRock Hospitality Company (NYSE: DRH), Northstar Healthcare Income Inc. (NYSE: NSAM), and Mancini Holdings. Mr. Altobello also serves as a trustee of Loyola Foundation, Inc. Mr. Altobello is a member of the Compensation Committee and the Corporate Governance/Nominating Committee. We believe Mr. Altobello is qualified to serve on our Board of Directors due to his experience in the air transportation industry and his general and airline business experience.
Ellen N. Artist has served as a member of our Board of Directors since March 2011. Ms. Artist has more than 35 years of experience in aviation finance as a bankruptcy trustee, financial advisor, financial principal and commercial lender. Ms. Artist led the out-of-court restructuring of lease and loan obligations for both Independence Air and American. During the course of her career, Ms. Artist has been involved in more than $10 billion in aviation, debt, equity and lease placements. Ms. Artist was formerly a founding partner at both The Seabury Group, LLC, from 1996 to 2002, and Sky Works Capital, LLC, from 2002 to 2005, two investment banking boutiques specializing in aviation activities. Other areas of expertise for Ms. Artist include claims resolution, trust accounting, litigation and interaction with counsel. Ms. Artist is a graduate of Northwestern University with a B.A. in Economics and received an M.B.A. with distinction from New York University. Ms. Artist is the chair of the Audit Committee. We believe Ms. Artist is qualified to serve on our Board of Directors due to her experience in the aviation industry, her financial expertise and general business expertise.
Mitchell Gordon has served as a member of our Board of Directors since March 2011. Mr. Gordon has more than 30 years of experience in transportation, finance and general business management. He is currently serving as the chief executive officer of Edition Logistics Management, LLC, a transportation sector investment and management firm, and Edition Capital Partners, LLC, a merchant banking firm. From December 2013 to December 2015, Mr. Gordon was the president, the chief
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financial officer and director of Cambridge Capital Acquisition Corporation, a special purpose acquisition company (the SPAC). In 2016, the SPAC merged with and into an Israeli company, Ability Computer & Software Industries, Ltd., which changed its name to Ability Inc. (Ability). Mr. Gordon served as an Ability director and audit committee member until 2016. In May 2016, Mr. Gordon, along with other Ability directors and officers, was named in a derivative action lawsuit filed in Israel. The defendants are vigorously defending the lawsuit. Mr. Gordon also served as president of Morpheus Capital Advisors, a leading merchant banking firm serving middle market companies, from 2003 to 2013. From 1998 to 2000, Mr. Gordon served as chief financial officer, executive vice president and a member of the Office of the President of Interpool (NYSE: IPX), one of the worlds largest lessors of transportation equipment. Prior to joining Interpool, Mr. Gordon founded and was president of Atlas Capital Partners from 2000 to 2003 and was managing director and co-head of Salomon Smith Barneys transportation investment banking group. Mr. Gordons background also includes serving as senior vice president and head of the transportation and automotive investment groups at Furman Selz as well as vice president of investment banking at Needham & Company. Mr. Gordon has served on the boards of Interpool, Indigo Aviation (NSE: INDIGO), Merchants Fleet and Almedica, Inc. He has served on numerous nonprofit boards and is currently the chair of the Hunter College Community Advisory Board. Mr. Gordon holds a B.S.B.A. from Washington University and an M.B.A. from Harvard Business School. Mr. Gordon is a member of our Audit Committee. We believe Mr. Gordon is qualified to serve on our Board of Directors due to his experience in the transportation industry, his financial expertise and his general business experience.
Dana J. Lockhart has served as a member of our Board of Directors since March 2011. Mr. Lockhart is an independent contractor offering advisory services in financing and procurement of civil aircraft, capital markets and in- and out-of-court restructuring. Mr. Lockhart joined Lockheed Corporation while in college and in 1979 became a founding executive of Lockheed Finance Corporation. In 1982, he was recruited to develop and manage Fairchild Industries new captive subsidiary responsible for sales financing of the companys regional aircraft. In 1987, Mr. Lockhart joined Airbus Americas as a sales finance negotiator, assuming management of the sales finance team in 1989. Mr. Lockhart was promoted to chief financial officer of Airbus Americas in 2002. Between 2008 and 2009, he led the capital markets function of GMT Global Republic Aviation. Since 2009, Mr. Lockhart has provided financial consulting services through his company DJL Advisors, LLC. Mr. Lockhart holds a B.S.B.A. in business administration from California State University and an M.B.A. from Pepperdine University. Mr. Lockhart is a member of the Audit Committee. We believe Mr. Lockhart is qualified to serve on our Board of Directors due to his experience in our industry with airlines and aircraft manufacturers.
G. Grant Lyon has served as a member of our Board of Directors since March 2011. Mr. Lyon has more than 20 years of distressed management experience and has served as a financial advisor for numerous corporate restructuring engagements. Mr. Lyons expertise includes out-of-court restructuring, claims analysis, securities valuation, debtor-in-possession financing, solvency analysis, litigation support and serving as a liquidation trustee. From 2006 to 2015, he was the managing director of Odyssey Capital Group, LLC, a financial advisory firm. From 2015 to 2017, he served as a consultant for KRyS Global USA, a fraud investigation, dispute resolution and corporate recovery firm. Since January 2018, he has served as the managing director of Atera Capital. Lyon holds a B.S. in accounting and an M.B.A. from Brigham Young University and is a Certified Public Accountant. Mr. Lyon is a member of the Compensation Committee and served as a member of the Corporate Governance/Nominating Committee until July 16, 2018. We believe Mr. Lyon is qualified to serve on our Board of Directors due to his financial expertise and general business experience.
Giacomo Picco has served as a member of our Board of Directors since August 2016. He is a partner at Sound Point Capital Management LP (Sound Point), an asset management firm specializing in credit strategies, where he serves as co-portfolio manager of the Strategic Capital Fund and head of corporate solutions for the firm. He focuses on sourcing and structuring directly originated loans for
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companies requiring immediate liquidity or complex financing solutions. Mr. Picco also serves as a member of the investment committee for the Sound Point Beacon Fund and the Sound Point Credit Opportunities Fund. Prior to joining Sound Point, Mr. Picco was a partner at KS Management Corp., an event-driven hedge fund, from 2005 to 2014. Before becoming a partner there, Mr. Picco served as co-head of research. From 2001 to 2002, Mr. Picco was an associate at the Carlyle Group (Nasdaq: CG), where he worked on leveraged buyout transactions. From 1991 to 2001, he worked at Lazard Fréres & Co. as a banker in their mergers and acquisitions group. Mr. Picco also serves on the board of directors of OmniMax International, Inc. and was appointed to be the independent non-executive chairman of Seismic Library Enterprises LLC, which operates a seismic mapping library, by Morgan Stanley Smith Barney. Mr. Picco serves as a guest lecturer for Columbia Business Schools Value Investing Program and for its Private Equity Program. He serves on the investment committee for the Resurrection Episcopal Day School in New York City. Mr. Picco holds a B.A. from Columbia University and an M.B.A. from Harvard Business School. Mr. Picco was appointed to the Corporate Governance/Nominating Committee on July 16, 2018. We believe Mr. Picco is qualified to serve on our Board of Directors due to his financial expertise and general business experience.
Brigadier General Harvey Schiller, USAF, Ret. , has served as a member of our Board of Directors since March 2011. He has a varied history of experience that includes a decorated military career as a pilot to various leadership positions in business and sports. Mr. Schiller previously served as the president of Turner Sports (from 1994 to 2000), the Atlanta Thrasher NHL Club (from 1997 to 2000), executive director of the U.S. Olympic Committee (from 1990 to 1994), commissioner of the Southeastern Conference (from 1986 to 1990), and chairman of the security company Global Options Group (from 2004 to 2012). He has served on the national board of directors for the Boys and Girls Clubs and as director of IDT Corporation. Mr. Schiller was appointed as permanent professor at the United States Air Force Academy and the White House Commission on Presidential Scholars. Mr. Schiller is a graduate of The Citadel and earned a PhD in Chemistry from the University of Michigan. We believe Mr. Schiller is qualified to serve on our Board of Directors due to his extensive general business experience.
Don Skiados has served as a member of our Board of Directors since March 2011. Mr. Skiados is currently the president of Leadership Communication & Training, an aviation industry consulting company with a focus on advising boards of directors on proper governance procedures, management and labor relations and strategic planning. Prior to retiring in June 2009, Mr. Skiados served as the executive director of the ALPA, the worlds largest pilots union. He had previously served as the ALPAs director of communication and was continuously employed by the ALPA for 40 years. Mr. Skiados is the recipient of the Paul Whalen Education Award for his role in the formation of the Council on Aviation Accreditation (now known as the Aviation Accreditation Board International (AABI)) and the Richard W. Taylor Industry Award, which is presented annually to a member of AABI who volunteers time and effort to further the goals of that organization. Mr. Skiados has successfully completed the Wharton Executive Development Program at the Wharton School, University of Pennsylvania, and attended the University of Maryland. Mr. Skiados serves as Chair of the Corporate Governance/Nominating Committee. We believe Mr. Skiados is qualified to serve on our Board of Directors due to his corporate governance expertise, labor and management expertise and general and airline business experience.
Board Composition
Our business and affairs are managed under the direction of our Board of Directors. The number of directors will be fixed by our Board of Directors, subject to the terms of our second amended and restated articles of incorporation and amended and restated bylaws that will become effective immediately prior to the completion of this offering. Our Board of Directors is presently comprised of nine members.
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If authorized by a resolution of our Board of Directors, directors may be appointed to fill any vacancy on our Board of Directors, regardless of how such vacancy shall have been created. Newly created directorships, resulting from any increase in the number of authorized directors, or from any vacancy in our Board of Directors, may be filled only by a majority vote of the directors then in office, though less than a quorum, or by the sole remaining director, or, to the extent required by the amended and restated articles of incorporation or if there are no directors, by the shareholders, and directors so chosen shall hold office until such directors successor shall have been duly elected and qualified. No decrease in the number of authorized directors shall shorten the term of any incumbent director.
Director Independence
With the assistance of legal counsel, our Board of Directors has determined that each of the members of the Board of Directors, except Mr. Ornstein, is currently an independent director for purposes of the Nasdaq Listing Rules and Rule 10A-3(b)(1) under the Exchange Act, as the term applies to membership on our Board of Directors and the various committees of our Board of Directors. Nasdaqs independence definition includes a series of objective tests, such as that the director has not been our employee within the past three years and has not engaged in various types of business dealings with us. In addition, as further required by Nasdaq rules, our Board of Directors has made an affirmative subjective determination as to each independent director that no relationships exist which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our Board of Directors reviewed and discussed information provided by the directors and us with regard to each directors business and personal activities as they may relate to us and our management. On an annual basis, each director and executive officer is obligated to complete a director and officer questionnaire that requires disclosure of any transactions with us in which the director or officer, or any member of his or her family, has a direct or indirect material interest.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Board Committees
Our Board of Directors has established the following committees to assist our Board of Directors in discharging its responsibilities: an Audit Committee, a Compensation Committee and a Corporate Governance/Nominating Committee. The composition of each committee is determined by our Board of Directors, after consultation with the Chairman/Chief Executive Officer and the Corporate Governance/Nominating Committee. The composition and responsibilities of each committee are described below.
Audit Committee
Our Audit Committee oversees all aspects of our control, reporting and audit functions, with a particular focus on the qualitative aspects of financial reporting to shareholders and on our processes for the management of business and financial risk and for compliance with significant applicable legal, ethical and regulatory requirements. Among other matters, the Audit Committee:
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facilitates communication between the independent registered public accountants, members of senior management, our internal audit function and our Board of Directors; |
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reviews, assesses and reports to our Board of Directors on the independence of the registered public accountant, and maintains an active dialogue with the independent registered public accountant; |
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receives reports from senior management regarding the internal audit function and relays this information directly to our Board of Directors; |
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evaluates and assesses significant risks or exposures and ensures that the yearly audit plan addresses such risks; |
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reviews and coordinates audit efforts to ensure completeness of coverage and effective use of audit resources; |
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considers and reviews with the internal audit function and independent registered public accountants issues relating to the internal audit plan; |
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meets four times per year or more frequently as circumstances may require; |
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meets at least annually with the independent registered public accountant, the internal audit function and management, including the Chief Financial Officer, in separate executive sessions to discuss matters privately with the Audit Committee; |
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reviews the audited financial statements and considers the matters required to be discussed by Rule 2-07 of Regulation S-X; and |
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reports periodically to our Board of Directors on significant results of the foregoing activities. |
The current members of our Audit Committee are Ellen N. Artist, who is the chair of the committee, Mitchell Gordon and Dana J. Lockhart. Pursuant to the Audit Committee charter, committee membership shall consist of at least three board members, all of whom qualify as independent within the meaning of our corporate governance guidelines and satisfy the independence requirements of the Nasdaq Listing Rules and Rule 10A-3(b)(1) under the Exchange Act. Our Audit Committee charter also requires members to have financial literacy and familiarity with fundamental financial statements that would allow them to understand key business and financial controls in the primary industries in which we operate. Our Board of Directors has determined that Ms. Artist is an Audit Committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of FINRA, and the remaining Audit Committee members are independent directors as defined under the applicable rules and regulations of the SEC and FINRA. The Audit Committee operates under a written charter that satisfies the applicable standards of the SEC and the Nasdaq Global Select Market. Pursuant to Rule 10A-3 of the Exchange Act, our Audit Committee will consist of at least one board member that is independent upon the effectiveness of our registration statement of which this prospectus forms a part, a majority of members that are independent within 90 days thereafter and all members that are independent within one year thereafter.
Compensation Committee
Our Compensation Committee carries out the Board of Directors overall responsibility relating to executive compensation. Among other matters, the Compensation Committee:
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assists our Board of Directors in developing and evaluating potential candidates for executive positions and oversees the development of executive succession plans; |
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reviews and approves annually the corporate goals and objectives regarding compensation for the Chief Executive Officer; |
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reviews and approves annually the evaluation process and compensation structure for our officers, including salary, bonus, incentive and equity compensation for our senior officers, while providing oversight of managements decisions in this area; |
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reviews our incentive compensation and other equity plans and recommends changes to our Board of Directors as needed; and |
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maintains regular contact with our leadership. |
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The current members of our Compensation Committee are Harvey Schiller, who is the chair of the committee, Daniel J. Altobello and Grant Lyon.
Pursuant to our Compensation Committee charter, members of the Compensation Committee will consist of a minimum of three directors, and all such members will be independent directors and satisfy the applicable independence requirements of the Nasdaq Listing Rules. Members of the committee will be appointed and removed by our Board of Directors in its discretion, and the committee must be composed of a majority of independent directors within 90 days from the date our common stock is listed on the Nasdaq Global Select Market and entirely of independent directors within one year from the date our common stock is listed on the Nasdaq Global Select Market. Our Board of Directors has affirmatively determined that each of Messrs. Schiller, Altobello and Lyon meets the definition of independent director for purposes of the listing rules and is and will be a non-employee director as defined in Rule 16b-3 promulgated under the Exchange Act, and an outside director as that term is defined in Section 162(m) of the Code.
Corporate Governance/Nominating Committee
Our Corporate Governance/Nominating Committee assists our Board of Directors in identifying qualified individuals to become board members, nominates directors to serve on and to chair the board committees, and recommends to our Board of Directors any improvements to our corporate governance guidelines as it deems appropriate. The committee also assists our Board of Directors in continuing education, new director orientation, assessment of board effectiveness and strategic planning. Among other matters, the Corporate Governance/Nominating Committee:
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leads the search for individuals qualified to become members of the board by making its own inquiries and receiving suggestions from other directors, shareholders, and other sources; |
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retains and a search firm to assist in searching for a director and approves their fees; |
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evaluates the suitability of potential nominees for membership on our Board of Directors; |
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recommends to our Board of Directors the number and names of proposed nominees for election as director at the annual meeting of shareholders, as well as naming individuals to fill a vacancy on the board; |
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monitors trends and best practices in corporate governance and reviews our corporate governance guidelines, and recommends changes to corporate governance guidelines when necessary; |
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annually reviews and makes recommendations to our Board of Directors regarding its process for evaluating the effectiveness of the Board of Directors and its committees; |
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periodically reviews and makes recommendations to the board regarding strategic initiatives and new director orientation and director continuing education; and |
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annually recommends to our Board of Directors, following the annual meeting of shareholders, committee membership and chairs, and reviews periodically with our Board of Directors its committee rotation practices. |
The current members of our Corporate Governance/Nominating Committee are Don Skiados, who is the chair of the committee, Daniel J. Altobello and Giacomo Picco. Mr. Picco replaced Mr. Lyon on our Corporate Governance/Nominating Committee effective July 16, 2018.
Pursuant to our Corporate Governance/Nominating Committee charter, the committee shall consist of at least three directors. The members of the Corporate Governance/Nominating Committee and its chair shall be appointed by our Board of Directors, and may be removed by our Board of Directors at
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its discretion. All members of the Corporate Governance/Nominating Committee shall, in the boards judgment, meet the applicable independence requirements of the Nasdaq Listing Rules. In order for our Corporate Governance/Nominating Committee to continue to make recommendations or determinations with respect to the composition of our Board of Directors, the committee must be composed of a majority of independent directors within 90 days from the date our common stock is listed on the Nasdaq Global Select Market and entirely of independent directors within one year from the date our common stock is listed on the Nasdaq Global Select Market. Our Board of Directors has affirmatively determined that each of Messrs. Skiados, Altobello and Picco meets definition of independent director for purposes of the Nasdaq Listing Rules.
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee is or has at any time during the past year been an officer or employee of ours. None of our executive officers currently serves or in the past year has served as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers serving on our board or Compensation Committee.
Director Compensation
Fees . The following fees were paid to our non-employee directors during fiscal year 2017. Directors who are our full-time employees receive no additional compensation for serving as directors. Board members also are reimbursed for all expenses associated with attending board or committee meetings.
Annual retainer |
$ | 20,000 | ||
Quarterly fee |
$ | 8,750 | ||
Fee for each board meeting |
$ | 1,500 | ||
Fee for each telephonic board meeting |
$ | 750 | ||
Compensation Committee Chair retainer |
$ | 10,000 | ||
Nominating/Corporate Governance Chair retainer |
$ | 10,000 | ||
Audit Committee Chair retainer |
$ | 15,000 |
Additionally, members of our committees receive $1,500 for each in-person meeting and $750 for each telephonic meeting.
Equity Awards . Equity awards are made to our non-employee directors on an annual basis. The types and amounts of such awards are set by the Compensation Committee. During fiscal year 2017, each non-employee director received a combination of restricted stock and SARs in the aggregate amount of $74,700.
Other benefits . As is common in the airline industry, we provide flight benefits to members of our Board of Directors, whereby each non-employee director and certain family members of directors receive free or reduced-fare travel on our major airline partners at no cost to us or the director. We believe that the directors use of free air travel is de minimis and did not maintain any records of non-employee directors travel during fiscal year 2017.
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Director Compensation Table
The following table sets forth information regarding compensation earned by the non-employee directors during the fiscal year ended September 30, 2017.
Name |
Fees Earned or
Paid in Cash ($) |
Stock Awards ($) (1) | Total ($) | |||||||||
Daniel J. Altobello |
75,250 | 74,700 | 149,950 | |||||||||
Ellen N. Artist |
82,250 | 74,700 | 156,950 | |||||||||
Mitchell Gordon |
70,000 | 74,700 | 144,700 | |||||||||
Dana J. Lockhart |
68,500 | 74,700 | 143,200 | |||||||||
G. Grant Lyon |
73,750 | 74,700 | 148,250 | |||||||||
Giacomo Picco (2) |
| | | |||||||||
Harvey Schiller |
80,000 | 74,700 | 154,700 | |||||||||
Don Skiados |
80,000 | 74,700 | 154,700 |
(1) |
Represents the aggregate grant date fair value of restricted stock and SARs awarded to each non-employee director during fiscal year 2017. |
(2) |
Mr. Picco became a paid board member in January 2018. |
Code of Conduct and Ethics
Our Board of Directors has adopted a code of conduct and ethics. The code of conduct and ethics applies to all of our officers and employees as well as all members of the Board of Directors and all subsidiaries. The code of conduct and ethics will be available in the Corporate Governance section on our website (which is located under the About Mesa tab on homepage) at www.mesa-air.com under Code of Conduct and Ethics at or around the time of this offering. The information included on our website is not incorporated into this prospectus. The code of conduct and ethics addresses, among other matters, issues relating to conflicts of interests, including internal reporting of violations and disclosures, and compliance with applicable laws, rules and regulations. The purpose of the code of conduct and ethics is to ensure that we and our subsidiaries and affiliated companies continue to follow the highest standards of business and personal ethics, while at all times promoting our best interests, and performing our duties in an honest, courteous manner while abiding by all applicable laws, regulations and Company policies. We intend to promptly post on our website all disclosures that are required by law or the listing standards concerning any amendments to, or waivers from, any provision of the code.
Limitation of Liability and Indemnification
Nevada law provides that our directors and officers will not be individually liable to us, our shareholders or our creditors for any damages for any act or omission of a director or officer other than in circumstances where the presumption that the director or officer acted in good faith and with a view to the interests of the Company has been rebutted, and it is proven that the director or officer breaches his or her fiduciary duty to us or our shareholders and such breach involves intentional misconduct, fraud or a knowing violation of law.
Nevada law also allows a corporation to indemnify officers and directors for actions for which a director or officer either would not be liable pursuant to the limitation of liability provisions of Nevada law or where he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to our best interests, and, in the case of an action not by or in the right of the company and with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. Our second amended and restated articles of incorporation and amended and restated bylaws provide indemnification for our directors and officers to the fullest extent permitted by Nevada law. We have entered into, and expect to continue to enter into, agreements to indemnify our directors
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as determined by our Board of Directors. Prior to the completion of this offering, we intend to enter into indemnification agreements with each of our directors that may, in some cases, be broader than the specific indemnification provisions under Nevada law. In addition, as permitted by Nevada law, our second amended and restated articles of incorporation include provisions that eliminate the personal liability of our directors and officers for monetary damages resulting from certain breaches of fiduciary duties as a director or officer. The effect of these provisions is to restrict our rights and the rights of our shareholders in derivative suits to recover monetary damages against a director for breach of fiduciary duties as a director, except that a director will be personally liable for acts or omissions not in good faith or in a manner which he or she did not reasonably believe to be in or not opposed to our best interest if, subject to certain exceptions, the act or failure to act constituted a breach of fiduciary duty and such breach involved intentional misconduct, fraud or knowing violations of law. We are also authorized to carry directors and officers insurance to protect our directors, officers, employees and agents against certain liabilities.
The limitation of liability and indemnification provisions in our second amended and restated articles of incorporation, amended and restated bylaws and indemnification agreements may discourage shareholders from bringing a lawsuit against directors or officers for breach of their fiduciary duties. These provisions may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our shareholders. A shareholders investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. However, these provisions do not limit or eliminate our rights, or those of any shareholder, to seek non-monetary relief such as injunction or rescission in the event of a breach of a directors or officers fiduciary duties. Moreover, the provisions do not alter the liability of directors under federal securities laws. At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
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This section discusses the material components of our 2017 compensation program for our principal executive officer and next two most highly compensated officers. These named executive officers (NEOs) and their positions are:
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Jonathan G. Ornstein, Chairman and Chief Executive Officer; |
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Michael J. Lotz, President and Chief Financial Officer; and |
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Brian S. Gillman, Executive Vice President, General Counsel and Secretary. |
2017 Summary Compensation Table
The following table sets forth all of the compensation awarded to, earned by or paid to our NEOs during our 2017 fiscal year.
Name and
|
Year |
Salary
($) |
Bonus
($) |
Stock
Awards (1) |
Option
Awards |
Non-Equity
Incentive Plan Compensation ($) (2) |
Change in
Pension Value and Nonqualified Deferred Compensation Earnings |
All Other
Compensation ($) (3) |
Total ($) | |||||||||||||||||||||||||||
Jonathan G. Ornstein, |
2017 | 600,000 | | 588,159 | | 750,000 | | 4,134 | 1,942,293 | |||||||||||||||||||||||||||
Chairman & CEO |
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Michael J. Lotz, |
2017 | 533,333 | | 465,816 | | 587,963 | | 21,690 | 1,608,802 | |||||||||||||||||||||||||||
President & CFO |
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Brian S. Gillman, |
2017 | 275,000 | | 91,897 | | 200,000 | | 1,895 | 568,792 | |||||||||||||||||||||||||||
EVP, General Counsel & Secretary |
(1) |
Includes the dollar amount of the aggregate grant date fair value of restricted stock granted to Messrs. Ornstein, Lotz and Gillman during fiscal year 2017 pursuant to the terms of their respective employment agreements, each of which is discussed under Employment and Separation Agreements with Named Executive Officers below. These grants were made under the 2017 Plan, as discussed in Equity Compensation Plans below. These shares of restricted stock vest in three equal annual installments beginning on June 1, 2018. These amounts are determined in accordance with the provisions of FASB ASC Topic 718, rather than an amount paid to or realized by the executive officer. The assumptions used in calculating the grant-date fair value of the stock awards reported in this column are set forth in the notes to our consolidated financial statements included elsewhere in this prospectus. |
(2) |
Includes incentive bonuses earned by each of the NEOs during our fiscal year 2017. These bonuses were paid pursuant to the terms of each NEOs respective employment agreement. |
(3) |
Mr. Lotz was paid non-cash fringe benefits in the amount of $21,690 during our fiscal year 2017, consisting of our portion of the premium on a term life insurance policy maintained for Mr. Lotz pursuant to the terms of his employment agreement and our portion of the premium on a disability insurance policy maintained for Mr. Lotz pursuant to the terms of his employment agreement. The non-cash fringe benefits paid to Messrs. Ornstein and Gillman represent our portion of the premiums on disability policies maintained for them pursuant to the terms of their respective employment agreements. |
Components of Compensation for Fiscal Year 2017
Base Salary . The base salary payable to each NEO is intended to provide a fixed component of compensation that adequately reflects the executives qualifications, experience, role and responsibilities. Base salary amounts are established based on consideration of, among other factors, the scope of the NEOs position, responsibilities and years of service and our Compensation Committees general knowledge of the competitive market, based on, among other things, experience with other similarly situated companies and our industry and market data reviewed by the Compensation Committee.
Base salaries and broad-based benefits for Messrs. Ornstein, Lotz and Gillman are set forth in their respective employment agreements, which are described below in the Employment and Change of Control Arrangements section. The following table represents our NEOs base salaries in effect for our fiscal year 2017.
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Name |
Base Salary
for 2017 ($) |
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Jonathan G. Ornstein, Chairman and Chief Executive Officer |
600,000 | |||
Michael J. Lotz, President and Chief Financial Officer |
533,333 | |||
Brian S. Gillman, EVP, General Counsel and Secretary |
275,000 |
Performance-Based Cash Incentives . As a cornerstone of our compensation policy, we aim to create a direct correlation between the executives role and responsibilities and the ability to earn variable pay. Our cash incentive compensation plans are designed to reward individuals for the achievement of certain defined financial and operational objectives. We provide cash bonuses to reward and incentivize superior individual and business performance, resulting in a performance-based organizational culture. Our performance-based cash incentive plans are designed to motivate our executives to achieve both corporate targets and individual goals, thereby tying the executives goals and interests to those of our company and its shareholders.
Incentive bonuses for our NEOs, which are set forth in their respective employment agreements, are payable quarterly, based upon our quarterly and annual achievement of certain financial and operational goals identified by the Compensation Committee at the beginning of the fiscal year. The following table summarizes incentive bonuses that were potentially payable to each of our NEOs for our fiscal year 2017:
NEO |
Bonus Level |
Quarterly Amount
($) |
Annual Amount
($) |
Actual Annual
Amount ($) |
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Jonathan G. Ornstein |
Guaranteed | 15,432 | 77,160 | | ||||||||||
Minimum | 36,111 | 180,556 | | |||||||||||
Threshold | 56,790 | 283,951 | | |||||||||||
Target | 98,148 | 490,741 | | |||||||||||
Maximum | 150,000 | 750,000 | 750,000 | |||||||||||
Michael J. Lotz |
Guaranteed | 12,731 | 63,657 | | ||||||||||
Minimum | 29,167 | 145,833 | | |||||||||||
Threshold | 45,448 | 227,238 | | |||||||||||
Target | 78,086 | 390,432 | | |||||||||||
Maximum | 117,593 | 587,963 | 587,963 | |||||||||||
Brian S. Gillman |
Target | 50,000 | 200,000 | 200,000 |
We also, at times, pay discretionary cash bonuses to our NEOs. In our fiscal year 2017, we did not pay any discretionary cash bonuses to our NEOs.
Equity-Based Incentives . Our Compensation Committee fosters an environment of executive ownership that encourages and incentivizes long-term investment and engagement by our NEOs through the use of equity-based awards. Our aim is to promote long-term, sustainable growth and align executive performance and behaviors to create a culture conducive to shareholder investment.
In order to attract and retain the best available management and other personnel with the training, experience and ability to make substantial contributions to the success of our business and to motivate and provide additional incentives to our employees, non-employee board members and consultants, we maintain four equity compensation plans, discussed under Equity Compensation Plans below. Employees, officers, and directors of, and other individuals providing bona fide services to or for us are eligible to receive awards under our equity compensation plans, and awards are issued at the discretion of the Compensation Committee.
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During our fiscal year 2017, we made certain grants of restricted stock and RSUs to Messrs. Ornstein, Lotz and Gillman, as set forth in the 2017 Summary Compensation Table above. These awards were made pursuant to the employment agreements with these individuals, discussed in more detail under Employment and Separation Agreements with Named Executive Officers below, which require annual equity grants with grant date values of not less than the amounts set forth in their respective agreements.
After the end of our fiscal year 2017, on October 17, 2017, we granted to Messrs. Ornstein, Lotz and Gillman the following RSUs under the RSU Plan, which relate to each NEOs service during our fiscal year 2017 and which vest in three equal annual installments commencing June 1, 2018.
NEO |
Number of
RSUs (1) |
Grant Date
Value ($) (2) |
||||||
Jonathan G. Ornstein |
68,710 | 357,292 | ||||||
Michael J. Lotz |
54,420 | 282,984 | ||||||
Brian S. Gillman |
10,738 | 55,835 |
(1) |
Awards vest in three equal annual installments beginning on June 1, 2018. All vesting is conditioned on continuous service. Awards may be settled in cash or shares at the holders option. |
(2) |
Reflects the dollar amount of the aggregate grant date fair value of each award, determined in accordance with the provisions of FASB ASC Topic 718, rather than an amount paid to or realized by the executive officer. The assumptions used in calculating the grant-date fair value of the stock awards reported in this column are set forth in the notes to our consolidated financial statements included elsewhere in this prospectus. |
Benefits and Perquisites . Our NEOs are eligible to participate, to the same extent as our other full-time employees generally and subject to the terms and eligibility requirements of those plans, in our employee benefit plans and programs, which include the following:
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medical, dental and vision insurance; |
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life insurance, accidental death and dismemberment and business travel and accident insurance; |
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health and dependent care flexible spending accounts; and |
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short and long-term disability insurance. |
We determine perquisites on a case-by-case basis and will provide a perquisite to a NEO when we believe it is necessary to attract or retain the executive officer. Any perquisites we provide are reasonable and consistent with market trends.
Retirement Benefits . We maintain a 401(k) tax-deferred retirement savings plan, in which our NEOs are eligible to participate on the same terms as other fulltime employees (the 401(k) Plan). Under the 401(k) Plan, employees may contribute up to 85% of their pretax annual compensation, subject to certain Code limitations. Employer contributions are made at our discretion. During fiscal year 2017, we made matching contributions of 30% of employee contributions up to 10% of such employees annual compensation. The employee vests 20% per year in employer contributions. Employees become fully vested in employer contributions after completing six years of employment.
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Outstanding Equity Awards at Fiscal Year End
The following table lists all outstanding equity awards held by our NEOs as of September 30, 2017.
Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name |
Vesting
Commencement Date |
Number
of Securities Underlying Unexercised Options (#) (1) Exercisable |
Number
Of Securities Underlying Unexercised Options (#) Unexercisable |
Option
Exercise Price ($) |
Option
Expiration Date |
Equity
incentive plan awards: number of unearned shares, units or other rights that have not vested (#) (2) |
Equity
incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($) |
|||||||||||||||||||||
Jonathan G. Ornstein |
1/21/2014 | 250,000 | | 1.60 | 1/21/2024 | | | |||||||||||||||||||||
7/21/2015 | 166,665 | 83,335 | 6.80 | 7/21/2025 | | | ||||||||||||||||||||||
7/21/2015 | | | | | 112,500 | 585,000 | ||||||||||||||||||||||
1/19/2016 | 83,333 | 166,668 | 7.10 | 1/19/2026 | ||||||||||||||||||||||||
6/1/2016 | | | | | 115,943 | 602,901 | ||||||||||||||||||||||
6/1/2017 | | | | | 113,108 | 588,159 | ||||||||||||||||||||||
Michael J. Lotz |
7/21/2015 | 120,000 | 60,000 | 6.80 | 7/21/2025 | | | |||||||||||||||||||||
7/21/2015 | | | | | 81,000 | 421,200 | ||||||||||||||||||||||
1/19/2016 | 60,000 | 120,000 | 7.10 | 1/19/2026 | | | ||||||||||||||||||||||
6/1/2016 | | | | | 91,828 | 477,503 | ||||||||||||||||||||||
6/1/2017 | | | | | 89,580 | 465,816 | ||||||||||||||||||||||
Brian S. Gillman |
9/3/2013 | | | | | 25,000 | 130,000 | |||||||||||||||||||||
7/21/2015 | 16,665 | 8,335 | 6.80 | 7/21/2025 | | | ||||||||||||||||||||||
7/21/2015 | | | | | 22,500 | 117,000 | ||||||||||||||||||||||
1/19/2016 | 13,888 | 27,780 | 7.10 | 1/19/2026 | | | ||||||||||||||||||||||
6/1/2016 | | | | | 18,118 | 94,211 | ||||||||||||||||||||||
6/1/2017 | | | | | 17,673 | 91,897 |
(1) |
The SARs granted on January 21, 2014 and on January 19, 2016 vest and become exercisable with respect to 1/3 of the shares underlying each respective award on each anniversary of the vesting commencement date, such that all shares will be vested on the third anniversary of the vesting commencement date, subject to the holder continuing to provide services to us through each such vesting date. The SARs granted in 2015 vest and become exercisable with respect to 1/3 of the shares underlying each respective award on each of January 21, 2016, January 21, 2017 and January 21, 2018, subject to the holder continuing to provide services to us through each such vesting date. The SARs currently settle in cash. Immediately following this offering, the SARs will be cancelled and exchanged for shares of restricted stock under our 2018 Plan. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances elsewhere in this prospectus. |
(2) |
The restricted stock award granted to Mr. Gillman with a vesting commencement date of September 3, 2013 vests in five equal annual installments beginning on September 3, 2014. The restricted stock awards granted to Messrs. Ornstein, Lotz and Gillman on July 21, 2015 vest in five equal annual installments beginning on June 1, 2016. The restricted stock awards granted to Messrs. Ornstein, Lotz and Gillman on June 1, 2016 vest in three equal annual installments beginning on June 1, 2017. The restricted stock granted to Messrs. Ornstein, Lotz and Gillman on June 1, 2017 vest in three equal annual installments beginning on June 1, 2018. All vesting is conditioned on continuous service to us. Immediately following this offering, unvested shares of restricted stock will be cancelled and exchanged for shares of restricted stock under our 2018 Plan, which shares will be subject to the same vesting schedules and conditions as set forth herein and will not be accelerated in connection with the exchange. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances elsewhere in this prospectus. |
Employment and Separation Agreements with Named Executive Officers
Jonathan G. Ornstein . We entered into an employment agreement with Mr. Ornstein on February 23, 2011, effective as of March 1, 2011, to serve as the Chairman of the Board of Directors and as our Chief
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Executive Officer, which agreement was amended first effective as of January 22, 2014, again effective as of June 1, 2016, and which will be amended and restated prior to the completion of this offering to consolidate the prior amendments. Under the employment agreement, as amended and restated, we may terminate Mr. Ornsteins employment at any time with prior written notice at least one year before the intended termination date. Mr. Ornsteins employment agreement entitles him to a base salary and an opportunity to earn a cash incentive bonus, paid on a quarterly basis based upon achievement of certain benchmarks mutually agreed upon by our Board of Directors and Mr. Ornstein. Mr. Ornstein is also entitled to receive an annual equity award pursuant to the terms of our then-existing equity incentive plan, as determined by our Board of Directors or the Compensation Committee in its sole discretion, provided that such award shall have a grant date value of not less than $800,000 for fiscal year 2016 and any fiscal year thereafter during the term of the agreement. The employment agreement entitles Mr. Ornstein to participate in all employee benefit plans and arrangements available to our executive officers, including the flight benefits discussed above. It also contains certain confidential information covenants prohibiting Mr. Ornstein from using or disclosing any Company confidential information for non-company purposes during the term of his employment and for two years thereafter.
Mr. Ornsteins employment agreement also provides him with severance in the event his employment is terminated without Cause (as defined below) by us (or, in certain circumstances, by our successor-in-interest ) or if he resigns for Good Reason (as defined below). If Mr. Ornsteins employment is terminated by us without Cause or he resigns for Good Reason he is entitled to payment equal to two times the sum of his base salary, plus an amount equal to the greater of (i) his target annual performance bonus or (ii) half the bonuses (incentive or otherwise) earned by Mr. Ornstein with respect to the two fiscal years immediately preceding his termination. If Mr. Ornstein is terminated by us or our successor-in-interest without Cause or he resigns for Good Reason within 12 months following a Change of Control (as defined below), he is entitled to payment equal to three times the sum of his base salary, plus the greater of (i) his target performance bonus for the fiscal year in which the termination occurs or (ii) the highest amount of the bonuses (incentive or otherwise) paid to Mr. Ornstein with respect to the three fiscal years immediately preceding the year in which his termination occurs. Upon Mr. Ornsteins termination without Cause or resignation for Good Reason, he is also entitled to the payment of continued health, dental and vision insurance premiums for Mr. Ornstein and any covered dependents for 24 months following termination, and he is entitled to immediate vesting of any equity awards.
For purposes of Mr. Ornsteins employment agreement, Cause means (i) Mr. Ornsteins willful misconduct, including but not limited to misappropriation of trade secrets, fraud or embezzlement; (ii) Mr. Ornsteins commission of a felony offense or any crime involving dishonesty or physical harm to any person; (iii) Mr. Ornsteins material breach of his employment agreement that, if curable, is not cured within 30 days following written notice from us; or (iv) Mr. Ornsteins willful refusal to follow a lawful directive of us, which refusal is not cured within 30 days following written notice from us. Change of Control means that (i) any person acquires more than 50% of the voting power of our then-outstanding securities; (ii) a majority of the members of our Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of our Board of Directors before the date of appointment or election; (iii) a tender offer or exchange offer is made where the intent of such offer is to take over control of our company, and such offer is consummated for the securities representing more than 50% of the combined voting power of our then-outstanding voting securities over a twelve-month period; or (iv) a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of our assets. Finally, Good Reason means any of the following, if not cured within 20 days of our receipt of a notice of termination by Mr. Ornstein: (i) any change by us in Mr. Ornsteins title, or any significant diminishment in Mr. Ornsteins function, duties or responsibilities from those associated with his functions, duties or responsibilities as of January 1, 2011; (ii) any material breach of the employment agreement or any other agreement between us and Mr. Ornstein which remains uncured for a period of 10 days after
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Mr. Ornstein gives us notice of such breach; (iii) except with Mr. Ornsteins prior written consent, relocation of Mr. Ornsteins principal place of employment to a location greater than 50 miles from Phoenix, Arizona, or requiring Mr. Ornstein to provide his services outside of Maricopa County, Arizona, for more than 50% of his working days during any consecutive six-month period; or (iv) any reduction of Mr. Ornsteins base salary, bonus opportunity or benefits, other than under circumstances in which we have imposed cuts in salary of other officers on an across-the-board basis (in which case the cuts to Mr. Ornsteins compensation must not be in a greater percentage than the reduction imposed on any other officer).
Michael J. Lotz . We entered into an employment agreement with Mr. Lotz on February 23, 2011, effective as of March 1, 2011, as our President and Chief Financial Officer, which agreement was amended first effective as of January 22, 2014, again effective as of June 1, 2016, and which will be amended and restated prior to the completion of this offering to consolidate the prior amendments. Under Mr. Lotzs employment agreement, as amended and restated, we may terminate Mr. Lotzs employment at any time with prior written notice at least one year before the intended termination date. Mr. Lotzs employment agreement entitles him to a base salary and an opportunity to earn a cash incentive bonus paid on a quarterly basis based upon achievement of certain benchmarks mutually agreed upon by our Board of Directors and Mr. Lotz. Mr. Lotz is also entitled to receive an annual equity award pursuant to the terms of our then-existing equity incentive plan, as determined by our Board of Directors or the Compensation Committee in its sole discretion, provided that such award shall have a grant date value of not less than $633,600 for any fiscal year following fiscal year 2016. The employment agreement entitles Mr. Lotz to participate in all employee benefit plans and arrangements available to our executive officers, including the flight benefits discussed above. It also contains certain confidential information covenants prohibiting Mr. Lotz from using or disclosing any of our confidential information for non-company purposes during the term of his employment and for two years thereafter.
Mr. Lotzs employment agreement also provides him with severance in the event his employment is terminated without Cause by us (or, in certain circumstances, by our successor-in-interest ) or if he resigns for Good Reason. If Mr. Lotzs employment is terminated by us without Cause or if he resigns with Good Reason, he is entitled to payment equal to two times the sum of his base salary, plus the greater of (i) his target annual performance bonus or (ii) half the sum of the bonuses (incentive or otherwise) earned by Mr. Lotz with respect to the two fiscal years immediately preceding the year in which his resignation occurs. If Mr. Lotz is terminated by us or our successor-in-interest without Cause or he resigns for Good Reason within 12 months following a Change of Control, Mr. Lotz is entitled to payment equal to three times the sum of his base salary, plus the greater of (i) his target performance bonus for the fiscal year in which the termination occurs or (ii) the highest amount of the bonuses (incentive or otherwise) paid to Mr. Lotz with respect to the three fiscal years immediately preceding the year in which his termination occurs. Upon Mr. Lotzs termination without Cause or resignation for Good Reason, he is also entitled to the payment of continued health, dental and vision insurance premiums for Mr. Lotz and any covered dependents for 24 months following termination, and immediate vesting of any unvested Company equity awards.
For purposes of Mr. Lotzs employment agreement, Cause, Change of Control and Good Reason have identical meanings to those contained in Mr. Ornsteins employment agreement, as set forth above.
Brian S. Gillman . We entered into an employment agreement with Mr. Gillman on April 23, 2014, effective as of September 3, 2013, as our Executive Vice President, General Counsel and Secretary, which agreement was amended effective as of June 1, 2016, and which will be amended and restated prior to the completion of this offering to consolidate the prior amendments. Under Mr. Gillmans employment agreement, as amended and restated, we may terminate Mr. Gillmans employment at any time with prior written notice at least one year before the intended termination date. Mr. Gillmans employment agreement entitles him to a base salary and an opportunity to earn a cash incentive bonus
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paid on a quarterly basis based upon achievement of certain benchmarks identical to those in Mr. Lotzs and Mr. Ornsteins employment agreements. Mr. Gillman is also entitled to receive an annual equity award pursuant to the terms of our then-existing equity incentive plan, as determined by our Board of Directors or the Compensation Committee in its sole discretion, provided that such award shall have a grant date value of not less than $125,000 for any fiscal year following fiscal year 2016. The employment agreement entitles Mr. Gillman to participate in all employee benefit plans and arrangements available to our executive officers, including the flight benefits discussed above. It also contains certain confidential information covenants prohibiting Mr. Gillman from using or disclosing any of our confidential information for non-company purposes during the term of his employment and for two years thereafter.
Mr. Gillmans employment agreement also provides him with severance in the event his employment is terminated without Cause by us (or, in certain circumstances, by our successor-in-interest ) or if he resigns for Good Reason. If Mr. Gillman is terminated without Cause or if he resigns with Good Reason, he is entitled to payment equal to two times the sum of his base salary, plus an amount equal to the greater of (i) his target annual performance bonus or (ii) half the sum of the bonuses (incentive or otherwise) earned by Mr. Gillman with respect to the two fiscal years immediately preceding the year in which his termination occurs. If Mr. Gillman is terminated by us or our successor-in-interest without Cause or he resigns with Good Reason within 12 months following a Change of Control, he is entitled to payment equal to three times the sum of his base salary, plus the greater of (i) his maximum target performance bonus for the fiscal year in which the termination occurs or (ii) the amount of all bonuses (incentive or otherwise) paid to Mr. Gillman with respect to the three fiscal years immediately preceding the year in which his termination occurs. Upon Mr. Gillmans termination without Cause or resignation for Good Reason, he is also entitled to the payment of continued health, dental and vision insurance premiums for Mr. Gillman and any covered dependents for 24 months following termination, and he is entitled to immediate vesting of any unvested equity awards.
For purposes of Mr. Gillmans employment agreement, Cause, Change of Control and Good Reason have identical meanings to those contained in Mr. Ornsteins employment agreement, as set forth above.
Equity Compensation Plans
The principal features of our equity incentive plans are summarized below. These summaries are qualified in their entirety by reference to the text of the plans or agreements, which are filed as exhibits to the registration statement. For information regarding proposed issuances of restricted stock under our 2018 Plan immediately following the completion of this offering in exchange for the cancellation of certain awards under our 2011 Plan, 2017 Plan, RSU Plan and SAR Plan, See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances.
2018 Plan
Our Board of Directors has adopted and on July 18, 2018 our shareholders approved the 2018 Plan. We expect that our 2018 Plan will be effective on the business day immediately prior to the effective date of the registration statement of which this prospectus forms a part and will replace all prior equity plans. It is intended to make available incentives that will assist us to attract, retain and motivate employees, including officers, consultants and directors. We may provide these incentives through the grant of stock options, restricted stock, restricted stock units, performance shares and units and other cash-based or stock-based awards.
A total of 2.5 million shares of our common stock was initially authorized and reserved for issuance under the 2018 Plan. This reserve will automatically increase on January 1, 2020, and each subsequent anniversary through 2028, by an amount equal to the smaller of (a) 1% of the number of
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shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by our Board of Directors.
Appropriate adjustments will be made in the number of authorized shares and other numerical limits in the 2018 Plan and in outstanding awards to prevent dilution or enlargement of participants rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the 2018 Plan. The shares available will not be reduced by awards settled in cash or by shares withheld to satisfy tax withholding obligations in connection with restricted stock units or other full value awards. If the exercise price of an option is paid by tender of previously owned shares or by means of a net exercise, the number of shares available for issuance under the 2018 Plan will be reduced by the gross number of shares for which the option is exercised. Shares purchased in the open market with option exercise proceeds or shares withheld to satisfy tax obligations upon the exercise of options will not add to the number of shares available under the 2018 Plan. Only the net number of shares issued upon the exercise of SARs or options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under the 2018 Plan.
The 2018 Plan will be generally administered by the Compensation Committee of our Board of Directors. Subject to the provisions of the 2018 Plan, the Compensation Committee will determine in its discretion the persons to whom and the times at which awards are granted, the sizes of such awards and all of their terms and conditions. However, the Compensation Committee may delegate to one or more of our officers the authority to grant awards to persons who are not officers or directors, subject to certain limitations contained in the 2018 Plan and award guidelines established by the Compensation Committee. The Compensation Committee will have the authority to construe and interpret the terms of the 2018 Plan and awards granted under it. The 2018 Plan provides, subject to certain limitations, for indemnification by us of any director, officer or employee against all reasonable expenses, including attorneys fees, incurred in connection with any legal action arising from such persons action or failure to act in administering the 2018 Plan.
The 2018 Plan authorizes the Compensation Committee, subject to shareholder approval, to provide for the cancellation of stock options with exercise prices in excess of the fair market value of the underlying shares of common stock in exchange for new options or other equity awards with exercise prices equal to the fair market value of the underlying common stock or a cash payment.
Awards may be granted under the 2018 Plan to our employees, including officers, directors or consultants or those of any present or future parent or subsidiary corporation or other affiliated entity. All awards will be evidenced by a written agreement between us and the holder of the award and may include any of the following:
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Stock options. We may grant nonstatutory stock options or incentive stock options (as described in Section 422 of the Code), each of which gives its holder the right, during a specified term (not exceeding 10 years) and subject to any specified vesting or other conditions, to purchase a number of shares of our common stock at an exercise price per share determined by the administrator, which may not be less than the fair market value of a share of our common stock on the date of grant. |
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Restricted stock. The administrator may grant restricted stock awards either as a bonus or as a purchase right at such price as the administrator determines. Shares of restricted stock remain subject to forfeiture until vested, based on such terms and conditions as the administrator specifies. Holders of restricted stock will have the right to vote the shares and to receive any dividends paid, except that the dividends will be subject to the same vesting conditions as the related shares. |
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Restricted stock units. Restricted stock units represent rights to receive shares of our common stock (or their value in cash) at a future date without payment of a purchase price, subject to vesting or other conditions specified by the administrator. Holders of restricted stock units have no voting rights or rights to receive cash dividends unless and until shares of common stock are issued in settlement of such awards. However, the administrator may grant restricted stock units that entitle their holders to dividend equivalent rights subject to the same vesting conditions as the related units. |
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Performance shares and performance units. Performance shares and performance units are awards that will result in a payment to their holder only if specified performance goals are achieved during a specified performance period. Performance share awards are rights denominated in shares of our common stock, while performance unit awards are rights denominated in dollars. The administrator establishes the applicable performance goals based on one or more measures of business or personal performance enumerated in the 2018 Plan, such as revenue, gross margin, net income or total shareholder return, or otherwise determined by the administrator. To the extent earned, performance share and unit awards may be settled in cash or in shares of our common stock. Holders of performance shares or performance units have no voting rights or rights to receive cash dividends unless and until shares of common stock are issued in settlement of such awards. However, the administrator may grant performance shares that entitle their holders to dividend equivalent rights subject to the same vesting conditions as the related units. |
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Cash-based awards and other stock-based awards. The administrator may grant cash-based awards that specify a monetary payment or range of payments or other stock-based awards that specify a number or range of shares or units that, in either case, are subject to vesting or other conditions specified by the administrator. Settlement of these awards may be in cash or shares of our common stock, as determined by the administrator. Their holder will have no voting rights or right to receive cash dividends unless and until shares of our common stock are issued pursuant to the award. The administrator may grant dividend equivalent rights with respect to other stock-based awards. |
In the event of a change in control as described in the 2018 Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2018 Plan or substitute substantially equivalent awards. Any awards which are not assumed or continued in connection with a change in control or are not exercised or settled prior to the change in control will terminate effective as of the time of the change in control. The Compensation Committee may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such extent as it determines, except that the vesting of all awards held by members of our Board of Directors who are not employees will automatically be accelerated in full. The 2018 Plan will also authorize the Compensation Committee, in its discretion and without the consent of any participant, to cancel each or any outstanding award denominated in shares upon a change in control in exchange for a payment to the participant with respect to each share subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the change in control transaction over the exercise price per share, if any, under the award. This offering does not constitute a change in control as defined in the 2018 Plan.
The 2018 Plan will continue in effect until it is terminated by the administrator, provided, however, that all awards will be granted, if at all, within 10 years of its effective date. The administrator may amend, suspend or terminate the 2018 Plan at any time, provided that without shareholder approval, the plan cannot be amended to increase the number of shares authorized, change the class of persons eligible to receive incentive stock options, or effect any other change that would require shareholder approval under any applicable law or listing rule.
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2017 Plan
Our 2017 Plan became effective on January 23, 2017. Our 2017 Plan permits the grant of incentive stock options, within the meaning of Section 422 of the Code, to our employees and any parent and subsidiary corporations employees, and for the grant of nonstatutory stock options, restricted stock and restricted stock unit awards to our to our employees, including officers, directors or consultants or those of any present or future parent or subsidiary corporation. We will not grant any additional awards under our 2017 Plan following the completion of this offering. Instead, we will grant equity awards under our 2018 Plan. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances for information regarding the proposed exchange of outstanding equity awards granted under our 2017 Plan for shares of restricted stock under our 2018 Plan.
Authorized Shares . The aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the 2017 Plan is 125,000, 20,843 of which were issued but unvested as of March 31, 2018.
Administration . Our Board of Directors is authorized to administer the 2017 Plan, but consistent with its authority under the 2017 Plan, our Board of Directors has the authority to appoint one or more committees to administer the 2017 Plan. Subject to the terms and conditions of the 2017 Plan, the plan administrator will determine in its discretion the persons to whom and the times at which awards are granted, the sizes of such awards and all of their terms and conditions. The plan administrator will have the authority to construe and interpret the terms of the 2017 Plan and awards granted under it. The 2017 Plan provides, subject to certain limitations, for indemnification by us of any director, officer or employee against all reasonable expenses, including attorneys fees, incurred in connection with any legal action arising from such persons actions or failure to act in administrating the 2017 Plan.
Stock Options . We may grant nonstatutory stock options or incentive stock options (as described in Section 422 of the Code), each of which gives its holder the right, during a specified term (not exceeding 10 years) and subject to any specified vesting or other conditions, to purchase a number of shares of our common stock at an exercise price per share determined by the administrator, which may not be less than the fair market value of a share of our common stock as of the date of grant.
Restricted Stock . The plan administrator may grant restricted stock awards either as a bonus or as a purchase right at a price determined by the plan administrator. Shares of restricted stock remain subject to forfeiture until vested, based on such terms and conditions as the plan administrator specifies. Holders of restricted stock will have the right to vote the shares and to receive any dividends paid, except that the dividends may be subject to the same vesting conditions as the related shares.
Restricted Stock Units . Restricted stock units represent rights to receive shares of our common stock (or their value in cash) at a future date without payment of a purchase price, subject to vesting or other conditions specified by the plan administrator. Holders of restricted stock units have no voting rights to receive cash dividends unless and until shares of our common stock are issued in settlement of such awards. However, the plan administrator may grant restricted stock units that entitle their holders to dividend equivalent rights.
Change in Control Transactions . In the event of a change in control as described in our 2017 Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2017 Plan or substitute substantially equivalent awards. Any awards which are not assumed or continued in connection with a change in control or are not exercised or settled prior to the change in control will terminate effective as of the time of the change in control. The plan administrator may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such extent as it determines. The 2017 Plan will also authorize the plan administrator, in its discretion and without the
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consent of any participant, to cancel each or any outstanding award denominated in shares upon a change in control in exchange for a payment to the participant with respect to each share subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the change in control transaction over the exercise price per share, if any, under the award. If any portion of such consideration may be received by holders of awards pursuant to the change in control on a contingent or delayed basis, the plan administrator may, in its discretion, determine such fair market value per share as of the time of the change in control on the basis of the plan administrators good faith estimate of the present value of the probable future payment of such consideration. Notwithstanding the foregoing, shares acquired upon exercise of an award prior to the change in control and any consideration received pursuant to the change in control with respect to such shares shall continue to be subject to all applicable provisions of the award agreement evidencing such award except as otherwise provided in such award. This offering does not constitute a change in control as defined in the 2017 Plan.
Certain Adjustments . Appropriate adjustments will be made in the number of authorized shares and other numerical limits in the 2017 Plan and in outstanding awards to prevent dilution or enlargement of award recipients rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the 2017 Plan. The shares available will not be reduced by awards settled in cash or by shares withheld to satisfy tax withholding obligations. Only the net number of shares issued upon the exercise of stock options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under the 2017 Plan.
Non-Transferability of Awards . With limited exceptions for the laws of descent and distribution, awards under the 2017 Plan are generally exercisable only by the grantee or the grantees guardian or legal representative. Unless the plan administrator provides otherwise, the 2017 Plan generally does not allow for the transfer of awards other than by will or the laws of descent and distribution.
Amendment and Termination . The 2017 Plan will continue in effect until it is terminated by the plan administrator, provided, however, that all awards will be granted, if at all, within 10 years of its effective date. The plan administrator may amend, suspend or terminate the 2017 Plan at any time, provided that without shareholder approval, the 2017 Plan cannot be amended to increase the number of shares authorized, change the class of persons eligible to receive incentive stock options, or effect any other change that would require shareholder approval under any applicable law or listing rule.
2011 Plan
Our 2011 Plan became effective on March 1, 2011. Our 2011 Plan permits the grant of incentive stock options, within the meaning of Section 422 of the Code, to our employees and any parent and subsidiary corporations employees, and for the grant of nonstatutory stock options, SARs, restricted or unrestricted stock, phantom stock units, performance awards and other stock based awards to our employees, officers, and directors of, and other individuals providing services to or for us or any of our affiliates, as may be selected by the plan administrator from time to time. We will not grant any additional awards under our 2011 Plan following the completion of this offering. Instead, we will grant equity awards under our 2018 Plan. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances for information regarding the proposed exchange of outstanding equity awards granted under our 2011 Plan for shares of restricted stock under our 2018 Plan.
Authorized Shares . The aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the 2011 Plan is 2,500,000, 744,498 of which were issued but unvested as of March 31, 2018.
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Administration . Our Board of Directors is authorized to administer the 2011 Plan, but consistent with its authority under the 2011 Plan, our Board of Directors has delegated some of its administrative authority to our compensation committee. Subject to the terms and conditions of the 2011 Plan, the plan administrator has the authority to select persons to whom awards are to be made, determine the types of awards to be made, determine the number of shares subject to awards and all of their terms and conditions and to make all other determination and take all other actions necessary or advisable for the administration of the 2011 Plan. The plan administrator is authorized to interpret the provisions of the 2011 Plan and individual award agreements, and all decisions of the plan administrator are final and binding on all persons.
Options . Stock options may be granted under our 2011 Plan. Stock options must have an exercise price at least equal to fair market value on the date of grant and may not have a term in excess of ten years duration. Subject to the provisions of our 2011 Plan, the administrator determines the other terms of stock options.
Stock Appreciation Rights . SARs may be granted under our 2011 Plan. A SAR entitles the grantee to receive, subject to the provisions of the 2011 Plan and the applicable award agreement, the appreciation in the fair market value of our common stock between the exercise date and the date of grant. The base price per share specified in a SAR award agreement may not be less than the lower of the fair market value on the grant date or the exercise price of any tandem stock option award to which the SAR is related. A SAR may not have a term exceeding 10 years. Subject to the provisions of the 2011 Plan, the administrator determines the other terms of a SAR, including when such rights become exercisable and whether to pay any increased appreciation in cash, with shares of our common stock, or a combination thereof. No fractional shares shall be used for such payment and the plan administrator will determine whether cash will be given instead of such fractional shares or whether such fractional shares will be eliminated.
Stock Awards . The plan administrator may from time to time grant restricted or unrestricted stock awards in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as required by law, as the plan administrator may determine. A stock award may be paid in our common stock, in cash, or in a combination thereof, as determined in the sole discretion of the plan administrator.
Phantom Stock Units . The plan administrator may from time to time grant awards denominated in stock-equivalent units or restricted stock units, collectively referred to as phantom stock units, in such amounts and on such terms and conditions as the plan administrator may determine. Phantom stock units are credited to a bookkeeping reserve account solely for accounting purposes and do not require a segregation of any of our assets. An award of phantom stock units may be settled in our common stock, in cash, or in a combination thereof, as determined in the sole discretion of the plan administrator. Except as otherwise provided in the applicable award agreement, the grantee of phantom stock units does not have the rights of a shareholder with respect to any shares of our common stock represented by a phantom stock unit solely as a result of the grant of a phantom stock unit to the grantee.
Performance Awards . The plan administrator may grant performance awards which become payable on account of attainment of one or more performance goals established by the plan administrator. Performance awards may be paid by the delivery of our common stock or cash, or any combination thereof, as determined in the sole discretion of the plan administrator. The plan administrator established performance goals may be based on the our or our affiliates selected business criteria that apply to an individual or group of individuals, a business unit, or us or our affiliate as a whole, over such performance period as the plan administrator may designate.
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Other Stock Based Awards . The plan administrator may grant other stock-based awards in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be require by law, as the plan administrator may determine. Other stock-based awards may be denominated in cash, our common stock or other securities, in stock-equivalent units, in stock appreciation units, in securities or debentures convertible into our common stock, or in any combination of the foregoing and may be paid in our common stock or other securities, in cash, or in a combination thereof, as determined in the sole discretion of the plan administrator.
Change in Control Transactions . In the event of any transaction resulting in a change in control as defined in the 2011 Plan, outstanding awards that are payable in or convertible into our common stock under the 2011 Plan will terminate on the effective time of such change in control unless provision is made in connection with the transaction for the continuation or assumption of such awards by, or for the substitution of equivalent awards, as determined by the plan administrator, of, the surviving or successor entity or a parent thereof. In the event of such termination, the holders of awards under the 2011 Plan will be permitted, immediately before the change in control, to exercise or convert all portions of such awards under the 2011 Plan that are then exercisable or convertible or which become exercisable or convertible upon or prior to the effective time of the change in control. If, immediately before the change in control, no common stock of ours is readily tradeable on an established securities market or otherwise, and the vesting of an award would be treated as a parachute payment under Section 280G of the Code, then such award will not vest unless the requirements of the shareholder approval exemption of Section 280G of the Code are satisfied with respect to such award. This offering does not constitute a change in control as defined in the 2011 Plan.
Certain Adjustments . In the event of a stock dividend of, or stock split or reverse stock split affecting our common stock, the maximum number of shares of such common stock as to which awards may be granted under the 2011 Plan and the number of shares covered by and exercise price and other terms of outstanding awards, will, without further action by our Board of Directors, be adjusted to reflect such event. In addition, in the event of any change affecting our common stock or our capitalization, by reason of a spin-off, split-up, dividend, recapitalization, merger, consolidation or share exchange, other than any such change that is part of a transaction resulting in a change in control, the plan administrator, in its sole discretion, may make appropriate adjustments to the maximum number and kind of shares reserved for issuance or with respect to which awards may be granted under the 2011 Plan and any adjustments in outstanding awards, including to modify the number, kind and price of securities subject to awards as the plan administrator determines to be appropriate and equitable. The plan administrator is authorized to make, in its sole discretion, adjustments in the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events affecting us or our affiliates or our or our affiliates financial statements, or of changes in applicable laws, regulations, or accounting principles, whenever the plan administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2011 Plan.
Non-Transferability of Awards . Unless the plan administrator provides otherwise, our 2011 Plan generally does not allow for the transfer of awards other than by will or the laws of descent and distribution and only the recipient of an award may exercise an award during his or her lifetime or, during a period the grantee is under a legal disability, by the grantees guardian or legal representative.
Amendment and Termination . Our Board of Directors may terminate, amend or modify the 2011 Plan or any portion thereof at any time. Except as otherwise determined by our Board of Directors, termination of the 2011 Plan will not affect the plan administrators ability to exercise the powers granted to the plan administrator with respect to awards granted under the 2011 Plan prior to the date of such termination.
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RSU Plan
Our RSU Plan became effective on October 17, 2017. Our RSU Plan permits the grant of restricted stock units to employees, officers and directors of, and other individuals providing services to us or any of our affiliates, as may be selected by the plan administrator from time to time. We will not grant any additional awards under our RSU Plan following the completion of this offering. Instead, we will grant equity awards under our 2018 Plan. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances for information regarding the proposed exchange of outstanding equity awards granted under our RSU Plan for shares of restricted stock under our 2018 Plan.
Authorized Shares . The aggregate number of shares of common stock reserved for issuance pursuant to awards granted under the RSU Plan is 1,250,000, 323,048 of which were issued as of March 31, 2018.
Administration . Our Board of Directors is authorized to administer the RSU Plan, but consistent with its authority under the RSU Plan, our Board of Directors has delegated some of its administrative authority to our compensation committee. Subject to the terms and conditions of the RSU Plan, the plan administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the RSU Plan. The plan administrator is authorized to interpret the provisions of the RSU Plan and individual award agreements, and all decisions of the plan administrator are final and binding on all persons.
Awards . The RSU Plan provides for the grant of awards denominated in stock-equivalent units or restricted stock units in such amounts and on such terms and conditions as the plan administrator may determine. Restricted stock units are credited to a bookkeeping reserve account solely for accounting purposes and will not require a segregation of any of our assets. An award of restricted stock units may be settled in our common stock, in cash, or in a combination thereof, as determined by the plan administrator. Except as otherwise provided in the applicable award agreement, the recipient of an award will not have the rights of a shareholder with respect to any shares of our common stock represented by a restricted stock unit as a result of the grant or payment of a restricted stock unit.
Change in Control Transactions . In the event of any transaction resulting in a change in control, as defined in our RSU Plan, outstanding awards will immediately vest upon such change in control. If, immediately before the change in control, no common stock of ours is readily tradeable on an established securities market or otherwise, and the vesting of an award would be treated as a parachute payment under Section 280G of the Code, then such award will not vest unless the requirements of the shareholder approval exemption of Section 280G of the Code are satisfied with respect to such award. This offering does not fall within the definition of a change in control as set forth in the RSU Plan.
Certain Adjustments . In the event of a stock dividend of, or stock split or reverse stock split affecting our common stock, the maximum number of shares of such common stock as to which awards may be granted under the RSU Plan and the number of shares covered by and other terms of outstanding awards, will, without further action by our Board of Directors, be adjusted to reflect such event. In addition, in the event of any change affecting our common stock or our capitalization, by reason of a spin-off, split-up, dividend, recapitalization, merger, consolidation or share exchange, other than any such change that is part of a transaction resulting in a change in control, the plan administrator, in its sole discretion, may make appropriate adjustments to the maximum number and kind of shares reserved with respect to which awards may be granted under the RSU Plan and any adjustments in outstanding awards, including to modify the number, kind and price of securities subject to awards as the plan administrator determines to be appropriate and equitable. The plan administrator is authorized to make,
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in its sole discretion, adjustments in the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events affecting us or our affiliates or our or our affiliates financial statements, or of changes in applicable laws, regulations, or accounting principles, whenever the plan administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the RSU Plan.
Non-Transferability of Awards . Unless the plan administrator provides otherwise, our RSU Plan generally does not allow for the transfer of awards other than by will or the laws of descent and distribution.
Amendment and Termination . Our Board of Directors may terminate, amend or modify the RSU Plan or any portion thereof at any time. Except as otherwise determined by our Board of Directors, termination of the RSU Plan will not affect the plan administrators ability to exercise the powers granted to the plan administrator with respect to awards granted under the RSU Plan prior to the date of such termination.
SAR Plan
Our SAR Plan became effective on February 2014. Our SAR Plan permits the grant of stock appreciation rights to all employees, officers, and directors of, and other individuals providing services to or for us or our affiliates, as may be selected by the plan administrator from time to time. We will not grant any additional awards under our SAR Plan following the completion of this offering. Instead, we will grant equity awards under our 2018 Plan. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances for information regarding the proposed exchange of outstanding equity awards under our SAR Plan for shares of restricted stock under our 2018 Plan.
Authorized Shares . The aggregate number of shares of common stock subject to awards granted under the SAR Plan is 5,000,000, 2,116,660 of which were outstanding as of March 31, 2018.
Administration . Our Board of Directors is authorized to administer the SAR Plan, but consistent with its authority under the SAR Plan, our Board of Directors has delegated some of its administrative authority to our compensation committee. Subject to the terms and conditions of the SAR Plan, the plan administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the SAR Plan. The plan administrator is authorized to interpret the provisions of the SAR Plan and individual award agreements, and all decisions of the plan administrator are final and binding on all persons.
SARs . The plan administrator may from time to time grant awards of SARs. A SAR entitles the recipient to receive, subject to the provisions of the SAR Plan and the award agreement, a payment having an aggregate value equal to the product of the excess of the fair market value on the exercise date of one share of our common stock over the base or exercise price per share specified in the award agreement, multiplied by the number of shares specified by the SAR, or any portion thereof, which is exercised. The base or exercise price per share specified in the award agreement may not be less than the fair market value of our common stock on the grant date. The SAR may not have a term longer than 10 years. Payment of the amount receivable upon any exercise of a SAR will be made in cash.
Change in Control Transactions . In the event of any transaction resulting in a change in control, as defined in our SAR Plan, outstanding awards will terminate on the effective time of such change in control unless provision is made in connection with the transaction for the continuation or assumption of such awards by, or for the substitution of equivalent awards, as determined by the plan
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administrator, of, the surviving or successor entity or a parent thereof. In the event of such termination, the holders of awards under the SAR Plan will be permitted, immediately before the change in control, to exercise all portions of such awards under the SAR Plan that are then exercisable or which become exercisable upon or prior to the effective time of the change in control. If, immediately before the change in control, no common stock of ours is readily tradeable on an established securities market or otherwise, and the vesting of an award would be treated as a parachute payment under Section 280G of the Code, then such award will not vest unless the requirements of the shareholder approval exemption of Section 280G of the Code are satisfied with respect to such award. This offering does not constitute a change in control as defined in the SAR Plan.
Certain Adjustments . In the event of a stock dividend of, or stock split or reverse stock split affecting our common stock, the maximum number of shares of such common stock as to which awards may be granted under the SAR Plan and the maximum number of shares with respect to which awards may be granted during any one fiscal year to any individual and the number of shares covered by and the exercise price and other terms of outstanding awards, will, without further action by our Board of Directors, be adjusted to reflect such event. In addition, in the event of any change affecting our common stock or our capitalization, by reason of a spin-off, split-up, dividend, recapitalization, merger, consolidation or share exchange, other than any such change that is part of a transaction resulting in a change in control, the plan administrator, in its sole discretion, may make appropriate adjustments to the maximum number and kind of shares reserved for issuance or with respect to which awards may be granted under the SAR Plan, in the aggregate and with respect to any individual during any one fiscal year as provided in the SAR Plan and any adjustments in outstanding awards, including to modify the number, kind and price of securities subject to awards as the plan administrator determines to be appropriate and equitable. The plan administrator is authorized to make, in its sole discretion, adjustments in the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events affecting us or our affiliates or our or our affiliates financial statements, or of changes in applicable laws, regulations, or accounting principles, whenever the plan administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the SAR Plan.
Non-Transferability of Awards . Unless the plan administrator provides otherwise, our SAR Plan generally does not allow for the transfer of awards other than by will or the laws of descent and distribution and only the recipient of an award may exercise an award during his or her lifetime or, during a period the grantee is under a legal disability, by the grantees guardian or legal representative.
Amendment and Termination . Our Board of Directors may terminate, amend or modify the SAR Plan or any portion thereof at any time. Except as otherwise determined by our Board of Directors, termination of the SAR Plan will not affect the plan administrators ability to exercise the powers granted to the plan administrator with respect to awards granted under the SAR Plan prior to the date of such termination.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We describe below transactions and series of similar transactions, during our last three fiscal years, to which we were a party or will be a party, in which:
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the amounts involved exceeded or will exceed $120,000; and |
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any of our directors, executive officers, holders of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest. |
Each agreement described below is filed as an exhibit to the registration statement of which this prospectus forms a part, and the following descriptions are qualified by reference to such agreements.
Shareholders Agreements
We entered into a shareholders agreement on March 1, 2011 with US Airways, Inc. (the American Shareholders Agreement), which later assigned its rights and obligations thereunder by operation of law to American following the merger of US Airways, Inc. and American. Under the American Shareholders Agreement, as amended by those certain letter agreements dated as of February 27, 2014 and March 22, 2017, American has agreed to vote any shares of our common stock that exceed Americans fully-diluted interest, including all issued and outstanding capital stock and warrants (which, as of March 31, 2018, was 10.6%) in the manner directed by our Board of Directors. By way of example, American holds 2,500,000 shares of our issued and outstanding shares of common stock. Under the terms of the American Shareholders Agreement, Americans percentage interest in our fully-diluted equity as of March 31, 2018 was 10.6%. Our fully-diluted equity as of March 31, 2018 equalled the sum of our issued and outstanding shares of common stock (12,394,215) and shares issuable upon exercise of outstanding warrants (11,140,905), or 23,535,120 shares. Accordingly, based on the terms of the American Shareholders Agreement, as of March 31, 2018, American could only vote 1,316,565 of its 2,500,000 shares (i.e., 10.6% x 23,535,120), with the remaining 1,183,435 shares owned by American subject to a proxy in favor of our Board of Directors. Any transferee of Americans shares will not be subject to these voting obligations or corresponding proxy. The American Shareholders Agreement terminates upon our mutual agreement or the exercise or expiration of all of our outstanding warrants.
On June 1, 2016, we entered into an amended and restated shareholders agreement (the Citigroup Shareholders Agreement) with Citigroup Global Markets Inc. (Citigroup), whereby Citigroup, in consideration for our extension of its outstanding warrants and our approval of its purchase of additional shares of our capital stock, agreed to vote certain shares of our common stock in the manner directed by our Board of Directors. Specifically, any shares of our capital stock held by Citigroup that exceed Citigroups fully-diluted percentage interest in us must be voted in such manner. As of March 31, 2018, 27,520 shares of common stock held by Citigroup were subject to these voting obligations. To secure Citigroups voting obligations, our Board of Directors has been appointed as Citigroups proxy to vote such shares of our common stock owned by Citigroup in the manner prescribed in the Citigroup Shareholders Agreement. The Citigroup Shareholders Agreement terminates when all of our outstanding warrants have been exercised or are expired, as the case may be, or upon our agreement.
We have entered into shareholders agreements with other 5% shareholders as of the dates set forth below. Each shareholders agreement contains voting covenants and an irrevocable proxy identical to the provisions of the Citigroup Shareholders Agreement described above. These shareholders agreements terminate upon the exercise or expiration of all of our outstanding warrants, or upon our mutual agreement. As of March 31, 2018, the following number of shares were subject to the voting restrictions for each respective shareholder:
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579,055 shares of our common stock held by Penguin Lax, Inc. are subject to voting covenants pursuant to a Shareholders Agreement dated December 12, 2017 by and among us, Penguin Lax, Inc. and P Marblegate Ltd.; |
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297,278 shares of our common stock held by Owl Creek Credit Opportunities Fund, L.P. are subject to voting covenants pursuant to a Shareholders Agreement dated February 6, 2018 by and among us, Owl Creek Credit Opportunity Fund, L.P. and Owl Creek Credit Opportunity Intermediate Fund, L.P.; and |
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147,930 and 387,298 shares of our common stock held by Marneu Holdings Co. and Momar Corp., respectively, are subject to voting covenants pursuant to a Shareholders Agreement dated December 13, 2017, by and among us, Marneu Holdings Co. and Momar Corp. |
See Principal and Selling Shareholders for the number of shares subject to the voting covenants described above as of July 27, 2018.
During the last three fiscal years, we have also entered into agreements with holders of less than 5% of our common stock, which agreements contain voting covenants and an irrevocable proxy substantially identical to those in the Citigroup Shareholders Agreement described above.
American Capacity Purchase Agreement
For a summary of the terms of our American Capacity Purchase Agreement, see BusinessCapacity Purchase AgreementsAmerican Capacity Purchase Agreement.
American Investor Rights Agreement
On March 1, 2011, we entered into the Investor Rights Agreement, which contains certain registration rights that are described in Description of Capital StockRegistration Rights below. The agreement also grants American approval rights over (i) related party transactions; (ii) payment of dividends to shareholders or repurchases or redemptions of shares of our capital stock (except pursuant to our equity incentive plans); (iii) amendments to our articles of incorporation or bylaws that adversely impact American relative to any other security holder and (iv) increases to the number of shares available for grant under our equity incentive plans. These approval rights terminate at such time as our common stock is listed on the New York Stock Exchange (NYSE) or Nasdaq and American no longer holds the greater of 62.5% of the Shares (as defined in the Investor Rights Agreement) or 4.9% of our outstanding common stock. These approval rights will terminate upon the closing of this offering.
Other Related Party Transactions
Under the terms of the Investor Rights Agreement with American, we are prohibited from increasing the number of shares available for grant under our equity incentive plans. In December 2016, we obtained approval from our Board of Directors to acquire 125,000 shares of our capital stock in a private transaction in order to have such shares available for grant under our 2017 Plan. We sought and obtained Americans approval to purchase such shares and use them for future equity grants.
Policies and Procedures for Related Party Transactions
We will enter into future business arrangements with related parties only where such arrangements are approved by a majority of disinterested directors and are on terms at least as favorable as available from unaffiliated third parties.
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Our Board of Directors has adopted a written related party policy to set forth the policies and procedures for the review and approval or ratification of related person transactions, which policy will be effective upon the completion of this offering. This policy will cover any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we (or any of our subsidiaries) are to be a participant, the amount involved exceeds $120,000 and a related party had or will have a direct or indirect material interest, including purchases of goods or services by or from the related party or entities in which the related party has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related party.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth, as of July 27, 2018, information regarding beneficial ownership of our capital stock by:
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each person, or group of affiliated persons, known by us to beneficially own more than 5% of our voting securities; |
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each of our NEOs; |
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each of our directors; |
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all of our executive officers and directors as a group; and |
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the selling shareholders. |
Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, including options and warrants that are currently exercisable or exercisable within 60 days. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the beneficial owners named in the table below have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable.
Common stock subject to warrants and other convertible securities currently exercisable or exercisable within 60 days of July 27, 2018, are deemed to be outstanding for computing the percentage ownership of the person holding these convertible securities and the percentage ownership of any group of which the holder is a member, but are not deemed outstanding for computing the percentage of any other person. In some cases, we believe that foreign ownership may limit the ability of warrant holders to exercise warrants they hold, meaning that such holder may not be required, under relevant rules and regulations, to report beneficial ownership, as the holder would not be entitled to receive the underlying shares of common stock. See Description of Capital StockLimited Ownership and Voting by Foreign Owners .
We have based our calculation of the percentage of beneficial ownership prior to the offering on 12,621,850 shares of common stock outstanding on July 27, 2018. We have based our calculation of the percentage of beneficial ownership after the offering on shares of our common stock outstanding immediately after the completion of this offering.
Unless otherwise noted below, the address for each of the shareholders in the table below is c/o Mesa Air Group, Inc., 410 North 44th Street, Suite 700, Phoenix, Arizona 85008.
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The information in the table below with respect to each selling shareholder has been obtained from that selling shareholders. When we refer to the selling shareholder in this prospectus, we mean the entity listed in the table below as offering shares, as well as the pledgees, donees, assignees, transferees, successors and others who may hold any of the selling shareholders interest.
Beneficial Ownership Prior to the Offering |
Shares
Beneficially Owned After the Offering (Assuming No Exercise of the Underwriters Overallotment Option) |
Shares
Beneficially Owned After the Offering (Assuming Full Exercise of the Underwriters Overallotment Option) |
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Name of Beneficial Owner |
Common
Stock |
Convertible
Securities Exercisable within 60 days |
Number of
Shares Beneficially Owned |
% | Shares | % | Shares | % | ||||||||||||||||||||||||
5% Shareholders: |
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American Airlines, Inc. (1) |
2,500,000 | | 2,500,000 | 19.8 | % | 2,500,000 | 10.3 | % | 2,500,000 | 10.0 | % | |||||||||||||||||||||
Corre Opportunities Entities (2) |
396,493 | 1,854,828 | 2,251,321 | 16.8 | % | 2,251,321 | 9.0 | % | 2,251,321 | 8.6 | % | |||||||||||||||||||||
Citigroup Global Markets Inc. (3) |
272,903 | 1,605,975 | 1,878,878 | 13.2 | % | 1,878,878 | 7.3 | % | 1,878,878 | 7.0 | % | |||||||||||||||||||||
Penguin Lax Entities (4) |
1,550,948 | 60,443 | 1,611,391 | 12.8 | % | 1,611,391 | 6.6 | % | 1,611,391 | 6.4 | % | |||||||||||||||||||||
MSD Credit Opportunity Master Fund LP (5) |
| 1,609,463 | 1,609,463 | 11.3 | % | 1,609,463 | 6.2 | % | 1,609,463 | 6.0 | % | |||||||||||||||||||||
Axar Entities (6) |
| 1,458,928 | 1,458,928 | 10.6 | % | 1,458,928 | 5.7 | % | 1,458,928 | 5.5 | % | |||||||||||||||||||||
Candlewood Entities (7) |
500,000 | 790,575 | 1,290,575 | 9.9 | % | 1,290,575 | 5.2 | % | 1,290,575 | 5.0 | % | |||||||||||||||||||||
Momar Entities (8) |
1,130,665 | | 1,130,665 | 9.0 | % | 1,130,665 | 4.7 | % | 1,130,665 | 4.5 | % | |||||||||||||||||||||
USDR Entities (9) |
1,091,525 | | 1,091,525 | 8.7 | % | 1,091,525 | 4.5 | % | 1,091,525 | 4.3 | % | |||||||||||||||||||||
Owl Creek Entities (10) |
777,220 | 332,883 | 1,110,103 | 8.6 | % | 1,110,103 | 4.5 | % | 1,110,103 | 4.3 | % | |||||||||||||||||||||
AB Moore, LP (11) |
434,138 | 676,643 | 1,110,781 | 8.4 | % | 1,110,781 | 4.5 | % | 1,110,781 | 4.3 | % | |||||||||||||||||||||
J.P. Morgan Securities LLC (12) |
878,988 | | 878,988 | 7.0 | % | 878,988 | 3.6 | % | 878,988 | 3.5 | % | |||||||||||||||||||||
Wolverine Flagship Fund Trading Limited (13) |
| 811,308 | 811,308 | 6.0 | % | 811,308 | 3.2 | % | 811,308 | 3.1 | % | |||||||||||||||||||||
Whitebox Entities (14) |
| 792,371 | 792,371 | 6.0 | % | 316,948 | 3.2 | % | 316,948 | 3.1 | % | |||||||||||||||||||||
Wells Fargo Securities LLC (15) |
736,010 | | 736,010 | 5.8 | % | 736,010 | 3.0 | % | 736,010 | 2.9 | % | |||||||||||||||||||||
Named Executive Officers and Directors: |
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Daniel J. Altobello (16) |
1,488 | | 1,488 | * | 30,378 | * | 16,813 | * | ||||||||||||||||||||||||
Ellen N. Artist (16) |
1,488 | | 1,488 | * | 30,378 | * | 16,813 | * | ||||||||||||||||||||||||
Mitchell Gordon (16) |
1,488 | | 1,488 | * | 30,378 | * | 16,813 | * | ||||||||||||||||||||||||
Dana J. Lockhart (16) |
1,488 | | 1,488 | * | 30,378 | * | 16,813 | * | ||||||||||||||||||||||||
G. Grant Lyon (16) |
1,488 | | 1,488 | * | 30,378 | * | 16,813 | * | ||||||||||||||||||||||||
Giacomo Picco (17) |
0 | | 0 | * | 0 | * | 0 | * | ||||||||||||||||||||||||
Harvey Schiller (16) |
1,488 | | 1,488 | * | 30,378 | * | 16,813 | * | ||||||||||||||||||||||||
Don Skiados (16) |
1,488 | | 1,488 | * | 30,378 | * | 16,813 | * | ||||||||||||||||||||||||
Jonathan Ornstein (18) |
548,550 | | 548,550 | 4.5 | % | 996,327 | 4.1 | % | 698,527 | 2.8 | % | |||||||||||||||||||||
Michael J. Lotz (19) |
236,780 | | 236,780 | 2.0 | % | 398,380 | 1.6 | % | 247,213 | * | ||||||||||||||||||||||
Brian S. Gillman (20) |
78,670 | 25,000 | 103,670 | * | 106,968 | * | 64,671 | * | ||||||||||||||||||||||||
Other Selling Shareholders: |
||||||||||||||||||||||||||||||||
All other employees (9 persons) (21) |
58,043 | 7,500 | 65,543 | * | 184,157 | * | 103,710 | * | ||||||||||||||||||||||||
All executive officers and directors as a group (12 persons) |
881,796 | 25,000 | 906,796 | 7.2 | % | 1,738,414 | 7.2 | % | 1,142,024 | 4.5 | % |
* |
Represents beneficial ownership of less than one percent (1%) of the outstanding common stock. |
(1) |
Of the 2,500,000 shares of common stock beneficially owned by American, 1,156,883 shares are currently subject to a proxy in favor of our Board of Directors pursuant to the terms of our shareholders agreement with American. See Certain Relationships and Related Party TransactionsShareholders Agreements . The address for American Airlines, Inc. is 4333 Amon Carter Blvd., Fort Worth, TX 76155. |
(2) |
Corre Opportunities Qualified Master Fund, LP (Corre Qualified Fund) holds a warrant to purchase 1,157,018 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Corre Opportunities II Master Fund, LP (Corre Master Fund) holds a warrant to purchase 697,810 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. See Description of Capital StockLimited Ownership and Voting by Foreign Owners . Corre Opportunities Fund, LP (Corre Opportunities Fund) holds 396,493 shares of our common stock. Each of Corre Qualified |
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Fund, Corre Master Fund and Corre Opportunities Fund (collectively, the Corre Funds) has the authority to dispose of and vote the shares of our common stock and warrants, as applicable, owned by such fund, which power may be exercised by the general partner of each of the Corre Funds, Corre Partners Advisors, LLC (Corre General Partner) and by Corre Partners Management, LLC (Corre Investment Advisor), an affiliate of the Corre General Partner, which is the investment advisor to the Corre Funds. John Barrett and Eric Soderland (collectively, the Corre Managing Members) are each managing members of the Corre General Partner and the Corre Investment Advisor, and each has shared authority to dispose of and vote the shares of our common stock and warrants, as applicable, held by the Corre Funds. Each of the Corre General Partner, Corre Investment Advisor and Corre Managing Members may be deemed to beneficially own the shares of our common stock and warrants held by the Corre Funds but disclaim ownership for any other purpose. |
(3) |
Citigroup Global Markets Inc. (Citigroup) holds a warrant to purchase 1,605,975 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Of the 272,903 shares of common stock beneficially owned by Citigroup, no shares are currently subject to a proxy in favor of our Board of Directors pursuant to the terms of our shareholders agreement with Citigroup. See Certain Relationships and Related Party TransactionsShareholders Agreements . The address for Citigroup Global Markets Inc. is 390 Greenwich St., 4th Floor, New York, NY 10013. |
(4) |
Reflects 1,550,948 shares held directly by Penguin Lax, Inc. (Penguin). Marblegate Asset Management, LLC (Marblegate) has exclusive voting and investment power over the shares held by Penguin and therefore may be deemed to beneficially own such shares. Andrew Milgram and Paul Arrouet, as managing partners of Marblegate, may be deemed to exercise voting and investment power over the shares directly owned by Penguin and therefore may be deemed to beneficially own such shares. Each of Marblegate, Mr. Milgram and Mr. Arrouet disclaim beneficial ownership of the shares directly owned by Penguin. Marblegate is also the investment adviser of P Marblegate Ltd., which directly holds a warrant to purchase 60,443 shares of common stock, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Marblegate has exclusive voting and investment power over the warrants held by P Marblegate Ltd., and therefore may be deemed to beneficially own such warrants and the underlying shares. Andrew Milgram and Paul Arrouet, as managing partners of Marblegate, may be deemed to exercise voting and investment power over the warrants directly owned by P Marblegate Ltd. and therefore may be deemed to beneficially own such warrants and the underlying shares. Each of Marblegate, Mr. Milgram and Mr. Arrouet disclaim beneficial ownership of such warrants and the underlying shares of common stock. Of the 1,550,948 shares of common stock beneficially owned by Penguin, 717,708 shares are currently subject to a proxy in favor of our Board of Directors pursuant to the terms of our shareholders agreement with Penguin. See Certain Relationships and Related Party TransactionsShareholders Agreements . The address for Penguin and Marblegate is 80 Field Point Road, Suite 101, Greenwich, CT 06830. |
(5) |
MSD Credit Opportunity Master Fund, L.P. holds a warrant to purchase 1,609,463 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. The address for MSD Credit Opportunity Master Fund, L.P. is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. |
(6) |
Star V Partners LLC holds a warrant to purchase 145,893 shares of our common stock, and Axar Master Fund, Ltd. holds a warrant to purchase 1,313,035 shares of our common stock, each with an exercise price of $0.004 per share, and each of which is exercisable within 60 days of the date hereof, subject to applicable securities laws. Axar Capital Management, LP serves as investment advisor to Axar Master Fund, Ltd. and Star V Partners LLC. Axar GP, LLC is the sole general partner of Axar Capital Management, LP. Andrew Axelrod is the sole member of Axar GP, LLC and is the managing partner, portfolio manager and majority control person of Axar Capital Management, LP. As such, Andrew Axelrod may be deemed to be the beneficial owner of and have voting and dispositive power with respect to the warrants held by Axar Master Fund, Ltd. and Star V Partners LLC. The address for Axar Master Fund, Ltd. and Star V Partners LLC is 1330 Avenue of the Americas, 6th Floor, New York, NY 10019. |
(7) |
Reflects a warrant to purchase 348,000 shares of our common stock, with an exercise price of $0.004 per share, held collectively by each of Flagler Master Fund SPC Ltd. (the Flagler Master Fund), acting for and on behalf of the class B segregated portfolio (Flagler B) and Candlewood Special Situations Master Fund II, L.P. (Candlewood Special Situations, and together with Flagler B, the Candlewood Funds). The Candlewood Funds hold 500,000 shares of our common stock in the aggregate and a warrant to purchase 442,575 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Candlewood Special Situations General, LLC (the Candlewood GP) is the sole general partner of Candlewood Special Situations, and the Candlewood GP is the holder of the Class I Shares of the Flagler Master Fund. Candlewood Investment Group, LP (CIG) serves as the investment manager to the Candlewood Funds. Candlewood Investment Group General, LLC is the sole general partner of CIG. Mr. Michael Lau is the CEO of and a managing partner of CIG. Mr. David Koenig and Mr. Jonathan Weiss are also managing partners of CIG. The mailing address for CIG and each of the Candlewood Funds is 555 Theodore Fremd Avenue, Suite C-303, Rye, NY 10580. |
(8) |
Represents 818,165 shares of our common stock held by Momar Corp. and 312,500 shares of our common stock held by Marneu Holdings Co. Of the shares held by Momar Corp., 378,745 shares are currently subject to a proxy in favor of our Board of Directors pursuant to the terms of our shareholders agreement with Momar Corp. Of the shares held by Marneu Holdings Co., 144,662 shares are currently subject to a proxy in favor of our Board of Directors pursuant to the terms of our |
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shareholders agreement with Marneu Holdings Co. See Certain Relationships and Related Party TransactionsShareholders Agreements . Mr. Moses Marx is the president of Momar Corp. and a member of its board of directors. Mr. Marx owns 50% of the equity in Marneu Holdings Co. Mr. Marx may be deemed to be the beneficial owner of and have voting and dispositive power with respect to the shares of our common stock held by Momar Corp. and Marneu Holdings Co. The address for Momar Corp. and Marneu Holdings Co. is 160 Broadway, New York, NY 10038. |
(9) |
Each of United States Debt Recovery, L.P. (USDR), United States Debt Recovery VIII, L.P. (USDR VIII), United States Debt Recovery X, L.P. (USDR X), United States Debt Recovery XI, L.P. (USDR XI) and United States Debt Recovery XII, L.P. (USDR XII and together with USDR, USDR VIII, USDR X and USDR XI, the USDR Funds) is a Delaware limited partnership managed by general partner WJ Investments, LLC, doing business as USDR Investment Management (WJ Investments). USDR holds 8,255 shares of our common stock. USDR VIII holds 643,270 shares of our common stock. USDR X holds 125,000 shares of our common stock. USDR XI holds 275,000 shares of our common stock. USDR XII holds 40,000 shares of our common stock. As the general partner of each of the USDR Funds, WJ Investments may direct the vote and disposition of the shares held by those entities. The authorized principals of WJ Investments are Nathan E. Jones, chief information officer and managing director, and Wendy J. Mueller, chief financial officer and managing director. As the authorized principals of WJ Investments, Mr. Jones and Ms. Mueller may each direct the vote and disposition of the shares held by the USDR Funds. The address for WJ Investments is 5575 Kietzke Lane, Suite A, Reno, NV 89511. |
(10) |
Owl Creek Credit Opportunities Fund, L.P. holds 777,220 shares of our common stock and a warrant to purchase 169,545 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Owl Creek Credit Opportunities Intermediate Fund, L.P. holds a warrant to purchase 163,338 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Of the 777,220 shares of our common stock held by Owl Creek Credit Opportunities Fund, L.P., 180,823 shares are currently subject to a proxy in favor of our Board of Directors pursuant to the terms of our shareholders agreement with Owl Creek Credit Opportunities Fund, L.P. See Certain Relationships and Related Party TransactionsShareholders Agreements . Owl Creek Advisors, LLC is the general partner of Owl Creek Credit Opportunities Fund, L.P. and Owl Creek Credit Opportunities Intermediate Fund, L.P. Owl Creek Asset Management, L.P. is the funds investment manager. As such, both Owl Creek Advisors, LLC and Owl Creek Asset Management, L.P. may be deemed to have voting and dispositive power in respect of the shares and warrants, as applicable, held by these funds. Jeffrey A. Altman is the managing member of the general partner of Owl Creek Asset Management, L.P. and the managing member of Owl Creek Advisors, LLC. The address for Owl Creek Credit Opportunities Fund, L.P. is 640 Fifth Avenue, New York, NY 10019. |
(11) |
AB Moore, LP holds a warrant to purchase 676,643 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Moore Capital Management, LP, the investment manager of AB Moore, LP, has voting and investment control of the shares held by AB Moore, LP. Mr. Louis M. Bacon controls the general partner of Moore Capital Management, LP, and may be deemed to be the beneficial owner of the shares of our common stock held by AB Moore, LP. The address of AB Moore, LP, Moore Capital Management, LP and Mr. Bacon is 11 Times Square, New York, NY 10036. |
(12) |
The address for J.P. Morgan Securities LLC is 277 Park Avenue, New York, NY 10172. |
(13) |
Wolverine Flagship Fund Trading Limited holds a warrant to purchase 811,308 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Wolverine Asset Management, LLC is the investment manager of Wolverine Flagship Fund Trading Limited and has voting and dispositive power over these securities. The sole member and manager of Wolverine Asset Management, LLC is Wolverine Holdings, L.P. Robert R. Bellick and Christopher L. Gust may be deemed to control Wolverine Trading Partners, Inc., the general partner of Wolverine Holdings, L.P. The address for Wolverine Flagship Fund Trading Limited is 175 West Jackson Blvd., Suite 340, Chicago, IL 60604. |
(14) |
Whitebox Asymmetric Partners LP (Whitebox Asymmetric) holds a warrant to purchase 41,810 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof. Whitebox GT Fund LP (Whitebox GT) holds a warrant to purchase 37,573 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof. Whitebox Multi-Strategy Partners LP (Whitebox Multi-Strategy) holds a warrant to purchase 712,988 shares of our common stock, with an exercise price of $0.004 per share, which is exercisable within 60 days of the date hereof. The exercise of these warrants is subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation. Whitebox General Partner LLC is the general partner of and Whitebox Advisors LLC is the investment manager to each of Whitebox Asymmetric, Whitebox GT and Whitebox Multi-Strategy. The address for each of Whitebox Asymmetric, Whitebox GT and Whitebox Multi-Strategy is 3033 Excelsior Blvd., Minneapolis, MN 55416. |
(15) |
The address for Wells Fargo Securities, LLC is 550 South Tryon Street, Charlotte, NC 28202. |
(16) |
Beneficial ownership prior to the offering does not reflect any shares that may be issued upon settlement of outstanding unvested RSUs. Post-offering holdings reflect 28,890 shares issued in settlement of vested SARs, 13,565 of which will be sold to the underwriters in the event they fully exercise their overallotment option. Post-offering holdings do not reflect |
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14,648 shares of unvested restricted stock awarded in settlement of unvested RSUs or 15,950 unvested shares of restricted stock awarded in settlement of unvested SARs, none of which vest within 60 days of the date hereof. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances . |
(17) |
Mr. Picco became a paid member of our Board of Directors in January 2018. Beneficial ownership prior to the offering does not reflect any shares that may be issued upon settlement of outstanding unvested RSUs. Post-offering holdings do not reflect 14,648 shares of unvested restricted stock awarded in settlement of unvested RSUs. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances . |
(18) |
Beneficial ownership prior to the offering does not reflect any shares that may be issued upon settlement of outstanding unvested RSUs. Post-offering holdings reflect 447,778 shares issued in settlement of vested SARs but do not reflect 155,385 shares of unvested restricted stock awarded in settlement of unvested RSUs or 43,890 unvested shares of restricted stock awarded in settlement of unvested SARs, none of which vest within 60 days of the date hereof. 297,800 shares will be sold to the underwriters in the event they fully exercise their overallotment option. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances . |
(19) |
Beneficial ownership prior to the offering does not reflect any shares that may be issued upon settlement of outstanding unvested RSUs. Post-offering holdings reflect 161,600 shares issued in settlement of vested SARs but do not reflect 123,068 shares of unvested restricted stock awarded in settlement of unvested RSUs or 193,200 unvested shares of restricted stock awarded in settlement of unvested SARs, none of which vest within 60 days of the date hereof. 151,168 shares will be sold to the underwriters in the event they fully exercise their overallotment option. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances . |
(20) |
Beneficial ownership prior to the offering reflects 25,000 shares of restricted stock that vest within 60 days of the date hereof but does not reflect any shares that may be issued upon settlement of outstanding unvested RSUs. Post-offering holdings reflect 28,298 shares issued in settlement of vested SARs but do not reflect 24,283 shares of unvested restricted stock awarded in settlement of unvested RSUs or 35,613 unvested shares of restricted stock awarded in settlement of unvested SARs, none of which vest within 60 days of the date hereof. 42,297 shares will be sold to the underwriters in the event they fully exercise their overallotment option. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances . |
(21) |
Holdings by non-executive-officer employees who, in the aggregate, hold less than 1% of our common stock are aggregated. Beneficial ownership prior to the offering does not reflect any shares that may be issued upon settlement of outstanding unvested RSUs. Post-offering holdings reflect shares issued in settlement of vested SARs but do not reflect shares of unvested restricted stock awarded in settlement of unvested RSUs or unvested shares of restricted stock awarded in settlement of unvested SARs, none of which vest within 60 days of the date hereof. An aggregate of 80,447 shares will be sold to the underwriters by these employees in the event they fully exercise their overallotment option. See Shares Eligible for Future SaleProposed Equity Exchange and 2018 Plan Issuances . |
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The following summary describes our capital stock and our second amended and restated articles of incorporation and our amended and restated bylaws to be in effect immediately prior to the consummation of this offering, and certain relevant provisions of Nevada corporate law, and is qualified in its entirety by our second amended and restated articles of incorporation and amended and restated bylaws copies of which are incorporated by reference as exhibits to the registration statement of which this prospectus is a part. Because the following is only a summary, it does not contain all of the information that may be important to you. For a complete description, you should refer to our second amended and restated articles of incorporation and amended and restated bylaws to be in effect immediately prior to the consummation of this offering, copies of which are incorporated by reference as exhibits to the registration statement of which this prospectus is part, and to the applicable provisions of Nevada law.
General
Upon the completion of this offering, our second amended and restated articles of incorporation will authorize us to issue up to 125,000,000 shares of common stock, no par value per share, and 5,000,000 shares of preferred stock, no par value per share.
As of March 31, 2018, there were outstanding 12,394,215 shares of our capital stock held by 69 shareholders of record.
Also as of March 31, 2018, there were no outstanding shares of preferred stock.
Common Stock
Dividend Rights . Holders of our common stock are entitled to receive dividends, if any, as may be declared from time to time by our Board of Directors out of legally available funds, subject to preferences that may be applicable to any then-outstanding preferred stock and limitations under our Investor Rights Agreement, RASPRO Lease Facility, GECAS Lease Facility and Nevada law.
Voting Rights . Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors, subject to any exclusive voting or director designation rights of the holders of shares of any series of our preferred stock that we may designate in the future. Our shareholders do not have cumulative voting rights in the election of directors.
Liquidation . In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to the net assets legally available for distribution to shareholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of preferred stock.
Rights and Preferences . Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate in the future.
Fully Paid and Nonassessable . All of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering will be, fully paid and nonassessable.
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Preferred Stock
Our Board of Directors has the authority, without further action by our shareholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. Our issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control of our company or other corporate action. Upon the closing of this offering, there will be no shares of preferred stock outstanding, and we have no present plan to issue any such shares of preferred stock.
Warrants
In connection with our emergence from bankruptcy in 2011, we issued warrants to purchase 15,915,628 shares of our common stock with an exercise price of $0.004 per share, to 60 claimholders in our bankruptcy proceedings who were not U.S. Citizens under applicable regulations. Certain exercise restrictions in our Plan of Organization, pursuant to which the warrants were originally issued, and ownership restrictions in our second amended and restated articles of incorporation may impact the ability of a warrant holder who is not a U.S. Citizen under applicable law to exercise these warrants. See Description of Capital StockLimited Ownership and Voting by Foreign Owners . The warrants are freely transferable, subject to applicable securities laws and ownership and transfer restrictions in our second amended and restated articles of incorporation, and expire on June 21, 2023. The shares of our common stock issuable pursuant to exercise of a warrant are subject to a shareholders agreement between the warrant holder and us, pursuant to which the warrant holder must vote certain shares of common stock acquired upon exercise of such warrant as directed by a majority of our Board of Directors and grant our Board of Directors an irrevocable proxy to do so.
Registration Rights
On March 1, 2011, we entered into an Investor Rights Agreement with US Airways, Inc. (now known as American Airlines, Inc.), which provides that if we become eligible to file a registration statement on Form S-3 and we receive a written request from any Initiating Holder (defined therein to effectively only include American), American will be entitled to certain demand registration rights. If and when American, pursuant to the Investor Rights Agreement, proposes through a written request to register securities the aggregate offering price of which, net of underwriting discounts and commissions, exceeds $500,000, American will be able to seek demand registration rights. In addition, should we decide to register certain securities, American will have piggyback registration rights, subject to lock-up arrangements and to certain restrictions. These demand and piggyback registration rights are described below.
Demand Registration Rights. If at any time we become eligible to file a registration statement on Form S-3, and we receive a written request from American to effect a registration statement on Form S-3, in accordance with the procedures outlined in the Investor Rights Agreement, and within 20 days of receiving notice from us regarding the registration, we will be required to: (i) promptly deliver written notice of the proposed registration to any other Holders (as defined therein) and (ii) use our reasonable best efforts to effect the registration statement on Form S-3 as soon as practicable (but in any event within 45 days after receiving the request) for the Registrable Securities (defined therein) proposed to be registered pursuant to the Investor Rights Agreement (subject to certain restrictions and limitations). We intend to obtain a lock-up agreement from American, the terms of which are described under Shares Eligible for Future SaleLock-Up Agreements .
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Piggyback Registration Rights. If we decide to register any of our securities, either for our own account or for the account of a security holder (subject to certain exceptions), we are required to: (i) promptly deliver (but in any event at least 10 days prior to filing any registration statement) written notice to American of the registration and any underwriting and (ii) use our reasonable best efforts (subject to certain exceptions) to include in such registration, which includes Americans participation in any underwriting, the Registrable Securities specified by American in a written request that we receive within 20 days after we have given them notice of our intent to register the securities. As of the date of this prospectus, we have provided such notice. In the event of an underwriting, Americans right to participate will be conditioned on its participation in such underwriting and including its Registrable Securities therein, as well as entering into and complying with the underwriter agreement we enter into with the managing underwriter, who may make a good faith determination that, because marketing factors require a limitation on the number of shares, Americans proposed number of Registrable Securities to be included in the underwriting is limited to not less than 20% of the Registrable Securities proposed by American. However, we reserve the right under the Investor Rights Agreement to terminate or withdraw any registration we have initiated prior to the effectiveness of such registration regardless of whether American has elected to include its Registrable Securities in the offering (provided we promptly notify American).
Expenses of Registration, Restriction and Indemnification . We will pay all Registration Expenses (defined therein) incurred from registering securities pursuant to the Investor Rights Agreement, while all Selling Expenses (defined therein) relating to securities registered on behalf of American shall be borne by American. The demand and piggyback registration rights are subject to customary restrictions such as blackout periods and any limitations on the number of shares to be included in the underwritten offering imposed by the managing underwriter. We and American have also agreed to customary indemnification provisions.
The covenants set forth in the Investor Rights Agreement, other than the registration rights described above, terminate and are of no further force or effect upon: (i) the listing of common stock on the Nasdaq Global Select Market, and (ii) American (including its affiliates) no longer holding the greater of 62.5% of our Shares (as defined in the Investor Rights Agreement) or 4.9% of our Common Stock (defined therein) then outstanding. As of March 31, 2018, American owns 20.2% of our issued and outstanding common stock (or 10.6% on a fully-diluted basis). The registration rights described above terminate when (a) our common stock is listed on the NYSE or Nasdaq, (b) none of our common stock held by American bears any restrictive legends and (c) Americans shares may be sold into the public market without any contractual restrictions or restriction pursuant to Rule 144 of the Securities Act.
Anti-Takeover Provisions of Our Articles of Incorporation, Bylaws and Nevada Law
Certain provisions of Nevada corporate law deter hostile takeovers. Specifically, Nevada Revised Statutes (NRS) 78.411 through 78.444 prohibit a publicly held Nevada corporation from engaging in a combination with an interested stockholder for a period of two years following the date the person first became an interested shareholder, unless (with certain exceptions) the combination or the transaction by which the person became an interested shareholder is approved in a prescribed manner. Generally, a combination includes a merger, asset or stock sale, or certain other transactions resulting in a financial benefit to the interested shareholder. Generally, an interested stockholder is a person who, together with affiliates and associates, beneficially owns or within two years prior to becoming an interested shareholder did own, 10% or more of a corporations voting power. Our second amended and restated articles of incorporation to be in effect immediately prior to the consummation of this offering exclude us from the restrictions imposed by these statutes.
Nevadas acquisition of controlling interest statutes, NRS 78.378 through 78.3793, contain provisions governing the acquisition of a controlling interest in certain Nevada corporations. These control share
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laws provide generally that any person that acquires a controlling interest in certain Nevada corporations may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights. These statutes provide that a person acquires a controlling interest whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the NRS, would enable that person to exercise (1) one-fifth or more, but less than one-third, (2) one-third or more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors. Once an acquirer crosses one of these thresholds, shares that it acquired in the transaction taking it over the threshold and within the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interest become control shares to which the voting restrictions described above apply. Our second amended and restated articles of incorporation to be in effect immediately prior to the consummation of this offering provide that these statutes do not apply to us or to any acquisition of our common stock.
Section 78.139 of the NRS, to which we are subject, provides that directors may resist a change or potential change in control if the directors, by majority vote of a quorum, determine that the change is opposed to, or not in, the best interests of the corporation.
In order to ensure that our capacity purchase agreements are not subject to early termination, our articles of incorporation prohibit the sale, transfer or assignment of our capital stock to the extent that such transfer would result in a change of control. Our articles of incorporation also grant our Board of Directors the ability to establish one or more series of preferred stock (including convertible preferred stock), to determine, with respect to any series of preferred stock, the voting powers, designations, preferences, limitations, restrictions and relative rights of each such series, and to authorize the issuance of shares of any such series, making it possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our company. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.
Limited Ownership and Voting by Foreign Owners
To comply with restrictions imposed by federal law on foreign ownership of U.S. airlines, our second amended and restated articles of incorporation to be in effect immediately prior to the consummation of this offering restrict the ownership and voting of shares of our common stock by people and entities who are not citizens of the United States as that term is defined in 49 U.S.C. § 40102(a). That statute defines citizen of the United States as, among other things, a U.S. corporation, of which the president and at least two-thirds of the board of directors and other managing officers are individuals who are citizens of the United States, which is under the actual control of citizens of the United States and in which at least 75% of the voting interest is owned or controlled by persons who are citizens of the United States. Our second amended and restated articles of incorporation prohibit any non-U.S. citizen from owning or controlling more than 24.9% of the aggregate votes of all outstanding shares of our common stock or 49.0% of the total number of outstanding shares of our capital stock. The restrictions imposed by the above-described ownership caps are applied to each non-U.S. citizen in reverse chronological order based on the date of registration on our foreign stock record. At no time may shares of our capital stock held by non-U.S. citizens be voted unless such shares are reflected on the foreign stock record. The voting rights of non-U.S. citizens having voting control over any shares of our capital stock are subject to automatic suspension to the extent required to ensure that we are in compliance with applicable law. In the event any transfer or issuance of shares of our capital stock to a non-U.S. citizen would result in non-U.S. citizens owning more than the above-described cap amounts, such transfer or issuance will be void and of no effect.
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Certain Transfer Restrictions
Our corporate charter imposes limits on certain transfers of our stock, which limits are intended to preserve our ability to use our net operating loss carryforwards. Specifically, our second amended and restated articles of incorporation to be in effect immediately prior to the consummation of this offering prohibit the transfer of any shares of our capital stock that would result in (i) any person or entity owning 4.75% or more of our then-outstanding capital stock, or (ii) an increase in the percentage ownership of any person or entity owning 4.75% or more of our then-outstanding capital stock. These transfer restrictions expire upon the earliest of (i) the repeal of Section 382 of the Code or any successor statute if our Board of Directors determines that such restrictions are no longer necessary to preserve our ability to use our net operating loss carryforwards, (ii) the beginning of a fiscal year to which our Board of Directors determines that no net operating losses may be carried forward, or (iii) such other date as determined by our Board of Directors. These transfer restrictions apply to the beneficial owner of the shares of our capital stock. The clients of an investment advisor are treated as the beneficial owners of stock for this purpose if the clients have the right to receive dividends, if any, the power to acquire or dispose of the shares of our capital stock, and the right to proceeds from the sale of our capital stock. Certain transactions approved by our Board of Directors, such as mergers and consolidations meeting certain requirements set forth in our articles of incorporation, are exempt from the above-described transfer restrictions. Our Board of Directors also has the ability to grant waivers, in its discretion, with respect to transfers of our stock that would otherwise be prohibited. Our Board of Directors has agreed to waive the above-referenced restrictions in our second amended and restated articles of incorporation to those persons or entities that acquire shares of our common stock in excess of the 4.75% threshold in this offering. Any transfer of common stock in violation of these restrictions will be void and will be treated as if such transfer never occurred.
Limitations of Liability and Indemnification
See ManagementLimitation of Liability and Indemnification .
Market Listing
Our common stock has been approved for quotation on the Nasdaq Global Select Market under the symbol MESA.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ComputerShare and its telephone number is (212) 805-7100.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.
Based on the number of shares and warrants outstanding as of March 31, 2018 and giving effect to the completion of this offering and the 2018 Plan Issuances, 35,201,192 million shares of common stock will be outstanding following this offering, assuming no exercise of the underwriters option to purchase additional shares. Of these shares, the shares sold in this offering by us, plus any shares sold upon exercise of the underwriters option to purchase additional shares of our common stock from us and the selling shareholders, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless the shares are held by any of our affiliates as such term is defined in Rule 144 of the Securities Act.
After this offering, 12,412,358 shares of common stock will be restricted as a result of securities laws or lock-up agreements as described below. Following the expiration of the various lock-up periods, all shares will be eligible for resale in compliance with Rule 144 or Rule 701, if then available, to the extent such shares have been released from any repurchase option that we may hold. Restricted securities as defined under Rule 144 were issued and sold by us in reliance on exemptions from the registration requirements of the Securities Act. These shares may be sold in the public market only if registered pursuant to an exemption from registration, such as Rule 144 or Rule 701 under the Securities Act.
Proposed Equity Exchange and 2018 Plan Issuances
In July 2018, our Board of Directors approved the issuance of shares of restricted common stock under our 2018 Plan immediately following the completion of this offering to certain of our employees and directors in exchange for the cancellation of: (i) restricted phantom stock units previously granted under our RSU Plan; (ii) unvested restricted shares previously issued under our 2011 Plan and our 2017 Plan; and (iii) SARs previously granted under our SAR Plan. The restricted phantom stock units and unvested restricted shares will be cancelled and exchanged for shares of restricted common stock under our 2018 Plan at a ratio of one share of restricted common stock for each restricted phantom stock unit and unvested restricted share delivered for cancellation. The shares of restricted common stock issued under our 2018 Plan in exchange for the cancellation of restricted phantom stock units, unvested restricted shares and SARs will be subject to vesting on the same terms set forth in the prior vesting schedules and are not subject to acceleration in connection with the exchange. The SARs, which currently settle only in cash, will be cancelled and exchanged for shares of restricted common stock under our 2018 Plan based on a formula that is dependent on the exercise price of the SAR exchanged by the participant and the fair market value of the SAR on the effective date of the exchange.
We believe that the 2018 Plan Issuances will be exempt from the registration requirements of the Securities Act pursuant to Section 3(a)(9) thereof as a transaction solely with existing security holders where no commission or other remuneration was paid or given directly or indirectly for soliciting the exchange.
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Shares of Common Stock and Warrants Issued in Reliance on Section 1145 of the Bankruptcy Code
In connection with our emergence from bankruptcy in 2011, we issued shares of our common stock to claimholders that were U.S. citizens and warrants to purchase shares of our common stock, with an exercise price of $0.004 per share, to claimholders that were not U.S. citizens under applicable regulations. These securities, issued in reliance on Section 1145(a)(1) of the Bankruptcy Code pursuant to our Plan of Reorganization, may be resold without registration, subject to certain restrictions described herein. In addition, these securities are freely transferable, subject to applicable securities laws and ownership and transfer restrictions in our articles of incorporation.
Section 1145(a)(1) exempts the offer and sale of securities under a plan of reorganization from registration under Section 5 of the Securities Act and state laws if certain requirements are satisfied. Such securities may be resold without registration unless the seller is an underwriter with respect to those securities. Section 1145(a)(1) defines an underwriter as any person who:
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purchases a claim against, an interest in, or a claim for an administrative expense against the debtor, if that purchase is with a view to distributing any security received in exchange for such a claim or interest; |
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offers to sell securities offered under the plan for holders of those securities; offers to buy those securities from the holders of the securities, if the offer to buy is (i) with a view to distributing those securities; and (ii) under an agreement made in connection with the plan, the consummation of the plan or with the offer or sale of securities under the plan; or |
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is an affiliate of the issuer. |
To the extent a person is deemed to be an underwriter, resales by such person would not be exempted by Section 1145 from registration under the Securities Act or other applicable law. Those persons would, however, be permitted to sell shares of our common stock without registration if they are able to comply with the provisions of Rule 144, as described further below.
As of March 31, 2018, 11,616,895 shares of our common stock and 10,890,905 warrants originally issued to claimholders upon our emergence from bankruptcy remained outstanding.
The share amounts set forth in this section are subject to change and will depend primarily on the price per share at which our common stock is sold in this offering and the total size of the offering. See Use of Proceeds elsewhere in this prospectus.
Rule 144
In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, a person (or persons whose shares are required to be aggregated) who is not deemed to have been one of our affiliates for purposes of Rule 144 at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell those shares in the public market (subject to the lock-up agreements referred to below, if applicable) without complying with the manner of sale, volume limitations or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than affiliates, then such person is entitled to sell such shares in the public market without complying with any of the requirements of Rule 144 (subject to the lock-up agreements referred to below, if applicable). In general, under Rule 144, as currently in effect, once we have been subject to the public company
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reporting requirements of the Exchange Act for at least 90 days, our affiliates, as defined in Rule 144, who have beneficially owned the shares proposed to be sold for at least six months are entitled to sell in the public market, upon expiration of any applicable lock-up agreements and within any three-month period, a number of those shares of our common stock that does not exceed the greater of:
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1% of the number of common shares then outstanding; or |
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the average weekly trading volume of our common stock on the Nasdaq Global Select Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Such sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions, notice requirements and to the availability of current public information about us. Notwithstanding the availability of Rule 144, the holders of substantially all of our restricted securities have entered into lock-up agreements as referenced below and their restricted securities will become eligible for sale (subject to the above limitations under Rule 144) upon the expiration of the restrictions set forth in those agreements.
Rule 701
In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants or advisors who acquired common stock from us in connection with a written compensatory stock or option plan or other written agreement in compliance with Rule 701 under the Securities Act before the effective date of the registration statement of which this prospectus is a part (to the extent such common stock is not subject to a lock-up agreement) is entitled to rely on Rule 701 to resell such shares in reliance on Rule 144. Accordingly, subject to any applicable lock-up agreements, under Rule 701 persons who are not our affiliates, as defined in Rule 144, may resell those shares without complying with the minimum holding period or public information requirements of Rule 144, and persons who are our affiliates may resell those shares without compliance with Rule 144s minimum holding period requirements (subject to the terms of the lock-up agreement referred to below, if applicable).
Lock-Up Agreements
In connection with this offering, we have agreed with the underwriters not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any such aforementioned transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, without, in each case, the prior written consent of Raymond James & Associates, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days after the date of this prospectus.
In connection with this offering, the selling shareholders, our officers, directors and holders of substantially all of our outstanding shares of capital stock and other securities have agreed with the underwriters not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock, enter into a transaction which would have the same effect, or enter into any swap,
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hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any such aforementioned transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Raymond James & Associates, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days after the date of this prospectus. Subject to certain requirements, the foregoing restrictions are not applicable to (i) transfers of shares of common stock (a) as a bona fide gift or gifts, (b) to any trust for the direct or indirect benefit of the applicable selling party or the immediate family of such party or (c) by will or intestacy to such partys legal representative, heir or legatee and (ii) distributions of shares of common stock to members, limited partners or shareholders of the applicable party, (iii) transfers of shares of capital to such partys affiliates or to any investment fund or other entity controlled or managed by such party, and (iv) transfers of shares of common stock to us as forfeitures to satisfy tax withholding and remittance obligations in connection with the vesting or exercise of equity awards granted pursuant to our equity incentive plans or pursuant to a net exercise or cashless exercise by the shareholder of outstanding equity awards pursuant to our equity incentive plans, subject to certain requirements. Additionally, sales of shares purchased in the open market are permitted in certain circumstances.
If any shareholder is granted an early release from the restrictions contained in the lock-up agreement, and the aggregate shares released pursuant to such waiver total at least 1% of such shareholders shares subject to the lock-up, then each beneficial owner of more than 5% of our voting securities as set forth in this prospectus will also be granted an early release from its obligations under the lock-up agreement on a pro rata basis. Two shareholders that provide investment banking services and products may continue to conduct market-making and other customary banking activities pursuant to the terms of their lock-up agreements.
The lock-up agreements automatically terminate upon the earliest of (i) the date the underwriting agreement is terminated prior to the payment for and delivery of the shares of common stock sold at the initial closing of this offering, (ii) written notice from us that we elect not to pursue this offering or (iii) December 31, 2018, in the event the initial closing of this offering has not occurred by that date.
Registration Statements
As soon as practicable after the completion of this offering, we intend to file a Form S-8 registration statement under the Securities Act to register shares of our common stock subject to awards outstanding or reserved for issuance under our equity compensation plans. This registration statement will become effective immediately upon filing, and shares covered by this registration statement will thereupon be eligible for sale in the public markets, subject to vesting restrictions, the lock-up agreements described above and Rule 144 limitations applicable to affiliates. For a more complete discussion of our stock plans, see Executive CompensationEquity Compensation Plans .
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the IRS), in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of our common stock.
This discussion is limited to Non-U.S. Holders that hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holders particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:
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U.S. expatriates and former citizens or long-term residents of the United States; |
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persons subject to the alternative minimum tax; |
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persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment; |
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persons subject to special tax accounting rules under Section 451(b) of the Code; |
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banks, insurance companies, and other financial institutions; |
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brokers, dealers or traders in securities; |
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controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax; |
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partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); |
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tax-exempt organizations or governmental organizations; |
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persons deemed to sell our common stock under the constructive sale provisions of the Code; and |
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tax-qualified retirement plans. |
If an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS
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TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Definition of Non-U.S. Holder
For purposes of this discussion, a Non-U.S. Holder is any beneficial owner of our common stock that is neither a U.S. person nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:
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an individual who is a citizen or resident of the United States; |
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a corporation created or organized under the laws of the United States, any state thereof or the District of Columbia; |
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an estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
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a trust that (i) is subject to the primary supervision of a U.S. court and all substantial decisions of which are subject to the control of one or more United States persons (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes. |
Distributions
As described in the section entitled Dividend Policy, we do not anticipate declaring or paying any cash dividends on our common stock. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holders adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under Sale or Other Taxable Disposition .
Subject to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable tax treaties.
If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States.
Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a
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branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Sale or Other Taxable Disposition
Subject to the discussions below under Information Reporting and Backup Withholding and Additional Withholding Tax on Payments Made to Foreign Accounts , a Non-U.S. Holder will not be subject to U.S. federal income or withholding tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
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the gain is effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable); |
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the Non-U.S. Holder is a non-resident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or |
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our common stock constitutes a U.S. real property interest (USRPI) by reason of our status as a U.S. real property holding corporation (USRPHC) for U.S. federal income tax purposes. |
Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by certain U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder of our common stock will not be subject to U.S. federal income tax if our common stock is regularly traded, as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holders holding period.
Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Payments of dividends on our common stock will not be subject to backup withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the Non-U.S. Holder is a United States person and the Non-U.S. Holder either certifies its non-U.S. status, such as by
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furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that such Non-U.S. Holder is a United States person, or the Non-U.S. Holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated relationships with the United States generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holders U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act (the FATCA)) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or gross proceeds from the sale or other disposition of, our common stock paid to a foreign financial institution or a non-financial foreign entity (each as defined in the Code), unless (i) the foreign financial institution undertakes certain diligence and reporting obligations, (ii) the non-financial foreign entity either certifies it does not have any substantial United States owners (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (i) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain specified United States persons or United States owned foreign entities (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our common stock, and will apply to payments of gross proceeds from the sale or other disposition of such stock on or after January 1, 2019.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
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Raymond James & Associates, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives of each of the underwriters named below. Subject to the conditions set forth in an underwriting agreement among us, the selling shareholders and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us the number of shares of our common stock set forth opposite its name below:
Underwriter |
Number
of Shares |
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Raymond James & Associates, Inc. |
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Merrill Lynch, Pierce, Fenner & Smith Incorporated |
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Cowen and Company, LLC |
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Stifel Nicolaus & Company, Incorporated |
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Imperial Capital, LLC |
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Total |
10,700,000 | |||
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The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.
The underwriters initially propose to offer part of the shares of common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers at that price less a concession not in excess of $ per share. After the initial offering of the shares of common stock, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the U.S. may be made by affiliates of the underwriters.
Option to Purchase Additional Shares of Common Stock
We and the selling shareholders have granted the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of 1,605,000 additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. If the overallotment option is exercised, an aggregate of up to 938,333 shares will be purchased directly from us, and an aggregate of 666,667 shares will be purchased directly from the selling shareholders. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of the additional shares of common stock as the number listed next to the underwriters name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table.
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Discounts and Expenses
The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us and the selling shareholders.
Per Share |
Total
(Full Exercise) |
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Public offering price |
$ | $ | ||||||
Underwriting discounts |
$ | $ | ||||||
Proceeds, before expenses, to us |
$ | $ | ||||||
Proceeds, before expenses, to us if overallotment option is exercised |
$ | $ | ||||||
Proceeds, before expenses, to selling shareholders if overallotment option is exercised |
$ | $ |
The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $3.3 million. We have agreed to reimburse the underwriters for expenses related to the clearance of this offering with the Financial Industry Regulatory Authority, Inc. and compliance with state securities or blue sky laws.
Indemnification
We and the selling shareholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
Lock-Up Agreements
In connection with this offering, we have agreed with the underwriters not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any such aforementioned transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, without, in each case, the prior written consent of Raymond James & Associates, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days after the date of this prospectus.
In connection with this offering, the selling shareholders (other than with respect to a de minimis number of shares), our officers, directors and holders of substantially all of our outstanding shares of capital stock and other securities have agreed with the underwriters not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any such aforementioned transaction is to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Raymond James & Associates, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days after the date of this prospectus. Subject to certain requirements, the foregoing restrictions are not applicable to: (i) transfers of shares of capital stock (a) as a bona fide gift or gifts, (b) to any trust for the direct or indirect benefit of the applicable selling party or the immediate family of such party or (c) by will or intestacy to such partys legal representative, heir or legatee; (ii) distributions of shares of capital stock to members, limited partners or shareholders of the applicable party; (iii) transfers of shares of capital stock to such partys affiliates or to any investment
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fund or other entity controlled or managed by such party; or (iv) transfers of shares of capital stock to us as forfeitures to satisfy tax withholding and remittance obligations in connection with the vesting or exercise of equity awards granted pursuant to our equity incentive plans or pursuant to a net exercise or cashless exercise by the shareholder of outstanding equity awards pursuant to our equity incentive plans, subject to certain requirements.
For additional details regarding the provisions of the lock-up agreements, see Shares Eligible for Future SaleLock-Up Agreements .
Stabilization
Until this offering is completed, rules of the SEC may limit the ability of the underwriters and various selling group members to bid for and purchase the shares of our common stock. As an exception to these rules and in accordance with Regulation M under the Exchange Act, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common stock in order to facilitate the offering of the common stock, including: short sales; syndicate covering transactions; imposition of penalty bids; and purchases to cover positions created by short sales.
Stabilizing transactions may include making short sales of shares of our common stock, which involve the sale by the underwriters of a greater number of shares than it is required to purchase in this offering and purchasing shares of common stock from us by exercising the option or in the open market to cover positions created by short sales. Short sales may be covered shorts, which are short positions in an amount not greater than the underwriters option referred to above, or may be naked shorts, which are short positions in excess of that amount.
Each underwriter may close out any covered short position either by exercising its option, in whole or in part, or by purchasing shares of common stock in the open market after the distribution has been completed. In making this determination, each underwriter will consider, among other things, the price of shares of our common stock available for purchase in the open market compared to the price at which the underwriter may purchase shares of our common stock pursuant to the underwriters option.
A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of shares of our common stock in the open market after pricing that could adversely affect investors who purchased in this offering. To the extent that the underwriters create a naked short position, they will purchase shares of our common stock in the open market to cover the position after the pricing of this offering.
The underwriters also may impose a penalty bid on selling group members. This means that if the underwriters purchase shares of our common stock in the open market in stabilizing transactions or to cover short sales, the underwriters can require the selling group members that sold those shares as part of this offering to repay the selling concession received by them.
As a result of these activities, the price of shares of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them without notice at any time. The underwriters may carry out these transactions on the Nasdaq Global Select Market or otherwise.
The underwriters are not required to engage in these activities and may end any of these activities at any time.
Relationships and Conflicts of Interest
Certain of the underwriters and their affiliates may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such
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affiliates, and for the selling shareholders and their affiliates, in the ordinary course of their business, for which they will receive customary fees and commissions, as applicable, and reimbursement for out-of-pocket expenses. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.
We have engaged Imperial Capital, LLC as our financial advisor. Pursuant to our arrangement, Imperial Capital, LLC may receive certain restructuring fees in addition to a $50,000 monthly advisory fee.
Listing
Currently, no public market exists for our shares. Our common stock has been approved for listing on the Nasdaq Global Select Market under the symbol MESA.
Electronic Prospectus
A prospectus in electronic format may be made available by e-mail or on the websites or through other online services maintained by one or more of the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of common units for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.
Other than the prospectus in electronic format, the information on the underwriters websites and any information contained on any other website maintained by any of the underwriters is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by the underwriters or us and should not be relied upon by investors.
Selling Restrictions
General
Other than in the U.S., no action has been taken by us or the underwriters that would permit a public offering of the shares of common stock offered by this prospectus in any jurisdiction where action for that purpose is required. The shares offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such shares be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Notice to Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area, each a Member State, no offer of the shares of common stock which are the subject of the offering has been, or will be made to the public in that Member State, other than under the following exemptions under the Prospectus Directive:
(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the representatives for any such offer; or
(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,
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provided that no such offer of the shares of common stock referred to in (a) to (c) above shall result in a requirement for us or any representative to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
Each person located in a Member State to whom any offer of shares of our common stock is made or who receives any communication in respect of an offer of shares of our common stock, or who initially acquires any of our shares of common stock will be deemed to have represented, warranted, acknowledged and agreed to and with each representative and us that: (i) it is a qualified investor within the meaning of the law in that Member State implementing Article 2(1)(e) of the Prospectus Directive; and (ii) in the case of any shares of common stock acquired by it as a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, the shares acquired by it in the offer have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the prior consent of the representatives has been given to the offer or resale; or where shares of our common stock have been acquired by it on behalf of persons in any Member State other than qualified investors, the offer of those shares of common stock to it is not treated under the Prospectus Directive as having been made to such persons.
We, the representatives and their respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgments and agreements.
This prospectus has been prepared on the basis that any offer of shares of our common stock in any Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Member State of shares of our common stock which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for us or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither we nor the representatives have authorized, nor do they authorize, the making of any offer of shares of our common stock in circumstances in which an obligation arises for us or the representatives to publish a prospectus for such offer.
For the purposes of this provision, the expression an offer of shares of our common stock to the public in relation to any shares of our common stock in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares of our common stock to be offered so as to enable an investor to decide to purchase or subscribe the shares of our common stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression Prospectus Directive means Directive 2003/71/EC (as amended) and includes any relevant implementing measure in each Member State.
The above selling restriction is in addition to any other selling restrictions set out below.
Notice to Prospective Investors in the United Kingdom
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are qualified investors (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons).
Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom,
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any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
Notice to Prospective Investors in Switzerland
The shares of our common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (SIX) or on any other stock exchange or regulated trading facility in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, us, or the shares of our common stock have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares of our common stock will not be supervised by, the Swiss Financial Market Supervisory Authority and the offer of shares of our common stock has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (CISA). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus relates to an exempt offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (DFSA). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with exempt offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the Corporations Act), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the Exempt Investors) who are sophisticated investors (within the meaning of section 708(8) of the Corporations Act), professional investors (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares of our common stock applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in
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circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in Hong Kong
The shares of our common stock offered in this prospectus may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a prospectus within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares of our common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Japan
The shares of our common stock offered in this prospectus have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan (including any corporation or other entity organized under the laws of Japan), except (i) pursuant to an exemption from the registration requirements of the Financial Instruments and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares of our common stock may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
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Where shares of our common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
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a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
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a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor. |
shares, debentures and units of shares and debentures of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
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to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
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where no consideration is or will be given for the transfer; |
|
where the transfer is by operation of law; |
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as specified in Section 276(7) of the SFA; or |
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as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
Notice to Prospective Investors in Canada
The shares of our common stock offered in this prospectus may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchasers province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105) the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
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The validity of the common stock offered by this prospectus will be passed upon for us by Brownstein Hyatt Farber Schreck, LLP, Las Vegas, Nevada, and certain other legal matters will be passed upon for us by DLA Piper LLP (US), Phoenix, Arizona. The underwriters are being represented by Mayer Brown LLP, New York, New York, in connection with the offering.
The consolidated financial statements as of September 30, 2016 and September 30, 2017, and for each of the two years in the period ended September 30, 2017, included in this prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such consolidated financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to this offering of our common stock. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some items of which are contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The exhibits to the registration statement should be referenced for the complete contents of these contracts and documents. You may obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SECs public reference facilities and the website of the SEC referred to above.
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Set forth below is a glossary of industry terms used in this prospectus:
Available seat miles or ASMs means the number of seats available for passengers multiplied by the number of miles the seats are flown.
Average aircraft means the average number of aircraft used in flight operations, as calculated on a daily basis.
Average stage length means the average number of statute miles flown per flight segment.
Block hours means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination.
CASM or unit costs means operating expenses divided by ASMs.
CRASM means contract revenue divided by ASMs.
DOT means the United States Department of Transportation.
FAA means the United States Federal Aviation Administration.
FTE means full-time equivalent employee.
Load factor means the percentage of aircraft seat miles actually occupied on a flight (RPMs divided by ASMs).
Mesa means Mesa Air Group, Inc. and its predecessors, direct and indirect subsidiaries and affiliates.
NMB means the National Mediation Board.
Pass-Through Revenue means costs from our major airline partners under our capacity purchase agreements that we equally recognize as both a revenue and an expense, including passenger and hull insurance, aircraft property taxes, landing fees, catering and certain maintenance costs related to our E-175 aircraft.
TSA means the United States Transportation Security Administration.
Utilization means the percentage derived from dividing (i) the number of block hours actually flown during a given month under a particular capacity purchase agreement by (ii) the maximum number of block hours that could be flown during such month under the particular capacity purchase agreement.
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INDEX TO FINANCIAL STATEMENTS
Page | ||||
Audited Consolidated Financial Statements |
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F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
Unaudited Consolidated Financial Statements |
||||
F-25 | ||||
F-26 | ||||
F-27 | ||||
Notes to Unaudited Condensed Consolidated Financial Statements |
F-28 |
F-1
The accompanying consolidated financial statements give effect to (1) a 2.5-for-1 stock split of the outstanding common stock of Mesa Air Group, Inc. (the Company) and (2) the Second Amended and Restated Articles of Incorporation of the Company, which will be completed prior to the effectiveness of the registration statement of which this prospectus is a part. The following report is in the form which will be furnished by Deloitte & Touche LLP, an independent registered public accounting firm, upon completion of the items above, which are described in Note 17 to the consolidated financial statements, and assuming that from May 3, 2018 to the date of such completion, no other material events have occurred that would affect the accompanying consolidated financial statements and notes thereto.
/s/ Deloitte & Touche LLP
Phoenix, Arizona
July 28, 2018
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Mesa Air Group, Inc.
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of Mesa Air Group, Inc. and its subsidiaries (the Company) as of September 30, 2017 and 2016, and the related consolidated statements of operations, shareholders equity, and cash flows for each of the two years in the period ended September 30, 2017. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Mesa Air Group, Inc. and its subsidiaries as of September 30, 2017 and 2016, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2017, in conformity with accounting principles generally accepted in the United States of America.
Phoenix, Arizona
May 3, 2018 (August , 2018 as to the effects of the stock split and the Second Amended and Restated Articles of Incorporation described in Note 17)
F-2
Consolidated Balance Sheets
(in thousands)
September 30, | ||||||||
2016 | 2017 | |||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 37,686 | $ | 56,788 | ||||
Restricted cash |
3,513 | 3,559 | ||||||
Receivables, net ($0 and $1,329 from related party) |
9,297 | 8,853 | ||||||
Expendable parts and supplies, net |
12,154 | 15,114 | ||||||
Prepaid expenses and other current assets |
42,517 | 61,525 | ||||||
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|
|
|
|||||
Total current assets |
105,167 | 145,839 | ||||||
Property and equipment, net |
1,153,350 | 1,192,448 | ||||||
Intangibles, net |
12,107 | 11,724 | ||||||
Lease and equipment deposits |
4,244 | 1,945 | ||||||
Other assets |
8,362 | 5,693 | ||||||
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|
|
|
|||||
Total assets |
$ | 1,283,230 | $ | 1,357,649 | ||||
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|
|
|
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities |
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Current portion of long-term debt |
$ | 109,901 | $ | 140,466 | ||||
Accounts payable ($4,875 and $2,644 to related party) |
52,959 | 44,738 | ||||||
Accrued compensation |
8,839 | 9,080 | ||||||
Other accrued expenses |
20,150 | 23,929 | ||||||
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|
|
|
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Total current liabilities |
191,849 | 218,213 | ||||||
Long-term debt, excluding current portion |
803,115 | 803,874 | ||||||
Deferred credits ($6,175 and $7,370 to related party) |
16,876 | 17,189 | ||||||
Deferred income taxes |
35,921 | 56,436 | ||||||
Other noncurrent liabilities |
46,318 | 39,713 | ||||||
|
|
|
|
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Total noncurrent liabilities |
902,230 | 917,212 | ||||||
|
|
|
|
|||||
Total liabilities |
1,094,079 | 1,135,425 | ||||||
|
|
|
|
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Commitments and contingencies (Notes 15 and 16) |
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Shareholders equity: |
||||||||
Preferred stock of no par value, 5,000,000 shares authorized; no shares issued and outstanding |
| | ||||||
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 11,294,083 (2017) and 10,369,643 (2016) shares issued and outstanding, and 12,230,625 (2017) and 13,150,610 (2016) warrants issued and outstanding |
114,211 | 114,456 | ||||||
Retained earnings |
74,940 | 107,768 | ||||||
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|
|
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Total shareholders equity |
189,151 | 222,224 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 1,283,230 | $ | 1,357,649 | ||||
|
|
|
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See accompanying notes to the consolidated financial statements.
F-3
Consolidated Statements of Operations
(in thousands, except per share amounts)
Years Ended
September 30, |
||||||||
2016 | 2017 | |||||||
Operating revenues: |
||||||||
Contract revenue ($366,911 and $354,614 from related party) |
$ | 569,373 | $ | 618,698 | ||||
Pass-through and other ($8,885 and $7,920 from related party) |
18,463 | 24,878 | ||||||
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|
|
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Total operating revenues |
587,836 | 643,576 | ||||||
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|
|
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Operating expenses: |
||||||||
Flight operations |
141,422 | 155,516 | ||||||
Fuel |
753 | 766 | ||||||
Maintenance |
225,130 | 210,729 | ||||||
Aircraft rent |
71,635 | 72,551 | ||||||
Aircraft and traffic servicing |
3,936 | 3,676 | ||||||
General and administrative |
42,182 | 38,996 | ||||||
Depreciation and amortization |
46,020 | 61,048 | ||||||
|
|
|
|
|||||
Total operating expenses |
531,078 | 543,282 | ||||||
|
|
|
|
|||||
Operating income |
56,758 | 100,294 | ||||||
|
|
|
|
|||||
Other (expense) income, net: |
||||||||
Interest expense |
(32,618 | ) | (46,110 | ) | ||||
Interest income |
325 | 32 | ||||||
Other income (expense), net |
381 | (514 | ) | |||||
|
|
|
|
|||||
Total other (expense) income, net |
(31,912 | ) | (46,592 | ) | ||||
|
|
|
|
|||||
Income before taxes |
24,846 | 53,702 | ||||||
Income tax expense |
9,926 | 20,874 | ||||||
|
|
|
|
|||||
Net income |
$ | 14,920 | $ | 32,828 | ||||
|
|
|
|
|||||
Net income per share attributable to common shareholders: |
||||||||
Basic |
$ | 1.56 | $ | 3.01 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.62 | $ | 1.40 | ||||
|
|
|
|
|||||
Weighted-average common shares outstanding: |
||||||||
Basic |
9,558 | 10,919 | ||||||
|
|
|
|
|||||
Diluted |
24,082 | 23,386 | ||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
F-4
Consolidated Statements of Shareholders Equity
(in thousands)
Number of
Shares |
Number of
Warrants |
Common
Stock and Additional Paid-In Capital |
Retained
Earnings |
Total | ||||||||||||||||
Balance at September 30, 2015, as previously reported |
7,866,160 | 16,165,628 | $ | 114,076 | $ | 57,768 | $ | 171,844 | ||||||||||||
Prior period adjustment (See note 2) |
| | | 2,252 | 2,252 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at September 30, 2015, as corrected |
7,866,160 | 16,165,628 | $ | 114,076 | $ | 60,020 | $ | 174,096 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stock compensation expense |
| | 1,546 | | 1,546 | |||||||||||||||
Repurchased shares |
(232,085 | ) | | (1,411 | ) | | (1,411 | ) | ||||||||||||
Forfeited warrants |
| (804,700 | ) | | | | ||||||||||||||
Warrants converted to common stock |
2,210,318 | (2,210,318 | ) | | | | ||||||||||||||
Restricted shares issued |
525,250 | | | | | |||||||||||||||
Net income |
| | | 14,920 | 14,920 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at September 30, 2016 |
10,369,643 | 13,150,610 | $ | 114,211 | $ | 74,940 | $ | 189,151 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stock compensation expense |
| | 1,288 | | 1,288 | |||||||||||||||
Repurchased shares |
(228,735 | ) | | (1,043 | ) | | (1,043 | ) | ||||||||||||
Warrants converted to common stock |
919,985 | (919,985 | ) | | | | ||||||||||||||
Restricted shares issued |
233,190 | | | | | |||||||||||||||
Net income |
| | | 32,828 | 32,828 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at September 30, 2017 |
11,294,083 | 12,230,625 | $ | 114,456 | $ | 107,768 | $ | 222,224 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
F-5
Consolidated Statements of Cash Flows
(in thousands)
Years Ended
September 30, |
||||||||
2016 | 2017 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 14,920 | $ | 32,828 | ||||
Adjustments to reconcile net income to net cash flows provided by operating activities: |
||||||||
Depreciation and amortization |
46,020 | 61,048 | ||||||
Stock compensation expense |
1,546 | 1,288 | ||||||
Deferred income taxes |
9,513 | 20,515 | ||||||
Amortization of unfavorable lease liabilities and deferred credits |
(9,626 | ) | (10,626 | ) | ||||
Amortization of debt financing costs and accretion of interest on non-interest-bearing subordinated notes |
1,990 | 2,689 | ||||||
Loss on disposal of assets |
428 | 533 | ||||||
Provision for obsolete expendable parts and supplies |
41 | 419 | ||||||
Provision for doubtful accounts |
575 | (86 | ) | |||||
Changes in assets and liabilities: |
||||||||
Receivables |
1,908 | 530 | ||||||
Expendable parts and supplies |
(1,675 | ) | (3,379 | ) | ||||
Prepaid expenses and other current assets |
1,554 | (17,243 | ) | |||||
Accounts payable |
29,673 | (17,336 | ) | |||||
Accrued liabilities |
7,625 | 3,547 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
104,492 | 74,727 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(490,081 | ) | (84,500 | ) | ||||
Proceeds from sale of rotable spare parts |
196 | 18 | ||||||
Withdrawal (deposit) of restricted cash |
807 | (46 | ) | |||||
(Payments) net returns of lease and equipment deposits |
(2,049 | ) | 406 | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(491,127 | ) | (84,122 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from long-term debt |
452,841 | 185,912 | ||||||
Principal payments on long-term debt |
(75,496 | ) | (152,995 | ) | ||||
Debt financing costs |
(10,086 | ) | (3,377 | ) | ||||
Repurchase of stock |
(1,411 | ) | (1,043 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities |
365,848 | 28,497 | ||||||
|
|
|
|
|||||
Net change in cash and cash equivalents |
(20,787 | ) | 19,102 | |||||
Cash and cash equivalents at beginning of period |
58,473 | 37,686 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 37,686 | $ | 56,788 | ||||
|
|
|
|
|||||
Supplemental cash flow information |
||||||||
Cash paid for interest |
$ | 28,693 | $ | 43,798 | ||||
|
|
|
|
|||||
Cash paid for income taxesnet |
$ | 196 | $ | 332 | ||||
|
|
|
|
|||||
Supplemental non-cash investing and financing activities |
||||||||
Accrued capital expenditures |
$ | 418 | $ | 9,533 | ||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
F-6
Notes to Consolidated Financial Statements
1. |
Organization and Operations |
The Company
Mesa Air Group, Inc. (Mesa or the Company) is a holding company whose principal subsidiary operates as a regional air carrier, providing scheduled passenger service. As of September 30, 2017, the Company served 110 cities in 37 states, the District of Columbia, Canada, Mexico, and the Bahamas and operated a fleet of 140 aircraft with approximately 611 daily departures.
The Companys airline operations are conducted by its regional airline subsidiary, Mesa Airlines, Inc. (Mesa Airlines), providing services to major air carriers under capacity purchase agreements. Mesa Airlines operates as American Eagle (formerly US Airways Express) under a capacity purchase agreement with American Airlines, Inc. (American) and as United Express under a capacity purchase agreement with United Airlines, Inc. (United). All of the Companys consolidated contract revenues for 2016 and 2017 were derived from operations associated with these two capacity purchase agreements.
The financial arrangements between the Company and its major airline partners involve a revenue-guarantee arrangement (i.e., a capacity purchase agreement). Under the capacity purchase agreements, the major airline generally pays a monthly guaranteed amount. Under the terms of these agreements, the major carrier controls marketing, scheduling, ticketing, pricing, and seat inventories. The Company receives a guaranteed payment based upon a fixed minimum monthly amount per aircraft, plus amounts related to departures and block hours flown, plus direct reimbursement for expenses, such as certain landing fees, and insurance. The major airline partners also pay certain expenses directly to suppliers, such as fuel, ground operations and certain landing fees. The capacity purchase agreements reduce the Companys exposure to fluctuations in passenger traffic, fare levels, and fuel prices.
American Capacity Purchase Agreements
As of September 30, 2017, the Company operated 64 CRJ-900 aircraft for American under a capacity purchase agreement. Unless otherwise extended or amended, the capacity purchase agreement for the aircraft expires between 2021 and 2025. In exchange for providing flights and all other services under the agreement, the Company receives a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown during the month. In addition, the Company may also receive incentives or pay penalties based upon the Companys operational performance, including controllable on-time departure and controllable completion percentages. American also reimburses the Company for the actual amount incurred for certain items such as passenger liability and hull insurance, and aircraft property taxes. In addition, American also provides, at no cost to the Company, certain ground handling and customer service functions, as well as airport-related facilities and fuel. The Company also receives a monthly profit margin payment from American based on the number of aircraft operating. The capacity purchase agreement is subject to early termination for cause under specified circumstances and subject to the Companys right to cure under certain conditions. American (formerly US Airways) has a 10.6% ownership interest in the Company on a fully-diluted basis. The related party amounts presented on the Consolidated Balance Sheets and Statements of Operations pertain to American.
United Capacity Purchase Agreement
As of September 30, 2017, the Company operated 20 CRJ-700 and 58 E-175 aircraft for United under a capacity purchase agreement. Subject to certain early termination rights, the capacity purchase
F-7
agreement for each of the 20 CRJ-700 aircraft expires between August and December 2019. Subject to early termination rights, the capacity purchase agreement for 30 of the E-175 aircraft (owned by United) expires between June 2019 and August 2020, subject to Uniteds right to extend for four additional two-year terms (maximum of eight years). Subject to early termination rights, the capacity purchase agreement for 18 of the E-175 aircraft (owned by Mesa) expires between January 2028 and November 2028. During fiscal 2017, Mesa and United expanded the capacity purchase agreement to include an additional 12 E-175 aircraft (to be purchased by United) with the aircraft entering service through January 2018 for five-year terms, subject to Uniteds right to extend for four additional two-year terms (maximum of eight years). As of September 30, 2017, Mesa has taken delivery of seven E-175 aircraft, of which, five are in service. In exchange for performing the flight services under such agreement, the Company receives from United a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown during the month. Additionally, certain costs incurred by the Company in performing the flight services are pass-through costs, whereby United agrees to reimburse the Company for the actual amounts incurred for the following items: property tax per aircraft, landing fees, and additionally for the E-175 aircraft owned by United, heavy airframe and engine maintenance, landing gear, APUs and component maintenance. The Company also receives a profit margin based upon certain reimbursable costs under the agreement, as well as its operational performance in addition to a fixed profit margin. The capacity purchase agreement is also subject to early termination for cause under specified circumstances and subject to the Companys right to cure under certain circumstances.
2. |
Summary of Significant Accounting Policies |
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the accounts of the Company and its wholly owned operating subsidiaries. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).
All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the Companys consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.
Segment Information
The Company is organized as a single operating segment, whereby its chief operating decision maker assesses the performance of and allocates resources to the business as a whole.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
F-8
Restricted Cash
Restricted cash primarily includes deposits in trust accounts to collateralize letters of credit and to fund workers compensation claims, landing fees, and other business needs. Restricted cash is stated at cost, which approximates fair value.
The Company has an agreement with a financial institution for a $6.0 million letter of credit facility to issue letters of credit for landing fees, workers compensation insurance, and other business needs. Pursuant to such agreement, $3.5 million and $3.6 million of outstanding letters of credit are required to be collateralized by amounts on deposit as of September 30, 2016 and 2017, respectively, which are classified as restricted cash.
Expendable Parts and Supplies
Expendable parts and supplies are stated at the lower of cost (using the first-in, first-out method) or market, and are charged to expense as they are used. The Company provides an allowance for obsolescence for such parts and supplies over the useful life of its aircraft after considering the useful life of each aircraft fleet, the estimated cost of expendable parts expected to be on hand at the end of the useful life, and the estimated salvage value of the parts. This allowance was $1.2 million and $1.6 million as of September 30, 2016 and 2017, respectively.
Prepaid Expenses
Prepaid expenses consist primarily of the excess of aircraft lease payments over the straight-lined lease expense. The straight-lined lease expense is net of estimated rebates to be received from the lessor during the term of the agreements, contingent on the Company performing certain engine restorations.
Property and Equipment
Property and equipment are stated at cost, net of manufacturer incentives, and depreciated over their estimated useful lives to their estimated salvage values, which are 20% for aircraft and rotable spare parts, using the straight-line method.
Estimated useful lives of the various classifications of property and equipment are as follows:
Property and Equipment |
Estimated Useful Life |
|
Buildings |
30 years | |
Aircraft |
25 years from manufacture date | |
Flight equipment |
7-20 years | |
Equipment |
5-9 years | |
Furniture and fixtures |
3-5 years | |
Vehicles |
5 years | |
Rotable spare parts |
Life of the aircraft or term of the lease, whichever is less | |
Leasehold improvements |
Life of the aircraft or term of the lease, whichever is less |
Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. The Company records an impairment loss if (i) the undiscounted future cash flows are found to be less than the carrying amount of the asset or asset group, and (ii) the carrying amount of the asset or asset group exceeds fair value. If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its estimated fair value. The Company recognized no impairment charges on property and equipment for the years ended September 30, 2016 and 2017.
F-9
Fair Value Measurements
The Company accounts for assets and liabilities in accordance with accounting standards that define fair value and establish a consistent framework for measuring fair value on either a recurring or a nonrecurring basis. Fair value is an exit price representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
Accounting standards include disclosure requirements relating to the fair values used for certain financial instruments and establish a fair value hierarchy. The hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels:
|
Level 1 Observable inputs such as quoted prices in active markets; |
|
Level 2 Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
|
Level 3 Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The Company did not measure any of its assets or liabilities at fair value on a recurring or nonrecurring basis as of September 30, 2016 and 2017.
The carrying values of cash and cash equivalents, unrestricted cash, accounts receivable, and accounts payable included on the accompanying consolidated balance sheets approximated fair value at September 30, 2016 and 2017.
The Companys debt agreements are not publicly held. The Company has determined the estimated fair value of its debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable and, therefore, could be sensitive to changes in inputs. The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt. See Note 9 for more information on these agreements.
The carrying value and estimated fair value of the Companys long-term debt, including current maturities, were as follows (in millions):
September 30, 2016 | September 30, 2017 | |||||||||||||||
Carrying
Value |
Fair
Value |
Carrying
Value |
Fair
Value |
|||||||||||||
Long-term debt, including current maturities |
$ | 923.5 | $ | 951.2 | $ | 956.9 | $ | 975.0 | ||||||||
|
|
|
|
|
|
|
|
Prepaid Maintenance Deposits
Prepaid maintenance deposits consist of payments made on a monthly basis to cover certain future maintenance events for leased flight equipment. The deposits are contractual obligations that are held in trust by the lessors. The deposits are only to be used to cover maintenance events, which include, among other things, C-checks, engine restoration events, engine life limited parts, landing gear repairs, and auxiliary power unit overhauls. The Company expenses the service as it is performed and receives reimbursement from the reserve trust account. The current portion is included in prepaid expenses and other current assets and the noncurrent portion is included in other assets on the consolidated balance sheet.
F-10
Debt Financing Costs
Debt financing costs consist of payments made to issue debt related to the purchase of aircraft, flight equipment, and certain flight equipment maintenance costs. The Company defers the costs and amortizes them over the term of the debt agreement. Debt financing costs related to a recognized debt liability are presented as a direct deduction from the carrying amount of the related long-term debt on the consolidated balance sheet. Debt financing costs with no related recognized debt liability are presented as assets, with the current portion included in prepaid expenses and other current assets and the noncurrent portion included in other assets on the consolidated balance sheet.
Unutilized Manufacturer Credits
Manufacturer credits received in connection with aircraft purchases that can be used for the future purchase of certain goods and services are recorded as a prepaid asset based on the value of the credits expected to be utilized, and the Company reduces the asset as the credits are utilized to fund such purchases. The current portion is included in prepaid expenses and other current assets and the noncurrent portion is included in other assets on the consolidated balance sheet.
Intangibles
Identifiable intangible assets consist of the American (formerly US Airways) customer relationship with a 25-year life, which is being amortized in a manner consistent with the timing and amount of cash flows that the Company expects to generate from this customer relationship.
In accordance with ASC 360, Property, Plant and Equipment, an intangible asset with a finite life that is being amortized is reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. The Company records an impairment loss if the undiscounted future cash flows are found to be less than the carrying amount of the asset and if the carrying amount of the asset exceeds fair value. If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to its estimated fair value.
Information about the intangible assets of the Company at September 30, 2016 and 2017, are as follows (in thousands):
September 30, | ||||||||
2016 | 2017 | |||||||
Customer relationship |
$ | 43,800 | $ | 43,800 | ||||
Accumulated amortization |
(31,693 | ) | (32,076 | ) | ||||
|
|
|
|
|||||
$ | 12,107 | $ | 11,724 | |||||
|
|
|
|
Total amortization expense recognized was approximately $0.4 million for each of the years ended September 30, 2016 and 2017. The Company expects to record amortization expense of $0.4 million, $1.8 million, $1.5 million, $1.2 million, $1.0 million, and $5.8 million for 2018, 2019, 2020, 2021, 2022, and thereafter, respectively.
Other Assets
Other long-term assets primarily consist of noncurrent deferred reimbursed costs, debt financing costs, and prepaid maintenance deposits.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
F-11
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records deferred tax assets for the value of benefits expected to be realized from the utilization of alternative minimum tax credit carryforwards, capital loss carryforwards, and state and federal net operating loss carryforwards. The Company periodically reviews these assets to determine the likelihood of realization. To the extent the Company believes some portion of the benefit may not be realizable, an estimate of the unrealized position is made and a valuation allowance is recorded. The Company and its consolidated subsidiaries file a consolidated federal income tax return.
Deferred Credits
Deferred credits consist of cost reimbursements from major airline partners related to aircraft modifications per revised capacity purchase agreements and costs associated with pilot training. The deferred credits are amortized on a straight-line basis as a component of revenue over the term of the respective capacity purchase agreements.
Other Noncurrent Liabilities
Other non-current liabilities consist of the remaining fair value adjustment for unfavorable aircraft operating leases related to a previous bankruptcy and related accounting. This adjustment to fair value is being amortized on a straight-line basis over the remaining initial lease terms for these aircraft. During each of the years ended September 30, 2016 and 2017, the Company recorded amortization of this unfavorable lease liability of $6.8 million as a reduction of lease expense.
Revenue Recognition
Under the Companys capacity purchase agreements, the major airline partners generally pay a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown. The contracts also include reimbursement of certain costs incurred by the Company in performing flight services. These costs, known as pass-through costs, may include passenger and hull insurance, aircraft property taxes, as well as landing fees and catering. Additionally, for the E-175 aircraft owned by United, the capacity purchase agreement provides that United will reimburse the Company for heavy airframe and engine maintenance, landing gear, auxiliary power units (APU) and component maintenance which are treated as pass-through and will increase revenue (and expense for the same amount) upon completion of the work. The Company also receives compensation under its capacity purchase agreements for heavy maintenance expenses at a fixed hourly rate or per-aircraft rate for all aircraft in scheduled service other than the E-175 aircraft owned by United. The Company records reimbursement of pass-through costs as pass-through and other revenue in the consolidated statements of operations as service is provided. In addition, the Companys major airline partners also provide, at no cost to the Company, certain ground handling and customer service functions, as well as airport-related facilities and gates at their hubs and other cities. Services and facilities provided by major airline partners at no cost to the Company are presented net in the Companys consolidated financial statements; hence, no amounts are recorded for revenue or expense for these items. The contracts also include a profit margin on certain reimbursable costs, as well as a profit margin, incentives and penalties based on certain operational benchmarks. The Company recognizes revenue under its capacity purchase agreements when the transportation is provided, including an estimate of the profit component based upon the information available at the end of the accounting period. All revenue recognized under these contracts is presented as the gross amount billed to the major airline partners.
Under the Companys capacity purchase agreements with American and United, the Company is reimbursed under a fixed rate per-block hour, plus an amount per aircraft designed to reimburse the
F-12
Company for certain aircraft ownership costs. The Company has concluded that a component of its revenue under these agreements is rental income, as such agreements identify the right of use of a specific type and number of aircraft over a stated period of time. The Company calculates the amount of rental income using the contractual ownership rates set forth in the respective capacity purchase agreements. The amount deemed to be rental income during fiscal 2016 and 2017 was $190.1 million and $217.6 million, respectively, and has been included in contract revenue on the Companys consolidated statements of operations. The Company has not separately stated aircraft rental income and aircraft rental expense in the consolidated statements of operations because the use of the aircraft is not a separate activity of the total service provided.
The American and United capacity purchase agreements contain an option that allows the major airline partner to assume the contractual responsibility for procuring and providing the fuel necessary to operate the flights that the Company operates for them. Both airlines have exercised this option. Accordingly, the Company does not recognize fuel expense or revenue for fuel on passenger flight services.
Maintenance Expense
The Company operates under a Federal Aviation Administration (FAA) approved continuous inspection and maintenance program. The Company uses the direct expense method of accounting for its maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance wherein the expense is recognized when the maintenance work is completed, or over the period of repair, if materially different. For leased aircraft, the Company is subject to lease return provisions that require a minimum portion of the life of an overhaul be remaining on the engine at the lease return date. The Company estimates the cost of maintenance lease return obligations and accrues such costs over the remaining lease term when the expense is probable and can be reasonably estimated.
Engine overhaul expense totaled $90.9 million and $64.0 million for the years ended September 30, 2016 and 2017, respectively, of which $0 and $0.3 million was pass-through expense. Airframe check expense totaled $13.2 million and $22.6 million for the years ended September 30, 2016 and 2017, respectively, of which $0 and $4.9 million was pass-through expense.
Pursuant to the United capacity purchase agreement, United reimburses the Company for heavy maintenance on certain E-175 aircraft. Those reimbursements are included in pass-through and other revenue. See Note 1: Organization and Operations for further information.
Correction of immaterial misstatement
Subsequent to the issuance of the Companys 2016 consolidated financial statements, management determined that a payment the Company received in 2017 of $4.6 million from a former vendor for engine maintenance support credits should have been recorded as a receivable and a reduction in engine maintenance expense in prior years, and also identified other minor prior period adjustments for under-accrued property tax. Accordingly, the Company made a prior period adjustment to increase retained earnings by $2.3 million as of September 30, 2015 and adjusted accounts receivable, accrued property taxes, and deferred tax liability (for related income tax effects) as of September 30, 2016, to correct such amounts. These adjustments had no effect on the Companys previously-reported results of operations or net cash flows from operating, investing, or financing activities for the year ended September 30, 2016. The Company evaluated these adjustments considering both quantitative and qualitative factors and concluded they were immaterial to previously issued financial statements.
3. |
Recent Accounting Pronouncements |
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The standard establishes a new recognition model that requires revenue to be
F-13
recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company may adopt the requirements of ASU 2014-09 using either of two acceptable methods: (1) retrospective adoption to each prior period presented with the option to elect certain practical expedients; or (2) adoption with the cumulative effect recognized at the date of initial application and providing certain disclosures. In July 2015, the FASB approved a one-year deferral of the effective date of the new standard, making it effective for our reporting periods beginning October 1, 2018. The Company is currently evaluating the potential impact of the adoption of this new guidance on its financial position or results of operations, including the method of adoption to be used.
In August 2014, The FASB issued ASU No. 2014-15, Presentation of Financial StatementsGoing Concern: Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (Topic 205), which provides guidance on determining when and how to disclose going-concern uncertainties in the condensed consolidated financial statements. The new standard requires management to perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the consolidated financial statements are issued. An entity must provide certain disclosure if conditions or events raise substantial doubt about the entitys ability to continue as a going concern. The update applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter. The Company adopted this ASU in fiscal year 2017, and the adoption did not have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02), which provides guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of income. The guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of the adoption of this new guidance on its consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, CompensationStock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting , which simplifies several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The guidance is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the potential impact of the adoption of this new guidance on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force) , which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact that the standard will have on the consolidated statements of cash flows. Further, in November 2016, the FASB issued ASU No. 2016-18 that requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company has restricted cash of $3.6 million as of September 30, 2017 and intends to adopt the new guidance in fiscal 2019.
4. |
Concentrations |
At September 30, 2017, the Company had capacity purchase agreements with American and United. All of the Companys consolidated revenue for fiscal 2016 and 2017 and accounts receivable at the
F-14
end of each of these years was derived from these agreements. The terms of both the American and United capacity purchase agreements are not aligned with the lease obligations on the aircraft performing services under such agreements.
Amounts billed by the Company under capacity purchase agreements are subject to the Companys interpretation of the applicable capacity purchase agreement and are subject to audit by the Companys partners. Periodically, the Companys major airline partners dispute amounts billed and pay amounts less than the amount billed. Ultimate collection of the remaining amounts not only depends upon the Company prevailing under audit, but also upon the financial well-being of the major airline partner. As such, the Company periodically reviews amounts past due and records a reserve for amounts estimated to be uncollectible. The allowance for doubtful accounts was $0.6 million and $0.7 million at September 30, 2016 and 2017, respectively. If the Companys ability to collect these receivables and the financial viability of our partners is materially different than estimated, the Companys estimate of the allowance could be materially impacted.
American accounted for approximately 64% and 56% of the Companys total revenue in fiscal 2016 and 2017, respectively. United accounted for approximately 36% and 44% of the Companys revenue in fiscal 2016 and 2017, respectively. A termination of either the American or the United capacity purchase agreement would have a material adverse effect on the Companys business prospects, financial condition, results of operations, and cash flows.
5. |
Prepaid expenses and other current assets |
Prepaid expenses and other current assets as of September 30, 2016 and 2017, consists of the following (in thousands):
September 30, | ||||||||
2016 | 2017 | |||||||
Prepaid aircraft rent |
$ | 32,397 | $ | 53,645 | ||||
Unutilized manufacturer credits |
4,180 | | ||||||
Deferred reimbursed costs |
1,237 | 1,863 | ||||||
Maintenance deposits |
400 | 3,529 | ||||||
Other |
4,303 | 2,488 | ||||||
|
|
|
|
|||||
Total prepaid expenses and other current assets |
$ | 42,517 | $ | 61,525 | ||||
|
|
|
|
6. |
Property and Equipment |
Property and equipment as of September 30, 2016 and 2017, consists of the following (in thousands):
September 30, | ||||||||
2016 | 2017 | |||||||
Aircraft and other flight equipment substantially pledged |
$ | 1,293,438 | $ | 1,388,990 | ||||
Other equipment |
3,817 | 3,383 | ||||||
Leasehold improvements |
2,693 | 2,746 | ||||||
Vehicles |
728 | 744 | ||||||
Building |
699 | 699 | ||||||
Furniture and fixtures |
384 | 251 | ||||||
|
|
|
|
|||||
Total property and equipment |
1,301,759 | 1,396,813 | ||||||
Less accumulated depreciation and amortization |
(148,409 | ) | (204,365 | ) | ||||
|
|
|
|
|||||
Property and equipmentnet |
$ | 1,153,350 | $ | 1,192,448 | ||||
|
|
|
|
F-15
Depreciation and amortization expense totaled approximately $45.6 million and $60.7 million for the years ended September 30, 2016 and 2017, respectively.
7. |
Other Assets |
Other assets at September 30, 2016 and 2017, consists of the following (in thousands):
September 30, | ||||||||
2016 | 2017 | |||||||
Noncurrent deferred reimbursed costs, net |
$ | 3,672 | $ | 4,249 | ||||
Noncurrent debt financing costs, net |
1,791 | 841 | ||||||
Noncurrent prepaid maintenance deposits |
2,884 | 588 | ||||||
Other items |
15 | 15 | ||||||
|
|
|
|
|||||
Total other assets |
$ | 8,362 | $ | 5,693 | ||||
|
|
|
|
8. |
Other Accrued Expenses |
Other accrued expenses at September 30, 2016 and 2017, were as follows (in thousands):
September 30, | ||||||||
2016 | 2017 | |||||||
Accrued property taxes |
$ | 5,756 | $ | 6,484 | ||||
Accrued interest |
3,901 | 4,036 | ||||||
Accrued vacation |
2,464 | 2,663 | ||||||
Accrued wheels, brakes and tires |
1,328 | 2,477 | ||||||
Other |
6,701 | 8,269 | ||||||
|
|
|
|
|||||
Total accrued expenses |
$ | 20,150 | $ | 23,929 | ||||
|
|
|
|
F-16
9. |
Long-Term Debt and Other Borrowings |
Long-term debt as of September 30, 2016 and 2017, consists of the following (in thousands):
September 30, | ||||||||
2016 | 2017 | |||||||
Notes payable to financial institution, collateralized by the underlying aircraft, due 2019 (1)(2) |
$ | 90,408 | $ | 58,254 | ||||
Notes payable to financial institution, collateralized by the underlying aircraft, due 2022 (3)(4) |
135,094 | 113,611 | ||||||
Notes payable to financial institution, collateralized by the underlying aircraft, due 2024 (5) |
92,820 | 82,776 | ||||||
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2027 (6) |
147,883 | 137,028 | ||||||
Notes payable to secured parties, collateralized by the underlying aircraft, due 2028 (7) |
242,680 | 226,399 | ||||||
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2028 (8) |
194,494 | 181,115 | ||||||
Notes payable to financial institution, collateralized by the underlying equipment, due 2022 (9) |
0 | 93,031 | ||||||
Notes payable to financial institution, collateralized by the underlying equipment, due 2020 (10) |
6,635 | 4,976 | ||||||
Notes payable to financial institution due 2020 (11) |
8,421 | 6,390 | ||||||
Notes payable to financial institution, collateralized by the underlying equipment, due 2020 (12) |
5,054 | 9,158 | ||||||
Notes payable to financial institution due 2019 (13) |
0 | 18,530 | ||||||
Working capital draw loan, collateralized by certain flight equipment and spare parts (14) |
0 | 25,650 | ||||||
|
|
|
|
|||||
Total long-term debt |
923,489 | 956,918 | ||||||
Less current portion |
(109,901 | ) | (140,466 | ) | ||||
Less unamortized debt issuance costs |
(10,473 | ) | (12,578 | ) | ||||
|
|
|
|
|||||
Long-term debtexcluding current portion |
$ | 803,115 | $ | 803,874 | ||||
|
|
|
|
(1) |
In fiscal 2005, the Company permanently financed five CRJ-900 aircraft with $118 million in debt. The debt bears interest at the monthly London InterBank Offered Rate (LIBOR), plus 3% (4.232% at September 30, 2017) and requires monthly principal and interest payments. |
(2) |
In fiscal 2004, the Company permanently financed five CRJ-700 and six CRJ 900 aircraft with $254.7 million in debt. The debt bears interest at the monthly LIBOR plus 3% (4.232% at September 30, 2017) and requires monthly principal and interest payments. |
(3) |
In fiscal 2007, the Company permanently financed three CRJ-900 and three CRJ-700 aircraft for $120.3 million. The debt bears interest at the monthly LIBOR plus 2.25% (3.482% at September 30, 2017) and requires monthly principal and interest payments. |
(4) |
In fiscal 2014, the Company permanently financed 10 CRJ-900 aircraft for $88.4 million. The debt bears interest at the monthly LIBOR plus a spread ranging from 1.95% to 7.25% (3.182% to 8.482% at September 30, 2017) and requires monthly principal and interest payments. |
(5) |
In fiscal 2014, the Company permanently financed eight CRJ-900 aircraft with $114.5 million in debt. The debt bears interest at 5% and requires monthly principal and interest payments. |
(6) |
In fiscal 2015, the Company financed seven CRJ-900 aircraft with $170.2 million in debt. The senior notes payable of $151 million bear interest at monthly LIBOR plus 2.71% (3.942% at September 30, 2017) and require monthly principal and interest payments. The subordinated notes payable are noninterest-bearing and become payable in full on the last day of the term of the notes. The Company has imputed an interest rate of 6.25% on the subordinated notes payable and recorded a related discount of $8.1 million, which is being accreted to interest expense over the term of the notes. |
(7) |
In fiscal 2016, the Company financed 10 E-175 aircraft with $246 million in debt under an EETC financing arrangement (see discussion below). The debt bears interest ranging from 4.75% to 6.25% and requires semi-annual principal and interest payments. |
(8) |
In fiscal 2016, the Company financed eight E-175 aircraft with $195.3 million in debt. The senior notes payable of $172 million bear interest at the three-month LIBOR plus a spread ranging from 2.20% to 2.32% (3.533% to 3.654% at |
F-17
September 30, 2017) and require quarterly principal and interest payments. The subordinated notes payable bear interest at 4.50% and require quarterly principal and interest payments. |
(9) |
In fiscal 2017, the Company financed certain flight equipment with $99.1 million in debt. The debt bears interest at the monthly LIBOR (rounded to the nearest 16th) plus 7.25% (8.50% at September 30, 2017) and requires monthly principal and interest payments. |
(10) |
In fiscal 2015, the Company financed certain flight equipment with $8.3 million in debt. The debt bears interest at 5.163% and requires monthly principal and interest payments. |
(11) |
In fiscal 2015 and 2016, the Company financed certain flight equipment maintenance costs with $10.2 million in debt. The debt bears interest at the monthly LIBOR plus 3.07% (4.302% at September 30, 2017) and requires quarterly principal and interest payments. |
(12) |
In fiscal 2016 and 2017, the Company financed certain flight equipment maintenance costs with $11.9 million in debt. The debt bears interest at the three-month LIBOR plus a spread ranging from 2.93% to 2.96% (4.264% to 4.294% at September 30, 2017) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of September 30, 2017, the Company was in compliance with this covenant. |
(13) |
In fiscal 2017, the Company financed certain flight equipment maintenance costs with $25 million in debt. The debt bears interest at the three-month LIBOR plus 3.30% (4.634% at September 30, 2017) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of September 30, 2017, the Company was in compliance with this covenant. |
(14) |
In fiscal 2016, the Company obtained a $35 million working capital draw loan, which terminates in August 2019. Interest is assessed on drawn amounts at one month LIBOR plus 4.25% (5.482% at September 30, 2017). The line was drawn upon during fiscal 2017. The working capital draw loan is subject to an interest and rental coverage ratio covenant. As of September 30, 2017, the Company was in compliance with this covenant. |
Principal maturities of long-term debt as of September 30, 2017, for each of the next five years are as follows (in thousands):
Years Ending September 30 |
Total Principal Amount |
|||
2018 |
$ | 140,466 | ||
2019 |
$ | 154,472 | ||
2020 |
$ | 111,635 | ||
2021 |
$ | 102,751 | ||
2022 |
$ | 111,235 |
The net book value of collateralized equipment as of September 30, 2017 is $1,126.1 million.
In December 2015, an Enhanced Equipment Trust Certificate (EETC) pass-through trust was created to issue pass-through certificates to obtain financing for new E-175 aircraft. Mesa has $226.4 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the consolidated balance sheets. The structure of the EETC financing consists of a pass-through trust created by Mesa to issue pass-through certificates, which represent fractional undivided interests in the pass-through trust and are not obligations of Mesa.
The proceeds of the issuance of the pass-through certificates were used to purchase equipment notes which were issued by Mesa and secured by its aircraft. The payment obligations under the equipment notes are those of Mesa. Proceeds received from the sale of pass-through certificates were initially held by a depositary in escrow for the benefit of the certificate holders until Mesa issued equipment notes to the trust, which purchased such notes with a portion of the escrowed funds.
The Company records the debt obligation upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates. Mesa received all proceeds from the pass-through trust during fiscal 2016.
Mesa evaluated whether the pass-through trust formed for its EETC financing is a Variable Interest Entity (VIE) and required to be consolidated. The pass-through trust was determined to be a VIE, however, the Company has determined that it does not have a variable interest in the pass-through trust, and therefore, has not consolidated the pass-through trust with its financial statements.
F-18
10. |
Earnings Per Share and Equity |
Calculations of net income per common share attributable to Mesa Air Group are as follows (in thousands, except per share data):
For the years Ended
September 30, |
||||||||
2016 | 2017 | |||||||
Net income attributable to Mesa Air Group |
$ | 14,920 | $ | 32,828 | ||||
|
|
|
|
|||||
Basic weighted average common shares outstanding |
9,558 | 10,919 | ||||||
Add: Incremental shares for: |
||||||||
Dilutive effect of warrants |
14,451 | 12,369 | ||||||
Dilutive effect of restricted stock |
73 | 98 | ||||||
|
|
|
|
|||||
Diluted weighted average common shares outstanding |
24,082 | 23,386 | ||||||
|
|
|
|
|||||
Net income per common share attributable to Mesa Air Group: |
||||||||
Basic |
$ | 1.56 | $ | 3.01 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.62 | $ | 1.40 | ||||
|
|
|
|
Basic income per common share is computed by dividing net income attributable Mesa Air Group Corporation by the weighted average number of common shares outstanding during the period.
11. |
Common Stock |
The Company has issued warrants to third parties, which had a five-year term to be converted to common stock at an exercise price of $0.004 per share. Outstanding warrants to purchase shares of common stock are held by persons who are not U.S. citizens. The warrants are not exercisable due to restrictions imposed by federal law requiring that no more than 24.9% of our stock be voted, directly or indirectly, or controlled by persons who are not U.S. citizens. The warrants can be converted to common stock upon warrant holders demonstrating U.S. citizenship. During fiscal 2016, we extended the term of outstanding warrants set to expire that year for two years (through fiscal year 2018), and any such warrants not extended were forfeited.
Holders of the Companys common stock are entitled to receive dividends, if any, as may be declared from time to time by the Board of Directors out of legally available funds, subject to preferences that may be applicable to any then-outstanding preferred stock and limitations under the Companys Investor Rights Agreement, RASPRO Lease Facility, GECAS Lease Facility and Nevada law.
F-19
12. |
Income Taxes |
Income tax expense for the years ended September 30, 2016 and 2017, consists of the following (in thousands):
September 30, | ||||||||
2016 | 2017 | |||||||
Current: |
||||||||
Federal |
$ | | $ | | ||||
State |
413 | 359 | ||||||
|
|
|
|
|||||
413 | 359 | |||||||
|
|
|
|
|||||
Deferred: |
||||||||
Federal |
8,982 | 17,713 | ||||||
State |
531 | 2,802 | ||||||
|
|
|
|
|||||
9,513 | 20,515 | |||||||
|
|
|
|
|||||
Total |
||||||||
Federal |
8,982 | 17,713 | ||||||
State |
944 | 3,161 | ||||||
|
|
|
|
|||||
Income tax expense |
$ | 9,926 | $ | 20,874 | ||||
|
|
|
|
The difference between the actual income tax expense and the statutory tax expense (computed by applying the U.S. federal statutory income tax rate of 35% to income before income taxes) for the years ended September 30, 2016 and 2017 is as follows (in thousands):
2016 | 2017 | |||||||
Statutory tax expense |
$ | 8,696 | $ | 18,796 | ||||
Increase in income taxes resulting from: |
792 | 1,397 | ||||||
State taxes, net of federal tax benefit |
71 | 92 | ||||||
Permanent items |
249 | 531 | ||||||
Change in valuation allowance |
(673 | ) | (353 | ) | ||||
Impact of change in rates on deferred tax assets |
380 | 409 | ||||||
Expired tax attributes |
411 | 2 | ||||||
Other |
| | ||||||
|
|
|
|
|||||
Income tax expense |
$ | 9,926 | $ | 20,874 | ||||
|
|
|
|
As of September 30, 2016 and 2017, the Companys deferred tax assets and liabilities were as follows (in thousands):
September 30, | ||||||||
2016 | 2017 | |||||||
Deferred tax assets |
$ | 116,242 | $ | 136,805 | ||||
Deferred tax liabilities |
(150,108 | ) | (190,655 | ) | ||||
Valuation allowance |
(2,055 | ) | (2,586 | ) | ||||
|
|
|
|
|||||
Net deferred tax liabilities |
$ | (35,921 | ) | $ | (56,436 | ) | ||
|
|
|
|
As of September 30, 2016 and 2017, the Company has alternative minimum tax credit carryforwards of approximately $2.5 million that do not expire. The Company also has federal and state net operating loss carryforwards of approximately $299.8 million and $172.3 million, respectively, that expire in years 20272036 (federal) and 20182037 (state).
F-20
Under ASC 740-10, Income Taxes , the tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The beginning and ending balance of unrecognized tax benefits for the year ended September 30, 2016, was $7.5 million. The beginning and ending balance of unrecognized tax benefits for the year ended September 30, 2017, was $7.5 million. The Company is subject to taxation in the U.S. and various states. As of September 30, 2017, the Company is no longer subject to U.S. federal or state examinations by taxing authorities for years prior to 1998.
Subsequent to our fiscal year end, the U.S. Senate joined the U.S. House of Representatives in passing tax reform legislation. Reconciliation of the provisions in the U.S. Senate bill and the U.S. House of Representatives bill concluded on December 20, 2017. On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the Tax Act). The Tax Act incorporates several new provisions into the law that will have an impact on the Companys financial statements. Most notably, the Tax Act will decrease the Companys federal income tax rate, resulting in a tax benefit due to the re-measurement of the Companys deferred tax assets and liabilities. The Companys federal income tax rate for the year ended September 30, 2017 is 35%; however, it is expected that the Companys federal income tax rate will decrease to approximately 24.5% for the year ended September 30, 2018, and will be 21% for each subsequent fiscal year. It is estimated that the Company will recognize an income tax benefit within the range of $20 million to $25 million in the first quarter of fiscal 2018 as a result of the tax effect of reducing the net deferred income tax liability due to the tax reform legislation.
Additional provisions in the Tax Act that will affect the Companys financial statements include full expensing of the cost of qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023, refundable minimum tax credits over a four year period, net interest expense deductions limited to 30% of earnings before interest, taxes, depreciation, and amortization through 2021 and of earnings before interest and taxes thereafter, and net operating losses incurred in tax years beginning after December 31, 2017 are only allowed to offset a taxpayers taxable income by 80%, but those net operating losses are allowed to be carried forward indefinitely with no expiration. The Company is still evaluating the impact of these provisions.
13. |
Share-Based Compensation |
Restricted Stock
The Companys Board of Directors is authorized to issue 2,500,000 shares of common stock to management under the 2011 Plan. All management shares are subject to a three to five-year vesting schedule, with the initial vesting date on March 1, 2012. On January 23, 2017, the Companys Board of Directors was authorized to issue an additional 125,000 shares of common stock for issuance to management and directors pursuant to the 2017 Plan. The Company has the right to withhold shares to satisfy tax withholding obligations and the withheld shares become available for future grants. The shares are valued at grant date based upon recent share transactions. As of September 30, 2017, approximately 144,840 shares are available to grant under the 2011 Plan, and 93,745 shares are available to grant under the 2017 Plan. Since inception of the 2011 Plan, 2,480,160 shares have been granted, and 1,704,408 shares have vested. Since the inception of the 2017 Plan, 31,255 shares have been granted, and none have vested.
F-21
The restricted stock activity for the years ended September 30, 2016 and 2017 is summarized as follows:
Number
of Shares |
Weighted-
Average Grant Date Fair Value |
|||||||
Restricted shares unvested at September 30, 2015 |
956,250 | $ | 5.24 | |||||
|
|
|||||||
Granted |
351,328 | 4.66 | ||||||
Vested |
(525,250 | ) | 4.54 | |||||
Forfeited |
(25,000 | ) | 6.80 | |||||
|
|
|||||||
Restricted shares unvested at September 30, 2016 |
757,328 | 5.40 | ||||||
|
|
|||||||
Granted |
251,615 | 4.54 | ||||||
Vested |
(233,190 | ) | 5.06 | |||||
Forfeited |
| | ||||||
|
|
|
|
|||||
Restricted shares unvested at September 30, 2017 |
775,753 | 5.22 | ||||||
|
|
|
|
Stock Appreciation Rights
In 2014, the Company implemented a share-based payment plan under which certain executives and directors are eligible to receive grants of SARs (the SARs Plan). The SARs provide a participant with the right to receive the aggregate appreciation in stock price over the market price of the Companys common stock at the date of grant, payable in cash. The participant may exercise his or her SARs quarterly after the grant is vested but no later than 10 years after the date of grant. The SARs awards vest ratably over a three year period from the date of grant. The Company has elected to use the intrinsic value method to account for its share-based payment awards that are payable in cash, and therefore classified as liability awards. Under the intrinsic value method, the compensation expense associated with these awards is measured by the difference between the exercise price of the SAR and the estimated fair value of the Companys common stock on the valuation date and is recognized ratably over the vesting period. Upon the exercise of a SAR, compensation cost is adjusted to the amount of the cash payment. The Company estimates the fair value of its common stock based on recent share transactions. The Company has authorized 5,000,000 shares available under this plan and has granted 4,204,993 since inception of the plan. Since inception of the plan, 3,064,980 of SARs have vested and 2,088,333 of SARs have been exercised.
The SARs activity for the years ended September 30, 2016 and 2017 is summarized as follows:
Number of
Shares |
Weighted-Average
Intrinsic Value Per Share |
|||||||
SARs unvested at September 30, 2015 |
2,372,500 | $ | 3.66 | |||||
|
|
|||||||
Granted |
827,500 | | ||||||
Vested |
(776,667 | ) | 3.60 | |||||
Forfeited |
(200,000 | ) | 2.60 | |||||
|
|
|||||||
SARs unvested at September 30, 2016 |
2,223,333 | 1.19 | ||||||
|
|
|||||||
Granted |
384,160 | | ||||||
Vested |
(1,460,812 | ) | 1.96 | |||||
Forfeited |
(6,668 | ) | | |||||
|
|
|||||||
SARs unvested at September 30, 2017 |
1,140,013 | | ||||||
|
|
As of September 30, 2016 and 2017, there was $4.7 million and $3.6, respectively, of total unrecognized compensation cost related to unvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.8 years from the grant date.
F-22
Compensation cost for share-based awards are recognized on a straight-line basis over the vesting period. Share-based compensation expense for the years ended September 30, 2016 and 2017 was $4.7 million and $2.3 million, respectively and recorded in general and administrative expenses in the consolidated statements of income.
14. |
Retirement Plans |
The Company has a 401(k) plan covering all employees (the 401(k) Plan). Under the 401(k) Plan, employees may contribute up to 85% of their pretax annual compensation, subject to certain Internal Revenue Code limitations. Employer contributions are made at the discretion of the Company. During the years ended September 30, 2016 and 2017, the Company made matching contributions of 30% of employee contributions up to 10% of annual employee compensation. The employee vests 20% per year in employer contributions. Employees become fully vested in employer contributions after completing six years of employment. In July 2017, the Company amended its 401(k) plan to revise the matching and vesting components for its pilots. The Company matches 50% of pilot contributions up to 6% (and up to 10% for pilots with 10 years or more employment). The pilot vests 25% per year in employer contribution and becomes fully vested in employer contributions after completing four years of employment. The expense recognized for contributions by the Company to the 401(k) Plan for the years ended September 30, 2016 and 2017 was approximately $1.0 million and $1.2 million, respectively.
15. |
Commitments |
At September 30, 2017, the Company leased 37 aircraft under noncancelable operating leases with remaining terms of up to 6.5 years. The Company has the option to terminate certain leases at various times throughout the lease. The Company headquarters and other facility noncancelable operating leases have remaining terms of up to nine years. The leases require the Company to pay all taxes, maintenance, insurance, and other operating expenses. Rental expense is recognized on a straight-line basis over the lease term, net of lessor rebates and other incentives. Aggregate rental expense under all operating aircraft, equipment and facility leases totaled approximately $84.8 million and $83.8 million for the years ended September 30, 2016 and 2017, respectively.
Future minimum lease payments as of September 30, 2017, under noncancelable operating leases are as follows (in thousands):
Years Ended September 30 |
Aircraft | Other | Total | |||||||||
2018 |
$ | 94,407 | $ | 2,778 | $ | 97,185 | ||||||
2019 |
71,739 | 1,866 | 73,605 | |||||||||
2020 |
45,812 | 1,880 | 47,692 | |||||||||
2021 |
47,274 | 1,253 | 48,527 | |||||||||
2022 |
32,551 | 1,281 | 33,832 | |||||||||
Thereafter |
24,267 | 4,013 | 28,280 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 316,050 | $ | 13,071 | $ | 329,121 | ||||||
|
|
|
|
|
|
The majority of the Companys leased aircraft are leased through trusts that have a sole purpose to purchase, finance, and lease these aircraft to the Company; therefore, they meet the criteria of a variable interest entity. However, since these are single-owner trusts in which the Company does not participate, the Company is not at risk for losses and is not considered the primary beneficiary. Management believes that the Companys maximum exposure under these leases is the remaining lease payments.
F-23
Under the Companys lease agreements, the Company typically agrees to indemnify the equity/owner participant against liabilities that may arise due to changes in benefits from tax ownership of the respective leased aircraft. The terms of these contracts range up to 18.5 years. The Company did not accrue any liability relating to the indemnification to the equity/owner participant because the probability of this occurring is not reasonably estimable.
In accordance with the aircraft and certain engine leases, the Company must comply with certain maintenance conditions upon return of the assets or the Company will incur a liability.
16. |
Contingencies |
The Company is involved in various legal proceedings (including, but not limited to, insured claims) and FAA civil action proceedings that the Company does not believe will have a material adverse effect upon its business, financial condition, or results of operations, although no assurance can be given to the ultimate outcome of any such proceedings.
17. |
Subsequent Events |
Subsequent to September 30, 2017, the Company amended an agreement with an aircraft lessor to defer up to $29.3 million of payments originally due in December 2017 through March 2018. Deferred amounts are charged 7.5% interest per annum and are repaid through December 2021.
Subsequent to year end, the Company refinanced $41.9 million of debt on nine CRJ-900 aircraft (due between 2019 and 2022) with $74.9 million of debt, resulting in net cash proceeds to the Company of $30.5 million after transaction related fees. The refinanced debt requires quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus a spread ranging from 3.50% to 4.50%.
Subsequent to year end, Mesa Airlines entered into an amendment relating to the $35 million working capital draw loan to lower the consolidated interest and rental coverage ratio through the term of the agreement.
Subsequent to year end, Mesa Airlines entered into an amendment of the fiscal 2016 and 2017 flight equipment debt to, among other things, lower the fixed charge ratio covenant and provide for $1 million in mandatory principal prepayments over each of the next five fiscal quarters beginning on September 30, 2018.
In July 2018, the Companys Board of Directors and shareholders approved a 2.5-for-1 stock split of the Companys common stock, which will occur immediately prior to the completion of its initial public offering. Except as otherwise noted, all references to share and per share amounts related to common stock and equity awards in the Companys consolidated financial statements have been presented to reflect the stock split. The stock split has also been retroactively applied to the Companys historical consolidated financial statements. Additionally, the Companys Board of Directors and shareholders approved an increase in authorized shares of common stock and preferred stock to 125,000,000 shares and 5,000,000 shares, respectively. The increase in the number of authorized common and preferred shares will occur immediately prior to the completion of the Companys initial public offering.
The Company has evaluated subsequent events through January 29, 2018, the date these consolidated financial statements were originally issued, and has updated such evaluation for disclosure purposes through May 3, 2018, the date the consolidated financial statements were reissued, and August , 2018 with respect to the stock split and the change in the authorized number of common and preferred stock in the Second Amended and Restated Articles of Incorporation.
F-24
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
September 30, | March 31, | |||||||
2017 | 2018 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 56,788 | 52,699 | |||||
Restricted cash |
3,559 | 3,828 | ||||||
Receivables, net ($1,329 and $1,320 from related party) |
8,853 | 17,011 | ||||||
Expendable parts and supplies, net |
15,114 | 15,442 | ||||||
Prepaid expenses and other current assets |
61,525 | 47,216 | ||||||
|
|
|
|
|||||
Total current assets |
145,839 | 136,196 | ||||||
Property and equipment, net |
1,192,448 | 1,182,760 | ||||||
Intangibles, net |
11,724 | 11,533 | ||||||
Lease and equipment deposits |
1,945 | 1,923 | ||||||
Other assets |
5,693 | 10,226 | ||||||
|
|
|
|
|||||
Total assets |
$ | 1,357,649 | $ | 1,342,638 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities |
||||||||
Current portion of long-term debt |
$ | 140,466 | $ | 144,542 | ||||
Accounts payable ($2,644 and $736 to related party) |
44,738 | 41,890 | ||||||
Accrued compensation |
9,080 | 9,482 | ||||||
Other accrued expenses |
23,929 | 24,456 | ||||||
|
|
|
|
|||||
Total current liabilities |
218,213 | 220,370 | ||||||
Long-term debt, excluding current portion |
803,874 | 784,487 | ||||||
Deferred credits ($7,370 and $6,655 to related party) |
17,189 | 15,688 | ||||||
Deferred income taxes |
56,436 | 37,126 | ||||||
Other noncurrent liabilities |
39,713 | 36,262 | ||||||
|
|
|
|
|||||
Total noncurrent liabilities |
917,212 | 873,563 | ||||||
|
|
|
|
|||||
Total Liabilities |
1,135,425 | 1,093,933 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 15 and Note 16) |
||||||||
Shareholders equity: |
||||||||
Preferred stock of no par value, 5,000,000 shares authorized; no shares issued and outstanding |
| | ||||||
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 11,294,083 (2017) and 12,394,215 (2018) shares issued and outstanding, and 12,230,625 (2017) and 11,140,905 (2018) warrants issued and outstanding |
114,456 | 115,275 | ||||||
Retained earnings |
107,768 | 133,430 | ||||||
|
|
|
|
|||||
Total shareholders equity |
222,224 | 248,705 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 1,357,649 | $ | 1,342,638 | ||||
|
|
|
|
See accompanying notes to the unaudited condensed consolidated financial statements.
F-25
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share amounts)
Six months Ended | Six months Ended | |||||||
March 31, 2017 | March 31, 2018 | |||||||
Operating revenues: |
||||||||
Contract revenue ($179,202 and $175,204 from related party) |
$ | 309,711 | $ | 310,904 | ||||
Pass-through and other ($3,785 and $3,355 from related party) |
9,619 | 21,420 | ||||||
|
|
|
|
|||||
Total operating revenues |
319,330 | 332,324 | ||||||
|
|
|
|
|||||
Operating expenses: |
||||||||
Flight operations |
72,349 | 103,807 | ||||||
Fuel |
400 | 198 | ||||||
Maintenance |
117,422 | 105,756 | ||||||
Aircraft rent |
36,060 | 36,582 | ||||||
Aircraft and traffic servicing |
1,580 | 1,744 | ||||||
General and administrative |
20,676 | 21,267 | ||||||
Depreciation and amortization |
29,600 | 31,598 | ||||||
|
|
|
|
|||||
Total operating expenses |
278,087 | 300,952 | ||||||
|
|
|
|
|||||
Operating income |
41,243 | 31,372 | ||||||
|
|
|
|
|||||
Other (expenses) income, net: |
||||||||
Interest expense |
(21,840 | ) | (27,474 | ) | ||||
Interest income |
15 | 19 | ||||||
Other expense |
(394 | ) | (102 | ) | ||||
|
|
|
|
|||||
Total other (expense), net |
(22,219 | ) | (27,557 | ) | ||||
|
|
|
|
|||||
Income before taxes |
19,024 | 3,815 | ||||||
Income tax expense (benefit) |
7,110 | (21,181 | ) | |||||
|
|
|
|
|||||
Net Income |
$ | 11,914 | $ | 24,996 | ||||
|
|
|
|
|||||
Net income per share attributable to common shareholders |
||||||||
Basic |
$ | 1.11 | $ | 2.18 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.51 | $ | 1.06 | ||||
|
|
|
|
|||||
Weighted-average common shares outstanding |
||||||||
Basic |
10,781 | 11,441 | ||||||
|
|
|
|
|||||
Diluted |
23,444 | 23,563 | ||||||
|
|
|
|
F-26
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six months ended | Six months ended | |||||||
March 31, 2017 | March 31, 2018 | |||||||
Cash Flows From Operating Activities: |
||||||||
Net income |
$ | 11,914 | $ | 24,996 | ||||
Adjustments to reconcile net income to net cash flows provided by operating activities: |
||||||||
Depreciation and amortization |
29,600 | 31,598 | ||||||
Stock compensation expense |
590 | 819 | ||||||
Deferred income taxes |
7,116 | (18,646 | ) | |||||
Amortization of unfavorable lease liabilities and deferred credits |
(5,137 | ) | (5,552 | ) | ||||
Amortization of debt financing costs and accretion of interest on non-interest-bearing subordinated notes |
668 | 2,636 | ||||||
Loss on disposal of assets |
462 | 198 | ||||||
Provision for obsolete expendable parts and supplies |
234 | 62 | ||||||
Provision for doubtful accounts |
135 | | ||||||
Changes in assets and liabilities: |
||||||||
Receivables |
(2,768 | ) | (8,158 | ) | ||||
Expendable parts and supplies |
(1,795 | ) | (390 | ) | ||||
Prepaid expenses and other current assets |
(5,218 | ) | 9,428 | |||||
Accounts payable |
(14,801 | ) | 6,685 | |||||
Accrued liabilities |
(4,457 | ) | (2,468 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
16,543 | 41,208 | ||||||
|
|
|
|
|||||
Cash Flows From Investing Activities: |
||||||||
Capital expenditures |
(63,312 | ) | (16,978 | ) | ||||
(Deposit) withdrawal of restricted cash |
(51 | ) | (269 | ) | ||||
Net returns (payments) of lease and equipment deposits |
(2,663 | ) | 23 | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(66,026 | ) | (17,224 | ) | ||||
|
|
|
|
|||||
Cash Flows From Financing Activities: |
||||||||
Proceeds from long-term debt |
127,705 | 85,441 | ||||||
Principal payments on long-term debt and capital leases |
(87,781 | ) | (110,836 | ) | ||||
Debt financing costs |
(2,282 | ) | (2,678 | ) | ||||
Repurchase of stock |
(575 | ) | | |||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
37,067 | (28,073 | ) | |||||
|
|
|
|
|||||
Net Change in Cash and Cash Equivalents |
(12,416 | ) | (4,089 | ) | ||||
Cash and Cash EquivalentsBeginning of Period |
37,686 | 56,788 | ||||||
|
|
|
|
|||||
Cash and Cash EquivalentsEnd of Period |
$ | 25,270 | $ | 52,699 | ||||
|
|
|
|
|||||
Non-cash Investing and Financing Transactions |
||||||||
Acquisition of capital leases |
$ | | $ | 10,473 | ||||
|
|
|
|
See accompanying notes to the unaudited condensed consolidated financial statements.
F-27
Notes to Unaudited Condensed Consolidated Financial Statements
1. |
Organization and Operations |
The Company
Mesa Air Group, Inc. (Mesa or the Company) is a holding company whose principal subsidiary operates as a regional air carrier, providing scheduled passenger service. As of March 31, 2018, the Company served 110 cities in 38 states, the District of Columbia, Canada, Mexico, and the Bahamas and operated a fleet of 145 aircraft with up to 610 daily departures.
The Companys airline operations are conducted by its regional airline subsidiary, Mesa Airlines, Inc. (Mesa Airlines), providing services to major air carriers under capacity purchase agreements. Mesa Airlines operates as American Eagle (formerly US Airways Express) under a capacity purchase agreement with American Airlines, Inc. (American) and as United Express under a capacity purchase agreement with United Airlines, Inc. (United). All of the Companys consolidated contract revenues for 2017 and 2018 were derived from operations associated with these two capacity purchase agreements.
The financial arrangements between the Company and its major airline partners involve a revenue-guarantee arrangement (i.e., a capacity purchase agreement). Under the capacity purchase agreements, the major airline generally pays a monthly guaranteed amount. Under the terms of these agreements, the major carrier controls marketing, scheduling, ticketing, pricing, and seat inventories. The Company receives a guaranteed payment based upon a fixed minimum monthly amount per aircraft, plus amounts related to departures and block hours flown, plus direct reimbursement for expenses, such as certain landing fees, and insurance. The major airline partners also pay certain expenses directly to suppliers, such as fuel, ground operations and certain landing fees. The capacity purchase agreements reduce the Companys exposure to fluctuations in passenger traffic, fare levels, and fuel prices.
American Capacity Purchase Agreement
As of March 31, 2018, the Company operated 64 CRJ-900 aircraft for American under a capacity purchase agreement. Unless otherwise extended or amended, the capacity purchase agreement for the aircraft expires between 2021 and 2025. In exchange for providing flights and all other services under the agreement, the Company receives a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown during the month. In addition, the Company may also receive incentives or pay penalties based upon the Companys operational performance, including controllable on-time departure and controllable completion percentages. American also reimburses the Company for the actual amount incurred for certain items such as passenger liability and hull insurance, and aircraft property taxes. In addition, American also provides, at no cost to the Company, certain ground handling and customer service functions, as well as airport-related facilities and fuel. The Company also receives a monthly profit margin payment from American based on the number of aircraft operating. The capacity purchase agreement is subject to early termination for cause under specified circumstances and subject to the Companys right to cure under certain conditions. American (formerly US Airways) has a 10.6% ownership interest in the Company on a fully-diluted basis. The related party amounts presented on the Condensed Consolidated Balance Sheets and Statements of Operations pertain to American.
United Capacity Purchase Agreement
As of March 31, 2018, the Company operated 20 CRJ-700 and 58 E-175 aircraft for United under a capacity purchase agreement. Subject to certain early termination rights, the capacity purchase
F-28
agreement for each of the 20 CRJ-700 aircraft expires between August and December 2019. Subject to early termination rights, the capacity purchase agreement for 30 of the E-175 aircraft (owned by United) expires between June 2019 and August 2020, subject to Uniteds right to extend for four additional two-year terms (maximum of eight years). Subject to early termination rights, the capacity purchase agreement for 18 of the E-175 aircraft (owned by Mesa) expires between January 2028 and November 2028. During fiscal 2017, Mesa and United expanded the capacity purchase agreement to include an additional 12 E-175 aircraft (to be purchased by United) with the aircraft entering service through January 2018 for five-year terms, subject to Uniteds right to extend for four additional two-year terms (maximum of eight years). As of March 31, 2018, Mesa has taken delivery of all 12 E-175 aircraft, of which, 10 are in scheduled service. In exchange for performing the flight services under such agreement, the Company receives from United a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown during the month. Additionally, certain costs incurred by the Company in performing the flight services are pass-through costs, whereby United agrees to reimburse the Company for the actual amounts incurred for the following items: property tax per aircraft, landing fees, and additionally for the E-175 aircraft owned by United, heavy airframe and engine maintenance, landing gear, APUs and component maintenance. The Company also receives a profit margin based upon certain reimbursable costs under the agreement, as well as its operational performance in addition to a fixed profit margin. The capacity purchase agreement is also subject to early termination for cause under specified circumstances and subject to the Companys right to cure under certain circumstances.
In February 2018, the Company mutually agreed with United to temporarily remove two aircraft from service under its United capacity purchase agreement until the Company is able to fully staff flight operations. During the temporary removal, the Company agreed to pay the lease costs associated with the two E-175 aircraft, which totaled $0.6 million as of March 31, 2018.
2. |
Summary of Significant Accounting Policies |
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the accounts of the Company and its wholly owned operating subsidiaries. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).
All intercompany accounts and transactions have been eliminated in consolidation.
These condensed consolidated financial statements have been derived from, and should be read in conjunction with, the Companys audited financial statements and notes thereto as of and for the year ended September 30, 2017. There has not been any significant changes to the Companys significant accounting policies during the six months ended March 31, 2018. Information and footnote disclosures normally included in financial statements have been condensed or omitted in these condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the SEC) and U.S. GAAP. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented.
F-29
Use of Estimates
The preparation of the Companys condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results could differ from those estimates.
Expendable Parts and Supplies
Expendable parts and supplies are stated at the lower of cost (using the first-in, first-out method) or market, and are charged to expense as they are used. The Company provides an allowance for obsolescence for such parts and supplies over the useful life of its aircraft after considering the useful life of each aircraft fleet, the estimated cost of expendable parts expected to be on hand at the end of the useful life, and the estimated salvage value of the parts. This allowance was $1.6 million and $1.7 million as of September 30, 2017 and March 31, 2018, respectively.
Fair Value Measurements
The Company accounts for assets and liabilities in accordance with accounting standards that define fair value and establish a consistent framework for measuring fair value on either a recurring or a nonrecurring basis. Fair value is an exit price representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
Accounting standards include disclosure requirements relating to the fair values used for certain financial instruments and establish a fair value hierarchy. The hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels:
|
Level 1 Observable inputs such as quoted prices in active markets; |
|
Level 2 Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
|
Level 3 Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The Company did not measure any of its assets or liabilities at fair value on a recurring or nonrecurring basis as of September 30, 2017 or March 31, 2018.
The carrying values of cash and cash equivalents, unrestricted cash, accounts receivable, and accounts payable included on the accompanying consolidated balance sheets approximated fair value at September 30, 2017 and March 31, 2018.
The Companys debt agreements are not publicly held. The Company has determined the estimated fair value of its debt to be Level 3, as certain inputs used to determine the fair value of these agreements are unobservable and, therefore, could be sensitive to changes in inputs. The Company utilizes the discounted cash flow method to estimate the fair value of Level 3 debt. See Note 9 for more information on these agreements.
F-30
The carrying value and estimated fair value of the Companys long-term debt, including current maturities, were as follows (in millions):
September 30, 2017 | March 31, 2018 | |||||||||||||||
Carrying
Value |
Fair
Value |
Carrying
Value |
Fair
Value |
|||||||||||||
Long-term debt, including current maturities |
$ | 956.9 | $ | 975.0 | $ | 942.3 | $ | 933.8 | ||||||||
|
|
|
|
|
|
|
|
Intangibles
Information about the intangible assets of the Company at September 30, 2017 and March 31, 2018, are as follows (in thousands):
September 30, | March 31, | |||||||
2017 | 2018 | |||||||
Customer relationship |
$ | 43,800 | $ | 43,800 | ||||
Accumulated amortization |
(32,076 | ) | (32,267 | ) | ||||
|
|
|
|
|||||
$ | 11,724 | $ | 11,533 | |||||
|
|
|
|
Total amortization expense recognized was approximately $0.2 million for the six months ended March 31, 2017 and 2018. The Company expects to record amortization expense of $0.2 million for the remainder of 2018, $1.8 million, and $1.5 million, $1.2 million, $1.0 million and $5.8 million for fiscal years 2019, 2020, 2021, 2022, respectively.
Other Noncurrent Liabilities
Other noncurrent liabilities consist of the remaining fair value adjustment for unfavorable aircraft operating leases related to the Companys bankruptcy. This adjustment to fair value is being amortized on a straight-line basis over the remaining initial lease terms for these aircraft. During each of the six months ended March 31, 2017 and 2018, the Company recorded amortization of this unfavorable lease liability of $3.4 million as a reduction of lease expense.
Revenue Recognition
Under the Companys capacity purchase agreements, the major airline partner generally pays a fixed monthly minimum amount per aircraft, plus certain additional amounts based upon the number of flights and block hours flown. The contracts also include reimbursement of certain costs incurred by the Company in performing flight services. These costs, known as pass-through costs, may include passenger and hull insurance, aircraft property taxes, as well as landing fees and catering. Additionally, for the E-175 aircraft owned by United, the capacity purchase agreement provides that United will reimburse the Company for heavy airframe and engine maintenance, landing gear, APUs and component maintenance, which are treated as pass-through and will increase revenue (and expense for the same amount) upon completion of the work. The Company also receives compensation under its capacity purchase agreements for heavy maintenance expenses at a fixed hourly rate or per-aircraft rate for all aircraft in scheduled service other than the E-175 aircraft owned by United. The Company records reimbursement of pass-through costs as other revenue in the condensed consolidated statements of operations as service is provided. In addition, the Companys major airline partners also provide, at no cost to the Company, certain ground handling and customer service functions, as well as airport-related facilities and gates at their hubs and other cities. Services and facilities provided by major airline partners at no cost to the Company are presented net in the Companys condensed consolidated financial statements; hence, no amounts are recorded for revenue
F-31
or expense for these items. The contracts also include a profit margin on certain reimbursable costs, as well as a profit margin, incentives and penalties based on certain operational benchmarks. The Company recognizes revenue under its capacity purchase agreements when the transportation is provided, including an estimate of the profit component based upon the information available at the end of the accounting period. All revenue recognized under these contracts is presented as the gross amount billed to the major airline partners.
Under the Companys capacity purchase agreements with American and United, the Company is reimbursed under a fixed rate per-block hour, plus an amount per aircraft designed to reimburse the Company for certain aircraft ownership costs. The Company has concluded that a component of its revenue under these agreements is rental income, as such agreements identify the right of use of a specific type and number of aircraft over a stated period of time. The Company calculates the amount of rental income using the contractual ownership rates set forth in its capacity purchase agreements. The amount deemed to be rental income during the six months ended March 31, 2017 and 2018 was $108.6 million and $108.5 million, respectively, and has been included in contract revenue on the Companys condensed consolidated statements of operations. The Company has not separately stated aircraft rental income and aircraft rental expense in the condensed consolidated statements of operations since the use of the aircraft is not a separate activity of the total service provided.
The Companys capacity purchase agreements contain an option that allows the major airline partner to assume the contractual responsibility for procuring and providing the fuel necessary to operate the flights that the Company operates for them. Both major airline partners have exercised this option. Accordingly, the Company does not recognize fuel expense or revenue for fuel on passenger flight services.
Maintenance Expense
Engine overhaul expense totaled $45.1 million and $33.1 million for the six months ended March 31, 2017 and 2018, respectively, of which $0 and $5.2 million was pass-through expense. Airframe check expense totaled $10.2 million and $13.5 million for the six months ended March 31, 2017 and 2018, respectively, of which $ 0.5 million and $5.7 million was pass-through expense.
Pursuant to the United capacity purchase agreement, United reimburses the Company for heavy maintenance on certain E-175 aircraft. Those reimbursements are included in pass-through and other revenue. See Note 1: Organization and Operations for additional information.
3. |
Recent Accounting Pronouncements |
In May 2014, the FASB issued ASU (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The standard establishes a new recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company may adopt the requirements of ASU 2014-09 using either of two acceptable methods: (1) retrospective adoption to each prior period presented with the option to elect certain practical expedients; or (2) adoption with the cumulative effect recognized at the date of initial application and providing certain disclosures. In July 2015, the FASB approved a one-year deferral of the effective date of the new standard, making it effective for our reporting periods beginning October 1, 2018. The Company has preliminarily elected to use the modified retrospective method to adopt the new guidance. The Company is currently evaluating the potential impact of this new guidance on its financial position and results of operations.
In August 2014, The FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern: Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern (Topic 205), which provides guidance on determining when and how to disclose going-concern uncertainties in the condensed consolidated financial statements. The new standard requires management to
F-32
perform interim and annual assessments of an entitys ability to continue as a going concern within one year of the date the condensed consolidated financial statements are issued. An entity must provide certain disclosure if conditions or events raise substantial doubt about the entitys ability to continue as a going concern. The update applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter. The Company adopted this ASU in fiscal year 2017, and the adoption did not have a material impact on the condensed consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02), which provides guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of income. The guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its condensed consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718)Improvements to Employee Share-Based Payment Accounting, which simplifies several areas of accounting for share-based compensation arrangements, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 requires that the tax impact related to the difference between share-based compensation for book and tax purposes be recognized as income tax benefit or expense in the reporting period in which such awards vest. ASU 2016-09 also required a modified retrospective adoption for previously unrecognized excess tax benefits. The guidance in ASU 2016-09 is effective for public business entities for annual periods beginning after December 15, 2016, including interim periods within those annual reporting periods. The Company adopted ASU 2016-09 in the first quarter of fiscal 2018 on a modified retrospective basis, recognizing all excess tax benefits previously unrecognized, as a cumulative-effect adjustment increasing deferred tax assets by $0.4 million, increasing income tax expense by $0.3 million, and increasing retained earnings by $0.7 million. Adoption of ASU 2016-09 did not have any other material effect on the Companys results of operations, financial position or cash flows.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force) , which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of this standard on its condensed consolidated statements of cash flows. Further, in November 2016, the FASB issued ASU No. 2016-18 that requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company has restricted cash of $3.8 million as of March 31, 2018 and intends to adopt the new guidance in fiscal 2019.
4. |
Concentrations |
At March 31, 2018, the Company had capacity purchase agreements with American and United. All of the Companys condensed consolidated revenue for the six months ended March 31, 2017 and 2018 and accounts receivable at the end of each of these periods was derived from these agreements. The terms of both the American and United capacity purchase agreements are not aligned with the lease obligations on the aircraft performing services under such agreements.
Amounts billed by the Company under capacity purchase agreements are subject to the Companys interpretation of the applicable capacity purchase agreement and are subject to audit by the
F-33
Companys major airline partners. Periodically, the Companys major airline partners dispute amounts billed and pay amounts less than the amount billed. Ultimate collection of the remaining amounts not only depends upon the Company prevailing under audit, but also upon the financial well-being of the major airline partner. As such, the Company periodically reviews amounts past due and records a reserve for amounts estimated to be uncollectible. The allowance for doubtful accounts was $0.7 million and $1.4 million at September 30, 2017 and March 31, 2018, respectively. If the Companys ability to collect these receivables and the financial viability of our partners is materially different than estimated, the Companys estimate of the allowance could be materially impacted.
American accounted for approximately 57% and 54% of the Companys total revenue in the six month periods ended March 31, 2017 and 2018, respectively. United accounted for approximately 43% and 46% of the Companys revenue in the six month periods ended March 31, 2017 and 2018, respectively. A termination of either the American or the United capacity purchase agreement would have a material adverse effect on the Companys business prospects, financial condition, results of operations, and cash flows.
5. |
Prepaid expenses and other current assets |
Prepaid expenses and other current assets as of September 30, 2017 and March 31, 2018, consists of the following (in thousands):
September 30, | March 31, | |||||||
2017 | 2018 | |||||||
Prepaid aircraft rent |
$ | 53,645 | $ | 39,403 | ||||
Deferred reimbursed costs |
1,863 | 1,939 | ||||||
Maintenance deposits |
3,529 | 1,060 | ||||||
Other |
2,488 | 4,813 | ||||||
|
|
|
|
|||||
Total prepaid expenses and other current assets |
$ | 61,525 | $ | 47,216 | ||||
|
|
|
|
6. |
Property and Equipment |
Property and equipment as of September 30, 2017 and March 31, 2018, consists of the following (in thousands):
September 30, | March 31, | |||||||
2017 | 2018 | |||||||
Aircraft and other flight equipment substantially pledged |
$ | 1,388,990 | $ | 1,407,360 | ||||
Other equipment |
3,383 | 3,743 | ||||||
Leasehold improvements |
2,746 | 2,746 | ||||||
Vehicles |
744 | 678 | ||||||
Building |
699 | 699 | ||||||
Furniture and fixtures |
251 | 287 | ||||||
|
|
|
|
|||||
Total property and equipment |
1,396,813 | 1,415,513 | ||||||
Less accumulated depreciation and amortization |
(204,365 | ) | (232,753 | ) | ||||
|
|
|
|
|||||
Property and equipmentnet |
$ | 1,192,448 | $ | 1,182,760 | ||||
|
|
|
|
Depreciation and amortization expense totaled approximately $29.4 million and $31.4 million for the six months ended March 31, 2017 and 2018, respectively.
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7. |
Other Assets |
Other assets at September 30, 2017 and March 31, 2018, consists of the following (in thousands):
September 30, | March 31, | |||||||
2017 | 2018 | |||||||
Noncurrent deferred reimbursed costs, net |
$ | 4,249 | $ | 3,601 | ||||
Noncurrent debt financing costs, net |
841 | 3,585 | ||||||
Noncurrent income tax receivable |
| 2,535 | ||||||
Noncurrent prepaid maintenance deposits |
588 | 490 | ||||||
Other items |
15 | 15 | ||||||
|
|
|
|
|||||
Total other assets |
$ | 5,693 | $ | 10,226 | ||||
|
|
|
|
8. |
Other Accrued Expenses |
Other accrued expenses at September 30, 2017 and March 31, 2018, were as follows (in thousands):
September 30, | March 31, | |||||||
2017 | 2018 | |||||||
Accrued property taxes |
$ | 6,484 | $ | 3,712 | ||||
Accrued interest |
4,036 | 4,272 | ||||||
Accrued vacation |
2,663 | 5,110 | ||||||
Accrued wheels, brakes and tires |
2,477 | 1,952 | ||||||
Other |
8,269 | 9,410 | ||||||
|
|
|
|
|||||
Total accrued expenses |
$ | 23,929 | $ | 24,456 | ||||
|
|
|
|
F-35
9. |
Long-Term Debt and Other Borrowings |
Long-term debt as of September 30, 2017 and March 31, 2018, consists of the following (in thousands):
September 30, | March 31, | |||||||
2017 | 2018 | |||||||
Notes payable to financial institution, collateralized by the underlying aircraft, due 2019 (1)(2) |
$ | 58,254 | $ | 28,960 | ||||
Notes payable to financial institution, collateralized by the underlying aircraft, due 2022 (3)(4) |
113,611 | 77,289 | ||||||
Notes payable to financial institution, collateralized by the underlying aircraft, due 2024 (5) |
82,776 | 77,390 | ||||||
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2027 (6) |
137,028 | 131,486 | ||||||
Notes payable to secured parties, collateralized by the underlying aircraft, due 2028 (7) |
226,399 | 217,930 | ||||||
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2028 (8) |
181,115 | 174,252 | ||||||
Notes payable to financial institution, collateralized by the underlying equipment, due 2022 (9) |
93,031 | 92,274 | ||||||
Senior and subordinated notes payable to secured parties, collateralized by the underlying aircraft, due 2022 (10) |
| 71,105 | ||||||
Notes payable to financial institution, collateralized by the underlying equipment, due 2020 (11) |
4,976 | 4,147 | ||||||
Notes payable to financial institution due 2020 (12) |
6,390 | 5,375 | ||||||
Notes payable to financial institution, collateralized by the underlying equipment, due 2020 (13) |
9,158 | 13,901 | ||||||
Notes payable to financial institution due 2019 (14) |
18,530 | 12,213 | ||||||
Working capital draw loan, collateralized by certain flight equipment and spare parts (15) |
25,650 | 25,650 | ||||||
Other obligations due to financial institution, collateralized by the underlying equipment, due 2023 (16) |
| 10,292 | ||||||
|
|
|
|
|||||
Total long-term debt |
956,918 | 942,264 | ||||||
Less current portion |
(140,466 | ) | (144,542 | ) | ||||
Less unamortized debt issuance costs |
(12,578 | ) | (13,235 | ) | ||||
|
|
|
|
|||||
Long-term debtexcluding current portion |
$ | 803,874 | $ | 784,487 | ||||
|
|
|
|
(1) |
In fiscal 2005, the Company permanently financed five CRJ-900 aircraft with $118 million in debt. The debt bears interest at the monthly London InterBank Offered Rate (LIBOR), plus 3% (4.878% at March 31, 2018) and requires monthly principal and interest payments. |
(2) |
In fiscal 2004, the Company permanently financed five CRJ-700 and six CRJ 900 aircraft with $254.7 million in debt. The debt bears interest at the monthly LIBOR plus 3% (4.878% at March 31, 2018) and requires monthly principal and interest payments. |
(3) |
In fiscal 2007, the Company permanently financed three CRJ-900 and three CRJ-700 aircraft for $120.3 million. The debt bears interest at the monthly LIBOR plus 2.25% (4.128% at March 31, 2018) and requires monthly principal and interest payments. |
(4) |
In fiscal 2014, the Company permanently financed 10 CRJ-900 aircraft for $88.4 million. The debt bears interest at the monthly LIBOR plus a spread ranging from 1.95% to 7.25% (3.828% to 9.128% at March 31, 2018) and requires monthly principal and interest payments. |
(5) |
In fiscal 2014, the Company permanently financed eight CRJ-900 aircraft with $114.5 million in debt. The debt bears interest at 5% and requires monthly principal and interest payments. |
(6) |
In fiscal 2015, the Company financed seven CRJ-900 aircraft with $170.2 million in debt. The senior notes payable of $151 million bear interest at monthly LIBOR plus 2.71% (4.588% at March 31, 2018) and require monthly principal and interest payments. The subordinated notes payable are noninterest-bearing and become payable in full on the last day of the term of the notes. The Company has imputed an interest rate of 6.25% on the subordinated notes payable and recorded a related discount of $8.1 million, which is being accreted to interest expense over the term of the notes. |
F-36
(7) |
In fiscal 2016, the Company financed 10 E-175 aircraft with $246 million in debt under an EETC financing arrangement (see discussion below). The debt bears interest ranging from 4.75% to 6.25% and requires semi-annual principal and interest payments. |
(8) |
In fiscal 2016, the Company financed eight E-175 aircraft with $195.3 million in debt. The senior notes payable of $172 million bear interest at the three-month LIBOR plus a spread ranging from 2.20% to 2.32% (4.521% to 4.641% at March 31, 2018) and require quarterly principal and interest payments. The subordinated notes payable bear interest at 4.50% and require quarterly principal and interest payments. |
(9) |
In fiscal 2017, the Company financed certain flight equipment with $99.1 million in debt. The debt bears interest at the monthly LIBOR (rounded to the nearest 16th) plus 7.25% (8.94% at March 31, 2018) and requires monthly principal and interest payments. |
(10) |
In fiscal 2018, the Company refinanced nine CRJ-900 aircraft with $74.9 million in debt. The senior notes payable of $46.9 million bear interest at the monthly LIBOR plus 3.50% (5.378% at March 31, 2018) and require quarterly principal and interest payments. The subordinated notes payable bear interest at the monthly LIBOR plus 4.50% (6.378% at March 31, 2018) and require quarterly principal and interest payments. |
(11) |
In fiscal 2015, the Company financed certain flight equipment with $8.3 million in debt. The debt bears interest at 5.163% and requires monthly principal and interest payments. |
(12) |
In fiscal 2015 and 2016, the Company financed certain flight equipment maintenance costs with $10.2 million in debt. The debt bears interest at the monthly LIBOR plus 3.07% (4.948% at March 31, 2018) and requires quarterly principal and interest payments. |
(13) |
In fiscal 2016 and 2017, the Company financed certain flight equipment maintenance costs with $11.9 million in debt. The debt bears interest at the three-month LIBOR plus a spread ranging from 2.93% to 2.96% (5.251% to 5.281% at March 31, 2018) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of March 31, 2018, the Company was in compliance with this covenant. |
(14) |
In fiscal 2017, the Company financed certain flight equipment maintenance costs with $25 million in debt. The debt bears interest at the three-month LIBOR plus 3.30% (5.621% at March 31, 2018) and requires quarterly principal and interest payments. The debt is subject to a fixed charge ratio covenant. As of March 31, 2018, the Company was in compliance with this covenant. |
(15) |
In fiscal 2016, the Company obtained a $35 million working capital draw loan, which terminates in August 2019. Interest is assessed on drawn amounts at one month LIBOR plus 4.25% (6.128% at March 31, 2018). The line was drawn upon during fiscal 2017. The working capital draw loan is subject to an interest and rental coverage ratio covenant. As of March 31, 2018, the Company was in compliance with this covenant. |
(16) |
In fiscal 2018, the Company leased two spare engines. The leases were determined to be capital as the leases contain a bargain purchase option at the end of the term. Imputed interest is 9.13% and the leases require monthly payments. |
Principal maturities of long-term debt as of March 31, 2018, for each of the next five years are as follows (in thousands):
Periods Ending September 30, |
Total Principal
Amount |
|||
Remainder of 2018 |
$ | 72,733 | ||
2019 |
$ | 162,777 | ||
2020 |
$ | 127,273 | ||
2021 |
$ | 119,585 | ||
2022 |
$ | 119,931 |
The net book value of collateralized aircraft and equipment as of March 31, 2018 is $1,114.3 million.
In December 2015, an Enhanced Equipment Trust Certificate (EETC) pass-through trust was created to issue pass-through certificates to obtain financing for new E-175 aircraft. At March 31, 2018 Mesa has $217.9 million of equipment notes outstanding issued under the EETC financing included in long-term debt on the condensed consolidated balance sheets. The structure of the EETC financing consists of a pass-through trust created by Mesa to issue pass-through certificates, which represent fractional undivided interests in the pass-through trust and are not obligations of Mesa.
The proceeds of the issuance of the pass-through certificates were used to purchase equipment notes which were issued by Mesa and secured by its aircraft. The payment obligations under the equipment notes are those of Mesa. Proceeds received from the sale of pass-through certificates were initially held by a depositary in escrow for the benefit of the certificate holders until Mesa issued equipment notes to the trust, which purchased such notes with a portion of the escrowed funds.
F-37
The Company records the debt obligation upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates. Mesa received all proceeds from the pass-through trust during fiscal 2016.
Mesa evaluated whether the pass-through trust formed for its EETC financing is a Variable Interest Entity (VIE) and required to be consolidated. The pass-through trust was determined to be a VIE, however, the Company has determined that it does not have a variable interest in the pass-through trust, and therefore, has not consolidated the pass-through trust with its financial statements.
10. |
Earnings Per Share and Equity |
Calculations of net income per common share attributable to Mesa Air Group are as follows (in thousands, except per share data):
Six Months Ended
March 31, |
||||||||
2017 | 2018 | |||||||
Net income attributable to Mesa Air Group |
$ | 11,914 | $ | 24,996 | ||||
|
|
|
|
|||||
Basic weighted average common shares outstanding |
10,781 | 11,441 | ||||||
Add: Incremental shares for: |
||||||||
Dilutive effect of warrants |
12,508 | 11,918 | ||||||
Dilutive effect of restricted stock |
155 | 204 | ||||||
|
|
|
|
|||||
Diluted weighted average common shares outstanding |
23,444 | 23,563 | ||||||
|
|
|
|
|||||
Net income per common share attributable to Mesa Air Group: |
||||||||
Basic |
$ | 1.11 | $ | 2.18 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.51 | $ | 1.06 | ||||
|
|
|
|
Basic income per common share is computed by dividing net income attributable to Mesa Air Group by the weighted average number of common shares outstanding during the period.
11. |
Common Stock |
The Company has issued warrants to third parties, which had a five-year term to be converted to common stock at an exercise price of $0.004 per share. Outstanding warrants to purchase shares of common stock are held by persons who are not U.S. citizens. The warrants are not exercisable due to restrictions imposed by federal law requiring that no more than 24.9% of our stock be voted, directly or indirectly, or controlled by persons who are not U.S. citizens. The warrants can be converted to common stock upon warrant holders demonstrating U.S. citizenship. During fiscal 2016, the Company extended the term of outstanding warrants set to expire by two years (through fiscal year 2018). Any warrants that were not extended were forfeited.
12. |
Income Taxes |
Our total income tax expense from continuing operations was $7.1 million for the six months ended March 31, 2017, compared to an income tax benefit of $21.2 million for the same period in 2018. The decrease in income tax expense for the six months ended March 31, 2018, was primarily attributable to the comprehensive tax legislation commonly referred to as the Tax Act enacted by the U.S. government on December 22, 2017, the adoption of ASU 2016-09, state taxes, changes in the valuation allowance against state net operating losses, expired state attributes and the benefit from changes in state apportionment and statutory rates.
F-38
The Tax Act makes broad and complex changes to the U.S. tax code that will affect the Companys fiscal year ending September 30, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate, (2) changing rules related to uses and limitations of NOL carryforwards created in tax years beginning after December 31, 2017, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized, and (4) bonus depreciation that will allow for full expensing of qualified property. The Tax Act reduces the federal corporate tax rate to 21% in the fiscal year ending September 30, 2018. The Internal Revenue Code stipulates that the Companys fiscal year ending September 30, 2018, will have a blended corporate tax rate of 24.53%, which is based on the applicable tax rates before and after the Tax Act and the number of days in the year.
The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a companys accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.
In connection with the Companys initial analysis of the impact of the Tax Act, the Company has recorded a discrete net tax benefit of $22.2 million in the six months ending March 31, 2018. As discussed more fully below, the Company has not completed its accounting for the income tax effects of certain elements of the Tax Act. The Company has recorded provisional adjustments where reasonable adjustments are available. Where reasonable adjustments are not available, the Company has not recorded and provisions adjustments and continues to account for them in accordance with ASC 740.
Reduction of US federal corporate tax rate: Our accounting for the following elements of the Tax Act is complete. The Tax Act reduces the corporate tax rate to 21% effective January 1, 2018. Accordingly, the Company has recorded a decrease related to its net deferred tax liabilities of $22.2 million with a corresponding net adjustment to deferred tax benefit of $22.2 million for the six months ended March 31, 2018.
The Company was not able to make reasonable estimates or, correspondingly, record provisional adjustments for the following:
Valuation allowances: The Company must determine whether the valuation allowances assessments are affected by various aspects of the Tax Act (e.g., section 163(j), state tax effect of the Tax Act, net operating loss carryforwards). Any corresponding determinations relating to changes in valuation allowances have, likewise, not been completed or recorded.
F-39
13. |
Share-Based Compensation |
Restricted Stock
The restricted stock activity is summarized as follows:
Number
of Shares |
Weighted-
Average Grant Date Fair Value |
|||||||
Restricted shares unvested at September 30, 2017 |
775,753 | 5.22 | ||||||
|
|
|||||||
Granted |
| | ||||||
Vested |
(10,413 | ) | 5.50 | |||||
Forfeited |
| | ||||||
Restricted shares unvested at March 31, 2018 |
765,340 | 5.22 | ||||||
|
|
Stock Appreciation Rights
The SARs activity is summarized as follows:
Number of
Shares |
Weighted-Average
Intrinsic Value Per Share |
|||||||
SARs unvested at September 30, 2017 |
1,140,013 | | ||||||
|
|
|||||||
Granted |
| | ||||||
Vested |
(622,238 | ) | | |||||
Forfeited |
| |||||||
|
|
|||||||
SARs unvested at March 31, 2018 |
517,775 | | ||||||
|
|
Phantom Stock
On October 17, 2017, the Company implemented a share-based payment plan under which employees, officers, directors and other individuals providing services to the Company are eligible to receive grants of restricted phantom stock units (Phantom Stock Plan). The restricted phantom stock units (restricted stock units or RSUs) provide a participant with the right to receive a cash or stock bonus based on the fair market value of a stated number of RSUs that are vested. The shares of Common Stock that may be subject to RSUs granted under the Plan shall not exceed an aggregate of 1,250,000 shares. All of the RSUs are non-vested and forfeitable as of the grant date and vest over a three year period. Any vested RSU will be settled by the Company upon vesting but no later than March 15 of the calendar year after the date that the RSUs become vested. The Company has elected to use the intrinsic value method to account for its share-based payment awards that are payable in cash, and therefore classified as liability awards. Under the intrinsic value method, the compensation expense associated with these awards is measured by estimated fair value of the Companys common stock on the valuation date and is recognized ratably over the vesting period. Upon the settlement of a RSU, compensation cost is adjusted to the amount of the cash or stock payment. The Company estimates the fair value of its common stock based on recent share transactions. The Company has authorized 1,250,000 shares available under this plan and has granted 323,048 since inception of the plan. Since inception of the plan, no RSUs have vested or settled.
F-40
The phantom stock activity is summarized as follows:
Number
of Shares |
Fair Value Per Share | |||||||
Phantom stock unvested at September 30, 2017 |
| | ||||||
|
|
|||||||
Granted |
323,048 | 5.00 | ||||||
Vested |
| | ||||||
Forfeited |
| | ||||||
|
|
|||||||
Phantom stock unvested at March 31, 2018 |
323,048 | 5.00 | ||||||
|
|
As of March 31, 2018, there was $4.2 million, of total unrecognized compensation cost related to unvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.6 years.
Compensation cost for share-based awards are recognized on a straight-line basis over the vesting period. Share-based compensation expense for the six months ended March 31, 2017 and 2018 was $1.7 million and $1.0 million, respectively, and recorded in general and administrative expenses in the condensed consolidated statements of income.
14. |
Retirement Plans |
The Company has a 401(k) plan covering all employees (the 401(k) Plan). Under the 401(k) Plan, employees may contribute up to 85% of their pretax annual compensation, subject to certain Internal Revenue Code limitations. Employer contributions are made at the discretion of the Company. During the six months ended March 31, 2017 and 2018, the Company made matching contributions of 30% of employee contributions up to 10% of annual employee compensation. The employee vests 20% per year in employer contributions. Employees become fully vested in employer contributions after completing six years of employment. In July 2017, the Company amended its 401(k) plan to revise the matching and vesting components for its pilots. The Company matches 50% of pilot contributions up to 6% (and up to 10% for pilots with 10 years or more employment). The pilot vests 25% per year in employer contribution and becomes fully vested in employer contributions after completing four years of employment. The expense recognized for contributions by the Company to the 401(k) Plan for the six months ended March 31, 2017 and 2018 was approximately $0.5 million and $1.0 million, respectively.
15. |
Commitments |
At March 31, 2018, the Company leased 37 aircraft under noncancelable operating leases with remaining terms of up to 6.5 years. The Company has the option to terminate certain leases at various times throughout the lease. The Company headquarters and other facility noncancelable operating leases have remaining terms of up to nine years. The leases require the Company to pay all taxes, maintenance, insurance, and other operating expenses. Rental expense is recognized on a straight-line basis over the lease term, net of lessor rebates and other incentives. Aggregate rental expense under all operating aircraft, equipment and facility leases totaled approximately $41.2 million and $44.1 million for the six months ended March 31, 2017 and 2018, respectively.
F-41
Future minimum lease payments as of March 31, 2018, under noncancelable operating leases are as follows (in thousands):
Years Ended September 30 |
Aircraft | Other | Total | |||||||||
Remainder of 2018 |
$ | 47,716 | $ | 1,036 | $ | 48,752 | ||||||
2019 |
73,001 | 1,866 | 74,867 | |||||||||
2020 |
55,812 | 1,880 | 57,692 | |||||||||
2021 |
57,274 | 1,253 | 58,527 | |||||||||
2022 |
37,551 | 1,281 | 38,832 | |||||||||
Thereafter |
24,267 | 4,013 | 28,280 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 295,621 | $ | 11,329 | $ | 306,950 | ||||||
|
|
|
|
|
|
The majority of the Companys leased aircraft are leased through trusts that have a sole purpose to purchase, finance, and lease these aircraft to the Company; therefore, they meet the criteria of a variable interest entity. However, since these are single-owner trusts in which the Company does not participate, the Company is not at risk for losses and is not considered the primary beneficiary. Management believes that the Companys maximum exposure under these leases is the remaining lease payments.
16. |
Contingencies |
The Company is involved in various legal proceedings (including, but not limited to, insured claims) and FAA civil action proceedings that the Company does not believe will have a material adverse effect upon its business, financial condition, or results of operations, although no assurance can be given to the ultimate outcome of any such proceedings.
17. |
Subsequent Events |
On June 27, 2018, the Company refinanced $16.0 million of debt on six CRJ-900 aircraft (due in 2019), with $27.5 million of debt, resulting in net cash proceeds to us of $10.4 million after transaction related fees. The notes payable require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus a spread ranging from 3.50% to 7.50%.
On June 28, 2018, the Company purchased nine CRJ-900 aircraft, which were previously on lease, for $76.5 million. The Company financed the aircraft purchase with $69.6 million in new debt and proceeds from the June 2018 aircraft refinancing. The notes payable of $69.6 million require quarterly payments of principal and interest through fiscal 2022 bearing interest at LIBOR plus a spread ranging from 3.50% for the Senior Promissory notes to 7.5% for the Subordinated Promissory notes. The Company recorded non-cash lease termination expense of $15.1 million in connection with the lease buyout. Also, as part of the transaction, the Company (i) received $4.5 million of future goods and services credits and $5.6 million of loan forgiveness for loans with a maturity date in 2027 from the aircraft manufacturer, and (ii) mutually agreed to terminate 250,000 warrants with a five-year term and an exercise price of $3.20 per share.
In July 2018, the Company mutually agreed with United to place two E-175 aircraft back into service under the United capacity purchase agreement that were temporarily removed in February 2018.
In July 2018, the Companys Board of Directors approved the issuance of shares of restricted common stock under its 2018 Equity Incentive Plan (the 2018 Plan) immediately following the completion of its initial public offering to certain of its employees and directors in exchange for the cancellation of existing restricted phantom stock units, unvested restricted shares and SARs. The shares of restricted
F-42
common stock issued under the 2018 Plan in exchange for the cancellation of restricted phantom stock units, unvested restricted shares and SARs will be subject to vesting on the same terms set forth in the prior vesting schedules and are not subject to acceleration in connection with the exchange.
In July 2018, the Companys Board of Directors and shareholders approved a 2.5-for-1 stock split of the Companys common stock, which will occur immediately prior to the completion of its initial public offering. Except as otherwise noted, all references to share and per share amounts related to common stock and equity awards in the Companys condensed consolidated financial statements have been presented to reflect the stock split. The stock split has been retroactively applied to the Companys historical condensed consolidated financial statements. Additionally, the Companys Board of Directors and shareholders approved an increase in authorized shares of common stock and preferred stock to 125,000,000 shares and 5,000,000 shares, respectively. The increase in the number of common and preferred shares will occur immediately prior to the completion of the Companys initial public offering.
The Company has reviewed subsequent events through June 15, 2018, the date these consolidated financial statements were available to be issued, and through the re-issuance date, August , 2018.
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10,700,000 Shares
Common Stock
PROSPECTUS
RAYMOND JAMES | BofA Merrill Lynch |
Cowen | Stifel | Imperial Capital |
, 2018
PART II
Item 13. |
Other Expenses of Issuance and Distribution |
The following table sets forth the costs and expenses, other than underwriting discounts, and commissions, payable in connection with the sale and distribution of the securities being registered. All amounts are estimated except the SEC registration fee and the FINRA filing fee.
Item | Amount | |||
SEC registration fee |
$ | 22,980 | ||
FINRA filing fee |
23,000 | |||
Exchange listing fee |
125,000 | |||
Legal fees and expenses |
1,500,000 | |||
Accounting fees and expenses |
917,855 | |||
Printing and engraving expenses |
500,000 | |||
Transfer agent and registrar fees |
7,500 | |||
Miscellaneous |
250,000 | |||
|
|
|||
Total |
$ | 3,346,335 |
Item 14. |
Indemnification of Directors and Officers |
Mesa Air Group, Inc. is a Nevada corporation. Nevada corporate law enables us to indemnify any of our directors or officers under the provisions of the NRS if either (i) the director or officer acted in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, our best interests, or (ii) such director or officer is not liable pursuant to NRS 78.138. Under NRS 78.138, a director or officer is not liable unless the presumption that the director or officer acted in good faith and with a view to the interests of the Company have been rebutted, and it is proven that his or her act or failure to act constituted a breach of his or her fiduciary duties as an officer or director and such breach involved intentional misconduct, fraud or a knowing violation of law. Our second amended and restated articles of incorporation to be in effect immediately prior to the consummation of this offering compel indemnification of our directors and officers and permits indemnification of our employees and other agents, in each case to the maximum extent permitted by Nevada law, and our amended and restated bylaws to be in effect immediately prior to the consummation of this offering provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by Nevada law. In addition, we have entered into indemnification agreements with our directors and NEOs containing provisions which are in some respects broader than the specific indemnification provisions contained in Nevada law. The indemnification agreements may require us, among other things, to indemnify our directors and officers against certain liabilities that may arise by reason of their status or service as directors and officers and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. Reference is also made to Section 8 of the underwriting agreement to be filed as Exhibit 1.1 hereto, which provides for indemnification by the underwriter of our officers and directors against certain liabilities.
Item 15. |
Recent Sales of Unregistered Securities |
During our last three fiscal years and the six months ended March 31, 2018, we have granted equity awards representing an aggregate of 3,303,003 shares of our common stock to employees and directors under our 2011 Plan, 2017 Plan, RSU Plan and SAR Plan, which includes 56,250 shares that were subsequently forfeited and 126,648 shares that were subsequently repurchased.
The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an
II-1
issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us.
There were no underwriters employed in connection with any of the transactions set forth in Item 15.
Item 16. |
Exhibits and Financial Statement Schedules |
(a) Exhibits
EXHIBIT INDEX
Some of the agreements included as exhibits to the registration statement of which this prospectus forms a part contain representations and warranties by the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of materiality that are different from materiality under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.
The undersigned registrant acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding contractual provisions are required to make the statements in the registration statement of which this prospectus forms a part not misleading.
Incorporated by Reference | ||||||||||||
Exhibit
|
Description |
Form |
Date |
Number |
Filed
|
|||||||
1.1* | Form of Underwriting Agreement | |||||||||||
2.1** | Third Amended Joint Plan of Reorganization of the Registrant and Affiliated Debtors Under Chapter 11 of the Bankruptcy Code, effective February 27, 2011 | DRS |
May 7,
2018 |
2.1 | ||||||||
3.1 | Amended and Restated Articles of Incorporation of the Registrant, currently in effect | DRS |
May 7,
2018 |
3.1 | ||||||||
3.2 | Amended and Restated Bylaws of the Registrant, currently in effect | DRS |
May 7,
2018 |
3.2 | ||||||||
3.3 | Form of Second Amended and Restated Articles of Incorporation of the Registrant, to be in effect immediately prior to the completion of this offering | X | ||||||||||
3.4 | Form of Amended and Restated Bylaws of the Registrant, to be in effect upon the closing of the offering | X | ||||||||||
4.1* | Form of Common Stock Certificate | |||||||||||
4.2 | Investor Rights Agreement between the Registrant and US Airways, Inc., dated March 1, 2011 | DRS |
May 7,
2018 |
4.2 |
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II-3
II-4
II-5
II-6
II-7
II-8
* |
To be filed by amendment. |
** |
The exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request. |
# |
Management contract or compensatory plan. |
|
Portions of this exhibit have been omitted pursuant to a request for confidential treatment and this exhibit has been filed separately with the SEC. |
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(b) Financial Statement Schedules
No financial statement schedules have been submitted because they are not required or are not applicable or because the information required is included in the consolidated financial statements or the notes thereto.
Item 17. |
Undertakings |
The undersigned registrant hereby undertakes that:
(1) insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14, or otherwise, the registrant 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 registrant of expenses incurred or paid by a director, officer or controlling person of the registrant 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 registrant 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; and
(2) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant 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; and
(3) 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.
(4) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, we have duly caused this Amendment No.1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Phoenix, State of Arizona, on the 30th day of July, 2018.
MESA AIR GROUP, INC. | ||
By: |
/s/ Jonathan G. Ornstein |
|
Jonathan G. Ornstein Chairman and Chief Executive Officer |
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Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No.1 to the Registration Statement has been signed by the following persons in the capacities indicated below on the dates indicated.
Signature |
Title |
Date |
||
/s/ Jonathan G. Ornstein Jonathan G. Ornstein |
Chairman and Chief Executive Officer (principal executive officer) | July 30, 2018 | ||
/s/ Michael J. Lotz Michael J. Lotz |
President and Chief Financial Officer (principal financial and accounting officer) | July 30, 2018 | ||
* Daniel J. Altobello |
Director | July 30, 2018 | ||
* Ellen N. Artist |
Director | July 30, 2018 | ||
* Mitchell Gordon |
Director | July 30, 2018 | ||
* Dana J. Lockhart |
Director | July 30, 2018 | ||
* G. Grant Lyon |
Director | July 30, 2018 | ||
* Giacomo Picco |
Director | July 30, 2018 | ||
* Harvey Schiller |
Director | July 30, 2018 | ||
* Don Skiados |
Director | July 30, 2018 |
By: |
/s/ Michael J. Lotz |
|
Michael J. Lotz | ||
Attorney-in-Fact |
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Exhibit 3.3
CERTIFICATE OF
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MESA AIR GROUP, INC.
Pursuant to Nevada Revised Statutes 78.390 and 78.403, the undersigned officer of Mesa Air Group, Inc., a Nevada corporation, does hereby certify as follows:
A. The board of directors of the corporation has duly adopted resolutions proposing to amend and restate the articles of incorporation of the corporation as set forth below, declaring such amendment and restatement to be advisable and in the best interests of the corporation.
B. The amendment and restatement of the articles of incorporation as set forth below has been approved by a majority of the voting power of the stockholders of the corporation, which is sufficient for approval thereof.
C. This certificate sets forth the text of the articles of incorporation of the corporation as amended and restated in their entirety to this date as follows:
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MESA AIR GROUP, INC.
ARTICLE 1
NAME
The name of the corporation is Mesa Air Group, Inc. (the Corporation ).
ARTICLE 2
REGISTERED OFFICE
The Corporation may, from time to time, in the manner provided by law, change the registered agent and registered office within the State of Nevada. The Corporation may also maintain an office or offices for the conduct of its business, either within or without the State of Nevada.
ARTICLE 3
PURPOSE
The Corporation is formed for the purpose of engaging in any lawful act or activity for which corporations may be organized under the laws of the State of Nevada.
ARTICLE 4
AUTHORIZED CAPITAL STOCK
A. The total authorized capital stock of the Corporation shall consist of 125,000,000 shares of common stock, no par value per share (the Common Stock ), and 5,000,000 shares of preferred stock, no par value per share ( Preferred Stock ).
Effective upon the filing of these Second Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada, each currently outstanding share of Common Stock shall be converted into and become [Range: 2 for 1 to 5 for 1] shares of Common Stock (collectively, the Stock Split ). For each stockholder who would be entitled to a fraction of a share of Common Stock as a result of the Stock Split, the Corporation will issue such additional fraction of a share as is necessary to increase the fractional share to a full share. The Stock Split shall occur without any further action on the part of the Corporation or the stockholders thereof and whether or not certificates representing the stockholders shares prior to the Stock Split are surrendered for cancellation.
B. The board of directors of the Corporation (the Board of Directors ) is authorized, to the fullest extent permitted under the Nevada Revised Statutes (as amended from time to time, the NRS ), to designate and cause the Corporation to issue shares of Preferred Stock in one or more classes or series, and by filing a certificate of designation pursuant to and in accordance with the applicable laws of the State of Nevada (each, a Preferred Stock Designation ), to establish the number of shares to be included in such class or series, and to fix the voting powers, designations, preferences, limitations, restrictions and relative rights thereof. To the extent provided in the Preferred Stock Designation relating to a class or series of Preferred Stock, the Board of Directors may increase (but not above the total number of then authorized and undesignated shares of Preferred Stock) or decrease (but not below the number of shares of that class or series of Preferred Stock then outstanding) the number of shares of such class or series, provided that in case the number of shares of any class or series shall be so decreased, the shares constituting such decrease shall resume the status of authorized and undesignated shares of Preferred Stock. There shall be no limitation or restriction on any variation between or among any classes or series of Preferred Stock as to the voting powers, designations, preferences, limitations, restrictions and relative rights thereof; and each class or series of Preferred Stock may vary in any and all respects from any other class or series of Preferred Stock, as and to the extent set forth in the Preferred Stock Designation providing for the issuance thereof.
ARTICLE 5
CERTAIN OWNERSHIP RESTRICTIONS
C. All capital stock of the Corporation shall be subject to the following limitations:
1. In no event shall persons or entities who fail to qualify as a citizen of the United States, as the term is defined in Section 40102(a)(15) of Subtitle VII of Title 49 of the United States Code, as amended, in any similar legislation of the United States enacted in substitution or replacement therefor, and as interpreted by the Department of Transportation, its predecessors and successors, from time to time, including any agent, trustee or representative of such persons or entities (a Non-Citizen ), be entitled to own (beneficially or of record) and/or control more than (x) 24.9% of the aggregate votes of all outstanding shares of capital stock of the Corporation (the Voting Cap Amount ) or (y) 49.0% of the total number of outstanding shares of capital stock of the Corporation (the Control Cap Amount , and together with the Voting Cap Amount, the Cap Amounts ), in each case as more specifically set forth in the bylaws of the Corporation (the Bylaws ).
2. Except as otherwise set forth in the Bylaws, the restrictions imposed by the Cap Amounts shall be applied to each Non-Citizen in reverse chronological order based upon the date of registration (or attempted registration in the case of the Control Cap Amount) on the separate stock record maintained by the Corporation or any transfer agent for the registration of capital stock held by Non-Citizens (the Foreign Stock Record ) or the stock transfer records of the Corporation. At no time shall the shares of capital stock held by Non-Citizens be voted, unless such shares are registered on the Foreign Stock Record. In the event that Non-Citizens shall own (beneficially or of record) or have voting control over any shares of capital stock, the voting rights of such persons shall be subject to automatic suspension to the extent required to ensure that the Corporation is in compliance with applicable provisions of law and regulations relating to ownership or control of a United States air carrier. In the event that any transfer or issuance of shares of capital stock to a Non-Citizen would result in Non-Citizens owning (beneficially or of record) more than the Control Cap Amount, such transfer or issuance shall be void and of no effect and shall not be recorded in the books and records of the Corporation. The Bylaws shall contain provisions to implement this Article 5 , including without limitation, provisions restricting or prohibiting the transfer of shares of capital stock to Non-Citizens and provisions restricting or removing voting rights as to shares of capital stock owned or controlled by Non-Citizens. Any determination as to ownership, control or citizenship made by the Board of Directors shall be conclusive and binding as between the Corporation and any stockholder.
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D. Each certificate or other representative document for capital stock of the Corporation with voting rights (including each such certificate or representative document for such capital stock issued upon any permitted transfer of capital stock) shall contain a legend in substantially the following form:
THE SECURITIES OF MESA AIR GROUP, INC. REPRESENTED BY THIS CERTIFICATE OR DOCUMENT ARE SUBJECT TO VOTING RESTRICTIONS WITH RESPECT TO CERTAIN SECURITIES HELD BY PERSONS OR ENTITIES THAT FAIL TO QUALIFY AS CITIZENS OF THE UNITED STATES AS THE TERM IS DEFINED IN SECTION 40102 (a)(15) OF SUBTITLE VII OF TITLE 49 OF THE UNITED STATES CODE, AS AMENDED, IN ANY SIMILAR LEGISLATION OR THE UNITED STATES ENACTED IN SUBSTITUTION OR REPLACEMENT THEREFOR, AND AS INTERPRETED BY THE DEPARTMENT OF TRANSPORTATION, ITS PREDECESSORS AND SUCCESSORS, FROM TIME TO TIME. SUCH VOTING RESTRICTIONS ARE CONTAINED IN THE ARTICLES OF INCORPORATION AND THE BYLAWS OF MESA AIR GROUP, INC., AS THE SAME MAY BE AMENDED OR RESTATED FROM TIME TO TIME. A COMPLETE AND CORRECT COPY OF SUCH ARTICLES OF INCORPORATION AND THE BYLAWS SHALL BE FURNISHED FREE OF CHARGE TO THE HOLDER OF THE SECURITIES REPRESENTED HEREBY UPON WRITTEN REQUEST TO THE SECRETARY OF MESA AIR GROUP, INC.
ARTICLE 6
BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Subject to any additional vote required by these Second Amended and Restated Articles of Incorporation (as further amended from time to time, the Articles of Incorporation ) or the Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws. Except as otherwise fixed or provided for pursuant to the Articles of Incorporation (including the Preferred Stock Designation for any class or series of then outstanding Preferred Stock), the number of directors of the Corporation shall be determined in accordance with the Bylaws. Elections of directors need not be by written ballot unless required by the Bylaws.
ARTICLE 7
LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS
The liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS. If the NRS are amended to further eliminate or limit or authorize corporate action to further eliminate or limit the liability of directors or officers, the liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the NRS, as so amended from time to time.
ARTICLE 8
INDEMNIFICATION
A. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a Covered Person ) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding ), by reason of the fact that he or she, or a person for whom he or she is legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity (an Other Entity ), including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys fees and costs) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in this Article 8 , the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board of Directors.
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B. The Corporation shall pay the expenses (including attorneys fees and costs) incurred by a Covered Person in defending any Proceeding in advance of its final disposition, provided, however , that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article 8 or otherwise.
C. If a claim for indemnification or advancement of expenses under this Article 8 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action, the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
D. The rights conferred on any Covered Person by this Article 8 shall not be exclusive of any other rights that such Covered Person may have or hereafter acquire under any statute, provision of these Articles of Incorporation, the Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
E. The Board of Directors is authorized to enter into a contract with any director, officer, employee or agent of the corporation, or any person serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than, those provided for in this Article 8 .
F. The Corporations obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of an Other Entity shall be reduced by any amount such Covered Person collects as indemnification or advancement of expenses from such Other Entity.
G. Any amendment, repeal or modification of any provision of this Article 8 shall not adversely affect any right or protection of any Covered Person in respect of any act or omission occurring prior to such amendment, repeal or modification.
H. This Article 8 shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.
ARTICLE 9
INAPPLICABILITY OF CERTAIN NEVADA STATUTES
A. At such time, if any, as the Corporation becomes a resident domestic corporation (as that term is defined in NRS 78.427), the Corporation shall not be subject to, or governed by, any of the provisions in NRS 78.411 to 78.444, inclusive, as amended from time to time, or any successor statutes.
B. In accordance with the provisions of NRS 78.378, the provisions of NRS 78.378 to 78.3793, inclusive, as amended from time to time, or any successor statutes, relating to acquisitions of controlling interests in the Corporation, shall not apply to the Corporation or to any acquisition of any shares of the Corporations capital stock.
ARTICLE 10
TRANSFER RESTRICTIONS
A. Definitions . As used in this Article 10 , the following capitalized terms have the following meanings when used herein with initial capital letters (and any references to any portions of Treasury Regulation § 1.382-2T shall include any successor provisions):
1. 4.75-percent Transaction means any Transfer described in clause (i) or (ii) of paragraph B(1) of this Article 10 .
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2. 4.75-percent Stockholder a Person who owns 4.75% or more of the aggregate of (i) the Corporations then-outstanding Common Stock and (ii) the Corporations Stock. For this purpose (i) a Persons ownership will be measured and determined pursuant to Section 382 of the Code, or any successor provision or replacement provision and the Treasury Regulations thereunder (ii) a Persons ownership includes direct and indirect ownership and (iii) a Persons ownership will include shares such Person would be deemed to constructively own or which otherwise would be aggregated with shares owned by such Person pursuant to Section 382 of the Code, or any successor provision or replacement provision and the Treasury Regulations thereunder (substituting 5 percent with 4.75 percent where relevant),
3. Agent has the meaning set forth in paragraph E of this Article 10 .
4. Change of Control means any person or group (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) either becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of voting securities of the Corporation (or securities convertible into or exchangeable for such voting securities) representing 50% or more of the combined voting power of all voting securities of the Corporation (on a fully diluted basis) or otherwise has the ability, directly or indirectly, to elect a majority of the Board of Directors of the Corporation or any person or two or more persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence on the management or policies of the Corporation.
5. Common Stock means any interest in the common stock, no par value per share, of the Corporation that would be treated as stock of the Corporation pursuant to Treasury Regulation § 1.382-2T(f)(18).
6. Code means the United States Internal Revenue Code of 1986, as amended from time to time, and the rulings issued thereunder.
7. Corporation Security or Corporation Securities means (i) shares of Common Stock, (ii) shares of Preferred Stock (other than preferred stock described in Section 1504(a)(4) of the Code), (iii) warrants, rights, options (including options within the meaning of Treasury Regulation § 1.382-2T(h)(4)(v) or Treasury Regulation §1.382-4(d)(9)) to purchase Securities of the Corporation, and (iv) any Stock.
8. Effective Date means the date of filing of these Second Amended and Restated Articles of Incorporation of the Corporation with the Secretary of State of the State of Nevada.
9. Excess Securities has the meaning given such term in paragraph D of this Article 10 .
10. Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
11. Expiration Date means the earlier of (i) the repeal of Section 382 of the Code or any successor statute if the Board of Directors determines that this Article 10 is no longer necessary for the preservation of Tax Benefits, (ii) the beginning of a taxable year of the Corporation to which the Board of Directors determines that no Tax Benefits may be carried forward, or (iii) such date as the Board of Directors shall fix in accordance with paragraph L of this Article 10 .
12. Percentage Stock Ownership means the percentage Stock Ownership interest of any Person or group (as the context may require) for purposes of Section 382 of the Code as determined in accordance with the Treasury Regulation § 1.382-2T(g), (h), (j) and (k) or any successor provision. For purposes of applying Treasury Regulation § 1.382-2T(k)(2), the Corporation shall be treated as having actual knowledge of the beneficial ownership of all outstanding shares of Stock that would be attributed to any Person.
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13. Person means any individual, firm, corporation or other legal entity, including a group of persons treated as an entity pursuant to Treasury Regulation § 1.382-3(a)(1)(i); and includes any successor (by merger or otherwise) of such entity.
14. Prohibited Distributions means any and all dividends or other distributions paid by the Corporation with respect to any Excess Securities received by a Purported Transferee.
15. Prohibited Transfer means any Transfer or purported Transfer of Corporation Securities if that such Transfer is prohibited and/or void under this Article 10 .
16. Public Group has the meaning set forth in Treasury Regulation § 1.382-2T(f)(13).
17. Purported Transferee has the meaning set forth in paragraph D of this Article 10 .
18. Securities and Security each has the meaning set forth in paragraph G of this Article 10 .
19. Stock means any Common Stock or Preferred Stock that would be treated as stock of the Corporation pursuant to Treasury Regulation § 1.382-2T(f)(18) and any nonstock instruments treated as stock for purposes of Section 382 of the Code inclusive of nonstock instruments treated as stock pursuant to Treasury Regulation § 1.382-2T(f)(18) and other options (within the meaning of Treasury Regulation § 1.382-4(d)(9)) if characterized as stock under Treasury Regulation § 1.382-4(d) or under general principles of U.S. federal income tax law. If substantial uncertainty exists as to the designation of a particular nonstock instrument as Stock for this purpose, such instrument will be included in or excluded from the definition of Stock for a Person in a manner most likely to preserve Tax Benefits.
20. Stock Ownership means any direct or indirect ownership of Stock, including any ownership by virtue of application of constructive ownership rules, with such direct, indirect, and constructive ownership determined under the provisions of Section 382 of the Code and the regulations thereunder.
21. Tax Benefits means the net operating loss carryforwards, capital loss carryforwards, general business credit carryforwards, alternative minimum tax credit carryforwards and foreign tax credit carryforwards, as well as any loss or deduction attributable to a net unrealized built-in loss of the Corporation or any direct or indirect subsidiary thereof, within the meaning of Section 382 of the Code.
22. Transfer means, any direct or indirect sale, transfer, assignment, conveyance, claim of worthlessness subject to Section 382(g)(4)(D) of the Code, pledge or other disposition or other action taken by a Person, other than the Corporation, that alters the Percentage Stock Ownership of any Person. A Transfer also shall include the creation or grant of an option (including an option within the meaning of Treasury Regulation § 1.382-2T(h)(4)(v) or Treasury Regulation §1.382-4(d)(9)). For the avoidance of doubt, a Transfer shall not include the creation or grant of an option by the Corporation, nor shall a Transfer include the issuance of Stock by the Corporation.
23. Transferee means any Person to whom Corporation Securities are Transferred.
24. Treasury Regulations means the regulations, including temporary regulations or any successor regulations promulgated under the Code, as amended from time to time.
B. Transfer And Ownership Restrictions .
1. To preserve the Tax Benefits, from and after the Effective Date of this Article 10 any attempted Transfer of Corporation Securities prior to the Expiration Date and any attempted Transfer of Corporation Securities pursuant to an agreement entered into prior to the Expiration Date, shall be prohibited and void ab initio if, as a result of such Transfer (or any series of Transfers of which such Transfer is a part) (i) any Person or Persons would become a 4.75-percent Stockholder, or (ii) the Percentage Stock Ownership in the Corporation of any 4.75-percent Stockholder would be increased.
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2. To ensure the Corporations capacity purchase share agreements are not subject to early termination, from and after the Effective Date any attempted Transfer of Corporation Securities shall be prohibited and void ab initio if, as a result of such Transfer (or series of Transfers of which such Transfer is a part), a Change of Control would occur.
C. Exceptions .
1. Notwithstanding anything to the contrary in this Article 10 , Transfers to a Public Group shall be permitted.
2. The restrictions set forth in paragraph B of this Article 10 shall not apply to certain transactions approved by the Board of Directors, including, but not limited to, a merger or consolidation, in which all holders of Common Stock (and/or Corporation Securities) receive or are offered the same opportunity to receive, cash or other consideration for all such Common Stock (and/or Corporation Securities), and upon the consummation of which the acquirer will own at least a majority of the outstanding shares of Common Stock (and/or Corporation Securities), (B) a tender or exchange offer by the Corporation to purchase Corporation Securities, (C) a purchase program effected by the Corporation on the open market and not the result of a privately-negotiated transaction, or (D) any optional or required redemption of a Corporation Security pursuant to the terms of such security.
3. The restrictions set forth in paragraph B of this Article 10 shall not apply to an attempted Transfer (including, without limitation, a 4.75-percent Transaction) if the transferor or the Transferee obtains the written approval of the Board of Directors or a duly authorized committee thereof. As a condition to granting its approval pursuant to this paragraph C of Article 10 , the Board of Directors, may, in its discretion, require (at the expense of the transferor and/or Transferee) reasonable documentation, including, without limitation, an opinion of counsel or other tax advisor selected by the Board of Directors that the Transfer should not result in the application of any Section 382 of the Code limitation on the use of the Tax Benefits; provided that the Board may grant such approval notwithstanding the effect of such approval on the Tax Benefits if it determines that the approval is in the best interests of the Corporation. Further, the restrictions set forth in paragraph B of this Article 10 shall not apply to an attempted Transfer (including, without limitation, a 4.75-percent Transaction) if the Board determines (treating all holder of Common Stock similarly) in its reasonable discretion that such restrictions are not necessary to preserve the value of the Tax Benefits. The Board of Directors may impose any conditions that it deems reasonable and appropriate in connection with any approval granted pursuant to this subparagraph (3), including, without limitation, restrictions on the ability of any Transferee to Transfer Stock acquired through a Transfer. The Board of Directors, to the fullest extent permitted by law, may exercise the authority granted by this Article 10 through duly authorized officers or agents of the Corporation. Nothing in this paragraph C of this Article 10 shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law.
D. Excess Securities .
1. No employee or agent of the Corporation shall record any Prohibited Transfer, and the purported transferee of such a Prohibited Transfer (the Purported Transferee ) shall not be recognized as a stockholder of the Corporation for any purpose whatsoever in respect of the Corporation Securities which are the subject of the Prohibited Transfer (the Excess Securities ). Until the Excess Securities are acquired by another person in a Transfer that is not a Prohibited Transfer, the Purported Transferee shall not be entitled with respect to such Excess Securities to any rights as a stockholder of the Corporation, including, without limitation, the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, and the Excess Securities shall be deemed to remain with the transferor unless and until the Excess Securities are Transferred to the Agent pursuant to paragraph E of this Article 10 or until an approval is obtained under paragraph C of this Article 10 . After the Excess Securities have been acquired in a Transfer that is not a Prohibited Transfer, the Corporation Securities shall cease to be Excess Securities. For this purpose, any Transfer of Excess Securities not in accordance with the provisions of paragraphs D or E of this Article 10 shall also be a Prohibited Transfer.
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2. The Corporation may require as a condition to the registration of the Transfer of any Corporation Securities or the payment of any distribution on any Corporation Securities that the proposed Transferee or payee furnish to the Corporation all information reasonably requested by the Corporation with respect to its direct or indirect ownership interests in such Corporation Securities. The Corporation may make such arrangements or issue such instructions to its stock transfer agent as may be determined by the Board of Directors to be necessary or advisable to implement this Article 10 , including, without limitation, authorizing such transfer agent to require an affidavit from a Purported Transferee regarding such Persons actual and constructive ownership of stock and other evidence that a Transfer will not be prohibited by this Article 10 as a condition to registering any transfer.
E. Transfer To Agent; Rescission .
If the Board of Directors determines that an attempted Transfer of Corporation Securities constitutes a Prohibited Transfer then, upon written demand by the Corporation sent within thirty days of the date on which the Board of Directors determines that the attempted Transfer would result in Excess Securities, then, at the election of the Board of Directors, (1) the Purported Transferee and the transferor shall take all steps necessary to rescind the Prohibited Transfer or (ii) shall Transfer or cause to be Transferred any certificate or other evidence of ownership of the Excess Securities within the Purported Transferees possession or control, together with any Prohibited Distributions, to an agent designated by the Board of Directors (the Agent ). The Agent shall thereupon sell to a buyer or buyers, which may include the Corporation, the Excess Securities transferred to it in one or more arms-length transactions (on the public securities market on which such Excess Securities are traded, if possible, or otherwise privately); provided, however , that any such sale must not constitute a Prohibited Transfer and, provided, further, that the Agent shall effect such sale or sales in an orderly fashion and shall not be required to effect any such sale within any specific time frame if, in the Agents discretion, such sale or sales would disrupt the market for the Corporation Securities or otherwise would adversely affect the value of the Corporation Securities. If the Purported Transferee has resold the Excess Securities before receiving the Corporations demand to surrender Excess Securities to the Agent, the Purported Transferee shall be deemed to have sold the Excess Securities for the Agent, and shall be required to transfer to the Agent any Prohibited Distributions and proceeds of such sale, except if the Corporation grants written permission to the Purported Transferee to retain a portion of such sales proceeds not exceeding the amount that the Purported Transferee would have received from the Agent pursuant to paragraph F of this Article 10 if the Agent rather than the Purported Transferee had resold the Excess Securities.
F. Application Of Proceeds And Prohibited Distributions .
The Agent shall apply any proceeds of a sale by it of Excess Securities and, if the Purported Transferee has previously resold the Excess Securities, any amounts received by it from a Purported Transferee, together, in either case, with any Prohibited Distributions, as follows: (a) first, such amounts shall be paid to the Agent if necessary to cover its costs and expenses incurred in connection with its duties hereunder; (b) second, any remaining amounts shall be paid to the Purported Transferee, up to the amount paid by the Purported Transferee for the Excess Securities (or the fair market value at the time of the Transfer, in the event the purported Transfer of the Excess Securities was, in whole or in part, a gift, inheritance or similar Transfer) which amount shall be determined at the discretion of the Board of Directors; and (c) third, any remaining amounts shall be paid to one or more organizations qualifying under section 501(c)(3) of the Code (or any comparable successor provision) selected by the Board of Directors. The Purported Transferee of Excess Securities shall have no claim, cause of action or any other recourse whatsoever against any transferor of Excess Securities. The Purported Transferees sole right with respect to such shares shall be limited to the amount payable to the Purported Transferee pursuant to this paragraph F of Article 10 . In no event shall the proceeds of any sale of Excess Securities pursuant to this paragraph F of Article 10 inure to the benefit of the Corporation or the Agent, except if used to cover costs and expenses incurred by Agent in performing its duties hereunder.
G. Modification Of Remedies For Certain Indirect Transfers .
In the event of any Transfer which does not involve a transfer of securities of the Corporation within the meaning of applicable law ( Securities, and individually, a Security ) but which would cause a 4.75-percent Stockholder to violate a restriction on Transfers provided for in this Article 10 , the application of paragraphs E and F of this Article 10 shall be modified as described in this paragraph G of this Article 10 . In such case, no such 4.75-percent Stockholder shall be required to dispose of any interest that is not a Security, but such 4.75-percent
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Stockholder and/or any Person whose ownership of Securities is attributed to such 4.75-percent Stockholder shall be deemed to have disposed of and shall be required to dispose of sufficient Securities (which Securities shall be disposed of in the inverse order in which they were acquired) to cause such 4.75-percent Stockholder, following such disposition, not to be in violation of this Article 10 . Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this provision, and such number of Securities that are deemed to be disposed of shall be considered Excess Securities and shall be disposed of through the Agent as provided in paragraphs E and F of this Article 10 , except that the maximum aggregate amount payable either to such 4.75-percent Stockholder, or to such other Person that was the direct holder of such Excess Securities, in connection with such sale shall be the fair market value of such Excess Securities at the time of the purported Transfer. All expenses incurred by the Agent in disposing of such Excess Stock shall be paid out of any amounts due such 4.75-percent Stockholder or such other Person. The purpose of this paragraph G of Article 10 is to extend the restrictions in paragraphs B and E of this Article 10 to situations in which there is a 4.75-percent Transaction without a direct Transfer of Securities, and this paragraph G of Article 10 , along with the other provisions of this Article 10 , shall be interpreted to produce the same results, with differences as the context requires, as a direct Transfer of Corporation Securities.
H. Legal Proceedings; Prompt Enforcement .
If the Purported Transferee fails to rescind the transaction or surrender the Excess Securities or the proceeds of a sale thereof to the Agent within thirty days from the date on which the Corporation makes a written demand pursuant to paragraph E of this Article 10 (whether or not made within the time specified in paragraph E of this Article 10 ), then the Corporation shall promptly take all reasonable actions which the Board of Directors believes are appropriate to enforce the provisions hereof, including the institution of legal proceedings to compel the surrender. Nothing in this paragraph H of Article 10 shall (i) be deemed inconsistent with any Transfer of the Excess Securities provided in this Article 10 being void ab initio , (ii) preclude the Corporation in its discretion from immediately bringing legal proceedings without a prior demand or (iii) cause any failure of the Corporation to act within the time periods set forth in paragraph E of this Article 10 to constitute a waiver or loss of any right of the Corporation under this Article 10 . The Board of Directors may authorize such additional actions as it deems advisable to give effect to the provisions of this Article 10 .
I. [ Intentionally Deleted .]
J. Obligation To Provide Information .
As a condition to the registration of the Transfer of any Stock, any Person who is a beneficial, legal or record holder of Stock, and any proposed Transferee and any Person controlling, controlled by or under common control with the proposed Transferee, shall provide such information as the Corporation may reasonably request from time to time to determine compliance with this Article 10 or the status of the Tax Benefits of the Corporation.
K. Legends .
Any certificates issued by the Corporation evidencing ownership of shares of Stock that are subject to the restrictions on transfer and ownership contained in this Article 10 shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS SET FORTH IN THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION (AS THERETOFORE AMENDED, THE CHARTER), OF THE CORPORATION. A COPY OF THE CHARTER CONTAINING SUCH TRANSFER RESTRICTIONS IS AVAILABLE UPON WRITTEN REQUEST TO THE CORPORATIONS CORPORATE SECRETARY AT ITS PRINCIPAL PLACE OF BUSINESS.
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L. Authority Of Board Of Directors .
1. The Board of Directors shall have the power to determine all matters necessary for assessing compliance with this Article 10 , including, without limitation, (i) the identification of 4.75-percent Stockholders, (ii) whether a Transfer is a 4.75-percent Transaction or a Prohibited Transfer, (iii) the Percentage Stock Ownership in the Corporation of any 4.75-percent Stockholder, (iv) whether an instrument constitutes a Corporation Security or Stock, (v) the amount (or fair market value) due to a Purported Transferee pursuant to paragraph F of this Article 10 , and (vi) any other matters which the Board of Directors determines to be relevant; and the good faith determination of the Board of Directors on such matters shall be conclusive and binding for all the purposes of this Article 10 . In addition, the Board of Directors may, if permitted by law, from time to time establish, modify, amend or rescind bylaws, regulations and procedures of the Corporation not inconsistent with the provisions of this Article 10 (including, without limitation, for purposes of determining whether any Transfer of Corporation Securities would jeopardize the Corporations ability to preserve and use the Tax Benefits) and for the orderly application, administration and implementation of this Article 10 .
2. Nothing contained in this Article 10 shall limit the authority of the Board of Directors to take such other action if permitted by law as it deems necessary or advisable in preserving the Tax Benefits or otherwise. Without limiting the generality of the foregoing, in the event of a change in law making one or more of the following actions necessary or desirable, the Board of Directors may, by adopting a written resolution, (i) accelerate or extend the Expiration Date, (ii) modify the ownership interest percentage in the Corporation or the Persons or groups covered by this Article 10 , (iii) modify the definitions of any terms set forth in this Article 10 or (iv) modify the terms of this Article 10 as appropriate, in the instance of the restriction in B(1) of Article 10 only, to prevent an ownership change for purposes of Section 382 of the Code as a result of any changes in applicable Treasury Regulations or otherwise; provided, however , that in such instance only the Board of Directors shall not cause there to be such acceleration, extension or modification unless it determines, by adopting a written resolution, that such action is reasonably necessary or advisable to preserve the Tax Benefits or that the continuation of these restrictions is no longer reasonably necessary for the preservation of the Tax Benefits. Stockholders of the Corporation shall be notified of such determination through a filing with the Securities and Exchange Commission or such other method of notice as the Secretary of the Corporation shall deem appropriate.
3. In the case of an ambiguity in the application of any of the provisions of this Article 10 , including any definition used herein, the Board of Directors shall have the power to determine the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. In the event this Article 10 requires an action by the Board of Directors but fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Article 10 . All such actions, calculations, interpretations and determinations which are done or made by the Board of Directors in good faith shall be conclusive and binding on the Corporation, the Agent, and all other parties for all other purposes of this Article 10 . The Board of Directors may delegate all or any portion of its duties and powers under this Article 10 to a committee of the Board of Directors as it deems necessary or advisable and, to the fullest extent permitted by law, may exercise the authority granted by this Article 10 through duly authorized officers or agents of the Corporation. Nothing in this Article 10 shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law.
M. Reliance .
To the fullest extent permitted by law, the Corporation and the members of the Board of Directors shall be fully protected in relying in good faith upon the information, opinions, reports or statements of the chief executive officer, the chief financial officer, the chief accounting officer or the corporate controller of the Corporation and the Corporations legal counsel, independent auditors, transfer agent, investment bankers or other employees and agents in making the determinations and findings contemplated by this Article 10 . The members of the Board of Directors and officers of the Corporation shall not be responsible for any good faith errors made in connection therewith. For purposes of determining the existence and identity of, and the amount of any Corporation Securities which are described in Rule 13d-1(d) of Regulation 13D-G and are owned by any stockholder, the Corporation is entitled to rely on the existence and absence of filings of Schedule 13D or 13G under the Securities and Exchange Act of 1934, as amended (or similar filings), as of any date, subject to its actual knowledge of the ownership of Corporation Securities.
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N. Benefits Of This Article 10 .
Nothing in this Article 10 shall be construed to give to any Person other than the Corporation or the Agent any legal or equitable right, remedy or claim under this Article 10 . This Article 10 shall be for the sole and exclusive benefit of the Corporation and the Agent.
O. Severability .
If any provision of this Article 10 or the application of any such provision to any Person or under any circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Article 10 .
P. Waiver .
With regard to any power, remedy or right provided herein or otherwise available to the Corporation or the Agent under this Article 10 , (i) the Board of Directors shall have full power and authority to waive any condition or provision on behalf of the Corporation or the Agent; (ii) no waiver will be effective unless expressly contained in a writing signed by the waiving party; and (iii) no alteration, modification or impairment will be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.
ARTICLE 11
AMENDMENTS
The Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner, and subject to approval by stockholders as now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation; provided that any amendment to this Article 11 shall be effective only upon the affirmative vote of the holders of at least two-thirds of the voting power of the shares of the then outstanding stock of the Corporation, voting together as a single class.
ARTICLE 12
DEEMED NOTICE AND CONSENT
To the fullest extent permitted by law, each and every natural person, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity purchasing or otherwise acquiring any interest (of any nature whatsoever) in any shares of the capital stock of the Corporation shall be deemed, by reason of and from and after the time of such purchase or other acquisition, to have notice of and to have consented to all of the provisions of (a) the Articles of Incorporation (including, without limitation, this Article 12 ), (b) the Bylaws and (c) any amendment to the Articles of Incorporation or the Bylaws enacted or adopted in accordance with the Articles of Incorporation, the Bylaws and applicable law.
IN WITNESS WHEREOF, I have executed this Certificate of Second Amended and Restated Articles of Incorporation of Mesa Air Group, Inc. as of __________, 2018.
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Name: |
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Exhibit 3.4
AMENDED AND RESTATED BYLAWS
OF
MESA AIR GROUP, INC.
a Nevada corporation
As Amended and Restated Effective as of , 2018
ARTICLE I
OFFICES
1.1 Principal Office and Registered Office . The principal office and place of business of Mesa Air Group, Inc. (the Corporation ) shall be at such location as established from time to time by resolution of the board of directors of the Corporation (the Board ). The street address of the Corporations registered agent is the registered office of the Corporation in Nevada.
1.2 Other Offices . The Corporation may have other offices, either within or outside the State of Nevada, at such place or places as the Board may determine or the business of the Corporation may require from time to time.
ARTICLE II
STOCKHOLDERS MEETINGS
2.1 Place of Meetings . All meetings of stockholders shall be held at such place (if any) within or outside of the State of Nevada as may be determined from time to time by the Board or, if not determined by the Board, by the Chairman of the Board, the President or the Chief Executive Officer; provided, however that the Board may, in its sole discretion, determine that any meeting of stockholders shall not be held at any place but shall be held solely by means of electronic communications, videoconferencing, teleconferencing or other available technology authorized by and in accordance with the Nevada Revised Statutes ( NRS ), provided that the Corporation has implemented reasonable measures to: (a) verify the identity of each person participating through such means as a stockholder; and (b) provide the stockholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to communicate, and to read or hear the proceedings of the meetings in a substantially concurrent manner with such proceedings.
2.2 Annual Meeting . Each annual meeting of the stockholders shall be held at such time and date as the Board shall determine. At each annual meeting of the stockholders, the stockholders shall elect directors and transact such other business as has been properly brought before the meeting in accordance with this Section 2 . To be properly brought before an annual meeting, nominations and other business must be: (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof), (ii) otherwise properly brought before the meeting by or at the direction of the Board, or (iii) otherwise properly brought before the meeting by a stockholder of record at the time of giving notice provided for in the Corporations bylaws (as amended from time to time, the Bylaws ), who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2 .
2.3 Special Meetings . Special meetings of stockholders may be called at any time only by any two or more directors, the Chairman of the Board, the Chief Executive Officer, or the President, for any purpose or purposes prescribed in the notice of the meeting and shall be held on such date and at such time as the Board may fix. Business transacted at any special meeting of stockholders shall be confined to the purpose or purposes stated in the notice of meeting. Except as otherwise restricted by the Corporations articles of incorporation (as amended from time to time, the Articles of Incorporation ) or applicable law, the Board may postpone, reschedule or cancel any special meeting of stockholders.
2.4 Record Dates .
(a) For the purpose of determining the stockholders entitled to notice of and to vote at any meeting of stockholders or any adjournment or postponement thereof, or entitled to receive payment of any distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, if applicable.
(b) If no record date is fixed, the record date for determining stockholders: (i) entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the date on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (ii) for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment or postponement of the meeting; provided, however , that the Board may fix a new record date for the adjourned or postponed meeting and must fix a new record date if the meeting is adjourned or postponed to a date more than sixty (60) days later than the meeting date set for the original meeting.
2.5 Notice of Meetings; Waiver of Notice . Except as otherwise provided by applicable law, a written notice of each annual and special meeting of the stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of such meeting to each stockholder of record of the Corporation entitled to vote at such meeting stating the time and place of the meeting and the purpose or purposes for which the meeting is called. Such notice shall be (a) mailed postage prepaid to a stockholder at the stockholders address as it appears on the stock books of the Corporation, or (b) delivered to a stockholder by any other method of delivery permitted at such time by the NRS and other applicable law and by the rules of any exchange on which the Corporations shares are listed at such time. The written certificate of the individual signing a notice of meeting, setting forth the substance of the notice or having a copy thereof attached, the date the notice was mailed or otherwise delivered to the stockholders and the addresses to which the notice was mailed shall be prima facie evidence of the manner and fact of giving such notice. Any stockholder may waive notice of any meeting by a signed writing, either before or after the meeting. Such waiver of notice shall be deemed the equivalent of the giving of such notice.
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2.6 Quorum; Adjournment . Except as otherwise provided by law or the Bylaws, the holders of a majority of the shares of the capital stock of the corporation entitled to vote at the meeting, present in person or represented by proxy, regardless of whether the proxy has authority to vote on all matters, shall constitute a quorum for the transaction of business. Where a separate class vote by a class or classes or series is required by the NRS, the Articles of Incorporation or the Bylaws, a majority of the shares of such class or classes or series present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter. Regardless of whether or not a quorum is present or represented at any annual or special meeting of the stockholders, the chairman of the meeting, or, in the absence of such person, any officer entitled to preside at or to act as secretary of such meeting, or the holders of a majority of the shares of stock entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at such meeting, until a quorum shall be present in person or represented by proxy, provided, however , that if a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally noticed.
2.7 Voting .
(a) Unless otherwise provided in the NRS or the Articles of Incorporation (including the certificate of designation relating to any outstanding class or series of the Corporations capital stock), each stockholder of record, or such stockholders duly authorized proxy, shall be entitled to one (1) vote for each share of voting stock standing registered in such stockholders name at the close of business on the record date.
(b) If a quorum is present, unless the Articles of Incorporation, the Bylaws, the rules or regulations of any stock exchange applicable to the Corporation, Chapter 78 of the NRS or other applicable law provides for a different proportion, action by the stockholders entitled to vote on a matter, other than the election of directors, is approved by and is the act of the stockholders if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, unless voting by classes or series is required for any action of the stockholders by the NRS, the Articles of Incorporation or the Bylaws, in which case the number of votes cast in favor of the action by the voting power of each such class or series must exceed the number of votes cast in opposition to the action by the voting power of each such class or series.
(c) If a quorum is present, directors shall be elected by a plurality of the votes cast.
(d) In determining the right to vote shares of the Corporation pursuant to this Section 2.7 or otherwise, the Corporation may rely on any instruments or statements presented to it, provided that the Corporation has the right, but not the obligation, to require and review such proof of ownership and voting rights as it determines in good faith. The Corporation is entitled to reject a vote, consent, waiver or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the
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validity of the signature on it or about the signatorys authority to sign for the stockholder. All decisions of the Corporation shall be valid and binding unless and until a court of competent jurisdiction determines otherwise.
2.8 Proxies . Each stockholder entitled to vote at a meeting of stockholders may authorize, in a manner permitted by the NRS, another person or persons to act for such stockholder by proxy. Every proxy shall continue in full force and effect until its expiration or revocation in a manner permitted by the NRS. A proxy may be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient to support an irrevocable power. Subject to the above, any proxy may be revoked if an instrument or transmission revoking it or a properly created proxy bearing a later date is filed with or transmitted to the Secretary or another person appointed by the Corporation to count the votes of stockholders and determine the validity of proxies and ballots, or, in the case of a meeting of stockholders, the stockholder revokes the proxy by attending the meeting and voting the stockholders shares in person, in which case, any vote cast by the person or persons designated by the stockholder to act as a proxy or proxies must be disregarded by the Corporation when the votes are counted.
2.9 Director Nominations . Subject to the rights, if any, of the holders of preferred stock to nominate and elect directors, nominations of persons for election to the Board may be made by the Board, by a committee appointed by the Board or by any stockholder of record entitled to vote in the election of directors who complies with the notice procedures set forth in Section 2.10 .
2.10 Advance Notice of Stockholder Proposals and Director Nominations by Stockholders .
(a) Annual Meetings of Stockholders .
(i) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (A) pursuant to the Corporations notice of meeting (or any supplement thereto), (B) by or at the direction of the Board or a committee appointed by the Board or (C) by any stockholder who (1) was a stockholder of record at the time the notice provided for in this Section 2.10 is delivered to the Secretary and at the time of the annual meeting, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.10 or (2) properly made such proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the Exchange Act ), which proposal has been included in the proxy statement for the annual meeting.
(ii) For any nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to this Section 2.10 , the stockholder must have given timely notice thereof in writing to the Secretary and must provide any updates or supplements to such notice at the times and in the forms required by this Section 2.10 , and any such proposed business (other than the nominations of persons for election to the Board) must constitute a proper matter for stockholder action. To be timely, a stockholders notice shall be
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delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day, prior to the first anniversary of the preceding years annual meeting ( provided, however , that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation). In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholders notice as described above. To be in proper form, such stockholders notice must:
(1) as to each person whom the stockholder proposes to nominate for election as a director of the Corporation, set forth (A) the name, age, business address and residence address of the nominee; (B) the principal occupation or employment of the nominee; (C) the class and number of shares of the Corporation which are owned by the nominee, including shares beneficially owned and shares held of record; (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the Corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (E) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (F) a written statement executed by the nominee acknowledging that as a director of the Corporation, the nominee will owe fiduciary duties under Nevada law as a director of a corporation, and (G) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required, in each case pursuant to Section 14A of the Exchange Act (including without limitation the nominees written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected);
(2) as to any other business that the stockholder proposes to bring before the meeting, set forth (A) a brief description of the business desired to be brought before the meeting, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the exact phrasing of the proposed amendment), (C) the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and (D) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14A of the Exchange Act; and
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(3) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, set forth (A) the name and address of such stockholder, as they appear on the Corporations books, and of such beneficial owner, (B) the class or series and number of shares of stock which are owned beneficially and of record by such stockholder and such beneficial owner, except that such stockholder shall in all events be deemed to beneficially own any shares of any class or series of stock of the Corporation as to which such stockholder has a right to acquire beneficial ownership at any time in the future, (C) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominee, (D) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholders notice by, or on behalf of, such stockholder and such beneficial owners, whether or not such instrument or right shall be subject to settlement in underlying shares of stock of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to securities of the Corporation, (E) a representation that the stockholder is a holder of record of stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (F) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of outstanding stock required to approve or adopt the proposal or elect the nominee and/or (y) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination, (G) any material pending or threatened legal proceeding in which such stockholder is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (H) any other material relationship between such stockholder, on the one hand, and the Corporation or any affiliate of the Corporation, on the other hand, and (I) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14A of the Exchange Act and the rules and regulations promulgated thereunder.
The foregoing notice requirements of this Section 2.10(a) shall be deemed satisfied by a stockholder with respect to business other than a nomination for election as a director of the Corporation if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholders proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee for election as a director of the Corporation to furnish such other information as the Corporation may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.
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(iii) Notwithstanding anything in the second sentence of Section 2.10(a)(ii) of the Bylaws to the contrary, in the event that the number of directors to be elected to the Board at the annual meeting is increased effective after the time period for which nominations would otherwise be due under Section 2.10(a)(ii) of the Bylaws and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding years annual meeting, a stockholders notice required by this Section 2.10 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement of such increase is first made by the Corporation.
(b) Special Meetings of Stockholders . The only business to be conducted at a special meeting of stockholders is that brought before the meeting pursuant to the Corporations notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporations notice of meeting (1) by or at the direction of the Board or a committee appointed by the Board or (2) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder who is a stockholder of record at the time the notice provided for in this Section 2.10 is delivered to the Secretary, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 2.10 . In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporations notice of meeting, if the stockholders notice required by Section 2.10(a)(ii) of the Bylaws shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or, if the first public announcement of the date of such special meeting is less than 100 days prior to the date of such special meeting, the close of business on the tenth (10th) day following the day on which the Corporation makes a public announcement of the date of the special meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholders notice as described above.
(c) General.
(i) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 2.10 shall be eligible to be elected at an annual or special meeting of stockholders to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.10 . Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (A) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.10 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made or solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholders nominee or proposal in compliance with
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such stockholders representation as required by Section 2.13(a)(ii)(4)(F) of the Bylaws) and (B) if any proposed nomination or business was not made or proposed in compliance with this Section 2.10 , to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.10 , unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.10 , to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
(ii) For purposes of this Section 2.10 , public announcement shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or other national news service or in a document publicly filed by the Corporation with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.
(iii) Notwithstanding the foregoing provisions of this Section 2.10 , a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.10 ; provided, however , that any references in the Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.10 (including clause (a)(ii)(3) ) hereof and clause (b) hereof), and compliance with clauses (a)(ii)(3) and (b) of this Section 2.10 shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the clause (a)(i) hereof, business other than nominations brought properly under and in compliance with Rule 14a-8 promulgated under the Exchange Act, as may be amended from time to time). Nothing in this Section 2.10 shall be deemed to affect any rights (x) of stockholders to request inclusion of proposals or nominations in the Corporations proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (y) of the holders of any series of preferred stock of the Corporation to elect directors pursuant to any applicable provisions of the Articles of Incorporation.
(iv) A stockholder providing notice of its intent to propose business or to nominate a person for election to the Board shall update and supplement its notice to the Corporation, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.10 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days
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prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
2.11 Conduct of Business . Subject to the requirements of the NRS and the express provisions of the Articles of Incorporation and the Bylaws, all annual and special meetings of stockholders shall be conducted in accordance with such rules and procedures as the Board may determine and, as to matters not governed by such rules and procedures, as the chairman of such meeting shall determine. Meetings of stockholders shall be presided over by the Chairman of the Board of Directors, or, in the absence of the Chairman, by the Chief Executive Officer, if any, or if there be no Chief Executive Officer or in the absence of the Chief Executive Officer, by the President, or, in the absence of the President, or, in the absence of any of the foregoing persons, by a chairman designated by the Board of Directors, or by a chairman chosen at the meeting by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast.
2.12 No Action Without Meeting . Except as expressly provided by, and in accordance with, the Articles of Incorporation (including the certificate of designation relating to any outstanding class or series of the Corporations capital stock), no action shall be taken by the stockholders except at an annual or special meeting of stockholders called and noticed in the manner required by the Bylaws, nor may the stockholders under any circumstance take action by written consent in lieu of a meeting of stockholders.
ARTICLE III
BOARD OF DIRECTORS
3.1 General Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as otherwise provided in the NRS or the Articles of Incorporation.
3.2 Number and Term of Office . The authorized number of directors of the Corporation shall be not less than five (5) nor more than fifteen (15), with the number of directors within the foregoing fixed minimum and maximum established and changed from time to time solely by resolution adopted by the Board without amendment to the Bylaws or the Articles of Incorporation. All directors of the Corporation shall be at least 21 years of age and at least a majority of the directors shall be citizens of the United States. Subject to Section 3. 3, each director shall be elected to hold office for a one-year term expiring at the next annual meeting of stockholders.
3.3 Classification and Election . The Board shall not be classified. Each director shall hold office until his or her successor shall be elected or appointed and qualified or until his or her earlier death, retirement, disqualification, resignation or removal. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his or her term of office. No provision of this Section 3.3 shall restrict the right of the Board of Directors to fill vacancies or the right of the stockholders to remove directors, each as provided in the Bylaws.
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3.4 Vacancies and Newly Created Directorships . Subject to the rights of the holders of any series of Preferred Stock then outstanding, any newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the remaining directors then in office, though less than a quorum, or by a sole remaining director, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders and when his, her or their successors are elected or appointed, or until his, her or their earlier resignation or removal. No decrease in the number of authorized directors shall shorten the term of any incumbent director.
3.5 Removal of Directors . Subject to any rights of the holders of Preferred Stock, if any, and except as otherwise provided in the NRS, any director may be removed from office with or without cause by the affirmative vote of the holders of not less than two-thirds (2/3) of the voting power of the issued and outstanding stock of the Corporation entitled to vote generally in the election of directors (voting as a single class) excluding stock entitled to vote only upon the happening of a fact or event unless such fact or event shall have occurred.
3.6 Resignation . Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect at the time therein specified, and, unless otherwise specified in such resignation, the acceptance of such resignation shall not be necessary to make it effective.
3.7 Compensation . Each director, in consideration of his or her service as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at directors meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable out-of-pocket expenses, if any, incurred by such director in connection with the performance of his or her duties. Each director who shall serve as a member of any committee of directors, including as a chairman of such committee of directors, in consideration of serving as such shall be entitled to such additional amount per annum or such fees for attendance at committee meetings, or both, as the Board may from time to time determine, together with reimbursement for reasonable out-of-pocket expenses, if any, incurred by such director in the performance of his or her duties. Nothing contained in this Section 3.7 shall preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving proper compensation therefor.
3.8 Regular Meetings . Regular meetings of the Board may be held without notice at such time and place, either within or without the State of Nevada, as shall be determined from time to time by the Board.
3.9 Special Meetings . Special meetings of the Board may be held at any time or place, within or without the State of Nevada, whenever called by the Chairman, the President or the Secretary or by a majority of the directors then serving as directors on at least twenty-four (24) hours notice to each director given by one of the means specified in Section 5.7 hereof other than by mail, or on at least three (3) days notice if given by mail. Special meetings shall be called by the Chairman, President or Secretary in like manner and on like notice on the written request of a majority of the directors then serving as directors. Notwithstanding the foregoing, for a majority of directors then serving as directors to call a special meeting of the Board or
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request that a special meeting be called, they must first give the Chairman prior written notice of the calling of, or request for, a special meeting and the proposed agenda for such meeting at least 12 hours before calling for or requesting such meeting given by one of the means specified in Section 5.7 hereof other than by mail (or with at least two days notice if given by mail). In addition to the foregoing, if the Chairman determines that an emergency or other pressing issue exists that requires the consideration of the Board, the Chairman may call a special meeting of the Board upon three (3) hours notice given by electronic mail to the electronic mail address of each director on file with the Corporation.
3.10 Participation in Meetings by Telephone Conference Calls or Other Methods of Communication . Members of the Board or of any committee designated by the Board may participate in a meeting of the Board or such committee by any means of electronic communications, videoconferencing, teleconferencing or other available technology permitted under the NRS (including, without limitation, a telephone conference or similar method of communication by which all individuals participating in the meeting can hear each other) and utilized by the Corporation. If any such means are utilized, the Corporation shall, to the extent required under the NRS, implement reasonable measures to (a) verify the identity of each person participating through such means as a director or member of the committee, as the case may be, and (b) provide the directors or members of the committee a reasonable opportunity to participate in the meeting and to vote on matters submitted to the directors or members of the committee, including an opportunity to communicate, and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings. Participation in a meeting pursuant to this Section 3.10 constitutes presence in person at the meeting.
3.11 Quorum . A majority of the total number of authorized directors shall constitute a quorum at any meeting of the Board. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.
3.12 Action at Meeting . At any meeting of the Board at which a quorum is present, the vote of a majority of those directors present shall be sufficient to take any action, unless a different vote is specified by applicable law, the Articles of Incorporation or the Bylaws.
3.13 Action by Written Consent . Any action required or permitted to be taken at any meeting of the Board or of any committee of the Board may be taken without a meeting if all members of the Board or committee, as the case may be, consent to the action in writing. Such written consent shall be filed with the minutes of the proceedings of the Board and shall have the same force and effect as a unanimous vote of such directors.
3.14 Committees . The Board may, by resolution, designate one or more committees, each committee to consist of one or more of the directors of the Corporation, with such lawfully delegated powers and duties as it therefor confers, by committee charter or otherwise, to serve at the pleasure of the Board. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to
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act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board and subject to the provisions of the NRS, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. The Board may remove any member from any committee at any time, with or without cause. Unless otherwise specified in the resolution of the Board designating a committee or the charter for such committee, at all meetings of such committee, a majority of the then-authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board conducts its business pursuant to this Article III.
ARTICLE IV
OFFICERS
4.1 Positions . The officers of the Corporation shall be a President, a Secretary, a Treasurer and such other officers as the Board may elect, including a Chairman, a Chief Executive Officer, a Chief Financial Officer, one or more Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers, who shall exercise such powers and perform such duties as shall be determined from time to time by resolution of the Board. The Board may elect one or more Vice Presidents as Executive Vice Presidents and may use descriptive words or phrases to designate the standing, seniority or areas of special competence of the Vice Presidents elected or appointed by it. Any number of offices may be held by the same person.
4.2 Election . The officers of the Corporation shall be elected by the Board at its annual meeting or at such other time or times as the Board shall determine.
4.3 Qualification . No officer need be a stockholder. Any two or more offices may be held by the same person.
4.4 Term of Office . Each officer of the Corporation shall hold office for the term for which he or she is elected and until such officers successor is elected and qualified or until such officers earlier death, resignation or removal.
4.5 Resignation and Removal . Any officer may resign at any time upon written notice to the Corporation. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective. Any officer may be removed at any time, with or without cause, by the Board. Any such removal or resignation shall be subject to the rights, if any, of the respective parties under any contract between the Corporation and such officer. The election of appointment of an officer shall not of itself create contract rights. Any vacancy occurring in any office of the Corporation may be filled by the Board.
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4.6 Chairman of the Board . The Chairman, if one shall have been appointed, shall preside at all meetings of the Board and shall exercise such powers and perform such other duties as shall be determined from time to time by resolution of the Board.
4.7 Chief Executive Officer . The Chief Executive Officer, subject to the supervision and control of the Board and any duly authorized committee of the Board, shall have the ultimate responsibility for the management and control of the business and affairs of the Corporation, and shall perform such other duties and have such other powers which are delegated to him or her by the Board, the Bylaws or as may be provided by law.
4.8 President . The President, subject to the supervision and control of the Board and any duly authorized committee of the, shall in general actively supervise and control the business and affairs of the Corporation. The President shall inform the Board as the Board may request and shall consult the Board, from time to time and as appropriate, concerning the business of the Corporation. The President shall perform such other duties and have such other powers which are delegated and assigned to him or her by the Board, the Bylaws or as may be provided by law.
4.9 Vice Presidents . The Board may elect one or more Vice Presidents. In the absence or disability of the President, or at the Presidents request, the Vice President or Vice Presidents, in order of their rank as fixed by the Board, and if not ranked, the Vice Presidents in the order designated by the Board, shall perform all of the duties of the President, and when so acting, shall have all the powers of, and be subject to all the restrictions on, the President. Each Vice President shall perform such other duties and have such other powers which are delegated and assigned to him or her by the Board, the Bylaws or as may be provided by law.
4.10 Secretary and Assistant Secretaries . The Secretary shall attend all meetings of the stockholders, the Board and any committees, and shall keep, or cause to be kept, the minutes of proceedings thereof in books provided for that purpose. He or she shall keep, or cause to be kept, a register of the stockholders and shall be responsible for the giving of notice of meetings of the stockholders, the Board and any committees thereof, and shall see that all notices are duly given in accordance with the provisions of the Bylaws or as required by law. The Secretary shall be custodian of the corporate seal, the records of the Corporation, the stock certificate books, transfer books and stock ledgers, and such other books and papers as the Board or appropriate committee thereof may direct. The Secretary shall perform all other duties commonly incident to the office and shall perform such other duties which are assigned to him or her by the Board, the Chief Executive Officer, the President, the Bylaws or as may be provided by law. An Assistant Secretary shall, at the request of the Secretary, or in the absence or disability of the Secretary, perform all the duties of the Secretary. He or she shall perform such other duties as are assigned to him or her by the Board, the Chief Executive Officer, the President, the Bylaws or as may be provided by law. In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the person presiding at the meeting shall designate a temporary secretary to keep a record of the meeting.
4.11 Treasurer and Assistant Treasurers . The Treasurer, subject to the order of the Board, shall have charge and custody of, and be responsible for, all of the money, funds, securities, receipts and valuable papers, documents and instruments of the Corporation, and all books and records relating thereto. The Treasurer shall keep, or cause to be kept, full and
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accurate books of accounts of the Corporations transactions, which shall be the property of the Corporation, and shall render financial reports and statements of condition of the Corporation when so requested by the Board, the Chairman of the Board, if any, the Chief Executive Officer or the President. The Treasurer shall perform all other duties commonly incident to the office and such other duties as may, from time to time, be assigned to him or her by the Board, the Chief Executive Officer, the President, the Bylaws or as may be provided by law. An Assistant Treasurer shall, at the request of the Treasurer, or in the absence or disability of the Treasurer, perform all the duties of the Treasurer. He or she shall perform such other duties which are assigned to him or her by the Board, the Chief Executive Officer, the President, the Treasurer, the Bylaws or as may be provided by law.
4.12 Chief Financial Officer . The Chief Financial Officer shall in general have overall supervision of the financial operations of the Corporation and shall perform such other duties and have such powers which are delegated and assigned to him or her by the Board, the Chief Executive Officer, the President, the Bylaws or as may be provided by law. Unless otherwise designated by the Board, the Chief Financial Officer shall be the Treasurer of the corporation.
4.13 Salaries . Officers of the Corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board.
ARTICLE V
GENERAL PROVISIONS
5.1 Certificates of Stock . The shares of stock of the Corporation shall be represented by certificates, or shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock, or a combination of both. Every holder of stock shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman, if any, or the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by such holder of stock in the Corporation. Any or all of the signatures upon a certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Articles of Incorporation, the Bylaws, applicable securities laws or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.
5.2 Transfers . Shares of stock of the Corporation shall be transferable in the manner prescribed by law and in the Bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holders attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the
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Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.
5.3 Lost, Stolen or Destroyed Certificates . The corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed, or it may issue uncertificated shares if the shares represented by such certificate have been designated as uncertificated shares in accordance with the Bylaws, upon such terms and conditions as the Board may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the Board may require for the protection of the corporation or any transfer agent or registrar.
5.4 Fiscal Year . The fiscal year of the corporation shall be as fixed by the Board.
5.5 Corporate Seal . The corporate seal shall be in such form as shall be approved by the Board.
5.6 Waiver of Notice . Whenever any notice whatsoever is required to be given by law, by the Articles of Incorporation or by the Bylaws, a waiver of such notice either in writing signed by the person entitled to such notice or such persons duly authorized attorney, or by electronic transmission or any other method permitted under the NRS, whether before, at or after the time stated in such waiver, or the appearance of such person or persons at such meeting in person or by proxy, shall be deemed equivalent to such notice. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance at any meeting shall constitute waiver of notice except attendance for the sole purpose of objecting to the timeliness
5.7 Notices . Except as otherwise specifically provided herein or required by law, all notices required to be given under the NRS, the Articles of Incorporation or the Bylaws to any stockholder, director or officer of the corporation shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by commercial courier service, or by facsimile or other electronic transmission, provided that notice to stockholders by electronic transmission shall be given in accordance with the applicable provisions of the NRS. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his, her or its last known physical or electronic, as applicable, address as the same appears on the books of the corporation. The time when such notice shall be deemed to be received shall be as set forth in the applicable provisions of the NRS.
5.8 Time Periods . In applying any provision of the Bylaws which require that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
6.1 Right to Indemnification . The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (a Covered Person ) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding ), by reason of the fact that he or she, or a person for whom he or she is legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity (an Other Entity ), including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except as otherwise provided in Section 6.3 , the Corporation shall be required to indemnify a Covered Person in connection with a Proceeding (or part thereof) commenced by such Covered Person only if the commencement of such Proceeding (or part thereof) by the Covered Person was authorized by the Board.
6.2 Prepayment of Expenses . The Corporation shall pay the expenses (including attorneys fees) incurred by a Covered Person in defending any Proceeding in advance of its final disposition, provided, however , that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under this Article VI or otherwise.
6.3 Claims . If a claim for indemnification or advancement of expenses under this Article 6 is not paid in full within 30 days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action, the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
6.4 Non-Exclusivity of Rights . The rights conferred on any person in this Article VI shall not be exclusive of any other right which such persons may have or hereafter acquire under any statute, provision of the Articles of Incorporation, the Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
6.5 Indemnification Contracts . The Board is authorized to enter into a contract with any director, officer, employee or agent of the corporation, or any person serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing for indemnification rights equivalent to or, if the Board so determines, greater than, those provided for in this Article VI.
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6.6 Other Sources . The Corporations obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of an Other Entity shall be reduced by any amount such Covered Person collects as indemnification or advancement of expenses from such Other Entity.
6.7 Effect of Amendment . Any amendment, repeal or modification of any provision of this Article VI shall not adversely affect any right or protection of any Covered Person in respect of any act or omission occurring prior to such amendment, repeal or modification.
6.8 Other Indemnification and Prepayment of Expenses . This Article VI shall not limit the right of the Corporation, to the extent and in the manner permitted by law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.
ARTICLE VII
LIMITATIONS ON OWNERSHIP BY NON-CITIZENS
7.1 Non-Citizen Voting and Ownership Limitations . It is the policy of the Corporation that, consistent with the requirements of Subtitle VII of Title 49 of the United States Code, as amended, or as the same may be from time to time amended (the Aviation Act ), that persons or entities who are not a citizen of the United States (as defined in Section 40102(a)(15) of the Aviation Act, in any similar legislation of the United States enacted in substitution or replacement thereof, and as interpreted by the Department of Transportation, its predecessors and successors, from time to time), including any agent, trustee or representative of such persons or entities (each, a Non-Citizen ), shall not be entitled to own (beneficially or of record) and/or control more than (a) 24.9% of the aggregate votes of all outstanding shares of capital stock of the Corporation (the Voting Cap Amount ) or (b) 49.0% of the total number of outstanding shares of capital stock of the Corporation (the Control Cap Amount ). If Non-Citizens nonetheless at any time own and/or control more than the Voting Cap Amount, the voting rights of the shares of capital stock in excess of the Voting Cap Amount shall be automatically suspended in accordance with Section 7.2 below. Further, if at any time a transfer or issuance of capital stock to a Non-Citizen would result in Non-Citizens owning more than the Control Cap Amount, such transfer or issuance shall be void and of no effect, in accordance with Section 7.2 below.
7.2 Foreign Stock Record .
(a) The Corporation or its transfer agent shall maintain a separate stock record, designated the Foreign Stock Record , for the registration of shares of capital stock held by Non-Citizens. It is the duty of each stockholder who is a Non-Citizen to register his, her or its shares of capital stock on the Foreign Stock Record. The beneficial ownership of shares of the Corporations capital stock by Non-Citizens shall be determined in conformity with regulations prescribed by the Board. Only shares that have been issued and are outstanding may be registered in the Foreign Stock Record. The Foreign Stock Record shall include (i) the name and nationality of each Non-Citizen owning shares of capital stock, (ii) the number of shares owned by each such Non-Citizen and (iii) the date of registration of such shares in the Foreign Stock Record.
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(b) In no event shall shares of capital stock of the Corporation owned (beneficially or of record) by Non-Citizens representing more than the Voting Cap Amount be voted. In the event that Non-Citizens shall own (beneficially or of record) or have voting control over any shares of capital stock, the voting rights of such persons shall be subject to automatic suspension to the extent required to ensure that the Corporation is in compliance with applicable provisions of law and regulations relating to ownership or control of a United States air carrier. Voting rights of shares owned (beneficially or of record) by Non-Citizens shall be suspended in reverse chronological order based upon the date of registration in the Foreign Stock Record.
(c) In the event that any transfer or issuance of shares of capital stock of the Corporation to a Non-Citizen would result in Non-Citizens owning (beneficially or of record) more than the Control Cap Amount, such transfer or issuance shall be void and of no effect and shall not be recorded in the Foreign Stock Record or the stock records of the Corporation. In the event that the Corporation shall determine that the shares of capital stock registered on the Foreign Stock Record or otherwise registered on the stock records of the Corporation and owned (beneficially or of record) by Non-Citizens, taken together (without duplication), exceed the Control Cap Amount, such number of shares shall be removed from the Foreign Stock Record and the stock records of the Corporation, as applicable, in reverse chronological order based on the date of registration in the Foreign Stock Record and the stock records of the Corporation, as applicable, and any transfer or issuance that resulted in such event shall be deemed void and of no effect, such that the Foreign Stock Record and the stock records of the Corporation, as applicable, reflect the ownership of shares without giving effect to any transfer or issuance that caused the Corporation to exceed the Control Cap Amount until the aggregate number of shares registered in the Foreign Stock Record or otherwise registered to Non-Citizens is equal to the Control Cap Amount.
7.3 Registration of Shares . Registry of the ownership of shares of capital stock of the Corporation by Non-Citizens shall be effected by written notice to, and in the form specified from time to time by, the Secretary of the Corporation. Subject to the limitations set forth in Section 7.2 , the order in which such shares shall be registered on the Foreign Stock Record shall be chronological, based on the date the Corporation received notice to so register such shares; provided that any Non-Citizen who purchases or otherwise acquires shares that are registered on the Foreign Stock Record and who registers such shares in its own name within 30 days of such acquisition will assume the position of the seller of such shares in the chronological order of shares registered on the Foreign Stock Record.
7.4 Certification of Shares .
(a) The Corporation may by notice in writing (which may be included in the form of proxy or ballot distributed to stockholders in connection with the annual meeting or any special meeting of the stockholders of the Corporation, or otherwise) require a person that is a holder of record of shares or that the Corporation knows to have, or has reasonable cause to believe has beneficial ownership of shares to certify in such manner as the Corporation shall deem appropriate (including by way of execution of any form of proxy or ballot of such person) that, to the knowledge of such person:
1) |
all shares as to which such person has record ownership or beneficial ownership are owned and controlled only by citizens of the United States; or |
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2) |
the number of shares of record or beneficially owned by such person that are owned and/or controlled by Non-Citizens is as set forth in such certificate. |
(b) With respect to any shares identified in response to clause (a)(2) above, the Corporation may require such person to provide further information as the Corporation may reasonably require in order to implement the provisions of this Article VII.
(c) For purposes of applying the provisions of this Article VII with respect to any shares, in the event of the failure of any person to provide the certificate or other information to which the Corporation is entitled pursuant to this Section 7.4 , the Corporation shall presume that the shares in question are owned and/or controlled by Non-Citizens.
ARTICLE VIII
AMENDMENTS
8.1 Amendment of Bylaws . The Bylaws may be altered, amended or repealed, and new bylaws made, only by the affirmative vote of (a) a majority of the Board, or (b) stockholders representing at least two-thirds or more of the votes eligible to be cast in an election of directors.
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Exhibit 4.3.6
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This Shareholders Agreement (this Shareholders Agreement or Agreement ) is made effective as of Feb 6, 2018 (the Effective Date ), by and among Mesa Air Group, Inc., a Nevada corporation (the Company ), and the undersigned holder (the Holders ) of the Common Stock and/or Warrants (each as defined below) set forth on the signature page of this Agreement.
RECITALS:
A. As of the date of this Agreement, there is outstanding 4,517,633 shares of common stock, no par value per share, of the Company (the Common Stock ) and warrants to purchase an aggregate of 4,892,250 shares of Common Stock (the Warrants ), for a fully diluted equity of 9,409,883 shares of Common Stock (the Companys Fully Diluted Equity ).
B. Holder desires to acquire Shares of Common Stock and 364,542 number of New Warrants from another Company shareholder, who is a party to a shareholders agreement with the Company, for a total holdings of 364,542 shares of the Companys Fully Diluted Equity.
C. In connection with Holders acquisition of such Common Stock and the Companys approval of such transfer, Holder has agreed to execute this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Voting of Common Stock . At every meeting of the stockholders of the Company (hereinafter Stockholders ) called subsequent to the date of this Agreement, and at every adjournment or postponement thereof, and on every action or approval by written consent, if any, of the Stockholders (collectively, the Company Actions ), Holder shall appear at the meeting or otherwise cause any Excess Voting Shares (as defined below) to be present thereat for purposes of establishing a quorum and, to the extent not voted by the persons appointed as proxies pursuant to this Agreement, to vote all Excess Voting Shares then held by such Stockholder with respect to any and all Company Actions in such manner as directed by a majority of the Board. Notwithstanding the foregoing, Stockholder shall be permitted to vote any shares of Common Stock that it holds in its sole discretion that do not consist of Excess Voting Shares.
The term Excess Voting Shares shall mean at any time those shares of Common Stock then held by Holder that are in excess of Holders percentage interest in the Companys Fully Diluted Equity. For purposes of example only, if Holder beneficially owns 1,000,000 shares of Common Stock and the Companys Fully Diluted Equity is 10,000,000 shares of Common Stock, then Holders percentage interest in the Companys Fully Diluted Equity is 10%. If, at the time of a Company Action the number of outstanding shares of Common Stock is 4,000,000, then Holder may only vote 400,000 of the 1,000,000 shares owned by Holder (i.e., 10% x 4,000,000) and the remaining 600,000 shares owned by Holder would be deemed Excess Voting Shares under this Agreement. For purposes of this Agreement, the parties agree that calculation of the percentages set forth in this Agreement at any time during the term of this Agreement shall be based on the then outstanding shares of Common Stock and the Companys Fully Diluted Equity at the time such calculation is being made (i.e., rather than being based on the numbers set forth in the first Recital of this Agreement).
2. Irrevocable Proxy . To secure Holders obligations to vote any Excess Voting Shares beneficially owned by Holder in accordance with the terms of this Agreement, Holder hereby appoints each member of the Board and any of them (the Grantees ), as Holders true and lawful proxy and attorney, with the power to act alone and with full power of substitution, for and in the name, place and stead of Holder, to vote the Excess Voting Shares or to instruct nominees or record holders to vote the Excess Voting Shares in accordance with Section 1 hereof and, in the discretion of the Grantees, with respect to any proposed adjournments or postponements of any meeting of stockholders of the Company at which any of the Company Actions are to be considered. The proxy and power granted by Holder pursuant to this Section 2 are coupled with an interest and are given to secure the performance of such partys duties under Section 1 . Each such proxy and power will be irrevocable for the Term. The proxy and power, so long as any party hereto is an individual, will survive the death, incompetency and disability of such party or any other individual affiliate holder of the Common Stock and, so long as any party hereto is an entity, will survive the merger or reorganization of such party or any other entity holding any Common Stock.
3. Transfer of Shares .
(a) Any transfer of shares of Common Stock and/or Warrants by Holder to another party (a Transferee ) shall be subject to, and made in compliance with, Article Eleventh of the Companys Amended and Restated Articles of Incorporation (as amended to date). In addition, Holder shall not be permitted at any time to transfer to any person any shares of Common Stock or any Warrants if such transfer would not be in compliance with the Securities Act of 1933, as amended, and the regulations promulgated thereunder, or any applicable state securities laws. For purposes of this Agreement, a transfer shall mean, with respect to any security, the direct or indirect assignment, sale, transfer, tender, exchange, pledge, hypothecation, or the gift, placement in trust, or other disposition of such security.
(b) Any Transferee shall be required to execute a copy of this Shareholders Agreement at the time of such transfer or such transfer shall be deemed null and void.
4. Representations and Warranties of Holder .
(a) Holder hereby represents and warrants to the Company as follows: (i) Holder is the beneficial or record owner of the shares of Common Stock and/or Warrants indicated on the signature page of this Agreement free and clear of any and all pledges, liens, security interests, mortgage, claims, charges, restrictions, options, title defects or encumbrances, in each case that would impair or adversely affect Holders ability to perform its obligations under this Agreement; (ii) Holder has full power and authority to make, enter into and carry out the terms of this Agreement and to grant the irrevocable proxy as set forth in Section 2 ; and (iii) this Agreement has been duly and validly executed and delivered by Holder and constitutes a valid and binding agreement of Holder enforceable against Holder in accordance with its terms. Holder agrees to notify the Company promptly of any proposed transfers of any shares of Common Stock or any Warrants.
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(b) As of the date hereof and for so long as this Agreement remains in effect, except for this Agreement or as otherwise permitted by this Agreement, Holder has full legal power, authority and right to vote all of shares of Common Stock then owned of record or beneficially by Holder without the consent or approval of, or any other action on the part of, any other person. Without limiting the generality of the foregoing, Holder has not entered into any voting agreement (other than this Agreement) with any person with respect to any shares of Common Stock or any Warrants (or any shares of Common Stock underlying any Warrants), granted any person any proxy (revocable or irrevocable) or power of attorney with respect to any shares of Common Stock or any Warrants (or any shares of Common Stock underlying any Warrants), deposited such shares of Common Stock or any Warrants (or any of the shares of Common Stock underlying any Warrants) in a voting trust or entered into any arrangement or agreement with any person limiting or affecting Holders legal power, authority or right to vote any shares of Common Stock on any matter.
(c) The execution and delivery of this Agreement and the performance by Holder of its agreements and obligations hereunder will not result in any breach or violation of or be in conflict with or constitute a default under any term of any agreement, judgment, injunction, order, decree, law, regulation or arrangement to which Holder is a party or by which Holder (or any of Holders assets) are bound, except for any such breach, violation, conflict or default which, individually or in the aggregate, would not impair or adversely affect Holders ability to perform its obligations under this Agreement or render inaccurate any of the representations made by Holder herein.
5. Representations and Warranties of the Company .
(a) The Company has full corporate power and authority to make, enter into and carry out the terms of this Agreement.
(b) This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms.
6. Effectiveness of Agreement; Termination .
(a) Effectiveness of Agreement . This Agreement and the voting obligations set forth herein shall become effective as of the date set forth in the introductory paragraph on page one of this Agreement.
(b) Termination . This Agreement shall terminate at such time as the Companys outstanding Warrants have been fully exercised and/or expired, as the case may be, or upon written agreement of the Company.
7. Restrictive Legend . All certificates representing Common Stock owned or hereafter acquired by Holder during the Term shall have affixed thereto a legend substantially in the following form:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHAREHOLDERS AGREEMENT, AS AMENDED FROM TIME TO TIME, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE SECRETARY OF THE COMPANY.
8. General .
(a) Severability . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(b) Specific Performance . In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement, the Company shall be entitled to specific performance of the agreements and obligations of Holder hereunder and to such other injunctive or other equitable relief as may be granted by a court of competent jurisdiction. The Company shall not be required to prove actual damages or post a bond with respect to such proceedings.
(c) Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY LAW OTHER THAN THAT OF NEVADA. COURTS WITHIN THE STATE OF NEVADA WILL HAVE JURISDICTION OVER ALL DISPUTES BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES HEREBY CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH PARTYS PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
(d) Waiver of Jury Trial . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
(e) Attorneys Fees . If any action that law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party will be entitled to recover reasonable attorneys fees and other costs incurred in such proceeding, in addition to any relief which such party may be entitled.
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(f) Notices . All notices, requests, claims, demands or other communications that are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered, if delivered by hand, (b) one business day after transmitted, if transmitted by a nationally recognized overnight courier service, (c) when telecopied, if telecopied (which is confirmed), or (d) three business days after mailing, if mailed by registered or certified mail (return receipt requested), to the parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8(f)):
(g) If to Company:
Mesa Air Group, Inc.
410 N. 44th Street, Suite 700
Phoenix, Arizona 85008
Attention: Brian S. Gillman
Telephone: (602) 685-4000
Facsimile: (602) 685-4350
With a simultaneous copy to:
DLA Piper LLP (US)
2525 E. Camelback Road, Suite 1000
Phoenix, Arizona 85016
Attention: Gregory R. Hall, Esq.
Telephone: (480) 606-5128
Facsimile: (480) 606-5528
(h) If to the Holder, the address specified on the Holders signature page hereto.
(i) Complete Agreement . This Agreement constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings relating to such subject matter.
(j) Amendments and Waivers . Except with respect to termination pursuant to Section 6, this Agreement may not be amended or terminated and the observance of any term hereunder may not be waived with respect to Holder without the written consent of the Board. Any term hereof may be amended and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by the written consent of the Board and Holder. Any amendment, termination or waiver effected in accordance with this Section 8(h) shall be binding on all parties hereto, even if they do not execute such consent. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
(k) Pronouns . Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.
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(l) Counterparts; Facsimile Signatures . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Agreement may be executed by facsimile or PDF electronic signatures.
(m) Section Headings and References . The section headings are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties. Any reference in this agreement to a particular section or subsection shall refer to a section or subsection of this Agreement, unless specified otherwise.
(n) Successors and Assigns . Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the parties hereto and their respective successors and assigns; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Common Stock or any Warrants to a Transferee specifying the full name and address of such Transferee, the Company may deem and treat the person listed as the holder of such Common Stock and/or Warrants in its records as the absolute owner and holder of such Common Stock and/or Warrants for all purposes.
(o) Third Parties . Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties to this Agreement and, their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement except as expressly provided in this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first above written.
COMPANY: | ||
Mesa Air Group, Inc. |
By: |
/s/ Brian S. Gillman |
Name: Brian S. Gillman | ||
Its: EVP & General Counsel |
[Signature Page to Shareholders Agreement]
HOLDER : Owl Creek Credit Opportunities Fund, L.P. By: Owl Creek Advisors, LLC, its Special Partner |
By: |
/s/ Reuben Kopel |
Name: Reuben Kopel | ||
Title: General Counsel | ||
Address: c/o Owl Creek Asset Management, L.P. 640 Fifth Avenue, 20 th FL NY, NY 10019 |
Warrants:
Warrants to Purchase an Aggregate of 310,888 Shares of Common Stock
Common Stock:
Shares of Common Stock: *
* |
Represents shares of Common Stock acquired on or about , 2018, from a Company stockholder |
[Signature Page to Shareholders Agreement]
HOLDER : Owl Creek Credit Opportunities Intermediate Fund, L.P. By: Owl Creek Advisors, LLC, its Special Partner |
By: |
/s/ Reuben Kopel |
Name: Reuben Kopel | ||
Title: General Counsel | ||
Address: c/o Owl Creek Asset Management, L.P. 640 Fifth Avenue, 20 th FL NY, NY 10019 |
Warrants:
Warrants to Purchase an Aggregate of 53,654 Shares of Common Stock
Common Stock:
Shares of Common Stock: *
* |
Represents shares of Common Stock acquired on or about , 2018, from a Company stockholder |
[Signature Page to Shareholders Agreement]
Exhibit 4.3.7
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This Shareholders Agreement (this Shareholders Agreement or Agreement ) is made effective as of Dec 13, 2017 (the Effective Date ), by and among Mesa Air Group, Inc., a Nevada corporation (the Company ), and the undersigned holder (the Holder ) of the Common Stock and/or Warrants (each as defined below) set forth on the signature page of this Agreement.
RECITALS:
A. As of the date of this Agreement, there is outstanding 4,510,024 shares of common stock, no par value per share, of the Company (the Common Stock ) and warrants to purchase an aggregate of 4,892,250 shares of Common Stock (the Warrants ), for a fully diluted equity of 9,402,274 shares of Common Stock (the Companys Fully Diluted Equity ).
B. This Amended and Restated Shareholders Agreement is being entered into by the Company and the undersigned Holder for the purpose of replacing and superseding in its entirety the Shareholders Agreement dated effective March 1, 2011, between the Company and Momar Corp.
C. Holder desires to acquire an additional 250,000 Shares of Common Stock from another Company shareholder to bring Holders total holdings to 451,981 shares of the Companys Fully Diluted Equity.
D. In connection with Holders acquisition of such Common Stock and the Companys approval of such transfer, Holder has agreed to execute this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Voting of Common Stock . At every meeting of the stockholders of the Company (hereinafter Stockholders ) called subsequent to the date of this Agreement, and at every adjournment or postponement thereof, and on every action or approval by written consent, if any, of the Stockholders (collectively, the Company Actions ), Holder shall appear at the meeting or otherwise cause any Excess Voting Shares (as defined below) to be present thereat for purposes of establishing a quorum and, to the extent not voted by the persons appointed as proxies pursuant to this Agreement, to vote all Excess Voting Shares then held by such Stockholder with respect to any and all Company Actions in such manner as directed by a majority of the Board. Notwithstanding the foregoing, Stockholder shall be permitted to vote any shares of Common Stock that it holds in its sole discretion that do not consist of Excess Voting Shares.
The term Excess Voting Shares shall mean at any time those shares of Common Stock then held by Holder that are in excess of Holders percentage interest in the Companys Fully Diluted Equity. For purposes of example only, if Holder beneficially owns 1,000,000 shares of Common Stock and the Companys Fully Diluted Equity is 10,000,000 shares of Common Stock, then Holders percentage interest in the Companys Fully Diluted Equity is 10%. If, at the time of a Company Action the number of outstanding shares of Common Stock is 4,000,000,
then Holder may only vote 400,000 of the 1,000,000 shares owned by Holder (i.e., 10% x 4,000,000) and the remaining 600,000 shares owned by Holder would be deemed Excess Voting Shares under this Agreement. For purposes of this Agreement, the parties agree that calculation of the percentages set forth in this Agreement at any time during the term of this Agreement shall be based on the then outstanding shares of Common Stock and the Companys Fully Diluted Equity at the time such calculation is being made (i.e., rather than being based on the numbers set forth in the first Recital of this Agreement).
2. Irrevocable Proxy. To secure Holders obligations to vote any Excess Voting Shares beneficially owned by Holder in accordance with the terms of this Agreement, Holder hereby appoints each member of the Board and any of them (the Grantees ), as Holders true and lawful proxy and attorney, with the power to act alone and with full power of substitution, for and in the name, place and stead of Holder, to vote the Excess Voting Shares or to instruct nominees or record holders to vote the Excess Voting Shares in accordance with Section 1 hereof and, in the discretion of the Grantees, with respect to any proposed adjournments or postponements of any meeting of stockholders of the Company at which any of the Company Actions are to be considered. The proxy and power granted by Holder pursuant to this Section 2 are coupled with an interest and are given to secure the performance of such partys duties under Section 1 . Each such proxy and power will be irrevocable for the Term. The proxy and power, so long as any party hereto is an individual, will survive the death, incompetency and disability of such party or any other individual affiliate holder of the Common Stock and, so long as any party hereto is an entity, will survive the merger or reorganization of such party or any other entity holding any Common Stock.
3. Transfer of Shares .
(a) Any transfer of shares of Common Stock and/or Warrants by Holder to another party (a Transferee ) shall be subject to, and made in compliance with, Article Eleventh of the Companys Amended and Restated Articles of Incorporation (as amended to date). In addition, Holder shall not be permitted at any time to transfer to any person any shares of Common Stock or any Warrants if such transfer would not be in compliance with the Securities Act of 1933, as amended, and the regulations promulgated thereunder, or any applicable state securities laws. For purposes of this Agreement, a transfer shall mean, with respect to any security, the direct or indirect assignment, sale, transfer, tender, exchange, pledge, hypothecation, or the gift, placement in trust, or other disposition of such security.
(b) Any Transferee shall be required to execute a copy of this Shareholders Agreement at the time of such transfer or such transfer shall be deemed null and void.
4. Representations and Warranties of Holder.
(a) Holder hereby represents and warrants to the Company as follows: (i) Holder is the beneficial or record owner of the shares of Common Stock and/or Warrants indicated on the signature page of this Agreement free and clear of any and all pledges, liens, security interests, mortgage, claims, charges, restrictions, options, title defects or encumbrances, in each case that would impair or adversely affect Holders ability to perform its obligations under this Agreement; (ii) Holder has full power and authority to make, enter into and carry out
2
the terms of this Agreement and to grant the irrevocable proxy as set forth in Section 2; and (iii) this Agreement has been duly and validly executed and delivered by Holder and constitutes a valid and binding agreement of Holder enforceable against Holder in accordance with its terms. Holder agrees to notify the Company promptly of any proposed transfers of any shares of Common Stock or any Warrants.
(b) As of the date hereof and for so long as this Agreement remains in effect, except for this Agreement or as otherwise permitted by this Agreement, Holder has full legal power, authority and right to vote all of shares of Common Stock then owned of record or beneficially by Holder without the consent or approval of, or any other action on the part of, any other person. Without limiting the generality of the foregoing, Holder has not entered into any voting agreement (other than this Agreement) with any person with respect to any shares of Common Stock or any Warrants (or any shares of Common Stock underlying any Warrants), granted any person any proxy (revocable or irrevocable) or power of attorney with respect to any shares of Common Stock or any Warrants (or any shares of Common Stock underlying any Warrants), deposited such shares of Common Stock or any Warrants (or any of the shares of Common Stock underlying any Warrants) in a voting trust or entered into any arrangement or agreement with any person limiting or affecting Holders legal power, authority or right to vote any shares of Common Stock on any matter.
(c) The execution and delivery of this Agreement and the performance by Holder of its agreements and obligations hereunder will not result in any breach or violation of or be in conflict with or constitute a default under any term of any agreement, judgment, injunction, order, decree, law, regulation or arrangement to which Holder is a party or by which Holder (or any of Holders assets) are bound, except for any such breach, violation, conflict or default which, individually or in the aggregate, would not impair or adversely affect Holders ability to perform its obligations under this Agreement or render inaccurate any of the representations made by Holder herein.
5. Representations and Warranties of the Company .
(a) The Company has full corporate power and authority to make, enter into and carry out the terms of this Agreement.
(b) This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms.
6. Effectiveness of Agreement; Termination .
(a) Effectiveness of Agreement . This Agreement and the voting obligations set forth herein shall become effective as of the date set forth in the introductory paragraph on page one of this Agreement.
(b) Termination . This Agreement shall terminate at such time as the Companys outstanding Warrants have been fully exercised and/or expired, as the case may be, or upon written agreement of the Company.
3
7. Restrictive Legend . All certificates representing Common Stock owned or hereafter acquired by Holder during the Term shall have affixed thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHAREHOLDERS AGREEMENT, AS AMENDED FROM TIME TO TIME, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE SECRETARY OF THE COMPANY.
8. General .
(a) Severability . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(b) Specific Performance . In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement, the Company shall be entitled to specific performance of the agreements and obligations of Holder hereunder and to such other injunctive or other equitable relief as may be granted by a court of competent jurisdiction. The Company shall not be required to prove actual damages or post a bond with respect to such proceedings.
(c) Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY LAW OTHER THAN THAT OF NEVADA. COURTS WITHIN THE STATE OF NEVADA WILL HAVE JURISDICTION OVER ALL DISPUTES BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES HEREBY CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH PARTYS PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
(d) Waiver of Jury Trial . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
4
(e) Attorneys Fees . If any action that law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party will be entitled to recover reasonable attorneys fees and other costs incurred in such proceeding, in addition to any relief which such party may be entitled.
(f) Notices . All notices, requests, claims, demands or other communications that are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered, if delivered by hand, (b) one business day after transmitted, if transmitted by a nationally recognized overnight courier service, (c) when telecopied, if telecopied (which is confirmed), or (d) three business days after mailing, if mailed by registered or certified mail (return receipt requested), to the parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8(f)):
(g) If to Company:
Mesa Air Group, Inc.
410 N. 44th Street, Suite 700
Phoenix, Arizona 85008
Attention: Brian S. Gillman
Telephone: (602) 685-4000
Facsimile: (602) 685-4350
With a simultaneous copy to:
DLA Piper LLP (US)
2525 E. Camelback Road, Suite 1000
Phoenix, Arizona 85016
Attention: Gregory R. Hall, Esq.
Telephone: (480) 606-5128
Facsimile: (480) 606-5528
(h) If to the Holder, the address specified on the Holders signature page hereto.
(i) Complete Agreement . This Agreement constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings relating to such subject matter.
(j) Amendments and Waivers . Except with respect to termination pursuant to Section 6, this Agreement may not be amended or terminated and the observance of any term hereunder may not be waived with respect to Holder without the written consent of the Board. Any term hereof may be amended and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by the written consent of the Board and Holder. Any amendment, termination or waiver effected in accordance with this Section 8(h) shall be binding on all parties hereto, even if they do not execute such consent. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
5
(k) Pronouns . Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.
(l) Counterparts; Facsimile Signatures . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document. This Agreement may be executed by facsimile or PDF electronic signatures.
(m) Section Headings and References . The section headings are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties. Any reference in this agreement to a particular section or subsection shall refer to a section or subsection of this Agreement, unless specified otherwise.
(n) Successors and Assigns . Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon the parties hereto and their respective successors and assigns; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Common Stock or any Warrants to a Transferee specifying the full name and address of such Transferee, the Company may deem and treat the person listed as the holder of such Common Stock and/or Warrants in its records as the absolute owner and holder of such Common Stock and/or Warrants for all purposes.
(o) Third Parties . Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties to this Agreement and their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement except as expressly provided in this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first above written.
COMPANY: | ||
Mesa Air Group, Inc. |
By: |
/s/ Brian S. Gillman |
Name: Brian S. Gillman | ||
Its: EVP & General Counsel |
[Signature Page to Shareholders Agreement]
HOLDER: Marneu Holding Company |
By: |
/s/ Philippe D. Katz |
Name: Philippe D. Katz | ||
Title: Partner | ||
Address: | ||
160 Broadway - 1st Floor | ||
New York, NY 10038 |
Warrants:
Warrants to Purchase an Aggregate of Shares of Common Stock
Common Stock:
Shares of Common Stock: 125,000 *
* |
Represents shares of Common Stock acquired on or about , 2017, from a Company stockholder |
[Signature Page to Shareholders Agreement]
HOLDER: Momar Corp |
By: |
/s/ Philippe D. Katz |
Name: Philippe D. Katz | ||
Title: Secretary | ||
Address: | ||
160 Broadway - 1st Floor | ||
New York, NY 10038 |
Warrants:
Warrants to Purchase an Aggregate of Shares of Common Stock
Common Stock:
Shares of Common Stock: 326,981 *
* |
Represents shares of Common Stock acquired on or about , 2017, from a Company stockholder |
[Signature Page to Shareholders Agreement]
Exhibit 10.5
MESA AIR GROUP, INC.
2018 EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
Page | ||||||||
1. |
Establishment, Purpose and Term of Plan |
1 | ||||||
1.1 |
Establishment |
1 | ||||||
1.2 |
Purpose |
1 | ||||||
1.3 |
Term of Plan |
1 | ||||||
2. |
Definitions and Construction |
1 | ||||||
2.1 |
Definitions |
1 | ||||||
2.2 |
Construction |
6 | ||||||
3. |
Administration |
6 | ||||||
3.1 |
Administration by the Committee |
6 | ||||||
3.2 |
Authority of Officers |
7 | ||||||
3.3 |
Administration with Respect to Insiders |
7 | ||||||
3.4 |
Powers of the Committee |
7 | ||||||
3.5 |
Option Repricing |
8 | ||||||
3.6 |
Indemnification |
8 | ||||||
4. |
Shares Subject to Plan |
8 | ||||||
4.1 |
Maximum Number of Shares Issuable |
8 | ||||||
4.2 |
Annual Increase in Maximum Number of Shares Issuable |
8 | ||||||
4.3 |
Share Counting |
8 | ||||||
4.4 |
Adjustments for Changes in Capital Structure |
9 | ||||||
4.5 |
Assumption or Substitution of Awards |
9 | ||||||
5. |
Eligibility, Participation and Award Limitations |
9 | ||||||
5.1 |
Persons Eligible for Awards |
9 | ||||||
5.2 |
Participation in the Plan |
9 | ||||||
5.3 |
Incentive Stock Option Limitations |
10 | ||||||
6. |
Stock Options |
10 | ||||||
6.1 |
Exercise Price |
10 | ||||||
6.2 |
Exercisability and Term of Options |
10 | ||||||
6.3 |
Payment of Exercise Price |
11 | ||||||
6.4 |
Effect of Termination of Service |
11 | ||||||
6.5 |
Transferability of Options |
12 | ||||||
7. |
Restricted Stock Awards |
12 | ||||||
7.1 |
Types of Restricted Stock Awards Authorized |
12 | ||||||
7.2 |
Purchase Price |
13 | ||||||
7.3 |
Purchase Period |
13 | ||||||
7.4 |
Payment of Purchase Price |
13 |
-i-
TABLE OF CONTENTS
(continued)
Page | ||||||||
7.5 |
Vesting and Restrictions on Transfer |
13 | ||||||
7.6 |
Voting Rights; Dividends and Distributions |
13 | ||||||
7.7 |
Effect of Termination of Service |
14 | ||||||
7.8 |
Nontransferability of Restricted Stock Award Rights |
14 | ||||||
8. |
Restricted Stock Units |
14 | ||||||
8.1 |
Grant of Restricted Stock Unit Awards |
14 | ||||||
8.2 |
Purchase Price |
14 | ||||||
8.3 |
Vesting |
14 | ||||||
8.4 |
Voting Rights, Dividend Equivalent Rights and Distributions |
14 | ||||||
8.5 |
Effect of Termination of Service |
15 | ||||||
8.6 |
Settlement of Restricted Stock Unit Awards |
15 | ||||||
8.7 |
Nontransferability of Restricted Stock Unit Awards |
15 | ||||||
9. |
Performance Awards |
15 | ||||||
9.1 |
Types of Performance Awards Authorized |
15 | ||||||
9.2 |
Initial Value of Performance Shares and Performance Units |
15 | ||||||
9.3 |
Establishment of Performance Period, Performance Goals and Performance Award Formula |
16 | ||||||
9.4 |
Measurement of Performance Goals |
16 | ||||||
9.5 |
Settlement of Performance Awards |
17 | ||||||
9.6 |
Voting Rights; Dividend Equivalent Rights and Distributions |
18 | ||||||
9.7 |
Effect of Termination of Service |
19 | ||||||
9.8 |
Nontransferability of Performance Awards |
19 | ||||||
10. |
Cash-Based Awards and Other Stock-Based Awards |
19 | ||||||
10.1 |
Grant of Cash-Based Awards |
19 | ||||||
10.2 |
Grant of Other Stock-Based Awards |
19 | ||||||
10.3 |
Value of Cash-Based and Other Stock-Based Awards |
20 | ||||||
10.4 |
Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards |
20 | ||||||
10.5 |
Voting Rights; Dividend Equivalent Rights and Distributions |
20 | ||||||
10.6 |
Effect of Termination of Service |
20 | ||||||
10.7 |
Nontransferability of Cash-Based Awards and Other Stock-Based Awards |
20 | ||||||
11. |
Standard Forms of Award Agreement |
20 | ||||||
11.1 |
Award Agreements |
20 | ||||||
11.2 |
Authority to Vary Terms |
21 | ||||||
12. |
Change in Control |
21 | ||||||
12.1 |
Effect of Change in Control on Awards |
21 |
-ii-
TABLE OF CONTENTS
(continued)
Page | ||||||||
12.2 |
Effect of Change in Control on Nonemployee Director Awards |
22 | ||||||
12.3 |
Federal Excise Tax Under Section 4999 of the Code |
22 | ||||||
13. |
Compliance with Securities Law |
22 | ||||||
14. |
Compliance with Section 409A |
22 | ||||||
14.1 |
Awards Subject to Section 409A |
22 | ||||||
14.2 |
Deferral and/or Distribution Elections |
23 | ||||||
14.3 |
Subsequent Elections |
23 | ||||||
14.4 |
Payment of Section 409A Deferred Compensation |
24 | ||||||
15. |
Tax Withholding |
25 | ||||||
15.1 |
Tax Withholding in General |
25 | ||||||
15.2 |
Withholding in or Directed Sale of Shares |
25 | ||||||
16. |
Amendment, Suspension or Termination of Plan |
26 | ||||||
17. |
Miscellaneous Provisions |
26 | ||||||
17.1 |
Repurchase Rights |
26 | ||||||
17.2 |
Forfeiture Events |
26 | ||||||
17.3 |
Provision of Information |
26 | ||||||
17.4 |
Rights as Employee, Consultant or Director |
27 | ||||||
17.5 |
Rights as a Stockholder |
27 | ||||||
17.6 |
Delivery of Title to Shares |
27 | ||||||
17.7 |
Fractional Shares |
27 | ||||||
17.8 |
Retirement and Welfare Plans |
27 | ||||||
17.9 |
Beneficiary Designation |
27 | ||||||
17.10 |
Severability |
27 | ||||||
17.11 |
No Constraint on Corporate Action |
27 | ||||||
17.12 |
Unfunded Obligation |
28 | ||||||
17.13 |
Choice of Law |
28 |
-iii-
Mesa Air Group, Inc.
2018 Equity Incentive Plan
1. E STABLISHMENT , P URPOSE AND T ERM OF P LAN .
1.1 Establishment . The Mesa Air Group, Inc. 2018 Equity Incentive Plan (the Plan ) is hereby established effective as of , 2018, the date of its approval by the stockholders of the Company and implementation by the Board of Directors of the Company (the Effective Date ).
1.2 Purpose . The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.
1.3 Term of Plan. The Plan shall continue in effect until its termination by the Committee; provided, however, that all Awards shall be granted, if at all, within ten (10) years from the Effective Date.
2. D EFINITIONS AND C ONSTRUCTION .
2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:
(a) Affiliate means (i) a parent entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) a subsidiary entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the terms parent, subsidiary, control and controlled by shall have the meanings assigned such terms for the purposes of registration of securities on Form S-8 under the Securities Act.
(b) Award means any Option, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the Plan.
(c) Award Agreement means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions applicable to an Award.
(d) Board means the Board of Directors of the Company.
(e) Cash-Based Award means an Award denominated in cash and granted pursuant to Section 10.
(f) Cashless Exercise means a Cashless Exercise as defined in Section 6.3(b)(i).
(g) Cause means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Participant and a Participating Company applicable to an Award, any of the following: (i) the Participants theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participants material failure to abide by a Participating Companys code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participants unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of a Participating Company (including, without limitation, the Participants improper use or disclosure of a Participating Companys confidential or proprietary information); (iv) any intentional act by the Participant
1
which has a material detrimental effect on a Participating Companys reputation or business; (v) the Participants repeated failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure or inability; (vi) any material breach by the Participant of any employment, service, non-disclosure, non-competition, non-solicitation or other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participants conviction (including any plea of guilty or nolo contendere ) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participants ability to perform his or her duties with a Participating Company.
(h) Change in Control means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Participant and a Participating Company applicable to an Award, the occurrence of any one or a combination of the following:
(i) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) acquires during a twelve-month period ending on the date of the most recent acquisition by such person, in one or a series of transactions, beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total Fair Market Value or total combined voting power of the Companys then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of fifty percent (50%) or more of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or
(ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a Transaction ) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(dd)(iii), the entity to which the assets of the Company were transferred (the Transferee ), as the case may be; or
(iii) a date specified by the Committee following approval by the stockholders of a plan of complete liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section 2.1(h) in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors.
For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple events described in subsections (i), (ii) and (iii) of this Section 2.1(h) are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.
(i) Code means the Internal Revenue Code of 1986, as amended, and any applicable regulations and administrative guidelines promulgated thereunder.
(j) Committee means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.
2
(k) Company means Mesa Air Group, Inc., a Nevada corporation, and any successor corporation thereto.
(l) Consultant means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S-8 under the Securities Act.
(m) Director means a member of the Board.
(n) Disability means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between the Participant and a Participating Company applicable to an Award, the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.
(o) Dividend Equivalent Right means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant.
(p) Employee means any person treated as an employee (including an Officer or a Director who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director nor payment of a Directors fee shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individuals employment or termination of employment, as the case may be. For purposes of an individuals rights, if any, under the terms of the Plan as of the time of the Companys determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individuals status as an Employee.
(q) Exchange Act means the Securities Exchange Act of 1934, as amended.
(r) Fair Market Value means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.
(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value of a share of Stock on the basis of the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions in the Stock as reported on a national or regional securities exchange or quotation system, or on any other basis consistent with the requirements of Section 409A. The Committee may also determine the Fair Market Value upon the average selling price of the Stock during a specified period that is within thirty (30) days before or thirty (30) days after such date, provided
3
that, with respect to the grant of an Option, the commitment to grant such Award based on such valuation method must be irrevocable before the beginning of the specified period. The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.
(iii) If, on such date, the Stock is not listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of Section 409A.
(s) Full Value Award means any Award settled in Stock, other than an Option or a Restricted Stock Purchase Right or an Other Stock-Based Award under which the Company will receive monetary consideration equal to the Fair Market Value (determined on the effective date of grant) of the shares subject to such Award.
(t) Incentive Stock Option means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.
(u) Incumbent Director means a director who either (i) is a member of the Board as of the Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but excluding a director who was elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company).
(v) Insider means an Officer, a Director or other person whose transactions in Stock are subject to Section 16 of the Exchange Act.
(w) Net Exercise means a Net Exercise as defined in Section 6.3(b)(iii).
(x) Nonemployee Director means a Director who is not an Employee.
(y) Nonemployee Director Award means any Award granted to a Nonemployee Director.
(z) Nonstatutory Stock Option means an Option not intended to be (as set forth in the Award Agreement) or which does not qualify as an incentive stock option within the meaning of Section 422(b) of the Code.
(aa) Officer means any person designated by the Board as an officer of the Company.
(bb) Option means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.
(cc) Other Stock-Based Award means an Award denominated in shares of Stock and granted pursuant to Section 10.
(dd) Ownership Change Event means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Companys then outstanding securities entitled to vote generally in the election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).
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(ee) Parent Corporation means any present or future parent corporation of the Company, as defined in Section 424(e) of the Code.
(ff) Participant means any eligible person who has been granted one or more Awards.
(gg) Participating Company means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.
(hh) Participating Company Group means, at any point in time, the Company and all other entities collectively which are then Participating Companies.
(ii) Performance Award means an Award of Performance Shares or Performance Units.
(jj) Performance Award Formula means, for any Performance Award, a formula or table established by the Committee pursuant to Section 9.3 which provides the basis for computing the value of a Performance Award at one or more levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
(kk) Performance Goal means a performance goal established by the Committee pursuant to Section 9.3.
(ll) Performance Period means a period established by the Committee pursuant to Section 9.3 at the end of which one or more Performance Goals are to be measured.
(mm) Performance Share means a right granted to a Participant pursuant to Section 9 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based upon attainment of applicable Performance Goal(s).
(nn) Performance Unit means a right granted to a Participant pursuant to Section 9 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon attainment of applicable Performance Goal(s).
(oo) Restricted Stock Award means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.
(pp) Restricted Stock Bonus means Stock granted to a Participant pursuant to Section 7.
(qq) Restricted Stock Purchase Right means a right to purchase Stock granted to a Participant pursuant to Section 7.
(rr) Restricted Stock Unit means a right granted to a Participant pursuant to Section 8 to receive on a future date or occurrence of a future event a share of Stock or cash in lieu thereof, as determined by the Committee.
(ss) Rule 16b -3 means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.
(tt) Section 409A means Section 409A of the Code.
(uu) Section 409A Deferred Compensation means compensation provided pursuant to an Award that constitutes nonqualified deferred compensation within the meaning of Section 409A.
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(vv) Securities Act means the Securities Act of 1933, as amended.
(ww) Service means a Participants employment or service with the Participating Company Group, whether as an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a Participants Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders Service or a change in the Participating Company for which the Participant renders Service, provided that there is no interruption or termination of the Participants Service. Furthermore, a Participants Service shall not be deemed to have been interrupted or terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participants Service shall be deemed to have terminated, unless the Participants right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participants Award Agreement. A Participants Service shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participants Service has terminated and the effective date of and reason for such termination.
(xx) Stock means the common stock of the Company, as adjusted from time to time in accordance with Section 4.4.
(yy) Stock Tender Exercise means a Stock Tender Exercise as defined in Section 6.3(b)(ii).
(zz) Subsidiary Corporation means any present or future subsidiary corporation of the Company, as defined in Section 424(f) of the Code.
(aaa) Ten Percent Owner means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.
(bbb) Trading Compliance Policy means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Companys equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.
(ccc) Vesting Conditions mean those conditions established in accordance with the Plan prior to the satisfaction of which an Award or shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participants monetary purchase price, if any, for such shares upon the Participants termination of Service or failure of a performance condition to be satisfied.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term or is not intended to be exclusive, unless the context clearly requires otherwise.
3. A DMINISTRATION .
3.1 Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken
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or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. All expenses incurred in connection with the administration of the Plan shall be paid by the Company.
3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the Officer has apparent authority with respect to such matter, right, obligation, determination or election. To the extent permitted by applicable law, the Committee may, in its discretion, delegate to a committee comprised of one or more Officers the authority to grant one or more Awards, without further approval of the Committee, to any Employee, other than a person who, at the time of such grant, is an Insider, and to exercise such other powers under the Plan as the Committee may determine; provided, however, that (a) the Committee shall fix the maximum number of shares subject to Awards that may be granted by such Officers, (b) each such Award shall be subject to the terms and conditions of the appropriate standard form of Award Agreement approved by the Board or the Committee and shall conform to the provisions of the Plan, and (c) each such Award shall conform to such other limits and guidelines as may be established from time to time by the Committee.
3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.
3.4 Powers of the Committee . In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock, units or monetary value to be subject to each Award;
(b) to determine the type of Award granted;
(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of expiration of any Award, (vii) the effect of any Participants termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;
(e) to determine whether an Award will be settled in shares of Stock, cash, other property or in any combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participants termination of Service;
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(i) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws of, or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose residents may be granted Awards; and
(j) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.
3.5 Option Repricing. Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Committee shall not approve a program providing for either (a) the cancellation of outstanding Options having exercise prices per share greater than the then Fair Market Value of a share of Stock ( Underwater Awards ) and the grant in substitution therefor of new Options having a lower exercise price, Full Value Awards or payments in cash, or (b) the amendment of outstanding Underwater Awards to reduce the exercise price thereof. This Section shall not be construed to apply to (i) issuing or assuming a stock option in a transaction to which Section 424(a) applies, within the meaning of Section 424 of the Code, (ii) adjustments pursuant to the assumption of or substitution for an Option or SAR in a manner that would comply with Section 409A, or (iii) an adjustment pursuant to Section 4.4.
3.6 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, to the extent permitted by applicable law, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
4. S HARES S UBJECT TO P LAN .
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2, 4.4, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to Two Million Five Hundred Thousand (2,500,000) shares, and such shares shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.
4.2 Annual Increase in Maximum Number of Shares Issuable . Subject to adjustment as provided in Section 4.4, the maximum aggregate number of shares of Stock that may be issued under the Plan as set forth in Section 4.1 shall be cumulatively increased on January 1, 2020 and on each subsequent January 1 through and including January 1,2028, by a number of shares (the Annual Increase ) equal to the smaller of (a) 1% of the number of shares of Stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Board.
4.3 Share Counting. If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participants purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. If
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the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net Exercise, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised. Shares purchased in the open market with proceeds from the exercise of Options shall not be added to the limit set forth in Section 4.1. Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to the exercise or settlement of Options pursuant to Section 15.2 shall not again be available for issuance under the Plan. Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to the vesting or settlement of Full Value Awards pursuant to Section 15.2 shall again become available for issuance under the Plan.
4.4 Adjustments for Changes in Capital Structure . Subject to any required action by the stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, the Annual Increase, the Award limits set forth in Section 5.3, and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution or enlargement of Participants rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as effected without receipt of consideration by the Company. If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the New Shares ), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number and the exercise or purchase price per share shall be rounded up to the nearest whole cent. In no event may the exercise or purchase price, if any, under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award. The Committee in its discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.
4.5 Assumption or Substitution of Awards. The Committee may, without affecting the number of shares of Stock reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable provisions of the Code. In addition, subject to compliance with applicable laws, and listing requirements, shares available for grant under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for awards under the Plan to individuals who were not Employees or Directors of the Participating Company Group prior to the transaction and shall not reduce the number of shares otherwise available for issuance under the Plan.
5. E LIGIBILITY , P ARTICIPATION AND A WARD L IMITATIONS .
5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and Directors.
5.2 Participation in the Plan. Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.
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5.3 Incentive Stock Option Limitations.
(a) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to adjustment as provided in Section 4.4, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed 2,500,000 shares, cumulatively increased on January 1, 2020 and on each subsequent January 1, through and including January 1, 2028, by a number of shares equal to the smaller of the Annual Increase determined under Section 4.2 or 500,000 shares. The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Sections 4.2, 4.3, and 4.4.
(b) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an ISO-Qualifying Corporation ). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option.
(c) Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a limitation different from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise of the Option, shares issued pursuant to each such portion shall be separately identified.
6. S TOCK O PTIONS .
Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price less than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner that would qualify under the provisions of Section 409A or Section 424(a) of the Code.
6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option and (c) no Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such Option (except in the event of such Employees
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death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Committee and subject to the limitations contained in Section 6.3(b), by means of (1) a Cashless Exercise, (2) a Stock Tender Exercise or (3) a Net Exercise; (iii) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (iv) by any combination thereof. The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.
(b) Limitations on Forms of Consideration.
(i) Cashless Exercise. A Cashless Exercise means the delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Companys sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.
(ii) Stock Tender Exercise. A Stock Tender Exercise means the delivery of a properly executed exercise notice accompanied by a Participants tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock owned by the Participant having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Companys stock. If required by the Company, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
(iii) Net Exercise. A Net Exercise means the delivery of a properly executed exercise notice followed by a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to a Participant upon the exercise of an Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.
6.4 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided by this Plan and unless otherwise provided by the Committee, an Option shall terminate immediately upon the Participants termination of Service to the extent that it is then unvested and shall be exercisable after the Participants termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate.
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(i) Disability. If the Participants Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participants Service terminated, may be exercised by the Participant (or the Participants guardian or legal representative) at any time prior to the expiration of twelve (12) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participants Service terminated, but in any event no later than the date of expiration of the Options term as set forth in the Award Agreement evidencing such Option (the Option Expiration Date ).
(ii) Death. If the Participants Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participants Service terminated, may be exercised by the Participants legal representative or other person who acquired the right to exercise the Option by reason of the Participants death at any time prior to the expiration of twelve (12) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participants Service terminated, but in any event no later than the Option Expiration Date. The Participants Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months (or such longer or shorter period provided by the Award Agreement) after the Participants termination of Service.
(iii) Termination for Cause . Notwithstanding any other provision of the Plan to the contrary, if the Participants Service is terminated for Cause or if, following the Participants termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(iv) Other Termination of Service. If the Participants Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participants Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participants Service terminated, but in any event no later than the Option Expiration Date.
(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 13 below, the Option shall remain exercisable until the later of (i) thirty (30) days after the date such exercise first would no longer be prevented by such provisions or (ii) the end of the applicable time period under Section 6.4(a), but in any event no later than the Option Expiration Date.
6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participants guardian or legal representative. An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act or, in the case of an Incentive Stock Option, only as permitted by applicable regulations under Section 421 of the Code in a manner that does not disqualify such Option as an Incentive Stock Option.
7. R ESTRICTED S TOCK A WARDS .
Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
7.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 9.4. If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).
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7.2 Purchase Price . The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right shall be established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.
7.3 Purchase Period . A Restricted Stock Purchase Right shall be exercisable within a period established by the Committee, which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.
7.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof.
7.5 Vesting and Restrictions on Transfer . Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 7.8. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Trading Compliance Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
7.6 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 7.5 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares; provided, however, that if so determined by the Committee and provided by the Award Agreement, such dividends and distributions shall be subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid, and otherwise shall be paid no later than the end of the calendar year in which such dividends or distributions are paid to stockholders (or, if later, the 15th day of the third month following the date such dividends or distributions are paid to stockholders). In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant is entitled by reason of the Participants Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.
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7.7 Effect of Termination of Service . Unless otherwise provided by the Committee in the Award Agreement evidencing a Restricted Stock Award, if a Participants Service terminates for any reason, whether voluntary or involuntary (including the Participants death or disability), then (a) the Company shall have the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participants termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participants termination of Service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.
7.8 Nontransferability of Restricted Stock Award Rights . Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participants guardian or legal representative.
8. R ESTRICTED S TOCK U NITS .
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
8.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 9.4. If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).
8.2 Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.
8.3 Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award.
8.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with a cash amount or with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock, as determined by the Committee. The number of additional Restricted Stock Units (rounded to the nearest whole number), if any, to be credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. If so determined by the Committee and provided by the Award Agreement, such cash amount or additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a dividend or
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distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participants Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.
8.5 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participants Service terminates for any reason, whether voluntary or involuntary (including the Participants death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participants termination of Service.
8.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participants Restricted Stock Unit Award vest or on such other date determined by the Committee in compliance with Section 409A, if applicable, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 8.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that if the settlement date with respect to any shares issuable upon vesting of Restricted Stock Units would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the settlement date shall be deferred until the next trading day on which the sale of such shares would not violate the Trading Compliance Policy but in any event no later than the 15 th day of the third calendar month following the year in which such Restricted Stock Units vest. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.
8.7 Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participants guardian or legal representative.
9. P ERFORMANCE A WARDS .
Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
9.1 Types of Performance Awards Authorized. Performance Awards may be granted in the form of either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award.
9.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.4, on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial
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monetary value established by the Committee at the time of grant. The final value payable to the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.
9.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.
9.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee on the basis of targets to be attained ( Performance Targets ) with respect to one or more measures of business or financial performance or other criteria established by the Committee (each, a Performance Measure ), subject to the following:
(a) Performance Measures. Performance Measures based on objective criteria shall be calculated in accordance with the Companys financial statements, or, if such measures are not reported in the Companys financial statements, they shall be calculated in accordance with generally accepted accounting principles, a method used generally in the Companys industry, or in accordance with a methodology established by the Committee prior to the grant of the Performance Award. Performance Measures based on subjective criteria shall be determined on the basis established by the Committee in granting the Award. As specified by the Committee, Performance Measures may be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes, one or more Subsidiary Corporations or such division or other business unit of any of them selected by the Committee. Unless otherwise determined by the Committee prior to the grant of the Performance Award, the Performance Measures applicable to the Performance Award shall be calculated prior to the accrual of expense for any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) on the Performance Measures of any change in accounting standards or any unusual or infrequently occurring event or transaction, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participants rights with respect to a Performance Award. Performance Measures may be based upon one or more of the following, without limitation, as determined by the Committee:
(i) revenue;
(ii) sales;
(iii) expenses;
(iv) operating income;
(v) gross margin;
(vi) operating margin;
(vii) earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;
(viii) pre-tax profit;
(ix) net operating income;
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(x) net income;
(xi) economic value added;
(xii) free cash flow;
(xiii) operating cash flow;
(xiv) balance of cash, cash equivalents and marketable securities;
(xv) stock price;
(xvi) earnings per share;
(xvii) return on stockholder equity;
(xviii) return on capital;
(xix) return on assets;
(xx) return on investment;
(xxi) total stockholder return;
(xxii) employee satisfaction;
(xxiii) employee retention;
(xxiv) market share;
(xxv) customer satisfaction;
(xxvi) product development;
(xxvii) research and development expenses;
(xxviii) completion of an identified special project;
(xxix) completion of a joint venture or other corporate transaction; and
(xxx) personal performance objectives established for an individual Participant or group of Participants.
(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the Performance Target level attained during the applicable Performance Period. A Performance Target may be stated as an absolute value, an increase or decrease in a value, or as a value determined relative to an index, budget or other standard selected by the Committee.
9.5 Settlement of Performance Awards.
(a) Determination of Final Value. As soon as practicable following the completion of the Performance Period applicable to a Performance Award, the Committee shall determine the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement in accordance with the applicable Performance Award Formula.
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(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award to reflect such Participants individual performance in his or her position with the Company or such other factors as the Committee may determine.
(c) Effect of Leaves of Absence. Unless otherwise required by law or a Participants Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on the basis of the number of days of the Participants Service during the Performance Period during which the Participant was not on an unpaid leave of absence.
(d) Notice to Participants. As soon as practicable following the Committees determination in accordance with Sections 9.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.
(e) Payment in Settlement of Performance Awards. As soon as practicable following the Committees determination in accordance with Sections 9.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 14.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such Participants legal representative or other person who acquired the right to receive such payment by reason of the Participants death) of the final value of the Participants Performance Award. Payment of such amount shall be made in cash, shares of Stock, or a combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to the Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth in the Award Agreement. If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or interest.
(f) Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock, the number of such shares shall be determined by dividing the final value of the Performance Award by the Fair Market Value of a share of Stock determined by the method specified in the Award Agreement. Shares of Stock issued in payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 7.5. Any shares subject to Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 7.5 through 7.8 above.
9.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalent Rights, if any, shall be credited to the Participant either in cash or in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock, as determined by the Committee. The number of additional Performance Shares (rounded to the nearest whole number), if any, to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent Rights, if any, shall be accumulated and paid to the extent that the related Performance Shares become nonforfeitable. Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 9.5. Dividend Equivalent Rights shall not be paid with respect to Performance Units. In the event of a dividend or distribution paid in shares of Stock or other
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property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participants Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.
9.7 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Performance Award, the effect of a Participants termination of Service on the Performance Award shall be as follows:
(a) Death or Disability. If the Participants Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participants Performance Award shall be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and shall be prorated based on the number of months of the Participants Service during the Performance Period. Payment shall be made following the end of the Performance Period in any manner permitted by Section 9.5.
(b) Other Termination of Service. If the Participants Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the event of an involuntary termination of the Participants Service, the Committee, in its discretion, may waive the automatic forfeiture of all or any portion of any such Award and determine the final value of the Performance Award in the manner provided by Section 9.7(a). Payment of any amount pursuant to this Section shall be made following the end of the Performance Period in any manner permitted by Section 9.5.
9.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the provisions of the Plan, no Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participants guardian or legal representative.
10. C ASH -B ASED A WARDS AND O THER S TOCK -B ASED A WARDS .
Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall establish. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
10.1 Grant of Cash-Based Awards . Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine.
10.2 Grant of Other Stock-Based Awards . The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Other Stock-Based Awards may be made available as a form of payment in the settlement of other Awards or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
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10.3 Value of Cash-Based and Other Stock-Based Awards . Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee. The Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met.
10.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards . Payment or settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as the Committee determines. To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A.
10.5 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid in accordance with the provisions set forth in Section 8.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participants Other Stock-Based Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of such Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions and performance criteria, if any, as are applicable to the Award.
10.6 Effect of Termination of Service . Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participants Service. Such provisions shall be determined in the discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination, subject to the requirements of Section 409A, if applicable.
10.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. The Committee may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state securities laws or foreign law applicable to such shares of Stock.
11. S TANDARD F ORMS OF A WARD A GREEMENT .
11.1 Award Agreements . Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means.
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11.2 Authority to Vary Terms . The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.
12. C HANGE IN C ONTROL .
12.1 Effect of Change in Control on Awards. In the event of a Change in Control, outstanding Awards shall be subject to the definitive agreement entered into by the Company in connection with the Change in Control. Subject to the requirements and limitations of Section 409A, if applicable, the Committee may provide for any one or more of the following:
(a) Accelerated Vesting. In its discretion, the Committee may provide in the grant of any Award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement in connection with a Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participants Service prior to, upon, or following the Change in Control, and to such extent as the Committee determines.
(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the Acquiror ), may, without the consent of any Participant, assume or continue the Companys rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquirors stock, as applicable. For purposes of this Section, if so determined by the Committee in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.
(c) Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced (but not below zero) by the exercise or purchase price per share, if any, under such Award. In the event such determination is made by the Committee, an Award having an exercise or purchase price per share equal to or greater than the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this Section (reduced by applicable withholding taxes, if any) shall be made to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.
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12.2 Effect of Change in Control on Nonemployee Director Awards. Subject to the requirements and limitations of Section 409A, if applicable, including as provided by Section 14.4(f), in the event of a Change in Control, each outstanding Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent assumed, continued or substituted for pursuant to Section 12.1(b), shall be settled effective immediately prior to the time of consummation of the Change in Control.
12.3 Federal Excise Tax Under Section 4999 of the Code.
(a) Excess Parachute Payment. If any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an excess parachute payment under Section 280G of the Code, then, provided such election would not subject the Participant to taxation under Section 409A, the Participant may elect to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.
(b) Determination by Tax Firm. To aid the Participant in making any election called for under Section 12.3(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an excess parachute payment to the Participant as described in Section 12.3(a), the Company shall request a determination in writing by the professional firm engaged by the Company for general tax purposes, or, if the tax firm so engaged by the Company is serving as accountant or auditor for the Acquiror, the Company will appoint a nationally recognized tax firm to make the determinations required by this Section (the Tax Firm ). As soon as practicable thereafter, the Tax Firm shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Tax Firm may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Tax Firm such information and documents as the Tax Firm may reasonably request in order to make its required determination. The Company shall bear all fees and expenses the Tax Firm charges in connection with its services contemplated by this Section.
13. C OMPLIANCE WITH S ECURITIES L AW .
The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award, or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Companys legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
14. C OMPLIANCE WITH S ECTION 409A .
14.1 Awards Subject to Section 409A. The Company intends that Awards granted pursuant to the Plan shall either be exempt from or comply with Section 409A, and the Plan shall be so construed. The provisions of this Section 14 shall apply to any Award or portion thereof that constitutes or provides for payment of Section 409A Deferred Compensation. Such Awards may include, without limitation:
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(a) A Nonstatutory Stock Option that includes any feature for the deferral of compensation other than the deferral of recognition of income until the later of (i) the exercise or disposition of the Award or (ii) the time the stock acquired pursuant to the exercise of the Award first becomes substantially vested.
(b) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award that either (i) provides by its terms for settlement of all or any portion of the Award at a time or upon an event that will or may occur later than the end of the Short-Term Deferral Period (as defined below) or (ii) permits the Participant granted the Award to elect one or more dates or events upon which the Award will be settled after the end of the Short-Term Deferral Period.
Subject to the provisions of Section 409A, the term Short-Term Deferral Period means the 2 1 ⁄ 2 month period ending on the later of (i) the 15th day of the third month following the end of the Participants taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Companys taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term substantial risk of forfeiture shall have the meaning provided by Section 409A.
14.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by Section 409A, the following rules shall apply to any compensation deferral and/or payment elections (each, an Election ) that may be permitted or required by the Committee pursuant to an Award providing Section 409A Deferred Compensation:
(a) Elections must be in writing and specify the amount of the payment in settlement of an Award being deferred, as well as the time and form of payment as permitted by this Plan.
(b) Elections shall be made by the end of the Participants taxable year prior to the year in which services commence for which an Award may be granted to the Participant.
(c) Elections shall continue in effect until a written revocation or change in Election is received by the Company, except that a written revocation or change in Election must be received by the Company prior to the last day for making the Election determined in accordance with paragraph (b) above or as permitted by Section 14.3.
14.3 Subsequent Elections . Except as otherwise permitted or required by Section 409A, any Award providing Section 409A Deferred Compensation which permits a subsequent Election to delay the payment or change the form of payment in settlement of such Award shall comply with the following requirements:
(a) No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made.
(b) Each subsequent Election related to a payment in settlement of an Award not described in Section 14.4(a)(ii), 14.4(a)(iii) or 14.4(a)(vi) must result in a delay of the payment for a period of not less than five (5) years from the date on which such payment would otherwise have been made.
(c) No subsequent Election related to a payment pursuant to Section 14.4(a)(iv) shall be made less than twelve (12) months before the date on which such payment would otherwise have been made.
(d) Subsequent Elections shall continue in effect until a written revocation or change in the subsequent Election is received by the Company, except that a written revocation or change in a subsequent Election must be received by the Company prior to the last day for making the subsequent Election determined in accordance the preceding paragraphs of this Section 14.3.
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14.4 Payment of Section 409A Deferred Compensation .
(a) Permissible Payments. Except as otherwise permitted or required by Section 409A, an Award providing Section 409A Deferred Compensation must provide for payment in settlement of the Award only upon one or more of the following:
(i) The Participants separation from service (as defined by Section 409A);
(ii) The Participants becoming disabled (as defined by Section 409A);
(iii) The Participants death;
(iv) A time or fixed schedule that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 14.2 or 14.3, as applicable;
(v) A change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 409A; or
(vi) The occurrence of an unforeseeable emergency (as defined by Section 409A).
(b) Installment Payments . It is the intent of this Plan that any right of a Participant to receive installment payments (within the meaning of Section 409A) shall, for all purposes of Section 409A, be treated as a right to a series of separate payments.
(c) Required Delay in Payment to Specified Employee Pursuant to Separation from Service. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, except as otherwise permitted by Section 409A, no payment pursuant to Section 14.4(a)(i) in settlement of an Award providing for Section 409A Deferred Compensation may be made to a Participant who is a specified employee (as defined by Section 409A) as of the date of the Participants separation from service before the date (the Delayed Payment Date ) that is six (6) months after the date of such Participants separation from service, or, if earlier, the date of the Participants death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.
(d) Payment Upon Disability. All distributions of Section 409A Deferred Compensation payable pursuant to Section 14.4(a)(ii) by reason of a Participant becoming disabled shall be paid in a lump sum or in periodic installments as established by the Participants Election. If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon becoming disabled, all such distributions shall be paid in a lump sum upon the determination that the Participant has become disabled.
(e) Payment Upon Death . If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participants Election upon receipt by the Committee of satisfactory notice and confirmation of the Participants death. If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon death, all such distributions shall be paid in a lump sum upon receipt by the Committee of satisfactory notice and confirmation of the Participants death.
(f) Payment Upon Change in Control. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within
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the meaning of Section 409A. Any Award which constitutes Section 409A Deferred Compensation and which would vest and otherwise become payable upon a Change in Control as a result of the failure of the Acquiror to assume, continue or substitute for such Award in accordance with Section 12.1(b) shall vest to the extent provided by such Award but shall be converted automatically at the effective time of such Change in Control into a right to receive, in cash on the date or dates such award would have been settled in accordance with its then existing settlement schedule (or as required by Section 14.4(c)), an amount or amounts equal in the aggregate to the intrinsic value of the Award at the time of the Change in Control.
(g) Payment Upon Unforeseeable Emergency. The Committee shall have the authority to provide in the Award Agreement evidencing any Award providing for Section 409A Deferred Compensation for payment pursuant to Section 14.4(a)(vi) in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an unforeseeable emergency. In such event, the amount(s) distributed with respect to such unforeseeable emergency cannot exceed the amounts reasonably necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such emergency need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participants assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award. All distributions with respect to an unforeseeable emergency shall be made in a lump sum upon the Committees determination that an unforeseeable emergency has occurred. The Committees decision with respect to whether an unforeseeable emergency has occurred and the manner in which, if at all, the payment in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.
(h) Prohibition of Acceleration of Payments. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, this Plan does not permit the acceleration of the time or schedule of any payment under an Award providing Section 409A Deferred Compensation, except as permitted by Section 409A.
(i) No Representation Regarding Section 409A Compliance . Notwithstanding any other provision of the Plan, the Company makes no representation that Awards shall be exempt from or comply with Section 409A. No Participating Company shall be liable for any tax, penalty or interest imposed on a Participant by Section 409A.
15. T AX W ITHHOLDING .
15.1 Tax Withholding in General. The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes (including social insurance), if any, required by law to be withheld by any Participating Company with respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Groups tax withholding obligations have been satisfied by the Participant.
15.2 Withholding in or Directed Sale of Shares. The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of any Participating Company. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates (or the maximum individual statutory withholding rates for the applicable jurisdiction if use of such rates would not result in adverse accounting consequences or cost). The Company may require a Participant to direct a broker, upon the vesting, exercise or settlement of an Award, to sell a portion of the shares subject to the Award determined by the Company in its discretion to be sufficient to cover the tax withholding obligations of any Participating Company and to remit an amount equal to such tax withholding obligations to such Participating Company in cash.
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16. A MENDMENT , S USPENSION OR T ERMINATION OF P LAN .
The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Companys stockholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Sections 4.2, 4.3 and 4.4), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Companys stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may have a materially adverse effect on any then outstanding Award without the consent of the Participant. Notwithstanding any other provision of the Plan or any Award Agreement to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A.
17. M ISCELLANEOUS P ROVISIONS .
17.1 Repurchase Rights . Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
17.2 Forfeiture Events.
(a) The Committee may specify in an Award Agreement that the Participants rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service, or any accounting restatement due to material noncompliance of the Company with any financial reporting requirements of securities laws as a result of which, and to the extent that, such reduction, cancellation, forfeiture, or recoupment is required by applicable securities laws. In addition, to the extent that claw-back or similar provisions applicable to Awards are required by applicable law, listing standards and/or policies adopted by the Company, Awards granted under the Plan shall be subject to such provisions.
(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for (i) the amount of any payment in settlement of an Award received by such Participant during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such Participant from the sale of securities of the Company during such twelve- (12-) month period.
17.3 Provision of Information. Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Companys common stockholders.
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17.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participants Service at any time. To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employees employer or that the Employee has an employment relationship with the Company.
17.5 Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.4 or another provision of the Plan.
17.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.
17.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.
17.8 Retirement and Welfare Plans . Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as compensation for purposes of computing the benefits payable to any Participant under any Participating Companys retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participants benefit. In addition, unless a written employment agreement or other service agreement specifically references Awards, a general reference to benefits or a similar term in such agreement shall not be deemed to refer to Awards granted hereunder.
17.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participants death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participants lifetime. If a married Participant designates a beneficiary other than the Participants spouse, the effectiveness of such designation may be subject to the consent of the Participants spouse. If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participants death, the Company will pay any remaining unpaid benefits to the Participants legal representative.
17.10 Severability . If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.
17.11 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Companys or another Participating Companys right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.
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17.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be considered unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participants creditors in any assets of any Participating Company. The Participants shall have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
17.13 Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of Nevada, without regard to its conflict of law rules.
IN WITNESS WHEREOF , the undersigned Secretary of the Company certifies that the foregoing sets forth the Mesa Air Group, Inc. 2018 Equity Incentive Plan as duly adopted by the Board on , 2018.
Brian S. Gillman, Secretary |
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MESA AIR GROUP, INC.
NOTICE OF GRANT OF STOCK OPTION
(For U.S. Participants)
Mesa Air Group, Inc. (the Company ) has granted to the Participant an option (the Option ) to purchase certain shares of Stock pursuant to the Mesa Air Group, Inc. 2018 Equity Incentive Plan (the Plan ), as follows:
Participant: | Employee ID: | |||||
Date of Grant: | ||||||
Number of Option Shares: | , subject to adjustment as provided by the Option Agreement. | |||||
Exercise Price: | $ | |||||
Vesting Start Date: | ||||||
Option Expiration Date: | The tenth anniversary of the Date of Grant | |||||
Tax Status of Option: | Stock Option. (Enter Incentive or Nonstatutory. If blank, this Option will be a Nonstatutory Stock Option.) | |||||
Vested Shares: | Except as provided in the Option Agreement and provided the Participants Service has not terminated prior to the applicable date, the number of Vested Shares (disregarding any resulting fractional share) as of any date is determined by multiplying the Number of Option Shares by the Vested Ratio determined as of such date, as follows: | |||||
Vested Ratio | ||||||
Prior to first anniversary of Vesting Start Date | 0 | |||||
On first anniversary of Vesting Start Date (the Initial Vesting Date ) | 1/4 | |||||
Plus | ||||||
For each additional full month of the Participants Service from the Initial Vesting Date until the Vested Ratio equals 1/1, an additional | 1/48 | |||||
Superseding Agreement: | None |
By their signatures below or by electronic acceptance or authentication in a form authorized by the Company, the Company and the Participant agree that the Option is governed by this Grant Notice and by the provisions of the Option Agreement and the Plan, both of which are made a part of this document, and by the Superseding Agreement, if any. The Participant acknowledges that copies of the Plan, the Option Agreement and the prospectus for the Plan are available on the Companys internal web site and may be viewed and printed by the Participant for attachment to the Participants copy of this Grant Notice. The Participant represents that the Participant has read and is familiar with the provisions of the Option Agreement and the Plan, and hereby accepts the Option subject to all of their terms and conditions.
MESA AIR GROUP, INC. | PARTICIPANT | |||
By: |
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[officer name] |
Signature | |||
[officer title] |
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Date | ||||
Address: |
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Address | ||||
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ATTACHMENTS: |
2018 Equity Incentive Plan, as amended to the Date of Grant; Stock Option Agreement, Exercise Notice and Plan Prospectus |
MESA AIR GROUP, INC.
STOCK OPTION AGREEMENT
(For U.S. Participants)
Mesa Air Group, Inc. (the Company ) has granted to the Participant named in the Notice of Grant of Stock Option (the Grant Notice ) to which this Stock Option Agreement (the Option Agreement ) is attached an option (the Option ) to purchase certain shares of Stock upon the terms and conditions set forth in the Grant Notice and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms and conditions of the Mesa Air Group, Inc. 2018 Equity Incentive Plan (the Plan ), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of, and represents that the Participant has read and is familiar with, the Grant Notice, this Option Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of shares issuable pursuant to the Option (the Plan Prospectus ), (b) accepts the Option subject to all of the terms and conditions of the Grant Notice, this Option Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Option Agreement or the Plan.
1. D EFINITIONS AND C ONSTRUCTION .
1.1 Definitions . Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2 Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term or is not intended to be exclusive, unless the context clearly requires otherwise.
2. T AX C ONSEQUENCES .
2.1 Tax Status of Option . This Option is intended to have the tax status designated in the Grant Notice.
(a) Incentive Stock Option . If the Grant Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Participant should consult with the Participants own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. (NOTE TO PARTICIPANT: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.)
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(b) Nonstatutory Stock Option. If the Grant Notice so designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code.
2.2 ISO Fair Market Value Limitation. If the Grant Notice designates this Option as an Incentive Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Participant under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options designated as Incentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO PARTICIPANT: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the Participating Company Group) is greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.)
3. A DMINISTRATION .
All questions of interpretation concerning the Grant Notice, this Option Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Option shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Option, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Option or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Option. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
4. E XERCISE OF THE O PTION .
4.1 Right to Exercise . Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Vesting Date and prior to the termination of the Option (as provided in Section 6) in an amount not to exceed the number of Vested Shares less the number of shares previously acquired upon exercise of the Option. In no event shall the Option be exercisable for more shares than the Number of Option Shares, as adjusted pursuant to Section 9.
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4.2 Method of Exercise . Exercise of the Option shall be by means of electronic or written notice (the Exercise Notice ) in a form authorized by the Company. An electronic Exercise Notice must be digitally signed or authenticated by the Participant in such manner as required by the notice and transmitted to the Company or an authorized representative of the Company (including a third-party administrator designated by the Company). In the event that the Participant is not authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by a written Exercise Notice addressed to the Company, which shall be signed by the Participant and delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Company, or an authorized representative of the Company (including a third-party administrator designated by the Company). Each Exercise Notice, whether electronic or written, must state the Participants election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Participants investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. Further, each Exercise Notice must be received by the Company prior to the termination of the Option as set forth in Section 6 and must be accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such electronic or written Exercise Notice and the aggregate Exercise Price.
4.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized . Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Company and subject to the limitations contained in Section 4.3(b), by means of (1) a Cashless Exercise, (2) a Net-Exercise, or (3) a Stock Tender Exercise; or (iii) by any combination of the foregoing.
(b) Limitations on Forms of Consideration. The Company reserves, at any and all times, the right, in the Companys sole and absolute discretion, to establish, decline to approve or terminate any program or procedure providing for payment of the Exercise Price through any of the means described below, including with respect to the Participant notwithstanding that such program or procedures may be available to others.
(i) Cashless Exercise. A Cashless Exercise means the delivery of a properly executed Exercise Notice together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to shares of Stock acquired upon the exercise of the Option in an amount not less than the aggregate Exercise Price for such shares (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).
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(ii) Net-Exercise. A Net-Exercise means the delivery of a properly executed Exercise Notice electing a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to the Participant upon the exercise of the Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate Exercise Price not satisfied by such reduction in the number of whole shares to be issued. Following a Net-Exercise, the number of shares remaining subject to the Option, if any, shall be reduced by the sum of (1) the net number of shares issued to the Participant upon such exercise, and (2) the number of shares deducted by the Company for payment of the aggregate Exercise Price.
(iii) Stock Tender Exercise. A Stock Tender Exercise means the delivery of a properly executed Exercise Notice accompanied by (1) the Participants tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock having a Fair Market Value that does not exceed the aggregate Exercise Price for the shares with respect to which the Option is exercised, and (2) the Participants payment to the Company in cash of the remaining balance of such aggregate Exercise Price not satisfied by such shares Fair Market Value. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Companys stock. If required by the Company, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
4.4 Tax Withholding .
(a) In General. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company Group, if any, which arise in connection with the Option. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company Group have been satisfied by the Participant.
(b) Withholding in Shares . The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Companys tax withholding obligations upon exercise of the Option by deducting from the shares of Stock otherwise issuable to the Participant upon such exercise a number of whole shares having a fair market value, as determined by the Company as of the date of exercise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates if required to avoid liability classification of the Option under generally accepted accounting principles in the United States.
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4.5 Beneficial Ownership of Shares; Certificate Registration . The Participant hereby authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice any or all shares acquired by the Participant pursuant to the exercise of the Option. Except as provided by the preceding sentence, a certificate for the shares as to which the Option is exercised shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
4.6 Restrictions on Grant of the Option and Issuance of Shares . The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Companys legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
4.7 Fractional Shares . The Company shall not be required to issue fractional shares upon the exercise of the Option.
5. N ONTRANSFERABILITY OF THE O PTION .
During the lifetime of the Participant, the Option shall be exercisable only by the Participant or the Participants guardian or legal representative. The Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. Following the death of the Participant, the Option, to the extent provided in Section 7, may be exercised by the Participants legal representative or by any person empowered to do so under the deceased Participants will or under the then applicable laws of descent and distribution.
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6. T ERMINATION OF THE O PTION .
The Option shall terminate and may no longer be exercised after the first to occur of (a) the close of business on the Option Expiration Date, (b) the close of business on the last date for exercising the Option following termination of the Participants Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8.
7. E FFECT OF T ERMINATION OF S ERVICE .
7.1 Option Exercisability. The Option shall terminate immediately upon the Participants termination of Service to the extent that it is then unvested and shall be exercisable after the Participants termination of Service to the extent it is then vested only during the applicable time period as determined below and thereafter shall terminate.
(a) Disability . If the Participants Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participants Service terminated, may be exercised by the Participant (or the Participants guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participants Service terminated, but in any event no later than the Option Expiration Date.
(b) Death . If the Participants Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on which the Participants Service terminated, may be exercised by the Participants legal representative or other person who acquired the right to exercise the Option by reason of the Participants death at any time prior to the expiration of twelve (12) months after the date on which the Participants Service terminated, but in any event no later than the Option Expiration Date. The Participants Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participants termination of Service.
(c) Termination for Cause. Notwithstanding any other provision of this Option Agreement to the contrary, if the Participants Service is terminated for Cause or if, following the Participants termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(d) Other Termination of Service . If the Participants Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for Vested Shares by the Participant on the date on which the Participants Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participants Service terminated, but in any event no later than the Option Expiration Date.
7.2 Extension if Exercise Prevented by Law . Notwithstanding the foregoing, other than termination of the Participants Service for Cause, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until the later of (a) thirty (30) days after the date such exercise first would no longer be prevented by such provisions, or (b) the end of the applicable time period under Section 7.1, but in any event no later than the Option Expiration Date.
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8. E FFECT OF C HANGE IN C ONTROL .
In the event of a Change in Control, the Option shall be treated as set forth in Section 13 of the Plan.
9. A DJUSTMENTS FOR C HANGES IN C APITAL S TRUCTURE .
The Option shall be treated as set forth in Section 4 of the Plan in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends).
10. R IGHTS AS A S TOCKHOLDER , D IRECTOR , E MPLOYEE OR C ONSULTANT .
The Participant shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participants employment is at will and is for no specified term. Nothing in this Option Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participants Service as a Director, an Employee or Consultant, as the case may be, at any time.
11. N OTICE OF S ALES U PON D ISQUALIFYING D ISPOSITION .
The Participant shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Grant Notice designates this Option as an Incentive Stock Option, the Participant shall (a) promptly notify the Chief Financial Officer of the Company if the Participant disposes of any of the shares acquired pursuant to the Option within one (1) year after the date the Participant exercises all or part of the Option or within two (2) years after the Date of Grant and (b) provide the Company with a description of the circumstances of such disposition. Until such time as the Participant disposes of such shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Participant shall hold all shares acquired pursuant to the Option in the Participants name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Companys stock to notify the Company of any such transfers. The obligation of the Participant to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence.
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12. L EGENDS .
The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (ISO ). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO EITHER THE TWO YEAR ANNIVERSARY OF THE DATE OF GRANT OR THE ONE-YEAR ANNIVERSARY OF THE DATE OF EXERCISE. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDERS NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.
13. M ISCELLANEOUS P ROVISIONS .
13.1 Termination or Amendment. The Committee may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may have a materially adverse effect on the Option or any unexercised portion thereof without the consent of the Participant unless such termination or amendment is necessary to comply with any applicable law or government regulation. No amendment or addition to this Option Agreement shall be effective unless in writing.
13.2 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Option Agreement.
13.3 Binding Effect. This Option Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participants heirs, executors, administrators, successors and assigns.
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13.4 Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a) Description of Electronic Delivery and Signature . The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Option Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Companys stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice and Exercise Notice called for by Section 4.2 to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company. Any and all such documents and notices may be electronically signed.
(b) Consent to Electronic Delivery and Signature. The Participant acknowledges that the Participant has read Section 13.4(a) of this Option Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and Exercise Notice, as described in Section 13.4(a). The Participant agrees that any and all such documents requiring a signature may be electronically signed and that such electronic signature shall have the same effect as handwritten signature for the purposes of validity, enforceability and admissibility. The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.4(a) or may change the electronic mail address to which such documents are to be delivered (if the Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.4(a).
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13.5 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan, together with the Superseding Agreement, if any, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein, the provisions of the Grant Notice, the Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.
13.6 Applicable Law. This Option Agreement shall be governed by the laws of Nevada as such laws are applied to agreements between Nevada residents entered into and to be performed entirely within the Nevada.
13.7 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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MESA AIR GROUP, INC.
NOTICE OF GRANT OF RESTRICTED STOCK
(For U.S. Participants)
Mesa Air Group, Inc. (the Company ) has granted to the Participant an award (the Award ) of certain shares of Stock (the Shares ) pursuant to the Mesa Air Group, Inc. 2018 Equity Incentive Plan (the Plan ), as follows:
Participant: | Employee ID: | |||||
Date of Grant: | ||||||
Total Number of Shares: | , subject to adjustment as provided by the Restricted Stock Agreement. | |||||
Fair Market Value per Share on Date of Grant: | $ | |||||
Vesting Start Date: | ||||||
Vested Shares: | Except as provided in the Restricted Stock Agreement and provided that the Participants Service has not terminated prior to the applicable date, the number of Vested Shares (disregarding any resulting fractional share) as of any date is determined by multiplying the Total Number of Shares by the Vested Ratio determined as of such date, as follows: | |||||
Vested Ratio | ||||||
Prior to first anniversary of Vesting Start Date | 0 | |||||
On first anniversary of Vesting Start Date (the Initial Vesting Date ) | 1/4 | |||||
Plus | ||||||
For each additional full year of the Participants Service from the Initial Vesting Date until the Vested Ratio equals 1/1, an additional | 1/4 | |||||
Superseding Agreement: | None |
By their signatures below or by electronic acceptance or authentication in a form authorized by the Company, the Company and the Participant agree that the Award is governed by this Grant Notice and by the provisions of the Restricted Stock Agreement and the Plan, both of which are made a part of this document, and by the Superseding Agreement, if any. The Participant acknowledges that copies of the Plan, the Restricted Stock Agreement and the prospectus for the Plan are available on the Companys internal web site and may be viewed and printed by the Participant for attachment to the Participants copy of this Grant Notice. The Participant represents that the Participant has read and is familiar with the provisions of the Restricted Stock Agreement and the Plan, and hereby accepts the Award subject to all of their terms and conditions.
MESA AIR GROUP, INC. | PARTICIPANT | |||
By: |
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[officer name] |
Signature | |||
[officer title] |
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Date | ||||
Address: |
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Address | ||||
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ATTACHMENTS: |
2018 Equity Incentive Plan, as amended to the Date of Grant; Restricted Stock Agreement; Assignment Separate from Certificate; form of Section 83(b) Election. |
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MESA AIR GROUP, INC.
RESTRICTED STOCK AGREEMENT
(For U.S. Participants)
Mesa Air Group, Inc. (the Company ) has granted to the Participant named in the Notice of Grant of Restricted Stock (the Grant Notice ) to which this Restricted Stock Agreement (the Agreement ) is attached an Award consisting of Shares subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the Mesa Air Group, Inc. 2018 Equity Incentive Plan (the Plan ), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the Shares (the Plan Prospectus ), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Agreement or the Plan.
1. D EFINITIONS AND C ONSTRUCTION .
1.1 Definitions . Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2 Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term or is not intended to be exclusive, unless the context clearly requires otherwise.
2. A DMINISTRATION .
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
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3. T HE A WARD .
3.1 Grant and Issuance of Shares. On the Date of Grant, the Participant shall acquire and the Company shall issue, subject to the provisions of this Agreement, a number of Shares equal to the Total Number of Shares, subject to adjustment as provided in Section 9. As a condition to the issuance of the Shares, the Participant shall execute and deliver the Grant Notice to the Company, and, if required by the Company, an Assignment Separate from Certificate duly endorsed (with date and number of shares blank) in the form provided by the Company.
3.2 No Monetary Payment Required. The Participant is not required to make any monetary payment (other than to satisfy applicable tax withholding, if any, with respect to the issuance or vesting of the Shares) as a condition to receiving the Shares, the consideration for which shall be past services actually rendered or future services to be rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the Shares issued pursuant to the Award.
3.3 Beneficial Ownership of Shares; Certificate Registration . The Participant hereby authorizes the Company, in its sole discretion, to deposit the Shares with the Companys transfer agent, including any successor transfer agent, to be held in book entry form during the term of the Escrow pursuant to Section 6. Furthermore, the Participant hereby authorizes the Company, in its sole discretion, to deposit, following the term of such Escrow, for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice any or all Shares which are no longer subject to such Escrow. Except as provided by the foregoing, a certificate for the Shares shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
3.4 Issuance of Shares in Compliance with Law . The issuance of the Shares shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No Shares shall be issued hereunder if their issuance would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Companys legal counsel to be necessary to the lawful issuance of any Shares shall relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority shall not have been obtained. As a condition to the issuance of the Shares, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
4. V ESTING OF S HARES .
Shares acquired pursuant to this Agreement shall become Vested Shares as provided in the Grant Notice. For purposes of determining the number of Vested Shares following an Ownership Change Event, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after the Ownership Change Event.
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5. C OMPANY R EACQUISITION R IGHT .
5.1 Grant of Company Reacquisition Right . Except to the extent otherwise provided by the Superseding Agreement, if any, in the event that (a) the Participants Service terminates for any reason or no reason, with or without cause, or (b) the Participant, the Participants legal representative, or other holder of the Shares, attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than pursuant to an Ownership Change Event), including, without limitation, any transfer to a nominee or agent of the Participant, any Shares which are not Vested Shares ( Unvested Shares ), the Participant shall forfeit and the Company shall automatically reacquire the Unvested Shares, and the Participant shall not be entitled to any payment therefor (the Company Reacquisition Right ).
5.2 Ownership Change Event, Non-Cash Dividends, Distributions and Adjustments . Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 9, any and all new, substituted or additional securities or other property to which the Participant is entitled by reason of the Participants ownership of Unvested Shares shall be immediately subject to the Company Reacquisition Right and included in the terms Shares, Stock and Unvested Shares for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Shares immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Shares following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.
5.3 Forfeiture of Cash Dividends and Distributions. All dividends and other distributions payable in cash with respect to Unvested Shares shall be subject to the same Vesting Conditions set forth in the Grant Notice as the Shares with respect to which such dividends or distributions are payable. Until such Unvested Shares become Vested Shares, any such related cash dividends and distributions shall be included in the term Unvested Shares and shall be subject to the Escrow described in Section 6 and the Company Reacquisition Right upon the Participants termination of Service to the same extent as the related Unvested Shares.
6. E SCROW .
6.1 Appointment of Agent. To ensure that Shares subject to the Company Reacquisition Right will be available for reacquisition, the Participant and the Company hereby appoint the Secretary of the Company, or any other person designated by the Company, as their agent and as attorney-in-fact for the Participant (the Agent ) to hold any and all Unvested Shares and to sell, assign and transfer to the Company any such Unvested Shares reacquired by the Company pursuant to the Company Reacquisition Right. The Participant understands that appointment of the Agent is a material inducement to make this Agreement and that such appointment is coupled with an interest and is irrevocable. The Agent shall not be personally liable
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for any act the Agent may do or omit to do hereunder as escrow agent, agent for the Company, or attorney in fact for the Participant while acting in good faith and in the exercise of the Agents own good judgment, and any act done or omitted by the Agent pursuant to the advice of the Agents own attorneys shall be conclusive evidence of such good faith. The Agent may rely upon any letter, notice or other document executed by any signature purporting to be genuine and may resign at any time.
6.2 Establishment of Escrow . The Participant authorizes the Company to deposit the Unvested Shares with the Companys transfer agent to be held in book entry form, as provided in Section 3.3, and the Participant agrees to deliver to and deposit with the Agent each certificate, if any, evidencing the Shares and, if required by the Company, an Assignment Separate from Certificate with respect to such book entry shares and each such certificate duly endorsed (with date and number of Shares blank) in the form attached to this Agreement, to be held by the Agent under the terms and conditions of this Section 6 (the Escrow ). Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property or any other adjustment upon a change in the capital structure of the Company, as described in Section 9, any and all new, substituted or additional securities or other property to which the Participant is entitled by reason of his or her ownership of the Shares that remain, following such Ownership Change Event, dividend, distribution or change described in Section 9, subject to the Company Reacquisition Right shall be immediately subject to the Escrow to the same extent as the Shares immediately before such event. The Company shall bear the expenses of the Escrow.
6.3 Delivery of Shares to Participant . The Escrow shall continue with respect to any Shares for so long as such Shares remain subject to the Company Reacquisition Right. Upon termination of the Company Reacquisition Right with respect to Shares, the Company shall so notify the Agent and direct the Agent to deliver such number of Shares to the Participant. As soon as practicable after receipt of such notice, the Agent shall cause the Shares specified by such notice to be delivered to the Participant, and the Escrow shall terminate with respect to such Shares.
7. T AX M ATTERS .
7.1 Tax Withholding.
(a) In General. At the time the Grant Notice is executed, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, including, without limitation, obligations arising upon (a) the transfer of Shares to the Participant, (b) the lapsing of any restriction with respect to any Shares, (c) the filing of an election to recognize tax liability, or (d) the transfer by the Participant of any Shares. The Company shall have no obligation to deliver the Shares or to release any Shares from the Escrow established pursuant to Section 6 until the tax withholding obligations of the Participating Company have been satisfied by the Participant.
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(b) Assignment of Sale Proceeds . Subject to compliance with applicable law and the Companys Trading Compliance Policy, if permitted by the Company, the Participant may satisfy the Participating Companys tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares becoming Vested Shares on a Vesting Date as provided in the Grant Notice.
(c) Withholding in Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Companys tax withholding obligations by withholding a number of whole, Vested Shares otherwise deliverable to the Participant or by the Participants tender to the Company of a number of whole, Vested Shares or vested shares acquired otherwise than pursuant to the Award having, in any such case, a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates if required to avoid liability classification of the Award under generally accepted accounting principles in the United States.
7.2 Election Under Section 83(b) of the Code.
(a) The Participant understands that Section 83 of the Code taxes as ordinary income the difference between the amount paid for the Shares, if anything, and the fair market value of the Shares as of the date on which the Shares are substantially vested, within the meaning of Section 83. In this context, substantially vested means that the right of the Company to reacquire the Shares pursuant to the Company Reacquisition Right has lapsed. The Participant understands that he or she may elect to have his or her taxable income determined at the time he or she acquires the Shares rather than when and as the Company Reacquisition Right lapses by filing an election under Section 83(b) of the Code with the Internal Revenue Service no later than thirty (30) days after the date of acquisition of the Shares. The Participant understands that failure to make a timely filing under Section 83(b) will result in his or her recognition of ordinary income, as the Company Reacquisition Right lapses, on the difference between the purchase price, if anything, and the fair market value of the Shares at the time such restrictions lapse. The Participant further understands, however, that if Shares with respect to which an election under Section 83(b) has been made are forfeited to the Company pursuant to its Company Reacquisition Right, such forfeiture will be treated as a sale on which there is realized a loss equal to the excess (if any) of the amount paid (if any) by the Participant for the forfeited Shares over the amount realized (if any) upon their forfeiture. If the Participant has paid nothing for the forfeited Shares and has received no payment upon their forfeiture, the Participant understands that he or she will be unable to recognize any loss on the forfeiture of the Shares even though the Participant incurred a tax liability by making an election under Section 83(b).
(b) The Participant understands that he or she should consult with his or her tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date of the acquisition of the Shares pursuant to this Agreement. Failure to file an election under Section 83(b), if appropriate, may result in adverse tax consequences to the Participant. The
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Participant acknowledges that he or she has been advised to consult with a tax advisor regarding the tax consequences to the Participant of the acquisition of Shares hereunder. ANY ELECTION UNDER SECTION 83(b) THE PARTICIPANT WISHES TO MAKE MUST BE FILED NO LATER THAN 30 DAYS AFTER THE DATE ON WHICH THE PARTICIPANT ACQUIRES THE SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE PARTICIPANT ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE PARTICIPANTS SOLE RESPONSIBILITY, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
(c) The Participant will notify the Company in writing if the Participant files an election pursuant to Section 83(b) of the Code. The Company intends, in the event it does not receive from the Participant evidence of such filing, to claim a tax deduction for any amount which would otherwise be taxable to the Participant in the absence of such an election.
8. E FFECT OF C HANGE IN C ONTROL .
In the event of a Change in Control, the Award shall be treated as set forth in Section 12 of the Plan.
9. A DJUSTMENTS FOR C HANGES IN C APITAL S TRUCTURE .
The Award shall be treated as set forth in Section 4 of the Plan in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends).
10. R IGHTS AS A S TOCKHOLDER , D IRECTOR , E MPLOYEE OR C ONSULTANT .
The Participant shall have no rights as a stockholder with respect to any Shares subject to the Award until the date of the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the Shares are issued, except as provided in Section 9. Subject to the provisions of this Agreement, the Participant shall exercise all rights and privileges of a stockholder of the Company with respect to Shares deposited in the Escrow pursuant to Section 6, including the right to vote such Shares and to receive all dividends and other distributions paid with respect to such Shares, subject to Section 5.3. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participants employment is at will and is for no specified term. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participants Service at any time.
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11. L EGENDS .
The Company may at any time place legends referencing the Company Reacquisition Right and any applicable federal, state or foreign securities law restrictions on all certificates representing the Shares. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing the Shares in the possession of the Participant in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH IN AN AGREEMENT BETWEEN THIS CORPORATION AND THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.
12. T RANSFERS IN V IOLATION OF A GREEMENT .
No Shares may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Agreement and, except pursuant to an Ownership Change Event, until the date on which such shares become Vested Shares, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any Shares which will have been transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such Shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such Shares will have been so transferred. In order to enforce its rights under this Section, the Company shall be authorized to give a stop transfer instruction with respect to the Shares to the Companys transfer agent.
13. M ISCELLANEOUS P ROVISIONS .
13.1 Termination or Amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that no such termination or amendment may have a materially adverse effect on the Participants rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation. No amendment or addition to this Agreement shall be effective unless in writing.
13.2 Nontransferability of the Award. The right to acquire Shares pursuant to the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participants lifetime only by the Participant or the Participants guardian or legal representative.
13.3 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
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13.4 Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participants heirs, executors, administrators, successors and assigns.
13.5 Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a) Description of Electronic Delivery and Signature. The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Companys stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the parties may deliver electronically any notices called for in connection with the Escrow and the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company. Any and all such documents and notices may be electronically signed.
(b) Consent to Electronic Delivery and Signature. The Participant acknowledges that the Participant has read Section 13.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice and notices in connection with the Escrow, as described in Section 13.5(a). The Participant agrees that any and all such documents requiring a signature may be electronically signed and that such electronic signature shall have the same effect as handwritten signature for the purposes of validity, enforceability and admissibility. The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.5(a).
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13.6 Integrated Agreement. The Grant Notice, this Agreement and the Plan, together with the Superseding Agreement, if any, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
13.7 Applicable Law. This Agreement shall be governed by the laws of the State of Nevada as such laws are applied to agreements between Nevada residents entered into and to be performed entirely within the State of Nevada.
13.8 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED the undersigned does hereby sell, assign and transfer unto ___________________________________________________________________________
___________________________________________________ (_________________) shares of the Capital Stock of [COMPANY NAME] standing in the undersigneds name on the books of said corporation represented by Certificate No. __________________ herewith and does hereby irrevocably constitute and appoint ________________________________ Attorney to transfer the said stock on the books of said corporation with full power of substitution in the premises.
Dated: |
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Signature | ||||||||
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Print Name |
Instructions : Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its Company Reacquisition Right set forth in the Restricted Stock Agreement without requiring additional signatures on the part of the Participant.
SAMPLE
Internal Revenue Service
[IRS Service Center where Form 1040 is Filed]
Re: |
Section 83(b) Election |
Dear Sir or Madam:
The following information is submitted pursuant to section 1.83-2 of the Treasury Regulations in connection with this election by the undersigned under section 83(b) of the Internal Revenue Code of 1986, as amended (the Code).
1. |
The name, address and taxpayer identification number of the taxpayer are: |
Name: |
Address: |
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Social Security Number: |
2. |
The following is a description of each item of property with respect to which the election is made: |
shares of common stock of [Company Name] (the Shares), acquired from [Company Name] (the Company) pursuant to a restricted stock grant.
3. |
The property was transferred to the undersigned on: |
Restricted stock grant date: ________________________
The taxable year for which the election is made is:
Calendar Year ___________
4. The nature of the restriction to which the property is subject:
The Shares are subject to automatic forfeiture to the Company upon the occurrence of certain events. This forfeiture provision lapses with regard to a portion of the Shares based upon the continued performance of services by the taxpayer over time.
5. |
The following is the fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) of the property with respect to which the election is made: |
$__________________ (_____________ Shares at $__________ per Share).
The property was transferred to the taxpayer pursuant to the grant of an award of restricted stock.
6. |
The following is the amount paid for the property: |
No monetary consideration was provided in exchange for the Shares.
7. |
A copy of this election has been furnished to the Company, the corporation for which the services were performed by the undersigned. |
Please acknowledge receipt of this election by date or received-stamping the enclosed copy of this letter and returning it to the undersigned. A self-addressed stamped envelope is provided for your convenience.
Very truly yours, | ||||
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Date: | |||
Enclosures | ||||
cc: [Company Name] |
MESA AIR GROUP, INC.
NOTICE OF GRANT OF RESTRICTED STOCK UNITS
(For U.S. Participants)
Mesa Air Group, Inc. (the Company ) has granted to the Participant an award (the Award ) of certain units pursuant to the Mesa Air Group, Inc. 2018 Equity Incentive Plan (the Plan ), each of which represents the right to receive on the applicable Settlement Date one (1) share of Stock, as follows:
Participant: | Employee ID: |
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Date of Grant: | ||||||
Total Number of Units: | (each a Unit ), subject to adjustment as provided by the Restricted Stock Units Agreement. | |||||
Settlement Date: | Except as provided by the Restricted Stock Units Agreement, the date on which a Unit becomes a Vested Unit. | |||||
Vesting Start Date: | ||||||
Vested Units: | Except as provided in the Restricted Stock Units Agreement and provided that the Participants Service has not terminated prior to the applicable date, the number of Vested Units (disregarding any resulting fractional Unit) as of any date is determined by multiplying the Total Number of Units by the Vested Ratio determined as of such date, as follows: | |||||
Vested Ratio | ||||||
Prior to first anniversary of Vesting Start Date | 0 | |||||
On first anniversary of Vesting Start Date (the Initial Vesting Date ) | 1/4 | |||||
Plus | ||||||
For each additional period of 3 full months of the Participants Service from the Initial Vesting Date until the Vested Ratio equals 1/1, an additional | 1/16 | |||||
Superseding Agreement: | None |
By their signatures below or by electronic acceptance or authentication in a form authorized by the Company, the Company and the Participant agree that the Award is governed by this Grant Notice and by the provisions of the Restricted Stock Units Agreement and the Plan, both of which are made a part of this document, and by the Superseding Agreement, if any. The Participant acknowledges that copies of the Plan, the Restricted Stock Units Agreement and the prospectus for the Plan are available on the Companys internal web site and may be viewed and printed by the Participant for attachment to the Participants copy of this Grant Notice. The Participant represents that the Participant has read and is familiar with the provisions of the Restricted Stock Units Agreement and the Plan, and hereby accepts the Award subject to all of their terms and conditions.
MESA AIR GROUP, INC. | PARTICIPANT | |||
By: |
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[officer name] | Signature | |||
[officer title] |
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Date | ||||
Address: |
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Address | ||||
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ATTACHMENTS: |
2018 Equity Incentive Plan, as amended to the Date of Grant; Restricted Stock Units Agreement and Plan Prospectus |
MESA AIR GROUP, INC.
RESTRICTED STOCK UNITS AGREEMENT
(For U.S. Participants)
Mesa Air Group, Inc. (the Company ) has granted to the Participant named in the Notice of Grant of Restricted Stock Units (the Grant Notice ) to which this Restricted Stock Units Agreement (the Agreement ) is attached an Award consisting of Restricted Stock Units (each a Unit ) subject to the terms and conditions set forth in the Grant Notice and this Agreement. The Award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the Mesa Air Group, Inc. 2018 Equity Incentive Plan (the Plan ), as amended to the Date of Grant, the provisions of which are incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges receipt of and represents that the Participant has read and is familiar with the Grant Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares issuable pursuant to the Award (the Plan Prospectus ), (b) accepts the Award subject to all of the terms and conditions of the Grant Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Grant Notice, this Agreement or the Plan.
1. D EFINITIONS AND C ONSTRUCTION .
1.1 Definitions . Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Grant Notice or the Plan.
1.2 Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term or is not intended to be exclusive, unless the context clearly requires otherwise.
2. A DMINISTRATION .
All questions of interpretation concerning the Grant Notice, this Agreement, the Plan or any other form of agreement or other document employed by the Company in the administration of the Plan or the Award shall be determined by the Committee. All such determinations by the Committee shall be final, binding and conclusive upon all persons having an interest in the Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or the Award or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest in the Award. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, or election.
3. T HE A WARD .
3.1 Grant of Units. On the Date of Grant, the Participant shall acquire, subject to the provisions of this Agreement, the Total Number of Units set forth in the Grant Notice, subject to adjustment as provided in Section 9. Each Unit represents a right to receive on a date determined in accordance with the Grant Notice and this Agreement one (1) share of Stock.
3.2 No Monetary Payment Required. The Participant is not required to make any monetary payment (other than applicable tax withholding, if any) as a condition to receiving the Units or shares of Stock issued upon settlement of the Units, the consideration for which shall be past services actually rendered or future services to be rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Units.
4. V ESTING OF U NITS .
Units acquired pursuant to this Agreement shall become Vested Units as provided in the Grant Notice. For purposes of determining the number of Vested Units following an Ownership Change Event, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after the Ownership Change Event.
5. C OMPANY R EACQUISITION R IGHT .
5.1 Grant of Company Reacquisition Right. Except to the extent otherwise provided by the Superseding Agreement, if any, in the event that the Participants Service terminates for any reason or no reason, with or without cause, the Participant shall forfeit and the Company shall automatically reacquire all Units which are not, as of the time of such termination, Vested Units ( Unvested Units ) , and the Participant shall not be entitled to any payment therefor (the Company Reacquisition Right ).
5.2 Ownership Change Event, Non-Cash Dividends, Distributions and Adjustments . Upon the occurrence of an Ownership Change Event, a dividend or distribution to the stockholders of the Company paid in shares of Stock or other property, or any other adjustment upon a change in the capital structure of the Company as described in Section 9, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends paid on Stock pursuant to the Companys dividend policy) to which the Participant is entitled by reason of the Participants ownership of Unvested Units shall be immediately subject to the Company Reacquisition Right and included in the terms Units and Unvested Units for all purposes of the Company Reacquisition Right with the same force and effect as the Unvested Units immediately prior to the Ownership Change Event, dividend, distribution or adjustment, as the case may be. For purposes of determining the number of Vested Units following an Ownership Change Event, dividend, distribution or adjustment, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after any such event.
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6. S ETTLEMENT OF THE A WARD .
6.1 Issuance of Shares of Stock . Subject to the provisions of Section 6.3, the Company shall issue to the Participant on the Settlement Date with respect to each Vested Unit to be settled on such date one (1) share of Stock. The Settlement Date with respect to a Unit shall be the date on which such Unit becomes a Vested Unit as provided by the Grant Notice (an Original Settlement Date ); provided, however, that if the tax withholding obligations of a Participating Company, if any, will not be satisfied by the share withholding method described in Section 7.3 and the Original Settlement Date would occur on a date on which a sale by the Participant of the shares to be issued in settlement of the Vested Units would violate the Trading Compliance Policy of the Company, then the Settlement Date for such Vested Units shall be deferred until the next day on which the sale of such shares would not violate the Trading Compliance Policy, but in any event on or before the 15th day of the third calendar month following calendar year of the Original Settlement Date. Shares of Stock issued in settlement of Units shall not be subject to any restriction on transfer other than any such restriction as may be required pursuant to Section 6.3, Section 7 or the Companys Trading Compliance Policy.
6.2 Beneficial Ownership of Shares; Certificate Registration . The Participant hereby authorizes the Company, in its sole discretion, to deposit any or all shares acquired by the Participant pursuant to the settlement of the Award with the Companys transfer agent, including any successor transfer agent, to be held in book entry form, or to deposit such shares for the benefit of the Participant with any broker with which the Participant has an account relationship of which the Company has notice. Except as provided by the foregoing, a certificate for the shares acquired by the Participant shall be registered in the name of the Participant, or, if applicable, in the names of the heirs of the Participant.
6.3 Restrictions on Grant of the Award and Issuance of Shares . The grant of the Award and issuance of shares of Stock upon settlement of the Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. No shares of Stock may be issued hereunder if the issuance of such shares would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Companys legal counsel to be necessary to the lawful issuance of any shares subject to the Award shall relieve the Company of any liability in respect of the failure to issue such shares as to which such requisite authority shall not have been obtained. As a condition to the settlement of the Award, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
6.4 Fractional Shares . The Company shall not be required to issue fractional shares upon the settlement of the Award.
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7. T AX W ITHHOLDING .
7.1 In General. At the time the Grant Notice is executed, or at any time thereafter as requested by a Participating Company, the Participant hereby authorizes withholding from payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax (including any social insurance) withholding obligations of the Participating Company, if any, which arise in connection with the Award, the vesting of Units or the issuance of shares of Stock in settlement thereof. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company have been satisfied by the Participant.
7.2 Assignment of Sale Proceeds. Subject to compliance with applicable law and the Companys Trading Compliance Policy, if permitted by the Company, the Participant may satisfy the Participating Companys tax withholding obligations in accordance with procedures established by the Company providing for delivery by the Participant to the Company or a broker approved by the Company of properly executed instructions, in a form approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to some or all of the shares being acquired upon settlement of Units.
7.3 Withholding in Shares. The Company shall have the right, but not the obligation, to require the Participant to satisfy all or any portion of a Participating Companys tax withholding obligations by deducting from the shares of Stock otherwise deliverable to the Participant in settlement of the Award a number of whole shares having a fair market value, as determined by the Company as of the date on which the tax withholding obligations arise, not in excess of the amount of such tax withholding obligations determined by the applicable minimum statutory withholding rates if required to avoid liability classification of the Award under generally accepted accounting principles in the United States.
8. E FFECT OF C HANGE IN C ONTROL .
In the event of a Change in Control, the Option shall be treated as set forth in Section 12 of the Plan.
9. A DJUSTMENTS FOR C HANGES IN C APITAL S TRUCTURE .
The Option shall be treated as set forth in Section 4 of the Plan in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends).
10. R IGHTS AS A S TOCKHOLDER , D IRECTOR , E MPLOYEE OR C ONSULTANT .
The Participant shall have no rights as a stockholder with respect to any shares which may be issued in settlement of this Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
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agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date the shares are issued, except as provided in Section 9. If the Participant is an Employee, the Participant understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Participant, the Participants employment is at will and is for no specified term. Nothing in this Agreement shall confer upon the Participant any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Participants Service at any time.
11. L EGENDS .
The Company may at any time place legends referencing any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock issued pursuant to this Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of this Section.
12. C OMPLIANCE WITH S ECTION 409A .
It is intended that any election, payment or benefit which is made or provided pursuant to or in connection with this Award that may result in Section 409A Deferred Compensation shall comply in all respects with the applicable requirements of Section 409A (including applicable regulations or other administrative guidance thereunder, as determined by the Committee in good faith) to avoid the unfavorable tax consequences provided therein for non-compliance. In connection with effecting such compliance with Section 409A, the following shall apply:
12.1 Separation from Service; Required Delay in Payment to Specified Employee. Notwithstanding anything set forth herein to the contrary, no amount payable pursuant to this Agreement on account of the Participants termination of Service which constitutes a deferral of compensation within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the Section 409A Regulations ) shall be paid unless and until the Participant has incurred a separation from service within the meaning of the Section 409A Regulations. Furthermore, to the extent that the Participant is a specified employee within the meaning of the Section 409A Regulations as of the date of the Participants separation from service, no amount that constitutes a deferral of compensation which is payable on account of the Participants separation from service shall be paid to the Participant before the date (the Delayed Payment Date ) which is first day of the seventh month after the date of the Participants separation from service or, if earlier, the date of the Participants death following such separation from service. All such amounts that would, but for this Section, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.
12.2 Other Changes in Time of Payment. Neither the Participant nor the Company shall take any action to accelerate or delay the payment of any benefits under this Agreement in any manner which would not be in compliance with the Section 409A Regulations.
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12.3 Amendments to Comply with Section 409A; Indemnification. Notwithstanding any other provision of this Agreement to the contrary, the Company is authorized to amend this Agreement, to void or amend any election made by the Participant under this Agreement and/or to delay the payment of any monies and/or provision of any benefits in such manner as may be determined by the Company, in its discretion, to be necessary or appropriate to comply with the Section 409A Regulations without prior notice to or consent of the Participant. The Participant hereby releases and holds harmless the Company, its directors, officers and stockholders from any and all claims that may arise from or relate to any tax liability, penalties, interest, costs, fees or other liability incurred by the Participant in connection with the Award, including as a result of the application of Section 409A.
12.4 Advice of Independent Tax Advisor. The Company has not obtained a tax ruling or other confirmation from the Internal Revenue Service with regard to the application of Section 409A to the Award, and the Company does not represent or warrant that this Agreement will avoid adverse tax consequences to the Participant, including as a result of the application of Section 409A to the Award. The Participant hereby acknowledges that he or she has been advised to seek the advice of his or her own independent tax advisor prior to entering into this Agreement and is not relying upon any representations of the Company or any of its agents as to the effect of or the advisability of entering into this Agreement.
13. M ISCELLANEOUS P ROVISIONS .
13.1 Termination or Amendment. The Committee may terminate or amend the Plan or this Agreement at any time; provided, however, that except as provided in Section 8 in connection with a Change in Control, no such termination or amendment may have a materially adverse effect on the Participants rights under this Agreement without the consent of the Participant unless such termination or amendment is necessary to comply with applicable law or government regulation, including, but not limited to, Section 409A. No amendment or addition to this Agreement shall be effective unless in writing.
13.2 Nontransferability of the Award. Prior to the issuance of shares of Stock on the applicable Settlement Date, neither this Award nor any Units subject to this Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to the Award shall be exercisable during the Participants lifetime only by the Participant or the Participants guardian or legal representative.
13.3 Further Instruments. The parties hereto agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
13.4 Binding Effect. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer set forth herein, be binding upon the Participant and the Participants heirs, executors, administrators, successors and assigns.
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13.5 Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by a Participating Company, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address of such party set forth in the Grant Notice or at such other address as such party may designate in writing from time to time to the other party.
(a) Description of Electronic Delivery and Signature . The Plan documents, which may include but do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any reports of the Company provided generally to the Companys stockholders, may be delivered to the Participant electronically. In addition, if permitted by the Company, the Participant may deliver electronically the Grant Notice to the Company or to such third party involved in administering the Plan as the Company may designate from time to time. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the Internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company. Any and all such documents and notices may be electronically signed.
(b) Consent to Electronic Delivery and Signature. The Participant acknowledges that the Participant has read Section 13.5(a) of this Agreement and consents to the electronic delivery of the Plan documents and, if permitted by the Company, the delivery of the Grant Notice, as described in Section 13.5(a). The Participant agrees that any and all such documents requiring a signature may be electronically signed and that such electronic signature shall have the same effect as handwritten signature for the purposes of validity, enforceability and admissibility. The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in Section 13.5(a) or may change the electronic mail address to which such documents are to be delivered (if Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. Finally, the Participant understands that he or she is not required to consent to electronic delivery of documents described in Section 13.5(a).
13.6 Integrated Agreement. The Grant Notice, this Agreement and the Plan, together with the Superseding Agreement, if any, shall constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein or therein and supersede any prior agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to such subject matter. To the extent contemplated herein or therein, the provisions of the Grant Notice, this Agreement and the Plan shall survive any settlement of the Award and shall remain in full force and effect.
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13.7 Applicable Law. This Agreement shall be governed by the laws of Nevada as such laws are applied to agreements between Nevada residents entered into and to be performed entirely within the Nevada.
13.8 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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Exhibit 10.7
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered into this 26th day of July, 2018, by and between Mesa Air Group, Inc., a Nevada corporation (the Company), and Jonathan G. Ornstein (the Executive).
RECITALS
The Company and Executive were parties to an Employment Agreement dated February 23, 2011, with an effective date of March 1, 2011 (the Original Employment Agreement), as amended by that certain Amendment No. 1 to Employment Agreement dated June 11, 2014, with an effective date of January 22, 2014 (Amendment No. 1), and further amended by that certain Amendment No. 2 to Employment Agreement dated May 24, 2016, with an effective date of June 1, 2016 (Amendment No. 2) (the Original Employment Agreement, Amendment No. 1 and Amendment No. 2 are collectively referred to herein as the Agreement). The parties have agreed to enter into this Amended and Restated Employment Agreement (the Amended and Restated Agreement) which shall supersede the Agreement.
ARTICLE I
DUTIES AND TERM
1.1 EMPLOYMENT. In consideration of their mutual covenants and other good and valuable consideration, the receipt, adequacy and sufficiency of which are acknowledged, the Company agrees to hire Executive, and Executive agrees to remain in the employ of the Company, upon the terms provided in this Amended and Restated Agreement.
1.2 POSITION AND RESPONSIBILITIES.
(a) Executive shall serve as the Chairman of the Board of Directors and Chief Executive Officer of the Company. Executive agrees to perform services not inconsistent with his position, as are from time to time assigned to him by the Board of Directors of the Company.
(b) During the period of his employment under this Amended and Restated Agreement, Executive shall devote substantially all of his business time, attention, skill and efforts to the faithful performance of his duties under this Amended and Restated Agreement, but Executive shall have the right to engage in personal business and to participate in charitable and civic activities, during normal business hours and otherwise, as long as such business and activities do not unreasonably interfere with Executives duties to the Company.
1.3 TERM. The Company may terminate Executives employment at any time, subject to providing Executive with written notice (in accordance with Section 6.6) of not less than one (1) year prior to the intended termination date. For the avoidance of doubt, the Companys election to terminate Executive in accordance with this Section 1.3 shall trigger the payments set forth in Section 4.5 of the Amended and Restated Employment Agreement.
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1.4 LOCATION. During the period of his employment under this Amended and Restated Agreement, Executive shall not be required, except with his prior written consent (which may be withheld in his discretion), to relocate his principal place of employment outside Maricopa County, Arizona. Required travel on the Companys business shall not be deemed a relocation so long as Executive is not required to provide his services under this Amended and Restated Agreement outside of Maricopa County, Arizona, for more than 50% of his working days during any consecutive six-month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his employment under this Amended and Restated Agreement, including, without limitation, services as a director, officer or member of any committee of the Board of the Company or of the board of directors of any subsidiary of the Company, the Company shall compensate Executive as set forth in this Article II and as provided in Article IV.
2.1 BASE SALARY. The Company shall pay to Executive an annual base salary of $600,000, less all appropriate taxes and withholdings (the Base Salary). Executives Base Salary shall be paid every other week in equal installments. The Base Salary shall be reviewed annually by the Board or a committee designated by the Board, and the Board or such committee may, in its discretion, increase the Base Salary. The Company may reduce the Base Salary under circumstances in which the Company has imposed cuts in salary of other officers on an across the board basis, but any such reduction may not be at a greater percentage than the reduction imposed on any other officer (an Across the Board Reduction).
2.2 BONUS PAYMENTS.
(a) Reserved.
(b) During the period of Executives employment under this Amended and Restated Agreement, Executive shall be entitled to the bonus payments specified on Exhibit A hereto, as such Exhibit may be amended and/or updated from time to time upon the mutual agreement of Executive and the Board of Directors. Any bonus payable to Executive under the plan described in Exhibit A is referred to as an Incentive Bonus. All Incentive Bonuses shall be paid on a quarterly basis, not later than 45 days after the end of each fiscal quarter (or 90 days after the end of any fiscal year), based on (i) the Companys financial statements and benchmarks to be determined by the Board of Directors after good faith consultation with Executive, and (ii) such other qualitative factors as agreed to by Executive and the Board of Directors in consultation with the Compensation Committee. Payments made with respect to any fiscal quarter other than the last fiscal quarter of a fiscal year of the Company will be made on an estimated basis (based on annualized results), and the parties will account to one another and make appropriate payment adjustments promptly after the financial statements for any fiscal year become available but no later than 90 days after the end of the fiscal year. At the discretion of the Board of Directors, the Company may pay bonuses to Executive in addition to the Incentive Bonuses set forth in Exhibit A.
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2.3 EQUITY PARTICIPATION. During the Employment Period, Executive shall receive an annual equity award (consisting of restricted stock, SARs, phantom stock or similar equity units) pursuant to the terms of the Companys then existing equity incentive plan (or similarly titled plan), as determined by the Board or its Compensation Committee in its sole discretion, provided that the annual equity grant during the term of this Amended and Restated Agreement shall have a grant date value of not less than $800,000. The agreements governing such equity grants shall provide for vesting of such equity over a three (3) year period.
2.4 ADDITIONAL BENEFITS.
(a) GENERAL BENEFITS. During the term of this Amended and Restated Agreement, Executive shall be entitled (i) to participate in all employee benefit and welfare programs, plans and arrangements (including, without limitation, pension, profit sharing, supplemental pension and other retirement plans, insurance, hospitalization, medical and group disability benefits, travel or accident insurance plans) and (ii) to receive fringe benefits, such as dues and fees of professional organizations and associations, in each case under (i) and (ii) to the extent that such programs, plans, arrangements, and benefits are from time to time available to the Companys executive personnel (the programs and benefits in (i) and (ii) are referred to as General Benefits). During the period of his employment under this Amended and Restated Agreement, the Company shall continue to provide the General Benefits to Executive at a level which shall in no event be less, in any material respect, than the General Benefits made available to Executive by the Company as of the date of this Amended and Restated Agreement; provided, however, the Company may reduce the General Benefits under circumstances in which the Company has imposed reductions in coverage of the General Benefits of other officers on an across the board basis, but any such reduction may not be disproportionately greater than the reduction imposed on any other officer.
(b) DEATH BENEFIT. The Company shall maintain term life insurance on the life of Executive such that the aggregate death benefit under existing and new policies held by the Company totals $5,000,000; such insurance shall be obtained under one or more policies from insurers reasonably acceptable to Executive; provided, however, the Company shall in no event be obligated to premiums in excess of 200% of the premiums in effect as of the effective date of this Amended and Restated Agreement. As long as Executive is employed by the Company, (i) the Company shall pay the applicable premiums on the policy (or policies) and shall maintain the policy (or policies) in full force and effect, and (ii) Executive shall have the exclusive right to designate the beneficiary under such policy (or policies). The Company shall assign the policy (or policies) to Executive, without any cost to Executive, effective immediately after Executive ceases to be an employee of the Company, regardless of the reason for Executives termination of employment; provided that the Executive shall be responsible for any premiums accruing following his final date of employment. The Company shall not pledge or otherwise encumber the policy (or policies) at any time.
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(c) DISABILITY BENEFITS. The Company shall provide Executive with the following disability benefits:
(i) During any period of disability, illness or incapacity during the term of this Amended and Restated Agreement which renders Executive at least temporarily unable to perform the services required under this Amended and Restated Agreement, Executive shall receive the Base Salary payable under Section 2.1 plus any cash bonus compensation earned pursuant to the provisions of this Amended and Restated Agreement or any incentive compensation plan then in effect but not yet paid, less any cash benefits received by him under any disability insurance carried by or provided by the Company. Upon Executives Total Disability (as defined below), which Total Disability continues during the payment periods specified in this Section, the Company shall pay to Executive, on a monthly basis, for the period specified below, an amount (the Disability Payment) equal to (A) one-twelfth of the sum of (1) Executives Base Salary in effect immediately prior to the time such Total Disability occurs, plus (2) an amount equal to the greater of (x) the Threshold Bonus or (y) one half of the sum of (i) the bonuses (whether Incentive Bonuses or other bonuses) that have been paid to Executive with respect to the two fiscal years immediately preceding the fiscal year in which the Total Disability occurs, and (ii) the bonuses (whether Incentive Bonuses or other bonuses) that have been earned with respect to the two fiscal years immediately preceding the fiscal year in which the Total Disability occurs but have not been paid (or if Executive has been employed by the Company for less than two full fiscal years at the time of such Total Disability, then an amount equal to the sum of such paid and earned bonuses with respect to the fiscal year immediately preceding the fiscal year in which the Total Disability occurs), which payments shall be offset by the amount of any compensation paid to Executive as a result of his employment by any other person after the date that Total Disability occurs, (B) reduced by the amount of any monthly payments under any policy of disability income insurance paid for by the Company (including the policy described in Section 2.4(c)(ii)) which payments are received during the time when any Disability Payment is being made to Executive following Executives Total Disability. The Company shall pay the Disability Payment to Executive in equivalent installments, at the same time or times as would have been the case for payment of Base Salary if Executive had not become Totally Disabled and had remained employed by the Company, and such payments shall continue until the later of the expiration of the term of this Amended and Restated Agreement and 24 months, except that the Companys obligation to make such payments shall cease upon the death of Executive. Upon Executives Total Disability, except as provided in this Amended and Restated Agreement, all rights of Executive under this Amended and Restated Agreement shall terminate.
(ii) In order to provide a ready source of funds with which to pay the benefits provided for in clause (i) above, if Executive becomes disabled (determined in accordance with the policy described below) during the term of this Amended and Restated Agreement and such disability extends beyond 180 days, then Executive shall be paid the benefits provided for under the disability insurance policy issued by UNUM Life Insurance Company (Policy #LAR 442810), which the Company agrees to maintain in full force and effect during the term of this Amended and Restated Agreement. The Company promptly (and in any event not later than 60 days after this Amended and Restated Agreement is executed) shall have endeavored to cause such policy to be amended to the extent necessary to cause Executive to be eligible for disability payments for a minimum of two years from the date of such disability (that is, providing for 1-1/2 years of coverage, taking into account the 180-day coverage provided by the Company directly under Section 2.4(c)(i)), to remove any exclusion for pre-existing conditions (including any treatment or operation or complications arising from the foregoing), and to increase the amount payable to a minimum of $37,173 per month. Such coverage shall apply regardless of whether such four-year period extends beyond the term of this Amended and Restated Agreement.
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(d) RELOCATION EXPENSES. During the term of this Amended and Restated Agreement, if Executives principal place of employment is relocated outside Maricopa County, Arizona (with Executives consent, in accordance with Section 1.4), the Company shall reimburse Executive for all usual relocation expenses incurred by Executive and his household in moving to the new location, including, without limitation, moving expenses and rental payments for temporary living quarters in the area of relocation for a period not to exceed six months, real estate brokerage commissions incurred by Executive in the sale of his then existing principal residence, and loan financing charges and closing costs incurred in connection with the acquisition and financing of a new residence.
(e) REIMBURSEMENT OF BUSINESS EXPENSES. During the term of this Amended and Restated Agreement, the Company shall upon submission of documentation by Executive, in accordance with standard Company policies from time to time, pay, or reimburse Executive for, all reasonable travel and other expenses incurred by Executive in performing his obligations under this Amended and Restated Agreement, including for investigation of business opportunities and strategic allegiances for the Company and for client and customer development.
(f) VACATIONS. During the term of this Agreement, Executive shall be entitled to vacations with pay, and to such personal and sick leave with pay, in accordance with the policy of the Company as may be established from time to time by the Company and as applies to other executive officers of the Company. In no event shall Executive be entitled to fewer than four weeks annual vacation. Unused vacation days may be carried over from one year to the next in the maximum amount of four weeks annual vacation; that is, to the extent that vacation days to which Executive is entitled remain unused, such unused vacation days will cumulate and be useable in any subsequent year, but no more than four weeks of annual vacation in the aggregate can be carried over from one year to the next. Any vacation days which remain unused at the end of a calendar year that are in excess of such four weeks annual vacation shall expire and shall thereafter no longer be useable by Executive, but the Company shall compensate Executive for any such unused vacation days in accordance with the formula set forth in Section 4.1(b), by payment in January of the next year. Similarly, any unused paid holidays may be carried over from one year to the next but not in excess of an aggregate of five days of paid holidays may be carried over from one year to the next; to the extent any paid holidays remain unused at the end of a calendar year that are in excess of such five paid holidays, such paid holidays shall expire and shall thereafter no longer be useable by Executive, but the Company shall compensate Executive for any such unused paid holidays in accordance with the formula set forth in Section 4.1(b), by payment in January of the next year.
(g) DIRECTOR FEES. During the term of this Amended and Restated Agreement, Executive shall not be entitled to be paid any fees for attendance at meetings of the Board of Directors or any committee of the Board of Directors (or the board or committee of the board of any subsidiary).
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(h) AIRLINE PASSES. During the term of this Amended and Restated Agreement, the Company shall use reasonable efforts to obtain for the benefit of Executive and Executives immediate family (Executives spouse, Executives children, and the spouse and children of any of Executives children), the right to fly on a complimentary basis on the aircraft of other airlines, on a positive space basis. Such efforts shall include negotiating in good faith with other carriers for such rights and offering reciprocal rights to the executives (and their immediate family members) of such other carriers. The Company shall provide to Executive and Executives immediate family, during the life of each such individual, the right to fly on a complimentary basis on any aircraft operated by the Company or any affiliate at any time on a positive space basis. The Company shall use its best efforts to cause any successor or subsequent successor to the business or assets of the Company to grant such rights as to all routes operated by such successor (or subsequent successor) and any of its affiliates.
(i) PROFESSIONAL SERVICES. During the term of this Amended and Restated Agreement, the Company shall reimburse Executive for his out-of-pocket costs incurred in connection with the retention of professionals by Executive to provide Executive with income tax, estate planning, and investment advisory services. The maximum amount of reimbursable expenses for such purposes shall be $5,000 for each calendar year during the term of this Amended and Restated Agreement. The amount that is not used each calendar year shall be forfeited and shall not carry over to be used in any subsequent year. The Company shall reimburse Executive for such costs promptly after Executive submits an invoice to Company. In order to preserve Executives rights to confidentiality, Executive may satisfy the requirement of submitting an invoice by providing the Company with a copy of the facing page of the invoice showing the fees and expenses for the services rendered and the general nature of the services rendered but without any detail concerning the substance of the services rendered.
2.5 PAYMENT OF EXCISE TAXES. If any payment received by Executive under this Amended and Restated Agreement, as a result of or following any termination of employment under this Amended and Restated Agreement, is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (as amended from time to time, the Code), or any successor or similar provision of the Code (the Excise Tax), the Company shall pay Executive an additional cash amount (the Gross Up) such that the net after-tax amount received by Executive under this Amended and Restated Agreement is the same as if the Excise Tax had not applied to any payments made under this Amended and Restated Agreement. The Company shall pay such amounts promptly after the calculation referred to in Section 2.6 has been made, subject, however, to the six month delay of payment described in Section 6.10, but no later than December 31 of the year following the year in which the Executive remits the related taxes.
2.6 CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross Up, Executive shall be deemed to pay the federal income tax at the highest marginal rate of taxation (currently 39.6%) in the calendar year in which the payment to which the Gross Up applies is to be made. The determination of whether such Excise Tax is payable and the amount of the Excise Tax shall be made upon the opinion of a national accounting firm selected by Executive and reasonably acceptable to the Company. If such opinion is not finally accepted by
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the Internal Revenue Service upon audit or otherwise, then appropriate adjustments shall be computed (with interest at the rate required to be paid by Executive under the Code and with Gross Up, if applicable) by such tax counsel based upon the final amount of the Excise Tax so determined, and (a) any additional amount due Executive as a result of such adjustment shall be paid to Executive by the Company in cash in a lump sum within 30 days after such computation, or (b) any amount due the Company as a result of such adjustment shall be paid to the Company by Executive in cash in a lump sum within 30 days after such computation. The Gross Up payment shall be subject to the six month delay of payment described in Section 6.10, but shall be made by December 31 of the year following the year in which the Executive remits the related taxes.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 DEATH OR RETIREMENT OF EXECUTIVE. Executives employment under this Amended and Restated Agreement shall automatically terminate upon the death or Retirement of Executive.
3.2 BY EXECUTIVE. Executive shall be entitled to terminate his employment under this Amended and Restated Agreement by giving Notice of Termination to the Company:
(a) for Good Reason;
(b) at any time without Good Reason.
3.3 BY COMPANY. The Company shall be entitled to terminate Executives employment under this Amended and Restated Agreement by giving Notice of Termination to Executive:
(a) in the event of Executives Total Disability;
(b) for Cause; and
(c) at any time without Cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executives employment under this Amended and Restated Agreement is terminated prior to the Expiration Date, then except for any other rights or benefits specifically provided for in this Amended and Restated Agreement, the Company shall be obligated to provide compensation and benefits to Executive following his period of employment only as follows and only after execution by Executive of a general release of claims in favor of the Company and all related parties in a form provided by the Company.
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4.1 UPON TERMINATION FOR DEATH OR TOTAL DISABILITY. If Executives employment under this Amended and Restated Agreement is terminated by reason of his death or Total Disability, the Company shall:
(a) pay Executive (or his estate) any Base Salary which has been earned but not been paid as of the termination date (the Accrued Base Salary);
(b) pay Executive (or his estate) for unused vacation days and paid holidays accrued as of the termination date in an amount equal to his Base Salary multiplied by a fraction the numerator of which is the number of accrued unused vacation days and paid holidays, and the denominator of which is 260 (the Accrued Vacation Payment);
(c) reimburse Executive (or his estate) for expenses incurred by him prior to the date of termination which are subject to reimbursement pursuant to this Amended and Restated Agreement (the Accrued Reimbursable Expenses);
(d) provide to Executive (or his estate) any accrued and vested benefits required to be provided by the terms of any Company-sponsored benefit plans or programs (the Accrued Benefits), together with any benefits required to be paid or provided in the event of Executives death or disability under applicable law; and
(e) pay Executive (or his estate) any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid.
4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON. If Executives employment is terminated by the Company for Cause, or if Executive terminates his employment with the Company prior to the Expiration Date, other than (x) upon Executives death or Total Disability or (y) for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive for the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law; and
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid.
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4.3 UPON EXPIRATION OF THIS AMENDED AND RESTATED AGREEMENT. In order to induce the Executive to continue his employment with the Company throughout the term of this Amended and Restated Agreement and until the Expiration Date of this Amended and Restated Agreement, upon termination of the Executives employment on the Expiration Date, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law; and
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid.
4.4 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON. If Executives employment is terminated by the Company without Cause or by the Executive for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law;
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid;
(f) Intentionally deleted;
(g) subject to the six month delay of payment described in Section 6.10, pay Executive an amount equal to twice the sum of (1) Executives Base Salary in effect immediately prior to the time such termination occurs, plus (2) an amount equal to the greater of (x) the Threshold Bonus and (y) one half of the sum of (i) the bonuses (whether Incentive Bonuses or other bonuses) that have been paid to Executive with respect to the two fiscal years immediately preceding the fiscal year in which the termination occurs, and (ii) the bonuses (whether Incentive Bonuses or other bonuses) that have been earned with respect to the two fiscal years immediately preceding the fiscal year in which the termination occurs but have not been paid (or if Executive has been employed by the Company for less than two full fiscal years at the time of such termination, then an amount equal to the sum of such paid and earned bonuses with respect to the fiscal year immediately preceding the fiscal year in which the termination, occurs), which payment shall be due in full regardless of any compensation paid to Executive as a result of his employment by any other person after the termination date;
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(h) maintain in full force and effect, for Executives and his eligible beneficiaries continued benefit, continued health insurance coverage, for a period of 24 months following the termination date of his employment under this Amended and Restated Agreement, except to the extent that, as to any such coverage, Executive receives the substantial equivalent of such coverage as a result of his employment with another employer after the termination date. Following the expiration of such 24-month period and to the extent permitted by the Companys then current employee benefit plans, the Company shall permit Executive, or his eligible beneficiaries, as the case may be, to purchase at his sole cost and expense such continued health insurance coverage for an additional period of 24 months. Notwithstanding the foregoing, if Executives continued participation in the health insurance plan is not permitted under the terms of the plan, program or arrangement under which the benefit was provided to Executive by the Company, or may result in negative tax effects for the Company, the Company shall arrange to provide Executive with health insurance coverage substantially similar to the coverage which Executive would have been entitled to receive under such plan, program or arrangement a portion of which may be provided by the Company paying Executives COBRA premiums (which may be included in Executives taxable income); and
(i) cause all unvested Equity to immediately vest.
4.5 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON FOLLOWING A CHANGE OF CONTROL. If Executives employment is terminated by the Company or its successor-in-interest without Cause or by Executive for Good Reason within 12 months following a Change of Control, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law;
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid;
(f) contribute to the Deferred Compensation Plan any amount that has been accrued but not yet paid to the account provided for in such plan;
(g) subject to the six month delay of payment described in Section 6.10, pay directly to Executive on the anniversary date of each year after such termination through the end of the term of this Amended and Restated Agreement, the amount that would have been payable to the account established under the Deferred Compensation Plan if this Amended and Restated Agreement had not been terminated;
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(h) subject to the six (6) month delay of payment described in Section 6.10 for a payment due to the Executives termination of employment, or if payment is made due to a Change of Control, within thirty (30) days after the Change of Control, pay Executive an amount equal to three multiplied by the sum of (1) Executives Base Salary in effect immediately prior the time such termination or Change of Control occurs, plus (2) an amount equal to the greater of (x) the Target Bonus and (y) the highest amount of the bonuses (whether Incentive Bonuses or other bonuses) that have been paid (or, if not yet paid, accrued or earned for such fiscal period) to Executive with respect to the three fiscal years immediately preceding the fiscal year in which the termination or Change of Control occurs;
(i) maintain in full force and effect, for Executives and his eligible beneficiaries continued benefit, continued health insurance coverage, for a period of 24 months following the termination date of his employment under this Amended and Restated Agreement, except to the extent that, as to any such coverage, Executive receives the substantial equivalent of such coverage as a result of his employment with another employer after the termination date or Change of Control. Following the expiration of such 24-month period, the Company shall permit Executive, or his eligible beneficiaries, as the case may be, to purchase such continued health insurance coverage for an additional period of 24 months. Notwithstanding the foregoing, if Executives continued participation in the health insurance plan is not permitted under the terms of the plan, program or arrangement under which the benefit was provided to Executive by the Company, or may result in negative tax effects for the Company, the Company shall arrange to provide Executive with health insurance coverage substantially similar to the coverage which Executive would have been entitled to receive under such plan, program or arrangement a portion of which may be provided by the Company paying Executives COBRA premiums (which may be included in Executives taxable income; and
(j) cause all unvested Equity to immediately vest.
4.6 Reserved.
ARTICLE V
RESTRICTIVE COVENANTS
5.1 CONFIDENTIAL INFORMATION AND MATERIALS. Executive agrees that during the course of his employment with the Company, he has obtained and shall likely obtain in the future Confidential Information. Confidential Information is information concerning the Company which the Company attempts to keep confidential, has not been publicly disclosed by the Company, is not a matter of common knowledge in the airline industry, and was not known by Executive prior to his employment by the Company, including, but not limited to, certain information relating to the business plans, trade practices, finances, accounting methods, methods of operations, trade secrets, marketing plans or programs, forecasts, statistics relating to routes and markets, contracts, customers, compensation arrangements, and business opportunities. Executive agrees that the Confidential Information is proprietary to the Company, and agrees to sign and be bound by the terms of the Companys Proprietary Information and Inventions Agreement (Proprietary Information Agreement).
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5.2 GENERAL KNOWLEDGE. The general skills and experience gained by Executive during Executives employment or engagement by the Company, and information publicly available without breach of any duty owed by any person to the Company or generally known within the airline industry, is not considered Confidential Information. Executive is not restricted from working with a person or entity which has independently developed information or materials similar to the Confidential Information, but in such a circumstance, Executive agrees not to disclose the fact that any similarity exists between the Confidential Information and the independently developed information and materials, and Executive understands that such similarity does not excuse Executive from the non-disclosure and other obligations in this Amended and Restated Agreement.
5.3 EXECUTIVE OBLIGATIONS AS TO CONFIDENTIAL INFORMATION AND MATERIALS. During Executives employment or engagement by the Company, Executive shall have access to the Confidential Information and shall occupy a position of trust and confidence with respect to the Confidential Information and the Companys affairs and business. Executive agrees to take the following steps to preserve the confidential and proprietary nature of the Confidential Information:
(a) NON-DISCLOSURE. During Executives Employment or engagement by the Company and for a period of two years after the termination of Executives Employment or engagement by the Company for any reason, Executive shall not use, disclose or otherwise permit any person or entity access to any of the Confidential Information other than as required in the performance of Executives duties with the Company and other than is required to be disclosed by law or by any court, administrative agency, or arbitration panel.
(b) PREVENT DISCLOSURE. During and for a period of two years after Executives Employment or engagement by the Company, other than as required in the performance of Executives duties with the Company and other than is required to be disclosed by law or by any court, administrative agency, or arbitration panel, Executive shall take all reasonable precautions to prevent disclosure of the Confidential Information to unauthorized persons or entities, other than is required to be disclosed by law or by any court, administrative agency, or arbitration panel.
(c) RETURN ALL MATERIALS. Upon termination of Executives employment or engagement by the Company for any reason whatsoever, or earlier if requested by the Company, Executive shall deliver to the Company all tangible materials relating to, but not limited to, the Confidential Information and any other information regarding the Company, including any documentation, records, listings, notes, data, sketches, drawings, memoranda, models, accounts, reference materials, samples, machine-readable media and equipment which in any way relate to the Confidential Information and shall not retain any copies of any of the above materials.
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ARTICLE VI
MISCELLANEOUS
6.1 DEFINITIONS. For purposes of this Amended and Restated Agreement, the following terms shall have the following meanings:
(a) Accrued Base Salary - as defined in Section 4.1(a);
(b) Accrued Benefits - as defined in Section 4.1(d);
(c) Accrued Reimbursable Expenses - as defined in Section 4.3(c);
(d) Accrued Vacation Payment - as defined in Section 4.1(b);
(e) Base Salary - as defined in Section 2.1;
(f) Board - shall mean the Board of Directors of the Company;
(g) Cause shall mean the occurrence of any of the following:
(h) Executives willful misconduct, including, but not limited to, Executives misappropriation of trade secrets, fraud or embezzlement;
(ii) Executive commits a felony offense or any crime involving dishonesty or physical harm to any person; or
(iii) Executive commits a material breach of this Amended and Restated Agreement, which breach, if curable, is not cured within thirty (30) days following written notice to Executive from the Company; or
(iv) If Executive willfully refuses to implement or follow a lawful policy or directive of the Company, which refusal is not cured within thirty (30) days following written notice to Executive from the Company;
(v) No failure of Executive to satisfy any goals, forecasts or other financial or business criteria established by the Company, standing alone, shall constitute Cause.
(i) Change of Control shall mean and shall be deemed to have occurred if one of the following occurs and the event is also a change in control event as defined in Section 409A (defined below):
(j) After the date of this Amended and Restated Agreement, any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act), or any successor provision), or any other persons who the Board of Directors determines in good faith is acting as a group, becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act or any successor provision) directly or indirectly of securities of the Company representing more than 50% of the combined voting power of the Companys then outstanding securities ordinarily having the right to vote at an election of directors;
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(ii) A majority of the members of the Companys Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the Companys Board of Directors before the date of appointment or election;
(iii) A tender offer or exchange offer is made where the intent of such offer is to take over control of the Company, and such offer is consummated for the equity securities of the Company representing more than fifty percent (50%) of the combined voting power of the Companys then outstanding voting securities over a twelve month period; or
(iv) Consummation of
(A) a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of the assets of the Company, in each case, with or to a corporation or other person or entity
(1) of which persons who were the holders of each class of the Companys capital stock immediately prior to such transaction do not receive voting securities, as a result of their ownership of such capital stock immediately prior to such transaction, that constitute both
(x) more than 51% of each class of capital stock and
(y) more than 51% of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the reorganized, merged, consolidated or purchasing corporation (or in the case of a non-corporate person or entity, functionally equivalent voting power).
(k) Confidential Information - as defined in Section 5.1;
(l) Continued Benefits - as defined in Section 4.3(g);
(m) Expiration Date - as defined in Section 1.3;
(n) Good Reason shall mean the occurrence of any of the following if not cured within 20 days following receipt of a Notice of Termination by Executive:
(i) Any change by the Company in Executives title, or any significant diminishment in Executives function, duties or responsibilities from those associated with his functions, duties or responsibilities as of January 1, 2011;
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(ii) Any material breach of this Amended and Restated Agreement or any other agreement between the Company and Executive (and for purposes of this Amended and Restated Agreement, any default by the Company to make any payment or to provide any fringe benefit shall be considered material) which remains uncured for a period of 10 days after Executive gives the Company notice of such breach specifying in reasonable detail the event(s) constituting such breach;
(iii) Except with Executives prior written consent, relocation of Executives principal place of employment to a location greater than 50 miles from Phoenix, Arizona, or requiring Executive to travel on the Companys business more than is required by Section 1.4; or
(iv) Other than an Across the Board Reduction, any reduction by the Company in Executives Base Salary, bonus opportunity or benefits to which Executive is entitled under this Amended and Restated Agreement.
(o) Incentive Bonus - as defined in Section 2.2;
(p) Market Price means the officially quoted closing price of the common stock of the Company, as reported by the principal exchange on which the common stock of the Company is traded for the date in question. If there are no transactions on such date, the Market Price shall be determined as of the immediately preceding date on which there were transactions. If no such prices are reported on such exchange, then Market Price shall mean the average of the high and low sale prices for the common stock of the Company (or if no sales prices are reported, the average of the high and low bid prices) as reported by a quotation system of general circulation to brokers and dealers. If the common stock of the Company is not traded on any exchange or in the over-the-counter market, the Market Price of the common stock of the Company on any date shall be determined in good faith by the parties.
(q) Notice of Termination shall mean a notice which shall indicate the specific termination provision of this Amended and Restated Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated. Each Notice of Termination shall be delivered at least 30 days prior to the effective date of termination.
(r) Prime Rate means the prime rate announced by The Wall Street Journal from time to time.
(s) Retirement shall mean the attainment of age 65;
(t) Threshold Bonus shall mean the amount set forth in Exhibit A in effect at any point in time.
(u) Total Disability or Totally Disabled shall mean that (i) the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last
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for a continuous period of not less than 12 months, or (ii) if applicable, that for at least three months the Executive is receiving income replacement benefits under a Company sponsored plan by reason of any medically determinable physical or mental impairment expected to last at least twelve consecutive months or result in death, or (iii) the Executive is determined to be disabled under a Company disability plan with the same or substantially similar definition of disability, as described in Section 409A (defined below). If there is a dispute as to whether Executive is Totally Disabled, such dispute shall be submitted for resolution to a licensed physician selected by Executive but subject to the reasonable approval of the Company. If such a dispute arises, Executive shall submit to such examinations and shall provide such information as such physician may request, and the determination of the physician as to whether Executive is Totally Disabled under this definition shall be binding and conclusive.
6.2 KEY MAN INSURANCE. In addition to the insurance policy described in Section 2.5(c), the Company shall have the right, in its sole discretion, to purchase key man insurance on the life of Executive. The Company shall be the owner and beneficiary of any such policy. If the Company elects to purchase such a policy, Executive shall take such physical examinations and supply such information as may be reasonably requested by the insurer.
6.3 SUCCESSORS, BINDING AGREEMENT. This Amended and Restated Agreement shall be binding upon and run to the benefit of the Company, its successors and assigns, and shall inure to the benefit of and be enforceable by Executives personal or legal representatives, beneficiaries, designees, executors, administrators, heirs, distributees, devisees and legatees.
6.4 MODIFICATION; NO WAIVER. This Amended and Restated Agreement may not be modified or amended except by an instrument in writing signed by the parties to this Amended and Restated Agreement. No term or condition of this Amended and Restated Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Amended and Restated Agreement, except by written instrument by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated in such waiver, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any other term or condition. No amendment agreed by the parties in writing shall be deemed to give rise to Good Reason.
6.5 SEVERABILITY. The covenants and agreements contained in this Amended and Restated Agreement are separate and severable and the invalidity or unenforceability of any one or more of such covenants or agreements, if not material to the employment arrangement that is the basis for this Amended and Restated Agreement, shall not affect the validity or enforceability of any other covenant or agreement contained in this Amended and Restated Agreement. If, in any judicial proceeding, a court shall refuse to enforce one or more of the covenants or agreements contained in this Amended and Restated Agreement because the duration thereof is too long, or the scope thereof is too broad, it is expressly agreed between the parties to this Amended and Restated Agreement that such duration or scope shall be deemed reduced to the extent necessary to permit the enforcement of such covenants or agreements.
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6.6 NOTICES. All the notices and other communications required or permitted under this Amended and Restated Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to the parties to this Amended and Restated Agreement at the following addresses:
If to the Company, to it at: | ||
Mesa Air Group, Inc. 410 North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Chair of Board of Directors |
||
If Executive, to him at: |
||
With a copy to: | ||
Notices shall be deemed to have been given and received upon personal delivery or three business days after having been deposited, if sent by registered or certified mail.
6.7 ASSIGNMENT. This Amended and Restated Agreement and any rights under this Amended and Restated Agreement shall not be assignable by either party without the prior written consent of the other party (which may be withheld in the discretion of such other party) except that the Company may assign this Amended and Restated Agreement to its successor in interest in a Change in Control transaction, provided that such successor in interest expressly assumes the terms of this Amended and Restated Agreement.
6.8 ENTIRE UNDERSTANDING. This Amended and Restated Agreement (together with the Exhibits incorporated as a part of this Amended and Restated Agreement) constitutes the entire understanding between the parties to this Amended and Restated Agreement and no agreement, representation, warranty or covenant has been made by either party except as expressly set forth in this Amended and Restated Agreement.
6.9 EXECUTIVES REPRESENTATIONS. Executive represents and warrants that neither the execution and delivery of this Amended and Restated Agreement nor the performance of his duties under this Amended and Restated Agreement violates the provisions of any other agreement to which he is a party or by which he is bound.
6.10 SECTION 409A. This Amended and Restated Agreement is intended to comply with, or otherwise be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended (the Code) and any regulations and Treasury guidance promulgated thereunder
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(Section 409A). If the Company determines in good faith that any provision of this Amended and Restated Agreement would cause the Executive to incur an additional tax, penalty, or interest under Section 409A, the Compensation Committee and the Executive shall use reasonable efforts to reform such provision, if possible, in a mutually agreeable fashion to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A or causing the imposition of such additional tax, penalty, or interest under Section 409A. The preceding provisions, however, shall not be construed as a guarantee by the Company of any particular tax effect to Executive under this Amended and Restated Agreement.
For purposes of Section 409A, the right to a series of installment payments under this Amended and Restated Agreement shall be treated as a right to a series of separate payments.
With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Amended and Restated Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (1) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (2) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
Termination of employment, or words of similar import, as used in this Amended and Restated Agreement means, for purposes of any payments under this Amended and Restated Agreement that are payments of deferred compensation subject to Section 409A, the Executives separation from service as defined in Section 409A.
If a payment obligation under this Amended and Restated Agreement arises on account of the Executives separation from service while the Executive is a specified employee (as defined under Section 409A and determined in good faith by the Compensation Committee), any payment of deferred compensation (as defined under Treasury Regulation Section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) that is scheduled to be paid within six (6) months after such separation from service shall accrue with interest as described in Section 6.11 and shall be paid within 15 days after the end of the six-month period beginning on the date of such separation from service, or, if earlier, within 15 days after the appointment of the personal representative or executor of the Executives estate following his death.
6.11 INTEREST ON PAST DUE AMOUNTS; ATTORNEYS FEES. All amounts under this Amended and Restated Agreement that are not paid when due shall bear interest at the rate of 4% plus Libor per annum, from the date such payments were due until paid. In addition, any party who breaches this Amended and Restated Agreement shall be obligated to pay the reasonable attorneys fees and costs incurred by the other party in seeking to enforce the terms of this Amended and Restated Agreement.
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6.12 GOVERNING LAW. THIS AMENDED AND RESTATED AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED FOR ALL PURPOSES BY THE LAWS OF THE STATE OF ARIZONA APPLICABLE TO CONTRACTS EXECUTED AND WHOLLY PERFORMED WITHIN SUCH STATE.
[Signature Pages Follow]
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MESA AIR GROUP, INC., a Nevada corporation |
By: |
Name: |
Title: |
|
||
JONATHAN G. ORNSTEIN |
[Signature Page to Amended and Restated Employment Agreement]
EXHIBIT A
INCENTIVE BONUS
BONUS LEVEL FISCAL |
QUARTERLY (1) |
ANNUAL |
||
Guaranteed | $15,432 | $77,160 | ||
Minimum | $36,111 | $180,556 | ||
Threshold | $56,790 | $283,951 | ||
Target | $98,148 | $490,741 | ||
Maximum | $150,000 | $750,000 |
NOTE 1 THE QUARTERLY AMOUNT WILL BE PAID FOR EACH OF THE FIRST THREE FISCAL QUARTERS BASED ON THE COMPANYS QUARTERLY UNAUDITED FINANCIAL REPORTS AND OTHER QUALITATIVE PERFORMANCE OBJECTIVES TO BE ESTABLISHED UPON MUTUAL AGREEMENT OF EXECUTIVE AND THE BOARD OF DIRECTORS. THE ANNUAL AMOUNT WILL BE PAID FOR THE FOURTH QUARTER LESS ANY AMOUNTS PAID FOR THE FIRST THREE QUARTERS BASED ON THE ANNUAL AUDITED FINANCIAL REPORTS AND OTHER QUALITATIVE PERFORMANCE OBJECTIVES TO BE ESTABLISHED UPON MUTUAL AGREEMENT OF EXECUTIVE AND THE BOARD OF DIRECTORS. THESE AMOUNTS WILL NOT BE DECREASED OVER THE TERM OF THE AGREEMENT.
Exhibit 10.8
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered into this 26th day of July, 2018, by and between Mesa Air Group, Inc., a Nevada corporation (the Company), and Michael J. Lotz (Executive).
RECITALS
The Company and Executive were parties to an Employment Agreement dated February 23, 2011, with an effective date of March 1, 2011 (the Original Employment Agreement), as amended by that certain Amendment No. 1 to Employment Agreement dated June 11, 2014, with an effective date of January 22, 2014 (Amendment No. 1), and further amended by that certain Amendment No. 2 to Employment Agreement dated May 24, 2016, with an effective date of June 1, 2016 (Amendment No. 2) (the Original Employment Agreement, Amendment No. 1 and Amendment No. 2 are collectively referred to herein as the Agreement). The parties have agreed to enter into this Amended and Restated Employment Agreement (the Amended and Restated Agreement) which shall supersede the Agreement.
ARTICLE I
DUTIES AND TERM
1.1 EMPLOYMENT. In consideration of their mutual covenants and other good and valuable consideration, the receipt, adequacy and sufficiency of which are acknowledged, the Company agrees to hire Executive, and Executive agrees to remain in the employ of the Company, upon the terms provided in this Amended and Restated Agreement.
1.2 POSITION AND RESPONSIBILITIES.
(a) Executive shall serve as the President and Chief Financial Officer of the Company. Executive agrees to perform services, not inconsistent with his position, as are from time to time assigned to him by the Board of Directors of the Company.
(b) During the period of his employment under this Amended and Restated Agreement, Executive shall devote substantially all of his business time, attention, skill and efforts to the faithful performance of his duties under this Amended and Restated Agreement, but Executive shall have the right to engage in personal business and to participate in charitable and civic activities, during normal business hours and otherwise, as long as such business and activities do not unreasonably interfere with Executives duties to the Company.
1.3 TERM. The Company may terminate Executives employment at any time, subject to providing Executive with written notice (in accordance with Section 6.6) of not less than one (1) year prior the intended termination date. For the avoidance of doubt, the Companys election to terminate Executive in accordance with this Section 1.3 shall trigger the payments set forth in Section 4.5 of the Employment Agreement.
1.4 LOCATION. During the period of his employment under this Amended and Restated Agreement, Executive shall not be required, except with his prior written consent
(which may be withheld in his discretion), to relocate his principal place of employment outside Maricopa County, Arizona. Required travel on the Companys business shall not be deemed a relocation so long as Executive is not required to provide his services under this Amended and Restated Agreement outside of Maricopa County, Arizona, for more than 50% of his working days during any consecutive six-month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his employment under this Amended and Restated Agreement, including, without limitation, services as a director, officer or member of any committee of the Board of the Company or of the board of directors of any subsidiary of the Company, the Company shall compensate Executive as, set forth in this Article IV.
2.1 BASE SALARY. The Company shall pay to Executive an annual base salary of $533,333, less all appropriate taxes and withholdings (the Base Salary). Executives Base Salary shall be paid every other week in equal installments. The Base Salary shall be reviewed annually by the Board or a committee designated by the Board, and the Board or such committee may, in its discretion, increase the Base Salary. The Company may reduce the Base Salary under circumstances in which the Company has imposed cuts in salary of other officers on an across the board basis, but any such reduction may not be at a greater percentage than the reduction imposed on any other officer (an Across the Board Reduction).
2.2 BONUS PAYMENTS.
(a) Reserved.
(b) During the period of Executives employment under this Amended and Restated Agreement, Executive shall be entitled to the bonus payments specified on Exhibit A hereto, as such Exhibit may be amended and/or updated from time to time upon the mutual agreement of Executive and the Board of Directors. Any bonus payable to Executive under the plan described in Exhibit A is referred to as an Incentive Bonus. All Incentive Bonuses shall be paid on a quarterly basis not later than 45 days after the end of each fiscal quarter (or 90 days after the end of any fiscal year), based on (i) the Companys financial statements and benchmarks to be determined by the Board of Directors after good faith consultation with Executive, and (ii) such other qualitative factors as agreed to by Executive and the Board of Directors in consultation with the compensation Committee. Payments made with respect to any fiscal quarter other than the last fiscal quarter of a fiscal year of the Company will be made on an estimated basis (based on annualized results), and the parties will account to one another and make appropriate payment adjustments promptly after the financial statements for any fiscal year become available but no later than 90 days after the end of the fiscal year. At the discretion of the Board of Directors, the Company may pay bonuses to Executive in addition to the Incentive Bonuses set forth in Exhibit A.
2.3 EQUITY PARTICIPATION. During the Employment Period, Executive shall receive an annual equity award (consisting of restricted stock, SARs, phantom stock or similar
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equity units) pursuant to the terms of the Companys then existing equity incentive plan (or similarly titled plan), as determined by the Board or its Compensation Committee in its sole discretion, provided that the annual equity grant during the term of this Amended and Restated Agreement shall have a grant date value of not less than $633,600. The agreements governing such equity grants shall provide for vesting of such equity over a three (3) year period.
2.4 ADDITIONAL BENEFITS.
(a) GENERAL BENEFITS. During the term of this Amended and Restated Agreement, Executive shall be entitled (i) to participate in all employee benefit and welfare programs, plans and arrangements (including, without limitation, pension, profit sharing, supplemental pension and other retirement plans, insurance, hospitalization, medical and group disability benefits, travel or accident insurance plans) and (ii) to receive fringe benefits, such as dues and fees of professional organizations and associations, in each case under (i) and (ii) to the extent that such programs, plans, arrangements, and benefits are from time to time available to the Companys executive personnel (the programs and benefits in (i) and (ii) are referred to as General Benefits). During the period of his employment under this Amended and Restated Agreement, the Company shall continue to provide the General Benefits to Executive at a level which shall in no event be less, in any material respect, than the General Benefits made available to Executive by the Company as of the date of this Amended and Restated Agreement; provided, however, the Company may reduce the General Benefits under circumstances in which the Company has imposed reductions in coverage of the General Benefits of other officers on an across the board basis, but any such reduction may not be disproportionately greater than the reduction imposed on any other officer.
(b) DEATH BENEFIT. The Company shall maintain term life insurance on the life of Executive such that the aggregate death benefit under existing and new policies totals $2,000,000; such insurance shall be obtained under one or more policies from insurers reasonably acceptable to Executive provided, however, the Company shall no event be obligated to premiums in excess of 200% of the premiums in effect as of the effective date of this Amended and Restated Agreement. As long as Executive is employed by the Company, (i) the Company shall pay the applicable premiums on the policy (or policies) and shall maintain the policy (or policies) in full force and effect, and (ii) Executive shall have the exclusive right to designate the beneficiary under such policy (or policies). The Company shall assign the policy (or policies) to Executive, without any cost to Executive, effective immediately after Executive ceases to be an employee of the Company, regardless of the reason for Executives termination of employment; provided that the Executive shall be responsible for any premiums accruing following his final date of employment. The Company shall not pledge or otherwise encumber the policy (or policies) at any time.
(c) DISABILITY BENEFITS. The Company shall provide Executive with the following disability benefits:
(i) During any period of disability, illness or incapacity during the term of this Amended and Restated Agreement which renders Executive at least temporarily unable to perform the services required under this Amended and Restated Agreement, Executive shall receive the Base Salary payable under Section 2.1 plus any cash bonus compensation
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earned pursuant to the provisions of this Amended and Restated Agreement or any incentive compensation plan then in effect but not yet paid, less any cash benefits received by him under any disability insurance carried by or provided by the Company. Upon Executives Total Disability (as defined below), which Total Disability continues during the payment periods specified in this Section, the Company shall pay to Executive, on a monthly basis, for the period specified below, an amount (the Disability Payment) equal to (A) one-twelfth of the sum of (1) Executives Base Salary in effect immediately prior to the time such Total Disability occurs, plus (2) an amount equal to the greater of (x) the Threshold Bonus or (y) one half of the sum of (i) the bonuses (whether Incentive Bonuses or other bonuses) that have been paid to Executive with respect to the two fiscal years immediately preceding the fiscal year in which the Total Disability occurs, and (ii) the bonuses (whether Incentive Bonuses or other bonuses) that have been earned with respect to the two fiscal years immediately preceding the fiscal year in which the Total Disability occurs but have not been paid (or if Executive has been employed by the Company for less than two full fiscal years at the time of such Total Disability, then an amount equal to the sum of such paid and earned bonuses with respect to the fiscal year immediately preceding the fiscal year in which the Total Disability occurs), which payments shall be offset by the amount of any compensation paid to Executive as a result of his employment by any other person after the date that Total Disability occurs, (B) reduced by the amount of any monthly payments under any policy of disability income insurance paid for by the Company (including the policy described in Section 2.4(c)(ii)) which payments are received during the time when any Disability Payment is being made to Executive following Executives Total Disability. The Company shall pay the Disability Payment to Executive in equivalent installments, at the same time or times as would have been the case for payment of Base Salary if Executive had not become Totally Disabled and had remained employed by the Company, and such payments shall continue until the later of the expiration of the term of this Amended and Restated Agreement and 24 months, except that the Companys obligation to make such payments shall cease upon the death of Executive or if Executive ceases to be Totally Disabled. Upon Executives Total Disability, except as provided in this Amended and Restated Agreement, all rights of Executive under this Amended and Restated Agreement shall terminate.
(ii) In order to provide a ready source of funds with which to pay the benefits provided for in clause (1) above, if Executive becomes disabled (determined in accordance with the policy described below) during the term of this Amended and Restated Agreement and such disability extends beyond 180 days, then Executive shall be paid the benefits provided for under the disability insurance policy issued by UNUM Life Insurance Company (Policy #IBD 060676), which the Company agrees to maintain in full force and effect during the term of this Amended and Restated Agreement. The Company promptly (and in any event not later than 60 days after this Amended and Restated Agreement is executed) shall have endeavored to cause such policy to be amended to the extent necessary to cause Executive to be eligible for disability payments for a minimum of two years from the date of such disability (that is, providing for 1-1/2 years of coverage, taking into account the 180-day coverage provided by the Company directly under Section 2.4(c)(i)), and to increase the amount payable to a minimum of $37,600 per month. Such coverage shall apply regardless of whether such two-year period extends beyond the term of this Amended and Restated Agreement.
(d) RELOCATION EXPENSES. During the term of this Amended and Restated Agreement, if Executives principal place of employment is relocated outside Maricopa
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County, Arizona, in accordance with Section 1.4, the Company shall reimburse Executive for all usual relocation expenses incurred by Executive and his household in moving to the new location, including, without limitation, moving expenses and rental payments for temporary living quarters in the area of relocation for a period not to exceed six months, real estate brokerage commissions incurred by Executive in the sale of his then existing principal residence, and loan financing charges and closing costs incurred in connection with the acquisition and financing of a new residence.
(e) REIMBURSEMENT OF BUSINESS EXPENSES. During the term of this Amended and Restated Agreement, the Company shall, upon submission of documentation by executive in accordance with standard Company policies from time to time, pay, or reimburse Executive for, all reasonable travel and other expenses incurred by Executive in performing his obligations under this Amended and Restated Agreement, including for investigation of business opportunities and strategic allegiances for the Company and for client and customer development.
(f) VACATIONS. During the term of this Amended and Restated Agreement, Executive shall be entitled to vacations with pay, and to such personal and sick leave with pay, in accordance with the policy of the Company as may be established from time to time by the Company and as applies to other executive officers of the Company. In no event shall Executive be entitled to fewer than four weeks annual vacation. Unused vacation days may be carried over from one year to the next in the maximum amount of four weeks annual vacation; that is, to the extent that vacation days to which Executive is entitled remain unused, such unused vacation days will cumulate and be useable in any subsequent year, but no more than four weeks of annual vacation in the aggregate can be carried over from one year to the next. Any vacation days which remain unused at the end of a calendar year that are in excess of such four weeks annual vacation shall expire and shall thereafter no longer be useable by Executive, but the Company shall compensate Executive for any such unused vacation days in accordance with the formula set forth in Section 4.1(b), by payment in January of the next year. Similarly, any unused paid holidays may be carried over from one year to the next but not in excess of an aggregate of five days of paid holidays may be carried over from one year to the next; to the extent any paid holidays remain unused at the end of a calendar year that are in excess of such five paid holidays, such paid holidays shall expire and shall thereafter no longer be useable by Executive, but the Company shall compensate Executive for any such unused paid holidays in accordance with the formula set forth in Section 4.1(b), by payment in January of the next year.
(g) DIRECTOR FEES. During the term of this Amended and Restated Agreement, Executive shall not be entitled to be paid any fees for attendance at meetings of the Board of Directors or any committee of the Board of Directors (or the board or committee of the board of any subsidiary).
(h) AIRLINE PASSES. During the term of this Amended and Restated Agreement, the Company shall use its reasonable efforts to obtain for the benefit of Executive and Executives immediate family (Executives spouse, Executives children, and the spouse and children of any of Executives children), the right to fly on a complimentary basis on the aircraft of other airlines, on a positive space basis. Such efforts shall include negotiating in good faith with other carriers for such rights and offering reciprocal rights to the executives (and their
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immediate family members) of such other carriers. The Company shall provide to Executive and Executives immediate family, during the life of each such individual, the right to fly on a complimentary basis on any aircraft operated by the Company or any affiliate at any time (subject only to reasonable and customary rules regarding availability), on a positive space basis. The Company shall use its best efforts to cause any successor or subsequent successor to the business or assets of the Company to grant such rights as to all routes operated by such successor (or subsequent successor) and any of its affiliates.
(i) PROFESSIONAL SERVICES. During the term of this Amended and Restated Agreement, the Company shall reimburse Executive for his out-of-pocket costs incurred in connection with the retention of professionals by Executive to provide Executive with income tax, estate planning, and investment advisory services. The maximum amount of reimbursable expenses for such purposes shall be $5,000 for each calendar year during the term of this Amended and Restated Agreement. The amount that is not used each calendar year shall be forfeited and shall not carry over to be used in any subsequent year. The Company shall reimburse Executive for such costs promptly after Executive submits an invoice to Company. In order to preserve Executives rights to confidentiality, Executive may satisfy the requirement of submitting an invoice by providing the Company with a copy of the facing page of the invoice showing the fees and expenses for the services rendered and the general nature of the services rendered but without any detail concerning the substance of the services rendered.
2.5 PAYMENT OF EXCISE TAXES. If any payment received by Executive under this Amended and Restated Agreement, as a result of or following any termination of employment under this Amended and Restated Agreement is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (as amended from time to time, the Code), or any successor or similar provision of the Code (the Excise Tax), the Company shall pay Executive an additional cash amount (the Gross Up) such that the net after-tax amount received by Executive under this Amended and Restated Agreement is the same as if the Excise Tax had not applied to any payments made under this Amended and Restated Agreement. The Company shall pay such amounts promptly after the calculation referred to in Section 2.6 has been made, subject, however, to the six month delay of payment described in Section 6.10, but no later than December 31 of the year following the year in which the Executive remits the related taxes.
2.6 CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross Up, Executive shall be deemed to pay the federal income tax at the highest marginal rate of taxation (currently 39.6%) in the calendar year in which the payment to which the Gross Up applies is to be made. The, determination of whether such Excise Tax is payable and the amount of the Excise Tax shall be made upon the opinion of a national accounting firm selected by Executive and reasonably acceptable to the Company. If such opinion is not finally accepted by the Internal Revenue Service upon audit or otherwise, then appropriate adjustments shall be computed (with interest at the rate required to be paid by Executive under the Code and with Gross Up, if applicable) by such tax counsel based upon the final amount of the Excise Tax so determined, and (a) any additional amount due Executive as a result of such adjustment shall be paid to Executive by the Company in cash in a lump sum within 30 days after such computation, or (b) any amount due the Company as a result of such adjustment shall be paid to the Company by Executive in cash in a lump sum within 30 days after such computation. The Gross Up payment shall be subject to the six month delay of payment described in Section 6.10, but shall be made by December 31 of the year following the year in which the Executive remits the related taxes.
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ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 DEATH OR RETIREMENT OF EXECUTIVE. Executives employment under this Amended and Restated Agreement shall automatically terminate upon the death or Retirement of Executive.
3.2 BY EXECUTIVE. Executive shall be entitled to terminate his employment under this Amended and Restated Agreement by giving Notice of Termination to the Company:
(a) for Good Reason;
(b) at any time without Good Reason.
3.3 BY COMPANY. The Company shall be entitled to terminate Executives employment under this Amended and Restated Agreement by giving Notice of Termination to Executive:
(a) in the event of Executives Total Disability;
(b) for Cause; and
(c) at any time without Cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executives employment under this Amended and Restated Agreement is terminated prior to the Expiration Date, then except for any other rights or benefits specifically provided for in this Amended and Restated Agreement following his period of employment, the Company shall be obligated to provide compensation and benefits to Executive only as follows and only after execution by Executive of a general release of claims in favor of the Company and all related parties in a form provided by the Company.
4.1 UPON TERMINATION FOR DEATH OR TOTAL DISABILITY. If Executives employment under this Amended and Restated Agreement is terminated by reason of his death or Total Disability, the Company shall:
(a) pay Executive (or his estate) any Base Salary which has been earned but not been paid as of the termination date (the Accrued Base Salary);
(b) pay Executive (or his estate) for unused vacation days and paid holidays accrued as of the termination date in an amount equal to his Base Salary multiplied by a fraction the numerator of which is the number of accrued unused vacation days and paid holidays, and the denominator of which is 260 (the Accrued Vacation Payment);
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(c) reimburse Executive (or his estate) for expenses incurred by him prior to the date of termination which are subject to reimbursement pursuant to this Amended and Restated Agreement (the Accrued Reimbursable Expenses);
(d) provide to Executive (or his estate) any accrued and vested benefits required to be provided by the terms of any Company-sponsored benefit plans or programs (the Accrued Benefits), together with any benefits required to be paid or provided in the event of Executives death or disability under applicable law; and
(e) pay Executive (or his estate) any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid.
4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON. If Executives employment is terminated by the Company for Cause, or if Executive terminates his employment with the Company prior to the Expiration Date, other than (x) upon Executives death or Total Disability or (y) for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive for the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law; and
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid.
4.3 UPON EXPIRATION OF THIS AMENDED AND RESTATED AGREEMENT. In order to induce the Executive to continue his employment with the Company throughout the term of this Amended and Restated Agreement and until the Expiration Date of this Amended and Restated Agreement, upon termination of the Executives employment on the Expiration Date, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law; and
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(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid.
4.4 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON. If Executives employment is terminated by the Company without Cause or by the Executive for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law;
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid;
(f) Intentionally deleted;
(g) subject to the six month delay of payment described in Section 6.10, pay Executive an amount equal to twice the sum of (1) Executives Base Salary in effect immediately prior to the time such termination occurs, plus (2) an amount equal to the greater of (x) the Threshold Bonus and (y) one half of the sum of (i) the bonuses (whether Incentive Bonuses or other bonuses) that have been paid to Executive with respect to the two fiscal years immediately preceding the fiscal year in which the termination occurs, and (ii) the bonuses (whether Incentive Bonuses or other bonuses) that have been earned with respect to the two fiscal years immediately preceding the fiscal year in which the termination occurs but have not been paid (or if Executive has been employed by the Company for less than two full fiscal years at the time of such termination, then an amount equal to the sum of such paid and earned bonuses with respect to the fiscal year immediately preceding the fiscal year in which the termination, occurs), which payment shall be due in full regardless of any compensation paid to Executive as a result of his employment by any other person after the termination date;
(h) maintain in full force and effect, for Executives and his eligible beneficiaries continued benefit, continued health insurance coverage, for a period of 24 months following the termination date of his employment under this Amended and Restated Agreement, except to the extent that, as to any such coverage, Executive receives the substantial equivalent of such coverage as a result of his employment with another employer after the termination date. Following the expiration of such 24-month period and to the extent permitted by the Companys then current employee benefit plans, the Company shall permit Executive, or his eligible beneficiaries, as the case may be, to purchase at his sole cost and expense such continued health insurance coverage for an additional period of 24 months. Notwithstanding the foregoing, if Executives continued participation in the health insurance plan is not permitted under the terms of the plan, program or arrangement under which the benefit was provided to Executive by the Company, or may result in negative tax effects for the Company, the Company shall arrange to provide Executive with health insurance coverage substantially similar to the coverage which
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Executive would have been entitled to receive under such plan, program or arrangement a portion of which may be provided by the Company paying Executives COBRA premiums (which may be included in Executives taxable income); and
(i) cause all unvested Equity to immediately vest.
4.5 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON FOLLOWING A CHANGE OF CONTROL. If Executives employment is terminated by the Company or its successor in interest without Cause or by Executive for Good Reason within 12 months following a Change of Control, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law;
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid;
(f) contribute to the Deferred Compensation Plan any amount that has been accrued but not yet paid to the account provided for in such plan;
(g) subject to the six month delay of payment described in Section 6.10, pay directly to Executive on the anniversary date of each year after such termination through the end of the term of this Amended and Restated Agreement, the amount that would have been payable to the account established under the Deferred Compensation Plan if this Amended and Restated Agreement had not been terminated;
(h) subject to the six month delay of payment described in Section 6.10 for a payment due to the Executives termination of employment, or if payment is made due to a Change of Control, within thirty (30) days after the Change of Control, pay Executive an amount equal to three multiplied by the sum of (1) Executives Base Salary in effect immediately prior to the time such termination or Change of Control occurs, plus (2) an amount equal to the greater of (x) the Target bonus and (y) the highest amount of the bonuses (whether Incentive Bonuses or other bonuses) that have been paid (or, if not yet paid, accrued or earned for such fiscal period) to Executive with respect to the three fiscal years immediately preceding the fiscal year in which the termination or Change of Control occurs;
(i) maintain in full force and effect, for Executives and his eligible beneficiaries continued benefit, continued health insurance coverage, for a period of 24 months following the termination date of his employment under this Amended and Restated Agreement, except to the extent that, as to any such coverage, Executive receives the substantial equivalent of such coverage as a result of his employment with another employer after the termination date.
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Following the expiration of such 24-month period, the Company shall permit Executive, or his eligible beneficiaries, as the case may be, to purchase such continued health insurance coverage for an additional period of 24 months. Notwithstanding the foregoing, if Executives continued participation in the health insurance plan is not permitted under the terms of the plan, program or arrangement under which the benefit was provided to Executive by the Company, or may result in negative tax effects for the Company, the Company shall arrange to provide Executive with health insurance coverage substantially similar to the coverage which Executive would have been entitled to receive under such plan, program or arrangement a portion of which may be provided by the Company paying Executives COBRA premiums (which may be included in Executives taxable income); and
(j) cause all unvested Equity to immediately vest.
4.6 Reserved.
ARTICLE V
RESTRICTIVE COVENANTS
5.1 CONFIDENTIAL INFORMATION AND MATERIALS. Executive agrees that during the course of his employment with the Company, he has obtained and shall likely obtain in the future Confidential Information. Confidential Information is information concerning the Company which the Company attempts to keep confidential, has not been publicly disclosed by the Company, is not a matter of common knowledge in the airline industry, and was not known by Executive prior to his employment by the Company, including, but not limited to, certain information relating to the business plans, trade practices, finances, accounting methods, methods of operations, trade secrets, marketing plans or programs, forecasts, statistics relating to routes and markets, contracts, customers, compensation arrangements, and business opportunities. Executive agrees that the Confidential Information is proprietary to the Company, and agrees to sign and be bound by the terms of the Companys Proprietary Information and Inventions Agreement (Proprietary Information Agreement).
5.2 GENERAL KNOWLEDGE. The general skills and experience gained by Executive during Executives employment or engagement by the Company, and information publicly available without breach of any duty owed by any person to the Company or generally known within the airline industry, is not considered Confidential Information. Executive is not restricted from working with a person or entity which has independently developed information or materials similar to the Confidential Information, but in such a circumstance, Executive agrees not to disclose the fact that any similarity exists between the Confidential Information and the independently developed information and materials, and Executive understands that such similarity does not excuse Executive from the non-disclosure and other obligations in this Amended and Restated Agreement.
5.3 EXECUTIVE OBLIGATIONS AS TO CONFIDENTIAL INFORMATION AND MATERIALS. During Executives employment or engagement by the Company, Executive shall have access to the Confidential Information and shall occupy a position of trust and confidence with respect to the Confidential Information and the Companys affairs and business. Executive agrees to take the following steps to preserve the confidential and proprietary nature of the Confidential Information:
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(a) NON-DISCLOSURE. During Executives Employment or engagement by the Company and for a period of two years after the termination of Executives Employment or engagement by the Company for any reason, Executive shall not use, disclose or otherwise permit any person or entity access to any of the Confidential Information other than as required in the performance of Executives duties with the Company and other than is required to be disclosed by law or by any court, administrative agency, or arbitration panel.
(b) PREVENT DISCLOSURE. During and for a period of two years after Executives Employment or engagement by the Company, except as provided in Section 5.3(a), Executive shall take all reasonable precautions to prevent disclosure of the Confidential Information to unauthorized persons or entities, other than is required to be disclosed by law or by any court, administrative agency, or arbitration panel.
(c) RETURN ALL MATERIALS. Upon termination of Executives employment or engagement by the Company for any reason whatsoever, or earlier if requested by the Company, Executive shall deliver to the Company all tangible materials relating to, but not limited to, the Confidential Information and any other information regarding the Company, including any documentation, records, listings, notes, data, sketches, drawings, memoranda, models, accounts, reference materials, samples, machine-readable media and equipment which in any way relate to the Confidential Information and shall not retain any copies of any of the above materials.
ARTICLE VI
MISCELLANEOUS
6.1 DEFINITIONS. For purposes of this Amended and Restated Agreement, the following terms shall have the following meanings:
(a) Across the Board Reduction as defined in Section 2.1;
(b) Accrued Base Salary as defined in Section 4.1(a);
(c) Accrued Benefits as defined in Section 4.1(d);
(d) Accrued Reimbursable Expenses as defined in Section 4.3(c);
(e) Accrued Vacation Payment as defined in Section 4.1(b);
(f) Base Salary as defined in Section 2.1;
(g) Board shall mean the Board of Directors of the Company;
(h) Cause shall mean the occurrence of any of the following:
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(i) Executives willful misconduct, including, but not limited to, Executives misappropriation of trade secrets, fraud or embezzlement;
(ii) Executive commits a felony offense or any crime involving dishonesty or physical harm to any person; or
(iii) Executive commits a material breach of this Amended and Restated Agreement, which breach, if curable, is not cured within thirty (30) days following written notice to Executive from the Company; or
(iv) If Executive willfully refuses to implement or follow a lawful policy or directive of the Company, which refusal is not cured within thirty (30) days following written notice to Executive from the Company;
(v) No failure of Executive to satisfy any goals, forecasts or other financial or business criteria established by the Company, standing alone, shall constitute Cause.
(i) Change of Control shall mean and shall be deemed to have occurred if one of the following occurs and the event is also a change in control event as defined in Section 409A (defined below):
(i) After the date of this Amended and Restated Agreement, any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act), or any successor provision), or any other persons who the Board of Directors determines in good faith is acting as a group, becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act or any successor provision) directly or indirectly of securities of the Company representing more than 50% of the combined voting power of the Companys then outstanding securities ordinarily having the right to vote at an election of directors;
(ii) A majority of the members of the Companys Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the Companys Board of Directors before the date of appointment or election;
(iii) A tender offer or exchange offer is made where the intent of such offer is to take over control of the Company, and such offer is consummated for the equity securities of the Company representing more than fifty percent (50%) of the combined voting power of the Companys then outstanding voting securities over a twelve month period; or
(iv) Consummation of
(A) a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of the assets of the Company, in each case, with or to a corporation or other person or entity
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(1) of which persons who were the holders of each class of the Companys capital stock immediately prior to such transaction do not receive voting securities, as a result of their ownership of such capital stock immediately prior to such transaction, that constitute both
(x) more than 51% of each class of capital stock and
(y) more than 51% of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the reorganized, merged, consolidated or purchasing corporation (or in the case of a non-corporate person or entity, functionally equivalent voting power).
(j) Confidential Information as defined in Section 5.1;
(k) Continued Benefits as defined in Section 4.3(g);
(l) Expiration Date as defined in Section 1.3;
(m) Good Reason shall mean the occurrence of any of the following if not cured within 20 days following receipt of a Notice of Termination by Executive:
(i) Any change by the Company in Executives title, or any significant diminishment in Executives function, duties or responsibilities from those associated with his functions, duties or responsibilities as of January 1, 2011;
(ii) Any material breach of this Amended and Restated Agreement or any other agreement between the Company and Executive (and for purposes of this Amended and Restated Agreement, any default by the Company to make any payment or to provide any fringe benefit shall be considered material) which remains uncured for a period of 10 days after Executive gives the Company notice of such breach specifying in reasonable detail the event(s) constituting such breach;
(iii) Except with Executives prior written consent, relocation of Executives principal place of employment to a location greater than 50 miles from Phoenix, Arizona, or requiring Executive to travel on the Companys business more than is required by Section 1.4; or
(iv) Other than an Across the Board Reduction, any reduction by the Company in Executives Base Salary, bonus opportunity or benefits to which Executive is entitled under this Amended and Restated Agreement.
(n) Incentive Bonus as defined in Section 2.2;
(o) Market Price means the officially quoted closing price of the common stock of the Company, as reported by the principal exchange on which the common stock of the
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Company is traded for the date in question. If there are no transactions on such date, the Market Price shall be determined as of the immediately preceding date on which there were transactions. If no such prices are reported on such exchange, then Market Price shall mean the average of the high and low sale prices for the common stock of the Company (or if no sales prices are reported, the average of the high and low bid prices) as reported by a quotation system of general circulation to brokers and dealers. If the common stock of the Company is not traded on any exchange or in the over-the-counter market, the Market Price of the common stock of the Company on any date shall be determined in good faith by the parties.
(p) Notice of Termination shall mean a notice which shall indicate the specific termination provision of this Amended and Restated Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated. Each Notice of Termination shall be delivered at least 30 days prior to the effective date of termination;
(q) Prime Rate means the prime rate announced by The Wall Street Journal from time to time;
(r) Retirement shall mean normal retirement at age 65;
(s) Threshold Bonus shall mean the amount set forth in Exhibit A in effect at any point in time.
(t) Total Disability or Totally Disabled shall mean that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) if applicable, that for at least three months the Executive is receiving income replacement benefits under a Company sponsored plan by reason of any medically determinable physical or mental impairment expected to last at least twelve consecutive months or result in death, or (iii) the Executive is determined to be disabled under a Company disability plan with the same or substantially similar definition of disability, as described in Section 409A (defined below). If there is a dispute as to whether Executive is Totally Disabled, such dispute shall be submitted for resolution to a licensed physician selected by Executive but subject to the reasonable approval of the Company. If such a dispute arises, Executive shall submit to such examinations and shall provide such information as such physician may request, and the determination of the physician as to whether Executive is Totally Disabled under this definition shall be binding and conclusive.
6.2 KEY MAN INSURANCE. In addition to the insurance policy described in Section 2.4(c), the Company shall have the right, in its sole discretion, to purchase key man insurance on the life of Executive. The Company shall be the owner and beneficiary of any such policy. If the Company elects to purchase such a policy, Executive shall take such physical examinations and supply such information as may be reasonably requested by the insurer.
6.3 SUCCESSORS, BINDING AGREEMENT. This Amended and Restated Agreement shall be binding upon and run to the benefit of the Company, its successors and assigns, and shall inure to the benefit of and be enforceable by Executives personal or legal representatives, beneficiaries, designees, executors, administrators, heirs, distributees, devisees and legatees.
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6.4 MODIFICATION; NO WAIVER. This Amended and Restated Agreement may not be modified or amended except by an instrument in writing signed by the parties to this Amended and Restated Agreement. No term or condition of this Amended and Restated Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Amended and Restated Agreement, except by written instrument by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated in such waiver, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any other term or condition. No amendment agreed by the parties in writing shall be deemed to give rise to Good Reason.
6.5 SEVERABILITY. The covenants and agreements contained in this Amended and Restated Agreement are separate and severable and the invalidity or unenforceability of any one or more of such covenants or agreements, if not material to the employment arrangement that is the basis for this Amended and Restated Agreement, shall not affect the validity or enforceability of any other covenant or agreement contained in this Amended and Restated Agreement. If, in any judicial proceeding, a court shall refuse to enforce one or more of the covenants or agreements contained in this Amended and Restated Agreement because the duration thereof is too long, or the scope thereof is too broad, it is expressly agreed between the parties to this Amended and Restated Agreement that such duration or scope shall be deemed reduced to the extent necessary to permit the enforcement of such covenants or agreements.
6.6 NOTICES. All the notices and other communications required or permitted under this Amended and Restated Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to the parties to this Amended and Restated Agreement at the following addresses:
If to the Company, to it at: | ||
Mesa Air Group, Inc. 410 North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Chair of Board of Directors |
||
If Executive, to him at: | ||
With a copy to: | ||
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Notices shall be deemed to have been given and received upon personal delivery or three business days after having been deposited, if sent by registered or certified mail.
6.7 ASSIGNMENT. This Amended and Restated Agreement and any rights under this Amended and Restated Agreement shall not be assignable by either party without the prior written consent of the other party except that the Company may assign this Amended and Restated Agreement to its successor in interest in a Change in Control transaction, provided that such successor in interest expressly assumes the terms of this Amended and Restated Agreement.
6.8 ENTIRE UNDERSTANDING. This Amended and Restated Agreement (together with the Exhibits incorporated as a part of this Amended and Restated Agreement) constitutes the entire understanding between the parties to this Amended and Restated Agreement and no agreement, representation, warranty or covenant has been made by either party except as expressly set forth in this Amended and Restated Agreement.
6.9 EXECUTIVES REPRESENTATIONS. Executive represents and warrants that neither the execution and delivery of this Amended and Restated Agreement nor the performance of his duties under this Amended and Restated Agreement violates the provisions of any other agreement to which he is a party or by which he is bound.
6.10 SECTION 409A. This Amended and Restated Agreement is intended to comply with, or otherwise be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended (the Code) and any regulations and Treasury guidance promulgated thereunder (Section 409A). If the Company determines in good faith that any provision of this Amended and Restated Agreement would cause the Executive to incur an additional tax, penalty, or interest under Section 409A, the Compensation Committee and the Executive shall use reasonable efforts to reform such provision, if possible, in a mutually agreeable fashion to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A or causing the imposition of such additional tax, penalty, or interest under Section 409A. The preceding provisions, however, shall not be construed as a guarantee by the Company of any particular tax effect to Executive under this Amended and Restated Agreement.
For purposes of Section 409A, the right to a series of installment payments under this Amended and Restated Agreement shall be treated as a right to a series of separate payments.
With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Amended and Restated Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (1) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (2) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
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Termination of employment, or words of similar import, as used in this Amended and Restated Agreement means, for purposes of any payments under this Amended and Restated Agreement that are payments of deferred compensation subject to Section 409A, the Executives separation from service as defined in Section 409A.
If a payment obligation under this Amended and Restated Agreement arises on account of the Executives separation from service while the Executive is a specified employee (as defined under Section 409A and determined in good faith by the Compensation Committee), any payment of deferred compensation (as defined under Treasury Regulation Section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) that is scheduled to be paid within six (6) months after such separation from service shall accrue with interest as described in Section 6.11 and shall be paid within 15 days after the end of the six-month period beginning on the date of such separation from service or, if earlier, within 15 days after the appointment of the personal representative or executor of the Executives estate following his death.
6.11 INTEREST ON PAST DUE AMOUNTS; ATTORNEYS FEES. All amounts under this Amended and Restated Agreement that are not paid when due shall bear interest at the rate of 4% plus Libor per annum, from the date such payments were due until paid. In addition, any party who breaches this Amended and Restated Agreement shall be obligated to pay the reasonable attorneys fees and costs incurred by the other party in seeking to enforce the terms of this Amended and Restated Agreement.
6.12 GOVERNING LAW. This Amended and Restated Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of Arizona applicable to contracts executed and wholly performed within such state.
[SIGNATURE PAGES FOLLOW]
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MESA AIR GROUP, INC., a Nevada corporation |
By: |
Name: |
Title: |
|
||
MICHAEL J. LOTZ |
[Signature Page to Amended and Restated Employment Agreement]
EXHIBIT A
INCENTIVE BONUS
BONUS LEVEL FISCAL |
QUARTERLY (1) |
ANNUAL |
||||||
Guaranteed | $ | 12,731 | $ | 63,657 | ||||
Minimum | $ | 29,167 | $ | 145,833 | ||||
Threshold | $ | 45,448 | $ | 227,238 | ||||
Target | $ | 78,086 | $ | 390,432 | ||||
Maximum | $ | 117,593 | $ | 587,963 |
NOTE 1 THE QUARTERLY AMOUNT WILL BE PAID FOR EACH OF THE FIRST THREE FISCAL QUARTERS BASED ON THE COMPANYS QUARTERLY UNAUDITED FINANCIAL REPORTS AND OTHER QUALITATIVE PERFORMANCE OBJECTIVES TO BE ESTABLISHED UPON MUTUAL AGREEMENT OF EXECUTIVE AND THE BOARD OF DIRECTORS. THE ANNUAL AMOUNT WILL BE PAID FOR THE FOURTH QUARTER LESS ANY AMOUNTS PAID FOR THE FIRST THREE QUARTERS BASED ON THE ANNUAL AUDITED FINANCIAL REPORTS AND OTHER QUALITATIVE PERFORMANCE OBJECTIVES TO BE ESTABLISHED UPON MUTUAL AGREEMENT OF EXECUTIVE AND THE BOARD OF DIRECTORS. THESE AMOUNTS WILL NOT BE DECREASED OVER THE TERM OF THE AGREEMENT.
Exhibit 10.9
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered into this 26th day of July, 2018, by and between Mesa Air Group, Inc., a Nevada corporation (the Company), and Brian S. Gillman (Executive).
RECITALS
The Company and Executive were parties to an Employment Agreement dated April 23, 2014, with an effective date of September 3, 2013 (the Original Employment Agreement), as amended by that certain Amendment No. 1 to Employment Agreement dated May 24, 2016, with an effective date of June 1, 2016 (Amendment No. 1) (the Original Employment Agreement and Amendment No. 1 are collectively referred to herein as the Agreement). The parties have agreed to enter into this Amended and Restated Employment Agreement (the Amended and Restated Agreement) which shall supersede the Agreement.
ARTICLE I
DUTIES AND TERM
1.1 EMPLOYMENT. In consideration of their mutual covenants and other good and valuable consideration, the receipt, adequacy and sufficiency of which are acknowledged, the Company agrees to hire Executive, and Executive agrees to remain in the employ of the Company, upon the terms provided in this Amended and Restated Agreement.
1.2 POSITION AND RESPONSIBILITIES.
(a) Executive shall serve as the Executive Vice President, General Counsel and Secretary of the Company. Executive agrees to perform services, not inconsistent with his position, as are from time to time assigned to him by the Chief Executive Officer or Board of Directors of the Company.
(b) During the period of his employment under this Amended and Restated Agreement, Executive shall devote substantially all of his business time, attention, skill and efforts to the faithful performance of his duties under this Amended and Restated Agreement, but Executive shall have the right to engage in personal business and to participate in charitable and civic activities, during normal business hours and otherwise, as long as such business and activities do not unreasonably interfere with Executives duties to the Company.
1.3 TERM. The Company may terminate Executives employment at any time, subject to providing Executive with written notice (in accordance with Section 6.6) of not less than one (1) year prior to the intended termination date. For the avoidance of doubt, the Companys election to terminate Executive in accordance with this Section 1.3 shall trigger the payments set forth in Section 4.5 of the Amended and Restated Agreement.
1.4 LOCATION. During the period of his employment under this Amended and Restated Agreement, Executive shall not be required, except with his prior written consent
(which may be withheld in his discretion), to relocate his principal place of employment outside Phoenix, Arizona metropolitan area. Required travel on the Companys business shall not be deemed a relocation so long as Executive is not required to provide his services under this Amended and Restated Agreement outside of Maricopa County, Arizona, for more than 50% of his working days during any consecutive six-month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his employment under this Amended and Restated Agreement, including, without limitation, services as a director, officer or member of any committee of the Board of the Company or of the board of directors of any subsidiary of the Company, the Company shall compensate Executive as set forth in this Article II.
2.1 BASE SALARY. The Company shall pay to Executive an annual base salary of $275,000, less all appropriate taxes and withholdings (the Base Salary). Executives Base Salary shall be paid every other week in equal installments. The Base Salary shall be reviewed annually by the Board (or a committee designated by the Board) or CEO, and the Board or CEO may, in its discretion, increase the Base Salary. The Company may reduce the Base Salary under circumstances in which the Company has imposed cuts in salary of other officers on an across the board basis, but any such reduction may not be at a greater percentage than the reduction imposed on any other officer (an Across the Board Reduction).
2.2 BONUS PAYMENTS. During the period of Executives employment under this Amended and Restated Agreement, Executive shall be entitled to the annual bonus payments specified on Exhibit A hereto, as such Exhibit may be amended and/or updated from time to time upon the mutual agreement of Executive and the Board of Directors. Any bonus payable to Executive under the plan described in Exhibit A is referred to as an Incentive Bonus. All Incentive Bonuses shall be paid on a quarterly basis (commencing with the first quarter ending September 30, 2013 (with the first quarter prorated in accordance with Executives start date) not later than 45 days after the end of each fiscal quarter (or 90 days after the end of any fiscal year), based on the Companys financial statements and pursuant to same matrix as Chief Executive and/or President of the Company. Payments made with respect to any fiscal quarter other than the last fiscal quarter of a fiscal year of the Company will be made on an estimated basis (based on annualized results), and the parties will account to one another and make appropriate payment adjustments promptly after the financial statements for any fiscal year become available but no later than 90 days after the end of the fiscal year. At the discretion of the Chief Executive Officer or Board of Directors, the Company may pay bonuses to Executive in addition to the Incentive Bonuses set forth in Exhibit A.
2.3 EQUITY PARTICIPATION. During the Employment Period, Executive shall receive an annual equity award (consisting of restricted stock, SARs, phantom stock or similar equity units) pursuant to the terms of the Companys then existing equity incentive plan (or similarly titled plan), as determined by the Board or its Compensation Committee in its sole discretion, provided that the annual equity grant during the term of this Amended and Restated Agreement shall have a grant date value of not less than $125,000. The agreements governing such equity grants shall provide for vesting of such equity over a three year period.
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2.4 ADDITIONAL BENEFITS.
(a) GENERAL BENEFITS. During the term of this Amended and Restated Agreement, Executive shall be entitled (i) to participate in all employee benefit and welfare programs, plans and arrangements (including, without limitation, pension, profit sharing, supplemental pension and other retirement plans, insurance, hospitalization, medical and group disability benefits, travel or accident insurance plans) and (ii) to receive fringe benefits, such as dues and fees of professional organizations and associations, in each case under (i) and (ii) to the extent that such programs, plans, arrangements, and benefits are from time to time available to the Companys executive personnel (the programs and benefits in (i) and (ii) are referred to as General Benefits). During the period of his employment under this Amended and Restated Agreement, the Company shall continue to provide the General Benefits to Executive at a level which shall in no event be less, in any material respect, than the General Benefits made available to Executive by the Company as of the date of this Amended and Restated Agreement; provided, however, the Company may reduce the General Benefits under circumstances in which the Company has imposed reductions in coverage of the General Benefits of other officers on an across the board basis, but any such reduction may not be disproportionately greater than the reduction imposed on any other officer.
(b) Intentionally omitted;
(c) DISABILITY BENEFITS. The Company shall provide Executive with the following disability benefits:
(i) During any period of disability, illness or incapacity during the term of this Amended and Restated Agreement which renders Executive at least temporarily unable to perform the services required under this Amended and Restated Agreement, Executive shall receive the Base Salary payable under Section 2.1 plus any cash bonus compensation earned pursuant to the provisions of this Amended and Restated Agreement or any incentive compensation plan then in effect but not yet paid, less any cash benefits received by him under any disability insurance carried by or provided by the Company. Upon Executives Total Disability (as defined below), which Total Disability continues during the payment periods specified in this Section, the Company shall pay to Executive, on a monthly basis, for the period specified below, an amount (the Disability Payment) equal to (A) one-twelfth of the sum of (1) Executives Base Salary in effect immediately prior to the time such Total Disability occurs, plus (2) an amount equal Target Bonus payable to the Executive under the Employment Agreement, which payments shall be offset by the amount of any compensation paid to Executive as a result of his employment by any other person after the date that Total Disability occurs, (B) reduced by the amount of any monthly payments under any policy of disability income insurance paid for by the. The Company shall pay the Disability Payment to Executive in equivalent installments, at the same time or times as would have been the case for payment of Base Salary if Executive had not become Totally Disabled and had remained employed by the Company, and such payments shall continue until the
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later of the expiration of the term of this Amended and Restated Agreement and 24 months, except that the Companys obligation to make such payments shall cease upon the death of Executive or if Executive ceases to be Totally Disabled. Upon Executives Total Disability, except as provided in this Amended and Restated Agreement, all rights of Executive under this Amended and Restated Agreement shall terminate.
(d) RELOCATION EXPENSES. During the term of this Amended and Restated Agreement, if Executives principal place of employment is relocated outside Maricopa County, Arizona, in accordance with Section 1.4, the Company shall reimburse Executive for all usual relocation expenses incurred by Executive and his household in moving to the new location, including, without limitation, moving expenses and rental payments for temporary living quarters in the area of relocation for a period not to exceed six months, real estate brokerage commissions incurred by Executive in the sale of his then existing principal residence, and loan financing charges and closing costs incurred in connection with the acquisition and financing of a new residence.
(e) REIMBURSEMENT OF BUSINESS EXPENSES. During the term of this Amended and Restated Agreement, the Company shall, upon submission of documentation by executive in accordance with standard Company policies from time to time, pay, or reimburse Executive for, all reasonable travel and other expenses incurred by Executive in performing his obligations under this Amended and Restated Agreement, including for investigation of business opportunities and strategic allegiances for the Company and for client and customer development.
(f) VACATIONS. During the term of this Amended and Restated Agreement, Executive shall be entitled to vacations with pay, and to such personal and sick leave with pay, in accordance with the policy of the Company as may be established from time to time by the Company and as applies to other executive officers of the Company. In no event shall Executive be entitled to fewer than four weeks annual vacation. Any vacation days which remain unused at the end of a calendar year that are in excess of such four weeks annual vacation shall expire and shall thereafter no longer be useable by Executive, but the Company shall compensate Executive for any such unused vacation days in accordance with the formula set forth in Section 4.1(b), by payment in January of the next year. Similarly, any unused paid holidays may be carried over from one year to the next but not in excess of an aggregate of five days of paid holidays may be carried over from one year to the next; to the extent any paid holidays remain unused at the end of a calendar year that are in excess of such five paid holidays, such paid holidays shall expire and shall thereafter no longer be useable by Executive, but the Company shall compensate Executive for any such unused paid holidays in accordance with the formula set forth in Section 4,1(b), by payment in January of the next year.
(g) DIRECTOR FEES. During the term of this Amended and Restated Agreement, Executive shall not be entitled to be paid any fees for attendance at meetings of the Board of Directors or any committee of the Board of Directors (or the board or committee of the board of any subsidiary).
(h) AIRLINE PASSES. During the term of this Amended and Restated Agreement, the Company shall use its reasonable efforts to obtain for the benefit of Executive
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and Executives immediate family (Executives spouse or partner, Executives children, and the spouse and children of any of Executives children), the right to fly on a complimentary basis on the aircraft of other airlines, on a positive space basis, Executive shall be designated as one of the top five executives under the US Airways code share agreement during the term of his employment and for the six (6) months following any termination of employment. Such efforts shall include negotiating in good faith with other carriers for such rights and offering reciprocal rights to the executives (and their immediate family members) of such other carriers. The Company shall provide to Executive and Executives immediate family, during the life of each such individual, the right to fly on a complimentary basis on any aircraft operated by the Company or any affiliate at any time (subject only to reasonable and customary rules regarding availability), on a positive space basis, The Company shall use its best efforts to cause any successor or subsequent successor to the business or assets of the Company to grant such rights as to all routes operated by such successor (or subsequent successor) and any of its affiliates,
(i) PROFESSIONAL SERVICES. During the term of this Amended and Restated Agreement, the Company shall reimburse Executive for his out-of-pocket costs incurred in connection with the retention of professionals by Executive to provide Executive with income tax, estate planning, and investment advisory services. The maximum amount of reimbursable expenses for such purposes shall be $1,500 for each calendar year during the term of this Amended and Restated Agreement. The amount that is not used each calendar year shall be forfeited and shall not carry over to be used in any subsequent year. The Company shall reimburse Executive for such costs promptly after Executive submits an invoice to Company. In order to preserve Executives rights to confidentiality, Executive may satisfy the requirement of submitting an invoice by providing the Company with a copy of the facing page of the invoice showing the fees and expenses for the services rendered and the general nature of the services rendered but without any detail concerning the substance of the services rendered.
2.5 PAYMENT OF EXCISE TAXES. If any payment received by Executive under this Amended and Restated Agreement, as a result of or following any termination of employment under this Amended and Restated Agreement is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (as amended from time to time, the Code), or any successor or similar provision of the Code (the Excise Tax), the Company shall pay Executive an additional cash amount (the Gross Up) such that the net after-tax amount received by Executive under this Amended and Restated Agreement is the same as if the Excise Tax had not applied to any payments made under this Amended and Restated Agreement. The Company shall pay such amounts promptly after the calculation referred to in Section 2.6 has been made, subject, however, to the six month delay of payment described in Section 6.10, but no later than December 31 of the year following the year in which the Executive remits the related taxes.
2.6 CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross Up, Executive shall be deemed to pay the federal income tax at the highest marginal rate of taxation (currently 39.6%) in the calendar year in which the payment to which the Gross Up applies is to be made. The determination of whether such Excise Tax is payable and the amount of the Excise Tax shall be made upon the opinion of a national accounting firm selected by Executive and reasonably acceptable to the Company. If such opinion is not finally accepted by the Internal Revenue Service upon audit or otherwise, then appropriate adjustments shall be
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computed (with interest at the rate required to be paid by Executive under the Code and with Gross Up, if applicable) by such tax counsel based upon the final amount of the Excise Tax so determined, and (a) any additional amount due Executive as a result of such adjustment shall be paid to Executive by the Company in cash in a lump sum within 30 days after such computation, or (b) any amount due the Company as a result of such adjustment shall be paid to the Company by Executive in cash in a lump sum within 30 days after such computation. The Gross Up payment shall be subject to the six month delay of payment described in Section 6.10, but shall be made by December 31 of the year following the year in which the Executive remits the related taxes.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 DEATH OR RETIREMENT OF EXECUTIVE. Executives employment under this Amended and Restated Agreement shall automatically terminate upon the death or Retirement of Executive.
3.2 BY EXECUTIVE. Executive shall be entitled to terminate his employment under this Amended and Restated Agreement by giving Notice of Termination to the Company:
(a) for Good Reason;
(b) at any time without Good Reason.
3.3 BY COMPANY. The Company shall be entitled to terminate Executives employment under this Amended and Restated Agreement by giving Notice of Termination to Executive:
(a) in the event of Executives Total Disability;
(b) for Cause; and
(c) at any time without Cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executives employment under this Amended and Restated Agreement is terminated prior to the Expiration Date, then except for any other rights or benefits specifically provided for in this Amended and Restated Agreement following his period of employment, the Company shall be obligated to provide compensation and benefits to Executive only as follows and only after execution by Executive of a general release of claims in favor of the Company and all related parties in a form provided by the Company.
4.1 UPON TERMINATION FOR DEATH OR TOTAL DISABILITY. If Executives employment under this Amended and Restated Agreement is terminated by reason of his death or Total Disability, the Company shall:
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(a) pay Executive (or his estate) any Base Salary which has been earned but not been paid as of the termination date (the Accrued Base Salary);
(b) pay Executive (or his estate) for unused vacation days and paid holidays accrued as of the termination date in an amount equal to his Base Salary multiplied by a fraction the numerator of which is the number of accrued unused vacation days and paid holidays, and the denominator of which is 260 (the Accrued Vacation Payment);
(c) reimburse Executive (or his estate) for expenses incurred by him prior to the date of termination which are subject to reimbursement pursuant to this Amended and Restated Agreement (the Accrued Reimbursable Expenses);
(d) provide to Executive (or his estate) any accrued and vested benefits required to be provided by the terms of any Company-sponsored benefit plans or programs (the Accrued Benefits), together with any benefits required to be paid or provided in the event of Executives death or disability under applicable law;
(e) pay Executive (or his estate) any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid; and
4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON. If Executives employment is terminated by the Company for Cause, or if Executive terminates his employment with the Company prior to the Expiration Date, other than (x) upon Executives death or Total Disability or (y) for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive for the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law;
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid; and
4.3 UPON EXPIRATION OF THIS AMENDED AND RESTATED AGREEMENT. In order to induce the Executive to continue his employment with the Company throughout the term of this Amended and Restated Agreement and until the Expiration Date of this Amended and Restated Agreement, upon termination of the Executives employment on the Expiration Date, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
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(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law;
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid; and
4.4 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON. If Executives employment is terminated by the Company without Cause or by the Executive for Good Reason, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law;
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid;
(f) subject to the six month delay of payment described in Section 6.10, pay Executive an amount equal the greater of (A) twice the sum of (1) Executives Base Salary in effect immediately prior to the time such termination occurs, plus (2) an amount equal to the greater of (x) the Target Bonus and (y) one half of the sum of (i) the bonuses (whether Incentive Bonuses or other bonuses) that have been paid to Executive with respect to the two fiscal years immediately preceding the fiscal year in which the termination occurs, and (ii) the bonuses (whether Incentive Bonuses or other bonuses) that have been earned with respect to the two fiscal years immediately preceding the fiscal year in which the termination occurs but have not been paid (or if Executive has been employed by the Company for less than two full fiscal years at the time of such termination, then an amount equal to the sum of such paid and earned bonuses with respect to the fiscal year immediately preceding the fiscal year in which the termination occurs) or (B) the sum of (1) Executives Base Salary in effect immediately prior to the time such termination occurs, plus (2) an amount equal to the greater of (x) the Threshold Bonus and (y) one half of the sum of (i) the bonuses (whether Incentive Bonuses or other bonuses) that have been paid to Executive with respect to the two fiscal years immediately preceding the fiscal year in which the termination occurs, and (ii) the bonuses (whether Incentive Bonuses or other bonuses) that have been earned with respect to the two fiscal years immediately preceding the fiscal year in which the termination occurs but have not been paid (or if Executive has been employed by the Company for less than two full fiscal years at the time of such termination, then an amount equal to the sum of such paid and earned bonuses with respect to the fiscal year immediately preceding the fiscal year in which the termination occurs) times the number of years remaining in this Amended and Restated Agreement pro-rated by month, which payment shall be due in full regardless of any compensation paid to Executive as a result of his employment by any other person after the termination date;
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(g) maintain in full force and effect, for Executives and his eligible beneficiaries continued benefit, continued health insurance coverage, for a period of 24 months following the termination date of his employment under this Amended and Restated Agreement, except to the extent that, as to any such coverage, Executive receives the substantial equivalent of such coverage as a result of his employment with another employer after the termination date. Notwithstanding the foregoing, if Executives continued participation in the health insurance plan is not permitted under the terms of the plan, program or arrangement under which the benefit was provided to Executive by the Company, or may result in negative tax effects for the Company, the Company shall arrange to provide Executive with health insurance coverage substantially similar to the coverage which Executive would have been entitled to receive under such plan, program or arrangement a portion of which may be provided by the Company paying Executives COBRA premiums (which may be included in Executives taxable income); and
(h) cause all unvested Equity to immediately vest.
4.5 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON FOLLOWING A CHANGE OF CONTROL. If Executives employment is terminated by the Company or its successor-in-interest without Cause or by Executive for Good Reason within 12 months following a Change of Control, the Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) reimburse Executive the Accrued Reimbursable Expenses;
(d) provide Executive the Accrued Benefits, together with any benefits required to be paid or provided under applicable law;
(e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal quarter which has been earned but has not been paid;
(f) subject to the six month delay of payment described in Section 6.10 for a payment due to the Executives termination of employment, or if payment is made due to a Change of Control, within thirty (30) days after the Change of Control, pay Executive an amount equal to three multiplied by the sum of (1) Executives Base Salary in effect immediately prior to the time such termination or Change of Control occurs, plus (2) an amount equal to the greater of (x) the Target Bonus and (y) the highest amount of the bonuses (whether Incentive Bonuses or other bonuses) that have been paid (or, if not yet paid, accrued or earned for such fiscal period) to Executive with respect to the three fiscal years immediately preceding the fiscal year in which the termination or Change of Control occurs;
(g) maintain in full force and effect, for Executives and his eligible beneficiaries continued benefit, continued health insurance coverage, for a period of 24 months following the termination date of his employment under this Amended and Restated Agreement, except to the extent that, as to any such coverage, Executive receives the substantial equivalent of such coverage as a result of his employment with another employer after the termination date.
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Following the expiration of such 24-month period, the Company shall permit Executive, or his eligible beneficiaries, as the case may be, to purchase such continued health insurance coverage for an additional period of 24 months. Notwithstanding the foregoing, if Executives continued participation in the health insurance plan is not permitted under the terms of the plan, program or arrangement under which the benefit was provided to Executive by the Company, or may result in negative tax effects for the Company, the Company shall arrange to provide Executive with health insurance coverage substantially similar to the coverage which Executive would have been entitled to receive under such plan, program or arrangement a portion of which may be provided by the Company paying Executives COBRA premiums (which may be included in Executives taxable income); and
(h) cause all unvested Equity to immediately vest.
4.6 Reserved.
ARTICLE V
RESTRICTIVE COVENANTS
5.1 CONFIDENTIAL INFORMATION AND MATERIALS. Executive agrees that during the course of his employment with the Company, he has obtained and shall likely obtain in the future Confidential Information, Confidential Information is information concerning the Company which the Company attempts to keep confidential, has not been publicly disclosed by the Company, is not a matter of common knowledge in the airline industry, and was not known by Executive prior to his employment by the Company, including, but not limited to, certain information relating to the business plans, trade practices, finances, accounting methods, methods of operations, trade secrets, marketing plans or programs, forecasts, statistics relating to routes and markets, contracts, customers, compensation arrangements, and business opportunities. Executive agrees that the Confidential Information is proprietary to the Company, and agrees to sign and be bound by the terms of the Companys Proprietary Information and Inventions Agreement (Proprietary Information Agreement).
5.2 GENERAL KNOWLEDGE. The general skills and experience gained by Executive during Executives employment or engagement by the Company, and information publicly available without breach of any duty owed by any person to the Company or generally known within the airline industry, is not considered Confidential Information. Executive is not restricted from working with a person or entity which has independently developed information or materials similar to the Confidential Information, but in such a circumstance, Executive agrees not to disclose the fact that any similarity exists between the Confidential Information and the independently developed information and materials, and Executive understands that such similarity does not excuse Executive from the non-disclosure and other obligations in this Amended and Restated Agreement.
5.3 EXECUTIVE OBLIGATIONS AS TO CONFIDENTIAL INFORMATION AND MATERIALS. During Executives employment or engagement by the Company, Executive shall have access to the Confidential Information and shall occupy a position of trust and confidence with respect to the Confidential Information and the Companys affairs and business. Executive agrees to take the following steps to preserve the confidential and proprietary nature of the Confidential Information:
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(a) NON-DISCLOSURE. During Executives Employment or engagement by the Company and for a period of two years after the termination of Executives Employment or engagement by the Company for any reason, Executive shall not use, disclose or otherwise permit any person or entity access to any of the Confidential Information other than as required in the performance of Executives duties with the Company and other than is required to be disclosed by law or by any court, administrative agency, or arbitration panel.
(b) PREVENT DISCLOSURE. During and for a period of two years after Executives Employment or engagement by the Company, except as provided in Section 5.3(a), Executive shall take all reasonable precautions to prevent disclosure of the Confidential Information to unauthorized persons or entities, other than is required to be disclosed by law or by any court, administrative agency, or arbitration panel.
(c) RETURN ALL MATERIALS. Upon termination of Executives employment or engagement by the Company for any reason whatsoever, or earlier if requested by the Company, Executive shall deliver to the Company all tangible materials relating to, but not limited to, the Confidential Information and any other information regarding the Company, including any documentation, records, listings, notes, data, sketches, drawings, memoranda, models, accounts, reference materials, samples, machine-readable media and equipment which in any way relate to the Confidential Information and shall not retain any copies of any of the above materials.
ARTICLE VI
MISCELLANEOUS
6.1 DEFINITIONS. For purposes of this Amended and Restated Agreement, the following terms shall have the following meanings:
(a) Across the Board Reduction as defined in Section 2.1;
(b) Accrued Base Salary as defined in. Section 4.1(a);
(c) Accrued Benefits as defined in Section 4.1(d);
(d) Accrued Reimbursable Expenses as defined in Section 4.3(c);
(e) Accrued Vacation Payment as defined in Section 4.1(b);
(f) Base Salary as defined in Section 2.1;
(g) Board shall mean the Board of Directors of the Company;
(h) Cause shall mean the occurrence of any of the following:
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(i) Executives willful misconduct, including, but not limited to, Executives misappropriation of trade secrets, fraud or embezzlement;
(ii) Executive commits a felony offense or any crime involving dishonesty or physical harm to any person; or
(iii) Executive commits a material breach of this Amended and Restated Agreement, which breach, if curable, is not cured within thirty (30) days following written notice to Executive from the Company; or
(iv) If Executive willfully refuses to implement or follow a lawful policy or directive of the Company, which refusal is not cured within thirty (30) days following written notice to Executive from the Company;
(v) No failure of Executive to satisfy any goals, forecasts or other financial or business criteria established by the Company, standing alone, shall constitute Cause.
(i) Change of Control shall mean and shall be deemed to have occurred if one of the following occurs and the event is also a change in control event as defined in Section 409A (defined below):
(i) After the date of this Amended and Restated Agreement, any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act), or any successor provision), or any other persons who the Board of Directors determines in good faith is acting as a group, becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act or any successor provision) directly or indirectly of securities of the Company representing more than 50% of the combined voting power of the Companys then outstanding securities ordinarily having the right to vote at an election of directors;
(ii) A majority of the members of the Companys Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the Companys Board of Directors before the date of appointment or election;
(iii) A tender offer or exchange offer is made where the intent of such offer is to take over control of the Company, and such offer is consummated for the equity securities of the Company representing more than fifty percent (50%) of the combined voting power of the Companys then outstanding voting securities over a twelve month period; or
(iv) Consummation of
(A) a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of the assets of the Company, in each case, with or to a corporation or other person or entity
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(1) of which persons who were the holders of each class of the Companys capital stock immediately prior to such transaction do not receive voting securities, as a result of their ownership of such capital stock immediately prior to such transaction, that constitute both
(x) more than 51% of each class of capital stock and
(y) more than 51% of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the reorganized, merged, consolidated or purchasing corporation (or in the case of a non-corporate person or entity, functionally equivalent voting power).
(j) Confidential Information as defined in Section 5.1;
(k) Continued Benefits as defined in Section 4,3(g);
(l) Expiration Date as defined in Section 1.3;
(m) Good Reason shall mean the occurrence of any of the following if not cured within 20 days following receipt of a Notice of Termination by Executive:
(i) Any change by the Company in Executives title, or any significant diminishment in Executives function, duties or responsibilities from those associated with his functions, duties or responsibilities as of September 3, 2013;
(ii) Any material breach of this Amended and Restated Agreement or any other agreement between the Company and Executive (and for purposes of this Amended and Restated Agreement, any default by the Company to make any payment or to provide any fringe benefit shall be considered material) which remains uncured for a period of 10 days after Executive gives the Company notice of such breach specifying in reasonable detail the event(s) constituting such breach;
(iii) Except with Executives prior written consent, relocation of Executives principal place of employment to a location greater than 50 miles from Phoenix, Arizona, or requiring Executive to travel on the Companys business more than is required by Section 1.4; or
(iv) Other than an Across the Board Reduction, any reduction by the Company in Executives Base Salary, bonus opportunity or benefits to which Executive is entitled under this Amended and Restated Agreement.
(n) Incentive Bonus as defined in Section 2.2;
(o) Market Price means the officially quoted closing price of the common stock of the Company, as reported by the principal exchange on which the common stock of the
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Company is traded for the date in question. If there are no transactions on such date, the Market Price shall be determined as of the immediately preceding date on which there were transactions. If no such prices are reported on such exchange, then Market Price shall mean the average of the high and low sale prices for the common stock of the Company (or if no sales prices are reported, the average of the high and low bid prices) as reported by a quotation system of general circulation to brokers and dealers. If the common stock of the Company is not traded on any exchange or in the over-the-counter market, the Market Price of the common stock of the Company on any date shall be determined in good faith by the parties.
(p) Notice of Termination shall mean a notice which shall indicate the specific termination provision of this Amended and Restated Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executives employment under the provision so indicated, Each Notice of Termination shall be delivered at least 30 days prior to the effective date of termination;
(q) Prime Rate means the prime rate announced by The Wall Street Journal from time to time;
(r) Retirement shall mean normal retirement at age 65;
(s) Total Disability or Totally Disabled shall mean that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) if applicable, that for at least three months the Executive is receiving income replacement benefits under a Company sponsored plan by reason of any medically determinable physical or mental impairment expected to last at least twelve consecutive months or result in death, or (iii) the Executive is determined to be disabled under a Company disability plan with the same or substantially similar definition of disability, as described in Section 409A (defined below), If there is a dispute as to whether Executive is Totally Disabled, such dispute shall be submitted for resolution to a licensed physician selected by Executive but subject to the reasonable approval of the Company. If such a dispute arises, Executive shall submit to such examinations and shall provide such information as such physician may request, and the determination of the physician as to whether Executive is Totally Disabled under this definition shall be binding and conclusive.
6.2 Intentionally omitted.
6.3 SUCCESSORS, BINDING AGREEMENT. This Amended and Restated Agreement shall be binding upon and run to the benefit of the Company, its successors and assigns, and shall inure to the benefit of and be enforceable by Executives personal or legal representatives, beneficiaries, designees, executors, administrators, heirs, distributees, devisees and legatees.
6.4 MODIFICATION; NO WAIVER. This Amended and Restated Agreement may not be modified or amended except by an instrument in writing signed by the parties to this Amended and Restated Agreement. No term or, condition of this Amended and Restated Agreement shall be deemed to have been waived, nor shall there be any estoppel against the
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enforcement of any provision of this Amended and Restated Agreement, except by written instrument by the party charged with such waiver or estoppel, No such written waiver shall be deemed a continuing waiver unless specifically stated in such waiver, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any other term or condition. No amendment agreed by the parties in writing shall be deemed to give rise to Good Reason,
6.5 SEVERABILITY. The covenants and agreements contained in this Amended and Restated Agreement are separate and severable and the invalidity or unenforceability of any one or more of such covenants or agreements, if not material to the employment arrangement that is the basis for this Amended and Restated Agreement, shall not affect the validity or enforceability of any other covenant or agreement contained in this Amended and Restated Agreement. If, in any judicial proceeding, a court shall refuse to enforce one or more of the covenants or agreements contained in this Amended and Restated Agreement because the duration thereof is too long, or the scope thereof is too broad, it is, expressly agreed between the parties to this Amended and Restated Agreement that such duration or scope shall be deemed reduced to the extent necessary to permit the enforcement of such covenants or agreements.
6.6 NOTICES. All the notices and other communications required or permitted under this Amended and Restated Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to the parties to this Amended and Restated Agreement at the following addresses:
If to the Company, to it at: |
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Mesa Air Group, Inc. 410 North 44th Street, Suite 700 Phoenix, AZ 85008 Attn: Chief Executive Officer |
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If Executive, to him at: |
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Notices shall be deemed to have been given and received upon personal delivery or three business days after having been deposited, if sent by registered or certified mail.
6.7 ASSIGNMENT. This Amended and Restated Agreement and any rights under this Amended and Restated Agreement shall not be assignable by either party without the prior written consent of the other party except that the Company may assign this Amended and Restated Agreement to its successor in interest in a Change in Control transaction, provided that such successor in interest expressly assumes the terms of this Amended and Restated Agreement.
6.8 ENTIRE UNDERSTANDING. This Amended and Restated Agreement (together with the Exhibits incorporated as a part of this Amended and Restated Agreement) constitutes the entire understanding between the parties to this Amended and Restated Agreement and no agreement, representation, warranty or covenant has been made by either party except as expressly set forth in this Amended and Restated Agreement.
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6.9 EXECUTIVES REPRESENTATIONS. Executive represents and warrants that neither the execution and delivery of this Amended and Restated Agreement nor the performance of his duties under this Amended and Restated Agreement violates the provisions of any other agreement to which he is a party or by which he is bound.
6.10 SECTION 409A. This Amended and Restated Agreement is intended to comply with, or otherwise be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended (the Code) and any regulations and Treasury guidance promulgated thereunder (Section 409A). If the Company determines in good faith that any provision of this Amended and Restated Agreement would cause the Executive to incur an additional tax, penalty, or interest under Section 409A, the Compensation Committee and the Executive shall use reasonable efforts to reform such provision, if possible, in a mutually agreeable fashion to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A or causing the imposition of such additional tax, penalty, or interest under Section 409A. The preceding provisions, however, shall not be construed as a guarantee by the Company of any particular tax effect to Executive under this Amended and Restated Agreement.
For purposes of Section 409A, the right to a series of installment payments under this Amended and Restated Agreement shall be treated as a right to a series of separate payments.
With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Amended and Restated Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (1) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (2) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.
Termination of employment, or words of similar import, as used in this Amended and Restated Agreement means, for purposes of any payments under this Amended and Restated Agreement that are payments of deferred compensation subject to Section 409A, the Executives separation from service as defined in Section 409A.
If a payment obligation under this Amended and Restated Agreement arises on account of the Executives separation from service while the Executive is a specified employee (as defined under Section 409A and determined in good faith by the Compensation Committee), any payment of deferred compensation (as defined under Treasury Regulation Section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) that is scheduled to be paid within six (6) months after such separation from service shall accrue with interest as described in Section 6.11 and shall be paid within 15 days after the end of the six-month period beginning on the date of such separation from service or, if earlier, within 15 days after the appointment of the personal representative or executor of the Executives estate following his death.
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6.11 INTEREST ON PAST DUE AMOUNTS; ATTORNEYS FEES. All amounts under this Amended and Restated Agreement that are not paid when due shall bear interest at the rate of 4% plus Libor per annum, from the date such payments were due until paid. In addition, any party who breaches this Amended and Restated Agreement shall be obligated to pay the reasonable attorneys fees and costs incurred by the other party in seeking to enforce the terms of this Amended and Restated Agreement.
6.12 GOVERNING LAW. This Amended and Restated Agreement shall be construed in accordance with and governed for all purposes by the laws of the State of Arizona applicable to contracts executed and wholly performed within such state.
[SIGNATURE PAGES FOLLOW]
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MESA AIR GROUP, INC., a Nevada corporation |
By: |
Name: |
Title: |
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BRIAN S. GILLMAN |
[Signature Page to Amended and Restated Employment Agreement]
EXHIBIT A
INCENTIVE BONUS
BONUS LEVEL FISCAL 2016 |
QUARTERLY AMOUNT (1) |
FISCAL 2016 AMOUNT (1) |
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Target | $ | 50,000 | $ | 200,000 |
NOTE 1 THE QUARTERLY AMOUNT WILL BE PAID FOR EACH OF THE FIRST THREE FISCAL QUARTERS BASED ON THE COMPANYS QUARTERLY UNAUDITED FINANCIAL REPORTS AND OTHER QUALITATIVE PERFORMANCE OBJECTIVES TO BE ESTABLISHED UPON MUTUAL AGREEMENT OF EXECUTIVE AND THE BOARD OF DIRECTORS. THE ANNUAL AMOUNT WILL BE PAID FOR THE FOURTH QUARTER LESS ANY AMOUNTS PAID FOR THE FIRST THREE QUARTERS BASED ON THE ANNUAL AUDITED FINANCIAL REPORTS AND OTHER QUALITATIVE PERFORMANCE OBJECTIVES TO BE ESTABLISHED UPON MUTUAL AGREEMENT OF EXECUTIVE AND THE BOARD OF DIRECTORS. THE METRICS WILL BE THE SAME AS THE CEO AND PRESIDENT. THESE AMOUNTS WILL NOT BE DECREASED OVER THE TERM OF THE AGREEMENT.
Exhibit 10.10.1
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
Execution Version
CAPACITY PURCHASE AGREEMENT
A MONG
U NITED A IRLINES , I NC .,
M ESA A IRLINES , I NC .
AND
M ESA A IR G ROUP , I NC .
D ATED AS OF A UGUST 29, 2013
Execution Version
T ABLE OF C ONTENTS
ARTICLE I |
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DEFINITIONS | 1 | |||||
ARTICLE II |
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CAPACITY PURCHASE, SCHEDULES AND FARES | 1 | |||||
2.1 | Capacity Purchase | 1 | ||||
2.2 | Revenues | 4 | ||||
2.3 | Pass Travel | 5 | ||||
2.4 | Removal Events | 5 | ||||
ARTICLE III |
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CONTRACTOR COMPENSATION | 7 | |||||
3.1 | Compensation for Carrier Controlled Costs | 7 | ||||
3.2 | Incentive Compensation | 8 | ||||
3.3 | Start Up Costs | 11 | ||||
3.4 | Expenses | 11 | ||||
3.5 | Audit Rights; Financial Information | 13 | ||||
3.6 | Billing and Payment | 14 | ||||
ARTICLE IV |
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CONTRACTOR OPERATIONS AND AGREEMENTS WITH UNITED | 25 | |||||
4.1 | Crews, Etc | 25 | ||||
4.2 | Governmental Regulations; Maintenance | 27 | ||||
4.3 | Quality of Service | 27 | ||||
4.4 | Regulatory Complaints | 29 | ||||
4.5 | DOD Approval | 29 | ||||
4.6 | Aircraft Ground Movement | 29 | ||||
4.7 | Incidents or Accidents | 30 | ||||
4.8 | Emergency Response | 30 | ||||
4.9 | Safety Matters | 30 | ||||
4.10 | Facilities | 31 | ||||
4.11 | Codeshare Terms | 34 | ||||
4.12 | Fuel Procurement and Fuel Services | 34 | ||||
4.13 | Slots and Route Authorities | 35 | ||||
4.14 | Code Share Limitation | 35 |
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Execution Version
4.15 | Use of United Marks | 36 | ||||
4.16 | Use of Contractor Marks | 36 | ||||
4.17 | Catering Standards | 36 | ||||
4.18 | Fuel Efficiency Program | 37 | ||||
4.19 | Environmental | 37 | ||||
4.20 | Early Brake Release | 41 | ||||
4.21 | Ground Handling | 44 | ||||
4.22 | IT Requirements | 44 | ||||
4.23 | Maintenance Right to Bid | 44 | ||||
4.24 | Landing Fees | 44 | ||||
ARTICLE V |
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CERTAIN RIGHTS OF UNITED | 45 | |||||
5.1 | Use of Covered Aircraft | 45 | ||||
5.2 | Prohibited Transaction | 45 | ||||
5.3 | Performance Discussions | 45 | ||||
ARTICLE VI |
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INSURANCE | 46 | |||||
6.1 | Minimum Insurance Coverages | 46 | ||||
6.2 | Endorsements | 47 | ||||
6.3 | Evidence of Insurance Coverage | 47 | ||||
ARTICLE VII |
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INDEMNIFICATION | 47 | |||||
7.1 | Contractor Indemnification of United | 47 | ||||
7.2 | United Indemnification of Contractor | 48 | ||||
7.3 | Indemnification Claims | 49 | ||||
7.4 | Employers Liability; Independent Contractors; Waiver of Control | 50 | ||||
7.5 | No Double Recovery | 51 | ||||
7.6 | Survival | 51 | ||||
ARTICLE VIII |
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TERM, TERMINATION AND DISPOSITION OF AIRCRAFT | 51 | |||||
8.1 | Term | 51 | ||||
8.2 | Early Termination | 51 | ||||
8.3 | Disposition of Aircraft During Wind-Down Period | 53 | ||||
8.4 | Certain Other Remedies | 55 |
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Execution Version
ARTICLE IX |
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REPRESENTATIONS, WARRANTIES AND COVENANTS | 60 | |||||
9.1 | Representations and Warranties of Contractor | 60 | ||||
9.2 | Representations, Warranties and Covenants of United | 63 | ||||
ARTICLE X |
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CERTAIN AIRCRAFT-RELATED PROVISIONS | 64 | |||||
10.1 | Right to Call | 64 | ||||
10.2 | Extension of E175 Aircraft Term | 71 | ||||
10.3 | Alternative Aircraft | 71 | ||||
10.4 | Additional Aircraft | 71 | ||||
10.5 | Covered Aircraft Leases | 72 | ||||
10.6 | Lien; Subordination | 73 | ||||
10.7 | Delivery of Aircraft | 76 | ||||
10.8 | CRJ Interior Project | 77 | ||||
ARTICLE XI |
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MISCELLANEOUS | 77 | |||||
11.1 | Transition Arrangements | 77 | ||||
11.2 | Notices | 77 | ||||
11.3 | Binding Effect; Assignment | 79 | ||||
11.4 | Amendment and Modification | 79 | ||||
11.5 | Waiver | 79 | ||||
11.6 | Interpretation | 79 | ||||
11.7 | Confidentiality | 80 | ||||
11.8 | Counterparts | 80 | ||||
11.9 | Severability | 81 | ||||
11.10 | Relationship of Parties | 81 | ||||
11.11 | Entire Agreement; No Third Party Beneficiaries | 81 | ||||
11.12 | Governing Law | 81 | ||||
11.13 | Right of Set-Off | 82 | ||||
11.14 | Cooperation with Respect to Reporting | 82 | ||||
11.15 | Parent Guarantee | 83 | ||||
11.16 | Arbitration | 83 | ||||
11.17 | Termination of 2004 Agreement; Transition of CRJ-700 Aircraft | 85 |
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Execution Version
SCHEDULE 1: | Covered Aircraft | |
SCHEDULE 1A: | E175 Covered Aircraft Scheduled Delivery Dates and Scheduled In- Service Dates | |
SCHEDULE 2A: | E175 Covered Aircraft Compensation for Carrier Controlled Costs | |
SCHEDULE 2B: | CRJ Covered Aircraft Compensation for Carrier Controlled Costs | |
SCHEDULE 3: | Pass-Through Costs | |
SCHEDULE 4: | Incentive Compensation | |
EXHIBIT A: | Definitions | |
EXHIBIT B: | Terms of Codeshare Arrangements | |
EXHIBIT C: | Non-Revenue Pass Travel | |
EXHIBIT D: | Fuel Services | |
EXHIBIT E: | Use of United Marks and Other Identification | |
EXHIBIT F: | Use of Contractor Marks | |
EXHIBIT G: | Catering Standards | |
EXHIBIT H: | Fuel Efficiency Program | |
EXHIBIT I: | IT Requirements | |
EXHIBIT J: | Aircraft Cleanliness and Refurbishment Standards | |
EXHIBIT K: | Parent Guarantee | |
EXHIBIT L: | Letter of Agreement | |
EXHIBIT M: | Career Path Program for Pilots | |
EXHIBIT N: | Safety Standards for United and United Express Carriers | |
EXHIBIT O: | Form of Assignment Agreement | |
EXHIBIT P: | Charter Flight Operations | |
EXHIBIT Q: | Ground Handler Indemnity | |
EXHIBIT R: | CRJ Interior Project | |
EXHIBIT S: | CRJ Lease Return Conditions |
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Execution Version
CAPACITY PURCHASE AGREEMENT
This Capacity Purchase Agreement (this Agreement ), dated as of August 29, 2013 is among United Airlines, Inc., a Delaware corporation ( United ), Mesa Airlines, Inc., a Nevada corporation ( Contractor ) and Mesa Air Group, Inc., a Nevada corporation ( Parent );
WHEREAS , Contractor desires to perform Contractor Services pursuant to the terms hereof, and United desires to engage Contractor to perform such services, provided that the performance of such services is guaranteed by Parent; and
WHEREAS , the parties are entering into the Ancillary Agreements (as defined herein), in each case as an integral part of this Agreement;
NOW, THEREFORE , in consideration of the foregoing premises and the mutual covenants and obligations hereinafter contained, the parties agree to:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement (including, unless otherwise defined therein, in the Schedules, Appendices and Exhibits to this Agreement) shall have the meanings set forth in Exhibit A hereto.
ARTICLE II
CAPACITY PURCHASE, SCHEDULES AND FARES
2.1 Capacity Purchase .
(a) |
Contractor shall present each Covered Aircraft for service under this Agreement on the Committed In-Service Date determined with respect to such aircraft pursuant to Table 1 in Schedule 1 (for the E175 Covered Aircraft) or the In-Service Date set forth on Table 2 in Schedule 1 (for the CRJ Covered Aircraft), as the case may be, and for each day thereafter until the exit date set forth for such aircraft on Schedule 1 under the caption Scheduled Exit Date, as such date may be extended pursuant to Section 10.2 hereof, in each case unless such aircraft is earlier withdrawn from the terms of this Agreement or this Agreement is earlier terminated, and United agrees to purchase the capacity of each such Covered Aircraft for the period during which such Covered Aircraft is so presented for service, all under the terms and conditions set forth herein and for the consideration described in Article III ; provided that if, on or before the ninetieth (90 th ) day following the Scheduled Delivery Date, as set forth on Schedule 1A , for an E175 Covered Aircraft (or such later date as United may determine in Uniteds sole discretion), either (x) such aircraft has not been delivered by Embraer to United or to Contractor, acting as Uniteds agent pursuant to Section 10.7 , or (y) United, using reasonable commercial efforts, has not obtained a consent to its entry into a Covered Aircraft Lease with Contractor regarding such aircraft from any applicable lender, mortgagee or other financing party, which consent is required pursuant to the terms of any loan agreement, lease, mortgage or other |
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Execution Version
financing agreement or instrument relating to such aircraft and to which United is a party, then (i) such aircraft shall not constitute a Covered Aircraft for any purposes hereunder, (ii) Schedule 1 attached hereto shall be deemed to have been amended and replaced by a Schedule 1 as revised to delete such Covered Aircraft therefrom (and such aircraft shall not be replaced) without any further action by the parties hereto and (iii) no party hereunder shall incur any liability whatsoever to any of the other parties hereunder in connection with the removal of such aircraft from this Agreement as a result of the failure of such aircraft to be delivered or of United to obtain such consent. Subject to the terms and conditions of this Agreement, Contractor shall provide all of the capacity of the Covered Aircraft solely to United and use the Covered Aircraft solely to operate the Scheduled Flights and as otherwise expressly provided herein, including without limitation in Section 3.6(c)(v) . All Covered Aircraft operated by Contractor in the provision of Regional Airline Services to United under this Agreement shall be painted and otherwise outfitted in the aircraft livery as set forth in Section 8 of Exhibit E hereto. Contractor will do all things necessary to cause and assure, and will cause and assure, that it will at all times be and remain in custody and control of the Covered Aircraft and all other aircraft and equipment of, or operated by, Contractor and used in the performance of Contractor Services, and United and its directors, officers, employees, and agents shall not, for any reason, be deemed to be in custody or control, or a bailee, of any such aircraft or equipment. Contractor represents that the provisions of this Agreement setting the schedule for Contractor to begin to provide Regional Airline Services, including those set forth above and in Schedules 1 and 1A , afford sufficient time for Contractor to be able to provide such services in a safe and reliable manner consistent with the requirements set forth in Article IV and Exhibit N and as otherwise required by this Agreement, including without limitation sufficient time for Contractor to obtain all certifications, permits, licenses, certificates, exemptions, approvals, plans and insurance required in order for it to provide Regional Airline Services and for Contractor to train its flight and cabin crews, maintenance personnel and other staff as necessary for the safe and reliable provision of Regional Airline Services. Contractor acknowledges that United is relying on this representation in connection with entering into this Agreement. |
(b) |
Fares, Rules and Seat Inventory . United shall establish and publish all fares and related tariff rules for all seats on the Covered Aircraft. Contractor shall not publish any fares, tariffs, or related information for the Covered Aircraft. In addition, United shall have complete control over all seat inventory and inventory and revenue management decisions for the Covered Aircraft, including overbooking levels, discount seat levels and allocation of seats among various fare buckets. |
(c) |
Flight Schedules . United shall, in its sole discretion, establish and publish all schedules for the Covered Aircraft (such scheduled flights, together with Charter Flights, referred to herein as Scheduled Flights ), including determining the city- pairs served, frequencies, utilization and timing of scheduled arrivals and departures, and shall, in its sole discretion, make all determinations regarding the |
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Execution Version
establishment and scheduling of any flights other than Scheduled Flights; provided that such schedules shall be subject to Reasonable Operating Constraints and Conditions and the provisions of this Section 2.1 ; and provided further that Contractor shall operate all Charter Flights in accordance with the provisions set forth on Exhibit P ; and provided further that Scheduled Flights may include flights from a maintenance base to any Applicable Airport or from one Hub Airport to another Hub Airport. United shall also be entitled, in its sole discretion and at any time prior to takeoff, to direct Contractor to delay or cancel a Scheduled Flight, including without limitation for delays and cancellations that are ATC or weather related, and Contractor shall take all necessary action to give effect to any such direction. Except as otherwise provided in the last sentence of this Section 2.1(c) , any Scheduled Flight canceled at Uniteds direction shall be coded in accordance with Uniteds standard practices as an Uncontrollable Cancelation for all purposes hereunder. Contractor shall be entitled to make such maintenance, ferry and repositioning flights as may be required to facilitate the proper maintenance of the Covered Aircraft or to accommodate the Scheduled Flights. At least sixty (60) calendar days prior to the first day of each month to which a proposed Final Monthly Schedule relates, United shall present a planned flight schedule for such month, together with a proposed Final Monthly Schedule for the following two (2) months (the Initial Proposed Monthly Schedule ). In addition, United may from time to time submit to Contractor a schedule of proposed block hours for future periods and request confirmation from Contractor as to its availability to operate the Covered Aircraft for such number of block hours, and Contractor shall respond in a timely manner to any such request (it being understood that, notwithstanding any such request or response, the Scheduled Flights shall operate in accordance with the applicable Final Monthly Schedule). United shall review and consider any changes to the planned flight schedule for the Covered Aircraft, including the Initial Proposed Monthly Schedule, suggested by Contractor. Not later than forty-five (45) calendar days prior to the beginning of the calendar month to which a proposed Final Monthly Schedule relates, United will deliver to Contractor the Final Monthly Schedule. Following such delivery of the Final Monthly Schedule, however, United may make such adjustments to such Final Monthly Schedule as it deems appropriate (subject to Reasonable Operating Constraints and Conditions); provided that such adjustments by United shall not require more flight crew resources to operate the Final Monthly Schedule, based on reasonable flight crew requirements, than the flight crew resources that would have been necessary to operate the Initial Proposed Monthly Schedule. In addition, if, after such delivery of the Final Monthly Schedule, United decides to adjust the Final Monthly Schedule by removing a flight either (x) at Contractors request or (y) because United reasonably determines, in good faith, that (I) (after having consulted directly with a designated point of contact with Contractor in an effort to resolve any concerns regarding Contractors ability to perform) such flight would have resulted in a Controllable Cancellation and (II) Contractor has not acted in accordance with, or complied with United Expresss standard and/or customary operating policy and/or past practices in promptly and accurately, to the best of its knowledge, |
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Execution Version
notifying United of Contractors ability to perform such flight, then, in each case of clause (x) and (y), notwithstanding the removal of such flight from the Final Monthly Schedule, such flight shall be deemed to have resulted in a Controllable Cancellation for all purposes hereunder. |
(d) |
Spare Aircraft . Notwithstanding anything to the contrary contained in this Section 2.1 but subject to the provisions below in this Section 2.1(d) , Contractor shall maintain the number of spare regional jet aircraft equal to the quotient obtained by dividing (x) the sum of the number of Covered Aircraft and the number of all covered aircraft under each other capacity purchase or similar agreement between or among United and Contractor, by (y) [***], and rounding the quotient to the nearest whole number; provided that a quotient ending in [***] shall be rounded down; and provided further that, at any time at which more than [***] Covered Aircraft are in service and Contractor bases the Covered Aircraft at [***] or more Hub Airports, then Contractor shall be allocated one spare regional jet aircraft in each Hub Airport. Following the six month anniversary of the first Actual In-Service Date for an E175 Covered Aircraft, the parties agree to engage in good faith discussions regarding a possible reduction in the number and/or allocation of Spare Aircraft, it being understood that such discussions shall not be binding absent an agreement among the parties. Without limiting the foregoing, the Covered Aircraft constituting spare aircraft (the Spare Aircraft ) shall be constituted from both E175 Covered Aircraft and CRJ Covered Aircraft, in a proportion determined by United from time to time; provided that United shall provide Contractor with at least ninety (90) days advance notice before any proposed change in such proportion takes effect. Contractor shall select the specific E175 and/or CRJ-700 hulls that shall constitute the Spare Aircraft, in a proportion that complies with Uniteds instructions. Contractor shall be entitled to use the Spare Aircraft in Contractors reasonable discretion to replace another regional jet aircraft in the operation of a flight scheduled in the Final Monthly Schedule. In addition, subject to applicable Reasonable Operating Constraints and Conditions, Contractor shall use such Spare Aircraft to operate flights as directed by United (unless such Spare Aircraft was, prior to such direction by United, already scheduled as contemplated by the immediately preceding sentence), including flights originally scheduled to be operated by United or other United service providers; provided that if a Scheduled Flight is delayed or cancelled due to the unavailability of a Spare Aircraft which unavailability would not have occurred but for Contractors use of such Spare Aircraft at Uniteds direction (given over Contractors expressly stated objection) for another United service provider pursuant to this sentence, then, each such delay or cancellation occurring within a reasonable period after such unavailability shall be deemed an Uncontrollable Delay or an Uncontrollable Cancellation, as the case may be, for all purposes hereunder. |
2.2 Revenues .
Contractor and Parent acknowledge and agree that all revenues resulting from the sale and issuance of passenger tickets associated with the operation of the Covered Aircraft and all
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other sources of revenue associated with the operation of the Covered Aircraft or the provision of Regional Airline Services, in each case following the Effective Date and during the Term, including without limitation revenues relating to Charter Flights, the transportation of cargo or mail, the sale of food, beverages and onboard entertainment, checked baggage fees, duty-free services, exterior and interior advertising and guaranteed or incentive payments from airport or governmental authorities, civic associations or other third parties in connection with scheduling flights to such airport or locality, are the sole property of and shall be retained by United (or, if received by Contractor or Parent, shall be promptly remitted to United, free and clear of claims of any third party arising by, through or under Contractor or Parent or their affiliates). Contractor agrees that it shall reasonably cooperate with United so as to permit United to receive all revenues of the type described above.
2.3 Pass Travel .
All pass travel and other non-revenue travel on any Scheduled Flight shall be administered in accordance with Exhibit C .
2.4 Removal Events .
(a) |
With respect to CRJ Covered Aircraft, at any time and from time to time following the second anniversary of the In-Service Date for any such aircraft, United shall have the right, in its sole discretion, to remove from this Agreement any or all of the CRJ Covered Aircraft as provided in this Section 2.4 by delivering a written notice (a 2.4(a) Notice ) to Contractor, which 2.4(a) Notice shall specify the specific aircraft to be removed (each such removed aircraft, a CRJ Removed Aircraft ) and a Termination Date for each such aircraft not earlier than ninety (90) days following the date of such 2.4(a) Notice (it being understood that such notice may be delivered prior to such second anniversary provided that any such Termination Date may only occur on or after such second anniversary). For clarification purposes, Covered Aircraft that are not the subject of a 2.4(a) Notice shall remain subject to the terms of this Agreement (including this Section 2.4 ). Subject to Section 8.4(f) , following the delivery of a 2.4(a) Notice, the provisions of Section 8.3(b) shall apply to each CRJ Removed Aircraft and, at end of the applicable Wind-Down Period for such aircraft, (i) the provisions of Section 10.1 shall apply to each CRJ Removed Aircraft that is owned or leased by Contractor, other than any such aircraft leased from United, except that United must exercise the Call Option with respect to such aircraft, (ii) United shall pay Contractor the Wind-Down Expenses relating to each CRJ Removed Aircraft and (iii) United shall pay to Contractor the CRJ Margin Payment for each CRJ Removed Aircraft; provided that, notwithstanding clause (i) above, Contractor shall have the right to retain, and United shall then not have the right or obligation to acquire, any or all CRJ Removed Aircraft upon written notice by Contractor to United exercising such right to retain within thirty (30) days of Contractors receipt of the 2.4(a) Notice; provided further that the specific CRJ Removed Aircraft retained by Contractor, if any, shall be those aircraft with the latest Termination Dates as set forth in the relevant 2.4(a) Notices. |
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(b) |
With respect to E175 Covered Aircraft, at any time and from time to time, United shall have the right, in its sole discretion, to remove from this Agreement any or all of such aircraft as provided in this Section 2.4 by delivering a notice (a 2.4(b) Notice ) to Contractor, which 2.4(b) Notice shall specify the number of aircraft to be removed (each such removed aircraft, an E175 Removed Aircraft ) and a Termination Date not earlier than ninety (90) days following the date of such 2.4(b) Notice. For clarification purposes, Covered Aircraft that are not the subject of a 2.4(b) Notice shall remain subject to the terms of this Agreement (including this Section 2.4 ). Subject to Section 8.4(f) , following the delivery of a 2.4(b) Notice, the provisions of Section 8.3(b) shall apply to each E175 Removed Aircraft and, at end of the applicable Wind-Down Period for such aircraft, United shall pay Contractor the Wind-Down Expenses relating to each E175 Removed Aircraft. |
(c) |
At any time during the two calendar years following the end of the Wind-Down Period applicable to any CRJ Removed Aircraft pursuant to Section 2.4(a) , if United desires to begin the use of CRJ Removed Aircraft in Uniteds regional airline service (specifically excluding the renewal or extension of any then-existing contract or arrangement for the use of such an aircraft), and provided that at such time a Termination Event shall not have occurred and Contractor shall have consistently satisfied in all material respects the standards of care and service described in Section 4.3 in connection with its obligations under this Agreement (it being understood that any repeated failure to correct any violation of any standard of care and service reasonably asserted by United to be material shall be deemed to be a material failure) and otherwise complied in all material respects with the terms of this Agreement and any Ancillary Agreements, then, unless United has either sold such CRJ Removed Aircraft or leased it (other than for the provision of regional airline services to United) and subject to any of Uniteds contractual arrangements in place as of the Effective Date, United shall offer Contractor by written notice the opportunity to re-designate such CRJ Removed Aircraft as a CRJ Covered Aircraft hereunder, beginning on a date specified in such notice; provided that the rate per aircraft per month as set forth on Schedule 2B shall be modified to reflect the actual ownership cost of such aircraft to Contractor, if any; and provided, further that Contractors acceptance of such offer shall be at Contractors discretion, except that Contractor shall not accept such offer if Contractor believes that the date specified does not provide it with sufficient time to be able to provide Regional Airline Services using such CRJ Removed Aircraft in a safe and reliable manner as required by this Agreement (and if Contractor and United cannot agree on a later date). If, within fifteen (15) days after receipt of any such offer from United, Contractor accepts in writing such offer, then Contractor shall place such CRJ Removed Aircraft into service as a CRJ Covered Aircraft on the date specified in Uniteds notice to Contractor (or on such other agreed date, if any). |
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ARTICLE III
CONTRACTOR COMPENSATION
For and in consideration of the services to be provided by Contractor pursuant to the terms and conditions of this Agreement, and subject to the terms and conditions set forth herein, (i) United shall be responsible for (a) paying to Contractor Compensation for Carrier Controlled Costs and the Incentive Markup Payments, if any, (b) reimbursing Contractor for the Pass-Through Costs, and (c) incurring directly the expenses described in Section 3.4(a) , and United shall not be responsible for any other costs or expenses incurred by Contractor hereunder, and (ii) Contractor shall be responsible for incurring directly the expenses described in Section 3.4(b) , in each case as more specifically provided below in this Article III , such amounts to be paid and reconciled as set forth in Section 3.6 below.
3.1 Compensation for Carrier Controlled Costs .
(a) |
For and in consideration of the services to be provided by Contractor pursuant to the terms and conditions of this Agreement, United shall make payments to Contractor, subject to the terms and conditions set forth in this Article III and elsewhere in this Agreement, for each of the following measurements: (i) aircraft per month, (ii) block hours flown on completed Scheduled Flights, (iii) flight hours flown on completed Scheduled Flights, (iv) the number of departures for completed Scheduled Flights, (v) interrupted trip expense, (vi) the number of aircraft in schedule, and (vii) passengers on completed Scheduled Flights, in each case in accordance with the rates set forth on Schedules 2A (with respect to the E175 Covered Aircraft) and 2B (with respect to the CRJ Covered Aircraft) (all such compensation, collectively, the Compensation for Carrier Controlled Costs ), as applicable. Compensation for Carrier Controlled Costs shall be paid as provided in Section 3.6 below. |
(b) |
Pending Rules Adjustment . Upon the date (the Implementation Date ) which is the later of (a) the date on which the flight and duty rest rules set forth in FAR 117 currently pending as of the date hereof (the Pending Rules ) are required to be implemented by Parent or Contractor in order to be in compliance with such rules, and (b) the date on which Contractor actually fully implements the Pending Rules, (x) the rates for each block hour set forth on Schedules 2A and 2B shall be increased by [***] per block hour and (y) the parties shall use commercially reasonable efforts to determine the actual cost impact to Contractor of the implementation of the Pending Rules in a timely manner, but in any event before the day which is 120 days following the Implementation Date (such date, the Outside Date ). Upon the determination of the actual cost impact of the foregoing, the rates for each block hour set forth on Schedules 2A and 2B shall be amended accordingly, which such amendment shall apply retroactively to the Implementation Date; provided that, notwithstanding the above, if the parties have not mutually agreed upon a determination of such actual cost impact by the Outside Date, the actual cost impact shall be deemed to be an amount equivalent to the lower of (a) Uniteds good faith estimation of such cost impact and (b) Contractors good faith estimation of such cost impact, which such deemed cost |
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impact shall be applied retroactively to the Implementation Date and prospectively until the parties reach a mutual agreement to the actual cost impact, which shall also be applied retroactively to the same Implementation Date and prospectively. In the event the parties have determined by the Outside Date that there has been no such actual cost impact or either or both parties are unable to calculate a good faith estimate of such cost impact, then in each case the rates for each block hour set forth on Schedules 2A and 2B shall immediately be decreased to amounts which would otherwise be in effect, without giving effect to the increase described in this Section 3.1(b) and Contractor shall immediately repay to United an amount equivalent to the aggregate increase in the rates for each block hour set forth on Schedules 2A and 2B paid by United pursuant to the first sentence of this Section 3.1(b) . |
3.2 Incentive Compensation .
United and Contractor have developed a monthly incentive payment program (the Incentive Program ) under which Contractor shall earn incentive markup payments as more fully set forth below:
(a) |
Under the Incentive Program, operating performance goals (the Operating Goals ) for Contractors operation of Scheduled Flights shall be set with respect to the following measurements (each, an Operating Performance Measure ): (i) On-Time Departure Rate, (ii) Controllable Completion Factor and (iii) Customer Satisfaction Score. |
(b) |
Each initial Operating Goal, effective through and including the next succeeding December 31, will be established on the Commencement Date and shall be reestablished for each succeeding calendar year, using the predetermined methodology as set forth below. |
(c) |
The methodology set forth below shall be used to determine the Operating Goal relating to such Operating Performance Measure for each month in such calendar year (or any portion thereof, as the case may be). |
(i) |
Contractors Operating Goal relating to On-Time Departure Rate (the On-Time Zero Operating Goal ) for a calendar year shall be equal to Uniteds system-wide operating goal for On-Time Departure Rate for its domestic mainline operations for such year, (x) adjusted downwards by [***] percentage points, (y) further adjusted for regional differences by multiplying such number by a quotient, the numerator of which is the weighted average of each separate On-Time Departure Rate for the prior calendar year for Uniteds domestic mainline operations at each Hub Airport from which Contractor operates Scheduled Flights, weighted by the number of Scheduled Flight departures from each such Hub Airport, and the denominator of which is Uniteds aggregate On-Time Departure Rate for its domestic mainline operations for such prior calendar year, and |
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(z) further adjusted by the Seasonality Adjustment Factor, if applicable, as provided by Section 3.2(c)(iv) below. |
(ii) |
Contractors Operating Goal relating to its Controllable Completion Factor (the Controllable Completion Operating Goal ) for a calendar year shall be equal to Uniteds system-wide operating goal for Controllable Completion Factor for its domestic mainline operations for such year, adjusted downward by [***] percentage points. |
(iii) |
Contractors Operating Goal relating to Customer Satisfaction Score (the Customer Satisfaction Operating Goal ) for a calendar year shall be equal to the customer satisfaction operating goal for Uniteds domestic mainline operations (set by United for the current calendar year), (x) adjusted downwards by [***] percentage points and (y) further adjusted for regional differences by multiplying such number by a quotient, the numerator of which is the weighted average of each separate Customer Satisfaction Score for the prior calendar year of Uniteds domestic mainline operations at each Hub Airport from which Contractor operates Scheduled Flights, weighted by the number of Scheduled Flight departures from each such Hub Airport, and the denominator of which is Uniteds aggregate Customer Satisfaction Score for its domestic mainline operations for such prior calendar year. |
(iv) |
Seasonality Adjustment . As of the Commencement Date and as of the beginning of each subsequent calendar year, after the On-Time Zero Operating Goal has been calculated by the methodology outlined above but before such Operating Goal has been finalized, Contractor may adjust the On-Time Zero Operating Goal for each month in such period by applying a seasonality factor developed by Contractor and approved by United (any such factor, expressed as a percentage, a Seasonality Adjustment Factor ); provided, that the straight average of each of the resulting monthly On-Time Zero Operating Goals shall equal the unadjusted On-Time Zero Operating Goal calculated by the methodology outlined above; provided further , that the Seasonality Adjustment Factor shall in no event exceed [***] percent. |
(d) |
Performance Levels . The Operating Goals shall be used to determine four performance levels, A, B, C and D (each a Performance Level ) as follows: |
(i) |
Operating Goals Establish B-Level Performance . The Operating Goals shall define the minimum performance necessary to achieve at least the B Performance Level. |
(ii) |
Performance Grade Widths . The ranges between the lowest ends of consecutive Performance Levels set forth on Schedule 4 ( Grade Widths ) |
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shall be as set forth on Schedule 4 hereto and will not be changed at any time during the entire Term of this Agreement. |
(iii) |
Setting All Performance Levels . Immediately following the periodic establishment of the Operating Goals, constituting the low end of B Performance Level, and using the Grade Widths, the level of performance corresponding to each of the A, B, C and D Performance Levels will be computed, provided that the A Performance Level shall extend to [***], the D Performance Level shall extend to [***] for the On-Time Zero Operating Goal and the Controllable Completion Operating Goal, and the D Performance Level shall extend below [***] for the Customer Satisfaction Operating Goal. For example, if the Controllable Completion Operating Goal for a measurement period is determined to be [***], such number shall be the lowest end of the B Performance Level. Applying the methodology, in the Grade Width table referenced above, the bottom of the A Performance Level would be [***] ([***] plus [***]). Furthermore, the bottom of the C Performance Level would be [***] ([***] minus [***]). Based on these numbers and the Grade Widths, and before application of any Seasonality Adjustment Factors, the range of the Performance Levels would be as follows: |
A Performance Level |
|
= |
[***] |
|||
B Performance Level |
= |
[***] |
||||
C Performance Level |
= |
[***] |
||||
D Performance Level |
= |
[***] |
(e) |
For each calendar month during the Term during which Scheduled Flights shall have been flown, Contractors level of performance under this Agreement with respect to the Operating Goals ( Contractors Performance ) shall be measured against the Performance Levels, and a Contractor Grade shall be determined with respect to each Operating Goal; provided that no Incentive Markup Payments shall be payable with respect to any E175 Covered Aircraft prior to its Actual In-Service Date. |
(f) |
Markup . Following the determination of each Contractor Grade for each month, any applicable markup amount (in the case of E175 Covered Aircraft) or markup percentage (in the case of CRJ Covered Aircraft), as the case may be, shall be determined pursuant to Schedule 4 , and such markup amount shall be paid (in the case of E175 Covered Aircraft) or such markup percentage shall be applied (in the case of CRJ Covered Aircraft) to the Compensation for Carrier Controlled Costs (excluding the rate per aircraft per month), as the case may be, as part of the reconciliation process set forth in Section 3.6 (any such payment owed to Contractor by United associated with such markup amount (in the case of E175 Covered Aircraft), together with any such application of markup percentage to Compensation for Carrier Controlled Costs (in the case of CRJ Covered Aircraft), an Incentive Markup Payment ). |
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3.3 Start Up Costs .
United shall reimburse the following expenses and provide the following support related to the initiation of Regional Airline Services by E175 Covered Aircraft under this Agreement:
(a) |
Pilot Training Expenses . United shall pay Contractor an amount equivalent to [***] per E175 Covered Aircraft for initial pilot training expenses (such expenses, the Initial E175 Pilot Training Expenses ) payable upon the Actual In-Service Date of each aircraft to Contractor; provided that if either United or Contractor negotiates a cost of E175 simulator use by Contractor that is different than [***] per hour, then the [***] amount set forth above shall be adjusted accordingly. For the avoidance of doubt, United shall not be obligated to pay the Initial E175 Pilot Training Expenses more than one (1) time for any particular hull. |
(b) |
Maintenance Training Expenses . United shall provide Contractor any maintenance training credits received from Embraer with respect to the E175 Covered Aircraft to the extent such credits are assignable and are not extinguished as a result of this Agreement or such assignment. |
(c) |
Manufacturer Manuals . Not later than August 31, 2013, United shall use commercially reasonable efforts to cause Embraer to provide Contractor with manufacturer manuals (or a copy thereof) for an E175 aircraft received from Embraer, which manuals shall become subject to the terms of the Covered Aircraft Lease for the relevant E175 Covered Aircraft when entered into by the parties. |
(d) |
Manufacturer Support . United shall use its reasonable commercial efforts to cause Embraer to provide Contractor with all other manufacture support available pursuant to the applicable purchase agreement at no cost to Contractor or United (for example, possibly including Check Airmen and Field Service Reps). |
(e) |
Delivery Expenses . At Uniteds option, United shall either (i) deliver the aircraft to Contractor at a location within the United States, or (ii) instruct Contractor to take delivery of the aircraft in a location outside of the United States pursuant to Section 10.7 and shall reimburse Contractor for the reasonable out-of-pocket associated expenses. |
3.4 Expenses .
(a) |
United Directly Incurred Expenses . With respect to Regional Airline Services, in consideration of the provision by Contractor of Contractor Services and its compliance with the other terms and conditions of this Agreement, the following expenses, together with such expenses, if any, as are referenced in the last sentence of Section 3.4(b) , shall be incurred directly by United: |
(i) |
passenger and cargo revenue-related expenses, including but not limited to commissions, taxes and fees related to the transportation of passengers or cargo, food and beverage costs, charges for fare or tariff filings, sales and |
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advertising costs, computer reservation system fees, credit card fees, interline fees, revenue taxes, GDS fees, reservation costs, revenue accounting costs, including costs associated with ticket sales reporting and unreported sales, and Mileage Plus participation costs and beverage voucher coupons; |
(ii) |
denied boarding compensation and the cost of travel certificates; |
(iii) |
with respect to the E175 Covered Aircraft, passenger-related interrupted trip costs (including hotel, meal and ground transportation vouchers) and baggage handling claims, repairs and delivery costs related to Uncontrollable Delays and Uncontrollable Cancellations; provided that, for avoidance of doubt, Contractor is responsible for all passenger related |
(iv) |
interrupted trip costs (hotel, meal and ground transportation vouchers only) (A) for all Controllable Delays and Controllable Cancellations with respect to the E175 Covered Aircraft and (B) for all Controllable Delays, Controllable Cancellations, Uncontrollable Delays and Uncontrollable Cancellations with respect to the CRJ Covered Aircraft; |
(v) |
if United elects to procure, or arrange for the procurement of, aircraft fuel and/or Fuel Services, as the case may be, pursuant to Section 4.12(b) , and in consideration of Contractors compliance with its obligations under such Section 4.12 , (I) the cost of such fuel procurement, including any administration fees of any fuel supplier, and/or (II) charges for such Fuel Services, as applicable; |
(vi) |
rent for Terminal Facilities used by Contractor hereunder that are not Contractor Terminal Facilities constituting both exclusive and common use charges imposed or charged by airports; provided that, for avoidance of doubt, rents and any associated expenses for Contractor flight operations facilities including, but not limited to, maintenance, training, flight ops crews, in-flight crews, or corporate, station, or domicile management office space are Contractor expenses and shall not be reconciled; |
(vii) |
all ground handling costs incurred pursuant to Uniteds standard ground handling agreement; |
(viii) |
the cost of technology services provided by United for its reservation, check-in and baggage-handling processes; |
(ix) |
TSA fees or charges and any other passenger security fees or charges for security, other than such fees and charges for which United is or would be entitled to indemnification under Article VII ; |
(x) |
reasonable out-of-pocket expenses of Contractor associated with Design Changes directed and approved by United; and |
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(xi) |
if United elects to pay for landing fees on behalf of Contractor for Scheduled Flights pursuant to Section 4.24(a) , landing fees. |
If, notwithstanding the foregoing, Contractor incurs any of the expenses set forth in this Section 3.4(a) , and only to the extent that United determines, in its sole discretion, that such expenses are both reasonable and should properly have been incurred by United hereunder, then United shall reimburse Contractor for such expenses.
(b) |
Contractor Expenses . Except as provided in Section 3.4(a) , Contractor shall pay in accordance with commercially reasonable practices all expenses or costs incurred in connection with Contractors provision of Contractor Services. Without limiting the foregoing, for the avoidance of doubt, Contractor shall be responsible for the payment of (x) all costs necessary to comply with airworthiness directives relating to the CRJ Covered Aircraft (including without limitation those pertaining to pressure floors), and shall perform any and all repairs as may be necessary in connection therewith in accordance with (i) its maintenance program and/or (ii) any applicable airworthiness directives or other regulatory requirements, and (y) all costs for which Contractor is responsible pursuant to Section 10.8 . Contractor agrees that, in connection with its provision of Contractor Services to United hereunder and the provision of the other services contemplated to be performed by Contractor under the Ancillary Agreements, it shall use commercially reasonable efforts to minimize costs incurred by it if such costs would be reimbursable by United to Contractor in accordance with the terms of this Agreement or any Ancillary Agreement (it being understood that the payment of any amount owed pursuant to Schedule 2A or 2B , as the case may be, shall not constitute costs that would be reimbursable by United for purposes of this sentence). Further, with respect to any service or item the cost of which United is required to reimburse Contractor hereunder or under any Ancillary Agreement, if United can provide or arrange to provide such service or item at a lower cost than the reimbursement cost that United would otherwise be charged and at substantially similar quality or service level, then Contractor shall allow United to provide or arrange to provide such service or item in order to permit United to lower its costs, and the cost of providing such service or item shall be treated as a United directly-incurred cost pursuant to Section 3.4(a) . |
3.5 Audit Rights; Financial Information .
Contractor shall make available for inspection by United and its outside auditors and advisors, within a reasonable period of time after United makes a written request therefor, all of Contractors books and records (including all financial and accounting records and operations reports, and records of other subsidiaries or affiliates of Contractor, if any) (i) as necessary to audit any payments made or amounts or setoff pursuant to this Agreement, and (ii) otherwise related to Contractors provision of Contractor Services to United or any of Contractors other obligations under this Agreement, including without limitation relating to the performance, regulatory and operational standards in Sections 4.2 , 4.3 , 4.4 , 4.5 , 4.7 , 4.8 , 4.9 , 4.17 , 4.18 , 4.19 , 4.20 and 4.22 (all such books and records, collectively, the CPA Records ). United and its
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outside auditors and advisors shall be entitled to make copies and notes of such information as they deem necessary and to discuss such records with Contractors Chief Financial Officer or such other employees or agents of Contractor knowledgeable about such records. Upon the reasonable written request of United or its outside auditors or advisors, Contractor will cooperate with United and its outside auditors and advisors to permit United and its outside auditors and advisors access to Contractors outside auditors for purposes of reviewing such records. Any audit conducted pursuant to this Section 3.5 shall be paid for by United, unless pursuant to such audit it is determined that Contractor owes United in excess of [***], in which case Contractor shall pay to United the entire costs and expenses incurred by United in connection with such audit. In addition, Contractor shall deliver or cause to be delivered to United (I) as soon as available, but in any event within 90 days after the end of each fiscal year, a copy of the consolidated balance sheet of Contractor, as at the end of such year, and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on by an independent certified public accountants of nationally recognized standing; and (II) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year, the unaudited consolidated balance sheet of Contractor, as at the end of such quarter, and the related unaudited consolidated statements of income and retained earnings and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a responsible officer of Contractor as being fairly stated in all material respects (subject to normal year-end audit adjustments); provided , that Contractor shall not be required to deliver financial statements pursuant to this sentence at any time that Contractor is a reporting issuer pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and such financial statements are timely filed with the Securities and Exchange Commission pursuant thereto. All financial statements delivered hereunder shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein).
3.6 Billing and Payment .
(a) |
Prepayment . At least ten (10) days prior to the commencement of the applicable month to which a Final Monthly Schedule relates, Contractor shall present a reasonably detailed written invoice for the following amount (the Prepayment ) due under this Agreement in respect of the month to which such Final Monthly Schedule pertains, assuming C level performance for such month with respect to CRJ Covered Aircraft: |
(i) |
for each Covered Aircraft for such month, calculated separately, the per aircraft per month amount set forth on Schedule 2A or 2B , as the case may be, for such Covered Aircraft, as the case may be, multiplied by [***] with respect to CRJ Covered Aircraft; provided , that for any calendar month in which such Covered Aircraft enters or exits service hereunder, such amount shall be multiplied by a fraction, the numerator of which is the actual number of days in such month such aircraft constituted a |
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Covered Aircraft, and the denominator of which is the total number of days in such month; plus |
(ii) |
the number of block hours set forth on the Final Monthly Schedule for such month, multiplied by the rate for each block hour as set forth on Schedule 2A or 2B , as the case may be, multiplied by [***]; plus |
(iii) |
the number of flight hours set forth on the Final Monthly Schedule for such month, multiplied by the rate for each flight hour as set forth on Schedule 2A , multiplied by [***]; plus |
(iv) |
the number of departures set forth on the Final Monthly Schedule for such month, multiplied by the rate for each Scheduled Flight departure, as set forth on Schedule 2A or 2B , as the case may be, multiplied by [***]; plus |
(v) |
the aggregate number of passengers on all completed Scheduled Flights during such month, multiplied by the rate for interrupted trip expense per passenger, as set forth on Schedule 2A or 2B , as the case may be, multiplied by [***]; plus |
(vi) |
the average number of aircraft available to schedule during such month, multiplied by the rate for each aircraft in schedule, as set forth on Schedule 2B , multiplied by [***]; plus |
(vii) |
the aggregate number of passengers on all completed Scheduled Flights during such month, multiplied by the rate for each completed passenger, as set forth on Schedule 2B , multiplied by [***]; plus |
(viii) |
the allocation of Pass-Through Costs calculated as set forth in Section 3.6(b)(iii)(B) . |
(b) |
Reconciliation. |
(i) |
Reconciliation of Certain Compensation for Carrier Controlled Costs . |
(A) |
With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) Contractors actual block hours flown, multiplied by (II) the rate for each block hour set forth on Schedule 2A or 2B , as the case may be, exceeds (y) the amount invoiced pursuant to Section 3.6(a)(ii) for such block hours during such calendar month, then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference (together with, in the case of CRJ Covered Aircraft, actual markup as provided in Section 3.2(f) for such month). |
(B) |
With respect to Scheduled Flights, for any calendar month for which (x) the amount invoiced for block hours pursuant to Section |
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3.6(a)(ii) exceeds (y) the product of (I) Contractors actual block hours flown in such calendar month, multiplied by (II) the rate for each block hour set forth on Schedule 2A or 2B , as the case may be, then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference (increased, in the case of CRJ Covered Aircraft, by markup on such difference assuming C performance for such month). |
(C) |
With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) Contractors actual flight hours flown, multiplied by (II) the rate for each flight hour set forth on Schedule 2A exceeds (y) the amount invoiced pursuant to Section 3.6(a)(iii) for such flight hours during such calendar month, then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference. |
(D) |
With respect to Scheduled Flights, for any calendar month for which (x) the amount invoiced for flight hours pursuant to Section 3.6(a)(iii) exceeds (y) the product of (I) Contractors actual flight hours flown in such calendar month, multiplied by (II) the rate for each flight hour set forth on Schedule 2A , then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference. |
(E) |
With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) Contractors actual Scheduled Flight departures, multiplied by (II) the rate for each Scheduled Flight departure set forth on Schedule 2A or 2B , as the case may be, exceeds (y) the amount invoiced pursuant to Section 3.6(a)(iv) for such departures during such calendar month, then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference (together with, in the case of CRJ Covered Aircraft, actual markup as provided in Section 3.2(f) for such month). |
(F) |
With respect to Scheduled Flights, for any calendar month in which (x) the amount invoiced for departures pursuant to Section 3.6(a)(iv) exceeds (y) the product of (I) Contractors actual Scheduled Flight departures for such month, multiplied by (II) the rate for each Scheduled Flight departure set forth on Schedule 2A or 2B , as the case may be, then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference (increased, in the case of CRJ Covered Aircraft, by markup on such difference assuming C performance for such month). |
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(G) |
With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) the aggregate number of passengers on all completed Scheduled Flights during such month, multiplied by (II) the rate for interrupted trip expense per passenger set forth on Schedule 2A or 2B , as the case may be, exceeds (y) the amount invoiced for interrupted trip expenses pursuant to Section 3.6(a)(v) , then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference (together with, in the case of CRJ Covered Aircraft, actual markup as provided in Section 3.2(f) for such month). |
(H) |
With respect to Scheduled Flights, for any calendar month in which (x) the amount invoiced for interrupted trip expenses pursuant to Section 3.6(a)(v) , exceeds (y) the product of (I) the aggregate number of passengers on all completed Scheduled Flights during such month, multiplied by (II) the rate for interrupted trip expense per passenger set forth on Schedule 2A or 2B , as the case may be, then the reconciliation for such month shall include a payment by Contractor to United in an amount equal to such difference (increased, in the case of CRJ Covered Aircraft, by markup on such difference assuming C performance for such month). |
(I) |
With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) for the average number of aircraft available to schedule during such month, multiplied by (II) the rate for each aircraft in schedule set forth on Schedule 2B exceeds (y) the amount invoiced for aircraft in schedule pursuant to Section 3.6(a)(vi) , then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference (together with actual markup as provided in Section 3.2(f) for such month). |
(J) |
With respect to Scheduled Flights, for any calendar month in which (x) the amount invoiced for aircraft in schedule pursuant to Section 3.6(a)(vi) exceeds (y) the product of (I) the average number of aircraft available to schedule during such month, multiplied by (II) the rate for each aircraft in schedule set forth on Schedule 2B , then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference (increased, in the case of CRJ Covered Aircraft, by markup on such difference assuming C performance for such month). |
(K) |
With respect to Scheduled Flights, for any calendar month in which (x) the product of (I) aggregate number of passengers on all completed Scheduled Flights during such month, multiplied by (II) |
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the rate for each completed passenger set forth on Schedule 2B exceeds (y) the amount invoiced for number of completed passengers pursuant to Section 3.6(a)(vii) , then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to such difference (together with, in the case of CRJ Covered Aircraft, actual markup as provided in Section 3.2(f) for such month). |
(L) |
With respect to Scheduled Flights, for any calendar month in which (x) the amount invoiced for number of completed passengers pursuant to Section 3.6(a)(vii) exceeds (y) the product of (I) the aggregate number of passengers on all completed Scheduled Flights during such month, multiplied by (II) the rate for each completed passenger set forth on Schedule 2B , then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to such difference (increased, in the case of CRJ Covered Aircraft, by markup on such difference assuming C performance for such month). |
(M) |
Contractors actual block hours flown, actual flight hours flown and actual Scheduled Flight departures shall include block hours, flight hours and departures for, and completed Scheduled Flights shall include, all completed Scheduled Flights, including those resulting from any unscheduled stop required prior to the completion of a Scheduled Flight; however, actual block hours flown, actual flight hours flown and actual Scheduled Flight departures shall not include any block hours, flight hours or departures resulting from or attributable to, and completed Scheduled Flights shall not include, (x) uncompleted ground returns or uncompleted air returns or (y) flights referenced in Section 3.6(c)(v) or (z) Excess Delayed Flights referenced in Section 3.6(c)(vi) below. |
(ii) |
Reconciliation of Incentive Markup Payments . Following the end of each month, United and Contractor shall determine whether any Incentive Markup Payment is payable to Contractor by United as provided in Section 3.2 . With respect to E175 Covered Aircraft, if an Incentive Markup Payment has been earned by Contractor for a month, then the reconciliation for such month shall include a payment by United to Contractor in an amount equal to the Incentive Markup Payment. With respect to CRJ Covered Aircraft, if an Incentive Markup Payment has been earned by Contractor for a month and such markup is different from the assumed C level performance used in determining the Prepayment, then the reconciliation for such month shall include a payment by United to Contractor, or by Contractor to United, as the case may be, determined using the actual incentive performance level. |
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(iii) |
Reconciliation of Pass-Through Costs . |
(A) |
The following expenses incurred in connection with Regional Airline Services (collectively, the Pass-Through Costs ) shall be reconciled to actual costs as set forth below: |
(1) |
common use charges paid by Contractor under any lease agreement with any Applicable Airport, such charges to be allocated at an Applicable Airport between the Regional Airline Services, on the one hand, and Contractors services provided to other customers, if any, on the other hand, with such allocation to be proportionate at an Applicable Airport based on the number of enplaned passengers for Regional Airline Services and Contractors other customers; |
(2) |
Aircraft Property Taxes; provided that Contractor shall provide United with an annual reconciliation of all tax bills paid and reasonably allocated to United, in a format directed by United and including documentation of assessments, tax bills, and the allocation of such Aircraft Property Taxes among United, Contractors other business partners and relationships, and Contractors own business; and provided further that Contractor shall use commercially reasonable efforts to ensure that aircraft values and assessments and all allocated costs are correct and accurate, and shall use, at its own cost and expense, property tax professionals to ensure accurate and timely reporting of property tax Pass-Through Costs; and provided further that, notwithstanding the immediately preceding proviso, in the event that Contractors engagement of property tax professionals results in an economic benefit to United, then the cost of such engagement shall be treated as a Pass-Through Cost to the extent of such economic benefit conferred to United; |
(3) |
passenger liability insurance and war risk insurance costs; provided that United shall not pay to Contractor any amount in respect of this clause (3) reflecting an insurance rate which is greater than the sum of (x) the Insurance Baseline and (y) the cumulative Average Peer Group Rate Increase for a given year; provided further that Average Peer Group Rate Increase shall be provided by Contractor to United at least once annually; and provided further that United shall only pay to Contractor amounts in respect of this clause (3) for fees and expenses of insurance brokers, if any, that are reasonable and customary. For the avoidance of doubt, Contractors 2013 passenger liability and war risk |
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insurance costs shall be the baseline for any cumulative adjustment to the annual rates as set forth herein (the Insurance Baseline ); |
(4) |
if United elects to have Contractor pay for landing fees pursuant to Section 4.24(b) , landing fees paid for by Contractor; |
(5) |
passenger-related interrupted trip costs (including hotel, meal and ground transportation vouchers) and baggage handling claims, repairs and delivery costs incurred by United related to Controllable Delays and Controllable Cancellations; provided that United will present Contractor interrupted trip expense costs by way of detailed report each month; |
(6) |
Navigation Fees and Foreign Costs paid by Contractor; |
(7) |
as provided by and in consideration of Contractors compliance with its obligations under Section 4.12 (A) if United shall not have elected to procure fuel pursuant to clause (i) of Section 4.12(b) , the cost of such fuel procurement, including any administration fees of any fuel supplier, and (B) if United shall not have elected to procure Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.12(b) , charges for Fuel Services; |
(8) |
the actual and reasonable out-of-pocket costs incurred by Contractor in order for the E175 Covered Aircraft to comply with outstanding airworthiness directives issued by the FAA applicable to the E175 Covered Aircraft that by their terms require compliance during the Term; provided that United shall pay to Contractor (x) [***] per E175 Covered Aircraft per month toward the costs of compliance with airworthiness directives, (y) the excess above [***] of the cost of parts required to comply with any single airworthiness directive in respect of a single E175 Covered Aircraft and (z) the excess above [***] of the cost of parts and direct out-of-pocket costs for third-party labor, in each case required to comply with any single airworthiness directive in respect of a single E175 Covered Aircraft; provided further , that Contractor shall use its reasonable commercial efforts to minimize all costs described in this Section 3.6(b)(iii)(A)(8) ; |
(9) |
only with respect to E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for the |
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repair and/or replacement of non-expendable parts pursuant to the Parts Support Agreement; |
(10) |
only with respect to E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for the maintenance of engines pursuant to the Engine Maintenance Support Agreement; |
(11) |
only with respect to E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for Airframe Heavy Maintenance, the aircraft cleaning functions to be completed at C Check intervals and any associated ferry costs pursuant to the Airframe Heavy Maintenance Support Agreement; |
(12) |
only with respect to E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for the maintenance of landing gear pursuant to the Landing Gear Support Agreement; |
(13) |
only with respect to E175 Covered Aircraft, the actual out of pocket third-party costs incurred by Contractor for the maintenance of APUs pursuant to the APU Support Agreement; and |
(14) |
pursuant to Section 4.6(b) , towing expenses incurred by Contractor with respect to the excess, if any, of the number of Accommodating Aircraft Movements during such month over the number calculated pursuant to Section 4.6(b)(y) . |
(B) |
The Prepayment paid pursuant to Section 3.6(c)(i) shall include an allocation of Pass-Through Costs, determined as follows: |
(1) |
The amount of both passenger liability insurance and war risk insurance costs referred to in Section 3.6(b)(iii)(A)(3) included in the Pass-Through Costs for any particular month will be equal to the product of (1) the applicable insurance rate per completed passenger set forth on Schedule 3 multiplied by (2) the Forecasted Passengers for such month. |
(2) |
The amount of Landing Fees referred to in Section 3.6(b)(iii)(A)(4) included in the Pass-Through Costs for any particular month will be equal to the aggregate sum of the following products: (1) the landing fee rate set forth in Schedule 3 , multiplied by (2) the number of scheduled departures set forth in the Final Monthly Schedule for airports where Contractor pays |
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landing fees directly, multiplied by (3) [***]. For avoidance of doubt, United will not allocate to the reconciliation of Pass-Through Costs landing fees which are directly paid by United. |
(3) |
The amount of Navigation Fees referred to in Section 3.6(b)(iii)(A)(6) included in the Pass-Through Costs for any particular month will be equal to the aggregate sum of the following products: (1) the air navigation rates set forth in Schedule 3 , multiplied by (2) the number of scheduled departures set forth in the Final Monthly Schedule for flying to destinations in Canada or Mexico, multiplied by (3) [***]. |
(4) |
The amount of Fuel Services charges included in the Pass-Through Costs for any particular month (pursuant to Section 3.6(b)(iii)(A)(7)) , if any, will be equal to the aggregate sum of the following products: (1) the rate set forth in Schedule 3 for Fuel Services, multiplied by (2) the number of scheduled departures set forth in the Final Monthly Schedule, multiplied by (3) [***]. |
(C) |
Without limiting Uniteds audit rights, (i) if in any month the Contractors actual Pass-Through Costs exceed the amount of Prepayment in respect of Pass-Through Costs for such month as described in Section 3.6(b)(iii)(B) , then United shall pay to Contractor an amount equal to such difference, and (ii) if in any month the amount of Pass-Through Costs included in the Prepayment in respect of Pass-Through Costs as described in Section 3.6(b)(iii)(B) exceeds Contractors actual Pass-Through Costs for such month, then Contractor shall pay to United an amount equal to such difference. |
(c) |
Payment . |
(i) |
Payment of Invoiced Prepayments . United shall pay Contractor the Prepayment, subject to (x) Uniteds right to dispute any calculations set forth on such invoice that do not comply with the terms of this Agreement, (y) Uniteds set-off rights as set forth in Section 3.6(c)(ii) and Section 11.13 , and (z) any other adjustments as mutually agreed to by both Contractor and United, as follows: |
(A) |
One-quarter of the balance of the Prepayment shall be payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the first Wednesday of the month (or if such day is not a Business Day, the |
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next Business Day) to which such invoice relates, as adjusted pursuant to Section 3.6(c)(ii) below; |
(B) |
One-quarter of the balance of the Prepayment shall be payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 2nd Wednesday of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates; |
(C) |
One-quarter of the balance of the Prepayment shall be payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 3rd Wednesday of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates, as adjusted pursuant to Section 3.6(c)(ii) below; and |
(D) |
One-quarter of the balance of the Prepayment shall be payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 4th Wednesday of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates, as adjusted pursuant to Section 3.6(c)(ii) . |
(ii) |
Payment of Reconciled Items . Not later than 21 days following the end of each month, Contractor and United shall make the reconciliation calculations provided for in Subsections 3.6(b)(i) , (ii) and (iii) above, in accordance with the other provisions set forth in Section 3.6(b) . On or before the fourth Wednesday following the end of such month (or if such day is not a Business Day, the next Business Day), the sum of (A) such reconciled amounts for such month, (B) if any, liquidated damage amounts owed and unpaid by Contractor to United pursuant to Article VIII in respect of the period to and including the third Wednesday following the end of such month, (C) any Basic Rent payable pursuant to Section 10.5 and/or a Covered Aircraft Lease with respect to the period to and including the second Wednesday following the end of such month and (D) any unpaid EBR Payment with respect to an EBR Cure Period ending on or prior to the third Wednesday following the end of such month, (i) shall be paid by United to Contractor, together with any payment to be made by United pursuant to Section 3.6(c)(i)(C) above, or (ii) shall be paid by Contractor to United or set off by United against any other amounts owing to Contractor under this Agreement or any Ancillary Agreement. Further reconciliations shall be made on or prior to the first Wednesday of the month following the end of such month (or if such day is not a Business Day, the next Business Day) to the extent necessary as a result of Uniteds review of financial information provided by Contractor in respect of such month and, in addition, with respect to insurance and Aircraft Property Taxes, reconciliation shall occur on an annual basis. Such further |
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reconciled amounts for such month (x) shall be paid by United to Contractor, together with any other payment to be made by United pursuant to Section 3.6(c)(i)(D) above, or (y) shall be paid by Contractor to United or set off by United against any other amounts owing to Contractor. In addition, United shall pay to Contractor any amounts owed to Contractor by United pursuant to Section 10.8 in the weekly payment pursuant to this Section 3.6(c) next occurring after the third Business Day following presentation to United of documentation of such expenses as required by Section 10.8 . Notwithstanding the foregoing, United shall have the right to set-off any payment owed by Contractor to United which is not enumerated above against any of the amounts otherwise payable by United pursuant to Section 3.6(c)(i) . Notwithstanding any provisions in this Article III to the contrary, expenses presented by Contractor hereunder more than six (6) months after they were incurred shall not be reimbursed or paid pursuant to this Section 3.6 , and United shall have no obligation to Contractor with respect to such expenses and shall be entitled to reconcile such expenses as null and void. In addition, reconciliation of out of pocket third-party costs incurred by Contractor under any of agreements listed in clauses 9 , 10 , 11 , 12 and 13 of Section 3.6(b)(iii)(A) will occur under such timeframe and terms as are mutually agreeable by the parties. |
(iii) |
No Payment for Disputed Items . Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, neither United nor Contractor shall have any obligation to make any payment required under this Agreement or any Ancillary Agreement that is subject to a good faith dispute; provided , that within fifteen (15) Business Days following the resolution of any such dispute in accordance with the terms of this Agreement, United or Contractor, as applicable, shall make any payments required by such resolution. Except as may result from the exercise by United of its audit rights pursuant to Section 3.5 , all payments made by Contractor or United as provided in this Agreement or any Ancillary Agreement shall be deemed final and not subject to further review or reconciliation after the later to occur of (I) the date that is six (6) months after the date of the applicable payment and (II) the date of final resolution of any good faith dispute regarding the applicable payment arising during the six (6) months following the date of the applicable payment. |
(iv) |
No Payment for Fines, Etc. Notwithstanding anything to the contrary contained in this Section 3.6 , United shall not be required to incur any cost or make any reconciliation payment pursuant to this Section 3.6 to the extent that such cost or reconciliation payment is attributable to any costs, expenses or losses (including fines, penalties, settlements and any costs and expenses associated with any related investigation or defense) incurred by Contractor or its agents as a result of any violation by Contractor or such agent of any law, statute, judgment, decree, order, rule, regulation or lease requirement of any governmental or airport authority. |
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(v) |
No Payment for Maintenance and Ferry Operations . Notwithstanding anything to the contrary contained in Section 3.4 or this Section 3.6 , United shall not make any payments, including but not limited to those provided for on Schedules 2A and 2B hereto, to Contractor or incur any expense for any maintenance flights or ferry or reposition operations (to the extent such flights or operations are directly related to maintenance events) or any other expenses due to reasons or events within Contractors control, including without limitation with respect to fuel, landing fees, ground handling expenses, aircraft parking and other airport facility/use fees, de-icing or towing. Ferry or reposition flights related to reasons other than maintenance or due to any other reasons or events outside Contractors control (including without limitation weather and air traffic control) shall be compensated by United as set forth herein. |
(vi) |
No Payment for Significantly Delayed Flights . If (x) Contractor operates any Scheduled Flight either (a) more than [***] late from the scheduled departure time with a revenue passenger loadfactor of less than [***], or (b) more than [***] late with [***] revenue passengers, and (y) United did not direct Contractor to operate such flight in such manner (such flights, Excess Delayed Flights ), then the block hours, flight hours, aggregate number of passengers and departures attributable to such Excess Delayed Flights shall not be included when calculating Compensation for Carrier Controlled Costs and any Incentive Markup Payments owed to Contractor hereunder, and Contractor shall not otherwise be reimbursed for such flight including without limitation with respect to Fuel Services, landing fees, or any other reconciled expense pursuant to Section 3.6 or otherwise, and United shall be reimbursed for fuel and any other expenses specifically relating to such flight that were directly incurred by United pursuant to Section 3.4(a) ; provided that such flight shall be included in measurements of Contractors Performance under the Incentive Program and other measurements of delays and cancellations hereunder. |
(vii) |
For the avoidance of doubt, Contractor acknowledges and agrees that, after the Effective Date, all amounts owing to Contractor by United or to United by Contractor arising hereunder shall be settled in accordance with the provisions of this Article III or other applicable provisions of this Agreement, as the case may be, and not through the Automated Clearing House (ACH) invoice process. |
ARTICLE IV
CONTRACTOR OPERATIONS AND AGREEMENTS WITH UNITED
4.1 Crews, Etc .
(a) |
Contractor shall be responsible for providing all crews (flight and cabin), maintenance personnel, aircraft ground movement teams and other staff necessary to operate the Scheduled Flights and for all aspects (personnel and other) of |
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dispatch control in each case pursuant to this Section 4.1 and, as applicable, in accordance with Exhibit P . |
(b) |
Flight Crews . Aircraft used for Regional Airline Services will be operated with crews consisting of a captain or pilot, and a first officer or co-pilot. All such crew members will at all times meet all currently applicable governmental requirements, as such requirements may be amended from time to time during the Term, and will be fully licensed and qualified for the services that they perform hereunder. In addition, each of the Contractors captains, first officers and co-pilots will hold a current license to operate aircraft in scheduled (Part 121) service and all members of all flight crews used to provide Regional Airline Services hereunder must be qualified to fly between all city pairs on the Effective Date of this Agreement. Contractor shall ensure that crew members meet all requirements imposed by the insurance policies that are to be maintained pursuant to Article VI . |
(c) |
Flight Attendants . Contractors flight attendants will at all times possess all necessary training and meet all currently applicable governmental requirements and any other requirements pursuant to this Agreement (including without limitation as referenced in Section 4.3 ), in each case as such requirements may be amended from time to time during the Term. |
(d) |
United shall require Contractor flight and cabin crew daily schedules and forward planning schedules inclusive of reserves and placement for operational integrity; provided that such schedules shall be de-identified with respect to individual employee names and any information that would allow United to specifically identify individual employees. Such information will be used for irregular operations management and slot control. |
(e) |
Contractor agrees to be bound by and to remain in compliance with all obligations on United Express Carriers (as such term is defined in the Letter of Agreement) as set forth in that certain Letter of Agreement (LOA 11) between United Airlines, Inc. and the Air Line Pilots in the service of United Airlines, Inc., as represented by ALPA (the Letter of Agreement ) attached to this Agreement as Exhibit L . |
(f) |
In the event that United determines that the continued utilization by Contractor of any individual Contractor employee, independent contractor or agent in the provision of Contractor Services to United has provided customer service at a lower level than the standards to which Contractor and United have agreed herein, then United shall give Contractor notice to that effect requesting that such Contractor employee, independent contractor or agent no longer be utilized by Contractor in the provision of Contractor Services to United under this Agreement. Contractor shall have ten (10) Business Days following Uniteds request in which to investigate the matters forming the basis of such request, correct any deficient performance and provide United with written assurances that such deficient performance shall not recur. If, following such ten (10) Business Day period, United is not reasonably satisfied with the results of Contractors efforts to correct the deficient performance and/or to ensure its non-recurrence, |
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then Contractor shall, as soon as possible, cease utilizing such Contractor employee, independent contractor or agent in Contractors provision of Contractor Services to United under this Agreement, without cost to United. Nothing in this provision shall operate or be construed to limit Contractors responsibility for the acts or omission of the Contractor employee, independent contractor or agent, or be construed as joint employment, or excuse any of Contractors obligations under Section 4.1(a) herein or under any other provision of this Agreement. |
(g) |
Career Path Program for Pilots . United and Contractor agree to comply with the provisions set forth in Exhibit M . |
4.2 Governmental Regulations; Maintenance .
Contractor has and shall maintain all certifications, permits, licenses, certificates, exemptions, approvals, plans, and insurance required by governmental authorities and Airport Authorities, including, without limitation, FAA, DOT and TSA, to enable Contractor to perform the services required by this Agreement. All flight operations, dispatch operations and all other operations and services undertaken by Contractor pursuant to this Agreement shall be conducted, operated and provided by Contractor in compliance with all laws, regulations and requirements of applicable governmental authorities and Airport Authorities (foreign and domestic), including, without limitation, those relating to airport security, the use and transportation of hazardous materials and dangerous goods, crew qualifications, crew training and crew hours, the carriage of persons with disabilities and without any violation of U.S. or foreign laws, regulations or governmental prohibitions. All Covered Aircraft shall be operated and maintained by Contractor in compliance with all laws, regulations and governmental requirements of applicable governmental authorities and Airport Authorities (foreign and domestic), Contractors own operations manuals and maintenance manuals and procedures, all applicable provisions of any aircraft lease, mortgage or sublease, and all applicable equipment manufacturers manuals and instructions.
4.3 Quality of Service .
(a) |
At all times, Contractor shall provide Contractor Services with appropriate standards of care, but in no event lower than such standards utilized by United as of the date of this Agreement. United procedures, performance standards and means of measurement thereof concerning the provision of air passenger and air cargo services shall be applicable to all Regional Airline Services provided by Contractor. Contractor shall achieve at least the comparable quality of airline service as provided by United. Contractor shall comply with all airline customer service commitments, policies and service standards of United as of the Commencement Date, including without limitation the Customer First commitments, on board services requirements and employee conduct, appearance and training policies in place as of the Commencement Date, and shall handle customer-related services in a professional, businesslike and courteous manner. In connection therewith, Contractor shall maintain aircraft cleaning cycles and policies, shall comply with the provisions set forth in Exhibit J and shall maintain adequate staffing levels, to ensure at least a comparable level of customer service |
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and operational efficiency that United achieves, including without limitation in respect of customer complaint response, ticketing and boarding timing, oversales, baggage services and handling of irregular operations. In addition, at the request of United, Contractor shall comply with all such airline customer service commitments, policies and standards of care of United as adopted, amended or supplemented after the Commencement Date. |
(b) |
Contractor shall make such interior and exterior design and product-related changes as may be required by United from time to time, including both those for which the cost is borne by United pursuant to Section 3.4(a)(ix) , and those that occur within Contractors normal aircraft and facility refurbishment program. |
(c) |
Contractor shall ensure that all Covered Aircraft are equipped with an ARINC aircraft communications addressing and reporting system (or such other system as is designated by United), the cost of which will be borne by Contractor with respect to CRJ Covered Aircraft. Contractor shall make such interior and exterior design and product-related changes as may be required by United from time to time, including both those for which the cost is borne by United pursuant to Section 3.4(a)(ix) , and those that occur within Contractors normal aircraft and facility refurbishment program. |
(d) |
Contractor shall provide United with timely communication regarding the status of all flights. Contractor shall, at its own expense, ensure that each Covered Aircraft is equipped with the software capability of providing ACARS-based data requested by United from time to time in Uniteds sole discretion, including without limitation as provided in Exhibit H hereto and relating to automated weight and balance procedures for each Scheduled Flight, and shall accurately and timely perform such automated weight and balance procedures. |
(e) |
Contractor shall maintain and utilize Contractors passenger and bag weight program approved by the FAA and existing on the Commencement Date (unless and until otherwise directed by the FAA). |
(f) |
United shall timely inform Contractor of the required seat layouts of the E175 Covered Aircraft (for SHARES Seat Map). Contractor shall ensure that all Scheduled Flights using E175 Covered Aircraft are capable of operating in Category 2 conditions (with respect to instrument landing systems), crew training and other requirements to provide such capability. |
(g) |
Contractor will use Uniteds standard procedures for processing and adjudicating all claims for which Contractor is responsible in an effort to avoid such matters becoming the subject of claims, litigation or an investigation by a governmental agency or authority. At either partys request, Contractor and United will meet to discuss and review Contractors customer service and handling procedures and policies and its employees conduct, appearance and training standards and policies. |
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(h) |
Contractor acknowledges that United may implement programs to evaluate the delivery of customer service and adherence to customer service standards established by United and Contractor hereby agrees to fully comply with all aspects of any such programs. Contractor acknowledges that pursuant to such programs United may directly observe customer service delivery and provide Contractor with findings and corrective actions. Contractor acknowledges that Contractors required compliance with such programs shall include without limitation (i) Contractors provision of certain data to United, as requested, for customer service quality evaluations and assessments by United and (ii) Contractors compliance with corrective actions required by United. United shall give Contractor written notice of any non-safety-related alleged breach of this Section 4.3 , identifying with reasonable specificity such alleged breach, not less than fifteen (15) days prior to exercising any remedy regarding such alleged breach. |
(i) |
Contractor agrees to participate in the United Cargo Program. |
4.4 Regulatory Complaints .
Contractor agrees, to the extent permitted by law, to accept as an air carrier any and all regulatory complaints issued by a governmental or regulatory authority having competent jurisdiction for any reason or cause. Contractor agrees that any such complaint, regardless of whether the basis for such complaint is within Contractors control, shall be accepted as a Contractor complaint for such regulatory authority purposes. For the avoidance of doubt, no complaint recorded on a Contractor flight, inclusive of station origin and destination, will count against Uniteds complaint rate for such applicable regulatory authority. Notwithstanding the provisions of Sections 7.1 and 7.2 , United shall be liable for and hereby agrees to indemnify and hold harmless Contractor from and against regulatory fines and penalties arising from any such regulatory complaints accepted by Contractor to the extent resulting from the negligence of United, or any ground handler or other party acting pursuant to a contract with United and directly interfacing with passengers on Scheduled Flights (e.g. wheelchair providers); provided that, for the avoidance of doubt, the provisions of Sections 7.3 , 7.4 , 7.5 and 7.6 shall apply with respect to Contractors right to indemnification as provided in this Section 4.4 .
4.5 DOD Approval .
Contractor must maintain Department of Defense air carrier approval per 32 CFR Part 861 and agrees to notify United immediately if changes to such status occur.
4.6 Aircraft Ground Movement .
(a) |
With respect to all Covered Aircraft, Contractor agrees to provide aircraft ground movement (towing teams) at all Applicable Airports, as and when requested by United from time to time, for ground movements of Covered Aircraft required to accommodate Uniteds flight schedule (each such movement, an Accommodating Aircraft Movement ). |
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(b) |
If (x) the number of Accommodating Aircraft Movements at a Hub Airport during any calendar month is greater than (y) the result of (I) the aggregate number of Covered Aircraft available to schedule during such month, multiplied by (II) 1.1 (such number determined by this clause (y) , the Towing Baseline ), then United shall reimburse Contractor pursuant to Section 3.6(b)(iii)(A)(14) . |
(c) |
In all cases, Contractor shall provide, at its cost, aircraft ground movement (towing teams) where movement is due to circumstances within Contractors control, including without limitation due to IT systems, flight crew, maintenance or movement of overnight aircraft to or from remote hangar locations. |
4.7 Incidents or Accidents .
Contractor shall promptly notify United of all irregularities involving a Scheduled Flight or Covered Aircraft operated by Contractor, including, without limitation, aircraft accidents and incidents, which result in any damage to persons and/or property or may otherwise result in a complaint or claim by passengers or an investigation by a governmental agency or authority. Contractor shall furnish to United as much detail as practicable concerning such irregularities and shall cooperate with United at Contractors own expense in any appropriate investigation.
4.8 Emergency Response .
Contractor shall adopt Uniteds Emergency Response Plan for aircraft accidents or incidents and shall be responsible for Uniteds direct costs resulting from Contractors participation in such plan. In the event of an accident or incident involving a Covered Aircraft or Scheduled Flight, United will have the right, but not the obligation, exercised in Uniteds sole discretion, to manage the emergency response in coordination with Contractor efforts on behalf of Contractor with full cooperation from Contractor; provided that, in all events, Contractor shall manage in coordination with United the initial response and on scene investigation.
4.9 Safety Matters .
In the event of a reasonable safety concern, United shall have the right, at its own cost, to inspect, review, and observe Contractors operations of Scheduled Flights. Notwithstanding the conduct or absence of any such review, Contractor is and shall remain solely responsible for the safe operation of its aircraft and the safe provision of Regional Airline Services, including all Scheduled Flights, in each case in accordance with the standards, agreements, representations and warranties set forth in Exhibit N. Contractor represents and warrants that it has successfully undergone an IATA Operational Safety Audit ( IOSA ). Contractor hereby covenants (i) to comply and maintain compliance with the requirements of such audits within the timeframe required by IATA and (ii) maintain its membership in the IOSA registry. Any failure to maintain compliance shall immediately be brought to Uniteds attention along with corrective actions taken or a corrective action plan. Although the IOSA is to be completed biennially, United in its sole discretion may require, and Contractor shall comply with, additional safety review audits. Nothing in Exhibit N , this Section 4.9 , or otherwise in this Agreement is intended or shall be interpreted to make United responsible for such safety matters.
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Execution Version
4.10 |
Facilities . |
(a) |
Lease, Use and Modification of Airport Facilities . |
(i) |
United and Contractor agree that the use by Contractor of all Terminal Facilities at all Applicable Airports for the provision of Contractor Services shall be at the direction of United. In furtherance of this Section 4.10(a)(i) , from time to time, and notwithstanding the execution of any license, lease, sublease or other agreement pursuant to this Section 4.10 , at the request and direction of United and subject to Section 4.10(a)(ii) , Contractor shall take the following actions, in each case as and when directed by United: |
(A) |
use its commercially reasonable efforts to enter into a lease, sublease or other appropriate agreement with any Airport Authority at any Applicable Airport for the lease, sublease or use of any Terminal Facilities used or to be used in connection with the provision of Contractor Services; |
(B) |
use its commercially reasonable efforts to amend, modify or terminate any agreement with any Airport Authority at any Applicable Airport for the lease, sublease or use of any Contractor Terminal Facilities; |
(C) |
use its commercially reasonable efforts to obtain the consent of any relevant Airport Authority at any Applicable Airport for the Transfer to United or its designee of any lease, sublease or other agreement in respect of any Contractor Terminal Facility, or for the right of United or its designee to use any Contractor Terminal Facility; |
(D) |
enter into a mutually agreed sublease for the sublease to United or its designee of Contractors interest in any Contractor Terminal Facility; |
(E) |
enter into an assignment substantially in the form of Exhibit O hereto (or as otherwise agreed) for the assignment to United or its designee of Contractors interest in any Contractor Terminal Facility; |
(F) |
enter into a sublease or license using Uniteds standard form in regard to the use of any Terminal Facility owned, leased or otherwise controlled by United and used or to be used in connection with the provision of Contractor Services; |
(G) |
enter into an assignment substantially in the form of Exhibit O hereto (or as otherwise agreed) for the assignment to Contractor of |
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Execution Version
Uniteds interest in any Terminal Facility used or to be used in connection with the provision of Contractor Services; |
(H) |
in each case as and when directed in writing by United, (a) Parent shall become, or shall cause Contractor to become, if such carrier is not already, a signatory carrier at any of the following locations: CLE, DEN, EWR, IAD, IAH, LAX, ORD, and SFO; provided, however , that with regard to this clause (a) , if (i) United directs Contractor to become a signatory at any such airport and (ii) there are any direct costs required by such airport to become a signatory carrier, then United agrees to pay such direct costs that are required by the airport to become a signatory carrier, and (b) Parent shall vote, or shall cause Contractor to vote, as directed in writing by United, on any matters submitted to carriers for a vote if such matters concern, or may result in, any costs, direct or indirect, to be paid for and/or reimbursed by United at any of the following locations: CLE, DEN, EWR, IAD, IAH, LAX, ORD, and SFO; and |
(I) |
take any other action reasonably requested by United in furtherance of this Section 4.10(a)(i) . |
For the avoidance of doubt, Uniteds direction to Contractor with respect to the foregoing actions shall extend to the action itself (e.g., use commercially reasonable efforts to enter into an agreement) as well as to the substance underlying the action (e.g., directions as to the terms and conditions of such agreement).
(ii) |
The licenses, assignments and subleases to be entered into pursuant to Section 4.10(a)(i) shall be subject to the rights of the Applicable Airports in such Terminal Facilities and to the receipt of all necessary consents from Airport Authorities and other third parties to such sublease or assignment. |
(iii) |
Each of Contractor and United shall pay for all landing fees for its respective flights at all Applicable Airports, and to the extent that the other party is obligated to make such payments under any applicable lease or other agreement, the first party hereby indemnifies and agrees to hold harmless the other party for all such amounts. Contractor agrees that any landing fee credits given to Contractor in respect of Scheduled Flights or other flights involving the Covered Aircraft as are permitted hereunder, shall be for the account of United (and if any such credits are applied by Contractor to the payment of any landing fees applicable to flights other than Scheduled Flights or other flights involving the Covered Aircraft as are permitted hereunder, Contractor shall pay the amount of any such credits to United). |
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Execution Version
(iv) |
Contractor shall perform in a timely manner all obligations under all leases, subleases and other agreements to which Contractor is or becomes a party for the use of Terminal Facilities, including without limitation making in a timely manner all payments of rent and other amounts due under such agreement, and shall use commercially reasonable efforts to keep such agreements in effect (or to promptly renew or extend such agreements on substantially similar terms as directed by United). Contractor shall adhere to Uniteds space standards with respect to all Terminal Facilities. |
(v) |
Contractor shall obtain the written consent of United prior to entering into an agreement to lease, sublease, assign, dispose of or otherwise transfer (each, a Transfer ) or any other agreement for the use or modification of, or otherwise relating to, any Contractor Terminal Facilities (or other airport facilities which would become Contractor Terminal Facilities), or amending or modifying in any manner any such agreement, or consenting to any of the same. Any purported Transfer of any interest in a Contractor Terminal Facility in violation of this Section 4.10 shall be void ab initio , and any rent or other amounts payable under any such Transfer or other agreement shall not be considered a Pass-Through Cost for purposes of this Agreement, and Contractor shall be obligated to follow Uniteds direction with respect to the disposition of such Transfer or other agreement. |
(vi) |
Contractor shall give United at least thirty (30) days prior written notice before ceasing to use any Contractor Terminal Facilities; provided , that no such notice shall be required where such use is ceasing because United has informed Contractor that no Scheduled Flights will be scheduled in or out of such location. |
(b) |
Exclusivity . Each Passenger- Related Terminal Facility used by Contractor for the provision of Regional Airline Services shall be used by Contractor exclusively for the provision of Contractor Services, and may not be used by Contractor in connection with any other flights, including any flights using any aircraft that is not a Covered Aircraft, or for any other purpose, without Uniteds prior written approval; provided that the foregoing limitation shall not apply to: |
(i) |
baggage claim and other similar facilities that are leased or otherwise made available to all air carriers at such airport on a common-use or joint-use basis; or |
(ii) |
any facilities that are properly required by an Airport Authority to be made available for use by others in accordance with any applicable agreement that is in place as of the date hereof or has been approved by United under Section 4.10(a)(v) . |
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Execution Version
Each Contractor Terminal Facility that is not a Passenger-Related Terminal Facility used for the provision of Contractor Services, and each other facility used by Contractor for the provision of Contractor Services, may be used by Contractor in connection with other flights or for other purposes; provided , that Contractor shall use such facilities for the provision of Contractor Services in priority to any such other use, and any such other use of such facilities shall be subordinate to Contractors use for the provision of Contractor Services. |
4.11 |
Codeshare Terms . |
Contractor agrees to operate all Scheduled Flights using the United flight codes and flight numbers assigned by United, or such other flight codes and flight numbers as may be assigned by United (to accommodate, for example, a United alliance partner), and otherwise under the codeshare terms set forth in Exhibit B .
4.12 |
Fuel Procurement and Fuel Services . |
(a) |
The parties will cooperate in identifying (i) fuel savings opportunities, (ii) providers of aircraft fuel and (iii) providers of Fuel Services. Contractor shall enter into agreements with any such providers as shall be directed by United. Contractor shall use its best efforts to document Fuel Services agreements using substantially the form attached hereto as Exhibit D (which form may be replaced, amended, or otherwise modified by United from time to time). Contractor shall provide any data or analysis of its fuel procurement and Fuel Services as reasonably requested by United. |
(b) |
Notwithstanding the foregoing, United, by or through its subsidiaries, agents, or affiliates, shall have the option (but shall not have any obligation) in its sole discretion (i) to procure or arrange for the procurement of fuel and/or (ii) procure or arrange for the procurement of Fuel Services for or on behalf of Contractor. |
(c) |
If United elects to procure, or arrange for the procurement of, fuel for or on behalf of Contractor pursuant to clause (i) of Section 4.12(b) above, then the costs of such procurement, or such arranging for procurement, as applicable (in each case including without limitation the cost of procuring the aircraft fuel) shall be incurred directly by United, pursuant to Section 3.4(a)(iv) . If United does not so elect, then Contractor shall procure, or arrange for the procurement of fuel, and such costs shall be incurred directly by Contractor and reconciled pursuant to Section 3.6(b)(iii)(A)(7) . |
(d) |
If United elects to procure, or arrange for the procurement of, Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.12(b) above, then the costs of such procurement, or such arranging for procurement, as applicable shall be incurred directly by United pursuant to Section 3.4(a)(iv) . If United does not so elect, then Contractor shall procure, or arrange for the procurement of Fuel Services, and such costs shall be incurred directly by Contractor and reconciled pursuant to Section 3.6(b)(iii)(A)(7) . |
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Execution Version
(e) |
United and Contractor acknowledge and agree that any fuel provided to Contractor pursuant to an agreement between United and a fuel supplier is provided as is and without warranty of any kind, including without limitation the warranties of merchantability and fitness for a particular purpose, by, through or under United, and that no warranties by, through or under United shall be implied by law. |
(f) |
United and Contractor acknowledge and agree that any aircraft fuel procured, or arranged for procurement, for on behalf of Contractor by United shall not be deemed to have been procured, purchased or otherwise acquired for on behalf of Contractor, and Contractor shall in no event have any claim to or interest in, any fuel procured by United or its agents, unless and until such fuel is delivered into a Covered Aircraft, except as otherwise may be provided in a Fuel Services agreement, if any, between United and Contractor. |
4.13 |
Slots and Route Authorities . |
At the request of United made during the Term or upon termination of this Agreement, Contractor shall use its commercially reasonable efforts to transfer to United or its designee, to the extent permitted by law, any airport takeoff or landing slots, route authorities or other similar regulatory authorizations transferred to Contractor by United for use in connection with Scheduled Flights, or held by Contractor and used for Scheduled Flights, in consideration of the payment to Contractor of the net book value, if any, of such slot, authority or authorization on Contractors books. Contractors obligations pursuant to the immediately preceding sentence shall survive the termination of this Agreement for so long as any transfer requested pursuant to this Section 4.13 shall not have been completed. Contractor hereby agrees that all of Contractors contacts or communications with any applicable regulatory authority concerning any airport takeoff or landing slots, route authorities or other similar regulatory authorizations used for Scheduled Flights will be coordinated through United. If any airport takeoff or landing slot, route authority or other similar regulatory authorization transferred to Contractor by United for use in connection with Scheduled Flights, or held by Contractor and used for Scheduled Flights is withdrawn or otherwise forfeited as a result of Controllable Cancellations or any other reason within Contractors reasonable control, then Contractor agrees to pay to United promptly upon demand an amount equal to the fair market value of such withdrawn or forfeited slot, authority or authorization.
4.14 |
Code Share Limitation . |
As of the date of this Agreement, but subject to Contractors existing contractual code-share agreements as in effect on the Effective Date, Contractor represents that it does not plan, nor will it, operate pursuant to a marketing or code share relationship in a hub operation with any party other than United at the following airports during the Term: CLE, EWR, IAB, DEN, LAX, SFO, ORD, IAD or SEA. Contractor may, however, fly to aforementioned airports under codeshare or marketing relationships from another carriers hub (other than from aforementioned airports) as a spoke service. In the event that Contractor acquires another entity during the course of this agreement with marketing or codeshare operations at any of the aforementioned airports, United agrees to allow Contractor to continue operations at such airports at levels of
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Execution Version
operations consistent with the acquirees right of operation at the time of acquisition. In addition, Contractor will use commercially reasonable efforts to amend its existing contractual commitments to provide for the codeshare limitations set forth in this Section 4.14 .
4.15 |
Use of United Marks . |
United hereby grants to Contractor the right to and a personal, non-exclusive, non-transferable, non-sublicenseable, fully paid-up, and royalty-free license to use the United Marks and other Identification as provided in, and Contractor shall use the United Marks and other Identification in accordance with the terms and conditions of, Exhibit E .
4.16 |
Use of Contractor Marks . |
Contractor hereby grants to United the right to and a personal, non-exclusive, non-transferable, non-sublicenseable, fully paid-up, and royalty-free license to use the Contractor Marks as provided in, and United shall use the Contractor Marks in accordance with the terms and conditions of, Exhibit F .
4.17 |
Catering Standards . |
(a) |
United and Contractor shall comply with the catering requirements set forth on Exhibit G hereto. The parties agree that, in the event of a conflict between the provisions of Exhibit G and any ground handling agreement with Contractor, the provisions of Exhibit G shall control as it applies to Regional Airline Services. |
(b) |
Sales of Alcoholic Beverage Products . Contractor agrees that it shall comply with all federal, state, and local laws, rules and regulations and Contractor shall obtain and maintain all permits, certifications and licenses necessary for the full and proper conduct of its operations relating to the purchase, sale, distribution, storage, or service of any Alcoholic Beverage Product by Contractor. Contractor hereby assumes liability for and agrees to indemnify, defend and hold harmless United and its officers, directors, agents, affiliates, and employees from and against any and all liabilities, damages, expenses, losses, claims, demands, suits, fines or judgments, including, but not limited to, attorneys and witnesses fees, costs and expenses incident thereto, which may be suffered by, accrue against, be charged to or be recovered from United or its officers, directors, employees or agents, arising out of or in connection with or in any way related to any non-compliance by Contractor with the procedures set forth in Exhibit G or any non-compliance by Contractor with any federal, state, or local law, rule or regulation or any failure of Contractor to obtain or maintain any permit, certification or license necessary for the full and proper conduct of its operations relating to the purchase, sale, distribution, storage, or service of any Alcoholic Beverage Product by Contractor. Contractor also agrees to comply with the Alcoholic Beverage Handling Procedures as outlined in Exhibit G hereto. |
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Execution Version
4.18 |
Fuel Efficiency Program . |
Contractor shall use its commercially reasonable efforts to promptly adopt and adhere to a fuel efficiency program as described on Exhibit H hereto.
4.19 |
Environmental . |
(a) |
Definitions . |
(i) |
The term Environmental Laws means all applicable federal, state, local and foreign laws and regulations, including airport or United rules, regulations, policies, or lease requirements relating to the prevention of pollution, protection of the environment or occupational health and safety, or remediation of environmental contamination, including, without limitation, laws, regulations and rules relating to emissions to the air, discharges to surface and subsurface soil and waters, regulation of potable or drinking water, the use, storage, release, disposal, transport or handling of Hazardous Materials, protection of endangered species, and aircraft noise, vibration, exhaust and overflight. |
(ii) |
The term Hazardous Materials means any substances, whether solid, liquid or gaseous, which are listed and/or regulated as hazardous, toxic, or similar terminology under any Environmental Laws or which otherwise cause or pose threat or hazard to human health, safety or the environment, including, but not limited to, petroleum and petroleum products. |
(b) |
Contractor Obligations . |
(i) |
Contractor shall conduct its operations in a prudent manner, taking reasonable preventative measures to avoid liabilities under any Environmental Laws or harm to human health or the environment, including, without limitation, measures to prevent unpermitted releases of Hazardous Materials to the environment, adverse environmental impacts to on-site or off-site properties and the creation of any public nuisance. If, in the course of conducting services under this Agreement, Contractor encounters adverse environmental conditions that could reasonably be expected to give rise to liability for United or Contractor under any Environmental Laws or which otherwise could reasonably be expected to result in harm to human health or the environment, Contractor shall promptly notify United of such conditions. |
(ii) |
Contractor shall, at its own expense, conduct its operations in compliance with applicable Environmental Laws, including obtaining any needed permits or authorizations for Contractors operations. If United provides any information, instruction, or materials to Contractor relating to its obligations under any Environmental Laws, Contractor agrees that this shall not in any way relieve Contractor of its obligation to comply with Environmental Laws. Contractor further agrees that it shall otherwise |
37
Execution Version
preserve the proprietary nature of any such information that is identified by United as proprietary and confidential and shall use its commercially reasonable efforts to ensure that the information is not disclosed to any third parties without first obtaining the written consent of United. |
(iii) |
Contractor shall use its commercially reasonable efforts to perform its services under this Agreement so as to minimize the unnecessary generation of waste materials, including consideration of source reduction and re-use or recycling options, and coordination with United on a cabin service recycling program. If requested by United, Contractor shall replace specific products used in its operations with less toxic products, as long as there is a reasonable replacement available at a similar cost, or if the product is not at a similar cost, provide United the option to agree to pay the difference. If requested by United, Contractor shall take reasonable efforts to provide quantitative data on materials recycled and waste disposed to facilitate coordination and enhancement of cabin service recycling where feasible. Contractor shall ensure that any waste materials generated in connection with the services performed by Contractor under this Agreement are managed in accordance with all applicable Environmental Laws, with Contractor assuming responsibility as the legal generator of such wastes; provided , however , this provision does not apply should United or another vendor of United be the entity who has, in fact, independently generated the wastes. |
(iv) |
For any leased areas or other equipment that are jointly used or operated by both Contractor and United (and/or other United contractors), Contractor shall use its commercially reasonable efforts to coordinate its activities with United and/or United contractors and otherwise perform such activities to ensure compliance with applicable Environmental Laws. |
(v) |
Except for de minimis amounts of Hazardous Materials which are immediately and fully remediated to pre-existing conditions, Contractor shall promptly notify United of any spills or leaks of Hazardous Materials arising out of Contractors provision of services under this Agreement, and, if requested, shall provide copies to United of any written reports provided to any governmental agencies and airport authorities under any Environmental Laws regarding same. Contractor shall promptly undertake all reasonable commercial actions to remediate any such spills or leaks to the extent Contractor is required to do so by applicable Environmental Laws, by the relevant airport authority, or in order to comply with a lease obligation. In the event that Contractor fails to fulfill its remediation obligations under this paragraph and United may otherwise be prejudiced or adversely affected (such as involving United leased property), United may undertake such actions as are reasonable at the cost and expense of Contractor. Such costs and expenses shall be promptly paid upon Contractors receipt of a written request for reimbursement for them by United. |
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Execution Version
(vi) |
Contractor shall promptly provide United with written copies of any notices of violation issued or other claims from a third party asserted pursuant to Environmental Laws or associated with a potential release of Hazardous Materials and related to or associated with the provision of services by Contractor under this Agreement. Contractor shall promptly undertake all actions necessary to resolve such matters, including, without limitation, the payment of fines and penalties, and promptly addressing any noncompliance identified; provided , however , that Contractor may contest any notice of violation or other alleged violation and defend any claim that it believes is untrue, improper or invalid. In the event that Contractor fails to fulfill its obligations under this paragraph and United may otherwise be prejudiced or adversely affected, United may undertake such actions as are reasonable or legally required at the cost and expense of Contractor. Such costs and expenses shall be promptly paid upon Contractors receipt of a written request for reimbursement for them by United. |
(vii) |
If requested by United, Contractor shall conduct a review and provide information to United regarding Contractors compliance with the requirements of this Section 4.19 . This review may include the completion of an environmental compliance audit of Contractors activities or an environmental site assessment, each subject to a work plan approved by United. Contractor shall provide United with a summary of the results of this audit, provide United an opportunity to review any report generated in connection with such an audit, and will promptly use its commercially reasonable efforts to address any noncompliance or liability identified. |
(viii) |
In the event that Contractor Services include providing bulk (nonbottled) potable water for crew or passenger consumption Contractor shall ensure compliance with the Aircraft Drinking Water Regulation, FDA requirements, and other similar applicable laws (collectively, the Drinking Water Requirements ), including without limitation using its commercially reasonable efforts to ensure all water handling equipment is properly and regularly disinfected and kept in sanitary condition. If Contractor relies upon another contractor to load water onto its aircraft or to maintain water handling equipment, it shall inquire with such contractors to ensure they meet these Drinking Water Requirements as well. Contractor shall immediately notify United if it becomes aware of practices or conditions that may negatively impact potable water quality, regardless of the provider or the source of such potable water (including whether such source is an airport, ground handler or aircraft water system). |
(ix) |
Contractor shall maintain records relating to its compliance with Environmental Laws under this Agreement for the longer of three (3) years or such period of time as is required by Environmental Laws. |
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Execution Version
Contractor shall, at the request of United and with reasonable advance notice, provide United with reasonable access to Contractors operations, documents, and employees for the sole purpose of allowing United to assess Contractors compliance with its obligations with this Section 4.19 , including responding to reasonable information requests. |
(x) |
Upon the termination of operations at a space used to support the provision of Contractor Services under this Agreement, Contractor shall use its commercially reasonable efforts to ensure the removal and proper management of any and all Hazardous Materials associated with Contractors operations (including its subcontractors) and will comply with any other applicable Environmental Laws applicable to the provision of Contractor Services. |
(xi) |
Contractor has reviewed Uniteds Environmental Commitment Statement (found at www.united.com/ecoskies) and agrees to cooperate with United in meeting these commitments in effect as of the date hereof and in responding to reasonable information requests. |
(xii) |
Contractor shall be responsible for and will indemnify, defend, and hold harmless United, including its officers, agents, servants and employees, from and against any and all claims, liabilities, damages, costs, losses, penalties, and judgments, including costs and expenses incident thereto under Environmental Laws or due to the release of a Hazardous Material, which may be suffered or incurred by, accrue against, be charged to, or recoverable from United or its officers, agents, servants and employees arising out of an act or omission of Contractor (or its subcontractor) related to Contractors provision of services under this Agreement, excluding willful misconduct, or gross negligence, of United. Notwithstanding anything to the contrary set forth in Section 8.4(h) , such damages may include the payment of consequential, special or exemplary damages for claims under Environmental Laws or due to the release of Hazardous Materials to the extent an applicable lease agreement, sublease or other similar agreement requires the payment of such damages. Any indemnification claims arising under this Section 4.19(b)(xii) shall be administered pursuant to the procedures set forth in Section 7.3 hereto. |
(xiii) |
All notices to be provided by Contractor to United under this Section4.19 shall be provided as indicated in Section 11.2 of this Agreement, with a copy to Managing DirectorEnvironmental Affairs, United Airlines, Inc., 233 South Wacker Drive-WHQSE, Chicago, IL 60606. |
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Execution Version
4.20 |
Early Brake Release . |
(a) |
Early Brake Release Provision . |
For all Scheduled Flight departures of Covered Aircraft operated by Contractor under this Agreement, no more than [***] will be permitted to elapse between the brake release and the call to push (any such period, regardless of whether such period is greater or less than [***] in length, a EBR Period and such [***] timeframe, the EBR Goal ). United, or its representatives, will periodically measure (with a minimum sample of thirty (30) measurements) Contractors EBR Periods and will provide reports detailing the observed EBR Periods; provided that the process of conducting such measurement may be altered at any time and from time to time by United in its sole discretion. If, in any given calendar month, Contractors average observed EBR Period for Scheduled Flight departures is greater than the EBR Goal, United shall provide Contractor with written notice that Contractor has not met the EBR Goal, following which Contractor shall have a thirty (30) day period (such thirty (30) day period, the EBR Cure Period ) during which to reduce its average EBR Period to an observed average EBR Period less than or equivalent to the EBR Goal. If Contractor has not reduced its average EBR Period to an observed average EBR Period that is less than or equivalent to the EBR Goal as of the end of the EBR Cure Period, then Contractor shall owe a payment (the EBR Payment ) to United equal to the product of (x) the excess of the observed average EBR Period during the EBR Cure Period over [***], multiplied by (y) the number of completed Contractors Scheduled Flight departures of Covered Aircraft during such EBR Cure Period, multiplied by (z) [***] of the block hour rate set forth on Schedule 2A or Schedule 2B , as the case may be. The EBR Payment will be made by Contractor to United as provided in Section 3.6(c)(ii) . Contractors average EBR Period shall be continuously tested in successive EBR Cure Periods and Contractor shall pay the applicable EBR Payment with respect to each such EBR Cure Period, until Contractor meets the EBR Goal with respect to a EBR Cure Period. For purposes of clarity, an example of the calculation of an observed average EBR Period and a EBR Payment are provided below.
Example September EBR Performance Observations |
Actual Brake Release |
Observed Time |
Difference between Call and Actual Brake Release |
|||||||||||||||
CAR R |
FLIGHT | DATE | ORIG | DEST | SCHED | EST/ACT | PLANE |
CALL FOR
PUSH |
ELAPSED TIME | |||||||||
UA |
9999 | 1-Sep | ORD | DAY | [***] | [***] | N9999XX | [***] | [***] | |||||||||
UA |
9999 | 2-Sep | ORD | PWM | [***] | [***] | N9999XX | [***] | [***] | |||||||||
UA |
9999 | 2-Sep | ORD | MDT | [***] | [***] | N9999XX | [***] | [***] | |||||||||
UA |
9999 | 2-Sep | ORD | SYR | [***] | [***] | N9999XX | [***] | [***] | |||||||||
UA |
9999 | 3-Sep | DEN | DTW | [***] | [***] | N9999XX | [***] | [***] | |||||||||
UA |
9999 | 3-Sep | DEN | DTW | [***] | [***] | N9999XX | [***] | [***] | |||||||||
UA |
9999 | 5-Sep | DEN | DTW | [***] | [***] | N9999XX | [***] | [***] | |||||||||
UA |
9999 | 5-Sep | DEN | STL | [***] | [***] | N9999XX | [***] | [***] | |||||||||
UA |
9999 | 5-Sep | DEN | STL | [***] | [***] | N9999XX | [***] | [***] |
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Execution Version
Example September EBR Performance Observations |
Actual Brake Release |
Observed Time |
Difference between Call and Actual Brake Release |
|||||||||||||||
CAR R |
FLIGHT | DATE | ORIG | DEST | SCHED | EST/ACT | PLANE |
CALL FOR
PUSH |
ELAPSED TIME | |||||||||
UA | 9999 | 6-Sep | DEN | SAT |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 6-Sep | DEN | MCI |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 6-Sep | DEN | DTW |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 7-Sep | ORD | GSO |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 7-Sep | ORD | DAY |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 8-Sep | DEN | SAT |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 8-Sep | ORD | MDT |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 9-Sep | ORD | PWM |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 12-Sep | DEN | STL |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 13-Sep | ORD | DTW |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 14-Sep | ORD | DTW |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 18-Sep | ORD | DAY |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 18-Sep | ORD | DTW |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 23-Sep | DEN | DTW |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 23-Sep | ORD | MDT |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 29-Sep | DEN | DTW |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 29-Sep | ORD | PVD |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 30-Sep | ORD | GSO |
[***] |
[***] |
N9999XX |
[***] |
[***] |
|||||||||
UA | 9999 | 30-Sep | DEN | AUS |
[***] |
[***] |
N9999XX |
[***] |
[***] |
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Execution Version
(b) |
Transition to Modified Early Brake Release Provision . |
(i) |
Unless the parties decide otherwise, the provisions of Section 4.20(a) shall be applicable to all Covered Aircraft. |
(ii) |
Promptly following the six-month anniversary of the first Actual In-Service Date for an E175 Covered Aircraft, the parties shall meet to discuss in good faith the application of the following early brake release provisions to each E175 Covered Aircraft based upon data United will gather for each individual aircraft from the Actual In-Service Date: |
(A) |
United shall gather all data relating to the measurement of the time periods elapsed (any such elapsed period, an Modified EBR Period ) between aircraft brake release and aircraft wheel movement for departures of all Scheduled Flights for E175 Covered Aircraft as measured by the electronic systems included on all in-service E175 Covered Aircraft (and such systems shall meet the requirements of Section 4.3(c) , Section 4.3(d) , Exhibit H and Exhibit I hereto including without limitation in respect of ACARS-based data capture). |
(B) |
The time period goal for Modified EBR Periods (the Modified EBR Goal ) shall be deemed to be one (1) minute. |
(C) |
Contractors early brake release performance relating to E175 Covered Aircraft for each calendar month (the Modified EBR Performance ) shall be determined by calculating the simple average of the Modified EBR Periods for all Scheduled Flights. If the Modified EBR Performance for any calendar month is higher than the Modified EBR Goal, then Contractor shall pay to United an amount (a Modified EBR Payment ) in respect of such calendar month equal to the product of (x) for all Scheduled Flights of E175 Covered Aircraft included in the Modified EBR Performance calculation whose recorded Modified EBR Period exceeds the Modified EBR Goal, the aggregate number of minutes by which such recorded Modified EBR Periods exceeded the Modified EBR Goal, multiplied by (y) [***] of the block hour rate set forth on Schedule 2A , as applicable. Any Modified EBR Payment owed will be made by Contractor to United as provided in Section 3.6(c)(ii) . |
No later than the first anniversary of the first Actual In-Service Date for an E175 Covered Aircraft and at Uniteds sole discretion, the foregoing provisions (or such other provisions as the parties may agree upon) shall replace the provisions of Section 4.20(a) with respect to the E175 Covered Aircraft.
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Execution Version
4.21 |
Ground Handling . |
(a) |
United or Uniteds designee (for the purposes of this Section 4.21(a) , references to United shall be interpreted to include Uniteds designee, as applicable) shall be responsible for all Ground Handling Services at all cities identified from time to time by United to which Contractor shall provide Regional Airline Services. To effect the performance of the Ground Handling Services, United at its sole option and in its sole discretion may from time to time (i) perform all Ground Handling Services directly, (ii) contract with Contractor pursuant to a separate ground handling agreement, or (iii) sub-contract with an affiliate of United or a third party vendor, or any combination of any of the foregoing. |
(b) |
Contractor shall use commercially reasonable efforts to cooperate with any provider of Ground Handling Services in order to facilitate efficient, cost effective, and safe operations and to ensure compliance with all applicable laws. |
(c) |
In connection with Contractors provision of Contractor Services to United under this Agreement, Contractor shall adopt and comply with, and shall cause its employees to adopt and comply with, and shall be responsible for Uniteds direct costs resulting from Contractors compliance with, all applicable procedures, including without limitation training procedures, as required by Uniteds provision of Ground Handling Services as provided in Section 4.21(a) above. |
4.22 |
IT Requirements . |
Contractor shall comply with the IT Requirements, as set forth on Exhibit I .
4.23 |
Maintenance Right to Bid . |
If Contractor intends to engage in any maintenance, repair or overhaul of the Covered Aircraft, and intends to engage a third party (rather than performing such maintenance, repair or overhaul using its own employees), then Contractor shall invite United to match the most favorable, last and final bona fide offer received by Contractor from a third party for such maintenance, repair or overhaul work on a right of last offer basis, and shall engage United to perform such maintenance, repair or overhaul work if United matches such offer.
4.24 |
Landing Fees . |
(a) |
United, directly or by or through its subsidiaries, agents, or affiliates, shall pay on behalf of Contractor landing fees incurred for Scheduled Flights, unless, in Uniteds sole discretion exercised from time to time, it notifies Contractor in writing that Contractor shall pay such landing fees at an Applicable Airport. |
(b) |
If United pays for landing fees on behalf of Contractor pursuant to Section 4.24(a) above, then the costs of such landing fees shall be incurred directly by United, pursuant to Section 3.4(a)(x) . If United elects to have Contractor pay for such landing fees, then such costs shall be incurred directly by Contractor and reconciled pursuant to Section 3.6(b)(iii)(A)(4) . |
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Execution Version
ARTICLE V
CERTAIN RIGHTS OF UNITED
5.1 |
Use of Covered Aircraft . |
Contractor agrees that, except as expressly permitted hereby or as otherwise directed in writing by United, the Covered Aircraft and the Engines may be used only to provide Regional Airline Services. Without the written consent of United, the Covered Aircraft may not be used by Contractor for any other purpose, including without limitation flying for any other airline or on Contractors own behalf. In addition, with respect to any Engine, Contractor shall not discriminate against United with respect to Contractors operation, use or maintenance of such Engine (x) as compared to other similar engines in Contractors fleet, or (y) in the provision of Regional Airline Services as compared to Contractors operations for other airlines or for its own use.
5.2 |
Prohibited Transaction . |
Upon the occurrence of a Prohibited Transaction without the prior written consent of United, then the provisions of Section 8.2(a) shall apply.
5.3 |
Performance Discussions . |
Upon Uniteds request delivered at any time and from time to time, Contractors chief executive officer (the CEO ) and/or, at Uniteds option, if Contractors Performance Level for any Performance Metric for the most recent two (2) consecutive months is below the [***] Performance Level, and is also below the average performance level of United Express carriers operating regional aircraft with more than sixty-five (65) and fewer than seventy-seven (77) seats, Contractors independent lead director (or in the absence of a designated independent lead director, any independent director of Contractor selected by United) (the Lead Director ) shall meet in person with United at its headquarters to discuss such operational performance as soon as reasonably practicable after Uniteds request, but in any event not more than thirty (30) days following such request; provided that if the CEO and/or the Lead Director, as applicable, do not meet in person with United upon Uniteds request as provided above, then Contractors margin shall be reduced by [***] per Covered Aircraft for each month (or pro-rated portion thereof, as the case may be) that occurs following Uniteds request until either the CEO and/or the Lead Director, as applicable, meets in person with United or this Agreement is earlier terminated. For the avoidance of doubt, nothing in this Section 5.3 shall limit Contractors obligations hereunder and under any Ancillary Agreement to provide Contractor Services, including without limitation its obligations under Section 4.8 , and Contractor is and shall remain solely responsible for the safe operation of its aircraft and the safe provision of Regional Airline Services, including all Scheduled Flights.
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Execution Version
ARTICLE VI
INSURANCE
6.1 |
Minimum Insurance Coverages . |
During the Term, in addition to any insurance required to be maintained by Contractor pursuant to the terms of any aircraft lease, or by any applicable governmental or airport authority, Contractor shall maintain, or cause to be maintained, in full force and effect policies of insurance with insurers of recognized reputation and responsibility, in each case to the extent available on a commercially reasonable basis, as follows:
(a) |
Comprehensive aircraft hull and liability insurance, including aircraft third party, passenger liability (including passengers baggage and personal effects), cargo and mail legal liability, personal injury and all-risk ground and flight physical damage, with a combined single limit of not less than $[***] per occurrence and a minimum limit in respect of personal injury for non-passengers of $[***] per occurrence and in the aggregate, and hull and liability war risk and other perils insurance with a combined single limit no less than $[***] per occurrence and in the aggregate; provided that with respect to war risk insurance acquired from the United States government, the commercial general liability coverage (crew and passengers) of such policy may have such lower combined single limit as is the maximum limit issued by the government from time to time; |
(b) |
Workers compensation at statutory limits and employers liability with a limit of not less than $[***]; |
(c) |
Automobile liability covering all owned, non-owned, leased and hired automobiles, trucks and trailers in an amount not less than $[***] combined single limit per occurrence; and |
(d) |
All risk property insurance at replacement cost, including flood, and earthquake if located in an earthquake zone, and placed with commercially reasonable deductibles not to exceed [***]% of the insured values. United shall be named as a loss payee, as their interests may appear. |
United shall retain the right at any time to review the coverage, form, and amount of the insurance required hereby. If, in the opinion of United, the insurance provisions in this Agreement do not provide adequate protection for United and/or the aviation operations of Contractor associated with the Covered Aircraft, United may require Contractor to obtain insurance sufficient in coverage, form, and amount to provide adequate protection. Uniteds requirement shall be commercially reasonable but shall be designed to assure protection from and against the kind and extent of risk which exists at the time a change in insurance is required (provided such protection is available on commercially reasonable terms), and Contractor agrees to provide same within thirty (30) days of receiving notice from United.
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Execution Version
6.2 |
Endorsements . |
Contractor shall cause the policies described in Section 6.1 to be duly and properly endorsed by Contractors insurance underwriters with respect to Contractors flights and operations as follows:
(a) |
To provide that the underwriters shall waive subrogation rights against United, its affiliates, directors, officers, agents, employees and other authorized representatives, except for the war risk hull insurance as provided by the U.S. government pursuant to Chapter 443, Premium War Risks Insurance; |
(b) |
To provide that United, UCH, and their respective directors, officers, agents, employees and other authorized representatives shall be endorsed as additional insured parties as respects operations of the named insured and liability coverage (other than as to workers compensation, employers liability and property insurance); |
(c) |
To provide that insurance shall be primary to and without right of contribution from any other insurance which may be available to the additional insureds; |
(d) |
To include a breach of warranty provision in favor of the additional insureds; |
(e) |
To accept and insure Contractors hold harmless and indemnity undertakings set forth in this Agreement, but only to the extent of the coverage afforded by the policy or policies; and |
(f) |
To provide that such policies shall not be canceled, terminated or adversely materially altered, changed or amended until thirty (30) days (but seven (7) days or such lesser period as may be available in respect of war risk and other perils and ten (10) days in the case of a cancellation for nonpayment of premium) after written notice shall have been sent to United. |
6.3 |
Evidence of Insurance Coverage . |
At the commencement of this Agreement, and upon each renewal, Contractor shall furnish to United evidence reasonably satisfactory to United of such insurance coverage and endorsements, including certificates certifying that such insurance and endorsements are in full force and effect. If Contractor fails to acquire or maintain insurance as herein provided, United may at its option secure such insurance on Contractors behalf at Contractors expense.
ARTICLE VII
INDEMNIFICATION
7.1 |
Contractor Indemnification of United . |
Contractor shall be liable for and hereby agrees to fully defend, release, discharge, indemnify and hold harmless United, UCH, and their respective directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments,
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Execution Version
actions, causes of action, losses, fines, penalties, costs and expenses of any kind, character or nature whatsoever, including attorneys fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from United, UCH or their respective directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person, including without limitation any of Contractors or Uniteds directors, officers, employees or agents, (ii) loss of, damage to, or destruction of property (including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights), including any loss of use of such property, or (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to (w) any act or omission by Contractor or any of its directors, officers, employees or agents relating to the provision of Contractor Services, (x) the performance, improper performance, non-performance or breach of any and all obligations to be undertaken by Contractor or any of its directors, officers, employees or agents pursuant to this Agreement or any Ancillary Agreement, or (y) the operation, non-operation, or improper operation of the Covered Aircraft or Contractors equipment or facilities at any location, in each case excluding only claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses (A) to the extent resulting from the gross negligence or willful misconduct of United, UCH or their respective directors, officers, agents or employees (other than gross negligence or willful misconduct imputed to such indemnified person by reason of its interest in a Covered Aircraft, and excluding Contractor acting as Uniteds agent pursuant to Section 10.7 ), or (B) directly caused by a breach by United of this Agreement or any Ancillary Agreement.
7.2 |
United Indemnification of Contractor . |
United shall be liable for and hereby agrees to fully defend, release, discharge, indemnify, and hold harmless Contractor, Parent, and their respective directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses of any kind, character or nature whatsoever, including attorneys fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from Contractor, Parent or their respective directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person, including without limitation any of Contractors or Uniteds directors, officers, employees or agents (excluding Contractor as such an agent), (ii) loss of, damage to, or destruction of property including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights, including any loss of use of such property or (iii) damages due to delays in any manner, in each case arising out of, connected with or attributable to (x) the performance, improper performance, nonperformance or breach of any and all obligations to be undertaken by United or any of its directors, officers, employees or agents (excluding Contractor as such an agent) pursuant to this Agreement, but only to the extent that such performance, improper performance or nonperformance is due to gross negligence or willful misconduct, or (y) the operation, non-operation or improper operation of Uniteds aircraft, equipment or facilities (excluding, for the avoidance of doubt, Covered Aircraft and any equipment or facilities leased or subleased by
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Execution Version
United to Contractor or otherwise used by Contractor for the provision of Contractor Services to United) at any location, in each case excluding only claims, demands, damages, liabilities, suits judgments, actions, causes of action, losses, fines, penalties, costs and expenses (A) to the extent resulting from the negligence or willful misconduct of Contractor (including in its capacity as an agent of United, UCH or their respective directors, officers, agents or employees), Parent or their respective directors, officers, employees or agents, (B) for which Contractor is obligated to indemnify or otherwise reimburse United pursuant to this Agreement or any Ancillary Agreement, (C) directly caused by a breach by Contractor of this Agreement or any Ancillary Agreement, or (D) to the extent resulting from acts or omissions of any ground handler, fuel supplier or servicer, or caterer (including without limitation, for purposes of this clause (D) , United and its affiliates where any of them is acting in the capacity as a ground handler pursuant to this Agreement); provided that if United or any of its affiliates is acting directly in the capacity of a ground handler pursuant to this Agreement, then unless superseded by another agreement between United or such affiliate, on the one hand, and Contractor, on the other, the indemnity provisions set forth in Exhibit Q shall govern the indemnification obligations of United or such affiliate to Contractor, its directors, officers, employees and agents with respect to the actions of United or such affiliate in its capacity as a ground handler; and provided further that in the event of a conflict between the provisions of this Section 7.2 and the provisions of Section 4.4 , the provisions of Section 4.4 shall control.
7.3 |
Indemnification Claims . |
A party (the Indemnified Party ) entitled to indemnification from another party under the terms of this Agreement (the Indemnifying Party ) shall provide the Indemnifying Party with prompt written notice (an Indemnity Notice ) of any third party claim or other claim which the Indemnified Party believes gives rise to a claim for indemnity against the Indemnifying Party hereunder. Notwithstanding the foregoing, the failure of an Indemnified Party to promptly provide an Indemnity Notice shall not constitute a waiver by the Indemnified Party to any right to indemnification or otherwise relieve such Indemnifying Party from any liability hereunder unless and only to the extent that the Indemnifying Party is materially prejudiced as a result thereof, and in any event shall not relieve such Indemnifying Party from any liability which it may have otherwise than on account of this Article VII . With respect to third party claims, the Indemnifying Party shall be entitled, if it accepts financial responsibility for the third party claim, to control the defense of or to settle any such third party claim at its own expense and by its own counsel; provided that the Indemnified Partys prior written consent (which may not be unreasonably withheld, conditioned or delayed) must be obtained prior to settling any such third party claim. The Indemnified Party shall provide the Indemnifying Party with such information as the Indemnifying Party shall reasonably request to defend any such third party claim and shall otherwise cooperate with the Indemnifying Party in the defense of any such third party claim. Except as set forth in this Section 7.3 , the Indemnified Party shall not enter into any settlement or other compromise or consent to a judgment with respect to a third party claim as to which the Indemnifying Party has an indemnity obligation hereunder without the prior written consent of the Indemnifying Party (which may not be unreasonably withheld or delayed), and the entering into of any settlement or compromise or the consent to any judgment in violation of the foregoing shall constitute a waiver by the Indemnified Party of its right to indemnity hereunder to the extent the Indemnifying Party was prejudiced thereby. Any Indemnifying Party shall be subrogated to the rights of the Indemnified Party to the extent that the Indemnifying Party pays
49
Execution Version
for any loss, damage or expense suffered by the Indemnified Party hereunder. If the Indemnifying Party does not accept financial responsibility for the third party claim or fails to defend against the third party claim that is the subject of an Indemnity Notice within thirty (30) days of receiving such notice (or sooner if the nature of the third party claim so requires), or otherwise contests its obligation to indemnify the Indemnified Party in connection therewith, the Indemnified Party may, upon providing written notice to the Indemnifying Party, pay, compromise or defend such third party claim without the prior consent of the (otherwise) Indemnifying Party. In the latter event, the Indemnified Party, by proceeding to defend itself or settle the matter, does not waive any of its rights hereunder to later seek reimbursement from the Indemnifying Party. With respect to all other claims, the Indemnifying Party shall promptly make payment of such claim upon receipt of reasonably sufficient evidence supporting such claim; provided , that if the Indemnifying Party in good faith disputes all or part of its obligation to indemnify the Indemnified Party hereunder or the amount involved, the senior management of each party shall meet to discuss and attempt to resolve such dispute between the parties and, if such dispute is not resolved within forty-five (45) days of such claim being made, then the parties may pursue other remedies.
7.4 |
Employer s Liability; Independent Contractors; Waiver of Control . |
(a) |
Employers Liability and Workers Compensation . Each party, with respect to its own employees, accepts full and exclusive liability for the payment of workers compensation premiums and employers liability insurance premiums with respect to such employees, and for the payment of all taxes, contributions or other payments for unemployment compensation or old age or retirement benefits, pensions or annuities now or hereafter imposed upon employers by the government of the United States or any other governmental body, including state, local or foreign, with respect to such employees measured by the wages, salaries, compensation or other remuneration paid to such employees, or otherwise. |
(b) |
Employees, etc., of Contractor . The employees, agents, and independent contractors of Contractor engaged in performing any of the services Contractor is to perform pursuant to this Agreement are employees, agents, and independent contractors of Contractor for all purposes, and under no circumstances will be deemed to be employees, agents or independent contractors of United. In its performance under this Agreement, Contractor will act, for all purposes, as an independent contractor and not as an agent for United. Notwithstanding the fact that Contractor has agreed to follow certain procedures, instructions and standards of service of United pursuant to this Agreement, United will have no supervisory power or control over any employees, agents or independent contractors engaged by Contractor in connection with its performance hereunder, and all complaints or requested changes in procedures made by United will, in all events, be transmitted by United to Contractors designated representative. Nothing contained in this Agreement shall be construed as joint employment or is intended to limit or condition Contractors control over its operations or the conduct of its business as an air carrier. |
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Execution Version
(c) |
Employees, etc., of United . The employees, agents, and independent contractors of United engaged in performing any of the services United is to perform pursuant to this Agreement are employees, agents, and independent contractors of United for all purposes, and under no circumstances will be deemed to be employees, agents, or independent contractors of Contractor. Contractor will have no supervision or control over any such United employees, agents and independent contractors and any complaint or requested change in procedure made by Contractor will be transmitted by Contractor to Uniteds designated representative. In its performance under this Agreement, United will act, for all purposes, as an independent contractor and not as an agent for Contractor. |
(d) |
Contractor Flights . The fact that Contractors operations are conducted under Uniteds Marks and listed under the UA designator code will not affect their status as flights operated by Contractor for purposes of this Agreement or any other agreement between the parties, and Contractor and United agree to advise all third parties, including passengers, of this fact. |
7.5 |
No Double Recovery . |
Notwithstanding anything to the contrary contained in this Agreement, no party shall be entitled to indemnification or reimbursement under any provisions of this Agreement for any amount to the extent such party has been indemnified or reimbursed for such amount under any other provision of this Agreement.
7.6 |
Survival . |
The provisions of this Article VII shall survive the termination of this Agreement.
ARTICLE VIII
TERM, TERMINATION AND DISPOSITION OF AIRCRAFT
8.1 |
Term . |
This Agreement shall be effective as of the date hereof (the Effective Date ). The Term of this Agreement shall commence on the date that the first Covered Aircraft is placed into service under the terms and conditions of this Agreement (the Commencement Date ) and, unless earlier terminated or extended as provided herein, shall continue until the last Scheduled Exit Date for any Covered Aircraft as set forth on Schedule 1 , as such date may be extended pursuant to Section 10.2 hereof (the Term ).
8.2 |
Early Termination . |
(a) |
By United for Cause or Special Cause . United may terminate this Agreement, immediately upon providing written notice of termination to Contractor following the occurrence of any event that constitutes Cause or Special Cause. Any termination pursuant to this Section 8.2(a) shall supersede any other termination pursuant to any other provision of this Agreement (even if such other right of termination shall already have been exercised), and the date of such notice of |
51
Execution Version
termination for Cause or Special Cause shall be the Termination Date for purposes of this Agreement (and such Termination Date pursuant to this Section 8.2(a) shall supersede any other Termination Date that may have been previously established pursuant to another termination). |
(b) |
By United for Breach . United may terminate this Agreement, by providing written notice to Contractor, upon the occurrence of a material breach of this Agreement by Contractor as described in clause (i) below which breach shall not have been cured within five (5) days after notice of such breach is delivered by United to Contractor. United may terminate this Agreement, by providing written notice of termination to Contractor, upon the occurrence of any other material breach of this Agreement by Contractor, which breach shall not have been cured within thirty (30) days after written notice of such breach is delivered by United to Contractor (which thirty (30) day notice period may run concurrently with the fifteen (15) day notice period, if any, provided pursuant to Section 4.3 for quality of service-related breaches). Any such written notice of termination delivered pursuant to the foregoing sentences shall specify the Termination Date (subject to the provisions of this Article VIII ) and describe in reasonable detail the events giving rise to the material breach claim. The parties hereto agree that, without limiting the circumstances or events that may constitute a material breach, each of the following shall constitute a material breach of this Agreement by Contractor: (i) a reasonable and good faith determination by United, using recognized standards of safety, that there is a material safety concern with the operation of any Scheduled Flights, (ii) a carrier-specific grounding of more than ten (10) Covered Aircraft by regulatory or court order or other governmental action, (iii) a failure to meet the terms of Section 9.1(j) hereof, (iv) the occurrence of a material breach by Contractor of any Ancillary Agreement, which breach shall not have been cured during the applicable cure period, (v) the failure of Contractor to cure, within sixty (60) days following written notice to Contractor from United, any material failure of five (5) or more Covered Aircraft to meet Uniteds standards set forth in Exhibit J . |
(c) |
By Contractor for Breach . Contractor may terminate this Agreement, by providing written notice of termination to United, upon (i) failure by United to make any payment or payments under this Agreement aggregating in excess of $[***], including, without limitation, any payments which become due during any Wind-Down Period, but excluding any amounts which are the subject of a good faith dispute between the parties, which failure shall not have been cured within five (5) Business Days after written notice of such breach is delivered by Contractor to United or (ii) the occurrence of any other material breach of this Agreement by United, including without limitation, any breach during any Wind-Down Period, which breach shall not have been cured within thirty (30) days after written notice of such breach is delivered by Contractor to United. Such written notice of termination shall specify the Termination Date (subject to the provisions of this Article VIII ). |
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Execution Version
(d) |
By United for Breach of Other CPA . United may terminate this Agreement, by providing written notice of termination to Contractor upon the early termination by United of any other capacity purchase or similar arrangement between United and Contractor or Contractors affiliate; provided , that the foregoing termination right in this Section 8.2(d) shall not apply in the event such other capacity purchase or similar arrangement between United and Contractor or Contractors affiliate is terminated solely as a result of events or actions similar to those described in clauses (i) , (ii) or (iii) of the definition of Cause herein. Such written notice of termination shall specify the Termination Date (subject to the provisions of this Article VIII ). |
(e) |
Survival During Wind-Down Period . Upon any termination hereunder, the Term shall continue, and this Agreement shall survive in full force and effect, beyond the Termination Date until the end of the Wind-Down Period, if any, and the rights and obligations of the parties under this Agreement, including without limitation remedies available upon the occurrence of events constituting Cause, Special Cause or material breach, shall continue with respect to each Covered Aircraft until it is withdrawn from this Agreement and otherwise until the later of the Termination Date and the end of the Wind-Down Period, if any. |
(f) |
Terminations for Non-Carrier Specific Groundings . United may terminate this Agreement, by providing written notice to Contractor, upon (i) the non-carrier specific grounding of more than ten (10) Covered Aircraft by regulatory or court order or other governmental action for thirty (30) consecutive days or (ii) the non-carrier specific grounding of ten (10) or fewer Covered Aircraft by regulatory or court order or other governmental action for sixty (60) consecutive days. Such a termination shall be effective upon Contractors receipt of such termination notice. |
8.3 |
Disposition of Aircraft During Wind-Down Period . |
(a) |
Termination by United for Cause or Special Cause . If this Agreement is terminated pursuant to Section 8.2(a) , then at Uniteds election at the time of such termination, either (x) such termination shall be treated as a termination pursuant to Section 8.2(b) and the provisions of Section 8.3(b) shall apply or (y) the Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following schedule: (i) within ninety (90) days of delivery of any notice of termination, United shall deliver to Contractor a revocable written Wind-Down Schedule which shall (A) provide for the withdrawal of such Covered Aircraft from the capacity purchase provisions of this Agreement and (B) delineate the number of each aircraft type to be withdrawn by month, (ii) United may amend or modify such Wind-Down Schedule in its sole discretion by providing two weeks written notice to Contractor of such amendment or modification, and (iii) the Wind-Down Schedule (A) may begin immediately upon its delivery, and (B) may not provide for the withdrawal of any Covered Aircraft beyond the earlier of (a) the date that is fifteen (15) months after the date of delivery of the Wind-Down Schedule, and (b) the date on which the |
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Execution Version
head lease applicable to the Covered Aircraft terminates. United shall have the right to designate any specific Call Option Aircraft to be withdrawn on a specific date in accordance with the Wind-Down Schedule; otherwise, Contractor shall determine which specific Covered Aircraft shall be withdrawn on all other dates as required by, and in accordance with, the Wind-Down Schedule. The provisions of this Section 8.3(a) shall supersede any Wind-Down Schedule delivered pursuant to any other provision of this Agreement in accordance with a Wind-Down Schedule to be delivered by United to Contractor on the Termination Date. |
(b) |
Termination by United for Breach, etc . If this Agreement is terminated by United under Section 2.4 , Section 8.2(b) , Section 8.2(d) or Section 8.2(f) , then the Covered Aircraft (or in the event of a partial termination under Section 8.2(b)(ii) , any E175 Covered Aircraft) shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following terms and conditions. |
(i) |
Within ninety (90) days of delivery of any notice of termination delivered pursuant to Section 2.4 , Section 8.2(b) , Section 8.2(d) or Section 8.2(f) , United shall deliver to Contractor an irrevocable written Wind-Down Schedule, providing for the withdrawal of such Covered Aircraft from the capacity purchase provisions of this Agreement, and delineating the number of each aircraft type to be withdrawn by month. |
(ii) |
Such Wind-Down Schedule (x) may not commence until the Termination Date, (y) may not provide for the withdrawal of any Covered Aircraft prior to the date that is fifteen (15) days after the date of delivery of the Wind-Down Schedule and (z) may not provide for the withdrawal of any Covered Aircraft beyond the earlier of (A) the date that is sixty (60) months after the date of delivery of the Wind-Down Schedule, and (B) the date on which the head lease applicable to the Covered Aircraft terminates. United shall have the right to designate any specific Call Option Aircraft to be withdrawn on a specific date in accordance with the Wind-Down Schedule; otherwise, Contractor shall determine which specific Covered Aircraft shall be withdrawn on all other dates as required by, and in accordance with, the Wind-Down Schedule. |
(c) |
Termination by Contractor for Breach . If this Agreement is terminated by Contractor under Section 8.2(c) , then the Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following terms and conditions: |
(i) |
The notice of termination delivered by Contractor to United pursuant to Section 8.2(c)(i) shall be irrevocable and shall contain a Termination Date that is not more than thirty (30) days after the date of such notice; provided that such termination notice shall be void and of no further effect automatically upon the payment by United prior to such Termination Date |
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of all unpaid amounts giving rise to the default under Section 8.2(c)(i) . As of the Termination Date set forth in such notice of termination delivered pursuant to Section 8.2(c)(i) , all of the Covered Aircraft shall automatically be withdrawn from the capacity purchase provisions of this Agreement and shall cease to be Covered Aircraft as of such date. |
(ii) |
The notice of termination delivered by Contractor to United pursuant to Section 8.2(c)(ii) shall be irrevocable and shall contain a Termination Date that is at least 180 days after the date of such notice. Prior to the 90th day after receipt of such termination notice, United shall deliver to Contractor a Wind-Down Schedule beginning on such Termination Date. The Wind-Down Schedule may not provide for the withdrawal of more than [***] Covered Aircraft per month (excluding the withdrawal of any Covered Aircraft upon the termination of the head lease relating to such Covered Aircraft), and may not provide for the withdrawal of any Covered Aircraft on any date more than sixty (60) months after the Termination Date. Contractor shall determine which specific Covered Aircraft shall be withdrawn on all dates as required by, and in accordance with, the Wind-Down Schedule. |
(d) |
Termination at End of Term . If the Agreement is terminated at the end of the Term (other than pursuant to Section 8.2 ), then each Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement on the Scheduled Exit Date set forth for such Covered Aircraft on Schedule 1 , as amended. |
8.4 |
Certain Other Remedies . |
In addition to the remedies contemplated above in this Article VIII , United shall be entitled to the following remedies:
(a) |
Certain Remedies for Labor Strike and Groundings . In the event of (i) the occurrence of a Labor Strike or (ii) the mandatory grounding of any portion of the Covered Aircraft by the FAA due to any action or inaction of Contractor, then for so long as such Labor Strike or mandatory grounding shall continue and thereafter until the number of Scheduled Flights that are On-Time Departures (including any delays resulting from a Labor Strike or mandatory grounding) on any day of the week equals or exceeds the number of Scheduled Flights that were On-Time Departures on the same day of the week prior to such Labor Strike or mandatory grounding, United shall not be required to pay or otherwise reimburse Contractor for any of the per aircraft per month or per aircraft in schedule rates set forth on Schedules 2A and 2B . The rights set forth in this Section 8.4(a) are in addition to, and not in limitation of, any other right of United arising hereunder. |
(b) |
Certain Remedies During Wind-Down Operations . Upon a material breach of this Agreement by Contractor (including without limitation, those described in Section 8.2(b) and Section 8.2(d) ), which breach, if such breach has a cure period |
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thereunder, shall not have been cured during such cure period, then from the date of such breach, or the end of such cure period, as applicable, until (i) such breach is cured or (ii) if this Agreement is otherwise terminated by United pursuant to Section 8.2(b) or Section 8.2(d) , then until the end of any applicable Wind-Down Period, as consideration for Uniteds forbearance in exercising its termination remedies and damages incurred with respect to the portion of the Regional Airline Services that continue to be provided prior to and during such Wind-Down Period (the parties having agreed that the value of such forbearance and damages may be difficult to calculate) and without any further action by any party, each item of Compensation for Carrier Controlled Costs set forth in Section 3.1(a) and Schedules 2A and 2B shall be decreased to an amount equal to such item of Compensation for Carrier Controlled Costs (per hour, departure, passenger or other unit of measurement, as applicable) divided by 1.12; provided that the parties specifically acknowledge that the foregoing liquidated damages are in respect of Regional Airline Services for such period of time as they continue to be provided and are without regard to, and not in limitation of, any recourse or remedy available to United at law or in equity for damages suffered in respect of Regional Airline Services that are terminated; and provided further that the provisions of this Section 8.4(b) are not intended to be duplicative of the provisions of Section 8.4(e) , and in the event of any conflict between such provisions, the provisions of Section 8.4(e) are intended to override the provisions of this Section 8.4(b) . |
(c) |
Liquidated Damages for Failure to Place Covered Aircraft in Service by In-Service Date . If Contractor shall fail to place in-service an E175 Covered Aircraft by the Committed In-Service Date, as such Committed In-Service Date may be delayed by, and only to the extent such date is delayed by, a Regulatory Approval Delay or an Act of God, then: |
(X) Contractor shall pay to United as liquidated damages for Uniteds lost revenue related to such delay, [***] per aircraft per calendar day for each calendar day that delivery of such aircraft is so delayed from performing Regional Airline Services, such payment to be made in accordance with Section 3.6(c)(ii) , and
(Y) if Contractor has failed to place such Covered Aircraft in-service by the 150th day after the Committed In-Service Date for an E175 Covered Aircraft or the In-Service Date for a CRJ Covered Aircraft, then United shall have the unilateral right to terminate this Agreement as to such Covered Aircraft immediately by written notice to Contractor.
For the avoidance of doubt, none of a delay attributable to the manufacturer, a Regulatory Approval Delay or a delay due to an Act of God that continues for fewer than fifteen (15) days shall be deemed a default by Contractor for purposes of this Agreement.
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(d) |
Liquidated Damages for Reduction in the Number of Covered Aircraft . If, after delivery of all of the Covered Aircraft, the number of Covered Aircraft available to operate in Regional Airline Services (accounting for Spare Aircraft and aircraft undergoing scheduled maintenance) falls below the total number of Covered Aircraft listed in Schedule 1 for a period of time exceeding seven (7) days, then Contractor will pay to United, as liquidated damages for Uniteds lost revenue related to such unavailability of each such Covered Aircraft and not as a penalty, the following amounts within ten (10) business days from the receipt of Uniteds calculations of such amounts (which may be sent together or separately): |
(i) |
the Daily United Damages (as described below) divided by the total number of Covered Aircraft in service immediately prior to such Covered Aircraft becoming unavailable, paid for each aircraft for each day each such aircraft is unavailable to schedule; plus |
(ii) |
any prepayment made pursuant to Section 3.6(a) in respect of such unavailable aircraft for the period of such unavailability; plus |
(iii) |
the total denied boarding compensation and passenger-related interrupted trip costs paid or otherwise incurred by United (including without limitation hotel, meal and ground transportation costs and the face value of any travel certificates issued) in respect of any Scheduled Flights delayed or canceled as a result of the unavailability of such aircraft. |
(e) |
Liquidated Damages for Termination by United . If United terminates this Agreement as a result of Contractors breach, then Contractor will pay to United, as liquidated damages for Uniteds prospective losses related to the loss of the benefit of the bargain for the remainder of the term of this Agreement and not as a penalty, within ten (10) business days from the receipt of the calculation from United, the Daily United Damages (as described below), for each day remaining during the period commencing with the date of termination through the end of the then current term of this Agreement; provided, however , that if, within two years of the date of the applicable termination notice delivered by United to Contractor, United secures and begins operations with another carrier to replace Contractors Regional Airline Services provided by the Covered Aircraft, then the Daily United Damages will be offset by an amount calculated by United to reasonably correspond to the Daily United Damages calculation described below but calculated with regard to such operations with such other carrier. As used herein, Daily United Damages shall equal (W) Uniteds aggregate revenue received from the operation of all Covered Aircraft under this Agreement during the twelve (12) full calendar months immediately preceding the event constituting such breach (including but not limited to revenues from passenger sales, cargo and mail services as well as any beyond revenue (constituting revenue from transfers to other United flights)), minus (X) the aggregate revenue received by Contractor from United pursuant to the terms of this Agreement with regard to the operation of all Covered Aircraft under this Agreement during such twelve (12) calendar months (including all payments received pursuant to Section 3.6 in |
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respect of such operations), minus (Y) the United incurred expenses referred to in Section 3.4(a) incurred in respect of such operations, and divided by (Z) 365; provided that, as of the date United terminates this Agreement, if the first Covered Aircraft has been in service hereunder for fewer than twenty-four (24) months, then the Daily United Damages hereunder shall equal (A) the amount of the Daily United Damages for the 12-month period immediately preceding such date of termination, as such term is defined and such amount is determined, pursuant to that certain United Express Agreement, dated January 28, 2004, by and between United (as successor to United Air Lines, Inc.) and Contractor for Regional Airline Services (as amended, the 2004 Agreement ), divided by (B) the average number of aircraft in service under the 2004 Agreement for such 12-month period, and multiplied by (C) fifty (50). Where applicable, dollar amounts used in the calculations described in this Section 8.4(e) shall be as reported in Uniteds Financial Profitability System ( FPS ). |
(f) |
If a Termination Event shall have occurred, then notwithstanding anything contained herein to the contrary, United shall be relieved of any obligation existing at such time or thereafter to make any payments to Contractor pursuant to Sections 2.4 or 10.8 . |
(g) |
The parties agree that the damages to be suffered by United in the scenarios described in each of the foregoing paragraphs of this Section 8.4 would be difficult to calculate, and that the liquidated damages set forth in each of such foregoing paragraphs are a good faith and reasonable estimate of such damages, and that such liquidated damages are not intended to be a penalty. The inclusion of liquidated damages in this Section 8.4 is not intended to modify, waive or restrict Uniteds rights to exercise any and all remedies available at law or in equity for Contractors breach of this Agreement, other than the recovery of monetary damages for the losses and damages described herein, for which these liquidated damages are intended to be the sole and exclusive remedy; provided that Uniteds right to indemnification pursuant to Article VII for claims brought by third parties shall not be limited in any way by this Section 8.4 . |
(h) |
Damages . |
(i) |
NO PARTY TO THIS AGREEMENT OR ANY OF ITS AFFILIATES SHALL BE LIABLE TO ANY OTHER PARTY HERETO OR ANY OF ITS AFFILIATES FOR CLAIMS FOR CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHETHER A CLAIM IS BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, VIOLATION OF ANY APPLICABLE DECEPTIVE TRADE PRACTICES ACT OR SIMILAR LAW OR ANY OTHER LEGAL OR EQUITABLE PRINCIPLE, AND EACH PARTY RELEASES THE OTHERS AND THEIR RESPECTIVE AFFILIATES FROM LIABILITY FOR ANY SUCH DAMAGES; |
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PROVIDED THAT THE FOREGOING LIMITATION SHALL NOT APPLY TO LIMIT THE LIABILITY OF ANY PARTY FOR THE CONSEQUENTIAL DAMAGES SUFFERED BY ANY OTHER PARTY IF THE FIRST PARTY ACTED IN BAD FAITH; PROVIDED FURTHER THAT THE PARTIES AGREE THAT ANY LIQUIDATED DAMAGES PAYABLE TO UNITED PURSUANT TO THIS SECTION 8.4 (OR, IF FOR ANY REASON DIRECT OR ACTUAL DAMAGES ARE AWARDED, THE COSTS INCURRED BY UNITED FOR ARRANGING AND PROVIDING FOR ANY REGIONAL AIRLINE, GROUND HANDLING AND OTHER SERVICES TO REPLACE THE CONTRACTOR SERVICES (OR ANY PORTION THEREOF) FOLLOWING A TERMINATION OF THIS AGREEMENT) SHALL BE CONSIDERED DIRECT AND ACTUAL DAMAGES SUFFERED BY UNITED, AND SHALL NOT BE CONSIDERED CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES FOR PURPOSES OF THIS AGREEMENT. NO PARTY SHALL BE ENTITLED TO RESCISSION OF THIS AGREEMENT AS A RESULT OF BREACH OF ANY OTHER PARTYS REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS, OR FOR ANY OTHER MATTER; PROVIDED FURTHER THAT NOTHING IN THIS SECTION 8.4(h) SHALL RESTRICT THE RIGHT OF ANY PARTY TO EXERCISE ANY RIGHT TO TERMINATE THIS AGREEMENT PURSUANT TO THE TERMS HEREOF. |
(ii) |
NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT TO THE CONTRARY, CONTRACTOR SHALL NOT BE LIABLE TO UNITED (OR ANY OF ITS AFFILIATES, OR ITS OR ITS AFFILIATES DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS) FOR MONETARY DAMAGES CALCULATED PURSUANT TO SECTION 8.4(c) , 8.4(d) or 8.4(e) IN RESPECT OF ANY CLAIMS ARISING FROM A TERMINATION FOR BREACH OF CONTRACT CONSTITUTING SPECIAL CAUSE IN EXCESS (INDIVIDUALLY AND IN THE AGGREGATE) OF [***]; PROVIDED THAT IF SUCH CLAIMS ARE FOR A BREACH OF CONTRACT CONSTITUTING CAUSE OR ANY BREACH (INCLUDING ANY BREACH CONSTITUTING AN INCHOATE OR UNMATURED DEFAULT) OTHER THAN A BREACH CONSTITUTING ONLY SPECIAL CAUSE (BUT NOT ALSO CAUSE), THEN THE PROVISIONS AND LIMITATIONS SET FORTH IN THIS SECTION 8.4(h)(ii) SHALL NOT APPLY; AND PROVIDED FURTHER THAT THE FOREGOING LIMITATIONS SHALL BE CALCULATED WITHOUT REGARD TO, AND SHALL EXCLUDE, DAMAGES IN RESPECT OF CLAIMS MADE PURSUANT TO ARTICLE VII HERETO FOR INDEMNIFICATION OF THIRD PARTY CLAIMS. |
(i) |
Equitable Remedies . Each party acknowledges and agrees that, under certain circumstances, the breach by a party of a term or provision of this Agreement will |
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materially and irreparably harm the other party, that money damages will accordingly not be an adequate remedy for such breach and that the non-defaulting party, in its sole discretion and in addition to its rights under this Agreement and any other remedies it may have at law or in equity (and notwithstanding the provisions of Section 11.16 below), may apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit and without provision of any notice) for specific performance and/or other injunctive relief in order to enforce or prevent any breach of the provisions of this Agreement. |
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 |
Representations and Warranties of Contractor . |
Contractor represents, warrants and covenants to United as of the date hereof as follows:
(a) |
Organization and Qualification . Contractor is a duly organized and validly existing corporation under the laws of its state of incorporation. Contractor has the corporate power and authority to own, operate and use its assets and to provide the Contractor Services. Contractor is duly qualified to do business as a foreign corporation under the laws of each jurisdiction that requires such qualification. |
(b) |
Authority Relative to this Agreement . Contractor has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Contractor. This Agreement has been duly and validly executed and delivered by Contractor and is, assuming due execution and delivery thereof by United and that United has legal power and right to enter into this Agreement, a valid and binding obligation of Contractor, enforceable against Contractor in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or otherwise under applicable law). |
(c) |
Conflicts; Defaults . Neither the execution or delivery of this Agreement nor the performance by Contractor of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Contractors certificate of incorporation, by-laws, or any provision of, or result in the acceleration of any obligation under, any material contract, sales commitment, license, purchase order, security agreement, mortgage, note, deed, lien, lease or other agreement to which Contractor is a party or by which it or any of its |
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properties or assets may be bound, (ii) result in the creation or imposition of any lien, charge or encumbrance in favor of any third person or entity, (iii) violate any law, statute, judgment, decree, order, rule or regulation of any governmental authority or body, or (iv) constitute any event which, after notice or lapse of time or both, would result in such violation, conflict, default, acceleration or creation or imposition of liens, charges or encumbrances. |
(d) |
No Existing Default . Contractor is not (i) in violation of its charter or by-laws, (ii) in breach or default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a breach or default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business, in each case of clauses (i) , (ii) or (iii) where such violation, breach, default or failure would have a material adverse effect on Contractor or on its ability to provide Regional Airline Services and otherwise perform its obligations hereunder. To the knowledge of Contractor, no third party to any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument that is material to Contractor to which Contractor is a party or by which any of them are bound or to which any of their properties are subject, is in default in any material respect under any such agreement. |
(e) |
Broker . Contractor has not retained or agreed to pay any broker or finder with respect to this Agreement and the transactions contemplated hereby. |
(f) |
Financial Statements . The financial statements (including the related notes and supporting schedules) of Contractor delivered (or, if filed with the Securities and Exchange Commission, made available) to United immediately prior to the date hereof fairly present in all material respects the consolidated financial position of Contractor, as the case may be, and their respective results of operations as of the dates and for the periods specified therein. Since the date of the latest of such financial statements, there has been no material adverse change nor any development or event involving a prospective material adverse change with respect to Contractor, as the case may be. Such financial statements have been prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved, except to the extent disclosed therein. |
(g) |
Insurance . Contractor is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts and with such deductibles as are customary in the businesses in which they are engaged. Contractor has not received notice of cancellation or non-renewal of such insurance. All such |
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insurance is outstanding and duly in force on the date hereof. Contractor has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on Contractor. |
(h) |
No Proceedings . There are no legal or governmental proceedings pending, or investigations commenced of which Contractor has received notice, in each case to which Contractor is a party or of which any property or assets of Contractor is the subject which, if determined adversely to Contractor, would individually or in the aggregate have a material adverse effect on Contractor or on Contractors ability to provide Regional Airlines Services and otherwise perform its obligations hereunder; and to the best knowledge of Contractor, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. |
(i) |
No Labor Dispute . No labor dispute with the employees of Contractor exists or, to the knowledge of Contractor, is imminent which would reasonably be expected to have a material adverse effect on Contractor or on its ability to provide Regional Airlines Services and otherwise perform their respective obligations hereunder. |
(j) |
Permits . With regard to CRJ Covered Aircraft, Contractor possesses all material certificates, authorizations and permits issued by FAA, DOT, TSA, DHS, EPA and other applicable federal, state or foreign regulatory authorities necessary to conduct its business, to provide Regional Airlines Services and otherwise to perform its obligations hereunder, and neither Contractor nor Parent has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a material adverse effect on Contractor or Parent or on the ability of either to conduct its businesses, to provide Regional Airlines Services or otherwise to perform its respective obligations hereunder. In addition, Contractor shall have received all requisite certifications necessary to place the Embraer E175 aircraft on Contractors operating certificate on or before (A) the Scheduled In-Service Date or (B) such later date as mutually agreed by Contractor and United, subject, however, to any delay in obtaining such certificate caused solely by delays in the regulatory approval process primarily attributable to FAA or DOT and, in any event, not attributable in any way to the action or inaction of Contractor or its employees or agents (such a delay, a Regulatory Approval Delay ). In the event that the Regulatory Approval Delay causes a delay in obtaining the necessary FAA certificate to place the Embraer E175 aircraft on Contractors operating certificate beyond September 1, 2014, then United may terminate this Agreement with respect to E175 Covered Aircraft upon written notice to Contractor. |
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9.2 |
Representations, Warranties and Covenants of United . |
United represents, warrants and covenants to Contractor as of the date hereof as follows:
(a) |
Organization and Qualification . United is a duly incorporated and validly existing corporation in good standing under the laws of the State of Delaware. |
(b) |
Authority Relative to this Agreement . United has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of United. This Agreement has been duly and validly executed and delivered by United and is, assuming due execution and delivery thereof by Contractor and that Contractor has legal power and right to enter into this Agreement, a valid and binding obligation of United, enforceable against United in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or otherwise under applicable law). |
(c) |
Conflicts; Defaults . Neither the execution or delivery of this Agreement nor the performance by United of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Uniteds certificate of incorporation, by-laws, or any provision of, or result in the acceleration of any obligation under, any material contract, sales commitment, license, purchase order, security agreement, mortgage, note, deed, lien, lease or other agreement to which United is a party or by which it or its properties or assets may be bound, (ii) result in the creation or imposition of any lien, charge or encumbrance in favor of any third person or entity, (iii) violate any law, statute, judgment, decree, order, rule or regulation of any governmental authority or body, or (iv) constitute any event which, after notice or lapse of time or both, would result in such violation, conflict, default, acceleration or creation or imposition of liens, charges or encumbrances. |
(d) |
Broker . United has not retained or agreed to pay any broker or finder with respect to this Agreement and the transactions contemplated hereby. |
(e) |
No Proceedings . There are no legal or governmental proceedings pending, or investigations commenced of which United has received notice, in each case to which United is a party or of which any property or assets of United is the subject which, if determined adversely to United, would individually or in the aggregate have a material adverse effect on United or on its ability to perform its obligations hereunder; and to the best knowledge of United, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. |
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ARTICLE X
CERTAIN AIRCRAFT-RELATED PROVISIONS
10.1 |
Right to Call . |
(a) |
If United delivers a notice of termination of this Agreement pursuant to Section 8.2(a) , (b) or (d) , then United, or its designee (for the purposes of this Section 10.1 , references to United shall be interpreted to include Uniteds designee, as applicable), will have the option to purchase any or all Covered Aircraft owned by Contractor or to assume Contractors leasehold interest with respect to any or all Covered Aircraft leased by Contractor (other than such aircraft leased from United), as the case may be. In addition, if United removes any CRJ Removed Aircraft from this Agreement, which CRJ Removed Aircraft is not retained by Contractor, in each case pursuant to Section 2.4(a) , and provided that United has not delivered a notice of termination of the Agreement pursuant to Section 8.2(a) , (b) or (d) , then United shall be obligated to purchase, or to assume Contractors leasehold interest with respect to, as the case may be, each such CRJ Removed Aircraft. Each Covered Aircraft and CRJ Removed Aircraft purchased or the leasehold interest in which is assumed pursuant to this Section 10.1 shall be referenced herein, individually and collectively, as a Call Option Aircraft , the option or obligation, as the case may be, to acquire the Call Option Aircraft or assume their leases shall be referenced herein as the Call Option , and the terms of such obligation to purchase or assume shall be as set forth in this Section 10.1 . |
(b) |
Such Call Option will be governed by the terms set forth below: |
(i) |
If this Agreement is terminated pursuant to Section 8.2(a) , 8.2(b) or 8.2(d) , then not later than the later of (A) twenty (20) Business Days following Contractors confirmation of delivery of all Call Option Information and (B) sixty (60) days following the date a relevant notice of termination of this Agreement, United may, at its option, deliver an irrevocable written notice (a Call Option Notice ) of its election to exercise the Call Option, which notice shall specify the Call Option Aircraft that are subject to such notice. |
(ii) |
With respect to any CRJ Removed Aircraft, the Call Option shall be deemed to have been exercised, and shall be automatically exercised, upon delivery of the applicable 2.4(a) Notice to Contractor. |
(iii) |
United may, at its option, deliver a written notice (a Call Option Request ) to Contractor requesting Call Option Information (x) not later than seven (7) days following the delivery of a relevant notice of termination of this Agreement by United to Contractor pursuant to Section 8.2(a) , 8.2(b) or 8.2(d) , or (y) at any time United determines in good faith that an inchoate default of this Agreement by Contractor has occurred that might lead to a termination pursuant to Section 8.2(a) , 8.2(b) or 8.2(d) , or (z) at any time in Uniteds discretion if it is reasonably likely to deliver a |
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2.4(a) Notice within the next 90 days. United shall be deemed to have delivered a Call Option Request upon delivery of a 2.4(a) Notice. |
(iv) |
Within ten (10) Business Days following its receipt of a Call Option Request, Contractor shall provide United with: (A) with respect to a Call Option Aircraft that is leased to Contractor (a Leased Call Option Aircraft ), copies of all lease agreements, and with respect to all Call Option Aircraft owned by Contractor (whether directly, through an affiliate or owner trust) (an Owned Call Option Aircraft ), copies of all financing and related agreements; (B) all lease rates and other financial information relevant to such lease agreements and financing and related agreements; (C) a good faith estimate of any costs to be incurred by Contractor in connection with the disposition of the Call Option Aircraft pursuant to the Call Option with respect to each such aircraft, including without limitation any termination, make-whole, prepayment (or similar) penalty or fee, breakage, third party attorneys fees and costs, trustee and wind-up fees and recording/filing fees, whether in connection with the lease or financing of the aircraft or the maintenance and/or support thereof, in each case as in effect on the earlier of the date of the applicable Call Option Request or the termination to which such Call Option Request relates; (D) the Outstanding Debt Balance and, in Contractors opinion, the Fair Market Value of each Owned Call Option Aircraft; (E) a summary of the maintenance status of each such aircraft, including with regard to the airframe, engines, landing gear, major components and other items reasonably requested by United; (F) the identity of and contact information for all parties with an interest in such aircraft or otherwise to be party to any assignments or purchases; and (G) any other information relevant to the Call Option that United may reasonably request (all such information in clauses (A) through (G) of this Section 10.1(b)(iii) , the Call Option Information ). Contractors disclosures of Call Option Information shall be made expressly subject to any confidentiality restrictions applicable to the Call Option Information, and United agrees to be bound by such restrictions (subject to any arrangements regarding such confidentiality restrictions made between United and the party or parties to which such confidentiality obligations are owed). Upon the delivery of all Call Option Information to United, Contractor shall notify United in writing that all such information has been delivered. |
(v) |
United shall have the right to revoke, with respect to any or all of the Call Option Aircraft, any such Call Option exercise prior to the consummation of the purchase or assignment of the relevant Call Option Aircraft, by written notice to Contractor prior to such consummation; provided that if the Call Option Aircraft is a CRJ Removed Aircraft, then the removal of such CRJ Removed Aircraft from this Agreement pursuant to Section 2.4(a) (and the 2.4(a) Notice applicable to such CRJ Removed Aircraft) shall likewise be revoked, and such CRJ Removed Aircraft shall remain subject to the terms of this Agreement (including Section 2.4(a) ) as if a |
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2.4(a) Notice had not been delivered in respect of such aircraft. United shall reimburse Contractor all of Contractors out-of-pocket costs and expenses, including attorneys fees and costs, incurred by Contractor solely in connection with the preparation for removal of any such Call Option Aircraft for which United has revoked its Call Option. |
(vi) |
Leased Call Option Aircraft . |
(A) |
In each case in respect of each Leased Call Option Aircraft, United shall obtain and provide to Contractor, at no cost to Contractor, the written consent from the existing lessor (and applicable financing parties) to a full assignment and assumption by United (without recourse to Contractor) of all obligations of Parent and Contractor under the lease agreement, any guaranty and other related documents associated with the lease (or lease financing) of such Call Option Aircraft, together with a full release (the Release ) of Contractor and Parent from any and all obligations under such agreements for periods following the assignment date (such lease agreement, guaranty and other related documents, the Lease Documents ). Such assignment and assumption agreement shall contain the Release and shall otherwise be in a form reasonably acceptable to Contractor and United and shall contain the provisions provided in clause (C) below (such agreement, Assignment and Assumption Agreement ). |
(B) |
United and Contractor shall enter into an Assignment and Assumption Agreement for each Leased Call Option Aircraft. Subject to Contractors receipt of a duly executed and effective Release, Contractor shall deliver such aircraft to United free and clear of all liens and encumbrances other than (x) the lien attributable to the lease, (y) any other lien attributable to the lessor or other financing party of the Covered Aircraft and (z) any lien permitted to exist pursuant to the terms of the Lease Documents. Each Leased Call Option Aircraft shall otherwise be delivered to United in AS-IS, WHERE-IS condition, subject to the terms of the Lease Documents; provided that nothing in this sentence shall be interpreted as relieving Contractor of any of its obligations under this Agreement, including its obligation to operate and maintain the aircraft in accordance with the terms herein; and provided further that, notwithstanding the above, Contractor shall be solely liable, and United shall not be liable, for any breaches or defaults, or damages resultant thereto, having occurred in respect of any Leased Call Option Aircraft pursuant to this Agreement or the Lease Documents prior to the effective time of the assignment and Release and delivery by Contractor to United of such Leased Call Option Aircraft. Each Leased Call Option Aircraft shall be delivered to United at a location in the continental United States |
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selected by United in Uniteds sole discretion (any such location, a Delivery Location ); provided that, if Contractor does not have a maintenance/operations base at a Delivery Location, then United shall pay to Contractor the direct out-of-pocket costs incurred by Contractor to deliver the applicable Leased Call Option Aircraft to such Delivery Location; provided further that any Leased Call Option Aircraft shall not be deemed delivered unless and until: (aa) Contractor has delivered to United all records and documents that Contractor is required to maintain in accordance with its FAA-approved records retention program and the applicable lease in respect of such aircraft, plus such other records and documents that are reasonably requested by United and are in Contractors possession ( provided , however, that if United reasonably requests additional records and documents that are not so required and are not in Contractors possession, then, at Uniteds request and cost, Contractor shall use commercially reasonable efforts to assist United in causing such records to be delivered to United); and (bb) the delivered aircraft is (vv) complete, (ww) has no parts or other items of equipment installed thereon that are not at the effective time of such assignment titled with the owner of such aircraft in accordance with the terms of the applicable lease, (xx) is in a condition for continuing commercial passenger operations under FAR Part 121 and the applicable lease, (yy) has no deferred/carryover maintenance items or, with respect to any Airworthiness Directives, any waivers or Alternative Means of Compliance (AMOCs) and (zz) complies with the applicable leases aircraft return provisions (a copy of which is attached to this Agreement as Exhibit S ), except for those provisions regarding (A) Lessees exterior insignia and interior markings, (B) airworthiness directives (without limiting the requirements set forth in clause (yy) above), (C) scheduled maintenance, (D) engine maintenance, (E) engine return, (F) structural inspection tasks, (G) landing gear life, (H) tires and brakes, (I) condition of controlled components and (J) appraisals; provided further that the reasonable costs of Contractors compliance with return conditions relating to storage upon return shall be for Uniteds account; and provided further that, notwithstanding anything to the contrary contained herein, upon Uniteds request, Contractor shall make the aircraft available, prior to delivery of the aircraft and consummation of any assignment or sale, for the performance of airframe and engine inspections arranged by United and performed at its cost, including but not limited to boroscopes, ground performance runs, on-wing static inspections and testing and EGT margin tests. The effective date of such assignment shall occur, and subject to Section 10.1(b)(vi)(D) below Contractor shall deliver such aircraft to United, on the 7 th day following the date of withdrawal of such |
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aircraft as determined pursuant to Section 2.4(a) or Sections 8.2(a) , 8.2(b) or 8.2(d) , respectively (or such earlier or later day as United and Contractor may agree). |
(C) |
Each of the following provisions shall apply and shall be provided for in the Assignment and Assumption Agreement: (t) risk of loss or damage to the Leased Call Option Aircraft and any corresponding obligation to store and maintain such aircraft shall transfer to United at the effective time of such assignment and Release and upon the completion of transfer of possession of such aircraft by Contractor to United; (u) United shall indemnify and insure (in accordance with customary terms) Contractor against all third-party liabilities and obligations related to facts or circumstances arising at and after such assignment, (v) Contractor shall indemnify and insure (in accordance with customary terms) United from all liabilities and obligations related to facts or circumstances arising prior to the date of the assignment, (w) at the effective time of the Assignment and Assumption Agreement, (i) Contractor shall transfer to United, and United shall take possession of, all rights in any deposits, prepaid rent and/or maintenance reserves held by the Lessor pursuant to, but subject to, the terms of the Lease Documents, (ii) United shall pay to Contractor, in immediately available funds, an amount equal to such rent security deposits and transferred prepaid rent (but only to the extent that United has not already reimbursed Contractor or otherwise paid for such rent security deposits and/or rent pursuant to the compensation and reimbursement provisions herein or used any portion of such rent security deposits and/or rent to cure any default existing under such Lease Documents at the time of such lease assumption), and (iii) to the extent that any payments of rent, reserves and/or deposits existing under the applicable Lease Documents cannot be transferred to (or for the benefit of) United, and such payments, reserves and/or deposits have already been paid or reimbursed by United, then Contractor shall pay to United, in immediately available funds, an amount equal to such payments, reserves and/or deposits, (x) United shall assume all obligations and liabilities of Contractor as above provided with respect to such Lease Documents as of the effective date of such assignment, and (y) Contractor shall assign, to the extent assignable, all warranties, service life policies, guarantees and similar programs relating to such Leased Call Option Aircraft provided by the applicable manufacturer. |
(D) |
United may not take possession of any Leased Call Option Aircraft unless United or Contractor first obtains an Assignment and Assumption Agreement and Release relating to all such aircraft that have been fully executed by all of the parties thereto (a |
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Consent ). With respect to each CRJ Removed Aircraft, if the relevant Consent has not been obtained by the removal date specified by the relevant 2.4(a) Notice, then the Wind-Down Period for such aircraft shall be extended and shall continue until either (x) such Consent has been obtained, or (y) United has revoked the Call Option pursuant to Section 10.1(b)(v) , or (z) if such Consent shall not have been obtained within three (3) months following the delivery (or deemed delivery) of such Call Option Notice, then, to the extent permitted under the terms of the Lease Documents, United (at its sole option) may sublease such aircraft from Contractor on the same terms, mutatis mutandis , as the Lease Documents, with Uniteds indemnification of Contractor as set forth in Section 10.1(b)(vi)(B) above expanded to include all claims arising in respect of such Lease Documents for all periods from and after the date of such sublease. With respect to any Call Option Aircraft withdrawn from this Agreement pursuant to Section 8.2(a) , 8.2(b) or 8.2(d) , if within six (6) calendar months of the withdrawal date for such aircraft at the end of the applicable Wind-Down Period neither of the circumstances in clauses (x) or (y) above has occurred, nor has United subleased such aircraft from Contractor as provided in clause (z) above, then the Call Option in respect of such aircraft shall be deemed to have been and shall be without further act immediately revoked; provided however , that, for the avoidance of doubt, the Wind-Down Period for such aircraft shall not be extended beyond such Termination Date. |
(vii) |
Owned Call Option Aircraft . Contractor shall sell all Owned Call Option Aircraft to United for a purchase price equal to the greater of the Outstanding Debt Balance and the Fair Market Value of such aircraft. United shall further pay any and all taxes (including, without limitation, sales, use VAT and GST charged or chargeable on account of the sale of the aircraft by Contractor), and any termination, make-whole, prepayment (or similar) penalty or fee, breakage, third party attorneys fees and costs, trustee and wind-up fees and recording/filing fees incurred by Contractor, whether in connection with the lease or financing of the aircraft or the maintenance and/or support thereof, and disclosed to United as Call Option Information (without duplication of any portion of the Outstanding Debt Balance, and, for the avoidance of doubt, any changes in income tax position, including loss of deductions, increased income tax expense or other income and other tax losses). Subject to Uniteds payment to Contractor of the Fair Market Value (determined in accordance with the terms of this Agreement) and the other amounts required to be paid hereunder, Contractor shall deliver such aircraft to United free and clear of all liens and encumbrances, and otherwise in AS-IS, WHERE-IS condition; provided that nothing in this sentence shall be interpreted as relieving Contractor of any of its obligations under this Agreement, |
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including its obligation to operate and maintain the aircraft in accordance with the terms herein; and provided further that, notwithstanding the above, Contractor shall be solely liable, and United shall not be liable, for any breaches or defaults, or damages resultant thereto, having occurred in respect of any Owned Call Option Aircraft or any debt or financing arrangements in respect of such Owned Call Option Aircraft prior to the delivery by Contractor to United of such Owned Call Option Aircraft. Each Owned Call Option Aircraft shall be delivered to United at a Delivery Location; provided that, if Contractor does not have a maintenance/operations base at the Delivery Location, then United shall pay to Contractor the direct out-of-pocket costs incurred by Contractor to deliver the applicable Owned Call Option Aircraft to such Delivery Location; provided further that any Owned Call Option Aircraft shall not be deemed delivered unless and until all records and documents required by Contractors FAA-approved maintenance program to be maintained in respect of such aircraft have been delivered to United. The effective date of such sale shall occur, and Contractor shall deliver such aircraft to United, on the 7 th day following the withdrawal date for such aircraft specified in the 2.4(a) Notice (with respect to CRJ Removed Aircraft) or the 7 th day following the end of the Wind-Down Period for such aircraft (with respect to aircraft removed from this Agreement in connection with a termination of this Agreement by United pursuant to Section 8.2(a) , 8.2(b) or 8.2(d)) , as the case may be. The applicable purchase and sale agreement with respect to such Owned Call Option Aircraft shall provide that (x) risk of loss or damage to the Owned Call Option Aircraft and any corresponding obligation to store and maintain such aircraft shall transfer to United only upon the completion of transfer of possession of such aircraft by Contractor to United and payment to Contractor of the amounts specified herein, (y) United shall indemnify and insure (in accordance with customary terms) Contractor against all third-party liabilities and obligations related to facts or circumstances arising at and after such transfer, and (z) to the extent not otherwise provided for in this Agreement, Contractor shall indemnify and insure (in accordance with customary terms) United from all liabilities and obligations related to facts or circumstances arising prior to the date of such transfer. |
(c) |
Contractor shall not discriminate in its operation or maintenance of the Call Option Aircraft (including without limitation with respect to any swapping or removal of parts, components or engines) following Uniteds exercise, or deemed exercise of, a Call Option in respect to any aircraft and shall continue to comply with the provisions of Article IV hereto as they relate to each aircraft. |
(d) |
United shall assume (or, if permitted thereunder or with the consent of the contracting parties thereto, terminate) all power by the hour, maintenance cost per hour and similar agreements Contractor has in force in respect of the maintenance and support of each Call Option Aircraft, and such assumption (or termination) shall be without recourse or cost to Contractor with respect to such |
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Call Option Aircraft provided that Contractor is not then in uncured default under such agreements, including without limitation with respect to any amounts due and owing thereunder, it being understood that Contractor shall be solely liable, and United shall not be liable, for any breaches or defaults, or damages resultant thereto, having occurred under any such agreement prior to such assumption or termination. |
10.2 |
Extension of E175 Aircraft Term . |
(a) |
At any time and from time to time, but not less than six (6) months prior to the existing exit date for any E175 Covered Aircraft, and at its sole option, United may extend the exit date for any E175 Covered Aircraft (which shall extend the capacity purchase provisions hereof with respect to such Covered Aircraft to such later exit date) by delivering to Contractor a revised Schedule 1 reflecting such later exit date; provided , that any extension shall be made only in increments of twenty-four (24) months; provided further, that the exit date for any E175 Covered Aircraft may be extended more than once but not greater than four (4) times; provided further , that in no event shall Uniteds exercise of its extension rights pursuant to the provisions in this Section 10.2 result in Contractor operating less than ten (10) E175 Covered Aircraft in its provision of Regional Airline Services to United under this Agreement; and provided further , that the rates set forth on Schedules 2A and 2B in effect immediately prior to such extension term shall remain in effect throughout the extension term. Upon delivery to Contractor, such revised Schedule 1 shall be incorporated into this Agreement without any further action by any party and shall thereafter constitute the amended and restated Schedule 1 for all purposes of this Agreement. Upon any determination by Contractor not to renew any lease for any Covered Aircraft, Contractor shall promptly notify United. |
(b) |
United may at any time and from time to time propose to extend the exit date for any E175 Covered Aircraft to Contractor through mutually-agreed modification of this Agreement. |
10.3 |
Alternative Aircraft . |
At any time that United desires to utilize aircraft other than the Covered Aircraft, Contractor and United agree to meet and discuss in good faith the appropriate adjustments to this Agreement necessary to include such other aircraft as a Covered Aircraft.
10.4 |
Additional Aircraft . |
United shall have the right in its sole discretion at any time and from time to time during the Term to amend Table 1 of Schedule 1 unilaterally to increase the number of E175 Covered Aircraft (any such additional aircraft, the Growth Aircraft ) utilized by Contractor for Regional Airline Services (such right, the Growth Aircraft Option ); provided that the following provisions shall apply:
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(a) |
in order to exercise the Growth Aircraft Option, United must provide Contractor with written notice of Uniteds election of the Growth Aircraft Option (the Growth Aircraft Option Notice ). Once the Growth Aircraft Option Notice has been issued, the Parties shall mutually agree on in-service dates for such aircraft, such date to be at least 180 days after the date of the Growth Aircraft Option Notice; |
(b) |
the Growth Aircraft shall be of an aircraft type equivalent to the aircraft type set forth on Schedule 1 (or an acceptable substitute aircraft agreed to by United and Contractor); |
(c) |
the maximum number of Growth Aircraft shall be [***]; |
(d) |
United shall pay Contractor in respect of the Growth Aircraft the Compensation for Carrier Controlled Costs as set forth on Schedule 2A . In addition, United shall pay to Contractor pilot training expenses equivalent to those set forth in Section 3.3(a) ; |
(e) |
if a Growth Aircraft is owned or leased by United, then prior to such aircraft entering Regional Airline Services on the date set forth in the Growth Aircraft Option Notice, Contractor shall sublease such aircraft from United pursuant to a sublease in the form of the United standard form of sublease; provided that the rent under such sublease shall be abated, except in the circumstances of such sublease where the rent is no longer abated, in which case such rent shall be payable as provided in such sublease; and |
(f) |
if a Growth Aircraft is neither owned nor leased by United, then prior to such aircraft entering Regional Airline Services on the date set forth in the Growth Aircraft Option Notice, Contractor shall sublease such aircraft from its owner or lessee, as directed by United, pursuant to a sublease in the form of the United standard form of sublease or another form of sublease acceptable to each of United, Contractor and such other party; provided that the rent under such sublease shall be treated as a Pass-Through Cost for purposes of this Agreement, except in circumstances where the rent would no longer be abated under such sublease, in which case such rent shall not be reimbursed or paid by United hereunder; and provided further that the terms and conditions of such sublease, including without limitation the rent thereunder, shall be acceptable to United in its sole discretion and provided further that in no case shall such lease or sublease extend for a term that is in excess of the term of this Agreement; and provided further that United shall assume any such lease or sublease, at its expense, in the event Contractor terminates this Agreement due to a breach by United. |
10.5 |
Covered Aircraft Leases . |
With respect to each E175 Covered Aircraft and any other Covered Aircraft that is leased or subleased by United to Contractor, upon not less than ten Business Days notice by Contractor to United, and at least ten Business Days prior to the Actual In-Service Date (or In-Service
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Date, if the aircraft is not an E175 Covered Aircraft) for such aircraft, United and Contractor shall enter into a Covered Aircraft Lease for such aircraft; provided that pursuant to each Covered Aircraft Lease, among other things, Basic Rent payable by Contractor to United thereunder shall be entirely abated unless and until (A) such Covered Aircraft has been withdrawn from this Agreement and no longer constitutes a Covered Aircraft, (B) the occurrence of a Labor Strike, or (C) the mandatory grounding of such Covered Aircraft by the FAA due to any action or inaction of Contractor, upon which in each case such Basic Rent shall be payable by Contractor to United until (x) in the case of such a withdrawal of such Covered Aircraft, such aircraft shall have been returned to United in accordance with the terms of such Covered Aircraft Lease and this Agreement, or (y) in the case of a Labor Strike or such a mandatory grounding, as the case may be, the number of Scheduled Flights that are On-Time Departures (including any days resulting from a Labor Strike or mandatory grounding) on any day of the week equals or exceeds the number of Scheduled Flights that were On-Time Departures on the same day of the week prior to such Labor Strike or mandatory grounding, as the case may be. Notwithstanding anything else contained herein to the contrary, if and when a Covered Aircraft Lease terminates in accordance with its terms, then the aircraft subject to such lease shall no longer constitute a Covered Aircraft effective on the date on which the term of such Covered Aircraft Lease ends, regardless of whether the event giving rise to such lease termination also constitutes an independent termination or withdrawal event hereunder. Any withdrawal occurring upon such a termination of a Covered Aircraft Lease shall be separate and distinct from, and shall not limit or supersede, any other withdrawal rights of United contained in this Agreement.
10.6 |
Lien; Subordination . |
(a) |
In order to secure all of Contractors obligations owed to United pursuant to this Agreement (including without limitation the timely payment by Contractor of all payment and reimbursement obligations to United hereunder and any damages incurred by United (including without limitation pursuant to Article VIII ) in any case where United is entitled to recover damages pursuant to applicable law as a result of the default by Contractor of its obligations hereunder), Contractor hereby grants to United a security interest of first priority (subject only to liens that arise by operation of applicable law and except as provided below) in the following (the E175 Lien ): any and all of Contractors right, title and interest in all appliances, accessories and other equipment or property installed in or on the E175 Covered Aircraft (including all replacements of the foregoing), any equipment stored at United facilities, any contractual rights or general intangibles material to the operation or ownership or otherwise related to the E175 Covered Aircraft or amounts payable to Contractor with respect to damage or casualty to the E175 Covered Aircraft and all proceeds of the foregoing and any accounts containing such proceeds (collectively, the E175 Collateral ); provided that the E175 Lien shall be junior and subordinate to any purchase money security interest in favor of one or more lenders (which lenders are not affiliates of Contractor) (each, a PMSI Lender ) arising from the provision by such lender(s) to Contractor of purchase money financing used to acquire any portion of the E175 Collateral. Contractor agrees, subject to the subordination provision set forth in this Section 10.6 , that United shall have all the rights, powers and remedies of a secured party available under applicable law following any such default by |
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Contractor, including but not limited to, the right to take possession of and sell in one or more transactions (whether by foreclosure, power of sale, or otherwise) the E175 Collateral or any part thereof; provided further that the E175 Collateral shall not include any property owned by United or not owned by Contractor or its affiliates. Contractor further agrees that United shall be entitled from time to time to file such Uniform Commercial Code ( UCC ) financing statements and continuation statements with respect to the E175 Collateral and take such other actions as it deems necessary or appropriate in connection with the perfection and maintenance of such security interest, and Contractor hereby consents to the filing of all such UCC financing statements and continuation statements. Contractor represents and warrants to United that Contractors current location (within the meaning of Section 9-307 of the UCC) is the State of Arizona. Contractor agrees that it will give United timely written notice (but in any event not later than thirty (30) days prior to the expiration of the period of time specified under applicable law to prevent lapse of perfection) of any change of its location (as such term is used in Section 9-307 of the UCC) from its then present location and will promptly take any action reasonably requested by United to continue the perfection of the E175 Lien on the E175 Collateral granted hereunder in favor of United. |
(b) |
In order to secure all of Contractors obligations owed to United pursuant to this Agreement (including without limitation the timely payment by Contractor of all payment and reimbursement obligations to United hereunder and any damages incurred by United (including without limitation pursuant to Article VIII ) in any case where United is entitled to recover damages pursuant to applicable law as a result of the default by Contractor of its obligations hereunder), Contractor hereby grants to United a security interest (subject only to liens that arise by operation of applicable law and except as provided below) in the following (the CRJ Lien ): the CRJ Covered Aircraft owned by Contractor or its affiliates, all appliances, accessories and other equipment or property installed in or on the CRJ Covered Aircraft owned by Contractor or its affiliates (including all replacements of the foregoing), any equipment stored at United facilities, any contractual rights or general intangibles material to the operation or ownership or otherwise related to the CRJ Covered Aircraft owned by Contractor or its affiliates or amounts payable to Contractor with respect to damage or casualty to the CRJ Covered Aircraft owned by Contractor or its affiliates and all proceeds of the foregoing and any accounts containing such proceeds (collectively, the CRJ Collateral ); provided that the CRJ Lien shall in all respects be junior and subordinate to any and all security interests and/or liens in effect as of the Effective Date in or on all or any portion of the CRJ Collateral, and to any and all security interests and/or liens on all or any portion of the CRJ Collateral in effect at any time subsequent to the Effective Date and held by or in favor of any lender of any senior debt obligation of Contractor or its affiliates, which lender is not an affiliate of Contractor (hereinafter, a Senior Lender ). Contractor agrees that, subject to the subordination provisions set forth in this Section 10.6 , United shall have all the rights, powers and remedies of a secured party available under applicable law following any such default by Contractor, including but not limited to, the right to |
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take possession of and sell in one or more transactions (whether by foreclosure, power of sale, or otherwise) the CRJ Collateral or any part thereof; provided further that the CRJ Collateral shall not include any property owned by United or not owned by Contractor or its affiliates. Contractor further agrees that United shall be entitled from time to time to file such UCC financing statements and continuation statements with respect to the CRJ Collateral and take such other actions as it deems necessary or appropriate in connection with the perfection and maintenance of such security interest, and Contractor hereby consents to the filing of all such UCC financing statements and continuation statements. Contractor represents and warrants to United that Contractors current location (within the meaning of Section 9-307 of the UCC) is the State of Arizona. Contractor agrees that it will give United timely written notice (but in any event not later than thirty (30) days prior to the expiration of the period of time specified under applicable law to prevent lapse of perfection) of any change of its location (as such term is used in Section 9-307 of the UCC) from its then present location and will promptly take any action reasonably requested by United to continue the perfection of the CRJ Lien on the CRJ Collateral granted hereunder in favor of United. |
(c) |
Contractor hereby represents and warrants that (i) it has all requisite corporate power and authority to grant the E175 Lien and the CRJ Lien in the E175 Collateral and CRJ Collateral, respectively, and (ii) such grant does not breach or result in a default of any of Contractors contracts or agreements. |
(d) |
Notwithstanding the date, manner or order of perfection or attachment of the security interests and liens granted by Contractor to United pursuant to this Section 10.6 or to any PMSI Lender or Senior Lender, and notwithstanding the usual application of the priority provisions of the UCC or any other applicable law or judicial decision, or whether a PMSI Lender or Senior Lender or United holds possession of all or any part of the E175 Collateral or CRJ Collateral, United hereby acknowledges and agrees that such PMSI Lender or Senior Lender, as the case may be, shall have a first and prior continuing security interest in and lien on the E175 Collateral or CRJ Collateral, respectively, and United shall have a security interest therein junior and subordinate in priority to the lien and security interest held by such PMSI Lender or Senior Lender, as the case may be. United hereby agrees to make such filings and recordings in the public records to evidence the priorities made herein as may be reasonably requested by Contractor at the request any PMSI Lender or Senior Lender, as the case may be, and, if required by any such PMSI Lender or Senior Lender, enter into a subordination agreement directly with such PMSI Lender or Senior Lender, as the case may be, in form and substance reasonably satisfactory to such PMSI Lender or Senior Lender for the purpose of evidencing the subordination provisions set forth in this Section 10.6 . The provisions of this Section 10.6 are applicable regardless of whether the security interest and/or lien of any PMSI Lender or Senior Lender, as the case may be, in the E175 Collateral or CRJ Collateral, respectively, is not perfected for any reason. |
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10.7 |
Delivery of Aircraft . |
With respect to E175 Covered Aircraft, Contractor agrees to act as Uniteds agent under the Embraer Purchase Agreement for the limited purposes set forth below:
(a) |
Contractor agrees to take, and shall take, any and all commercially reasonable actions requested by United in connection with the inspection of and the acceptance or non-acceptance of each E175 Covered Aircraft pursuant to the Embraer Purchase Agreement. |
(b) |
In furtherance, and not in limitation, of clause (a) above, Contractor agrees as follows: |
(i) |
At Uniteds instruction, given upon not less than five (5) days notice, Contractor shall inspect (or assist United in inspecting, as and to the extent requested by United) each E175 Covered Aircraft delivered by Embraer at Embraers premises in San Jose dos Campos, State of Sao Paulo, Brazil (or at such other location as United shall instruct Contractor), to determine whether such aircraft is in full compliance with the delivery requirements set forth in the Embraer Purchase Agreement Excerpt. Contractor shall conduct (or assist United in conducting, as and to the extent requested by United) all inspection procedures, including without limitation the conducting of an acceptance flight, if so instructed by United, within the time period set forth in the Embraer Purchase Agreement Excerpt. |
(ii) |
Following the inspection conducted pursuant to clause (i) above, Contractor shall immediately notify United of the results of such inspection in writing, specifically including Contractors determination as to whether all of the delivery requirements as set forth in the Embraer Purchase Agreement Excerpt have been met with respect to such E175 Covered Aircraft. Following receipt of such notice from Contractor, if United delivers specific instructions to Contractor to do so (and not otherwise), Contractor shall take such actions as United may request in connection with the delivery of such E175 Covered Aircraft, specifically including the following actions if so requested: (w) accept, or decline to accept, such E175 Covered Aircraft on Uniteds behalf pursuant to the Embraer Purchase Agreement, (x) accept, or decline to accept, on Uniteds behalf the warranty bill of sale, the Certificate of Sanitary Construction and such other documents or instruments from Embraer as may be provided in the Embraer Purchase Agreement or as United may otherwise request, (y) deliver to Embraer on Uniteds behalf such certificates or instruments as may be required as set forth in the Embraer Purchase Agreement Excerpt in order to effect such acceptance or as United may otherwise request, and (z) take delivery, or decline to take delivery, of such aircraft on Uniteds behalf, together with all manufacturer manuals relating thereto provided by Embraer. For the avoidance of doubt, the parties agree that if United fails to deliver any instructions to Contractor, |
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then Contractor shall not take any further action vis-à-vis Embraer with respect to such E175 Covered Aircraft unless and until further instructed by United. |
10.8 |
CRJ Interior Project . |
Contractor agrees to timely complete the installation of slim line seats on the CRJ Covered Aircraft as more fully set forth in Exhibit R , including those items specified as part of Phase 1 ( Phase 1 ) on such exhibit. Contractor agrees to complete no later than December 31, 2013 the installation of slim line seats on the CRJ Covered Aircraft as more fully set forth in Exhibit R , including (i) those items specified as part of Phase 2 on such exhibit and (ii) all activities required by Uniteds aircraft refurbishment standards, and (iii) painting the CRJ Covered Aircraft in the new livery, it being understood that Final Monthly Schedule shall accommodate a commercially reasonable amount of time for each CRJ Covered Aircraft requiring new livery paint (excluding Spare Aircraft and aircraft designated for Aircraft Heavy Maintenance) to undergo such Phase 2 obligations of Contractor (collectively, Phase 2 and, together with Phase 1, the CRJ Interior Project ). In connection therewith, Contractor shall purchase and pay for all seats and other materials, equipment and services, including all engineering and certification services, necessary or appropriate to complete those items specified as part of both phases of the CRJ Interior Project in accordance with the schedule, requirements and specifications established by United after consultation with Contractor. Contractor shall be responsible (and shall not be reimbursed by United) for those certain Phase 1 costs specified as its responsibility on Exhibit R , and, subject to Section 8.4(f) , United shall be responsible for reimbursing Contractor for those reasonable out-of-pocket Phase 1 costs approved by United and denominated as United Expenses in Exhibit R ; provided that United will reimburse Contractor for such costs on the next weekly wire transfer in accordance with the terms of the Agreement. In addition, Contractor shall be responsible for all Phase 2 costs. At its option and expense, United may provide an on-sight technical representative to act as a technical liaison between United, Contractor and any third party contractors regarding the Interior Project.
ARTICLE XI
MISCELLANEOUS
11.1 |
Transition Arrangements . |
(a) |
Scheduling . Subsequent to the execution of this Agreement, and prior to the commencement of the Term, Contractor and United shall work together to facilitate the initial monthly scheduling of Scheduled Flights. |
(b) |
Other Setup Arrangements . Subsequent to the execution of this Agreement, and prior to the commencement of the Term, Contractor and United shall work together to facilitate all other relevant aspects of the commencement of Contractors provision of Contractor Services as of the beginning of the Term. |
11.2 |
Notices . |
All notices made pursuant to this Agreement shall be in writing and shall be deemed given upon (a) a transmitters confirmation of a receipt of a facsimile transmission (but only if
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followed by confirmed delivery by a standard overnight courier the following Business Day or if delivered by hand the following Business Day), or (b) confirmed delivery by a standard overnight courier or delivered by hand, to the parties at the following addresses:
if to United:
United Airlines, Inc.
Willis Tower
233 S. Wacker Drive
Chicago, IL 60606
Attention: Senior Vice President Network Operations & United Express
Facsimile No.: (872) 825-0030
with a copy to:
United Airlines, Inc.
Willis Tower
233 S. Wacker Drive
Chicago, IL 60606
Attention: Vice President and Deputy General Counsel
Facsimile No.: (872) 825-0081
and to:
United Airlines, Inc.
Willis Tower
233 S. Wacker Drive
Chicago, IL 60606
Attention: Vice President Fleet
Facsimile No.: (872) 825-8113
if to Contractor:
Mesa Airlines, Inc.
410 N. 44th Street
Suite 700
Phoenix, AZ 85008
Attention: President (with a copy to General Counsel)
Facsimile No.: (602) 685-4350
if to Parent:
Mesa Air Group, Inc.
410 N. 44th Street
Suite 700
Phoenix, AZ 85008
Attention: President (with a copy to General Counsel)
Facsimile No.: (602) 685-4350
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or to such other address as any party hereto may have furnished to the other parties by a notice in writing in accordance with this Section 11.2 .
11.3 |
Binding Effect; Assignment . |
This Agreement and all of the provisions hereof shall be binding upon the parties hereto and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger or other consolidation of either party with another Person (and without limiting Uniteds rights pursuant to Section 5.2 hereof), neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other parties. For the avoidance of doubt, United may effectively assign without Contractors prior written consent all of its performance, rights, and obligations hereunder to any direct or indirect wholly-owned Subsidiary of United Continental Holdings, Inc.
11.4 |
Amendment and Modification . |
This Agreement may not be amended or modified in any respect except by a written agreement signed by the parties hereto that specifically states that it is intended to amend or modify this Agreement.
11.5 |
Waiver . |
The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but such waiver shall be effective only if it is in writing signed by the party against which such waiver is to be asserted that specifically states that it is intended to waive such term. Unless otherwise expressly provided in this Agreement, no delay or omission on the part of any party in exercising any right or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right or privilege under this Agreement operate as a waiver of any other right or privilege under this Agreement nor shall any single or partial exercise of any right or privilege preclude any other or further exercise thereof or the exercise of any other right or privilege under this Agreement. No failure by any party to take any action or assert any right or privilege hereunder shall be deemed to be a waiver of such right or privilege in the event of the continuation or repetition of the circumstances giving rise to such right unless expressly waived in writing by each party against whom the existence of such waiver is asserted.
11.6 |
Interpretation . |
The table of contents and the section and other headings and subheadings contained in this Agreement and in the exhibits and schedules hereto are solely for the purpose of reference, are not part of the agreement of the parties hereto, and shall not in any way affect the meaning or interpretation of this Agreement or any exhibit or schedule hereto. All references to days or months shall be deemed references to calendar days or months. All references to $ shall be deemed references to United States dollars. Unless the context otherwise requires, any reference to an Article, a Section, an Exhibit, or a Schedule shall be deemed to refer to a section of this Agreement or an exhibit or schedule to this Agreement, as applicable. The words hereof, herein and hereunder and words of similar import referring to this Agreement refer
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to this Agreement as a whole and not to any particular provision of this Agreement. Whenever the words include, includes or including are used in this Agreement, unless otherwise specifically provided, they shall be deemed to be followed by the words without limitation. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing the document to be drafted.
11.7 |
Confidentiality . |
Except as required by law or stock exchange or other regulation or in any proceeding to enforce the provisions of this Agreement, or as otherwise provided below, each party to this Agreement hereby agrees not to publicize or disclose to any third party the terms or conditions of this Agreement or any of the Ancillary Agreements, or any exhibit, schedule or appendix hereto or thereto, or any CPA Records, without the prior written consent of the other parties thereto (except that (i) a party may disclose such information to its existing and potential lenders, lessors and other financing parties, its third-party consultants, its advisors and its representatives, in each case who are themselves bound to keep such information confidential and (ii) United may disclose any information to its organized labor groups and their third-party consultants, advisors and representatives as required pursuant to applicable collective bargaining agreements). Except as required by law or stock exchange or other regulation or in any proceeding to enforce the provisions of this Agreement or any of the Ancillary Agreements, or as otherwise provided below, each party hereby agrees not to disclose to any third party any confidential information or data, both oral and written, received from the other, whether pursuant to or in connection with this Agreement or any of the Ancillary Agreements, without the prior written consent of the party providing such confidential information or data (except that a party may disclose such information to its third-party consultants, advisors and representatives, in each case who are themselves bound to keep such information confidential). Each party hereby agrees not to use any such confidential information or data of the other party other than in connection with performing their respective obligations or enforcing their respective rights under this Agreement or any of the Ancillary Agreements, or as otherwise expressly permitted or contemplated by this Agreement or any of the Ancillary Agreements. If either party is served with a subpoena or other process requiring the production or disclosure of any of such agreements or information, then the party receiving such subpoena or other process, before complying with such subpoena or other process, shall immediately notify the other parties hereto of the same and permit said other parties a reasonable period of time to intervene and contest disclosure or production. Upon termination of this Agreement, each party must return to each other any confidential information or data received from the other which is still in the recipients possession or control. Without limiting the foregoing, no party shall be prevented from disclosing the following terms of this Agreement: the number of aircraft subject hereto, the periods for which such aircraft are subject hereto, and any termination provisions contained herein. The provisions of this Section 11.7 shall survive the termination of this Agreement for a period of ten (10) years.
11.8 |
Counterparts . |
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The Agreement may be executed by facsimile signature.
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11.9 Severability . |
|
Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective (unless and until reformed automatically or replaced via good faith negotiations, as applicable, pursuant to the third sentence of this Section 11.9 ) to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. If (x) any term or provision of this Agreement is or is rendered or held invalid, illegal or incapable of being enforced by any jurisdiction, applicable law or public policy and (y) the parties agree that such term or provision is essential to this Agreement, then such term or provision will be reformed automatically in the applicable jurisdiction so as to comply with the applicable law or public policy and to effect the original intent of the parties as closely as possible; provided , however , that if, in the reasonable opinion of either party hereto, the reformation of such invalid, illegal or unenforceable term or provision materially adversely affects a partys rights or duties hereunder, then the parties shall immediately begin good faith negotiations for a suitable replacement provision which effects the original intent of the parties as closely as possible; provided further , that if, after the good faith negotiations referenced in the immediately preceding proviso, the parties are unable to reach agreement as to a suitable replacement provision, then the party adversely affected by the reformation may immediately terminate this Agreement upon written notice to the other party hereto, upon which termination this Agreement shall be of no further force and effect and the provisions of Section 8.3 shall apply.
11.10 Relationship |
of Parties . |
Nothing in this Agreement shall be interpreted or construed as establishing between the parties a partnership, joint venture, joint employment, agency (except pursuant to Section 10.7 ) or other similar arrangement.
11.11 Entire |
Agreement; No Third Party Beneficiaries . |
This Agreement (including the exhibits and schedules hereto) and the Ancillary Agreements are intended by the parties as a complete statement of the entire agreement and understanding of the parties with respect to the subject matter hereof and all matters between the parties related to the subject matter herein or therein set forth. This Agreement is made among, and for the benefit of, the parties hereto, and the parties do not intend to create any third-party beneficiaries hereby, and no other Person shall have any rights arising under, or interests in or to, this Agreement.
11.12 Governing |
Law . |
Except with respect to matters referenced in Section 11.16(e) (which shall be governed by and construed pursuant to the Federal Arbitration Act), this Agreement shall be governed by and construed in accordance with the laws of the State of Illinois (excluding Illinois choice of law principles that might call for the application of the law of another jurisdiction) as to all matters, including matters of validity, construction, effect, performance and remedies. Subject to Section 11.16 , any action arising out of this Agreement or the rights and duties of the parties
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Execution Version
arising hereunder may be brought, if at all, only in the state or federal courts located in the United States District Court for the Northern District of Illinois or the County of Cook, Illinois, as applicable. Each party further agrees to waive any right to a trial by jury.
11.13 Right |
of Set-Off . |
If any party hereto shall be in default hereunder or under any Ancillary Agreement or any other agreement between the parties hereto relating to the provision of Contractor Services (including without limitation any ground handling agreement), then in any such case the non-defaulting party shall be entitled to set off from any payment owed by such non-defaulting party to the defaulting party hereunder any amount owed by the defaulting party to the non-defaulting party hereunder or thereunder; provided that contemporaneously with any such set-off, the non-defaulting party shall give written notice of such action to the defaulting party; provided further that the failure to give such notice shall not affect the validity of the set-off. It is specifically agreed that (i) for purposes of the set-off by any non-defaulting party, mutuality shall be deemed to exist among the parties; (ii) reciprocity among the parties exists with respect to their relative rights and obligations in respect of any such set-off; and (iii) the right of set-off is given as additional security to induce the parties to enter into the transactions contemplated hereby and by the Ancillary Agreements. Upon completion of any such set-off, the obligation of the defaulting party to the non-defaulting party shall be extinguished to the extent of the amount so set-off. Each party hereto further waives any right to assert as a defense to any attempted set-off the requirements of liquidation or mutuality. This set-off provision shall be without prejudice, and in addition, to any right of set-off, combination of accounts, lien or other right to which any non-defaulting party is at any time otherwise entitled (either by operation of law, contract or otherwise), including without limitation pursuant to Article III hereof. In addition to the foregoing, United shall have a credit in the amount of $[***] (representing [***] per month per aircraft for all twenty (20) CRJ Covered Aircraft, less [***] per month per aircraft for five (5) CRJ Covered Aircraft, for each of June, July and August, 2013), which amount shall be set off by United against any payments to be made to Contractor hereunder.
11.14 Cooperation |
with Respect to Reporting . |
Contractor shall be responsible for filing all reports relating to its operations that are required by the DOT, FAA or other applicable government agencies (other than any such reports for which United, where permitted by law, has assumed in writing the responsibility to file on Contractors behalf), and Contractor shall promptly furnish United with copies of all such reports and such other available traffic and operating reports as United may request from time to time. Each of the parties hereto agrees to use its commercially reasonable efforts to cooperate with each other party in providing necessary data, to the extent in the possession of the first party, required by such other party in order to meet any reporting requirements to, or otherwise in connection with any filing with or provision of information to be made to, any regulatory agency or other governmental authority. If a party fails to provide any such data to the other party sufficiently in advance of the applicable deadline for such filings, and the other party is unable to submit such filings by the deadline because of such delay, the first party will reimburse the other party for any fines or penalties incurred by the other party as a result of its failure to submit such filings by the deadline. The obligations under this Section 11.14 shall survive the termination of this Agreement.
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11.15 Parent |
Guarantee . |
Contemporaneous with the execution and delivery of this Agreement, Parent shall execute a guarantee in favor of United in form of Exhibit K . Parent hereby agrees that it shall not participate in any transaction or series of transactions if, after giving effect to such transaction or series of transactions, Contractor will become the Subsidiary of another Person, unless at the time such transactions are consummated such other Person executes and delivers to United a guarantee of the obligations of Contractor under this Agreement and the Ancillary Agreements substantially in the form of Exhibit K .
11.16 Arbitration . |
|
(a) |
Agreement to Arbitrate . Subject to the equitable remedies provided under Section 8.4(h) , any and all claims, demands, causes of action, disputes, controversies and other matters in question (all of which are referred to herein as Claims ) arising out of or relating to this Agreement (other than with regard to the determination of Fair Market Value of a Call Option Aircraft or CRJ Removed Aircraft), shall be resolved by binding arbitration pursuant to the commercial arbitration rules (the Rules ) of the American Arbitration Association (the AAA ). In the event of a conflict between this Agreement and the Rules, the provisions of this Agreement shall control. Subject to the equitable remedies provided under Section 8.4(i) , each of the parties agrees that arbitration under this Section 11.16 is the exclusive method for resolving any Claim and that it will not commence an action or proceeding based on a Claim hereunder, except to enforce the arbitrators decisions as provided in this Section 11.16 , to compel any other party to participate in arbitration under this Section 11.16 . The governing law for any such action or proceeding shall be the law set forth in Section 11.16(f) . The parties shall bear the costs for the arbitration equally, but each shall pay for its own legal expenses. |
(b) |
Initiation of Arbitration . If any Claim has not been resolved by mutual agreement on or before the 15th day following the first notice of the Claim to or from a disputing party, then the arbitration may be initiated by one party by providing to the other party a written notice of arbitration specifying the Claim or Claims to be arbitrated. If a party refuses to honor its obligations to arbitrate under this provision, the other party may compel arbitration in either federal or state court in Chicago, Illinois and seek recovery of its attorneys fees and court costs incurred if the arbitration is ordered to proceed. |
(c) |
Place of Arbitration . The arbitration proceeding shall be conducted in Chicago, Illinois, or some other location mutually agreed upon by the parties. |
(d) |
Selection of Arbitrators . The arbitration panel (the Panel ) shall consist of three arbitrators who are qualified to hear the type of Claim at issue. They may be selected by agreement of the parties within thirty days of the notice initiating the arbitration procedure, or from the date of any order compelling such arbitration to proceed. If the parties fail to agree upon the designation of any or all the Panel, |
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Execution Version
then the parties shall request the assistance of the AAA. The Panel shall make all of its decisions by majority vote. Evident partiality on the part of an arbitrator exists only where the circumstances are such that a reasonable person would have to conclude there in fact existed actual bias, and a mere appearance or impression of bias will not constitute evident partiality or otherwise disqualify an arbitrator. The decision of the Panel will be binding and non-appealable, except as permitted under the Federal Arbitration Act. |
(e) |
Choice of Law as to Procedural Matters . The enforcement of this agreement to arbitrate, and all procedural aspects of the proceeding pursuant to this Agreement to arbitrate, including but not limited to, the issues subject to arbitration (i.e., arbitrability), the scope of the arbitrable issues, and the rules governing the conduct of the arbitration, unless otherwise agreed by the parties, shall be governed by and construed pursuant to the Federal Arbitration Act. |
(f) |
Choice of Law as to Substantive Claims . In deciding the substance of the parties Claims, the arbitrators shall apply the substantive laws of the State of Illinois (excluding Illinois choice of law principles that might call for the application of the law of another jurisdiction). |
(g) |
Procedure . It is contemplated that the arbitration proceeding will be self-administered by the parties and conducted in accordance with procedures jointly determined by the Panel and the parties; provided , however , that if either or both parties believes the process will be enhanced if it is administered by the AAA, then either or both parties shall have the right to cause the process to become administered by the AAA and, thereafter, the arbitration shall be conducted, where applicable or appropriate, pursuant to the administration of the AAA. In determining the extent of discovery, the number and length of depositions, and all other pre-hearing matters, the Panel shall endeavor to the extent possible to streamline the proceedings and minimize the time and cost of the proceedings. |
(h) |
Final Hearing . The final hearing shall be conducted within 120 days of the selection of the entire Panel. The final hearing shall not exceed ten business days, with each party to be granted one half of the allocated time to present its case to the arbitrators, unless otherwise agreed by the parties. |
(i) |
Damages . Only actual damages may be awarded. It is expressly agreed that the Panel shall have no authority to award (i) damages inconsistent with this Agreement or (ii) damages of any type that has been waived by the parties pursuant to Section 8.4(h) . The parties expressly waive their right to obtain such damages in arbitration or in any other forum. In no event, even if any portion of these provisions is held to be invalid or unenforceable, shall the arbitrator have the power to make an award or impose a remedy which could not be made or imposed by a court deciding the matter in the same jurisdiction. |
(j) |
Decision of the Arbitration . The Panel shall render its final decision and award (such decision, together with such decisions associated award, the Award ) in |
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Execution Version
writing within twenty (20) days of the completion of the final hearing completely resolving all of the Claims that are the subject of the arbitration proceeding. The Panel shall certify in its decision that no part of the Award includes any amount for treble, exemplary or punitive damages. Any and all of the Panels orders and decisions will be enforceable in, and judgment upon any award rendered in the arbitration proceeding may be confirmed and entered by, any federal or state court in Chicago, Illinois having jurisdiction. |
(k) |
Appeal . Within thirty (30) days of receipt of the Award (which shall not be binding if an appeal is taken), a party may notify the AAA of an intention to appeal to a second arbitral tribunal panel (the Second Panel ). The Second Panel shall be comprised of three (3) arbitrators who are qualified to hear the type of Claim at issue, each with at least fifteen (15) years of experience as an attorney or judge specializing in corporate or commercial matters. The Second Panel shall be entitled (x) to adopt the Award as its own, (ii) modify the Award or (z) substitute its own award for the Award. The Second Panel shall not modify or replace the Award except for clear errors of law or because of findings of fact against the manifest weight of the evidence. The award of the Second Panel (the Appeals Award ) shall be final, binding and non-appealable to the maximum extent permitted by law, and judgment may be entered by a court having jurisdiction thereof. The Appeals Award shall not be vacated, modified or corrected by the court other than on the grounds specified in Section 10 or Section 11 of the Federal Arbitration Act. |
(l) |
Confidentiality . All proceedings conducted hereunder and the decision and award of the Panel shall be kept confidential by the Panel and, except as required by law or stock exchange regulation or in any proceeding to enforce any decision or award by the Panel, by the parties. |
11.17 Termination |
of 2004 Agreement; Transition of CRJ-700 Aircraft . |
The 2004 Agreement shall continue in full force and effect through 11:59:59 pm central time on August 31, 2013 (the 2004 Termination Time ) with respect to the CRJ Covered Aircraft, and shall terminate at the 2004 Termination Time, except that such agreement shall continue in force and effect with respect to any flight covered by such agreement in operation at such time, until the completion of such flight. The provisions of this Agreement shall take effect with respect to the CRJ Covered Aircraft from and after September 1, 2013 (or, with respect to such ongoing flights, from and after the completion of such flights). With respect to costs and expenses incurred by, revenue received by, any party, and to claims (if any) arising in respect of any partys operations, the parties intend that (x) all such revenues, costs, expenses, claims, liabilities and obligations relating primarily to regional jet operations performed prior to the 2004 Termination Time shall be governed by the terms and provisions of the 2004 Agreement (including without limitation the payment, reconciliation and indemnification provisions therein) and such terms and provisions shall survive the termination of the 2004 Agreement to the extent necessary to give effect to this clause (x) , and (y) all such revenues, costs, expenses, claims, liabilities and obligations relating primarily to regional jet operations performed after the 2004 Termination Time shall be governed by the terms and provisions of this Agreement (including
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Execution Version
without limitation the payment, reconciliation and indemnification provisions herein); provided that, for purposes of determining the occurrence of an event constituting Special Cause or an event of Cause described in clauses (iv) , (v) or (viii) of the definition thereof, provisions in this Agreement requiring the measurement of past performance shall not apply to, or measure performance from, any period prior to the 2004 Termination Time. The parties agree to work together in good faith to accomplish any necessary reconciliation that gives effect to the intentions set forth above.
86
IN WITNESS WHEREOF, the parties hereto have caused this Capacity Purchase Agreement to be duly executed and delivered as of the date and year first written above.
UNITED AIRLINES, INC. |
By: |
Name: |
Title: |
MESA AIR GROUP, INC. |
By: |
Name: |
Title: |
MESA AIRLINES, INC. |
By: |
Name: |
Title: |
S IGNATURE P AGE T O
C APACITY P URCHASE A GREEMENT
A MONG
U NITED A IRLINES , I NC ., M ESA A IRLINES , I NC , AND M ESA AIR GROUP , I NC .
SCHEDULE 1
Covered Aircraft
The following Table 1 shall apply to the E175 Covered Aircraft:
Aircraft
Number |
Aircraft
Type |
Tail Number |
MSN |
Actual
Date (1) |
Actual In- Service Date (1) |
Scheduled
Date (2) |
Scheduled
Term |
|||||||
01 | E175 | 5 years | ||||||||||||
02 | E175 | 5 years | ||||||||||||
03 | E175 | 5 years | ||||||||||||
04 | E175 | 5 years | ||||||||||||
05 | E175 | 5 years | ||||||||||||
06 | E175 | 5 years | ||||||||||||
07 | E175 | 5 years | ||||||||||||
08 | E175 | 5 years | ||||||||||||
09 | E175 | 5 years | ||||||||||||
10 | E175 | 5 years | ||||||||||||
11 | E175 | 5 years | ||||||||||||
12 | E175 | 5 years | ||||||||||||
13 | E175 | 5 years | ||||||||||||
14 | E175 | 5 years | ||||||||||||
15 | E175 | 5 years | ||||||||||||
16 | E175 | 5 years | ||||||||||||
17 | E175 | 5 years | ||||||||||||
18 | E175 | 5 years | ||||||||||||
19 | E175 | 5 years | ||||||||||||
20 | E175 | 5 years | ||||||||||||
21 | E175 | 5 years | ||||||||||||
22 | E175 | 5 years | ||||||||||||
23 | E175 | 5 years | ||||||||||||
24 | E175 | 5 years | ||||||||||||
25 | E175 | 5 years | ||||||||||||
26 | E175 | 5 years | ||||||||||||
27 | E175 | 5 years | ||||||||||||
28 | E175 | 5 years | ||||||||||||
29 | E175 | 5 years | ||||||||||||
30 | E175 | 5 years |
1. |
The delivery dates and in-service dates for all E175 Covered Aircraft must satisfy the following conditions: |
(a) |
No later than one hundred and fifty (150) days prior to the Scheduled Delivery Date for any E175 Covered Aircraft as set forth on Schedule 1A attached hereto (the Scheduled Delivery Date ), United shall inform Contractor of the dates that are |
Schedule 1-1
likely to be selected as the Committed In-Service Date for each E175 Covered Aircraft, it being understood that (x) such communication from United to Contractor shall not be binding for purposes of selecting the actual Committed In-Service Date pursuant to clause (d) below, and (y) such dates shall be used by Contractor and United in anticipating aircraft available to schedule and with respect to any applicable Final Monthly Schedule. |
(b) |
Subject to the proviso to the first sentence of Section 2.1(a) of this Agreement, United shall provide a final notice of the actual delivery date of any E175 Covered Aircraft (the Final Notice) to Contractor no later than the earlier of (x) the date such aircraft is actually delivered to United or to Contractor pursuant to Section 10.7, as the case may be, pursuant to the terms of the Embraer Purchase Agreement (the Actual Delivery Date), and (y) the day following the completion of the final inspection of such aircraft, which notice shall determine the delivery date of the aircraft for purposes of this Schedule 1 (the Committed Delivery Date), and which determination shall be confirmed in writing by the parties. |
(c) |
United shall use its commercially reasonable efforts to provide Contractor with notice regarding the delivery status of each E175 Covered Aircraft from time to time in advance of the delivery of a Final Notice with respect to such E175 Covered Aircraft, including without limitation information relating to the commencement of the delivery inspection period, delays in delivery, or otherwise relating to the delivery of such aircraft. |
(d) |
Following the determination of the Committed Delivery Date for an E175 Covered Aircraft pursuant to clause (b) above, Contractor shall inform United of a projected Actual In-Service Date for such aircraft (the Committed In-Service Date), which shall be not later than the first to occur of (x) the 60th day (or, in the case of the first E175 Covered Aircraft to be placed into service hereunder, the 90th day) following the Committed Delivery Date and (y) the date set forth under the caption Scheduled In-Service Date for such aircraft on Schedule 1A attached hereto (as such Scheduled In-Service Date may be delayed by, and only to the extent such date is delayed by, a delay attributable to the manufacturer, by a Regulatory Approval Delay, or by a delay due to an Act of God that continues for fewer than fifteen (15) days). |
(e) |
On the date that an E175 Covered Aircraft becomes available to schedule under the provisions of this Agreement, such aircraft shall be deemed to have been placed into service hereunder (such date being the Actual In-Service Date for such aircraft). |
(f) |
As soon as practicable following the determination of the Actual Delivery Date and the Actual In-Service for an E175 Covered Aircraft pursuant to clauses (c) and (e) above, the parties hereto shall revise Schedule 1 accordingly. |
(g) |
The scheduled exit date for any E175 Covered Aircraft (the Scheduled Exit Date) shall be the fifth (5th) anniversary of the Actual In-Service Date determined pursuant to clause (e) above, and the parties hereto shall further revise Schedule 1 accordingly. |
Schedule 1-2
(h) |
Following the determinations in clauses (c), (e) and (g) above of the Actual Delivery Date, the Actual In-Service Date and the Scheduled Exit Date for an E175 Covered Aircraft, Contractor and United shall complete all missing information in this Schedule 1 with respect to such E175 Covered Aircraft, and the initial Schedule 1 attached hereto as of the Effective Date shall be deemed to have been amended and replaced by the Schedule 1 as revised pursuant to this clause (h) with respect to such E175 Covered Aircraft without any further action by the parties hereto. |
2. |
The Scheduled Exit Dates set forth in the above table shall be adjusted from time to time to reflect any extension of the Term for any E175 Covered Aircraft pursuant to Section 10.2 of this Agreement. |
The following Table 2 and Table 3 shall apply to the CRJ Covered Aircraft:
Table 2
Aircraft Number
|
Aircraft Type
|
Tail Number
|
CRJ Scheduled Delivery Date
|
CRJ In-Service Date | ||||
01 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
02 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
03 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
04 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
05 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
06 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
07 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
08 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
09 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
10 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
11 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
12 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
13 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
14 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
15 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
16 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
17 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
18 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
19 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
20 | CRJ700 | September 1, 2013 | September 1, 2013 |
Table 3
Aircraft Number
|
CRJ Scheduled Exit Date (1) (2)
|
Scheduled Term (3)
|
||
01 |
August 31, 2019 | 6 yrs 3 mos | ||
02 |
August 31, 2019 | 6 yrs 3 mos |
Schedule 1-3
Aircraft Number
|
CRJ Scheduled Exit Date (1) (2)
|
Scheduled Term (3)
|
||
03 | August 31, 2019 | 6 yrs 3 mos | ||
04 | August 31, 2019 | 6 yrs 3 mos | ||
05 | September 30, 2019 | 6 yrs 4 mos | ||
06 | September 30, 2019 | 6 yrs 4 mos | ||
07 | September 30, 2019 | 6 yrs 4 mos | ||
08 | September 30, 2019 | 6 yrs 4 mos | ||
09 | October 31, 2019 | 6 yrs 5 mos | ||
10 | October 31, 2019 | 6 yrs 5 mos | ||
11 | October 31, 2019 | 6 yrs 5 mos | ||
12 | October 31, 2019 | 6 yrs 5 mos | ||
13 | November 30, 2019 | 6 yrs 6 mos | ||
14 | November 30, 2019 | 6 yrs 6 mos | ||
15 | November 30, 2019 | 6 yrs 6 mos | ||
16 | November 30, 2019 | 6 yrs 6 mos | ||
17 | December 31, 2019 | 6 yrs 7 mos | ||
18 | December 31, 2019 | 6 yrs 7 mos | ||
19 | December 31, 2019 | 6 yrs 7 mos | ||
20 | December 31, 2019 | 6 yrs 7 mos |
1. |
The CRJ Scheduled Exit Dates and Scheduled Term set forth in the above table shall be adjusted from time to time to reflect any extension of Term for any CRJ Covered Aircraft pursuant to Section 10.2 of this Agreement and to coincide with the schedule change date within Uniteds scheduling system most closely following any applicable exit date. |
2. |
Contractor shall provide United, not later than 90 days prior to each CRJ Scheduled Exit Date, with specific tail numbers identifying the CRJ Covered Aircraft to be terminated on such date. |
3. |
Upon the CRJ Scheduled Exit Date, the Term associated with each of the CRJ Covered Aircraft shall expire. |
Schedule 1-4
SCHEDULE 1A
E175 Covered Aircraft Scheduled Delivery Dates and Scheduled In-Service Dates
Aircraft Number
|
Scheduled Delivery Date
|
Scheduled In-Service Date *
|
Target In- Service Date
|
|||
01 | March 30, 2014 | July 31, 2014 | June 15, 2014 | |||
02 | April 30, 2014 | August 14, 2014 | July 15, 2014 | |||
03 | April 30, 2014 | August 14, 2014 | July 15, 2014 | |||
04 | June 30, 2014 | September 14, 2014 | August 15, 2014 | |||
05 | July 30, 2014 | September 30, 2014 | August 15, 2014 | |||
06 | July 30, 2014 | October 15, 2014 | September 15, 2014 | |||
07 | August 30, 2014 | October 31, 2014 | September 15, 2014 | |||
08 | August 30, 2014 | November 14, 2014 | October 15, 2014 | |||
09 | October 30, 2014 | December 15, 2014 | November 15, 2014 | |||
10 | October 30, 2014 | December 15, 2014 | November 15, 2014 | |||
11 | October 30, 2014 | January 14, 2014 | December 15, 2014 | |||
12 | November 30, 2014 | January 14, 2014 | December 15, 2014 | |||
13 | November 30, 2014 | February 14, 2015 | January 15, 2015 | |||
14 | November 30, 2014 | February 14, 2015 | January 15, 2015 | |||
15 | December 30, 2014 | March 17, 2015 | January 30, 2015 | |||
16 | December 30, 2014 | March 17, 2015 | February 15, 2015 | |||
17 | December 30, 2014 | March 17, 2015 | February 15, 2015 | |||
18 | February 28, 2015 | April 14, 2015 | March 15, 2015 | |||
19 | February 28, 2015 | April 14, 2015 | March 15, 2015 | |||
20 | March 30, 2015 | May 15, 2015 | April 15, 2015 | |||
21 | March 30, 2015 | May 15, 2015 | April 15, 2015 | |||
22 | April 30, 2015 | June 14, 2015 | May 15, 2015 | |||
23 | April 30, 2015 | June 14, 2015 | May 15, 2015 | |||
24 | May 30, 2015 | July 15, 2015 | June 15, 2015 | |||
25 | June 30, 2015 | August 14, 2015 | July 15, 2015 | |||
26 | June 30, 2015 | August 14, 2015 | July 15, 2015 | |||
27 | June 30, 2015 | September 14, 2015 | August 15, 2015 | |||
28 | July 30, 2015 | September 14, 2015 | August 15, 2015 | |||
29 | July 30, 2015 | October 15, 2015 | September 15, 2015 | |||
30 | ** | ** | ** |
* |
Notwithstanding the date listed for this aircraft, Contractor agrees to use its best efforts to place this aircraft in service by its associated Target In-Service Date. |
** |
With respect to Aircraft Number 30, the parties shall discuss in good faith and agree upon a Scheduled Delivery Date, Scheduled In-Service Date and Target In-Service Date for such aircraft; provided that, if no such agreement is reached within sixty (60) days of the Effective Date, then United, at its sole option, may determine that such aircraft shall not constitute Covered Aircraft for any purposes hereunder, upon which (i) Schedule 1 attached hereto shall be deemed to have been amended and replaced by a Schedule 1 as revised to delete such Covered Aircraft therefrom (and such aircraft shall not be replaced) without any further action by the parties hereto and (ii) no party hereunder shall incur any liability whatsoever to any of the other parties hereunder in connection with the removal of such aircraft from this Agreement as a result of the failure of the parties to reach such agreement. |
Schedule 1A-1
SCHEDULE 2A
E175 Covered Aircraft Compensation for Carrier Controlled Costs
The following rates shall apply per corresponding year to all E175 Covered Aircraft flown under this Agreement and shall become effective at the Actual In-Service Date for each E175 Covered Aircraft:
Year
|
Category (1) | |||||||||||
for each block
|
for each flight hour
|
for each Scheduled Flight departure
|
for interrupted trip expense per passenger
|
per aircraft
|
per aircraft
per month AD
pursuant to
3.6(b)(iii)(A)(8)
|
|||||||
2014 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2015 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2016 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2017 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2018 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2019 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2020 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2021 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2022 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2023 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2024 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2025 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
2026 |
[***] | [***] | [***] | [***] | [***] | [***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
Schedule 2A-1
SCHEDULE 2B
CRJ Covered Aircraft Compensation for Carrier Controlled Costs
The following rates shall apply to all CRJ Covered Aircraft flown under this Agreement and shall become effective at the In-Service Date for each CRJ Covered Aircraft:
Category | ||||||||||||||
for each block hour
|
for each aircraft
|
for
each
|
For interrupted trip
expense
passenger
|
for each
|
per aircraft per
|
per month
|
||||||||
June 2013 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||
June 2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||
June 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||
June 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||
June 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||
June 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||
June 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
Schedule 2B-1
SCHEDULE 3
Pass-Through Costs
Category |
Reconciled Expense |
Section 3 Reference | Driver |
Prepayment
Rate |
||||
Completed Departures |
Fuel Services**
|
Section 3.6(b)(iii)(A)(7)
|
Departures
|
*
|
||||
Landing
Fees*** |
Section 3.6(b)(iii)(A)(4) | Departures | * | |||||
Navigation
Fees |
Section 3.6(b)(iii)(A)(6) | Departures | * | |||||
Completed Passengers |
War Risk Insurance |
Section 3.6(b)(iii)(A)(3) | Completed Passenger | * | ||||
Passenger Liability Insurance |
Section 3.6(b)(iii)(A)(3) | Completed Passenger | * | |||||
Completed Revenue Passenger Miles |
War Risk Insurance |
Section 3.6(b)(iii)(A)(3) | Per 1000 RPMs | * | ||||
Passenger Liability Insurance |
Section 3.6(b)(iii)(A)(3) | Per 1000 RPMs | * | |||||
Non- Expendable Parts |
Section 3.6(b)(iii)(A)(9) |
As incurred |
* | |||||
Engine Maintenance Expenses |
Section 3.6(b)(iii)(A)(10) |
As incurred |
* | |||||
Airframe Heavy Checks |
Section 3.6(b)(iii)(A)(11)
|
As incurred |
* | |||||
Landing Gear Maintenance Expenses |
Section 3.6(b)(iii)(A)(12) |
As incurred |
* | |||||
APU Maintenance Expenses |
Section 3.6(b)(iii)(A)(13) |
As incurred |
* | |||||
Towing
the Towing Baseline |
3.6(b)(iii)(A)(14) |
As incurred |
* |
* The Prepayment Rates reflected above in this Schedule 3 shall be determined annually by the parties acting reasonably and may be confirmed by e-mail exchange or other writing by the parties and may otherwise be adjusted from time to time, upon the mutual agreement of the parties (and confirmed by e-mail exchange or other writing), to reflect a closer approximation of the actual reconciled amounts of such Pass-Through Costs.
** Fuel Services shall constitute a Pass-Through Cost only if United shall not have elected to procure Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.12(b) .
*** Landing fees shall constitute a Pass-Through Cost only if United elects to have Contractor pay for landing fees pursuant to Section 4.24(b) .
Schedule 3-1
SCHEDULE 4
Incentive Compensation
Markup Amounts, Markup Percentages and Performance Grade Widths
Markup Amounts for E175 Covered Aircraft
Level of Performance Markup Amounts
|
||||||||
Performance Metric | A | B | C | D | ||||
On-Time Departure Rate (On-Time Zero) |
[***] | [***] | [***] | [***] | ||||
Controllable Completion Factor |
[***] | [***] | [***] | [***] | ||||
Customer Satisfaction |
[***] | [***] | [***] | [***] | ||||
Total |
[***] | [***] | [***] | [***] |
Markup Percentages for CRJ Covered Aircraft
Level of Performance Markup Percentages
|
||||||||
Performance Metric | A | B | C | D | ||||
On-Time Departure Rate (On-Time Zero) |
[***] | [***] | [***] | [***] | ||||
Controllable Completion Factor |
[***] | [***] | [***] | [***] | ||||
Customer Satisfaction |
[***] | [***] | [***] | [***] | ||||
Total |
[***] | [***] | [***] | [***] |
Performance Grade Widths
Performance Grade Widths
|
||||||||
Performance Metric |
Bottom of A |
Bottom of B* |
Bottom of C |
Level D | ||||
On-Time Departure Rate (On-Time Zero) |
X + [***] | X | X [***] |
Anything Below C |
||||
Controllable Completion Factor |
Y + [***] | Y | Y [***] |
Anything Below C |
||||
Customer Satisfaction |
Z + [***] | Z | Z [***] |
Anything Below C |
* X, Y, Z= Contractors Monthly Operating Goal for the Operating Category
Schedule 4-1
EXHIBIT A
Definitions
2004 Agreement is defined in Section 8.4(e) .
2004 Termination Time is defined in Section 11.17 .
2.4(a) Notice is defined in Section 2.4(a) .
2.4(b) Notice is defined in Section 2.4(b) .
AAA is defined in Section 11.16(a) .
Accommodating Aircraft Movement is defined in Section 4.6(a) .
Act of God means an unpreventable natural catastrophe resulting in material consequences, such as an earthquake, a tidal wave, a volcanic eruption, or a tornado (it being understood that Labor Strikes, labor disputes any other events or circumstances involving the action or inaction of human beings shall not constitute an Act of God). For the avoidance of doubt, the parties agree that the term Act of God shall only be relevant in this Agreement specifically where it is used, namely Section 8.4 and Schedule 1 .
Actual Delivery Date is defined in Schedule 1 .
Actual In-Service Date is defined in Schedule 1 .
Agreement is defined in the first paragraph of the Agreement.
Aircraft Drinking Water Regulation means 40 CFR Part 141.
Aircraft Property Taxes means all aircraft property taxes (however designated, including excise or franchise taxes imposed on the ownership of aircraft property, ad valorem taxes, and special assessments or levies) for aircraft, spare parts and engines, including rotables and consumables included in or constituting part of an aircraft or engine or spare parts. Aircraft property taxes do not include property tax related to ground equipment, real estate, or personal property or any other tax that is not for aircraft property, including without limitation income, profits, withholding, employment, social security, disability, occupation, severance, excise, ad valorem, sales, use or franchise taxes.
Airframe Heavy Maintenance means all activities performed pursuant to the Aircraft Heavy Maintenance Support Agreement.
Airframe Heavy Maintenance Support Agreement means that certain airframe heavy maintenance agreement entered into by Contractor with a third party aircraft heavy maintenance service provider for the E175 Covered Aircraft, provided Contractor has received Uniteds written approval of the commercial terms of such agreement.
Exhibit A-1
Airport Authority means any municipal, county, state or federal governmental authority, or any private authority, owning or operating any Applicable Airport with authority to lease, convey or otherwise grant rights to use any Airport Facilities.
Alcoholic Beverage Product means beer, wine, liquor or any other alcoholic beverages. ALPA means the Air Line Pilots Association, International.
Ancillary Agreements means each of the Covered Aircraft Leases and each of the agreements entered into by United and/or Contractor substantially in the form of any of the exhibits hereto (including without limitation Exhibits D, K and O), together with all amendments, exhibits, schedules and annexes thereto.
Appeals Award is defined in Section 11.16(k) .
Applicable Airport means any airport into or from which Scheduled Flights are scheduled to arrive or depart.
APU means an auxiliary power unit.
APU Support Agreement means that certain APU support agreement entered into by Contractor with a third party APU service provider for the E175 Covered Aircraft, provided Contractor has received Uniteds written approval of the commercial terms of such agreement.
Assignment and Assumption Agreement is defined in Section 10.1(b)(vi)(A) .
Average Peer Group Rate Increase means, with respect to any insurance coverage and as of any date of determination, (x) the insurance rates relating to passenger liability insurance and war risk insurance as set forth on Schedule 3, multiplied by (y) the average percentage increase or decrease, as appropriate, from January 1, 2013 to such date of determination, in the cost of such passenger liability insurance and war risk insurance coverage for the five regional airlines with annual revenue passenger miles closest to those of Contractor, as determined by available information obtained from public sources or reputable insurance brokers, excluding (i) any such regional airline that experienced a major loss within the previous three years, and (ii) any regional airline whose insurance rates are included with its major airline partner(s).
Award is defined in Section 11.16(j) .
Basic Rent is defined, with respect to any Covered Aircraft, in the Covered Aircraft Lease for such Covered Aircraft.
Business Day means each Monday, Tuesday, Wednesday, Thursday and Friday unless such day shall be a day when financial institutions in New York, New York or Chicago, Illinois are authorized by law to close.
Call Option is defined in Section 10.1(a) .
Call Option Aircraft is defined in Section 10.1(a) .
Exhibit A-2
Call Option Information is defined in Section 10.1(b)(iv) .
Call Option Notice is defined in Section 10.1(b)(ii) .
Call Option Request is defined in Section 10.1(b)(iii) .
Cause means the following, each of which constitutes breach: (i) the suspension for three consecutive days or longer or the revocation of Contractors authority to operate as a scheduled airline, (ii) the ceasing of Contractors operations as a scheduled airline, other than as a result of a Labor Strike or the mandatory grounding of any of portion of the Covered Aircraft by the FAA, and other than any temporary cessation for not more than fourteen (14) consecutive days, (iii) the occurrence of a Labor Strike that shall have continued for seven (7) consecutive days or longer, (iv) a Controllable Completion Factor of [***] or below for each of any three consecutive calendar months, (v) an On-Time Departure Rate of [***] or below for each of any three consecutive calendar months, (vi) a Prohibited Transaction shall occur to which United shall not have consented in writing in advance, (vii) the occurrence of a willful or intentional material breach of this Agreement by Contractor that substantially deprives United of the benefits of this Agreement, which breach shall have continued for three (3) days after notice thereof is delivered by United to Contractor or, if Contractor has provided United reasonable assurance that such breach will be cured by Contractor within ten (10) days after delivery of such notice and for so long as Contractor is acting diligently in all respects to cure such breach within such period, for ten (10) days after notice thereof is delivered by United to Contractor, or (viii) the occurrence of a System Flight Disruption.
CEO is defined in Section 5.3 .
Charter Flights means any flight by a Covered Aircraft for charter operations at the direction of United that may or may not be reflected in the Final Monthly Schedule.
Claims is defined in Section 11.16(a) .
Commencement Date is defined in Section 8.1 .
Committed Delivery Date is defined in Schedule 1 .
Committed In-Service Date is defined in Schedule 1 .
Compensation for Carrier Controlled Costs is defined in Section 3.1(a) .
Consent is defined in Section 10.1(b)(vi)(D) .
Contractor means Mesa Airlines, Inc., a Nevada corporation, and its successors and permitted assigns.
Contractor Grade is defined in Section 3.2(e) .
Contractor Marks is defined in Exhibit F .
Exhibit A-3
Contractors Performance is defined in Section 3.2(e) .
Contractor Services means (i) Regional Airline Services and (ii) any other services provided by Contractor pursuant to this Agreement or any Ancillary Agreement.
Contractor Terminal Facility means any Terminal Facility to the extent owned, leased, subleased or otherwise retained or used by Contractor as of the date hereof, and any Terminal Facility to the extent owned, leased, subleased or otherwise retained or used by Contractor pursuant to Section 4.10(a) after the date hereof, in either case, for the provision of Contractor Services.
Controllable Cancellations means a cancellation of a Scheduled Flight that is not an Uncontrollable Cancellation (including flights deemed to have resulted in Controllable Cancellations pursuant to the last sentence of Section 2.1(c)) .
Controllable Delays means a delay of a Scheduled Flight that is not an Uncontrollable Delay. Controllable Completion Operating Goal is defined in Section 3.2(c)(ii) .
Controllable Completion Factor means, for any period of determination, the number of actual departures completed divided by the number of scheduled departures, excluding Uncontrollable Cancellations.
Covered Aircraft means the E175 Covered Aircraft and the CRJ Covered Aircraft.
Covered Aircraft Lease means an aircraft lease or sublease agreement, as the case may be, substantially in the form of Uniteds then-current (at the time of execution of such agreement by the parties) standard aircraft lease or sublease agreement, as the case may be, for transactions in which United is lessor or sublessor, as the case may be, which standard agreement shall contain, among other things, (w) provisions, whether financial, operational or otherwise, that are necessary to conform to the requirements of any mortgage, lease and/or other financing agreement relating to the applicable Covered Aircraft, to which United is a party and under which United is the mortgagor, lessee, borrower or similar party, as the case may be, (x) provisions, whether financial, operational or otherwise, that are necessary to conform to the requirements of the Embraer Purchase Agreement, including without limitation provisions effective to obligate Contractor to perform, or refrain from performing, any and all actions (including without limitation making and submitting reports, performing inspections, taking possession of the aircraft as directed by United, utilizing Embraer personnel, and communicating with Embraer and United) as may be required to preserve all of Uniteds rights and privileges arising under the provisions of the Embraer Purchase Agreement Excerpt (including without limitation rights relating to the delivery and acceptance of the aircraft, maintenance and dispatch reliability guarantees, ferry flight assistance and product support, and all other warranties and guarantees contained therein), (y) term and termination provisions that conform to the provisions of this Agreement (including a base term that conforms to the term set forth on Schedule 1 with respect to the applicable Covered Aircraft, termination provisions conforming to Article VIII and Section 2.4(b) and cross-default and term extension provisions), and (z) other economic terms, if any, that are commercially reasonable taking into account the financial condition of Contractor.
CPA Records is defined in Section 3.5 .
Exhibit A-4
CRJ Collateral is defined in Section 10.6(b) .
CRJ Covered Aircraft means all of the CRJ700 aircraft listed on Schedule 1 (as amended from time to time pursuant to the provisions of this Agreement), or any acceptable substitute aircraft agreed to in writing by United and presented for Regional Airline Services by Contractor, as adjusted from time to time for withdrawals pursuant to Article VIII and for exit date extensions pursuant to Section 10.2 .
CRJ Interior Project is defined in Section 10.8 .
CRJ Lien is defined in Section 10.6(b) .
CRJ Margin Payment means [***].
CRJ Removed Aircraft is defined in Section 2.4(a) .
Customer Satisfaction Operating Goal is defined in Section 3.2(c)(iii) .
Customer Satisfaction Score means the score, as determined by surveys, measuring customer satisfaction on Uniteds mainline and regional flights, as such surveys or program may be altered or replaced from time to time by United in its sole discretion.
Daily United Damages is defined in Section 8.4(e). Delivery Location is defined in Section 10.1(b)(vi)(B) .
Design Changes means, following the initial entry of Covered Aircraft and crews into service for the provision of Contractor Services by Contractor, the expenses of Contractor relating to interior and exterior design changes to the Covered Aircraft and other product-related changes required by United, including the cost of changes uniforms and other livery, in each case that occur outside of Contractors normal uniform replacement and aircraft maintenance/refurbishment program. For the avoidance of doubt, Design Changes shall not include (a) scheduled refresh paint to occur within normal paint standards (unless poor workmanship by, on behalf of, or directed by Contractor requires an additional event) or (b) initial paint on new aircraft.
DG is defined in the definition of United Cargo Program.
DHS means the United States Department of Homeland Security.
DOT means the United States Department of Transportation.
Drinking Water Requirements is defined in Section 4.19(b)(viii) .
E175 Collateral is defined in Section 10.6(a) .
E175 Covered Aircraft means all of the Embraer E175 aircraft listed on Schedule 1 (as amended from time to time pursuant to the provisions of this Agreement), or any acceptable substitute aircraft agreed to in writing by United and presented for Regional Airline Services by
Exhibit A-5
Contractor, as adjusted from time to time for withdrawals pursuant to Article VIII and for exit date extensions pursuant to Section 10.2 .
E175 Lien is defined in Section 10.6(a) .
E175 Removed Aircraft is defined in Section 2.4(b) .
EBR Cure Period is defined in Section 4.20(a) .
EBR Goal is defined in Section 4.20(a) .
EBR Payment is defined in Section 4.20(a) .
EBR Period is defined in Section 4.20(a) .
Effective Date is defined in Section 8.1 .
Embraer means Embraer SA, a Brazilian corporation.
Embraer Confidentiality Agreement means that certain Confidentiality Agreement among Embraer, United and Parent, dated as of July 30, 2013.
Embraer Purchase Agreement means that certain Purchase Agreement entered into by and United and Embraer as of April 29, 2013 for the purchase by United of the E175 Covered Aircraft.
Embraer Purchase Agreement Excerpt means the portion of the Embraer Purchase Agreement disclosed to Contractor pursuant to the Embraer Confidentiality Agreement (as such provisions may be amended from time to time by United and Embraer; provided that United shall have notified Contractor in writing of such amendments, if any).
Engine means any jet aircraft engine delivered with any Covered Aircraft (or any replacement engine thereof) that constitutes an Engine, as such term is defined in a Covered Aircraft mortgage, lease or sublease, as the case may be.
Engine Maintenance Support Agreement means that certain engine maintenance support agreement entered into by Contractor with a third party maintenance service provider for the E175 Covered Aircraft, provided Contractor has received Uniteds written approval of the commercial terms of such agreement.
Environmental Laws is defined in Section 4.19(a)(i) .
EPA means the Environmental Protection Agency.
Excess Delayed Flights is defined in Section 3.6(c)(vi) .
FAA means the United States Federal Aviation Administration.
Exhibit A-6
Fair Market Value means, as of any date of determination, the then-current market value of the aircraft, (u) mutually determined by the parties; or (v) failing mutual agreement between the parties, determined by an independent International Society of Transport Aircraft Trading ( ISTAT ) certified appraiser jointly selected by United and Contractor within ten (10) Business Days after either party requests such an appraiser be selected; or (w) failing the joint selection by United and Contractor of such independent aircraft appraiser by the end of the period referenced in clause (v) above, then determined by two independent ISTAT-certified aircraft appraisers within fifteen (15) Business Days after the end of the period referenced in clause (v) above, one of whom shall be appointed by the Contractor and the other of whom shall be appointed by United, in each case selected within five (5) Business Days after the end of the period referenced in clause (v) above; or (x) failing an agreement between such two appointed appraisers by the end of the later period referenced in clause (w) above, then determined by a third recognized independent ISTAT-certified appraiser jointly appointed by such two appraisers within five (5) Business Days after the end of the later period referenced in clause (w) above; or (y) failing the selection of such third appraiser referenced in clause (x) above by the end of the later period referenced in clause (x) above, then determined by a recognized independent ISTAT-certified appraiser appointed by the AAA (or any successor organization thereto) following the application by either party for such appointment. The appraisal by such recognized independent appraiser shall be completed within fifteen (15) days of the appointment of such third appraiser. All determinations made as provided in this definition shall be binding upon Contractor and United. All such appraisal costs will be shared equally between Contractor and United.
Final Monthly Schedule means the final schedule of Scheduled Flights for the applicable calendar month delivered by United to Contractor pursuant to Section 2.1(c) .
Final Notice is defined in Schedule 1 .
Forecasted Passengers means, for any month, the forecasted Revenue Onboards derived from the Final Monthly Schedule for such month.
Foreign Costs means the one-time third-party fees and expenses reasonably incurred by Contractor and paid to government agencies in connection with its initial provision of Regional Airline Services to a foreign country, and recurrent mandatory fees imposed by foreign governmental or regulatory authorities in connection with the provision of Scheduled Flights into or out of such foreign jurisdiction.
FPS is defined in Section 8.4(e) .
Fuel Services means the act of putting fuel product into an aircraft and taking fuel product out of an aircraft, and any other incidental tasks as are customarily required from time to time in connection therewith; provided that the cost of aircraft fuel shall not be included as a cost of Fuel Services.
GAAP means generally accepted accounting principles in the United States of America, consistently applied.
Grade Widths is defined in Section 3.2(d)(ii) .
Exhibit A-7
Ground Handling Services means the ground handling services performed in connection with Regional Airline Services and as determined by United or Uniteds designee in Uniteds or Uniteds designees, sole option and discretion, which services will typically (but not necessarily) include without limitation the following: (i) gate check-in activities, (ii) passenger enplaning/deplaning activities, (iii) sky cap and wheelchair services, (iv) aircraft loading/unloading services, (v) passenger ticketing, (vi) jetbridge maintenance, (vii) janitorial services, (viii) deicing services, (ix) pushback, (x) airstarts, and (xi) aircraft overnight cleaning, including lavatory service and water service; provided that the foregoing list shall typically (but not necessarily) exclude turn cleaning unless otherwise directed by United, and towing services provided by Contractor pursuant to Section 4.6 .
Growth Aircraft is defined in Section 10.4 .
Growth Aircraft Option is defined in Section 10.4 .
Growth Aircraft Option Notice is defined in Section 10.4(a) .
Guarantor means Parent.
Hazardous Materials is defined in Section 4.19(a)(ii) .
Hub Airport means, as of any date of determination, (i) each of CLE, DEN, EWR, IAD, IAH, LAX, ORD, and SFO, and (ii) any other airport at which United and its subsidiaries, together with all other operators operating under Uniteds livery or a derivative thereof, operate an average of at least fifty (50) flights per day at such airport during the six months period prior to such date of determination.
Identification means the United Marks, the aircraft livery set forth on Exhibit E, the United flight code and other trade names, trademarks, service marks, graphics, logos, employee uniform designs, distinctive color schemes and other identification selected by United in its sole discretion for the Regional Airline Services to be provided by Contractor, whether or not such identification is copyrightable or otherwise protected or protectable under federal law.
Implementation Date is defined in Section 3.1(b) .
Incentive Markup Payment is defined in Section 3.2(f) .
Incentive Program is defined in Section 3.2 .
Indemnified Party is defined in Section 7.3 .
Indemnifying Party is defined in Section 7.3 .
Indemnity Notice is defined in Section 7.3 .
Initial E175 Pilot Training Expenses is defined in Section 3.3(a) .
Initial Proposed Monthly Schedule is defined in Section 2.1(c) .
Exhibit A-8
In-Service Date means, with respect to a CRJ Covered Aircraft, the date such CRJ Covered Aircraft is scheduled to enter into service pursuant to Schedule 1 .
Insurance Baseline is defined in Section 3.6(b)(iii)(A)(3) .
IOSA is defined in Section 4.9 .
ISTAT is defined in the definition of Fair Market Value.
Labor Strike means a labor dispute, as such term is defined in 29 U.S.C. Section 113(c) involving Contractor and some or all of its employees, which dispute results in a union-authorized strike resulting in a work stoppage.
Landing Fees consists of all airport landing fees, Aircraft Rescue Fire Fighter (ARFF) charges or similar charges, apron fees, and any other fees charged by airport operators to cover airfield costs or other airport facilities. Unscheduled flights operated by Contractor for aircraft repositioning, maintenance or any purpose other than carrying revenue passengers will not be reimbursed.
Landing Gear Support Agreement means that certain landing gear support agreement entered into by Contractor with a third party landing gear service provider for the E175 Covered Aircraft, provided Contractor has received Uniteds written approval of the commercial terms of such agreement.
Lead Director is defined in Section 5.3 .
Lease Documents is defined in Section 10.1(b)(vi)(A) .
Leased Call Option Aircraft is defined in Section 10.1(b)(iv) .
Letter of Agreement is defined in Section 4.1(e) .
Modified EBR Goal is defined in Section 4.20(b)(ii)(B) .
Modified EBR Payment is defined in Section 4.20(b)(ii)(C) .
Modified EBR Performance is defined in Section 4.20(b)(ii)(C) .
Modified EBR Period is defined in Section 4.20(b)(ii)(A) .
Navigation Fees means navigation charges invoiced from Canadian/Mexican authorities to operate flights in the air space (NavCanada and Services a la Navigation en el Espacio Aereo Mexicano (SENEAM)) and fees and reasonable third party expenses to file schedules in foreign country.
On-Time Departure means a flight departing on-time or earlier than scheduled departure time during such period. For the avoidance of doubt, On-Time Departures shall exclude all flights which do not depart on-time or earlier than scheduled departure time, without regard to any
Exhibit A-9
circumstance whatsoever, and specifically without regard to whether the failure to depart on-time or earlier was within Contractors control or outside of Contractors control.
On-Time Departure Rate means, for any period of determination and for any number of flights, the quotient, expressed as a percentage, obtained by dividing (x) the number of such flights that are On-Time Departures by (y) the total number of such flights. For example, Contractors On-Time Departure Rate for Scheduled Flights for a particular month would equal the number of Scheduled Flights for such month that were On-Time Departures divided by the total number of Scheduled Flights for such month.
On-Time Zero Operating Goal is defined in Section 3.2(c)(i) .
Operating Goals is defined in Section 3.2(a) .
Operating Performance Measure is defined in Section 3.2(a) .
Outstanding Debt Balance means the aggregate principal and interest owing with respect to any note, mortgage or other instrument evidencing a debt obligation of Contractor incurred in order to pay the purchase price of a Call Option Aircraft plus any and all out-of-pocket fees and expenses required to be incurred in order to pay the same, including without limitation termination, make-whole, prepayment (or similar) penalty or fee, breakage, third party attorneys fees and costs, trustee and wind-up fees and recording/filing fees, in each case pursuant to obligations in effect on the earlier of the date of the applicable Call Option Request or the termination to which such Call Option Request relates, but in each case only to the extent that such fees and expenses have been disclosed as part of the Call Option Information in a timely manner as required hereunder, and, for the avoidance of doubt, shall not include any changes in income tax position, including loss of deductions, increased income tax expense or other income and other tax losses.
Outside Date is defined in Section 3.1(b) .
Owned Call Option Aircraft is defined in Section 10.1(b)(iv) .
Panel is defined in Section 11.16(d) .
Parent means Mesa Air Group, Inc., a Nevada corporation, and its successors and permitted assigns.
Parts Support Agreement means that certain parts support agreement entered into by Contractor with a third party parts service provider for the E175 Covered Aircraft, provided Contractor has received Uniteds written approval of the commercial terms of such agreement.
Passenger-Related Terminal Facilities shall mean all passenger-related terminal facilities and spaces leased, subleased or otherwise retained or used by a party at an Applicable Airport, including without limitation all passenger lounges, passenger holding areas, aircraft parking positions (which may or may not be adjacent to a passenger holding area) and associated ramp spaces, gates (including loading bridges and associated ground equipment parking areas), ticketing counters and curbside check-in facilities.
Exhibit A-10
Pass-Through Costs is defined in Section 3.6(b)(iii)(A) .
Pending Rules is defined in Section 3.1(b) .
Performance Level is defined in Section 3.2(d) .
Performance Metric means any of (i) On-Time Departure Rate, (ii) Controllable Completion Factor or (iii) Customer Satisfaction Score.
Person means an individual, partnership, limited liability company, corporation, joint stock company, trust, estate, joint venture, association or unincorporated organization, or any other form of business or professional entity.
Phase 1 is defined in Section 10.8 .
Phase 2 is defined in Section 10.8 .
PMSI Lender is defined in Section 10.6(a) .
Prepayment is defined in Section 3.6(a) .
Prohibited Person means an air carrier (other than United and its successors and any Subsidiary thereof), or a corporation directly or indirectly owning or controlling or directly or indirectly owned or controlled by an air carrier.
Prohibited Transaction means any transaction described in clauses (I) , (II) or (III) below:
I. |
With respect to Contractor or Parent (each of the foregoing being referred to in this clause (I) as Contractor ): |
a. |
Contractor consolidates with, or merges with or into, a Prohibited Person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to a Prohibited Person, or a Prohibited Person consolidates with, or merges with or into, Contractor in any such event pursuant to a transaction in which the voting securities of Contractor are converted into or exchanged for cash or securities of a Prohibited Person, except where the holders of voting securities of Contractor immediately prior to such transaction own not less than a majority of the voting securities of the surviving or transferee corporation immediately after such transaction, in each case other than any such transaction between Contractor on the one hand, and United and/or any of its Subsidiaries on the other; |
b. |
the direct or indirect acquisition by a Prohibited Person or any Person directly or indirectly controlling a Prohibited Person of control of Contractor (including without limitation as a result of the acquisition by such Prohibited Person or other Person of a controlling block of the capital stock of Contractor or the voting power with regard to such capital stock); |
Exhibit A-11
c. |
the liquidation or dissolution of Contractor in connection with which Contractor ceases operations as an air carrier; or |
d. |
the sale, transfer or other disposition of all or substantially all of the airline assets of Contractor on a consolidated basis directly or indirectly to a Prohibited Person or its affiliate, whether in a single transaction or a series of related transactions. |
II. |
Any transaction as a result of which neither of the following circumstances exists: (x) Contractor is a direct wholly-owned subsidiary of Parent or (y) Contractor is both (A) an indirect wholly-owned subsidiary of Parent and (B) the direct or indirect wholly-owned subsidiary only of other direct or indirect wholly-owned subsidiaries of Parent, each of which has executed a guarantee in the form of Exhibit K ; provided that notwithstanding the foregoing, this clause (II) shall not be applicable due to a merger of Contractor so long as the successor to Contractor meets at least one of the circumstances describing Contractor in clauses (x) and (y) above and such successor to Contractor shall have assumed all of Contractors obligations arising under this Agreement, whether by operation of law or otherwise. |
III. |
The execution by Contractor or Parent or their affiliates of bona fide definitive agreements, the consummation of the transactions contemplated by which would result in a transaction described in the immediately preceding clauses (I) or (II) . |
Reasonable Operating Constraints and Conditions means the operating constraints and conditions for the operation of Scheduled Flights reasonably imposed by the aircraft type, maintenance requirements, crew training requirements, aircraft rotation requirements, and route authorities, slots, and other applicable regulatory restrictions on flight schedule, in each case as evidenced by industry practice and custom.
Regional Airline Services means the provisioning by Contractor to United of Scheduled Flights and all other flights contemplated in this Agreement, including, ground returns (completed and uncompleted), air returns (completed and uncompleted), permitted ferrying and maintenance flights, and delayed flights (including Excess Delayed Flights) using the Covered Aircraft in accordance with this Agreement.
Regulatory Approval Delay is defined in Section 9.1(j) .
Release is defined in Section 10.1(b)(v)(A) .
Revenue Onboard means one revenue-generating passenger on one flight segment, regardless of whether such flight segment is all or part of such passengers entire one-way flight itinerary.
Rules is defined in Section 11.16(a) .
Scheduled ASMs means, for any period of calculation, the greater of (x) the number of available seat miles for all Scheduled Flights set forth on the Initial Proposed Monthly Schedule and (y) the number of available seat miles for all Scheduled Flights set forth on the Final Monthly Schedule, it being understood that each of the Initial Proposed Monthly Schedule and
Exhibit A-12
the Final Monthly Schedule shall be determined pursuant to Section 2.1(c) herein and are subject to Reasonable Operating Constraints and Conditions as set forth therein.
Scheduled Delivery Date is defined in footnote 1(a) of Table 1 in Schedule 1 with respect to E175 Covered Aircraft and shall be the date set forth under the caption CRJ Scheduled Delivery Date of Table 2 of Schedule 1 with respect to CRJ Covered Aircraft.
Scheduled Exit Date is defined in footnote 1(g) of Table 1 of Schedule 1 with respect to E175 Covered Aircraft and shall be the date set forth under the caption CRJ Scheduled Exit Date of Table 3 of Schedule 1 with respect to CRJ Covered Aircraft.
Scheduled Flight means a flight as determined by United pursuant to Section 2.1(c) (including all Charter Flights).
Seasonality Adjustment Factor is defined in Section 3.2(c)(iv) .
Second Panel is defined in Section 11.16(k) .
Senior Lender is defined in Section 10.6(b) .
Spare Aircraft is defined in Section 2.1(d) .
Special Cause means the following, each of which constitutes breach: (i) a Controllable Completion Factor of [***] (in the case of E175 Covered Aircraft) or [***] (in the case of CRJ Covered Aircraft) or below for each of any three consecutive calendar months or for each of any four calendar months during any period of seven consecutive calendar months, (ii) an On-Time Departure Rate of [***] or below for each of any four consecutive calendar months or for each of any four calendar months during any period of seven consecutive calendar months; provided that all departure delays or cancellations caused by United and resulting from a material and extraordinary event that causes a departure delay or cancellation to similarly situated United or United Express flights not operated by Contractor or its affiliates shall be excluded from such calculation in this clause (ii) , and that, for the avoidance of doubt and without limitation, Weather and ATC Delays and Cancels shall not be considered delays caused by United, (iii) a Customer Satisfaction score of [***] for a period of each of any four consecutive calendar months or for each of any four calendar months during any period of seven consecutive calendar months; provided that if [***] or more of the collective number of all United Express regional jet operators receive a score of [***] in any given month, then such month shall be excluded from the above calculation in this clause (iii) , or (iv) a Performance Level for any Performance Metric below a grade of [***] for a period of six (6) consecutive calendar months; provided that, with respect only to the Customer Satisfaction Operating Goal, if [***] or more of the collective number of all United Express regional jet operators receive a score of [***] in any given month, then such month shall be excluded from the above calculation in this clause (iv) .
Subsidiary means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and
Exhibit A-13
(b) any partnership, association, joint venture, limited liability company, joint stock company or any other form of business or professional entity, in which such Person directly or indirectly through Subsidiaries has more than 50% equity interest at any time.
System Flight Disruption means the failure by Contractor to complete at least [***] of the aggregate Scheduled ASMs in any three consecutive calendar months, or at least [***] of the aggregate Scheduled ASMs in any consecutive forty-five (45) day period, in each case excluding the effect of Uncontrollable Cancellations; provided , that if the average number of Block Hours flown per Covered Aircraft during such period is more than the average number of Block Hours flown per Covered Aircraft during the three consecutive calendar months immediately preceding the period first measured, then the calculation for purposes of this definition shall disregard that number of Scheduled ASMs for such period as is necessary to reduce the average number of Block Hours flown per Covered Aircraft during such period to the average number of Block Hours flown per Covered Aircraft during such prior three consecutive calendar month period; provided further , that a System Flight Disruption shall be deemed to continue until the next occurrence of a single calendar month in which Contractor completes at least [***] of the aggregate Scheduled ASMs; and provided further , that completions and cancellations of Scheduled Flights on any day during which a Labor Strike is continuing shall not be taken into account in the foregoing calculations.
Term has the meaning set forth in Section 8.1 , as earlier terminated pursuant to Section 8.2 , if applicable, and any Wind-Down Period.
Termination Event means any event or circumstance which provides United a right to terminate this Agreement pursuant to Article VIII .
Terminal Facilities means (i) all Passenger-Related Terminal Facilities and (ii) all other terminal facilities and spaces leased, subleased or otherwise retained or used by a party at an Applicable Airport, including without limitation all baggage makeup areas, inbound baggage areas and other terminal facilities.
Termination Date means the date of early termination of this Agreement, as provided in a notice delivered from one party to the others pursuant to Section 8.2 , or, if no such early termination shall have occurred, the date of the end of the Term.
Towing Baseline is defined in Section 4.6(b) .
Transfer is defined in Section 4.10(a)(v) .
TSA means the United States Transportation Security Administration.
UCC is defined in Section 10.6(a) .
UCH means United Continental Holdings, Inc., a Delaware corporation, and its successors and permitted assigns.
Uncontrollable Cancellation means:
Exhibit A-14
i. |
a cancellation of a Scheduled Flight as a result of weather or air traffic control; and |
ii. |
a cancellation of a Scheduled Flight as a result of any changes to the Final Monthly Schedule made by United after the presentation of the Final Monthly Schedule pursuant to Section 2.1(c) , provided that such cancellation was not made pursuant to the last sentence of Section 2.1(c) ; and |
iii. |
a cancellation of a Scheduled Flight described by the last proviso in Section 2.1(d) ; |
in each case of (i), (ii) and (iii) above, as coded on Uniteds operations reports in accordance with Uniteds standard coding policies; it being further understood and agreed that if Uniteds operations or other United Express Operations are subject to the same circumstances giving rise to such Scheduled Flight cancellation, and such United or other United Express flights are not canceled as a result, then such Scheduled Flight cancellation shall not be an Uncontrollable Cancellation.
Uncontrollable Delays means a delay of a Scheduled Flight for any reason that, if it resulted in the cancellation of such flight, would constitute an Uncontrollable Cancellation.
United means United Airlines, Inc., a Delaware corporation and subsidiary of UCH, and its successors and permitted assigns.
United Express Operations means, with respect to any contractor or service provider, all of the flights and other related operations of such contractor or service provider performed under the livery and/or the brand of United Express.
United Marks is defined in Exhibit E .
United Cargo Program means Uniteds QuickPak and Petsafe programs and/or any additional or replacement cargo program implemented by United from time to time, pursuant to which: (i) Contractor shall accept for carriage all baggage and shipments, whether from the ticket counter or cargo facility, that are permitted under Uniteds DOT and FAA approved Dangerous Goods ( DG ) management program, (ii) Contractor shall have access to Uniteds required training records and DG procedures and/or forms as necessary to permit Contractor to integrate such procedures into its existing flight crew training and acceptance procedures, (iii) Contractor shall accept and maintain compliance with Uniteds Hazardous Training Program for Scheduled Flights, and any training in connection therewith may be utilized to meet Contractors requirements under 14 CFR 121.1001-1007, Subpart Z and (iv) Contractor shall be permitted to transport its aircraft parts which are shipped as Company Material (COMAT) on Scheduled Flights, which shipments shall be tendered and/or accepted for shipment only by Uniteds employees or agents who have satisfactorily completed Uniteds required DG training and are authorized to perform such tendering and/or acceptance functions.
Weather and ATC Delays and Cancels means a delay or cancellation of a Scheduled Flight as a result of weather or air traffic control as coded on Uniteds operations reports in accordance with Uniteds standard coding policies consistently applied to all domestic operations of United and its related United Express operators.
Exhibit A-15
Wind-Down Expenses means (i) the reasonable direct severance expenses in respect of flight crews, and (ii) the reasonable out-of-pocket expenses incurred by Contractor for the relocation and retraining of flight crews, in each case of clauses (i) and (ii) above only as a direct result of Uniteds exercise of its termination rights pursuant to Section 2.4 .
Wind-Down Period means, as the context may require, (i) with respect to any specific Covered Aircraft, the period after the Termination Date and until the time when such Covered Aircraft has been withdrawn from the capacity purchase provisions of this Agreement, and (ii) with respect to the Agreement as a whole, the period after the Termination Date and until the time when the last Covered Aircraft has been withdrawn from the capacity purchase provisions of this Agreement.
Wind-Down Schedule means the schedule, determined as provided in Article VIII of this Agreement, for Covered Aircraft to be withdrawn from the capacity purchase provisions of this Agreement.
Exhibit A-16
EXHIBIT B
Terms of Codeshare Arrangements
1. Contractors use of United designated code . During the Term of the Agreement, United shall place its designator code, UA, on all Scheduled Flights operated by Contractor. United may suspend the display of its code on flights operated by Contractor if Contractor is in breach of any of its safety-related obligations, or material breach of any of its operational obligations, under the Agreement during the period that such breach continues. All Contractor operated flights that display the United designated code are referred to herein as UA* Flights.
2. Contractors display of United designated code .
(a) All UA* Flights will be included in the schedule, availability and fare displays of all computerized reservations systems in which United and Contractor participate, the Official Airline Guide (to the extent agreed upon) and Uniteds and Contractors internal reservation systems, under the UA code, to the extent possible. United and Contractor will take the appropriate measures necessary to ensure the display of the schedules of all UA* Flights in accordance with the preceding sentence.
(b) United and Contractor will disclose and identify the UA* Flights to the public as actually being a flight of and operated by Contractor, in at least the following ways:
(i) a symbol will be used in timetables and computer reservation systems indicating that UA* Flights are actually operated by Contractor;
(ii) to the extent reasonable, messages on airport flight information displays will identify Contractor as the operator of flights shown as UA* Flights;
(iii) United and Contractor advertising concerning UA* Flights and United and Contractor reservationists will disclose Contractor as the operator of each UA* Flight; and
(iv) in any other manner prescribed by law.
3. Terms and Conditions of Carriage . In all cases the contract of carriage between a passenger and a carrier will be that of the carrier whose code is designated on the ticket. United and Contractor shall each cooperate with the other in the exchange of information necessary to conform each carriers contract of carriage to reflect service offered by the other carrier.
4. Notification of irregularities in operations . Contractor shall promptly notify United of all irregularities involving a UA* Flight which result in any material damage to
Exhibit B-1
persons or property as soon as such information is available and shall furnish to United as much detail as practicable. For purposes of this section, notification shall be made as follows:
United Airlines Dispatch
233 South Wacker Drive, 27 th Floor
Chicago, IL 60606
Attention: Operations Director
Phone no.: (847) 700-4190
Fax no.: (872) 825-0985
Ops Spec A008
5. Code Sharing License.
(a) Grant of License . Subject to the terms and conditions of the Agreement, United hereby grants to Contractor a nonexclusive, nontransferable, revocable license to use the UA* designator code on all of its flights operated as a UA* Flight.
(b) Control of UA* Flights . Subject to the terms and conditions of the Agreement, Contractor shall have sole responsibility for and control over, and United shall have no responsibility for, control over or obligations or duties with respect to, each and every aspect of Contractors operation of UA* Flights.
6. Display of other codes . During the Term of the Agreement, United shall have the exclusive right to determine which other airlines ( Alliance Airlines ), if any, may place their two letter designator codes on flights operated by Contractor with Covered Aircraft and to enter into agreements with such Alliance Airlines with respect thereto. Contractor will cooperate with United and any Alliance Airlines in the formation of a code share relationship between Contractor and the Alliance Airlines and enter into reasonably acceptable agreements and make the necessary governmental filings, as requested by United, with respect thereto.
7. Customer Commitment . During the period that United places its designator code on flights operated by Contractor, Contractor will adopt and follow plans and policies comparable (to the extent applicable and permitted by law and subject to operational constraints) to Uniteds Customer Commitment as presently existing and hereafter modified. Contractor acknowledges that it has received a copy of Uniteds presently existing Customer Commitment. United will provide Contractor with any modifications thereto promptly after they are made.
Exhibit B-2
EXHIBIT C
Non-Revenue Pass Travel
United will have the sole right to design, implement and oversee a pass travel program for the Regional Air Services.
Exhibit C-1
EXHIBIT D
Fuel Services
AGREEMENT FOR FUEL SERVICES
This Agreement for Fuel Services (this Agreement ), dated _________ (the Effective Date ) is entered into by and between __________________, a _________ __________ with its principal offices at _________________ ( Airline ) and ________, with its principal offices at _________________ ( Service Provider ).
1. |
OBLIGATIONS OF SERVICE PROVIDER; SCOPE OF UNDERTAKING |
A. |
Fuel Services : Service Provider will provide fuel services for Airline at the location(s) designated on Exhibit A hereto ( Airport ). Fuel Services means the Fueling and Defueling of aircraft, and other incidental tasks as may be required, on occasion, by Airline. Fueling means putting fuel product into and Defueling means taking fuel product out of aircraft. The Fuel Services shall include the following services: |
1. |
Perform Skill Category 4 Fueling and Defueling of aircraft as defined in Airlines General Fueling Manual, latest revision, as provided by Airline, based on schedule requirements and upon receipt of requests from an authorized representative of Airline specifying the type of service required, the type and amount of fuel product required, the time and place of delivery, and the type and identification number of aircraft to be serviced; |
2. |
At the time of into-plane fuel delivery, provide Airline with an imprinted ticket specifying meter readings and quantity serviced, date, type of aircraft, and plane/flight number. On the first working day of each calendar month, Service Provider will provide Airlines Airport Station Manager with a statement recapping the total quantity of fuel product issued to Airline during the preceding month. Other reports will be prepared and furnished by Service Provider as required by Airline; |
3. |
Provide a daily report to Airline and Airlines fuel supplier (including, if applicable, United Airlines) itemizing the amount of fuel product withdrawn from the airport fuel system truck rack, each dispensal of fuel into-plane and a report of the fuel balance held in Service Providers refueler trucks; |
4. |
When title to fuel product remains in Airlines name or that of Airlines fuel supplier, accountability for such fuel product shall be reported on a gallon-in, gallon-out basis as a book inventory. Service Provider shall have responsibility for all losses and gains in excess of +/- [***]% while fuel product is stored in refuelers or trucks under Service Providers care, custody and control; |
Exhibit D-1
5. |
Maintain complete and accurate books and records and make reports to Airline, in such form and detail as may be specified by Airline, of deliveries into and withdrawals from Airlines aircraft, employee training, Fuel Quality Assurance checks, and equipment maintenance; |
6. |
Maintain (including necessary testing and flushing), repair, and replace fuel service equipment, including refueling equipment in order to keep the fuel service equipment (i) in good, safe and efficient operating condition and repair, (ii) in sanitary and sightly condition, (iii) in compliance with the obligations under any Airport leases, (iv) in compliance with all applicable governmental laws, rules and regulations, (v) in compliance with all directives and applicable rules of the applicable port authority, city and/or Airport authority granting rights to or having jurisdiction over the Airport (collectively, the Airport Authority ), (vi) in compliance with Airlines Fuel Operations Manual, latest revision, that defines equipment and facility maintenance standards, and that will be provided separately to Service Provider; and (vii) in compliance with all directives or procedures of Airline regarding safety and security; provided that such Airline requirements, if any, shall be deemed minimum requirements, and shall not diminish to any extent Service Providers duty to comply with law or requirements of any Airport Authority; |
7. |
Obtain and furnish all facilities, labor, supervision, materials, supplies, vehicles, equipment and tools and other requisites necessary for the performance of into-plane fueling and defueling services to Airline and all administrative services related thereto; and |
8. |
Furnish only properly trained and Airline qualified personnel to perform the Fuel Services. |
B. |
Facility Required to Perform Fuel Services . In the event and to the extent that Service Providers provision of Fuel Services requires access and occupancy of a portion of the site leased, subleased, licensed or operated by Airline at the Airport (the Airline Premises , Service Provider shall be additionally subject to all the terms and provisions specified below. |
1. |
Grant of License . Airline hereby grants to Service Provider a license (which, if required by an airport, shall be in a form approved by such airport) and a permit to enable Service Provider and its employees to access and use a portion of the Airline Premises delineated on Exhibit B attached hereto (the Licensed Premises ) for the sole purpose of performing the Fuel Services, and for no other purpose. Service Provider shall have the right to access and occupy the Licensed Premises for the purposes specified herein only during the Term of this Agreement and such right shall expire simultaneously with the expiration of this Agreement. Service Provider acknowledges that (i) the size, location and configuration of the Licensed Premises shall be determined by Airline in |
Exhibit D-2
its sole discretion; (ii) the license and Service Providers right to access and use the Licensed Premises is granted only to employees of Service Provider, and (iii) extending such rights to subcontractors of Service Provider shall require Airlines prior written consent in each instance. Service Provider agrees that Airline shall have no obligation to perform any services or to provide any equipment to Service Provider except as otherwise expressly provided in this Agreement. |
2. |
Acceptance of Licensed Premises . By its execution of this Agreement, Service Provider shall be deemed to represent and certify that (i) Service Provider has been given adequate opportunity to investigate and examine the condition of the Licensed Premises; (ii) Airline shall not be required to improve, equip, repair or otherwise prepare the Licensed Premises for Service Providers occupancy or use thereof for the provision of the Fuel Services except as otherwise provided in Agreement; (iii) further and for the avoidance of doubt, nothing in this Agreement for Fuel Services is intended or shall be construed to make Service Provider liable for, or to cure, correct or remediate, any Pre-Existing Condition, as hereinafter defined. Pre-Existing Condition shall mean any condition in, on, or within the Licenses Premises which first manifested itself prior to the Effective Date, including but not limited to any condition which fails to comply with or violates any applicable law, including any legal requirement or prohibition related to hazardous materials, but does not include any exacerbation of a condition by Service Provider or its subcontractors. |
3. |
Use and Maintenance of Licensed Premises . Service Provider (i) shall use the Licensed Premises solely for the purposes delineated in this Agreement, and for no other purpose, in compliance with, and without violating, the agreements granting Airline its rights to the Licensed Premises ( provided that Service Provider shall be provided a copy of any such agreements granting); (ii) shall take good care of the Licensed Premises and keep same clean and orderly; (iii) shall not waste electricity or other utility resources, and (iv) shall not use or authorize the Licensed Premises to be used, in whole or in part, in a manner that is dangerous to persons or property, or that may invalidate or increase the premium cost of any policy of insurance carried with respect to the Airline Premises, in whole or in part, or in violation of rules, regulations or requirements of the local Fire Department or Fire Insurance Rating Organization, or other authority having jurisdiction. In the event and to the extent that any damage to the Licensed Premises is caused by the negligent or intentional act or omission of Service Provider, its employees or agents, or any breach or noncompliance by Service Provider with its obligations under this Agreement, the reasonable and necessary cost of such repair shall be the responsibility of Service Provider, and Service Provider shall be liable to Airline for, and shall pay to Airline, on demand, all such reasonable, necessary and documented costs. |
Exhibit D-3
4. |
Airline Agreements Relating to Licensed Premises . Service Provider acknowledges and agrees that: Service Providers rights to use the Licensed Premises are and shall be subject and subordinate to (i) the terms and provisions of the agreements granting Airline its rights to the Licensed Premises; (ii) any rules and regulations that may, at any time or from time to time, be promulgated by the Airport Authority, and (iii) any approvals, consents and authorizations of the Airport Authority that may be required in order for the Service Provider to provide the Fuel Services. If requested, Airline will reasonably assist Service Provider with obtaining the requisite Airport Authority approval. |
5. |
No Liens . Service Provider will not file, and will not permit or authorize any laborers, materialmens, mechanics or other similar lien to be filed or otherwise imposed on any part of the Licensed Premises, the Airline Premises, or the Airport of which the Licensed Premises or Airline Premises form a part. If any laborers, materialmens, mechanics or other similar lien or claimed is filed as a result of Service Providers fault or negligence, and Service Provider does not cause such lien to be released and discharged promptly, or promptly file a bond in lieu thereof, Airline shall have the right to pay all sums necessary, including without limitation, direct payment to the claimant, to obtain such release and discharge and recover all such amount from Service Provider forthwith, together with interest thereon and reasonable attorneys fees and costs. |
6. |
Surrender . Upon termination of this Agreement, Service Provider shall vacate the Licensed Premises and surrender same to Airline vacant and in as good a condition as when Service Provider originally entered upon same, normal wear and tear excepted. Service Provider shall, at its sole cost, repair any and all damage to the Licensed Premises, excepting reasonable wear and tear, the Airline Premises or any other property of Airline resulting from Service Providers use of the Licensed Premises. |
7. |
Equipment . Service Provider will be responsible for the protection of all equipment, materials and tools used in the provision of the Fuel Services, whether such items belong to Airline or to Service Provider, regardless of the fact that such property may be stored, with Airlines permission, on Airlines property, including the Licensed Premises. Airline will not be responsible for any loss of or damage to such property from any cause whatsoever, other than the negligent or intentionally wrongful act of Airline or its employees, agents or contractors other than Service Provider. In the case of any equipment provided by Airline, Service Provider agrees to maintain same to the manufacturers operational standards. |
C. |
Schedule of Work . Service Provider will be available to perform the Fuel Services upon request during the hours designated by Airline. Also, the Service Provider, in any event, perform the Fuel Services, where practicable, in such a |
Exhibit D-4
manner as to avoid inconvenience to Airline and its personnel and to avoid interference with Airlines operations. |
D. |
Inspection and Acceptance of Fuel Services . All Fuel Services will be subject to inspection and acceptance by Airlines designated representative, including inspections to verify compliance with this Agreement. Service Provider understands and expressly agrees that, with respect to any performance or provision of any Fuel Services subject to this Agreement: (i) to the extent of Service Providers authority to allow such access and to the extent Service Provider is not prohibited by other legal or contractual obligations, Airline will have full access at all times to any and all work spaces provided to or used by Service Provider to perform any Fuel Services; (ii) Fuel Services will be subject to quality audits [and to compliance with the standards defined in the applicable Service Level Agreement (SLA), as modified from time to time, ][but not more than twice per year, upon mutual written agreement between Airline and Service Provider;] and (iii) Service Provider will promptly respond to reasonable requests from Airline or its designee for information regarding Service Providers performance of Fuel Services and compliance with this Agreement. |
2. |
PERSONNEL |
A. |
Independent Service Provider Status of Service Provider and Service Providers Personnel . Airline and Service Provider will not act as and will not be deemed to be employees, partners, joint ventures, agents or associates of one another, and nothing herein set forth will be construed to impose any liability on them as such. Service Provider understands and expressly agrees that, with respect to any performance or provision of any Fuel Services subject to this Agreement: |
1. |
Service Providers relationship to Airline shall be strictly that of an independent contractor; |
2. |
Service Provider will not be entered on Airlines payroll; Service Provider will be solely responsible for the payment and withholding, as the case may be, of all federal, state and local income taxes, and all contributions under the Federal Insurance Contribution Act; |
3. |
Airline shall not maintain, keep in force or pay for any workers compensation, employer liability insurance, or unemployment compensation insurance for Service Provider. |
4. |
Service Provider shall be responsible for procuring and maintaining its own insurance protection, and understands that Airline shall not provide any insurance coverage; |
5. |
Service Provider shall not be eligible to receive or participate in any vacation, group insurance, pension, travel or any other benefit currently available or at any time extended to Airlines employees; and |
Exhibit D-5
6. |
(Any persons providing any Fuel Services in whole or in part under this Agreement ( Personnel ) will be and remain employees or subcontractors of Service Provider and not of Airline; they shall not be eligible or entitled to participate in any of the benefits or privileges extended by Airline to its employees, including the privileges or benefits referenced in Section 2(A)(1)-(5) above, and they shall not be, nor shall they be deemed to be, employees of Airline for purposes of federal, state or local income taxes, FICA taxes, unemployment benefits, workers compensation or in any other respect. |
B. |
Personnel Standards of Performance . Service Provider represents and warrants to Airline that all Fuel Services to be delivered shall (i) be performed by qualified Personnel in a good, competent and safe manner; (ii) reflect and adhere to the industry standards; (iii) be provided in accordance with the terms and conditions of this Agreement and Exhibits hereto; (iv) comply and comport with all applicable laws or airport rules and/or regulations; and (v) comply and comport with Airline rules and regulations applicable to the Fuel Services. |
C. |
Background Investigations And Airport Badges . If required at the Airport or by the Transportation Security Administration, the Department of Homeland Security, the Department of Transportation, the Federal Aviation Administration, or any other duly constituted governmental authority with jurisdiction over the matter, Service Provider, at its sole cost and expense, will conduct background investigations of all Personnel who will have access to any secure or restricted area of such premises. Background investigations will include, at a minimum, verification of prior employment (five years where available, shorter periods as applicable for those who have not been in the work force for ten years) to the extent permitted by law. Further, Service Provider must complete FBI approved fingerprint checks on all Personnel being issued a security badge to enter the air operations area (AOA) at the Airport. Each background investigation will be reduced to writing and will be verified by Service Provider as having been completed upon request by Airline, or by applicable governmental authority, upon reasonable notice. Without limiting, excusing or waiving to any extent Service Providers obligations under this Section 2(C) , Airline reserves the right to verify independently the results of any investigation, and to terminate this Agreement without further notice upon discovery of a materially inaccurate investigation or deception regarding an investigation. |
D. |
Safety . The Service Provider shall be responsible for compliance with all local, municipal, federal or government regulations that relate to the safety of its Personnel and operations, including any airport rules or regulations. Service Provider shall have a written safety program that defines the roles and responsibilities of the Service Provider and its Personnel for achieving a safe operation. At Airlines request, a copy of this program shall be submitted to Airline for review to assure that it is compatible with Airlines safety program and in no way jeopardizes the safety of Airlines employees, customers or operations. Service Provider and its Personnel shall, at a minimum, comply with all written |
Exhibit D-6
Airline procedures and regulations that apply to the operation and maintenance of equipment, if any, that have been made available by Airline to Service Provider; such availability to be satisfied by (i) physical delivery to Service Provider of hard copies of such procedures and regulations, or, alternatively, (ii) through access to Airlines web-based procedures and regulations, along with specific direction from Airline as to the location of any such procedures and regulations. Service Provider shall actively participate in all local safety initiatives, as requested by Airline station management, and shall assist and cooperate in incident investigations that involve Fuel Services equipment and/or Service Provider or Personnel. |
3. |
TERM OF AGREEMENT; PERIOD OF PERFORMANCE; TERMINATION |
A. |
This Agreement takes effect on, and Service Providers performance under this Agreement shall commence on [DATE] and, unless earlier terminated, shall continue and remain in effect thereafter for _________ years, through [DATE] ( Term ). Airline shall have the right to immediately terminate this Agreement if (i) Airline, in its reasonable and good faith judgment, determines that Service Providers performance does not meet the standards established by Airline as necessary for the performance of the Fuel Services required under this Agreement, or (ii) the Service Provider is in violation of any material provision of this Agreement. Either party shall have the right to terminate this Agreement, (a) for convenience, upon ninety (90) days written notice to the other party, or (b) in the event of a breach of this Agreement by the other party, which breach is not cured within ten (10) days from the date of receipt of notice of such breach. |
B. |
In the event of any termination, Airlines sole obligation to Service Provider shall be the payment to the Service Provider for Fuel Services properly rendered, and pre-authorized out-of-pocket expenses incurred, up to the time of termination, subject, however, to Airlines right to withhold payments or portions thereof to compensate and make Airline whole for any loss resulting from Service Providers breach of this Agreement. |
C. |
In the event of termination, the Service Provider shall immediately return to Airline all originals, copies and summaries of records related to the Fuel Services provided under this contract, Airlines Confidential and Proprietary Information, and Airline property, materials, equipment or documents in Service Providers possession. |
4. |
FEES AND EXPENSES |
A. |
Compensation . In consideration of the performance by Service Provider of all Fuel Services (and subject to Service Providers full performance of all Fuel Services), Airline shall pay Service Provider the compensation set forth on Exhibit A . |
Exhibit D-7
B. |
Reimbursable Expenses . There are no reimbursable expenses under this contract. In the event Airline, in its sole discretion, determines certain expenses to be reimbursable, any reimbursement must be approved in writing by Airline prior to Service Provider incurring the expense. |
C. |
Taxes . Airline agrees to be responsible for and pay any sales or use taxes (other than taxes imposed on or measured by income received for provision of the Fuel Services, including both gross receipts and net income) imposed by any taxing authority and required to be paid by Service Provider or Airline as a result of the Fuel Services provided to Airline pursuant to this Agreement. If a claim is made against Service Provider for any taxes that are to be paid by Airline, Service Provider will timely notify Airline and take such action, at Airlines expense, as Airline may reasonably direct with respect to such taxes, including payment of same under protest. In the event that the disputed tax was previously paid and if Airline so requests, Service Provider will, at Airlines expense, take such action as Airline may reasonably direct, including the filing of an amended tax return, or Service Provider shall permit Airline to file a claim or commence legal action in Service Providers name to recover such tax payment. In the event of a refund or recovery of any tax, in whole or in part, Service Provider will pay to Airline promptly that portion of the tax paid by Airline, including any interest received thereon. |
D. |
Airport Fees . Airline agrees to reimburse Service Provider for applicable airport fees related to the Fuel Services as a result of this Agreement. Specifically excluded from this provision are airport badging fees, vehicle registration or tag fees (and charges related thereto), airport environmental recovery fees, fuel system access fees and airport fines. |
E. |
Invoices . Service Provider shall invoice Airline monthly, payable in U.S. dollars, for Fuel Services satisfactorily performed and completed in the previous month, less the sum of all credit notices due Airline. Each invoice, submitted in the form provided by Airline under separate cover. Invoices shall be submitted to the Station Manager at the address shown on Exhibit A and Service Provider will also send as quickly as possible thereafter an electronic copy. |
F. |
Disputed Invoices . Airline reserves the right to reasonably reject invoices that are unclear and do not meet Airlines requirements as stipulated in this Agreement. In the event that Airline disputes any invoices, payment of only the disputed portion will be delayed until such dispute is resolved to the mutual satisfaction of the parties. Airline will timely pay the undisputed portion. If there has been no response from Service Provider within 30 days after disputed invoice notification, Service Provider shall be deemed to have agreed with Airline regarding the disputed amount and the invoice dispute shall be closed without further payment due. Airline shall inform Service Provider of any disputed invoice within 21 calendar days from Airlines receipt of said invoice. |
Exhibit D-8
G. |
Late Invoices . Service Provider must submit an invoice, in the form provided by Airline under separate cover, to Airline within thirty (30) days after the end of the month in which the Fuel Services were performed. If more than once during any 12-month period, Service Providers invoice is submitted more than thirty (30) days after the end of the month in which Fuel Services are performed, the payment required on subsequent late invoices during that 12-month period shall be reduced as follows: |
Months after Fuel Services are performed: % due:
1 to 3 months |
90 |
|
After 3 months |
50 |
H. |
Payment of Invoices . Airline will pay properly issued and approved invoices, or to the extent an invoice is subject to reasonable dispute, any undisputed portion, within thirty (30) calendar days of date on invoice. The Station Manager will approve invoices in a timely manner. |
I. |
Liens . Service Provider will keep the premises, improvements, machinery, and equipment of Airline free and clear from any and all liens arising out of the Fuel Services performed or materials furnished hereunder. Service Provider will obtain properly executed waivers and releases from all permitted subcontractors or other persons entitled to liens for Fuel Services or materials furnished in accordance with this Agreement. Service Provider hereby agrees to defend, indemnify and hold Airline harmless from any and all costs, expenses, losses and all damages resulting from the filing of any such liens against Airline. As a condition to payment hereunder, Service Provider will from time to time, upon reasonable request by Airline, furnish waivers or releases of such liens or receipts in full for all claims for such Fuel Services or materials and an affidavit that all such claims have been fully satisfied. |
5. |
REPRESENTATIONS AND WARRANTIES |
A. |
Permits . Service Provider represents that it has obtained, and will maintain at all times during the term of this Agreement, all permits and consents required in order to provide Fuel Services to Airline at the Airport. |
B. |
Due Authorization, Execution and Delivery . Each of Airline and Service Provider represent that this Agreement has been duly authorized, executed and delivered by such party and is enforceable against such party in accordance with its terms. |
6. |
INDEMNIFICATION |
A. |
Indemnification by Service Provider . Service Provider will be responsible for, defend, indemnify, and hold harmless Airline, United Airlines, Inc. ( United ) and the owner or lessor (and, if applicable, sublessor) of the Airline Premises and their respective officers, employees, and agents (collectively the Airline |
Exhibit D-9
Indemnified Parties ) from and against any and all liabilities, claims, suits, judgments, losses, damages, fines or costs (including reasonable attorneys fees and expenses) to the extent that they arise out of (i) any negligence or willful misconduct on the part of Service Provider in connection with its performance under this Agreement, (ii) any failure of supervision, negligence, or willful misconduct of the Service Provider in connection with its performance under this Agreement, or (iii) any breach or default by Service Provider of its obligations under this Agreement, or (iv) otherwise arising out of Service Providers provision of Services under this Agreement, all except and to the extent caused by the negligence or willful misconduct of any of the Airline Indemnified Parties. |
B. |
Indemnification by Airline . Subject to and without limiting any of Service Providers obligations under this Agreement, including the above Service Provider Indemnity, Airline will be responsible for, defend, indemnify and hold harmless Service Provider and United, and their respective officers, employees, and agents (collectively, the Service Provider Indemnified Parties ) against and from any and all liabilities, claims, suits, judgments, losses, damages, fines or costs (including reasonable attorneys fees and expenses in the event that Airline breaches its duty of defense) to the extent that they arise out of any (i) gross negligence or willful misconduct on the part of Airline, its employees or agents (other than Service Provider) in connection with this Agreement, or (ii) any breach or default by Airline of its obligations under this Agreement, all except and to the extent caused by the negligence or willful misconduct of any of the Service Provider Indemnified Parties. |
C. |
Environmental Indemnity . In addition to all other indemnities provided in this Agreement, Service Provider shall be responsible for, indemnify, defend and hold harmless Airline Indemnified Parties (as defined herein) from and against any and all claims, liabilities, damages, costs, losses, penalties, and judgments, including costs and expenses incident thereto under Environmental Laws or due to the release of a Hazardous Material, which may be suffered or incurred by, accrue against, be charged to, or recoverable from Airline or its officers, agents, servants and employees, arising out of Service Providers provision of Services under this Agreement, except to the extent caused by the negligence or willful misconduct of Airline. Notwithstanding anything to the contrary set forth in Section 14(L), such damages may include the payment of consequential, special or exemplary damages to the extent an applicable lease agreement, sublease or other similar agreement requirements payment of such damages. |
D. |
Cooperation . Both parties shall reasonably cooperate with and assist each other in the defense of any action of whatever kind brought by a third party against either party in connection with the Services, except to the extent such cooperation or assistance precludes or jeopardizes any claims or defenses of such party in connection with any such action. |
Exhibit D-10
7. |
RECORDS |
A. |
Upon reasonable request by Airline, Service Provider will make available to Airline for inspection and, if necessary, copying a complete set of all daily sign-in registers, listing each of the employees of Service Provider engaged in performance under this Agreement, including name, date, and number of hours worked. Each listing will be acknowledged and verified by the supervisor of each such employee. |
B. |
Service Provider will maintain, for a period of three (3) years following the performance of any Services, such books, records, and accounts as are necessary for Airline to verify the accuracy of Service Providers invoices regarding any performance by Service Provider under this Agreement, including without limitation time sheets, payroll registers, canceled payroll checks, and any other work records of all personnel regarding all work included in any invoice of Service Provider under this Agreement. Airline or its designated representative upon reasonable notice and to the extent permissible by law, may inspect any such books, records, and accounts, during normal business hours throughout the term of this Agreement and for a period of one year after expiration or other termination hereof. |
C. |
To the extent that Service Provider is required by law or by any regulatory authority to maintain records of background investigations, training, or other qualification or certification of employees or agents of Service Provider performing services under this Agreement, upon expiration or termination of this Agreement for any reason and upon reasonable notice, Service Provider will make available to Airline all such records, to the extent reasonable and permissible by law. |
D. |
Upon reasonable notice, the books and records of Service Provider relating to Airline fuel inventories and Service Providers records relating to employee training, fuel QA checks, facility and equipment maintenance, and compliance requirements, will be accessible to and open for inspection, examination and audit by Airline and/or its authorized representatives to the extent permissible by law. |
E. |
Service Provider shall maintain records relating to its compliance with Environmental Laws under this Agreement for at least three (3) years or such longer period of time if required by Environmental Laws. Upon reasonable notice Service Provider shall, at the reasonable request of Airline, promptly provide copies of relevant environmental records to Airline to the extent permissible by law. |
8. |
NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETY INFORMATION |
A. |
Service Provider acknowledges that, in connection with its performance hereunder, it may access business information that is proprietary to Airline, confidential or compressively sensitive, and/or information, materials, documents |
Exhibit D-11
that are proprietary to third parties. Service Provider acknowledges that all such information and programs constitute Confidential and Proprietary Information which is highly confidential, proprietary and sensitive and understands that any Confidential and Proprietary Information shall be disclosed and made available to Service Provider for the sole and exclusive purpose of performing the Services required by the Agreement. |
B. |
Service Provider shall (i) treat all Confidential and Proprietary Information as privileged, confidential, and proprietary (ii) retain same in the strictest confidence; (iii) use the utmost diligence to guard and protect such Confidential and Proprietary Information (iv) not divulge, copy, disclose or use same, in whole or in part, for any purpose other than for the performance of the Services subject to this Agreement; and (v) not duplicate or use any Confidential and Proprietary Information, in whole or in part, for itself or third parties, except with the express written consent of Airline and, if applicable, the third party owner; provided however that Confidential and Proprietary Information shall not mean or include: |
1. |
Any information which is in the public domain or becomes publicly available, unless due to any unauthorized act or omission on the part of Service Provider or any other party; |
2. |
Any information which becomes rightfully known to the Service Provider from a third party not bound by any restriction of non-disclosure, or |
3. |
Any information which is expressly authorized to be disclosed by Airline in writing; or |
4. |
Any information sought pursuant to any subpoena or court order; provided , however , that in such event, Service Provider will promptly notify Airline and afford to Airline such opportunity as is feasible under the circumstances to permit Airline to object to, challenge or resist the disclosure. |
C. |
Service Provider understands and acknowledges that disclosure of the Confidential and Proprietary Information may give rise to an irreparable injury to Airline, its parent company and/or their respective subsidiaries or affiliates. Accordingly, Service Provider agrees that Airline or the affected entity may seek, in addition to any legal remedies available to it and without the posting of any bond or other security, injunctive relief against the breach or threatened breach of any of the foregoing undertakings. |
D. |
Airline acknowledges that, in connection with its performance hereunder, it may access business information that is proprietary to Service Provider, confidential or compressively sensitive, and/or information, materials, documents that are proprietary to third parties. Airline acknowledges that all such information and programs constitute Confidential and Proprietary Information which is highly confidential, proprietary and sensitive and understands that any Confidential and |
Exhibit D-12
Proprietary Information shall be disclosed and made available to Airline for the sole and exclusive purpose of performing the Services required by the Agreement. |
E. |
Airline shall (i) treat all Confidential and Proprietary Information as privileged, confidential, and proprietary (ii) retain same in the strictest confidence; (iii) use the utmost diligence to guard and protect such Confidential and Proprietary Information (iv) not divulge, copy, disclose or use same, in whole or in part, for any purpose other than for the performance of the Services subject to this Agreement; and (v) not duplicate or use any Confidential and Proprietary Information, in whole or in part, for itself or third parties, except with the express written consent of Service Provider and, if applicable, the third party owner; provided however that Confidential and Proprietary Information shall not mean or include: |
1. |
Any information which is in the public domain or becomes publicly available, unless due to any unauthorized act or omission on the part of Airline or any other party; |
2. |
Any information which becomes rightfully known to the Airline from a third party not bound by any restriction of non-disclosure, or |
3. |
Any information which is expressly authorized to be disclosed by Service Provider in writing; or |
4. |
Any information sought pursuant to any subpoena or court order; provided , however , that in such event, Airline will promptly notify Service Provider and afford to Service Provider such opportunity as is feasible under the circumstances to permit Service Provider to object to, challenge or resist the disclosure. |
F. |
Airline understands and acknowledges that disclosure of the Confidential and Proprietary Information may give rise to an irreparable injury to Service Provider, its parent company and/or their respective subsidiaries or affiliates. Accordingly, Airline agrees that Service Provider or the affected entity may seek, in addition to any legal remedies available to it and without the posting of any bond or other security, injunctive relief against the breach or threatened breach of any of the foregoing undertakings. |
9. |
UNAUTHORIZED PAYMENTS |
A. |
Prohibited Payments . In connection with any performance under this Agreement, neither Service Provider, nor any officer, employee, or agent of Service Provider, will make any payment, or offer, promise or authorize any payment, of any money or other article of value, to any official, employee, or representative of Airline, or to any person or entity doing business with Airline, in order either to obtain or to retain Airlines business, or to direct Airlines business to a third party, or to influence any act or decision of any employee or representative of |
Exhibit D-13
Airline to perform or to fail to perform his or her duties, or to enlist the aid of any third party to do any of the foregoing. |
B. |
Prohibited Receipt of Payments . In connection with any performance under this Agreement, neither Service Provider, nor any officer, employee, or agent of Service Provider, will solicit or receive any amount of cash or negotiable paper, or any item, service or favor of value from any present or prospective supplier, Service Provider or customer of Airline, or from anyone else with whom Airline does business, including any governmental official or representative, for or in connection with the obtaining or retaining any business of or with Airline. Service Provider will refuse to accept all such gifts and, if received, will return such gifts to the donor. In all such cases Service Provider will notify Airline promptly of such gift or offer thereof. If Airline deems it necessary, Service Provider will turn over such gifts to Airline for further handling. |
10. |
OPERATION OF BUSINESS |
A. |
Change in Ownership . If any person or business entity that does not presently have a controlling interest in Service Provider obtains a controlling interest in Service Provider whether by merger, acquisition, or otherwise then Airline may provide notice of termination to the Service Provider (or its successor or assign) within sixty (60) days from learning of the acquisition. Termination according to this section shall be without penalty or cost to Airline except for payment for obligations which arose prior to the termination date. |
B. |
Cessation of Business . If Service Provider ceases to do business as a going concern, Service Provider will provide Airline promptly with all testing and quality control procedures and manuals, and all other technical information, and certain equipment as referenced in Section 3(C) above under the terms of that Section, to the extent the foregoing does not represent proprietary information of Service Provider, or if it does, after receipt of assurances from Airline, acceptable to Service Provider, to protect the confidentiality of said proprietary information, sufficient to allow Airline to obtain substitute performance of any duties or obligations of Service Provider under this Agreement. |
11. |
INSURANCE |
It is understood and agreed that the insurance coverages required herein will neither limit nor expand Service Providers duty to defend, indemnify and hold harmless pursuant to this Agreement. It is further understood and agreed that the designation of Airline as an additional insured of Service Provider will not increase or expand Service Providers defense and indemnification obligations beyond what is required under the terms of this Agreement, nor will it limit or expand Service Providers sole responsibility for payment of any deductible or self-insured retention amounts under the Insurance. Except as expressly provided in this Agreement, the aforementioned insurance coverages required of the Service Provider shall be subject to all coverage limitations, exclusions,
Exhibit D-14
definitions, conditions, endorsements and other requirements, limitations and obligations set forth in Service Providers insurance policies.
Service Provider will obtain and maintain insurance of the following types and amounts:
A. |
Comprehensive General Liability Coverage including, On-Airport Operations (including air-side automobile, contractual, completed operations, independent contractor, products hazards, and war risk and allied perils) covering both bodily injury and property damage in an amount not less than $[***] combined single limit per occurrence. |
B. |
Automobile Liability covering both bodily injury and property damage in an amount not less than $[***] combined single limit per occurrence. |
C. |
Workers Compensation at statutory limits with a waiver of subrogation in favor of Airline and Employers Liability Insurance in an amount not less than $[***] per employee by accident, $[***] per employee by disease, and $[***] policy limit by disease. |
D. |
Environmental Impairment Liability in an amount not less than $[***] per occurrence and in the annual aggregate. |
E. |
All Risk Property Coverage at replacement cost. |
All insurance policies required to be carried by the Service Provider will (i) be written on an occurrence basis by companies of recognized responsibility and otherwise reasonably acceptable to Airline; (ii) be subject to such deductibles, increases in limits and coverages as Airline may from time to time reasonably request; (iii) name Airline, its directors and officers, agents and employees as additional insureds; (iv) include a provision that no act or omission of Service Provider or any party acting under its direction will affect or limit the obligations of the insurance company in respect to any additional insured; (v) provide appropriate cross liability and severability of interest clauses (vi) be deemed primary without right of contribution of any insurance that Airline may carry and the liability assumed by Service Provider has been specifically insured under the liability policy; and (vii) provide that the prescribed coverages may not be reduced, canceled, or non-renewed without at least thirty (30) days prior written notice to Airline (7 days notice with respect to war risk), except in the case of a cancellation for nonpayment of premium, in which case only ten (10) days prior written notice will be sufficient. Certificates evidencing such insurance and clauses will be provided to Airline prior to or upon execution of this agreement.
12. |
COMPLIANCE |
A. |
Law . Service Provider will comply (and will cause all its Personnel to comply) with all applicable laws, ordinances, rules and regulations (federal, state and local), statutory, regulatory, and any and all legal requirements now in effect or that may be enacted, promulgated, issued, or imposed in the future in connection with or relating to any services to be provided by Service Provider including, by |
Exhibit D-15
way of example and not a limitation, all legal requirements relating to safety or otherwise that are subject to the jurisdiction of the Federal Aviation Administration and the Department of Transportation, The Americans with Disabilities Act, the Civil Rights Act of 1964, as amended, the Foreign Corrupt Practices Act, Workmans Compensation, Employers Liability, Environmental Laws, and applicable rules of affected airport authorities and will make all reports and remit all required withholdings and other deductions from the compensation paid to its personnel. |
B. |
Airlines Safety and Security Procedures . Service Provider shall at all times comply (and will cause all its Personnel fully to comply) with all safety, environmental, security and health regulations in effect at Airlines facilities of which Service Provider is made aware, including without limitation, Airlines drug screening and no smoking policies; provided , however that Airlines policies or directives will be minimum requirements, and Service Providers full compliance with Airlines directives will not limit to any extent Service Providers responsibility to comply with applicable law under Section 12(A) above. It is additionally provided that, in the event that Airlines policies are inconsistent with or in conflict with any express legal requirement, Service Provider shall comply with said legal requirement. |
C. |
Permits, Notices, Approvals, And Code Compliance . Service Provider will at its expense obtain all necessary permits and licenses that may be required in order to perform the Services. Service Provider will ensure that all Services performed and materials furnished under this Agreement comply with all applicable municipal, county, state and federal building, fire, sanitary and other codes. Service Provider will arrange for all necessary governmental or other inspections or approvals, including all notices in connection therewith, regarding all Services. At Airlines request and upon reasonable notice, Service Provider will provide to Airline written and documentary evidence of Service Providers compliance. |
D. |
Costs . Service Provider must pay governmental fines and fees and any other costs to address any such enforcement action that arises out of the provision of Fuel Services under this Agreement, except to the extent caused by the negligence or willful misconduct of Indemnified Parties. |
13. |
ENVIRONMENTAL |
A. |
Definitions . |
1. |
The term Environmental Laws means all applicable federal, state, local and foreign laws and regulations, including orders or settlements under those laws and including airport rules, regulations and policies, lease requirements (if the lease is provided to Service Provider) relating to the environment or human health and safety, including, without limitation, laws, regulations and rules relating to emissions to the air, discharges to |
Exhibit D-16
surface and subsurface waters, regulation of potable or drinking, the use, storage, release, disposal, transport or handling of Hazardous Materials. |
2. |
The term Hazardous Materials means any substances, whether solid, liquid or gaseous, which are listed and/or or regulated under any Environmental Laws or which otherwise cause or pose a known threat or hazard to health, safety or the environment, including, without limitation any petroleum products or any constituent thereof. |
B. |
Service Provider Obligations. |
1. |
Service Provider shall conduct its operations in a prudent manner, taking reasonable preventative measures to avoid liabilities under any Environmental Laws or harm to human health or the environment, including, without limitation, measures to prevent unpermitted releases of Hazardous Materials to the environment, impacts to on-site or off-site properties and the creation of any public nuisance. If in the course of conducting services under this Agreement Service Provider encounters conditions that could give rise to any liability for Airline (whether or not caused by Service Provider), Service Provider or any other person under any Environmental Laws or which otherwise could harm human health or the environment, Service Provider shall promptly notify Airline of such conditions. Notification shall be provided as indicated in Section 14(G) of this Agreement, with a copy to [ insert title and address of Airline representative ]. |
2. |
Service Provider shall, at its own expense, conduct its operations in compliance with applicable Environmental Laws, including obtaining any needed permits or authorizations for Service Providers operations, and shall properly train its employees to comply with such Environmental Laws. |
3. |
Service Provider shall ensure that any waste materials generated in connection with the services performed by Service Provider under this Agreement are managed in accordance with all applicable Environmental Laws with Service Provider assuming responsibility as the legal generator of such wastes. |
4. |
For any leased areas or other equipment that are jointly used or operated by both Service Provider and Airline (and/or other Airline contractors), Service Provider shall effectively coordinate its activities with Airline (and/or other Airline contractors) and otherwise perform such activities to ensure compliance with applicable Environmental Laws. Service Providers obligations under this Section shall include, without limitation (by way of example only): (a) properly managing shared fuel storage tanks and ground service equipment to ensure that the fuel complies with the sulfur concentration limitations required under the Clean Air Act and |
Exhibit D-17
state laws, and its implementing regulations, as amended from time to time, (b) providing information on operations, materials used, and equipment (c) coordination regarding spill response responsibilities. If requested in writing by Airline, Service Provider shall replace specific products used in its operations with less toxic products, as long as there is a reasonable replacement available. If such products are more expensive, the parties agree the increased cost would be paid by Airline. |
5. |
Except for de minimis amounts of Hazardous Materials that are not required to be reported to the Airport or any governmental authority and are immediately and fully remediated to pre-existing conditions, Service Provider shall promptly notify Airline of any spills or leaks of Hazardous Materials arising out of Service Providers provision of Services under this Agreement, and shall provide copies to Airline of any written reports provided to any governmental agencies and airport authorities under any Environmental Laws. Service Provider shall promptly undertake all actions to remediate any such spills or leaks to the extent required by applicable Environmental Laws, by an applicable governmental authority, by the airport authority, or in order to comply with a lease obligation. In the event that Service Provider fails to fulfill its remediation obligations under this Section 13(B)(5) to the satisfaction of Airline, Airline may undertake such actions at the sole reasonable and necessary cost and expense of Service Provider. Such costs and expenses shall be promptly paid upon Service Providers receipt of a written request for reimbursement by Airline. |
6. |
Service Provider shall upon written request promptly provide Airline written copies of any notices of violation or other claims from any party related to or associated with the provision of Services conducted by Service Provider under this Agreement. Service Provider shall promptly undertake all actions necessary to resolve such matters, including, without limitation, the payment of fines and penalties to the extent required by applicable Environmental Laws. In the event that Service Provider fails to fulfill its obligations under this Section 13(B)(6) , Airline may undertake such actions at the sole reasonable and necessary cost and expense of Service Provider. |
7. |
If reasonably requested in writing, Service Provider shall conduct a review and provide information to Airline demonstrating compliance with any provision of this Section 13 . This review may include, at Airlines request and expense, the completion of an environmental compliance audit of Service Providers activities pursuant to a work plan approved by Airline. Service Provider shall provide Airline with a summary of the results of this audit and provide an opportunity to review the report. Upon three (3) days advance written notice from Airline, Service Provider shall provide Airline with access (for the limited purpose of ascertaining Service Providers compliance with this Section) to that portion of the Fuel |
Exhibit D-18
Services operations, documents and management employees specifically developed and positioned to provide the Fuel Services to Airline. Service Provider shall promptly remedy areas of non-compliance identified in writing by Service Provider, Airline or by a government agency with jurisdiction over Service Providers operations. |
8. |
Service Provider shall develop, maintain, implement, and update (as necessary) a Spill prevention, Control and Countermeasures Plan (SPCC) as required by 40 CFR Part 112 for the regulated storage of oil and oil products. |
9. |
If Airline provides any information, instruction, or materials ( Airlines Materials ) to Service Provider relating to Airlines obligations under any Environmental Laws, Service Provider agrees that such information, instruction, or materials shall not in any way relieve Service Provider of its obligation to comply with Environmental Laws and for avoidance of doubt, Service Provider shall comply with applicable Environmental Laws in the event of a conflict between Environmental Laws and Airlines Materials. Service Provider further agrees that it shall otherwise preserve the proprietary nature of any such information and ensure that the information is not disclosed to any third parties without first obtaining the written consent of Airline. |
14. |
MISCELLANEOUS |
A. |
Governing Law . This Agreement shall be construed and interpreted according to the laws of the State of Illinois without regard to conflicts of law provisions. |
B. |
Entire Agreement/Modifications/Validity . This Agreement, together with all exhibits and attachments hereto, contains the entire agreement between the parties, and supersedes all prior or contemporaneous oral or written representations or communications between the parties. This Agreement may be modified only by an instrument in writing executed by both parties. In the event that a court determines that a portion of this Agreement is void, invalid or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that the Agreement shall otherwise remain in full force and effect and the remaining provisions of this Agreement remain in effect. |
C. |
Assignment and Subcontracting . Service Provider acknowledges that it may not, and agrees that it shall not (i) assign or otherwise transfer this Agreement, or (ii) subcontract or delegate any of Service Providers obligations under this Agreement in whole or in part without the prior written consent of Airline in each instance, which consent may be withheld in Airlines sole discretion. No subcontracting, even if approved by Airline, shall (a) release Service Provider from its responsibility for its obligations under this Agreement, in whole or in part; (b) diminish or limit to any extent Service Providers obligation to Airline, or (c) create a contractual relationship between Airline and any subcontractor. |
Exhibit D-19
Notwithstanding anything in this Agreement to the contrary, this Agreement may be assigned, in whole or in part, to any entity into which Airline, or its parent, may be merged or consolidated, or which may succeed to the business of Airline, or its parent, as well as any entity that is an affiliate, subsidiary, parent, or successor of Airline or its parent.
D. |
Force Majeure . Without prejudice to Airlines rights of termination set forth herein, neither party will be deemed to be in default or breach of this Agreement, in the event and to the extent that its delay or failure to perform as required under this Agreement is prevented, delayed, or made impossible or impracticable as a result of any act of God, war, insurrection, riot, terrorist attack, civil disorder, unrest or disturbance, martial law or other governmental restrictions, including rationing, epidemics, fire, flood, earthquake or other casualty, failure of facilities or systems, any natural or man-made disaster or other cause of like nature that is beyond the reasonable control of such party ( Force Majeure ). The party affected by an event of Force Majeure, upon prompt written notice given to the other party, shall be excused from its obligations on a day to day basis to the extent of such prevention, restriction or interference provided that the party so affected shall use its best efforts to avoid, remove or work around such Force Majeure event and minimize the consequences thereof and both parties shall resume performance hereunder as soon as feasible. |
E. |
Nonwaiver . No delay or failure of either party to exercise any right or remedy hereunder shall operate as a waiver thereof in such or any subsequent instance. |
F. |
Third Party Beneficiaries . Except with respect to United, which shall be a third party beneficiary of this Agreement with respect to the indemnification provisions set forth in Section 6 hereto, nothing in this Agreement is intended to confer any rights or remedies under this Agreement on any person other than Airline and Service Provider. |
G. |
Notices . All notices, requests or other communications (other than routine communications made or exchanged in the ordinary course of Service Providers performance hereunder) shall be given in person, or mailed by certified or registered mail, or by a nationally recognized overnight courier. Notices shall be given to each party at the addresses specified below, or to such other address or addresses as either party may from time to time designate to the other by written notice: |
Exhibit D-20
To Airline |
To Service Provider |
Notices shall be effective upon receipt, or upon attempted delivery where delivery is refused or mail is unclaimed. Any notices from Service Provider to Airline regarding termination of the agreement or changes in the terms and conditions of this agreement shall be directed to Airlines corporate headquarters at the above mailing addresses.
H. |
Publicity . Service Provider may refer to Airline as a customer reference in non-public business dealings with potential customers and financial concerns. Neither party will refer to this Agreement or use the name of the other party in any form of publicity or advertising, either directly or indirectly, without the prior written consent of the other party. |
I. |
Survival . All obligations accrued but not performed as of the termination of this Agreement, and all obligations which, by their nature survives the expiration or termination of this Agreement, shall survive any such expiration or termination. |
J. |
Successors and Assigns . Without waiving or limiting any provision of Section 14(C) above, all rights specified hereunder shall be binding on and shall inure to the benefit of the parties respective successors and assigns, including trustees and receivers. |
K. |
Attorneys Fees . In the event either party fails to perform any of its obligations under this Agreement or in the event a dispute arises concerning the meaning or interpretation of any provision of this Agreement, the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by any other party in enforcing or establishing its rights hereunder (whether in pre-trial, trial or post-trial proceedings or on appeal), including court costs and reasonable attorneys fees. The prevailing party shall include (i) a party who dismisses an action in exchange for sums allegedly due, (ii) the party who received performance from the other party where such performance is substantially equal to the relief sought in an action, or (iii) the party determined to be the prevailing party by a court of law, and the party not prevailing shall be the other party. |
Exhibit D-21
L. |
DISCLAIMER OF CONSEQUENTIAL DAMAGES . IN NO EVENT WILL EITHER PARTY BE LIABLE FOR, AND EACH PARTY HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS AGAINST THE OTHER PARTY FROM, ANY CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL, COLLATERAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING, WITHOUT LIMITATION DAMAGES DUE TO BUSINESS INTERRUPTION, LOST REVENUES, LOST PROFIT, LOSS OF PROSPECTIVE ECONOMIC ADVANTAGE OR GOODWILL, ARISING FROM OR RELATED TO THIS AGREEMENT, REGARDLESS OF THE TYPE OF CLAIM OF THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLY THEORY, AND REGARDLESS OF THE CAUSE OF SUCH DAMAGES (INCLUDING LOSS OF DATA) AND EVEN IF SUCH DAMAGES WERE FORESEEABLE. |
THE PROTECTION OR LIMITATION AGAINST LIABILITY AFFORDED BY THIS SECTION 14(L) SHALL APPLY REGARDLESS OF WHETHER THE DAMAGES ARE SOUGHT IN CONTRACT, TORT, STATUTE OR OTHERWISE, AND IRRESPECTIVE OF WHETHER SOLE, CONCURRENT OR OTHER NEGLIGENCE (ACTIVE OR PASSIVE) OR STRICT LIABILITY IF INVOLVED OR IS ASSERTED, AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. TO THE EXTENT NOT PROHIBITED BY LAW, ANY STATUTORY REMEDY INCONSISTENT WITH THE FOREGOING IS HEREBY WAIVED.
M. |
Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The Agreement may be executed by facsimile or PDF signature. |
[Remainder of This Page Intentionally Left Blank; Signature Page(s) Follow]
Exhibit D-22
EXHIBIT A
Location and Compensation
A. |
Location of Fuel Services: |
Airport
City
State of
B. |
Compensation For Fuel Services: |
I.Service | II. Products | *Service Providers sole compensation for providing such services will be: | ||
Into-plane Fueling | Jet-A | per scheduled flight | ||
Defueling | Jet-A | $ per flight, plus disposal fees if applicable. Fuel must be reintroduced into Airline aircraft within 24 hours. |
*Above rates are plus all applicable taxes and airport fees except those specifically excluded in Section 4(D) of this Agreement.
Invoices should be directed to:
Airline
[Insert address]
Exhibit D-24
EXHIBIT B
Licensed Premises
Exhibit D-25
EXHIBIT E
Use of United Marks and Other Identification
1. |
Grant . United hereby grants to Contractor, and Contractor accepts, a non-exclusive, personal, non-transferable, royalty-free, fully paid-up right and license to adopt and use the United Marks and other Identification in connection with the rendering by Contractor of Regional Airline Services, subject to the conditions and restrictions set forth herein. |
2. |
Ownership of the United Marks and Other Identification . |
a |
United shall at all times remain the owner of the United Marks and the other Identification and any registrations thereof and Contractors use of any United Marks or other Identification shall clearly identify United as the owner of such marks (to the extent practical) to protect Uniteds interest therein. All use by Contractor of the United Marks and the other Identification shall inure to the benefit of United. Nothing in this Agreement shall give Contractor any right, title, or interest in the United Marks or the other Identification other than right to use the United Marks and the other Identification in accordance with the terms of this Agreement. |
b |
Contractor acknowledges Uniteds ownership of the United Marks and the other Identification and further acknowledges the validity of the Identification. Contractor agrees that it will not do anything that in any way infringes or abridges Uniteds rights in the Identification or directly or indirectly challenges the validity of the Identification |
3. |
Use of the United Marks and the Other Identification . |
a |
Contractor shall use the United Marks and other Identification only as authorized herein by United and in accordance with such standards of quality as United may establish. |
b |
Contractor shall use the Identification on all Covered Aircraft and all facilities, equipment and printed materials used in connection with the Contractor Services. |
c |
Contractor shall not use the Identification for any purpose other than as set forth in this Exhibit E , and specifically shall have no right to use the United Marks or other Identification on or in any aircraft other than Covered Aircraft or in connection with any other operations of Contractor. |
d |
United shall have exclusive control over the use and display of the United Marks and other Identification, and may change the Identification at any time and from time to time (including by adding or deleting marks from the list specified in this Exhibit E ), in which case Contractor shall as soon as practicable make such changes as are requested by United to utilize the new Identification; provided that United shall either pay directly the reasonable costs of making such changes to the Identification or shall promptly reimburse Contractor for its reasonable |
Exhibit E-1
expenses incurred in making such changes. Expenses paid to Contractor by United require advanced written approval from United. |
e |
Nothing shall abridge Uniteds right to use and/or to license the Identification, and United reserves the right to the continued use of all the Identification, to license such other uses of the Identification and to enter into such agreements with other carriers providing for arrangements similar to those with Contractor as United may desire. No term or provision of this Agreement shall be construed to preclude the use of the United Marks or other Identification by other persons or for similar or other uses not covered by this Agreement. |
4. |
United-Controlled Litigation . United at its sole expense shall take all steps that in its opinion and sole discretion are necessary and desirable to protect the United Marks and other Identification against any infringement or dilution. Contractor agrees to cooperate fully with United in the defense and protection of the United Marks and other Identification as reasonably requested by United. Contractor shall report to United any infringement or imitation of, or challenge to, the United Marks and other Identification, immediately upon becoming aware of same. Contractor shall not be entitled to bring, or compel United to bring, an action or other legal proceedings on account of any infringements, imitations, or challenges to any element of the United Marks and other Identification without the written agreement of United. United shall not be liable for any loss, cost, damage or expense suffered or incurred by Contractor because of the failure or inability to take or consent to the taking of any action on account of any such infringements, imitations or challenges or because of the failure of any such action or proceeding. If United shall commence any action or legal proceeding on account of such infringements, imitations or challenges, Contractor agrees to provide all reasonable assistance requested by United in preparing for and prosecuting the same. |
5. |
Revocation of License . United shall have the right to cancel the license provided herein in whole or in part at any time and for any reason, in which event all terminated rights to use the Identification provided Contractor herein shall revert to United and the United Marks and the other Identification shall not be used by Contractor in connection with any operations of Contractor. The following provisions shall apply to the termination of the license provided herein: (i) in the case of a termination of the license to use the globe element of the United Marks, Contractor shall cease all use of the globe element of the United Marks with respect to each Covered Aircraft within ninety (90) days of such aircraft being withdrawn from the capacity purchase provisions of the Agreement, and shall cease all use of the globe element of the United Marks in all other respects within ninety (90) days of last Covered Aircraft being withdrawn from this Agreement (unless this Agreement is terminated for Cause or Special Cause pursuant to Section 8.2(a) or the first sentence of Section 8.2(b) , in which case Contractor shall cease all use of the globe element of the United Marks within forty-five (45) days of the Termination Date); (ii) in the case of a termination of the license to use any other United Marks and Identification, Contractor shall cease all use of such other United Marks and Identification within forty-five (45) days of the termination of the license for such other United Marks and other Identification. Within such specified period, Contractor shall cease all use of such other United Marks and Identification, and shall change its facilities, equipment, uniforms and |
Exhibit E-2
supplies to avoid any customer confusion or the appearance that Contractor is continuing to have an operating relationship with United, and Contractor shall not thereafter make use of any word, words, term, design, name or mark confusingly similar to the United Marks or other Identification or take actions that otherwise may infringe the United Marks and the other Identification. |
6. |
Assignment . The non-exclusive license granted by United to Contractor is personal to Contractor and may not be assigned, sub-licensed or transferred by Contractor in any manner without the written consent of a duly authorized representative of United. |
7. |
United Marks . The United Marks are as follows: |
UNITED EXPRESS
UNITED EXPRESSS LOGO (DESIGN) IN COLOR
UNITED EXPRESSS LOGO (DESIGN) IN BLACK AND WHITE
8. |
Aircraft Livery . The aircraft livery shall be as follows, unless otherwise directed by United: The colors blue, gray, white and gold are used on the aircraft. The color white appears on the top approximate 2/3 of the body of the aircraft; the color gray appears below the color white on the remainder of the bottom portion of the body of the aircraft; the color gold is used as a stripe or band dividing the white and gray colors. The tail of the aircraft is primarily blue with the globe logo design in a gold and white combination and the trade name is written in blue on the white portion of the body of the aircraft. Interior décor shall be as directed by United. There shall be no Contractor Marks displayed on the aircraft exterior or in the aircraft interior, including without limitation any marks on any backwall or cabin separator. |
All aircraft delivered per Schedule 1 shall be delivered in United livery as of the Actual Delivery Date. If Contractor does not deliver aircraft in United livery on the Actual Delivery Date, then Contractor agrees to backfill the aircraft and its associated lines of flying at no additional cost to United while the scheduled aircraft is being painted. For avoidance of doubt United will incur no additional ownership and United will not reduce lines of flying to accommodate paint.
9. |
Survival . The provisions of this Exhibit E shall survive the termination of this Agreement for a period of six years. |
Exhibit E-3
EXHIBIT F
Use of Contractor Marks
1. |
Grant . Contractor hereby grants to United, and United accepts, a non-exclusive, personal, non-transferable, royalty-free right, fully paid-up and license to adopt and use the Contractor Marks (as defined below) in connection with Uniteds entering into this Agreement, subject to the conditions and restrictions set forth herein. |
2. |
Ownership of the Contractor Marks . |
a |
Contractor shall at all times remain the owner of the Contractor Marks and any registrations thereof and Uniteds use of any Contractor Marks shall clearly identify Contractor as the owner of such marks (to the extent practical) to protect Contractors interest therein. All use by United of the Contractor Marks shall inure to the benefit of Contractor. Nothing in this Agreement shall give United any right, title, or interest in the Contractor Marks other than right to use the Contractor Marks in accordance with the terms of this Agreement |
b |
United acknowledges Contractors ownership of the Contractor Marks and further acknowledges the validity of the Contractor Marks. United agrees that it will not do anything that in any way infringes or abridges Contractors rights in the Contractor Marks or directly or indirectly challenges the validity of the Contractor Marks. |
3. |
Use of the Contractor Marks . |
a |
United shall use the Contractor Marks only as authorized herein by Contractor and in accordance with such standards of quality as Contractor may establish. |
b |
United shall use the Contractor Marks as necessary or appropriate in Uniteds sole discretion in connection with the Regional Airline Services, including without limitation the sale or disposition by United of the seat inventory of the Scheduled Flights. |
c |
United shall not use the Contractor Marks for any purpose other than as set forth in this Exhibit F , and specifically shall have no right to use the Contractor Marks in connection with any other operations of United. |
d |
Contractor may change the Contractor Marks at any time and from time to time (including by adding or deleting marks from the list specified in this Exhibit F ), in which case United shall as soon as practicable make such changes as are requested by Contractor to utilize the new Contractor Marks; provided that Contractor shall either pay directly the reasonable costs of making such changes to the Contractor Marks or shall promptly reimburse United for its reasonable expenses incurred in making such changes. |
Exhibit F-1
e |
Nothing shall abridge Contractors right to use and/or to license the Contractor Marks, and Contractor reserves the right to the continued use of all the Contractor Marks, to license such other uses of the Contractor Marks and to enter into such agreements with other carriers providing for arrangements similar to those with United as Contractor may desire. No term or provision of this Agreement shall be construed to preclude the use of the Contractor Marks by other persons or for other similar uses not covered by this Agreement. |
4. |
Contractor-Controlled Litigation . Contractor at its sole expense shall take all steps that in its opinion and sole discretion are necessary and desirable to protect the Contractor Marks against any infringement or dilution. United agrees to cooperate fully with Contractor in the defense and protection of the Contractor Marks as reasonably requested by Contractor; provided that Contractor agrees to reimburse United for any reasonable third party costs and expenses incurred by United. United shall report to Contractor any infringement or imitation of, or challenge to, the Contractor Marks, immediately upon becoming aware of same. United shall not be entitled to bring, or compel Contractor to bring, an action or other legal proceedings on account of any infringements, imitations, or challenges to any element of the Contractor Marks without the written agreement of Contractor. Contractor shall not be liable for any loss, cost, damage or expense suffered or incurred by United because of the failure or inability to take or consent to the taking of any action on account of any such infringements, imitations or challenges or because of the failure of any such action or proceeding. If Contractor shall commence any action or legal proceeding on account of such infringements, imitations or challenges, United agrees to provide all reasonable assistance requested by Contractor in preparing for and prosecuting the same; provided that Contractor agrees to reimburse United for any reasonable third party costs and expenses incurred by United. |
5. |
Revocation of License . Contractor shall have the right to cancel the license provided herein in whole or in part at any time and for any reason, in which event all terminated rights to use the Contractor Marks provided United herein shall revert to Contractor and the Contractor Marks shall not be used by United in connection with any operations of United. United shall cease all use of the Contractor Marks in all respects upon the last Covered Aircraft being withdrawn from this Agreement. United shall not thereafter make use of any word, words, term, design, name or mark confusingly similar to the Contractor Marks or take actions that otherwise may infringe the Contractor Marks. |
6. |
Assignment . The non-exclusive license granted by Contractor to United may be assigned, sub-licensed or transferred by United to its affiliates in any manner without the written consent of Contractor. |
7. |
Contractor Marks . Contractor represents and warrants that the Contractor Marks consist exclusively of the following: Operated by Mesa Airlines, Inc. |
8. |
Survival . The provisions of this Exhibit F shall survive the termination of this Agreement for a period of six years. |
Exhibit F-2
EXHIBIT G
Catering Standards
INFLIGHT PRODUCT SALES PROGRAM
United will market a portfolio of inflight products for purchase on United Express flights which includes liquor, beer, wine, food, or other product offerings. Contractor will administer the program related to such in-flight sales (the Inflight Product Sales Program ) as Uniteds representative following all policies and procedures of United. The initial policies and procedures established by United for the sale of products onboard Contractors flights under the Agreement with United are set forth below. United reserves the right to change the product offerings, policies and procedures associated with the Inflight Product Sales Program at any time and in its sole discretion.
Station Services
● |
United, or Uniteds catering agent, will provide catering services as directed by United. |
● |
United or its catering agent will provide supplies, food, liquor, other beverage, and other product uplift as necessary and will remove, store and re-board perishable supply and beverage items on Remain Over Night (RON)/originating flights at airports designated by United as catering airports. |
● |
In respect of all catering items (including the Inflight Product Sales Programs), Contractor will coordinate and communicate with United or Uniteds catering agent regarding all flight activity, cancellations and irregular operations providing necessary information in a timely manner. |
Onboard Services
● |
United has right to determine meal/beverage and other product offering service parameters and scheduling for Scheduled Flights. |
● |
United has right to conduct onboard service audits on Scheduled Flights to ensure service standards are being met. |
● |
Contractor shall ensure that all flight attendants providing Regional Airline Services are trained on meal and beverage service procedures, including liquor and duty-free sales and cash handling, and will collect all on-board revenue for food, liquor, duty-free sales and/or any other products for sale. |
● |
Contractor will provide, at Contractors cost and expense, the initial galley service ships equipment to operate, such as hot jugs, coffee makers and trash bins, carts, carrier boxes, drawers, inserts and oven racks. Contractor shall provide a sufficient quantity of, but in no case fewer than three (3), sets of required galley ships equipment, as well as replacements as needed, to ensure adequate rotation of equipment for catering exchanges. |
Exhibit G-1
● |
With respect to CRJ Covered Aircraft, Contractor shall provide all catering items in accordance with the specifications provided to Contractor by United. With respect to all other Covered Aircraft, United will provide all liveried catering items, including cups, napkins, etc. as well as all products in the Inflight Product Sales Program. |
TECHNOLOGY
The sale of product onboard Contractors flights under the Agreement will involve non-cash transactions. United will provide a single hand held device (each such device, an HHD and collectively, the HHD units) necessary to process credit and debit card transactions for each aircraft in Contractors fleet operating as United Express. Contractor shall only swipe the customers credit or debit card into the HHD unit for the purpose of processing the customers transaction and shall not otherwise use or record the customer information. The HHD units provided by United shall only be used for Uniteds business purposes.
The HHD units and the information contained therein shall be deemed the confidential and proprietary information of United and its licensors and shall be subject to the confidentiality terms and conditions set forth in the Agreement for other types of confidential information of United. Contractor shall not, and shall not permit others to, reverse engineer, decompile, disassemble or translate the HHD units, including any firmware or software that is loaded upon the units, or otherwise attempt to view, display or print the source code embedded in the HHD units, or any firmware or software loaded on the HHD units.
Upon the earlier to occur of (i) the termination of Uniteds Inflight Product Sales Program, (ii) the termination of this Agreement, or (iii) the cessation of the use of the HHD units by Contractor, as determined by United in its sole discretion, Contractor shall cooperate with United or its designated vendor for the collection and return of all HHD units to United at the address designated by United, at Uniteds cost. Contractor shall return the HHD units in as good a condition as reasonably possible, except for reasonable wear and tear thereof.
Contractor shall use commercially reasonable efforts to keep secure the HHD on each aircraft. Contractor agrees to notify United whenever any HHD unit has been, or Contractor reasonably believes or suspects that any HHD unit has been, lost, acquired, destroyed, modified, used, disclosed or accessed by any person in an unauthorized manner or for an unauthorized purpose (collectively, Security Breach). Contractor further agrees to provide all reasonable assistance requested by United or Uniteds designated representatives, in the furtherance of any correction, remediation, investigation, enforcement or litigation with respect to a Security Breach, including but not limited to, any notification that United may determine appropriate to send to individuals impacted or potentially impacted by a Security Breach.
Lost equipment will be replaced by United. Replacement costs will be borne by Contractor. Any equipment that is unaccounted for and for which no transactions have been logged for 48 hours will be considered lost and, if United shows that such equipment is lost due to Contractors negligence, United reserves the right to set-off the replacement cost of such lost equipment by taking a credit of such excess replacement cost pursuant to the procedures set forth in Section 11.13 of the Agreement.
Exhibit G-2
Any HHD unit that is damaged beyond reasonable wear and tear which is shown by United to be due to Contractors negligence, will be replaced at Contractors expense. United reserves the right to set-off the replacement cost associated with such damaged HHD unit by taking a credit of such excess replacement cost pursuant to the procedures set forth in Section 11.13 of the Agreement.
United, at its cost, will provide or cause to be provided by a vendor of Uniteds choice the maintenance and battery replacement for the HHD units. Such maintenance and battery replacement will be provided at predetermined intervals designed to maximize HHD and battery useful life, and Contractor will have the right to request maintenance at different times than the predetermined intervals or additional battery replacement at Uniteds cost upon request. In the event Contractors request for maintenance is related to a faulty or defective HHD unit, United shall pay the vendor directly for such non-routine service call.
United will provide at its sole cost and expense (including all out of pocket costs and reimbursement of Contractors labor costs) for initial train the trainer training to a reasonable number of Contractor-designated trainers on the use of the HHD. Such cost will be negotiated and agreed upon by the parties. Contractor will be required to (i) retain the training skill beyond the initial train the trainer training provided by United and (ii) provide training to Contractors crew personnel at Contractors own expense.
PRODUCT LOSS AND PILFERAGE
United will establish procedures aimed at limiting product loss. At a minimum, it is required that Contractors Flight Attendants record opening and closing inventories of each product to be sold onboard, accounting for all sales and complimentary items distributed.
Seals may be required to prevent tampering with product inventories and to deter pilferage. United will monitor all inventories and reserves the right to charge Contractor for identified loss (including breakage and other damage) and pilferage on a cost (non mark-up) basis determined monthly. Any discrepancies in inventories, seal numbers recorded, or excessive complimentary activity for any product sold must be reported at the hub for use in pilferage investigations by United. Contractors failure to provide documentation as reasonably requested by United or its representatives will result in Contractor being charged for pilferage as reasonably determined by United on a cost basis. United reserves the right to set off the value of the loss and/or pilferage on a cost (non mark-up) basis, by taking a credit of such loss and/or pilferage pursuant to the procedures set forth in Section 11.13 of the Agreement. All reasonable product loss and pilferage procedures established by United must be adhered to by Contractor.
United may, at any time during normal operating hours inspect, monitor, or audit Contractors administration of the Inflight Product Sales Program described in this Appendix or in other policies and procedures, in order to verify that Contractor is in compliance, in all material respects, with Uniteds requirements for the Inflight Product Sales Program. Contractor will work with United to ensure reasonably appropriate controls exist designed to comply with Uniteds requirements and will ensure corrective actions are in place as necessary.
Exhibit G-3
LIQUOR, BEER AND WINE PROGRAM
The Alcoholic Beverage Products offering will be determined by United and provided for by United in the liquor kit supplied to each aircraft. Except as prohibited by law or otherwise agreed by United and Contractor due to the various applicable liquor license laws and regulations, the Alcoholic Beverage Products will be purchased by United prior to being placed onboard Contractors aircraft and sold onboard all United Express flights designated by United.
Once onboard Contractors aircraft, liquor drawers, bags or other liquor containment mechanisms used by Contractor, as determined by Contractor, are considered a part of ships equipment and will be used for the distribution of Uniteds inflight products.
Contractor shall not serve any Alcoholic Beverage Product(s) on the ground without Uniteds consent. Contractor will obtain and maintain liquor licenses in the states where they board and/or unload any Alcoholic Beverage Product. Unless otherwise agreed by the parties, Contractor will not board or unload any Alcoholic Beverage Products in Virginia but in the event it is agreed that Contractor will board or unload any Alcoholic Beverage Products in Virginia, the parties shall comply with the procedures for Virginia below.
Virginia Alcoholic Beverage Handling Procedures
Contractor will comply with Virginias liquor purchase procedures. In Virginia, Contractor will board and/or unload only Alcoholic Beverage Products that Contractor owns. To that end, in the event it is agreed by the parties that Contractor will board and/or unload any Alcoholic Beverage Products in Virginia, Contractor will purchase such Alcoholic Beverage Products directly. Contractor will timely pay the supplier of such Alcoholic Beverage Products directly for such order(s). Once out of Virginia airspace, Contractor will transfer to United the title to the purchased Alcoholic Beverage Products. United will be responsible for any sales tax attributable to the foregoing title transfer.
FOOD AND OTHER PRODUCTS
United reserves the right to introduce other products for sale onboard including food offerings. Food offerings may come in a variety of packaging options and will be integrated into the entire portfolio with regards to specifications and procedures established by United.
Provisioning of product offering will follow Uniteds procedures at distribution points.
Exhibit G-4
EXHIBIT H
Fuel Efficiency Program
Contractor shall use commercially reasonable efforts to develop and maintain a comprehensive fuel efficiency program, acceptable to United, in a timely manner and with the overall objective of operating and maintaining the Covered Aircraft in a manner that maximizes fuel efficiency, with due consideration to other performance objectives. The program will include applicable data collection and trend analysis, and will set and track target metrics. United shall audit Contractors program at its discretion, but at no less than annual intervals, and Contractor and United shall work together to revise and adjust such program from time to time so that such program remains acceptable to United. Such audits will be based on the IATA Fuel and Emissions Efficiency Checklist, supplemented by the IATA Guidance Material and Best Practices for Fuel and Environmental Management, any applicable manufacturer material, Uniteds own fuel efficiency program applicable to its own fleet, and any other material standard in the industry.
Contractors Fuel efficiency program shall emphasize at least the following (subject to revisions and adjustments as referenced above):
1. |
A cost index (CI) based flight planning system, or as an alternative a flight planning system that adequately balances the cost of fuel versus the cost of time on a segment specific basis to be optimized from Uniteds perspective. If capable, dynamic cost indexing will be utilized. The ability to provide the system with current and accurate applicable costs is required. Cost Index values will be updated monthly and will include delay cost if provided by United. |
2. |
Flight planning technology that accurately predicts fuel burn and optimizes lateral and vertical profiles for takeoff and landing runway, climb and descent, crossing restrictions, special use airspace, preferred routings, enroute altitude agreements, etc. United periodically evaluates city pair routings and provides optimized routes which shall be incorporated into the flight planning software to provide greater flexibility to determine the least cost routes. Carrier commits to work in good faith with United to establish an audit process to ensure that least cost routing option is selected, provided such actions do not impose any additional burden or cost on Contractor. |
3. |
Development of a comprehensive fuel policy which is appropriate, well documented, implemented, and thoroughly trained for dispatchers, pilots, load planners, station agents, mechanics and management that maximize opportunities for fuel efficiency. Policy shall be reviewed with United annually. |
4. |
An active interface with appropriate Air Traffic Control (ATC) facilities, management, and other personnel to minimize operational restrictions, and improve ATC handling of Contractor flights. |
5. |
Well-defined and fully integrated flight planning Fuel policies, including ACARS-based statistical tracking of Fuel, efficient reserves, guidelines for efficient alternate selection, a no-alternate policy, and target fuel on deck. |
Exhibit H-1
6. |
Thorough and effective pilot and dispatcher training on aerodynamics, cruise performance and overall fuel efficient flying in initial, transition, upgrade, and recurrent programs, with an emphasis on operating the aircraft at the most efficient speeds and altitudes as well as correct descent and approach planning. |
7. |
Maximized use of on-board Flight Management Systems (FMS) or performance management computers as an in-flight Fuel efficiency tool. Applicable thorough and effective training is required. |
8. |
An effective fuel tankering program, including automated tankering suggestions and calculations, using validated methods and formulas. Tankered flights must be identified and supplied to United. |
9. |
Thorough ACARS-based statistical tracking, analysis and measurement of Fuel efficiency using actual data, data from flight plans, and FOQA data with a comprehensive plan to identify and correct deficiencies. All such data will be provided to United. |
10. |
A designated manager charged with overall responsibility for fuel efficiency either as a stand-alone position, or as a substantial element of an individual job description. Manager will audit carriers efficiency and provide fuel synopsis to United in a format provided by United. Manager will discuss audit results and fuel efficiency initiatives monthly with United. |
11. |
The inclusion of Fuel efficiency issues and targets in appropriate job descriptions and performance objectives. Applicable work groups include, but are not limited to, pilots, dispatchers, SOCC managers, and gate and ramp personnel. |
12. |
A weight management program that prevents the carriage of unnecessary galley supplies, spare parts and equipment, customer service items, etc. unless approved by United. |
13. |
A center of gravity management system that considers the most efficient center of gravity in load distribution and aircraft loaded utilizing this data |
14. |
Operational participation (including the provision of ACARS-based data to United) in APU reduction program by utilizing ground power and PC Air at stations when supplied. APU run data by station will be reported to United monthly. |
15. |
An engine-out taxi program (which shall include the provision of ACARS-based data to United) both before takeoff and after landing. |
16. |
Fuel- and operationally-efficient takeoff and landing flap selection priorities. |
17. |
An engine maintenance program or maintenance contracts that track deterioration in Specific Fuel Consumption (SFC) and allow for cost effective early removal and repair/overhaul of high burn engines. Utilized an engine wash program to on a calendar or condition basis to optimize engine fuel efficiency. |
Exhibit H-2
18. |
An airframe maintenance program that measures airframe drag and corrects high drag airframes that exceed an agreed upon threshold as provided by Digital Performance Data or engine monitoring vendor engine fuel consumption data. An airframe maintenance program shall also include scheduled thorough aerodynamic conformity checks and corrective action. |
19. |
Contractor, at its sole expense, will use Uniteds designated service provider to provide and maintain all aircraft parameter information to efficiently manage the fuel efficiency program including but not limited to fuel flow, altitudes, landing gear extension, exhaust gas temperatures, etc. |
20. |
Proof of the following: |
a |
Fuel efficiency management structure |
b |
Existing fuel efficiency programs |
c |
Pilot/dispatcher fuel efficiency communications from prior 24 months |
d |
Fuel efficiency training syllabi (stand-alone, recurrent, upgrade, initial) |
e |
Monitor the fuel efficiency program to provide modifications to fuel efficiency training |
In addition to the above, Contractor agrees to provide the following to United:
1. |
Copies of applicable OEM flight manuals and OEM dispatch manuals for study by United fuel team |
2. |
FTWeb access to United fuel team (Flight Plan audit) |
3. |
Information regarding the following fuel efficiency metrics, broken out by month |
a |
Average planned and actual arrival endurance for flights without filed alternates |
b |
Average planned and actual fuel burn by fleet and city pair |
c |
Percentage of flights with filed alternates |
d |
Percentage of flights utilizing single-engine taxi |
e |
Average filed/flown altitude, by aircraft type |
Exhibit H-3
EXHIBIT I
IT Requirements
Contractor shall adhere to the IT system and data reporting standards described in this Exhibit I , as they may be changed or supplemented by United from time to time (the IT Requirements ).
Network Connectivity
United, at its sole expense, will provide and maintain or arrange for the provision of network connectivity with sufficient bandwidth to Contractor, including without limitation redundancy and firewall changes that may be required from time to time. This connectivity will include a minimum of one (1) dedicated circuit. If only one (1) dedicated circuit is used, then Contractor must also use a backup connection or virtual product network via the internet. United, at its sole discretion, shall have the right to determine the optimal number of network connections and to remove any network connections determined to be in excess.
Business Continuity Site
Contractor, at its sole expense, will provide and maintain a valid dispatch office site with network connectivity for business continuity purposes. Contractor will test the site annually to ensure that it is functional for its purposes. Contractor will be solely responsible for, and United will have no obligations or duties with respect to, the dispatch of Contractors flights. For the purposes of this Exhibit I , the term dispatch shall include, but will not be limited to, all planning of aircraft itineraries and routings, fueling and flight release.
United ID Numbers
Contractor, at its sole expense, will participate in Uniteds automated vendor identification number process. This process is a daily file in a specific format which manages the United vendor identification numbers. The identification numbers are used for system access and pass travel benefits.
Flight Information
Contractor, at its sole expense, will provide accurate real time flight and crew information to the designated United system (including without limitation updates of irregularities) via the designated transmission mechanism.
Data shall include, but not be limited to:
● |
Estimated Departure/Arrival Times; |
● |
Brake Release; |
● |
Wheel Movement (forward and backward, including first movement after Actual Out Time) |
Exhibit I-1
● |
Actual Out/Off/On and In Times; |
● |
Aircraft assignments; |
● |
Irregular Ops; and |
o |
Cancel, Re-instate, Diversion, No-Stop, Extra flying, Return to blocks or Field; |
● |
Flight Plan Enroute Time; |
● |
Operating/Deadheading Crew Names; |
● |
Operating Crew Routings (connect from / to); and |
● |
Operating crew time per applicable contract or legal parameters. |
Partner Flight Ops System
Contractor, at its sole expense, will provide Uniteds designated representatives web access to its Flight Operations System for Flight/Crew Departure Papers and other necessary data requested by United.
United Systems
United will provide access to the following:
● |
SHARES Passenger Service System |
o |
United will provide SHARES set addresses and signs, however, the flying partner will need to provide the terminal emulation package (can be purchased via United). |
● |
FLIFO Portal For manual input in correction of FLIFO |
SSD Real time performance data for flying partner |
IT Support
Contacts
Contractor will provide a 24/7 technical support contact and contacts for United to escalate IT issues.
Change Management
Contractor will comply with Uniteds change management processes and system freezes. The change freeze restricts IT system changes during specific periods (Example 1 week prior to 1
Exhibit I-2
week after a major holiday). Contractor will notify United at least three (3) days prior to any scheduled system or network outage.
IT System Automated Monitoring/Alerting
Contractor, at its sole expense, will provide and maintain or arrange for the provision of automated monitoring and alerting for IT system and network issues. This service must be programmed to page or call a valid on-call contact with any IT system or network issue being experienced by Contractor.
Notification
Contractor will notify Uniteds designated Service desk (24/7) (accessible at 847-700-5800 or 1-800-255-5801 or any other phone number provided by United from time to time) with any outages or technical issues that impact flights operated by Contractor in the provision of Regional Airline Services.
Exhibit I-3
EXHIBIT J
Aircraft Cleanliness and Refurbishment Standards
Aircraft Cleanliness Standards
United requires Contractor to adhere to certain aircraft interior deep clean standards provided by United to Contractor from time to time (the Deep Clean Scope of Work ). With the exception of certain heavy cleaning events which will occur during heavy Maintenance and shall be incorporated into the C-Check schedule, the elements of the Deep Clean Scope of Work shall be performed by Contractor according to a work schedule set forth by United but no less than every forty-five (45) days. The Deep Clean Scope of Work is comprised of the minimum required interior deep clean work required of Contractor and identifies the items in scope for all interior aircraft cleaning work over and above routine Remain Over Night ( RON ) cleaning standards, including, but not limited to, carpets, seats, cabin interior, lavatories etc. Contractor will audit the deep clean provider and provide monthly written results to United in a format determined by United. United retains the right to audit Contractors compliance with Uniteds deep clean standards and the performance of the deep clean provider, as well as any of the aircraft upon the completion of the Deep Clean Scope of Work. Items identified through Uniteds audit will be corrected by Contractor within five (5) days of Uniteds written notification or any other mutually agreed upon date. United will charge Contractor [***] for each day that the Deep Clean Scope of Work standards are not corrected after the later of such five (5) day correction period or such other mutually agreed upon date.
At the end of each flight, the flight attendants will ensure that the aircraft is left in a clean condition. If this is not accomplished by other personnel at the station, then the flight attendants are responsible for:
1. |
Removal of all trash, including all floors, galley trash and lavatory trash. Flight attendants will comply with all appropriate station protocol for garbage disposal and will assure garbage is not visible on the ramp or jetbridge prior to deplaning or boarding; and |
2. |
Cleaning tray tables and galley. |
United Express Deep Clean Minimum Specifications
The minimum standards outlined here serve as an auditable baseline standardizing this clean type. Contractor is responsible for the Deep Clean programs and cycle times and may choose to have standards above and beyond those listed in this section. Any audits performed on United Express Deep Clean missions will be based on these minimum standards.
Deep Cleans are the most intense and thorough clean missions, including complete provisioning change out of linens, headsets, etc., with new or refurbished product. Scheduled at approved intervals, Deep Clean events are performed in designated stations during the aircrafts overnight layover by authorized personnel that receive scheduled available aircraft.
Exhibit J-1
Interior Cabin Security Search
1. |
Perform aircraft security check as contained in the AOSSP or published Security Directives. |
2. |
Security searches are integrated with Uniteds cleaning standard operating procedures for each clean mission, including but not limited to, Deep Cleans. As a result, security checks must be performed as outlined in the Aircraft Appearance Cabin Interior Search procedures during the course of accomplishing the cleaning tasks outlined hereinafter. |
Flight Deck
1. |
While it is true all aspects of cleaning require safety awareness, cleaning personnel must give special attention to safety during the Flight Deck cleaning process, including but not limited to, the following: |
a. |
Notify Maintenance immediately should you accidentally move or trip a switch/circuit breaker. |
b. |
Do not spray liquids on instruments or dashboards. |
c. |
Do not dampen brush or cloth excessively as water may come in contact with electrical equipment and cause injury to personnel and damage to the aircraft. |
d. |
Dip sponge or cleaning rag into cleaning solution and scrub surfaces until soil loosens. Repeat procedure on stubborn stains. |
e. |
Avoid getting surfaces excessively wet. |
f. |
Dry all surfaces. |
2. |
Remove trash and debris from flight deck |
3. |
Remove and replace trash bag |
4. |
Vacuum clean the following areas: |
a. |
Seats, seat pockets |
b. |
Creases around and between seat cushion areas |
c. |
Floor, seat tracks, seat assemblies and vent grills |
5. |
Clean and remove soil from the following areas: |
a. |
Ceiling panels and vents |
b. |
Sidewall panels |
c. |
Floor, seat tracks, seat assemblies and vent grills |
d. |
Front, back and side of Flight Deck door |
6. |
Damp wipe and dry the following areas assuring a streak free appearance: |
a. |
Glare-shield; sun-visors |
b. |
Windshield / side windows interior (Sani-Coms replacement) |
7. |
Clean and dry the following areas: |
a. |
Recessed areas instrument panels; center console |
b. |
Control yokes and columns |
c. |
Base plate and nose gear steering wheel |
d. |
Captains and 1st Officers rudder pedals |
e. |
Captains, 1st Officers, 1st Observer |
f. |
Cup / drink holders |
g. |
Log compartments |
h. |
Engineers table |
i. |
Crew coatroom |
Exhibit J-2
Cabin
1. |
Remove all trash from seats, seat pockets, floor, overheads, shelves, closets and overhead bins. |
2. |
Inspect seat covers. Report covers with any size stain or tear into local Maintenance for replacement. |
3. |
Brush crumbs off seats. Seat Cushions to be left in the upright position, exposing the seat frame for pre-departure security inspection. |
4. |
Pull up seat cushions; vacuum all sides to remove crumbs, lint, etc. Place in overhead bin. |
5. |
Vacuum / brush seat pan free of crumbs and debris. |
6. |
Scrub seat frames including all exterior surfaces of seat panels, armrests, luggage restraints, seat legs, connect points, seat control panels, seat shroud and gap between seats. Rinse, dry. |
7. |
Return seat cushions to original position. |
8. |
Place armrest in DOWN position and Cross seatbelts. |
9. |
Vacuum and scrub seat tracks. |
10. |
Scrub seat tracks covers. Rinse, dry and reinstall. |
11. |
Spray cleaning solution on the cloth and clean Emergency Aisle path track lighting. Do not spray solution directly on the path lighting system. Follow by wiping the cover with a clean cloth dampened in clean rinse water and dry. |
12. |
Vacuum and scrub stowage wells, including tray table wells. |
13. |
Scrub tray tables including latch area on seatback, edging, hinges, mating surfaces, bridges and arms. Rinse and dry before stowing. |
14. |
Scrub center seat console areas; side stowage coves. Rinse, dry. |
15. |
Remove trash and seat back pocket materials. Vacuum seat pockets. Tuck any loose seat cover flaps into the seat shroud. |
16. |
Scrub clean passenger service units, reading lights, call button, air vents and panel. Rinse, dry. |
17. |
Scrub clean sidewalls and sidewall air vents. Rinse, dry. |
18. |
Clean and dry windows, window shades, and window shade tracks with approved cleaner. |
19. |
Scrub clean Flight Attendant jump seat area(s); including the call station, phone entry walls, ceiling, compartments and floors. |
20. |
Provision and organize seat pockets with literature and supplies. Discard and replace worn or dog-eared literature and/or when missing. Replace Hemispheres/Play guides with new after the 10th day of the month. |
1 - SAFETY INFORMATION CARD As required by Contractor
2 - MAGAZINE(S) As required by Contractor
3 - AIR SICK BAG As required by Contractor
Replace soiled blankets with clean ones and place neatly on top as designated in the provisioning chart ( UF only on 2-cabin AC ).
21. |
Vacuum air vent covers. |
22. |
Vacuum sidewall upper and lower air vents and section dividers. |
23. |
Overhead Bins, Ceilings, Closets, Bassinets, Storage Areas |
a. |
Remove trash from overhead bins, storage areas, closets. |
Exhibit J-3
b. |
Scrub clean inside of overhead bins, all exposed surfaces of overhead bin doors, latches, hinges and inner rim that runs perimeter of bin. Rinse, dry. |
c. |
Scrub ceilings, centerline ceiling vents, curtain class dividers. Rinse, dry. |
d. |
Vacuum storage areas, closets to remove dust, debris. |
e. |
Scrub clean inside of storage areas, closets, exterior doors and latches. Rinse, dry. |
f. |
Onboard wheelchair compartment, remove wheelchair, wipe clean and dry (when applicable). |
g. |
Vacuum inside onboard wheelchair compartment. Scrub interior/exterior door and latches. Rinse, dry (when applicable). |
Galley
1. |
Remove and dispose of all trash. |
2. |
Clean counters, storage doors and galley extension tables. |
3. |
Spot wipe walls, ceiling and doors to remove fingerprints, scuff marks, spills, graffiti, etc. |
4. |
Scrub interior and exterior of storage space. Pay particular attention to all protrusions, corners, cracks, crevices, sliding tracks, hinges, latches, control panel, etc. Rinse with clean water and dry with clean cloth. |
5. |
If applicable, empty all ice and water drawers |
6. |
Vacuum and damp mop the floor |
7. |
Thoroughly scrub, wash, rinse and dry the following: |
a. |
Serving carts and folding meal carts. |
b. |
Interior and exterior of trash compartments and trash chutes. |
c. |
All light fixtures and cover lights and air vents. |
8. |
Thoroughly scrub (Eraser Pad), wash, rinse and dry the following: |
9. |
Wipe clean coffee makers, hot plates and spigots when applicable. (Coffee pots to be handled and cleaned by catering). |
a. |
Note: Interior of coffeepots is not to be cleaned by cleaning personnel, only by catering staff. |
10. |
Cleaning personnel to clean interior and exterior of all compartments (pay particular attention to latches, corner hinges and locks). |
a. |
Interior and exterior of trash compartments and trash chute. |
b. |
All light fixtures, cove lights, and air vents. |
c. |
Clean exterior of coffee makers/hot jugs. |
d. |
Walls, ceiling, air vents, service door and floor. |
e. |
Polish stainless steel areas with approved Airlines chemical (appendix 1). |
f. |
Thoroughly scrub walls, ceiling and floors. Rinse with clean water and dry with clean rag. |
g. |
Scrub the galley entry door, doorframe, sill and rubber seal on bottom of door. |
h. |
Ensure the drain holes on the sill are clear and free of debris. |
i. |
Replenish Galley paper towel dispensers (where applicable) |
Lavatory
1. |
Remove trash and other debris from counters, bin and floor. |
2. |
Scrub, wash and rinse all of the following: |
● |
Toilet bowl, shroud and chute. |
Exhibit J-4
● |
Toilet seat cover and hinges. |
● |
Inside and outside of storage compartments. |
● |
Walls, ceiling, door and floor. |
3. |
Clean all stainless steel or hard surface areas; basin, counter, sink, light fixtures and toilet chute. |
4. |
Clean and dry mirror. |
5. |
Clean all exposed surfaces of fold down diaper changing table (if applicable). |
6. |
Restock supply dispenser and storage bins. |
7. |
Deodorize with air freshener spray. |
8. |
Replace deodorant disk. |
9. |
All Paper Supplies, Soap and Hand Sanitizer, as applicable (if no certified potable water available please utilize waterless hand sanitizer) |
Entrance Areas and Doors
1. |
Scrub aircraft door, hinge, handle area, sills, walls, ceilings and floor. Ensure weep holes on the sill are clean and free of debris. |
2. |
Clean all exposed surfaces of entrance doors: remove all fingerprints, grease stains and graffiti. |
3. |
Scrub entryway floor and doorsill. Rinse, dry or Vacuum if carpeted. |
4. |
Damp wipe ceiling air vent. |
5. |
Clean rubber seal on bottom of door. |
6. |
Clean inside door windows. |
Carpets and Curtains (When Applicable)
1. |
Remove gum spots on carpeting using approved chemical. |
2. |
Clip any frayed or raveled carpet strings. |
3. |
Vacuum all carpeted areas. |
4. |
Vacuum top of all cabin curtains. |
Aircraft Refurbishment Standards
United requires Contractor to adhere to certain aircraft interior cabin refurbishment standards described in this Exhibit J , which such standards are outlined in the table below (the Refurbishment Scope of Work ). The elements of the Refurbishment Scope of Work shall be performed by Contractor according to a work schedule set forth by United. The Refurbishment Scope of Work is comprised of the minimum required interior cabin refurbishment work required of Contractor, itemized by type of aircraft service visit, e.g., Heavy Maintenance, RON (as such term is defined in this Exhibit J ). The Refurbishment Scope of Work identifies the items in scope for all interior refurbishment work, e.g., carpets, seats, cabin decor/interior, lavatories etc., as specifically set forth in the table below, as well as the timing of when such refurbishment work shall be performed by Contractor.
Subject to the consent of Contractor (such consent not to be unreasonably withheld or delayed), United may change the Refurbishment Scope of Work. Upon such consent of Contractor, such change shall be made part of the Refurbishment Scope of Work.
Exhibit J-5
All refurbishment work performed by Contractor with respect to the Refurbishment Scope of Work set forth below, whether replacement, repair, or reconditioning/cleaning, must result in like-new interior cabin condition of the refurbished aircraft. United may, from time-to-time, or at any time, monitor and audit the interior cabin refurbishment work undertaken by Contractor pursuant to the Refurbishment Scope of Work, in order to ensure that the interior cabins of the Contractor-refurbished aircraft are in like-new condition post-refurbishment. If United reasonably determines that any Contractor-refurbished interior cabins are not returned to like-new condition, then United will require Contractor to repeat the refurbishment work on that specific aircraft, whether such work requires replacement, repair, or reconditioning/cleaning, at Contractors sole cost and expense, until such aircraft interior cabin is returned to like-new condition. Items identified through Uniteds audit will be corrected by Contractor within five (5) days of Uniteds written notification or any other mutually agreed upon date. United will charge Contractor [***] for each day that the Refurbishment Scope of Work standards are not corrected after the later of such five (5) day correction period or such other mutually agreed upon date.
Interval for refurbishment work by type of aircraft service visit:
|
Heavy Maintenance category should be similar to the carrier C Check interval timeframe, which occurs at approximately every [***] hours of flight time. |
|
Intermediate category should be similar to half of the C Check interval timeframe, which occurs at approximately every [***] hours of flight time, or about every [***] A Check interval. |
Note: These definitions/intervals are guidelines and are subject to change by United, with any such change subject to consent of the Contractor (such consent not to be unreasonably withheld or delayed).
Aircraft paint
In addition to aircraft interior refurbishment, Contractor is required to maintain aircraft paint in good condition. Aircraft will be painted in the aircraft livery as set forth in Section 8 of Exhibit E hereto, at an interval of seven (7) years or less. Aircraft with significant paint degradation will be identified and directed for immediate paint at Contractors expense. Contractor, at its own expense, shall execute aircraft paint requirements without impact to Scheduled Flights and will be communicated to United for the planning of carriers scheduled operations. Contractor may be required to substitute other aircraft into the scheduled line of flying at its own expense in order not to impact Scheduled Flights. In addition, Contractor, at its own expense, shall cause the CRJ Covered Aircraft to be painted in the United livery as set forth in Section 8 of Exhibit E hereto, no later than December 31, 2013 and failure to do so shall result in a fine of [***] per aircraft per day for each day thereafter that any such aircraft remains non-compliant.
Statement of Work
Exhibit J-6
Heavy Maintenance | Intermediate Visits | In-Service/Overnight | ||||
Floor Coverings |
||||||
Carpet Galley Flooring Lav Flooring |
Replace All Replace All Replace All |
Replace Aisle/Heavy Traffic Areas or All on Condition Replace On Condition Replace On Condition
|
Cleaned/Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition |
|||
Seats |
||||||
Seat Covers (Fabric) Seat Covers (Leather) Seat Cushions Headrest Covers Headrest Cushions Tray Tables Literature Pockets (seat back) Armrests Recline Actuation Safety Belt Webbing Seat Overhaul
|
Replace All with new/cleaned Replace All with new/cleaned Replace All Replace All with new/cleaned Replace All Cleaned/Replace On Condition Replace All with new/cleaned Cleaned/Replace On Condition Repaired to function properly Replace All Completed |
Dry Cleaned/Replace On Condition Cleaned/Replace On Condition Replace On Condition Cleaned/Replace On Condition Replace On Condition Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition Repaired to function properly Cleaned/Replace On Condition As needed |
Cleaned/Replace On Condition Cleaned/Replace On Condition Replace On Condition Cleaned/Replace On Condition Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition Cleaned/Replace On Condition Repaired to function properly Cleaned/Replace On Condition As needed |
|||
Cabin Décor |
||||||
Bulkhead Décor Bulkhead Literature Pockets Seat/Row Placards Passenger Service Units Dado Panel Décor Weather Curtain Seat Track Covers Cabin Curtain Dividers
|
Replace On Condition Replace All Replace On Condition Repaired to function properly Replace On Condition Replace On Condition Replace All Replace On Condition |
Replace On Condition Replace On Condition Replace On Condition Repaired to function properly Replace On Condition Cleaned/Replace On Condition Replace if missing or damaged Replace On Condition |
Replace On Condition Replace On Condition Replace On Condition Repaired to function properly Replace On Condition Cleaned/Replace On Condition Replace if missing or damaged Replace On Condition |
|||
Lavatories |
||||||
Flush Sink Drain Faucet Lighting Infant Changing Tables Door Lock Indicators Door Thresholds
|
Repaired to function properly Repaired to function properly Repaired to function properly Repaired to function properly Replace All Repaired to function properly Replace All Replace All |
Repaired to function properly Repaired to function properly Repaired to function properly Repaired to function properly Replace On Condition Repaired to function properly Replace On Condition Replace On Condition |
Repaired to function properly Repaired to function properly Repaired to function properly Repaired to function properly Replace On Condition Repaired to function properly Replace On Condition Replace On Condition |
|||
Cabin Interiors |
||||||
Cabin Lighting Sidewall Panels Placards Lighted Lavatory In-Use Indicators Overhead Bins Window Shades Stairs Windows |
Replace All Cleaned/Replace On Condition Replace All Clean/Repair to proper functionality Cleaned/Paint/Repair to proper functionality Clean/Repair to proper functionality Clean/Repair to proper functionality Clean/Repair damage
|
Cleaned/Replace On Condition Replace On Condition Clean/Repair to proper functionality Cleaned/Paint/Repair to proper functionality Clean/Repair to proper functionality Clean/Repair to proper functionality Clean/Repair as needed |
Cleaned/Replace On Condition Replace On Condition Clean/Repair to proper functionality Cleaned/Paint/Repair to proper functionality Repair to proper functionality Repair to proper functionality Cleaned/Repair as needed |
On Condition: |
||
-wom, torn, ripped, soiled, scratched, pilled, fraying, dented, gouged, soaked -altered from original installation state -not functioning for intended use |
Assumption: A separate cleaning program is in place for daily, intermediate, and heavy cleaning at various levels
Exhibit J-7
EXHIBIT K
Form of Parent Guarantee
THIS GUARANTEE AGREEMENT (as may be amended from or supplemented from time to time, this Guarantee ), effective as of August 29, 2013 (the Effective Date ) by Mesa Air Group, Inc., a Nevada corporation ( Guarantor ), for the benefit of UNITED AIRLINES, INC., a Delaware corporation ( United ).
RECITALS
WHEREAS United, Guarantor and Mesa Airlines, Inc., a Nevada corporation ( Contractor ) are prepared to enter into that certain Capacity Purchase Agreement, dated as of August 29, 2013 ( CPA );
WHEREAS, pursuant to the CPA, Contractor is obligated, among other things, to provide Contractor Services (as such term is defined in the CPA) to United and, in certain circumstances, to make certain reconciliation or indemnity payments to United;
WHEREAS, United, Guarantor and Contractor are prepared to enter into the Ancillary Agreements (as such term is defined in the CPA) pursuant which Contractor is obligated, among other things, to provide ground handling and other services to United and, in certain circumstances, to make certain payments to United;
WHEREAS, Contractor is the wholly-owned subsidiary of Guarantor; and
WHEREAS, it is a condition precedent to Uniteds execution and delivery of the CPA and the Ancillary Agreements and Guarantor is fully informed, understands and acknowledges that it is a requisite inducement for United to enter into the CPA and the Ancillary Agreement that Guarantor execute and deliver this Guarantee;
NOW, THEREFORE, for and in consideration of the benefits, rights and interests to Contractor derived from the CPA and the Ancillary Agreements, for a necessary inducement to United to enter into the CPA and the Ancillary Agreements, and for other good and valuable consideration, the receipt and sufficiency of which Guarantor acknowledges, Guarantor, fully aware that United in relying hereupon, fully covenants and agrees for the benefit of United as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Definitions . Any terms not defined herein shall have the definition given such term in the CPA. As used in this Guarantee, the following terms have the following meanings:
Beneficiaries has the meaning given to that term in Section 3.07 .
Contractor has the meaning given to that term in the Recitals
Exhibit K-1
CPA has the meaning given to that term in the Recitals.
Default Interest has the meaning given to that term in Section 3.06 .
Documents has the meaning given to that term in Section 2.02(a) .
Effective Date has the meaning given to that term in the preamble.
Enforcement Expenses has the meaning given to that term in Section 3.06 .
Guarantee has the meaning given to that term in the preamble.
Guarantor has the meaning given to that term in the preamble.
United has the meaning given to that term in the preamble.
Section 1.02 Other Definitions . Other terms defined in this Guarantee have the meanings so given them. Capitalized terms used but not defined herein shall the same meaning herein as in the CPA.
Section 1.03 Terminology . Unless the context of this Guarantee clearly requires otherwise, (a) pronouns, wherever used herein, and of whatever gender, shall include natural persons and corporations, partnerships, limited liability companies and entities of every kind and character, (b) the singular shall include the plural wherever and as often as may be appropriate, (c) the word includes or including shall mean including without limitation , and (d) the words hereof , herein , hereunder , and similar terms in this Guarantee shall refer to this Guarantee as a whole and not any particular section or article in which such words appear. The section, article, and other headings in this Guarantee are for reference purposes and shall not control or affect the construction of this Guarantee or the interpretation hereof in any respect. Article, section, subsection, and exhibit references are to this Guarantee unless otherwise specified. All exhibits attached to this Guarantee constitute a part of this Guarantee and are incorporated herein. All references to a specific time of day in this Guarantee shall be based upon Central Standard Time or Central Daylight Time, whichever is applicable.
ARTICLE II
GUARANTEE
Section 2.01 Guarantee of Obligations . Guarantor unconditionally, absolutely and irrevocably guarantees unto the Beneficiaries the timely payment and performance by Contractor of all of its obligations under the CPA and the Ancillary Agreements, including without limitation the obligation to provide Regional Airlines Services, and to make all indemnification payments and reconciliation payments that Contractor is required to make pursuant to the CPA and the Ancillary Agreements.
Section 2.02 Guarantee Absolute . This Guarantee is absolute, continuing and independent of, and in addition to, any and all rights and remedies United may have under the CPA or any Ancillary Agreement and any other guaranties or documents now or hereafter given in connection therewith by Guarantor or others. Without limiting any of the provisions of this
Exhibit K-2
Guarantee or the CPA, including without limitation, Section 5.2 thereof, it is acknowledged that Guarantor is not currently a certificated airline and that therefore Guarantor may be required to cause its obligations hereunder to be performed rather than performing them directly. Except as otherwise expressly herein provided, the enforceability of Guarantors obligations hereunder in accordance with the terms hereof shall not in any way be discharged, impaired or otherwise affected by:
(a) Any change in the time, manner or place of payment of amounts due under the CPA or any Ancillary Agreement, or any other change or modification in or of any terms, provisions, covenants or conditions of any or all of them;
(b) The entering into, or the modification or amendment in or of, any lease or sublease of any aircraft or engine, any contract or arrangement for the maintenance or refurbishment of any aircraft or engine, any contract or arrangement for the provision of ground handling services, any lease, sublease or other agreement relating to the use of any terminal or non-terminal airport facility, or any loan agreement, note, deed of trust, assignment, contract or other document or agreement entered into by Contractor or Guarantor relating to the provision of Contractor Services (together with the CPA and the Ancillary Agreements, the Documents );
(c) Any lack of validity or enforceability of any of the Documents;
(d) Any release or amendment or waiver of or consent to the modification of any other guarantee of payment or performance of all or any obligations under the CPA or any Ancillary Agreement, or any sale or transfer by Contractor of any of its interest in the CPA or any Ancillary Agreement (without implying that Contractor has consented or will consent to any such sale or transfer);
(e) Any sale or transfer by Guarantor of any of its interest in Contractor (without implying that Guarantor has consented or will consent to any such sale or transfer);
(f) Any release or waiver of or delay in the enforcement of rights against Contractor, Guarantor or any other person or entity under any of the Documents or against any security thereunder;
(g) The exercise by United of any of its rights or remedies under any one or more of the Documents; or
(h) Any other circumstance which might otherwise constitute a defense available to, or discharge of, Guarantor.
Section 2.03 Guarantee of Payment . This Guarantee is a guarantee of payment and performance and not merely a guarantee of collection, and Guarantors liabilities and obligations under this Guarantee are and shall at all times continue to be absolute, irrevocable and unconditional in all respects in accordance with the terms of this Guarantee, and shall at all times be valid and enforceable without set off, deduction or counterclaim irrespective of any other agreements or circumstances of any nature whatsoever which might otherwise constitute a defense to this Guarantee or the obligations of Guarantor under this Guarantee.
Exhibit K-3
Section 2.04 Financial Statements . Not later than ninety (90) days following the end of each calendar year, Guarantor shall deliver to United a copy of Guarantors audited consolidated financial statements for such calendar year, certified by Guarantor as being true, correct and complete, together with a report thereon of Guarantors independent auditors; provided , that Guarantor shall not be required to deliver financial statements pursuant to this sentence if it is a reporting issuer pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and such financial statements are timely filed with the Securities and Exchange Commission pursuant thereto.
Section 2.05 Representations . Guarantor represents, warrants and covenants that:
(a) All financial statements heretofore delivered to United with respect to Guarantor are, and all financial statements hereafter delivered to United by Guarantor will be, true and correct in all material respects and fair presentations of Guarantor as of the respective dates thereof;
(b) No material adverse change has occurred in the financial condition of Guarantor since December 31, 2012;
(c) Guarantor is a duly organized and validly existing corporation in good standing under the laws of the State of Nevada. Guarantor has the corporate power and authority to enter into and perform its obligations under this Guarantee. Guarantor is duly qualified to do business as a foreign corporation under the laws of each jurisdiction that requires such qualification;
(d) This Guarantee has been duly executed and delivered by Guarantor and constitutes the legal, valid and binding obligation of Guarantor, fully enforceable against Guarantor in accordance with the terms hereof except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors and subject to the principles of equity;
(e) Neither the execution or delivery of this Agreement nor the performance by Guarantor of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Guarantors certificate of incorporation, by-laws, or any provision of, or result in the acceleration of any obligation under, any material contract, sales commitment, license, purchase order, security agreement, mortgage, note, deed, lien, lease or other agreement to which Guarantor is a party or by which any of them or any of their respective properties or assets may be bound, (ii) result in the creation or imposition of any lien, charge or encumbrance in favor of any third person or entity, (iii) violate any law, statute, judgment, decree, order, rule or regulation of any governmental authority or body, or (iv) constitute any event which, after notice or lapse of time or both, would result in such violation, conflict, default, acceleration or creation or imposition of liens, charges or encumbrances;
(f) No consent of any other person and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority, bureau or agency is required in connection with the execution,
Exhibit K-4
delivery or performance by Guarantor, the enforceability against Guarantor, or the validity, of this Guarantee;
(g) Guarantor has, independently and with advice of counsel of Guarantors choice and without reliance upon United, and based upon such documents and information as Guarantor has deemed appropriate, made its own analysis and decision to enter into this Guarantee;
(h) The financial statements (including the related notes and supporting schedules) of Guarantor delivered (or, if filed with the Securities and Exchange Commission, made available) to United immediately prior to the date hereof fairly present in all material respects the consolidated financial position of Guarantor and its results of operations as of the dates and for the periods specified therein. Since the date of the latest of such financial statements, there has been no material adverse change nor any development or event involving a prospective material adverse change with respect to Guarantor. Such financial statements have been prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved, except to the extent disclosed therein;
(i) Guarantor is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts and with such deductibles as are customary in the businesses in which it is engaged, and Guarantor has not received notice of cancellation or non-renewal of such insurance. All such insurance is outstanding and duly in force on the date hereof. Guarantor has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on Guarantor;
(j) No litigation, arbitration, investigation or administrative proceeding of or before any court, arbitrator or governmental authority, bureau or agency is currently pending or, to the knowledge of Guarantor, threatened: (i) with respect to this Guarantee or any of the transactions contemplated by this Guarantee; (ii) with respect to the CPA or any Ancillary Agreement or any of the transactions contemplated thereby; or (iii) against or affecting Guarantor, or any of its property or assets, which, if adversely determined, would have a material adverse effect on the ability of Guarantor to perform its obligations hereunder; and
(k) Guarantor has filed or caused to be filed all tax returns required to be filed, and has paid all taxes due on said returns or on any assessments made against Guarantor, which if not filed or not paid would have a material adverse effect on the business, operations, assets or condition, financial or otherwise, of Guarantor (other than those being contested in good faith by appropriate proceedings for which adequate reserves have been provided for in accordance with generally accepted accounting principles).
Without limiting the other remedies of the Beneficiaries as a result of a breach of any of the foregoing representations and warranties, Guarantor hereby agrees to indemnify the Beneficiaries, their Affiliates and their respective officers, directors, partners, members, employees and agents, and hold them harmless from and against any and all losses, claims, damages, liabilities, expenses (including without limitation reasonably legal fees and expenses),
Exhibit K-5
judgments, fines and settlements any of them may incur as a result of any material breach of any representation or warranty contained herein.
Section 2.06 Reinstatement . This Guarantee shall continue to be effective, or be reinstated (as the case may be) if at any time payment by Contractor or Guarantor of all or any part of any sum payable pursuant to the CPA or any Ancillary Agreement, this Guarantee or the other Documents is rescinded or otherwise must be returned by United upon Contractors insolvency, bankruptcy or reorganization, all as though such payment had not been made. Until all of the obligations guaranteed hereunder shall have been paid or performed in full, Guarantor shall have no right of subrogation or any other right to enforce any remedy which any of the Beneficiaries now has or may hereafter have against Contractor.
Section 2.07 Self-Help Rights . If Guarantor fails or refuses to perform any or all monetary or non-monetary obligations that are guaranteed hereunder and, in the case of any non-monetary obligations, such failure or refusal continues for twenty (20) days following written notice thereof to Guarantor, then, in addition to any other rights and remedies which any Beneficiary may have hereunder or elsewhere, and not in limitation thereof, any Beneficiary shall have the right (but without any obligation so to do) to take action (including the payment of amounts due to any third party) to satisfy such obligation either before or after the exercise of any right or remedy of United against Contractor or Guarantor. The amounts of any and all expenditures so made by United in satisfaction of such obligation ( INCLUDING ANY SUCH EXPENDITURE ARISING FROM OR IN CONNECTION WITH UNITEDS NEGLIGENCE IN TAKING SUCH ACTION, BUT EXCEPTING ANY SUCH EXPENDITURES TO THE EXTENT PROVEN TO HAVE BEEN CAUSED BY OR ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF UNITED ) shall be immediately due and payable to United by Guarantor.
ARTICLE III
MISCELLANEOUS
Section 3.01 Exhausting Recourse . United shall not be obligated to pursue or exhaust its recourse against Contractor or any other Person or guarantor, or any security it may have for satisfaction of the obligations guarantied hereunder, before being entitled to performance by Guarantor of each and every one of the obligations hereunder. No delay on the part of Beneficiaries in exercising any right or remedy under this Guarantee or failure to exercise the same shall operate as a waiver in whole or in part of any such right or remedy. No notice to or demand on Contractor or failure to give any such notice to or make any such demand on Contractor shall be deemed to be a waiver of the obligations of Guarantor hereunder or of the right of Beneficiaries to take further action without notice or demand as provided in this Guarantee. No course of dealing between Guarantor and Beneficiaries shall change, modify or discharge, in whole or in part, this Guarantee or any of the obligations of Guarantor hereunder.
Section 3.02 Guarantee Remains Effective . This Guarantee shall remain in full force and effect, notwithstanding any invalidity, irregularity, or unenforceability of any one or more of the CPA and the Ancillary Agreements. No release or discharge of Contractor in any receivership, bankruptcy, winding-up or other creditor proceedings shall affect, diminish or otherwise impair or otherwise be a defense to the enforcement of this Guarantee by the
Exhibit K-6
Beneficiaries. The liability of Guarantor shall not be affected by United causing work necessary for the provision of Contractor Services to be done, or by Uniteds pursuing any other remedies provided for in the Documents.
Section 3.03 No Conditions . This Guarantee has been delivered free of any conditions and, except as otherwise expressly set forth herein, no representations have been made to Guarantor affecting or limiting the liability of Guarantor hereunder except as expressly provided herein.
Section 3.04 No Bar or Defense; Waiver of Defenses . No action or proceeding brought or instituted under this Guarantee and no recovery in pursuance thereof shall be a bar or defense to any further action or proceeding which may be brought under this Guarantee by reason of any further default or defaults hereunder or in the performance and observance of the terms, covenants, conditions, and provisions in the Documents. Guarantor hereby waives all suretyship defenses and defenses in the nature thereof. Guarantor hereby further waives presentment, protest, notice, demand, or action or delinquency in respect to any obligation hereby guarantied except as expressly provided herein. Guarantor waives acceptance of this Guarantee. Without limiting the generality of the foregoing, Guarantor specifically waives any requirements imposed by or to which Guarantor may otherwise be entitled by virtue of the suretyship laws of the State of Illinois or any other relevant state of the United States.
Section 3.05 Liability Independent . The liability of Guarantor hereunder is independent of any other bonds or guaranties or other obligations at any time in effect with respect to the Documents and may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guaranties or other obligations.
Section 3.06 Expenses . Guarantor shall pay all costs, fees and expenses (including reasonable attorneys fees) incurred by United in enforcing this Guarantee, provided that United prevails in such enforcement (the Enforcement Expenses ). Any and all amounts due and owing by Guarantor to United hereunder that are not paid in full to United within ten (10) days following the earlier of the due date or demand therefor shall bear interest from the date such amounts were due hereunder until paid in full at the highest contract rate of interest permitted by applicable law (the Default Interest ).
Section 3.07 Binding Effect . Neither this Guarantee nor any provisions hereof may be amended, modified, waived, discharged, or terminated orally, except by an instrument in writing duly signed by or on behalf of the party against whom enforcement of such amendment, modification, waiver, discharge or termination is sought. This Guarantee shall inure to the benefit of United and its successors and assigns (collectively, the Beneficiaries ), and shall be binding upon Guarantor and its successors and assigns; provided, however , that Guarantor shall in no event have the right to assign or transfer Guarantors obligations and liabilities under this Guarantee in whole or part and any such attempted assignment or transfer without the prior written consent of United shall be null and void and of no force or effect. This Guarantee is intended to be for the benefit of, and shall be enforceable by, only the Beneficiaries and not by any third parties (including creditors of the Beneficiaries).
Exhibit K-7
Section 3.08 Entire Agreement . This Guarantee, together with the CPA and the Ancillary Agreements, to the extent references are made thereto in this Guarantee, contain the undersigneds sole and entire understanding and agreement with respect to its entire subject matter, and all prior negotiations, discussions, commitments, representations, agreements and understandings heretofore had between United and Guarantor with respect thereto are merged herein.
Section 3.09 Governing Law . This instrument shall be governed by and construed in accordance with the laws of the State of Illinois.
Section 3.10 Reliance . Guarantor acknowledges that United will rely upon this Guarantee in entering into the CPA and the Ancillary Agreements.
Notices . Unless otherwise expressly permitted by the terms of this Guarantee, all notices, consents, approvals and other communications required or permitted hereunder shall be in writing and shall be deemed to have been properly given if delivered by hand personally to the addressee or sent overnight by a nationally recognized air courier, and or to such other address as last designated by a party by notice in writing to the other party hereto.
If directed to Guarantor, addressed to:
Mesa Air Group, Inc.
410 N. 44th Street
Suite 700
Phoenix, AZ 85008
Attention: President (with a copy to General Counsel)
Facsimile No.: (602) 685-4350
If directed to United, addressed to:
United Airlines, Inc.
Willis Tower
233 S. Wacker Drive
Chicago, IL 60606
Attention: Senior Vice President Network Operations & United Express
Facsimile No.: (872) 825-0030
with a copy to:
United Airlines, Inc.
Willis Tower
233 S. Wacker Drive
Chicago, IL 60606
Attention: Vice President and Deputy General Counsel
Facsimile No.: (872) 825-0308
Exhibit K-8
and to:
United Airlines, Inc.
Willis Tower
233 S. Wacker Drive
Chicago, IL 60606
Attention: Vice President Fleet
Facsimile No.: (872) 825-8113
Section 3.11 Waiver of Jury Trial . Guarantor and United each hereby knowingly, voluntarily and intentionally waive the right to a trial by jury in respect of any litigation based hereon, arising out of, under or in connection with this Guarantee. This waiver is a material inducement for Guarantor to deliver and United to accept this Guarantee.
Section 3.12 Drafting of Guarantee . Guarantor represents and warrants that (i) it was represented by counsel of its choice, who has reviewed this Guarantee and advised it of the contents and meaning; (ii) it is signing this Guarantee voluntarily and with full understanding of its contents and meaning; (iii) it waives any claim or defense that this Guarantee should be construed more strictly against the other party as the drafter thereof.
Section 3.13 Severability . If any provision of this Guarantee or its application to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of this Guarantee and the application of that provision to other Persons or circumstances is not affected in that provision shall be enforced to the greatest extent permitted by law.
Section 3.14 Further Assurances . In connection with this Guarantee and the transactions contemplated by it, Guarantor shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Guarantee and those transactions.
Section 3.15 Multiple Counterparts . This Guarantee may be executed in any number of counterparts and with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument.
EXECUTED as of the Effective Date.
GUARANTOR: |
Mesa Air Group, Inc. |
By: |
Name: |
Title: |
Exhibit K-9
EXHIBIT L
Letter of Agreement
|
|
LOA 11 United Express Job Opportunities for Furloughed United Pilots
L ETTER OF A GREEMENT
between
U NITED A IRLINES , I NC .
and
T HE A IR L INE P ILOTS
in the service of
U NITED A IRLINES , I NC .
as represented by the
A IR L INE P ILOTS A SSOCIATION , I NTERNATIONAL
THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between UNITED AIRLINES, INC. (hereinafter referred to as the Company or United) and the AIR LINE PILOTS in the service of UNITED AIRLINES, INC., as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter referred to as the Association or ALPA).
The Company and the Association agree that furloughed United pilots shall be offered job opportunities at United Express carriers operating jet aircraft with seating capacity in excess of fifty (50) seats under the following conditions:
1. |
Definitions |
a. |
United Express Carrier means a Carrier that has contracted with the Company to operate Aircraft in accordance with the conditions of Section 1 of the Agreement. |
b. |
Eligible Furloughed Pilot means a Pilot whose name appears on the United Express Carrier Opportunity List and who is on furlough or who has received notice of furlough. |
c. |
United Express Carrier Opportunity List means the list maintained by the UAL-MEC Furloughed Pilot Coordinator after review by United Express Carriers performing flying in the service of the Company pursuant to the terms of Section 1 of the Agreement. |
2. |
United Express Carriers shall make offers for new hire positions to Eligible Furloughed Pilots in a number equal to five (5) times the number of aircraft operated in the service of the Company and subject to the limits of Section 1 of the Agreement. Of these five (5) offers, at least three (3) shall be offers for new hire positions in aircraft with seating capacity in excess of 50 seats and not more than 76 seats, and operated pursuant to the terms of Section 1 of the Agreement. Once such offers have been made, even if the United Express Carrier subject to the obligations of Section 1 of the Agreement and this Letter of Agreement has not been provided with a sufficient number of Eligible Furloughed Pilots to fill the new hire positions, the Participating United Express Carriers obligation to make offers for the purpose of |
LOA 11 Page 387
Exhibit L-1
|
|
operating Aircraft under the terms of Section 1 of the Agreement and this Letter of Agreement shall be satisfied. |
3. |
In the event that a United Express Carrier making offers of employment pursuant to Section 1 of the Agreement and this Letter of Agreement receives an insufficient number of Eligible Furloughed Pilots to fill offers for new hire Pilot positions, the Carrier shall continue to extend offers of employment under the terms of this Letter of Agreement until Eligible Furloughed Pilots have accepted a number of positions equal to the number of job offers the Carrier is required to make under Paragraph 2 of this Letter of Agreement. |
a. |
A United Express Carrier shall make such employment offers stated in Paragraph 3 of this Letter of Agreement as new hire positions become available in the normal course of business. |
b. |
A United Express Carriers ability to operate Aircraft under the terms of Section 1 and this Letter of Agreement is dependent on extending employment offers as required per Paragraph 2 of this Letter of Agreement and Section 1-C-1-j of the Agreement, but is not dependent on Eligible Furloughed Pilots accepting the employment offers as provided in Paragraph 3 of this Letter of Agreement. |
4. |
A Pilot who is interviewed and accepts an offer of employment and who subsequently declines this offer shall count toward the United Express Carriers number of job offers required by Paragraph 2 and the number of accepted offers required by Paragraph 3 of this Letter of Agreement. |
5. |
When preparing to select pilots for new hire positions pursuant to this Letter of Agreement, the United Express Carrier shall contact the UAL-MEC Furloughed Pilot Coordinator to receive a list of names from the United Express Carrier Opportunity List. |
a. |
To be an Eligible Furloughed Pilot, a United Pilot must i) be on furlough or have received notice of furlough, and ii) have not previously rejected an offer of employment (following an interview under this agreement) from a United Express Carrier pursuant to this Letter of Agreement |
b. |
Working through the UAL-MEC Furloughed Pilot Coordinator, an Eligible Furloughed Pilot may designate i) carrier(s) to which he would like his name forwarded, ii) carrier(s) from which he would like his name withheld, and iii) criteria that would result in bypassing him for certain new hire positions. An Eligible Furloughed Pilot whose name is forwarded to a United Express Carrier consistent with his designations and who is offered a position is required to accept such position and, if he declines, shall be ineligible for any future employment opportunities with that United Express Carrier under the terms of this Letter of Agreement. |
c. |
Monthly, the MEC Furloughed Pilot Coordinator shall provide the Company with a current copy of the annotated United Express Carrier Opportunity List and an update on the activity associated with the names. |
6. |
Eligible Furloughed Pilots whose names are forwarded to a United Express Carrier pursuant to this Letter of Agreement shall be required to complete all new hire paper work, meet all |
LOA 11 Page 388
Exhibit L-2
|
|
new hire airman and medical qualifications, satisfy background checks and participate in an interview. An Eligible Furloughed Pilot shall not be required to perform a flight test. An Eligible Furloughed Pilot who, in conjunction with the establishment of the United Express Carrier Opportunity List, is identified by a United Express Carrier as being in a no rehire status shall not have his name forwarded to that United Express Carrier. |
7. |
While Eligible Furloughed Pilot names shall be forwarded in seniority order (modified by the qualifiers permitted above) once such pilots have accepted employment at a United Express Carrier pursuant to this Letter of Agreement, their seniority, longevity and all other terms and conditions of employment at that Carrier shall be governed by the rules of that carrier that apply to all new hires, except as set forth in Paragraph 9 of this Letter of Agreement. |
8. |
An Eligible Furloughed Pilot who accepts employment under the terms of this agreement shall serve the required new-hire contractual and/or company policy required probationary period. Should a situation occur during the probationary period where an Eligible Furloughed Pilot, in the opinion of the United Express Carrier, fails to perform at an acceptable level and faces termination for such failure, the Pilot shall be afforded the due process considerations provided by that United Express Carriers pilot collective bargaining agreement and/or company policy. |
9. |
An Eligible Furloughed Pilot who accepts employment under the terms of this Letter of Agreement shall receive a minimum salary equal to that United Express Carriers second year First Officer pay rate for the largest Equipment permitted under Section 1 of the Agreement operated by that carrier in its United Express operations. The Carrier shall pay its applicable hourly rate for the position held and United Airlines shall, on a monthly basis, pay the furloughed Pilot any salary difference required under this Paragraph. This monthly payment shall be subject to all applicable federal, state and local payroll taxes. The monthly payment shall not, however, have any impact on the Pilots employment status at United and it shall not be considered earnings for the purpose of any United Airlines employee benefit plans. |
10. |
A United Express Carrier shall not require an Eligible Furloughed Pilot who accepts employment pursuant to this Letter of Agreement to resign his United seniority number. |
11. |
An Eligible Furloughed Pilot who accepts employment with a United Express Carrier pursuant to this Letter of Agreement and who subsequently desires to leave shall give as much notice as possible but not less than three (3) months notice. Should an Eligible Furloughed Pilot resign his employment with a United Express Carrier prior to the satisfaction of any training note obligation for the sole purpose of recall to United Airlines, the Company shall pay any remaining obligation on the note. |
12. |
If an Eligible Furloughed Pilot is hired by a United Express Carrier and subsequently leaves that carrier, the United Express Carrier shall replace that Pilot by offering a job opportunity to another Eligible Furloughed Pilot as new hire positions become available in the normal course of business. The provisions of this Letter of Agreement shall apply to these Eligible Furloughed Pilots except for Paragraphs 2, 3 and 9 of this Letter of Agreement. The United Express Carriers ability to operate Aircraft under Section 1 of the Agreement and the terms of this Letter of Agreement is not dependent on Eligible Furloughed Pilots accepting these |
LOA 11 Page 389
Exhibit L-3
|
|
employment offers. This Paragraph shall only apply after Eligible Furloughed Pilots have accepted the number of positions required in Paragraph 3 of this Letter of Agreement. |
13. |
While all United Express Carriers are committed to complying with the job opportunity provisions of this Letter of Agreement, adherence to these job opportunity provisions would be problematic if circumstances were such that the United Express Carrier may have to furlough pilots at the same time that they were required to hire furloughed United pilots. Should this circumstance occur, the Company and the Association agree to meet and discuss acceptable solutions to mitigate the impact of such circumstances which would be agreeable to the parties and maintain the integrity of this Letter of Agreement. |
AGREED, this 18 th day of December, 2012. |
||
For United Airlines, Inc.: |
For the Air Line Pilots Association, International: |
|
/s/ Captain Fred Abbott Captain Fred Abbott Senior Vice President Flight Operations |
/s/ Captain Donald L. Moak Captain Donald L. Moak President Air Line Pilots Association, International |
|
/s/ P. Douglas McKeen P. Douglas McKeen Senior Vice President Labor Relations |
/s/ Captain Jay Heppner Captain Jay Heppner Chairman UAL MEC |
|
/s/ Captain Jay Pierce Captain Jay Pierce Chairman CAL MEC |
LOA 11 Page 390
Exhibit L-4
EXHIBIT M
Career Path Program for Pilots
United and Contract each agree to the following :
1. |
United and Contractor agree to participate in mutually advantageous opportunities to establish a program for the recruitment, training, and mentoring of Qualified Pilot Candidates aimed at creating a pipeline of well-trained industry professionals to serve a continuing need for pilots at Contractor and United. The term Qualified Pilot Candidate refers to potential pilot candidates whom the Contractor has recruited, trained and mentored based on the qualifications similar to those used by United. This program may be conducted in conjunction with an accredited aviation college or university. |
2. |
Contractor agrees to work with appropriate educational institutions, as well as flight schools associated with such educational institutions, to recruit Qualified Pilot Candidates using qualifications similar to those at United. Contractor further agrees to train and mentor Qualified Pilot Candidates as appropriate to meet all FAA and Contractor pilot requirements beginning when the candidate is at the educational institution and/or flight school and continuing through interview and hiring with Contractor. |
3. |
Pilot Interviews . |
a. |
During periods of hiring, United will offer competitive Qualified Pilot Candidates a guaranteed pilot interview at United based on the following criteria being met: |
i. |
Contractor shall ensure the Qualified Pilot Candidate has signed a release permitting United access to all work records on file with Contractor; |
ii. |
Contractor shall submit a recommendation for the Qualified Pilot Candidate from a flight operations manager holding a position no lower than Chief Pilot; and |
iii. |
Qualified Pilot Candidate shall meet all of Uniteds pilot hiring requirements currently in place at the time of the interview. |
4. |
Pilot Hiring . |
a. |
United, at its sole option and discretion, may make employment offers to successful Qualified Pilot Candidates who are guaranteed interviews pursuant to Section 3(a) above. |
b. |
If United makes an offer of employment to any pilot then employed at Contractor and such offer is accepted, then United shall notify Contractor of such offer and acceptance at least 90 days prior to the start date of such pilots training class. If (x) United fails to deliver such a notice with respect to a pilot, and (y) United hires at least nineteen (19) other pilots then employed at Contractor whose |
Exhibit M-1
training class start dates occur within a thirty (30) day period that includes such first pilots training class start date, and (z) any Scheduled Flight is delayed or cancelled because of an unavailability of Contractor pilots specifically attributable to such United pilot hiring within 90 days after such first pilots training class start date, then any and all such delays and cancellations shall be disregarded specifically for purposes of determining Cause and Special Cause. |
5. |
Contractor shall encourage all pilots interested in interviewing with a mainline carrier to pursue an interview with United. |
Exhibit M-2
EXHIBIT N
SAFETY STANDARDS FOR UNITED AND UNITED EXPRESS CARRIERS
Contractor agrees and, as applicable, represents and warrants, to each of the following:
1. |
Contractor is in compliance with, has obtained the applicable air carrier approvals with respect to, and shall remain in compliance throughout the Term of this Agreement, with the U.S. Department of Defense (DoD) Quality and Safety Requirements (including without limitation 32 CFR Part 861 and any other applicable governmental quality or safety requirement), and will maintain approval and continue to comply with all applicable Federal Aviation Regulations (F.A.R.). In the event any change to such compliance or status occurs at any time during the Term, Contractor shall notify United immediately of both (x) any such change and (y) the corrective actions taken by Contractor or a correction action plan. |
2. |
Any non-compliance with any safety requirements or corrective action plans shall be grounds for partial or complete suspension or termination by United, without further liability, of this Agreement or any of the terms or conditions of this Agreement; but, with reservation of all other rights and remedies available to United. |
3. |
Additional safety reviews and audits may be required at Uniteds discretion and Contractor shall cooperate with all such reviews and audits. |
4. |
Contractor shall perform all operations in accordance with United Airlines Policies and Procedures and Regional Ground Operations Manual (RGOM). |
5. |
In all facets of United Express Carrier operations, SAFETY shall be Contractors #1 priority. Contractor shall ensure all personnel maintain this same standard during the course of performing their duties. |
6. |
In addition, Contractor agrees to implement or maintain, as applicable, the following: |
a. |
Mutual support of one another in implementing these standards by sharing safety data, information and expertise. |
b. |
Quality maintenance and operations training programs |
c. |
A carrier internal evaluation program to monitor all operational divisions to include, at a minimum, key safety issues, dangerous goods handling, and training records and qualifications for all personnel. |
d. |
Quality programs to manage outsourcing of services. |
e. |
A formalized maintenance quality assurance program to monitor all maintenance and maintenance support activities including but not limited to maintenance practices, required inspection items and technical document control. |
Exhibit N-1
f. |
Implementation of a program to rectify FAA inspection findings. |
g. |
Presence of a voluntary self-disclosure reporting program. |
h. |
Formal process to routinely bring safety and compliance issues to the attention of carriers senior management. |
i. |
Anonymous and non-punitive safety hazard reporting system. |
j. |
A Senior Management policy statement supporting open safety reporting by employees. |
k. |
Director of Safety, reporting to the highest levels of management, overseeing the carriers safety programs. |
l. |
Process for managing corrective actions from FAA and internal audit program as well as employee disclosure. |
m. |
Ongoing flight safety education/feedback program. |
n. |
Ground safety program in airport operating areas. |
o. |
Incident investigation process that includes accountability, recommendations and corrective actions taken. |
p. |
Establishment and maintenance of emergency response procedures and manual. |
q. |
Participation in UAL/industry safety information exchange forum. |
r. |
Compliance with the safety standards set forth by the International Air Transport Authority (IATA) Operational Safety Audit (IOSA) and shall not be suspended from such IOSA registry. |
s. |
Contractor will pay for any IOSA audit costs, which costs shall not be reimbursable by United. |
Exhibit N-2
EXHIBIT O
Form of Assignment Agreement
This Agreement (this Agreement ) is made and entered into, and is to be effective on, this the ____ day of ___________ (the Effective Date ), by ___________, a ___________ corporation ( Assignor ) and ___________, a ___________ corporation ( Assignee ), [and the ___________ ( Airport Lessor )].
W I T N E S S E T H:
WHEREAS, Assignor leases space], designated on Exhibit(s) _____ attached hereto and made a part hereof (together the Premises ), at ___________ at the___________ Airport, ___________ (the Airport ) under a certain [Airport Use and Lease Agreement dated ___________, (as amended, hereinafter referred to as the Lease )] between Assignor and the Airport Lessor;
WHEREAS, a copy of the Lease has been provided to Assignee and is incorporated herein by reference;
WHEREAS, Assignee operates at the Airport and from portions of the Premises;
WHEREAS, Assignor desires to assign to Assignee [all] [a portion] of Assignors remaining right, title and interest in the Lease [insofar (and only insofar) as the Lease pertains to certain leased premises and improvements described on the attached Annex 1], such space herein called the Assigned Space and the improvements located within the Assigned Space are herein called the Assigned Space Improvements . The Assigned Space and Assigned Space Improvements are herein called the Assigned Premises ;
WHEREAS, Assignee desires to accept such assignment from Assignor;
[WHEREAS, such assignment requires the prior written consent of the Airport Lessor];
[WHEREAS, pursuant to the Lease, such assignment does not require the consent of the Airport Lessor (but written notice of such assignment is required to be given to the Airport Lessor)].
NOW, THEREFORE, in consideration of the assignment herein made and of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows:
1. DEMISE AND USE
Effective on the Effective Date, Assignor hereby assigns to Assignee all of the interest of the lessee under the Lease [insofar (and only insofar) as the Lease pertains to the Assigned Premises].
Exhibit O-1
2. ACCEPTANCE OF ASSIGNMENT
Assignee accepts the foregoing assignment of the Lease [insofar (and only insofar) as the Lease pertains to the Assigned Premises] and covenants with Assignor, from and after the Effective Date, to pay all rent and other charges provided for in the Lease, as amended and to perform and observe all of the other covenants, conditions and provisions in the Lease, as amended, to be performed or observed by or on the part of Assignor as tenant under the Lease [in respect of the Assigned Premises].
3. WARRANTIES
Assignor hereby warrants and covenants that (i) except for the rights and interests of the Airport Lessor under the Lease, Assignor is now the sole owner of all rights and interests in and to the Assigned Premises, (ii) the Lease[, as it relates to the Assigned Premises,] is in full force and effect, (iii) Assignor has complied with all terms and provisions of the Lease [as it relates to the Assigned Premises] and same is not currently in default and Assignor knows of no condition which with the passage of time or giving of notice might constitute a default under the Lease by any party, and (iv) the Assigned Premises and the Lease [, insofar as it relates to the Assigned Premises,] are free from all liens and encumbrances. A copy of the Lease (and all amendments thereto) are attached as Annex 2.
Subject to the foregoing, Assignee accepts the Assigned Premises and equipment thereon AS IS and acknowledges that there is, with respect to the Assigned Premises and equipment thereon, NO WARRANTY, REPRESENTATION, OR CONDITION OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTY OF HABITABILITY, MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE, and that none shall be implied by law. Except as stated in this Agreement, Assignee acknowledges that Assignor has made no representations with respect to the Assigned Premises or equipment. Final determination of the suitability of the Assigned Premises or equipment for the use contemplated by Assignee is the sole responsibility of Assignee, and Assignor shall have no responsibility in connection with such suitability.
4. ASSIGNEE TO COMPLY WITH LEASE TERMS
Assignee agrees to perform and observe all of the covenants, conditions and terms of the Lease relating to the period of time from and after the Effective Date [(insofar, but only insofar, as the same related to the Assigned Premises)], and to protect, defend, indemnify and hold harmless Assignor from and against all claims, damages, and expenses of any kind asserted by any person or entity, including the Airport Lessor, arising out of the nonperformance, nonobservance or improper performance or observance of the covenants, conditions or terms of the Lease [(insofar, but only insofar, as the same relates to the Assigned Premises)]. Assignor shall comply with all remaining terms of the Lease, to the extent any non-compliance could adversely affect Assignee rights in or to the Assigned Premises. Assignor agrees to protect, defend, indemnify and hold harmless Assignee from and against all claims, damages, and expenses of any kind asserted by any person or entity, including the Airport Lessor, arising out of the nonperformance, nonobservance or improper performance or observance prior to the Effective Date of the covenants, conditions or terms of the Lease [(insofar, but only insofar as
Exhibit O-2
the same relates to or effects the Assigned Premises)]. Nothing herein shall be construed as to obligate Assignee to be responsible in any way for any hazardous material located in, or the environmental condition of, the Assigned Premises as of the Effective Date to the extent not caused by or arising from Assignees operations.
5. APPROVALS
[This Agreement shall not become effective unless and until the consent of the Airport Lessor is given by execution of consents for the assignments herein made, which consents shall be requested on the standard form for such consents by the lessor as attached hereto as Annex 3. Assignor and Assignee hereby mutually agree to expeditiously take any and all actions, and to cooperate fully with each other, with respect to obtaining any approvals, authorizations, licenses or similar items that may be necessary or desirable in order to carry out the agreements set forth herein or contemplated hereby. The parties hereto agree to request the consent of the Lessor on the consent form attached hereto as Annex 3. The parties agree to make such reasonable changes to such form as may be required by Airport Lessor.]
[Consent by Airport Lessor . Airport Lessor, as evidenced by its execution below, does hereby consent to this Assignment, [releases Assignor from all of its responsibilities and obligations under the Lease that are attributable to the period of time after the Effective Date, and] agrees to look solely to Assignee for performance of all obligations thereafter under the Lease [as it relates to the Assigned Premises].]
[Acknowledgement . Assignor and Airport Lessor hereby represent to Assignee that the Lease is currently in full force and effect, and that they know of no events of default relating to the Lease or the Assigned Premises as of the date hereof.]
6. APPLICABLE LAW
[The laws of the State where the Assigned Premises are located shall be used in interpreting this Agreement and in determining the rights of the parties under it.]
7. SEVERABILITY
If any part of this Agreement is held to be invalid by final judgment of any court of competent jurisdiction, the part held invalid shall be modified to the extent necessary to make it valid or, if necessary, excised, and the remainder of the Agreement shall continue to remain effective.
8. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with respect to its subject matter and may not be changed in any way, except by a written instrument executed by the parties and, if necessary, approved by the Airport Lessor.
Exhibit O-3
IN WITNESS WHEREOF, the parties have properly executed this Agreement effective the date first above written.
ATTEST: |
[ ASSIGNOR ] |
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BY: |
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TITLE: |
||
DATE: |
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ATTEST: |
[ ASSIGNEE ] |
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BY: |
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TITLE: |
||
DATE: |
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[Consent of Airport Lessor |
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By: |
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Name: |
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Title: |
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Date: ] |
Exhibits to be Attached:
Annex 1 Description of Assigned Space
Annex 2 Copy of Lease
Annex 3 Request for Consent
Exhibit O-5
ANNEX 1
to the Form of Assignment
DESCRIPTION OF ASSIGNED SPACE
Exhibit O-6
ANNEX 2
to the Form of Assignment
COPY OF LEASE
Exhibit O-7
ANNEX 3
to the Form of Assignment
REQUEST FOR CONSENT TO ASSIGNMENT
___________, a ___________ corporation ( Assignor ) and ___________, a___________ corporation ( Assignee ) hereby apply to the [___________ ] (the Airport Lessor ) for its consent to an Assignment attached as Exhibit A and dated___________ (the Effective Date), for premises described therein (the Assigned Premises ) as required by the [___________ Use and Lease Agreement] (the Agreement ) with___________ for certain premises at___________ Airport. As consideration for the granting of the aforesaid consent and without limitation of any right or remedy of the Airport Lessor as set out in the Agreement, Assignor and Assignee agree with the Airport Lessor as follows:
1. |
Assignor represents to Assignee that to its knowledge as of the date hereof, the agreement dated___________, by and between the Airport Lessor, as Lessor, and Assignor, as Lessee, is in full force and effect and there are no rental fees in arrears and no notices of termination or default are outstanding. |
2. |
The parties hereto recognize and agree that the cancellation, termination, or expiration of the Agreement shall serve to terminate Assignors and Assignees rights and obligations concerning the Assigned Premises. |
3. |
All notices to Assignee (as Lessee) with respect to the Assigned Premises pursuant to the Agreement shall hereinafter be sent to Assignee at the following address: |
4. |
In addition, it is expressly understood and agreed as follows: |
(a) |
That by the granting of this consent to Assignment, the Airport Lessor is not consenting in advance to any future subleases or assignments of the Assigned Premises or any other facilities by [either Assignor or] Assignee. |
(b) |
That no future amendment, modification or alteration to the Assignment shall be or become effective without prior notice to and approval by the Airport Lessor if required by the provisions of the Agreement. |
(c) |
That Airport Lessor, as evidenced by it execution of this consent below, [releases Assignor from all of its responsibilities and obligations under the Agreement that are attributable to the period of time after the Effective Date, and] agrees to look solely to Assignee for performance of all obligations thereafter under the Lease [as it relates to the Assigned Premises]. |
(d) |
[That Assignor and Airport Lessor hereby represent to Assignee that the Lease is currently in full force and effect, and that they know of no events of default relating to the Lease or the Assigned Premises as of the date hereof.] |
Exhibit O-8
The parties accept the foregoing acknowledgments and agreements and the Airport Lessor hereby consents to the Assignment attached as Exhibit A. However, the terms of the Agreement and this Request for Consent shall prevail over any conflicting terms or provisions contained in Exhibit A hereto.
FOR THE AIRPORT LESSOR:
APPROVED |
FOR [ASSIGNOR]:
APPROVED |
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Name: |
Name: |
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Title: Director, Department of Aviation |
Title: |
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Date: |
Date: |
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FOR [ASSIGNEE]:
APPROVED |
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ATTEST/SEAL: |
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Name: |
Name: |
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Title: Corporate Secretary |
Title: |
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Date: |
Date: |
Exhibit O-9
EXHIBIT P
Charter Flight Operations
Subject to the provisions of Section 2.1 establishing, without limitation, that United shall, in its sole discretion, establish all schedules for Charter Flights, including determining the city-pairs served, frequencies, utilization and timing of scheduled arrivals and departures, and shall, in its sole discretion, make all determinations regarding the establishment and scheduling of any Charter Flights, and that Contractor shall operate such Charter Flights pursuant to the terms of the Agreement, each of Contractor and United agrees to the following:
1. |
United agrees to schedule Charter Flights using only aircraft that are available to schedule, including Remain Over Night ( RON ) aircraft that are not otherwise in maintenance. |
2. |
Charter Flights shall be performed at the rates as set forth on Schedules 2A and 2B . |
3. |
Contractor agrees to have its System Operations Control ( SOC ) employees work directly with United to successfully operate Charter Flights. |
4. |
Contractors SOC will ensure Charter Briefings provided by Unitedare distributed to and reviewed by its crews before the operation of any Charter Flight. |
5. |
Contractor agrees to provide Uniteds Charter Operations Planner aircraft routing and assigned crew information (including contact information for the crew) seventy-two (72) hours before the start of any Charter Flight. |
6. |
Contractor agrees to withhold Charter Flights from its normal monthly crew bid, in order to minimize re-crewing costs in the event that United should need to alter the schedule of a Charter Flight or cancel the Charter Flight altogether. |
7. |
Contractors SOC will remain in constant contact with Uniteds Charter Operations Planners while conducting any Charter Flight on behalf of United, advising them of weather, maintenance issues, and other factors that could impact, delay, or cause the cancellation of any Charter Flight. |
8. |
United personnel will be the sole contact with the charterer and will advise the customer of any delay or cancellation to a Charter Flight. |
9. |
Contractor will provide Operations Engineering support capable of providing Charter Flight approval for new airports and routes within seventy-two (72) hours of the initial request from United. |
10. |
Contractor agrees to provide, to the extent allowed by its existing labor agreements, a charter-trained subset of flight attendants at each base to be used on Charter Flights operated on behalf of United. |
Exhibit P-1
11. |
United agrees to train the above described charter-trained subset of flight attendantsat its own expenseon the special requirements of working a Charter Flight. |
12. |
To the extent allowed by its existing labor agreements, Contractor agrees to allow United, based upon Customer Satisfaction scores, to select specific flight attendants to fly specific Charter Flights. Nothing in this provision shall operate or be construed to limit Contractors responsibility for the acts or omissions of Contractors employees, independent contractors or agents, or be construed as joint employment, or excuse any of Contractors obligations under Section 4.1(a) herein or under any other provision of this Agreement. |
Exhibit P-2
EXHIBIT Q
Ground Handler Indemnity
Unless superseded by another agreement between a United Ground Handler (as defined below) and Contractor, the following provisions shall apply with respect to the actions of United or any of Uniteds affiliates, in each case only to the extent that such person is acting directly in the capacity as a ground handler (a United Ground Handler ) for Contractor pursuant to this Agreement.
1. |
Indemnification . The United Ground Handler (the Indemnitor ), on the one hand, shall indemnify, defend and hold harmless Contractor and its directors, officers and employees, on the other hand, (the Indemnitees ), from and against any and all liabilities incurred by Indemnitee arising out of physical loss of or damage to the Covered Aircraft (hereinafter, a Claim ) resulting from the negligence of the Indemnitor in providing ground handling services to Indemnitees, except to the extent caused by the negligence or willful misconduct of any Indemnitee; provided that the Indemnitors liability pursuant to this Exhibit Q with respect to any such Claim shall not exceed $[***] in the aggregate; provided further , that the Indemnitor shall not indemnify Indemnitee for any individual Claim in an amount less than $[***]. |
2. |
Exclusion of Consequential Damages . THE INDEMNITOR SHALL NOT BE LIABLE TO ANY PERSON PURSUANT TO THIS EXHIBIT Q FOR ANY INDIRECT, INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF REVENUE OR LOST PROFITS, EVEN IF THE INDEMNITOR HAD BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND EACH INDEMNITEE HEREBY RELEASES AND WAIVES ANY CLAIMS AGAINST THE INDEMNITOR REGARDING SUCH DAMAGES. |
3. |
Prompt Notification . Any Indemnitee seeking indemnification hereunder shall give prompt and timely notification to the Indemnitor of any such claim, fine, penalty, action or proceeding, and allow the Indemnitor the right to compromise or participate in the defense of same. |
Exhibit Q-1
EXHIBIT R
CRJ Interior Project
Interior Project Phase 1 :
United Expenses :
1. |
Reimbursement of purchase price of Zodiac Seats (20 shipsets) |
2. |
Reimbursement of all shipping costs associated with the seats and the interior kits |
3. |
Reimbursement of purchase price of Buyer Furnished equipment: |
a. |
Seat Track Covers and associated shipping |
b. |
Proximity Lighting and associated shipping |
4. |
Reimbursement of service fees to TIMCO for Standard Installation (including seats, interior kits and First Class carpet installation) |
Contractor Expenses :
1. |
Other than the service fees for Standard Installation, as described above, all service fees to TIMCO for Maintenance performed by TIMCO for the Interior Project Phase 1 as approved by Contractor (including but not limited to corrosion remediation) |
2. |
Costs associated with seats after removal from aircraft (e.g., disposal costs, storage costs, shipment costs) |
3. |
Costs associated with on-site oversight by Contractor during Standard Installation (wages and travel expenses) |
4. |
Costs associated with relocating any ships equipment as a result of Standard Installation |
5. |
Costs associated with revision of manuals and/or training costs associated with the Interior Project |
Interior Project Phase 2 (Interior Refurbishment) :
Contractor Expenses :
1. |
Purchase of Carpet (First and Economy cabin) |
2. |
Installation of Carpet in Economy Cabin |
3. |
Aircraft cleaning including sidewalls, lavatories, galleys and completion of all of the requirements set forth in Exhibit J (including without limitation the actions specified in the column titled Heavy Maintenance in the table titled Statement of Work therein) |
Exhibit R-1
EXHIBIT S
CRJ Lease Return Conditions
Attachment A
to Schedule I
RETURN OF THE AIRCRAFT
(a) General . At the time of such return, (i) the Aircraft shall be registered under the laws of the United States with the FAA in the name of Lessor or its designee unless such registration is prohibited by reason of the failure of Lessor, the Owner Participant or Lessors designee to be eligible on such date to own an aircraft registered with the FAA and (ii) the Airframe will be fully equipped with the Engines installed thereon.
At the time of such return, such Airframe and Engines:
(A) |
shall have a valid certificate of airworthiness issued by the FAA and be eligible for operation under Part 121 or any successor regulation; |
(B) |
shall be free and clear of all Liens (other than Lessor Liens (including for this purpose Liens that would be Lessor Liens but for the proviso to the definition of Lessor Liens)); |
(C) |
shall be in a regular passenger configuration used by Lessee and in as good condition as when originally delivered to Lessee, ordinary wear and tear excepted, and otherwise in the condition required to be maintained under Lessees FAA-approved maintenance program; |
(D) |
shall have all of Lessees exterior insignia painted over or removed in a good and workmanlike manner (and any repainted or stripped down areas shall match the existing exterior colors) and all of Lessees interior markings removed in accordance with industry standards; |
(E) |
shall be in a state of cleanliness suitable under Lessees normal standards for use in its fleet operations and by U.S. commercial airline standards; |
(F) |
shall be maintained by cleaning and treating all mild and moderate corrosion and correcting all severe or exfoliate corrosion in accordance with Lessees FAA-approved maintenance program or Manufacturers structural repair manual; and |
(G) |
shall be cleared through all applicable customs; |
and in all such cases the Aircraft shall not have been discriminated against in its maintenance, use or operation by reason of its leased status.
Exhibit S-1
(b) Airworthiness Directives . All FAA Airworthiness Directives and amendments or changes to the Federal Aviation Regulations applicable to the Airframe, Engines (or Acceptable Alternate Engines) or Parts, as well as all mandatory service bulletins applicable to any of the foregoing, shall have been accomplished by terminating action in compliance with the issuing agencys or the manufacturers specific instructions, regardless of any waivers that the Lessee may have negotiated with the FAA, as the case may be, to the extent that any such directives, regulations or bulletins have an effective date for terminating compliance (i) prior to the date of return, or (ii) after the date of return but only if Lessee has begun termination action in regard thereto on other aircraft in Lessees fleet, and such termination action is accomplished by Lessee concurrently with a particular type of maintenance procedure, and the Aircraft is scheduled (or in the normal course would be scheduled) for such maintenance procedure prior to the date of return and, in all cases, without discrimination against the Aircraft by reason of its leased status.
(c) Scheduled Maintenance . Airframe . At the time of return, the Airframe shall be fresh from a block C check in accordance with the Lessees then applicable FAA-approved maintenance program.
As used herein, and notwithstanding the then applicable nomenclature, the term C check shall be deemed at all times to refer to maintenance procedures of the same type and scope as constitute a C check under the Lessees FAA-approved maintenance program as in effect on the date hereof.
(d) Engines . At the time of return, the Engines shall meet the following requirements:
(i) each Engine shall have remaining no less than [***] flight hours, until the next on-condition and next scheduled removal for life limited parts (based on Lessees experience for engine refurbishment during the three (3) immediately preceding years before the date of return);
(ii) the Lessor (or its designated representative) shall perform a complete external visual inspection and internal boroscope of the Engines. The Lessee shall promptly correct, or procure the correction of any discrepancies found which are beyond the engine manufacturers maintenance manual in-service limits or which are subject to reduced interval and/or special inspection in accordance with the engine manufacturers maintenance manual;
(iii) each Engine shall have a video boroscope inspection performed in accordance with the applicable engine manufacturers maintenance manual. Boroscope inspection findings shall be within the engine manufacturers maintenance manual limitations. Any component or part found during the boroscope inspection that has a published limitation specified in the applicable engine manufacturers maintenance manual of less than [***] hours remaining life due to its condition shall be repaired or replaced by the Lessee in accordance with the applicable engine manufacturers maintenance manual. A ground performance run will be conducted in accordance with the applicable engine manufacturers maintenance manual to ensure that the Engine has a 20 degree Celsius margin remaining on accordance with paragraph (v) Engine operating
Exhibit S-2
parameters, i.e., EGT, oil pressure, oil consumption and vibration shall be within the engine manufacturers maintenance manual limits;
(iv) the Aircraft shall be capable of certificated, full rated performance without limitations throughout the entire operating envelope as defined in the Airplane Flight Manual. Performance compliance will be demonstrated at the time of the acceptance flight test by on-wing static inspection and testing of the Engines (including nacelles and accessories) in accordance with the engine manufacturers maintenance manual;
(v) each Engine shall have a positive EGT margin at 20 degree Celsius outside air temperature at sea level and standard atmospheric pressure condition of no less than 20 degrees Celsius, as calculated per the engine manufacturers recommendation at full rated thrust take-off and the Lessor and the Lessee agree that the 20 degree positive EGT margin shall be adjusted at the date of return based on an average of the engine manufacturers and Lessees then Engine Trend Monitoring data to support a remaining on-wing life of 3,500 flight hours for an assumed operation of 1 hour to 1 cycle; and
(vi) each installed Engine shall have no single life limited part with less than [***] cycles life remaining in accordance with the engine manufacturers maintenance manual, Chapter 5 total approval lives.
In respect of Engines, for each life limited part, the Lessor and Lessee shall agree as follows:
At the date of return, for each life limited part with cycles since new in excess of [***]% of the manufacturers total approved life, Lessee shall pay an amount to Lessor calculated as follows:
(A/B) x C where
A |
= part cycles since new minus [***]% of manufacturers total approved life |
B |
= [***]% of manufacturers total approved life |
C |
= the then current manufacturers price to Mesa for a new replacement of that Part |
In respect of installed Engines, for Engine refurbishment, the Lessor and Lessee shall agree as follows, assuming Lessees hour to cycle ratio is 1 to 1:
At the date of return, for each Engine with flight hours since last core performance restoration in excess of ([***]% of the Lessees 12 month rolling average shop visit rate x [***] hours), the Lessee shall pay an amount to the Lessor calculated as follows:
(B.F) x G where
B |
= Engine flight hours since last core performance restoration |
F |
= [***]% of the Lessees 12 month rolling average shop visit rate x [***] hours |
Exhibit S-3
G = |
$X, the core performance restoration supplemental rent per Engine flight hour based on Lessees cost for engine refurbishment during the three (3) immediately preceding year before the date of return. |
(e) Return of the Engines . In the event that an Acceptable Alternate Engine shall be delivered with the returned Airframe, Lessee, concurrently with such delivery, will, at no cost to Lessor, furnish, or cause to be furnished, to Lessor a full warranty (as to title) bill of sale with respect to each such Acceptable Alternate Engine, in form and substance reasonably satisfactory to Lessor (together with an opinion of counsel (which may be an employee of Lessee or Guarantor)) to the effect that such full warranty bill of sale has been duly authorized and delivered, and is enforceable in accordance with its terms and that such Acceptable Alternative Engines are free and clear of all Liens other than Lessor Liens (including for this purpose Liens that would be Lessor Liens but for the proviso to the definition of Lessor Liens), against receipt from Lessor of a bill of sale evidencing the transfer, without recourse or warranty (except as to the absence of Lessor Liens (including for this purpose Liens that would be Lessor Liens but for the proviso to the definition of Lessor Liens)) by Lessor to Lessee or its designee of all of Lessors right, title and interest in and to any Engine not installed on the Airframe at the time of the return of the Airframe.
(f) Structural Inspection Tasks . Along with the C check the Airframe shall have accomplished all structural tasks due through the next scheduled C check thereafter.
(g) Landing Gear Life . The main gear and the nose landing gear shall have at least [***] percent ([***]%) of the landings remaining or [***] ([***]) landings, whichever is less, since its last removal and overhaul or original installation for the main gear and the nose landing gear in the Lessees FAA approved maintenance program.
(h) Tires and Brakes . The tires and brakes shall have remaining [***] percent ([***]%) or more of the full service life.
(i) Condition of Controlled Components . Aircraft and engine hour and/or cycle controlled components at time of return to Lessor shall have remaining, as a minimum, [***] life and/or [***] percent ([***]%) of the manufacturers recommended overhaul, interval in hours or cycles, whichever is applicable, before any scheduled removals for overhaul, test or disassembly. All components controlled on a calendar basis shall have remaining at least half-time before scheduled removal for testing or overhaul. Such hour/cycle or calendar controlled components are defined as those components controlled under Lessees FAA-approved maintenance program.
(j) Deferred Maintenance . There shall be no open, outstanding or deferred maintenance items, scheduled or unscheduled, against the Aircraft.
(k) Manuals . Upon the return of the Aircraft upon any termination of this Lease in accordance with paragraph (a) of Section 5 of the Lease, Lessee shall deliver or cause to be delivered to Lessor all current logs, manuals and data and maintenance, inspection, modification and overhaul records and similar records incorporating the latest revisions required to be maintained with respect to the Aircraft and Parts under FAA rates under Part 121, the Lessees
Exhibit S-4
FAA approved maintenance program and all other applicable laws and applicable rules and regulations of each country under the laws of which the Aircraft has been registered during the period of operation thereof, which logs, manuals, records and other data shall be in the English language or accompanied by an English translation thereof. If any such logs, manuals, records or other data are missing, incomplete or otherwise not in accordance with FAA standards applicable to Lessee, Lessee shall reaccomplish the maintenance tasks under Part 121 necessary to produce such records in accordance with its FAA-approved maintenance program prior to return of the Aircraft or otherwise perform all necessary acts (without regard to any applicable waivers or deferrals) to obtain such records in a manner satisfactory to the FAA.
(l) Storage Upon Return . If, at least 15 days prior to expiration of the Lease at the end of the Basic Term or any Renewal Term or prior to a termination pursuant to Section 9(b) or Section 15 of the Lease, Lessee receives from Lessor a written request for storage of the Aircraft upon its return hereunder, Lessee will provide Lessor or cause Lessor to be provided, with storage facilities for the Aircraft (x) at Lessees risk and expense for a period not exceeding 30 days, and (y) thereafter at Lessors risk and at Lessors cost for insurance, maintenance and Lessees out-of-pocket expenses plus a reasonable parking fee for such storage for a period not exceeding 60 days commencing on the date of such expiration or termination; in the case of each (x) and (y), at Lessees facility at Phoenix, Arizona or at any other location in the continental United States selected be Lessee and used by Lessee as a location for the long-term parking or storage of aircraft; provided that the period set forth in clause (y) may, at Lessors option, be extended for an additional 60 day period if such storage facilities are available.
(m) Severable Parts . At any time after the Lessee has advised Lessor that it has determined not to renew this Lease or purchase the Aircraft, or the Aircraft is otherwise to be returned to Lessor, Lessee shall, at Lessors request, advise Lessor of the nature and condition of all severable nonproprietary Parts (other than Parts otherwise required by Section 7 or 8 of the Lease to be maintained on the Aircraft) owned by Lessee which have been used by Lessee during the prior six months and which Lessee has or intends to remove from the Aircraft in accordance with Section 8 of the Lease. Lessor may, at its option, upon 30 days notice to Lessee, purchase any or all of such nonproprietary Parts from Lessee upon the expiration of the Term at their fair market value.
(n) Acceptance Flights . Lessee shall provide for acceptance test flights, each not to exceed one (1) hour in duration, as necessary to demonstrate the airworthiness to the Aircraft (including for this purpose Acceptable Alternate Engines to be returned) and the proper functioning of all systems and components in accordance with the Manufacturers flight functional procedures. The Lessee shall pay for any costs associated with the first such flight and any subsequent flights to the extent that such initial flight demonstrated material discrepancies, including, but not limited to, costs for fuel, oil, airport fees, insurance, takeoff/landing fees, customs duties and any other costs incurred by the Lessor. Lessee shall permit not more than two (2) Lessors representatives onboard during any flight tests as direct observers of the functional tests.
(o) Appraisal Procedure . Following expiration of the 60-day cure period provided for in Section 14(d) of the Lease, if there remains any dispute between Lessee and Lessor as to compliance with the provisions of Section 5 of the Lease and the parties are unable to agree on the cost necessary to remedy such disputed items, Lessee and Lessor shall such dispute to the
Exhibit S-5
Appraisal Procedure I (as defined in the Residual Agreement) and Lessee shall pay the Lessor and Adjustment Amount (as defined in the Residual Agreement) determined to be due as a result of deficiency, if any, as determined by Appraisal Procedure I, without duplication of any amounts otherwise payable under the preceding provisions of this Attachment A.
Exhibit S-6
Exhibit 10.10.2
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
FIRST AMENDMENT TO THE CAPACITY PURCHASE AGREEMENT
This First Amendment (this Amendment ) to that certain Capacity Purchase Agreement, among United Airlines, Inc., a Delaware corporation (United), Mesa Airlines, Inc., a Nevada corporation (Contractor) and Mesa Air Group, Inc., a Nevada Corporation (Parent), dated as of August 29, 2013 (as previously amended by the parties thereto, the Agreement) is entered into by and between United, Contractor, and Parent and is effective as of September 12, 2014 (or as of a different date if expressly so provided below).
WHEREAS , the parties desire to amend certain provisions of the Agreement related to (i) United Cancelled Flights (as such term is defined in this Amendment) (ii) prepayment and reconciliation of aircraft property taxes, (iii) Customer Satisfaction Performance Metric as described in Schedule 4 of the Agreement, (iv) the definition of Special Cause, and (v) Schedules 2A and 2B of the Agreement to include the increase in block hour rate due to FAR 117, all in accordance with the terms and conditions of this Amendment: and
NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt, sufficiency, and adequacy of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. |
Effective as of August 29, 2013, Section 2.1.(c) of the Agreement is hereby deleted and replaced with the following: |
(c) Flight Schedules. United shall, in its sole discretion, establish and publish all schedules for the Covered Aircraft (such scheduled flights, together with Charter Flights, referred to herein as Scheduled Flights), including determining the city-pairs served, frequencies, utilization and timing of scheduled arrivals and departures, and shall, in its sole discretion, make all determinations regarding the establishment and scheduling of any flights other than Scheduled Flights; provided that such schedules shall be subject to Reasonable Operating Constraints and Conditions and the provisions of this Section 2.1 ; and provided further that Contractor shall operate all Charter Flights in accordance with the provisions set forth on Exhibit P; and provided further that Scheduled Flights may include flights from a maintenance base to any Applicable Airport or from one Hub Airport to another Hub Airport. United shall also be entitled, in its sole discretion and at any time prior to takeoff, to direct Contractor to delay or cancel a Scheduled Flight, including without limitation for delays and cancellations that are ATC or weather related, and Contractor shall take all necessary action to give effect to any such direction; provided that, with respect to the CRJ Covered Aircraft only, if United, following delivery of a Final Monthly Schedule, directs the cancellation of flights (each, a United Cancelled Flight and collectively, the United Cancelled Flights) and that flight cancellation is coded in Uniteds systems as a United initiated cancel then United shall pay Contractor in accordance with the rates set forth in Schedule 2B for each United Cancelled Flight, as if each such United Cancelled Flight had been operated as contemplated in the Final Monthly Schedule as the sole compensation for such flight. Except as otherwise provided in the last sentence of this Section 2.l(c) , any Scheduled Flight canceled at Uniteds direction shall be coded in accordance with Uniteds standard
practices as an Uncontrollable Cancelation for all purposes hereunder. Contractor shall be entitled to make such maintenance, ferry and repositioning flights as may be required to facilitate the proper maintenance of the Covered Aircraft or to accommodate the Scheduled Flights. At least sixty (60) calendar days prior to the first day of each month to which a proposed Final Monthly Schedule relates, United shall present a planned flight schedule for such month, together with a proposed Final Monthly Schedule for the following two (2) months (the Initial Proposed Monthly Schedule). In addition, United may from time to time submit to Contractor a schedule of proposed block hours for future periods and request confirmation from Contractor as to its availability to operate the Covered Aircraft for such number of block hours, and Contractor shall respond in a timely manner to any such request (it being understood that, notwithstanding any such request or response, the Scheduled Flights shall operate in accordance with the applicable Final Monthly Schedule). United shall review and consider any changes to the planned flight schedule for the Covered Aircraft, including the Initial Proposed Monthly Schedule, suggested by Contractor. Not later than forty-five (45) calendar days prior to the beginning of the calendar month to which a proposed Final Monthly Schedule relates, United win deliver to Contractor the Final Monthly Schedule. Following such delivery of the Final Monthly Schedule, however, United may make such adjustments to such Final Monthly Schedule as it deems appropriate (subject to Reasonable Operating Constraints and Conditions); provided that such adjustments by United shall not require more flight crew resources to operate the Final Monthly Schedule, based on reasonable flight crew requirements, than the flight crew resources that would have been necessary to operate the Initial Proposed Monthly Schedule. In addition, if, after such delivery of the Final Monthly Schedule, United decides to adjust the Final Monthly Schedule by removing a flight either (x) at Contractors request or (y) because United reasonably determines, in good faith, that (I) (after having consulted directly with a designated point of contact with Contractor in an effort to resolve any concerns regarding Contractors ability to perform) such flight would have resulted in a Controllable Cancellation and (II) Contractor has not acted in accordance with, or complied with United Expresss standard and/or customary operating policy and/or past practices in promptly and accurately, to the best of its knowledge, notifying United of Contractors ability to perform such flight, then, in each case of clause (x) and (y), notwithstanding the removal of such flight from the Final Monthly Schedule, such flight shall be deemed to have resulted in a Controllable Cancellation for all purposes hereunder.
2. |
The revised rates for each block hour set forth in the revised Schedules 2A and 2B of the Agreement attached hereto and incorporated herein by reference reflect the outcome of the parties commercially reasonable efforts to determine the actual cost impact to Contractor of the implementation of the Pending Rules (as such term is defined in Section 3.1 (b) of the Agreement) and by mutual agreement, the revised rates for each block hour set forth in the initial table of each of the revised Schedules 2A and 2B will be retroactively applied to January 4, 2014 notwithstanding anything to the contrary in Section 3.1 (b) of the Agreement. Accordingly, the parties hereby agree that the requirements of Section 3.1(b) (y) of the Agreement are |
satisfied and, as such, Section 3.1(b) of the Agreement is of no further force and effect. |
3. |
Section 3.2.(d).(iii) of the Agreement is hereby deleted in its entirety and replaced with the following: |
(iii) Setting All Performance Levels . Immediately following the periodic establishment of the Operating Goals, constituting the low end of B Performance Level, and using the Grade Widths, the level of performance corresponding to each of the A, B, C, D for On- Time Zero Operating Goal and the Controllable Completion Operating Goal and for A, B, C, D, DI and 02 Performance Levels for the Customer Satisfaction Operating Goal will be computed, provided that the A Performance Level shall extend to [***], the D Performance Level shall extend to [***] for the On-Time Zero Operating Goal and the Controllable Completion Operating Goal and the D2 Performance Level shall extend below [***] for the Customer Satisfaction Operating Goal. For example, if the Controllable Completion Operating Goal for a measurement period is determined to be [***], such number shall be the lowest end of the B Performance Level. Applying the methodology, in the Grade Width table referenced above, the bottom of the A Performance Level would be [***]. Furthermore, the bottom of the C Performance Level would be [***]. Based on these numbers and the Grade Widths, and before application of any Seasonality Adjustment Factors, the range of the Performance Levels would be as follows:
A Performance Level |
= |
[***] |
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B Performance Level |
= |
[***] |
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C Performance Level |
= |
[***] |
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D Performance Level |
= |
[***] |
As a second example pertaining to the Customer Satisfaction Operating Goal, if the Customer Satisfaction Operating Goal for a measurement period is determined to be [***], based on the Grade Width table referenced above, the range of the Performance Levels would be as follows:
A Performance Level |
= |
[***] |
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B Performance Level |
= |
[***] |
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C Performance Level |
= |
[***] |
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D Performance Level |
= |
[***] |
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D1 Performance Level |
= |
[***] |
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D2 Performance Level |
= |
[***] |
4. |
Section 3.2.(f) of the Agreement is hereby deleted in its entirety and replaced with the following: |
Markup . Following the determination of each Contractor Grade for each month, any applicable markup amount (in the case of E175 Covered Aircraft) or markup percentage or markup amount (in the case of CRJ Covered Aircraft), as the case may
be, shall be determined pursuant to Schedule 4 . and such markup amount shall be paid (in the case of El 75 Covered Aircraft) or such markup percentage or markup amount shall be applied (in the case of CRJ Covered Aircraft) to the Compensation for Carrier Controlled Costs (excluding the rate per aircraft per month), as the case may be, as part of the reconciliation process set forth in Section 3.6 (any such payment owed to Contractor by United associated with such markup amount (in the case of E175 Covered Aircraft), together with any such application of markup percentage or amount to Compensation for Carrier Controlled Costs (in the case of CRJ Covered Aircraft), an Incentive Markup Payment).
5. |
Effective as of August 29, 2013, Section 3.6. (b). (i) of the Agreement is hereby amended to add a subsection (N), as follows: |
(N) With respect to United Cancelled Flights utilizing CRJ Covered Aircraft, for any calendar month, then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to the rates set for in Schedule 2B for each United Cancelled Flight.
6. |
Effective as of August 29, 2013, Section 3.6. (b). (ii) of the Agreement is hereby deleted in its entirety and replaced with the following: |
Reconciliation of Incentive Markup Payments . Following the end of each month, United and Contractor shall determine whether any Incentive Markup Payment or Incentive Markup Rebate is payable to Contractor by United or by Contractor to United as provided in Section 3.2 . With respect to E175 Covered Aircraft, if mi Incentive Markup Payment or Incentive Markup Rebate has been earned by Contractor or United, as the case may be, for a month, then the reconciliation for such month shall include a payment by United to Contractor or by Contractor to United in an amount equal to the Incentive Markup Payment or Incentive Markup Rebate, as the case may be. With respect to CRJ Covered Aircraft, if an Incentive Markup Payment has been earned by Contractor for a month and such markup is different from the assumed C level performance used in determining the Prepayment, then the reconciliation for such month shall include a payment by United to Contractor, determined using the actual incentive performance level. With respect to CRJ Covered Aircraft, if an Incentive Markup Rebate has been earned by United for a month, then the reconciliation for such month shall include a payment by Contractor to United, determined using the actual incentive performance level.
7. |
Effective as of August 29, 2013, Section 3.6. (b). (iii). (A) of the Agreement is hereby amended to add a subsection (15), as follows: |
(15) only with respect to the CRJ Covered Aircraft, the actual and reasonable out of pocket third party Aerodata variable mach speed cruise program fees paid by Contractor, (the Aerodata Fees)
8. |
Effective as of August 29, 2013, Section 3.6. (b). (iii). (B) of the Agreement is hereby amended to add a subsection (5), as follows: |
(5) The amount of Aircraft Property Taxes included in the Pass-Through Costs for any particular month (pursuant to Section 3.6(b)(iii)(A)(2) will be a fixed amount, as reasonably agreed to between United and Contractor based on historical tax costs allocated under this Agreement.
9. |
Effective as of August 29, 2013, Section 3.6. (b). (iii). (B) of the Agreement is hereby amended to add a subsection (6), as follows: |
(6) The amount of Aerodata Fees included in the Pass-Through Costs for any particular month (pursuant to Section 3.6 (b)(iii)(A)(15) will be equal to the product: (1) the applicable Aerodata fee of [***] per departure set forth on Schedule 3 multiplied by (2) the number of scheduled CRJ Covered Aircraft departures set forth in the Final Monthly Schedule.
10. |
Schedule 2A of the Agreement is hereby deleted in its entirety and replaced with the revised Schedule 2A attached hereto and incorporated herein by reference (it being acknowledged that the only changes to such Schedule 2A are to amend the rates for each block hour as provided for in Section 2 of this Amendment and to identify different revised rates for each block hour depending on the specific percentage which Contractors ORD flying for United represents of the Contractors entire operation for United). |
11. |
Schedule 2B of the Agreement is hereby deleted in its entirety and replaced with the revised Schedule 2B attached hereto and incorporated herein by reference (it being acknowledged that the only changes to such Schedule 2B are to amend the rates for each block hour as provided for in Section 2 of this Amendment and to identify different revised rates for each block hour depending on the specific percentage which Contractors ORD flying for United represents of the Contractors entire operation for United). |
12. |
Schedule 3 of the Agreement is hereby deleted in its entirety and replaced with the revised Schedule 3 attached hereto and incorporated herein by reference (it being acknowledged that the only changes to such Schedule 3 are to amend the placement of the Reconciled Expense terms for Passenger Liability Insurance and to add Aerodata and Aircraft Property Tax as Reconciled Expenses). |
13. |
Schedule 4 of the Agreement is hereby deleted in its entirety and replaced with the revised Schedule 4 attached hereto and incorporated herein by reference. |
14. |
Effective as of August 29, 2013, Exhibit A of the Agreement is hereby amended to add the following definitions: |
Aerodata Fees - is defined in Section 3.6. (b). (iii). (A)
Incentive Markup Rebate - is defined in Section 3.2(f)
United Cancelled Flight - is defined in Section 2.1(c) .
15. |
Effective as of August 29, 2013, Exhibit A of the Agreement is hereby amended to replace the definition of Special Cause with the following: |
Special Cause - means the following, each of which constitutes breach: (i) a Controllable Completion Factor of [***] (in the case of E175 Covered Aircraft) or [***] (in the case of CRJ Covered Aircraft) or below for each of any three consecutive calendar months or for each of any four calendar months during any period of seven consecutive calendar months, (ii) an On-Time Departure Rate of [***] or below for each of any four consecutive calendar months or for each of any four calendar months during any period of seven consecutive calendar months; provided that all departure delays or cancellations caused by United and resulting from a material and extraordinary event that causes a departure delay or cancellation to similarly situated United or United Express flights not operated by Contractor or its affiliates shall be excluded from such calculation in this clause (ii), and that, for the avoidance of doubt and without limitation, Weather and ATC Delays and Cancels shall not be considered delays caused by United, or (iii) a Performance Level for Controllable Completion Factor or On-Time Departure Rate below a grade of [***] for a period of six (6) consecutive calendar months;
Except as otherwise specified herein, capitalized terms shall have the meanings ascribed to such terms in the Agreement. This Amendment may be executed in counterparts. Except as expressly amended in this Amendment, the Agreement will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
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Name: Sandra Pineau-Boddison |
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Title: SVP United Express |
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MESA AIR GROUP,INC. |
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By: |
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Name: |
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Title: |
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MESA AIRLINES, INC. |
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By: |
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Name: |
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Title: |
SCHEDULE 2A
E175 Covered Aircraft Compensation for Carrier Controlled Costs
The following rates shall apply per corresponding year to all E175 Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents [***] percent or more of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the Actual In- Service Date for each E175 Covered Aircraft; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Year |
Category (1) | |||||||||||
for each block hour |
for each flight hour |
for each
Flight departure |
for interrupted trip expense per passenger |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
|||||||
2014 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2015 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2016 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2019 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June l, 2020 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2021 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June l, 2023 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
Jane 1, 2024 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
Jane 1, 2025 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June l, 2026 | [***] | [***] | [***] | [***] | [***] | [***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (¡0 engine maintenance, (ill) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
Effective as of September 20, 2014, the following rates shall apply per corresponding year to all E175 Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents less than [***] percent of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||||
Year |
for each
block hour |
for each
flight hour |
for each
Flight departure |
for interrupted trip expense per passenger |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
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September 20, 2014 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2015 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2016 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June l, 2017 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June l, 2018 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2019 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June l, 2020 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June l, 2021 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June l, 2022 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2024 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2025 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2026 | [***] | [***] | [***] | [***] | [***] | [***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement |
costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
SCHEDULE 2B
CRJ Covered Aircraft Compensation for Carrier Controlled Costs
The following rates shall apply to all CRJ Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents [***] percent or more of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the In-Service Date for each CRJ Covered Aircraft:
Category
|
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United Cancelled
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for each
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for
each
|
for
each
|
for
trip expense per passenger
|
for
each
|
per aircraft
|
per month
|
for each
|
for
each
|
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June 2013 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
January 2014 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 2014 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 201$ | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2016 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2017 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2018 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2019 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] |
Effective as of September 20, 2014, the following rates shall apply to all CRJ Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents less than [***] percent of the Contractors entire United Express operation for United, including both El75 Covered Aircraft and CRJ Covered Aircraft:
Category
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United Cancelled
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for each
|
for each
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for
each
|
for
|
for
each
|
per aircraft
|
per month
|
for each
|
for
each
|
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September 20, 2014 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2015 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2016 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2017 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2018 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2019 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] |
SCHEDULE 3
Pass-Through Costs
Category |
Reconciled Expense |
Section 3 Reference | Driver |
Prepayment Rate |
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Completed Departures |
Fuel Services**
|
Section 3.6(b)(iii)(A)(7) | Departures | * | ||||
Landing Fees**
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Section 3.6(b)(iii)(A)(4) | Departures | * | |||||
Navigation Fees**
|
Section 3.6(b)(iii)(A)(6) | Departures | * | |||||
Aerodata
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Section 3.6(b)(iii)(A)(15) | Departures | [***] | |||||
Passenger Liability Insurance
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Section 3.6(b)(iii)(A)(3) | Departures | * | |||||
Completed Passengers |
War Risk Insurance
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Section 3.6(b)(iii)(A)(3) | Completed Passenger | * | ||||
Passenger Liability Insurance
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Section 3.6(b)(iii)(A)(3) | Completed Passenger | * | |||||
Completed Revenue Passenger Miles
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War Risk Insurance
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Section 3.6(b)(iii)(A)(3) | Per 1000 RPMs | * | ||||
Aircraft Property Tax
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Section 3.6(b)(iii)(A)(2) | Fixed per month | * | |||||
Non-Expendable Parts
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Section 3.6(b)(iii)(A)(9) | As incurred | * | |||||
Engine Maintenance Expenses
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Section 3.6(b)(iii)(A)(10) | As incurred | * | |||||
Airframe Heavy Checks
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Section 3.6(b)(iii)(A)(11) | As incurred | * | |||||
Landing Gear Maintenance Expenses
|
Section 3.6(b)(iii)(A)(12) | As incurred | * | |||||
APU Maintenance Expenses
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Section 3.6(b)(iii)(A)(13) | As incurred | * | |||||
Towing Expense above the Towing Baseline
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Section 3.6(b)(iii)(A)(14) | As incurred | * | |||||
* The Prepayment Rates reflected above in this Schedule 3 shall be determined annually by the parties acting reasonably and may be confirmed by e-mail exchange or other writing by the parties and may otherwise be adjusted from time to time, upon the mutual agreement of the
parties (and confirmed by e-mail exchange or other writing), to reflect a closer approximation of the actual reconciled amounts of such Pass-Through Costs.
** Fuel Services shall constitute a Pass-Through Cost only if United shall not have elected to procure Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.12(b) .
*** Landing few shall constitute a Pass-Through Cost only if United elects to have Contractor pay for landing fees pursuant to Section 4.24(b) .
SCHEDULE 4
Incentive Compensation
Markup Amount, Markup Percentages and Performance Grade Widths
Markup Amounts for E175 Covered Aircraft
* X, Y, Z= Contractors Monthly Operating Goal for the Operating Category
Exhibit 10.10.3
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
SECOND AMENDMENT TO THE CAPACITY PURCHASE AGREEMENT
This Second Amendment (this Amendment ) to that certain Capacity Purchase Agreement, among United Airlines, Inc., a Delaware corporation (United), Mesa Airlines, Inc., a Nevada corporation (Contractor) and Mesa Air Group, Inc., a Nevada Corporation (Parent), dated as of August 29, 2013 (as previously amended by the parties thereto, the Agreement) is entered into by and between United, Contractor, and Parent and is effective as of October 2, 2015.
WHEREAS , the parties desire to amend the Agreement to add up to fifteen (15) E175 Covered Aircraft to the Agreement; and
WHEREAS , the parties desire to amend certain provisions of the Agreement as set forth in this Amendment and
NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt, sufficiency, and adequacy of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. |
Contractor and United agree to add ten (10) New Aircraft (as such term is defined in Section 10.4.B. of the Agreement) (such ten (10) New Aircraft, referred to herein below as the Block 1 of the 2015 New Aircraft) and five (5) additional New Aircraft in addition to the Block 1 of the 2015 New Aircraft (such five (5) additional New Aircraft referred to herein below as the Block 2 of the 2015 New Aircraft). Block 1 of the 2015 New Aircraft and Block 2 of the 2015 New Aircraft are collectively referred to herein as the 2015 New Aircraft. The 2015 New Aircraft are hereby added as Covered Aircraft under the Agreement, subject to the terms and conditions applicable to New Aircraft except as expressly provided otherwise in this Amendment. In addition, the following shall apply: |
a. |
Subject to Section 2 of this Amendment, Contractor shall provide, deliver, and operate such 2015 New Aircraft as part of the Regional Airline Services it provides under the Agreement, subject to the following additional provisions: |
i. |
Subject to Embraer providing its written consent, on the delivery date of each respective Block 1 of the 2015 New Aircraft, United shall assign to Contractor its obligations and certain of its rights under its Embraer 175 aircraft purchase agreement with Embraer with respect to such aircraft; and |
ii. |
On the delivery date of each respective Block 1 of the 2015 New Aircraft, Contractor shall accept and assume such assignment and further will immediately pay Embraer both the initial deposits and all pre-delivery payments (so that United will be able to have Embraer refund United its previous payment of the initial deposits and all pre-delivery payments) and all other amounts due upon delivery to Embraer for each respective aircraft; |
1
b. |
The 2015 New Aircraft shall be referenced on Schedule 1, Schedule 1A, and Schedule 2A to the Agreement as E175 Covered Aircraft with Aircraft Numbers 31 through and including 45; |
c. |
The 2015 New Aircraft shall be inducted into the Regional Airline Services on the schedule set forth in Schedule 1 (subject to such acceleration or other variation as United and Contractor may mutually agree in writing from time to time, each party acting reasonably, to meet each parties operational requirements); |
d. |
The term of the Agreement with respect to each respective 2015 New Aircraft, if such aircraft are purchased by Contractor, shall be for twelve years each; |
e. |
Contractor shall ensure that the Block 2 of the 2015 New Aircraft materially conform to Uniteds specifications (defined as Technical Description TD175-Rev.17, December 2011), including, but not limited to, specifications for aircraft configuration, galley, seats, winglets, etc., and that such aircraft are consistent with the specifications and livery applicable to the E175 Covered Aircraft in operation by Contractor for United prior to this Amendment; |
f. |
The 2015 New Aircraft shall not be considered Growth Aircraft under Section 10.4.A. of the Agreement; and |
g. |
The following provisions of the Agreement shall not apply with respect to such 2015 New Aircraft if such aircraft are purchased by Contractor: Section 3.3(b), Section 33(c), Section 3.3 (d), Section 10.7. |
2. |
If Contractor is unable to secure financing for the 2015 New Aircraft acceptable to United (as determined by United in its sole discretion), United shall, at its election, either (i) secure financing for Contractors benefit, where Contractor is the borrower or co-borrower, as determined by United in its sole discretion, and with Contractors contribution and fee and expense reimbursement obligations otherwise consistent with Section 3.7 (which financing may include a loan to Contractor secured by the 2015 New Aircraft that is extended solely by United) or (ii) work with Embraer and Contractor (it being acknowledged and agreed Contractor shall use best efforts to so assist United) to assign and transfer the purchase obligation for the 2015 New Aircraft, to the extent requested by United, to United under Uniteds aircraft purchase agreement with Embraer, on or prior to the delivery date for such respective aircraft (and in each case, Contractor shall execute such documentation as is deemed customary or appropriate by United to complete such transactions). In the event United purchases any one or more of the 2015 New Aircraft, then the following terms shall apply: |
a. |
The United purchased aircraft shall be operated by Contractor as E175 Covered Aircraft under the Agreement (it being acknowledged and agreed that if Contractor is in default of the Agreement at the time of Uniteds purchase of |
2
such aircraft, United reserves the right exercised in its sole discretion to award such aircraft to another United Express carrier); |
b. |
United shall not pay Contractor any aircraft ownership costs (or any associated margin or markup applicable to such ownership costs) with respect to such United-purchased aircraft and prior to such aircraft entering Regional Airline Services on the date set forth in Schedule 1, Contractor shall lease such aircraft back from United under a United lease agreement containing substantially similar terms and conditions as are included in those lease agreements in existence between the parties with respect to other E175 Covered Aircraft already in operation under the Agreement; |
c. |
The contract term for each of these United purchased aircraft shall be approximately 4.5 years each, as set forth in Schedule 1 attached herein; |
d. |
The United purchased 2015 New Aircraft will ramp down at the same frequency per month over the three months immediately subsequent to the current expiration dates for the other E175 Covered Aircraft, as such dates may be extended pursuant to Section 10.2 Extension of E175 Aircraft Term; and |
e. |
The following provisions of the Agreement shall not apply with respect to such United purchased 2015 New Aircraft: Section 3.3(b), Section 3.3(c), Section 3.3(d). |
f. |
In the event United purchases any one or more of the Block 2 of the 2015 New Aircraft, the provisions of this Amendment applicable to Block 1 of the 2015 New Aircraft shall also apply to such United-purchased aircraft. |
3. |
Section 2.4(b) of the Agreement is hereby deleted in its entirety and replaced with the following: |
(b)
(i) With respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30 and any of the United purchased 2015 New Aircraft, at any time and from time to time, United shall have the right, in its sole discretion, to remove from this Agreement any or all of such aircraft as provided in this Section 2.4 (b) (i) by delivering a notice (a 2.4(b) Notice ) to Contractor, which 2.4(b) Notice shall specify the number of aircraft to be removed (each such removed aircraft, an E175 Removed Aircraft ) and a Termination Date not earlier than ninety (90) days following the date of such 2.4(b) Notice. For clarification purposes, Covered Aircraft that are not the subject of a 2.4(b) Notice shall remain subject to the terms of this Agreement (including this Section 2.4 ). Subject to Section 8.4(f) , following the delivery of a 2.4(b) Notice, the provisions of Section 8.3(b) shall apply to each E175 Removed Aircraft and, at the end of the applicable Wind-Down Period for such aircraft, United shall pay Contractor the Wind-Down Expenses relating to each E175 Removed Aircraft.
3
(ii) With respect to any of the Contractor purchased 2015 New Aircraft, at any time and from time to time following the second anniversary of the In-Service Date for any such aircraft, United shall have the right, in its sole discretion, to remove from this Agreement any or all of such aircraft as provided in this Section 2.4 (b) (ii) by delivering a 2.4(b) Notice to Contractor, which 2.4(b) Notice shall specify the specific aircraft to be removed (each such removed aircraft, an E175 2015 New Aircraft Removed Aircraft ) and a Termination Date for each such aircraft not earlier than ninety (90) days following the date of such 2.4(b) Notice (it being understood that such notice may be delivered prior to such second anniversary provided that any such Termination Date may only occur on or after such second anniversary). For clarification purposes, Covered Aircraft that are not the subject of a 2.4(b) Notice shall remain subject to the terms of this Agreement (including this Section 2.4 ). Subject to Section 8.4(f) , following the delivery of a 2.4(b) Notice, the provisions of Section 8.3(b) shall apply to each E175 2015 New Aircraft Removed Aircraft and, at the end of the applicable Wind-Down Period for such aircraft, (i) the provisions of Section 10.1 shall apply to each E175 2015 New Aircraft Removed Aircraft that is owned or leased by Contractor, other than any such aircraft leased from United, except that United must exercise the Call Option with respect to such aircraft, (ii) United shall pay Contractor the Wind-Down Expenses relating to each E175 2015 New Aircraft Removed Aircraft and (iii) United shall pay to Contractor the ERT Margin Payment for each E175 2015 New Aircraft Removed Aircraft; provided that, notwithstanding clause (i) above, Contractor shall have the right to retain, and United shall then not have the right or obligation to acquire, any or all E175 New Aircraft Removed Aircraft upon written notice by Contractor to United exercising such right to retain within thirty (30) days of Contractors receipt of the 2.4(b) Notice; provided further that the specific 2015 New Aircraft Removed Aircraft retained by Contractor, if any, shall be those aircraft with the latest Termination Dates as set forth in the relevant 2.4(b) Notices.
4. |
Section 3.3(a) of the Agreement is hereby deleted in its entirety and replaced with the following if United exercises its right to purchase the Block 1 of the 2015 New Aircraft (it being acknowledged that no payment for Pilot Training Expenses will be due Contractor if Contractor purchases Block 1 of the 2015 New Aircraft): |
Pilot Training Expenses. United shall pay Contractor an amount equivalent to [***] per E175 Covered Aircraft with Aircraft Numbers 1 through 30 (as set forth on Schedule 1 to the Agreement) for initial pilot training expenses (such expenses, the Initial E175 Pilot Training Expenses) payable upon the Actual In-Service Date of each aircraft to Contractor; provided that if either United or Contractor negotiates a cost of E175 simulator use by Contractor that is different than [***] per hour, then the [***] amount set forth above shall be adjusted accordingly. United shall pay Contractor an amount equivalent to [***] per Block 1 of the 2015 New Aircraft if United purchases the Covered Aircraft. For the avoidance of doubt, United shall not be obligated to pay the Initial E175 Pilot Training Expenses more than one (1) time for any particular hull.
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5. |
The parties agree to continue their good faith negotiations to amend and restate Section 3.4(a)(iii) of the Agreement, and to reach mutually agreed rate adjustments associated with such restated provision not later than October 30, 2015 (it being acknowledged that pending such rate adjustment agreement which shall be documented in a subsequent written amendment by and between the parties, it is anticipated that Section 3.4 (a) (iii) shall be revised as follows: |
with respect to the E175 Covered Aircraft and CRJ Covered Aircraft, baggage handling claims, repairs and delivery costs related to Uncontrollable Delays, Uncontrollable Cancellations, Controllable Delays, and Controllable Cancellations and passenger-related interrupted trip costs (including hotel, meal, and ground transportation vouchers) related to Uncontrollable Delays and Uncontrollable Cancellations; provided that, for avoidance of doubt, Contractor is responsible for all passenger related interrupted trip costs (hotel, meal, and ground transportation vouchers) for all Controllable Delays and Controllable Cancellations).
6. |
Section 3.6(b)(iii)(A)(8) of the Agreement is hereby deleted in its entirety and replaced with the following: |
the actual and reasonable out-of-pocket costs incurred by Contractor in order for the E175 Covered Aircraft to comply with outstanding airworthiness directives issued by the FAA applicable to the E175 Covered Aircraft that by their terms require compliance during the Term; provided that United shall pay to Contractor (w) [***] per E175 Covered Aircraft Numbers 1 through and including 30 per month toward the costs of compliance with airworthiness directives, (x) the excess above [***] of the cost of parts required to comply with any single airworthiness directive in respect of a single E175 Covered Aircraft Numbers 1 through and including 30, (y) the excess above [***] of the cost of parts and direct out-of-pocket costs for third-party labor, in each case required to comply with any single airworthiness directive in respect of a single E175 Covered Aircraft Numbers 1 through and including 30 and (z) the excess above [***] of the cost of parts and direct out-of-pocket costs for third-party labor required to comply with any single airworthiness directive in respect of a single 2015 New Aircraft, provided that, for avoidance of doubt, clause (z) applies only if Contractor purchases the 2015 New Aircraft and such clause (z) would not apply to Block 1 of the 2015 New Aircraft if United purchases such aircraft; provided further, that Contractor shall use its reasonable commercial efforts to minimize all costs described in this Section3.6(b)(iii)(A)(8);
7. |
Section 3.6(b)(iii)(A)(9) of the Agreement is hereby deleted in its entirety and replaced with the following: |
only with respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for the repair and/or replacement of non-expendable parts pursuant to the Parts Support Agreement. The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and
5
agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt, the terms set forth in the foregoing provision will not apply to Block 2 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer;
8. |
Section 3.6(b)(iii)(A)(10) of the Agreement is hereby deleted in its entirety and replaced with the following: |
only with respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for the maintenance of engines pursuant to the Engine Maintenance Support Agreement. The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt, the terms set forth in the foregoing provision will not apply to Block 2 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer;
9. |
Section 3.6(b)(iii)(A)(11) of the Agreement is hereby deleted in its entirety and replaced with the following: |
only with respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for Airframe Heavy Maintenance, the aircraft cleaning functions to be completed at C Check intervals and any associated ferry costs pursuant to the Airframe Heavy Maintenance Support Agreement. The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt, the terms set forth in the foregoing provision will not apply to Block 2 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer;
10. |
Section 3.6(b)(iii)(A)(12) of the Agreement is hereby deleted in its entirety and replaced with the following: |
only with respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for the maintenance of landing gear pursuant to the Landing Gear Support Agreement.
6
The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt, the terms set forth in the foregoing provision will not apply to Block 2 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer;
11. |
Section 3.6(b)(iii)(A)(13) of the Agreement is hereby deleted in its entirety and replaced with the following: |
only with respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for the maintenance of APUs pursuant to the APU Support Agreement. The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt, the terms set forth in the forgoing provision will not apply to Block 2 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer;
12. |
Section 3.6(b)(iii)(A)(14) of the Agreement is hereby deleted in its entirety and replaced with the following: |
pursuant to Section 4.6(b) towing expenses incurred by Contractor with respect to the excess, if any, of the number of Accommodating Aircraft Movements during such month over the number calculated pursuant to Section 4.6(b)(y) ; and
13. |
Article III is hereby amended to add a new subsection 3.6(b)(iii)(A)(15), as follows: |
only with respect to the 2015 New Aircraft, the costs described in Section 3.7(c) of the Agreement, as amended in this Amendment.
14. |
Article III is hereby amended to add a new subsection 3.7 ( Certain Adjustments of Compensation for Carrier Controlled Costs ) as follows: |
3.7 Certain Adjustments of Compensation for Carrier Controlled Costs if Contractor purchases any of the 2015 New Aircraft.
(a) |
Except as otherwise expressly provided in this Section 3.7, the Compensation for Carrier Controlled Costs set forth on Table 2 of Schedule 2A and Table 4 of Schedule 2A as of the Effective Date shall not be adjusted. |
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(b) |
The financing transaction for each of the 2015 New Aircraft will take the form of a 4(a)(2) private Enhanced Equipment Trust Certificate (EETC) issuance. |
(1) |
The Schedule 2A ownership rate payable by United for each of the 2015 New Aircraft under the Agreement will match the principal and interest due under the EETC transaction, including any interest due prior to the delivery of an aircraft, and the upfront fee and commitment fee related to any liquidity facility. Without limiting any of Uniteds rights or remedies under this Agreement, if required by the financing documentation United will pay all, or a portion of, the ownership rate and related amounts to a party other than Contractor subject to documentation acceptable to United relating thereto. |
(2) |
Contractor and United will use commercially reasonable efforts to find an equitable solution if collateralization of a depositarys interest obligation is required. For the avoidance of doubt a delayed draw option may be mutually agreed as an alternative. |
(3) |
Generally the structural decisions required to complete the issuance will be a joint effort of Contractor and United and when affecting the Schedule 2A ownership rate payable by United for each of the 2015 New Aircraft, such structural decisions will be mutually agreed. |
(4) |
Unless otherwise agreed between the parties the structure will include three tranches. The A (first) and B (second) tranches will be purchased by non-United entities with United purchasing the C (third) tranche. The following conditions will apply unless mutually agreed otherwise by the parties: |
a. |
The advance, coupon, term, amortization profile and liquidity facility economics are subject to Uniteds prior written approval. |
b. |
United will have the right to purchase the more senior certificates at par under default events customary with EETC transactions. In addition, United will have this purchase right under a termination of the Agreement by United due to a material breach of the Agreement by Contractor including, but not limited to, Sections 8.2(a), 8.2(b), 8.2(d), and 8.2(f) of the Agreement. |
c. |
In the event of United purchasing all of the more senior certificates as contemplated in the second sentence of paragraph (4)b above, United will also have the right to purchase the Contractor initial investment in the 2015 New Aircraft at an amount representing the unamortized balance at the time of such purchase assuming the initial investment amortizes on a straight line basis over a 12 year term plus any unamortized airworthiness directive expense balance (provided that any airworthiness |
8
directive expense balance shall (i) be limited to the cost of parts and direct out-of-pocket costs for third-party labor required to comply with such airworthiness directive, (ii) include only those airworthiness directives in respect of a single aircraft whose initial cost determined in accordance with clause (i) exceeds [***], and (iii) use an amortization period not greater than seven years). |
(5) |
Unless otherwise agreed by United in writing, Contractor will contribute [***] USD toward the purchase price of each of the 2015 New Aircraft which amount will be adjusted based upon the actual purchase price of an aircraft less the amount of debt funded, including the C tranche, for such aircraft. |
(c) |
United will reimburse Contractor for the following actual reasonable costs in accordance with Section 3.6(b)(iii)(A)(15): |
(1) |
Bankers fees not to exceed [***] (or other amount as mutually agreed) of the principal value of the bonds issued to investors other than those bonds purchased by United, such banks and the allocation of fees across the banks to be mutually agreed, plus Bankers reasonable out of pocket expenses in connection with the engagement. |
(2) |
Investors legal expenses. For the avoidance of doubt, Uniteds legal expenses will be for its account. |
(3) |
Fees payable to appraisers and [***] of the rating agency fees, subject to such appraisers being approved by United in writing prior to engagement. |
For the avoidance of doubt, legal expenses for the representation of Contractor, and [***] of the rating agency fees will be for Contractors account. Unless otherwise agreed with United, a definitive agreement with investors must be reached by Contractor no later than November 15, 2015. Any extension beyond this date will be subject to Uniteds prior written consent at the sole discretion of United. Additionally United and Contractor will discuss the continued viability of the above proposed Contractor transaction on or prior to the 5th day of each month until such time the definitive documentation is in place or November 15, 2015, subject to a potential extension pursuant to the prior sentence. If during a monthly discussion United reasonably concludes that the Contractor transaction is not viable for any or all of the 2015 New Aircraft, then Contractor will cooperate to assist United to source an alternative form of financing which may include, but not require, United to purchase and own the 2015 New Aircraft (it being acknowledged and agreed that in such event (or, separately, in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer), Block 2 of the 2015 New Aircraft will be deemed subject to the provisions of this Amendment applicable to Block 1 of the 2015 New Aircraft concurrent with Uniteds purchase of each of the 2015 New Aircraft).
9
15. |
Section 4.1(b) of the Agreement is hereby amended to add the following language at the end of such subsection: |
Without limiting any of Contractors or Parents obligations (or Uniteds remedies) under the Agreement as amended by the Amendment, Contractor and Parent (i) will ensure that any reductions to Uniteds Scheduled Flights due to lack of crew availability are no less favorable to United than those that are proportional to flight reductions made by Contractor to Contractors regional air services for other carriers operating fleet types with pilots that are trained to operate Embraer aircraft in the same period due to lack of crew availability and (ii) will each take commercially reasonable efforts to hire crews to support Uniteds Scheduled Flights in the same proportion as Contractor and Parent are taking with respect to Contractors regional air services for other carriers.
16. |
Section 4.2 of the Agreement is hereby amended to add the following language at the end of such subsection: |
Without limiting the foregoing, Contractor and its subcontractors shall abide by the requirements of 41 CFR §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a), which regulations (x) prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin, and (y) require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability.
17. |
Section 4.8 of the Agreement is hereby deleted in its entirety and replaced, with the following new: |
Emergency Response
Contractor shall adopt Uniteds Emergency Response Plan for aircraft accidents or incidents and shall be responsible for Uniteds direct costs resulting from Uniteds management of emergency response efforts on Contractors behalf. In the event of an accident or incident involving a Covered Aircraft or Scheduled Flight, United will have the right, but not the obligation, exercised in Uniteds sole discretion, to manage the emergency response efforts on behalf of Contractor with full cooperation from Contractor. Contractor shall be liable for and will indemnify, defend and hold harmless United, Uniteds Parent, their respective subsidiaries and their respective directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, fines, penalties, costs and expenses, including but not limited to, reasonable attorneys fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to or recoverable from United, Uniteds Parent, their respective subsidiaries or their respective directors, officers, employees or agents arising out
10
of, connected with, or attributable to any act, error, omission, operation, performance or failure of performance of United, regardless of any negligence whether it be active, passive or otherwise on the part of United (but excluding the gross negligence or willful misconduct of United or its directors, officers, agents or employees), which in any way relates to Uniteds provision of post-accident or post-incident emergency response management efforts. The provisions of the foregoing indemnification obligation shall survive the termination of this Agreement for a period of seven years.
18. |
Section 4.14 of the Agreement is hereby deleted in its entirety and replaced with the following: |
Code Share Limitation .
As of the date of this Agreement, but subject to Contractors existing contractual codeshare agreements as in effect on the Effective Date, Contractor represents that it does not plan, nor will it, operate pursuant to a marketing or code share relationship in a hub operation with any party other than United at the following airports during the Term CLE, EWR, IAH, DEN, LAX, SFO, ORD, IAD or SEA. Contractor may, however, fly to aforementioned airports under codeshare or marketing relationships from another carriers hub (other than from aforementioned airports) as a spoke service. In the event that Contractor acquires another entity during the course of this agreement with marketing or codeshare operations at any of the aforementioned airports, United agrees to allow Contractor to continue operations at such airports at levels of operations consistent with the acquire& s right of operation at the time of acquisition. In addition, Contractor will use commercially reasonable efforts to amend its existing contractual commitments to provide for the codeshare limitations set forth in this Section 4.14. If Contractor experiences a shortage of flight crews prior to the Actual Delivery Date of any 2015 New Aircraft and affecting the operation of any E175 Covered Aircraft, Contractor represents and warrants that it will hire and have available flight crews to provide Regional Airline Services using E175 Covered Aircraft for United prior to hiring and making flight crews available to operate regional service for any airline other than United with which Contractor has entered into a marketing, code share or regional airline services agreement after the execution of this Amendment. Contractor represents and warrants that it shall not use flight crews operating E175 Covered Aircraft for United to provide regional airline services to support any airline other than United during the Term of this Agreement, subject to Contractors flight crew collective bargaining agreements.
19. |
Section 4.19 of the Agreement is hereby deleted in its entirety and replaced, with the following: |
4.19 Environmental
(a) Definitions .
11
(i) The term Environmental Laws means all applicable federal, state, local and foreign laws and regulations, guidance documents and policy statements of the Centers for Disease Control, the Occupational Health and Safety Administration, the Department of Transportation, and the Federal Aviation Administration, airport or United rules, and any other applicable regulations, policies, or lease requirements relating to the prevention of pollution, protection of the environment or occupational health and safety, or remediation of environmental contamination, including, without limitation, laws, regulations and rules relating to emissions to the air, discharges to surface and subsurface soil and waters, regulation of potable or drinking water, the use, storage, release, disposal, transport or handling of Hazardous Materials, protection of endangered species, and aircraft noise, vibration, exhaust and over flight.
(ii) The term Hazardous Materials means any substances, whether solid, liquid or gaseous, which are listed and/or regulated as hazardous, toxic, or similar terminology under any Environmental Laws or which otherwise cause or pose threat or hazard to human health, safety or the environment, including, but not limited to, petroleum and petroleum products.
(b) Contractor Obligations .
(i) Contractor shall conduct its operations in a prudent manner, taking reasonable preventative measures to avoid liabilities under any Environmental Laws or harm to human health or the environment, including, without limitation, measures to prevent unpermitted releases of Hazardous Materials to the environment, adverse environmental impacts to on-site or off-site properties and the creation of any public nuisance. If, in the course of conducting services under this Agreement, Contractor encounters adverse environmental conditions that could reasonably be expected to give rise to liability for United under any Environmental Laws or which otherwise could reasonably be expected to result in harm to human health or the environment, Contractor shall promptly notify United of such conditions.
(ii) Contractor shall, at its own expense, conduct its operations in compliance with applicable Environmental Laws, including obtaining any needed permits or authorizations for Contractors operations. If United provides any information, instruction, or materials to Contractor relating to its obligations under any Environmental Laws, Contractor agrees that this shall not in any way relieve Contractor of its obligation to comply with Environmental Laws. Contractor further agrees that it shall otherwise preserve the proprietary nature of any such information that is identified by United as proprietary and confidential and shall use its commercially reasonable efforts to ensure that the information is not disclosed to any third parties without first obtaining the written consent of United.
(iii) Contractor shall use its commercially reasonable efforts to perform its services under this Agreement so as to minimize the unnecessary generation of waste materials, including consideration of source reduction and re-use or recycling options, and coordination with United on a cabin service recycling program; provided that United will reimburse Contractor for any reasonable and documented incremental
12
expense associated with complying with any cabin service recycling program requested by United. If requested by United, Contractor shall replace specific products used in its operations with less toxic products, as long as there is a reasonable replacement available at a similar cost, or if the product is not at a similar cost, provide United the option to agree to pay the difference. If requested by United, Contractor will undertake reasonable efforts to provide quantitative data on materials recycled and waste disposed of to facilitate coordination and enhancement of cabin service recycling where feasible. Contractor shall ensure that any waste materials generated in connection with the services performed by Contractor under this Agreement are managed in accordance with all applicable Environmental Laws, with Contractor assuming responsibility as the legal generator of such wastes; provided, however, this provision does not apply should United or another vendor of United be the entity who has, in fact, independently generated the wastes.
(iv) For any leased areas or other equipment that are jointly used or operated by Contractor and United (and/or other United contractors), Contractor shall use its commercially reasonable efforts to coordinate its activities with United and/or United contractors and otherwise perform such activities to ensure compliance with applicable Environmental Laws.
(v) Except for deminimis amounts of Hazardous Materials which are immediately and fully remediated to pre-existing conditions, Contractor shall promptly notify United of any spills or leaks of Hazardous Materials arising out of Contractors provision of services under this Agreement, and, if requested, shall provide copies to United of any written reports provided to any governmental agencies and airport authorities under any Environmental Laws regarding same. Contractor shall promptly undertake all reasonable commercial actions to remediate any such spills or leaks to the extent Contractor is required to do so by applicable Environmental Laws, by the relevant airport authority, or in order to comply with a lease obligation. In the event that Contractor fails to fulfill its remediation obligations under this paragraph and United may otherwise be prejudiced or adversely affected (such as involving United leased property), United may undertake such actions as are reasonable at the cost and expense of Contractor. Such costs and expenses shall be promptly paid upon Contractors receipt of a written request for reimbursement for them by United.
(vi) Contractor shall promptly provide United with written copies of any notices of violation issued or other claims from a third party asserted pursuant to Environmental Laws or associated with a potential release of Hazardous Materials and related to or associated with the provision of services by Contractor under this Agreement. Contractor shall promptly undertake all actions necessary to resolve such matters, including, without limitation, the payment of fines and penalties, and promptly addressing any noncompliance identified; provided, however, that Contractor may contest any notice of violation or other alleged violation and defend any claim that it believes is untrue, improper or invalid. In the event that Contractor fails to fulfill its obligations under this paragraph and United may otherwise be prejudiced or adversely affected, United may undertake such actions as are reasonable or legally required at the
13
cost and expense of Contractor. Such costs and expenses shall be promptly paid upon Contractors receipt of a written request for reimbursement for them by United.
(vii) If requested by United upon Uniteds reasonable suspicion of environmental noncompliance, Contractor shall retain a third party, at Contractors sole expense, to conduct an environmental compliance audit of Contractors activities and/or an environmental site assessment. If, pursuant to such audit, Contractor is found to have been in material compliance with the applicable provisions of this Agreement, then United shall reimburse Contractor for its reasonable costs actually incurred to obtain such audit. Contractor will provide United with the draft audit report, provide United the ability to comment on the draft audit report, and will promptly use its commercially reasonable efforts to address any noncompliance or liability identified in any such report.
(viii) In the event that Contractor Services include providing bulk (non-bottled) potable water for crew or passenger consumption, Contractor shall ensure compliance with the Aircraft Drinking Water Regulation, FDA requirements, and other similar applicable laws (collectively, the Drinking Water Requirements), including without limitation using its commercially reasonable efforts to ensure all water handling equipment is properly and regularly disinfected and kept in sanitary condition. If Contractor relies upon another contractor to load water onto its aircraft or to maintain water handling equipment, it shall inquire with such contractors to ensure they meet these Drinking Water Requirements as well. Contractor shall immediately notify United if it becomes aware of practices or conditions that may negatively impact potable water quality, regardless of the provider or the source of such potable water (including whether such source is an airport, ground handler or aircraft water system). Contractor shall maintain records relating to its compliance with Environmental Laws under this Agreement for the longer of three (3) years or such period of time as is required by Environmental Laws. Contractor shall, at the request of United and with reasonable advance notice, provide United with reasonable access to Contractors operations, documents, and employees for the sole purpose of allowing United to assess Contractors compliance with its obligations with this Section 4.19, including responding to reasonable information requests. Upon the termination of operations at a space used to support the provision of Contractor Services under this Agreement, Contractor shall use its commercially reasonable efforts to ensure the removal and proper management of any and all Hazardous Materials associated with Contractors operations (including its subcontractors) and will comply with any other applicable Environmental Laws applicable to the provision of Contractor Services.
(ix) Contractor has reviewed Uniteds Environmental Commitment Statement (found at www.united.com/ecoskies) and agrees to use reasonable efforts to cooperate with United in connection with these commitments in effect as of the date hereof and in responding to reasonable information requests.
(x) Contractor shall be responsible for and will indemnify, defend, and hold harmless United, including its officers, agents, servants and employees, from and against any and all claims, liabilities, damages, costs, losses, penalties, and judgments,
14
including costs and expenses incident thereto under Environmental Laws or due to the release of a Hazardous Material, which may be suffered or incurred by, accrue against, be charged to, or recoverable from United or its officers, agents, servants and employees arising out of an act or omission of Contractor (or its subcontractor) related to Contractors provision of services under this Agreement, excluding willful misconduct, or the gross negligence, of United. Notwithstanding anything to the contrary set forth in this Agreement, such damages may include the payment of consequential, special or exemplary damages for claims under Environmental Laws or due to the release of Hazardous Materials to the extent an applicable lease agreement, sublease or other similar agreement requires the payment of such damages. Any indemnification claims arising under this Section 4.19 shall be administered pursuant to the procedures set forth in Section 7.3 hereto.
(xi) All notices to be provided by Contractor to United under this Section 4.19 shall be provided as indicated in Section 11.2 of this Agreement, with a copy to Managing DirectorEnvironmental Affairs, United Airlines, Inc., 233 South Wacker Drive-WHQSE, Chicago, IL 60606.
20. |
Article IV is hereby amended to add a new subsection 4.25 (Ground Support Equipment), as follows: |
4.25 Ground Support Equipment (GSE)
At Uniteds direction, and to the extent permitted by applicable federal law and regulations, mainline ground support equipment (GSE) and GSE processes shall be used in connection with Contractors performance of Regional Airline Services; provided that such GSE and GSE processes shall be modified to be compatible with the Covered Aircraft if necessary, such determination to be made by United.
21. |
Article IV is hereby amended to add a new subsection 4.26 (Ozone Monitoring), as follows: |
4.26 Ozone Monitoring
Contractor agrees to mitigate the risk of passenger ozone exposure on the E175 Covered Aircraft and CRJ Covered Aircraft through the use of a dispatcher product that detects the presence of ozone and adjusts to a higher altitude when ozone is absent. All costs incurred to achieve this mitigation shall be borne by Contractor. Product is to be installed not later than November 30, 2015.
22. |
Section 7.3 is hereby deleted in its entirety and replaced, with the following new Section 7.3: |
7.3 Indemnification Claims
A party (the Indemnified Party ) entitled to indemnification from another party under the terms of this Agreement (the Indemnifying Party ) shall provide the Indemnifying Party with prompt written notice (an Indemnity Notice ) of any third
15
party claim or other claim which the Indemnified Party believes gives rise to a claim for indemnity against the Indemnifying Party hereunder. Notwithstanding the foregoing, the failure of an Indemnified Party to promptly provide an Indemnity Notice shall not constitute a waiver by the Indemnified Party to any right to indemnification or otherwise relieve such Indemnifying Party from any liability hereunder unless and only to the extent that the Indemnifying Party is materially prejudiced as a result thereof, and in any event shall not relieve such Indemnifying Party from any liability which it may have otherwise than on account of this Article VII . With respect to third party claims, the Indemnifying Party shall be entitled, if it accepts financial responsibility for the third party claim, to control the defense of or to settle any such third party claim at its own expense and by its own counsel; provided that no settlement by the Indemnifying Party of such a claim will be binding on the Indemnified Party for purposes of the indemnification provisions hereof without the prior written consent of such Indemnified Party to such settlement, which consent may not be unreasonably withheld, conditioned or delayed. The Indemnified Party shall provide the Indemnifying Party with such information as the Indemnifying Party shall reasonably request to defend any such third party claim and shall otherwise cooperate with the Indemnifying Party in the defense of any such third party claim. Except as set forth in this Section 7.3, no settlement or other compromise or consent to a judgment by the Indemnified Party with respect to a third party claim as to which the Indemnifying Party is asserted to have an indemnity obligation hereunder will be binding on the Indemnifying Party for purposes of the indemnification provisions hereof without the prior written consent of such Indemnifying Party to such settlement, which consent may not be unreasonably withheld, conditioned or delayed, it being agreed however that it shall be reasonable for the Indemnifying Party to withhold or delay its consent if the Indemnifying Party reasonably asserts that the claim is not fully covered by the indemnity provided hereunder, and the entering into of any settlement or compromise or the consent to any judgment in violation of the foregoing shall constitute a waiver by the Indemnified Party of its right to indemnity hereunder to the extent the Indemnifying Party was prejudiced thereby. Any Indemnifying Party shall be subrogated to the rights of the Indemnified Party to the extent that the Indemnifying Party pays for any loss, damage or expense suffered by the Indemnified Party hereunder. If the Indemnifying Party does not accept financial responsibility for the third party claim or fails to defend against the third party claim that is the subject of an Indemnity Notice within thirty (30) days of receiving such notice (or sooner if the nature of the third party claim so requires), or otherwise contests its obligation to indemnify the Indemnified Party in connection therewith, the Indemnified Party may, upon providing written notice to the Indemnifying Party, pay, compromise or defend such third party claim without the prior consent of the (otherwise) Indemnifying Party. In the latter event, the Indemnified Party, by proceeding to defend itself or settle the matter, does not waive any of its rights hereunder to later seek reimbursement from the Indemnifying Party. With respect to all other claims, the Indemnifying Party shall promptly make payment of such claim upon receipt of reasonably sufficient evidence supporting such claim; provided, that if the Indemnifying Party in good faith disputes all or part of its
16
obligation to indemnify the Indemnified Party hereunder or the amount involved, the senior management of each party shall meet to discuss and attempt to resolve such dispute between the parties and, if such dispute is not resolved within forty-five (45) days of such claim being made, then the parties may pursue other remedies.
23. |
Section 10.4 of the Agreement is hereby deleted and replaced with the following: |
A. Growth Aircraft
United shall have the right in its sole discretion at any time and from time to time during the Term to amend Table 1 of Schedule 1 unilaterally to increase the number of E175 Covered Aircraft (any such additional aircraft, the Growth Aircraft ) utilized by Contractor for Regional Airline Services (such right, the Growth Aircraft Option ); provided that the following provisions shall apply:
(a) |
in order to exercise the Growth Aircraft Option, United must provide Contractor with written notice of Uniteds election of the Growth Aircraft Option (the Growth Aircraft Option Notice ). Once the Growth Aircraft Option Notice has been issued, the Parties shall mutually agree on in-service dates for such aircraft, such date to be at least 180 days after the date of the Growth Aircraft Option Notice; |
(b) |
the Growth Aircraft shall be of an aircraft type equivalent to the aircraft type set forth on Schedule 1 (or an acceptable substitute aircraft agreed to by United and Contractor); |
(c) |
the maximum number of Growth Aircraft shall be thirty-five (35); |
(d) |
United shall pay Contractor in respect of the Growth Aircraft the Compensation for Carrier Controlled Costs as set forth on Schedule 2A . In addition, United shall pay to Contractor pilot training expenses equivalent to those set forth in Section 3.3(a) ; |
(e) |
if a Growth Aircraft is owned or leased by United, then prior to such aircraft entering Regional Airline Services on the date set forth in the Growth Aircraft Option Notice, Contractor shall sublease such aircraft from United pursuant to a sublease in the form of the United standard form of sublease; provided that the rent under such sublease shall be abated, except in the circumstances of such sublease where the rent is no longer abated, in which case such rent shall be payable as provided in such sublease; and |
(f) |
if a Growth Aircraft is neither owned nor leased by United, then prior to such aircraft entering Regional Airline Services on the date set forth in the Growth Aircraft Option Notice, Contractor shall sublease such aircraft from its owner or lessee, as directed by United, pursuant to a sublease in the form of the United standard form of sublease or another form of sublease acceptable to each of United, Contractor and such other party; provided that the rent under such |
17
sublease shall be treated as a Pass-Through Cost for purposes of this Agreement, except in circumstances where the rent would no longer be abated under such sublease, in which case such rent shall not be reimbursed or paid by United hereunder; and provided further that the terms and conditions of such sublease, including without limitation the rent thereunder, shall be acceptable to United in its sole discretion and provided further that in no case shall such lease or sublease extend for a term that is in excess of the term of this Agreement; and provided further that United shall assume any such lease or sublease, at its expense, in the event Contractor terminates this Agreement due to a breach by United. |
B. New Aircraft
Without limiting any of Uniteds rights hereunder in respect of any Growth Aircraft, the parties may agree at any time and from time to time during the Term to amend Schedule 1 to increase the number of E175 Covered Aircraft as a result of Uniteds decision to award or induct new aircraft into the fleet (any such additional aircraft, the New Aircraft) utilized by Contractor for Regional Airline Services; provided that the following provisions shall apply, except as otherwise mutually agreed at the time of such addition of aircraft:
(a) |
the Parties shall mutually agree on in-service dates for such New Aircraft; |
(b) |
The New Aircraft shall be of an aircraft type equivalent to the aircraft type set forth on Schedule 1 (or an acceptable substitute aircraft mutually agreed to by United and Contractor); |
(c) |
United shall pay Contractor in respect of the New Aircraft the Compensation for Carrier Controlled Costs as set forth in Schedule 2A (Table 4); and |
(d) |
if a New Aircraft is owned or leased by United, then prior to such aircraft entering Regional Airline Services on the Actual In-Service Date set forth in Schedule 1, Contractor shall sublease such aircraft from United pursuant to a sublease in the form of the United standard form of sublease; provided that the rent under such sublease shall be abated, except in the circumstances of such sublease where the rent is no longer abated, in which case such rent shall be payable as provided in such sublease. |
24. |
Article XI is hereby amended to add a new subsection 11.18 (Unauthorized Payments), as follows: |
11.18 Unauthorized Payments
(a) |
In connection with any performance under this Agreement, neither Contractor, nor any officer, employee, or agent of Contractor, will make any payment, or offer, promise, give or authorize any payment, of any money or other article of value, to any official, employee, or representative of United or any government official or representative, or to any person or |
18
entity doing business with United, in order either to obtain or to retain Uniteds business, or to direct Uniteds business to a third party, or to influence any act or decision of any employee or representative of United or any government official or representative to perform or to fail to perform his or her duties, or to enlist the aid of any third party to do any of the foregoing. |
(b) |
In connection with any performance under this Agreement, neither Contractor, nor any officer, employee, or agent of Contractor, will solicit or receive any amount of cash or negotiable paper, or any item, service or favor of value (a gift) from any present or prospective contractor, vendor or customer of United, or from anyone else with whom United does business, including any governmental official or representative, for or in connection with the obtaining or retaining any business of or with United. Contractor will refuse to accept all such gifts and, if received, will return such gifts to the donor. In all such cases Contractor will notify United promptly of such gift or offer thereof. If United deems it necessary, Contractor will turn over such gifts to United for further handling. |
(c) |
In connection with any performance under this Agreement, Contractor will at all times comply fully with all of the terms and provisions of the Foreign Corrupt Practices Act (15 U.S.C. §§ 78dd-1, et seq.) and any related or successor statute, regulation, or governmental directive regarding payments to foreign nationals or other persons or entities. |
(d) |
To the best of Contractors knowledge, Contractor hereby certifies and represents that no official, employee or agent of United has any significant financial or other pecuniary interest in the Contractors business enterprise or in the performance of this Agreement, and no inducements of monetary or other value were offered or given to any United officer, employee or agent, except as is stated in writing to the United official designated to sign this Agreement, prior to execution of this Amendment. Contractor further certifies and represents that no official, employee or agent of Contractor shall receive or has received any inducement of monetary or other value from any vendor or Contractor of United or has a significant ownership or other interest in a vendor or Contractor of United which is or could be perceived by a reasonable person as a conflict of interest, except as is stated in writing to the United official designated to sign this Agreement, prior to execution of this Amendment. |
(e) |
The parties agree incidental expenses incurred for business meetings, meals and other minor business related expenses shall not violate this Article XL |
25. |
Schedule 1 is hereby deleted in its entirety and replaced with the revised Schedule 1, attached hereto and incorporated herein by reference. |
19
26. |
Schedule lA is hereby deleted in its entirety and replaced with the revised Schedule lA attached hereto and incorporated herein by reference. |
27. |
Schedule 2A is hereby deleted in its entirety and replaced with the revised Schedule 2A attached hereto and incorporated herein by reference, which includes new Tables 1, Table 1A, 2, 3, and 4. |
28. |
Exhibit A of the Agreement is hereby amended by the addition of the following new definitions: |
New Aircraft is defined in Section 10.4 (b)
2015 New Aircraft is defined in Section 1 of that certain Second Amendment to the Agreement dated October 2, 2015 between the parties.
Block 1 of the 2015 New Aircraft - is defined in Section 1 of that certain Second Amendment to the Agreement dated October 2, 2015 between the parties.
Block 2 of the 2015 New Aircraft - is defined in Section 1 of that certain Second Amendment to the Agreement dated October 2, 2015 between the parties.
ERJ Margin Payment - means the product of the number of remaining calendar months, which may include a partial month, between the Termination Date and the Scheduled Exit Date as set forth on Schedule 1 for each E175 2015 New Aircraft Removed Aircraft multiplied by the Markup Amount for E175 Covered Aircraft set forth on Schedule 4 for B ¬Level of Performance.
E175 2015 New Aircraft Removed Aircraft is defined in Section 3 of that certain Second Amendment to the Agreement dated October 2, 2015 between the parties.
29. |
The parties agree as consideration for this Second Amendment to continue their good faith negotiations to amend and restate Exhibit G Catering Standards of the Agreement, and to reach mutually agreed rate adjustments associated with such restated Exhibit G not later than October 30, 2015. |
Except as otherwise specified herein, capitalized terms shall have the meanings ascribed to such terms in the Agreement. This Amendment may be executed in counterparts. Except as expressly amended in this Amendment, the Agreement will remain in full force and effect.
20
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
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By: |
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Name: |
Gerald Laderman |
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Title: |
Senior Vice President Finance and acting Chief Financial Officer | |||||
MESA AIR GROUP, INC. |
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By: |
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Name: |
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Title: |
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MESA AIRLINES, INC. |
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By: |
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Name: |
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Title: |
21
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
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By: |
||||||
Name: |
Gerald Laderman |
|||||
Title: |
Senior Vice President Finance and acting Chief Financial Officer | |||||
MESA AIR GROUP, INC. |
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By: |
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Name: |
||||||
Title: |
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MESA AIRLINES, INC. |
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By: |
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Name: |
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Title: |
22
SCHEDULE 1
Covered Aircraft
The following Table 1 shall apply to the E175 Covered Aircraft with Aircraft Number 1 through and including 45:
Aircraft Number |
Aircraft
|
Tail
|
MSN |
Actual
|
Actual
|
Scheduled
|
Scheduled
|
|||||||
01 | E175 | N87302 | 17000394 | 4/11/2014 | 6/15/2014 | 6/15/2019 | 5 years | |||||||
02 | E175 | N88301 | 17000388 | 3/26/2014 | 7/15/2014 | 7/15/2019 | 5 years | |||||||
03 | E175 | N87303 | 17000398 | 4/25/2015 | 7/15/2014 | 7/20/2019 | 5 years | |||||||
04 | E175 | N89304 | 17000406 | 6/16/2014 | 8/10/2014 | 8/10/2019 | 5 years | |||||||
05 | E175 | N93305 | 17000412 | 7/25/2014 | 8/19/2014 | 8/19/2019 | 5 years | |||||||
06 | E175 | N87306 | 17000414 | 7/25/2014 | 9/10/2014 | 9/10/2019 | 5 years | |||||||
07 | E175 | N84307 | 17000419 | 9/8/2014 | 9/20/2014 | 9/20/2019 | 5 years | |||||||
08 | E175 | N89308 | 17000422 | 9/11/2014 | 10/5/2014 | 10/5/2019 | 5 years | |||||||
09 | E175 | N86309 | 17000426 | 10/9/2014 | 10/26/2014 | 10/26/2019 | 5 years | |||||||
10 | E175 | N88310 | 17000427 | 10/16/2014 | 11/10/2014 | 11/10/2019 | 5 years | |||||||
11 | E175 | N86311 | 17000429 | 10/16/2014 | 11/20/2014 | 11/20/2019 | 5 years | |||||||
12 | E175 | N86312 | 17000432 | 11/6/2014 | 12/3/2014 | 12/3/2019 | 5 years | |||||||
13 | E175 | N89313 | 17000433 | 11/6/2014 | 12/18/2014 | 12/18/2019 | 5 years | |||||||
14 | E175 | N82314 | 17000436 | 11/20/2014 | 12/30/2014 | 12/30/2019 | 5 years | |||||||
15 | E175 | N89315 | 17000437 | 11/20/2014 | 1/6/2015 | 1/6/2020 | 5 years | |||||||
16 | E175 | N86316 | 17000438 | 12/4/2014 | 1/24/2015 | 1/24/2020 | 5 years | |||||||
17 | E175 | N89317 | 17000442 | 12/4/2014 | 2/12/2015 | 2/12/2020 | 5 years | |||||||
18 | E175 | N87318 | 17000443 | 12/16/2014 | 2/20/2015 | 2/20/2020 | 5 years |
23
19 | E175 | N87319 | 17000448 | 12/18/2014 | 3/5/2020 | 3/5/2020 | 5 years | |||||||
20 | E175 | N85320 | 17000454 | 2/26/2015 | 3/25/2015 | 3/25/2020 | 5 years | |||||||
21 | E175 | N89321 | 17000459 | 3/5/2015 | 4/7/2015 | 4/7/2020 | 5 years | |||||||
22 | E175 | N86322 | 17000465 | 4/9/2015 | 4/23/2015 | 4/23/2020 | 5 years | |||||||
23 | E175 | N85323 | 17000469 | 4/9/2015 | 5/6/2015 | 5/6/2020 | 5 years | |||||||
Aircraft
|
Aircraft
|
Tail
|
MSN |
Actual
|
Actual
|
Scheduled
|
Scheduled
|
|||||||
24 | E175 | N86324 | 17000471 | 4/16/2015 | 5/24/2015 | 5/24/2020 | 5 years | |||||||
25 | E175 | N88325 | 17000474 | 5/14/2015 | 6/4/2015 | 6/4/2020 | 5 years | |||||||
26 | E175 | N88326 | 17000478 | 5/21/2015 | 6/20/2015 | 6/20/2020 | 5 years | |||||||
27 | E175 | N88327 | 17000479 | 6/8/2015 | 7/2/2015 | 7/2/2020 | 5 years | |||||||
28 | E175 | N88328 | 17000480 | 6/11/2015 | 7/25/2015 | 7/25/2020 | 5 years | |||||||
29 | E175 | N88329 | 17000487 | 6/25/2015 | 8/10/2015 | 8/10/2020 | 5 years | |||||||
30 | E175 | N88330 | 17000488 | 6/29/2015 | 8/18/2015 | 8/18/2020 | 5 years | |||||||
31 (3) | E175 | |||||||||||||
32 (3) | E175 | |||||||||||||
33 (3) | E175 | |||||||||||||
34 (3) | E175 | |||||||||||||
35 (3) | E175 | |||||||||||||
36 (3) | E175 | |||||||||||||
37 (3) | E175 | |||||||||||||
38 (3) | E175 | |||||||||||||
39 (3) | E175 | |||||||||||||
40 (3) | E175 | |||||||||||||
41 (3) | E175 | |||||||||||||
42 (3) | E175 | |||||||||||||
43 (3) | E175 | |||||||||||||
44 (3) | E175 | |||||||||||||
45 (3) | E175 |
1 |
The delivery dates and in-service dates for all E175 Covered Aircraft with Aircraft Number 1 through and including 30 must satisfy the following conditions: |
24
(a) |
No later than one hundred and fifty (150) days prior to the Scheduled Delivery Date for any E175 Covered Aircraft with Aircraft Number 1 through and including 30 as set forth on Schedule 1A attached hereto (the Scheduled Delivery Date ), United shall inform Contractor of the dates that are likely to be selected as the Committed In-Service Date for each E175 Covered Aircraft with Aircraft Number 1 through and including 30, it being understood that (x) such communication from United to Contractor shall not be binding for purposes of selecting the actual Committed In-Service Date pursuant to clause (d) below, and (y) such dates shall be used by Contractor and United in anticipating aircraft available to schedule and with respect to any applicable Final Monthly Schedule. |
(b) |
Subject to the proviso to the first sentence of Section 2.1(a) of this Agreement, United shall provide a final notice of the actual delivery date of any E175 Covered Aircraft with Aircraft Number 1 through and including 30 (the Final Notice ) to Contractor no later than the earlier of (x) the date such aircraft is actually delivered to United or to Contractor pursuant to Section 10.7 , as the case may be, pursuant to the terms of the Embraer Purchase Agreement (the Actual Delivery Date ), and (y) the day following the completion of the final inspection of such aircraft, which notice shall determine the delivery date of the aircraft for purposes of this Schedule 1 (the Committed Delivery Date ), and which determination shall be confirmed in writing by the parties. |
(c) |
United shall use its commercially reasonable efforts to provide Contractor with notice regarding the delivery status of each E175 Covered Aircraft with Aircraft Number 1 through and including 30 from time to time in advance of the delivery of a Final Notice with respect to such E175 Covered Aircraft, including without limitation information relating to the commencement of the delivery inspection period, delays in delivery, or otherwise relating to the delivery of such aircraft. |
(d) |
Following the determination of the Committed Delivery Date for an E175 Covered Aircraft with Aircraft Number 1 through and including 30 pursuant to clause (b) above, Contractor shall inform United of a projected Actual In-Service Date for such aircraft (the Committed In-Service Date ), which shall be not later than the first to occur of (x) the 60 th day following the Committed Delivery Date and (y) the date set forth under the caption Scheduled In-Service Date for such aircraft on Schedule 1A attached hereto (as such Scheduled In-Service Date may be delayed by, and only to the extent such date is delayed by, a delay attributable to the manufacturer or by a delay due to an Act of God that continues for fewer than fifteen (15) days). |
(e) |
On the date that an E175 Covered Aircraft with Aircraft Number 1 through and including 30 becomes available to schedule under the provisions of this Agreement, such aircraft shall be deemed to have been placed into service hereunder (such date being the Actual In-Service Date for such aircraft). |
(f) |
As soon as practicable following the determination of the Actual Delivery Date and the Actual In-Service for an E175 Covered Aircraft with Aircraft Number 1 through and including 30 pursuant to clauses (c) and (e) above, the parties hereto shall revise Schedule 1 accordingly. |
25
(g) |
The scheduled exit date for any E175 Covered Aircraft (the Scheduled Exit Date ) for Aircraft Number 1 through and including 30 shall be the fifth (5 th ) anniversary of the Actual In-Service Date determined pursuant to clause (e) above, and the parties hereto shall further revise Schedule 1 accordingly. |
(h) |
Following the determinations in clauses (c), (e) and (g) above of the Actual Delivery Date, the Actual In-Service Date and the Scheduled Exit Date for an E175 Covered Aircraft with Aircraft Number 1 through and including 30, Contractor and United shall complete all missing information in this Schedule 1 with respect to such E175 Covered Aircraft with Aircraft Number 1 through and including 30, and the initial Schedule 1 attached hereto as of the Effective Date shall be deemed to have been amended and replaced by the Schedule 1 as revised pursuant to this clause (h) with respect to such E175 Covered Aircraft with Aircraft Number 1 through and including 30 without any further action by the parties hereto. |
2 |
The Scheduled Exit Dates set forth in the above table shall be adjusted from time to time to reflect any extension of the Term for any E175 Covered Aircraft with Aircraft Number 1 through and including 30 pursuant to Section 10.2 of this Agreement. |
3 |
The addition of 2015 New Aircraft is subject to the other provisions set forth in Sections 1 and 2 of the Second Amendment to the Agreement by and between the parties. In the event United purchases Block 1 of the 2015 New Aircraft, all of the provisions outlined in footnotes 1 and 2 shall apply and the Scheduled Term for each shall be approximately 4.5 years. In the event Contractor purchases any of the 2015 New Aircraft, the provisions outlined in clauses (e), (f), (g), and (h) of footnote 1 and the provisions in footnote 4 shall apply with respect to such 2015 New Aircraft, and the Scheduled Term for each shall be 12 years. |
4 |
In the event Contractor purchases any of the 2015 New Aircraft, the delivery dates and in-service dates for all 2015 New Aircraft must satisfy the following conditions (a), (b), (c) and (d), which are an amended and restated version of subsections (a) , (b), (c) and (d) of foot note 1: |
(a) |
No later than one hundred and fifty (150) days prior to the Scheduled Delivery Date for any 2015 New Aircraft with Aircraft Numbers 31 through and including 40, or as soon as practically possible for any 2015 New Aircraft with Aircraft Numbers 41 through and including 45, as set forth on Schedule 1A attached hereto, Contractor and United shall meet to discuss the dates that are likely to be selected as the Committed In-Service Date for each 2015 New Aircraft, it being understood that (x) such discussions shall not be binding for purposes of selecting the actual Committed In-Service Date pursuant to clause (d) below, and (y) such dates shall be used by Contractor and United in anticipating aircraft available to schedule and with respect to any applicable Final Monthly Schedule. |
(b) |
Ninety (90), sixty (60) and thirty (30) days prior to the Scheduled Delivery Date for each 2015 New Aircraft as set forth on Schedule 1A attached hereto, and reasonably from time to time thereafter, Contractor shall provide United with notice regarding the |
26
delivery status of such 2015 New Aircraft, including without limitation information relating to the commencement of the delivery inspection period (which notice is anticipated to be given no later than twenty (20) days prior to actual delivery date of such aircraft), delays in delivery, or otherwise relating to the delivery of such aircraft. |
(c) |
With respect to each 2015 New Aircraft, Contractor shall provide a Final Notice to United no later than the earlier of (x) the Actual Delivery Date, and (y) the Committed Delivery Date, and which determination shall be confirmed in writing by the parties. |
(d) |
Following the determination of the Committed Delivery Date for a 2015 New Aircraft pursuant to clause (c) above, the parties shall determine a Committed In-Service Date , which shall be not later than the first to occur of (x) the 60 th day following the Committed Delivery Date and (y) the date set forth under the caption Scheduled In-Service Date for such aircraft on Schedule lA attached hereto (as such Scheduled In-Service Date may be delayed by, and only to the extent such date is delayed by, a delay attributable to the manufacturer or by a delay due to an Act of God that continues for fewer than fifteen (15) days), and which determination shall be confirmed in writing by the parties. |
27
The following Table 2 and Table 3 shall apply to the CRJ Covered Aircraft:
Table 2
Aircraft Number |
Aircraft
|
Tail
|
CRJ Scheduled
|
CRJ
In-Service
|
||||
01 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
02 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
03 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
04 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
05 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
06 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
07 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
08 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
09 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
10 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
11 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
12 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
13 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
14 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
15 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
16 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
17 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
18 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
19 | CRJ700 | September 1, 2013 | September 1, 2013 | |||||
20 | CRJ700 | September 1, 2013 | September 1, 2013 |
Table 3
Aircraft Number |
CRJ Scheduled
|
Scheduled
|
||
01 | August 31, 2019 | 6 yrs 3 mos | ||
02 | August 31, 2019 | 6 yrs 3 mos | ||
03 | August 31, 2019 | 6 yrs 3 mos | ||
04 | August 31, 2019 | 6 yrs 3 mos | ||
05 | September 30, 2019 | 6 yrs 4 mos | ||
06 | September 30, 2019 | 6 yrs 4 mos | ||
07 | September 30, 2019 | 6 yrs 4 mos | ||
08 | September 30, 2019 | 6 yrs 4 mos | ||
09 | October 31, 2019 | 6 yrs 5 mos | ||
10 | October 31, 2019 | 6 yrs 5 mos | ||
11 | October 31, 2019 | 6 yrs 5 mos | ||
12 | October 31, 2019 | 6 yrs 5 mos | ||
13 | November 30, 2019 | 6 yrs 6 mos |
28
Aircraft Number |
CRJ Scheduled
|
Scheduled
|
||
14 | November 30, 2019 | 6 yrs 6 mos | ||
15 | November 30, 2019 | 6 yrs 6 mos | ||
16 | November 30, 2019 | 6 yrs 6 mos | ||
17 | December 31, 2019 | 6 yrs 7 mos | ||
18 | December 31, 2019 | 6 yrs 7 mos | ||
19 | December 31, 2019 | 6 yrs 7 mos | ||
20 | December 31, 2019 | 6 yrs 7 mos |
1 |
The CRJ Scheduled Exit Dates and Scheduled Term set forth in the above table shall be adjusted from time to time to reflect any extension of Term for any CRJ Covered Aircraft pursuant to Section 10.2 of this Agreement and to coincide with the schedule change date within Uniteds scheduling system most closely following any applicable exit date. |
2 |
Contractor shall provide United, not later than 90 days prior to each CRJ Scheduled Exit Date, with specific tail numbers identifying the CRJ Covered Aircraft to be terminated on such date. |
3 |
Upon the CRJ Scheduled Exit Date, the Term associated with each of the CRJ Covered Aircraft shall expire. |
29
SCHEDULE 1A
E175 Covered Aircraft Scheduled Delivery Dates and Scheduled In-Service Dates
Aircraft Number |
Scheduled
|
Scheduled
|
Target
In-Service
|
|||
01 | March 30, 2014 | July 31, 2014 | June 15, 2014 | |||
02 | April 30, 2014 | August 14, 2014 | July 15, 2014 | |||
03 | April 30, 2014 | August 14, 2014 | July 15, 2014 | |||
04 | June 30, 2014 | September 14, 2014 | August 15, 2014 | |||
05 | July 30, 2014 | September 30, 2014 | August 15, 2014 | |||
06 | July 30, 2014 | October 15, 2014 | September 15, 2014 | |||
07 | August 30, 2014 | October 31, 2014 | September 15, 2014 | |||
08 | August 30, 2014 | November 14, 2014 | October 15, 2014 | |||
09 | October 30, 2014 | December 15, 2014 | November 15, 2014 | |||
10 | October 30, 2014 | December 15, 2014 | November 15, 2014 | |||
11 | October 30, 2014 | January 14, 2014 | December 15, 2014 | |||
12 | November 30, 2014 | January 14, 2014 | December 15, 2014 | |||
13 | November 30, 2014 | February 14, 2015 | January 15, 2015 | |||
14 | November 30, 2014 | February 14, 2015 | January 15, 2015 | |||
15 | December 30, 2014 | March 17, 2015 | January 30, 2015 | |||
16 | December 30, 2014 | March 17, 2015 | February 15, 2015 | |||
17 | December 30, 2014 | March 17, 2015 | February 15, 2015 | |||
18 | February 28, 2015 | April 14, 2015 | March 15, 2015 | |||
19 | February 28, 2015 | April 14, 2015 | March 15, 2015 | |||
20 | March 30, 2015 | May 15, 2015 | April 15, 2015 | |||
21 | March 30, 2015 | May 15, 2015 | April 15, 2015 | |||
22 | April 30, 2015 | June 14, 2015 | May 15, 2015 | |||
23 | April 30, 2015 | June 14, 2015 | May 15, 2015 | |||
24 | May 30, 2015 | July 15, 2015 | June 15, 2015 | |||
25 | June 30, 2015 | August 14, 2015 | July 15, 2015 | |||
26 | June 30, 2015 | August 14, 2015 | July 15, 2015 | |||
27 | June 30, 2015 | September 14, 2015 | August 15, 2015 | |||
28 | July 30, 2015 | September 14, 2015 | August 15, 2015 | |||
29 | July 30, 2015 | October 15, 2015 | September 15, 2015 | |||
30 | June 30, 2015 | September 15, 2015 | August 18, 2015 | |||
31 | April 2016 | |||||
32 | May 2016 | |||||
33 | May 2016 | |||||
34 | June 2016 | |||||
35 | June 2016 | |||||
36 | July 2016 | |||||
37 | July 2016 | |||||
38 | August 2016 | |||||
39 | August 2016 |
30
40 | September 2016 | |||||
41 | December 2015 | |||||
42 | December 2015 | |||||
43 | December 2015 | |||||
44 | January 2016 | |||||
45 | February 2016 |
* |
Notwithstanding the date listed for this aircraft, Contractor agrees to use its best efforts to place this aircraft in service by its associated Target In-Service Date. |
31
SCHEDULE 2A
E175 Covered Aircraft Compensation for Carrier Controlled Costs
The following Table 1 shall apply per corresponding year to E175 Covered Aircraft Numbers 1 through 30 flown under this Agreement when Contractors ORD United Express flying represents fifty (50) percent or more of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the Actual In-Service Date for each E175 Covered Aircraft; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category 1 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for each
|
for
|
per aircraft
|
per aircraft per month AD payment
pursuant to
3.6(b)(iii)(A)(8)
|
||||||
2014
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2015
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2016
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2019
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2020
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2021
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
Jane 1, 2024
|
[***] | [***] | [***] | [***] | [***] | [***] |
1 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance.
32
Category 1 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for each
|
for
|
per aircraft
|
per aircraft per month AD payment
pursuant to
3.6(b)(iii)(A)(8)
|
||||||
Jane 1, 2025
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2026
|
[***] | [***] | [***] | [***] | [***] | [***] |
Effective as of September 20, 2014, the following Table 1A shall apply per corresponding year to E175 Covered Aircraft Numbers 1 through 30 flown under this Agreement when Contractors ORD United Express flying represents less than fifty (50) percent of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category 2 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for each
|
for
|
per aircraft
|
per aircraft per month AD payment
pursuant to
3.6(b)(iii)(A)(8)
|
||||||
September 20, 2014
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2015
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2016
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2019
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2020
|
[***] | [***] | [***] | [***] | [***] | [***] |
2 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance.
33
Category 2 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for each
|
for
|
per aircraft
|
per aircraft per month AD payment
pursuant to
3.6(b)(iii)(A)(8)
|
||||||
June 1, 2021
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2024
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2025
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2026
|
[***] | [***] | [***] | [***] | [***] | [***] |
The following Table 2 shall apply per corresponding year to Block 1 of the 2015 New Aircraft with Aircraft Numbers 31 through 40 in the event Contractor purchases the E175 Covered Aircraft flown under this Agreement and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft with Aircraft Numbers 31 through 40; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category 3 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for
|
Ownership
|
per aircraft
|
per aircraft in
|
||||||
April 2016
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018
|
[***] | [***] | [***] | [***] | [***] | [***] |
3 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement.
4 The parties agree to adjust the ownership rates in accordance with Section 3.7(b) of the Agreement, pursuant to the amortization schedule associated with the issuance of the above contemplated EETC.
34
Category 3 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for
interrupted
departure
|
Ownership
|
per aircraft in
month
|
per aircraft in
month
|
||||||
June 1, 2019
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2020
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2021
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2024
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2025
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2026
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2027
|
[***] | [***] | [***] | [***] | [***] | [***] |
The following Table 3 shall apply per corresponding year to Block 1 of the 2015 New Aircraft with Aircraft Numbers 31 through 40 in the event United purchases the E175 Covered Aircraft flown under this Agreement and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft with Aircraft Numbers 31 through 40; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category 5 | ||||||||||
Year
|
for each block hour
|
for each flight hour
|
for interrupted
|
per aircraft in
|
per aircraft in
|
|||||
April 2016
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2017
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2018
|
[***] | [***] | [***] | [***] | [***] |
5 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement.
35
Category 5 | ||||||||||
Year
|
for each block hour
|
for each flight hour
|
for interrupted
|
per aircraft in
|
per aircraft in
|
|||||
June 1, 2019
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2020
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2021
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2022
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2023
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2024
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2025
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2026
|
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2027
|
[***] | [***] | [***] | [***] | [***] |
The following Table 4 shall apply per corresponding year to Block 2 of the 2015 New Aircraft with Aircraft Numbers 41 through and including 45 and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft with Aircraft Numbers 41 through 45; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category 6 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for
interrupted
|
Ownership
|
per aircraft in
month
|
per aircraft in
month
|
||||||
December 2015
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2019
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2020
|
[***] | [***] | [***] | [***] | [***] | [***] |
6 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement.
7 The parties agree to adjust the ownership rates in accordance with Section 3.7(b) of the Agreement, pursuant to the amortization schedule associated with the issuance of the above contemplated EETC.
36
Category 6 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for
interrupted
|
Ownership
|
per aircraft in
month
|
per aircraft in
month
|
||||||
June 1, 2021
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2024
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2025
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2026
|
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2027
|
[***] | [***] | [***] | [***] | [***] | [***] |
37
Exhibit 10.10.5
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
FOURTH AMENDMENT TO THE CAPACITY PURCHASE
AGREEMENT
This Fourth Amendment (this Amendment ) to that certain Capacity Purchase Agreement, among United Airlines, Inc., a Delaware Corporation (United), Mesa Airlines, Inc., a Nevada Corporation (Contractor) and Mesa Air Group, Inc., a Nevada Corporation (Parent), dated as of August 29, 2013 (as previously amended by the parties thereto, the Agreement) is entered into by and between United, Contractor, and Parent and is effective as of November 13, 2015.
WHEREAS , the parties desire to amend the Agreement to add three (3) El 75 Covered Aircraft to the Agreement; and
WHEREAS , the parties desire to amend certain provisions of the Agreement as set forth in this Amendment and
NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt, sufficiency, and adequacy of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. |
Contractor and United agree to add three (3) New Aircraft (as such term is defined in Section l0.4.B of the Agreement) (such three (3) New Aircraft, referred to herein below as Block 3 of the 2015 New Aircraft. Block 3 of the 2015 New Aircraft shall be deemed an integral part of the 2015 New Aircraft (as such term is defined in that certain Second Amendment dated October 2, 2015 to the Agreement by and between the parties, the Second Amendment). The Block 3 of the 2015 New Aircraft are hereby added as Covered Aircraft under the Agreement, subject to the terms and conditions applicable to New Aircraft except as expressly provided otherwise in this Amendment In addition, the following shall apply: |
a. |
Subject to Section 2 of this Amendment, Contractor shall provide, deliver, and operate such 2015 New Aircraft as part of the Regional Airline Services it provides under the Agreement; |
b. |
The three (3) New Aircraft in Block 3 of the 2015 New Aircraft shall be referenced on Schedule 1, Schedule 1A, and Schedule 2A to the Agreement as El 75 Covered Aircraft with Aircraft Numbers 46 through and including 48; |
c. |
The three (3) New Aircraft in Block 3 of the 2015 New Aircraft shall be inducted into the Regional Airline Services on the schedule set forth in Schedule 1 (subject to such acceleration or other variation as United and Contractor may mutually agree in writing from time to time, each party acting reasonably, to meet each parties operational requirements); |
d. |
The term of the Agreement with respect to each respective New Aircraft in Block 3 of the 2015 New Aircraft, if such aircraft are purchased by Contractor, shall be for twelve years each; |
1
e. |
Contractor shall ensure that each respective New Aircraft in the Block 3 of the 2015 New Aircraft materially conform to Uniteds specifications (defined as Technical Description TD175-Rev.l7, December 2011), including, but not limited to, specifications for aircraft configuration, galley, seats, winglets, etc., and that such aircraft are consistent with the specifications and livery applicable to the El 75 Covered Aircraft in operation by Contractor for United prior to this Amendment; |
f. |
The three (3) New Aircraft in Block 3 of the 2015 New Aircraft shall not be considered Growth Aircraft under Section 10.4. A of the Agreement; but shall be considered New Aircraft under Section 10.4. B; and |
g. |
The following provisions of the Agreement shall not apply with respect to such three (3) New Aircraft in Block 3 of the 2015 New Aircraft if such aircraft are purchased by Contractor: Section 3.3 (b), Section 3.3 (c), Section 33 (d), Section 10.7. |
2. |
If Contractor is unable to secure financing for the Block 3 of the 2015 New Aircraft acceptable to United (as determined by United in its sole discretion), United shall, at its election, either (i) secure financing for Contractors benefit, where Contractor is the borrower or co-borrower, as determined by United in its sole discretion, and with Contractors contribution and fee and expense reimbursement obligations otherwise consistent with Section 3.7 (which financing may include a loan to Contractor secured by the Block 3 of the 2015 New Aircraft that is extended solely by United) or (ii) work with Embraer and Contractor (it being acknowledged and agreed Contractor shall use best efforts to so assist United) to assign and transfer the purchase obligation for the Block 3 of the 2015 New Aircraft, to the extent requested by United, to United under Uniteds aircraft purchase agreement with Embraer, on or prior to the delivery date for such respective aircraft (and in each case, Contractor shall execute such documentation as is deemed customary or appropriate by United to complete such transactions). In the event United purchases any one or more aircraft in Block 3 of the 2015 New Aircraft, then the following terms shall apply: |
a. |
The United purchased aircraft shall be operated by Contractor as El75 Covered Aircraft under the Agreement (it being acknowledged and agreed that if Contractor is in default of the Agreement at the time of Uniteds purchase of such aircraft, United reserves the right exercised in its sole discretion to award such aircraft to another United Express carrier); |
b. |
United shall not pay Contractor any aircraft ownership costs (or any associated margin or markup applicable to such ownership costs) with respect to such United- purchased aircraft and prior to such aircraft entering Regional Airline Services on the date set forth in Schedule 1, Contractor shall lease such aircraft back from United under a United lease agreement containing substantially similar terms and conditions as are included in those lease agreements in existence between the parties with respect to other E175 Covered Aircraft already in operation under the Agreement; |
2
c. |
The contract term for each of these United purchased aircraft shall be approximately 4.5 years each, as set forth in Schedule 1 attached herein; |
d. |
The United purchased Block 3 of the 2015 New Aircraft will ramp down over the three months immediately subsequent to the current expiration dates for the other United purchased El75 Covered Aircraft, as such dates may be extended pursuant to Section 10.2 Extension of E175 Aircraft Term; and |
e. |
The following provisions of the Agreement shall not apply with respect to such United purchased Block 3 of the 2015 New Aircraft: Section 33(b), Section 3.3(c), Section 33(d). |
f. |
In the event United purchases any one or more of the Block 3 of the 2015 New Aircraft, the provisions of Sections 4 and 6 of the Second Amendment applicable to Block 1 of the 2015 New Aircraft shall also apply to such United-purchased aircraft |
3. |
Section 3.6(b)(iii)(A)(9) of the Agreement is hereby deleted in its entirely and replaced with the following: |
only with respect to El 75 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for the repair and/or replacement of non-expendable parts pursuant to the Parts Support Agreement. The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt the terms set forth in the foregoing provision will not apply to Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer;
4. |
Section 3.6(b)(iii)(A)(10) of the Agreement is hereby deleted in its entirely and replaced with the following: |
only with respect to El75 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for the maintenance of engines pursuant to the Engine Maintenance Support Agreement The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt, the terms set forth in the foregoing provision will not apply to Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft or Block
3
3 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer,
5. |
Section 3.6(b)(iii)(A)(11) of the Agreement is hereby deleted in its entirely and replaced with the following: |
only with respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for Airframe Heavy Maintenance, the aircraft cleaning functions to be completed at C Check intervals and any associated ferry costs pursuant to the Airframe Heavy Maintenance Support Agreement. The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt the terms set forth in the foregoing provision will not apply to Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer;
6. |
Section 3.6(b)(iii)(A)(12) of the Agreement is hereby deleted in its entirety and replaced with the following; |
only with respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for the maintenance of landing gear pursuant to the Landing Gear Support Agreement The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt, the terms set forth in the foregoing provision will not apply to Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer;
7. |
Section 3.6(b)(iii)(A)(13) of the Agreement is hereby deleted in its entirety and replaced with the following: |
only with respect to E175 Covered Aircraft with Aircraft Numbers 1 through and including 30, the actual out of pocket third-party costs incurred by Contractor for the maintenance of APUs pursuant to the APU Support Agreement The terms set forth in such provision will apply to Block 1 of the 2015 New Aircraft only if United purchases such aircraft (it being acknowledged and agreed that Contractor would solely bear such expenses and the responsibility for the payment of such expenses if Contractor purchases such aircraft). For the avoidance of doubt the terms set forth in the forgoing provision will not apply to Block 2 of the 2015 New Aircraft or Block 3 of the 2015
4
New Aircraft, except in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer,
8. |
Section 3.7 of the Agreement is hereby deleted in its entirety and replaced with the following: |
3.7 Certain Adjustments of Compensation for Carrier Controlled Costs if Contractor purchases any of the 2015 New Aircraft
(a) |
Except as otherwise expressly provided in this Section 3.7, the Compensation for Carrier Controlled Costs set forth on Table 2 of Schedule 2A and Table 4 of Schedule 2A as of the Effective Date shall not be adjusted. |
(b) |
The financing transaction for each of the 2015 New Aircraft will take the form of a 4(a)(2) private Enhanced Equipment Trust Certificate (EETC) issuance. |
(1) |
The Schedule 2A ownership rate payable by United for each of the 2015 New Aircraft under the Agreement will match the principal and interest due under the EETC transaction, including any interest due prior to the delivery of an aircraft, and the upfront fee and commitment fee related to any liquidity facility. Without limiting any of Uniteds rights or remedies under this Agreement, if required by the financing documentation United will pay all, or a portion of the ownership rate and related amounts to a party other than Contractor subject to documentation acceptable to United relating thereto. |
(2) |
Contractor and United will use commercially reasonable efforts to find an equitable solution if collateralization of a depositarys interest obligation is required. For the avoidance of doubt a delayed draw option may be mutually agreed as an alternative. |
(3) |
Generally the structural decisions required to complete the issuance will be a joint effort of Contractor and United and when affecting the Schedule 2A ownership rate payable by United for each of the 2015 New Aircraft, such structural decisions will be mutually agreed. |
(4) |
Unless otherwise agreed between the parties the structure will include three tranches. The A (first) and B (second) tranches will be purchased by non-United entities with United purchasing the C (third) tranche. The following |
5
conditions will apply unless mutually agreed otherwise by the parties: |
a. |
The advance, coupon, term, amortization profile and liquidity facility economics are subject to Uniteds prior written approval. |
b. |
United will have the right to purchase the more senior certificates at par under default events customary with EETC transactions. In addition, United will have this purchase right under a termination of the Agreement by United due to a material breach of the Agreement by Contractor including, but not limited to, Sections 8.2(a), 8.2(b), 8.2(d), and 8.2(f) of the Agreement |
c. |
In the event of United purchasing all of the more senior certificates as contemplated in the second sentence of paragraph (4)b above, United will also have the right to purchase the Contractor initial investment in the 2015 New Aircraft at an amount representing the unamortized balance at the time of such purchase assuming the initial investment amortizes on a straight line basis over a 12 year term plus any unamortized airworthiness directive expense balance (provided that any airworthiness directive expense balance shall (i) be limited to the cost of parts and direct out-of-pocket costs for third-party labor required to comply with such airworthiness directive, (ii) include only those airworthiness directives in respect of a single aircraft whose initial cost determined in accordance with clause (i) exceeds [***], and (iii) use an amortization period not greater than seven years). |
(5) |
Unless otherwise agreed by United in writing, Contractor will contribute [***] USD toward the purchase price of each of the 2015 New Aircraft which amount will be adjusted based upon the actual purchase price of an aircraft less the amount of debt funded, including the C tranche, for such aircraft. |
(c) |
United will reimburse Contractor for the following actual reasonable costs in accordance with Section 3.6(b)(iii)(A)(15): |
(1) |
Bankers fees not to exceed [***] (or other amount as mutually agreed) of the principal value of the bonds issued to investors other than those bonds purchased by United, such banks and the allocation of fees across the banks to be |
6
mutually agreed, plus Bankers reasonable out of pocket expenses in connection with the engagement. |
(2) |
Investors legal expenses. For the avoidance of doubt, Uniteds legal expenses will be for its account. |
(3) |
Fees payable to appraisers and [***] of the rating agency fees, subject to such appraisers being approved by United in writing prior to engagement. |
For the avoidance of doubt legal expenses for the representation of Contractor, and [***] of the rating agency fees will be for Contractors account Unless otherwise agreed with United, a definitive agreement with investors must be reached by Contractor no later than December 7, 2015. Any extension beyond this date will be subject to Uniteds prior written consent at the sole discretion of United. Additionally United and Contractor will discuss the continued viability of the above proposed Contractor transaction on or prior to the 5th day of each month until such time the definitive documentation is in place or November 15,2015, subject to a potential extension pursuant to the prior sentence. If during a monthly discussion United reasonably concludes that the Contractor transaction is not viable for any or all of the 2015 New Aircraft, then Contractor will cooperate to assist United to source an alternative form of financing which may include, but not require, United to purchase and own the 2015 New Aircraft (it being acknowledged and agreed that in such event (or, separately, in the event of a Contractor default of its purchase agreement with Embraer for the Block 2 of the 2015 New Aircraft or Block 3 of the 2015 New Aircraft that results in any one or more of such aircraft being purchased by United directly from Embraer), Block 2 of the 2015 New Aircraft and Block 3 of the 2015 New Aircraft will be deemed subject to the provisions of the Second Amendment applicable to Block 1 of the 2015 New Aircraft concurrent with Uniteds purchase of each of the 2015 New Aircraft).
9. |
Schedule 1 is hereby deleted in its entirety and replaced with the revised Schedule 1 attached hereto and incorporated herein by reference. |
10. |
Schedule 1A is hereby deleted in its entirety and replaced with the revised Schedule 1A attached hereto and incorporated herein by reference. |
11. |
Schedule 2A is hereby deleted in its entirety and replaced with the revised Schedule 2A attached hereto and incorporated herein by reference, which includes new Tables 1 and, Table 4. |
12. |
Exhibit A of the Agreement is hereby amended by the addition of the following new definition: |
Block 3 of the 2015 New Aircraft - is defined in Section 1 of that certain Fourth Amendment to the Agreement dated November 13, 2015 between the parties.
7
Except as otherwise specified herein, capitalized terms shall have the meanings ascribed to such terms in the Agreement. This Amendment may be executed in counterparts. Except as expressly amended in this Amendment, the Agreement will remain in full force and effect
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC.
By:
Name:
Title: Senior Vice President Finance and acting Chief Financial Officer
|
||
MESA AIR GROUP, INC.
By:
Name:
Title:
|
||
MESA AIRLINES, INC.
By:
Name:
Title: |
8
SCHEDULE 1
Covered Aircraft
The following Table 1 shall apply to the E175 Covered Aircraft with Aircraft Number 1 through and including 48:
Aircraft Number |
Aircraft Type |
Tail Number |
MSN |
Actual Delivery Date (1) |
Actual In- Service Date (1) |
Scheduled Exit Date (2) |
Scheduled Term | |||||||
01 | E175 | N87302 | 17000394 | 4/11/2014 | 6/15/2014 | 6/15/2019 | 5 years | |||||||
02 | El75 | N88301 | 17000388 | 3/26/2014 | 7/15/2014 | 7/15/2019 | 5 years | |||||||
03 | E175 | N87303 | 17000398 | 4/25/2015 | 7/15/2014 | 7/20/2019 | 5 years | |||||||
04 | E175 | N89304 | 17000406 | 6/16/2014 | 8/10/2014 | 8/10/2019 | 5 years | |||||||
05 | E175 | N93305 | 17000412 | 7/25/2014 | 8/19/2014 | 8/19/2019 | 5 years | |||||||
06 | E175 | N87306 | 17000414 | 7/25/2014 | 9/10/2014 | 9/10/2019 | 5 years | |||||||
07 | E175 | N84307 | 17000419 | 9/8/2014 | 9/20/2014 | 9/20/2019 | 5 years | |||||||
08 | E175 | N89308 | 17000422 | 9/11/2014 | 10/5/2014 | 10/5/2019 | 5 years | |||||||
09 | E175 | N86309 | 17000426 | 10/9/2014 | 10/26/2014 | 10/26/2019 | 5 years | |||||||
10 | E175 | N88310 | 17000427 | 10/16/2014 | 11/10/2014 | 11/10/2019 | 5 years | |||||||
11 | E175 | N86311 | 17000429 | 10/16/2014 | 11/20/2014 | 11/20/2019 | 5 years | |||||||
12 | E175 | N86312 | 17000432 | 11/6/2014 | 12/3/2014 | 12/3/2019 | 5 years | |||||||
13 | E175 | N89313 | 17000433 | 11/6/2014 | 12/18/2014 | 12/18/2019 | 5 years | |||||||
14 | E175 | N82314 | 17000436 | 11/20/2014 | 12/30/2014 | 12/30/2019 | 5 years | |||||||
15 | E175 | N89315 | 17000437 | 11/20/2014 | 1/6/2015 | 1/6/2020 | 5 years | |||||||
16 | E175 | N86316 | 17000438 | 12/4/2014 | 1/24/2015 | 1/24/2020 | 5 years | |||||||
17 | E175 | N89317 | 17000442 | 12/4/2014 | 2/12/2015 | 2/12/2020 | 5 years | |||||||
18 | E175 | N87318 | 17000443 | 12/16/2014 | 2/20/2015 | 2/20/2020 | 5 years | |||||||
19 | E175 | N87319 | 17000448 | 12/18/2014 | 3/5/2020 | 3/5/2020 | 5 years | |||||||
20 | E175 | N85320 | 17000454 | 2/26/2015 | 3/25/2015 | 3/25/2020 | 5 years | |||||||
21 | E175 | N89321 | 17000459 | 3/5/2015 | 4/7/2015 | 4/7/2020 | 5 years | |||||||
22 | E175 | N86322 | 17000465 | 4/9/2015 | 4/23/2015 | 4/23/2020 | 5 years | |||||||
23 | E175 | N85323 | 17000469 | 4/9/2015 | 5/6/2015 | 5/6/2020 | 5 years | |||||||
24 | E175 | N86324 | 17000471 | 4/16/2015 | 5/24/2015 | 5/24/2020 | 5 years | |||||||
25 | E175 | N88325 | 17000474 | 5/14/2015 | 6/4/2015 | 6/4/2020 | 5 years | |||||||
26 | E175 | N88326 | 17000478 | 5/21/2015 | 6/20/2015 | 6/20/2020 | 5 years | |||||||
27 | E175 | N88327 | 17000479 | 6/8/2015 | 7/2/2015 | 7/2/2020 | 5 years |
9
Aircraft Number |
Aircraft Type |
Tail Number |
MSN |
Actual Delivery Date (1) |
Actual In- Service Date (1) |
Scheduled Exit Date (2) |
Scheduled Term | |||||||
28 | E175 | N88328 | 17000480 | 6/11/2015 | 7/25/2015 | 7/25/2020 | 5 years | |||||||
29 | E175 | N88329 | 17000487 | 6/25/2015 | 8/10/2015 | 8/10/2020 | 5 years | |||||||
30 | E175 | N88330 | 17000488 | 6/29/2015 | 8/18/2015 | 8/18/2020 | 5 years | |||||||
31 (3) | E175 | |||||||||||||
32 (3) | E175 | |||||||||||||
33 (3) | E175 | |||||||||||||
34 (3) | E175 | |||||||||||||
35 (3) | E175 | |||||||||||||
36 (3) | E175 | |||||||||||||
37 (3) | E175 | |||||||||||||
38 (3) | E175 | |||||||||||||
39 (3) | E175 | |||||||||||||
40 (3) | E175 | |||||||||||||
41 (3) | E175 | |||||||||||||
42 (3) | E175 | |||||||||||||
43 (3) | E175 | |||||||||||||
44 (3) | E175 | |||||||||||||
45 (3) | E175 | |||||||||||||
46 (3) | E175 | |||||||||||||
47 (3) | E175 | |||||||||||||
48 (3) | E175 |
1 |
The delivery dates and in-service dates for all E175 Covered Aircraft with Aircraft Number 1 through and including 30 must satisfy the following conditions: |
(a) |
No later than one hundred and fifty (150) days prior to the Scheduled Delivery Date for any E175 Covered Aircraft with Aircraft Number 1 through and including 30 as set forth on Schedule 1A attached hereto (the Scheduled Delivery Date ). United shall inform Contractor of the dates that are likely to be selected as the Committed In-Service Date for each E175 Covered Aircraft with Aircraft Number 1 through and including 30, it being understood that (x) such communication from United to Contractor shall not be binding for purposes of selecting the actual Committed In-Service Date pursuant to clause (d) below, and (y) such dates shall be used by Contractor and United in anticipating aircraft available to schedule and with respect to any applicable Final Monthly Schedule. |
10
(b) |
Subject to the proviso to the first sentence of Section 2.1(a) of this Agreement, United shall provide a final notice of the actual delivery date of any E175 Covered Aircraft with Aircraft Number 1 through and including 30 (the Final Notice ) to Contractor no later than the earlier of (x) the date such aircraft is actually delivered to United or to Contractor pursuant to Section 10.7 . as the case may be, pursuant to the terms of the Embraer Purchase Agreement (the Actual Delivery Date ) and (y) the day following the completion of the final inspection of such aircraft, which notice shall determine the delivery date of the aircraft for purposes of this Schedule 1 (the Committed Delivery Date ), and which determination shall be confirmed in writing by the parties. |
(c) |
United shall use its commercially reasonable efforts to provide Contractor with notice regarding the delivery status of each El75 Covered Aircraft with Aircraft Number 1 through and including 30 from time to time in advance of the delivery of a Final Notice with respect to such El75 Covered Aircraft, including without limitation information relating to the commencement of the delivery inspection period, delays in delivery, or otherwise relating to the delivery of such aircraft. |
(d) |
Following the determination of the Committed Delivery Date for an El75 Covered Aircraft with Aircraft Number 1 through and including 30 pursuant to clause (b) above, Contractor shall inform United of a projected Actual In-Service Date for such aircraft (the Committed In-Service Date , which shall be not later than the first to occur of (x) the 60 th day following the Committed Delivery Date and (y) the date set forth under the caption Scheduled In-Service Date for such aircraft on Schedule 1A attached hereto (as such Scheduled In-Service Date may be delayed by, and only to the extent such date is delayed by, a delay attributable to the manufacturer or by a delay due to an Act of God that continues for fewer than fifteen (15) days). |
(e) |
On the date that an E175 Covered Aircraft with Aircraft Number 1 through and including 30 becomes available to schedule under the provisions of this Agreement, such aircraft shall be deemed to have been placed into Service hereunder (such date being the Actual In-Service Date for such aircraft). |
(f) |
As soon as practicable following the determination of the Actual Delivery Date and the Actual In-Service for an E175 Covered Aircraft with Aircraft Number 1 through and including 30 pursuant to clauses (c) and (e) above, the parties hereto shall revise Schedule 1 accordingly. |
(g) |
The scheduled exit date for any El75 Covered Aircraft (the Scheduled Exit Date ) for Aircraft Number 1 through and including 30 shall be the fifth (5 th ) anniversary of the Actual In-Service Date determined pursuant to clause (e) above, and the parties hereto shall further revise Schedule 1 accordingly. |
(h) |
Following the determinations in clauses (c), (e) and (g) above of the Actual Delivery Date, the Actual In-Service Date and the Scheduled Exit Date for an E175 Covered Aircraft with Aircraft Number 1 through and including 30, Contractor and United shall complete all missing information in this Schedule 1 with respect to such E175 Covered Aircraft with Aircraft Number 1 through and including 30, and the initial Schedule 1 |
11
attached hereto as of the Effective Date shall be deemed to have been amended and replaced by the Schedule 1 as revised pursuant to this clause (h) with respect to such El75 Covered Aircraft with Aircraft Number 1 through and including 30 without any further action by the parties hereto. |
2 |
The Scheduled Exit Dates set forth in the above table shall be adjusted from time to time to reflect any extension of the Term for any E175 Covered Aircraft with Aircraft Number 1 through and including 30 pursuant to Section 10.2 of this Agreement |
3 |
The 2015 New Aircraft are subject to the other provisions set forth in Sections 1 and 2 of the Second Amendment and Sections 1 and 2 of this Amendment to the Agreement by and between the parties, in each case as applicable to Block 1 of the 2015 New Aircraft, Block 2 of the 2015 New Aircraft and Block 3 of the 2015 New Aircraft, respectively. In the event United purchases any of the 2015 New Aircraft all of the provisions outlined in footnotes 1 and 2 shall apply with respect to such aircraft and the Scheduled Term for each shall be approximately 4.5 years. In the event Contractor purchases any of the 2015 New Aircraft the provisions outlined in clauses (e), (f), (g), and (h) of footnote 1 and the provisions in footnote 4 shall apply with respect to such aircraft, and the Scheduled Term for each shall be twelve years. |
4 |
In the event Contractor purchases any of the 2015 New Aircraft, the delivery dates and in-service dates each such aircraft must satisfy the following conditions (a), (b), (c) and (d), which are an amended and restated version of subsections (a), (b), (c) and (d) of foot note 1: |
(a) |
No later than one hundred and fifty (150) days prior to the Scheduled Delivery Date for any of the 2015 New Aircraft, or as soon as practically possible for any of the 2015 New Aircraft, as set forth on Schedule 1A attached hereto, Contractor and United shall meet to discuss the dates that are likely to be selected as the Committed In-Service Date for each of the 2015 New Aircraft, it being understood that (x) such discussions shall not be binding for purposes of selecting the actual Committed In-Service Date pursuant to clause (d) below, and (y) such dates shall be used by Contractor and United in anticipating aircraft available to schedule and with respect to any applicable Final Monthly Schedule. |
(b) |
Ninety (90), sixty (60) and thirty (30) days prior to the Scheduled Delivery Date for each of the 2015 New Aircraft as set forth on Schedule 1A attached hereto, and reasonably from time to time thereafter, Contractor shall provide United with notice regarding the delivery status of such 2015 New Aircraft, including without limitation information relating to the commencement of the delivery inspection period (which notice is anticipated to be given no later than twenty (20) days prior to actual delivery date of such aircraft), delays in delivery, or otherwise relating to the delivery of such aircraft. |
(c) |
With respect to each 2015 New Aircraft, Contractor shall provide a Final Notice to United no later than the earlier of (x) the Actual Delivery Date, and (y) the Committed Delivery Date, and which determination shall be confirmed in writing by the parties. |
12
(d) |
Following the determination of the Committed Delivery Date for a 2015 New Aircraft pursuant to clause (c) above, the parties shall determine a Committed In-Service Date ., which shall be not later than the first to occur of (x) the 60 th day following the Committed Delivery Date and (y) the date set forth under the caption Scheduled In-Service Date for such aircraft on Schedule 1A attached hereto (as such Scheduled In-Service Date may be delayed by, and only to the extent such date is delayed by, a delay attributable to the manufacturer or by a delay due to an Act of God that continues for fewer than fifteen (15) days), and which determination shall be confirmed in writing by the parties. |
13
The following Table 2 and Table 3 shall apply to the CRJ Covered Aircraft:
Table 2
Aircraft Number |
Aircraft Type |
Tail Number |
CRJ Scheduled Delivery Date |
CRJ In-Service Date | ||||
01 | CRJ700 | September 1,2013 | September 1,2013 | |||||
02 | CRJ700 | September 1,2013 | September 1,2013 | |||||
03 | CRJ700 | September 1,2013 | September 1,2013 | |||||
04 | CRJ700 | September 1,2013 | September 1,2013 | |||||
05 | CRJ700 | September 1, 2013 | September 1,2013 | |||||
06 | CRJ700 | September 1,2013 | September 1,2013 | |||||
07 | CRJ700 | September 1,2013 | September 1,2013 | |||||
08 | CRJ700 | September 1,2013 | September 1,2013 | |||||
09 | CRJ700 | September 1,2013 | September 1,2013 | |||||
10 | CRJ700 | September 1,2013 | September 1,2013 | |||||
11 | CRJ700 | September 1,2013 | September 1,2013 | |||||
12 | CRJ700 | September 1,2013 | September 1,2013 | |||||
13 | CRJ700 | September 1,2013 | September 1,2013 | |||||
14 | CRJ700 | September 1,2013 | September 1,2013 | |||||
15 | CRJ700 | September 1,2013 | September 1,2013 | |||||
16 | CRJ700 | September 1,2013 | September 1,2013 | |||||
17 | CRJ700 | September 1,2013 | September 1,2013 | |||||
18 | CRJ700 | September 1,2013 | September 1,2013 | |||||
19 | CRJ700 | September 1,2013 | September 1,2013 | |||||
20 | CRJ700 | September 1,2013 | September 1,2013 |
Table 3
Aircraft Number |
CRJ Scheduled Exit Date (1)(2) |
Scheduled Term (3) |
||
01 | August 31,2019 | 6 yrs 3 mos | ||
02 | August 31,2019 | 6 yrs 3 mos | ||
03 |
August 31,2019 | 6 yrs 3 mos | ||
04 | August 31,2019 | 6 yrs 3 mos | ||
05 | September 30,2019 | 6 yrs 4 mos | ||
06 | September 30,2019 | 6 yrs 4 mos | ||
07 | September 30,2019 | 6 yrs 4 mos | ||
08 | September 30,2019 | 6 yrs 4 mos | ||
09 | October 31,2019 | 6 yrs 5 mos | ||
10 | October 31,2019 | 6 yrs 5 mos | ||
11 | October 31,2019 | 6 yrs 5 mos | ||
12 | October 31,2019 | 6 yrs 5 mos | ||
13 | November 30,2019 | 6 yrs 6 mos | ||
14 | November 30,2019 | 6 yrs 6 mos | ||
15 | November 30,2019 | 6 yrs 6 mos | ||
16 | November 30,2019 | 6 yrs 6 mos | ||
17 | December 31,2019 | 6 yrs 7 mos | ||
18 | December 31,2019 | 6 yrs 7 mos |
14
Aircraft Number |
CRJ Scheduled Exit Date (1)(2) |
Scheduled Term (3) |
||
19 | December 31,2019 | 6 yrs 7 mos | ||
20 | December 31,2019 | 6 yrs 7 mos |
1 |
The CRJ Scheduled Exit Dates and Scheduled Term set forth in the above table shall be adjusted from time to time to reflect any extension of Term for any CRJ Covered Aircraft pursuant to Section 10.2 of this Agreement and to coincide with the schedule change date within Uniteds scheduling system most closely following any applicable exit date. |
2 |
Contractor shall provide United, not later than 90 days prior to each CRJ Scheduled Exit Date, with specific tail numbers identifying the CRJ Covered Aircraft to be terminated on such date. |
3 |
Upon the CRJ Scheduled Exit Date, the Term associated with each of the CRJ Covered Aircraft shall expire. |
15
SCHEDULE 1A
E175 Covered Aircraft Scheduled Delivery Dates and Schedules In-Service Dates
Aircraft Number |
Scheduled Delivery Date |
Scheduled In-Service Date* |
Target In-Service Date |
|||
01 | March 30,2014 | July 31,2014 | June 15,2014 | |||
02 | April 30,2014 | August 14,2014 | July 15,2014 | |||
03 | April 30,2014 | August 14,2014 | July 15,2014 | |||
04 | June 30,2014 | September 14,2014 | August 15,2014 | |||
05 | July 30,2014 | September 30,2014 | August 15,2014 | |||
06 | July 30,2014 | October 15,2014 | September 15,2014 | |||
07 | August 30,2014 | October 31,2014 | September 15,2014 | |||
08 | August 30,2014 | November 14,2014 | October 15,2014 | |||
09 | October 30,2014 | December 15,2014 | November 15,2014 | |||
10 | October 30,2014 | December 15,2014 | November 15,2014 | |||
11 | October 30,2014 | January 14,2014 | December 15,2014 | |||
12 | November 30,2014 | January 14,2014 | December 15,2014 | |||
13 | November 30,2014 | February 14,2015 | January 15,2015 | |||
14 | November 30,2014 | February 14,2015 | January 15,2015 | |||
15 | December 30,2014 | March 17,2015 | January 30,2015 | |||
16 | December 30,2014 | March 17,2015 | February 15,2015 | |||
17 | December 30,2014 | March 17,2015 | February 15,2015 | |||
18 | February 28,2015 | April 14,2015 | March 15,2015 | |||
19 | February 28,2015 | April 14,2015 | March 15,2015 | |||
20 | March 30,2015 | May 15,2015 | April 15,2015 | |||
21 | March 30,2015 | May 15,2015 | April 15,2015 | |||
22 | April 30,2015 | June 14,2015 | May 15,2015 | |||
23 | April 30,2015 | June 14,2015 | May 15,2015 | |||
24 | May 30,2015 | July 15,2015 | June 15,2015 | |||
25 | June 30,2015 | August 14,2015 | July 15,2015 | |||
26 | June 30,2015 | August 14,2015 | July 15,2015 | |||
27 | June 30,2015 | September 14,2015 | August 15,2015 | |||
28 | July 30,2015 | September 14,2015 | August 15,2015 | |||
29 | July 30,2015 | October 15,2015 | September 15,2015 | |||
30 | June 30,2015 | September 15,2015 | August 18,2015 | |||
31 | April 2016 | |||||
32 | May 2016 | |||||
33 | May 2016 | |||||
34 | June 2016 | |||||
35 | June 2016 | |||||
36 | July 2016 | |||||
37 | July 2016 | |||||
38 | August 2016 | |||||
39 | August 2016 | |||||
40 | September 2016 | |||||
41 | December 2015 | |||||
42 | December 2015 | |||||
43 | December 2015 | |||||
44 | January 2016 |
16
Aircraft Number |
Scheduled Delivery Date |
Scheduled In-Service Date* |
Target In-Service Date |
|||
45 | February 2016 | |||||
46 | April 2016 | |||||
47 | May 2016 | |||||
48 | September 2016 |
* |
Notwithstanding the date listed for this aircraft, Contractor agrees to use its best efforts to place this aircraft in Service by its associated Target In-Service Date. |
17
SCHEDULE 2A
E175 Covered Aircraft Compensation for Carrier Control Costs
The following Table 1 shall apply per corresponding year to El75 Covered Aircraft Numbers 1 through 30 flown under this Agreement when Contractors ORD United Express flying represents fifty (50) percent or more of the Contractors entire United Express operation for United, including both El75 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the Actual In-Service Date for each E175 Covered Aircraft; provided, however, once an aircraft is in Service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||||
Year |
for each block hour |
for each flight hour |
for each Scheduled Flight departure |
for interrupted trip expense per passenger |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
||||||
2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Jane 1, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
18
Category (1) | ||||||||||||
Year |
for each block hour |
for each flight hour |
for each Scheduled Flight departure |
for interrupted trip expense per passenger |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
||||||
June 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Jane 1, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non- expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
19
Effective as of September 20, 2014, the following Table 1A shall apply per corresponding year to E175 Covered Aircraft Numbers 1 through 30 flown under this Agreement when Contractors ORD United Express flying represents less than fifty (50) percent of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Cateory (1) | ||||||||||||
Year |
for each block hour |
for each flight hour |
for each Scheduled Flight departure | for interrupted trip expense per passenger | per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
||||||
September 20,2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
20
Category (1) | ||||||||||||
Year |
for each block hour |
for each flight hour |
for each Scheduled Flight departure |
for interrupted trip expense per passenger |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
||||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non- expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
21
The following Table 2 shall apply per corresponding year to Block 1 of the 2015 New Aircraft with Aircraft Numbers 31 through 40 in the event Contractor purchases the E175 Covered Aircraft flown under this Agreement and shall become effective at the Actual In- Service Date for each such E175 Covered Aircraft with Aircraft Numbers 31 through 40; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||||
Year |
for each block hour |
for each flight hour |
for interrupted trip expense per departure | Ownership rate (2) | per aircraft in fleet per month |
per aircraft in schedule per month |
||||||
April 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2027 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement. |
22
(2) |
The parties agree to adjust the ownership rates in accordance with Section 3.7(b) of the Agreement, pursuant to the amortization schedule associated with the issuance of the above contemplated EETC. |
23
The following Table 3 shall apply per corresponding year to Block 1 of the 2015 New Aircraft with Aircraft Numbers 31 through 40 in the event United purchases the E175 Covered Aircraft flown under this Agreement and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft with Aircraft Numbers 31 through 40; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||
Year |
for each block hour |
for each flight hour |
for interrupted trip expense per departure |
per aircraft in in fleet per month |
per aircraft in schedule per month | |||||
April 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2027 |
[***] |
[***] |
[***] |
[***] |
[***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement. |
24
The following Table 4 shall apply per corresponding year to Block 2 of the 2015 New Aircraft and Block 3 of the 2015 New Aircraft with Aircraft Numbers 41 through and including 48 and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft with Aircraft Numbers 41 through and including 48; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rales shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||||
Year |
for each block hour |
for each flight hour |
for interrupted trip expense per departure |
Ownership rate (2) |
per aircraft in fleet per month |
per aircraft in schedule per month |
||||||
December 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2027 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement. |
25
(2) |
The parties agree to adjust the ownership rates in accordance with Section 3.7(b) of the Agreement pursuant to the amortization schedule associated with the issuance of the above contemplated EETC |
26
Exhibit 10.10.6
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION COPY
FIFTH AMENDMENT TO THE CAPACITY PURCHASE AGREEMENT
This Fifth Amendment (this Amendment ) to that certain Capacity Purchase Agreement, among United Airlines, Inc., a Delaware corporation ( United ), Mesa Airlines, Inc., a Nevada corporation ( Contractor ), and Mesa Air Group, Inc., a Nevada corporation ( Parent ), dated as of August 29, 2013 (as previously amended by the parties thereto, the Agreement ) is entered into by and between United, Contractor and Parent and is effective as of December 14, 2015.
WHEREAS , the parties desire to amend certain provisions of the Agreement in accordance with the terms and conditions of this Amendment.
NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt, sufficiency, and adequacy of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. |
Section 1.g. of the Second Amendment to the Capacity Purchase Agreement and Section 1.f. of the Fourth Amendment to the Capacity Purchase Agreement each is hereby amended to insert Section 10.5, following Section 3.3(d), therein. |
2. |
Section 2.4(b)(ii) is hereby amended to add the following sentence after the last sentence thereof: |
Notwithstanding anything to the contrary in this Agreement, (i) any 2.4(b) Notice given by United with respect to the EETC Aircraft must be given with respect to all of the EETC Aircraft and (ii) the provisions of clause (i) and the two provisos of the immediately preceding sentence shall not apply to such 2.4(b) Notice with respect to the EETC Aircraft.
3. |
Section 3.6 is hereby amended to add the following after Section 3.6(c): |
(d) Ownership Rate . As compensation for the cost of ownership of the 10 2015 New Aircraft financed pursuant to the EETC Transaction as listed by expected U.S. registration number ( Reg. No. ) in Schedule 5 hereto (the EETC Aircraft ), United shall pay to Contractor on each payment date set forth in Schedule 5 hereto on the Table therein applicable to such EETC Aircraft (or if not a Business Day, the next Business Day) the amount set forth opposite such payment date on such Table (the Ownership Rate ), provided that United shall have no obligation to make a payment with respect to an EETC Aircraft that would otherwise be due on any such payment date that occurs after the earliest of (i) in the case of any EETC Aircraft not previously financed pursuant to the EETC Transaction, the date that such EETC Aircraft is no longer able to be financed pursuant to the EETC Transaction, (ii) the date of withdrawal of such EETC Aircraft from the capacity purchase provisions of this Agreement, (iii) the date of purchase of such EETC Aircraft by United and (iv) the date that all equipment notes issued in the EETC Transaction with respect to such EETC Aircraft shall have been paid in full, and such EETC Aircraft shall cease to be an EETC Aircraft on such earliest date. If an EETC Aircraft ceases to be an EETC Aircraft pursuant to clause (i) of the preceding sentence, within five Business Days after the date of such cessation (the Trigger
Date ), Contractor shall pay to United the amount set forth in Schedule 6 hereto on the Table therein applicable to such Aircraft opposite the Trigger Date (or, if such Trigger Date is not set forth on such Table, opposite the date set forth on such Table immediately preceding such Trigger Date).
4. |
Section 3.7 is hereby amended as follows: |
a. |
Subsection (a) is hereby deleted in its entirety and replaced with the following: |
(a) United and Contractor will make good faith efforts to finance the Contractors acquisition of the EETC Aircraft on the terms set forth in the Summary Mesa Airlines, Inc. ( Mesa ) EETC Transaction 2015-1 Execution Version, subject to such changes as Contractor and United shall agree (the EETC Transaction ). The size, advance rate, coupon, term, amortization profile and liquidity facility economics of the EETC Transaction are subject to Uniteds prior written approval.
b. |
Subsection (b) is hereby deleted in its entirety and replaced with the following: |
(b) Unless otherwise agreed by United in writing, if the EETC Aircraft are financed in the EETC Transaction, Contractor will contribute approximately US $[***] toward the purchase of each of the EETC Aircraft, which amount will be adjusted to equal the actual purchase price of an EETC Aircraft less the amount of debt funded, including the Series C Equipment Notes, for such Aircraft.
c. |
Subsection (c) is hereby amended by adding the following clauses after clause (3) thereof: |
(4) The upfront fees payable to the Liquidity Provider at or prior to the closing of the EETC Transaction.
(5) The upfront fees payable to the Depositary at or prior to the closing of the EETC Transaction.
d. |
The last paragraph is hereby amended by changing (i) the reference to December 7, 2015 in the second sentence thereof to December 14, 2015 and (ii) the reference to November 15, 2015 in the fourth sentence thereof to December 14, 2015 and by deleting from the last sentence thereof during a monthly discussion. |
5. |
Section 8.3(a) is hereby amended to delete in the penultimate sentence thereof any specific Call Option Aircraft and to insert in lieu thereof the following: any specific Covered Aircraft purchased or to be purchased by United. |
6. |
Section 8.3(b) is hereby amended to delete the parenthetical phrase in the first sentence thereof and to insert in lieu thereof the following: |
(or in the event of a partial termination, the applicable Covered Aircraft).
7. |
Section 8.3(b)(ii) is hereby amended to delete in the last sentence thereof the phrase any specific Call Option Aircraft and to insert in lieu thereof the following: any specific Covered Aircraft purchased or to be purchased by United. |
8. |
Section 10.1(a) is hereby amended by adding the following after the last sentence thereof: |
Notwithstanding anything to the contrary in this Agreement, if this Agreement is terminated with respect to one or more EETC Aircraft at a time when any such EETC Aircraft is subject to an EETC Security Interest, the provisions of Section 10.1 shall not apply to such EETC Aircraft.
9. |
Section 10.6 is hereby amended to insert at the end of the first sentence thereof the following: |
; and provided , further , that no security interest shall be granted hereby in any property to the extent that such grant is prohibited by any agreement that comprises part of the EETC Transaction.
10. |
Section 11.4 is hereby amended to insert at the end thereof the following: |
Any amendment or modification of this Agreement to decrease the amount of Ownership Rate payments required to be paid by United to Contractor with respect to any EETC Aircraft may be an Event of Default as defined under the Trust Indenture and Mortgage for such Aircraft under the EETC Transaction.
11. |
Table 2 and Table 4 of Schedule 2A each is hereby amended by deleting the column with the caption Ownership rate and deleting footnote (2). |
12. |
Schedule 4 is hereby amended as follows: |
a. |
The caption for the first table therein is hereby deleted and the following is inserted in lieu thereof: Markup Amounts for E175 Covered Aircraft (excluding EETC Aircraft). |
b. |
The following table is hereby inserted following the table referred to in Section 12.a. above: |
Markup Amounts for EETC Aircraft* |
Performance Metric | A | B | C | D | D1 | D2 | ||||||
On-Time Departure Rate (On-Time Zero) |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
Controllable Completion Factor |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
Customer Satisfaction |
[***] | [***] | [***] | [***] | [***] | [***] |
*If any EETC Aircraft ceases to be an EETC Aircraft pursuant to Section 3.6(d) during any month, commencing with the next month the markup amount for such E175 Covered Aircraft shall be determined using the table above captioned Markup Amounts for E175 Covered Aircraft (excluding EETC Aircraft).
13. |
A new Schedule 5 and new Schedule 6 are hereby added after Schedule 4 in the form of Schedule 5 and Schedule 6, respectively, to this Amendment. |
14. |
Exhibit A of the Agreement is hereby amended as follows: |
a. |
The following new definitions are hereby added to Exhibit A: EETC Aircraft is defined in Section 3.6(d). |
EETC Security Interest means a security interest granted on an EETC Aircraft in connection with the EETC Transaction.
EETC Transaction is defined in Section 3.7(a).
Ownership Rate is defined in Section 3.6(d).
Trigger Date is defined in Section 3.6(d).
b. |
The definition of ERJ Margin Payment in Exhibit A is hereby amended to insert therein after Markup Amount for E175 Covered Aircraft the following: (excluding EETC Aircraft). |
c. |
The definitions of CRJ Covered Aircraft and E175 Covered Aircraft each is hereby amended to delete as adjusted from time to time for withdrawals pursuant to Article VIII and to insert in lieu thereof the following: |
but such Schedule 1 shall be deemed automatically adjusted from time to time to account for any such aircraft that is withdrawn from the capacity purchase provisions of this Agreement effective beginning on the date of such withdrawal. |
Except as otherwise specified herein, capitalized terms shall have the meanings ascribed to such terms in the Agreement. This Amendment may be executed in counterparts. Except as expressly amended in this Amendment, the Agreement will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC.
By: Name: Gerald Laderman Title: Senior Vice President Finance Acting Chief Financial Officer
|
MESA AIR GROUP, INC.
By: Name: Brian S. Gillman Title: EVP & General Counsel
|
MESA AIRLINES, INC.
By: Name: Brian S. Gillman Title: EVP & General Counsel |
Schedule 5 Ownership Rate Schedule 1
Aircraft Reg. No.: N88331, N88332, N82333 |
Aircraft Reg. No.: N86334 |
Aircraft Reg. No.: N88335 |
Aircraft Reg. No.: N86336, N87337 |
Aircraft Reg. No.: N82338, N87339, N85340 |
||||||||||||||||||||||
Payment Date | Ownership Rate | Payment Date | Ownership Rate | Payment Date |
Ownership Rate |
Payment Date |
Ownership Rate |
Payment Date |
Ownership Rate |
|||||||||||||||||
December 14, 2015 | [***] | December 14, 2015 | [***] | December 14, 2015 | [***] | December 14, 2015 | [***] | December 14, 2015 | [***] | |||||||||||||||||
December 15, 2015 | [***] | December 15, 2015 | [***] | December 15, 2015 | [***] | December 15, 2015 | [***] | December 15, 2015 | [***] | |||||||||||||||||
January 15, 2016 | [***] | January 15, 2016 | [***] | January 15, 2016 | [***] | January 15, 2016 | [***] | January 15, 2016 | [***] | |||||||||||||||||
February 15, 2016 | [***] | February 15, 2016 | [***] | February 15, 2016 | [***] | February 15, 2016 | [***] | February 15, 2016 | [***] | |||||||||||||||||
March 15, 2016 | [***] | March 15, 2016 | [***] | March 15, 2016 | [***] | March 15, 2016 | [***] | March 15, 2016 | [***] | |||||||||||||||||
April 15, 2016 | [***] | April 15, 2016 | [***] | April 15, 2016 | [***] | April 15, 2016 | [***] | April 15, 2016 | [***] | |||||||||||||||||
May 15, 2016 | [***] | May 15, 2016 | [***] | May 15, 2016 | [***] | May 15, 2016 | [***] | May 15, 2016 | [***] | |||||||||||||||||
June 15, 2016 | [***] | June 15, 2016 | [***] | June 15, 2016 | [***] | June 15, 2016 | [***] | June 15, 2016 | [***] | |||||||||||||||||
July 15, 2016 | [***] | July 15, 2016 | [***] | July 15, 2016 | [***] | July 15, 2016 | [***] | July 15, 2016 | [***] | |||||||||||||||||
August 15, 2016 | [***] | August 15, 2016 | [***] | August 15, 2016 | [***] | August 15, 2016 | [***] | August 15, 2016 | [***] | |||||||||||||||||
September 15, 2016 | [***] | September 15, 2016 | [***] | September 15, 2016 | [***] | September 15, 2016 | [***] | September 15, 2016 | [***] | |||||||||||||||||
October 15, 2016 | [***] | October 15, 2016 | [***] | October 15, 2016 | [***] | October 15, 2016 | [***] | October 15, 2016 | [***] | |||||||||||||||||
November 15, 2016 | [***] | November 15, 2016 | [***] | November 15, 2016 | [***] | November 15, 2016 | [***] | November 15, 2016 | [***] | |||||||||||||||||
December 15, 2016 | [***] | December 15, 2016 | [***] | December 15, 2016 | [***] | December 15, 2016 | [***] | December 15, 2016 | [***] | |||||||||||||||||
January 15, 2017 | [***] | January 15, 2017 | [***] | January 15, 2017 | [***] | January 15, 2017 | [***] | January 15, 2017 | [***] | |||||||||||||||||
February 15, 2017 | [***] | February 15, 2017 | [***] | February 15, 2017 | [***] | February 15, 2017 | [***] | February 15, 2017 | [***] | |||||||||||||||||
March 15, 2017 | [***] | March 15, 2017 | [***] | March 15, 2017 | [***] | March 15, 2017 | [***] | March 15, 2017 | [***] | |||||||||||||||||
April 15, 2017 | [***] | April 15, 2017 | [***] | April 15, 2017 | [***] | April 15, 2017 | [***] | April 15, 2017 | [***] | |||||||||||||||||
May 15, 2017 | [***] | May 15, 2017 | [***] | May 15, 2017 | [***] | May 15, 2017 | [***] | May 15, 2017 | [***] | |||||||||||||||||
June 15, 2017 | [***] | June 15, 2017 | [***] | June 15, 2017 | [***] | June 15, 2017 | [***] | June 15, 2017 | [***] | |||||||||||||||||
July 15, 2017 | [***] | July 15, 2017 | [***] | July 15, 2017 | [***] | July 15, 2017 | [***] | July 15, 2017 | [***] | |||||||||||||||||
August 15, 2017 | [***] | August 15, 2017 | [***] | August 15, 2017 | [***] | August 15, 2017 | [***] | August 15, 2017 | [***] | |||||||||||||||||
September 15, 2017 | [***] | September 15, 2017 | [***] | September 15, 2017 | [***] | September 15, 2017 | [***] | September 15, 2017 | [***] | |||||||||||||||||
October 15, 2017 | [***] | October 15, 2017 | [***] | October 15, 2017 | [***] | October 15, 2017 | [***] | October 15, 2017 | [***] | |||||||||||||||||
November 15, 2017 | [***] | November 15, 2017 | [***] | November 15, 2017 | [***] | November 15, 2017 | [***] | November 15, 2017 | [***] | |||||||||||||||||
December 15, 2017 | [***] | December 15, 2017 | [***] | December 15, 2017 | [***] | December 15, 2017 | [***] | December 15, 2017 | [***] | |||||||||||||||||
January 15, 2018 | [***] | January 15, 2018 | [***] | January 15, 2018 | [***] | January 15, 2018 | [***] | January 15, 2018 | [***] | |||||||||||||||||
February 15, 2018 | [***] | February 15, 2018 | [***] | February 15, 2018 | [***] | February 15, 2018 | [***] | February 15, 2018 | [***] | |||||||||||||||||
March 15, 2018 | [***] | March 15, 2018 | [***] | March 15, 2018 | [***] | March 15, 2018 | [***] | March 15, 2018 | [***] | |||||||||||||||||
April 15, 2018 | [***] | April 15, 2018 | [***] | April 15, 2018 | [***] | April 15, 2018 | [***] | April 15, 2018 | [***] | |||||||||||||||||
May 15, 2018 | [***] | May 15, 2018 | [***] | May 15, 2018 | [***] | May 15, 2018 | [***] | May 15, 2018 | [***] | |||||||||||||||||
June 15, 2018 | [***] | June 15, 2018 | [***] | June 15, 2018 | [***] | June 15, 2018 | [***] | June 15, 2018 | [***] | |||||||||||||||||
July 15, 2018 | [***] | July 15, 2018 | [***] | July 15, 2018 | [***] | July 15, 2018 | [***] | July 15, 2018 | [***] | |||||||||||||||||
August 15, 2018 | [***] | August 15, 2018 | [***] | August 15, 2018 | [***] | August 15, 2018 | [***] | August 15, 2018 | [***] | |||||||||||||||||
September 15, 2018 | [***] | September 15, 2018 | [***] | September 15, 2018 | [***] | September 15, 2018 | [***] | September 15, 2018 | [***] | |||||||||||||||||
October 15, 2018 | [***] | October 15, 2018 | [***] | October 15, 2018 | [***] | October 15, 2018 | [***] | October 15, 2018 | [***] | |||||||||||||||||
November 15, 2018 | [***] | November 15, 2018 | [***] | November 15, 2018 | [***] | November 15, 2018 | [***] | November 15, 2018 | [***] | |||||||||||||||||
December 15, 2018 | [***] | December 15, 2018 | [***] | December 15, 2018 | [***] | December 15, 2018 | [***] | December 15, 2018 | [***] | |||||||||||||||||
January 15, 2019 | [***] | January 15, 2019 | [***] | January 15, 2019 | [***] | January 15, 2019 | [***] | January 15, 2019 | [***] | |||||||||||||||||
February 15, 2019 | [***] | February 15, 2019 | [***] | February 15, 2019 | [***] | February 15, 2019 | [***] | February 15, 2019 | [***] | |||||||||||||||||
March 15, 2019 | [***] | March 15, 2019 | [***] | March 15, 2019 | [***] | March 15, 2019 | [***] | March 15, 2019 | [***] | |||||||||||||||||
April 15, 2019 | [***] | April 15, 2019 | [***] | April 15, 2019 | [***] | April 15, 2019 | [***] | April 15, 2019 | [***] | |||||||||||||||||
May 15, 2019 | [***] | May 15, 2019 | [***] | May 15, 2019 | [***] | May 15, 2019 | [***] | May 15, 2019 | [***] | |||||||||||||||||
June 15, 2019 | [***] | June 15, 2019 | [***] | June 15, 2019 | [***] | June 15, 2019 | [***] | June 15, 2019 | [***] | |||||||||||||||||
July 15, 2019 | [***] | July 15, 2019 | [***] | July 15, 2019 | [***] | July 15, 2019 | [***] | July 15, 2019 | [***] | |||||||||||||||||
August 15, 2019 | [***] | August 15, 2019 | [***] | August 15, 2019 | [***] | August 15, 2019 | [***] | August 15, 2019 | [***] |
1 All Reg. Nos. are expected and subject to change pursuant to the EETC Transaction.
Aircraft Reg. No.: N88331, N88332, N82333 |
Aircraft Reg. No.: N86334 |
Aircraft Reg. No.: N88335 |
Aircraft Reg. No.: N86336, N87337 |
Aircraft Reg. No.: N82338, N87339, N85340 |
||||||||||||||||||||||
Payment Date | Ownership Rate | Payment Date | Ownership Rate |
Payment Date |
Ownership Rate |
Payment Date |
Ownership Rate |
Payment Date |
Ownership Rate | |||||||||||||||||
September 15, 2019 | [***] | September 15, 2019 | [***] |
September 15, 2019 |
[***] |
September 15, 2019 |
[***] |
September 15, 2019 |
[***] | |||||||||||||||||
October 15, 2019 | [***] | October 15, 2019 | [***] |
October 15, 2019 |
[***] |
October 15, 2019 |
[***] |
October 15, 2019 |
[***] | |||||||||||||||||
November 15, 2019 | [***] | November 15, 2019 | [***] |
November 15, 2019 |
[***] |
November 15, 2019 |
[***] |
November 15, 2019 |
[***] | |||||||||||||||||
December 15, 2019 | [***] | December 15, 2019 | [***] |
December 15, 2019 |
[***] |
December 15, 2019 |
[***] |
December 15, 2019 |
[***] | |||||||||||||||||
January 15, 2020 | [***] | January 15, 2020 | [***] |
January 15, 2020 |
[***] |
January 15, 2020 |
[***] |
January 15, 2020 |
[***] | |||||||||||||||||
February 15, 2020 | [***] | February 15, 2020 | [***] |
February 15, 2020 |
[***] |
February 15, 2020 |
[***] |
February 15, 2020 |
[***] | |||||||||||||||||
March 15, 2020 | [***] | March 15, 2020 | [***] |
March 15, 2020 |
[***] |
March 15, 2020 |
[***] |
March 15, 2020 |
[***] | |||||||||||||||||
April 15, 2020 | [***] | April 15, 2020 | [***] |
April 15, 2020 |
[***] |
April 15, 2020 |
[***] |
April 15, 2020 |
[***] | |||||||||||||||||
May 15, 2020 | [***] | May 15, 2020 | [***] |
May 15, 2020 |
[***] |
May 15, 2020 |
[***] |
May 15, 2020 |
[***] | |||||||||||||||||
June 15, 2020 | [***] | June 15, 2020 | [***] |
June 15, 2020 |
[***] |
June 15, 2020 |
[***] |
June 15, 2020 |
[***] | |||||||||||||||||
July 15, 2020 | [***] | July 15, 2020 | [***] |
July 15, 2020 |
[***] |
July 15, 2020 |
[***] |
July 15, 2020 |
[***] | |||||||||||||||||
August 15, 2020 | [***] | August 15, 2020 | [***] |
August 15, 2020 |
[***] |
August 15, 2020 |
[***] |
August 15, 2020 |
[***] | |||||||||||||||||
September 15, 2020 | [***] | September 15, 2020 | [***] |
September 15, 2020 |
[***] |
September 15, 2020 |
[***] |
September 15, 2020 |
[***] | |||||||||||||||||
October 15, 2020 | [***] | October 15, 2020 | [***] |
October 15, 2020 |
[***] |
October 15, 2020 |
[***] |
October 15, 2020 |
[***] | |||||||||||||||||
November 15, 2020 | [***] | November 15, 2020 | [***] |
November 15, 2020 |
[***] |
November 15, 2020 |
[***] |
November 15, 2020 |
[***] | |||||||||||||||||
December 15, 2020 | [***] | December 15, 2020 | [***] |
December 15, 2020 |
[***] |
December 15, 2020 |
[***] |
December 15, 2020 |
[***] | |||||||||||||||||
January 15, 2021 | [***] | January 15, 2021 | [***] |
January 15, 2021 |
[***] |
January 15, 2021 |
[***] |
January 15, 2021 |
[***] | |||||||||||||||||
February 15, 2021 | [***] | February 15, 2021 | [***] |
February 15, 2021 |
[***] |
February 15, 2021 |
[***] |
February 15, 2021 |
[***] | |||||||||||||||||
March 15, 2021 | [***] | March 15, 2021 | [***] |
March 15, 2021 |
[***] |
March 15, 2021 |
[***] |
March 15, 2021 |
[***] | |||||||||||||||||
April 15, 2021 | [***] | April 15, 2021 | [***] |
April 15, 2021 |
[***] |
April 15, 2021 |
[***] |
April 15, 2021 |
[***] | |||||||||||||||||
May 15, 2021 | [***] | May 15, 2021 | [***] |
May 15, 2021 |
[***] |
May 15, 2021 |
[***] |
May 15, 2021 |
[***] | |||||||||||||||||
June 15, 2021 | [***] | June 15, 2021 | [***] |
June 15, 2021 |
[***] |
June 15, 2021 |
[***] |
June 15, 2021 |
[***] | |||||||||||||||||
July 15, 2021 | [***] | July 15, 2021 | [***] |
July 15, 2021 |
[***] |
July 15, 2021 |
[***] |
July 15, 2021 |
[***] | |||||||||||||||||
August 15, 2021 | [***] | August 15, 2021 | [***] |
August 15, 2021 |
[***] |
August 15, 2021 |
[***] |
August 15, 2021 |
[***] | |||||||||||||||||
September 15, 2021 | [***] | September 15, 2021 | [***] |
September 15, 2021 |
[***] |
September 15, 2021 |
[***] |
September 15, 2021 |
[***] | |||||||||||||||||
October 15, 2021 | [***] | October 15, 2021 | [***] |
October 15, 2021 |
[***] |
October 15, 2021 |
[***] |
October 15, 2021 |
[***] | |||||||||||||||||
November 15, 2021 | [***] | November 15, 2021 | [***] |
November 15, 2021 |
[***] |
November 15, 2021 |
[***] |
November 15, 2021 |
[***] | |||||||||||||||||
December 15, 2021 | [***] | December 15, 2021 | [***] |
December 15, 2021 |
[***] |
December 15, 2021 |
[***] |
December 15, 2021 |
[***] | |||||||||||||||||
January 15, 2022 | [***] | January 15, 2022 | [***] |
January 15, 2022 |
[***] |
January 15, 2022 |
[***] |
January 15, 2022 |
[***] | |||||||||||||||||
February 15, 2022 | [***] | February 15, 2022 | [***] |
February 15, 2022 |
[***] |
February 15, 2022 |
[***] |
February 15, 2022 |
[***] | |||||||||||||||||
March 15, 2022 | [***] | March 15, 2022 | [***] |
March 15, 2022 |
[***] |
March 15, 2022 |
[***] |
March 15, 2022 |
[***] | |||||||||||||||||
April 15, 2022 | [***] | April 15, 2022 | [***] |
April 15, 2022 |
[***] |
April 15, 2022 |
[***] |
April 15, 2022 |
[***] | |||||||||||||||||
May 15, 2022 | [***] | May 15, 2022 | [***] |
May 15, 2022 |
[***] |
May 15, 2022 |
[***] |
May 15, 2022 |
[***] | |||||||||||||||||
June 15, 2022 | [***] | June 15, 2022 | [***] |
June 15, 2022 |
[***] |
June 15, 2022 |
[***] |
June 15, 2022 |
[***] | |||||||||||||||||
July 15, 2022 | [***] | July 15, 2022 | [***] |
July 15, 2022 |
[***] |
July 15, 2022 |
[***] |
July 15, 2022 |
[***] | |||||||||||||||||
August 15, 2022 | [***] | August 15, 2022 | [***] |
August 15, 2022 |
[***] |
August 15, 2022 |
[***] |
August 15, 2022 |
[***] | |||||||||||||||||
September 15, 2022 | [***] | September 15, 2022 | [***] |
September 15, 2022 |
[***] |
September 15, 2022 |
[***] |
September 15, 2022 |
[***] | |||||||||||||||||
October 15, 2022 | [***] | October 15, 2022 | [***] |
October 15, 2022 |
[***] |
October 15, 2022 |
[***] |
October 15, 2022 |
[***] | |||||||||||||||||
November 15, 2022 | [***] | November 15, 2022 | [***] |
November 15, 2022 |
[***] |
November 15, 2022 |
[***] |
November 15, 2022 |
[***] | |||||||||||||||||
December 15, 2022 | [***] | December 15, 2022 | [***] |
December 15, 2022 |
[***] |
December 15, 2022 |
[***] |
December 15, 2022 |
[***] | |||||||||||||||||
January 15, 2023 | [***] | January 15, 2023 | [***] |
January 15, 2023 |
[***] |
January 15, 2023 |
[***] |
January 15, 2023 |
[***] | |||||||||||||||||
February 15, 2023 | [***] | February 15, 2023 | [***] |
February 15, 2023 |
[***] |
February 15, 2023 |
[***] |
February 15, 2023 |
[***] | |||||||||||||||||
March 15, 2023 | [***] | March 15, 2023 | [***] |
March 15, 2023 |
[***] |
March 15, 2023 |
[***] |
March 15, 2023 |
[***] | |||||||||||||||||
April 15, 2023 | [***] | April 15, 2023 | [***] |
April 15, 2023 |
[***] |
April 15, 2023 |
[***] |
April 15, 2023 |
[***] | |||||||||||||||||
May 15, 2023 | [***] | May 15, 2023 | [***] |
May 15, 2023 |
[***] |
May 15, 2023 |
[***] |
May 15, 2023 |
[***] | |||||||||||||||||
June 15, 2023 | [***] | June 15, 2023 | [***] |
June 15, 2023 |
[***] |
June 15, 2023 |
[***] |
June 15, 2023 |
[***] | |||||||||||||||||
July 15, 2023 | [***] | July 15, 2023 | [***] |
July 15, 2023 |
[***] |
July 15, 2023 |
[***] |
July 15, 2023 |
[***] | |||||||||||||||||
August 15, 2023 | [***] | August 15, 2023 | [***] |
August 15, 2023 |
[***] |
August 15, 2023 |
[***] |
August 15, 2023 |
[***] | |||||||||||||||||
September 15, 2023 | [***] | September 15, 2023 | [***] |
September 15, 2023 |
[***] |
September 15, 2023 |
[***] |
September 15, 2023 |
[***] | |||||||||||||||||
October 15, 2023 | [***] | October 15, 2023 | [***] |
October 15, 2023 |
[***] |
October 15, 2023 |
[***] |
October 15, 2023 |
[***] | |||||||||||||||||
November 15, 2023 | [***] | November 15, 2023 | [***] |
November 15, 2023 |
[***] |
November 15, 2023 |
[***] |
November 15, 2023 |
[***] | |||||||||||||||||
December 15, 2023 | [***] | December 15, 2023 | [***] |
December 15, 2023 |
[***] |
December 15, 2023 |
[***] |
December 15, 2023 |
[***] |
Aircraft Reg. No.: N88331, N88332, N82333 |
Aircraft Reg. No.: N86334 |
Aircraft Reg. No.: N88335 |
Aircraft Reg. No.: N86336, N87337 |
Aircraft Reg. No.: N82338, N87339, N85340 |
||||||||||||||||||||||
Payment Date | Ownership Rate | Payment Date | Ownership Rate | Payment Date | Ownership Rate | Payment Date | Ownership Rate | Payment Date | Ownership Rate | |||||||||||||||||
January 15, 2024 | [***] | January 15, 2024 | [***] | January 15, 2024 | [***] | January 15, 2024 | [***] | January 15, 2024 | [***] | |||||||||||||||||
February 15, 2024 | [***] | February 15, 2024 | [***] | February 15, 2024 | [***] | February 15, 2024 | [***] | February 15, 2024 | [***] | |||||||||||||||||
March 15, 2024 | [***] | March 15, 2024 | [***] | March 15, 2024 | [***] | March 15, 2024 | [***] | March 15, 2024 | [***] | |||||||||||||||||
April 15, 2024 | [***] | April 15, 2024 | [***] | April 15, 2024 | [***] | April 15, 2024 | [***] | April 15, 2024 | [***] | |||||||||||||||||
May 15, 2024 | [***] | May 15, 2024 | [***] | May 15, 2024 | [***] | May 15, 2024 | [***] | May 15, 2024 | [***] | |||||||||||||||||
June 15, 2024 | [***] | June 15, 2024 | [***] | June 15, 2024 | [***] | June 15, 2024 | [***] | June 15, 2024 | [***] | |||||||||||||||||
July 15, 2024 | [***] | July 15, 2024 | [***] | July 15, 2024 | [***] | July 15, 2024 | [***] | July 15, 2024 | [***] | |||||||||||||||||
August 15, 2024 | [***] | August 15, 2024 | [***] | August 15, 2024 | [***] | August 15, 2024 | [***] | August 15, 2024 | [***] | |||||||||||||||||
September 15, 2024 | [***] | September 15, 2024 | [***] | September 15, 2024 | [***] | September 15, 2024 | [***] | September 15, 2024 | [***] | |||||||||||||||||
October 15, 2024 | [***] | October 15, 2024 | [***] | October 15, 2024 | [***] | October 15, 2024 | [***] | October 15, 2024 | [***] | |||||||||||||||||
November 15, 2024 | [***] | November 15, 2024 | [***] | November 15, 2024 | [***] | November 15, 2024 | [***] | November 15, 2024 | [***] | |||||||||||||||||
December 15, 2024 | [***] | December 15, 2024 | [***] | December 15, 2024 | [***] | December 15, 2024 | [***] | December 15, 2024 | [***] | |||||||||||||||||
January 15, 2025 | [***] | January 15, 2025 | [***] | January 15, 2025 | [***] | January 15, 2025 | [***] | January 15, 2025 | [***] | |||||||||||||||||
February 15, 2025 | [***] | February 15, 2025 | [***] | February 15, 2025 | [***] | February 15, 2025 | [***] | February 15, 2025 | [***] | |||||||||||||||||
March 15, 2025 | [***] | March 15, 2025 | [***] | March 15, 2025 | [***] | March 15, 2025 | [***] | March 15, 2025 | [***] | |||||||||||||||||
April 15, 2025 | [***] | April 15, 2025 | [***] | April 15, 2025 | [***] | April 15, 2025 | [***] | April 15, 2025 | [***] | |||||||||||||||||
May 15, 2025 | [***] | May 15, 2025 | [***] | May 15, 2025 | [***] | May 15, 2025 | [***] | May 15, 2025 | [***] | |||||||||||||||||
June 15, 2025 | [***] | June 15, 2025 | [***] | June 15, 2025 | [***] | June 15, 2025 | [***] | June 15, 2025 | [***] | |||||||||||||||||
July 15, 2025 | [***] | July 15, 2025 | [***] | July 15, 2025 | [***] | July 15, 2025 | [***] | July 15, 2025 | [***] | |||||||||||||||||
August 15, 2025 | [***] | August 15, 2025 | [***] | August 15, 2025 | [***] | August 15, 2025 | [***] | August 15, 2025 | [***] | |||||||||||||||||
September 15, 2025 | [***] | September 15, 2025 | [***] | September 15, 2025 | [***] | September 15, 2025 | [***] | September 15, 2025 | [***] | |||||||||||||||||
October 15, 2025 | [***] | October 15, 2025 | [***] | October 15, 2025 | [***] | October 15, 2025 | [***] | October 15, 2025 | [***] | |||||||||||||||||
November 15, 2025 | [***] | November 15, 2025 | [***] | November 15, 2025 | [***] | November 15, 2025 | [***] | November 15, 2025 | [***] | |||||||||||||||||
December 15, 2025 | [***] | December 15, 2025 | [***] | December 15, 2025 | [***] | December 15, 2025 | [***] | December 15, 2025 | [***] | |||||||||||||||||
January 15, 2026 | [***] | January 15, 2026 | [***] | January 15, 2026 | [***] | January 15, 2026 | [***] | January 15, 2026 | [***] | |||||||||||||||||
February 15, 2026 | [***] | February 15, 2026 | [***] | February 15, 2026 | [***] | February 15, 2026 | [***] | February 15, 2026 | [***] | |||||||||||||||||
March 15, 2026 | [***] | March 15, 2026 | [***] | March 15, 2026 | [***] | March 15, 2026 | [***] | March 15, 2026 | [***] | |||||||||||||||||
April 15, 2026 | [***] | April 15, 2026 | [***] | April 15, 2026 | [***] | April 15, 2026 | [***] | April 15, 2026 | [***] | |||||||||||||||||
May 15, 2026 | [***] | May 15, 2026 | [***] | May 15, 2026 | [***] | May 15, 2026 | [***] | May 15, 2026 | [***] | |||||||||||||||||
June 15, 2026 | [***] | June 15, 2026 | [***] | June 15, 2026 | [***] | June 15, 2026 | [***] | June 15, 2026 | [***] | |||||||||||||||||
July 15, 2026 | [***] | July 15, 2026 | [***] | July 15, 2026 | [***] | July 15, 2026 | [***] | July 15, 2026 | [***] | |||||||||||||||||
August 15, 2026 | [***] | August 15, 2026 | [***] | August 15, 2026 | [***] | August 15, 2026 | [***] | August 15, 2026 | [***] | |||||||||||||||||
September 15, 2026 | [***] | September 15, 2026 | [***] | September 15, 2026 | [***] | September 15, 2026 | [***] | September 15, 2026 | [***] | |||||||||||||||||
October 15, 2026 | [***] | October 15, 2026 | [***] | October 15, 2026 | [***] | October 15, 2026 | [***] | October 15, 2026 | [***] | |||||||||||||||||
November 15, 2026 | [***] | November 15, 2026 | [***] | November 15, 2026 | [***] | November 15, 2026 | [***] | November 15, 2026 | [***] | |||||||||||||||||
December 15, 2026 | [***] | December 15, 2026 | [***] | December 15, 2026 | [***] | December 15, 2026 | [***] | December 15, 2026 | [***] | |||||||||||||||||
January 15, 2027 | [***] | January 15, 2027 | [***] | January 15, 2027 | [***] | January 15, 2027 | [***] | January 15, 2027 | [***] | |||||||||||||||||
February 15, 2027 | [***] | February 15, 2027 | [***] | February 15, 2027 | [***] | February 15, 2027 | [***] | February 15, 2027 | [***] | |||||||||||||||||
March 15, 2027 | [***] | March 15, 2027 | [***] | March 15, 2027 | [***] | March 15, 2027 | [***] | March 15, 2027 | [***] | |||||||||||||||||
April 15, 2027 | [***] | April 15, 2027 | [***] | April 15, 2027 | [***] | April 15, 2027 | [***] | April 15, 2027 | [***] | |||||||||||||||||
May 15, 2027 | [***] | May 15, 2027 | [***] | May 15, 2027 | [***] | May 15, 2027 | [***] | May 15, 2027 | [***] | |||||||||||||||||
June 15, 2027 | [***] | June 15, 2027 | [***] | June 15, 2027 | [***] | June 15, 2027 | [***] | June 15, 2027 | [***] | |||||||||||||||||
July 15, 2027 | [***] | July 15, 2027 | [***] | July 15, 2027 | [***] | July 15, 2027 | [***] | July 15, 2027 | [***] | |||||||||||||||||
August 15, 2027 | [***] | August 15, 2027 | [***] | August 15, 2027 | [***] | August 15, 2027 | [***] | August 15, 2027 | [***] | |||||||||||||||||
September 15, 2027 | [***] | September 15, 2027 | [***] | September 15, 2027 | [***] | September 15, 2027 | [***] | September 15, 2027 | [***] | |||||||||||||||||
October 15, 2027 | [***] | October 15, 2027 | [***] | October 15, 2027 | [***] | October 15, 2027 | [***] | October 15, 2027 | [***] | |||||||||||||||||
November 15, 2027 | [***] | November 15, 2027 | [***] | November 15, 2027 | [***] | November 15, 2027 | [***] | November 15, 2027 | [***] | |||||||||||||||||
December 15, 2027 | [***] | December 15, 2027 | [***] | December 15, 2027 | [***] | December 15, 2027 | [***] | December 15, 2027 | [***] | |||||||||||||||||
January 15, 2028 | [***] | January 15, 2028 | [***] | January 15, 2028 | [***] | January 15, 2028 | [***] | |||||||||||||||||||
February 15, 2028 | [***] | February 15, 2028 | [***] | February 15, 2028 | [***] | |||||||||||||||||||||
March 15, 2028 | [***] | March 15, 2028 | [***] | |||||||||||||||||||||||
April 15, 2028 | [***] | April 15, 2028 | [***] |
Schedule 6 Refund Amounts 2
Aircraft Reg. No.: N88331, N88332, N82333 |
Aircraft Reg. No.: N86334 |
Aircraft Reg. No.: N88335 |
Aircraft Reg. No.: N86336, N87337 |
Aircraft Reg. No.: N82338, N87339, N85340 |
||||||||||||||||||||||
Trigger Date | Payment | Trigger Date | Payment | Trigger Date | Payment | Trigger Date | Payment | Trigger Date | Payment | |||||||||||||||||
December 14, 2015 | [***] | December 14, 2015 | [***] | December 14, 2015 | [***] | December 14, 2015 | [***] | December 14, 2015 | [***] | |||||||||||||||||
January 15, 2016 | [***] | January 15, 2016 | [***] | January 15, 2016 | [***] | January 15, 2016 | [***] | January 15, 2016 | [***] | |||||||||||||||||
February 15, 2016 | [***] | February 15, 2016 | [***] | February 15, 2016 | [***] | February 15, 2016 | [***] | February 15, 2016 | [***] | |||||||||||||||||
March 15, 2016 | [***] | March 15, 2016 | [***] | March 15, 2016 | [***] | March 15, 2016 | [***] | March 15, 2016 | [***] | |||||||||||||||||
April 15, 2016 | [***] | April 15, 2016 | [***] | April 15, 2016 | [***] | April 15, 2016 | [***] | April 15, 2016 | [***] | |||||||||||||||||
May 15, 2016 | [***] | May 15, 2016 | [***] | May 15, 2016 | [***] | May 15, 2016 | [***] | May 15, 2016 | [***] | |||||||||||||||||
June 15, 2016 | [***] | June 15, 2016 | [***] | June 15, 2016 | [***] | June 15, 2016 | [***] | June 15, 2016 | [***] | |||||||||||||||||
July 15, 2016 | [***] | July 15, 2016 | [***] | July 15, 2016 | [***] | July 15, 2016 | [***] | July 15, 2016 | [***] | |||||||||||||||||
August 15, 2016 | [***] | August 15, 2016 | [***] | August 15, 2016 | [***] | August 15, 2016 | [***] | August 15, 2016 | [***] | |||||||||||||||||
September 15, 2016 | [***] | September 15, 2016 | [***] | September 15, 2016 | [***] | September 15, 2016 | [***] | September 15, 2016 | [***] | |||||||||||||||||
October 15, 2016 | [***] | October 15, 2016 | [***] | October 15, 2016 | [***] | October 15, 2016 | [***] | October 15, 2016 | [***] |
2 All Reg. Nos. are expected and subject to change pursuant to the EETC Transaction.
Exhibit 10.10.7
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
SIXTH AMENDMENT TO THE CAPACITY PURCHASE AGREEMENT
This Sixth Amendment (this Amendment ) to that certain Capacity Purchase Agreement, among United Airlines, Inc., a Delaware corporation ( United ), Mesa Airlines, Inc., a Nevada corporation ( Contractor ) and Mesa Air Group, Inc., a Nevada Corporation ( Parent ), dated as of August 29, 2013, (as previously amended by the parties thereto the Agreement ) is entered into by and between United, Contractor, and Parent and is effective as of December 1, 2015.
WHEREAS the parties desire to amend certain provisions of the Agreement as set forth in this Amendment: and
NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt, sufficiency, and adequacy of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. |
Section 3.4 (a) (iii) of the Agreement is hereby deleted in its entirety and replaced with the following: |
with respect to the E175 Covered Aircraft and CRJ Covered Aircraft, baggage handling claims, repairs and delivery costs related to Uncontrollable Delays, Uncontrollable Cancellations, Controllable Delays, and Controllable Cancellations and passenger-related interrupted trip costs (including hotel, meal, and ground transportation vouchers) related to Uncontrollable Delays and Uncontrollable Cancellations; provided that, for avoidance of doubt, Contractor is responsible for all passenger related interrupted trip costs (hotel, meal, and ground transportation vouchers) for all Controllable Delays and Controllable Cancellations).
2. |
Section 3.6 (a) (v) of the Agreement is hereby deleted in its entirety. |
3. |
Section 3,6 (a) (vii) of the Agreement is hereby deleted in its entirety. |
4. |
Section 3.6 (b) (i) (G) of the Agreement is hereby deleted in its entirety. |
5. |
Section 3.6 (b) (i) (H) of the Agreement is hereby deleted in its entirety. |
6. |
Section 3.6 (b) (i) (K) of the Agreement is hereby deleted in its entirety. |
7. |
Section 3.6 (b) (i) (L) of the Agreement is hereby deleted in its entirety. |
8. |
Section 3.6 (b) (iii) (A) (5) of the Agreement is hereby deleted in its entirely and replaced with the following: |
passenger-related interrupted trip costs (including hotel, meal and ground transportation vouchers) incurred by United related to Controllable Delays and Controllable Cancellations; provided that United will present Contractor interrupted trip expense costs by way of detailed report each month;
9. |
Schedule 2A of the Agreement is hereby deleted in its entirety and replaced with the revised Schedule 2A attached hereto and incorporated herein by reference. |
10. |
Schedule 2B of the Agreement is hereby deleted in its entirety and replaced with the revised Schedule 2B attached hereto and incorporated herein by reference, |
11. |
Exhibit G of the Agreement is hereby deleted in its entirety and replaced with the revised Exhibit G attached hereto and incorporated herein by reference. |
12. |
United agrees to invoice Mesa for any and all outstanding interrupted trip and baggage related costs due United under the agreement for costs prior to December 1, 2015 no later than June 1, 2016 |
13. |
The parties acknowledge that the amendments covered by this Amendment shall have a retroactive effective date of December 1, 2015 notwithstanding the date(s) of execution of this Amendment by the parties, It is further acknowledged that this Amendment is not intended to, nor does, amend any aspect of the Fifth Amendment to the Agreement dated December 14, 2015 by and between the parties. |
Except as otherwise specified herein, capitalized terms shall have the meanings ascribed to such terms in the Agreement. This Amendment may be executed in counterparts. Except as expressly amended in this Amendment, the Agreement will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed to duplicate (each of which duplicates are deemed to be on original) by their duly authorized representatives and made effective as of the date first set forth above.
UNITED AIRLINES, INC.
By:
Name: Bradford R. Rich
Title: Senior Vice President, United Express
|
MESA AIR GROUP, INC.
By:
Name:
Title:
|
MESA AIRLINES, INC.
By:
Name:
Title: |
SCHEDULE 2A
E175 Covered Aircraft Compensation for Carrier Controlled Costs
The following Table 1 shall apply per corresponding year to El75 Covered Aircraft Numbers 1 through 30 flown under this Agreement when Contractors ORD United Express flying represents [***] or more of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the Actual In-Service Date for each El 75 Covered Aircraft; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Year |
Category (1) | |||||||||||
for each block hour
|
for each flight hour
|
for each
|
for
|
per aircraft
|
per aircraft
3.6(b)(iii)(A)(8)
|
|||||||
2014 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2015 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
Dec 1, 2015 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2016 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2019 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2020 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2021 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2024 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2025 |
[***] | [***] | [***] | [***] | [***] | [***] |
Year |
Category (1) | |||||||||||
for each block hour
|
for each flight hour
|
for each
|
for
|
per aircraft
|
per aircraft
3.6(b)(iii)(A)(8)
|
|||||||
June 1, 2026 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
(1) The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A ) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
Effective as of September 20, 2014, the following Table 1A shall apply per corresponding year to E175 Covered Aircraft Numbers 1 through 30 flown under this Agreement when Contractors ORD United Express flying represents less than [***] of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||||
Year |
for each block hour |
for each flight hour |
for each
Scheduled Flight departure |
for
interrupted trip expense per passenger |
per aircraft
per month |
per aircraft per
3.6(b)(iii)(A)(8) |
||||||
September 20, 2014 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2015 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
Dec 1, 2015 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2016 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2019 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2020 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2021 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023 |
[***] | [***] | [***] | [***] | [***] | [***] |
Category (1) | ||||||||||||
Year |
for each block hour |
for each flight hour |
for each
Scheduled Flight departure |
for
interrupted trip expense per passenger |
per aircraft
per month |
per aircraft per
3.6(b)(iii)(A)(8) |
||||||
June 1, 2024 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2025 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2026 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
(1) The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A ) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
The following Table 2 shall apply per corresponding year to Block 1 of the 2015 New Aircraft with Aircraft Numbers 31 through 40 in the event Contractor purchases the E175 Covered Aircraft flown under this Agreement and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft with Aircraft Numbers 31 through 40; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for
|
Ownership
|
per aircraft
|
per aircraft in
|
||||||
April 2016 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018 |
[***] | [***] | [***] | [***] | [***] | [***] |
Category (1) | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for
|
Ownership
|
per aircraft
|
per aircraft in
|
||||||
June 1, 2019 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
Jane 1, 2020 | [***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2021 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2024 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2025 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2026 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2027 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
(1) The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A ) of the Agreement. |
||||||||||||
(2) The parties agree to adjust the ownership rates in accordance with Section 3.7(b) of the Agreement, pursuant to the amortization schedule associated with the issuance of the above contemplated EETC. |
The following Table 3 shall apply per corresponding year to Block 1 of the 2015 New Aircraft with Aircraft Numbers 31 through 40 in the event United purchases the B175 Covered Aircraft flown under this Agreement and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft with Aircraft Numbers 31 through 40; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||
Year
|
for each block hour
|
for each flight hour
|
for interrupted trip expense per departure
|
per aircraft
|
per aircraft in schedule per month
|
|||||
April 2016 | [***] | [***] | [***] | [***] | [***] | |||||
June I, 2017 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2018 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2019 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2020 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2021 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2022 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2023 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2024 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2025 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2026 |
[***] | [***] | [***] | [***] | [***] | |||||
June 1, 2027 |
[***] | [***] | [***] | [***] | [***] |
(1) The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A ) of the Agreement. |
The following Table 4 shall apply per corresponding year to Block 2 of the 2015 New Aircraft and Block 3 of the 2015 New Aircraft with Aircraft Numbers 41 through and including 48 and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft with Aircraft Numbers 41 through and including 48; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Category (1) | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for
|
Ownership
|
per aircraft
|
per aircraft in
|
||||||
December 2015 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2017 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2018 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2019 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2020 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2021 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2022 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2023 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2024 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2025 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2026 |
[***] | [***] | [***] | [***] | [***] | [***] | ||||||
June 1, 2027 |
[***] | [***] | [***] | [***] | [***] | [***] |
(1) The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A ) of the Agreement. |
(2) The parties agree to adjust the ownership rates in accordance with Section 3.7(b) of the Agreement, pursuant to the amortization schedule associated with the issuance of the above contemplated EETC. |
SCHEDULE 2B
CRJ Covered Aircraft Compensation for Carrier Controlled Costs
The following rales shall apply to ail CRJ Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents [***] or more of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the In-Service Date for each CRJ Covered Aircraft:
Category | ||||||||||||||||||
United Cancelled Flights | ||||||||||||||||||
for each block hour |
for each aircraft in schedule |
for each
Scheduled Flight departure |
for
Interrupted trip expense per passenger |
for each
completed passenger |
per aircraft
per month |
per month |
for each
block hour for United Cancelled Flight |
for each
United Cancelled Flight |
||||||||||
June 2013 |
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
January 2014
|
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 2014
|
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2015
|
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
Dec 1, 2015
|
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2016
|
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2017
|
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2018
|
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2019
|
[***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] |
Effective as of September 20, 2014, the following rates shall apply to all CRJ Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents less than [***] of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft:
Category | ||||||||||||||||||
United Cancelled Flights | ||||||||||||||||||
for each block hour |
for each aircraft in schedule |
for each
Scheduled Flight departure |
for
Interrupted trip expense per passenger |
for each
completed passenger |
per aircraft
per month |
per month |
for each
block hour for United Cancelled Flight |
for each
United Cancelled Flight |
||||||||||
September 20, 2014 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2015 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
December 1, 2015 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2016 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2017 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2018 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | |||||||||
June 1, 2019 | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] | [***] |
EXHIBIT G
Catering Standards
INFLIGHT PRODUCT SALES PROGRAM
United will market a portfolio of inflight products for purchase on United Express flights which includes liquor, beer, wine, food, or other product offerings. Contractor will administer the program related to such in-flight sales (the Inflight Product Sales Program ) as Uniteds representative following all policies and procedures of United. The initial policies and procedures established by United for the sale of products onboard Contractors flights under the Agreement with United are set forth below. United reserves the right to change the product offerings, policies and procedures associated with the Inflight Product Sales Program at any time and in its sole discretion.
Station Services
● |
United, or Uniteds catering agent, will provide catering services as directed by United. |
● |
United or its catering agent will provide supplies, food, liquor, other beverage, and other product uplift as necessary and will remove, store and re-board perishable supply and beverage items on Remain Over Night (RON)/originating flights at airports designated by United as catering airports. |
● |
In respect of all catering items (including the Inflight Product Sales Programs), Contractor will coordinate and communicate with United or Uniteds catering agent regarding all flight activity, cancellations and irregular operations providing necessary information in a timely manner. |
Onboard Services
● |
United has right to determine meal/beverage and other product offering service parameters and scheduling for Scheduled Flights. |
● |
United has right to conduct onboard service audits on Scheduled Flights to ensure service standards are being met. |
● |
Contractor shall ensure that all flight attendants providing Regional Airline Services are trained on meal and beverage service procedures, including liquor and duty-free sales and cash handling, and will collect all on-board revenue for food, liquor, duty-free sales and/or any other products for sale. |
● |
With respect to the CRJ Covered Aircraft, Contractor will provide, at Contractors cost and expense, (i) the initial galley service ships equipment per aircraft to operate, such as food/beverage galley carts , trash carts, and carrier boxes (the Galley Service Equipment ), and (ii) other galley shipset equipment such as trays, hot jugs, and coffee makers (Other Equipment).(it being acknowledged that the CRJ Covered Aircraft was delivered to United with two (2) half meal service carts and two (2) half trash carts and not the configuration for |
the Galley Service Equipment described above),. In conjunction with this Amendment, the cart configuration for the CRJ Covered Aircraft has changed to three (3) half size food/beverage galley carts, three (3) carrier boxes and one (1) half size trash cart. United shall provide, at Uniteds cost and expense, the replacement of the Galley Service Equipment, in the newer configuration described in the foregoing sentence as needed; provided that if United shows that such replacement was needed due to damage caused by Contractors negligence or willful misconduct, then Contractor, not United, shall pay for the costs of such replacement Upon replacement, if the replacement is at Uniteds cost and expense, then, without further act by either party, title to the replacement Galley Service Equipment shall vest in United free and clear of any liens attributable to Contractor. Contractor shall provide, at its cost and expense, the replacement of Other Equipment, as needed. |
● |
With respect to the El75 Covered Aircraft, United will provide, at Uniteds cost and expense, (i) the initial Galley Service Equipment , and (ii) Other Equipment. United shall provide, at Uniteds cost and expense, the replacement of the Galley Service Equipment and Other Equipment as needed; provided that if United shows that such replacement was needed due to damage caused by Contractors negligence or willful misconduct, then Contractor, not United, shall pay for the costs of such replacement. Upon replacement, if the replacement is at Uniteds cost and expense, then, without further act by either party, title to the replacement Galley Service Equipment shall vest in United free and clear of any liens attributable to Contractor. |
● |
With respect to both CRJ Covered Aircraft and the E175 Covered Aircraft, United shall provide, at Uniteds cost and expense, any additional Galley Service Equipment and only, in the case of the E175 Covered Aircraft, any additional Other Equipment plus additional Galley Service Equipment, in each case as may be necessary for Contractors inflight catering services if more than one shipset per aircraft of any item is required in Uniteds reasonable discretion. Galley Service Equipment and Other Equipment where provided by United for the inflight catering services provided by Contractor as part of the Regional Airline Services shall hereinafter be referred to as the United Supplemental Equipment . Contractors initial shipset of Galley Service Equipment per CRJ Covered Aircraft is referred to herein below as the Contractor Equipment , and when combined with the Galley Service Equipment provided by United, may be referred to herein below as the Combined Equipment . |
● |
In addition, the parties agree as follows: |
1. |
Contractor acknowledges that in accordance with Uniteds galley cart exchange program, Contractor Equipment as well as the Galley Service Equipment provided by United, if any, will not be specifically assigned to or otherwise designated to the Contractor; rather, they will be rotated among Uniteds mainline aircraft and the aircraft operated by the United Express carriers, as cart exchanges are scheduled by United. |
2. |
A shipset of Galley Service Equipment per regional jet shall consist of three (3) half size food/beverage galley carts, three (3) carrier boxes, and one (1) half size trash cart unless otherwise expressly provided herein. |
3. |
The Combined Equipment will be maintained in accordance with Uniteds galley cart maintenance program, as defined in Uniteds Food Services Business Manual, Section 4. |
As such, Contractors staff shall ensure that defective or damaged carts and carriers on the aircraft are tagged with the Galley Equipment Needs Repair tag. |
4. |
Contractor shall use reasonable measures, including appropriate administrative, technical and physical safeguards, to secure the Combined Equipment and Other Equipment on each of the aircraft operated by Contractor in its Regional Airline Services and while the Combined Equipment and Other Equipment axe in the care, control or custody of Contractor. Contractor agrees to notify United promptly whenever any Combined Equipment or Other Equipment has been, or Contractor reasonably believes or suspects that any such Combined Equipment or Other Equipment has been, lost, damaged or destroyed. |
5. |
Any Combined Equipment and/or Other Equipment, where provided by United, which is lost will be replaced by United at Uniteds cost and expense; provided, the cost of any Combined Equipment or Other Equipment (provided by United) procured to replace such lost Combined Equipment or Other Equipment will be borne by Contractor to the extent United shows that such Combined Equipment and/or Other Equipment was lost due to Contractors negligence or willful misconduct. Any Combined Equipment and/or Other Equipment (provided by United) that is unaccounted for will be considered lost, If the Combined Equipment and/or Other Equipment (provided by United) was last in the care, custody or control of Contractor and has been lost due to Contractors negligence or willful misconduct, United reserves the right to set-off the cost to replace any such lost Combined Equipment and/or Other Equipment pursuant to Section 3,6(c)(ii) and Section 11.13 of the Agreement |
6. |
United will provide, at Uniteds cost and expense, the replacement of any damaged or worn out Combined Equipment and/or Other Equipment (provided by United) as needed; provided, that any Combined Equipment and/or Other Equipment (provided by United) that is damaged will be replaced at Contractors expense if United shows that such replacement was needed due to damage caused by Contractors negligence or willful misconduct. Worn out Combined Equipment and/or Other Equipment (provided by United) will be considered damaged for purposes of the foregoing provision. United reserves the right to set-off the cost to repair or replace any such damaged equipment pursuant to Section 3.6(c)(ii) and Section 11.13 of the Agreement. Upon replacement, without further act by either party, title to the replacement Combined Equipment and Other Equipment shall vest in United free and clear of any liens attributable to Contractor. |
7. |
Contractor acknowledges that the United Supplemental Equipment is owned solely by United. Subject to Section 9 below, United acknowledges that the Contractor Equipment is owned solely by Contractor. Contractor shall ensure that any and all United Supplemental Equipment and all other supplies and equipment of United or other United Express carriers that are provided by or on behalf of United in connection with Uniteds Inflight Product Sales Program remain free and clear from any liens attributable to Contractor. United shall ensure that any and all Contractor Equipment remains free and clear from any liens attributable to United. In the event that any liens not permitted hereunder arise, the responsible party will obtain a bond to fully satisfy such liens or otherwise remove such liens at its sole cost and expense within fourteen (14) days, |
8. |
Upon the earlier to occur of (i) the termination of Uniteds inflight catering service program for United Express flights, as determined by United, (ii) the termination of this Agreement, or (iii) the cessation of the use of the United Supplemental Equipment by the Contractor, as determined by United in its sole discretion (for the sole purposes of this paragraph, such date shall be referred to as the Service End Date), Contractor shall cooperate with United or its designated vendor for the collection and return of all United Supplemental Equipment to United at the address designated by United, with such reasonable shipment cost to be borne by United. Contractor shall return the United Supplemental Equipment in its care, custody or control within thirty (30) days of the Service End Date in the same condition as the condition of the equipment when Contractor received such United Supplemental Equipment, reasonable wear and tear excepted. United shall bear any reasonable out of pocket shipment cost to return such United Supplemental Equipment to United. United shall only ship United Supplemental Equipment from established United catering locations; in the event the United Supplemental Equipment is located at a non-catering location (such as, but not limited to, the Contractors training facility) then Contractor shall bear the shipment cost to return the United Supplemental Equipment to a United catering location. United Supplemental Equipment which is damaged due to Contractors negligence or willful misconduct when received back by United or its designee will be replaced by United at Contractors expense. Worn out United Supplemental Equipment shall be considered damaged for the purposes of the foregoing sentence, United reserves the right to set-off the cost associated with the replacement of any such damaged or worn out United Supplemental Equipment pursuant to Section 3,6(c)(ii) and Section 11.13 of the Agreement, For the avoidance of doubt, in addition, as of the Service End Date, Contractor shall retain or have returned to it one used shipset of Galley Service Equipment equal to the number of Contractor Equipment shipsets provided by Contractor as contemplated herein, and in the same configuration as provided by Contractor, subject to reasonable wear and tear, which may or may not be the initial Contractor Equipment initially supplied (any such shipset of Galley Service Equipment, the Contractor Returned Equipment ). United shall bear any reasonable out of pocket shipment cost to return such Contractor Returned Equipment to Contractor. United shall only ship Contractor Returned Equipment from established United catering locations; in the event the Contractor Returned Equipment is located at a non-catering location (such as, but not limited to, the Contractors training facility) then Contractor shall bear the shipment cost to return the Contractor Returned Equipment to a United catering location. |
9. |
As of the date of return following the Service End Date, title to any Contractor Returned Equipment returned to Contractor or retained by Contractor as contemplated herein shall, without further act by either party, vest in Contractor free and clear of any liens attributable to United. Title to any United Supplemental Equipment returned to United or retained by United, or to any Contractor Equipment other than the Contractor Returned Equipment that is returned to United or retained by United, as contemplated herein shall, without further act by either party, vest in United free and clear of any Hens attributable to Contractor, |
● |
United will provide all liveried catering items, including cups, napkins, etc. as well as all products in the Inflight Product Sales Program, |
TECHNOLOGY
The sale of product onboard Contractors flights under the Agreement will involve non-cash transactions. United will provide a single hand held device (each such device, an HHD and collectively, the HHD units ) necessary to process credit and debit card transactions for each aircraft in Contractors fleet operating as United Express. Contractor shall only swipe the customer s credit or debit card into the HHD unit for the purpose of processing the customers transaction and shall not otherwise use or record the customer information. The HHD units provided by United shall only be used for Uniteds business purposes.
The HHD units and the information contained therein shall be deemed the confidential and proprietary equipment and information of United and its licensors and shall be subject to the confidentiality terms and conditions set forth in the Agreement for other types of confidential information of United. Contractor shall not, and shall not permit others to, reverse engineer, decompile, disassemble or translate the HHD units, including any firmware or software that is loaded upon the units, or otherwise attempt to view, display or print the source code embedded in the HHD units, or any firmware or software loaded on the HHD units, Contractor shall ensure that any and all HHD units and all other supplies and equipment of United or its licensors that are provided by or on behalf of United in connection with Uniteds Inflight Product Sales Program remain free and clear from any liens attributable to Contractor.
Upon the earlier to occur of (i) the termination of Uniteds Inflight Product Sales Program, (ii) the termination of this Agreement, or (iii) the cessation of the use of the HHD units by Contractor, as determined by United in its sole discretion, Contractor shall cooperate with United or its designated vendor for the collection and return of all HHD units to United at the address designated by United, at Uniteds cost. Contractor shall return the HHD units in as good a condition as reasonably possible, except for reasonable wear and tear thereof.
Contractor shall use commercially reasonable efforts to keep secure the HHD on each aircraft. Contractor agrees to notify United whenever any HHD unit has been, or Contractor reasonably believes or suspects that any HHD unit has been, lost, acquired, destroyed, modified, used, disclosed or accessed by any person in an unauthorized manner or for an unauthorized purpose (collectively, Security Breach ), Contractor further agrees to provide all reasonable assistance requested by United or Uniteds designated representatives, in the furtherance of any correction, remediation, investigation, enforcement or litigation with respect to a Security Breach, including but not limited to, any notification that United may determine appropriate to send to individuals impacted or potentially impacted by a Security Breach.
Lost equipment will be replaced by United. Replacement costs will be borne by Contractor. Any equipment that is unaccounted for and for which no transactions have been logged for 48 hours will be considered lost and, if United shows that such equipment is lost due to Contractors negligence, United reserves the right to set-off the replacement cost of such lost equipment by taking a credit of such excess replacement cost pursuant to the procedures set forth in Section 11.13 of the Agreement.
Any HHD unit that is damaged beyond reasonable wear and tear which is shown by United to be due to Contractors negligence, will be replaced at Contractors expense. United reserves the right to set-off the replacement cost associated with such damaged HHD unit by taking a credit of such excess replacement cost pursuant to the procedures set forth in Section 11.13 of the Agreement.
United, at its cost, will provide or cause to be provided by a vendor of Uniteds choice the maintenance and battery replacement for the HHD units. Such maintenance and battery replacement will be provided at predetermined intervals designed to maximize HHD and battery useful life, and Contractor will have the right to request maintenance at different times than the predetermined intervals or additional battery replacement at Uniteds cost upon request. In the event Contractors request for maintenance is related to a faulty or defective HHD unit, United shall pay the vendor directly for such non-routine service call.
United will provide at its sole cost and expense (including all out of pocket costs and reimbursement of Contractors labor costs) for initial train the trainer training to a reasonable number of Contractor-designated trainers on the use of the HHD. Such cost will be negotiated and agreed upon by the parties. Contractor will be required to (i) retain the training skill beyond the initial train the trainer training provided by United and (ii) provide training to Contractors crew personnel at Contractors own expense.
PRODUCT LOSS AND PILFERAGE
United will establish procedures aimed at limiting product loss. At a minimum, it is required that Contractors Flight Attendants record opening and closing inventories of each product to be sold onboard, accounting for all sales and complimentary items distributed.
Seals may be required to prevent tampering with product inventories and to deter pilferage. United will monitor all inventories and reserves the right to charge Contractor for identified loss (including breakage and other damage) and pilferage on a cost (non mark-up) basis determined monthly. Any discrepancies in inventories, seal numbers recorded, or excessive complimentary activity for any product sold must be reported at the hub for use in pilferage investigations by United. Contractors failure to provide documentation as reasonably requested by United or its representatives will result in Contractor being charged for pilferage as reasonably determined by United on a cost basis. United reserves the right to set off the value of the loss and/or pilferage on a cost (non mark-up) basis, by taking a credit of such loss and/or pilferage pursuant to the procedures set forth in Section 11.13 of the Agreement. All reasonable product loss and pilferage procedures established by United must be adhered to by Contractor.
United may, at any time during normal operating hours inspect, monitor, or audit Contractors administration of the Inflight Product Sales Program described in this Appendix or b other policies and procedures, b order to verify that Contractor is in compliance, in all material respects, with Uniteds requirements for the Inflight Product Sales Program. Contractor will work with United to ensure reasonably appropriate controls exist designed to comply with United s requirements and will ensure corrective actions are in place as necessary.
LIQUOR BEER AND WINE PROGRAM
The Alcoholic Beverage Products offering will be determined by United and provided for by United in the liquor kit supplied to each aircraft. Except as prohibited by law or otherwise agreed by United and Contractor due to the various applicable liquor license laws and regulations, the Alcoholic Beverage Products will be purchased by United prior to being placed onboard Contractors aircraft and sold onboard all United Express flights designated by United.
Once onboard Contractors aircraft, liquor drawers, bags or other liquor containment mechanisms used by Contractor, as determined by Contractor, are considered a part of ships equipment and will be used for the distribution of Uniteds inflight products.
Contractor shall not serve any Alcoholic Beverage Produces) on the ground without Uniteds consent Contractor will obtain and maintain liquor licenses in the states where they board and/or unload any Alcoholic Beverage Product Unless otherwise agreed by the parties, Contractor will not board or unload any Alcoholic Beverage Products in Virginia but in the event it is agreed that Contractor will board or unload any Alcoholic Beverage Products in Virginia, the parties shall comply with the procedures for Virginia below.
Virginia Alcoholic Beverage Handling Procedures
Contractor will comply with Virginias liquor purchase procedures. In Virginia, Contractor will board and/or unload only Alcoholic Beverage Products that Contractor owns, To that end, in the event it is agreed by the parties that Contractor will board and/or unload any Alcoholic Beverage Products in Virginia, Contractor will purchase such Alcoholic Beverage Products directly. Contractor will timely pay the supplier of such Alcoholic Beverage Products directly for such order(s). Once out of Virginia airspace, Contractor will transfer to United the title to the purchased Alcoholic Beverage Products. United will be responsible for any sales tax attributable to the foregoing title transfer,
FOOD AND OTHER PRODUCTS
United reserves the right to introduce other products for sale onboard including food offerings. Food offerings may come in a variety of packaging options and will be integrated into the entire portfolio with regards to specifications and procedures established by United.
Provisioning of product offering will follow Uniteds procedures at distribution points.
Exhibit 10.10.9
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION VERSION
EIGHTH AMENDMENT TO THE CAPACITY PURCHASE AGREEMENT
This Eighth Amendment (this Amendment ) to that certain Capacity Purchase Agreement, among United Airlines, Inc., a Delaware corporation ( United ), Mesa Airlines, Inc., a Nevada corporation ( Contractor ), and Mesa Air Group, Inc., a Nevada corporation ( Parent ), dated as of August 29, 2013 (as previously amended by the parties thereto, the Agreement ) is entered into by and between United, Contractor and Parent and is effective as of June 6, 2016.
WHEREAS , the parties desire to amend certain provisions of the Agreement in accordance with the terms and conditions of this Amendment.
NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt, sufficiency, and adequacy of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. |
Section 2.4(b)(ii) is hereby amended to delete the last sentence thereof and replace it with the following: |
Notwithstanding anything to the contrary in this Agreement, (i) any 2.4(b) Notice given by United with respect to the EETC Aircraft must be given with respect to all of the EETC Aircraft and (ii) the provisions of clause (i) and the two provisos of the immediately preceding sentence shall not apply to any 2.4(b) Notice with respect to the EETC Aircraft or any Secured Loan Aircraft.
2. |
Section 3.6 is hereby amended to add the following after Section 3.6(d): |
(e) Ownership Rate For Secured Loan Aircraft . As compensation for the cost of ownership of each Secured Loan Aircraft, United shall pay to Contractor an amount equal to each regularly scheduled payment of principal and interest with respect to the loan under the Secured Loan Agreement with respect to such Secured Loan Aircraft on or before the first Business Day before the payment date on which such payment is due under the applicable Secured Loan Agreement (the Secured Loan Ownership Rate ), provided that United shall have no obligation to make any Secured Loan Ownership Rate payment with respect to a Secured Loan Aircraft (x) to the extent United shall have paid the corresponding principal and interest payment pursuant to Uniteds guaranty under the applicable Secured Loan Transaction and United has not been reimbursed as of the date such Secured Loan Ownership Rate payment is due or (y) if such payment would otherwise first become due on any such payment date that occurs after the earliest of (i) the date of withdrawal of such Secured Loan Aircraft from the capacity purchase provisions of this Agreement, (ii) the date of purchase of such Secured Loan Aircraft by United, and (iii) the date that all principal of and interest on the loans under the Secured Loan Agreements with respect to such Secured Loan Aircraft shall have been paid in full, and such Secured Loan Aircraft shall cease to be a Secured Loan Aircraft on such earliest date. United shall be entitled to set-off against its obligation to make any Secured Loan Ownership Rate payment with respect to any Secured Loan Aircraft any amount that United shall have paid under Uniteds
guaranty with respect to any due and unpaid Contractor obligation under the related Secured Loan Transaction for which United has not been reimbursed as of the date such Secured Loan Ownership Rate payment is due.
3. |
Section 3.7 is hereby amended by inserting after the fourth sentence in the last paragraph thereof the following: |
The preceding provisions of this Section 3.7 shall only apply to the EETC Transaction.
4. |
Article III is hereby amended to add the following after Section 3.7: |
3.8 Secured Loan Financings
(a) United and Contractor will make good faith efforts to finance the Contractors acquisition of each Secured Loan Eligible Aircraft on the terms set forth in the three separate Indicative Outline Proposal of Terms and Conditions, one each with Norddeutsche Landesbank Girozentrale, Credit Industriel et Commercial and Commonwealth Bank of Australia, dated May 6, 2016, May 10, 2016, and May 5, 2016, respectively, subject to such changes as Contractor and United shall agree. The size, advance rate, coupon, term, and amortization profile of the loan under each Secured Loan Transaction shall be acceptable to Contractor and are subject to Uniteds prior written approval.
(b) Unless otherwise agreed by United in writing, if any Secured Loan Eligible Aircraft is financed in a Secured Loan Transaction, Contractor will contribute approximately US $[***] toward the purchase of each of such Secured Loan Aircraft, which amount will be adjusted to equal the actual purchase price of such Secured Loan Aircraft less the amount of debt funded, including the junior loan, for such Aircraft.
(c) Each of United and Contractor shall bear its own costs and expenses (including legal fees and expenses of its counsel) incurred in connection with any Secured Loan Transaction, provided that United shall pay to SkyBlue Capital LLC the arrangers fees with respect to the Secured Loan Transactions agreed between United and SkyBlue Capital LLC and United shall reimburse Contractor for (i) any Arrangement Fee and any Commitment Fee paid by Contractor pursuant to any Secured Loan Agreement, (ii) any amounts paid by Contractor to any lender or secured party pursuant to any Secured Loan Agreement in respect of expenses incurred by such lender or secured party (including reasonable fees and disbursements of counsel to such party) in connection with the preparation, negotiation, execution or delivery of such Secured Loan Agreement and the other transaction documents related thereto and any subsequent amendment to such Secured Loan Agreement or any such other document, and (iii) any amounts paid by Contractor pursuant to any Secured Loan Agreement with respect to fees and expenses of FAA counsel in connection with any Secured Loan Transaction.
(d) United shall reimburse Contractor for (i) any amounts Contractor is required to and has paid to any lender pursuant to a Secured Loan Agreement in respect of such lenders increased costs attributable to such lender acquiring or holding any note issued under such Secured Loan Agreement, or any reduction in any amount receivable by such lender in respect of such note, in any case resulting from a change in law or a regulatory change, (ii) any amounts Contractor is required to and has paid to any initial lender under a Secured Loan Agreement in respect of liquidity breakage costs arising from such initial lender fixing the applicable margin with respect to such Secured Loan Agreement or (iii) any amounts Contractor is required to pay and has paid to or for the benefit of any lender pursuant to a Secured Loan Agreement with respect to taxes imposed on payments under such Secured Loan Agreement.
(e) If the loans advanced to Contractor under a Secured Loan Transaction relating to a Secured Loan Aircraft shall have been prepaid in full at the instruction of United and using funds provided or arranged by United, United shall have the option, exercisable by giving Contractor at least ten Business Days written notice, to effect a refinancing of such Secured Loan Aircraft simultaneously with or subsequent to such prepayment on terms not worse for Contractor to more than a de minimis extent than those under the applicable Secured Loan Transaction (in which case the net proceeds from such refinancing shall be paid to United or its designee and the Secured Loan Ownership Rate shall be adjusted to cover regularly scheduled payments of principal and interest with respect to such new loan secured by such Secured Loan Aircraft). In connection with any transaction pursuant to the preceding sentence, United and Contractor shall use commercially reasonable efforts to cause any such transaction to be closed and shall execute and deliver documentation customary for the applicable transaction and reasonably acceptable to the parties thereto. United shall pay or cause to be paid all expenses of any such refinancing and shall reimburse Contractor for its reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) incurred in connection with such refinancing.
(f) If any lender or any secured party on behalf of any lender under any Secured Loan Transaction shall have exercised remedies following any Event of Default (howsoever defined) under any Secured Loan Agreement or related security agreement due solely to a United Bankruptcy Default or due to Contractors failure to make any payment of principal or interest when due with respect to any loan made under any Secured Loan Agreement and such Contractor payment default is due solely to Uniteds failure to timely make any Secured Loan Ownership Rate payment when required under this Agreement (each, a United Precipitated Default ), United shall reimburse Contractor for all amounts required to be paid by Contractor to or on behalf of any lender under the applicable Secured Loan Agreement or related transaction documents with respect to such Event of Default including, without limitation, default interest, breakage costs, indemnity payments and any other fees, costs and expenses payable to such lender or any secured party on behalf of such lender, but excluding any amounts to the extent arising from or attributable to a breach by Contractor of any of its obligations under
circumstances where such Contractor breach does not arise from or is not attributable to such United Precipitated Default.
(g) If a United Bankruptcy Default shall have occurred and be continuing, within 30 days after the date of such occurrence Contractor may, without the consent of United, (i) pay the principal of, accrued interest on and all other amounts due with respect to the loans under any Secured Loan Transaction pursuant to Section 2.5 of the related Secured Loan Agreements (senior and junior) or (ii) arrange for the complete release of United from all obligations with respect to any Secured Loan Transaction in lieu of such repayment coupled with repayment of any junior loan with respect to which United is the holder of the related promissory note, following which Contractor may elect to withdraw from the capacity purchase provisions of this Agreement the Secured Loan Aircraft with respect to such Secured Loan Transaction(s) by giving written notice of withdrawal to United within 30 days after the occurrence of such United Bankruptcy Default. Such notice shall specify the Termination Date with respect to the Secured Loan Aircraft, which shall be five (5) Business Days after the date of such notice. Prior to the Termination Date, United shall deliver to Contractor an irrevocable written Wind-Down Schedule beginning on such Termination Date, which may not provide for the withdrawal of any Secured Loan Aircraft on any date more than thirty (30) days after the Termination Date. Contractor shall determine which specific Secured Loan Aircraft shall be withdrawn on all dates as required by, and in accordance with, the Wind-Down Schedule.
(h) Notwithstanding anything in this Agreement to the contrary, Contractor shall not be required to operate, and shall not be in breach of this Agreement or otherwise liable to United for damages or compensation under any provision of this Agreement including, without limitation, Section 8.4 , arising out of or attributable to any failure of Contractor to operate any Secured Loan Aircraft the operation of which by Contractor is precluded by the exercise of remedies by or on behalf of any lender under any Secured Loan Agreement or related security agreement in connection with a United Bankruptcy Default.
5. |
Section 10.1(a) is hereby amended by adding the following after the last sentence thereof: |
Notwithstanding anything to the contrary in this Agreement, if this Agreement is terminated with respect to one or more Secured Loan Aircraft at a time when any such Secured Loan Aircraft is subject to a Secured Loan Security Interest, the provisions of Section 10.1 shall not apply to such Secured Loan Aircraft.
6. |
Section 10.6(a) is hereby amended to insert at the end of the first sentence thereof the following: |
; and provided , further , that no security interest shall be granted hereby in any property to the extent that such grant is prohibited by any agreement that comprises part of a Secured Loan Transaction.
7. |
Table 2 and Table 4 of Schedule 2A each is hereby amended by deleting the column with the caption Ownership rate and deleting footnote (2). |
8. |
Exhibit A of the Agreement is hereby amended to add the following new definitions: |
Secured Loan Agreement means a loan agreement entered into by Contractor, as borrower, as part of a Secured Loan Transaction.
Secured Loan Aircraft means each Secured Loan Eligible Aircraft that is financed pursuant to a Secured Loan Transaction.
Secured Loan Eligible Aircraft means Aircraft Number 34 through and including Aircraft Number 40 in Block 1 of the 2015 New Aircraft and Aircraft Number 48 in Block 3 of New Aircraft.
Secured Loan Ownership Rate is defined in Section 3.6(e).
Secured Loan Security Interest means a security interest granted on a Secured Loan Aircraft in connection with a Secured Loan Transaction.
Secured Loan Transaction means the financing of any Secured Loan Eligible Aircraft pursuant to Section 3.8(a). For the avoidance of doubt, the financing of each such aircraft shall be a separate Secured Loan Transaction.
United Bankruptcy Default means the occurrence of any of the following events:
(a) United shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization, liquidation or other relief in a proceeding under the U.S. Bankruptcy Code (as in effect at such time) or United shall seek relief by voluntary petition, answer, or consent under the provisions of any other bankruptcy or other similar law providing for the reorganization or winding-up of corporations (as in effect at such time); or
(b) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of United, a receiver, trustee or liquidator of United or of substantially all of its property, or sequestering substantially all of the property of United, and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed, unstayed or unvacated for a period of 90 days after the date of entry thereof; or
(c) a petition against United in a proceeding under the U.S. Bankruptcy Code (as in effect at such time) or any other bankruptcy laws or other insolvency laws shall be filed and shall not be withdrawn or dismissed within 90 days thereafter, or, under the provisions of any law providing for reorganization or winding-up of corporations which may apply to United, any court of competent jurisdiction shall
assume jurisdiction, custody or control of United or of substantially all of its property and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of 90 days.
Except as otherwise specified herein, capitalized terms shall have the meanings ascribed to such terms in the Agreement. This Amendment may be executed in counterparts. Except as expressly amended in this Amendment, the Agreement will remain in full force and effect.
[Remainder of this page is blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
By: |
Name: Ted Davidson Title: Vice President - Procurement |
MESA AIR GROUP, INC. |
By: |
Name: Brian S. Gillman Title: EVP & General Counsel |
MESA AIRLINES, INC. |
By: |
Name: Brian S. Gillman Title: EVP & General Counsel |
Exhibit 10.10.10
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
NINTH AMENDMENT TO THE CAPACITY PURCHASE AGREEMENT
This Ninth Amendment (this Amendment ) is entered into this XXX day of January, 2017 by and among United Airlines, Inc., a Delaware corporation ( United ), Mesa Airlines, Inc., a Nevada corporation ( Contractor ) and Mesa Air Group, Inc., a Nevada Corporation ( Parent ) and is effective as of XXX XX , 2017.
WHEREAS , United, Contractor and Parent are parties to that certain Capacity Purchase Agreement, dated as of August 29, 2013 (as previously amended by the parties thereto, the Agreement ) (Capitalized teams not otherwise defined herein will have the same meanings as those contained in the Agreement.);
WHEREAS , the parties desire to amend the Agreement to add twelve (12) E175 aircraft, which will be purchased by United and leased by United to Contractor, as Covered Aircraft to the Agreement; and
WHEREAS , such additional E175 Covered Aircraft will not be considered Growth Aircraft; and
WHEREAS , the parties desire to amend certain provisions of the Agreement and
NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. |
Section 2.4(b) is amended by deleting the phrase: |
With respect to E175 covered Aircraft with Aircraft Numbers 1 through and including 30
and replacing it with the following:
With respect to United Owned E175 Covered Aircraft.
2. |
Section 3.3(a) is amended by deleting the phrase: |
Covered Aircraft with Aircraft Numbers 1 through 30 (as set forth on Schedule 1 to the Agreement)
and replacing it with the following:
United Owned E 175 Covered Aircraft.
3. |
Article III is hereby amended to add a new subsection, 3.6(a) (ix), as follows: |
a fixed margin rate (not subject to escalation) of [***] for each United Owned E175 Covered Aircraft that are numbered 49 through 60.
1
4. |
Section 3.6(b)(iii)(A)(8) is amended by deleting each of the three instances of the phrase: |
E175 covered Aircraft Numbers 1 through and including 30
and replacing each with the following:
United Owned E175 Covered Aircraft.
5. |
Section 3.6(b)(iii)(A)(9) is amended by deleting the phrase: |
E175 covered Aircraft Numbers 1 through and including 30
and replacing it with the following:
United Owned E175 Covered Aircraft.
6. |
Section 3.6(b)(iii)(A)(10) is amended by deleting the phrase: |
E175 covered Aircraft Numbers 1 through and including 30
and replacing it with the following:
United Owned E175 Covered Aircraft.
7. |
Section 3.6(b)(iii)(A)(11) is amended by deleting the phrase: |
E175 covered Aircraft Numbers 1 through and including 30
and replacing it with the following:
United Owned E175 Covered Aircraft.
8. |
Section 3.6(b)(iii)(A)(12) is amended by deleting the phrase: |
E175 covered Aircraft Numbers 1 through and including 30
and replacing it with the following:
United Owned E175 Covered Aircraft.
9. |
Section 3.6(b)(iii)(A)(13) is amended by deleting the phrase: |
E175 covered Aircraft Numbers 1 through and including 30
and replacing it with the following:
United Owned E175 Covered Aircraft.
2
10. |
Section 3.6(d) is deleted in its entirety and replaced with the following: |
(d) Ownership Rate . As compensation for the cost of ownership of the ten (10) 2015 New Aircraft financed pursuant to the EETC Transaction as listed by expected U.S. registration number ( Reg. No .) in Schedule 5 hereto (the EETC Aircraft ), United shall pay to Contractor during the calendar month of the payment date set forth in Schedule 5 hereto on the Table therein applicable to such EETC Aircraft the amount set forth opposite such payment date on such Table (the Ownership Rate ), in four (4) equal installments during such month (consistent with the payment schedule referenced in Section 3.6(c)(i)) , provided that United shall have no obligation to make a payment with respect to an EETC Aircraft that would otherwise be due during the calendar month of any such payment date that occurs after the earliest of (i) in the case of any EETC Aircraft not previously financed pursuant to the EETC Transaction, the date that such EETC Aircraft is no longer able to be financed pursuant to the EETC Transaction, (ii) the date of withdrawal of such EETC Aircraft from the capacity purchase provisions of this Agreement, (iii) the date of purchase of such EETC Aircraft by United and (iv) the date that all equipment notes issued in the EETC Transaction with respect to such EETC Aircraft shall have been paid in full, and such EETC Aircraft shall cease to be an EETC Aircraft on such earliest date. If an EETC Aircraft ceases to be an EETC Aircraft pursuant to clause (i) of the preceding sentence, within five Business Days after the date of such cessation (the Trigger Date ), Contractor shall pay to United the amount set forth in Schedule 6 hereto on the Table therein applicable to such Aircraft opposite the Trigger Date (or, if such Trigger Date is not set forth on such Table, opposite the date set forth on such Table immediately preceding such Trigger Date).
11. |
Section 3.6(e) is deleted in its entirety and replaced with the following: |
(e) Ownership Rate For Secured Loan Aircraft . As compensation for the cost of ownership of each Secured Loan Aircraft, United shall pay to Contractor an amount equal to each regularly scheduled payment of principal and interest with respect to the loan under the Secured Loan Agreement with respect to such Secured Loan Aircraft in four (4) equal installments during the calendar month (consistent with the payment schedule referenced in Section 3.6(c)(i)) of the payment date on which such payment is due under the applicable Secured Loan Agreement (the Secured Loan Ownership Rate ), provided that United shall have no obligation to make any Secured Loan Ownership Rate payment with respect to a Secured Loan Aircraft (x) to the extent United shall have paid the corresponding principal and interest payment pursuant to Uniteds guaranty under the applicable Secured Loan Transaction and United has not been reimbursed as of the first day of the month in during which such Secured Loan Ownership Rate payment is due or (y) if such payment would otherwise first become due on any such payment month that occurs after the earliest of (i) the date of withdrawal of such Secured Loan Aircraft from the capacity purchase provisions of this Agreement, (ii) the date of purchase of such Secured Loan Aircraft by United, and (iii) the date that all principal of and interest on the loans under the Secured Loan Agreements with respect to such Secured Loan Aircraft shall have been paid in full, and such Secured Loan Aircraft shall cease to be a Secured
3
Loan Aircraft on such earliest date. United shall be entitled to set-off against its obligation to make any Secured Loan Ownership Rate payment with respect to any Secured Loan Aircraft any amount that United shall have paid under Uniteds guaranty with respect to any due and unpaid Contractor obligation under the related Secured Loan Transaction for which United has not been reimbursed as of the date such Secured Loan Ownership Rate payment is due.
12. |
The following new Section 10.9 is added to the Agreement: |
10.9 |
New Aircraft Configuration . Contractor shall ensure that any Covered Aircraft added to scope of this Agreement materially conform to Uniteds then-current specifications, including, but not limited to, specifications for aircraft configuration, galley, seats, winglets, and other standards, and that such aircraft are consistent with the specifications and livery applicable to such fleet type. |
13. |
Schedule 1 is deleted in its entirety and replaced with the revised Schedule 1 attached hereto. |
14. |
Schedule lA is deleted in its entirety and replaced with the revised Schedule lA attached hereto. |
15. |
Schedule 2A is deleted in its entirety and replaced with the revised Schedule 2A attached hereto. |
16. |
Exhibit A is amended by the addition of the following new definition: |
United Owned E175 Covered Aircraft means those E175 Covered Aircraft identified as United owned E175 Covered Aircraft on Schedule 1 .
17. |
Exhibit A is amended by deleting the definition Committed Delivery Date. |
18. |
Condition precedent . This Amendment will have no effect until the following conditions precedent have been met: |
(a) |
This Amendment has been executed United, Contractor and Parent; |
(b) |
United has received an assignment from Republic Airlines, Inc. of the right to purchase the twelve (12) E175 aircraft that are the subject of this Amendment pursuant to terms that are reasonably acceptable to United; and |
(c) |
Uniteds senior management and board of directors have approved the purchase of the purchase of the twelve (12) E175 aircraft that are the subject of this Amendment. |
19. |
This Amendment may be executed in multiple counterparts, each which will be considered an original hereof. Except as expressly amended in this Amendment, the Agreement will remain in full force and effect. |
[SIGNATURE PAGE FOLLOWS]
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duty authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
By: |
Name: Gerald Laderman |
Title: Senior Vice President Finance and acting |
Chief Financial Officer |
MESA AIR GROUP, INC. |
By: |
Name: |
Title: |
MESA AIRLINES, INC. |
By: |
Name: |
Title: |
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
By: |
Name: Gerald Laderman |
Title: Senior Vice President Finance and acting |
Chief Financial Officer |
MESA AIR GROUP, INC. |
By: |
Name: |
Title: |
MESA AIRLINES, INC. |
By: |
Name: |
Title: |
6
SCHEDULE 1
Covered Aircraft
Table 1: E175 Covered Aircraft
Aircraft No. |
Aircraft Type |
Tail No. |
MSN |
Actual
Date |
Actual In-
Service
|
Scheduled
Exit Date |
Scheduled
Term |
Category | ||||||||
1. | E175 | N87302 | 17000394 | 4/11/2014 | 6/15/2014 | 6/15/2019 | 5 years | United Owned | ||||||||
2. | E175 | N88301 | 17000388 | 3/26/2014 | 7/15/2014 | 7/15/2019 | 5 years | United Owned | ||||||||
3. | E175 | N87303 | 17000398 | 4/25/2015 | 7/15/2014 | 7/20/2019 | 5 years | United Owned | ||||||||
4. | E175 | N89304 | 17000406 | 6/16/2014 | 8/10/2014 | 8/10/2019 | 5 years | United Owned | ||||||||
5. | E175 | N93305 | 17000412 | 7/25/2014 | 8/19/2014 | 8/19/2019 | 5 years | United Owned | ||||||||
6. | E175 | N87306 | 17000414 | 7/25/2014 | 9/10/2014 | 9/10/2019 | 5 years | United Owned | ||||||||
7. | E175 | N84307 | 17000419 | 9/8/2014 | 9/20/2014 | 9/20/2019 | 5 years | United Owned | ||||||||
8. | E175 | N89308 | 17000422 | 9/11/2014 | 10/5/2014 | 10/5/2019 | 5 years | United Owned | ||||||||
9. | E175 | N86309 | 17000426 | 10/9/2014 | 10/26/2014 | 10/26/2019 | 5 years | United Owned | ||||||||
10. | E175 | N88310 | 17000427 | 10/16/2014 | 11/10/2014 | 11/10/2019 | 5 years | United Owned | ||||||||
11. | E175 | N86311 | 17000429 | 10/16/2014 | 11/20/2014 | 11/20/2019 | 5 years | United Owned | ||||||||
12. | E175 | N86312 | 17000432 | 11/6/2014 | 12/3/2014 | 12/3/2019 | 5 years | United Owned | ||||||||
13. | E175 | N89313 | 17000433 | 11/6/2014 | 12/18/2014 | 12/18/2019 | 5 years | United Owned | ||||||||
14. | E175 | N82314 | 17000436 | 11/20/2014 | 12/30/2014 | 12/30/2019 | 5 years | United Owned | ||||||||
15. | E175 | N89315 | 17000437 | 11/20/2014 | 1/6/2015 | 1/6/2020 | 5 years | United Owned | ||||||||
16. | E175 | N86316 | 17000438 | 12/4/2014 | 1/24/2015 | 1/24/2020 | 5 years | United Owned | ||||||||
17. | E175 | N89317 | 17000442 | 12/4/2014 | 2/12/2015 | 2/12/2020 | 5 years | United Owned | ||||||||
18. | E175 | N87318 | 17000443 | 12/16/2014 | 2/20/2015 | 2/20/2020 | 5 years | United Owned | ||||||||
19. | E175 | N87319 | 17000448 | 12/18/2014 | 3/5/2015 | 3/5/2020 | 5 years | United Owned | ||||||||
20. | E175 | N85320 | 17000454 | 2/26/2015 | 3/25/2015 | 3/25/2020 | 5 years | United Owned | ||||||||
21. | E175 | N89321 | 17000459 | 3/5/2015 | 4/7/2015 | 4/7/2020 | 5 years | United Owned | ||||||||
22. | E175 | N86322 | 17000465 | 4/9/2015 | 4/23/2015 | 4/23/2020 | 5 years | United Owned | ||||||||
23. | E175 | N85323 | 17000469 | 4/9/2015 | 5/6/2015 | 5/6/2020 | 5 years | United Owned |
7
24. | E175 | N86324 | 17000471 | 4/16/2015 | 5/24/2015 | 5/24/2020 | 5 years | United Owned | ||||||||
25. | E175 | N88325 | 17000474 | 5/14/2015 | 6/4/2015 | 6/4/2020 | 5 years | United Owned | ||||||||
26. | E175 | N88326 | 17000478 | 5/21/2015 | 6/20/2015 | 6/20/2020 | 5 years | United Owned | ||||||||
27. | E175 | N88327 | 17000479 | 6/8/2015 | 7/2/2015 | 7/2/2020 | 5 years | United Owned | ||||||||
28. | E175 | N88328 | 17000480 | 6/11/2015 | 7/25/2015 | 7/25/2020 | 5 years | United Owned | ||||||||
29. | E175 | N88329 | 17000487 | 6/25/2015 | 8/10/2015 | 8/10/2020 | 5 years | United Owned | ||||||||
30. | E175 | N88330 | 17000488 | 6/29/2015 | 8/18/2015 | 8/18/2020 | 5 years | United Owned | ||||||||
31. | E175 | N87337 | 17000551 | 3/22/2016 | 6/9/2016 | 6/9/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
32. | E175 | N87339 | 17000559 | 5/16/2016 | 7/11/2016 | 7/11/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
33. | E175 | N85340 | 17000562 | 5/23/2016 | 7/25/2016 | 7/24/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
34. | E175 | N88341 | 17000563 | 6/7/2016 | 8/15/2016 | 8/15/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
35. | E175 | N89342 | 17000570 | 6/23/2016 | 8/22/2016 | 8/22/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
36. | E175 | N80343 | 17000571 | 7/6/2016 | 9/12/2016 | 9/12/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
37. | E175 | N86344 | 17000534 | 7/7/2016 | 9/12/2016 | 9/12/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
38. | E175 | N87345 | 17000582 | 8/18/2016 | 10/17/2016 | 10/17/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
39. | E175 | N88346 | 17000583 | 8/18/2016 | 10/17/2016 | 10/17/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
40. | E175 | N86347 | 17000599 | 9/22/2016 | 11/26/2016 | 11/26/2028 | 12 years | Block 1 2015 New Aircraft | ||||||||
41. | E175 | N88331 | 17000530 | 12/18/2015 | 1/25/2016 | 1/25/2028 | 12 years | Block 2 2015 New Aircraft | ||||||||
42. | E175 | N88332 | 17000531 | 12/22/2015 | 2/18/2016 | 2/28/2028 | 12 years | Block 2 2015 New Aircraft | ||||||||
43. | E175 | N82333 | 17000532 | 12/22/2016 | 3/1/2016 | 3/1/2028 | 12 years | Block 2 2015 New Aircraft |
8
44. | E175 | N86334 | 17000534 | 1/29/2016 | 3/15/2016 | 3/15/2028 | 12 years | Block 2 2015 New Aircraft | ||||||||
45. | E175 | N88335 | 17000538 | 2/15/2016 | 4/5/2016 | 4/5/2028 | 12 years | Block 3 2015 New Aircraft | ||||||||
46. | E175 | N86336 | 17000548 | 3/22/2016 | 6/8/2016 | 6/8/2028 | 12 years | Block 3 2015 New Aircraft | ||||||||
47. | E175 | N82338 | 17000552 | 5/10/2016 | 7/11/2016 | 7/11/2028 | 12 years | Block 3 2015 New Aircraft | ||||||||
48. | E175 | N80348 | 17000591 | 9/29/2016 | 11/30/2016 | 11/30/2028 | 12 years | Block 3 2015 New Aircraft | ||||||||
49. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
50. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
51. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
52. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
53. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
54. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
55. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
56. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
57. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
58. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
59. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned | ||||||||
60. | E175 | TBD | TBD | Note 1(b) | Note 1(e) | Note 1(g) | 5 years | United Owned |
Note 1 Relating to all Covered Aircraft (except where specified otherwise):
a) |
No later than one hundred and fifty (150) days prior to the scheduled delivery date for an aircraft set forth on Schedule 1A (the Scheduled Delivery Date), United shall inform Contractor if there is any change to the Scheduled In-Service Date (as specified in Table 1A), for such Covered Aircraft, it being understood that (x) such communication from United to Contractor shall not be binding for purposes of selecting the actual Committed In-Service Date pursuant to Clause (d) of this Note 1, below, and (y) such dates shall be used by Contractor and United in anticipating aircraft available to schedule and with respect to any applicable Final Monthly Schedule. The date that an aircraft is actually delivered to United or to Contractor |
9
pursuant to Section 10.7, as the case may be will be referred to as the Actual Delivery Date. |
b) |
Subject to the provisions to the first sentence of Section 2.1(a) of this Agreement, United shall provide a final notice of the actual delivery date of any United Owned E175 Covered Aircraft (the Final Notice) to Contractor no later than the earlier of (x) Actual Delivery Date, and (y) the day following the completion of the final inspection of such aircraft, which notice shall determine the delivery date of the aircraft for purposes of this Schedule 1, and which determination shall be confirmed in writing by the parties. |
c) |
United shall use its commercially reasonable efforts to provide Contractor with notice regarding the delivery status of each United Owned E175 Covered Aircraft from time to time in advance of the delivery of a Final Notice with respect to such E175 Covered Aircraft, including without limitation information relating to the commencement of the delivery inspection period, delays in delivery, or otherwise relating to the delivery of such aircraft. |
d) |
Following the determination of the Actual Delivery Date for a Covered Aircraft, Contractor shall inform United of a projected Actual In-Service Date for such aircraft (the Committed In-Service Date), which shall be no later than the first to occur of (x) the 60th day following the Actual Delivery Date, except in the case of United Owned E175 Aircraft 49 through and including 60, the 30th day following the Actual Delivery Date, and (y) the date set forth under the caption Scheduled In-Service Date for such aircraft on Schedule 1A (as such Scheduled In-Service Date may be amended pursuant to clause (a) of this Note 1 or delayed by, and only to the extent such date is delated by, a delay attributable to the manufacturer or by a delay due to an Act of God that continues for fewer than fifteen (15) days). |
e) |
On the date that any Covered Aircraft becomes available to schedule under the provisions of this Agreement, such aircraft shall be deemed to have been placed into service hereunder (such date being the Actual In-Service Date for such aircraft. |
f) |
As soon as practicable following the determination of the Actual Delivery Date and the Actual In-Service for an E175 Covered Aircraft, the parties hereto shall revise Schedule 1 accordingly. |
g) |
The scheduled exit date (the Scheduled Exit Date) for Covered Aircraft will be the date that is the number of years specified for such aircraft in Table 1 above after the Actual In-Service Date of such Covered Aircraft. |
h) |
Following the determinations of the Actual Delivery Date (as applicable), the Actual In-Service Date and the Scheduled Exit date for Covered Aircraft Contract and United shall update this Schedule 1 accordingly, and Schedule 1 will be deemed to be amended accordingly without any further action by the parties hereto. |
Note 2 Relating to all United Owned E175 Covered Aircraft:
The Scheduled Exit Dates set forth in the above table shall be adjusted from time to time to reflect any extension of the Term for any United Owned E175 Covered Aircraft pursuant to Section 10.2 of this Agreement.
10
Note 3 [RESERVED]
Note 4 Relating to 2015 New Aircraft:
The delivery dates and in-service dates for 2015 New Aircraft must satisfy the following conditions:
a) |
No later than one hundred fifty (150) days prior to the Scheduled Delivery Date for each 2015 New Aircraft, or as soon as practically possible for any of the 2015 New Aircraft, as set forth on Schedule 1A attached hereto, Contractor and United shall meet to discuss the dates that are likely to be selected as the Committed In-Service Date for each of the 2015 New Aircraft, it being understood that (x) such discussions shall not be binding for purposes of selecting the actual Committed In-Service Date pursuant to clause (d) below, and (y) such dates shall be used by Contractor and United in anticipating aircraft available to schedule and with respect to any applicable Final Monthly Schedule. |
b) |
Ninety (90), sixty (60) and thirty (30) days prior to the Scheduled Delivery Date for each of the 2015 New Aircraft as set forth on Schedule 1A attached hereto, and reasonably from time to time thereafter, Contractor shall provide United with notice regarding the delivery status of such 2015 New Aircraft, including without limitation information relating to the commencement of the delivery inspection period (which notice is anticipated to be given no later than twenty (20) days prior to actual delivery date of such aircraft), delays in delivery, or otherwise relating to the delivery of such aircraft. |
c) |
With respect to each 2015 New Aircraft, Contractor shall provide a Final Notice to United no later than the earlier of (x) the Actual Delivery Date, and (y) the Actual Delivery Date, and which determination shall be confirmed in writing by the parties. |
d) |
Following the determination of the Actual Delivery Date for a 2015 New Aircraft pursuant to clause (c) above, the parties shall determine a Committed In-Service Date, which shall be note later than the first to occur of (x) the 60th day following the Actual Delivery Date and (y) the date set forth under the caption Scheduled In-Service Date for such aircraft on Schedule 1A attached hereto (as such Scheduled In-Service Date may be delayed by, and only to the extent such date is delayed by, a delay attributable to the manufacturer or by a delay due to an Act of God that continues for fewer than fifteen (15) days), and which determination shall be confirmed in writing by the parties. |
Table 2 CRJ Covered Aircraft
Aircraft Number |
Aircraft Type | Tail Number |
CRJ Scheduled
Delivery Date |
CRJ
In-Service
Date |
||||
01 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
02 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
11
03 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
04 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
05 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
06 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
07 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
08 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
09 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
10 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
11 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
12 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
13 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
14 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
15 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
16 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
17 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
18 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
19 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
|||||
20 |
CRJ700 |
September 1, 2013 |
September 1, 2013 |
12
Table 3 CRJ Covered Aircraft
Aircraft Number | CRJ Scheduled Exit Date 12 | Scheduled Term 3 | ||
01 | August 31, 2019 | 6 yrs 3 mos | ||
02 | August 31, 2019 | 6 yrs 3 mos | ||
03 | August 31, 2019 | 6 yrs 3 mos | ||
04 | August 31, 2019 | 6 yrs 3 mos | ||
05 | September 30, 2019 | 6 yrs 4 mos | ||
06 | September 30, 2019 | 6 yrs 4 mos | ||
07 | September 30, 2019 | 6 yrs 4 mos | ||
08 | September 30, 2019 | 6 yrs 4 mos | ||
09 | October 31, 2019 | 6 yrs 5 mos | ||
10 | October 31, 2019 | 6 yrs 5 mos | ||
11 | October 31, 2019 | 6 yrs 5 mos | ||
12 | October 31, 2019 | 6 yrs 5 mos | ||
13 | November 30, 2019 | 6 yrs 6 mos | ||
14 | November 30, 2019 | 6 yrs 6 mos | ||
15 | November 30, 2019 | 6 yrs 6 mos | ||
16 | November 30, 2019 | 6 yrs 6 mos | ||
17 | December 31, 2019 | 6 yrs 7 mos | ||
18 | December 31, 2019 | 6 yrs 7 mos | ||
19 | December 31, 2019 | 6 yrs 7 mos | ||
20 | December 31, 2019 | 6 yrs 7 mos |
SCHEDULE 1A
E175 Covered Aircraft Scheduled Delivery Dates and Scheduled In-Service Dates
1 The CRJ Scheduled Exit Dates and Schedule Term set forth in the above table shall be adjusted from time to time to reflect any extension of Term for any CRJ Covered Aircraft pursuant to Section 10.2 of this Agreement and to coincide with the schedule change date within Uniteds Scheduling system most closely following any applicable exit date.
2 Contractor shall provide United, not later than ninety (90) days prior to each CRJ Scheduled Exit Date, with specific tail numbers identifying the CRJ Covered Aircraft to be terminated on such date.
3 Upon the CRJ Scheduled Exit Date, the Term associated with each of the CRJ Covered Aircraft shall expire.
13
Aircraft Number | Scheduled Delivery Date | Scheduled In-Service Date | ||
1. | 30-Mar-14 | 31-Jul-14 | ||
2. | 30-Apr-14 | 14-Aug-14 | ||
3. | 30-Apr-14 | 14-Aug-14 | ||
4. | 30-Jun-14 | 14-Sep-14 | ||
5. | 30-Ju1-14 | 30-Sep-14 | ||
6. | 30-Jul-14 | 15-Oct-14 | ||
7. | 30-Aug-14 | 31-Oct-14 | ||
8. | 30-Aug-14 | 14-Nov-14 | ||
9. | 30-Oct-14 | 15-Dec-14 | ||
10. | 30-Oct-14 | 15-Dec-14 | ||
11. | 30-Oct-14 | 14-Jan-14 | ||
12. | 30-Nov-14 | 14-Jan-14 | ||
13. | 30-Nov-14 | 14-Feb-15 | ||
14. | 30-Nov-14 | 14-Feb-15 | ||
15. | 30-Dec-14 | 17-Mar-15 | ||
16. | 30-Dec-14 | 17-Mar-15 | ||
17. | 30-Dec-14 | 17-Mar-15 | ||
18. | 28-Feb-15 | 14-Apr-15 | ||
19. | 28-Feb-15 | 14-Apr-15 | ||
20. | 30-Mar-15 | 15-May-15 | ||
21. | 30-Mar-15 | 15-May-15 | ||
22. | 30-Apr-15 | 14-Jun-15 | ||
23. | 30-Apr-15 | 14-Jun-15 | ||
24. | 30-May-15 | 15-Jul-15 | ||
25. | 30-Jun-15 | 14-Aug-15 | ||
26. | 30-Jun-15 | 14-Aug-15 | ||
27. | 30-Jun-15 | 14-Sep-15 | ||
28. | 30-Jul-15 | 14-Sep-15 | ||
29. | 30-Jul-15 | 15-Oct-15 | ||
30. | 30-Jun-15 | 15-Sep-15 |
14
31. | Apr-16 | 8-Jun-16 | ||
32. | May-16 | 11-Jul-16 | ||
33. | May-16 | 25-Jul-15 | ||
34. | Jun-16 | 15-Aug-16 | ||
35. | Jun-16 | 22-Aug-16 | ||
36. | Jul-16 | 12-Sep-16 | ||
37. | Jul-16 | 12-Sep-16 | ||
38. | Aug-16 | 17-Oct-16 | ||
39. | Aug-16 | 17-Oct-17 | ||
40. | Sep-16 | 26-Nov-16 | ||
41. | Dec-15 | 25-Jan-16 | ||
42. | Dec-15 | 18-Feb-16 | ||
43. | Dec-15 | 1-Mar-16 | ||
44. | Jan-16 | 15-Mar-16 | ||
45. | Feb-16 | 5-Apr-16 | ||
46. | Apr-16 | 8-Jun-16 | ||
47. | May-16 | 11-Jul-16 | ||
48. | Sep-16 | 30-Nov-16 | ||
49. | May-17 | Note 1 | ||
50. | May-17 | Note 1 | ||
51. | Jun-17 | Note 1 | ||
52. | Jun-17 | Note 1 | ||
53. | Jul-17 | Note 1 | ||
54. | Aug-17 | Note 1 | ||
55. | Sept-17 | Note 1 | ||
56. | Oct-17 | Note 1 | ||
57. | Oct-17 | Note 1 | ||
58. | Nov-17 | Note 1 | ||
59. | Dec-17 | Note 1 | ||
60. | Dec-17 | Note 1 |
15
*Notwithstanding the date listed for this aircraft, Contractor agrees to use its best efforts to place this aircraft in service by it associated Target In-Service Date.
Note 1 The scheduled in service date for these Covered Aircraft will be no sooner than May, 2017, subject to such acceleration or other variation as United and Contractor may mutually agree in writing from time to time, each party acting reasonably, to meet each parties operational requirements.
SCHEDULE 2A
E175 Covered Aircraft Compensation for Carrier Controlled Costs
The following Table 1 shall apply per corresponding year to United Owned E175 Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents [***] or more of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the Actual In-Service Date for each such United Owned E175 Covered Aircraft; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Table 1 United Owned E175 Covered (ORD > 50%)
Category 45 |
||||||||||||
Year
|
for each block hour
|
for each
|
for each
|
for
|
per aircraft
|
per aircraft per month AD payment
pursuant to
3.6(b)(iii)(A)(8)
|
||||||
2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Dec 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
4 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance.
5 Aircraft Numbers 49 through and included 60 will be paid a fixed margin rate of [***] per aircraft, per month with no escalation due throughout the term.
16
Category 45 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for each
|
for
|
per aircraft
|
per aircraft per month AD payment
pursuant to
3.6(b)(iii)(A)(8)
|
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Jane 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Jane 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
Effective as of September 20, 2014, the following Table 1A shall apply per corresponding year to United Owned E175 Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents less than [***] of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Table 1A United Owned E175 Covered (ORD < [***] )
17
Category 67 |
||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for each
|
for
|
per aircraft
|
per aircraft per month AD payment
pursuant to
3.6(b)(iii)(A)(8)
|
||||||
September 20, 2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Dec 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Jane 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Jane 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
The following Table 2 shall apply per corresponding year to Block 1 of the 2015 New Aircraft and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft; provided, however, once such a 2015 New Aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown
6 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance.
7 Aircraft Numbers 49 through and included 60 will be paid a fixed margin rate of [***] per aircraft, per month with no escalation due throughout the term.
18
for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Table 2 Block 1 of the 2015 New Aircraft
Category 8 | ||||||||||
Year
|
for each block hour
|
for each flight hour
|
for interrupted
|
per aircraft in
|
per aircraft in
|
|||||
April 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June l, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June l, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June l, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June l, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June l, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||
June 1, 2027 |
[***] |
[***] |
[***] |
[***] |
[***] |
Table 3 [RESERVED]
The following Table 4 shall apply per corresponding year to Block 2 of the 2015 New Aircraft and Block 3 of the 2015 New Aircraft and shall become effective at the Actual In-Service Date for each such E175 Covered Aircraft; provided, however, that once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Table 4 Block 2 of the 2015 New Aircraft and Block 3 of the 2015 New Aircraft
8 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement.
19
Category 9 | ||||||||||||
Year
|
for each block hour
|
for each flight hour
|
for
|
per aircraft in
|
per aircraft in
|
|||||||
December 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June l, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2027 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
SCHEDULE 2B
CRJ Covered Aircraft Compensation for Carrier Controlled Costs
The following rates shall apply to all CRJ Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents [***] or more of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the In-Service Date for each CRJ Covered Aircraft:
Table 2B CRJ Covered Aircraft (ORD > [***] )
9 The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement.
20
Category | ||||||||||||||||||
United Cancelled Flights | ||||||||||||||||||
Year
|
for each block hour
|
for each
|
for each
|
for
|
for each
|
per aircraft
|
per month
|
For each
|
For each
|
|||||||||
June 2013 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
Jan 2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
Dec 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 1, 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June l, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
Table 2B CRJ Covered Aircraft (ORD < [***] )
Effective as of September 20, 2014, the following rates shall apply to all CRJ Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents less than [***] of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft:
Category | ||||||||||||||||||
United Cancelled Flights | ||||||||||||||||||
Year
|
for each block hour
|
for each
|
for each
|
for
|
for each
|
per aircraft
|
per month
|
For each
|
For each
|
|||||||||
Sept 20, 2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
21
Category | ||||||||||||||||||
United Cancelled Flights | ||||||||||||||||||
Year
|
for each block hour
|
for each
|
for each
|
for
|
for each
|
per aircraft
|
per month
|
For each
|
For each
|
|||||||||
Dec 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 1, 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June l, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
|||||||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
22
Exhibit 10.10.11
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
TENTH AMENDMENT TO THE CAPACITY PURCHASE AGREEMENT
This Tenth Amendment (this Amendment ) is entered into this 3rd day of May 2017, by and among United Airlines, Inc., a Delaware corporation ( United ), Mesa Airlines, Inc., a Nevada corporation ( Contractor ) and Mesa Air Group, Inc., a Nevada Corporation ( Parent ) and is effective as of January 01, 2017.
WHEREAS , United, Contractor and Parent are parties to that certain Capacity Purchase Agreement, dated as of August 29, 2013 (as previously amended by the parties thereto, the Agreement ) (Capitalized terms not otherwise defined herein will have the same meanings as those contained in the Agreement.);
WHEREAS , the parties wish to amend the Agreement to address the circumstances and terms related to Section 3.6(b) (iii),Section 4.20, and Schedule 2, Table 1 and Table 1A.
NOW, THEREFORE , in consideration of the foregoing premises and the mutual covenants and obligations hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. |
Capitalized terms not otherwise defined herein will have the meanings ascribed to them under the Agreement. |
2. |
Article III is hereby amended to add a new subsection 3.6(b)(iii) (A) (17) Mexico Regulatory Rendered Services for on-call maintenance services under any maintenance agreement |
2. |
Section 4.20 (a) is deleted in its entirety and replaced with the following; |
(a) Early Brake Provision .
For all Scheduled Flight departures of Covered Aircraft operated by Contractor under this Agreement, no more than [***] will be permitted to elapse between the brake release and the call to push (any such period, regardless of whether such period is greater or less than [***] in length, a EBR Period and such [***] timeframe, the EBR Goal ). United, or its representatives, will periodically measure (with a minimum sample of thirty (30) measurements) Contractors EBR Periods and will provide reports detailing the observed EBR Periods; provided that the process of conducting such measurement may be altered at any time and from time to time by United in its sole discretion. If, in any given calendar month, Contractors average observed EBR Period for Scheduled Flight departures is greater than the EBR Goal, United shall provide Contractor with written notice that Contractor has not met the EBR Goal, following which Contractor shall have a thirty (30) day period (such thirty (30) day period, the ERR Cure Period ) during which to reduce its average EBR Period to an observed average EBR Period less than or equivalent to the EBR Goal. If Contractor has not reduced its average EBR Period to an observed average EBR Period that is less than or equivalent to the EBR Goal as of the end of the EBR Cure Period, then Contractor shall owe a payment (the EBR Payment ) to United equal to the product of (x) the
excess of the observed average EBR Period during the EBR Cure Period over [***], multiplied by (y) the number of completed Contractors Scheduled Flight departures of Covered Aircraft during such EBR Cure Period, multiplied by (z) one-sixtieth of the block hour rate set forth on Schedule 2A or Schedule 2B , as the case may be. The EBR Payment will be made by Contractor to United as provided in Section 3.6(c)(ii) . Contractors average EBR Period shall be continuously tested in successive EBR Cure Periods and Contractor shall pay the applicable EBR Payment with respect w each such EBR Cure Period, until Contractor meets the EBR Goal with respect to a EBR Cure Period. For purposes of clarity, an example of the calculation of an observed average EBR Period and a EBR Payment arc provided below.
Example September EBR Performance Observation |
Actual Brake Release |
Observed
Time |
Difference
between Call and Actual Brake Release |
|||||||||||||||
CARR | FLIGHT | DATE | ORIG | DEST | SCHED |
EST/ ACT |
PLAN E |
CALL
FOR PUSH |
ELAPSED
TIME |
|||||||||
UA | 9999 | 1-Sep | DEN | CVG | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 1-Sep | ORD | DAY | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 2-Sep | ORD | PWM | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 2-Sep | ORD | MDT | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 2-Sep | ORD | SYR | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 3-Sep | DEN | DTW | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 3-Sep | DEN | DTW | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 5-Sep | DEN | DTW | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 5-Sep | DEN | STL | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 5-Sep | DEN | STL | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 6-Sep | DEN | SAT | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 6-Sep | DEN | MCI | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 6-Sep | DEN | DTW | [***] | [***] | N9999 XX | [***] | [***] |
Example September EBR Performance Observation |
Actual Brake Release |
Observed
Time |
Difference
between Call and Actual Brake Release |
|||||||||||||||
CARR | FLIGHT | DATE | ORIG | DEST | SCHED |
EST/ ACT |
PLAN E |
CALL
FOR PUSH |
ELAPSED
TIME |
|||||||||
UA | 9999 | 7-Sep | ORD | GSO | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 7-Sep | ORD | DAY | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 8-Sep | DEN | SAT | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 8-Sep | ORD | MDT | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 9-Sep | ORD | PWM | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 12-Sep | DEN | STL | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 13-Sep | ORD | DTW | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 14-Sep | ORD | DTW | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 18-Sep | ORD | DAY | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 18-Sep | ORD | DTW | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 23-Sep | DEN | DTW | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 23-Sep | ORD | MDT | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 29-Sep | DEN | DTW | [***] | [***] | N9999 XX` | [***] | [***] | |||||||||
UA | 9999 | 29-Sep | ORD | PVD | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 30-Sep | ORD | GSO | [***] | [***] | N9999 XX | [***] | [***] | |||||||||
UA | 9999 | 30-Sep | DEN | AUS | [***] | [***] | N9999 XX | [***] | [***] |
SAMPLE MEASUREMENT (for illustrative purposes only)
|
||||
Category | Value | Source/Formula | ||
Total Carrier Departures in September |
[***] |
From flight statistics | ||
Total Observations Completed |
[***] |
See table above | ||
Total Observed Flights with EBR > [***] |
[***] |
See table above | ||
Fraction of Observations with EBR > [***] |
[***] |
= Total Observed Flights with EBR > [***]/ Total Observations Completed | ||
Total EBR Departures |
[***] |
= Total Carrier Departures in September x Fraction of Observations with EBR > [***] | ||
Average EBR Period |
[***] |
Simple average calculated from table above | ||
Rate Block Minute |
[***] |
= (Block hour rate on Schedule 2B)/60 | ||
EBR Payment Due United |
[***] |
= Total EBR Departures x (Average EBR Period EBR Goal) x (Rate Block Minute) |
3. |
Section 4.20 (b)(ii)(B) is deleted in its entirety and replaced with the following; |
The time period goal for Modified EBR Periods (the Modified EBR Coal ) shall be [***].
4. |
Table 1 and Table 1A of Schedule 2A are deleted in their entirety and replaced with the revised Table 1 and Table 1A of Schedule 2A attached hereto. |
5. |
Exhibit A is amended by the addition of the following new definition; Mexico Regulatory Rendered Services means 24 hour on call service personnel required for the performance of maintenance activities in Mexico in accordance (i) with local law or regulation and (ii) Contractors maintenance agreements. |
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
||
By: |
||
Name: Brad Rich |
||
Title: Senior Vice President United Express |
||
MESA AIR GROUP, INC. |
||
By: |
||
Name: |
||
Title: |
||
MESA AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
||
MESA AIR GROUP, INC. |
||
By: |
||
Name: |
||
Title: |
||
MESA AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
Schedule 2A
E175 Covered Aircraft Compensation for Carrier Controlled Costs
The following Table 1 shall apply per corresponding year to United Owned E175 Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents [***] or more of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft, and shall become effective at the Actual In-Service Date for each such United Owned E175 Covered Aircraft; provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Table 1 United Owned E175 Covered (ORD > 50%)
Year |
Category | |||||||||||
for each block hour |
for each flight hour | for each Scheduled Flight departure | for interrupted trip expense |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
|||||||
per passenger | ||||||||||||
2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Dec 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Jan 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
Year |
Category | |||||||||||
for each block hour |
for each flight hour | for each Scheduled Flight departure |
for interrupted trip expense |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
|||||||
per passenger | ||||||||||||
June 1, 2025 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2026 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
(2) |
Aircraft Numbers 49 through and included 60 will be paid a fixed margin rate of [***] |
[***] _per aircraft, per month with no escalation due throughout the term
Effective as of September 20, 2014, the following Table 1A shall apply per corresponding year to United Owned E175 Covered Aircraft flown under this Agreement when Contractors ORD United Express flying represents less than [***] of the Contractors entire United Express operation for United, including both E175 Covered Aircraft and CRJ Covered Aircraft provided, however, once an aircraft is in service then for the years subsequent to the year in which such aircraft entered service, as identified below, the rates shown for each such subsequent year shall take effect as of June 1 of that year through the term for such aircraft (unless earlier terminated pursuant to the provisions of the Agreement):
Table 1A United Owned E175 Covered (ORD > [***]
Year |
Category | |||||||||||
for each block hour |
for each flight hour | for each Scheduled Flight departure | for interrupted trip expense |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
|||||||
per passenger | ||||||||||||
Sept 20, 2014 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Dec 1, 2015 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2016 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
Jan 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2017 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2018 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2019 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2020 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2021 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2022 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2023 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||
June 1, 2024 |
[***] |
[***] |
[***] |
[***] |
[***] |
[***] |
Year |
Category | |||||||||||||
for each block hour |
for each flight hour | for each Scheduled Flight departure | for interrupted trip expense |
per aircraft per month |
per aircraft per month AD payment pursuant to Section 3.6(b)(iii)(A)(8) |
|||||||||
per passenger | ||||||||||||||
June 1, 2025 | [***] |
[***] |
[***] |
[***] |
[***] |
[***] |
||||||||
June 1, 2026 | [***] |
[***] |
[***] |
[***] |
[***] |
[***] |
(1) |
The rates included in this table do not include costs payable by United as Pass-Through Costs pursuant to Section 3.6(b)(iii)(A) of the Agreement, specifically including: (i) non-expendable repair/replacement costs, (ii) engine maintenance, (iii) Airframe Heavy Maintenance, (iv) landing gear maintenance, and (iv) APU maintenance. |
(2) |
Aircraft Numbers 49 through and included 60 will be paid a fixed margin rate of [***] |
[***] _per aircraft, per month with no escalation due throughout the term
Exhibit 10.10.12
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
ELEVENTH AMENDMENT TO THE CAPACITY PURCHASE
AGREEMENT
This Eleventh Amendment (this Amendment ) is entered into this XX day of XXX, 2018 by and among United Airlines, Inc., a Delaware corporation ( United ), Mesa Airlines, Inc., a Nevada corporation ( Contractor ) and Mesa Air Group, Inc., a Nevada Corporation ( Parent ) and is effective as of XXX,XX, 2018.
WHEREAS , United, Contractor and Parent are parties to that certain Capacity Purchase Agreement, dated as of August 29, 2013 (as previously amended by the parties thereto, the Agreement ) (Capitalized terms not otherwise defined herein will have the same meanings as those contained in the Agreement.);
WHEREAS , the parties desire to amend certain provisions of the Agreement relating to the Career Path Program for Pilots and
NOW THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Agreement as follows:
1. Exhibit M is deleted in its entirety and replaced with the attached new Exhibit M.
Except as otherwise specified herein, capitalized terms shall have the meanings ascribed to such terms in the Agreement. This Amendment may be executed in counterparts. Except as expressly amended in this Amendment, the Agreement will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in duplicate (each of which duplicates are deemed to be an original) by their duly authorized representatives as of the date first set forth above.
UNITED AIRLINES, INC. |
||
By: |
||
Name: Brad Rich |
||
Title: Senior Vice President United Express |
||
MESA AIR GROUP, INC. |
||
By: |
||
Name: |
||
Title: |
||
MESA AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
EXHIBIT M
Career Path Program for Pilots
United and Contractor each agree to the following:
1. |
United and Contractor agree that it is mutually advantageous to establish a program for the recruitment and mentoring of qualified pilot candidates aimed at creating a pipeline of well-trained industry professionals to serve a continuing need for pilots at Contractor and United. |
2. |
Contractor agrees to establish the United Career Path Program (also referred to herein below as, the Program ) at its own expense for pilots who have an interest in potentially pursuing a career with United following employment with Contractor. Contractor will place pilots into its Program who have successfully demonstrated or achieved eligibility criteria approved by United (each, a Program Participant ), as follows: |
a. |
Pilot is employed by Contractor; |
b. |
High school diploma or GED equivalent; |
c. |
A pilot will be ineligible for hire at United until he/she has obtained a Bachelors degree from an accredited institution, or otherwise has credentials established by United in its sole discretion and applicable to United new hires; |
d. |
A training performance record acceptable to United in its sole discretion, as further described in the policy and procedures manual referenced in Section 7 hereof; |
e. |
A dependability record acceptable to United in its sole discretion, as further described in the policy and procedures manual referenced in Section 7 hereof; |
f. |
A disciplinary record acceptable to United in its sole discretion, as further described in the policy and procedures manual referenced in Section 7 hereof; |
g. |
Completion of at least twelve months active service as a pilot with Contractor flying in exclusive service for United; |
h. |
Hogan Personality Inventory (HPI) score acceptable to United in its sole discretion, as further described in the policy and procedures manual referenced in Section 7 hereof; |
i. |
Contractor shall ensure that all Program applicants have signed a release as described in the policy and procedures manual referenced in Section 7 hereof prior to acceptance into the Program permitting United access to all information requested by United (including work records) on file with Contractor that are relevant to criteria set forth in this paragraph; |
j. |
A successful structured interview (as determined by United in its sole discretion) conducted by a representative of United Airlines or its designee; and |
k. |
Pilot is appropriately certified and trained to operate the Contractors aircraft; |
For a new pilot at Contractor who may elect to participate in the Program, the structured interview and the HPI will be conducted as part of Contractors recruiting process. For existing pilot employees of Contractor who seek to participate in the Program, the structured interview and HPI will be conducted at such time as such employees meet the other requirements set forth above. For the period beginning as of the Effective Date of this Agreement to and including the term of Contractors Capacity Purchase Agreement (CPA) with United, Program Participants shall only fly aircraft in United Express service.
3. |
Participants will participate in any professional development activities mutually agreed between United and Contractor, At Uniteds option, Program Participants may also interact with a United mentor pilot. |
4. |
When United is actively hiring new pilots, and subject to the limitations set forth in this Section 4 and in Section 6 below, United will make an offer of employment with United to a Program Participant conditioned upon such Program Participant successfully meeting the following criteria: |
a. |
|
Minimum flight hours in service to Contractor | Minimum flight training completed by Contractor | |
[***] hours Pilot-in-Command or [***] hours total time |
One initial qualification evaluation and one continuing qualification evaluation |
b. |
Continued compliance with the requirements included in the Program eligibility criteria described in Section 2a , 2c , 2d and 2e above; |
c. |
Completion of required professional development activities identified in Section 3 above (if any); |
d. |
Meets United new hire pilot minimum qualifications, and |
e. |
Satisfactory completion of other customary United pre-employment screening requirements, including, but not limited to, background investigation and drug screening test, but not to include another structured interview with United. |
5. |
Contractor shall provide United any information requested by United, including work records, associated with the service or work history of any Program applicant or Program Participant and Contractor will certify in writing that such information is accurate and complete. |
6. |
Notwithstanding anything to the contrary in this agreement, pilot participation in the Program and the hiring of any Program Participants by United pursuant to the Program described herein, shall be subject to all of the following additional limitations: |
a. |
The number of pilots placed into the Program is at Contractors discretion; provided that for the period beginning as of the Effective Date of this Agreement to and including the term of Contractors CPA with United, unless otherwise approved by United, all of Contractors pilots meeting the qualifications set forth herein shall be offered the option to be placed into the Program. |
b. |
It is expressly agreed and acknowledged that any hiring of Program Participants by United pursuant to the Program described herein is subject to the availability of slots in Uniteds scheduled basic indoctrination classes for pilots that are allocated to Contractors Program. The number of United pilot positions offered by United in any calendar year shall be determined by United but shall not be less than the Minimum Number of Positions for such year as set forth in the following subparagraph; provided that, notwithstanding anything herein to the contrary, during any period that any Labor Strike, labor slowdown or other similar action involving Contractors pilots is occurring, then United shall not be required to make any offers of employment to any Program Participants. |
c. |
The number of United pilot positions offered by United in any calendar year shall not be less than the following: |
(i) |
[***], |
(ii) |
[***] of the number of United positions available for such year in [***] and each year thereafter in the Term (each such number of United pilot positions represented by the foregoing clauses (i) and (ii) , a Minimum Number of Positions ); |
provided that if the number of candidates meeting all of the criteria in Section 4 above in a particular calendar year is less than the Minimum Number of Positions as set forth in the foregoing clause (i) or (ii) , as applicable, then the Minimum Number of Positions for such year shall be reduced on a one-for-one basis to the extent of such shortfall.
d. |
No more than [***] of Contractors pilots will be eligible to be offered employment at United pursuant to the terms of the Program in any calendar year unless Contactor and United consent in writing to a greater percentage of pilots becoming eligible for employment at United during such year. Uniteds hiring of any pilot of Contractor that applies for employment with United separately and independent of such pilots participation in the Program shall not count toward the satisfaction of, nor be subject to, the cap in the immediate preceding sentence. |
e. |
United and Contractor agree that it is in both their respective interests that the hiring of Contractors pilots by United under this program not adversely affect Contractors operational needs and requirements. Thus, notwithstanding anything |
in subparagraphs (c) and (d) above, if after review of Contractors operational performance with Contractor, United in its sole judgment may reduce the number of United pilot positions it offers to Contractors pilots in a particular calendar year, and/or delay the offer(s) of employment United would otherwise make to Contractors pilots. |
f. |
Any Program Participant may irrevocably elect to withdraw from the Program at any time. |
7. |
United and Contractor will work together cooperatively in the development of a policy and procedure manual detailing how the Program will be implemented in their respective operations in a manner that reflects the objectives outlined in this agreement, |
8. |
United reserves the right at any time to (a) modify any of Uniteds requirements for the Program, and/or (b) discontinue the Program, in each case upon thirty (30) days prior written notice to Contractor; provided further, that, if United requires Contractor to modify or discontinue the Program during the Term, the Program shall continue only for any then-enrolled Program Participants who have met the requirements set forth in Section 4 hereof; provided further, that, if during the Term, there occurs any Labor Strike, labor slowdown or other similar action involving Contractors pilots, then United may at any time thereafter elect to require Contractor to discontinue the Program or to modify Uniteds requirements for the Program, in each ease effective immediately upon written notice to Contractor and in such event, United shall have no further obligations under the Program and this agreement. |
9. |
Nothing in this agreement or the development or implementation of the Program shall operate or be construed to create a joint employment relationship or excuse any of Contractors obligations to its employees. Contractor shall remain solely responsible for the hiring, training, advancement, direction and control of its employees and solely liable for all compensation, benefits or other payments due such employees. Employees of Contractor who participate in the Program remain employees of Contractor for all purposes and under no circumstances will be deemed to be employees of United. Notwithstanding the fact that Contractor has agreed to follow certain requirements of United in the development and implementation of the Program, United will have no supervisory power or control over any employees of Contractor in connection with their participation in the Program or otherwise, nor will United have any responsibility or decision making authority with respect to Contractors pilot hiring or training. |
10. |
Notwithstanding anything in this agreement to the contrary, this agreement is made by and solely for the benefit of United and Contractor only. Accordingly, the parties do not intend to create any third-party beneficiaries hereby, and none of the rights hereunder may be assigned in whole or in part, and no person other than the Contractor under the Agreement shall have any right to enforce Uniteds obligations under the Program. |
11. |
Contractor shall defend, indemnify and hold harmless United, its directors, officers and employees from and against any and all (i) claims arising from or relating to Contractors adoption or use of Uniteds hiring procedures, instructions or standards in the hiring or |
provision of Contractors crews necessary to operate the Scheduled Flights, (ii) claims alleging that United is the employer of any employees, agents or independent contractors engaged by Contractor in connection with the Regional Airline Services or any other claims of joint employer, (iii) claims arising from or relating to Contractors employment of any Program Participant or the participation of any such individuals in the Program, and/or (iv) claims or charges of adverse employment brought by any employee of Contractor or Program Participant in the Program. |
12. |
For so long as the Program is continuing, Contractor will not |
(i) |
implement or sponsor its pilots participation in any career path or development programs for any carrier with whom Contractor does not have a Major Regional Flying Agreement as of the date the other carriers program commences, or |
(ii) |
place Program Participants in the Program into any career path or development programs of any other carrier unless such Program Participants irrevocably withdraw from the Program. |
For purposes of this paragraph, but without limiting any rights in favor of United under agreements related to Contractors flying for United, a Major Regional Flying Agreement shall be defined as an agreement between Contractor and another carrier under which Contractor agrees to operate on behalf of such carrier on average no less than [***] aircraft per day in commercial scheduled passenger or cargo service.
Notwithstanding the foregoing, but without limiting any rights in favor of United under agreements related to Contractors flying for United, nothing contained herein shall limit Contractors ability to place pilots employed by Contractor that do not participate in the Program into similar programs offered by carriers that do not have a major regional flying agreement with Contractor ( Other Programs ) as long as the total number of pilots participating in the Other Programs, when aggregated, do not exceed [***] annually of Contractors pilots.
13. |
The Program shall continue in effect until the expiration or termination of the Agreement and in such event, United shall have no further obligations under the Program and this agreement. |
Exhibit 10.11.1
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
CODE SHARE AND REVENUE SHARING AGREEMENT
This CODE SHARE AND REVENUE SHARING AGREEMENT (the Agreement ) is made and entered into as of March 20, 2001, to be effective retroactive to February 1, 2001 (the Contract Date ), by and between AMERICA WEST AIRLINES, INC., a Delaware corporation ( AWA ), and MESA AIRLINES, INC., a Nevada corporation ( Mesa ).
RECITALS
A. AWA holds a certificate of public convenience and necessity issued by the Department of Transportation ( DOT ) authorizing AWA to engage in the interstate and overseas air transportation of persons, property and mail between all points in the United States, its territories and possessions.
B. Mesa holds a certificate of public convenience and necessity issued by the DOT authorizing Mesa to engage in the interstate transportation of persons, property and mail in the United States, its territories and possessions.
C. AWA owns various trademarks, service marks and logos, including America West Airlines, America West Express, and distinctive exterior color decor and patterns on its aircraft, hereinafter referred to individually and collectively as the AWA Service Marks.
D. AWA and Mesa entered into that certain Code Share and Revenue Sharing Agreement, dated July 15, 1998, as amended by those certain First and Second Amendments to Code Share and Revenue Sharing Agreement, dated January 4, 2000 and May 10, 2000, respectively (the Original Agreement ), in order to provide scheduled air transportation services as America West Express and to share in revenue and costs of such services.
E. AWA and Mesa desire to terminate the Original Agreement and replace the Original Agreement, in its entirety, with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the promises, covenants, representations and warranties hereinafter set forth, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, AWA and Mesa agree as set forth below.
AGREEMENT
1. |
Effectiveness . This Agreement replaces the Original Agreement effective upon the date (the Effective Date ) that Mesa executes a binding agreement to acquire the CRJ Aircraft required to be provided by Mesa pursuant to Section 2.2.2 of this Agreement (the Aircraft Contract ). Mesa shall provide AWA with written notice of the date the Aircraft Contract is executed together with copies of the Aircraft Contract. On the date of execution of the Aircraft Contract, all of the terms and provisions of this Agreement shall be effective retroactive to the Contract Date. On the Effective Date, the Original Agreement shall be terminated in its entirety. All sums payable pursuant to Section 6 of the Original Agreement between the Contract Date and Effective Date shall be recalculated pursuant to the terms of Section 7 of this Agreement, and AWA, subject to the rights regarding disputed amounts contained in Section 7.8 , shall pay additional and |
undisputed sums payable within 30 days after receipt of a written invoice for such recalculation. Until the Effective Date, AWA and Mesa shall continue to perform pursuant to the Original Agreement. If the Aircraft Contract is not executed by May 1, 2001, then this Agreement shall automatically terminate and the terms and conditions of the Original Agreement shall remain in full force and effect. Simultaneously with the execution of this Agreement, AWA and Mesa shall enter into an amendment to the Original Agreement providing for the addition of 3 CRJs under the Original Agreement if this Agreement is terminated pursuant to this Section. |
As of the Contract Date, AWA and Mesa dispute certain amounts that are payable between AWA and Mesa under the Original Agreement (the Disputed Amounts ). Mesa and AWA shall continue to work to resolve their respective obligations concerning the Disputed Amounts pursuant to the terms of the Original Agreement. This is a new and separate agreement from the Original Agreement. The terms of this Agreement shall not be used by either Mesa or AWA to determine or interpret the respective payment obligations of the parties for the Disputed Amounts. The respective obligations for the Disputed Amounts and other matters and disputes arising under the Original Agreement prior to the Contract Date shall be resolved pursuant to the terms, covenants, rights and remedies of the Original Agreement, shall not affect the rights, duties and obligations of AWA or Mesa under this Agreement and shall not permit AWA or Mesa to exercise any remedies under this Agreement. The intent of AWA and Mesa is to resolve any disputes concerning the Disputed Amounts or any other matters and disputes under the Original Agreement under the Original Agreement and not pursuant to this Agreement.
2. |
Rights, Responsibilities and Obligations of Mesa : |
2.1 |
Flight Service . During the term of this Agreement, Mesa shall operate America West Express air transportation services (the Flight Services ), using the Fleet of Aircraft established pursuant to Section 2.2 , to and from the cities and based upon the schedule established from time to time by AWA (the Schedule ) in written notice to Mesa (a Schedule Notice ). For purposes of this Agreement, Flights means flights operated pursuant to the Schedule. AWA may change the Schedule by issuance of a Schedule Notice at any time. When creating a Schedule, AWA shall: (i) take into account Mesas aircraft maintenance requirements; (ii) create a Schedule which will permit Mesa to schedule flight crews in a manner consistent with industry operational practices; (iii) schedule block times based on AWAs internal block time policy; (iv) provide for the following turn times: (a) in a hub location: 20 minutes for Beech 1900s and Dash 8s and 25 minutes for CRJs; and (b) in other stations: 10 minutes for Beech 1900s, 15 minutes for Dash 8s and 20 minutes for CRJs; (v) take into account airport facilities available for Aircraft handling; (vi) provide for maintenance as required by Section 2.6.3 and scheduled heavy maintenance on Aircraft as required from time to time; and (vii) provide for at least 45 days prior notice of any holiday cancellations. Mesa shall implement all changes in the Schedule contained in a Schedule Notice in accordance with AWAs scheduling requirements within 60 days after receipt of a Schedule Notice. Mesa or any of its affiliates shall not provide any flight service for any other airline for flights that originate in or end in Phoenix, Arizona. |
2
So long as Air Midwest ( AM ) is a wholly-owned subsidiary of Mesa Air Group, Inc., Mesa may subcontract with AM for the performance of those Flight Services, Other Services (as hereinafter defined), and other related obligations under this Agreement, which are to be performed by Mesa using the Beech 1900s (the AM Services ). Mesa has delivered to AWA an assumption agreement pursuant to which AM agrees to perform all the duties and obligations of Mesa under this Agreement relating to the AM Services and to be bound by all of the liabilities, obligations, and duties of Mesa under this Agreement applicable to the AM Services, including, without limitation, the providing of flights, maintenance of aircraft, compliance with laws, maintenance of insurance and indemnification of AWA (the Assumption Agreement ). AWA shall have no duty, obligation or liability to AM under this Agreement. All payments for the use and operation of the Beech 1900 Subfleet to be made by AWA under this Agreement shall be paid to Mesa. Mesa shall pay all sums payable to AM for the operation of the Beech 1900 Subfleet pursuant to a separate agreement between AM and Mesa to which AWA is not a party. Notwithstanding the foregoing, Mesa shall not be released, discharged, or relieved from any duties, liabilities or obligations set forth in this Agreement, including those arising from the AM Services performed by AM. AM shall be deemed a subcontractor of Mesa, and Mesa shall cause AMs performance of the AM Services to comply with all relevant terms and conditions of this Agreement. If either: (i) AM ceases to be a wholly-owned subsidiary of Mesa Air Group, Inc.; or (ii) AM fails to comply with the terms and conditions of this Agreement as required by the Assumption Agreement, then Mesa, within thirty (30) days after receipt of written notice from AWA, shall terminate the subcontractor relationship with AM, acquire the Beech 1900 Subfleet and perform the duties and obligations applicable to the Beech 1900 Subfleet pursuant to this Agreement. |
Mesa, with the prior written consent of AWA, which consent shall not be unreasonably withheld, delayed or conditioned, may subcontract with a wholly-owned subsidiary of Mesa Air Group, Inc. for the performance of certain Flight Services, Other Services and other related obligations under this Agreement, which are to be performed by Mesa using certain Aircraft on terms and conditions similar to the terms and conditions applicable to the subcontracting of the AM Services (the Subcontracting of Services ). If AWA consents to the Subcontracting of Services, then AWA and Mesa shall execute an amendment to this Agreement permitting the Subcontracting of Services and setting forth the terms and conditions pursuant to which the Subcontracting of Services may occur (the Subcontracting Amendment ). The Subcontracting of Services shall not occur until the Subcontracting Amendment and any documents required from the wholly-owned subsidiary have been executed by Mesa and the affiliate and delivered by AWA.
AM and any other affiliate to which services are subcontracted under this Agreement are referred to as the Affiliated Service Providers .
3
2.2 |
Fleet . |
2.2.1 |
Initial Fleet . As of the Contract Date, Mesa and AM provide the Flight Services using the following aircraft (collectively, the Fleet ; with respect to any one aircraft type, the Subfleet ; and individually, the Aircraft ): |
Number |
Aircraft Type (Subfleet) |
|
12 5 22 |
deHavilland DHC-8-200 ( Dash 8 ) Hawker-Beech 1900 ( Beech 1900 ) Canadair Regional Jet-50 ( CRJ ) |
2.2.2 |
CRJ Fleet Expansion . Pursuant to the Aircraft Contract, Mesa shall have the right to acquire an additional 83 CRJ Aircraft, 43 by virtue of firm orders (the Firm Aircraft ) and 40 by virtue of options (the Option Aircraft ), in the configuration, with the seating capacity and at the times set forth on Exhibit A , attached hereto. The Firm Aircraft and Option Aircraft will consist of CRJ Models 200s, 700s and 900s as set forth in Exhibit A . For purposes of this Agreement, the CRJ Model 200s shall be a CRJ Subfleet and the CRJ Model 700s and 900s shall be a CRJ Subfleet . |
(a) |
Each of the Firm Aircraft shall be placed into Flight Services by Mesa in the calendar months set forth on Exhibit A (the Delivery Schedule ). The Firm Aircraft to be delivered in each of the calendar months from and including October, 2003 to and including June, 2004 may be either CRJ Model 700s or 900s (the Convertible Firm Aircraft ). AWA, by written notice to Mesa, given on or before the last day of the 18 th calendar month prior to the delivery of each Convertible Firm Aircraft, shall advise Mesa as to which model is to be added to the Fleet (the Firm Selection Notice ). For example, for the CRJ to be delivered in October, 2003, AWA must provide the Firm Selection Notice by April 31, 2002. If AWA does not provide the Firm Selection Notice timely, then AWA shall be deemed to have elected to have a CRJ Model 700 added to the Fleet. Mesa shall provide AWA with at least 90 days prior written notice of the week each of the Firm Aircraft will be placed into Flight Service under this Agreement and at least 60 days prior written notice of the date on which each of the Firm Aircraft will be placed into Flight Service under this Agreement (each, a Scheduled Delivery Date ). |
(b) |
AWA shall have the options to expand the CRJ Fleet by up to 40 additional CRJs from the Option Aircraft. On or before each option Exercise Date (as set forth on Exhibit A ), AWA, by written notice to Mesa (the Option Notice ), shall have the option to require Mesa to increase the CRJ Subfleet by the addition of the |
4
applicable CRJ Aircraft in the applicable In Service Months (as set for on Exhibit A )(each, a Fleet Expansion Option ). Each Option Notice shall specify whether AWA is selecting either a CRJ Model 700 or 900. If the Option Notice does not specify the CRJ Model, then AWA shall be deemed to have selected a CRJ Model 700. The Fleet Expansion. Options are separate and individual options and may be exercised or not exercised on a separate and individual basis. The Aircraft that are the subject of each Fleet Expansion Option shall be added to the Fleet by Mesa in the applicable In Service Months. Mesa shall provide AWA with at least 90 days prior written notice of the week each Option Aircraft will be placed into Flight Service under this Agreement and at least 60 days prior written notice of the Scheduled Delivery Date for each Option Aircraft that is the subject of each exercised Fleet Expansion Option. |
(c) |
Mesa shall not be liable to AWA for the failure to deliver any Firm Aircraft or Option Aircraft on the Scheduled Delivery Date (a Failed Delivery ) if: (i) the failure to deliver is the result of the manufacturers failure to deliver the Aircraft to Mesa as a result of acts of terrorism, hostilities, war, strikes, labor disputes, work stoppages beyond the manufacturers control, fire, act of government or court order; (ii) Mesa uses commercially reasonable efforts to acquire a replacement aircraft for the Aircraft that was not delivered; and (iii) Mesa pays to AWA any compensation, damages or award obtained by Mesa from the manufacturer as a result of the Failed Delivery (an Excused Failure ). In the event of a Failed Delivery, Mesa shall use commercially reasonable efforts to obtain the applicable Aircraft as soon as practicable after the Scheduled Delivery Date. If the Aircraft that is the subject of a Failed Delivery is not delivered within 90 days after the Scheduled Delivery Date, then AWA shall have the option to elect not to include such Aircraft under this Agreement by providing written notice to Mesa at any time prior to the actual delivery of such Aircraft. If a Failed Delivery is not the result of an Excused Failure, then AWA shall have all rights and remedies under this Agreement for such Failed Delivery. |
2.2.3 |
Intentionally Omitted . |
2.2.4 |
Fleet Reduction . Except as otherwise permitted by Section 2.2.5 , upon 180 days prior written notice from AWA, AWA, subject to limitations set forth below, may require Mesa to reduce the number of Aircraft in any Subfleet. AWA shall not require Mesa to reduce: (i) the number of Aircraft in the Dash 8 Subfleet, Beech 1900 Subfleet or the combined CRT Subfleets by more than one Aircraft in any Six Calendar Month Period. For purposes of this Agreement, Six |
5
Calendar Month Period means each period during the Term (as defined below) commencing on January 1 and ending on June 30 and commencing on July 1 and ending on December 30, with the first Six Calendar Month Period commencing on January 1, 2002; (ii) the number of CRJ Model 200s for a period of 1 year measured from the last date that a CRJ Model 200 is added to the CRJ Subfleet; provided, however, that the Scheduled Delivery Date shall be used to measure the date each CRJ Model 200 is added to the CRJ Subfleet; (iii) the number of CRJ Model 700s and 900s for a period of 1 year measured from the last date that a CRJ Model 700 or 900 is added to the CRJ Subfleet; provided, however, that the Scheduled Delivery Date shall be used to measure the date such CRJ Model 700 or 900 is added to the CRJ Subfleet; and (iv) the Dash 8 Subfleet below 6 Aircraft. |
2.2.5 |
Elimination of Beech 1900s and Dash 8s . Notwithstanding the provisions of Section 2.2.4 , AWA, at any time during the Term after August 25, 2004, may require the Subfleet of Beech 1900s to be reduced to zero by providing Mesa with at least 180 days prior written notice of AWAs election to eliminate the Beech 1900s on or after such date (the 1900 Elimination Notice ). Notwithstanding the provisions of Section 2.2.4 , AWA, at any time during the Term after August 25, 2006, may require Mesa to reduce the Subfleet of Dash 8s to zero by providing Mesa with at least 180 days prior written notice of AWAs election to eliminate the Dash 8s on or after such date (the Dash 8 Elimination Notice ). The 1900 Elimination Notice may be given at any time during the Term on or after February 27, 2004. The Dash 8 Elimination Notice may be given at any time during the Term on or after February 27, 2006. |
2.2.6 |
Spares . Mesa shall have available at least 1 spare Aircraft available for Flight Services under this Agreement at any time there are 35 or more CRJ Aircraft and at least 2 spare Aircraft available for Flight Services under this Agreement at any time there are 65 or more CRJ Aircraft. AWA shall pay the Actual Costs, Guaranteed Non-Maintenance Costs (other than overhead) and Guaranteed Maintenance Costs actually incurred by or payable to Mesa for each spare Aircraft as provided in Section 7 . |
2.2.7 |
Transition Costs . As of the Contract Date, all of the CRJ Aircraft are 50 seat Aircraft. The Firm Aircraft and Option Aircraft include CRJ-700 and CRJ-900 seat configurations (the New CRJ Types ). AWA shall reimburse Mesa for actual out-of-pocket costs and expenses incurred by Mesa in connection with the induction of the New CRJ Types into Flight Services for a period of 180 days after the induction of the first of each of the New CRJ Types, not to exceed [***] for each of the New CRJ Types (the Transition Reimbursement ). The Transition Reimbursement shall be paid by AWA within 30 days after |
6
receipt of monthly written invoices together with commercially reasonable evidence of the costs actually incurred by Mesa. |
2.3 |
Other Services . In addition to the Flight Services, Mesa, subject to AWAs payment of costs pursuant to Section 7.1.8 , shall provide the following services in connection with the Flight Services (the Other Services ): (i) curb-side service, other than at AWA Service Locations (as defined below), in all locations where it is normal and customary or where another airline offers curbside check-in; (ii) check-in service with automated baggage tags and boarding pass printers in all locations, other than AWA Service Locations; (iii) ticketing and security services in accordance with the Federal Aviation Administration ( FAA ) and AWA directives and guidelines, as may be issued from time to time, and any other directives or guidelines as Mesa and AWA may mutually approve, in all locations, other than the AWA Service Locations; (iv) Qik-Check service, to the extent used and supplied by AWA, at all gates used by Mesa; (v) transfer of all baggage for passengers connecting from Flights to AWA flights in a timely manner to ensure all baggage is placed on those connecting flights; and (vi) transportation of mail and other cargo (other than hazardous materials) on Flights, at the order of AWA, to the extent of available aircraft capacity. Mesa, at its expense, shall provide all facilities, machinery, equipment and inventory required to efficiently, timely and in a manner consistent with best airline industry practices provide the Other Services. Mesa shall require personnel providing the Other Services to comply with all rules, regulations and directives promulgated for all AWA operations from time to time. |
Mesa may outsource the Other Services performed by Mesa at any station with the prior written consent of AWA, which consent shall not be unreasonably withheld or delayed. Mesa shall cause any subcontractor to which the Other Services are outsourced to comply with and perform all of the duties and obligations imposed on Mesa in this Agreement applicable to the Other Services that have been outsourced.
Notwithstanding the foregoing, AWA shall provide the services set forth in subsections (i) (iii) above at Phoenix Sky Harbor International Airport, McCarron International Airport and any other airport that AWA designates with at least 90 days prior written notice to Mesa (the AWA Service Locations ). In the event AWA elects to convert any airport to an AWA Service Location, then AWA shall: (i) either assume Mesas lease at the airport or reimburse Mesa for the actual out-of-pocket costs and expenses incurred by Mesa in terminating the lease, at AWAs election; (ii) reimburse Mesa for up to one weeks compensation actually paid to airport employees that are not offered employment by AWA; and (iii) offer to purchase from Mesa or assume the lease of any equipment owned or leased by Mesa at the airport that may be used by AWA in AWAs operations and is in good condition and repair for a price equal to the fair market value of such equipment at the time of such offer.
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2.4 |
Personnel; Training . Mesa shall hire, engage, employ and maintain a sufficient number of competent, trained personnel and subcontractors, including, but not limited to pilots, flight attendants, ground crew, maintenance and cleaning personnel, baggage handling personnel and customer service personnel necessary to provide the Flight Services and Other Services as required by this Agreement. Subject to FAA approval, CRJ pilots shall be qualified to fly all models of CRJs providing Flight Services pursuant to this Agreement. CRJ pilots shall not be scheduled or dedicated to any particular model line of CRJs without the prior written consent of AWA. In addition, Mesa shall employ and maintain a commercially reasonable number of reserve pilots and flight attendants based in the Phoenix Metropolitan area based on the Flight Services to be provided pursuant to this Agreement. Mesa shall cause all Mesa personnel providing Flight Services or Other Services to wear uniforms approved by AWA and shall comply with all appearance guidelines required of all AWA personnel. |
Mesa shall provide initial training, recurrent training and customer service training to personnel and subcontractors reasonably identified by AWA at programs approved by AWA. AWA shall provide applicable training materials. In the event AWA becomes a hazardous materials carrier, Mesa, at AWAs expense, shall conduct all hazardous materials training required by AWA or AWAs other code share partners.
2.5 |
Service Quality and Level . All Flight Services and Other Services shall be provided by Mesa at a service quality and level of service equal to or greater than the service quality and level of service provided by AWA to the extent applicable to the type of Aircraft used to provide the Flight Services. All Aircraft shall be equipped with service amenities necessary to provide the service quality and level of service required by this Section. If AWA changes AWAs service requirements and as a result Mesa will be required to make any capital upgrades to any Aircraft, Mesa, in writing, shall advise AWA of the need for such upgrades together with the estimated cost to complete such upgrades (the Upgrade Notice ). If, after receipt of the Upgrade Notice, AWA, in writing, elects to require Mesa to comply with such changes in service requirements, then AWA, within 30 days after receipt of a written notice, shall reimburse Mesa for the actual out-of-pocket capital costs incurred by Mesa in making such capital upgrades. If AWA does not approve the making of the capital upgrades, then Mesa shall not be required to meet the new AWA service requirements. |
2.6 |
Maintenance . |
2.6.1 |
Obligation . Mesa, at its own cost and expense, shall be responsible for the service, repair, maintenance, overhauling and testing of each Aircraft: (i) in compliance with the maintenance program for each Aircraft as approved by the FAA and pursuant to all applicable aircraft maintenance manuals applicable to each Aircraft; (ii) so as to keep each Aircraft in good and safe operating condition; and (iii) so as to keep the Aircraft in such operating condition as may be necessary to |
8
enable the airworthiness certification of the Aircraft to be maintained in good standing. Mesa shall retain full authority and control over the service, repair, maintenance, overhauling and testing of each Aircraft. AWA shall have no obligations or duties with respect to the service, repair, maintenance, overhauling or testing of any Aircraft. |
2.6.2 |
Ground Equipment . Mesa, at its sole cost and expense, shall service, repair, maintain and clean (or cause to be serviced, repaired, maintained or cleaned) all ground equipment and facilities in accordance with AWA guidelines, provided by AWA to Mesa, for cleaning, maintenance and appearance. |
2.6.3 |
Location . Mesa shall maintain three maintenance bases, currently located in Fresno, California for CRJs, Grand Junction, Colorado for Dash 8s, and Farmington, New Mexico for Beech 1900s. Each Schedule prepared by AWA shall provide for not less than 20% of the Dash 8s and CRJs and 1 of the Beech 1900s to remain overnight at the applicable maintenance base each night. AWA acknowledges that a separate maintenance base shall be maintained by Mesa for each CRJ Subfleet. One Aircraft shall remain overnight for 10 hours and the remainder for at least 8 hours. Mesa shall not relocate any maintenance base, without the prior written consent of AWA, which consent may be withheld if the new location fails to meet AWAs maintenance base requirements. Each CRJ maintenance base shall be staffed and equipped to maintain a fleet of up to 25 Aircraft. Mesa shall add maintenance bases as necessary to provide the Flight Services and Other Services at locations which meet AWAs maintenance base requirements and are approved by AWA. AWA, by providing Mesa with at least 180 days prior written notice, may require Mesa to close any maintenance base. Upon Mesa assigning to AWA aloof its right, title and interest in the lease of the maintenance base that is closed (together with any required landlord consent), AWA shall reimburse Mesa for all actual out-of-pocket costs and expenses incurred by Mesa in closing such maintenance bases. |
2.7 |
Emergency Operations . Mesa and AWA shall coordinate to develop a plan that complies with applicable Regulations (as defined below) to be implemented in the event of any incident involving personal injury or death to a passenger or crew member on a Flight. The emergency response teams of AWA and Mesa shall coordinate their efforts and shall cooperate fully in response to such emergency. |
2.8 |
Fleet Configuration, Cleanliness and Appearance . |
2.8.1 |
Configuration . All Dash 8 and Beech 1900 Aircraft in the Fleet on the Contract Date and Dash 8 and Beech 1900 Aircraft added to the Fleet shall have a passenger seating configuration and seating capacity as provided on the Aircraft in the Fleet on the Contract Date. Each CRJ |
9
in the Fleet on the Contract Date shall retain the seating configuration and capacity as exists on the Contract Date. Each CRJ added to the Fleet pursuant to Section 2.2 shall have the seating configuration and capacity as provided for such Aircraft on Exhibit A . AWA, at AWAs cost and expense, may require Mesa to reconfigure or change the seating capacity of an Aircraft. All such requested changes shall be implemented within 180 days after Mesas receipt of written request from AWA. |
2.8.2 |
Cleanliness . Mesa, at its sole cost and expense, shall cause all Aircraft to be cleaned and maintained in an appearance in accordance with cleaning standards, requirements and guidelines promulgated by AWA from time to time and provided to Mesa in writing. |
2.9 |
Post-Departure Procedures . Mesa shall perform airport post-departure procedures (as defined in AWAs Customer Service Manual) and be responsible for securing and controlling all the contents in the ticket lift envelopes. All ticket lift envelopes should be forwarded and co-mailed to ELP/NPC within 24 hours after flight operations. Mesa shall be liable for losses to AWA as a result of the loss, misuse, theft or forgery of AWA passenger tickets (including lifted flight coupons and auditors coupons for sold tickets) in Mesas possession or control or the associated cash receipts. If actual documented losses to AWA resulting from erroneous or fraudulent system transactions due to Mesas or its employees failure to adhere to AWA policies and procedures exceed the actual documented losses incurred by AWA from erroneous or fraudulent system transactions, calculated monthly on a rate per passenger per month basis for each airline (the Excess Losses ), then Mesa, within 10 days after receipt of written demand together with the calculation of Excess Losses, shall pay to AWA an amount equal to the Excess Losses times the number of passengers flown on Flights during the applicable calendar month. |
2.10 |
Other Aircraft Handling and Ground Services . Mesa, at AWAs request, shall provide the Other Services and aircraft ground handling services for flights and aircraft operated by AWA and its code share partners at stations at which Mesa provides the Other Services pursuant to Section 2.3 . The costs and expenses of providing such Other Services and aircraft ground handling shall be charged to the airline (other than AWA) at market rates and in the case of AWA at actual out-of-pocket cost to Mesa plus 8%. |
2.11 |
Airport Slots . Upon each written request by AWA to Mesa, Mesa or the Affiliated Service Providers, as applicable, shall transfer the rights to airport slots operated by Mesa and used for America West Express service at New York. LaGuardia (LGA), Chicago OHare (ORD), Ronald Reagan Washington National (DCA) and any other slot controlled airports to any carrier(s) designated by AWA; provided, however, that Mesa or the Affiliated Service Providers, as applicable, shall not be required to transfer any slots at slot controlled airports acquired by Mesa or the Affiliated Service Providers, as applicable, and used for |
10
flights other than Flights pursuant to this Agreement. Upon receiving such request from AWA, Mesa shall prepare and process, within thirty (30) days, all documentation necessary to execute the transfer of the airport slots requested by AWA in its notice. |
2.12 |
MAPPER System . AWA and Mesa, at AWAs cost and expense, shall use commercially reasonable efforts to install AWAs internal MAPPER System ( MAPPER System ) at all airport stations to and from which Flight Services are provided by September 1, 2001. AWA, at AWAs cost and expense, shall train Mesa personnel on the use of the MAPPER System. The MAPPER System shall be installed in all new stations when such stations are activated. Mesa shall cause its employees and subcontractors to input all flight and other operational and passenger data and information that the MAPPER System is capable of receiving as soon as such data and information is available. All operational statistics for each Flight shall be input into the MAPPER System within 1 hour after each departure. Commencing on the 90 th day after the MAPPER System is installed at a station, if Mesa fails to input any information or data into the MAPPER System, then Mesa, within 10 days after receipt of written demand, shall pay to AWA an amount equal to $100.00 for each entry not made. Mesa shall not be required to pay a penalty for any data not entered into the MAPPER System as a result of a system failure. Absent manifest error, MAPPER System data, information and records shall be the controlling data, information and records for all statistics used for purposes of calculation of penalties, payments and bonuses under this Agreement. No penalty for failure to input data shall be assessed more than 180 days after the date the data was to be entered. |
3. |
Rights, Responsibilities and Obligations of AWA . |
3.1 |
Flight Management Items . AWA, in its sole discretion, shall: (i) designate from time to time, pursuant to each Schedule Notice, the routes on and destinations to which Mesa is to provide the Flight Services and the times of departure for the Flights; (ii) set the fares to be paid for such Flights by the passengers; and (iii) be responsible for the passenger booking, yield management and overbooking of Flights, limited only by the Fleet required to be maintained by Mesa pursuant to this Agreement. |
3.2 |
Marketing/Revenue . AWA, in its sole discretion and at its sole cost, shall market, advertise and sell tickets on all Flights. AWA shall provide all reservation services for the Flight Services and shall pay all ticketing and advertising expenses, credit card charges, travel agent commissions and CRS fees applicable to such services. AWA shall be entitled to retain, and Mesa shall pay to AWA, all revenue and income generated by the Flight Services. Mesa shall provide to AWA all tickets and other revenue documentation collected or lifted by Mesa. Mesa, on a daily basis, shall remit to AWA any revenue collected by Mesa in connection with the Flight Services and Other Services into bank accounts established by AWA. Mesa shall be responsible for any revenue shortfall not remitted to AWA and shall pay such shortfall within 10 days after receipt of |
11
written demand from AWA which demand shall document the shortfall in reasonable detail. AWA shall process Mesa lifted passenger lift documents using standard industry pricing procedures. Mesa agrees to cooperate with AWA on any special pricing or reporting requirements. Mesa shall supply AWA with specific traffic reporting requirements. |
3.3 |
Airport Services . AWA, at its sole cost and expense, shall: (i) provide curb-side service, check-in service, ticketing and security services at AWA Service Locations for all Flights; (ii) transfer all baggage for passengers connecting from AWA flights to Flights in a timely manner to ensure all baggage is placed on those connecting Flights; and (iii) provide such other ground services selected by AWA at locations selected by AWA in writing to Mesa. To the extent Other Services are provided by AWA, the costs of such services shall not be included in the Actual Costs or Guaranteed Non-Maintenance Costs. AWA shall pay the rent for the terminal and gates at Sky Harbor Airport. |
3.4 |
Other Code Share Partners . AWA shall have the right to enter into code share, joint marketing, charter or other alliance-type agreements with any other flight service commuter operator to provide flight services to any destinations or for any routes. AWA may permit any of AWAs other code share partners to place their code on any Flight. AWA or its code share partners shall pay all costs and expenses incurred by Mesa in placing such other code on such Flights. |
3.5 |
Charters . AWA, at its sole discretion, may market charter flights on the Aircraft. Mesa shall operate such charter flights provided flight crews and Aircraft are available and not otherwise subject or committed to maintenance requirements. Mesa is required to operate the charters in a manner consistent with the terms of this Agreement. In respect of any charter flight, AWA and Mesa, in good faith, shall negotiate the costs and expenses to be paid by AWA for such services. Mesa, upon 90 days prior written notice to AWA, may use any Aircraft for company business; provided, however, that no such trips may disrupt scheduled Flights. If such trips disrupt scheduled Flights, Mesa, within 10 days after receipt of written demand, shall pay to AWA an amount equal to [***] times the number of Flights disrupted (the Disruption Fee ). If the Disruption Fee is not paid timely, then AWA may offset the Disruption Fee against the next amounts due by AWA to Mesa. |
3.6 |
Executive Travel . AWA shall provide Mesa with travel cards for the five top executives of Mesa for business travel and personal travel on AWA flights on the same terms and conditions as provided to AWA officers. Mesa is not permitted to offer barter travel on AWA flights or Flights in exchange for goods or services. In the event of any breach of the terms of this Section, Mesa, within 10 days after receipt of written request, shall pay to AWA the full coach fare for the flight(s) taken in violation of the terms of this Section. |
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4. |
Compliance with Regulations . |
4.1 |
Regulations . Mesa shall perform its obligations and duties under this Agreement, including, without limitation, all Flight Services and Other Services in full compliance with any and all applicable laws, ordinances, codes, statutes, orders, directives, mandates, requirements, rules and regulations, whether now in effect or hereafter adopted or promulgated, of all governmental agencies having jurisdiction over Mesas operations, including but not limited to the FAA and the DOT (collectively, Regulations ). |
4.2 |
Flight Operations . Mesa shall be responsible for the operation of each Aircraft and the safe performance of the Flights in accordance with the Regulations and airline industry standard practice and shall retain full authority, operational control and possession of the Aircraft to do so. Mesa, its agents or employees, for the purpose of the safe performance of the Flights, shall have absolute discretion in and shall have sole responsibility for all matters concerning the preparation of each Aircraft for its Flights, and all other matters relating to the technical operation of the Aircraft. Mesa, insofar as such relates to the safe operation of a Flight, shall have sole and absolute discretion as to the load carried and its distribution and as to the decision whether such Flight shall be taken. Mesa shall be solely responsible for and AWA shall have no obligations or duties with respect to the dispatch of all Flights. |
4.3 |
Registration . All Aircraft shall remain registered in the United States of America in accordance with the Regulations. |
4.4 |
Disclosure . Mesa, upon 2 business days prior written request, shall provide AWA the opportunity to review all operating specifications, operational regulations, manuals and calculations with respect to all Aircraft and flight statistics with respect to all Flights at Mesas corporate or other relevant offices where such records are located. |
4.5 |
Review/Audit . AWA or its independent accountants, upon 2 business days prior written notice, may review, at Mesas corporate office, airport ticket offices and other relevant offices, all records, books, logs, files, documentation and information maintained by Mesa, or any of its maintenance or service contracts, in connection with Flight operation, safety and regulatory compliance, employee training, Flight dispatch, Aircraft use, operation, maintenance and repair, Flight incidents and governmental orders, mandates and requirements. AWA, to the extent AWA deems necessary, may make unannounced visits and inspections at airport ticket offices and stations to insure Mesas and its employees, agents and contractors compliance with the terms and conditions of this Agreement. |
4.6 |
Reporting . This Agreement shall be treated as a code share for DOT reporting requirements. AWA shall provide Mesa with such information necessary for Mesa to make the DOT reports and disclosures. |
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5. |
Operational Performance Criteria, Incentives and Penalties . |
5.1 |
DOT Complaint Rate Criteria . Mesa shall not permit its annual DOT Complaint Rate (defined below) for Flight Services to exceed the annual DOT Complaint Rate of AWA. The DOT Complaint Rate is defined as the number of consumer complaints received by the DOT for a given calendar year expressed in terms of the number of complaints per 100,000 passengers flown during that calendar year by Mesa and AWA; provided, however, that the DOT Complaint Rate shall exclude consumer complaints relating solely to (i) overbooking; (ii) fares; (iii) Aircraft size or suitability; (iv) schedule; and (v) food service. For purposes of this Agreement, AWAs DOT Complaint Rate shall mean AWAs actual DOT Complaint Rate multiplied by 1.05. DOT complaints made against AWA for America West Express service shall be allocated to Mesa for the purpose of calculating Mesas and AWAs DOT Complaint Rates. If Mesas DOT Complaint Rate exceeds AWAs DOT Complaint Rate in any calendar year during the Term of this Agreement, Mesa, within 10 days after receipt of written demand from AWA, shall pay to AWA a penalty equal to [***] multiplied by the amount by which Mesas DOT Complaint Rate exceeds AWAs DOT Complaint Rate. For example, if AWAs DOT Complaint Rate for a given year is [***] per 100,000 passengers and Mesas is [***] per 100,000 passengers, Mesa would pay AWA the product of [***] x [***]. On each anniversary date of the Contract Date, the penalty payment amount shall be increased by the increase in the CPI, as determined in accordance with Section 7.4 . |
5.2 |
Mishandled Baggage Rate Criteria . Commencing January 1, 2002, Mesa shall not permit its monthly MBR (defined below) for Flight Services to exceed the monthly MBR of AWA. The MBR is defined as the number of lost baggage claims entered into the world tracer system for a given month expressed in the terms of the number of entries per 1,000 bags handled during that calendar month by Mesa and AWA. Mesa shall enter all lost baggage claims into the world tracer system within 2 hours after the lost baggage claim is made by a passenger. If Mesas MBR exceeds AWAs MBR by [***] or more in any calendar month during the Term of this Agreement, Mesa, within 10 days after receipt of written demand from AWA, shall pay to AWA a penalty equal to [***]. If Mesas MBR exceeds AWAs MBR for three consecutive calendar months, Mesa, within 10 days after receipt of written demand, shall pay to AWA an additional penalty of [***]for such three-month period and for each consecutive month thereafter that Mesas MBR exceeds AWAs MBR, the penalty shall be [***] per month. On each anniversary date of the Contract Date, the penalty payment amount shall be increased by the increase in the CPI, as determined in accordance with Section 7.4 . |
5.3 |
On Time Performance Rate Criteria . Mesa shall not permit Mesas OTP Rate (as defined below) for any Six Month Period (as defined below) to fall below: (i) [***] percentage points above AWAs OTP Rate for Schedules operated by Mesa out of the Phoenix Sky Harbor International hub; and (ii) [***] percentage points below the AWAs OTP Rate for Schedules operated out of the Columbus, Ohio |
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hub (the OTP Rate Threshold ). The Phoenix Sky Harbor International hub and Columbus hub are each referred to as a Hub . The OTP Rate is defined as the percentage determined by dividing the number of flight segments not Delayed (as defined below) by the total number of flight segments during the applicable Six Month Period. For purposes of this Agreement, Delayed means a flight segment that does not arrive at the destination within 15 minutes after the scheduled arrival time. All Flights will be included for calculating the OTP Rate. A canceled flight (except ones cancelled because of no passengers and the reasons set out in Section 5.4(v) ) is a Delayed flight. To the extent that Mesas OTP Rate for either Hub Schedule falls below the applicable OTP Rate Threshold for any Six Month Period, Mesa, within 10 days after receipt of written demand, shall pay to AWA the OTP Penalty Amount (as defined below) for each percentage point, or portion thereof, by which Mesas OTP Rate for either Hub Schedule falls below the OTP Rate Threshold for such Six Month Period. The OTP Penalty Amount for each Hub is an amount equal to [***] times a fraction, the numerator of which is the daily average of Aircraft providing Flight Services to and from the Hub during the applicable Six Month Period and the denominator of which is the daily average of all Aircraft providing Flight Services during the applicable Six Month Period. On each anniversary date of the Contract Date the dollar amounts used for calculating the OTP Penalty Amount shall be increased by the increase in the CPI, as determined in accordance with Section 7.4 . AWA, within 10 days after receipt of written demand, shall pay to Mesa [***] for each percentage point, or portion thereof, by which Mesas OTP Rate system wide exceeds [***] for any Calendar Quarter. On each anniversary date of the Contract Date, the bonus amount shall be increased by the increase in CPI, as determined in accordance with Section 7.4 . Six Month Period means each January 1 June 30 and July 1 December 31 and Calendar Quarter means each 3 calendar month period commencing January 1 of each year. |
5.4 |
Flight Completion Factor . Mesa shall not permit its FCF (defined below) for any Calendar Quarter to fall below: (i) [***] for Schedules operated out of the Phoenix Sky Harbor International Airport Hub; and (ii) [***] for Schedules operated out of the Columbus, Ohio Hub (each, an FCF Threshold ). FCF is defined as the percentage of published, scheduled Flights completed for a Calendar Quarter. Flights not completed due to: (i) weather; (ii) cancellation or overflight because of no passengers; (iii) air traffic control cancellations; (iv) cancellations resulting from an emergency airworthiness directive from the FAA affecting all aircraft similarly equipped to the Aircraft in any Subfleet (not just those owned or operated by Mesa); or (v) cancellations resulting from the sole acts or omissions of AWA or its employees, including, without limitation, damage to an Aircraft, will not be included in either the numerator or denominator for calculating the FCF. Mesa, within 10 days after receipt of written demand, shall pay to AWA the FCF Penalty Amount for each tenth of a percentage point, or portion thereof, by which Mesas FCF for either Hub Schedule falls below the applicable FCF Threshold. The FCF Penalty Amount for each Hub is an amount equal to [***] times a fraction, the numerator of which is the daily average of Aircraft providing Flight Services to and from the Hub during the |
15
Calendar Quarter and the denominator of which is the daily average of all Aircraft providing Flight Services under this Agreement during the Calendar Quarter. On each anniversary date of the Contract Date the dollar amount used for calculating the FCF Penalty Amount shall be increased by the increase in the CPI, as determined in accordance with Section 7.4 . AWA, within 10 days after receipt of written demand, shall pay to Mesa [***] for each tenth of a percentage point by which Mesas FCF system wide exceeds [***] in any Calendar Quarter. On each anniversary date of the Contract Date, the bonus amount shall be increased by the increase in CPI, as determined in accordance with Section 7.4 . |
5.5 |
Records . Within 5 days after the end of each calendar month Mesa shall provide to AWA statements certified by Mesas chief financial officer as to Mesas OTP Rate and FCF for the prior calendar month and, as applicable, the prior Calendar Quarter and Six Month Period, together with such supporting documentation and information as AWA may request. AWA or its designee, upon 2 business days prior written notice, may review, at Mesas corporate or other relevant offices, all records and files maintained by Mesa in connection with on-time performance and flight completions. If AWAs or its designees review of the records or files reveals that Mesa has under or overstated, as applicable, Mesas OTP Rate or FCF, then Mesa, upon demand, shall pay all sums due based on the accurate calculations, the actual out-of-pocket costs and expenses of AWA in completing such review and the applicable penalties payable based on such new calculation. If such under or overstatement is willful or intentional, then Mesa, within 10 days after receipt of written demand, shall pay to AWA an amount equal to [***] per occurrence. |
5.6 |
Limitation on Applicability of Standards, Criteria, Incentives, and Penalties . AWA acknowledges that Mesa and the Affiliated Service Providers operate flights and provide flight services and other services under their own names and/or under names or service marks other than America West Express using aircraft that are not included in the Fleet and that are not subject to this Agreement. Notwithstanding any other term, condition or provision hereof to the contrary, the standards, criteria, incentives and penalties set forth above in this Section 5 apply only to Flight Services, Flights and Other Services performed by Mesa and the Affiliated Service Providers hereunder operating as America West Express and not to any other flights, flight services or other services performed by Mesa and the Affiliated Service Providers under their own names or under a name or service mark other than America West Express. Thus, in calculating Mesas DOT Complaint Rate, the MBR, the OTP Rate, the FCF, and all incentives and penalties set forth above, only Flight Services and Other Services performed by Mesa and the Affiliated Service Providers under the service mark America West Express shall be taken into account in calculating such rates and assessing such incentives and penalties. |
6. |
Irregular Operations . The misconnect and denied boarding benefits provided by Mesa to passengers (each, a Misconnect Benefit Package ) shall be similar in amount and scope to those offered by AWA in similar circumstances and geographic areas (the AWA |
16
Standards ). AWA shall not be required to reimburse Mesa for any Misconnect Benefit Package which is in excess of the AWA Standards. |
7. |
Payment of Fees/Revenue Sharing . Commencing on the Effective Date and retroactive to the Contract Date, Mesa and AWA hereby agree to pay the following sums as consideration for this Agreement and the provision of the Flight Services and Other Services provided for herein: |
7.1 |
Mesa Actual Costs . AWA, in accordance with Section 7.5 , shall reimburse to Mesa the following actual costs and expenses actually paid by Mesa in connection with performing the Flight Services and Other Services ( Actual Costs ): |
7.1.1 |
Hull insurance premiums and commissions paid by Mesa for each Aircraft for the prior calendar month. Insurance shall be allocated and paid by AWA on a monthly basis equally over the applicable premium period for which the insurance is paid. Insurance shall be prorated by Mesa in any premium period during which an Aircraft is added or deleted from this Agreement. If the monthly insurance payments made by AWA are less than the actual premiums paid by Mesa, then AWA shall pay such excess in the month Mesa pays the insurance premiums. If the monthly payments made by AWA exceed the actual insurance premiums, then AWA shall be entitled to a credit against the next payment of the Actual Costs in an amount equal to such overpayment. Mesa, within 10 days after receipt, shall provide AWA with copies of all premium notices received for insurance premiums. |
7.1.2 |
Liability insurance premiums and commissions paid by Mesa for the Flight Services on a revenue passenger mile basis. Insurance shall be allocated and paid on a monthly basis equally over the applicable premium period for which the insurance is paid. Insurance shall be prorated by Mesa in any premium period during which this Agreement commences, terminates or expires. If the monthly insurance payments made by AWA are less than the actual premiums paid by Mesa, then AWA shall pay such excess in the month Mesa pays the insurance premiums. If the monthly payments made by AWA exceed the actual insurance premiums, then AWA shall be entitled to a credit against the next payment of the Actual Costs in an amount equal to such overpayment. Mesa, within 10 days after receipt, shall provide AWA with copies of all premium notices received for insurance premiums. |
7.1.3 |
Property taxes paid by Mesa for each Aircraft or the Fleet. Property taxes shall be allocated and paid on a monthly basis equally over the applicable tax period for which the property taxes are assessed and paid. If an Aircraft is added to the Fleet after property taxes are assessed for a tax period and Mesa does not owe taxes for such Aircraft for such tax period, then AWA shall not pay property taxes on the Aircraft for such tax period. AWA shall pay the full year property |
17
taxes for the year in which an Aircraft is deleted from the Fleet in the manner provided herein if such Aircraft is not placed in revenue service outside this Agreement (in which case such taxes shall be prorated). If the monthly tax payments made by AWA are less than the actual property taxes assessed and paid by Mesa, then AWA shall pay such excess in the month Mesa pays the property taxes. If the monthly payments made by AWA exceed the actual property taxes assessed, then AWA shall be entitled to a credit against the next payment of Actual Costs in an amount equal to such overpayment. Mesa, within 10 days after receipt, shall provide AWA with copies of all tax notices received for property taxes assessed against any portion of the Fleet. |
7.1.4 |
De-Icing expenses paid by Mesa for each Aircraft for the prior calendar month. |
7.1.5 |
Fuel costs paid by Mesa during the prior calendar month, calculated as gallons of fuel burned per hour. If in any calendar month Mesas estimated fuel costs exceed the Actual Costs for fuel for such calendar month by more than 3%, then thereafter, for the purpose of calculating Estimated Costs pursuant to Section 7.5 below, Mesa shall use AWAs fuel forecast for the fuel costs. |
7.1.6 |
Landing fees calculated per Flight departure incurred during the prior calendar month. |
7.1.7 |
Security outside AWA Service Locations calculated per America West Express passenger. |
7.1.8 |
Passenger and ground handling costs incurred at stations maintained by Mesa more particularly described on Exhibit B ( Station Costs ), not to exceed in each calendar year the amount set forth in the budget for each calendar year (the Station Budget ); provided, however, that if AWA changes a Schedule and such change in the Schedule directly results in any Station Costs exceeding the amount set forth in the Station Budget, then Station Costs shall include such costs in excess of the Station Budget to the extent directly attributable to the Schedule change. The Station Budget for each calendar year, together with such backup information requested by AWA, shall be prepared and provided to AWA by Mesa on or before October 1 of the prior calendar year. The Station Budget shall be based on Mesas commercially reasonable estimate of the actual costs that are to be incurred during the next calendar year. If AWA does not approve the Station Budget for any station, then AWA may convert such station to an AWA Service Location pursuant to Section 2.3 . |
18
Mesa shall not enter into any contract with an affiliate to provide the services or materials for which AWA pays the Actual Costs unless such contract is on commercially reasonable terms substantially similar to those available in the market place for arms-length transactions with third parties. In the event any of the services or materials for which AWA pays the Actual Costs are purchased for the Flight Services and Other Services provided by this Agreement and for other services provided by Mesa and its affiliates, then the costs of such services and materials shall be equitably allocated to Actual Costs payable by AWA such that AWA only pays for the portion of such costs attributable to the Flight Services or Other Services provided by this Agreement. Mesa shall use commercially reasonable efforts to operate the Flight Services and Other Services in an efficient and cost effective manner to minimize the Actual Costs payable by AWA while maintaining the quality and quantity of services required by this Agreement. Mesa shall take all commercially reasonable actions to minimize the taxes imposed on the Fleet. If requested by AWA, in writing, AWA on behalf of Mesa may pursue any tax protest or contest for property taxes imposed on the Fleet or any Aircraft in the Fleet in the manner prescribed by applicable law. An affiliate of Mesa means any person or entity controlling, controlled by or under common control with Mesa.
7.2 |
Mesa Guaranteed Costs . AWA, in accordance with Section 7.5 , shall pay to Mesa: |
(a) |
the lesser of: (i) the actual costs and expenses associated with certain of the Flight Services and Other Services (the Guaranteed Non-Maintenance Costs ) set forth in the cost and expense categories set forth in Exhibit C , attached hereto (the Guaranteed Non-Maintenance Costs Schedule ), or (ii) the amounts set forth in the Guaranteed Non-Maintenance Costs Schedule for each cost and expense category set forth in Exhibit C , attached hereto (the Guaranteed Non-Maintenance Costs Caps ); and |
(b) |
an amount for maintenance costs and expenses equal to the amounts set forth on Exhibit D (the Guaranteed Maintenance Costs ). |
The Guaranteed Non-Maintenance Costs Caps and Guaranteed Maintenance Costs shall be adjusted on each anniversary of the Contract Date in accordance with Section 7.4 below. If the Term of this Agreement commences or expires or an Aircraft is added or eliminated from the Fleet on other than the first or last day of a calendar month, then the Guaranteed Non-Maintenance Costs and Guaranteed Maintenance Costs payable by AWA under this Agreement or for such Aircraft shall be prorated based on the actual number of days this Agreement is in effect or the Aircraft is in the Fleet during such month and the actual number of days in such month. Payment of Guaranteed Non-Maintenance Costs and Guaranteed Maintenance Costs for an Aircraft shall commence on the Aircraft Scheduled Delivery Date unless the Aircraft is delivered late in which case
19
payment will begin on the actual delivery date. If an Aircraft, at AWAs written request, is placed into Flight Services prior to the Scheduled Delivery Date, then payment of the Guaranteed Non-Maintenance Costs and Guaranteed Maintenance Costs for such Aircraft shall commence on the date requested by AWA.
7.3 |
Contract Negotiation . AWA may assist Mesa in the negotiation of contracts for the provision of materials or services subject to the Actual Costs, Guaranteed Non-Maintenance Costs and Guaranteed Maintenance Costs provided Mesa is not subject to an existing contract for such services or materials. |
7.4 |
Guaranteed Costs Adjustment . |
7.4.1 |
CPI Adjustment . For the purposes of calculating CPI increases in Guaranteed Non-Maintenance Costs Caps, increases in the Guaranteed Maintenance Costs, increases in bonuses or penalties pursuant to Section 5 or increases in the base EAS Subsidies pursuant to Section 7.7 the following definitions and formulas shall be applied: |
(a) |
Definition . CPI shall mean the Consumer Price Index, U.S. City Average, Urban Wage Earners and Clerical Workers, All Items (base index year 1982-84 = 100) as published by the United States Department of Labor, Bureau of Labor Statistics. If the manner in which the Consumer Price Index as determined by the Bureau of Labor Statistics shall be substantially revised, including, without limitation, a change in the base index year, an adjustment shall be made by the parties in such revised index which would produce results equivalent, as nearly as possible, to those which would have been obtained if such Consumer Price Index had not been so revised. If the Consumer Price Index shall become unavailable to the public because publication is not readily available to enable the parties to make the adjustment referred to in this Section, then the parties shall mutually agree to substitute therefor a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency or, if no such index shall be available, then a comparable index published by a major bank or other financial institution or by a university or a recognized financial publication. |
(b) |
Adjustment Formula . On each anniversary of the Contract Date (each an Adjustment Date ), to determine the amount of adjustment or increase based on CPI, the applicable Guaranteed Non-Maintenance Costs Caps, the Guaranteed Maintenance Costs, bonuses or penalties and EAS Subsidies, as applicable, in effect for the prior year, shall be adjusted by multiplying the Guaranteed Non-Maintenance Costs Caps on the Guaranteed Non-Maintenance Costs Schedule, the Guaranteed Maintenance Costs, bonuses or penalties and EAS Subsidies, as applicable, in effect for the prior |
20
year, by a fraction, the numerator which shall be the CPI for the third full calendar month immediately preceding the Adjustment Date, and the denominator of which shall be the CPI for the same calendar month in the immediately preceding calendar year (the Adjustment ). |
7.4.2 |
Governmental Requirements . If any governmental rule, order, regulation or requirement affecting: (i) all aircraft similarly equipped as the Aircraft in any Subfleet (not just those owned by Mesa); or (ii) all airlines flying similar equipment as the Aircraft (not just Mesa), results in an increase in any of the Guaranteed Non-Maintenance Costs or Guaranteed Maintenance Costs such that the actual Guaranteed Non-Maintenance Costs or Guaranteed Maintenance Costs will exceed the then applicable Guaranteed Non-Maintenance Costs Cap or amounts set forth on Exhibit D for the Guaranteed Maintenance Costs, then the applicable Guaranteed Non-Maintenance Costs Cap or Guaranteed Maintenance Costs shall be increased by such amount, as of the effective date of such governmental regulation, rule, order or requirement. |
7.4.3 |
Amendment . Mesa and AWA shall execute an amendment to Exhibit C and Exhibit D within 10 days after each adjustment occurs pursuant to this Section 7.4 . The failure to execute such an amendment shall not affect the effectiveness of any adjustment or the bases for any subsequent adjustment. Each adjusted Guaranteed Non-Maintenance Costs Cap and Guaranteed Maintenance Costs shall be effective until the next adjustment of such Guaranteed Non-Maintenance Costs Cap and Guaranteed Maintenance Costs pursuant to this Section 7.4 . |
7.4.4 |
Guaranteed Maintenance Costs Reconciliation . Within 180 days after the expiration or termination of this Agreement, AWA, by written notice to Mesa, may review and audit Mesas records and files relevant to the actual maintenance costs paid by Mesa in the categories set forth on Exhibit D . If AWAs review of the records and files reveals that the actual maintenance costs paid by Mesa during the term of this Agreement was less than the sum of all the Guaranteed Maintenance Costs paid by AWA during the term of this Agreement (the Excess Maintenance Payments ), then Mesa, within 30 days after receipt of written demand, shall pay to AWA an amount equal to the Excess Maintenance Payments. The terms and conditions of this Section shall survive the termination or expiration of this Agreement. Mesa shall maintain and retain all maintenance cost and expense records and files for the entire Term of this Agreement and for at least one year after the expiration or termination of this Agreement. |
21
7.5 |
Payment of Actual and Guaranteed Non-Maintenance Costs . |
7.5.1 |
Estimates . AWA shall pay to Mesa the estimated Actual Costs, Guaranteed Non-Maintenance Costs (using the Guaranteed Maintenance Costs Caps) and Guaranteed Maintenance Costs for each calendar month based on a 98% FCF (the Estimated Costs ) as follows: By the 20th day of each calendar month, Mesa shall provide AWA with a good faith statement of the Estimated Costs for the following calendar month. On or before the 7 th , 14 th , 21 st and 28 th day of each calendar month (or next business day thereafter if any such dates is other than a business day), AWA shall pay 25% of the Estimated Costs for such calendar month. |
7.5.2 |
Monthly Reconciliation . On or before the 120 th day after the last day of each calendar month, Mesa shall submit to AWA a statement of the actual Guaranteed Non-Maintenance Costs (using for each monthly statement the applicable Guaranteed Non-Maintenance Costs Caps), the Guaranteed Maintenance Costs and Actual Costs incurred by Mesa (the Incurred Costs ) and payable by AWA for such calendar month (the Incurred Costs Statement ). If the Estimated Costs paid by AWA in any calendar month exceed the Incurred Costs in any calendar month, then Mesa, together with the Incurred Costs Statement for such calendar month, shall reimburse AWA the amount by which the Estimated Costs paid by AWA exceeded the Incurred Costs. If the Incurred Costs in any calendar month exceed the Estimated Costs paid by AWA in any calendar month, then AWA, subject to the rights and procedures set forth in Section 7.8 , within 45 days after receipt of the Incurred Costs Statement, shall reimburse and pay to Mesa the amount by which the Incurred Costs exceed the Estimated Costs paid by AWA for the subject calendar month. |
7.5.3 |
Annual Reconciliation . At any time within 120 days after the expiration of each Contract Year (as defined below), AWA, upon 2 Business Days prior written notice to Mesa, may review and audit, or cause its independent accountants to review and audit, all records and files (including computer databases) maintained by Mesa and relevant to the calculation of the actual Guaranteed Non-Maintenance Costs incurred by Mesa during the prior Contract Year (the GNMC Audit ). If the GNMC Audit reveals that the actual Guaranteed Non-Maintenance Costs actually paid by Mesa during the prior Contract Year was less than the sum of all the Guaranteed Non-Maintenance Costs Caps paid by AWA during such Contract Year (the Excess Non-Maintenance Payments ), then Mesa, within 30 days after receipt of written demand from AWA, shall pay AWA an amount equal to the Excess Non-Maintenance Payment. If Mesa does not pay the Excess Non-Maintenance Payments to AWA timely, then AWA shall have the setoff rights contained in Section 7.9 below. For the purposes of this |
22
section, Contract Year means each one year period commencing on April 1 of each calendar year and expiring on March 31 of the next calendar year. For the purposes of the first Contract Year, the year shall commence on the Contract Date and expire on March 31, 2002. For purposes of the last Contract Year, the Contract Year shall commence on April 1 and expire on the Expiration Date. For the purpose of determining the actual Guaranteed Non-Maintenance Costs incurred in providing the Flight Services and Other Services, Guaranteed Non-Maintenance Costs subject to allocation to the Flight Services and Other Services shall be allocated to this Agreement by Mesa using the same methodology used by Mesa in establishing the Guaranteed Non-Maintenance Costs Caps. |
7.5.4 |
Finality . The Incurred Costs Statement issued by Mesa shall include all and be the final statement for the Guaranteed Non-Maintenance Costs and Actual Costs payable by AWA for the period covered by each Incurred Costs Statement. AWA shall not be obligated to pay any Guaranteed Non-Maintenance Costs or Actual Costs for a period that are not included in the applicable Incurred Costs Statement when initially issued by Mesa to AWA. |
7.6 |
Revenue Sharing . Commencing in the first calendar month after the month in which the Effective Date occurs, AWA shall pay to Mesa, by the 20 th day of each calendar month, an amount equal to the product obtained by multiplying the Segment Revenue Percentage by the Segment Revenue generated during the prior calendar month. For purposes of this Agreement, the following terms have the following definitions: |
Segment Revenue means the portion of the total fares paid by passengers allocated to the Flights flown by Mesa or the Affiliated Service Providers pursuant to this Agreement, less all taxes, assessments, airport charges and other governmental and quasi-governmental charges included in the fares. For calculating Segment Revenue, the portion of the revenue attributed to the Mesa Flight segment shall be determined in accordance with Straight Prorate Rule 11B of the Passenger Tariff Manual produced by the Airline Tariff Publishing Company.
Segment Revenue Percentage means the following percentages based on the type of Aircraft used to fly the Flight which creates the Segment Revenue allocable to Mesa Flight segment:
Aircraft |
Segment Revenue Percentage |
|
Beech 1900 |
[***] | |
Dash 8 |
[***] | |
CRJ Model 200 |
[***] | |
CRJ Model 700 |
[***] | |
CRJ Model 900 |
[***] |
23
7.7 |
Subsidies . Mesa, within 30 days after receipt, shall rebate to AWA all EAS subsidies paid to Mesa by any governmental entities for Flights (the EAS Subsidies ). Notwithstanding the foregoing to the contrary, if Mesa causes any EAS Subsidies to be increased to an amount in excess of the EAS Subsidies in effect on the Contract Date, increased annually on the anniversary of each Contract Date by an amount equal to an increase in the CPI as calculated pursuant to Section 7.4.1 , then AWA shall pay to Mesa 50% of any such increase within 30 days after receipt of written demand. AWA shall not be responsible to the DOT for continuing service in any EAS market. Notwithstanding the foregoing, if AWA directs Mesa to bid to provide flight service to any EAS market, then AWA shall be responsible for all liabilities incurred in connection with discontinuing such service prior to the expiration of any DOT hold-in order. AWA shall be entitled to retain all payments, subsidies, revenue guarantees or other similar payments generated from the Flight Services flown under this Agreement and negotiated by AWA. |
7.8 |
Records, Statements and Audit Rights . Mesa shall maintain separate accounting books and records for the Flight Services and Other Services performed by Mesa under this Agreement. All Incurred Costs Statements and other requests for payment made by Mesa pursuant to this Section 7 shall be accompanied by such supporting information, documentation and calculations described on Exhibit E , attached hereto, and as AWA may reasonably request from time to time (the Backup Information ). If AWA disputes the amount set forth in any statement or the Backup Information is inadequate, incomplete or inaccurate, then AWA shall pay the undisputed portion of such statement and the portions for which the Backup Information is adequate, complete and accurate, timely, and together with such payment provide Mesa with a written statement of any disputed amount and the amounts for which the Backup Information is inadequate, incomplete or inaccurate. AWA and Mesa shall meet and confer to resolve any disputed amount and inadequate, incomplete or inaccurate Backup Information within 30 days after AWA provides notice of the dispute. Disputed amounts and amounts for which the Backup Information is inadequate, incomplete or inaccurate shall not be payable until the dispute is resolved and then shall be payable within 10 days after the dispute is resolved. |
AWA, upon 2 business days prior written notice, may review and audit, or cause its independent accountants to review and audit, all records and files (including computer data bases) maintained by Mesa and relevant to the calculation of the payments required to be made by AWA pursuant to this Agreement. If AWAs review of the records and files reveals that Mesa has overcharged AWA or underpaid AWA, then Mesa shall pay to AWA, upon demand, the overpayments and/or underpayments and the costs and expenses of AWA incurred in completing such review and audit and, if such overcharge or underpayment is willful or intentional or exceeds more than 10% of the sums actually payable or receivable by AWA, then Mesa, within 10 days after receipt of written demand, shall pay to AWA an amount equal to 3 times the overcharge or underpayment. Mesa shall
24
maintain all records, files, information, data and documentation (including computer data bases) used in calculating the sums payable or receivable by AWA under this Agreement in good condition and order at Mesas corporate headquarters. AWA shall not be required to pay any sums, and shall be entitled to receive a refund of any sum paid, for which Mesa is unable to provide supporting information, documentation or data.
7.9 |
Setoff . All undisputed sums payable by Mesa to AWA pursuant to this Agreement may, at AWAs election, be setoff against amounts next due by AWA to Mesa pursuant to this Agreement. |
8. |
Term and Termination . |
8.1 |
Term . The term of this Agreement (the Term ) commences on the Effective Date retroactive to the Contract Date (the Commencement Date ) and shall expire ( Expiration Date ) on the 8th anniversary of the date that the last CRJ Aircraft is added to the Fleet pursuant to Section 2.2.2 of the Agreement (the Last Delivery Date ), unless earlier terminated as provided in this Agreement. AWA, by written notice to Mesa at least 180 days prior to the Expiration Date, may extend the Expiration Date to the 10 th anniversary of the Last Delivery Date. |
8.2 |
Early Termination . If: (i) Mesas OTP Rate for the Phoenix Hub falls below AWAs OTP Rate for the Phoenix Hub for five of any six calendar months or (ii) Mesas FCF for the Phoenix Hub falls below 96% for five of any of six consecutive calendar months (each, a Cancellation Event ), AWA, at its election, may by written notice (a Performance Notice ) inform Mesa that if the Cancellation Event is not cured within one hundred twenty (120) days from receipt of such Performance Notice (the Cure Period ), AWA, at its option may give a Termination Notice (as defined below). If the Cancellation Event relates to Mesas OTP Rate, the cure shall be effected by Mesa bringing its OTP Rate for such Hub to a rate that is equal to or above AWAs OTP Rate at the Phoenix Hub during the Cure Period. If the Cancellation Event relates to the Mesas FCF for the Phoenix Hub, the cure shall be effected by Mesa bringing its FCF at the Phoenix Hub to 97% or higher during the Cure Period. If, after the Cure Period has expired and Mesa has not cured the Cancellation Event as set forth above, then AWA at any time during the thirty (30) day period following the lapse of the Cure Period without cure may, upon 90 days prior written notice to Mesa ( Termination Notice ), terminate this Agreement. Such termination right shall be in addition to any penalty payments set forth in Section 5 and termination rights for an Event of Default pursuant to Section 13 . |
8.3 |
Change of Control . This Agreement may be terminated by either AWA or Mesa providing the other party with at least 90 days prior written notice (the Change Termination Notice ) in the event of a change of control of the other party or a sale of substantially all of the other partys assets. Change of Control means any person or group (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) either becomes the beneficial owner (as defined in Rule 13d-3 of |
25
the Exchange Act), directly or indirectly, of voting securities of either party (or securities converted into or exchangeable for such voting securities) representing 50% or more of the combined voting power of all voting securities of the party (on a fully diluted basis) or otherwise has the ability, directly or indirectly, to elect a majority of the board of directors of the party or any person or two or more persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence on the management or policies of the party. |
8.4 |
Effect of Termination . If AWA elects to terminate this Agreement pursuant to this Section 8 , AWA, in the Termination Notice, shall establish as the termination date any date between 90 and 180 days after delivery of the Termination Notice or Change Termination Notice, as applicable. Mesa shall continue to provide the Flight Services and Other Services required by this Agreement until the termination date set forth in the Termination Notice or Change Termination Notice, as applicable. AWA and Mesa shall make all payments as required by this Agreement for the period through and including the termination date set forth in the Termination Notice or Change Termination Notice, as applicable. |
9. |
Service Mark License For Services Provided By Mesa . |
9.1 |
Grant of License . For the payment of $1.00, AWA hereby grants to Mesa a non-exclusive, non-transferable license to use such AWA Service Marks as AWA may designate, in writing, from time to time in connection with the Flight Services and Other Services to be rendered by Mesa; provided, however, that at any time prior to expiration or termination of this Agreement AWA may alter, amend or revoke the license hereby granted and require Mesas use of any new or different AWA Service Mark in conjunction with the Flight Services and Other Services provided hereunder as AWA may determine in its sole discretion and judgment. |
9.2 |
Operation under AWA Service Marks/Aircraft Decor . Mesa, at its expense (subject to reimbursement in the next sentence), shall cause the Fleet and any replacement or additional Aircraft utilized by Mesa, or any of the Affiliated Service Providers, to provide the Flight Services, to be painted, marked and decorated to bear AWA Service Marks, consisting of AWA aircraft exterior and interior color decor and pattern provided by AWA and the name America West Express. AWA shall reimburse Mesa for 50% of the costs of painting, decorating or marking any new CRJ added to the Fleet pursuant to Section 2.2 . Upon written notice from AWA, which shall include the specifications for any such changes in AWA Service Marks and exterior or interior aircraft decor and patterns, Mesa shall effect changes in the aircraft decor and patterns within 12 months from the date of such notice. AWA shall reimburse Mesa for the cost of repainting the Fleet in the event that AWA changes its logo and color decor and pattern from the design existing as of the Effective Date. Mesa shall use and display suitable signs on the interior and exterior of each Aircraft identifying Mesa as the operator of the Services, such signs shall be subject to the prior written consent of AWA as to |
26
nature, size and location provided that the signs shall comply with all Regulations. AWA shall reimburse Mesa for the actual costs and expenses of repainting any Aircraft eliminated from the Fleet pursuant to Section 2.2 . All announcements, displays or literature used or viewed by Mesa customers on Flights shall highlight America West Express. No such announcements, displays or literature shall reference Mesa Airlines, other than to identify Mesa or the operator of the Services, on briefing cards or as required by the Regulations. |
9.3 |
Terms and Conditions Governing Service Mark License . |
9.3.1 |
Mesa hereby acknowledges AWAs ownership of the AWA Service Marks, further acknowledges the validity of the AWA Service Marks, and agrees that it shall not do anything in any way to infringe or abridge upon AWAs rights in the AWA Service Marks or directly or indirectly to challenge the validity of the AWA Service Marks. |
9.3.2 |
To assure that the production, appearance and quality of the AWA Service Marks is consistent with AWAs reputation for high quality and the goodwill associated with the AWA Service Marks, Mesa agrees to maintain a level of quality consistent with AWAs quality in the Flight Services and Other Services it provides pursuant to this Agreement and to follow AWAs written instructions regarding use of AWAs Service Marks, as they may be amended from time to time. |
9.3.3 |
Mesa agrees that, in providing the Flight Services and Other Services, it shall not advertise or make use of the AWA Service Marks without the prior written consent of AWA. AWA shall have absolute discretion to withhold its consent concerning any and all such advertising and use of the AWA Service Marks in any advertising by Mesa. In the event AWA approves the use of such AWA Service Marks in any advertising, such advertising shall identify AWA as the owner of such Service Marks and conform with any additional requirements specified by AWA. |
9.3.4 |
To the extent that Mesa is licensed to use the AWA Service Marks, the AWA Service Marks shall be used only in connection with the Flight Services and Other Services specifically covered by this Agreement and not in connection with any other business or activity of Mesa or any other entity. |
9.3.5 |
Nothing in this Agreement shall be construed to give Mesa the exclusive right to use the AWA Service Marks or abridge AWAs right to use and license the AWA Service Marks, and AWA hereby reserves the right to continue to use the AWA Service Marks and to license such other uses of the AWA Service Marks as AWA may desire. |
27
9.3.6 |
No term or provision of this Agreement shall be construed to preclude the use of the AWA Service Marks, including America West Express, or the aircraft exterior color decor and patterns by other individuals or entities not covered by this Agreement. |
9.3.7 |
Upon the termination or expiration of this Agreement, the license and use of the AWA Service Marks by Mesa shall cease and such use shall not thereafter occur. |
10. |
Liability and Indemnification . |
10.1 |
Relationship Between the Parties . Nothing contained in this Agreement will be deemed to create any agency or partnership or similar relationship between AWA and Mesa. Nothing contained in this Agreement will be deemed to authorize either AWA or Mesa to bind or obligate the other. Mesa and the Affiliated Service Providers and their employees engaged in performing the Flight Services and Other Services shall be employees of Mesa or the Affiliated Service Providers for all purposes, and under no circumstances shall be deemed to be employees, agents or independent contractors of AWA. AWA and its employees engaged in performing the obligations of AWA under this Agreement shall be employees, agents and independent contractors of AWA for all purposes, and under no circumstances shall be deemed to be employees, agents or independent contractors of Mesa. Pursuant to this Agreement, Mesa and the Affiliated Service Providers shall act, for all purposes, as independent contractors and not as agents for AWA. AWA shall have no supervisory power or control over any employees engaged by Mesa and the Affiliated Service Providers in connection with their performance hereunder, and all complaints or requested changes in procedures shall be transmitted by AWA to a designated officer of Mesa. Nothing contained in this Agreement shall be intended to limit or condition Mesas and the Affiliated Service Providers control over their operations or the conduct of their business as air carriers, and Mesa and the Affiliated Service Providers and their principals assume all risks of financial losses which may result from the operation of the Flight Services and Other Services to be provided by Mesa and the Affiliated Service Providers hereunder. |
10.2 |
Indemnification by Mesa . Mesa agrees to indemnify, defend and hold harmless AWA, its directors, officers, employees, agents, parent corporation, subsidiaries and affiliates for, from and against any and all loss, liability, claim, damage, penalty, fine, charge, cause of action, demand, cost and expense (including attorneys and consultants fees and costs) whatsoever (collectively, Damages ), as incurred, arising out of, resulting from or incurred in connection with: (i) the provision of the Flight Services and Other Services by Mesa and the Affiliated Service Providers or any of their employees, agents, licensees, contractors, suppliers, officers or directors; (ii) Mesas or the Affiliated Service Providers breach of this Agreement; (iii) damage or destruction of property of any person, or injury or death of any person, caused by, arising out of, or in connection with any act or omission of Mesa or the Affiliated Service Providers, their employees, |
28
agents, licensees, contractors, suppliers, officers or directors; (iv) any taxes, impositions, assessments or other governmental charges incurred by Mesa in providing the Flight Services or Other Services or imposed on any revenue generated by this Agreement (except as set forth in Section 7.1.3 ); (v) passenger complaints or claims by passengers using the Flight Services; (vi) the failure or discontinuance of service to any EAS market (except as specified in Section 7.7 ); and (vii) failure to comply with any Regulations. Mesa agrees to indemnify, defend and hold harmless AWA, its officers, directors, employees, agents, parent corporation, subsidiaries and affiliates for, from and against any and all Damages as incurred, arising out of, resulting from or incurred in connection with any claims for consideration for performance by the Affiliated Service Providers. Mesa shall reimburse AWA or other Indemnified Party (as defined below) for any legal and any other expenses reasonably incurred in investigating, preparing or defending against any claim or action arising out of or relating to any of the foregoing. |
10.3 |
Indemnification by AWA . AWA agrees to indemnify, defend and hold harmless Mesa, its directors, officers, employees, agents, parent corporation, subsidiaries and affiliates for, from and against any and all Damages, as incurred, arising out of, resulting from or incurred in connection with: (i) AWAs breach of this Agreement; (ii) damage or destruction of property of any person, or injury or death of any person, caused by, arising out of, or in connection with any act or omission of AWA, its employees, agents, licensees, contractors, suppliers, officers or directors in performing AWAs obligations under this Agreement to the extent not covered by Mesas or the Affiliated Service Providers insurance required to be maintained by this Agreement; and (iii) any taxes, impositions, assessments or other governmental charges incurred by AWA for revenue received by AWA under this Agreement. AWA shall reimburse Mesa or other Indemnified Party (as defined below) for any legal and any other expenses reasonably incurred in investigating, preparing or defending against any claim or action arising out of or relating to any of the foregoing. |
10.4 |
Conduct of Indemnification Proceedings . The person or entity claiming indemnification hereunder is referred to as the Indemnified Party and the party against whom such claims are asserted hereunder is referred to as the Indemnifying Party . Each Indemnified Party shall give reasonably prompt notice to the Indemnifying Party of any action or proceeding or assertion or threat of claim commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify the Indemnifying Party (i) shall not relieve the Indemnifying Party from any liability which it may have under the indemnity agreement provided in this Agreement, unless and to the extent it did not otherwise learn of such action, threat or claim and the lack of notice by the Indemnified Party results in the forfeiture by the Indemnifying Party of substantial rights and defenses and (ii) shall not, in any event, relieve the Indemnifying Party from any obligations to the Indemnified Party other than the indemnification obligation provided under Sections 10.2 and 10.3 above. If the Indemnifying Party elects within a reasonable time after receipt of notice, the |
29
Indemnifying Party may assume the defense of the action or proceeding at Indemnifying Partys own expense with counsel chosen by the Indemnifying Party and approved by the Indemnified Party; provided , however , that, if the Indemnified Party reasonably determines upon advice of counsel that a conflict of interest exists where it is advisable for the Indemnified Party to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to it which are different from or in addition to those available to the Indemnifying Party, then the Indemnified Party shall be entitled to separate counsel at the Indemnifying Partys expense, which counsel shall be chosen by the Indemnified Party in its sole discretion. If the Indemnifying Party does not assume the defense, after having received the notice referred to in the second sentence of this Section, the Indemnifying Party will pay the reasonable fees and expenses of counsel for the Indemnified Party. Unless and until a final judgment that an Indemnified Party is not entitled to the costs of defense under the foregoing provision, the Indemnifying Party shall reimburse, promptly as they are incurred, the Indemnified Partys costs of defense. The Indemnifying Party shall not settle or compromise any claim for which an Indemnified Party is entitled to indemnity without the prior written consent of the Indemnified Party. |
10.5 |
Insurance . |
10.5.1 |
Mesa, at all times during the Term of this Agreement, shall have and maintain and shall cause the Affiliated Service Providers to have and maintain in full force and effect, policies of insurance satisfactory to AWA, of the types of coverage, and in the minimum amounts stated below with insurance companies satisfactory to AWA and under terms and conditions satisfactory to AWA, including insurance coverage on all Aircraft used to provide Flight Services. Unless otherwise specified, the minimum amounts of insurance coverage required hereunder shall be per occurrence, combined single limit for all insurance coverage required hereunder. |
1. Aircraft Liability and Ground Liability Insurance (including Commercial General Liability) |
$250,000,000 per Occurrence Combined Single Limit of Liability for CRJs and Dash 8s and $150,000,000 per Occurrence Combined Single Limit of Liability for Beech 1900s | |
a. Bodily Injury and Personal Injury - Passengers |
Included in Combined Single Limit | |
b. Bodily Injury and Personal Injury Third Parties |
Included in Combined Single Limit | |
c. Property Damage |
Included in Combined Single Limit |
30
Per Accident | ||
2. Workers Compensation Insurance (Company Employees) |
Statutory | |
3. Employers Liability (Company Employees) |
$500,000 | |
4. All Risk Hull Insurance on Aircraft Performing Services Hereunder |
Replacement Cost or Such Lesser Amount as may be Consented to by AWA, in writing | |
5. Baggage Liability |
$1,250 (per Passenger) | |
6. Cargo Liability |
$100,000 any One Aircraft
$100,000 any One Disaster with Terms, Limitations and Conditions Acceptable to AWA |
10.5.2 |
The parties hereby agree that from time to time during the Term of this Agreement, AWA may require Mesa and the Affiliated Service Providers to have and maintain amounts of insurance coverage different from those amounts set forth in Section 10.5.1 , should AWA, in its reasonable judgment, deem the circumstances and conditions of the Flight Services and Other Services to require increases in any or all of the foregoing minimum insurance coverages. |
10.5.3 |
Mesa shall cause all policies of insurance which it and the Affiliated Service Providers maintain pursuant to this Agreement, to be duly and properly endorsed by Mesas and the Affiliated Service Providers insurance underwriters as follows: |
10.5.3.1 |
To provide that any waiver of rights of subrogation against other parties by Mesa or the Affiliated Service Providers shall not affect the coverage provided hereunder with respect to AWA. |
10.5.3.2 |
To provide that Mesas and the Affiliated Service Providers underwriters shall waive any and all subrogation rights against AWA, its directors, officers, agents and employees without regard to any breach of warranty by Mesa or the Affiliated Service Providers or to provide other evidence of such waiver of recourse against AWA, its |
10.5.3.3 |
directors, officers, agents, or employees as shall be acceptable to AWA. Be duly and properly endorsed to |
31
provide that each such policy or policies or any part or parts thereof shall not be canceled, terminated, or materially altered, changed or amended by Mesas and the Affiliated Service Providers insurance underwriters, until after 30 days written notice to AWA which 30 days written notice shall commence to run from the date such notice is actually received by AWA. |
10.5.4 |
With respect to policies of insurance described as Aircraft Liability and Ground Liability Insurance, Mesa will provide that Mesas and the Affiliated Service Providers policies: |
10.5.4.1 |
Endorse AWA, its directors, officers, agents, parents, subsidiaries and employees as Additional Insureds thereunder. |
10.5.4.2 |
Constitute primary insurance for such claims and acknowledge that any other insurance policy or policies of AWA will be secondary or excess insurance; |
10.5.4.3 |
Cover AWAs costs of defending against such insured claims including, without limitation, to the extent permitted by the policies, costs incurred in the retention of separate legal counsel of its choice; and |
10.5.4.4 |
Provide a cross-liability clause acceptable to AWA, and a specific contractual liability insurance provision covering liability assumed by Mesa and the Affiliated Service Providers under this Agreement. |
10.5.5 |
With respect to policies of insurance for coverage described as Aircraft Liability and Ground Liability Insurance and All Risk Hull Insurance, Mesa shall cause its insurance underwriters to provide a breach of warranty clause. |
10.5.6 |
All aircraft hull insurance provided pursuant to this Agreement shall be provided on agreed value basis and, except with the consent of AWA,, shall not be subject to more than the standard market deductibles. In the event of loss, settled on the basis of a total loss, all losses shall be payable in full. |
10.5.7 |
Upon request by AWA, Mesa shall furnish to AWA evidence satisfactory to AWA of the aforesaid insurance coverage and endorsements, including certificates certifying that the aforesaid insurance policy or policies with the aforesaid policy limits are duly and properly endorsed as aforesaid and are in full force and effect. |
32
10.5.8 |
With respect to policies of insurance obtained directly from foreign underwriters, Mesa shall cause such insurance underwriters to provide that AWA may maintain against Mesas and the Affiliated Service Providers underwriters a direct action in the United States upon such insurance policies and to this end to provide a standard service of suit clause designating an agent for service of process in the United States of America. |
10.5.9 |
In the event Mesa or the Affiliated Service Providers fails to maintain in full force and effect any of the insurance and endorsements described in Section 10.5 , AWA shall have the right (but not the obligation) to procure and maintain such insurance or any part thereof. The cost of such insurance shall be payable by Mesa to AWA upon demand by AWA. The procurement of such insurance or any part thereof by AWA shall not discharge or excuse Mesas or the Affiliated Service Providers obligation to comply with the provisions of Section 10.5 . Mesa agrees not to cancel, terminate or materially alter, change or amend any of the policies referred to in Section 10.5 without 30 days prior written notice to AWA of its intent to cancel, terminate or materially alter, change or amend said policies or insurance which 30 day notice period shall commence to run from the date notice is actually received by AWA. |
10.5.10 |
AWA shall maintain cargo liability coverage, in types and amounts required by law, for all air freight transported by Mesa or the Affiliated Service Providers under an AWA airbill on any Flights. |
11. |
Confidentiality . |
11.1 |
AWA and Mesa agree that the terms of this Agreement shall be treated as confidential and shall not be disclosed to third parties without the express written consent of AWA and Mesa, or as required by law. In the event of disclosure required by law, only those portions of this Agreement required to be disclosed shall, be disclosed. The disclosing party shall make good faith efforts to minimize the portions to be disclosed and shall seek confidential treatment by the receiving party or agency for any portions disclosed. In the event of one party being served a subpoena or discovery request, prior to responding to the subpoena or request, the party served shall notify the other party to provide the other party an opportunity to contest the disclosure of any terms of this Agreement. |
11.2 |
Confidential Information means any information in any form, including, without limitation, the terms of this Agreement, written documents, oral communications, recordings, videos, software, data bases, business plans, and electronic and magnetic media, provided to or observed by AWA or Mesa pursuant to this Agreement, including information owned or provided by either party to the other party, except for information generally available to the public. AWA and Mesa agree that they shall maintain all Confidential Information in |
33
confidence and use such Confidential Information solely for purposes of performance under this Agreement. Such Confidential Information shall be distributed within each partys company only to personnel and to its legal counsel, auditors and other consultants on a need-to-know basis for purposes related to this Agreement or in compliance with a court order or statutory or regulatory requirements. Except for legal counsel and auditors, and as permitted by Section 11.1 , in no event shall either party disclose Confidential Information to any third parties except subcontractors and independent consultants and then only if approved by both parties in writing in advance of such disclosure. Confidential Information does not include information that is available to the general public other than as a result of disclosure by the disclosing party or information that was known or independently developed by the receiving party prior to disclosure, as evidenced by records kept in the ordinary course of business. |
11.3 |
Mesa acknowledges and agrees that any Confidential Information shared or given to AWA pursuant to this Agreement may be shared by AWA on a confidential basis with America West Holdings Corporation, The Leisure Company and other subsidiaries and affiliates of AWA. AWA acknowledges and agrees that any Confidential Information shared or given to Mesa pursuant to-this Agreement may be shared by Mesa on a confidential basis with Mesa Air Group, Inc. and other subsidiaries or affiliates of Mesa. |
12. |
Taxes . Mesa shall pay, prior to delinquency, all airport, property, sales, use, excise or any other taxes, impositions, assessments or other governmental charges incurred in connection with the provision of the Flight Services and Other Services under this Agreement and all taxes imposed or any sums paid by AWA to Mesa under this Agreement. AWA shall pay, prior to delinquency, all taxes imposed on any sums paid by Mesa to AWA under this Agreement. |
13. |
Defaults and Remedies . |
13.1 |
Default by Mesa . The occurrence of any one or more of the following events shall constitute a material default and breach of this Agreement by Mesa (an Event of Default ): |
13.1.1 |
The failure of Mesa to make any payment required to be made by Mesa to AWA hereunder, as and when due, and such failure continues for 10 business days after Mesas receipt of written notice from AWA; |
13.1.2 |
If Mesa or any of the Affiliated Service Providers is required by the FAA or DOT to suspend a substantial portion of its operations for any safety reason and has not resumed such operation within 3 business days of the suspension or if Mesa suspends a substantial portion of the Height Services for any other reason, except as a result of an emergency airworthiness directive from the FAA affecting all aircraft similarly equipped to the Aircraft (not just those owned or operated by Mesa); |
34
13.1.3 |
The failure of Mesa or any of the Affiliated Service Providers to observe or perform any of the covenants, conditions or provisions of this Agreement to be observed or performed by Mesa or any of the Affiliated Service Providers, other than as described in Sections 8 or 13.1.1 or 13.1.2 above, and such failure shall continue for a period of 15 days after written notice thereof from AWA to Mesa or such longer period as may be reasonably necessary to complete the cure of such failure (not to exceed an additional 30 days); provided Mesa commences such cure during the initial 15-day period and continuously and diligently pursues the cure to completion; |
13.1.4 |
(i) the cessation of Mesas business operations as a going concern; (ii) the making by Mesa of any general assignment, or general arrangement for the benefit of creditors; (iii) the failure of Mesa to generally pay Mesas debts as they come due or Mesas written admission of its inability to pay its debts as they come due; (iv) the filing by or against Mesa of a petition to have Mesa adjudged bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of petition filed against Mesa, the same is dismissed, stayed or vacated within 60 days); (v) an adjudication of Mesas insolvency; (vi) appointment of a trustee or receiver to take possession of substantially all of Mesas assets which is not dismissed, stayed or vacated within 60 days; or (vii) the attachment, execution or other judicial seizure of all of Mesas assets. |
13.1.5 |
Upon an Event of Default, AWA may: (a) by written notice to Mesa (a Default Termination Notice ) terminate this Agreement effective as of the date set forth in the Default Termination Notice which date shall not be less than 30 nor more than 180 days after the date of the Default unless the event in 13.1.2 occurs, in which case immediate; and/or (b) pursue all other rights and remedies available at law or in equity to AWA for the Event of Default, including, without limitation, injunctive relief, specific performance and damages. After receipt of a Default Termination Notice, Mesa and the Affiliated Service Providers shall continue to provide the Flight Services and Other Services in accordance with this Agreement until the termination date set forth in the Default Termination Notice. No remedy or election by AWA hereunder shall be deemed exclusive, but shall, wherever possible, be cumulative with all other rights and remedies at law or in equity. |
13.2 |
AWA Default . The occurrence of any one or more of the following events shall constitute a material default and breach of this Agreement by AWA (an AWA Event of Default ): |
13.2.1 |
The failure of AWA to make any payment required to be made to Mesa by AWA hereunder, as and when due, and such failure continues for 10 business days after AWAs receipt of written notice from Mesa; |
35
13.2.2 |
The failure of AWA to observe or perform any of the covenants, conditions or provisions of this Agreement to be observed or performed by AWA, and such failure shall continue for a period of 15 days after written notice thereof from Mesa to AWA or such longer period as may be reasonably necessary to complete the cure of such failure (not to exceed an additional 30 days); provided AWA commences such cure during the initial 15-day period and continuously and diligently pursues the cure to completion; |
13.2.3 |
(i) the cessation of AWAs business operations as a going concern; (ii) the making by AWA of any general assignment, or general arrangement for the benefit of creditors; (iii) the failure of AWA to generally pay AWAs debts as they come due or AWAs written admission of its inability to pay its debts as they come due; (iv) the filing by or against AWA of a petition to have AWA adjudged bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of petition filed against AWA, the same is dismissed, stayed or vacated within 60 days); (v) an adjudication of AWAs insolvency; (vi) appointment of a trustee or receiver to take possession of substantially all of AWAs assets which is not dismissed, stayed or vacated within 60 days; or (vii) the attachment, execution or other judicial seizure of all of AWAs assets which is not dismissed, stayed or vacated within 60 days. |
13.2.4 |
Upon the occurrence and continuance of an AWA Event of Default, Mesa may: (a) by written notice to AWA (an AWA Default Notice ) terminate this Agreement effective as of the date set forth in the AWA Default Notice which date shall not be less than 30 nor more than 180 days after the date of the AWA Event of Default; and/or (b) pursue all other rights and remedies available at law or in equity to Mesa for the AWA Event of Default, including, without limitation, injunctive relief, specific performance and damages. After receipt of an AWA Default Notice, AWA shall continue to perform its obligations under this Agreement until the termination date set forth in the AWA Default Notice. No remedy or election by Mesa hereunder shall be deemed exclusive, but shall, wherever possible, be cumulative with all other rights and remedies at law or in equity. |
14. |
Records and Reports . |
14.1 |
Retention of Records . Mesa shall keep accurate and complete books and records of all Flight Services and Other Services performed under this Agreement as well as any additional records that the parties agree may be required in accordance with AWAs procedures and the Regulations. Mesa shall retain such records in accordance with applicable law, AWAs procedures and the Regulations. |
36
14.2 |
Provision of Financial Records . Upon AWAs request, and until such time as AWA advises Mesa that such reports are no longer necessary, Mesa shall furnish to AWA, within 60 days following the close of the first three fiscal quarters of Mesa, unaudited financial statements including Mesas current corporate balance sheets and profit and loss statements, and within 120 days after the close of its fiscal year, Mesa shall furnish AWA with audited financial statements of Mesa (or its parent company) including, either separately or on a consolidated basis, the balance sheet and profit and loss statements of that party. The appropriate reports filed on Form 10-Q and 10-K shall be satisfactory to fulfill such obligation. |
14.3 |
Provision of Additional Records . Mesa shall promptly furnish AWA with a copy of every report that it prepares and is required to submit to the DOT, FAA, National Transportation Safety Board or any other governmental agency, relating to any accident or incident involving an Aircraft used in performing Flight Services under this Agreement, when such accident or incident is claimed to have resulted in the death of or substantial injury to any person or the loss of, damage to, or destruction of any property. |
14.4 |
Additional Reports . Mesa shall promptly notify AWA in writing of: (i) any change in or relinquishment of control of Mesa; (ii) any agreement contemplating such a change or relinquishment with a copy of such agreement, if in writing, to AWA; or (iii) any change or contemplated change in the Chief Executive Officer position of Mesa. |
15. |
Miscellaneous Provisions . |
15.1 |
Notices . All notices, consents, approvals or other instruments required or permitted to be given by either party pursuant to this Agreement shall be in writing and given by: (i) hand delivery; (ii) facsimile; (iii) express overnight delivery service; or (iv) certified or registered mail, return receipt requested. Notices shall be provided to the parties and addresses (or facsimile numbers, as applicable) specified below and shall be effective upon receipt or the rejection of such delivery, except if delivered by facsimile outside of business hours in which case they shall be effective on the next succeeding business day: |
If to AWA: |
America West Airlines, Inc. 4000 E. Sky Harbor Blvd. Phoenix, Arizona 85034 Attn: Vice President and General Counsel Telephone: (602) 693-5805 Facsimile: (602) 693-5932 |
|
If to Mesa: |
Mesa Air Group 410 N. 44 th Street, Suite 700 Phoenix, Arizona 85008 Attn: General Counsel Telephone: (602) 685-4051 |
37
Facsimile: (602) 685-4352 |
15.2 |
Waiver and Amendment . No provisions of this Agreement shall be deemed waived or amended except by a written instrument unambiguously setting forth the matter waived or amended and signed by the party against which enforcement of such waiver or amendment is sought. Waiver of any matter shall not be deemed a waiver of the same or any other matter on any future occasion. |
15.3 |
Captions . Captions are used throughout this Agreement for convenience of reference only and shall not be considered in any manner in the construction or interpretation hereof. |
15.4 |
Attorneys Fees . In the event of any judicial or other adversarial proceeding between the parties concerning this Agreement, the prevailing party shall be entitled to recover its attorneys fees and other costs in addition to any other relief to which it may be entitled. |
15.5 |
Entire Agreement . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and there are no other representations, warranties or agreements, written or oral, between AWA and Mesa with respect to the subject matter of this Agreement. |
15.6 |
Jurisdiction; Choice of Law . For purposes of any action or proceeding arising out of this Agreement, the parties hereto hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona. This, Agreement shall be governed by and construed in accordance with the laws of the State of Arizona. |
15.7 |
Severability . If this Agreement, any one or more of the provisions of this Agreement, or the applicability of this Agreement or any one or more of the provisions of this Agreement to a specific situation, shall be held invalid, illegal or unenforceable or in violation of any contract or agreement to which Mesa or AWA are a party, then AWA and Mesa shall in good faith amend and modify this Agreement, consistent with the intent of Mesa and AWA, as evidenced by this Agreement, to the minimum extent necessary to make it or its application valid, legal and enforceable and in accordance with the applicable agreement or contract, and the validity or enforceability of all other provisions of this Agreement and all other applications of any such provision shall not be affected thereby. |
15.8 |
Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. |
15.9 |
Binding Effect . This Agreement shall be binding upon and inure to the benefit of AWA and Mesa and their respective successors and permitted assigns. |
38
15.10 |
No Assignment . The rights, obligations and duties of AWA and Mesa under this Agreement may not be assigned or delegated, except as may otherwise be mutually agreed by AWA and Mesa, in their sole and absolute discretion. |
AWA: |
||
America West Airlines, Inc., a Delaware corporation |
||
By: |
|
|
William A. Franke |
||
Chairman of the Board and |
||
Chief Executive Officer |
||
MESA: |
||
Mesa Airlines, Inc. a Nevada corporation |
||
By: |
|
|
Jonathan G. Ornstein |
||
Chief Executive Officer |
39
EXHIBITS
Exhibit A | Delivery Schedule | |
Exhibit B | Station Costs | |
Exhibit C | Guaranteed Non-Maintenance Costs | |
Exhibit D | Guaranteed Maintenance Costs | |
Exhibit E | Backup Information |
Exhibit A
Delivery Schedule
In Service Months
Delivery Month |
Addl CRJ-200 |
Firm CRJ-700 |
Firm CRJ-900 |
Convertible Firm CRJ-7/900 |
Option CRJ-7/900 |
|||||
Seating Configuration |
50Y | 6F/58Y | 6F/74Y | |||||||
Apr-01 May-01 Jun-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 |
1
1
1
0 0 |
|||||||||
Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 |
0 0
0 0 0 |
1 1
1
1 1 1 1 1 |
||||||||
Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 |
1 1 1 1 1 1 1 |
1
1 1 1 1 1 1 1 1 1 1 |
1 1 1 |
|||||||
Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 |
1 1 1 1 |
1 1 1 1 2 1 |
1 1 1 1 1 1 |
|||||||
Each calendar month thereafter through Oct-07 |
1 | |||||||||
3 | 15 | 15 | 10 | 40 |
Advance notice for Convertible Firm CRJ-7/900 is 18 months prior to delivery
The Exercise Date to exercise each Option Aircraft, AWA shall be
the last business day of the calendar month that 19 months prior to the
delivery month.
- For example, notice for the option aircraft that is to be delivery in July
2004, AWA must be given notice to Mesa on or before December 31, 2003
EXHIBITS C and D - Page 1
(See Note 4)
Guaranteed Non-Maintenance Costs (Exhibit C)
COST CATEGORY | UNIT | B1900D | DHC-82 | CRJ 200 | CRJ 700 | CRJ 900 | ||||||||
Aircraft Lease & Overhead | A/C MONTH | |||||||||||||
Note 1 |
Ownership |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 2 |
Overhead |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 2 |
Crew RON |
[***] | [***] | [***] | [***] | [***] | ||||||||
Total |
[***] | [***] | [***] | [***] | [***] | |||||||||
Flight Crew | BLK HR | |||||||||||||
Note 3 |
Pilot |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 3 |
Flight Attendant |
[***] | [***] | [***] | [***] | [***] | ||||||||
Total |
[***] | [***] | [***] | [***] | [***] | |||||||||
Note 2 | Dispatchers | DEP | [***] | [***] | [***] | [***] | [***] |
Guaranteed Maintenance Costs (Exhibit D)
COST CATEGORY | UNIT | B1900D | DHC-82 | CRJ 200 | CRJ 700 | CRJ 900 | ||||||||
Maintenance cost per aircraft | A/C MONTH | |||||||||||||
Note 2 |
MX Employees |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 2 |
Engine & APU Depreciation |
[***] | [***] | [***] | [***] | [***] | ||||||||
Total |
[***] | [***] | [***] | [***] | [***] | |||||||||
Maintenance Base Cost | BASE MONTH | |||||||||||||
Note 2 |
Rent & Utilities |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 2 |
Personnel |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 2 |
Parts Depreciation |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 2 |
Equipment Depreciation |
[***] | [***] | [***] | [***] | [***] | ||||||||
Total |
[***] | [***] | [***] | [***] | [***] | |||||||||
Maintenance cost per block hour | BLK HR | |||||||||||||
Note 2 |
Engine MX - Contractual |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 2 |
Engine MX - Other |
[***] | [***] | [***] | [***] | [***] | ||||||||
Note 2 |
Airframe MX |
[***] | [***] | [***] | [***] | [***] | ||||||||
Total |
[***] | [***] | [***] | [***] | [***] |
Maintenance cost per departure DEP | ||||||||||||||
Note 2 |
Airframe MX |
[***] | [***] | [***] | ||||||||||
Note 2 |
Engine MX |
[***] | [***] | [***] | [***] | [***] | ||||||||
Total |
[***] | [***] | [***] | [***] | [***] |
Note 1 - [***]
Note 2 - [***]
Note 3 - [***]
Note 4 - [***]
ASSUMPTIONS: |
||||||
Flight Hours Per Year |
[***] |
[***] |
[***] |
|||
Average Flight Hours Per Cycle |
[***] |
[***] |
[***] |
EXHIBITS C and D - Page 2
CRJ -200 A/C Ownership Schedule
Monthly | ||||
Tail | Amount | |||
1 | [***] | [***] | ||
2 | [***] | [***] | ||
3 | [***] | [***] | ||
4 | [***] | [***] | ||
5 | [***] | [***] | ||
6 | [***] | [***] | ||
7 | [***] | [***] | ||
8 | [***] | [***] | ||
9 | [***] | [***] | ||
10 | [***] | [***] | ||
11 | [***] | [***] | ||
12 | [***] | [***] | ||
13 | [***] | [***] | ||
14 | [***] | [***] | ||
15 | [***] | [***] | ||
16 | [***] | [***] | ||
17 | [***] | [***] | ||
18 | [***] | [***] | ||
19 | [***] | [***] | ||
20 | [***] | [***] | ||
21 | [***] | [***] | ||
22 | [***] | [***] | ||
23 | [***] | [***] | ||
24 | [***] | [***] | ||
25 | [***] | [***] | ||
Average |
[***] |
Exhibit E
Mesa Codeshare
Minimum Required Backup - Trueup Billings
Costs | Backup Required | Minimum Frequency | ||
|
|
|
||
Actual Costs (All use actual $ rates) Hull Insurance Liability Insurance Property Taxes De-icing Fuel Costs Catering Landing Fees Security Service Station Rent CRJ Leases Station Costs |
Insurance Policy/Bill Insurance Policy/Bill All Invoices & Assessment Notices All Invoices Station Invoices All Invoices All Invoices All Invoices All Invoices Lease Payment Schedule All Invoices |
Annually or when changes occur Annually or when changes occur Semi-Annually Monthly Audited Basis Monthly Monthly Monthly Monthly Every New Delivery or Change in Lease Monthly |
Exhibit 10.11.5
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
FOURTH AMENDMENT TO CODE SHARE AND REVENUE
SHARING AGREEMENT AND RELEASE
THIS FOURTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT AND RELEASE (this Fourth Amendment ) is made and entered as of September 5, 2003 (the Effective Date ), between AMERICA WEST AIRLINES, INC., a Delaware corporation ( AWA ), MESA AIRLINES, INC., a Nevada corporation ( Mesa ), AIR MIDWEST, INC., a Kansas corporation ( AM ), and FREEDOM AIRLINES, INC., a Nevada corporation ( Freedom ).
RECITALS :
A. AWA, Mesa, AM and Freedom are parties to that certain Code Share and Revenue Sharing Agreement, dated to be effective February 1, 2001, as amended by that certain First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001, that certain Second Amendment to Code Share and Revenue Sharing Agreement, dated to be effective October 24, 2002, and that certain Third Amendment to Code Share and Revenue Sharing Agreement, dated to be effective January 29, 2003 (the Code Share Agreement ). All capitalized terms used herein, but not otherwise defined herein, shall have the meaning given to such terms in the Code Share Agreement.
B. The Code Share Agreement requires Mesa to provide certain Flight Services and Other Services for AWA, pursuant to the terms and conditions of the Code Share Agreement.
C. AWA and Mesa desire to amend the Code Share Agreement pursuant to the terms and conditions of this Fourth Amendment.
D. AWA and Mesa, subject to certain exceptions, desire to release the other from certain amounts owed under the Code Share and Revenue Sharing Agreement dated July 15, 1998, as amended ( Original Agreement ) and the Code Share Agreement.
E. In connection with the execution of this Amendment, AWA intends to compensate Mesa in an amount equal to [***] ( Payment Amount ), which amount shall be offset and paid pursuant to the terms of this Fourth Amendment.
NOW, THEREFORE, in consideration of the promises, covenants, representations and warranties hereinafter set forth, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, AWA and Mesa, and Freedom and AM as Affiliated Service Providers under and pursuant to the Code Share Agreement, agree as set forth below.
AMENDMENTS :
1. |
The Parties agree that the first paragraph of Section 2.1 of the Code Share Agreement is amended in its entirety as follows: |
Flight Service . During the term of this Agreement, Mesa (and its Affiliated Service Providers) shall operate America West Express air transportation services
(the Flight Services ), using the Fleet of Aircraft established pursuant to Section 2.2, to and from the cities and based upon the schedule established from time to time by AWA (the Schedule ) in written notice to Mesa (a Schedule Notice ). For purposes of this Agreement, Flights means flights operated pursuant to the Schedule. AWA may change the Schedule by issuance of a Schedule Notice at any time. When creating a Schedule, AWA shall: (i) take into account Mesas (or its Affiliated Service Providers) aircraft maintenance requirements; (ii) create a Schedule which will permit Mesa (or its Affiliated Service Providers)to schedule flight crews in a manner consistent with industry operational practices; (iii) schedule block times based on AWAs internal block time policy; (iv) provide for the following turn times: (a) in a hub location: 20 minutes for Dash 8s and 25 minutes for any Aircraft in the CRJ Subfleet; and (b) in other stations: 15 minutes for Dash 8s and 20 minutes for any Aircraft in the CRJ Subfleet; (v) take into account airport facilities available for Aircraft handling; (vi) provide for maintenance as required by Section 2.6.3 and scheduled heavy maintenance on Aircraft as required from time to time; and (vii) provide for at least 45 days prior notice of any holiday cancellations. Mesa (and its Affiliated Service Providers) shall implement all changes in the Schedule contained in a Schedule Notice in accordance with AWAs scheduling requirements within 60 days after Mesas receipt of a Schedule Notice. Mesa or any of its affiliates shall not provide any flight service for any other airline for flights that originate in or end in Phoenix, Arizona, other than flights approved in advance by AWA, in writing, that are scheduled or operated for maintenance requirements only; provided, however, that Mesa, until 11:59 p.m. Phoenix time on March 1, 2004, may operate one (1) daily flight as United Express into Phoenix, Arizona provided that the aircraft used for the flight remains overnight in Phoenix, Arizona. |
2. |
The Parties agree that the introductory paragraph of Section 2.2.2 and Section 2.2.2(a) of the Code Share Agreement are amended in their entirety as follows: |
CRJ Fleet Expansion . Pursuant to the Aircraft Contract, Mesa (or its Affiliated Service Providers) has the right to acquire additional CRJ Model 900 Aircraft, by virtue of firm orders (the Firm Aircraft ), and additional CRJ Models 700 and 900 Aircraft, by virtue of options (the Option Aircraft ), in the number and in the months set forth on Exhibit A , attached hereto. The Firm Aircraft consist of CRJ Model 900 Aircraft and the Option Aircraft consist of CRJ Models 700 and 900 Aircraft as set forth in Exhibit A . For purposes of this Agreement, the CRJ Model 200s shall be a CRJ Subfleet and the CRJ Model 700s and 900s shall be a CRJ Subfleet . The term CRJ is intended to refer to CRJ Models 200s, 700s or 900s, as applicable.
(a) |
Each of the Firm Aircraft shall be placed into Flight Services by Mesa (or its Affiliated Service Providers) in the calendar months set forth on Exhibit A (the Delivery Schedule ). Mesa shall provide AWA with at least 90 days prior written notice of the week each of the Firm Aircraft will be placed into Flight Service under this Agreement and at least 60 |
2
days prior written notice of the date on which each of the Firm Aircraft will be placed into Flight Service under this Agreement (each, a Scheduled Delivery Date ). |
3. |
The Parties agree that Section 2.2.2(c) of the Code Share Agreement is amended by: (A) adding the phrase: (i) or in the calendar month in which the Firm Aircraft is to be delivered pursuant to the Delivery Schedule, as applicable after Scheduled Delivery Date in the first sentence of Section 2.2.2(c); and (ii) or the calendar month in which the Firm Aircraft is to be delivered pursuant to the Delivery Schedule, as applicable after the term Scheduled Delivery Date is used in the second and third sentences of Section 2.2.2(c); and (B) adding the parenthetical (as initially established by the Delivery Notice, as defined in Section 2.2.2(e)) after the term Scheduled Delivery Date in the Section. |
4. |
The Parties agree that the Code Share Agreement is amended by adding the following as Section 2.2.2(d): |
Notwithstanding anything contained in Sections 2.2.2(a) and (c) to the contrary, Mesa, by providing AWA with written notice (a Delay Notice ) at least 120 days prior to the first day of the calendar month in which a Firm Aircraft is to be delivered pursuant to the Delivery Schedule (the Scheduled Delivery Month ), may, at its sole option and without penalty of any kind, delay the Scheduled Delivery Month for a Firm Aircraft by up to 24 months if either: (i) Bombardier notifies Mesa, in writing, that Bombardier will be unable to deliver the applicable Firm Aircraft on time; or (ii) if Mesa, despite using commercially reasonable efforts, is unable to obtain financing for the applicable Firm Aircraft, timely to deliver the Firm Aircraft in the Scheduled Delivery Month. The Delay Notice shall: (i) be accompanied with the Bombardier notice or a reasonable description of the efforts made by Mesa to obtain the financing and the reason for not obtaining the financing, as applicable; and (ii) establish the new Scheduled Delivery Month in which the Firm Aircraft being delayed is to be delivered. Mesa shall only be entitled to extend the Scheduled Delivery Month for a Firm Aircraft one time pursuant to this Section 2.2.2(d).
5. |
The Parties agree that the Code Share Agreement is amended by adding the following as Section 2.2.2(e): |
Bombardier Delivery Date . Pursuant to Mesas agreement with Bombardier, Bombardier is required to provide Mesa with 90 days written notice of the scheduled delivery week of each Firm Aircraft (the B-90 Notice ). Based on the B-90 Notice, Mesa, at least 60 days prior to the Scheduled Delivery Date, provides AWA with written notice of the Scheduled Delivery Date pursuant to the last sentence of Section 2.2.2(a) (the Delivery Notice ) for each Firm Aircraft. For purposes of this Section 2.2.2(e), Mesa, based upon a change in delivery dates received by Mesa from Bombardier, shall have the right to extend the Scheduled Delivery Date to a new date certain once for each Firm Aircraft by providing AWA with written notice at least 45 days prior to the Scheduled Delivery Date
3
established by the applicable Delivery Notice (the Extension Notice ). If a Firm Aircraft is delivered by Mesa to AWA and is ready to be placed into Flight Services prior to the Scheduled Delivery Date established by the Delivery Notice (as may be extended by an Extension Notice), then AWA shall not be obligated to make any payment under this Agreement for such Firm Aircraft until the Scheduled Delivery Date established by Mesa pursuant to the Delivery Notice (as may be extended by an Extension Notice). If a Firm Aircraft is delivered by Mesa to AWA and is ready to be placed into Flight Services after the Scheduled Delivery Date established by the Delivery Notice (as may be extended as a result of an Excusable Delay or an Extension Notice), then, notwithstanding anything in Section 2.2.2(c) to the contrary, Mesa, within 30 days after receipt of written demand from AWA, shall pay to AWA an amount equal to [***] for each day following the fifth day after the Scheduled Delivery Date that the Firm Aircraft is not delivered until the date that the Firm Aircraft is available to AWA to be placed into Flight Services under this Agreement ( Delay Amount ), not to exceed for any Firm Aircraft the greater of (i) [***] or (ii) the amount paid by Bombardier to Mesa as damages for the late delivery of such Firm Aircraft. An Excusable Delay shall be defined to include delays commencing after the date of the Delivery Notice and before the Scheduled Delivery Date (as may be extended by an Extension Notice) and occasioned by the following causes:
i. |
acts of God; |
ii. |
war, warlike operations, act of the enemy, armed aggression, civil commotion, insurrection, riot or embargo; |
iii. |
fire, explosion, earthquake, lightning, flood, drought, windstorm or other action of the elements or other catastrophic or serious accidents; |
iv. |
epidemic or quarantine restrictions; |
v. |
any change in legislation, acts, orders, directives or regulations of any governmental or other duly constituted authority (other than CRJ Regulatory Changes and CRJ Airworthiness Directives) once the applicable Aircraft type has been certified by the FAA; or |
vi. |
strikes, lock-out, walk-out, and/or other labor troubles, in each case, with respect to employees of Bombardier causing cessation of work;. |
If an Excusable Delay occurs, then the Scheduled Delivery Date for purposes of this Section 2.2.2(e) shall be extended for the number of days of Excusable Delay ( Excusable Delay Period ), and the Delay Amount shall not begin to accrue until the fifth day after the Scheduled Delivery Date, as extended by the Excusable Delay Period. The terms of this Section 2.2.2(e) are in addition to, and not in lieu of, the terms of Sections 2.2.2(c) and 2.2.2(d).
6. |
The Parties agree that the Code Share Agreement is amended by adding the following as Section 2.2.2(f): |
4
CRJ 900 Put Option . Mesa, by written notice to AWA given on or before the 180 th day prior to the first day of the applicable Scheduled Delivery Month (each, an Induction Notice ), shall have the right to add to the CRJ Subfleet and place into Flight Services under this Agreement up to three (3) CRJ Model 900s as follows: (i) one of the two (2) CRJ Model 900s scheduled to be placed into Flight Services in February 2005 (the other CRJ Model 900 is to be placed into Flight Services without notice); and (ii) either, or both of the CRJ Model 900s scheduled to be placed into Flight Services in March 2005 (each, a Put CRJ 900s ). Each Induction Notice shall set forth the number of Put CRJ 900s to be added to the CRJ Subfleet. After an Induction Notice is given for a Put CRJ 900, all of the terms, covenants and conditions of this Agreement relating to the establishment of the delivery week, Scheduled Delivery Date, delivery delays (and rights, obligations and penalties associated therewith) and the pacing of Firm Aircraft into the CRJ Subfleet and Flight Services shall apply to the Put CRJ 900s. All Put CRJ 900s shall be marked with AWAs livery and shall be configured with all coach seating in the manner required by AWA, at Mesas sole cost and expense, upon being placed into Flight Services. If Mesa does not issue an Induction Notice for any or all of the three (3) Put CRJ 900s, timely, then notwithstanding the inclusion of such Put CRJ 900s on the Delivery Schedule, such Put CRJ 900s shall not be added to the CRJ Subfleet nor placed into Flight Services pursuant to this Agreement.
7. |
The Parties agree that the Code Share Agreement is amended by adding the following as Section 2.2.2(g): |
700/900 Swap Right . In the event that UAL Corporation and it subsidiaries (collectively, UAL ) cease to operate as certificated air transportation providers and elect or are forced to liquidate their assets or if Mesas (or its affiliates) code share agreement or any other agreement to operate CRJ Model 700 aircraft for UAL is not assumed by UAL or such assumption is not approved by the Bankruptcy Court having jurisdiction over the cases under Chapter 11, Title 11, of the Bankruptcy Code filed by UAL and is therefore rejected and if no substitute or modified agreement is reached for Mesa or its affiliates to operate such aircraft, either with UAL or any successor or assign (including but not limited to a purchaser of UAL assets) (each, the Trigger Event ), then Mesa, by providing AWA with written notice within 30 days of the Trigger Event (the Swap Notice ), may elect to substitute up to thirteen (13) of the CRJ Model 900s, that are either: (i) scheduled to be added to the CRJ Subfleet and placed into Flight Services pursuant to the Delivery Schedule; or (ii) subject to the put right to AWA pursuant to Section 2.2.2(f), in either case more than 60 days after the date of the Trigger Event, with CRJ Model 700s (the Swap 700s ). The Swap Notice shall indicate the number of Aircraft to be substituted and the Scheduled Delivery Months in which the substitutions are to occur. If Mesa issues the Swap Notice, timely, then each of the Swap 700s shall be added to the CRJ Subfleet and placed into Flight Services in the same Scheduled Delivery Months as for each of the CRJ Model 900s to be replaced and all of the terms, covenants, and conditions relating to the establishment of the delivery week, Scheduled Delivery Date,
5
delivery delays (and rights, obligations, and penalties associated therewith) and placing of the Firm Aircraft into the CRJ Subfleet and Flight Services shall apply to the Swap 700s. If Mesa does not issue the Swap Notice, timely, then Mesa shall have no further right to swap CRJ Model 700s for CRJ Model 900s pursuant to this Section 2.2.2(g). All Swap 700s shall be marked with AWAs livery and shall be configured with all coach seating in the manner required by AWA, at Mesas sole cost and expense for the first ten (10) Swap 700s and AWAs sole cost and expense for any additional Swap 700s (up to three), upon being placed into Flight Services. All Swap 700s shall be reintroduced into Flight Services at the same ownership cost (not to exceed the cap for such ownership costs set forth in Exhibit C) existing for such Aircraft on the date such Aircraft was removed pursuant to Section 2.2.3 or 2.2.5(d), as applicable. Mesas right to issue a Swap Notice and to substitute CRJ Model 700s for CRJ Model 900s pursuant to this Section 2.2.2(g) is expressly subject to the condition that neither Mesa nor any of its affiliates take any action, including, but not limited to; the filing of any objection or opposition in UALs bankruptcy cases, that seeks, attempts to cause, requests or increases the risk of the occurrence of a Trigger Event. Mesas right to issue a Swap Notice and to substitute CRJ Model 700s for CRJ Model 900s pursuant to this Section 2.2.2(g) will terminate effective without further documentation if such condition is not met.
8. |
The Parties agree that Section 2.2.3 of the Code Share Agreement is amended by adding the following: |
Elimination of CRJ Model 700s . In addition to the terms of Sections 2.2.4 and 2.2.5(d), (i) in recognition of the total of four (4) CRJ Model 900s to be delivered pursuant to the Delivery Schedule in October 2003, November 2003 and December 2003, Mesa shall remove, or cause Freedom to remove, from the CRJ Subfleet one (1) CRJ Model 700 at 11:59 p.m. Phoenix time on each of the following dates: November 24, 2003; December 1, 2003; December 2, 2003; and December 24, 2003; and (ii) on each date that a CRJ Model 900 is placed into Flight Services pursuant to the terms of this Agreement, commencing with the CRJ Model 900 to be delivered in January 2004, Mesa shall remove, or shall cause Freedom to remove, from the CRJ Subfleet a CRJ Model 700 for each CRJ Model 900 placed into Flight Services, until the number of CRJ Model 700s in the CRJ Subfleet is reduced to zero, which, pursuant to the Delivery Schedule, is scheduled to occur upon the delivery of the March 2004 CRJ Model 900. AWA shall reimburse Mesa for the actual, out-of-pocket costs or expenses incurred by Mesa (or Freedom as applicable) as a direct result of the painting (including the days out of service for painting) of each CRJ Model 700 removed pursuant to this Section 2.2.3 within thirty (30) days after receipt of an invoice from Mesa together with commercially reasonable evidence of such costs or expenses.
9. |
The Parties agree that Section 2.2.4 of the Code Share Agreement is amended in its entirety as follows: |
6
Additional CRJ Fleet Reduction . In addition to the terms of Sections 2.2.3 and 2.2.5, upon 180 days prior written notice from AWA to Mesa given from time to time during the Term, AWA, subject to limitations set forth in the next sentence, may require Mesa to reduce, or require Mesa to cause Freedom to reduce, the number of Aircraft in the combined CRJ Subfleets. AWA shall not require Mesa to reduce, or require Mesa to cause Freed to reduce e number of Aircraft: (i) in the CRJ Model 200 CRJ Subfleet prior to January 1, 2007 (ii) in the CRJ Model 900s (and CRJ Model 700s if any CRJ Model 900s are replaced pursuant to Section 2.2.2(g)) CRJ Subfleet prior to: (1) January 1, 2007, if Mesa does not induct any of the Put CRJ 900s pursuant to Section 2.2.2(f) (as may be replaced pursuant to Section 2.2.2(g) with CRJ Model 700s), or (2) July 1, 2006, if Mesa inducts one or more of the Put CRJ 900s pursuant to Section 2.2.2(f) (as may be replaced pursuant to Section 2.2.2(g) with CRJ Model 700s); and (iii) in the combined CRJ Subfleets by more than one Aircraft in any Six Calendar Month Period; notwithstanding such limitation, during the two (2) Six Calendar Month Periods commencing January 1, 2007 and July 1, 2007, AWA may reduce the combined CRJ Subfleets by either: (i) up to two (2) CRJ Model 200 Aircraft; or (ii) one (1) CRJ Model 900 or CRJ Model 700 Aircraft and one (1) CRJ Model 200 Aircraft, in each such Six Calendar Month Periods. For purposes of this Agreement, Six Calendar Month Period means each period during the Term (as defined below) commencing on January 1 and ending on June 30 and commencing on July 1 and ending on December 31.
10. |
The Parties agree that Section 2.2.5 of the Code Share Agreement is amended in its entirety as follows: |
Additional Aircraft Reduction .
(a) |
Effective July 1, 2003, the Subfleet of Beech 1900s was reduced to zero. From and after July 1, 2003, Mesa shall no longer provide any Flight Services using Beech 1900s and AWA shall have no payment or other obligations under this Agreement accruing or arising after July 1, 2003 in regards to any Beech 1900s. All references to the Beech 1900s and the subcontracting of services relating to the Beech 1900s shall be eliminated from the Agreement effective as of July 1, 2003. |
(b) |
Mesa, on July 1, 2003, removed one (1) Dash 8 Aircraft from the Dash 8 Subfleet and on September 3, 2003, will remove two (2) Dash 8 Aircraft from the Dash 8 Subfleet. At any time during the Term after August 25, 2007, AWA may require Mesa to reduce the Subfleet of Dash 8s to zero by providing Mesa with at least 180 days prior written notice of AWAs election to eliminate the Dash 8s on or after such date (the Dash 8 Elimination Notice ). The Dash 8 Elimination Notice may be given at any time during the Term on or after February 27, 2007. |
(c) |
Mesa removed one (1) CRJ Model 200 from the CRJ Subfleet (for a total of five (5) CRJ Model 200s) on each of the following dates: |
7
April 27, 2003
June 4, 2003
June 22, 2003
June 27, 2003
July 2, 2003
reducing the CRJ Model 200 CRJ Subfleet to 18 Aircraft.
(d) |
Mesa removed two (2) CRJ Model 700s from the CRJ Subfleet at 11:59 p.m. Phoenix time on September 2, 2003. Mesa shall remove, or cause Freedom to remove, (or not place into Flight Services, as applicable) one (1) CRJ Model 700 at 11:59 p.m. Phoenix time on September 14, 2003, and two (2) CRJ Model 700s at 11:59 p.m. Phoenix time on September 21, 2003 from the CRJ Subfleet, reducing the CRJ Model 700s in the applicable CRJ Subfleet to 10. |
(e) |
On or before October 31, 2003, AWA, by written notice to Mesa, shall have the right to cause the 12 CRJ Model 900s scheduled to be delivered into Flight Services from April, 2005 to November, 2005 (the Rejectable CRJs ), pursuant to the Delivery Schedule, not to be added to the CRJ Subfleet and not to be placed into Flight Services (the 900 Election Notice ). If AWA does not issue the 900 Election Notice, timely, and such failure to issue the 900 Election Notice, timely, continues for 15 days after AWAs receipt of written notice from Mesa stating that AWA failed to issue the 900 Election Notice, then AWA shall have no further right to issue a 900 Election Notice and reject the Rejectable CRJs. If AWA issues the Election Notice as provided by this Section 2.2.5(e), then none of the Rejectable CRJs shall be added to the CRJ Subfleet or placed into Flight Services under this Agreement. |
(f) |
Neither Mesa, AM nor Freedom shall operate any Aircraft removed from Flight Services for itself or any other airline while the Aircraft are marked with AWAs livery |
(g) |
From and after the date each Aircraft was or is removed from Flight Services pursuant to any section of this Agreement, AWA had and shall have no further payment or other obligation under this Agreement for such Aircraft. |
11. |
The Parties agree that Section 2.2.6 is amended in its entirety as follows: |
Spares . Mesa shall have available 1 spare CRJ Model 200, 700 or 900 Aircraft for Flight Services under this Agreement at any time there are 25 or more Aircraft in the combined CRJ Subfleets in Flight Services under this Agreement and 2 spare CRJ Model 200, 700 or 900 Aircraft available for Flight Services under this Agreement at any time there are 65 or more Aircraft in the combined CRJ Subfleets in Flight Services under this Agreement. AWA shall pay the Actual
8
Costs, Guaranteed Non-Maintenance Costs (other than overhead) and Guaranteed Maintenance Costs actually incurred by or payable to Mesa for each spare Aircraft as provided in Section 7.
12. |
The Parties agree that the Code Share Agreement is amended by adding the following as Section 2.2.8: |
Affiliated Service Provider Aircraft . Mesa, with at least 30 days prior written notice to AWA, may substitute any Aircraft operated by Mesa or Freedom under or pursuant to this Agreement with an aircraft of the same model, capacity, configuration and meeting the other requirements of this Agreement, operated by an Affiliated Service Provider (each, a Substituted Aircraft ); provided that Mesa and such Affiliated Service Provider have complied with the provisions of Section 2.1 and all other provisions relating to Affiliated Service Providers. Upon each substitution, each Substituted Aircraft shall become an Aircraft for all purposes of this Agreement. Mesa shall reimburse AWA for any out-of-pocket costs or expenses incurred by AWA as a result of the substitution of Aircraft under this Section 2.2.8 within thirty (30) days after receipt of an invoice from AWA together with commercially reasonable evidence of the out-of-pocket co or expenses actually incurred by AWA.
13. |
The Parties agree that the Code Share Agreement is amended by deleting Section 7.1.8. |
14. |
The parties agree that the Code Share Agreement is amended by adding the following as a new Section 7.10: |
Station Costs . AWA shall reimburse to Mesa the costs and expenses incurred by Mesa at stations maintained by Mesa in the amounts and at the rates set forth in Exhibit B , attached hereto (the Station Costs ). Mesa shall invoice, as part of the Estimated Costs, and AWA shall pay the Station Costs on a monthly basis in accordance with Section 7.5.1 of this Agreement. Pursuant to Section 7.5.2 of this Agreement, Mesa shall include in each Incurred Costs Statement the final amount of the Station Costs payable by AWA to Mesa for each applicable calendar month, all as calculated in accordance with Exhibit B , attached hereto. Underpayments and overpayments of Station Costs shall be reconciled in the manner set forth in Section 7.5.2 for Incurred Costs. The terms of Section 7.5.4 shall be applicable to the Station Costs included or not included in each applicable Incurred Costs Statement; provided, however, that if any landlord or operator of any station is entitled to retroactively adjust station rents, then the applicable station rent shall be adjusted by Mesa as soon as reasonably practicable after such adjustment and shall be paid by or reimbursed to AWA within 30 days after Mesa provides AWA with notice of such adjustment and recalculation. All of the terms contained in Sections 7.8 and 7.9 shall apply to the invoicing, paying, collecting and auditing of Station Costs.
9
AWA and Mesa intend for the Station Costs to be effective retroactive to January 1, 2003. As soon as practicable and in no event later than 90 days after the Effective Date of the Fourth Amendment, Mesa shall submit to AWA a reconciliation of the Station Costs (the Reconciliation ) since January 1, 2003 calculated in accordance with Exhibit F. To the extent the Reconciliation discloses that sums are due from AWA to Mesa, AWA shall pay such sums to Mesa.
15. |
The Parties agree that Section 8.1 of the Code Share Agreement is amended as follows: |
Term. The term of this Agreement (the Term ) commences on the Effective Date retroactive to the Contract Date (the Commencement Date ) and shall expire at 11:59 p.m., Phoenix time, on June 30, 2012 ( Expiration Date ), unless earlier terminated as provided in this Agreement. Notwithstanding the foregoing to the contrary, if the 900 Election Notice is not issued by AWA to Mesa as required by Section 2.2.5(e) and the Rejectable CRJs are added to the CRJ Subfleet, then the Expiration Date shall be extended to 11:59 p.m., Phoenix time, on November 30, 2013. AWA, by written notice to Mesa at least 180 days prior to the Expiration Date, may extend the Expiration Date for two years, expiring at 11:59 p.m., Phoenix time, on June 30, 2014 or November 30, 2015, as applicable.
16. |
The Parties agree that Exhibit A to the Code Share Agreement is amended in its entirety as set forth in Attachment 1 to this Fourth Amendment, and Exhibit B to the Code Share Agreement is amended in its entirety as set forth in Attachment 2 to this Fourth Amendment. |
17. |
Reserved. |
AGREEMENTS:
18. |
Release . |
(a) |
Except as provided in Section 17(c), below, AWA fully and finally releases, acquits and forever discharges Mesa and its parent companies and subsidiaries from any and all claims or demands for any amounts owed, accrued, payable, incurred, billed or invoiced pursuant to the Code Share Agreement or the Original Agreement for matters, services, actions, events, activities or other items provided or occurring on or before, or related to the period expiring on, December 31, 2002. |
(b) |
Except as provided in Section 17(c), below, Mesa, AM and Freedom fully and finally release, acquit and forever discharge AWA and its parent companies and subsidiaries from any and all claims or demands for any amounts owed, accrued, payable, incurred, billed or invoiced pursuant to the Code Share Agreement or the Original Agreement for matters, services, actions, events, activities or other items provided or occurring on or before, or related to the period expiring on, December 31, 2002. |
10
(c) |
Notwithstanding the foregoing, the parties agree that the releases set forth in subsections (a) and (b) above shall not apply to (i) any amounts accruing or payable under the Code Share Agreement after December 31, 2002 for services, actions, events, activities or other items occurring after December 31, 2002; (ii) any amounts owed by Mesa pursuant to Section 5 of the Code Share Agreement (provided, however, that AWA shall not use its right of offset for these amounts until payment by AWA of any amounts owing pursuant to the Reconciliation, unless Mesa has not provided AWA with the Reconciliation pursuant to Section 7.10 within 90 days of the Effective Date of this Fourth Amendment in which case AWA may exercise its offset rights for these amounts at any time after the 90th day after the Effective Date of this Fourth Amendment); (iii) any Transition Reimbursement owed by AWA pursuant to Section 2.2.7 of the Code Share Agreement; (iv) any amounts to be paid by AWA pursuant to paragraph 18 below; (v) any amount payable by AWA to Mesa for the closure of the maintenance base in Columbus, Ohio pursuant to Section 2.6.3 of the Code Share Agreement; (vi) any amounts owed by Mesa to AWA as reimbursement for overpayment of landing fees by AWA to Mesa; or (vii) any amounts payable by Mesa to AWA as reimbursement for Aviation Security Infrastructure Fees. |
19. |
Payment Obligation . On the Effective Date, AWA shall be obligated to pay to Mesa the Payment Amount, [***] |
20. |
Withdrawal of Notice . AWA withdraws all notices that it provided to Mesa for the cancellation of three (3) CRJ Model 700s and agrees and acknowledges that, as of the Effective Date of this Fourth Amendment, the number of CRJ Model 700s in the CRJ Subfleet (and committed to be added to the CRJ Subfleet) is, in the aggregate, fifteen (15). |
21. |
CRJ Model 200s . As of the Effective Date of this Fourth Amendment, the number of CRJ Model 200s in the CRJ Subfleet is eighteen (18). |
22. |
Effect . Except as set forth in this Fourth Amendment, all of the terms and conditions of the Code Share Agreement remain in full force and effect. |
23. |
Counterparts . This Fourth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document. |
24. |
Entire Agreement . This Fourth Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto. |
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AMERICA WEST AIRLINES, INC. |
By: |
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Name: |
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Title: |
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MESA AIRLINES, INC. |
By: |
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Name: |
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Title: |
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AIR MIDWEST, INC. |
By: |
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Name: |
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Title: |
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FREEDOM AIRLINES, INC. |
By: |
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Name: |
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Title: |
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12
Exhibit A
CRJ-700/900 Delivery Schedule
Current CRJ-900 Deliveries |
CRJ-700 Reductions |
New CRJ- 900 Deliveries |
CRJ-700 |
CRJ-900 |
Total CRJ-7/900 Fleet |
|||||||
9/2/03 |
(2) | 13 | 5 | 18 | ||||||||
Sep-03 |
1 | (3) | 10 | 6 | 16 | |||||||
Oct-03 |
1 | - | 10 | 7 | 17 | |||||||
Nov-03 |
1 | - | 10 | 8 | 18 | |||||||
Dec-03 |
2 | (4) | 6 | 10 | 16 | |||||||
Jan-04 |
3 | (3) | 3 | 13 | 16 | |||||||
Feb-04 |
2 | (2) | 1 | 15 | 16 | |||||||
Mar-04 |
2 | (1) | - | 17 | 17 | |||||||
Apr-04 |
3 | - | 20 | 20 | ||||||||
May-04 |
1 | 1 | - | 22 | 22 | |||||||
Jun-04 |
1 | 2 | - | 25 | 25 | |||||||
Jul-04 |
1 | 1 | - | 27 | 27 | |||||||
Aug-04 |
1 | 1 | - | 29 | 29 | |||||||
Sep-04 |
1 | - | 30 | 30 | ||||||||
Oct-04 |
- | 1 | - | 31 | 31 | |||||||
Nov-04 |
- | 1 | - | 32 | 32 | |||||||
Dec-04 |
- | 1 | - | 33 | 33 | |||||||
Jan-05 |
- | 1 | - | 34 | 34 | |||||||
Feb-05 |
- | 2 | - | 36 | 36 | |||||||
Mar-05 |
- | 2 | - | 38 | 38 | |||||||
Apr-05 |
- | 2 | - | 40 | 40 | |||||||
May-05 |
- | 1 | - | 41 | 41 | |||||||
Jun-05 |
- | 2 | - | 43 | 43 | |||||||
Jul-05 |
- | 1 | - | 44 | 44 | |||||||
Aug-05 |
- | 2 | - | 46 | 46 | |||||||
Sep-05 |
- | 1 | - | 47 | 47 | |||||||
Oct-05 |
- | 2 | - | 49 | 49 | |||||||
Nov-05 |
- | 1 | - | 50 | 50 | |||||||
Incremental Aircraft |
(15) | 25 |
Note :
1. |
As reflected in Section 9(e) of the Fourth Amendment to the Code Share Agreement, the last 12 new CRJ-900 deliveries (beginning in April 2005) represent the Rejectable CRJs. |
Exhibit A
Option CRJ-700/900
Delivery Schedule
Delivery Month |
Option CRJ-7/900 | |||
Jan-04 | ||||
Feb-04 | ||||
Mar-04 | ||||
Apr-04 | ||||
May-04 | ||||
Jun-04 | ||||
Jul-04 | 1 | |||
Aug-04 | 1 | |||
Sep-04 | 1 | |||
Oct-04 | 1 | |||
Nov-04 | 1 | |||
Dec-04 | 1 | |||
Each calendar month thereafter through Oct-07 | 1 | |||
40 |
Note |
The Exercise Date by which AWA must exercise each Option Aircraft shall be the last business day of the calendar month that is 19 months prior to the delivery month of the Option Aircraft. |
- For example, notice for the Option Aircraft that is to be delivered in July 2005 must be given by AWA to Mesa before January 1, 2004.
2
Exhibit B
Aircraft Type |
Monthly Cost Per Station |
Cost per
Departure > 3 Departures per Day |
Cost/ Departure PHX Hub |
|||
B19 |
[***] | [***] | [***] | |||
DH8 |
[***] | [***] | [***] | |||
CRJ 200 |
[***] | [***] | [***] | |||
CRJ 700 |
[***] | [***] | [***] | |||
CRJ 900 |
[***] | [***] | [***] |
Mexico Stations | ||||||
[***] |
B19, DH8 and CRJ 200 Markets Covered By Model (as of 12/31/021 |
[***] |
[***] |
[***] |
[***] |
[***] |
Each month, overall station cost reimbursement (exclusive of station rent) will be determined by the sum of:
[***]
Notes
[***]
3
Exhibit 10.11.7
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
SIXTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT AND
SETTLEMENT AGREEMENT
THIS SIXTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT AND SETTLEMENT AGREEMENT ( Sixth Amendment ) is made and entered into as of July 27, 2005 (the Effective Date ), between AMERICA WEST AIRLINES, INC., a Delaware corporation ( AWA ), MESA AIRLINES, INC., a Nevada corporation ( Mesa ), AIR MIDWEST, INC., a Kansas corporation ( AM ), and FREEDOM AIRLINES, INC., a Nevada corporation ( Freedom ). Mesa, AM and Freedom are referred to collectively as the Mesa Group).
RECITALS :
A. AWA and the Mesa Group are parties to that certain Code Share and Revenue Sharing Agreement, dated to be effective February 1, 2001, as amended by that certain First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001, that certain Second Amendment to Code Share and Revenue Sharing Agreement, dated to be effective October 24, 2002, that certain Third Amendment to Code Share and Revenue Sharing Agreement, dated to be effective January 29, 2003, that certain Fourth Amendment to Code Share and Revenue Sharing Agreement and Release, dated to be effective September 5, 2003 (the Fourth Amendment ), and that certain Fifth Amendment to Code Share and Revenue Agreement, dated to be effective January 28, 2005 (collectively, the Code Share Agreement ). All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement.
B. The Code Share Agreement requires the Mesa Group to provide certain Flight Services and Other Services for AWA, pursuant to the terms and conditions of the Code Share Agreement.
C. The Mesa Group and AWA desire to amend the Code Share Agreement pursuant to the terms and conditions of this Sixth Amendment.
D. The Mesa Group and AWA desire to settle certain amounts payable to each other pursuant to the Code Share Agreement.
NOW, THEREFORE, in consideration of the promises, covenants, representations and warranties hereinafter set forth, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, AWA and the Mesa Group agree as set forth below:
AMENDMENTS :
1. The parties agree that Section 2.2.2(f) of the Code Share Agreement is amended in its entirety as follows:
CRJ 900 Put Option . AWA agrees that Mesa may add to the CRJ Subfleet and place into Flight Services three (3) of the four (4) CRJ Model 900s that, pursuant to Exhibit A, were scheduled to be placed into Flight Services in February 2005
and March 2005 (the Put CRJ 900s ) on August 10, 2005, September 10, 2005 and October 10, 2005. Each Put CRJ 900 shall be marked with AWAs livery and shall be configured with all coach seating in a manner required by AWA, at Mesas sole cost and expense, upon being placed into Flight Services. Notwithstanding anything contained in Section 7.2 to the contrary, AWA shall not be required to pay Ownership Guaranteed Non-Maintenance Costs for each of the Put CRJ 900s for a period of 30 days after each Put CRJ 900 commences Flight Services.
2. The parties agree that Section 2.2.6 of the Code Share Agreement is amended by deleting the parenthetical (other than overhead) in the last sentence and replacing it with the following: (other than Overhead and Crew RON).
3. The parties agree that Section 2.6.3 of the Code Share Agreement is amended in its entirety as follows:
2.6.3 Location . Mesa shall maintain maintenance bases as follows: (i) one in Grand Junction, Colorado for Dash 8s; (ii) one in Phoenix, Arizona for CRJ Model 200s; (iii) one in Phoenix, Arizona for CRJ Model 900s; and (iv) commencing on or after December 1, 2005, one in a mutually acceptable location on the East Coast for CRJ Model 900s (the Maintenance Bases ). In addition, Mesa intends to provide CRJ Model 200 and 900 maintenance at certain outstation or Mesa provided maintenance bases (the Outstation Bases ). Each Schedule prepared by AWA shall provide for not less than 20% of the Dash 8s, 33% of the CRJ Model 200s, and 33% of the CRJ Model 900s to remain overnight at the applicable Maintenance Bases and Outstation Bases each night. AWA and Mesa intend that 20% to 25% of the CRJ will be maintained at the Maintenance Bases and the balance will be maintained at the Outstation Bases in order to reach the 33% overnight threshold. One aircraft shall remain overnight for 10 hours and the remainder for at least 8 hours. Mesa shall not relocate any Maintenance Base without prior written consent of AWA, which consent may be withheld if the new location fails to meet AWAs schedule requirements. Each CRJ Maintenance Base shall be staffed and equipped to maintain a fleet of up to 25 aircraft. Mesa shall add maintenance bases as necessary to provide the Flight Services and Other Services at locations which meet AWAs maintenance base requirements and are approved by AWA. AWA, by providing Mesa with at least 180 days prior written notice, may require Mesa to close any Maintenance Base. Upon Mesa assigning to AWA all of its rights, title and interest in the lease of the Maintenance Base that is closed (together with any required landlord consent), AWA shall reimburse Mesa for all actual out-of-pocket costs and expenses incurred by Mesa in closing such Maintenance Bases.
4. The parties agree that Section 5 of the Code Share Agreement is amended by adding the following new paragraph 5.7:
5.7 Performance Penalties Waiver . Mesa and AWA agree that neither Mesa nor AWA shall be required to pay any performance penalties or bonuses, pursuant to
2
Sections 5.1 through 5.4, based on Mesas provision of Flight Services for the period of January 1, 2005 through June 3, 2005. If AWA exercises its right to slot substitutions pursuant to that certain Slot Substitution Agreement, dated July , 2005, between AWA and Mesa (the Substitution Agreement ), then, for the purposes of calculating performance penalties and bonuses for the applicable year, month, Six Month Period or Calendar Quarter, as applicable, pursuant to Sections 5.1 through 5.4, the Flight Services and AWA flight operations occurring on any date on which AWA exercises its rights under the Substitution Agreement shall not be included. For example only, if AWA exercised its rights under the Substitution Agreement on August 15, 2005, then the Flight Services and AWA flight operations on such day shall not be used in calculating the DOT Complaint Rate and AWAs DOT Complaint Rate for calendar year 2005, the MBR for the month of August, 2005, the OTP Rate Threshold and OTP Rate for the Six Month Period between July 1, 2005 and December 31, 2005, and the FCF Threshold and FCF for the Calendar Quarter commencing July 1, 2005 and expiring on September 30, 2005.
5. The parties agree that the Code Share Agreement is amended by adding the following as a new Section 7.1.9:
7.1.9 Actual costs invoiced to and paid by Mesa for the maintenance of CRJs at the Outstation Bases, including depreciation of parts, equipment and tooling and on-site Mesa personnel costs (net of any discounts or promotions and provided a good faith estimate of the general scope and costs for the Outstation Bases was initially pre-approved, in writing, by AWAs scheduling and planning group).
6. The parties agree that the Code Share Agreement is amended by adding the following as a new last paragraph to Section 7.2:
7.2 Notwithstanding anything above to the contrary, subsequent to December 31, 2004 AWA shall be entitled to a credit equal to the greater of [***] per day that an applicable CRJ is out of Flight Services for the performance of the Reliability Improvement Program (RIMP) or the actual ownership reimbursement received by Mesa from Bombardier for the applicable CRJ undergoing such RIMP work; plus (ii) an amount equal to a per diem allocation of Crew RON and Engine and APU Depreciation chargeable by Mesa as Guaranteed Maintenance Costs for the CRJ undergoing such RIMP work, based on the number of days CRJ is out of service for RIMP work.
7. The parties agree that Exhibit C of the Code Share Agreement is amended by: (i) deleting the reference to $[***] in the Ownership line under the CRJ 200 column and replacing such number with a reference to Note 5; (ii) replacing the CRJ 200 A/C Ownership Schedule attached as page 2 to Exhibits C and D with page 2, attached; and (iii) adding the following Note 5:
[***]
3
AGREEMENTS :
8. Settlement Amounts . AWA and Mesa agree to the following settlement of certain outstanding liabilities, duties and obligations contained in the Code Share Agreement and disputes between Mesa and AWA:
8.1 AWA and Mesa agree that, pursuant to Section 19 of the Fourth Amendment, the Reimbursement Payment is $[***];
8.2 AWA and Mesa agree that Mesa shall reimburse AWA for Mesas overcharge of overhead costs for spare aircraft, pursuant to Section 2.2.6, in an amount equal to $[***];
8.3 AWA and Mesa agree that AWA shall pay to Mesa the sum of $[***]in settlement of outstanding CRJ Model 200 Ownership costs payable through [***], pursuant to Section 7.2(a);
8.4 AWA and Mesa agree that AWA shall pay to Mesa the sum of $[***] for actual outstation maintenance costs incurred by Mesa for the periods of [***] through [***] (the Outstation Costs );
8.5 AWA and Mesa agree that Mesa shall pay to AWA the sum of $[***] in settlement of all performance penalties incurred by Mesa, pursuant to Sections 5.1 through 5.4, through [***];
8.6 AWA and Mesa agree that AWA shall pay to Mesa the sum of $[***] in settlement of all transition costs incurred by Mesa in connection with the elimination of CRJ Model 700s, pursuant to Section 2.3.3;
8.7 AWA and Mesa agree that AWA shall pay to Mesa the sum of $[***] in settlement of all turn costs payable by AWA for CRJ Model 900s at the Phoenix Hub, pursuant to Exhibit B, for the period of [***];
8.8 AWA and Mesa agree that AWA shall pay to Mesa the sum of $[***] in settlement of disputed sums due for the provision of Flight Services to Guadalajara, Mexico (the GDL Services ); and
8.9 AWA and Mesa agree that AWA shall pay to Mesa the sum of $[***] for RIMP work performed by Mesa between March 1, 2004 and December 31, 2004 (the RIMP Work )
The net amount due pursuant to Sections 7.1 through 7.9, above, from AWA to Mesa is $[***], which sum shall be paid by AWA to Mesa within three (3) business days after the Effective Date.
9. Releases .
4
9.1 The Mesa Group fully and finally release, acquit and forever discharge AWA and its parent companies and subsidiaries from any and all claims or demands for: (i) the Reimbursement Payment; (ii) CRJ Model 200 Ownership costs through and including June 30, 2005; (iii) Outstation Costs through December 31, 2004; (iv) costs and expenses incurred in connection with the RIMP Work; (v) reimbursement of actual out-of-pocket costs and expenses incurred in connection with the elimination of CRJ Model 700s from the Fleet; (vi) turn costs for CRJ Model 900s pursuant to Exhibit B for the periods of October 1, 2004 through June 30, 2005; and (vii) payment for the GDL Services.
9.2 AWA fully and finally releases, acquits and forever discharges Mesa and its parent company and subsidiaries from any and all claims and demands for: (i) reimbursement of improperly charged overhead costs prior to the Effective Date pursuant to Section 2.2.6; (ii) performance penalties pursuant to Sections 5.1 through 5.4 for all periods prior to December 31, 2004; and (iii) Crew RON costs for Spare Aircraft prior to July 1, 2005.
10. Tail N937/TSA Expenses . AWA and Mesa agree that: (i) no amount is payable by AWA to Mesa for CRJ Model 900 tail number N937 for the month of June, 2005; and (ii) no payment is due to AWA for the double billed TSA expenses.
11. Effect . Except as set forth in this Sixth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Sixth Amendment.
12. Counterparts . This Sixth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
13. Entire Agreement . This Sixth Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
[signatures appear on next page]
5
AMERICA WEST AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
||
MESA AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
||
FREEDOM AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
||
AIR MIDWEST, INC. |
||
By: |
||
Name: |
||
Title: |
6
Exhibit C-Page 2
CRJ-200 A?C Ownership Schedule
Tail# |
Monthly
Amount |
|||||||||
1 |
7178 | $ | [***] | |||||||
2 |
7218 | $ | [***] | |||||||
3 |
7228 | $ | [***] | |||||||
4 |
7231 | $ | [***] | |||||||
5 |
7260 | $ | [***] | |||||||
6 |
7264 | $ | [***] | |||||||
7 |
7275 | $ | [***] | |||||||
8 |
7278 | $ | [***] | |||||||
9 |
7286 | $ | [***] | |||||||
10 |
7291 | $ | [***] | |||||||
11 |
7302 | $ | [***] | |||||||
12 |
7305 | $ | [***] | |||||||
13 |
7314 | $ | [***] | |||||||
14 |
7318 | $ | [***] | |||||||
15 |
7325 | $ | [***] | |||||||
16 |
7337 | $ | [***] | |||||||
17 |
7353 | $ | [***] | |||||||
18 |
7358 | $ | [***] | |||||||
Agreed Rate 1 |
|
$ | [***] |
1 [***]
7
Exhibit 10.11.8
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
SEVENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT AND SETTLEMENT, ASSIGNMENT
AND ASSUMPTION AGREEMENT
THIS SEVENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT AND SETTLEMENT, ASSIGNMENT AND ASSUMPTION AGREEMENT (Seventh Amendment) is made and entered into as of September 10, 2007 (the Effective Date) by and among AMERICA WEST AIRLINES, INC., a Delaware corporation (AWA ), US AIRWAYS, INC., a Delaware corporation (US Airways), MESA AIRLINES, INC., a Nevada corporation (Mesa), AIR MIDWEST, INC. a Kansas corporation (AM), and FREEDOM AIRLINES, INC., a Nevada corporation (Freedom). Mesa, AM and Freedom are referred to collectively as the Mesa Group.
RECITALS :
WHEREAS, AWA and the Mesa Group are parties to that certain Code Share and Revenue Sharing Agreement, dated to be effective February 1, 2001, as amended by that certain First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001, that certain Second Amendment to Code Share and Revenue Sharing Agreement, dated to be effective October 24, 2002, that certain Third Amendment to Code Share and Revenue Sharing Agreement, dated to be effective January 29, 2003, that certain Fourth Amendment to Code Share and Revenue Sharing Agreement, dated to be effective September 5, 2003, that certain Fifth Amendment to Code Share and Revenue Sharing Agreement, dated to be effective January 28, 2005, that certain Fifth Amendment to Code Share and Revenue Sharing Agreement, dated to be effective January 28, 2005 and that certain Sixth Amendment to Code Share and Revenue Sharing Agreement, dated to be effective July 27, 2005 (collectively, the Code Share Agreement);
WHEREAS, the Code Share Agreement requires the Mesa Group to provide certain Flight Services and Other Services for AWA, pursuant to the terms and conditions of the Code Share Agreement;
WHEREAS, the Mesa Group and AWA desire to amend the Code Share Agreement pursuant to the terms and conditions of this Seventh Amendment;
WHEREAS, the Mesa Group and AWA desire to settle certain amounts payable to each other pursuant to certain claims under the Code Share Agreement;
WHEREAS, as part of the integration of AWAs and US Airways operations, AWA and US Airways will combine their operating certificates into one operating certificate under US Airways;
WHEREAS, AWA wishes to assign, transfer and convey to US Airways its rights, title and interest in and to the Code Share Agreement and US Airways wishes to accept and assume from AWA, all of AWAs rights, interests, liabilities, duties and obligations in, to and under the Code Share Agreement; and
WHEREAS, AWA, US Airways and the Mesa Group have agreed to enter into this Agreement for the purpose of giving effect to such assignment to US Airways of AWAs rights and interests in, to and under the Code Share Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1: Definitions and Interpretation .
1.1 Unless otherwise defined or the context otherwise requires, capitalized terms used in this Seventh Amendment shall have the same meanings as in the Code Share Agreement (whether by reference to another document or otherwise) and the following terms shall have the following meanings:
Effective Time means the date AWA relinquishes its FAA operating certificate.
Section 2: Amendments .
2.1 AWA, US Airways and the Mesa Group agree that Exhibit C of the Code Share Agreement is amended by: (i) deleting the reference to $[***] in the Ownership line under the CRJ 900 column and replacing such number with a reference to Note 6 and (ii) adding the following Note 6:
[***] per CRJ 900 per month for [***] months from [***] through [***] and $[***] per CRJ 900 per month for the remainder of the Term.
Section 3: Settlement . AWA, US Airways and the Mesa Group agree to the following settlement of certain outstanding liabilities, duties and obligations contained in the Code Share Agreement and disputes between Mesa and AWA and US Airways:
3.1 AWA, US Airways and the Mesa Group agree that US Airways shall pay and has paid to Mesa the sum of $7,464,008 in settlement of outstanding claims Mesa has against AWA for CRJ Model 900 Ownership Guaranteed Non-Maintenance Costs payable through July 2007 pursuant to Section 7.2(a) of the Code Share Agreement (the CRJ 900 Claims). The Mesa Group hereby acknowledges receipt of this settlement payment in full on August 9, 2007. The parties agree that only the CRJ 900 Claims are being settled hereby and no other claims any party may have against any other party under the Code Share Agreement shall be settled or affected hereby (other than the release of AWA pursuant to Section 4.1(d) below upon the assumption hereunder by US Airways of all of AWAs obligations, duties and liabilities under the Code Share Agreement).
Section 4: Assignment and Assumption .
4.1 At the Effective Time:
(a) AWA hereby conveys, assigns, transfers and sets over to US Airways all of the rights, title and interests of AWA in, to and under the Code Share Agreement (including,
3
without limitation, in respect of rights and interests accruing, arising or pertaining to, and matters occurring during, the period prior to the Effective Time).
(b) US Airways hereby accepts the conveyance, assignment and transfer contained in sub-section (a) of this Section 4.1 and assumes and agrees to discharge, perform and satisfy all of the obligations, duties and liabilities of AWA under the Code Share Agreement, in each case arising prior to, at and after the Effective Time for the benefit of the Mesa Group in the time and manner required by the Code Share Agreement to the same extent as if US Airways had executed and delivered the Code Share Agreement. US Airways further agrees that it shall be deemed to be a party to the Code Share Agreement and shall be bound by the terms and provisions of the Code Share Agreement, and further agrees to observe and perform in favor of and for the benefit of the Mesa Group all obligations, duties and liabilities of AWA under the Code Share Agreement arising prior to, at and after the Effective Time.
(c) The Mesa Group hereby consents to and accepts the conveyance, assignment and transfer by AWA and the assumption by US Airways of all of the rights, title, interests, duties, liabilities and obligations of AWA in, to and under the Code Share Agreement, and US Airways agreement to be bound by the terms and provisions of the Code Share Agreement and to perform all of AWAs obligations, duties and liabilities under the Code Share Agreement pursuant to sub-sections (a) and (b) of this Section 4.1.
(d) The Mesa Group releases AWA from its obligations, duties and liabilities to the Mesa Group arising at or after the Effective Time under the Code Share Agreement.
(e) AWA releases the Mesa Group from its obligations, duties and liabilities to AWA arising at or after the Effective Time under the Code Share Agreement.
(f) The Mesa Group agrees to observe and perform in favor of and for the benefit of US Airways all its obligations, duties and liabilities arising at or after the Effective Time under the Code Share Agreement.
(g) At the Effective Time, all references to America West Airlines, Inc. and AWA shall be deleted and replaced with US Airways, Inc. and US Airways, respectively.
(h) At the Effective Time, the notice address for AWA in Section 15.1 of the Code Share Agreement will be amended as follows:
If to US Airways: US Airways: Inc.4000 E. Sky Harbor Blvd.
Phoenix, AZ 95034
Attn: General Counsel
Telephone: (480) 693-3760
Facsimile: (480) 693-5155
Each of the foregoing events and agreements in this Section 4.1 is conditional upon the happening of the others and shall occur simultaneously. It is hereby agreed and acknowledged that the above-described assignment and assumption of the Code Share Agreement and the resulting releases and discharges of AWA by the Mesa Group, and of the Mesa Group by AWA, are without prejudice to any and all rights, obligations, claims and demands, including, without
4
limitation, rights to indemnification under the Code Share Agreement, which AWA or the Mesa Group may have against each other in respect of acts, omissions, events and circumstances arising prior to the Effective Time. Notwithstanding anything contained herein, none of the parties respective obligations, duties and liabilities under the Code Share Agreement shall be increased, nor shall such parties rights and privileges under the Code Share Agreement be reduced, by reason of the transactions contemplated hereby.
Section 5: Effect . Except as set forth in this Seventh Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Seventh Amendment.
Section 6: Counterparts . This Seventh Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
Section 7: Entire Agreement . This Seventh Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
Section 8: References to Agreement . The Code Share Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof, or pursuant to the terms of the Code Share Agreement as amended hereby, are hereby amended so that any reference therein to the Code Share Agreement shall mean a reference to the Code Share Agreement as amended hereby.
Section 9: Agreement Remains in Effect . The Code Share Agreement, as amended hereby, remains in full force and effect and each of the parties ratifies and confirms its agreements and covenants contained therein.
[Signature Pages Follow]
5
IN WITNESS WHEREOF, the parties have duly executed this Seventh Amendment as of the date first above written.
AMERICA WEST AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
||
US AIRWAYS, INC. |
||
By: |
||
Name: |
||
Title: |
||
MESA AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
||
FREEDOM AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
||
AIR MIDWEST, INC. |
||
By: |
||
Name: |
||
Title: |
[Signature Page Seventh Amendment to Code Share Agreement]
6
Exhibit 10.11.9
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
EIGHTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT AND
SETTLEMENT AGREEMENT
THIS EIGHT AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT AND SETTLEMENT AGREEMENT (this Eighth Amendment ) is made and entered into as of May 12, 2008 (the Effective Date ), between US AIRWAYS, INC., a Delaware corporation ( US Airways ). MESA AIRLINES, INC., a Nevada corporation ( Mesa ). AIR MIDWEST, INC., a Kansas corporation ( AM ), and FREEDOM AIRLINES, INC., a Nevada corporation ( Freedom ). Mesa, AM and Freedom are referred to collectively as the Mesa Group.
RECITALS :
A. US Airways and the Mesa Group are parties to that certain Code Share and Revenue Sharing Agreement, dated as of February 1, 2001, as amended by: (1) the First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001; (2) the Second Amendment to Code Share and Revenue Sharing Agreement, dated as of October 24, 2002; (3) the Third Amendment to Code Share and Revenue Sharing Agreement, dated as of January 29, 2003; (4) the Fourth Amendment to Code Share and Revenue Sharing Agreement and Release, dated as of September 5, 2003; (5) the Fifth Amendment to Code Share and Revenue Agreement, dated as of January 28, 2005; (6) the Sixth Amendment to Code Share and Revenue Sharing Agreement and Settlement Agreement, dated as of July 27, 2005; and (7) the Seventh Amendment to Code Share and Revenue Sharing Agreement and Settlement, Assignment and Assumption Agreement (collectively, the Code Share Agreement ). All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Eighth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
B. The Code Share Agreement requires the Mesa Group to provide certain Flight Services and Other Services for US Airways, pursuant to the terms and conditions of the Code Share Agreement.
C. The Mesa Group and US Airways desire to amend the Code Share Agreement pursuant to the terms and conditions of this Eighth Amendment.
D. The Mesa Group and US Airways desire to settle certain amounts payable by the Mesa Group to US Airways.
NOW, THEREFORE, in consideration of the promises, covenants, representations and warranties hereinafter set forth, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and the Mesa Group agree as set forth below:
1. The parties agree that Section 5 of the Code Share Agreement is amended by adding the following new paragraph 5.8:
5.8 Damages [***] . Mesa acknowledges that, [***] for [***] reasons within Mesas control [***]. As a result [***], US Airways incurred damages of $[***]. US Airways withheld $[***] from the payments made to Mesa [***], leaving a balance owning by Mesa to US Airways of $[***]. Mesa agrees to pay this amount to US Airways as follows: [***]. In the event that Mesa fails to make any of the payments described above, and such failure continues for 5 days after notice thereof from US Airways, US Airways may, at its option and upon 30 days written notice, reduce [***] by up to all of the remaining [***], notwithstanding any provisions of the Code Share Agreement to the contrary.
2. Release . Except as set forth in this Eighth Amendment, and subject to Mesas obligation to make the payments set forth above (or in the event of Mesas failure to make such payments, to reduce [***]), US Airways fully and finally releases, acquits and forever discharges the Mesa Group from any and all claims and demands for reimbursement costs or payment of damages or other liabilities resulting [***]that occurred during the period [***]. The parties agree and acknowledge that they shall not be bound to use this Eighth Amendment as the basis for resolving any similar or dissimilar claims that may arise between them in the future.
3. Effect . Except as set forth in this Eighth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Eighth Amendment.
4. Counterparts . This Eighth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
5. Entire Agreement . This Eighth Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
[signature page follows]
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US AIRWAYS, INC. |
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MESA AIRLINES, INC. |
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FREEDOM AIRLINES, INC. |
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AIR MIDWEST, INC. |
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Exhibit 10.11.10
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
NINTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS NINTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Ninth Amendment ) is made and entered into as of March 31, 2009 (the Effective Date), between US AIRWAYS, INC., a Delaware corporation ( US Airways ), MESA AIRLINES, INC., a Nevada corporation (Mesa), AIR MIDWEST, INC., a Kansas corporation (AM), and FREEDOM AIRLINES, INC., a Nevada corporation ( Freedom ). Mesa, AM and Freedom are referred to collectively as the Mesa Group.
RECITALS:
A. US Airways and the Mesa Group are parties to that certain Code Share and Revenue Sharing Agreement, dated as of February 1, 2001, as amended by: (1) the First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001; (2) the Second Amendment to Code Share and Revenue Sharing Agreement, dated as of October 24, 2002; (3) the Third Amendment to Code Share and Revenue Sharing Agreement, dated as of January 29, 2003; (4) the Fourth Amendment to Code Share and Revenue Sharing Agreement and Release, dated as of September 5, 2003; (5) the Fifth Amendment to Code Share and Revenue Agreement, dated as of January 28, 2005; (6) the Sixth Amendment to Code Share and Revenue Sharing Agreement and Settlement Agreement, dated as of July 27, 2005; (7) the Seventh Amendment to Code Share and Revenue Sharing Agreement and Settlement, Assignment and Assumption Agreement; and (8) the Eighth Amendment to Code Share Agreement and Settlement Agreement, dated as of May 12, 2008 (collectively, the Code Share Agreement ). All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Ninth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
B. The Code Share Agreement requires the Mesa Group to provide certain Flight Services and Other Services for US Airways, pursuant to the terms and conditions of the Code Share Agreement.
C. The Mesa Group and US Airways desire to amend the Code Share Agreement pursuant to the terms and conditions of this Ninth Amendment, to provide for funding of certain costs and expenses arising under or relating to the Code Share Agreement.
NOW, THEREFORE, in consideration of the promises, covenants, representations and warranties hereinafter set forth, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and the Mesa Group agree as set forth below:
1. The parties agree that the Code Share Agreement is amended by adding the following new Section 7.11 (Section 7.10 having been previously added by the Fourth Amendment):
7.11 |
Advance Payment of Certain Costs, Fees and Payments . Upon execution of this Ninth Amendment, US Airways will pay Mesa a one-time lump-sum payment of $[***], representing an advance payment of the amounts otherwise due from US Airways under the Code Share Agreement (the Advance), which Advance will be used by Mesa to pay certain of its costs and expenses arising under or relating to the Code Share Agreement. In exchange for the Advance US Airways will receive a credit of $[***] (together, the Credits). In the event that Mesa contests or otherwise challenges or attempts to prevent the timely recoupment of the Credits on the dates specified above, US Airways may, at its option and upon 30 days written notice, [***], notwithstanding any provisions of the Code Share Agreement to the contrary. From the date of the Advance until all remaining Credits have been applied hereunder, Mesa shall be and remain in full compliance with its material loan and lease obligations, taken individually or in the aggregate. Upon request from US Airways, Mesa will provide appropriate certification of its compliance with the foregoing provision, and if Mesa is not in compliance with the foregoing provision as of the date any payment from US Airways, such payment will be reduced by the full amount of any Credits not yet applied. |
2. Effect . Except as set forth in this Ninth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Ninth Amendment.
3. Counterparts . This Ninth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
4. Entire Agreement . This Ninth Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
[signature page follows]
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US AIRWAYS, INC. |
By: |
Name: |
Title: |
MESA AIRLINES, INC. |
By: |
Name: |
Title: |
FREEDOM AIRLINES, INC. |
By: |
Name: |
Title: |
AIR MIDWEST, INC. |
By: |
Name: |
Title: |
3
Exhibit 10.11.11
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
Execution Copy
TENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS TENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Tenth Amendment ) is made and entered into as of November 18, 2010 (the Execution Date ), by and between US AIRWAYS, INC., a Delaware corporation ( US Airways ), MESA AIRLINES, INC., a Nevada corporation ( Mesa ). In addition, Mesa Air Group, Inc., a Nevada corporation, is also a party hereto with respect to Sections 11 and 12 of this Tenth Amendment.
RECITALS :
A. US Airways and Mesa are parties to that certain Code Share and Revenue Sharing Agreement, dated as of February 1, 2001, as amended by: (1) the First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001; (2) the Second Amendment to Code Share and Revenue Sharing Agreement, dated as of October 24, 2002; (3) the Third Amendment to Code Share and Revenue Sharing Agreement, dated as of January 29, 2003; (4) the Fourth Amendment to Code Share and Revenue Sharing Agreement and Release, dated as of September 5, 2003; (5) the Fifth Amendment to Code Share and Revenue Agreement, dated as of January 28, 2005; (6) the Sixth Amendment to Code Share and Revenue Sharing Agreement and Settlement Agreement, dated as of July 27, 2005; (7) the Seventh Amendment to Code Share and Revenue Sharing Agreement and Settlement, Assignment and Assumption Agreement, dated as of September 10, 2007; (8) the Eighth Amendment to Code Share Agreement and Settlement Agreement, dated as of May 12, 2008; and (9) the Ninth Amendment to Code Share and Revenue Sharing Agreement, dated as of March 30, 2009 (collectively, the Code Share Agreement ).
B. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Tenth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
C. The Code Share Agreement requires the Mesa Group to provide certain Flight Services and Other Services for US Airways, pursuant to the terms and conditions of the Code Share Agreement.
D. The Mesa Group and US Airways desire to amend the Code Share Agreement pursuant to the terms and conditions of this Tenth Amendment, to provide for an extension of the term of the Code Share Agreement as it relates to certain aircraft, amendment of the costs apportionment and revenue share percentage terms, release and settlement of certain disputed amounts between the parties arising under or relating to the Code Share Agreement, and other changes as set forth in this Tenth Amendment.
NOW, THEREFORE, in consideration of the promises, covenants, representations and warranties hereinafter set forth, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and the Mesa Group agree as set forth below.
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AMENDMENTS:
1. Guaranteed Non-Maintenance Costs . The parties agree that Exhibit C of the Code Share Agreement (as amended) is further amended, effective as of July 1, 2010, such that the Guaranteed Non-Maintenance Costs for each aircraft type used in providing the Flight Services shall be reduced as follows:
[***]
For clarity, to the extent Mesas actual ownership costs for the CRJ-200 aircraft are or have been at any point less than the amounts paid by US Airways for such aircraft, the difference will be (i) credited promptly to US Airways in accordance with Exhibit C of the Code Share Agreement (as amended by Revised Exhibit C Page 2 set forth in the Sixth Amendment), or alternatively (ii) credited as an offset against amounts owed by US Airways.
2. Segment Revenue Payments . The parties agree that Section 7.6 of the Code Share Agreement (as amended) is further amended, effective as of July 1, 2010, such that the Segment Revenue Percentage set forth therein for each type of aircraft shall be replaced with the Segment Revenue Payment as follows:
[***]
The revenue share percentage for each aircraft type will be adjusted proportionally upward to the extent actual utilization (total block hours divided by aircraft in fleet divided by days in month) for that aircraft type falls below 8.4 hours for the CRJ-900, 6.7 hrs for the CRJ200, or 6.5 hrs for the Dash-8 (e.g., if the actual utilization of the CRJ-900 aircraft is 5% below the actual utilization target of 8.4 hours, then the 6.39% Segment Revenue Percentage would be proportionally adjusted upwards by multiplying by 1.05). The payment rates set forth in Section 1 and 2 of this Tenth Amendment shall be in effect beginning on July 1, 2010, provided that US Airways shall continue making the payments calculated under the Code Share Agreement (without giving effect to this Tenth Amendment) until the Approval Order Date (as defined below). From and after the Approval Order Date, US Airways shall pay Mesa at the payment rates set forth in this section (the New Payment Rates ). Promptly following the Approval Order Date, upon US Airways written election, either (a) Mesa shall pay to US Airways the amount by which the payments made under the Agreement for the period from July 1, 2010 until US Airways Confidential the Approval Order Date exceed the payments due under this Tenth Amendment for such period (the Retroactive Payments ): or (b) US Airways may apply the Retroactive Payment amounts to credits against payments US Airways would otherwise be obligated to make to Mesa under the Code Share Agreement, as amended ( Retroactive Credits ). The Retroactive Payments or Retroactive Credits shall be retained indefeasibly by US Airways and US Airways shall have no obligation to refund or otherwise credit Mesa with the Retroactive Payments or Retroactive Credits under any circumstances or pay to Mesa amounts equal to the Retroactive Credits.
AGREEMENTS:
3. Term.
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(a) The term of the Code Share Agreement, as it relates to the CRJ-900 aircraft, shall be extended based on the schedule set forth on Exhibit E , which will amount to thirty-nine (39) months on average per aircraft, from June 30, 2012, to September 30, 2015, subject to the Term Extension Option and/or Individual Extension Option and the establishment of the schedule for the redelivery of aircraft set forth herein (the Term ).
(b) US Airways will have the option, to be exercised in writing and in US Airways sole discretion no more than three (3) times, to extend the Term with respect to all but not less than all of the CRJ-900 aircraft for an additional one year per option exercise. Each option (each a Term Extension Option ) shall be exercisable upon at least twelve (12) months prior written notice, on the terms and conditions of the Code Share Agreement as amended by this Tenth Amendment.
(c) The term of the Code Share Agreement as it relates to aircraft other than CRJ-900s shall remain June 30, 2012, and be unaffected by this Tenth Amendment and any Term Extension Options.
(d) In addition to the Term Extension Option, US Airways will have the one-time option to extend each CRJ-900 aircraft, on an individual aircraft basis for up to six (6) additional months upon six (6) months prior written notice on the terms and conditions of the Code Share Agreement as amended by this Tenth Amendment (the Individual Extension Option ).
4. Return of Aircraft . Unless extended by US Airways written exercise of the Term Extension Options and/or the Individual Extension Option, the expiration of the Term and the redelivery by US Airways to Mesa shall be phased according to the schedule set forth on Exhibit E , such that each aircraft shall be redelivered on a date not earlier than April 1, 2015, and not later than March 31, 2016 (the Initial Term Redelivery Dates ). If the Term is extended by US Airways written exercise of one or more of the Term Extension Options or Individual Extension Options, the expiration of the Term and the redelivery of the CRJ-900 aircraft shall be phased according to a schedule established by US Airways and consistent with the Initial Term Redelivery Dates described above, but extended to reflect the duration of the extended Term. Following the expiration of the Term and redelivery to Mesa, Mesa shall promptly remove any and all references to US Airways trademarks, trade names or service marks (including the AWA Service Marks) from the CRJ-900 aircraft prior to any further use of such aircraft.
5. Elimination of Right to Reduce CRJ-900 Fleet . Notwithstanding the terms of Section 2.2.4 of the Code Share Agreement (as amended), US Airways may not initiate fleet reductions in the CRJ-900 subfleet except as set forth in Section 4 above.
6. Ground Handling . Mesa shall transition its ground handling services to US Airways or, in US Airways sole discretion, to one or more ground handling vendors selected or approved by US Airways in its sole discretion, before the earlier of (a) a date that is ninety (90) days after written notice from US Airways and (b) five (5) months following the Approval Order Date (as defined in Section 14 below) for the PHX hub and seven (7) months following the Approval Order Date for all other locations. As such services are transitioned from Mesa, the corresponding payments due Mesa under the Code Share Agreement shall be eliminated,
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together with any obligations of Mesa regarding the provision of such services set forth in the Code Share Agreement. Subject to US Airways obligations under the Code Share Agreement and this Tenth Amendment, Mesa will reasonably cooperate at its own expense in connection with the transition of any such services. In connection with the transition of ground services, US Airways will purchase the ground service equipment owned by Mesa that is required by US Airways, for use in its operations and in good condition and repair, ordinary wear and tear excepted. The purchase price will be equal to the fair market value of such equipment. Absent agreement by the parties, fair market value shall be determined by an independent appraiser mutually selected and appointed by US Airways and Mesa immediately following the Execution Date. US Airways and Mesa will share equally the costs of any such appraisal.
7. Settlement . Upon the Approval Order Date or as soon as practicable thereafter and subject to the occurrence of a Vacatur Declaration (as defined below):
(a) US Airways shall:
(i) [***]
(ii) release Mesa and any of Mesas current or former subsidiaries, affiliates, officers, directors, stockholders, employees, professionals or agents (collectively, the US Airways Released Parties ) from any and all claims that US Airways has or had against the US Airways Released Parties, whether legal or equitable, known or unknown, liquidated or contingent, matured or inchoate, which arose or accrued in whole prior to the date that is two years before the Execution Date, including without limitation the disputed payment claims between the parties listed in Exhibit B (collectively, the US Airways Released Claims ). Except as set forth in Exhibit B, the US Airways Released Claims shall not include, and US Airways shall not be deemed to release, any claims US Airways has against any of the Mesa Released Parties that arose or accrued, in whole or in part, within two years before the Execution Date. Any US Airways claims that are not specifically identified as US Airways Released Claims and are within two years before the Execution Date shall be obligations of Mesa assumed under this Tenth Amendment and shall not be discharged or modified by any Mesa Plan.
(iii) audit Mesa property taxes for tax years 2008 and 2009 on a mutually agreed to timetable and Mesa will provide all information (including, without limitation, access to Mesa accountants, lawyers, other professionals, the relevant executives in charge of property taxes for Mesa and other Mesa employees and executives) reasonably requested by US Airways in connection with such audit. Any pre-payments made by US Airways related to such taxes will be reconciled in accordance with the procedures established in the Code Share Agreement.
(iv) have the right to audit property taxes for tax years prior to 2008 and Mesa will provide all information (including, without limitation, access to Mesa accountants, lawyers, other professionals, the relevant executives in charge of property taxes for Mesa and other Mesa employees and executives) reasonably requested by US Airways in connection with such audit. If such audit reveals that US Airways overpaid for such years (including the portions of the [***] payment allocated to property taxes as set forth in Exhibit B ), the difference will be credited by Mesa to US Airways ( Tax Credits ). Notwithstanding the definition of US Airways
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Released Claims, any claims that US Airways has or may have related to overpayment of property taxes shall not be included in the US Airways Released Claims. For the avoidance of doubt, if US Airways elects to audit years prior to 2008 and such audit reveals an underpayment by US Airways, US Airways shall not be obligated to make any additional payment to Mesa in respect of such underpayment. The parties will agree on mutually acceptable Property Tax true- up procedures for tax years from and after 2010.
(b) Mesa shall:
(i) release US Airways and any of US Airways current or former subsidiaries, affiliates, officers, directors, stockholders, employees, professionals or agents (collectively, the Mesa Released Parties ) from any and all claims that Mesa has or had against the Mesa Released Parties, whether legal or equitable, known or unknown, liquidated or contingent, matured or inchoate, which arose or accrued on or before the Execution Date, including without limitation the disputed payment claims between the parties listed in Exhibit B hereto and any right of set-off or offset against US Airways (collectively, the Mesa Released Claims ).
(ii) be obligated to pay US Airways (in addition to the Tax Credits) for (a) any properly claimed amounts arising after July 1, 2008 not specified in Exhibit B (the Post- July 2008 Claims ), and (b) all available Fuel Sales Tax refunds for North Carolina beginning from the 2006 tax year collected by Mesa (the Fuel Sales Tax Refunds ) within ten (10) business days of receipt. Mesa acknowledges that it has commenced collecting the Fuel Sales Tax Refunds as of October 18, 2010 and shall continue to collect the Fuel Sales Tax Refunds in a timely manner at Mesas sole expense. Mesa will reasonably cooperate with US Airways in connection with the collection of the Fuel Sales Tax Refunds (including, without limitation, access to Mesa accountants, lawyers, other professionals, the relevant executives in charge of the Fuel Sales Tax Refunds for Mesa and other Mesa employees and executives) reasonably requested by US Airways. Mesa will not settle or compromise any Fuel Sales Tax Refunds without the prior written consent of US Airways, which consent shall not be unreasonably withheld. Any claims related to the Post-July 2008 Claims or the Fuel Sales Tax Refunds shall not be included in the definition of US Airways Released Claims.
8. CRJ-900 Aircraft Modifications . Mesa shall, at its sole cost, install ACARS (without printers) on all CRJ-900 aircraft and such systems will be fully functioning on all such aircraft (in accordance with mutually agreed to specifications) no later than April 29, 2011. Mesa shall, at its sole cost, complete internal upgrades for each CRJ-900 aircraft incorporating each item in Exhibit A hereto. The items in Exhibit A that are to be completed when aircraft are parked at airports during regular overnight stays ( RON ) are defined as RON Upgrades , the items in Exhibit A that are to be completed upon US Airways request that an aircraft be taken out of service to perform the modifications are defined as Special Visit Upgrades, and the items in Exhibit A that are to be completed while aircraft are taken out of service during regularly scheduled C-check maintenance and inspection are defined as C-check Upgrades. Together the RON Upgrades, the Special Visit Upgrades and the C-check Upgrades are collectively defined as the Upgrades . Mesa will complete the Upgrades on the timetable set forth in Exhibit A or as otherwise specified by US Airways; provided that US Airways gives Mesa at least ninety (90) days prior written notice of any requested Special Visit and US
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Airways sets forth in such notice that it will remove the affected aircraft from service to accommodate such Special Visit. US Airways shall, within thirty (30) days after the Execution Date, provide the standard for reasonable approval of the Upgrades. Mesa shall commence work on the Upgrades as soon as practicable. US Airways shall pay to Mesa the Effective Date Payment, plus an [***] as a contribution towards Mesas cost for the Upgrades (collectively with the Effective Date Payment, the Upgrade Contribution ), in thirty-eight (38) equal installments, payable upon satisfactory completion of the RON Upgrades for each CRJ-900 aircraft. In the event Mesa completes one or more RON Upgrades (in a manner satisfactory to US Airways in US Airways sole discretion) during the Pre-Effective Date Period, US Airways shall pay the per aircraft portion of the Upgrade Contribution for each such RON Upgrade at the time such RON Upgrade has been approved by US Airways (each such payment, a Pre-Effective Date Upgrade Payment ). In the event US Airways makes one or more Pre-Effective Date Upgrade Payments and the Mesa Plan is not filed or confirmed or does not become effective by the respective deadlines set forth herein, US Airways shall be entitled to credit such Pre-Effective Date Upgrade Payments against amounts US Airways otherwise owes Mesa. No payments will be made by US Airways following completion of C-check Upgrades or Special Visit Upgrades, however each such C-check Upgrade and Special Visit Upgrade will also be subject to US Airways review and approval.
9. Operational Performance.
(a) Effective at 12:01 a.m. on the date that Mesas ground handling services in PHX Hub are fully transitioned to US Airways in accordance with Section 6 (the Transition Date ) and US Airways has made available to Mesa, on a daily basis (subject to immaterial delays), not less than two (2) months of operational performance data in accordance with Section 9(b)(i), Sections 5.3 and 5.4 of the Agreement dealing with On Time Performance and Flight Completion Factor are deleted and replaced in their entirety with the following Service Level Performance provisions:
(i) Mesa shall perform in accordance with the service levels set forth on Exhibit C hereto (the Service Levels ). Mesas operational performance will be measured using the following two measurements: Controllable Completion Factor ( CCF ) and Controllable Departures within Zero Minutes of Scheduled ( CD0 ), as such terms are defined below. Mesa will be subject to Service Level 1 and Service Level 2 credit amounts for all flights that fall below the established thresholds and will receive incentives for all flights that rise above the incentive levels ( Incentive Levels ), in accordance with the thresholds and credit amounts set forth in Exhibit C .
(ii) CD0: Mesa shall not allow its CD0 Rate to fall below the CDO Service Level 1 threshold percentage set out in Exhibit C . The CD0 Rate is defined as a fraction in which the numerator is the Actual Departures less departures which were delayed due to reasons controllable by Mesa and all downline departures which remain late departing due predominantly to reasons controllable by Mesa ( Controllable Delayed Departures ) and the denominator is Controllable Scheduled Departures. Controllable Scheduled Departures shall mean all Scheduled Departures less those scheduled departures cancelled for reasons beyond Mesas control, such as weather and ATC. Exhibit D lists all cancellation and delay codes used by US Airways at the time of this Tenth Amendment and specifically lists all such delay codes
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that are classified as Controllable Delay Codes used in calculating CD0 Rate and Controllable Scheduled Departures. US Airways may update Exhibit D and will make corresponding changes to the applicable Service Level and Incentive Level thresholds in Exhibit C and to the applicable early termination thresholds in Section 9(e) provided that:
(A) Codes are changed on a system-wide basis for US Airways and all other US Airways Express carriers;
(B) US Airways demonstrates to Mesa that any changes to the codes set forth in Exhibit D will have no adverse impact on Mesa. For avoidance of doubt, and by way of example, if a new code is added to the Controllable Delay list, US Airways will calculate the decrease to Mesas performance during the period used for setting the Service Levels and Incentive Level in this Tenth Amendment, and the corresponding Service Levels and Incentive Level will be reduced by that exact percentage; and
(C) The parties agree to enter into an amendment to the Code Share Agreement to reflect the changes to the delay codes and corresponding Service and Incentive Levels.
US Airways shall provide to Mesa, within thirty (30) days following the Execution Date, Mesas historical performance data (by delay code) and the methodology used to establish the Service Levels and Incentive Levels in this Tenth Amendment.
(iii) Mesa will be subject to Service Level 1 and Service Level 2 financial credits for all flights causing Actual CDO performance in a calendar quarter to fall below the Service Level 1 and Service Level 2 thresholds set out in Exhibit C and at the respective credit dollar amount specified in Exhibit C , and incentive payments when Mesa meets or exceeds the incentive levels set forth in Exhibit C (the Incentive Levels ). The number of flights credited is calculated as the respective Service Level Threshold less the Actual CDO Rate for the quarter multiplied by the Controllable Scheduled Departures. Service Level 1 and Service Level 2 credits are calculated independently and are additive, meaning that flights receiving a Service Level 2 credit by definition will also generate a Service Level 1 credit.
(iv) Mesa will receive incentive payments for each flight in a calendar quarter that rises above the CDO Rate incentive threshold specified in Exhibit C and at the incentive payment dollar amount specified in Exhibit C . For purposes of calculating the number of flights paid an incentive, the number of incentivized flights is calculated as the actual CDO Rate for the quarter less the incentive threshold multiplied by the Controllable Scheduled Departures.
(v) CCF: Mesa shall not allow its CCF Rate to fall below the CCF Level 1 threshold set out in Exhibit C . The CCF Rate is defined as a fraction where the numerator is actual departures and the denominator is Controllable Scheduled Departures.
(vi) Mesa will be subject to Service Level 1 and Service Level 2 financial credits for all flights causing actual CCF performance in a calendar quarter to fall below the Service Level 1 and Service Level 2 thresholds set out in Exhibit C and at the respective credit dollar amount specified in Exhibit C . The number of flights credited is
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calculated as the respective service level threshold less the actual CCF rate for the quarter multiplied by the Controllable Scheduled Departures. Service Level 1 and Service Level 2 credits are calculated independently and are additive, meaning that flights receiving a Service Level 2 credit by definition will also generate a Service Level 1 credit.
(vii) Mesa will receive incentive payments for each flight in a calendar quarter that rises above the CCF Rate incentive threshold specified in Exhibit C and at the incentive payment dollar amount specified in Exhibit C . For purposes of calculating the number of flights paid an incentive, the number of incentivized flights is calculated as the actual CCF rate for the quarter less the incentive threshold multiplied by the Controllable Scheduled Departures.
(viii) Credits for CDO and CCF added together comprise the Quarterly Performance Credit. Incentives for CDO and CCF added together comprise the Quarterly Performance Incentive . To the extent the Quarterly Performance Credit exceeds the Quarterly Performance Incentive in any calendar quarter, US Airways shall apply the difference as an offset against any payments due to Mesa in such quarter. To the extent the Quarterly Performance Incentive exceeds the Quarterly Performance Credit in any calendar quarter, US Airways shall pay Mesa the difference within ten (10) days of receipt of written demand from Mesa.
(ix) On each anniversary date of the Contract Date, commencing on February 1, 2011, the dollar amounts used for calculating the CDO and CCF credits and incentives shall be increased by the increase in the CPI, as determined in accordance with Section 7.4 of the Code Share Agreement. Calendar Quarter means each three month period commencing with January 1 of each year.
(b) Effective as of the Transition Date, Section 5.5 is deleted and replaced in its entirety with the following language:
(i) Within ten (10) business days after the end of each Calendar Month, US Airways shall provide to Mesa flight data and statistical information accumulated and captured by and within the official flight data reporting sources at US Airways for the prior Calendar Month and, as applicable, the prior Calendar Quarter, together with such supporting documentation and information as US Airways deems necessary. US Airways or its designee, upon two (2) business days prior written notice, may review at any time, at Mesas corporate or other relevant offices, all records and files, if any, generated or maintained by Mesa in connection with performance measurements and calculations as prescribed herein. If US Airways or its designees review of the records or files reveals that Mesa has under or overstated, as applicable, Mesas performance measurements, then Mesa, upon demand, shall pay all sums due based on the accurate calculations, the actual out of pocket costs and expenses of US Airways in completing such review and the applicable penalties payable based on such new calculations.
(ii) If such under or overstatement is willful or intentional, then Mesa, within ten (10) days after receipt of written demand, shall pay to US Airways an amount equal to [***] per occurrence.
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(c) Effective as of the Transition Date, Section 5.6 is amended by replacing the reference to OTP Rate with a reference to CDO Rate and the reference to FCF is replaced with CCF.
(d) Effective as of the Transition Date, and in order to meet the operational performance requirements set forth in this Section 9 to the Tenth Amendment,
(i) US will schedule Mesa to have one spare aircraft for each hub, either a CRJ-200 or a CRJ-900;
(ii) Mesa may use CRJ-200, CRJ-700, or CRJ-900 aircraft not in Mesas US Fleet, but painted in neutral livery or in US Airways livery as additional spares at Mesas sole expense on a limited basis; and
(iii) Subject to adjustment as provided below in this Section 9, the CDO and CCF thresholds used in this Section 9 to the Tenth Amendment for calculating credits, incentives, and default for performance are valid so long as the schedule given to Mesa for US Airways flying is for the PHX and CLT hubs and/or linear flying; and provided , further , that the schedules are reasonably consistent with past practice US Airways scheduling parameters for utilization, RON maintenance time, turn times, and recovery time. In the event that Mesa operates more than 3.8 Equivalent Aircraft (defined below) pursuant to a schedule given to Mesa for US Airways flying other than for the PHX or CLT hubs and/or linear flying or if US Airways gives Mesa scheduling parameters that are not reasonably consistent with past practice for utilization, RON maintenance time, turn times, and recovery time, the parties will meet and negotiate in good faith in order to agree on appropriate adjustments to the applicable schedule or Service Level 1, Service Level 2 and early termination thresholds described in Section 9(e). Equivalent Aircraft shall be determined by dividing the average daily scheduled block hours in and out of US Airways hubs other than CLT or PHX during a given month by the average daily utilization of active Aircraft in the Fleet for that month (total Mesa Aircraft flying for US Airways less spares and maintenance Aircraft).
(e) Effective as of the Transition Date, Section 8.2 is deleted and replaced in its entirety with the following language:
Early Termination : Subject to adjustment as provided in this Section 9, if Mesas (i) system CDO Rate [***], or (ii) CCF Rate, falls below [***] months (each, a Cancellation Event ), US Airways may, at its election, inform Mesa by written notice (a Performance Notice ) that if the Cancellation Event is not cured within one hundred twenty (120) days from receipt of a Performance Notice (the Cure Period ), US Airways may, at its option, give Mesa a Termination Notice (as defined below). If the Cancellation Event relates to Mesas system CDO Rate, the cure shall be affected by Mesa bringing its CDO Rate for a whole calendar month to a rate equal to or [***] during the Cure Period. If the Cancellation Event relates to Mesas system CCF Rate, the cure shall be affected by Mesa bringing its CCF Rate for a whole calendar month to a rate equal to or above [***] during the Cure Period. If, after the Cure Period has expired and Mesa has not cured the Cancellation Event as set forth above, then US Airways at any time during the thirty (30) day period following the lapse of the Cure Period without cure may terminate the Code Share Agreement by written notice ( Termination Notice ), effective ninety
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(90) days after the Termination Notice is provided. Such termination right shall be in addition to any penalty payments set forth in this Section 9 to the Tenth Amendment and termination rights for an Event of Default pursuant to Section 13 of the Code Share Agreement.
(f) At least two (2) months prior to the Transition Date, US Airways shall make available to Mesa, on a daily basis (subject to immaterial delays), unaudited data of its performance using the CDF and CDO metrics. To the extent that Mesa has fallen below the OTP or FCF service levels for any period of time prior to the Transition Date, such default time periods shall apply cumulatively with any defaults accruing following the Transition Date, such that the cumulative months of default (prior and following the Transition Date) shall be used to establish the early termination right set forth in Section 9(e) above.
(g) Mesa acknowledges and agrees that the service credits are a price adjustment reflecting diminution of service and harm suffered by US Airways, the exact extent of which is difficult to ascertain, but that service credits are not liquidated damages. Such service credits (i) shall be US Airways sole and exclusive remedy for a failure by Mesa to meet a Service Level when such failure does not rise to a default level justifying early termination in accordance with Section 9(e) of this Tenth Amendment, but (ii) shall not be US Airways sole or exclusive remedy for a failure by Mesa to meet a Service Level when such failure rises to a default level justifying early termination in accordance with Section 9(e) of this Tenth Amendment.
(h) Effective as of the Transition Date, the parties agree the Code Share Agreement is amended by deleting Section 5.2 in its entirety.
10. Aircraft Cleaning . Consistent with Mesas obligations under the Code Share Agreement, but effective July 1, 2010, to account for services on an ongoing basis, versus the claims related to past payment obligations for aircraft cleaning services addressed in Section 7 above, for the remainder of the term of the Code Share Agreement Mesa shall provide at its expense (either directly or through a third-party vendor approved by US Airways) RON cleaning for all Mesa aircraft operated pursuant to the Code Share Agreement. In cases where US Airways provides the RON cleaning, whether directly or through its vendor, Mesa will reimburse US Airways for the actual costs, without markup, of that cleaning service. Mesa shall have the option to select all vendors in connection with its RON cleaning, subject to US Airways reasonable approval. The aircraft will be cleaned in accordance with US Airways RON cleaning standards and procedures, consistent with Section 2.8.2 of the Code Share Agreement. Any amounts owed by Mesa to US Airways pursuant to this Section 10 as of and after July 1, 2010 shall be paid by Mesa within ten (10) days after the Approval Order Date.
[***]
(i) The Notes shall be issued as a single class (except to the extent US Airways consents, otherwise, such consent to be granted or withheld in US Airways sole discretion) and shall be unsecured obligations of Mesa;
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(ii) The Notes shall provide for the accrual or payment of interest in-kind at an annual all-in rate not [***] but may not provide for the payment of cash interest until maturity or pre-payment permitted by clause (v) below;
(iii) The Notes shall not amortize, and shall not have a maturity date prior to December 31, 2015, absent an event of default;
(iv) The Notes shall be structured in a tax efficient manner for both Mesa and US Airways;
(v) The Notes may not be prepaid, except only that the Notes, together with accrued interest, may be pre-paid on a pro-rata basis from the net cash proceeds actually received by Mesa from the sale of its indirect debt and equity investment in Spirit Airlines, Inc. (the Spirit Proceeds ), and from casualty events and sales of material assets;
(vi) The Notes will contain representations and warranties, covenants and other provisions, including provisions protecting the rights of Noteholders, customary for unsecured debt obligations of this kind (including, without limitation, covenants (affirmative, negative and financial), defaults, and debt baskets among others.). The terms of the Notes will not be modified or amended without the written approval of US Airways, which approval may be given in US Airways sole discretion. Mesa shall not enter into any agreement with any Noteholder (in respect of that Noteholders Notes) unless US Airways is a party to that agreement and consents to its terms (such consent to be granted or withheld in US Airways sole discretion); and
(vii) The Notes shall be guaranteed on a joint and several, full and unconditional basis, by the Post-Effective Date Debtors (as such term is defined under the Mesa Plan).
Notwithstanding the foregoing, Mesa may issue up to an [***] principal amount of Notes (the Bondholder Notes ) to holders of the 2012 Notes on terms identical to the Notes, provided that: (i) the total principal amount of all the Notes shall not exceed the sum [***] and the amount of Notes issued to US Airways and (ii) the principal amount of Notes issued to US Airways shall [***] of the aggregate principal amount of Notes. The Bondholder Notes may continue to be guaranteed by Nilchii (the entity that owns Mesas interest in Spirit Airlines, Inc. described above) or obtain some other structural payment and collection preference related to Nilchii, provided that if any of the Spirit Proceeds are used to pay off any of the Bondholder Notes, Mesa shall use any Spirit Proceeds in excess of the amounts necessary to pay off the Bondholder Notes to pay down the Notes held by US Airways (all such payments shall first repay accrued and unpaid interest and second reduce principal). Once the Notes held by US Airways have been paid in full, Mesa may use any remaining Spirit Proceeds to pay down the Notes held by Mesas general unsecured creditors, and then to pay down the Notes held by management.
11. Capital Stock . The Mesa Plan shall provide for the issuance of a single class of common stock by Mesa Air Group, Inc. as follows: (i) [***] to Mesas unsecured creditors; (ii) [***] basis. Upon the Plan Effective Date, Mesa and US Airways shall enter into an investor rights agreement in the form of Exhibit F (the Investor Rights Agreement ). The terms of such
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agreement shall be reasonably and mutually satisfactory to US Airways and Mesa Air Group, Inc. and shall be negotiated and finalized prior to the Disclosure Statement Approval Date. Once US Airways provides its approval of such agreement, its terms may not be modified or amended prior to or after confirmation of the Mesa Plan without the approval of US Airways, which approval may be given or withheld in US Airways sole discretion.
12. Conditions Precedent . The effectiveness of this Tenth Amendment is subject to the following conditions precedent:
(i) Approval by US Airways, by no later than the Mesa Plan Approval Date, in its sole discretion, of (i) the Mesa Plan and related disclosure statement (the Disclosure Statement ), and (ii) Mesas business plan, capital and ownership structure, board of directors, management structure, cash flow projections, and other information reasonably required by US Airways (collectively, the Reorganization Information ). The Reorganization Information has already or shall be provided to US Airways as soon as possible;
(ii) Approval of this Tenth Amendment and the Investor Rights Agreement by the parties respective Boards of Directors;
(iii) The filing by Mesa of a motion with the Bankruptcy Court for authorization to assume the Code Share Agreement as amended by this Tenth Amendment (the Approval Motion ) and set a hearing for approval on or before the Approval Order Date (or such other date as may be agreed by the parties in writing);
(iv) The filing by Mesas Creditors Committee (the Committee ) of a statement of support for the Mesa Plan, the Tenth Amendment and the Investor Rights Agreement (the Committee Support Statement ) by November 23, 2010 (the Committee Support Date ); and
(v) The Bankruptcy Court shall have entered a final order approving the Approval Motion on or before November 23, 2010 (the Approval Order Date ), and either the time for appeal shall have expired and no appeal has been taken or, if an appeal has been taken, the order has not been stayed (the Approval Order ); provided however, the Approval Order Date shall be extended to December 20, 2010 if (a) the Bankruptcy Court moves the Approval Order Date after November 23, 2010 following notice and a hearing pursuant to a motion or request by the Committee or other third party and (b) such motion or request has been opposed in good faith by Mesa.
13. Conditions to Continued Effectiveness . The continued effectiveness of this Tenth Amendment and US Airways obligation to make the Effective Date Payment is further subject to satisfaction of the following conditions (the Conditions to Continued Effectiveness ):
(i) The Disclosure Statement is approved by the Bankruptcy Court by order entered on or before November 23, 2010 (the Disclosure Statement Approval Date ).
(ii) The Mesa Plan is confirmed by the Bankruptcy Court (by order entered on or before January 17, 2011, the Confirmation Date ), in a form that provides no consideration to Mesas unsecured creditors other than (i) the Notes and common stock (as described in Sections
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11 and 12 hereof), (ii) cash payments to holders of de minimis general unsecured claims as provided in the Plan, and (iii) waiver of certain avoidance actions, and that does not contain any material change to the capital and ownership structure included in the Plan previously approved by US Airways, and is otherwise in a form that is consistent with Mesas obligations under the Agreement and this Tenth Amendment. Such Confirmation Date may be extended by the parties in writing in each partys sole discretion. If the Confirmation Date does not occur on or before January 17, 2011, despite Mesas best efforts to obtain confirmation of the Mesa Plan by such date, the Confirmation Date shall be extended to March 18, 2011.
(iii) The Plan has become effective on or before February 17, 2011 (the Plan Effective Date ). If the Plan Effective Date does not occur on or before February 17, 2011, despite Mesas best efforts to achieve the effective date of the Mesa Plan by such date, the Plan Effective Date shall be extended to April 15, 2011.
(iv) No occurrence, development or change shall have occurred after the Execution Date that, in the commercially reasonable judgment of US Airways had or could be reasonably expected to have a material adverse effect upon the business, operations, performance, properties, business prospects or financial condition of Mesa prior to Plan Effective Date.
(v) US Airways not becoming aware after the Execution Date of any new or inconsistent information or other matter not previously disclosed to US Airways in writing relating to Mesa or its direct or indirect subsidiaries or the transactions contemplated by the Tenth Amendment which US Airways, in its commercially reasonable judgment, deems material and adverse relative to the information or other matters disclosed to US Airways in writing by Mesa prior to the Execution Date, provided such occurs prior to the Plan Effective Date.
(vi) The accuracy in all material respects of all representations and warranties in this Tenth Amendment and the Mesa Plan.
(vii) No default or event of default under the Code Share Agreement or this Tenth Amendment.
The Approval Order shall be expressly conditioned on the satisfaction of the Conditions to Continued Effectiveness. In the event that any one of the Conditions to Continued Effectiveness are not satisfied, this Tenth Amendment shall immediately terminate.
Notwithstanding the foregoing, in the event of any termination of the Tenth Amendment, or in the event that the Tenth Amendment is otherwise rendered ineffective, (i) the provisions regarding (a) the Retroactive Payments or Retroactive Offsets, (b) credits for the Pre-Effective Date Upgrade Payments under Section 8, and (c) any other offset rights under Section 16, shall survive; and (ii) the provisions set forth in Section 15(iii) shall apply as if there had been a Vacatur Declaration (as defined in Section 15(ii) below) by US Airways.
14. Withdrawal or Extension.
(i) If (a) this Tenth Amendment is not executed and delivered by US Airways and Mesa in time for Mesa to file the Approval Motion so that the hearing date to approve this
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Tenth Amendment can occur on regular notice on or before the Approval Order Date, (b) the Committee Support Statement is not filed on before the Committee Support Date or (c) this Tenth Amendment is not approved by the Bankruptcy Court by the Approval Date (the Pre-Approval Date Conditions ), then US Airways shall have the option (in its sole discretion) to terminate this Tenth Amendment (the Withdrawal ). Upon the Withdrawal, US Airways and Mesa shall have all of their respective rights under the existing Code Share Agreement without regard to this Tenth Amendment (including Mesas right to assume the agreements and US Airways right to contest such assumption).
(ii) If (a) the Mesa Plan is not confirmed by the Confirmation Date in a form approved by US Airways as described above or (b) the Mesa Plan has not become effective on or before the Plan Effective Date (collectively, the Mesa Plan Conditions ) or (c) this Tenth Amendment is approved by the Bankruptcy Court and is thereafter modified, vacated, stayed or amended without US Airways consent (such consent to be granted or withheld in US Airways sole discretion) (the Bankruptcy Court Approval Condition ). US Airways shall have the right to declare the Approval Order vacated and of no further effect (a Vacatur Declaration ). Commencing on a date thirty (30) days after the occurrence of the Mesa Plan Conditions, if US Airways has not made a Vacatur Declaration, Mesa shall have the right to make a Vacatur Declaration. Upon a Vacatur Declaration by either US Airways or Mesa, (x) US Airways shall retain all amounts under this Tenth Amendment that would have otherwise been due to Mesa had the Approval Order not been entered and such amounts shall not be subject to disgorgement, set-off, offset, recovery or return, (y) US Airways and Mesa shall have all of their respective rights under the Code Share Agreement, without regard to this Tenth Amendment (including Mesas right to assume the agreements and US Airways right to contest such assumption) and (z) except as set forth in (iii)(a) below, the New Payment Rates shall survive any assumption of the existing agreement and remain in effect without modification.
(iii) Upon a Vacatur Declaration by US Airways:
(a) US Airways will have the option (to be exercised in US Airways sole discretion) to extend (ratably and on a schedule to be provided by US Airways) the redelivery date of the thirty-eight (38) CRJ-900 aircraft over eighteen (18) months beyond June 30, 2012 at the New Payment Rates (the 18 Month Redelivery Period ). In the event US Airways exercises the option set forth in this section (a) and Mesa has not exercised its option under section (b) below, then US Airways will pay Mesa the rates and other amounts due under the Code Share Agreement (without giving effect to the Tenth Amendment) for the period from July 1, 2011, through June 30, 2012.
(b) Mesa shall have the right to extend the Code Sharing Agreement by one year under the Code Sharing Agreement (i.e., the 18 Month Redelivery Period will commence in July 2013 instead of July 2012) but (i) the New Payment Rates will continue without modification through the 18 Month Redelivery Period instead of ending on June 30, 2011, and (ii) all other terms and conditions under this Tenth Amendment shall remain in full force and effect through the 18 Month Redelivery Period. Mesa shall have the right to exercise the foregoing extension only until the date that is thirty (30) days following the date US Airways makes a Vacatur Declaration.
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15. Parties . To the extent that Air Midwest, Inc. or Freedom Airlines, Inc. have any unsatisfied obligations to US Airways under the Code Share Agreement, such obligations shall be deemed obligations of, and assumed by, Mesa as of the Execution Date.
16. Rates . Exhibits C and D to the Code Share Agreement, as amended, are hereby deleted and replaced in its entirety as set forth in Exhibit G to this Tenth Amendment.
17. Offsets . Without limiting any other provisions set forth in this Tenth Amendment, for any payments owed by Mesa to US Airways pursuant to this Tenth Amendment, US Airways shall have the option to apply the amount of any such payments as credits against payments US Airways would otherwise be obligated to make to Mesa under this Tenth Amendment and the Code Share Agreement.
18. Rights and Remedies . No right or remedy herein conferred upon or reserved to a party is exclusive of any other right or remedy, and each and every right and remedy will be cumulative and in addition to any other right or remedy under this Agreement, or under applicable law, whether now or hereafter existing.
19. Effect . Except as set forth in this Tenth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Tenth Amendment.
20. Counterparts . This Tenth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
21. Entire Agreement . This Tenth Amendment, including the Exhibits attached hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
(signature page follows)
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IN WITNESS WHEREOF, the parties have duly executed this Tenth Amendment as of the date above written.
US AIRWAYS, INC. |
By: |
Name: |
Title: |
MESA AIRLINES, INC. |
By: |
Name: |
Title: |
MESA AIR GROUP, INC. (*) |
By: |
Name: |
Title: |
(*) For purposes of Sections 11 and 12 of this Tenth Amendment only.
[Signature Page to Tenth Amendment to Code Sharing Agreement]
EXHIBIT A
Interior Refurbish Requirements
RON UPGRADES |
||
Timing: |
Pacing item - Leather/Cushion Mesa to place order no later than Approval of Codeshare - or when the specification is provided by US Airways, if later 10 weeks following certification approval of seat cushions and leather (estimated certification March 20, 2011) |
Area |
Description |
|
Seats |
Install US spec leather seat covers |
|
Seats |
Replace seat cushions and backs w/ US spec |
|
Seats |
Repaint seat arm plastics rows 1, 15, 16 |
|
Seat belts |
Replace 16G covers, IRAN17 all others |
|
Interior lights |
Replace lights covers |
|
Lavs |
Replace shrouds and lids as required |
|
SPECIAL VISIT OR C CHECK UPGRADES |
||
Timing: |
Pacing Item - Laminate for windscreen Mesa to place order no later than Approval of Codeshare - or when the specification is provided if later Completion based on special visit availability to be provided by US Airways |
Area |
Description |
|
Windows |
Replace as needed |
|
Windows |
Repair/replace aft window shades |
|
Windscreens |
Replace forward laminates with US spec |
|
Interior lights |
Replace lights |
|
Dado carpet |
Replace |
|
Bag bins |
Replace warped door units, paint as needed |
|
C CHECK UPGRADE | ||
Timing: |
Pacing Item - Aft Laminate Mesa to place materials order no later then Approval of Codeshare - or when spec is provided if later Mesa to complete work on each aircraft at the first regularly scheduled C-check following receipt of materials |
Seats |
IRAN seats at heavy checks |
|
Windows |
Replace all as needed |
|
Carpet replace |
Replace including under seats |
|
Windscreens |
Replace aft laminates with US spec |
|
US Airways will be given full audit rights to inspect completed work to ensure conditions meet specifications of a reconditioned interior |
||
IRAN - Inspect and Replace as Needed |
[***]Confidential
EXHIBIT B
Disputed Claims Amounts
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] | |||
[***] |
[***] | [***] | [***] |
[***]Confidential
[***]
[***]
[***]Confidential
Exhibit D
US Airways Codes
A. CDO - Controllable Delays Codes
Maint |
Maintenance Delay Initial Code |
MT |
||
Maint |
Non-Specific MX Delay - MX Other |
MT0 |
||
Maint |
Mechanical Delay |
MT1 |
||
Maint |
Material Serviceability |
MT2 |
||
Maint |
Material Shortage |
MT3 |
||
Maint |
General Servicing |
MT4 |
||
Maint |
Maintenance Routing Delays |
MT5 |
||
Maint |
Precautionary Inspection |
MT6 |
||
Maint |
Material Allocation Delay |
MT7 |
||
Maint |
On-board computer/Component Reset |
MT8 |
||
Maint |
MX/ Engineering Personnel Errors |
MT9 |
||
Crew |
FA Error/ Other |
FA0 |
||
Crew |
FA Rest |
FA1 |
||
Crew |
FA Connection |
FA2 |
||
Crew |
FA Broken Thru Flight |
FA3 |
||
Crew |
Late FA to Aircraft |
FA4 |
||
Crew |
Sick or No Show FA |
FA5 |
||
Crew |
Pilot Error/ Other |
FP0 |
||
Crew |
Pilot Rest |
FP1 |
||
Crew |
Pilot Connection |
FP2 |
||
Crew |
Pilot Broken Thru Flight |
FP3 |
||
Crew |
Late Pilot to Aircraft |
FP4 |
||
Crew |
Sick or No Show Pilot |
FP5 |
||
Crew |
Crew Scheduling Error/ Other |
FC0 |
||
Crew |
Both Crews Rest |
FC1 |
||
Crew |
Both Crews Connection |
FC2 |
||
Crew |
Both Crews Broken Thru Flight |
FC3 |
||
Crew |
Late Both Crews to Aircraft |
FC4 |
||
Operational Controllable |
Late flight release |
OP3 |
||
Operational Controllable |
Dispatch related delays |
OP5 |
B. CDO - Uncontrollable Delays Codes
ACS - Loading & Cargo |
Loading Baggage |
CG1 |
||
ACS - Loading & Cargo |
Removal due to W&B |
CG2 |
||
ACS - Loading & Cargo |
Cargo delay (mail, freight) |
CG3 |
||
ACS - Turn Delays (Gate) |
Hold for connecting bags |
CX1 |
||
ACS - Turn Delays (Gate) |
Hold for connecting pax |
CX2 |
||
ACS - Turn Delays (Gate) |
Unplanned |
CX3 |
||
ACS - Fueling |
Fuel other |
FL0 |
||
ACS - Fueling |
Fuel Boost/ Top Off |
FL1 |
[***]Confidential
ACS - Fueling |
Fuel Servicing/ Chargeable |
FL2 |
||
ACS - Fueling |
Fuel Servicing/ Non Chargeable |
FL3 |
||
ACS - Catering |
Provisioning (controllable) |
FS1 |
||
ACS - Catering |
Provisioning (uncontrollable) |
FS2 |
||
ACS - Catering |
Contract Catering |
FS3 |
||
ACS - Customer Service |
Error/ other (inc Skycap) |
PR0 |
||
ACS - Customer Service |
Oversale/ Overbooking |
PR1 |
||
ACS - Customer Service |
Customer |
PR2 |
||
ACS - Customer Service |
Onboard/ Illness/ Injury |
PR3 |
||
ACS - Aircraft Service |
Other Servicing Delay |
SV0 |
||
ACS - Aircraft Service |
Aircraft Cleaning (Chargeable) |
SV1 |
||
ACS - Aircraft Service |
AC Cleaning (Non-chargeable) |
SV2 |
||
ACS - Aircraft Service |
Water/ Lavatory Service |
SV3 |
||
ACS - Aircraft Service |
Engine starts (air/ electric) |
SV4 |
||
ACS - Aircraft Service |
GSE (Internal) |
SV5 |
||
ACS - Aircraft Service |
GSE (Contract) |
SV6 |
||
Damage |
Aircraft Damage Initial Code |
DA |
||
Damage |
Aircraft Damage Delay - Unspecified Cause |
DA0 |
||
Damage |
Bird Strike/ FOD Damage |
DA1 |
||
Damage |
Weather Related Damage |
DA2 |
||
Damage |
Flight Deck or Cabin Crew Damage |
DA3 |
||
Damage |
Damage - Passenger |
DA4 |
||
Damage |
Uncontrolled Personnel Error Damage |
DA8 |
||
Damage |
Controlled Personnel Error Damage |
DA9 |
||
ATC / WX |
Gate Delay caused by ATC |
AT1 |
||
ATC/WX |
Ramp Field Conditions |
WX1 |
||
ATC / WX |
Snow/ Ice Removal |
WX2 |
||
ATC / WX |
Deicing |
WX3 |
||
Operational |
Late Load Plan from CLP |
OL1 |
||
Operational |
Adjustment passenger on bin loading after issuance of initial load |
OL2 |
||
Operational |
Late delivery of W & B |
OL3 |
||
Operational |
Moving passenger for W & B |
OL4 |
||
Operational |
Other Operational Delays |
OP0 |
||
Operational |
Ramp Traffic/ Pushback |
OP1 |
||
Operational |
Airport Facilities |
OP2 |
||
Miscellaneous |
Other or non-station issue |
MI0 |
||
Miscellaneous |
FAA ramp check |
MI1 |
||
Miscellaneous |
Other Security related delays |
SC0 |
||
Miscellaneous |
Bomb/ Highjack Threat |
SC1 |
||
Miscellaneous |
Security/ On-Board/ PPBM |
SC2 |
||
Miscellaneous |
Pax Related Security/ TSA/ GOV |
SC3 |
||
Miscellaneous |
Bag Related Security/ TSA/ GOV |
SC4 |
||
Miscellaneous |
Security Breach |
SC5 |
||
Miscellaneous |
Other IT related issues |
IT0 |
||
Miscellaneous |
Problems with Shares |
IT1 |
[***]Confidential
Miscellaneous |
Problems with FOS/CLP/Bomemann systems |
IT2 |
||
Miscellaneous |
Kiosks or other check-in IT infrastructure problems |
IT3 |
||
Miscellaneous |
Gate IT infrastructure problems |
IT4 |
||
Miscellaneous |
Airport IT infrastructure failures |
IT 5 |
C. CCF - Controllable Cancellation Codes
Other |
Operational Decision |
XOP |
||
Other |
Balance of XOP |
YOP |
||
Crew |
Flight Attendant caused cancellation |
XCA |
||
Crew |
Captain or FO caused cancellation |
XCC |
||
Crew |
Captain or Crew refused A/C |
XRC |
||
Crew |
Balance of Equipment XC1 |
YCA |
||
Crew |
Balance of Equipment XC2 |
YCC |
||
Crew |
Balance of Equipment XR0 |
YRC |
||
Maint |
Maintenance Cancellation Initial Code |
XMT |
||
Maint |
Non-Specific MX Cancellation |
XM0 |
||
Maint |
Mechanical |
XM1 |
||
Maint |
Material Serviceability |
XM2 |
||
Maint |
Material Shortage |
XM3 |
||
Maint |
Maintenance Servicing |
XM4 |
||
Maint |
Maintenance Routing |
XM5 |
||
Maint |
Precautionary Inspection |
XM6 |
||
Maint |
Material Allocation |
XM7 |
||
Maint |
On-board computer/ Component Reset |
XM8 |
||
Maint |
MX/ Engineering Dept. Personnel Error |
XM9 |
||
Maint |
Balance of XMT code |
YMT |
||
Maint |
Balance of XM0 code |
YM0 |
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Maint |
Balance of XM1 code |
YM1 |
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Maint |
Balance of XM2 code |
YM2 |
||
Maint |
Balance of XM3 code |
YM3 |
||
Maint |
Balance of XM4 code |
YM4 |
||
Maint |
Balance of XM5 code |
YM5 |
||
Maint |
Balance of XM6 code |
YM6 |
||
Maint |
Balance of XM7 code |
YM7 |
||
Maint |
Balance of XM8 code |
YM8 |
||
Maint |
Balance of XM9 code |
YM9 |
||
Damage |
Aircraft Damage Initial Cancellation |
XDA |
||
Damage |
Aircraft Damage - Unspecified Cause |
XD0 |
||
Damage |
Flight Deck or Cabin Crew Damage Cancellation |
XD3 |
||
Damage |
Passenger Damage Cancellation |
XD4 |
||
Damage |
Uncontrollable Personnel Error Damage (excl. MX) |
XD8 |
||
Damage |
Controllable Personnel Error Damage (excl. MX) |
XD9 |
||
Damage |
Balance of XDA code |
YDA |
||
Damage |
Balance of XDO code |
YD0 |
||
Damage |
Balance of XD3 code |
YD3 |
||
Damage |
Balance of XD4 code |
YD4 |
[***]Confidential
Damage |
Balance of XD8 code |
YD8 |
||
Damage |
Balance of XD9 code |
YD9 |
D. CCF - Uncontrollable Cancellation Codes
ATC/WX |
Air Traffic Control |
XAT |
||
ATC/WX |
Balance of Equipment XA |
YAT |
||
ATC/WX |
Weather Cancel |
XWX |
||
ATC/WX |
Balance of Equipment XW |
YWX |
||
Other |
Field Conditions |
XFC |
||
Other |
Balance of Equipment XF |
YFC |
||
Other |
Security Related Cancellation |
XTS |
||
Other |
Balance of Equipment XT0 |
YTS |
||
Maint |
Bird Strike/ FOD Damage |
XD1 |
||
Maint |
Balance of Bird Strike/FOD Damage |
YD1 |
||
Maint |
Weather Related Damage Cancellation |
XD2 |
||
Maint |
Balance of Weather Related Damage Cancellation |
YD2 |
[***]Confidential
Exhibit E
CRJ-900 Aircraft Return Schedule
[To be provided by US Airways]
[***]Confidential
Exhibit F
Form of Investor Rights Agreement
[See separate document]
[***]Confidential
Exhibit G
(Exhibit C & D)
Rates
[***]
[***] |
[***] |
[***] |
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[***] | [***] |
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[***] |
[***] | [***] |
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[***]Confidential
Exhibit 10.11.12
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
ELEVENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS ELEVENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Eleventh Amendment ) is made and entered into as of July 1, 2012 (the Effective Date ), by and between US AIRWAYS, INC., a Delaware corporation ( US Airways ), MESA AIRLINES, INC., a Nevada corporation ( Mesa ).
RECITALS:
A. US Airways and Mesa are parties to that certain Code Share and Revenue Sharing Agreement, dated as. of February 1, 2001, as amended by: (1) the First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001; (2) the Second Amendment to Code Share and Revenue Sharing Agreement, dated as of October 24, 2002; (3) the Third Amendment to Code Share and Revenue Sharing Agreement, dated as of January 29, 2003; (4) the Fourth Amendment to Code Share and Revenue Sharing Agreement and Release, dated as of September 5, 2003; (5) the Fifth Amendment to Code Share and Revenue Agreement, dated as of January 28, 2005; (6) the Sixth Amendment to Code Share and Revenue Sharing Agreement and Settlement Agreement, dated as of July 27, 2005; (7) the Seventh Amendment to Code Share and Revenue Sharing Agreement and Settlement, Assignment and Assumption Agreement, dated as of September 10, 2007; (8) the Eighth Amendment to Code Share Agreement and Settlement Agreement, dated as of May 12, 2008; (9) the Ninth Amendment to Code Share and Revenue Sharing Agreement, dated as of March 30, 2009; and (10) the Tenth Amendment to Code Share and Revenue Sharing Agreement, dated as of November 18, 2010 (the Tenth Amendment ) (collectively, the Code Share Agreement ).
B. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Eleventh Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
C. Mesa and US Airways desire to amend the Code Share Agreement to clarify the jet fuel purchase process. The parties further desire to enter into agreements providing for a one-time waiver of a Quarterly Performance Credit, establishing ACARS specifications for the CRJ-900 Aircraft and waiving a claim for crew relocation costs and to make the other changes as set forth in this Eleventh Amendment.
NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and Mesa agree as follows:
1. AMENDMENTS
1.1 Mesa Fuel Costs . The parties agree that Section 7.1.5 of the Code Share Agreement is hereby deleted and amended to read as follows:
7.1.5 US Airways, at its sole option, may either (1) reimburse Mesa for its actual cost of fuel as an Actual Cost, or (2) provide (or cause third parties to provide) fuel to Mesa for
US Airways Confidential
the Flight Services provided under the Code Share Agreement. To the extent US Airways provides fuel to Mesa, the cost of that fuel shall be paid for by US Airways and shall not be construed as an Actual Cost that Mesa could pass through to US Airways US Airways or its designee and Mesa will coordinate on determining the required volumes of fuel. For purposes of this Agreement the cost of fuel includes the cost of all aircraft fuel and oil, plus fuel flow charges, into-plane fees, third party administrative charges (not including third-party tax advisor fees), and defueling charges, and all applicable taxes on any of the foregoing. In the event that irregular operations or other extraordinary events cause a Flight to divert to an airport where US Airways cannot arrange and pay for the jet fuel within the timeframe reasonably required for Mesa to provide the Flight Services, Mesa may, as US Airways agent, purchase such jet fuel and related supplies at reasonable market prices applicable to such location. Where possible, Mesa will have the supplier of such jet fuel and supplies bill US Airways directly for such items; however, in the rare instance in which such direct billing is not possible, US Airways will reimburse Mesa for the actual costs thereof as an Actual Cost in accordance with the Code Share Agreement. Mesa shall submit appropriate receipts or other documentation of the actual costs of such jet fuel with its invoice for reimbursement. In addition, Mesa agrees to amend that certain Agency Agreement between Mesa and Material Services Company, Inc., dated March 29, 1999, as necessary to account for this Eleventh Amendment.
2. OTHER AGREEMENTS
2.1 ACARS Specifications . Pursuant to Section 8 of the Tenth Amendment, Mesa and US Airways intended to establish mutually agreed to specification for the ACARS equipment installed on the CRJ-900 Aircraft. ACARS equipment was installed on the CRJ-900 Aircraft, but the parties did not formally agree on the specifications for such equipment. Accordingly, the parties hereby agree that the specifications and functionality of the ACARS equipment installed on the CRJ-900 Aircraft are sufficient to meet the requirements of Section 8 of the Tenth Amendment.
2.2 Waiver of Quarterly Performance Credit . Pursuant to the provisions of Section 9 of the Tenth Amendment, based on Mesas operational performance during the third calendar quarter (July-September) of 2011, US Airways is entitled to offset a Quarterly Performance Credit in the amount of $[***] (the Third Quarter Credit ) against any payments due to Mesa. Notwithstanding the foregoing, in consideration of Mesas agreement to the amendment regarding fuel costs set forth above, US Airways agrees to waive the Third Quarter Credit. Accordingly, US Airways will not offset the Third Quarter Credit against payments due to Mesa and will not otherwise seek payment from Mesa of the Third Quarter Credit. Such waiver shall not be deemed to be a waiver by US Airways of any other financial credits, payments or other rights and remedies arising from Mesas operational performance.
2.3 Waiver of Crew Relocation Costs . Pursuant to Section 3.1 of the Code Share Agreement, during 2012 US Airways designated routes and destinations for the Flight Services that have required Mesa to temporarily relocate some of its flight crews from time-to-time. Mesa has claimed that such temporary relocation has caused Mesa to incur costs of up to approximately $[***] and has requested that US Airways reimburse such costs (the Relocation Claim ). Mesa hereby agrees to waive the Relocation Claim. Accordingly, Mesa will not seek
US Airways Confidential
payment of the Relocation Claim and will not otherwise attempt to offset it against payments or credits due to US Airways.
3. MISCELLANEOUS
3.1 Effect . Except as set forth in this Eleventh Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Eleventh Amendment.
3.2 Counterparts . This Eleventh Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
3.3 Entire Agreement . This Eleventh Amendment, including the Exhibits attached hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
IN WITNESS WHEREOF, the parties have duly executed this Eleventh Amendment as of the date first above written.
US AIRWAYS, INC |
|
Name: |
Title: |
MESA AIRLINES, INC. |
By: |
Name: |
Title: |
US Airways Confidential
Exhibit 10.11.13
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
TWELFTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS TWELFTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Twelfth Amendment ) is made and entered into as of February 14, 2013 (the Effective Date ), by and between US AIRWAYS, INC., a Delaware corporation ( US Airways ) and MESA AIRLINES, INC., a Nevada corporation ( Mesa ).
RECITALS :
A. US Airways and Mesa are parties to that certain Code Share and Revenue Sharing Agreement, dated as of February 1, 2001, as amended by: (1) the First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001; (2) the Second Amendment to Code Share and Revenue Sharing Agreement, dated as of October 24, 2002; (3) the Third Amendment to Code Share and Revenue Sharing Agreement, dated as of January 29, 2003; (4) the Fourth Amendment to Code Share and Revenue Sharing Agreement and Release, dated as of September 5, 2003; (5) the Fifth Amendment to Code Share and Revenue Agreement, dated as of January 28, 2005; (6) the Sixth Amendment to Code Share and Revenue Sharing Agreement and Settlement Agreement, dated as of July 27, 2005; (7) the Seventh Amendment to Code Share and Revenue Sharing Agreement and Settlement, Assignment and Assumption Agreement, dated as of September 10, 2007; (8) the Eighth Amendment to Code Share Agreement and Settlement Agreement, dated as of May 12, 2008; (9) the Ninth Amendment to Code Share and Revenue Sharing Agreement, dated as of March 30, 2009; (10) the Tenth Amendment to Code Share and Revenue Sharing Agreement, dated as of November 18, 2010 (the Tenth Amendment); and (11) the Eleventh Amendment to Code Share and Revenue Sharing Agreement, dated as of July 1, 2012 (the Eleventh Amendment) (collectively, the Code Share Agreement ).
B. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Twelfth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
C. Mesa and US Airways desire to amend the Code Share Agreement to provide for the addition of 9 CRJ-900 aircraft to the Agreement and to make the other changes and agreements as set forth in this Twelfth Amendment.
NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and Mesa agree as follows:
1. Additional CRJ-900 New Aircraft . Section 2.2.2. of the Code Share Agreement is amended by adding the following new subsection (g) thereto:
2.2.2 (g) Mesa will procure 9 CRJ-900 aircraft (the New Aircraft) and will operate such New Aircraft pursuant to the terms of the Code Share Agreement, as amended hereby. Exhibit A to this Amendment lists 35 CRJ-900 aircraft (the Listed Aircraft) from which Mesa may procure the New Aircraft, so long as such New Aircraft meet the
minimum specifications set forth on Exhibit A; Mesa agrees that each of the New Aircraft shall be one of the Listed Aircraft.
No later than Friday, February 15, 2013, Mesa shall demonstrate to US Airways reasonable satisfaction that Mesa will be able to execute definitive leases for, or otherwise procure, the New Aircraft and that Mesa can deliver them in accordance with the Induction Schedule set forth in Section 3 of this Amendment (for example by providing copies of executed leases, term sheets, LOIs, or MOUs showing the delivery date and term for the New Aircraft covered by such document(s)). Documents that are conditional or that otherwise evidence a lack of firm commitment on either Mesas or its counterpartys part will not constitute reasonably satisfactory evidence that Mesa can procure and deliver the New Aircraft in accordance with the Induction Schedule; further, any conditions precedent set forth in such lease, term sheet, LOI or MOU, including payment of any required deposits, approval by Mesas or its counterpartys Boards of Directors, and consent lessors, lenders or other third parties, must be met in order for such documents to constitute such reasonably satisfactory evidence. Should Mesa fail to demonstrate to US Airways reasonable satisfaction that Mesa will procure and deliver the New Aircraft as required hereby, US Airways may, at its sole discretion, immediately terminate this Amendment by providing written notification to Mesa. If Mesa provides evidence reasonably satisfactory to US Airways of its ability to procure and deliver the New Aircraft by February 15, 2013, Mesa must subsequently demonstrate the firm and unconditional procurement of the New Aircraft by February 28, 2013 (for example by providing copies of executed definitive leases or purchase agreements covering the New Aircraft). If Mesa fails to demonstrate by February 28, 2013, US Airways may immediately terminate this Amendment by providing written notification to Mesa and Mesa will pay to US Airways a break-up fee of $[***]. US Airways may at its sole discretion grant Mesa additional days to demonstrate that it has procured the New Aircraft, but doing so will not affect US Airways ability to terminate this Amendment or Mesas obligation to pay US Airways the break-up fee upon such termination.
2. Configuration, Branding & Livery of New Aircraft . The New Aircraft will be painted in US Airways Express livery and delivered in a single-class configuration as specified in the Induction Schedule set forth in Section 3 of this Amendment. US Airways and Mesa will collaborate in the management of the repainting, and redecorating process to ensure that the New Aircraft conform to US Airways Express interior and exterior specifications and branding requirements, including leather seating surfaces throughout. After the New Aircraft are delivered, Mesa will reconfigure the New Aircraft to a dual-class configuration that meets US Airways ExpressFirst requirements, and is substantially consistent with the 38 Aircraft currently in operation under the Code Share Agreement, with such reasonable allowances approved by US Airways in order to accommodate differences in aircraft monuments, etc. Such reconfiguration shall occur in accordance with a reconfiguration schedule established by US Airways, and the parties will cooperate in the management of the reconfiguration project in order to expedite the reconfiguration while minimizing the operational impact. US Airways will reimburse Mesa the actual and reasonable costs incurred to paint, redecorate and reconfigure the New Aircraft, such costs not to exceed $[***] for each New Aircraft (provided the dual class mod kit costs do not exceed $[***] per New Aircraft to the extent kit cost is more or less than $[***] then the $[***] would be adjusted accordingly. A list of the components and anticipated costs of the dual
class mod kits is set forth as Exhibit B .). Except as provided herein, all costs required to place the New Aircraft into service under the Code Share Agreement shall be Mesas sole responsibility.
3. Induction Schedule for New Aircraft.
3.1 The New Aircraft shall be delivered, painted, redecorated, have adequate pilot and crew staffing and otherwise be ready to operate in the US Airways network in accordance with the Induction Schedule set forth below.
In the event that a New Aircraft will not be ready to operate in the US Airways network on the date required by the Induction Schedule, Mesa shall immediately notify US Airways by telephone and in writing by confirmed email (Late Delivery Notice). New Aircraft that are not ready to operate in the US Airways network on the date required by the Induction Schedule shall be subject to the following late-delivery charges, that will accrue until such New Aircraft are inducted: $[***] per New Aircraft per aircraft day, if the Late Delivery Notice is given to US Airways more than 14 days prior to the applicable Induction Date; and $[***] per New Aircraft per aircraft day if the Late Delivery Notice is given 14 days or less prior to the applicable Induction Date. After 365 cumulative aircraft days of delay, US Airways may, at its option, elect to terminate this Amendment. Such late-delivery charges shall constitute liquidated damages and not a penalty, and each party agrees that such liquidated damages are a reasonable approximation of the actual damages but that the amount of actual damages that would result from late-delivery of the New Aircraft is difficult or impossible to calculate. Notwithstanding the foregoing, no late-delivery charges shall apply to the first 2 New Aircraft until such New Aircraft are more than 5 days late.
3.2 Notwithstanding the foregoing, performance by Mesa under this provision shall not be deemed to be in default and shall not give rise to the payment of the aforementioned late-delivery charge or any other penalties, costs, fees or expenses of any kind where delays or defaults are directly due to war, insurrection, strikes, walk-outs, riots, floods, earthquakes, fires, casualties, acts of God, governmental restrictions imposed or mandated by governmental entities after the date of this Amendment, enactment of conflicting state or federal laws or regulations, new or supplementary environmental regulations or litigation, materially adverse national or global economic conditions, or any other matter beyond the reasonable control of Mesa; provided that failure to procure the New Aircraft or the materials and/or services necessary to repaint or redecorate the New Aircraft shall not be deemed to be matters beyond Mesas reasonable control unless such failure is due to one of the specific events set forth above.
INDUCTION SCHEDULE
Induction Date
|
Expiration Date
|
Configuration at Induction
|
||
#1 April 1, 2013 | April 1, 2021 | Single Class | ||
#2 April 1, 2013 | April 1, 2021 | Single Class | ||
#3 May 1, 2013 | May 1, 2021 | Single Class | ||
#4 May 1, 2013 | May 1, 2021 | Single Class | ||
#5 June 1, 2013 | June 1, 2021 | Single Class | ||
#6 June 1, 2013 | June 1, 2021 | Single Class | ||
#7 June 1, 2013 | June 1, 2021 | Single Class | ||
#8 July 1, 2013 | July 1, 2021 | Single Class | ||
#9 July 1, 2013 | July 1, 2021 | Single Class |
4. Term . Section 8.1 of the Agreement (as previously amended) is further amended to provide that the Term of the Code Share Agreement, as it relates to the New Aircraft, shall be extended for 8 years from the scheduled induction date of each such New Aircraft such that the Code Share Agreement shall expire as to each New Aircraft on the Expiration Date set forth on the table in Section 3 of this Amendment, unless terminated earlier as provided herein.
5. Rates . In consideration of the services provided by Mesa under the Code Share Agreement in respect of the New Aircraft, US Airways shall compensate Mesa in accordance with the rate tables set forth in Exhibit G of the Tenth Amendment with the exception that ownership for the New Aircraft will be $[***] per month per New Aircraft.
6. Additional Outstation Maintenance Base Costs . Section 7.1.9 of the Code Share Agreement (as added by the Sixth Amendment) shall be amended to provide that costs associated with any Outstation Base added after the date of this Amendment will be a pass-through expense capped at $[***] per month.
7. Non-Hub or Linear Flying . Section 9(d)(iii) of the Tenth Amendment shall be amended to change the words 3.8 Equivalent Aircraft to Equivalent Aircraft equal to 10% of the total number of Aircraft operated by Mesa under the Code Share Agreement.
8. RON Maintenance Base Requirements . Section 2.6.3 of the Code Share Agreement (as amended by Section 3 of the Sixth Amendment) is amended in its entirety as follows:
Mesa shall maintain maintenance bases in Phoenix and Charlotte (the Maintenance Bases). In addition, Mesa will provide maintenance directly or with contract vendors at certain outstations (the Outstation Bases). Each schedule provided by US Airways shall provide for not less than [***]% of the Fleet to remain overnight at the applicable Maintenance Bases and not less than [***]% of the Fleet in the combination of Maintenance Bases and Outstation Bases. For purposes of calculating the percentage of the fleet that remains overnight at a Maintenance Base
or Outstation Base, spare Aircraft shall be treated as if they are scheduled to remain overnight in a Maintenance Base. One Aircraft shall be scheduled to remain overnight for at least 10 hours and the remainder scheduled to remain overnight for at least 8 hours. If approved by US Airways, Mesa may add Maintenance Bases and/or Outstation Bases as necessary to provide the Flight Services and Other Services at locations which meet US Airways maintenance base requirements and are approved by US Airways. US Airways, by providing Mesa with at least 180 days prior written notice, may require Mesa to close any Maintenance Base or Outstation Base. Upon Mesa assigning to US Airways all of its rights, title, and interest in the lease of the Maintenance Base that is closed (together with any required landlord consent) US Airways shall reimburse Mesa for all actual out-of-pocket costs and expenses incurred by Mesa in closing such Maintenance Bases.
Mesa shall not relocate any Maintenance Base or Outstation Base without prior written consent of US Airways, which consent may be withheld if the new location fails to meet US Airways schedule requirements. Each Maintenance Base shall be staffed and equipped to maintain a fleet of up to 35 aircraft.
9. Pilot Training and Availability . Mesa shall ensure that it has an adequate number of pilots properly trained and meet all FAA requirements to operate the New Aircraft on or before August 1, 2013 to normally operate all 47 Aircraft covered under the Code Share Agreement. The rates set forth in Exhibit G contemplate compliance with all applicable crew rest and minimum flight hour requirements.
10. Fuel Management . Mesa will continue to fully participate in US Airways fuel management programs and will work to actively manage fuel consumption and minimize overall fuel expense.
11. Change of Control Waiver and Consent to Assignment . In conjunction with this Amendment, and provided Doug Parker is named the initial Chief Executive Officer of the successor entity resulting from a strategic transaction involving US Airways and American Airlines, Mesa agrees to waive the application of Section 8.3 of the Code Share Agreement. Accordingly, subject to the condition concerning Mr. Parker in the immediately preceding sentence, Mesa agrees that it will not attempt to terminate the Code Share Agreement if US Airways engages in a strategic transaction that results in a Change of Control as defined in Section 8.3. Further, Mesa hereby consents to the assignment of the Code Share Agreement to a successor entity resulting from any such strategic transaction. The parties hereby acknowledge and agree that such assignment shall not affect any other terms of the Code Share Agreement or impose any additional obligations on either party.
12. Miscellaneous .
12.1 Except as set forth in this Twelfth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Twelfth Amendment.
12.2 This Twelfth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
12.3 This Twelfth Amendment, including the Exhibits attached hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
IN WITNESS WHEREOF, the parties have duly executed this Twelfth Amendment as of the date first above written.
US AIRWAYS, INC. |
By: |
|
Name: |
|
Title: |
|
MESA AIRLINES, INC. |
By: |
|
Name: |
|
Title: |
|
EXHIBIT A
(List of CRJ-900s and Minimum Specifications)
Registration Number |
Engine Type |
Next Gen Aircraft (Y/N) |
Manufacture Date |
Configuration (Single or Dual) | ||||
15057 |
CF34-8C5 |
Dec-05 |
Single |
|||||
15071 |
CF34-8C5 |
Jul-06 |
Single |
|||||
15074 |
CF34-8C5 |
Jul-06 |
Single |
|||||
15079 |
CF34-8C5 |
Jul-06 |
Single |
|||||
15087 |
CF34-8C5 |
Oct-06 |
Single |
|||||
15090 |
CF34-8C5 |
Oct-06 |
Single |
|||||
15106 |
CF34-8C5 |
Dec-06 |
Single |
|||||
15111 |
CF34-8C5 |
Jan-07 |
Single |
|||||
15113 |
CF34-8C5 |
Jan-07 |
Single |
|||||
15115 |
CF34-8C5 |
Jan-07 |
Single |
|||||
15117 |
CF34-8C5 |
Feb-07 |
Single |
|||||
15066 |
CF34-8C5 |
May-06 |
Single |
|||||
15068 |
CF34-8C5 |
May-06 |
Single |
|||||
15075 |
CF34-8C5 |
Jun-06 |
Single |
|||||
15076 |
CF34-8C5 |
Jun-06 |
Single |
|||||
15077 |
CF34-8C5 |
Jul-06 |
Single |
|||||
15104 |
CF34-8C5 |
Nov-06 |
Single |
|||||
15116 |
CF34-8C5 |
Nov-26 |
Single |
|||||
15118 |
CF34-8C5 |
Apr-07 |
Single |
|||||
15119 |
CF34-8C5 |
Apr-07 |
Single |
|||||
15123 |
CF34-8C5 |
Apr-07 |
Single |
|||||
15261 |
CF34-8C5 Al |
Yes |
Jan-11 |
Single |
||||
15262 |
CF34-8C5 Al |
Yes |
Jan-11 |
Single |
||||
15276 |
CF34-8C5 Al |
Yes |
Dec-11 |
Single |
||||
15233 |
CF34-8C5 |
t/b/d |
Sep-10 |
Single |
||||
15234 |
CF34-8C5 |
t/b/d |
Sep-10 |
Single |
||||
15239 |
CF34-8C5 |
t/b/d |
Sep-10 |
Single |
||||
15273 |
CF34-8C5 |
t/b/d |
Sep-11 |
Single |
||||
15274 |
CF34-8C5 |
t/b/d |
Oct-11 |
Single |
||||
15275 |
CF34-8C5 |
t/b/d |
Oct-11 |
Single |
||||
15063 |
CF34-8C5 |
Apr-06 |
Single |
|||||
15064 |
CF34-8C5 |
Apr-06 |
Single |
|||||
15065 |
CF34-8C5 |
Apr-06 |
Single |
|||||
15124 |
CF34-8C5 |
Jul-07 |
Dual (9/67) |
|||||
15126 |
CF34-8C5 |
Jul-07 |
Dual (9/67) |
Minimum Specifications:
All New Aircraft must meet the following minimum specifications and be otherwise appropriate for providing Flight Services pursuant to the Code Share Agreement.
● |
Configured or capable of being reconfigured to dual-class configuration in accordance with US Airways Express First specifications consistent with the 38 Code Share Aircraft currently being operated by Mesa, including up to 9 F-Class seats (with 38 pitch) and up to 70 Y-Class seats (with 31 pitch). |
● |
If inducted as single-class configuration, must have 88 Y-Class seats (with 31 pitch). |
● |
Two lavatories, fore and aft, appropriate for dual-class configuration. |
● |
Equipped with Bombardier Enhanced Performance Package (EPP) |
● |
Capable to meeting all CAT II requirements |
● |
will support all US Airways Express ACARS Program Requirements, including: |
o |
OOOI Times for System Management: Sends OUT, OFF, ON and IN times to the US Airways flight control system (TUL: FOS/DECS). |
o |
OOO1 Times for Carrier Operation: Sends 000I times to the operating carriers flight control system (Sabre FliteTrac), or FOS/DECS can forward times via PR-Alert. |
o |
FOB Monitor: Sends the amount of fuel on board with the OUT and IN message to the US Airways data repository (TUL: FOS/DECS, OASSISU). |
o |
FOB Management: Sends the amount of fuel on board with the OUT and IN message to the operating carriers flight control system (Sabre FliteTrac). |
o |
Pre-Departure Clearance: Supports issuing and confirming pre-departure clearance via ACARS messaging. |
o |
Weight & Balance: Supports issuing and confirming weight and balance via ACARS messaging. |
o |
Takeoff and Landing Performance: Supports uplink and downlink messaging for Takeoff Performance and Landing Performance transactions. |
o |
Dynamic Cost Indexing: Supports pre-departure and airborne messaging of flight plan adjustments for trade-offs between accelerated fuel burn and delay cost. |
o |
Required/Requested Time of Arrival (RTA): Supports airborne messaging of flight plan adjustments for RTA messages (e.g. Attila Exchange Managed Arrival System). |
o |
In-Range Call with Gate Status Reply: Supports sending an In-Range message in a format that will trigger a Gate Status uplink reply from FOS/DECS. |
o |
Free Text for Station Ops (In-Range): Supports sending free text messages such as in-range special requests, to the operations staff at the destination airport. |
o |
Free Text for Dispatch: Supports sending free text messages from pilots to the operating carriers dispatch center and from the dispatch center to the pilots. |
o |
Free Text for Maintenance: Supports sending free text messages to the Maintenance staff at the next maintenance station and to Maintenance Control. |
o |
Engine Condition Monitor: Sends engine monitoring messages to the operating carriers engineering department or to the operating carriers engine vendor or to both. |
o |
Data Repository: Archives all ACARS messages for analysis and ad hoc reporting |
o |
OOOI Times for Reporting: The ACARS system shall send 000I times to the US Airways data repositories (TUL: FOS/DECS, OASSISU and PHX: FOE DB). |
o |
Single Engine Taxi/APU Usage Monitor: The ACARS system shall send start/stop data for engines and APU to the US Airways data repositories (OASSISU and FOE DB). |
o |
Ground Power Availability: Where supported, the ACARS system shall send ground power connect/disconnect data to the US Airways data repositories (OASSISU and FOE DB). |
EXHIBIT B
US Airways/Mesa CRJ900 PO Matrix
PO
Line |
Kit Part Number | Reference | Description |
Qty
per ship set |
UOM | Program Price |
Extended
Price |
|||||||
1 | E832001-101 | Overhead Bin Installation | 1 | Ea | [***] | [***] | ||||||||
3 | E832005-101 | Interior Electrical Mod Kit | 1 | Ea | [***] | [***] | ||||||||
5 | E833001-101 | Class Divider Installation | 1 | Ea | [***] | [***] | ||||||||
6 | E834001-101 | Ceiling Panel Installation | 1 | Ea | [***] | [***] | ||||||||
8 | E835001-101 | PSU panel Installation | 1 | Ea | [***] | [***] | ||||||||
9 |
E177004-1
|
E837001-101; Floor Carpet Instl | Filler Strip | 2 | Ea | [***] | [***] | |||||||
10 |
E177004-11
|
E837001-101; Floor Carpet Instl | Filler Strip | 1 | Ea | [***] | [***] | |||||||
11 |
E177004-15
|
E837001-101; Floor Carpet Instl | Filler Strip | 1 | Ea | [***] | [***] | |||||||
12 |
E177004-17
|
E837001-101; Floor Carpet Instl | Filler Strip | 1 | Ea | [***] | [***] | |||||||
13 | E831501-101 | Placard Installation | 1 | Ea | [***] | [***] | ||||||||
14 | E838001-101 | FWD Lavatory Modification | 1 | Ea | [***] | [***] | ||||||||
15 | E839001-101 | FWD Underbin W/D Modification | 1 | Ea | [***] | [***] | ||||||||
16 | E831200-101 | Floor Panel Installation | 1 | Ea | [***] | [***] | ||||||||
17 | 41653001-111-AD | Seat Assy, Single Business Class | 3 | Ea | [***] | [***] | ||||||||
18 | 41652001-111-AD | Seat Assy, Double Business Class | 3 | Ea | [***] | [***] | ||||||||
Total
|
[***] |
Exhibit 10.11.14
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
Execution Copy
THIRTEENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS THIRTEENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Thirteenth Amendment ) is made and entered into as of December 24, 2013 (the Effective Date ), by and between US AIRWAYS, INC., a Delaware corporation ( US Airways ) and MESA AIRLINES, INC., a Nevada corporation ( Mesa ).
RECITALS :
A. US Airways and Mesa are parties to that certain Code Share and Revenue Sharing Agreement, dated as of February 1, 2001, as amended by: (1) the First Amendment to Code Share and Revenue Sharing Agreement, dated to be effective April 27, 2001; (2) the Second Amendment to Code Share and Revenue Sharing Agreement, dated as of October 24, 2002; (3) the Third Amendment to Code Share and Revenue Sharing Agreement, dated as of January 29, 2003; (4) the Fourth Amendment to Code Share and Revenue Sharing Agreement and Release, dated as of September 5, 2003; (5) the Fifth Amendment to Code Share and Revenue Agreement, dated as of January 28, 2005; (6) the Sixth Amendment to Code Share and Revenue Sharing Agreement and Settlement Agreement, dated as of July 27, 2005; (7) the Seventh Amendment to Code Share and Revenue Sharing Agreement and Settlement, Assignment and Assumption Agreement, dated as of September 10, 2007; (8) the Eighth Amendment to Code Share Agreement and Settlement Agreement, dated as of May 12, 2008; (9) the Ninth Amendment to Code Share and Revenue Sharing Agreement, dated as of March 30, 2009; (10) the Tenth Amendment to Code Share and Revenue Sharing Agreement, dated as of November 18, 2010 (the Tenth Amendment); (11) the Eleventh Amendment to Code Share and Revenue Sharing Agreement, dated as of July 1, 2012 (the Eleventh Amendment); and (12) the Twelfth Amendment to the Code Share and Revenue Sharing Agreement, dated as of February 14, 2013 (collectively, the Code Share Agreement ).
B. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Thirteenth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
C. Mesa and US Airways desire to amend the Code Share Agreement to (1) extend the term on the original 38 Aircraft currently operated under the Code Share Agreement; (2) add 4 CRJ-900 aircraft to the Code Share Agreement; and (3) to make the other changes and agreements as set forth in this Thirteenth Amendment.
NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and Mesa agree as follows:
1. Extension of Original 38 CRJ-900 Aircraft . The Term of the Code Share Agreement as it relates to the original 38 CRJ-900 Aircraft currently operated thereunder (the Original Aircraft) shall be extended by an average of approximately 6 years, with the Original Aircraft being returned in accordance with Section 5 below. Except as modified by this Thirteenth
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Amendment, all terms and conditions currently applicable to the Original Aircraft shall remain in effect during the extended term.
2. Addition of CRJ-900 Aircraft.
2.1 New Aircraft . Mesa will procure 4 CRJ-900 aircraft (the New Aircraft) and will operate such New Aircraft pursuant to the terms of the Code Share Agreement, as amended hereby. Exhibit A to this Thirteenth Amendment lists the 4 New Aircraft that are the subject of this Thirteenth Amendment.
2.2 Term of New Aircraft . The Term of the Code Share Agreement, as it relates to the New Aircraft, shall be 8 years from the scheduled induction date of each such New Aircraft such that the Code Share Agreement shall expire as to each New Aircraft on the Expiration Date set forth on the table in Section 4 of this Amendment, unless terminated earlier as provided herein.
2.3 Aircraft Procurement . No later than February 15, 2014, Mesa shall demonstrate to US Airways reasonable satisfaction that Mesa will be able to execute definitive leases for, or otherwise procure, the New Aircraft (for example by providing copies of executed leases, term sheets, LOIs, or MOUs showing the induction date and term for the New Aircraft covered by such documents). Should Mesa fail to demonstrate to US Airways reasonable satisfaction that Mesa will procure and deliver the New Aircraft as required hereby, US Airways may, at its sole discretion, cancel the addition of the New Aircraft to the Code Share Agreement without any further liability or obligation whatsoever.
3. Configuration, Branding & Livery of New Aircraft . The New Aircraft will be painted in US Airways Express or American Eagle livery at US Airways option and with reasonable advanced notice to allow Mesa to implement the chosen livery. The New Aircraft will be delivered in a single-class configuration on the dates specified in the Induction Schedule set forth in Section 4 of this Amendment. After the New Aircraft are delivered, Mesa will reconfigure the New Aircraft to a dual-class configuration that meets the US Airways Express or American Eagles requirements. Such reconfiguration shall occur in accordance with a reconfiguration schedule established by US Airways (the Reconfiguration Schedule), which shall be accomplished as soon as the seats are available, but in no event later than November 15, 2014. In the event that the New Aircraft are not reconfigured as required by this section, the charges applicable to late delivery of the New Aircraft set forth in section 4 below shall apply. Mesa will, in consultation with US Airways, manage the reconfiguration project in order to expedite the reconfiguration while minimizing the operational impact. The dual-class configuration will be consistent with the specifications for the reconfiguration of the Aircraft added by the Twelfth Amendment. US Airways and Mesa will collaborate in the management of the repainting, and redecorating process to ensure that the New Aircraft conform to US Airways Express or American Eagles interior and exterior specifications and branding requirements, including leather seating surfaces throughout. US Airways will reimburse Mesa the actual and reasonable costs incurred to paint, redecorate and reconfigure the New Aircraft, including first class kits, parts, installation labor, ferry costs, project management, and all other costs reasonably related with the reconfiguration the New Aircraft to a configuration materially similar to existing aircraft; provided that such costs shall not exceed $[***] per New Aircraft. In addition, US Airways will reimburse Mesa up to $[***] for certain one-time costs related to the
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reconfiguration, including the cost of non-recurring engineering, prototypes, supplemental type certificates and manuals.
4. Induction and Reconfiguration Schedule for New Aircraft.
4.1 Induction and Reconfiguration Schedule . The New Aircraft shall be delivered, painted, redecorated, have adequate pilot and crew staffing and otherwise be ready to operate in the US Airways network in accordance with the Induction Schedule set forth below. Additionally, the New Aircraft will be reconfigured in accordance with the Reconfiguration Schedule established pursuant to Section 3 of this Amendment. In the event that a New Aircraft will not be ready to operate in the US Airways network on the date required by the Induction Schedule or Reconfiguration Schedule, respectively, Mesa shall immediately notify US Airways by telephone and in writing by confirmed email (Late Delivery Notice). New Aircraft that are not ready to operate in the US Airways network on the date required by the Induction Schedule or Reconfiguration Schedule shall be subject to the following late-delivery charges, that will accrue until such New Aircraft are inducted: $[***] per New Aircraft per aircraft day, if the Late Delivery Notice is given to US Airways more than 45 days prior to the applicable Induction Date or reconfiguration date, $[***] per New Aircraft per aircraft day if the Late Delivery Notice is given between 45 days and 14 days prior to the applicable Induction Date or reconfiguration date, and $[***] per aircraft day if the Late Delivery Notice is given less than 14 days prior to the applicable Induction Date or reconfiguration date. With respect to the Induction Schedule, after 365 cumulative aircraft days of delay, US Airways may, at its option, elect to cancel the induction of the New Aircraft subject to the delay. Such late-delivery charges shall constitute liquidated damages and not a penalty, and each party agrees that such liquidated damages are a reasonable approximation of the actual damages but that the amount of actual damages that would result from late delivery or late reconfiguration of the New Aircraft is difficult or impossible to calculate.
4.2 Force Majeure . Notwithstanding the foregoing, performance by Mesa under this provision shall not be deemed to be in default and shall not give rise to the payment of the aforementioned late-delivery charge or any other penalties, costs, fees or expenses of any kind where delays or defaults are directly due to war, insurrection, strikes, walk-outs, riots, floods, earthquakes, fires, casualties, acts of God, governmental restrictions imposed or mandated by governmental entities after the date of this Amendment, enactment of conflicting state or federal laws or regulations, new or supplementary environmental regulations or litigation, materially adverse national or global economic conditions, or any other matter beyond the reasonable control of Mesa; provided that failure to procure the New Aircraft or the materials and/or services necessary to repaint, redecorate or reconfigure the New Aircraft shall not be deemed to be matters beyond Mesas reasonable control unless such failure is due to one of the specific events set forth above.
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NEW AIRCRAFT INDUCTION SCHEDULE
Induction Date
|
Expiration Date
|
Configuration at Induction
|
||
6/1/14
|
6/1/22 | single-class | ||
6/1/14
|
6/1/22 | single-class | ||
7/1/14
|
7/1/22 | single-class | ||
7/1/14
|
7/1/22 | single-class |
5. Aircraft Return Schedule . The New Aircraft and the Aircraft added by the Twelfth Amendment shall be returned on the dates set forth on their respective Induction Schedules (unless terminated early or extended in accordance with the applicable terms). All Original Aircraft operated under the Code Share Agreement will be returned ratably over an 18 month period beginning January 1, 2021 and concluding July 1, 2022 with a midpoint of September 30, 2021. This schedule may be modified to reflect the extension of aircraft contingent on the exercise of US Airways extension rights. For avoidance of doubt, the Twelfth Amendment aircraft, and the incremental 4 aircraft as contemplated in this amendment will have terms of 8 years from their induction date. The Original Aircraft shall be ratably returned within that schedule beginning January 1, 2021 and the average extension term of the Original Aircraft will be 6 years from the September 30, 2015 expiration date in Amendment 10.
6. Extension Rights . US Airways will have three successive one year extension rights covering all Aircraft operated under the Code Share Agreement (the Extended Aircraft). In addition, US Airways will have the right to extend individual Aircraft for up to 6 months to foster a more manageable return schedule. Ownership rates on leased Extended Aircraft will be passed through to US Airways at actual and documented lease cost. Ownership rates on Mesa-owned Extended Aircraft will be set at the average rate of the leased aircraft. Pursuant to this 13th Amendment and as mutually agreed by the parties, or under such other terms as may be mutually agreed by the parties, US Airways, or its successors may add any type of additional aircraft without restriction.
7. Rates.
7.1 Rates . The rates applicable to the Original Aircraft, the Twelfth Amendment Aircraft, and to the New Aircraft upon their entry into service under the Code Share Agreement are set forth in Exhibit B to this Amendment.
7.2 Escalation . For rate escalation adjustments beginning in February 2014, the escalation rate will be based on the index specified in the Code Share Agreement, but capped at [***]%.
7.3 Margin . The revenue share component covered in Segment Revenue Payments in Amendment 10 shall be replaced by a fixed margin payment of $[***] per aircraft month (as set forth in Exhibit B ), fixed for the duration of the JSA and only applicable for CRJ-900s in service at US Airways. If additional aircraft types are added, US Airways and Mesa will mutually agree to new terms, each acting reasonably.
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8. Monthly Reconciliation . Section 7.5.2 of the Code Share Agreement shall be replaced by the following: Not later than 90 days following the last day of each month, Mesa shall provide a reconciliation of Estimated Costs for Guaranteed Non-Maintenance Costs, Actual Costs, Guaranteed Maintenance costs against the actual Guaranteed Non-Maintenance Costs, Actual Costs, Guaranteed Maintenance costs owed for such month by applying the rates set forth in Exhibit A as applicable. Mesa will provide US Airways with an invoice reflecting any additional payments or credits resulting from such reconciliation.
If the Estimated Costs paid by US Airways exceed the Incurred Costs, then Mesa shall reimburse US Airways the amount that the Estimated Costs exceeded in the Incurred Costs. Payment by Mesa is due at the time the reconciliation is provided. If the Incurred Costs exceed the Estimated Costs, then US Airways will reimburse Mesa at the time the reconciliation is provided.
For avoidance of doubt, all invoices that include charges for pass-through expenses shall be accompanied by appropriate receipts or other supporting documentation evidencing the pass-through expenses charged.
9. Spare Aircraft . US Airways will schedule Mesas aircraft to provide a minimum of one Spare Aircraft per 30 active Aircraft operated under the Code Share Agreement, but in no event less than 1 Spare Aircraft per hub. For purposes of this Section 5, a hub shall mean an airport where Mesa operates a monthly average of 35 flights per day under the Code Share Agreement.
10. Crew Rest Regulation Costs . US Airways and Mesa will jointly calculate the cost impact of the new Part 117 Flight Crewmember Duty Rest Requirements to be implemented beginning in December 2013. The cost impact will be calculated as a cost per block hour based the difference between the number of pilots needed prior to the new rule baseline compared to the number of pilots needed for the same schedule after the rule. US Airways will pay [***] of such cost per block hour, subject to a cap of $[***] per block hour. The cost impact will be calculated quarterly for the first year after the new rules are implemented and both Mesa and US Airways will work closely to minimize the cost impact of the new rules. After the first year, the cost impact will be set for the remaining term of the Code Share Agreement.
11. Performance Credit Adjustment . In recognition of the extension of the Agreement and the addition of the New Aircraft, US Airways will provide Mesa with a one-time [***] reduction on the Quarterly Performance Credit incurred by Mesa for the Apr-June 2013 quarter. The reduction will be applied on a pro-rata basis upon the induction of each New Aircraft. In addition, US Airways will provide Mesa a full flight-by-flight reconciliation of the Quarterly Performance Credit calculation to the operational performance statistics prior to applying the April June 2013 Quarterly Performance Credit.
12. Hub Protection . Except with regard to operations conducted on behalf of United Airlines, Mesa shall not operate a hub and spoke operation for another carrier in any current US Airways and American hub, specifically [***]. Notwithstanding the foregoing, however, Mesa may provide flight services to the US Airways and American hubs under codeshare or marketing relationships with other carriers as a spoke service (5 flights or less per day in a given airport).
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13. CAT II Compliance . Mesa shall become CAT II compliant the earlier of 12 months from the date of this Thirteenth Amendment or December 31, 2014. Failure to comply will result in a non-compliance of a $[***] per month payable by Mesa to US Airways until Mesa is CAT II compliant.
14. Customer Programs . Mesa will participate in any current or future US Airways programs to monitor the product quality and/or customer satisfaction with programs such as but not limited to minimum equipment list (MEL) and non-essential furnishings (NEF) monitoring and customer satisfaction.
15. Engine Maintenance Program . Mesa agrees to enter into a maintenance program for its CRJ family engines covered under the Code Share Agreement which satisfies US Airways as reasonable for the aircraft in US Airways sole discretion.
16. ACARS . In order improve the statistical reliability of the data collected by the ACARS systems currently in place on the Aircraft, Mesa agrees to remove 7 of the ACARS systems currently in the Aircraft added by the Twelfth Amendment and to install 5 such ACARS systems in 5 of the Original Aircraft and to install 2 such ACARS systems in the New Aircraft. All Aircraft operating under the Code Share Agreement shall be equipped with ACARS systems with the minimum functionality of the ACARS systems in the Original Aircraft.
17. RON Maintenance Base Requirements . The Fleet percentages set forth in Section 8 of the Twelfth Amendment shall be changed as follows: The percentage of the Fleet to remain overnight at the applicable Maintenance Bases shall be changed from [***]% to [***]% and the percentage of the Fleet to remain overnight in the combination of Maintenance Bases and Outstation Bases shall be changed from [***]% to [***]%.
18. Mexico Office . As soon as reasonably practicable, US Airways will assume responsibility for administrative duties associated with airport contracts, records and statistics for required reporting and administrative activities in Mexico currently handled by Mesas Mexico office. To the extent Mesa incurs attorneys fees or other administrative expenses for legal filings and registrations, Mesa shall pass through the invoices for such expenses and US Airways will reimburse Mesa. For the period from June 2011 through September 20132 US Airways will pay Mesa $[***] monthly as payment for the Mexico office. Mesa hereby waives any past, present or future claims for payment related to the Mexico office other than such $[***] monthly payment.
19. Replacement of Code Share Agreement . Upon execution of this Thirteenth Amendment by both parties, the parties shall, in good faith promptly negotiate and execute a new Jet Services Agreement to replace the existing Code Share Agreement reflecting the foregoing terms and all applicable terms and conditions set forth in the Code Share Agreement and its various amendments. The purpose of such new Jet Services Agreement is to re-state and organize the previous agreement and clean up dead language for ease of administration. The parties agree to work in good faith to have such new Jet Services Agreement in place by March 31, 2014.
20. CD0 and CCF for Non-Hub or Linear Flying . Section 9(d)(iii) of the Tenth Amendment (as previously amended in the Twelfth Amendment) shall be restated as follows:
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Subject to adjustment as provided below in Section 9 of the Tenth Amendment, the CD0 and CCF thresholds used in Section 9 of the Tenth Amendment for calculating credits, incentives, and default for performance are valid so long as the schedule given to Mesa for US Airways flying is for the PHX and CLT hubs and/or linear flying; and provided, further, that the schedules are reasonably consistent with past practice US Airways scheduling parameters for utilization, RON maintenance time, turn times, and recovery time. In the event that Mesa operates more than Equivalent Aircraft equal to [***] of the total number of Aircraft operated by Mesa under the Code Share Agreement pursuant to a schedule given to Mesa for US Airways flying other than for the PHX or CLT hubs and/or linear flying, or if US Airways gives Mesa scheduling parameters that are not reasonably consistent with past practice for utilization, RON maintenance time, turn times, and recovery time, the Service Level 1, Service Level 2 and early termination thresholds described in Section 9(e) will be recalculated in a manner consistent with the calculation method used to establish the Service Levels and Incentive Levels in the 10th amendment, including the CCF and CD0 performance of American Airlines and US Airways (AA/US) mainline and the other AA/US regional jet operators who have at least [***] of their AA/US-branded operations in those same hubs over the preceding 3 years. The performance thresholds will be set based on this new baseline data-set such that Incentives Levels are triggered for performance above the same percentile of performance (and Service Level credits are triggered for performance below the same percentile of performance) as were used to calculate the Service Levels and Incentive Levels set forth in the 10th Amendment. Notwithstanding the foregoing, in no event will the Incentive Level threshold fall below, nor the Service Level thresholds rise above, the respective percentages set forth in the 10th Amendment.
Equivalent Aircraft shall be determined by dividing the average daily scheduled block hours in and out of US Airways hubs other than CLT or PHX during a given month by the average daily utilization of active Aircraft in the Fleet for that month (total Mesa Aircraft flying for US Airways less spares and maintenance Aircraft).
21. Property Tax . In the event that Mesa provides services US Airways and at least one other commercial airline in a particular property tax jurisdiction, the ratio used to calculate US Airways portion of property tax liability in such jurisdiction will be based on the allocation factor(s) used by such jurisdiction to allocate value to Mesa. Such allocation will be verified and validated by US Airways.
US Airways has the right to audit Mesas calculation of property taxes attributed to US Airways, using a third party auditor to audit up to 90% of the assessed value that is being apportioned by Mesa to US Airways.
In order to facilitate the audit, Mesa will promptly provide all information reasonably requested by US Airways or the auditor, including the following:
● |
Copies of all returns, assessments (initial and final if applicable), assessor detailed workpapers and tax bills involved in the audit. |
● |
Copies of the actual flyaway database used to file the returns in Excel format. |
● |
Internal workpapers and calculations made to prepare the returns. |
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● |
Flight statistics (RPMs, ground time, flight miles, flight hours, arrivals & departures, etc.) in electronic format such as Excel. Both raw statistics and apportioned statistics are to be provided. |
● |
Actual flight schedules for the California test week, if applicable. |
● |
Financial statements used for the filing of unit returns. |
● |
Additional data upon request such as ground property, leased property, CIP, supplies, spare parts, fuel, etc. |
Prompt on site access to returns, assessments tax bills and back up workpapers shall be provided when requested.
22. Miscellaneous.
22.1 Except as set forth in this Thirteenth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Twelfth Amendment.
22.2 This Thirteenth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
22.3 This Thirteenth Amendment, including the Exhibits attached hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
[Signatures Follow]
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EXHIBIT A
(List of CRJ-900s and Minimum Specifications)
Registration Number | Engine Type | Next Gen Aircraft (Y/N) | Manufacture Date | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX
|
CF34-8C5 | TBD | TBD |
Minimum Specifications:
All New Aircraft must meet the following minimum specifications and be otherwise appropriate for providing Flight Services pursuant to the Code Share Agreement:
● |
Capable of being configured in dual-class configuration in accordance with US Airways Express First specifications consistent with the 47 Code Share Aircraft currently being operated by Mesa. |
● |
Two lavatories, fore and aft, appropriate for dual-class configuration. |
● |
Equipped with Bombardier Enhanced Performance Package (EPP) |
● |
Capable of meeting all CAT II requirements |
● |
ACARs functionality consistent with ACARs installed on the current 38 original CRJ-900 flying at US Airways. |
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EXHIBIT B
Mesa Contract Rates (Effective July 31, 2013) |
||||||||
Guaranteed Non-Maintenance Costs |
||||||||
Original 38 | +9 (Amd. 12) | +4 | ||||||
COST CATEGORY |
UNIT | CRJ 900 | CRJ 900 | CRJ 900 | ||||
Aircraft Lease & Overhead |
A/C MONTH | |||||||
Ownership |
[***] |
[***] |
[***] |
|||||
Overhead |
[***] |
[***] |
[***] |
|||||
Crew RON |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
|||||
Flight Crew and Maintenance |
BLOCK HOUR |
[***] |
[***] |
[***] |
||||
Pilot |
[***] |
[***] |
[***] |
|||||
Flight Attendant |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
|||||
Dispatchers |
DEPARTURE |
[***] |
[***] |
[***] |
||||
Guaranteed Non-Maintenance Cost Reduction |
A/C/MONTH |
[***] |
[***] |
[***] |
||||
Reduction Effective through September 30, 2015 |
[***] |
[***] |
[***] |
|||||
Reduction Effective October 1, 2015 |
[***] |
[***] |
[***] |
|||||
Aircraft Margin |
A/C/MONTH |
[***] |
[***] |
[***] |
||||
Guaranteed Maintenance Costs |
||||||||
Original 38 | +9 (Amd. 12) | +4 | ||||||
COST CATEGORY |
CRJ 900 | CRJ 900 | CRJ 900 | |||||
Maintenance Cost Per A/C |
A/C MONTH | |||||||
MX Employees |
[***] |
[***] |
[***] |
|||||
Engine & APU Depreciation |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
|||||
Maintenance Base Cost |
BASE/MONTH |
[***] |
[***] |
[***] |
||||
Rent & Utilities |
[***] |
[***] |
[***] |
|||||
Personnel |
[***] |
[***] |
[***] |
|||||
Parts Depreciation |
[***] |
[***] |
[***] |
|||||
Equipment Depreciation |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
|||||
Pass-through Maintenance Base |
||||||||
RON MX (TUS) |
[***] | |||||||
RON MX (SDF) |
[***] | |||||||
RON MX (TBD) 1 |
[***] | |||||||
Maintenance Cost Per Block Hour |
BLOCK HOUR | |||||||
Engine MX Contractual |
[***] |
[***] |
[***] |
|||||
Engine MX Other |
[***] |
[***] |
[***] |
|||||
Airframe MX |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
US Airways Confidential
Execution Copy
1 Payable only if both parties mutually agree that an additional maintenance base is required
US Airways Confidential
Exhibit 10.11.15
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
FOURTEENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS FOURTEENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Fourteenth Amendment ) is made and entered into as of April 10, 2014 (the Effective Date ), by and between US AIRWAYS, INC., a Delaware corporation ( US Airways ) and MESA AIRLINES, INC., a Nevada corporation ( Mesa ).
RECITALS :
A. US Airways and Mesa are parties to that certain Code Share and Revenue Sharing Agreement, dated as of March 20, 2001 but effective as of February 1, 2001, as amended (the Code Share Agreement ).
B. The Code Share Agreement has previously been amended, including by the Twelfth Amendment to Code Share and Revenue Sharing Agreement, dated February 13, 2013 (the Twelfth Amendment) and the Thirteenth Amendment to Code Share and Revenue Sharing Agreement, dated December 24, 2013 (the Thirteenth Amendment).
C. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Fourteenth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
D. Mesa and US Airways desire to amend the Code Share Agreement to add 6 CRJ-900 aircraft to the Code Share Agreement and to make the other changes and agreements as set forth in this Fourteenth Amendment.
NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and Mesa agree as follows:
1. Flight Services for American Airlines . In connection with the operational integration of US Airways and American Airlines, Inc. (American) resulting from the merger between the parent company of US Airways and a wholly owned subsidiary of Americans parent company American Airlines Group Inc. (formerly AMR Corporation), Mesa acknowledges and agrees that any Schedule provided to Mesa after the Effective Date pursuant to Section 2.1 of the Code Share Agreement may include Flights operated for American under the American Eagle brand (the American Flights). Mesa will perform the Flight Services in connection with such American Flights in accordance with the terms and conditions of the Code Share Agreement. Mesa will cooperate with US Airways and American to establish Mesa as a carrier within the American systems as requested by US Airways and/or American from time to time.
2. Addition of CRJ-900 Aircraft.
2.1 New Aircraft . Mesa will procure 6 additional CRJ-900 aircraft (the New Aircraft) and will operate such New Aircraft pursuant to the terms of the Code Share Agreement, as amended hereby. The New Aircraft shall be considered Aircraft for all intents
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and purposes of the Code Share Agreement, as applicable, except as may be expressly provided otherwise in this Fourteenth Amendment. Exhibit A to this Fourteenth Amendment lists the 6 New Aircraft that are the subject of this Fourteenth Amendment.
2.2 Term of New Aircraft . The Term of the Code Share Agreement, as it relates to the New Aircraft, shall be 8 years from the scheduled induction date of each such New Aircraft as provided in the table in Section 4.1 of this Fourteenth Amendment (each an Induction Date), and the Code Share Agreement shall expire as to each New Aircraft when such Aircraft is returned in accordance with the return schedule described in Section 5 below, unless terminated earlier as provided in the Code Share Agreement.
2.3 Aircraft Procurement . No later than May 15, 2014, Mesa shall demonstrate to US Airways reasonable satisfaction that Mesa will be able to execute definitive leases for, or otherwise procure, the New Aircraft (for example by providing copies of executed leases, term sheets, LOIs, or MOUs showing the induction date and term for the New Aircraft covered by such documents). Should Mesa fail to demonstrate to US Airways reasonable satisfaction that Mesa will procure and deliver the New Aircraft as required hereby, US Airways may, at its sole discretion, cancel the addition of the New Aircraft to the Code Share Agreement without any further liability or obligation whatsoever.
3. Configuration, Branding & Livery of New Aircraft . The New Aircraft will be painted in American Eagle livery, will be compliant with American Eagle brand interior and exterior specifications and branding requirements (American Eagle Branding), and will be delivered on the dates and in the configuration specified in the New Aircraft Induction Schedule set forth in Section 4.1 of this Fourteenth Amendment (the Induction Schedule). US Airways and/or American will provide the American Eagle Branding requirements to Mesa. Furthermore, American will provide such licenses and other documentation to Mesa regarding the American Eagle Branding as American may deem necessary in order to protect Americans intellectual property rights (including without limitation the American Airlines and American Eagle trademarks and the American Eagle trade dress and livery). With respect to New Aircraft that are delivered in a single-class configuration in accordance with the Induction Schedule, Mesa will reconfigure such New Aircraft to a dual-class configuration that meets the requirements set out below (the Reconfiguration). Such Reconfiguration shall occur in accordance with a reconfiguration schedule to be established by US Airways (the Reconfiguration Schedule), and shall be accomplished as soon as the required seats are available, but in no event later than November 15, 2014. Each date stated in such Reconfiguration Schedule for the Reconfiguration of a New Aircraft to be completed and such New Aircraft to be inducted into the US Airways network and/or the American system, as provided in Section 1 above, a Reconfiguration Date. In the event that the New Aircraft are not delivered and/or reconfigured as required by this Section, the Late Delivery Charges (as defined below) and other terms and conditions applicable to late delivery of the New Aircraft set forth in Section 4 below shall apply. Mesa will, in consultation with US Airways, manage the Reconfiguration project in order to expedite the Reconfiguration while minimizing the operational impact. The dual-class configuration will be identical to the Aircraft added by the Thirteenth Amendment (the Thirteenth Amendment New Aircraft) and materially consistent with the Aircraft added by the Twelfth Amendment (the Twelfth Amendment New Aircraft) with the exceptions required to transition colors and materials to and make the New Aircraft compliant with the American Eagle Branding. US
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Airways and Mesa will collaborate in the management of the repainting, and redecorating process to ensure that the New Aircraft conform to the American Eagle Branding requirements, including leather seating surfaces throughout. US Airways will reimburse Mesa the actual and reasonable costs incurred by Mesa to paint, redecorate and reconfigure the New Aircraft, including first class kits, parts, installation labor, ferry costs, project management, and all other costs reasonably related with the reconfiguration of the New Aircraft to make them conform to the American Eagle Branding and/or the Reconfiguration requirements, as applicable, provided that such costs shall not exceed $[***] per New Aircraft (the Reimbursement Cap). In addition, US Airways will reimburse Mesa up to $[***] for certain one-time costs related to the Reconfiguration of the New Aircraft (including the cost of non-recurring engineering, prototypes, supplemental types certificates and manuals) to the extent such costs are new and have not been incurred and/or been reimbursed prior in connection with the reconfiguration of the Twelfth Amendment New Aircraft and/or the Thirteenth Amendment New Aircraft. Such reimbursement payments shall be made, subject to the Reimbursement Cap, within 30 days of receipt by US Airways of an invoice from Mesa detailing the actual and reasonable costs incurred, and submission by Mesa of auditable documentation supporting such actual and reasonable costs to US Airways reasonable satisfaction. For avoidance of doubt, the dual-class configuration shall be the same 9F/67Y LOPA as the Thirteenth Amendment New Aircraft with Zodiac Close Comfort 2 seats in F, and Y-class seats (i) will be consistent throughout the cabin, (ii) will include the B/E Spectrum seat that will be placed in the front of Y-class (including, without limitation, color, stitching and all seat contours), subject to approval by US Airways, and (iii) will have all bottom and back seat cushions replaced with new cushions before November 14, 2014. After the new cushions have been installed on the Y-class seats as provided in (iii) of the previous sentence, Y-class seat cushions (bottom and/or back seat) for the Thirteenth Amendment New Aircraft and the New Aircraft will be replaced on an as needed basis, subject to (i) and (ii) of the previous sentence. Furthermore, US Airways will be allowed to inspect and approve the first New Aircraft prior to its Induction Date to ensure that the quality is in line with US Airways and American Airlines standards and the terms of this Amendment.
4. Induction and Reconfiguration Schedule for New Aircraft.
4.1 Induction and Reconfiguration Schedule . The New Aircraft shall be delivered, painted, redecorated, have adequate pilot and crew staffing and otherwise be ready to operate in the US Airways network and/or the American system, as provided in Section 1 above, in accordance with the Induction Schedule set forth below. Additionally, the New Aircraft will be reconfigured in accordance with the Reconfiguration Schedule established pursuant to Section 3 of this Fourteenth Amendment, as provided above. In the event that a New Aircraft will not be ready to operate in the US Airways network and/or the American system, as provided in Section 1 above, on the date required by the Induction Schedule or Reconfiguration Schedule, respectively, Mesa shall immediately notify US Airways by telephone and in writing by confirmed email (Late Delivery Notice). New Aircraft that are not ready to operate in the US Airways network and/or the American system, as provided in Section 1 above, on the date required by the Induction Schedule or Reconfiguration Schedule, as applicable, shall be subject to the following late-delivery charges (the Late Delivery Charges), that will accrue until such New Aircraft are inducted: $[***] per New Aircraft per calendar day such New Aircraft is delivered after the respective date stated-in the Induction Schedule or Reconfiguration Schedule, as applicable, for such New Aircraft (each a Delay Day), if the Late Delivery Notice is given
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to US Airways more than 45 days prior to the applicable Induction Date or Reconfiguration Date, $[***] per New Aircraft per Delay Day if the Late Delivery Notice is given between 45 days and 14 days prior to the applicable Induction Date or Reconfiguration Date, and $[***] per Delay Day if the Late Delivery Notice is given less than 14 days prior to the applicable Induction Date or Reconfiguration Date. Mesa shall pay such Late Delivery Charges to US Airways within 30 days after receipt of an invoice from US Airways detailing the applicable Late Delivery Charges for each delayed New Aircraft. With respect to the Induction Schedule, after 365 cumulative Delay Days, US Airways may, at its option, elect to cancel the induction of the New Aircraft subject to the delay. Such Late Delivery Charges shall constitute liquidated damages and not a penalty, and each party agrees that such liquidated damages are a reasonable approximation of the actual damages, but that the amount of actual damages that would result from late delivery (whether for initial induction or from reconfiguration) of the New Aircraft is difficult or impossible to calculate.
NEW AIRCRAFT INDUCTION SCHEDULE
Induction Date
|
Configuration at Induction
|
|
August 1, 2014
|
76 seat single-class | |
August 15, 2014
|
76 seat single class | |
September 1, 2014
|
76 seat single class | |
October 1, 2014
|
76 seat dual-class | |
November 1, 2014
|
76 seat dual-class | |
November 15, 2014
|
76 seat dual-class |
4.2 Force Majeure . Notwithstanding the foregoing, performance by Mesa under this provision shall not be deemed to be in default and shall not give rise to the payment of the aforementioned late-delivery charge or any other penalties, costs, fees or expenses of any kind where delays or defaults are directly due to war, insurrection, strikes, walk-outs, riots, floods, earthquakes, fires, casualties, acts of God, governmental restrictions imposed or mandated by governmental entities after the date of this Amendment, enactment of conflicting state or federal laws or regulations, new or supplementary environmental regulations or litigation, materially adverse national or global economic conditions, or any other matter beyond the reasonable control of Mesa; provided that failure to procure the New Aircraft or the materials and/or services necessary to repaint, redecorate or reconfigure the New Aircraft shall not be deemed to be matters beyond Mesas reasonable control unless such failure is due to one of the specific events set forth above.
5. Aircraft Return Schedule . All Aircraft operated under the Code Share Agreement, including the New Aircraft, shall be ratably returned beginning January 1, 2021 in accordance with the applicable return schedule terms provided in the Twelfth and Thirteenth Amendments.
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The Aircraft will return at an approximate rate of 3 aircraft per month, provided that the New Aircraft shall begin to be ratably returned beginning August 1, 2022 and provided further that the Term for each of the New Aircraft shall be 8 years from the Induction Date for each New Aircraft (unless. terminated earlier or extended in accordance with the terms of the Code Share Agreement). Immediately after the return of each Aircraft as provided herein, Mesa shall remove any and all references to US Airways trademarks, trade dress, livery, service marks and trade names and all references to the American Eagle Branding, as applicable, prior to any further use of such Aircraft. For purposes of this Section 5, return shall mean that the respective Aircraft shall cease to be covered by the terms of the Code Share Agreement.
6. Rates.
6.1 Rates . The rates applicable to the Original Aircraft (as such term is defined in the Thirteenth Amendment), the Twelfth Amendment New Aircraft, the Thirteenth Amendment New Aircraft and to the New Aircraft upon their entry into service under the Code Share Agreement in accordance with the terms and conditions of this Fourteenth Amendment, are set forth in Exhibit B to this Amendment.
6.2 Escalation . For rate escalation adjustments beginning in February 2014, the escalation rate will be based on the index specified in the Code Share Agreement, but capped at ***%.
7. Performance Credit Adjustment . Section 11 of the Thirteenth Amendment is hereby deleted in its entirety. In recognition of the addition of the Thirteenth Amendment New Aircraft and the New Aircraft, US Airways will provide Mesa with a one-time 50% reduction on the Quarterly Performance Credit incurred by Mesa for the following periods:
Quarter
|
Perf. Rebate | 50% Credit | ||
Q2 2013
|
[***] |
[***] |
||
Q3 2013
|
[***] |
[***] |
||
Q4 2013
|
[***] |
[***] |
||
Total
|
[***] |
[***] |
||
A13 and A14 credit per inducted AC
|
[***] |
The reduction will be applied in the amount of $[***] per Aircraft upon the induction of each of the Thirteenth Amendment New Aircraft in accordance with the terms of the Thirteenth Amendment and each New Aircraft in accordance with the terms of this Fourteenth Amendment. Such payment shall be made within 30 days following the addition to the Code Share Agreement of each Thirteenth Amendment New Aircraft and each New Aircraft added pursuant to this Fourteenth Amendment. In recognition of such Performance Credit reduction, both parties acknowledge and agree that all claims and amounts related to 2013 Performance Credits are settled.
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8. ACARS . Section 16 of the Thirteenth Amendment is hereby deleted in its entirety. Instead, the parties hereby agree with regard to the ACARS systems as follows:
8.1 ACARS Requirements . Mesa agrees to install 10 of the ACARS systems equivalent to the specifications used by the Twelfth Amendment New Aircraft with 4 such ACARS systems being installed on the Thirteenth Amendment New Aircraft and 6 such ACARS systems being installed in the New Aircraft. All Aircraft operating under the Code Share Agreement shall be equipped with ACARS systems with the minimum functionality of the ACARS systems in the Original Aircraft (as such term is defined in the Thirteenth Amendment).
8.2 AGARS Swap Option . Solely at the discretion of US Airways, Mesa shall swap any number of ACARS boxes from the Twelfth Amendment New Aircraft, the Thirteenth Amendment New Aircraft and the New Aircraft to the Original Aircraft (as such term is defined in the Thirteenth Amendment). The actual and reasonable cost of such a swap shall be split 50/50 between Mesa and US Airways for the first 5 boxes with US Airways solely responsible for the costs of the swap with regard to the 6th box and any box thereafter.
9. Upon execution of this Fourteenth Amendment by both parties, the parties shall, in good faith promptly negotiate and execute a new Capacity Purchase Agreement to replace the existing Code Share Agreement reflecting the foregoing terms and all applicable terms and conditions set forth in the Code Share Agreement and its various amendments. The purpose of such new Capacity Purchase Agreement is to re-state and organize the previous agreement and clean up dead language for ease of administration. The parties agree to work in good faith to have such new Capacity Purchase Agreement in place by October 31, 2014.
10. Miscellaneous.
10.1 Except as set forth in this Fourteenth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Fourteenth Amendment.
10.2 This Fourteenth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
10.3 This Fourteenth Amendment, including the Exhibits attached hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
[Signatures Follow]
US Airways Confidential |
6 |
EXHIBIT A
(List of CRJ-900s and Minimum Specifications)
Registration Number | Engine Type | Next Gen Aircraft (Y/N) | Manufacture Date | |||
N944LR | CF34-8C5 | TBD | TBD | |||
N943LR | CF34-8C5 | TBD | TBD | |||
N947LR | CF34-8C5 | TBD | TBD | |||
N951LR | CF34-8C5 | TBD | TBD | |||
N950LR | CF34-8C5 | TBD | TBD | |||
N948LR | CF34-8C5 | TBD | TBD |
Minimum Specifications:
All New Aircraft must meet the following minimum specifications and be otherwise appropriate for providing Flight Services pursuant to the Code Share Agreement:
● |
Capable of being configured in dual-class configuration in accordance with US Airways Express First specifications or the American Eagle Branding specifications, as applicable, consistent with the 51 Aircraft currently being operated by Mesa under the Code Share Agreement. |
● |
Two lavatories, fore and aft, appropriate for dual-class configuration. |
● |
Equipped with Bombardier Enhanced Performance Package (EPP) |
● |
Capable of meeting all CAT II requirements |
● |
ACARs functionality consistent with ACARs installed on the 9 Twelfth Amendment New Aircraft. |
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EXHIBIT B
Mesa Contract Rates (Effective February 1, 2014) |
||||||||
(See Note 2) |
||||||||
Guaranteed Non-Maintenance Costs |
Original 38 | +9 (Amd. 12) | +4 (Amd. 13) & +6 (Amd.14) | |||||
COST CATEGORY |
UNIT | CRJ 900 | CRJ 900 | CRJ 900 | ||||
Aircraft Lease & Overhead |
A/C MONTH | |||||||
Ownership |
[***] |
[***] |
[***] |
|||||
Overhead |
[***] |
[***] |
[***] |
|||||
Crew RON |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
|||||
Flight Crew and Maintenance |
BLOCK HOUR |
[***] |
[***] |
[***] |
||||
Note 1 Pilot |
[***] |
[***] |
[***] |
|||||
Note 1 Flight Attendant |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
|||||
Dispatchers |
DEPARTURE |
[***] |
[***] |
[***] |
||||
Guaranteed Non-Maintenance Cost Reduction |
A/C/MONTH |
[***] |
[***] |
[***] |
||||
Rates to be applied on Amendment Effective Date ==> |
[***] |
[***] |
[***] |
|||||
Effective 10/1/2015 ==> |
[***] |
[***] |
[***] |
|||||
Aircraft Margin |
A/C/MONTH |
[***] |
[***] |
[***] |
||||
Guaranteed Maintenance Costs |
||||||||
Original 38 | +9 (Amd. 12) | +4 (Amd. 13) & +6 (Amd.14) | ||||||
COST CATEGORY |
CRJ 900 | CRJ 900 | CRJ 900 | |||||
Maintenance Cost Per A/C |
A/C MONTH | |||||||
MX Employees |
[***] |
[***] |
[***] |
|||||
Engine & APU Depredation |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
|||||
Maintenance Base Cost |
BASE/MONTH |
[***] |
[***] |
[***] |
||||
Rent & Utilities |
[***] |
[***] |
[***] |
|||||
Personnel |
[***] |
[***] |
[***] |
|||||
Parts Depreciation |
[***] |
[***] |
[***] |
|||||
Equipment Depreciation |
[***] |
[***] |
[***] |
|||||
Total |
[***] |
[***] |
[***] |
|||||
Pass-through Maintenance Base |
||||||||
RON MX (TUS) |
[***] | |||||||
RON MX (SDF) |
[***] | |||||||
RON MX (TBD) 1 |
[***] | |||||||
Maintenance Cost Per Block Hour |
BLOCK HOUR | |||||||
Engine MX Contractual |
[***] |
[***] |
[***] |
|||||
Engine MX Other |
[***] |
[***] |
[***] |
|||||
Airframe MX |
[***] |
[***] |
[***] |
US Airways Confidential |
9 |
Total |
[***] |
[***] |
[***] |
1 Payable only if both parties mutually agree that an additional maintenance base is required
US Airways Confidential |
10 |
Note 1 As of the Execution Date, Pilot and Flight Attendant cost will be set at the rates set forth above in this Exhibit B. Rates for Mesas pilots may be adjusted once during the remainder of the term of the Code Share Agreement to reflect an increase to the payscale for the pilots of no more than [***] ([***]) any time after June 30, 2012 to account for any new or renegotiated collective bargaining agreement, provided that any such adjusted rate shall not be billed to US Airways until after such adjusted rate is effective and paid to the Mesas pilots.
Note 2 In addition to the Aircraft (as defined below), Mesa may, subject to the terms and conditions of this Note 2, in its discretion and at its sole expense, arrange for and utilize substitute CRJ-900 aircraft or CRJ-200 aircraft in American Eagle/US Airways Express livery (as applicable based on the terms of the Code Share Agreement) or neutral livery to provide the Flight Services under this Code Share Agreement during those periods, but only during those periods, when any of the Original Aircraft, the Twelfth Amendment New Aircraft, the Thirteenth Amendment New Aircraft or the New Aircraft (collectively, Aircraft) may be out of service due to unforeseen and irregular maintenance requirements; provided that (i) each substitute CRJ-200 aircraft shall be approved by US Airways in writing before being used as a substitute aircraft pursuant to this Note 2, and (ii) Mesa may only utilize regional jet aircraft other than CRJ-900 or CRJ-200 aircraft to the extent that US Airways has permitted such use in advance in writing. For clarification purposes only, Mesa may operate such a substitute aircraft in US Airways Express or neutral livery in lieu of an Aircraft in US Airways Express livery and Mesa may operate such a substitute aircraft in American Eagle or neutral livery in lieu of an Aircraft in American Eagle livery, but may not operate a substitute aircraft in US Airways Express livery in lieu of an Aircraft in American Eagle livery or a substitute aircraft in American Eagle livery in lieu of an Aircraft in US Airways Express livery, without the prior written consent of US Airways.
a) |
Notwithstanding anything in the Code Share Agreement to the contrary, and assuming approval is granted, usage of substitute CRJ-200 aircraft shall be paid as follows: |
(1) |
Rates paid for operation of this aircraft will be $[***] per block hour and $[***] per departure plus any fuel costs associated with these substitute operations. Such rate shall be reduced by [***] after the 24th Flight of such aircraft in a calendar month, reduced by [***] after the 32nd Flight of the calendar month, and [***] after the 40th Flight of the calendar month. |
(2) |
In addition, the amount paid to Mesa will be further adjusted by any interrupted trip or passenger inconvenience costs to include, without limitation, such things as meals and hotels for displaced passengers, as well as an amount of $[***] per passenger downgraded from first class to coach class. |
b) |
If a substitute aircraft shall be utilized for more than two (2) consecutive days, Mesa and US Airways shall mutually agree upon the route that shall be covered by the substitute aircraft. |
c) |
For clarification purposes only, if a substitute aircraft is used in accordance with the terms hereof, the applicable provisions of the Code Share Agreement shall also apply to the Flight Services operated by such substitute aircraft, including, without limitation, if the respective Flight is not operated for any reason. |
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11 |
d) |
The provisions of this Note 2 replace Section 9(d)(ii) of the Tenth Amendment in its entirety. |
US Airways Confidential |
12 |
Exhibit 10.11.16
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
Execution Copy
FIFTEENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS FIFTEENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Fifteenth Amendment) is made and entered into as of November 26, 2014 (the Effective Date), by and between US AIRWAYS, INC., a Delaware corporation (US Airways) and MESA AIRLINES, INC., a Nevada corporation (Mesa).
RECITALS :
A. US Airways and Mesa are parties to that certain Code Share and Revenue Sharing Agreement, dated as of March 20, 2001 but effective as of February 1, 2001 (as amended, modified and supplemented, the Code Share Agreement).
B. The Code Share Agreement has previously been amended, including by the Tenth Amendment to Code Share and Revenue Sharing Agreement, dated November 18, 2010 (the Tenth Amendment), the Eleventh Amendment to Codeshare and Revenue Sharing Agreement, dated July 1, 2012 (the Eleventh Amendment), the Twelfth Amendment to Code Share and Revenue Sharing Agreement, dated February 13, 2013 (the Twelfth Amendment), the Thirteenth Amendment to Code Share and Revenue Sharing Agreement, dated December 24, 2013 (the Thirteenth Amendment) and the Fourteenth Amendment to Code Share and Revenue Sharing Agreement, dated April 10, 2014 (the Fourteenth Amendment).
C. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Fifteenth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
D. Mesa and US Airways desire to amend the Code Share Agreement to add seven (7) CRJ-900 aircraft to the Code Share Agreement and to make the other changes and agreements as set forth in this Fifteenth Amendment.
AGREEMENT :
NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and Mesa agree as follows:
1. Flight Services for American Airlines . In connection with the operational integration of US Airways and American Airlines, Inc. (American) resulting from the merger between the parent company of US Airways and a wholly owned subsidiary of Americans parent company American Airlines Group Inc. (formerly AMR Corporation), Mesa acknowledges, agrees and confirms that any Schedule provided to Mesa pursuant to Section 2.1 of the Code Share Agreement after the Effective Date may include Flights operated for American under the American Eagle brand (the American Airlines Flights). Mesa will perform the Flight Services in connection with such American Flights in accordance with the terms and conditions of the Code Share Agreement. Mesa will cooperate with US Airways and American to establish
US Airways - Mesa 15th Amendment Final2 (2) | 1 |
Execution Copy
Mesa as a carrier within the American systems as requested by US Airways and/or American from time to time.
2. Addition of CRJ-900 Aircraft .
2.1 New Aircraft . Mesa will procure seven (7) additional CRJ-900 aircraft (the New Aircraft) and will operate such New Aircraft pursuant to the terms of the Code Share Agreement, as amended hereby. The New Aircraft shall be considered Aircraft for all intents and purposes of the Code Share Agreement, as applicable, except as may be expressly provided otherwise in this Fifteenth Amendment. Exhibit A to this Fifteenth Amendment lists the seven (7) New Aircraft that are the subject of this Fifteenth Amendment.
2.2 Term of New Aircraft . The Term of the Code Share Agreement, as it relates to the New Aircraft, shall be 8 years from the scheduled induction date of each such New Aircraft as provided in the table in Section 4.1 of this Fifteenth Amendment (each an Induction Date), such that the Code Share Agreement shall expire as to each New Aircraft when such Aircraft is returned in accordance with the return schedule described in Section 5 below, unless terminated earlier as provided in the Code Share Agreement.
2.3 Aircraft Procurement . No later than December 31, 2014, Mesa shall demonstrate to US Airways reasonable satisfaction that Mesa will be able to execute definitive leases for, or otherwise procure, the New Aircraft (for example by providing copies of executed leases, term sheets, LOIs, or MOUs showing the induction date and term for the New Aircraft covered by such documents). Should Mesa fail to demonstrate to US Airways reasonable satisfaction that Mesa will procure and deliver the New Aircraft as required hereby, at any time after December 31, 2014 US Airways may, at its sole discretion, cancel the addition of the New Aircraft to the Code Share Agreement without any further liability or obligation whatsoever. Should US Airways not cancel the addition of the New Aircraft as provided in the previous sentence and should Mesa still be unable to lease or otherwise procure the New Aircraft, Mesa on January 31, 2015 may cancel the addition of the New Aircraft to the Code Share Agreement without any further liability or obligation to US Airways whatsoever.
3. Configuration, Branding & Livery of New Aircraft . The New Aircraft will be painted in American Eagle livery, will be compliant with American Eagle brand interior and exterior specifications and branding requirements (American Eagle Branding), and will be delivered on the dates and in the configuration specified in the New Aircraft Induction Schedule set forth in Section 4.1 of this Fifteenth Amendment (the Induction Schedule). US Airways and/or American will provide the American Eagle Branding requirements to Mesa. Furthermore, American will provide such licenses and other documentation to Mesa regarding the American Eagle Branding as American may deem necessary in order to protect Americans intellectual property rights (including without limitation the American Airlines and American Eagle trademarks and the American Eagle trade dress and livery). The New Aircraft will be delivered in a single-class configuration in accordance with the Induction Schedule and Mesa will reconfigure such New Aircraft to a dual-class configuration that meets the requirements set out below (the Reconfiguration). Such Reconfiguration shall occur in accordance with a reconfiguration schedule to be established by US Airways (the Reconfiguration Schedule), which shall be accomplished as soon as the seats are available, but in no event later than
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November 15, 2015. Each date stated in such Reconfiguration Schedule for the Reconfiguration of a New Aircraft to be completed and such reconfigured New Aircraft to be inducted into the US Airways network and/or the American system, as provided in Section 1 above, a Reconfiguration Date. In the event that the New Aircraft are not inducted and/or reconfigured as required by this Section 3, the Late Delivery Charges (as defined below) and other terms and conditions applicable to late delivery of the New Aircraft set forth in Section 4 below shall apply. Mesa will, in consultation with US Airways, manage the Reconfiguration project in order to expedite the Reconfiguration while minimizing the operational impact. The dual-class configuration will be identical to the Aircraft added by the Twelfth Amendment (the Twelfth Amendment New Aircraft) with the exceptions required to transition colors and materials to and make the New Aircraft compliant with the American Eagle Branding. US Airways and Mesa will collaborate in the management of the repainting, installation of the Emergency Locator Transmitters (ELT), installation of ACARS, and redecorating process to ensure that the New Aircraft conform to American Eagle Branding requirements, including leather seating surfaces throughout. For the avoidance of doubt, the dual-class configuration (i) shall be 9F/67Y LOPA with Zodiac Close Comfort 2 seats in F-class, and BE Spectrum seats in Y-class, (ii) will be consistent throughout the cabin, (iii) will include the B/E Spectrum seat that will be placed in the front of Y-class (including, without limitation, color, stitching and all seat contours), subject to approval by US Airways, and (iv) will have all bottom seat cushions replaced with new cushions before November 15, 2015. After the new cushions have been installed on the Y-class seats as provided in (iv) of the previous sentence, Y-class seat cushions (bottom and/or back seat) for the New Aircraft will be replaced on an as needed basis, subject to (i) through (iii) of the previous sentence. US Airways will reimburse Mesa the actual and reasonable costs incurred by Mesa to install ELT and ACARS, paint, redecorate and reconfigure the New Aircraft, including first class kits, parts, installation labor, ferry costs, project management, and all other costs reasonably related with the reconfiguration of the New Aircraft to make them conform to the American Eagle Branding and/or the Reconfiguration requirements, as applicable, provided that such costs shall (i) not exceed $[***] per New Aircraft (the Reimbursement Cap), and (ii) only be reimbursed to the extent they are incurred in connection with meeting US Airways and/or Americans specifications (including specifically, any preparations to make the New Aircraft airworthy, such as FAA certification, cockpit configuration). Such reimbursement payments shall be made, subject to the Reimbursement Cap, within thirty (30) days of receipt by US Airways of an invoice from Mesa detailing the actual and reasonable costs incurred, and submission by Mesa of auditable documentation supporting such actual and reasonable costs to US Airways reasonable satisfaction. Furthermore, US Airways will be allowed to inspect and approve each New Aircraft prior to its Induction Date and again prior to its Reconfiguration Date to ensure that the quality is in line with US Airways and American Airlines standards and the terms of this Amendment.
4. Induction and Reconfiguration Schedule for New Aircraft .
4.1 Induction and Reconfiguration Schedule . The New Aircraft shall be delivered, painted, redecorated, have adequate pilot and crew staffing and otherwise be ready to operate in the US Airways network and/or American system in accordance with the Induction Schedule set forth below. Additionally, the New Aircraft will be reconfigured in accordance with the Reconfiguration Schedule to be established pursuant to Section 3 of this Fifteenth Amendment. In the event that a New Aircraft will not be ready to operate in the US Airways network and/or
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American system on the date required by the Induction Schedule or Reconfiguration Schedule, respectively, Mesa shall immediately notify US Airways by telephone and in writing by confirmed email (Late Delivery Notice). New Aircraft that are not ready to operate in the US Airways network and/or American system on the date required by the Induction Schedule or Reconfiguration Schedule, as applicable, shall be subject to the following late-delivery charges (the Late Delivery Charges), that will accrue until the respective New Aircraft is inducted into or returns to the operation, as applicable: $[***] per New Aircraft per calendar day such New Aircraft is delivered after the respective date stated in the Induction Schedule or Reconfiguration Schedule, as applicable, for such New Aircraft (each a Delay Day), if the Late Delivery Notice is given to US Airways more than forty five (45) days prior to the applicable Induction Date or Reconfiguration Date, $[***] per New Aircraft per Delay Day if the Late Delivery Notice is given between forty five (45) days and fourteen (14) days prior to the applicable Induction Date or Reconfiguration Date, and $[***] per Delay Day if the Late Delivery Notice is given less than fourteen (14) days prior to the applicable Induction Date or Reconfiguration Date. US Airways will provide an invoice for such Late Delivery Charges to Mesa detailing the applicable Late Delivery Charges for each delayed New Aircraft and will offset such Late Delivery Charges against a future invoice from Mesa; provided that, in the event that Mesa incurs Late Delivery Charges in connection with any New Aircraft delivery as provided herein and US Airways, at its option decides to collect such Late Delivery Charges, US Airways shall adjust the schedule accordingly such that Mesas Spare Aircraft will not be scheduled by US Airways to cover the delayed New Aircraft. In lieu of collecting the Late Delivery Charges as provided in the previous sentence, US Airways may decide, at its option, to not adjust the schedule and require Mesa to operate its Spare Aircraft to cover the delayed New Aircraft, provided that in such event US Airways shall not collect Late Delivery Charges for such delayed New Aircraft. For clarification purposes only, US Airways will have the option as provided in the previous sentences for each delayed New Aircraft, if any.
With respect to the Induction Schedule, after three hundred sixty five (365) cumulative Delay Days of delay, US Airways may, at its option, elect to cancel the induction of the New Aircraft subject to the delay. Such Late Delivery Charges shall constitute liquidated damages and not a penalty, and each party agrees that such liquidated damages are a reasonable approximation of the actual damages but that the amount of actual damages that would result from late delivery (whether for initial induction or from reconfiguration) of the New Aircraft is difficult or impossible to calculate.
NEW AIRCRAFT INDUCTION SCHEDULE
Induction Date
|
Configuration at Induction | |
March 15, 2015
|
76 seat single-class | |
April 15, 2015
|
76 seat single-class | |
May 15, 2015
|
76 seat single-class | |
June 1, 2015
|
76 seat single-class |
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June 15, 2015
|
76 seat single-class | |
July 1, 2015
|
76 seat single-class | |
July 15, 2015
|
76 seat single-class |
4.2 Force Majeure . Notwithstanding the foregoing, performance by Mesa under this provision shall not be deemed to be in default and shall not give rise to the payment of the aforementioned late-delivery charge or any other penalties, costs, fees or expenses of any kind where delays or defaults are directly due to war, insurrection, strikes, walk-outs, riots, floods, earthquakes, fires, casualties, acts of God, governmental restrictions imposed or mandated by governmental entities after the date of this Amendment, enactment of conflicting state or federal laws or regulations, new or supplementary environmental regulations or litigation, materially adverse national or global economic conditions, or any other matter beyond the reasonable control of Mesa; provided that failure to procure the New Aircraft or the materials and/or services necessary to repaint, redecorate or reconfigure the New Aircraft shall not be deemed to be matters beyond Mesas reasonable control unless such failure is due to one of the specific events set forth above.
5. Aircraft Return Schedule . All Aircraft operated under the Code Share Agreement, including the New Aircraft, shall be ratably returned beginning January 1, 2021 in accordance with the applicable return schedule terms provided in the Twelfth and Thirteenth Amendments. The Aircraft will return at an approximate rate of three (3) aircraft per month, provided that the Aircraft added by the Fourteenth Amendment (the Fourteenth Amendment New Aircraft) shall begin to be ratably returned beginning August 1, 2022 and the New Aircraft shall be ratably returned beginning in March 2023, and provided further that the Term for each of the Fourteenth Amendment New Aircraft and each of the New Aircraft will be 8 years from the Induction Date for each such Aircraft (unless terminated earlier or extended in accordance with the terms of the Code Share Agreement). Immediately after the return of each Aircraft as provided herein, Mesa shall remove any and all references to US Airways trademarks, trade dress, livery, service marks and trade names and all references to the American Eagle Branding, as applicable, prior to any further use of such Aircraft. For purposes of this Section 5, return shall mean that the respective Aircraft shall cease to be covered by the terms of the Code Share Agreement.
6. Rates.
6.1 Rates . The rates applicable to the Original Aircraft (as such term is defined in the Thirteenth Amendment), the Twelfth Amendment New Aircraft, the Aircraft added by the Thirteenth Amendment (the Thirteenth Amendment New Aircraft), the Fourteenth Amendment New Aircraft, and the New Aircraft, upon their entry into service under the Code Share Agreement in accordance with the terms and conditions of this Fifteenth Amendment, are set forth in Exhibit B to this Fifteenth Amendment; provided that the Outstation Maintenance rates stated in Exhibit B will go into effect for December 2014. For clarification purposes only, Exhibit B to this Fifteenth Amendment (including Notes 1 and 2) replaces Exhibit B attached to the Fourteenth Amendment (including Notes 1 and 2) in its entirety.
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6.2 Escalation . For rate escalation adjustments beginning in February 2014, the escalation rate will be based on the index specified in the Code Share Agreement, but capped at [***]%. All the rates will be stated with up to two decimal points. Any future escalation will also be stated for up to two decimal points. For clarification purposes only, any rates (including rates after escalation) shall only be calculated up to the second decimal point.
6.3 Waiver of RON Maintenance Claims . Mesa agrees to waive any claims for, and to forego any amounts in connection with, any disputed pass-through RON maintenance expense cost claimed by Mesa under the maintenance cost structure pursuant to the Code Share Agreement as amended up to and including the Fourteenth Amendment, which have not been paid or reimbursed by US Airways as of the Effective Date.
7. Replacement of Code Share Agreement . Upon execution of this Fifteenth Amendment by both parties, the parties shall, in good faith promptly negotiate and execute a new Capacity Purchase Agreement to replace the existing Code Share Agreement reflecting the foregoing terms and all applicable terms and conditions set forth in the Code Share Agreement and its various amendments. The purpose of such new Capacity Purchase Agreement is to re-state and organize the previous agreement and clean up dead language for ease of administration. The parties agree to work in good faith to have such new Capacity Purchase Agreement in place by June 15, 2015.
8. New Maintenance Base .
8.1 ELP as new Maintenance Base . In connection with the closure of the Maintenance Base at Charlotte (in accordance with the Notice of CLT Maintenance Base Closure, dated June 18, 2014), the parties agree that El Paso (ELP) shall be designated as a new Maintenance Base pursuant to Section 2.6.3 of the Code Share Agreement (as amended by the Thirteenth Amendment) replacing Charlotte (CLT).
8.2 Rates . The payment rates for ELP, as stated under the header Maintenance Base Cost in Exhibit B hereto, shall be the same as the current CLT rates, at $[***] per month; provided, however, it is agreed and understood that for periods during which ELP and CLT may both be Maintenance Bases Mesa may only charge $[***] per month for both ELP and CLT collectively, but not $[***] per month for each of them.
8.3 Payment . US Airways will reimburse Mesa for the reasonable out-of-pocket expenses in connection with the relocation of the maintenance base; provided that retention packages provided by Mesa in connection with the relocation will be Mesas responsibility. Such reimbursement payments shall be made within 30 days of receipt by US Airways of an invoice from Mesa detailing the actual and reasonable costs incurred, and submission by Mesa of auditable documentation supporting such actual and reasonable costs to US Airways reasonable satisfaction.
9. Performance Threshold Changes due to LAX Transition .
The new CD0 and CCF thresholds for operational performance pursuant to Section 9 of the Tenth Amendment (as amended), including cure rate, default rate, incentive level, penalty level 1 and level 2 to be effective as of August 1, 2014 (the Post LAX Transition Thresholds) are set
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as follows (for convenience of the parties the thresholds as applicable immediately prior to the Effective Date are also provided):
Pre LAX Transition Thresholds (i.e., effective up to July 31, 2014)
|
Post LAX Transition Thresholds (i.e., effective as of August 1, 2014)
|
|||||||
CD0
|
CCF | CDO | CCF | |||||
Default
|
[***] |
[***] |
[***] |
[***] |
||||
Cure
|
[***] |
[***] |
[***] |
[***] |
||||
Incentive
|
[***] |
[***] |
[***] |
[***] |
||||
Penalty Level 1
|
[***] |
[***] |
[***] |
[***] |
||||
Penalty Level 2
|
[***] |
[***] |
[***] |
[***] |
These thresholds will apply until new thresholds are established in accordance with the Code Share Agreement. For purposes of setting revised operational performance thresholds in connection with potential future transitions, the parties agree to apply the same method as applied to set the LAX Transition Thresholds as provided in the Tenth Amendment. In addition, notwithstanding anything herein to the contrary, as one-time accommodation, US Airways and Mesa, as applicable, agree to waive [***] of the dollar value of any penalties or bonuses, as applicable, owed in this Section for the 3 rd Quarter 2014 (July-September 2014), [***] of the dollar value of any penalties or bonuses owed in this Section for the 4 th Quarter 2014 (October-December 2014), [***] of the dollar value of any penalties or bonuses owed in this Section for the 1 st Quarter 2015 (January-March 2015), and [***] of the dollar value of any penalties or bonuses owed in this Section for the 2 nd Quarter 2015 (April-June 2015) in connection with Mesas transition from Charlotte, North Carolina and Los Angeles, California to Dallas, Texas.
Beginning with the 3 rd Quarter 2015 (July-September 2015) the full dollar value of penalties shall begin to apply again subject to the following performance thresholds, which shall be unchanged until the end of the Term:
Service Level | CD0 | CCF | ||
Threshold | Threshold | |||
Incentive Level (Top 20%) |
[***] |
[***] |
||
Service Level 1 (Bottom 25%) |
[***] |
[***] |
||
Service Level 2 (Bottom 10%) |
[***] |
[***] |
||
Cure Level |
[***] |
[***] |
||
Default (Bottom 5%) |
[***] |
[***] |
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Effective as of January 1, 2015, the parties agree to (i) revise Section 8.2 of the Code Share Agreement (as amended by Section 9(e) of the Tenth Amendment) to remove the early termination right and related provisions with regard to the CD0 default event and (ii) limit the CD0 portion of the Quarterly Performance Credit (as defined in Section 9(a)(viii) of the Tenth Amendment) to a maximum amount of [***] ($[***]), i.e., the maximum amount owed by Mesa under this provision with respect to any CD0 performance credits per quarter will be [***] ($[***]).
In addition, the parties agree that non-controllable damage cancellations extend through the entire period the Aircraft is out of service. For each out of service day, Mesa shall receive a credit of two (2) cancelled flights per day for purposes of determining CDO and CCF percentages above.
10. Spares .
US Airways will schedule Mesas Aircraft to provide a minimum of one Spare Aircraft per [***] active Aircraft operated at each hub, but in no event less than [***] Spare Aircraft per hub. For purposes of this Section 10, a hub shall mean an airport where Mesa operates a monthly average of [***] flights per day under the Code Share Agreement.
11. Preferential Consideration of Furloughed Pilots .
US Airways, American and Mesa will enter into a letter agreement, regarding the terms and conditions pursuant to which Mesa will provide first consideration in Mesa application and screening process to mainline pilots on furlough from either the American or US Airways (East or West) pilots seniority lists, if (i) Mesa is hiring pilots, and (ii) there are mainline pilots on furlough from American or US Airways.
12. Quality of Service and Aircraft Condition .
12.1 Conflict . In the event of a conflict between the provisions of this Section 11 and/or Exhibit C or Exhibit E hereto and the provisions of the Code Share Agreement, the provisions of this Section 11 and/or Exhibit C or Exhibit E shall govern as to their subject matter.
12.2 Procedures and Performance Standards . At all times, Mesa shall (a) provide Flight Services to US Airways or American, as applicable in accordance with procedures and performance standards approved by US Airways from time to time in its sole discretion and provided in writing to Mesa, including but not limited to those certain Standards of Service set forth in Exhibit C hereto. The Service Standards set forth in Exhibit C hereto may be amended or changed by US Airways from time to time upon thirty (30) days prior notice to Mesa; provided that sixty (60) days notice shall be given by US Airways to the extent any such amendment or change may reasonably be expected to result in new or additional training. If Service Standards are materially changed or altered and such changes or alterations materially increase Mesas costs (i.e., an amount of more than [***] ($[***]) per year), US Airways shall reimburse Mesa for the actual incremental costs associated therewith, subject to Mesa providing sufficient documentation for such cost reasonably acceptable to US Airways. Mesa shall be responsible for all crew and other employee conduct, appearance and training policies (as set forth on Exhibit E ), aircraft cleaning (including the timing thereof), standards and adequate
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staffing levels in order to comply with such procedures and meet such standards, including without limitation in respect of customer complaint response and any handling of irregular operations, all of which shall be handled in a professional, businesslike and courteous manner.
12.3 In-Flight Services . Mesa shall comply with the catering requirements set forth on Exhibit C hereto. Mesa shall also coordinate all in-flight services relating to the Flight Services with the in-flight services department of US Airways or any person designated by US Airways to ensure consistency and quality of Mesas in-flight service, including non-safety related functions such as in-flight marketing announcements, meal and beverage presentation and delivery, and provisioning and usage of passenger amenity kits. Mesa shall sell beer, wine, liquor and any other alcoholic beverages on Flights. Mesa agrees that such in-flight sales shall be conducted as directed by US Airways or American, as applicable, from time to time. Mesa shall implement any suggestions made by US Airways or Americans in-flight services department, as applicable. All revenues collected by Mesa for such in-flight services on the Aircraft shall be promptly remitted or provided to US Airways. Mesa must provide notice to US Airways of any threatened catering-related fines or penalties that could result in a liability to US Airways or American within ten (10) days of receipt of such notification and allow for the involvement of US Airways or American, as applicable, in the resolution process of such issue so that the parties can work to minimize any fines to US Airways or American, as applicable.
12.4 Mesas Representative Uniforms . Mesa shall require all of its respective personnel and any of its respective agents providing Flight Services in job classifications requiring direct public contact to wear uniforms and accessories furnished by Mesa that are of colors and styles approved by US Airways from time to time. Mesa shall not alter or change such uniforms and accessories without the prior written consent of US Airways. If, after the date hereof, US Airways determines, in its sole discretion, that such uniforms and accessories should be materially altered or changed, then US Airways shall provide Mesa with notice of such alterations or changes. In the event that US Airways decides to implement such alterations or changes, Mesa shall implement such alterations or changes at US Airways cost for Mesas then current employees.
12.5 No Reimbursement of Fines . US Airways shall not be required to incur any cost or make any payment to the extent such cost or payment is attributable to any costs, expenses or losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Mesa as a result of any violation by Mesa of any law, statute, judgment, decree, order, rule or regulation of any governmental authority. US Airways shall be liable for all costs, expenses and losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Mesa as a result of any violation by US Airways, American or their respective agents, or by Mesa to the extent performed at the direction of US Airways or American, of any law, statute, judgment, decree, order, rule or regulation of any governmental authority. Mesa must provide notice to US Airways of any notification that could result in a liability to US Airways or American within ten (10) days of receipt of such notification and allow for the involvement of US Airways or American, as applicable, in the resolution process of such issue so that the parties can work to minimize any fines to US Airways or American.
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12.6 Right to Audit Service and Aircraft Condition . US Airways has the right, in its sole discretion, to audit Mesas service (each such audit a Service Audit) and aircraft condition (each such audit an Aircraft Condition Audit) to ensure it meets the Service and Aircraft Condition Standards and actions required as above and in Exhibit C or other Service Audit and/or Aircraft Condition Audit standards that may be developed by US Airways or American from time to time. US Airways will review the Service and Aircraft Audit Condition program for a period to be determined in its discretion in order to determine the appropriate pass and fail rates for such audits. An Inflight Service sample survey is described in Schedule 1 to Exhibit C , and an Aircraft Condition sample survey is described in Schedule 2 to Exhibit C , provided that such samples can be changed at any time in US Airways sole discretion. If Aircraft Condition Standards are materially changed or altered and such changes or alterations materially increase Mesas costs (i.e., an amount of more than [***] ($[***]) per year), US Airways shall reimburse Mesa for the actual incremental costs associated therewith, subject to Mesa providing sufficient documentation for such cost reasonably acceptable to US Airways. If an Aircraft fails (i) a Service Audit, Mesa shall pay $[***] per failed audit, and (ii) an Aircraft Condition Audit and such failure continues for seven (7) calendar days after Mesas receipt of written notice from US Airways, Mesa shall pay $[***] per day for any failure to remedy the failure noted in the Aircraft Condition Audit within the 7-day cure period; provided, however, that such remedies as provided under (i) and (ii) above shall not become effective until nine (9) months after Mesa has received written notice from US Airways that the audit program as described in this section 12.6 has been implemented, and provided further that during such 9-month period the parties shall meet and confer in good faith as to review initial findings and determine the appropriate pass and fail levels for each audit, subject to US Airways setting such pass and fail levels in the event that the parties are unable to agree on appropriate pass and fail levels.
13. Fuel Efficiency Program .
Section 10 of the Twelfth Amendment is deleted in its entirety and replaced by the following:
Fuel Management. Mesa shall continue to fully participate in US Airways fuel management program (Fuel Efficiency Program) and will work to actively manage fuel consumption and minimize over all fuel expense. Mesa shall promptly adopt and adhere to the fuel efficiency program as described on Exhibit D to the Fifteenth Amendment, as long as Mesas adoption or adherence to such fuel efficiency program does not impact the safety of Flight Services under FAA operational specifications, or other regulatory constraints, or the airworthiness of the Aircraft or materially increase Mesas costs in any way.
14. Withdrawal of Aircraft in lieu of Termination .
In the event that US Airways has the right to terminate the Code Share Agreement for any reason (including, without limitation, for any default by Mesa under the Code Share Agreement), US Airways shall have the right, in its sole discretion, instead of exercising any such termination right, to withdraw from the coverage of the Code Share Agreement up to fourteen (14) aircraft (i.e., any number between one and fourteen (14) aircraft), it being understood that (i) the fourteen (14) aircraft may be withdrawn in increments of any number of aircraft, provided that not more than fourteen (14) aircraft total may be withdrawn pursuant to this Section 14 over the remainder of the Term, and (ii) after such withdrawal any such withdrawn aircraft shall no longer be used to
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provide Flight Services under the Code Share Agreement and it being understood further that any payments by US Airways to Mesa pursuant to the Code Share Agreement shall be reduced accordingly. US Airways shall provide written notice to Mesa stating the effective date on which each such withdrawn aircraft will be withdrawn from the coverage of the Code Share Agreement (the Withdrawal Notice); provided that (i) Mesa, in its sole discretion, shall select the aircraft to be withdrawn on each withdrawal date stated in the Withdrawal Notice, except that in the event any default giving rise to a withdrawal right by US Airways is associated with any one or more particular covered aircraft, US Airways has the right, in its discretion, to have such aircraft withdrawn from coverage pursuant to this Section 14; (ii) the Withdrawal Notice shall be irrevocable by US Airways once received by Mesa; (iii) the withdrawal rights pursuant to this Section 14 may only be exercised by US Airways within ninety (90) days of the date on which the respective termination right is triggered (it being understood, that there may be multiple Withdrawal Notices, and it being understood further that such ninety (90) day period runs separately for each termination right US Airways may have whether concurrently or consecutively); (iv) the earliest date on which an aircraft may be withdrawn pursuant to a Withdrawal Notice shall be thirty (30) days from the date of such Withdrawal Notice; and (v) US Airways may not withdraw more than four (4) aircraft during any given calendar month.
15. Miscellaneous.
15.1 Except as set forth in this Fifteenth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Fifteenth Amendment.
15.2 This Fifteenth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
15.3 This Fifteenth Amendment, including the Exhibits attached hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
[Signatures Follow]
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EXHIBIT A
(List of CRJ-900s and Minimum Specifications)
Registration Number | Engine Type | Next Gen Aircraft (Y/N) | Manufacture Date | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX | CF34-8C5 | TBD | TBD | |||
15XXX
|
CF34-8C5 | TBD | TBD |
Minimum Specifications:
All New Aircraft must meet the following minimum specifications and be otherwise appropriate for providing Flight Services pursuant to the Code Share Agreement:
● |
Capable of being configured in dual-class configuration in accordance with US Airways Express First specifications or the American Eagle Branding specifications, as applicable, consistent with the Aircraft being operated by Mesa under the Code Share Agreement as of the Effective Date. |
● |
Two lavatories, fore and aft, appropriate for dual-class configuration. |
● |
Equipped with Bombardier Enhanced Performance Package (EPP) |
● |
Capable of meeting all CAT II requirements |
● |
ACARs functionality able to produce, at a minimum, the data required per the Fuel Efficiency Program (Exhibit D to this Fifteenth Amendment). |
● |
Compliant with applicable Transport Canada and Mexican DGAC 3 Frequency Emergency Locator Transmitter regulations. |
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EXHIBIT B
Mesa Contract Rates (Effective as of the Effective Date of the Fifteenth Amendment)
(See note 2)
Guaranteed Non-Maintenance Cost
Original 38 | +9 (Amd.12) |
+4/6 (Amd.13/14) |
+7(Amd.15) | |||||||||
COST CATEGORY | UNIT | CRJ 900 | CRJ 900 | CRJ 900 | CRJ 900 | |||||||
Aircraft Lease &Over Head | A/C MONTH | |||||||||||
Ownership |
[***] |
[***] |
[***] |
[***] |
||||||||
Overhead |
[***] |
[***] |
[***] |
[***] |
||||||||
Crew RON |
[***] |
[***] |
[***] |
[***] |
||||||||
Total |
[***] |
[***] |
[***] |
[***] |
||||||||
[***] |
[***] |
[***] |
[***] |
|||||||||
Flight Crew & Maintenance | BLOCK HOUR |
[***] |
[***] |
[***] |
||||||||
Note 1 | Pilot |
[***] |
[***] |
[***] |
[***] |
|||||||
Note 1 | Flight Attendant |
[***] |
[***] |
[***] |
[***] |
|||||||
Total |
[***] |
[***] |
[***] |
[***] |
||||||||
[***] |
[***] |
[***] |
[***] |
|||||||||
Dispatchers | DEPARTURE |
[***] |
[***] |
[***] |
[***] |
|||||||
Guaranteed Non-Maintenance Cost Reduction | A/C MONTH | |||||||||||
Rates to be applied on Amendment Effective Date==> | [***] | [***] | [***] | [***] | ||||||||
Effective Date==> 10/1/2015 | [***] | [***] | [***] | [***] | ||||||||
Aircraft Margin | A/C MONTH | [***] | [***] | [***] | [***] |
Guaranteed Maintenance Costs
Original 38 | +9 (Amd.12) |
+4/6 (Amd.13/14) |
+7(Amd.15) | |||||||||
COST CATEGORY | UNIT | CRJ 900 | CRJ 900 | CRJ 900 | CRJ 900 | |||||||
Maintenance Cost Per A/C | A/C MONTH | |||||||||||
MX Employees |
[***] |
[***] |
[***] |
[***] |
||||||||
Engine & APU Depreciation | [***] |
[***] |
[***] |
[***] |
||||||||
Outstation Base |
[***] |
[***] |
[***] |
[***] |
||||||||
Total |
[***] |
[***] |
[***] |
[***] |
||||||||
Maintenance Base Cost | BASE/MONTH | |||||||||||
Rent & Utilities |
[***] |
[***] |
[***] |
[***] |
||||||||
Personnel |
[***] |
[***] |
[***] |
[***] |
||||||||
Parts Depreciation |
[***] |
[***] |
[***] |
[***] |
||||||||
Equipment Depreciation | [***] |
[***] |
[***] |
[***] |
||||||||
Total |
[***] |
[***] |
[***] |
[***] |
||||||||
Maintenance Cost Per Block Hour | BLOCK HOUR | |||||||||||
Engine MX Contractual |
[***] |
[***] |
[***] |
[***] |
US Airways - Mesa 15th Amendment Final2 (2) | 14 |
Execution Copy
Original 38 | +9 (Amd.12) |
+4/6 (Amd.13/14) |
+7(Amd.15) | |||||||||
Engine MX- Other |
[***] |
[***] |
[***] |
[***] |
||||||||
Airframe MX |
[***] |
[***] |
[***] |
[***] |
||||||||
Total |
[***] |
[***] |
[***] |
[***] |
||||||||
* = these amounts will not be subject to escalation over the Term |
US Airways - Mesa 15th Amendment Final2 (2) | 15 |
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Note 1 As of the Execution Date, Pilot and Flight Attendant cost will be set at the rates set forth above in this Exhibit B. Rate for Mesas pilots may be adjusted once during the remainder of the term of the Code Share Agreement to reflect an increase to the pay scale for the pilots of no more than [***] ([***]) any time after November 26, 2014 to account for any new or renegotiated collective bargaining agreement, provided that such adjusted rate shall not be billed to US Airways until after such adjusted rate is effective and paid to the Mesas pilots.
Note 2 In addition to the Aircraft (as defined below), Mesa may, subject to the terms and conditions of this Note 2, in its discretion and at its sole expense, arrange for and utilize substitute CRJ-900 aircraft or CRJ-200 aircraft in American Eagle/US Airways Express livery (as applicable based on the terms of the Code Share Agreement) or neutral livery to provide the Flight Services under this Code Share Agreement during those periods, but only during those periods, when any of the Original Aircraft, the Twelfth Amendment New Aircraft, the Thirteenth Amendment New Aircraft, the Fourteenth Amendment New Aircraft or the New Aircraft (collectively, Aircraft) may be out of service due to unforeseen and irregular maintenance requirements; provided that (i) each substitute CRJ-200 aircraft shall be subject to compliance with flight interior and exterior standards and shall be approved by US Airways in writing before being used as a substitute aircraft pursuant to this Note 2, and (ii) Mesa may only utilize regional jet aircraft other than CRJ-900 or CRJ-200 aircraft to the extent that US Airways has permitted such use in advance in writing. For clarification purposes only, Mesa may operate such a substitute aircraft in US Airways Express or neutral livery in lieu of an Aircraft in US Airways Express livery and Mesa may operate such a substitute aircraft in American Eagle or neutral livery in lieu of an Aircraft in American Eagle livery, but may not operate a substitute aircraft in US Airways Express livery in lieu of an Aircraft in American Eagle livery or a substitute aircraft in American Eagle livery in lieu of an Aircraft in US Airways Express livery, without the prior written consent of US Airways.
a) |
Notwithstanding anything in the Code Share Agreement to the contrary, and assuming approval is granted, usage of substitute CRJ-200 aircraft shall be paid as follows: |
(1) |
Rates paid for operation of this aircraft will be $[***] per block hour and $[***] per departure plus any fuel costs associated with these substitute operations. Such rate shall be reduced by [***] after the 24th Flight of such aircraft in a calendar month, reduced by [***] after the 32 nd Flight of the calendar month, and [***] after the 40th Flight of the calendar month. Any CRJ-200 Flights operated as a result of Aircraft Damage caused by US Airways shall be excluded from the calculation and not subject to reductions pursuant to this paragraph. |
(2) |
In addition, the amount paid to Mesa will be further adjusted by any interrupted trip or passenger inconvenience costs to include, without limitation, such things as meals and hotels for displaced passengers, as well as an amount of $[***] per passenger downgraded from first class to coach class (excluding CRJ-200 flights operated because of Aircraft Damage caused by US Airways). |
b) |
If a substitute aircraft shall be utilized for more than two (2) consecutive days, Mesa and US Airways shall mutually agree upon the route that shall be covered by the substitute aircraft. |
US Airways - Mesa 15th Amendment Final2 (2) | 16 |
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c) |
For clarification purposes only, if a substitute aircraft is used in accordance with the terms hereof, the applicable provisions of the Code Share Agreement shall also apply to the Flight Services operated by such substitute aircraft, including, without limitation, if the respective Flight is not operated for any reason. |
d) |
The provisions of this Note 2 replace Section 9(d)(ii) of the Tenth Amendment in its entirety. |
US Airways - Mesa 15th Amendment Final2 (2) | 17 |
Execution Copy
EXHIBIT C
STANDARDS OF SERVICE
These Standards of Service are meant to provide an overview for Mesa of the service expectations established by US Airways and American for in-flight services on Flights. The Standards of Service outlined herein are not all-inclusive and may be changed from time to time by US Airways in its sole discretion.
I. In-Flight Service Product and Delivery . Mesa shall achieve at least the comparable quality of airline service as provided by US Airways and American, as applicable. Mesa shall coordinate with US Airways In-flight Services Department, or any similar department of any affiliate of US Airways as designated by US Airways, to ensure consistency and quality of Mesas in-flight service product, including non-safety related functions such as in-flight marketing announcements, meal and beverage presentation and delivery and provisioning and usage of passenger amenity kits. Mesa shall implement suggestions made by US Airways or its affiliates In-flight Services Department. Mesa shall coordinate with US Airways to ensure consistency with US Airways product delivery, including US Airways or American-logo, as applicable, napkins, stir rods and cups. Wherever possible, snack and beverage items should be consistent with the products served by US Airways and American, as applicable. Each Aircraft shall be supplied by US Airways or American, as applicable, with an adequate supply of US Airways or Americans, as applicable, in-flight publications. Mesa must place these in-flight publications in the designated seat pocket of each seat. Unless otherwise consented to by US Airways or American, as applicable, US Airways or Americans in-flight publications are the only magazines authorized in such seat pockets.
II. Uniforms . Mesas flight attendants on Flights shall wear uniforms as required under Section 11.4 of the Fifteenth Amendment. Mesas employees in such uniforms, whether on or off duty, are not permitted to drink intoxicating beverages, give the appearance of being intoxicated or visit any establishment whose primary purpose is to dispense liquor (including bars, saloons, cocktail lounges and liquor stores). As used herein, uniform refers to any uniform apparel bearing the US Airways or American brand or insignia, or which can be in any way identified with US Airways or American or one of their affiliates. Because the actions and appearance of employees influence, to a considerable extent, the publics opinion of the US Airways and American brands, uniformed employees must be mindful of this and conduct themselves accordingly.
III. In-Flight Announcements . While Mesa shall provide basic announcements, US Airways may request that Mesa make promotional announcements on behalf of US Airways and/or American from time to time and Mesa shall honor and execute any such request. In all on-board announcements on Flights, only the names US Airways, US Airways Express, American Airlines or American Eagle may be included and Mesas names shall not be included unless otherwise consented to by US Airways.
IV. Catering . US Airways or American, as applicable, shall provide, or arrange for another person to provide, all catering products and catering services for Flights, and, as directed by US Airways or American, Mesa shall serve the catering products on all such flights in accordance
US Airways - Mesa 15th Amendment Final2 (2) | 18 |
Execution Copy
with procedures and standards approved by US Airways or American, as applicable, in their sole discretion.
V. Failure to Meet Standards of Service.
In the event that Mesa fails to meet the Standards of Service as set forth in this Exhibit C, in addition to the remedies provided in section 12.6 of this Fifteenth Amendment for a Service Audit failure, US Airways may give notice to Mesa of such failure and the parties representatives shall meet within fifteen (15) days to discuss such failure in good faith. At such meeting, Mesa shall submit to US Airways a corrective action plan that Mesa reasonably believes will cure such failure to meet the Standards of Service within thirty (30) days and provide adequate assurance to US Airways that such Standards of Service will be complied with for the foreseeable future.
US Airways - Mesa 15th Amendment Final2 (2) | 19 |
Execution Copy
SCHEDULE 1 TO EXHIBIT C
FA Name | Flight Number | |
FA Employee # | Date | |
FA Base | City Pair | |
FA Position | Observing Supervisor | |
Base Supervisor |
Reason Codes - Requirement Not Met |
||||
A |
Unaware of the policy/procedure |
|||
B |
Chose not to follow procedure |
|||
C |
Irregular events/special circumstances |
A score of [***]% or above shall mean pass.
US Airways - Mesa 15th Amendment Final2 (2) | 20 |
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Pre-Take Off |
Requirement Met | Requirement Not Met |
Not Observed |
Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments: |
||||||||
Inflight |
Requirement Met | Requirement Not Met |
Not Observed |
Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments: |
||||||||
Arrival |
Requirement Met | Requirement Not Met |
Not Observed |
Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments: |
||||||||
Customer Service Experience |
Requirement Met | Requirement Not Met |
Not Observed |
Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
US Airways - Mesa 15th Amendment Final2 (2) | 21 |
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Comments / Follow-up action items: |
|
|
|
|
|
US Airways - Mesa 15th Amendment Final2 (2) | 22 |
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SCHEDULE 2 TO EXHIBIT C
|
||||||||
Date: |
Audit Analyst: | |||||||
Station: |
Audit Analyst: | |||||||
Carrier: |
Time On/Off: | |||||||
Flight: |
Tail Number: | |||||||
Number of Findings | ||||||||
TWO-CLASS CABIN |
0 |
Fewer than [***] is passing |
||||||
SINGLE-CLASS CABIN |
0 |
Fewer than [***] is passing |
||||||
Finding location /Observations |
||||||||
A |
Aircraft Cabin General |
Score | 0 | |||||
A1 |
[***] |
Pass | 0 | |||||
A2 |
[***] |
Pass | 0 | |||||
A3 |
[***] |
Pass | 0 | |||||
B |
First Class Cabin General |
Score | 0 | |||||
B1 |
[***] |
Pass | 0 | |||||
B2 |
[***] |
Pass | 0 | |||||
B3 |
[***] |
Pass | 0 | |||||
B4 |
[***] |
Pass | 0 | |||||
B5 |
[***] |
Pass | 0 | |||||
B6 |
[***] |
Pass | 0 | |||||
B7 |
[***] |
Pass | 0 | |||||
C |
First Class Seats (check all 9 seats) |
No. of Findings |
||||||
C1 |
[***] |
0 | ||||||
[***] |
0 | |||||||
C2 |
[***] |
0 | ||||||
[***] |
0 | |||||||
C3 |
[***] |
0 | ||||||
C4 |
[***] |
0 | ||||||
[***] |
0 | |||||||
C5 |
[***] |
0 | ||||||
C6 |
[***] |
0 | ||||||
[***] |
0 | |||||||
D |
Coach Cabin General |
Score | 0 | |||||
D1 |
[***] |
Pass | 0 |
US Airways - Mesa 15th Amendment Final2 (2) | 23 |
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D2 |
[***] |
Pass | 0 | |||||
D3 |
[***] |
Pass | 0 | |||||
D4 |
[***] |
Pass | 0 | |||||
D5 |
[***] |
Pass | 0 | |||||
D6 |
[***] |
Pass | 0 | |||||
E |
Coach Cabin Seats (check 15 seats) |
No. of Findings |
||||||
E1 |
[***] |
0 | ||||||
E2 |
[***] |
0 | ||||||
E3 |
[***] |
0 | ||||||
E4 |
[***] |
0 | ||||||
E5 |
[***] |
0 | ||||||
E6 |
[***] |
0 | ||||||
E7 |
[***] |
0 | ||||||
E8 |
[***] |
0 | ||||||
E8 |
[***] |
0 | ||||||
[***] |
0 | |||||||
F |
Lavatories (Check all Lavs) |
Score | 0 | |||||
F1 |
[***] |
0 | ||||||
F2 |
[***] |
0 | ||||||
[***] |
0 | |||||||
F3 |
[***] |
0 | ||||||
F4 |
[***] |
0 | ||||||
F5 |
[***] |
0 | ||||||
F6 |
[***] |
0 | ||||||
[***] |
0 | |||||||
F7 |
[***] |
0 | ||||||
F8 |
[***] |
0 | ||||||
F8 |
[***] |
0 | ||||||
Additional Comments |
||||||||
US Airways - Mesa 15th Amendment Final2 (2) | 24 |
Execution Copy
EXHIBIT D
FUEL EFFICIENCY PROGRAM
Mesas Fuel Efficiency Program shall incorporate at least the following:
I. |
Mesa will participate jointly with US Airways to interface with appropriate ATC facilities, management, and other personnel to minimize operational restrictions, and improve ATC handling of Flights. |
II. |
Implement, update and monitor flight planning fuel policies, including statistical tracking of fuel added by pilots and dispatchers, efficient reserves, and other objectives. |
III. |
Implement, update and monitor pilot and dispatcher training on the policies and objectives described in Section II above. |
IV. |
Implement, update and monitor an effective fuel tankering program, including automated tankering suggestions and calculations, using validated methods and formulas; US Airways will provide Mesa with cost data. |
V. |
Mesa will provide ACARS data as requested by US Airways to US Airways or one of US Airways agents in support of the program to be used for statistical tracking, analysis and measurement of fuel efficiency and for identifying and correcting deficiencies at the fleet and system levels. |
VI. |
Mesa will designate a manager to lead Mesas fuel task force (Mesa Fuel Task Force) which has overall responsibility for fuel efficiency. |
VII. |
Reviews each calendar quarter conducted by the Mesa Fuel Task Force of the Fuel Efficiency Program using data from US Airways in order to review Mesas fuel performance. Such reviews shall include the manager of the Mesa Fuel Task Force as described in Section VI above and representatives from the following groups: Mesas Service Operations Center, Mesas Flight group, US Airways Operations Engineering group and other US Airways or American personnel as designated by US Airways. |
VIII. |
Weight management oversight by the Mesa Fuel Task Force, including development of a policy to optimize arrival fuel. |
IX. |
Implement, update and monitor an auxiliary power unit management policy that prevents unnecessary or costly operation of the auxiliary power unit. |
X. |
Implement, update and monitor a single engine taxi policy both before takeoff and after landing. |
XI. |
Implement, update and monitor policy related to operationally efficient takeoff and landing flap selection priorities. |
US Airways - Mesa 15th Amendment Final2 (2) | 25 |
Execution Copy
XII. |
Additional programs may be developed by US Airways in the future that may require additional Mesa policies to be implemented. Mesa will not unreasonably withhold implementation of future policy requirements, subject to Mesa being reimbursed by US Airways for actual material cost increases (if any) in connection with such future policy requirements (if any). |
XIII. |
Monthly tracking data will be provided to US Airways consisting of the following fields for all flights flown by Mesa for US Airways and American; provided that Mesa shall not be required to deliver such data to US Airways to the extent it is prohibited by Mesas collective bargaining agreements and labor contracts as in effect on the date hereof: |
Carrier Code |
A/C Tail Number |
Aircraft Type |
Flight Number |
Flight Date |
Departure |
Destination |
Planned Departure Fuel |
Takeoff Weight Planned |
Flight Planned Burn |
Planned Landing Weight |
Arrival Fuel Planned |
Planned Zero Fuel Weight |
Estimated Time Enroute |
Average Wind Component at altitude |
Average ISA at altitude |
Top of Climb ISA |
Alternates Planned |
Alternate Fuel |
Reserve Fuel |
Hold Fuel |
Extra Hold Fuel |
Extra (contingency) Fuel |
Estimated Departure Time (Zulu) |
Coded Route |
Total Flight Plan Distance |
First Cruise Flight Level |
Step Climb/Descent FL |
Dispatcher Name (or code) |
Captain Name (or Code) |
OOOI Times (Zulu) |
Scheduled Block Time (from release) |
Actual Block Time (from OOOI times) |
Scheduled Flight Time |
US Airways - Mesa 15th Amendment Final2 (2) | 26 |
Execution Copy
Actual Off to On Time (from OOOI times) |
Source of the OOOI times (ACARS, FPLOT, Manual entry) |
Scheduled Block Time (from release) converted to minutes |
Actual Block Time (from OOOI times) converted to minutes |
Scheduled Flight Time converted to minutes |
Actual Off to On Time (from OOOI times) converted to minutes |
Minutes Over / Under Sked Block Time |
Minutes Over / Under Sked Flight Time |
Planned Departure Fuel (repeat) |
Takeoff Weight Planned (repeat) |
Flight Planned Burn (repeat) |
Planned Landing Weight (repeat) |
Arrival Fuel Planned including taxi burn (numbers at the gate) |
OOOI Reported Out and In Fuels |
Difference between Arrival Fuel Planned including taxi burn (numbers at the gate) and OOOI reported fuel at arrival) |
Difference between Flight Plan Burn and Actual Burn |
Planned Zero Fuel Weight (repeat) |
Max Takeoff Gross Weight |
Release Block - time from that days actual release rather than the schedule (minutes) |
Release Flight Time - time from that days actual release rather than the schedule (minutes) |
Dispatcher Desk |
Captain in specific format: DAVEY BRUCE CA 000110662 |
GMT DTG a Y or N for a tanker recommended flight |
Taxi out Fuel Planned |
Taxi In Fuel Planned |
US Airways - Mesa 15th Amendment Final2 (2) | 27 |
Execution Copy
XIV. |
Mesa will incorporate the following data reporting into the ACARS systems in all New Aircraft, enabling the collection of single engine start and stop information. US Airways acknowledges that the ACARS installed on original 38 CRJ900 aircraft does not report or track engine and APU starts and stops. Monthly tracking data will be provided to US Airways consisting of the following fields for all flights flown by Mesa for US Airways and American: |
Date |
Departure Station |
Arrival Station |
Flight Number |
Tail Number |
Equipment |
Departure Gate |
Actual Departure Time |
Actual Off Time |
Actual On Time |
Actual Arrival Time |
Engine (L/R) |
Start |
Stop |
Duration |
End of Sequence (x marker to show that the flight sequence has ended) |
Carrier |
US Airways - Mesa 15th Amendment Final2 (2) | 28 |
Execution Copy
EXHIBIT E
TRAINING
I. Customer Service . Mesa agrees that it shall train or cause to be trained to proficiency, all customer service employees of Mesa that may be associated with providing Flight Services. Mesa agrees to participate in any and all special training or other programs that US Airways or American provide for its customer service employees. Mesa may elect to accomplish such training through the use of a Train the Trainer concept. Mesas flight attendants providing Flight Services shall be trained by Mesa, at Mesas sole cost and expense, on meal and beverage service procedures for Flights, including liquor and duty-free sales and cash handling, and will collect all on-board revenue for liquor and duty-free sales on Flights.
US Airways - Mesa 15th Amendment Final2 (2) | 29 |
Exhibit 10.11.17
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
Execution Copy
SIXTEENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS SIXTEENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Sixteenth Amendment) is made and entered into as of January 26, 2015 (the Effective Date), by and between US AIRWAYS, INC., a Delaware corporation (US Airways) and MESA AIRLINES, INC., a Nevada corporation (Mesa).
RECITALS :
A. US Airways and Mesa are parties to that certain Code Share and Revenue Sharing Agreement, dated as of March 20, 2001 but effective as of February 1, 2001 (as amended, modified and supplemented, the Code Share Agreement).
B. The Code Share Agreement has previously been amended, including by the Tenth Amendment to Code Share and Revenue Sharing Agreement, dated November 18, 2010 (the Tenth Amendment), the Eleventh Amendment to Codeshare and Revenue Sharing Agreement, dated July 1, 2012 (the Eleventh Amendment), the Twelfth Amendment to Code Share and Revenue Sharing Agreement, dated February 13, 2013 (the Twelfth Amendment), the Thirteenth Amendment to Code Share and Revenue Sharing Agreement, dated December 24, 2013 (the Thirteenth Amendment), the Fourteenth Amendment to Code Share and Revenue Sharing Agreement, dated April 10, 2014 (the Fourteenth Amendment), and the Fifteenth Amendment to Code Share and Revenue Sharing Agreement, dated November 26, 2014 (the Fifteenth Amendment).
C. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Sixteenth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
D. Mesa and US Airways desire to amend the Code Share Agreement to add seven (7) new CRJ-900 aircraft to the Code Share Agreement and to make the other changes and agreements as set forth in this Sixteenth Amendment.
AGREEMENT :
NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and Mesa agree as follows:
1. Termination of the Fifteenth Amendment . The parties hereby acknowledge and agree that the Fifteenth Amendment shall be deemed terminated and of no further force and effect as of December 31, 2014.
2. Flight Services for American Airlines . In connection with the operational integration of US Airways and American Airlines, Inc. (American) resulting from the merger between the parent company of US Airways, and a wholly-owned subsidiary of Americans parent company, American Airlines Group Inc. (formerly AMR Corporation), Mesa acknowledges, agrees and
US Airways - Mesa 16 th Amendment Final | 1 |
confirms that any Schedule provided to Mesa pursuant to Section 2.1 of the Code Share Agreement may include Flights operated for American under the American Eagle brand (the American Flights). Mesa will perform the Flight Services in connection with such American Flights in accordance with the terms and conditions of the Code Share Agreement. Mesa will cooperate with US Airways and American to establish Mesa as a carrier within the American systems as requested by US Airways and/or American from time to time.
3. Addition of CRJ-900 Aircraft.
3.1 Sixteenth Amendment New Aircraft . Mesa will procure seven (7) additional Bombardier CRJ-900 aircraft that have not previously entered into service prior to being Inducted (as defined below), as further described on Exhibit A hereto (the Sixteenth Amendment New Aircraft), and will operate such Sixteenth Amendment New Aircraft pursuant to the terms of the Code Share Agreement, as amended hereby. The Sixteenth Amendment New Aircraft shall be considered Aircraft for all intents and purposes of the Code Share Agreement, except as may be expressly provided otherwise in this Sixteenth Amendment.
3.2 Term of Sixteenth Amendment New Aircraft . The Term of the Code Share Agreement, as it relates to each Sixteenth Amendment New Aircraft, shall be extended for an additional ten (10) years from the induction date of each such Aircraft, as determined in accordance with Section 5.1 of this Sixteenth Amendment (each such date, an Induction Date), such that the Code Share Agreement shall expire as to each Sixteenth Amendment New Aircraft on the tenth (10 th ) anniversary of each such Aircrafts Induction Date, unless terminated earlier as provided in the Code Share Agreement.
3.3 Aircraft Procurement . No later than February 15, 2015, Mesa shall demonstrate to US Airways reasonable satisfaction that Mesa will be able to execute definitive leases for, or otherwise procure, the Sixteenth Amendment New Aircraft (for example, by providing copies of executed leases, term sheets, LOIs, or MOUs showing the estimated Delivery Date (as defined below) and term for the Sixteenth Amendment New Aircraft covered by such documents). Should Mesa fail to demonstrate to US Airways reasonable satisfaction that Mesa will procure and deliver the Sixteenth Amendment New Aircraft as required hereby, at any time after February 15, 2015, US Airways may, at its sole discretion, terminate this Sixteenth Amendment without any further liability or obligation to Mesa whatsoever unless otherwise provided in Section 16.6. Should US Airways elect not to terminate this Sixteenth Amendment, as provided in the previous sentence, and should Mesa be unable to lease, or otherwise procure, the Sixteenth Amendment New Aircraft by March 15, 2015, Mesa may terminate this Sixteenth Amendment without any further liability or obligation to US Airways whatsoever unless otherwise provided in Section 16.6.
4. Configuration, Branding & Livery of Sixteenth Amendment New Aircraft . The Sixteenth Amendment New Aircraft will be (i) painted in American Eagle livery, (ii) compliant with American Eagle brand interior and exterior specifications and branding requirements (American Eagle Branding), (iii) compliant with the minimum specifications set forth in Exhibit B , (iv)
US Airways - Mesa 16 th Amendment Final | 2 |
Wi-Fi enabled; the installation of any necessary equipment in connection therewith shall be at US Airways expense, and (v) delivered to Mesa on the applicable Delivery Date and in the configuration specified in the Sixteenth Amendment New Aircraft Delivery Schedule set forth in Section 5.1 of this Sixteenth Amendment (the Delivery Schedule). US Airways and/or American will provide the American Eagle Branding requirements to Mesa. Furthermore, American will provide such licenses and other documentation to Mesa regarding the American Eagle Branding as American may deem necessary in order to protect Americans intellectual property rights (including without limitation the American Airlines and American Eagle trademarks and the American Eagle trade dress and livery). In the event that the Sixteenth Amendment New Aircraft are not Inducted, as required by Section 5.1, the Late Delivery Charges (as defined below) and other terms and conditions applicable to the late delivery of the Sixteenth Amendment New Aircraft set forth in Section 5 below shall apply. US Airways shall pay Mesa $[***] for each Sixteenth Amendment New Aircraft no later than twenty (20) days after such Aircraft is Inducted. Furthermore, US Airways will be allowed to inspect and approve each Sixteenth Amendment New Aircraft prior to its Induction Date to ensure that the quality is in line with US Airways and American Airlines standards and the terms of this Sixteenth Amendment.
5. Aircraft Delivery and Induction for Sixteenth Amendment New Aircraft .
5.1 Aircraft Delivery and Induction . The Sixteenth Amendment New Aircraft shall be (i) painted, decorated and configured in accordance with Section 4, (ii) have adequate pilot and crew staffing, and (iii) otherwise be ready to operate in the US Airways network and/or the American system on the applicable Induction Date (such Aircraft shall hereinafter be referred to as Inducted). In the event that a Sixteenth Amendment New Aircraft is not ready to be Inducted on the applicable Induction Date (each, a Late Aircraft), Mesa shall immediately notify US Airways of such Late Aircraft by telephone and in writing by confirmed email (Late Delivery Notice). For each Late Aircraft, Mesa shall pay to US Airways late-delivery charges (the Late Delivery Charges) in the amount of $[***] for each calendar day such Late Aircraft is Inducted after the applicable Induction Date (each a Delay Day). US Airways will provide an invoice for such Late Delivery Charges to Mesa detailing the applicable Late Delivery Charges for each Late Aircraft and will offset such Late Delivery Charges against a future invoice from Mesa; provided that, in the event that Mesa incurs Late Delivery Charges in connection with any Late Aircraft as provided herein and US Airways, at its option, decides to collect such Late Delivery Charges, US Airways shall adjust the Schedule accordingly such that Mesas Spare Aircraft will not be scheduled by US Airways to cover the Late Aircraft. In lieu of collecting the Late Delivery Charges as provided in the previous sentence, US Airways may decide, at its option, to not adjust the Schedule and require Mesa to operate its Spare Aircraft to cover the Late Aircraft, provided that in such event US Airways shall not collect Late Delivery Charges for such Late Aircraft. For clarification purposes only, US Airways will have the option as provided in the previous sentences for each Late Aircraft, if any. With respect to Late Aircraft, after three hundred sixty five (365) cumulative Delay Days, US Airways may, at its option, elect to cancel the induction of such Late Aircraft. Late Delivery Charges shall constitute liquidated damages and not a penalty, and each party agrees that such liquidated damages are a reasonable approximation of the actual damages but that the
US Airways - Mesa 16 th Amendment Final | 3 |
amount of actual damages that would result from a Late Aircraft is difficult or impossible to calculate.
SIXTEENTH AMENDMENT NEW AIRCRAFT DELIVERY SCHEDULE
Month of Delivery
|
Configuration at Delivery | |
July [TBD], 2015
|
76 seat dual-class | |
July [TBD], 2015
|
76 seat dual-class | |
August [TBD], 2015
|
76 seat dual-class | |
August [TBD], 2015
|
76 seat dual-class | |
September [TBD], 2015
|
76 seat dual-class | |
September [TBD], 2015
|
76 seat dual-class | |
September [TBD], 2015
|
76 seat dual-class |
Mesa shall provide US Airways with (i) at least 60 days prior written notice of the week each of the Sixteenth Amendment New Aircraft will be delivered to Mesa and (ii) at least 30 days prior written notice (each, a 30-day Notice) of the date on which each Sixteenth Amendment New Aircraft will be delivered to Mesa (the delivery date set forth on each 30-day Notice shall hereinafter be referred to as a Delivery Date). The Induction Date for each Sixteenth Amendment New Aircraft shall be the tenth day after the Delivery Date of each such Aircraft; provided, however, Mesa shall not be responsible for any delays associated with the installation of the wi-fi system that exceeds ninety-six (96 hours).
5.2 Force Majeure . Notwithstanding the foregoing, performance by Mesa under this provision shall not be deemed to be in default and shall not give rise to the payment of the aforementioned Late Delivery Charges or any other penalties, costs, fees or expenses of any kind where delays or defaults are directly due to manufacturer delays, war, insurrection, strikes, walk-outs, riots, floods, earthquakes, fires, casualties, acts of God, governmental restrictions imposed or mandated by governmental entities after the date of this Sixteenth Amendment, enactment of conflicting state or federal laws or regulations, new or supplementary environmental regulations or litigation, materially adverse national or global economic conditions, or any other matter beyond the reasonable control of Mesa; provided that failure to procure the Sixteenth Amendment New Aircraft or the materials and/or services necessary to Induct such Aircraft shall not be deemed to be matters beyond Mesas reasonable control unless such failure is due to one of the specific events set forth above.
6. Aircraft Return Schedule . All Aircraft operated under the Code Share Agreement, including the Sixteenth Amendment New Aircraft, shall be ratably returned beginning January 1,
US Airways - Mesa 16 th Amendment Final | 4 |
2021 in accordance with the applicable return schedule terms provided in the Twelfth and Thirteenth Amendments. The Aircraft will return at an approximate rate of three (3) aircraft per month, provided that the Aircraft added by the Fourteenth Amendment (the Fourteenth Amendment New Aircraft) shall begin to be ratably returned beginning August 1, 2022 and the Sixteenth Amendment New Aircraft shall be ratably returned beginning on the tenth (10th) anniversary of the Induction Date of the first Inducted Sixteenth Amendment New Aircraft, and provided further that the Term for each of the Sixteenth Amendment New Aircraft will be 10 years from the Induction Date for each such Aircraft (unless terminated earlier or extended in accordance with the terms of the Code Share Agreement). Immediately after the return of each Aircraft as provided herein, Mesa shall remove any and all references to US Airways trademarks, trade dress, livery, service marks and trade names and all references to the American Eagle Branding, as applicable, prior to any further use of such Aircraft. For purposes of this Section 6, return shall mean that the respective Aircraft shall cease to be covered by the terms of the Code Share Agreement.
7. Rates.
7.1 Rates . The rates applicable to the Original Aircraft (as such term is defined in the Thirteenth Amendment), the Twelfth Amendment New Aircraft, the Aircraft added by the Thirteenth Amendment (the Thirteenth Amendment New Aircraft), the Fourteenth Amendment New Aircraft, and the Sixteenth Amendment New Aircraft, upon their entry into service under the Code Share Agreement in accordance with the terms and conditions of this Sixteenth Amendment, are set forth in Exhibit C to this Sixteenth Amendment; provided that the Outstation Maintenance rates stated in Exhibit C will go into effect for December 2014. For clarification purposes only, Exhibit C to this Sixteenth Amendment (including Notes 1 and 2) replaces Exhibit B attached to the Fourteenth Amendment (including Notes 1 and 2) in its entirety.
7.2 Escalation . For rate escalation adjustments beginning in February 2014, the escalation rate will be based on the index specified in the Code Share Agreement, but capped at ***%. All the rates will be stated with up to two decimal points. Any future escalation will also be stated for up to two decimal points. For clarification purposes only, any rates (including rates after escalation) shall only be calculated up to the second decimal point.
7.3 Waiver of RON Maintenance Claims . Mesa agrees to waive any claims for, and to forego any amounts in connection with, any disputed pass-through RON maintenance expense cost claimed by Mesa under the maintenance cost structure pursuant to the Code Share Agreement as amended up to and including the Fourteenth Amendment, which have not been paid or reimbursed by US Airways as of the Effective Date.
8. Replacement of Code Share Agreement . Upon execution of this Sixteenth Amendment by both parties, the parties shall, in good faith promptly negotiate and execute a new Capacity Purchase Agreement to replace the existing Code Share Agreement reflecting the foregoing terms and all applicable terms and conditions set forth in the Code Share Agreement and its various amendments. The purpose of such new Capacity Purchase Agreement is to re-state and
US Airways - Mesa 16 th Amendment Final | 5 |
organize the previous agreement and clean up dead language for ease of administration. The parties agree to work in good faith to have such new Capacity Purchase Agreement in place by September 1, 2015.
9. New Maintenance Base .
9.1 ELP as new Maintenance Base . In connection with the closure of the Maintenance Base at Charlotte (in accordance with the Notice of CLT Maintenance Base Closure, dated June 18, 2014), the parties agree that El Paso (ELP) shall be designated as a new Maintenance Base pursuant to Section 2.6.3 of the Code Share Agreement (as amended by the Twelfth Amendment) replacing Charlotte (CLT).
9.2 Rates . The payment rates for ELP, as stated under the header Maintenance Base Cost in Exhibit C hereto, shall be the same as the current CLT rates, at $[***] per month; provided, however, it is agreed and understood that for periods during which ELP and CLT may both be Maintenance Bases Mesa may only charge $[***] per month for both ELP and CLT collectively, but not $[***] per month for each of them.
9.3 Payment . US Airways will reimburse Mesa for the reasonable out-of-pocket expenses in connection with the relocation of the maintenance base; provided that retention packages provided by Mesa in connection with the relocation will be Mesas responsibility. Such reimbursement payments shall be made within 30 days of receipt by US Airways of an invoice from Mesa detailing the actual and reasonable costs incurred, and submission by Mesa of auditable documentation supporting such actual and reasonable costs, to US Airways reasonable satisfaction.
10. Performance Threshold Changes due to LAX Transition . The new CD0 and CCF thresholds for operational performance pursuant to Section 9 of the Tenth Amendment (as amended), including cure rate, default rate, incentive level, penalty level 1 and level 2 to be effective as of August 1, 2014 (the Post LAX Transition Thresholds) are set as follows (for convenience of the parties the thresholds as applicable immediately prior to the Effective Date are also provided):
Pre LAX Transition Thresholds (i.e., effective up to July 31, 2014)
|
Post LAX Transition Thresholds (i.e., effective as of August 1, 2014)
|
|||||||
CD0
|
CCF
|
CDO
|
CCF
|
|||||
Default
|
[***] |
[***] |
[***] |
[***] |
||||
Cure
|
[***] |
[***] |
[***] |
[***] |
||||
Incentive
|
[***] |
[***] |
[***] |
[***] |
||||
Penalty Level 1
|
[***] |
[***] |
[***] |
[***] |
||||
Penalty Level 2
|
[***] |
[***] |
[***] |
[***] |
US Airways - Mesa 16 th Amendment Final | 6 |
These thresholds will apply until new thresholds are established in accordance with the Code Share Agreement. For purposes of setting revised operational performance thresholds in connection with potential future transitions, the parties agree to apply the same method as applied to set the LAX Transition Thresholds as provided in the Tenth Amendment. In addition, notwithstanding anything herein to the contrary, as one-time accommodation, US Airways and Mesa, as applicable, agree to waive [***] of the dollar value of any penalties or bonuses, as applicable, owed in this Section for the 3 rd Quarter 2014 (July-September 2014), [***] of the dollar value of any penalties or bonuses owed in this Section for the 4 th Quarter 2014 (October-December 2014), [***] of the dollar value of any penalties or bonuses owed in this Section for the 1 st Quarter 2015 (January-March 2015), and [***] of the dollar value of any penalties or bonuses owed in this Section for the 2 nd Quarter 2015 (April-June 2015) in connection with Mesas transition from Charlotte, North Carolina and Los Angeles, California to Dallas, Texas.
Beginning with the 3 rd Quarter 2015 (July-September 2015) the full dollar value of penalties shall begin to apply again subject to the following performance thresholds, which shall be unchanged until the end of the Term:
Service Level | CD0 | CCF | ||
Threshold | Threshold | |||
Incentive Level (Top 20%) |
[***] |
[***] |
||
Service Level 1 (Bottom 25%) |
[***] |
[***] |
||
Service Level 2 (Bottom 10%) |
[***] |
[***] |
||
Cure Level |
[***] |
[***] |
||
Default (Bottom 5%) |
[***] |
[***] |
Effective as of January 1, 2015, the parties agree to (i) revise Section 8.2 of the Code Share Agreement (as amended by Section 9(e) of the Tenth Amendment) to remove the early termination right and related provisions with regard to the CD0 default event and (ii) limit the CD0 portion of the Quarterly Performance Credit (as defined in Section 9(a)(viii) of the Tenth Amendment) to a maximum amount of [***] ($[***]), i.e., the maximum amount owed by Mesa under this provision with respect to any CD0 performance credits per quarter will be [***] ($[***]).
In addition, the parties agree that non-controllable damage cancellations extend through the entire period the Aircraft is out of service. For each out of service day, Mesa shall receive a credit of two (2) cancelled flights per day for purposes of determining CD0 and CCF percentages above.
11. Spares . US Airways will schedule Mesas Aircraft to provide a minimum of one Spare Aircraft per [***] active Aircraft operated at each hub, but in no event less than [***] Spare Aircraft per hub. For purposes of this Section 11, a hub shall mean an airport where Mesa operates a monthly average of [***] flights per day under the Code Share Agreement.
US Airways - Mesa 16 th Amendment Final | 7 |
12. Preferential Consideration of Furloughed Pilots . US Airways, American and Mesa will enter into a letter agreement, regarding the terms and conditions pursuant to which Mesa will provide first consideration in Mesas application and screening process to mainline pilots on furlough from either the American or US Airways (East or West) pilots seniority lists, if (i) Mesa is hiring pilots, and (ii) there are mainline pilots on furlough from American or US Airways.
13. Quality of Service and Aircraft Condition .
13.1 Conflict . In the event of a conflict between the provisions of (i) this Section 13 and/or Exhibit D or Exhibit F hereto and (ii) the provisions of the Code Share Agreement, the provisions of this Section 13 and/or Exhibit D or Exhibit F shall govern as to their subject matter.
13.2 Procedures and Performance Standards . At all times, Mesa shall provide Flight Services to US Airways or American, as applicable in accordance with procedures and performance standards approved by US Airways from time to time in its sole discretion and provided in writing to Mesa, including but not limited to those certain Standards of Service set forth in Exhibit D hereto (Service Standards). The Service Standards may be amended or changed by US Airways from time to time upon thirty (30) days prior notice to Mesa; provided that sixty (60) days notice shall be given by US Airways to the extent any such amendment or change may reasonably be expected to result in new or additional training. If Service Standards are materially changed or altered and such changes or alterations materially increase Mesas costs (i.e., an amount of more than [***] ($[***]) per year), US Airways shall reimburse Mesa for the actual incremental costs associated therewith, subject to Mesa providing sufficient documentation for such cost reasonably acceptable to US Airways. Mesa shall be responsible for all crew and other employee conduct, appearance and training policies (as set forth on Exhibit F ), aircraft cleaning (including the timing thereof), standards and adequate staffing levels in order to comply with such procedures and meet such standards, including without limitation in respect of customer complaint response and any handling of irregular operations, all of which shall be handled in a professional, businesslike and courteous manner.
13.3 In-Flight Services . Mesa shall comply with the catering requirements set forth on Exhibit D hereto. Mesa shall also coordinate all in-flight services relating to the Flight Services with the in-flight services department of US Airways or any person designated by US Airways to ensure consistency and quality of Mesas in-flight service, including non-safety related functions such as in-flight marketing announcements, meal and beverage presentation and delivery, and provisioning and usage of passenger amenity kits. Mesa shall sell beer, wine, liquor and any other alcoholic beverages on Flights. Mesa agrees that such in-flight sales shall be conducted as directed by US Airways or American, as applicable, from time to time. Mesa shall implement any suggestions made by US Airways or Americans in-flight services department, as applicable. All revenues collected by Mesa for such in-flight services on the Aircraft shall be promptly remitted or provided to US Airways. Mesa must provide notice to US Airways of any threatened catering-related fines or penalties that could result in a liability to US Airways or American within ten (10) days of receipt of such notification and allow for the
US Airways - Mesa 16 th Amendment Final | 8 |
involvement of US Airways or American, as applicable, in the resolution process of such issue so that the parties can work to minimize any fines to US Airways or American, as applicable.
13.4 Mesas Representative Uniforms . Mesa shall require all of its respective personnel and any of its respective agents providing Flight Services in job classifications requiring direct public contact to wear uniforms and accessories furnished by Mesa that are of colors and styles approved by US Airways from time to time. Mesa shall not alter or change such uniforms and accessories without the prior written consent of US Airways. If, after the date hereof, US Airways determines, in its sole discretion, that such uniforms and accessories should be materially altered or changed, then US Airways shall provide Mesa with notice of such alterations or changes. In the event that US Airways decides to implement such alterations or changes, Mesa shall implement such alterations or changes at US Airways cost for Mesas then current employees.
13.5 No Reimbursement of Fines . US Airways shall not be required to incur any cost or make any payment to the extent such cost or payment is attributable to any costs, expenses or losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Mesa as a result of any violation by Mesa of any law, statute, judgment, decree, order, rule or regulation of any governmental authority. US Airways shall be liable for all costs, expenses and losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Mesa as a result of any violation by US Airways, American or their respective agents, or by Mesa to the extent performed at the direction of US Airways or American, of any law, statute, judgment, decree, order, rule or regulation of any governmental authority. Mesa must provide notice to US Airways of any notification that could result in a liability to US Airways or American within ten (10) days of receipt of such notification and allow for the involvement of US Airways or American, as applicable, in the resolution process of such issue so that the parties can work to minimize any fines to US Airways or American.
13.6 Right to Audit Service and Aircraft Condition . US Airways has the right, in its sole discretion, to audit Mesas service (each such audit a Service Audit) and aircraft condition (each such audit an Aircraft Condition Audit) to ensure it meets the Service Standards and Aircraft Condition Standards and actions required as above and in Exhibit D or other Service Audit and/or Aircraft Condition Audit standards that may be developed by US Airways or American from time to time. US Airways will review the Service Audit and Aircraft Condition Audit program for a period to be determined in its discretion in order to determine the appropriate pass and fail rates for such audits. An Inflight Service sample survey is described in Schedule 1 to Exhibit D , and an Aircraft Condition sample survey is described in Schedule 2 to Exhibit D , provided that such samples can be changed at any time in US Airways sole discretion. If Aircraft Condition Standards are materially changed or altered and such changes or alterations materially increase Mesas costs (i.e., an amount of more than [***] ($[***]) per year), US Airways shall reimburse Mesa for the actual incremental costs associated therewith, subject to Mesa providing sufficient documentation for such cost reasonably acceptable to US Airways. If an Aircraft fails (i) a Service Audit, Mesa shall pay $[***] per failed audit,
US Airways - Mesa 16 th Amendment Final | 9 |
and (ii) an Aircraft Condition Audit and such failure continues for seven (7) calendar days after Mesas receipt of written notice from US Airways, Mesa shall pay $[***] per day for any failure to remedy the failure noted in the Aircraft Condition Audit within the 7-day cure period; provided, however, that such remedies as provided under (i) and (ii) above shall not become effective until nine (9) months after Mesa has received written notice from US Airways that the audit program as described in this Section 13.6 has been implemented, and provided further that during such 9-month period the parties shall meet and confer in good faith as to review initial findings and determine the appropriate pass and fail levels for each audit, subject to US Airways setting such pass and fail levels in the event that the parties are unable to agree on appropriate pass and fail levels.
14. Fuel Efficiency Program . Section 10 of the Twelfth Amendment is deleted in its entirety and replaced by the following:
Fuel Management . Mesa shall continue to fully participate in US Airways fuel management program (Fuel Efficiency Program) and will work to actively manage fuel consumption and minimize over all fuel expense. Mesa shall promptly adopt and adhere to the fuel efficiency program as described on Exhibit E to the Sixteenth Amendment, as long as Mesas adoption or adherence to such fuel efficiency program does not impact the safety of Flight Services under FAA operational specifications, or other regulatory constraints, or the airworthiness of the Aircraft or materially increase Mesas costs in any way.
15. Withdrawal of Aircraft in lieu of Termination . In the event that US Airways has the right to terminate the Code Share Agreement for any reason (including, without limitation, for any default by Mesa under the Code Share Agreement), US Airways shall have the right, in its sole discretion, instead of exercising any such termination right, to withdraw from the coverage of the Code Share Agreement up to fourteen (14) aircraft (i.e., any number between one and fourteen (14) aircraft), it being understood that (i) the fourteen (14) aircraft may be withdrawn in increments of any number of aircraft, provided that not more than fourteen (14) aircraft total may be withdrawn pursuant to this Section 15 over the remainder of the Term, and (ii) after such withdrawal any such withdrawn aircraft shall no longer be used to provide Flight Services under the Code Share Agreement and it being understood further that any payments by US Airways to Mesa pursuant to the Code Share Agreement shall be reduced accordingly. US Airways shall provide written notice to Mesa stating the effective date on which each such withdrawn aircraft will be withdrawn from the coverage of the Code Share Agreement (the Withdrawal Notice); provided that (i) Mesa, in its sole discretion, shall select the aircraft to be withdrawn on each withdrawal date stated in the Withdrawal Notice, except that in the event any default giving rise to a withdrawal right by US Airways is associated with any one or more particular covered aircraft, US Airways has the right, in its discretion, to have such aircraft withdrawn from coverage pursuant to this Section 15; (ii) the Withdrawal Notice shall be irrevocable by US Airways once received by Mesa; (iii) the withdrawal rights pursuant to this Section 15 may only be exercised by US Airways within ninety (90) days of the date on which the respective termination right is triggered (it being understood, that there may be multiple Withdrawal Notices, and it being understood further that such ninety (90) day period runs separately for each termination right US Airways may have whether concurrently or consecutively); (iv) the earliest date on which an aircraft may be withdrawn pursuant to a Withdrawal Notice shall be thirty (30)
US Airways - Mesa 16 th Amendment Final | 10 |
days from the date of such Withdrawal Notice; and (v) US Airways may not withdraw more than four (4) aircraft during any given calendar month.
16. Miscellaneous.
16.1 Except as set forth in this Sixteenth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Sixteenth Amendment.
16.2 This Sixteenth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
16.3 This Sixteenth Amendment, including the Exhibits attached hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
16.4 The following terms as defined herein shall apply only with respect to the Sixteenth Amendment New Aircraft: Configuration, Inducted, Delivery Schedule, Late Aircraft, Late Delivery Charges and Late Delivery Notice.
16.5 The definitions contained in this Sixteenth Amendment are applicable to the other grammatical forms of such terms.
16.6 Notwithstanding anything herein to the contrary, Sections 1, 2, 7, 8, 9, 12, 14, and 16 and Exhibit C (except with respect to any columns titled +7(Amd.16)) shall survive the expiration or termination of this Sixteenth Amendment.
[Signatures Follow]
US Airways - Mesa 16 th Amendment Final | 11 |
IN WITNESS WHEREOF, the parties have duly executed this Sixteenth Amendment as of the date first above written.
MESA AIRLINES, INC.
By:
Name:
Title:
Date: |
|
US AIRWAYS, INC.
By:
Name:
Title:
Date: |
|
US Airways - Mesa 16 th Amendment Final | 12 |
EXHIBIT B
Minimum Specifications
The minimum specifications shall include:
◾ |
American Eagle Branding livery |
◾ |
Economy class seats with leather dress covers (per the LOPA specified below) |
◾ |
Business class seats with leather dress covers (per the LOPA specified below) |
◾ |
G1 Galley NextGen - Provisions for Oven (Stowage Units in lieu of Oven) & Beverage Services (2 BE Endura), 5 Trolleys |
◾ |
G3 Galley with Bus. Wardrobe Full Height, Provisions for Dry Storage, 2 Trolleys |
◾ |
Beverage Maker (Qty: 2) |
◾ |
Galley - Storable Workshelf - Folding (each) |
◾ |
ELTs sufficient to perform Mexico and Canada operations |
◾ |
ACARS (Collins CMU-900) sufficient to capture the data required to perform the Fuel Efficiency Program |
◾ |
Powerplant - Standard Performance (CF34-8C5) Conic Nozzle |
◾ |
Equipped with Bombardier Enhanced Performance Package (EPP) |
◾ |
Capable of meeting all CAT II requirements |
◾ |
Cabin interior in conformance with the LOPA specified below |
US Airways - Mesa 16 th Amendment Final | 14 |
US Airways - Mesa 16 th Amendment Final | 15 |
EXHIBIT C
Mesa Contract Rates (Effective as of the Effective Date of the Sixteenth Amendment)
(See note 2)
Guaranteed Non-Maintenance Cost
Original 38 | +9 (Amd.12) |
+4/6 (Amd.13/14) |
+7(Amd.15) | |||||||||
COST CATEGORY | UNIT | CRJ 900 | CRJ 900 | CRJ 900 | CRJ 900 | |||||||
Aircraft Lease &Over Head | A/C MONTH | |||||||||||
Ownership |
[***] |
[***] |
[***] |
[***] |
||||||||
Overhead |
[***] |
[***] |
[***] |
[***] |
||||||||
Crew RON |
[***] |
[***] |
[***] |
[***] |
||||||||
Total |
[***] |
[***] |
[***] |
[***] |
||||||||
Flight Crew & Maintenance | BLOCK HOUR | |||||||||||
Note 1 | Pilot |
[***] |
[***] |
[***] |
[***] |
|||||||
Note 1 |
Flight Attendant | [***] | [***] | [***] | [***] | |||||||
Total |
[***] |
[***] |
[***] |
[***] |
||||||||
[***] |
[***] |
[***] |
[***] |
|||||||||
Dispatchers | DEPARTURE |
[***] |
[***] |
[***] |
[***] |
|||||||
Guaranteed Non-Maintenance Cost Reduction | A/C MONTH | |||||||||||
Rates to be applied on Amendment Effective Date==> |
[***] |
[***] |
[***] |
[***] |
||||||||
Effective Date==> 10/1/2015 |
[***] |
[***] |
[***] |
[***] |
||||||||
Aircraft Margin | A/C MONTH |
[***] |
[***] |
[***] |
[***] |
Guaranteed Maintenance Costs
Original 38 | +9 (Amd.12) |
+4/6 (Amd.13/14) |
+7(Amd.15) | |||||||
COST CATEGORY | UNIT | CRJ 900 | CRJ 900 | CRJ 900 | CRJ 900 | |||||
Maintenance Cost Per A/C | A/C MONTH | |||||||||
MX Employees | [***] | [***] | [***] | [***] | ||||||
Engine & APU Depreciation | [***] | [***] | [***] | [***] | ||||||
Outstation Base | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] | ||||||
Maintenance Base Cost | BASE/MONTH | |||||||||
Rent & Utilities | [***] | [***] | [***] | [***] | ||||||
Personnel | [***] | [***] | [***] | [***] | ||||||
Parts Depreciation | [***] | [***] | [***] | [***] | ||||||
Equipment Depreciation | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] | ||||||
Maintenance Cost Per Block Hour | BLOCK HOUR | |||||||||
Engine MX Contractual | [***] | [***] | [***] | [***] | ||||||
Engine MX- Other | [***] | [***] | [***] | [***] | ||||||
Airframe MX | [***] | [***] | [***] | [***] |
US Airways - Mesa 16 th Amendment Final | 16 |
Original 38 | +9 (Amd.12) |
+4/6 (Amd.13/14) |
+7(Amd.15) | |||||||
Total | [***] | [***] | [***] | [***] |
* = these amounts will not be subject to escalation over the Term |
US Airways - Mesa 16 th Amendment Final | 17 |
Note 1 As of the Execution Date, Pilot and Flight Attendant cost will be set at the rates set forth above in this Exhibit C . Rate for Mesas pilots may be adjusted once during the remainder of the term of the Code Share Agreement to reflect an increase to the pay scale for the pilots of no more than [***] ([***]) any time after January 16, 2015 to account for any new or renegotiated collective bargaining agreement, provided that such adjusted rate shall not be billed to US Airways until after such adjusted rate is effective and paid to the Mesas pilots.
Note 2 In addition to the Aircraft (as defined below), Mesa may, subject to the terms and conditions of this Note 2, in its discretion and at its sole expense, arrange for and utilize substitute CRJ-900 aircraft or CRJ-200 aircraft in American Eagle/US Airways Express livery (as applicable based on the terms of the Code Share Agreement) or neutral livery to provide the Flight Services under this Code Share Agreement during those periods, but only during those periods, when any of the Original Aircraft, the Twelfth Amendment New Aircraft, the Thirteenth Amendment New Aircraft, the Fourteenth Amendment New Aircraft or the Sixteenth Amendment New Aircraft (collectively, Aircraft) may be out of service due to unforeseen and irregular maintenance requirements; provided that (i) each substitute CRJ-200 aircraft shall be subject to compliance with flight interior and exterior standards and shall be approved by US Airways in writing before being used as a substitute aircraft pursuant to this Note 2, and (ii) Mesa may only utilize regional jet aircraft other than CRJ-900 or CRJ-200 aircraft to the extent that US Airways has permitted such use in advance in writing. For clarification purposes only, Mesa may operate such a substitute aircraft in US Airways Express or neutral livery in lieu of an Aircraft in US Airways Express livery and Mesa may operate such a substitute aircraft in American Eagle or neutral livery in lieu of an Aircraft in American Eagle livery, but may not operate a substitute aircraft in US Airways Express livery in lieu of an Aircraft in American Eagle livery or a substitute aircraft in American Eagle livery in lieu of an Aircraft in US Airways Express livery, without the prior written consent of US Airways.
a) |
Notwithstanding anything in the Code Share Agreement to the contrary, and assuming approval is granted, usage of substitute CRJ-200 aircraft shall be paid as follows: |
(1) |
Rates paid for operation of this aircraft will be $[***] per block hour and $[***] per departure plus any fuel costs associated with these substitute operations. Such rate shall be reduced by [***] after the 24 th Flight of such aircraft in a calendar month, reduced by [***] after the 32 nd Flight of the calendar month, and [***] after the 40 th Flight of the calendar month. Any CRJ-200 Flights operated as a result of Aircraft Damage caused by US Airways shall be excluded from the calculation and not subject to reductions pursuant to this paragraph. |
(2) |
In addition, the amount paid to Mesa will be further adjusted by any interrupted trip or passenger inconvenience costs to include, without limitation, such things as meals and hotels for displaced passengers, as well as an amount of $[***] per passenger downgraded from first class to coach class (excluding CRJ-200 flights operated because of Aircraft Damage caused by US Airways). |
b) |
If a substitute aircraft shall be utilized for more than two (2) consecutive days, Mesa and US Airways shall mutually agree upon the route that shall be covered by the substitute aircraft. |
US Airways - Mesa 16 th Amendment Final | 18 |
c) |
For clarification purposes only, if a substitute aircraft is used in accordance with the terms hereof, the applicable provisions of the Code Share Agreement shall also apply to the Flight Services operated by such substitute aircraft, including, without limitation, if the respective Flight is not operated for any reason. |
d) |
The provisions of this Note 2 replace Section 9(d)(ii) of the Tenth Amendment in its entirety. |
US Airways - Mesa 16 th Amendment Final | 19 |
EXHIBIT D
STANDARDS OF SERVICE
These Standards of Service are meant to provide an overview for Mesa of the service expectations established by US Airways and American for in-flight services on Flights. The Standards of Service outlined herein are not all-inclusive and may be changed from time to time by US Airways in its sole discretion.
I. In-Flight Service Product and Delivery . Mesa shall achieve at least the comparable quality of airline service as provided by US Airways and American, as applicable. Mesa shall coordinate with US Airways In-flight Services Department, or any similar department of any affiliate of US Airways as designated by US Airways, to ensure consistency and quality of Mesas in-flight service product, including non-safety related functions such as in-flight marketing announcements, meal and beverage presentation and delivery and provisioning and usage of passenger amenity kits. Mesa shall implement suggestions made by US Airways or its affiliates In-flight Services Department. Mesa shall coordinate with US Airways to ensure consistency with US Airways product delivery, including US Airways or American-logo, as applicable, napkins, stir rods and cups. Wherever possible, snack and beverage items should be consistent with the products served by US Airways and American, as applicable. Each Aircraft shall be supplied by US Airways or American, as applicable, with an adequate supply of US Airways or Americans, as applicable, in-flight publications. Mesa must place these in-flight publications in the designated seat pocket of each seat. Unless otherwise consented to by US Airways or American, as applicable, US Airways or Americans in-flight publications are the only magazines authorized in such seat pockets.
II. Uniforms . Mesas flight attendants on Flights shall wear uniforms as required under Section 13.4 of the Sixteenth Amendment. Mesas employees in such uniforms, whether on or off duty, are not permitted to drink intoxicating beverages, give the appearance of being intoxicated or visit any establishment whose primary purpose is to dispense liquor (including bars, saloons, cocktail lounges and liquor stores). As used herein, uniform refers to any uniform apparel bearing the US Airways or American brand or insignia, or which can be in any way identified with US Airways or American or one of their affiliates. Because the actions and appearance of employees influence, to a considerable extent, the publics opinion of the US Airways and American brands, uniformed employees must be mindful of this and conduct themselves accordingly.
III. In-Flight Announcements . While Mesa shall provide basic announcements, US Airways may request that Mesa make promotional announcements on behalf of US Airways and/or American from time to time and Mesa shall honor and execute any such request. In all on-board announcements on Flights, only the names US Airways, US Airways Express, American Airlines or American Eagle may be included and Mesas names shall not be included unless otherwise consented to by US Airways.
US Airways - Mesa 16 th Amendment Final | 20 |
IV. Catering . US Airways or American, as applicable, shall provide, or arrange for another person to provide, all catering products and catering services for Flights, and, as directed by US Airways or American, Mesa shall serve the catering products on all such flights in accordance with procedures and standards approved by US Airways or American, as applicable, in their sole discretion.
V. Failure to Meet Standards of Service . In the event that Mesa fails to meet the Standards of Service as set forth in this Exhibit D , in addition to the remedies provided in Section 13.6 of this Sixteenth Amendment for a Service Audit failure, US Airways may give notice to Mesa of such failure and the parties representatives shall meet within fifteen (15) days to discuss such failure in good faith. At such meeting, Mesa shall submit to US Airways a corrective action plan that Mesa reasonably believes will cure such failure to meet the Standards of Service within thirty (30) days and provide adequate assurance to US Airways that such Standards of Service will be complied with for the foreseeable future.
US Airways - Mesa 16 th Amendment Final | 21 |
SCHEDULE 1 TO EXHIBIT D
FA Name |
Flight Number |
|
FA Employee # |
Date |
|
FA Base |
City Pair |
|
FA Position |
Observing Supervisor |
|
Base Supervisor |
Reason Codes - Requirement Not Met |
||||||
A |
Unaware of the policy/procedure |
|||||
B |
Chose not to follow procedure |
|||||
C |
Irregular events/special circumstances |
A score of 75% or above shall mean pass.
Compliance Items |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments :
|
||||||||
Preflight |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
Gate Agent / FA briefing |
||||||||
Preflight equipment |
||||||||
Comments:
|
||||||||
Boarding |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
US Airways - Mesa 16 th Amendment Final | 22 |
Comments:
|
||||||||
Pre-Take Off |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
||||||||
Inflight |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
||||||||
Arrival |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
||||||||
Customer Service Experience |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
US Airways - Mesa 16 th Amendment Final | 23 |
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
||||||||
Domestic First Class |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
||||||||
Envoy Class |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Focus Items |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
Comments / Follow-up action items: |
|
|
|
|
|
US Airways - Mesa 16 th Amendment Final | 24 |
SCHEDULE 2 TO EXHIBIT D
|
||||||||
Date: |
Audit Analyst: | |||||||
Station: |
Audit Analyst: | |||||||
Carrier: |
Time On/Off: | |||||||
Flight: |
Tail Number: | |||||||
|
||||||||
Number of Findings | ||||||||
TWO-CLASS CABIN |
0 | Fewer than 53 is passing | ||||||
SINGLE-CLASS CABIN |
0 | Fewer than 34 is passing | ||||||
|
||||||||
Finding location/Observations | ||||||||
|
||||||||
|
||||||||
A1 |
[***] | Pass | 0 | |||||
A2 |
[***] | Pass | 0 | |||||
A3 |
[***] | Pass | 0 | |||||
B1 |
[***] | Pass | 0 | |||||
B2 |
[***] | Pass | 0 | |||||
B3 |
[***] | Pass | 0 | |||||
B4 |
[***] | Pass | 0 | |||||
B5 |
[***] | Pass | 0 | |||||
B6 |
[***] | Pass | 0 |
US Airways - Mesa 16 th Amendment Final | 25 |
F7 |
[***] | 0 | ||||||
F8 |
[***] | 0 | ||||||
F8 |
[***] | 0 | ||||||
US Airways - Mesa 16 th Amendment Final | 28 |
EXHIBIT E
FUEL EFFICIENCY PROGRAM
Mesas Fuel Efficiency Program shall incorporate at least the following:
I. |
Mesa will participate jointly with US Airways to interface with appropriate ATC facilities, management, and other personnel to minimize operational restrictions, and improve ATC handling of Flights. |
II. |
Implement, update and monitor flight planning fuel policies, including statistical tracking of fuel added by pilots and dispatchers, efficient reserves, and other objectives. |
III. |
Implement, update and monitor pilot and dispatcher training on the policies and objectives described in Section II above. |
IV. |
Implement, update and monitor an effective fuel tankering program, including automated tankering suggestions and calculations, using validated methods and formulas; US Airways will provide Mesa with cost data. |
V. |
Mesa will provide ACARS data as requested by US Airways to US Airways or one of US Airways agents in support of the program to be used for statistical tracking, analysis and measurement of fuel efficiency and for identifying and correcting deficiencies at the fleet and system levels. |
VI. |
Mesa will designate a manager to lead Mesas fuel task force (Mesa Fuel Task Force) which has overall responsibility for fuel efficiency. |
VII. |
Reviews each calendar quarter conducted by the Mesa Fuel Task Force of the Fuel Efficiency Program using data from US Airways in order to review Mesas fuel performance. Such reviews shall include the manager of the Mesa Fuel Task Force as described in Section VI above and representatives from the following groups: Mesas Service Operations Center, Mesas Flight group, US Airways Operations Engineering group and other US Airways or American personnel as designated by US Airways. |
VIII. |
Weight management oversight by the Mesa Fuel Task Force, including development of a policy to optimize arrival fuel. |
IX. |
Implement, update and monitor an auxiliary power unit management policy that prevents unnecessary or costly operation of the auxiliary power unit. |
X. |
Implement, update and monitor a single engine taxi policy both before takeoff and after landing. |
XI. |
Implement, update and monitor policy related to operationally efficient takeoff and landing flap selection priorities. |
US Airways - Mesa 16 th Amendment Final | 29 |
XII. |
Additional programs may be developed by US Airways in the future that may require additional Mesa policies to be implemented. Mesa will not unreasonably withhold implementation of future policy requirements, subject to Mesa being reimbursed by US Airways for actual material cost increases (if any) in connection with such future policy requirements (if any). |
XIII. |
Monthly tracking data will be provided to US Airways consisting of the following fields for all flights flown by Mesa for US Airways and American; provided that Mesa shall not be required to deliver such data to US Airways to the extent it is prohibited by Mesas collective bargaining agreements and labor contracts as in effect on the date hereof: |
Carrier Code |
A/C Tail Number |
Aircraft Type |
Flight Number |
Flight Date |
Departure |
Destination |
Planned Departure Fuel |
Takeoff Weight Planned |
Flight Planned Burn |
Planned Landing Weight |
Arrival Fuel Planned |
Planned Zero Fuel Weight |
Estimated Time Enroute |
Average Wind Component at altitude |
Average ISA at altitude |
Top of Climb ISA |
Alternates Planned |
Alternate Fuel |
Reserve Fuel |
Hold Fuel |
Extra Hold Fuel |
Extra (contingency) Fuel |
Estimated Departure Time (Zulu) |
Coded Route |
Total Flight Plan Distance |
First Cruise Flight Level |
Step Climb/Descent FL |
Dispatcher Name (or code) |
Captain Name (or Code) |
OOOI Times (Zulu) |
Scheduled Block Time (from release) |
Actual Block Time (from OOOI times) |
Scheduled Flight Time |
US Airways - Mesa 16 th Amendment Final | 30 |
Actual Off to On Time (from OOOI times) |
Source of the OOOI times (ACARS, FPLOT, Manual entry) |
Scheduled Block Time (from release) converted to minutes |
Actual Block Time (from OOOI times) converted to minutes |
Scheduled Flight Time converted to minutes |
Actual Off to On Time (from OOOI times) converted to minutes |
Minutes Over / Under Sked Block Time |
Minutes Over / Under Sked Flight Time |
Planned Departure Fuel (repeat) |
Takeoff Weight Planned (repeat) |
Flight Planned Burn (repeat) |
Planned Landing Weight (repeat) |
Arrival Fuel Planned including taxi burn (numbers at the gate) |
OOOI Reported Out and In Fuels |
Difference between Arrival Fuel Planned including taxi burn (numbers at the gate) and OOOI reported fuel at arrival) |
Difference between Flight Plan Burn and Actual Burn |
Planned Zero Fuel Weight (repeat) |
Max Takeoff Gross Weight |
Release Block - time from that days actual release rather than the schedule (minutes) |
Release Flight Time - time from that days actual release rather than the schedule (minutes) |
Dispatcher Desk |
Captain in specific format: DAVEY BRUCE CA 000110662 |
GMT DTG |
a Y or N for a tanker recommended flight |
Taxi out Fuel Planned |
Taxi In Fuel Planned |
XIV. |
Mesa will incorporate the following data reporting into the ACARS systems in all Sixteenth Amendment New Aircraft, enabling the collection of single engine start and stop information. US Airways acknowledges that the ACARS installed on the Original Aircraft does not report or track engine and APU starts and stops. Monthly tracking data will be provided to US Airways consisting of the following fields for all flights flown by Mesa for US Airways and American: |
Date |
Departure Station |
Arrival Station |
Flight Number |
Tail Number |
Equipment |
Departure Gate |
Actual Departure Time |
US Airways - Mesa 16 th Amendment Final | 31 |
Actual Off Time |
Actual On Time |
Actual Arrival Time |
Engine (L/R) |
Start |
Stop |
Duration |
End of Sequence (x marker to show that the flight sequence has ended) |
Carrier |
US Airways - Mesa 16 th Amendment Final | 32 |
EXHIBIT F
TRAINING
I. Customer Service . Mesa agrees that it shall train or cause to be trained to proficiency, all customer service employees of Mesa that may be associated with providing Flight Services. Mesa agrees to participate in any and all special training or other programs that US Airways or American provides for its customer service employees. Mesa may elect to accomplish such training through the use of a Train the Trainer concept. Mesas flight attendants providing Flight Services shall be trained by Mesa, at Mesas sole cost and expense, on meal and beverage service procedures for Flights, including liquor and duty-free sales and cash handling, and will collect all on-board revenue for liquor and duty-free sales on Flights.
US Airways - Mesa 16 th Amendment Final | 33 |
Exhibit 10.11.18
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
EXECUTION COPY
SEVENTEENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS SEVENTEENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Seventeenth Amendment ) is made and entered into as of December 28 th , 2015 (the Effective Date ), by and between US AIRWAYS, INC., a Delaware corporation ( US Airways ) and MESA AIRLINES, INC., a Nevada corporation ( Mesa ).
RECITALS :
A. US Airways and Mesa have previously entered into that certain Code Share and Revenue Sharing Agreement, dated as of March 20, 2001, but effective as of February 1, 2001 (as amended, modified and supplemented, the Code Share Agreement ).
B. The Code Share Agreement has previously been amended, including by the: Tenth Amendment to Code Share and Revenue Sharing Agreement, dated November 18, 2010 (the Tenth Amendment ); the Eleventh Amendment to Codeshare and Revenue Sharing Agreement, dated July 1, 2012; the Twelfth Amendment to Code Share and Revenue Sharing Agreement, dated February 13, 2013; the Thirteenth Amendment to Code Share and Revenue Sharing Agreement, dated December 24, 2013; the Fourteenth Amendment to Code Share and Revenue Sharing Agreement, dated April 10, 2014; the Fifteenth Amendment to Code Share and Revenue Sharing Agreement, dated November 26, 2014; and the Sixteenth Amendment to Code Share and Revenue Sharing Agreement, dated effective January 25, 2015 (the Sixteenth Amendment ).
C. Pursuant to Section 9 of the Tenth Amendment, as amended by Section 10 of the Sixteenth Amendment, US Airways believes it is entitled to outstanding performance credits in the aggregate amount of $[***] arising out of Mesas CDO and CCF performance during 1Q2015 and 2Q2015 ( Outstanding Credits ).
D. The Parties desire to enter into this Seventeenth Amendment, among other things, to settle outstanding performance credit disputes, which shall provide Mesa with the opportunity to reduce the amount of Outstanding Credits by: (i) $[***] for agreeing to terms outlined in this Seventeenth Amendment; and (ii) $[***] by achieving certain CDO and CCF rates during 2Q2016 and 3Q2016, as described in Section 3 hereof. Each Party to this Seventeenth Amendment acknowledges that this is a compromise of disputed claims and neither admits, and each expressly denies any liability on its part. This Seventeen Amendment is not, and may not be construed as, an admission of liability by either US Airways or Mesa in any future proceeding or action involving credit disputes between US Airways and Mesa.
E. The Parties also desire to further amend the Code Share Agreement on the terms specified below.
F. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the Parties that this Seventeenth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
1 |
AGREEMENT :
NOW, THEREFORE, in consideration of the promises and covenants set forth herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, US Airways and Mesa agree as follows:
1. |
Flight Services for American Airlines . |
1.1 Mesa acknowledges and agrees that as of October 17, 2015, US Airways has ceased operating flights under the US Airways Express brand and that all flights formerly operating under such brand shall thereafter be operated by AMERICAN AIRLINES, INC. ( American ) as American Eagle branded flights, or such other brand as American may determine in its sole discretion. To the extent necessary to give full force to the terms of the Code Share Agreement, all references to the US Airways Express brand shall be deemed to refer to American Eagle or such other brand as American may designate. For the avoidance of doubt, as of October 17, 2015, all Flight Services provided by Mesa will be provided under the American Eagle brand, or such other brand as American may determine, including Flight Services formerly provided under the US Airways Express brand and Flight Services formerly provided under the American Eagle brand.
1.2 Mesa further acknowledges and agrees that sometime subsequent to October 17, 2015, US Airways and American contemplate effecting a merger of the two companies and, upon such merger, US Airways will cease to exist as a separate entity. Mesa agrees that, upon such merger, all references to US Airways in the Code Share Agreement shall thereafter be deemed references to American.
2. |
Aircraft Cabin Interiors Program . |
2.1 Scope of Program . Mesa agrees to implement a program for the reconditioning, refurbishment, repair and replacement of aircraft cabin interior components for each Aircraft, including, but not limited to, seat cushions, seat covers, armrests, dropdown trays, overhead bins, interior walls, lavatories and carpeting, as necessary to bring all cabin interiors in conformance with the standards of US Airways and American (the Cabin Interiors Program ). For the avoidance of doubt, the Cabin Interiors Program shall not include new seatbelts unless provided at no cost to Mesa by US Airways.
2.2 Program Schedule . Mesa shall provide to US Airways, within forty-five (45) days after the Effective Date, a detailed project plan, reasonably acceptable to US Airways, that specifies by Aircraft all milestones (each a Milestone ) for the Cabin Interiors Program (the Program Schedule ), which shall, at a minimum, include and comply with a program completion date of no later than December 31, 2016. Mesa shall implement the Cabin Interiors Program in compliance with the Program Schedule; provided , however , that, in the event (i) American receives prior written notice directly from a supplier of aircraft interior components to be installed as part of the Cabin Interiors Program (each, a Supplier ); (ii) such notice states that, due to no fault of
2 |
Mesa, Supplier cannot meet the timeline specified in the Program Schedule; and (iii) such notice further specifies the length of Suppliers anticipated delay in providing the applicable aircraft interior components, the deadline(s) for Mesas performance under the Program Schedule shall be extended by a reasonable period of time, in light of the extent and nature of such delay; provided , further , that the deadline for completion of the Cabin Interiors Program shall in no event be extended beyond June 30, 2017. Mesa shall use commercially reasonable efforts to ensure that any such Supplier notices are provided as soon as possible following Suppliers determination that the timeline specified in the Program Schedule cannot be met.
2.3 Program Completion . Aircraft cabin interior components on all Aircraft inducted into the Cabin Interiors Program shall be reconditioned, refurbished, repaired and replaced to the reasonable satisfaction of American. Mesa shall replace all first class seats, main cabin seats, bulkhead walls, soft partitions, aisle curtains, galley curtains, placards, carpets and lavatory shrouds on Aircraft that undergo the Cabin Interiors Program with the components specified on Exhibit A hereto. Completion of the Cabin Interiors Program shall be deemed to have occurred upon receipt of written acknowledgement from American as to the Cabin Interiors Program, including all Milestones, having been performed and concluded to its reasonable satisfaction ( Program Completion ). Mesa acknowledges and agrees that time is of the essence for completion of each Milestone in the Cabin Interiors Program, and Mesa covenants to provide American with detailed monthly reports on the progress of the Cabin Interiors Program, not later than the fifth (5 th ) day of each calendar month subsequent to the Effective Date. American shall have thirty (30) days following Americans receipt of written notice of the completion of each Milestone to document in writing any objections to or concerns regarding the completion of the applicable Milestone.
3. Performance Credit Adjustments . As of the Effective Date, the Outstanding Credits shall be reduced by an amount equal to $[***]. Mesa shall be eligible for an additional reduction to the amount of Outstanding Credits, such amount not to exceed $2,400,000, based on compliance with this Section 3.
3.1 CDO Adjustments to Outstanding Credits . US Airways shall reduce Outstanding Credits by an amount equal to $[***] for each calendar month during 2Q2016 and 3Q2016 that Mesa achieves a CDO Rate greater than [***]; provided , however , that for each calendar month during 2Q2016 and 3Q2016 that Mesa fails to achieve such CDO Rate, such $[***] of Outstanding Credits will become immediately due.
3.2 CCF Adjustments to Outstanding Credits . US Airways shall reduce Outstanding Credits by an amount equal to $[***] for each calendar month during 2Q2016 and 3Q2016 that Mesa achieves a CCF Rate greater than [***]; provided , however , that for each calendar month during 2Q2016 and 3Q2016 that Mesa fails to achieve such CCF Rate, such $[***] of Outstanding Credits will become immediately due.
3 |
3.3 Cumulative of Quarterly Performance Credits . For the avoidance of doubt, any Outstanding Credits that become due pursuant to Section 3.1 and/or Section 3.2 hereof will be in addition to, and not in lieu of, any other credit amounts US Airways may be entitled to pursuant to Section 9 of the Tenth Amendment, as amended by Section 10 of the Sixteenth Amendment, for Mesas CDO and CCF performance.
4. Supportability Guaranty .
4.1 Supportability Credit . Effective as of the first full calendar month following the Effective Date, Mesa shall provide US Airways with a financial credit ( Supportability Credit ) for any calendar month in which Capacity is less than Minimum Block Hour Utilization, based on the following formula:
[***]
Schedule 1 to Exhibit B illustrates the computation of the Supportability Credit based on actual numbers derived from October 2015.
4.2 Initial Crew Max . Not later than one hundred sixty (160) calendar days prior to each month during which Mesa is obligated to provide Flight Services, Mesa shall provide AAG Network Planning (as defined herein) with Initial Crew Max information, meaning an initial estimate of schedulable hours available during such month for each of Mesas captains, first officers and flight attendants.
4.3 Initial Hangar Plan . Not later than one hundred fifty (150) calendar days prior to each month during which Mesa is obligated to provide Flight Services, Mesa shall provide AAG Network Planning with Initial Hangar Plan information, which shall include all scheduled heavy maintenance during such month.
4.4 Final Crew Max . Not later than one hundred ten (110) calendar days prior to each month during which Mesa is obligated to provide Flight Services, Mesa shall provide AAG Network Planning with Final Crew Max information, meaning a final estimate of schedulable hours available during such month for each of Mesas captains, first officers and flight attendants.
4.5 Final Hangar Plan . Not later than one hundred ten (110) calendar days prior to each month during which Mesa is obligated to provide Flight Services, Mesa shall provide AAG Network Planning with Final Hangar Plan information, which shall include all scheduled heavy maintenance during such month.
4.6 Notices to AAG Network Planning . All information provided to AAG Network Planning pursuant to Sections 4.2, 4.3, 4.4 and 4.5 hereof shall be provided in electronic format and submitted (i) to both the Managing Director Scheduling and Ops Coordination and the American schedule comments email address or (ii) to such other addressee as American may designate ( AAG Network Planning ).
4.7 Minimum Crew Allocation . For any month in which Capacity is less than Minimum Block Hour Utilization, Mesa shall (i) allocate its captains, first officers and
4 |
flight attendants to the Code Share Agreement in a manner no less favorable to American than Mesa allocates its captains, first officers and flight attendants to any other aircraft operated by Mesa and not covered by the Code Share Agreement, including those operated by or on behalf of other air carriers operating similar equipment; (ii) provide American with written calculations that demonstrate, for the applicable month, a pro rata or greater reduction in Mesas allocation of captains, first officers and flight attendants to all aircraft operated by Mesa and not covered by the Code Share Agreement, including all aircraft operated by or on behalf of other air carriers, whether operating similar equipment or not; (iii) provide American, upon request, with any and all other information that American may deem necessary or desirable (including detailed reports on all initial, transition, upgrade, and differences training of pilots conducted by or on behalf of Mesa for all types of aircraft, covering the month in question and the six (6) months immediately prior to the first day of the month in question) to confirm that Mesa has taken all reasonable steps to cause the allocation described in Section 4.7(i) of this Seventeenth Amendment to be no less favorable to American than to any other air carrier, whether operating similar equipment or not.
5. Reconciliation of Credits .
5.1 Outstanding Credits Tolled . The reconciliation of Outstanding Credits shall be tolled until the earlier to occur of (i) Program Completion and (ii) such earlier time as amounts constituting Outstanding Credits may become due under this Seventeenth Amendment.
5.2 Setoff as Credits Become Due . As Outstanding Credits and/or Supportability Credits become due pursuant to Sections 3.1, 3.2 and 4.1 hereof, US Airways shall have the option to immediately apply such amounts as an offset against any amounts otherwise payable by US Airways to Mesa.
6. Amendment to Delay Codes and Cancellation Codes .
6.1 Controllable Delay Codes . Exhibit D to the Tenth Amendment is hereby amended by adding the following Controllable Delay Codes to Section A, thereof:
Crew |
Boarding Held/Interrupted |
FA6 |
||
Crew |
Flight Attendant Gate Checked Bags |
FA7 |
||
Crew |
Re-Seating Passengers |
FA8 |
||
Crew |
Crew Swap/Crew Recovery |
FC5 |
||
Crew |
In Terminate/Out Originate |
FC6 |
||
Crew |
Unscheduled Crew Rest |
FC7 |
6.2 Controllable Cancellation Codes . Exhibit D to the Tenth Amendment is hereby further amended by adding the following Controllable Cancellation Code to Section B, thereof:
Crew |
Pilot Legality |
XCL |
5 |
6.3 Adjustments to Performance Thresholds . Mesa acknowledges and agrees that US Airways has demonstrated to Mesa that the changes to Exhibit D to the Tenth Amendment set forth in this Section 6 will not adversely affect Mesa and, accordingly, that no amendment to any Service Levels or Incentive Levels is necessary in connection therewith.
6.4 Modification of Delay Codes . Section 9(a)(ii) of the Tenth Amendment is hereby amended by deleting subsections (A), (B) and (B)[sic] of Section 9(a)(ii) and replacing them with the following text:
(A) Codes are changed on a system-wide basis for American and all other American Eagle carriers;
(B) US Airways demonstrates to Mesa that any changes to the codes set forth in Exhibit D will have no adverse impact on Mesa. For avoidance of doubt, and by way of example, if a new code is added to the controllable delay list, US Airways will calculate the decrease to Mesas performance during the period used for setting the Service Levels and Incentive Level in this Tenth Amendment, and the corresponding Service Levels and Incentive Level will be reduced by that exact percentage; and
(C) The parties hereto agree to enter into an amendment to the Code Share Agreement to reflect the changes to the delay codes and corresponding Service Levels and Incentive Level.
(D) Notwithstanding subparts (B) and (C) of this Section 9(a)(ii), US Airways may, in its sole discretion, divide any Controllable Delay Code or Controllable Cancellation Code listed on Exhibit D into multiple Controllable Delay Codes or Controllable Cancellation Codes, respectively, or consolidate multiple Controllable Delay Codes or Controllable Cancellation Codes into a single Controllable Delay Code or Controllable Cancellation Code, respectively, immediately upon notice to Mesa.
7. Quality of Service and Aircraft Condition .
7.1 Conflict: Interpretation . Section 13 to the Sixteenth Amendment, Exhibit D to the Sixteenth Amendment and Exhibit F to the Sixteenth Amendment are superseded in their entirety by this Section 7. In the event of a conflict between the provisions of (i) this Section 7 and/or Exhibit C or Exhibit D hereto and (ii) the provisions of the Code Share Agreement, the provisions of this Section 7 and/or Exhibit C or Exhibit D shall govern as to their subject matter; provided , however , that all standards specified in and/or pursuant to this Section 7 and/or Exhibit C or Exhibit D shall be deemed cumulative of, and not in conflict with, any standards specified elsewhere in the Code Share Agreement.
6 |
7.2 Procedures and Performance Standards . At all times, Mesa shall provide Flight Services to US Airways or American, as applicable, in accordance with procedures and performance standards approved by US Airways from time to time in its sole discretion and provided in writing to Mesa, including but not limited to those certain Standards of Service set forth in Exhibit C hereto ( Service Standards ). The Service Standards may be amended or changed by US Airways from time to time upon thirty (30) days prior notice to Mesa; provided that sixty (60) days notice shall be given by US Airways to the extent any such amendment or change may reasonably be expected to result in new or additional training. If Service Standards are materially changed or altered and such changes or alterations materially increase Mesas costs (i.e., an amount of more than [***] ($[***]) per year), US Airways shall reimburse Mesa for the actual incremental costs associated therewith, to the extent such costs exceed [***] ($[***]) per year and subject to Mesa providing sufficient documentation for such costs reasonably acceptable to US Airways. Mesa shall be responsible for all crew and other employee conduct, appearance and training policies (as set forth on Exhibit D ), aircraft cleaning (including the timing thereof), standards and adequate staffing levels in order to comply with such procedures and meet such standards, including without limitation in respect of customer complaint response and any handling of irregular operations, all of which shall be handled in a professional, businesslike and courteous manner.
7.3 In-Flight Services . Mesa shall comply with the catering requirements set forth on Exhibit C hereto. Mesa shall also coordinate all in-flight services relating to the Flight Services with the in-flight services department of US Airways or any person designated by US Airways to ensure consistency and quality of Mesas in-flight service, including non-safety related functions such as in-flight marketing announcements, meal and beverage presentation and delivery, and provisioning and usage of passenger amenity kits. Mesa shall sell beer, wine, liquor and any other alcoholic beverages on Flights. Mesa agrees that such in-flight sales shall be conducted as directed by US Airways or American, as applicable, from time to time. Mesa shall implement any suggestions made by US Airways or Americans in-flight services department, as applicable. All revenues collected by Mesa for such in-flight services on the Aircraft shall be promptly remitted or provided to US Airways. Mesa must provide notice to US Airways of any threatened catering-related fines or penalties that could result in a liability to US Airways or American within ten (10) days of receipt of such notification and allow for the involvement of US Airways or American, as applicable, in the resolution process of such issue so that the parties can work to minimize any fines to US Airways or American, as applicable.
7.4 Mesas Representative Uniforms . Mesa shall require all of its respective personnel and any of its respective agents providing Flight Services in job classifications requiring direct public contact to wear uniforms and accessories furnished by Mesa that are of colors and styles approved by US Airways from time to time. Mesa shall not alter or change such uniforms and accessories without the prior written consent of US Airways. If, after the date hereof, US Airways determines, in its sole discretion, that such uniforms and accessories should be materially altered or changed, then US Airways shall provide Mesa with notice of such alterations or changes. In the event that US Airways
7 |
decides to implement such alterations or changes, Mesa shall implement such alterations or changes at US Airways cost for Mesas then current employees.
7.5 No Reimbursement of Fines . US Airways and American shall not be required to incur any cost or make any payment to the extent such cost or payment is attributable to any costs, expenses or losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Mesa as a result of any violation by Mesa of any law, statute, judgment, decree, order, rule or regulation of any governmental authority. US Airways shall be liable for all costs, expenses and losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Mesa as a result of any violation by US Airways, American or their respective agents, or by Mesa to the extent performed at the direction of US Airways or American, of any law, statute, judgment, decree, order, rule or regulation of any governmental authority. Mesa must provide notice to US Airways of any notification that could result in a liability to US Airways or American within ten (10) days of receipt of such notification and allow for the involvement of US Airways or American, as applicable, in the resolution process of such issue so that the parties can work to minimize any fines to US Airways or American, as applicable.
7.6 Right to Audit Service and Aircraft Condition . US Airways has the right, in its sole discretion, to audit Mesas service (each such audit a Service Audit ) and aircraft condition (each such audit an Aircraft Condition Audit ) to ensure it meets the Service Standards and Aircraft Condition Audit standards and actions as required above and in Exhibit C or other Service Audit and/or Aircraft Condition Audit standards that may be developed by US Airways or American from time to time. US Airways will review the Service Audit and Aircraft Condition Audit program for a period to be determined in its discretion in order to determine the appropriate pass and fail rates for such audits. An Inflight Service sample survey is described in Schedule 1 to Exhibit C , and an Aircraft Condition sample survey is described in Schedule 2 to Exhibit C , provided that such samples can be changed at any time in US Airways sole discretion. If Aircraft Condition Audit standards are materially changed or altered and such changes or alterations materially increase Mesas costs (i.e., an amount of more than [***] ($[***]) per year), US Airways shall reimburse Mesa for the actual incremental costs associated therewith, to the extent such costs exceed [***] ($[***]) per year and subject to Mesa providing sufficient documentation for such cost reasonably acceptable to US Airways. If an Aircraft fails (i) a Service Audit, Mesa shall pay $*** per failed audit, and (ii) an Aircraft Condition Audit and such failure continues for seven (7) calendar days after Mesas receipt of written notice from US Airways, Mesa shall pay $[***] per day for so long as any failure noted in the Aircraft Condition Audit continues; provided, however, that such remedies as provided under (i) and (ii) above shall not become effective until six (6) months after Mesa has received written notice from US Airways that the audit program as described in this Section 7.6 has been implemented, and provided further that during such six (6)-month period the Parties shall meet and confer in good faith as to review initial findings and determine the appropriate pass and fail levels for each audit, subject to US Airways setting such pass and fail levels in the event that the Parties are unable to agree on appropriate pass and fail levels.
8 |
8. Safety .
8.1 Conflict . Sections 2.7 and 14.3 of the Code Share Agreement are superseded in their entirety by this Section 8.
8.2 Certain Definitions .
Accident means an Aircraft Accident as defined by the NTSB Regulations, including 49 C.F.R. §830.2 or any successor provision.
Governmental Authority means any federal, state, municipal, local, territorial, or foreign government or any governmental department, commission, court, judicial body, instrumentality, board, bureau, agency, registry, regulatory authority or body or airport authority (including private airport authorities or any similar authority or governing board in any domestic or foreign jurisdiction, or any private or quasi-governmental entity, governing board or other Person with authority to lease, convey or otherwise grant or restrict rights to use or operate any airport facilities).
NTSB means the National Transportation Safety Board.
Incident means an incident as defined by the Regulations adopted by the NTSB pursuant to 49 C.F.R. §830.2 or any successor provision.
8.3 Incidents or Accidents . Mesa shall promptly notify Americans System Operations Control/Flight Dispatch Office of any Accident, Incident or irregularity that could reasonably be expected to result in a complaint or claim by passengers or an investigation by a Governmental Authority involving any Aircraft occurring during Mesas provision of Flight Services, including those that result in any injury or death to persons or damage to property. To the extent Mesa is involved in any such Accident, Incident or irregularity, it shall furnish in writing to American a detailed account of such Accident, Incident or irregularity and shall cooperate with American at Mesas sole cost and expense in any internal or external investigation. Unless otherwise consented to by American, Mesa shall provide American with security level notification of all levels with respect to Mesas Accident or Incident reporting system, any other systems that provide information regarding Accidents or Incidents, and all reports prepared or derived from such systems. Mesa shall promptly reimburse American for any of its out-of-pocket costs and expenses actually incurred by it directly related to American maintaining necessary communication with any such Mesa system or, at Americans election, US Airways may set-off against any future payments owed by US Airways under the Code Share Agreement. Mesa shall maintain an emergency response plan, at a minimum, in accordance with the provisions of the Aviation Disaster Family Assistance Act of 1996 and any amendments or regulations relating thereto. Mesa shall promptly reimburse American in writing of any material modifications to such plan. American shall manage the customer response efforts on behalf of Mesa in the case of an Accident or Incident involving Flight Services or the Aircraft, including responding to an Accident or Incident and providing necessary assistance and services to the family members of passengers and
9 |
Mesa shall fully cooperate in such efforts at its sole cost and expense. Mesa shall further comply with the Emergency Assistance Services Agreement between Mesa and US Airways.
8.4 Accident Reports . Mesa shall promptly furnish to American a copy of every written report and plan that Mesa prepares, whether such report is filed with the FAA, NTSB or any other Governmental Authority, relating to any Accident or Incident involving any Aircraft or Flight Services when such Accident or Incident is claimed to have resulted in the death or injury to any person or the loss of, damage to or destruction of any property. Mesa shall also provide prompt notice to American of all irregularities involving any flights included in the Schedule (including, without limitation, irregularities that result in any injury to or death of persons or material damage to property) as soon as such information is available and shall furnish to American, in writing, detail regarding such irregularity.
8.5 International Air Transport Association Operational Safety Audit . Mesa shall be compliant with the safety standards set forth by the International Air Transport Association Operational Safety Audit, and upon notice from American from time to time, Mesa agrees to provide American with evidence in a form reasonably satisfactory to American of such compliance.
8.6 Em ergency Assistance Agreement . The foregoing provisions of this Section 8 shall in no way be deemed to limit, restrict or amend any of the obligations of Mesa pursuant to the Emergency Assistance Services Agreement between Mesa and US Airways.
9. Pilot Engagement . [***]
10. CAT II Compliance Settlement . Section 13 of the Thirteenth Amendment is hereby amended by inserting the following text immediately before Section 14 of the Thirteenth Amendment:
In the event Mesa becomes CAT II compliant on or before July 1, 2016, US Airways agrees to fully and finally release, acquit, and forever discharge Mesa for any and all amounts arising from Mesas CAT II non-compliance occurring prior to the date Mesa first obtains CAT II compliance. Upon obtaining CAT II compliance, Mesa shall remain CAT II compliant for the remainder of the Term of the Code Share Agreement, and US Airways shall be entitled to a credit in an amount equal to $[***] per month, for each month of CAT II non-compliance; US Airways may offset such credits against any amounts otherwise payable by US Airways to Mesa.
11. Notice . Section 15.1 of the Code Share Agreement is hereby amended by inserting the following text immediately before Section 15.2 of the Code Share Agreement:
Except where this Agreement specifically provides for a different form of notification, all notices, consents, approvals and other instruments required or permitted to be given to American under this Agreement shall be provided to
10 |
American at the address specified below or such other address as American may designate by written notice to Mesa
American Airlines, Inc.
4333 Amon Carter Blvd.
Mail Drop 5675
Ft. Worth, TX 76155
Attn: Corporate Secretary
Facsimile No.: (817) 967-2937
Telephone No.: (817) 963-3598
kenneth.wimberly@aa.com
12. Miscellaneous .
12.1 Except as set forth in this Seventeenth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Seventeenth Amendment.
12.2 This Seventeenth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
12.3 This Seventeenth Amendment, including the Exhibits attached hereto, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
12.4 The definitions contained in this Seventeenth Amendment are applicable to the other grammatical forms of such terms.
12.5 Notwithstanding anything herein to the contrary, Sections 1, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of this Seventeenth Amendment shall survive the expiration or termination of this Seventeenth Amendment.
[Signatures Follow]
11 |
EXHIBIT A
Cabin Interior Program Components
Area | Manufacturer | Part Number(s) | Additional Description | |||
First Class Seats | Muirhead / E-Leather | DF490 / SL3ULAAGREY045 Varies** |
N/A Leather Wraps for First Class Armcaps |
|||
Main Cabin Seats | Muirhead / E-Leather |
DF482 / SL3ULAABLUE045 DF490 DF538 / SL3UAARED045 Varies** |
Back & Bottom Cushion Headrest & Horse Collar Red Stripe Hard Surfaces of Main Cabin Armcaps | |||
Bulkhead Walls | Isovolta / Schneller | 70F1S-8245NF3-NOS / TBD | N/A | |||
Soft Partition | Botany | 119BWJ4108AW118 | N/A | |||
Aisle Curtain | Lantal |
BDR8603-74 2575-72 |
Mesh Trim |
|||
Galley Curtain | Botany | 119BWJ4108AW118 | N/A | |||
Placards | Various | TBD* | N/A | |||
Carpet | Neotex / Anker |
Neotex Carpet Neotex Thread Anker |
||||
Lavatory Shrouds | TBD* | TBD* | Injection-molded with color matching existing shrouds, throughout the depth of the material |
* To be mutually agreed upon by the Parties.
** Part numbers will correspond to the applicable seat covers.
A-1
EXHIBIT B
Supportability Credit
Fixed Costs Subject to Supportability Guaranty
Category | Unit | Rate | Notes | |||
Ownership (Original 38 A/C) | A/C/MONTH | [***] |
Ownership ($[***]) less Guaranteed Non-Maintenance Cost Reduction ($[***]) |
|||
Ownership (Thirteenth, Fourteenth and Sixteenth Amendment A/C) | A/C/MONTH | [***] |
Ownership ($[***]) less Guaranteed Non-Maintenance Cost Reduction ($[***]) |
|||
Ownership (Twelfth Amendment A/C) | A/C/MONTH | [***] |
Ownership ($[***]) less Guaranteed Non-Maintenance Cost Reduction ($[***]) |
|||
Overhead | A/C/MONTH | [***] | ||||
Crew RON | A/C/MONTH | [***] | ||||
Maintenance Cost Per A/C | A/C/MONTH | [***] |
Minimum Average Aircraft Block Hours Per Day
Month |
Minimum | |
January |
*** | |
February |
*** | |
March |
*** | |
April |
*** | |
May |
*** | |
June |
*** | |
July |
*** | |
August |
*** | |
September |
*** | |
October |
*** | |
November |
*** | |
December |
*** |
B-1 |
SCHEDULE 1 TO EXHIBIT B
Illustration of Supportability Credit Calculation
The following illustrates the Supportability Credit calculation based on actual numbers derived from October 2015.
***
B-2 |
EXHIBIT C
STANDARDS OF SERVICE
These Standards of Service are meant to provide an overview for Mesa of the service expectations established by US Airways and American for in-flight services on Flights. The Standards of Service outlined herein are not all-inclusive and may be changed from time to time by US Airways in its sole discretion.
I. In-Flight Service Product and Delivery . Mesa shall achieve at least the comparable quality of airline service as provided by US Airways and American, as applicable. Mesa shall coordinate with US Airways in-flight services department, or any similar department of any affiliate of US Airways as designated by US Airways, to ensure consistency and quality of Mesas in-flight service product, including non-safety related functions such as in-flight marketing announcements, meal and beverage presentation and delivery and provisioning and usage of passenger amenity kits. Mesa shall implement suggestions made by US Airways or its affiliates in-flight services department. Mesa shall coordinate with US Airways to ensure consistency with US Airways and Americans product delivery, including US Airways or American-logo, as applicable, napkins, stir rods and cups. Wherever possible, snack and beverage items should be consistent with the products served by US Airways and American, as applicable. Each Aircraft shall be supplied by US Airways or American, as applicable, with an adequate supply of US Airways or Americans, as applicable, in-flight publications. Mesa must place these in-flight publications in the designated seat pocket of each seat. Unless otherwise consented to by US Airways or American, as applicable, US Airways or Americans in-flight publications are the only magazines authorized in such seat pockets.
II. Uniforms . Mesas flight attendants on Flights shall wear uniforms as required under Section 7.4 of the Seventeenth Amendment. Mesas employees in such uniforms, whether on or off duty, are not permitted to drink intoxicating beverages, give the appearance of being intoxicated or visit any establishment whose primary purpose is to dispense liquor (including bars, saloons, cocktail lounges and liquor stores). As used herein, uniform refers to any uniform apparel bearing the US Airways or American brand or insignia, or which can be in any way identified with US Airways or American or one of their affiliates. Because the actions and appearance of employees influence, to a considerable extent, the publics opinion of the US Airways and American brands, uniformed employees must be mindful of this and conduct themselves accordingly.
III. In-Flight Announcements . While Mesa shall provide basic announcements, US Airways may request that Mesa make promotional announcements on behalf of US Airways and/or American from time to time and Mesa shall honor and execute any such request. In all on-board announcements on Flights, only the names US Airways, US Airways Express, American Airlines or American Eagle may be included and Mesas names shall not be included unless otherwise consented to by US Airways.
IV. Catering . US Airways or American, as applicable, shall provide, or arrange for another person to provide, all catering products and catering services for Flights, and, as directed by US Airways or American, Mesa shall serve the catering products on all such flights in accordance
C-1 |
with procedures and standards approved by US Airways or American, as applicable, in their sole discretion.
V. Failure to Meet Standards of Service . In the event that Mesa fails to meet the Standards of Service as set forth in this Exhibit C , in addition to the remedies provided in Section 7.6 of the Seventeenth Amendment for a Service Audit failure, US Airways may give notice to Mesa of such failure and the Parties representatives shall meet within fifteen (15) days to discuss such failure in good faith. At such meeting, Mesa shall submit to US Airways a corrective action plan that Mesa reasonably believes will cure such failure to meet the Standards of Service within thirty (30) days of said meeting and provide adequate assurance to US Airways that such Standards of Service will be complied with for the foreseeable future.
C-2 |
SCHEDULE 1 TO EXHIBIT C
STANDARDS OF SERVICE AUDIT
FA Name |
Flight Number |
|
FA Employee # |
Date |
|
FA Base |
City Pair |
|
FA Position |
Observing |
Reason Codes - Requirement Not Met |
||||||
A |
Unaware of the policy/procedure |
|||||
B |
Chose not to follow procedure |
|||||
C |
Irregular events/special circumstances |
A score of [***]% or above shall mean pass.
C-3 |
Pre-Take Off |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
||||||||
Inflight |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
||||||||
Arrival |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
Comments:
|
||||||||
Customer Service Experience |
Requirement Met | Requirement Not Met | Not Observed | Not Applicable | ||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
||||||||
[***] |
C-4 |
SCHEDULE 2 TO EXHIBIT C
|
||||||||
Date: |
Audit Analyst: | |||||||
Station: |
Audit Analyst: | |||||||
Carrier: |
Time On/Off: | |||||||
Flight: |
Tail Number: | |||||||
Number of Findings | ||||||||
TWO-CLASS CABIN |
0 |
Fewer than 53 is pass (53 or more is fail) |
||||||
SINGLE-CLASS CABIN |
0 |
Fewer than 34 is pass (34 or more is fail) |
||||||
Finding location/Observations |
||||||||
A1 |
[***] |
Pass | 0 | |||||
A2 |
[***] |
Pass | 0 | |||||
A3 |
[***] |
Pass | 0 | |||||
[***] |
||||||||
B1 |
[***] |
Pass | 0 | |||||
B2 |
[***] |
Pass | 0 | |||||
B3 |
[***] |
Pass | 0 | |||||
B4 |
[***] |
Pass | 0 | |||||
B5 |
[***] |
Pass | 0 | |||||
B6 |
[***] |
Pass | 0 | |||||
B7 |
[***] |
Pass | 0 | |||||
[***] |
||||||||
C1 |
[***] |
0 | ||||||
[***] |
0 | |||||||
C2 |
[***] |
0 | ||||||
[***] |
0 | |||||||
C3 |
[***] |
0 | ||||||
C4 |
[***] |
0 | ||||||
[***] |
0 | |||||||
C5 |
[***] |
0 | ||||||
C6 |
[***] |
0 | ||||||
[***] |
0 | |||||||
[***] |
C-6 |
EXHIBIT D
TRAINING
I. Customer Service . Mesa agrees that it shall train or cause to be trained to proficiency, all customer service employees of Mesa that may be associated with providing Flight Services. Mesa agrees to participate in any and all special training or other programs that US Airways or American provides for its customer service employees. Mesa may elect to accomplish such training through the use of a Train the Trainer concept. Mesas flight attendants providing Flight Services shall be trained by Mesa, at Mesas sole cost and expense, on meal and beverage service procedures for Flights, including liquor and duty-free sales and cash handling, and will collect all on-board revenue for liquor and duty-free sales on Flights.
D-1 |
Exhibit 10.11.19
***Text Omitted and Filed Separately with the Securities and Exchange Commission
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4) and 230.406
Execution Version
EIGHTEENTH AMENDMENT TO CODE SHARE AND
REVENUE SHARING AGREEMENT
THIS EIGHTEENTH AMENDMENT TO CODE SHARE AND REVENUE SHARING AGREEMENT (this Eighteenth Amendment ) is made and entered into to be effective as of March 1, 2017 (the Effective Date ) by and between AMERICAN AIRLINES, INC., a Delaware corporation, as successor in interest by merger to US Airways, Inc. ( American ), and MESA AIRLINES, INC., a Nevada corporation ( Mesa ).
RECITALS :
A. American and Mesa are parties to that certain Code Share and Revenue Sharing Agreement, dated as of March 20, 2001, but effective as of February 1, 2001 (as amended, modified and supplemented, the Code Share Agreement ).
B. The Code Share Agreement has previously been amended, including by:
i. |
the Tenth Amendment to Code Share and Revenue Sharing Agreement, dated November 18, 2010 (the Tenth Amendment ); |
ii. |
the Sixteenth Amendment to Code Share and Revenue Sharing Agreement, dated January 26, 2015 (the Sixteenth Amendment ); and |
iii. |
the Seventeenth Amendment to Code Share and Revenue Sharing Agreement, dated December 28, 2015 (the Seventeenth Amendment ). |
C. The Parties desire to further amend the Code Share Agreement as set forth in this Eighteenth Amendment.
D. All capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to such terms in the Code Share Agreement. It is the intent of the parties that this Eighteenth Amendment and the subject matter addressed herein is integral to the entirety of the Code Share Agreement and is not severable therefrom.
AGREEMENT :
In consideration of the mutual covenants contained herein and of other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
1. Pilot Block Hour Rate Increase .
1.1 As of the Effective Date, and subject to Section 1.2 of this Eighteenth Amendment:
[***]
1.2 Notwithstanding anything set forth in Section 1.1 of this Eighteenth Amendment, in the event that Mesa fails to enter into a collective bargaining agreement with its pilot labor organization on or before December 31, 2017: [***]
2. Performance Threshold Changes . Attachment B to this Eighteenth Amendment lists all cancellation and delay codes used by American at the time of this Eighteenth Amendment and specifically lists all such codes that are classified as Controllable Cancellation Codes and Controllable On-Time Departure Codes. Exhibit D to the Tenth Amendment is hereby superseded and replaced by Attachment B hereto. In the event the codes set forth in Americans Delay Code Handbook and Cancel Code Handbook (or any successor handbooks thereto) are amended, restated or modified in any way, subsequent to the Effective Date, then such amendment, restatement or modification shall automatically be deemed to amend, modify or restate the applicable codes set forth in Attachment B hereto without any action by American or Mesa; provided that, American shall promptly provide notice to Mesa of any such amendment, modification or restatement to the Delay Code Handbook and Cancel Code Handbook.
3. Initial Crew Max . Mesa acknowledges and reaffirms its obligation pursuant to Section 4.2 of the Seventeenth Amendment to, not later than one hundred sixty (160) calendar days prior to each month during which Mesa is obligated to provide Flight Services, provide AAG Network Planning (as defined therein) with Initial Crew Max information, meaning an initial estimate of schedulable hours available during such month for each of Mesas captains, first officers and flight attendants.
4. Replacement of Code Share Agreement . Upon execution of this Eighteenth Amendment by both parties, the parties shall, in good faith promptly negotiate and execute a new Capacity Purchase Agreement to replace the existing Code Share Agreement reflecting the foregoing terms and all applicable terms and conditions set forth in the Code Share Agreement and its various amendments. The purpose of such new Capacity Purchase Agreement is to re-state and organize the previous agreement and clean up dead language for ease of administration. The parties agree to work in good faith to have such new Capacity Purchase Agreement in place by December 31, 2017.
5. Miscellaneous .
5.1 Except as set forth in this Eighteenth Amendment, all of the terms and conditions of the Code Share Agreement shall remain in full force and effect and be applicable to this Eighteenth Amendment.
5.2 This Eighteenth Amendment may be executed in counterparts, all of which when taken together shall be one and the same document.
5.3 This Eighteenth Amendment, including the Attachments attached hereto, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto.
5.4 The definitions contained in this Eighteenth Amendment are applicable to the other grammatical forms of such terms.
5.5 Notwithstanding anything herein to the contrary, Sections 1.2 and 5 of this Eighteenth Amendment shall survive the expiration or termination of the Code Share Agreement.
[Signatures Follow]
Execution Version
IN WITNESS WHEREOF, the parties have duly executed this Eighteenth Amendment as of the date first above written.
AMERICAN AIRLINES, INC.
By: Name: Kenji Hashimoto Title: Senior Vice President Regional Carriers
|
MESA AIRLINES, INC.
By: Name: Title: |
Attachment A
Contract Rates
Mesa Contract Rates (Effective as of the Effective date of the Eighteenth Amendment)
(See Note 2)
Guaranteed Non-Maintenance Cost
Original 38 | +9 (Amd. 12) |
+4/6 (Amd. 13/14) |
+7 (Amd. 16) | |||||||
COST CATEGORY | UNIT | CRJ 900 | CRJ 900 | CRJ 900 | CRJ 900 | |||||
Aircraft Lease & Overhead |
A/C MONTH | |||||||||
Ownership | [***] | [***] | [***] | [***] | ||||||
Overhead | [***] | [***] | [***] | [***] | ||||||
Crew RON | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] | ||||||
Flight Crew & Maintenance (Rates applicable during initial Rate Increase Period 1 ) | BLOCK HOUR | |||||||||
(Note 1)Pilot | [***] | [***] | [***] | [***] | ||||||
Flight Attendant | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] | ||||||
Flight Crew & Maintenance (Rates applicable during Secondary Rate Increase Period 2 ) | BLOCK HOUR | |||||||||
(Note 1)Pilot | [***] | [***] | [***] | [***] | ||||||
Flight Attendant | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] | ||||||
[***] | [***] | [***] | [***] | |||||||
Dispatchers |
DEPARTURE | [***] | [***] | [***] | [***] | |||||
Guaranteed Non-Maintenance Cost Reduction | A/C MONTH | [***] | [***] | [***] | [***] | |||||
Aircraft Margin |
A/C MONTH | [***] | [***] | [***] | [***] |
1 |
As such term is defined in Section 1.1(a) of the Eighteenth Amendment |
2 |
As such term is defined in Section 1.1(b) of the Eighteenth Amendment |
Guaranteed Maintenance Costs |
||||||||||
Original 38 | +9 (Amd. 12) |
+4/6 (Amd. 13/14) |
+7 (Amd. 16) | |||||||
COST CATEGORY | UNIT | CRJ 900 | CRJ 900 | CRJ 900 | CRJ 900 | |||||
Maintenance Cost Per A/C |
A/C MONTH | |||||||||
MX Employees | [***] | [***] | [***] | [***] | ||||||
Engine & APU Depreciation | [***] | [***] | [***] | [***] | ||||||
Outstation Base | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] | ||||||
[***] | [***] | [***] | [***] | |||||||
Maintenance Base Cost |
BASE/MONTH | |||||||||
Rent & Utilities | [***] | [***] | [***] | [***] | ||||||
Personnel | [***] | [***] | [***] | [***] | ||||||
Parts Depreciation | [***] | [***] | [***] | [***] | ||||||
Equipment Depreciation | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] | ||||||
Maintenance Cost Per Block Hour |
BLOCK HOUR | |||||||||
Engine MX Contractual | [***] | [***] | [***] | [***] | ||||||
Engine MX Other | [***] | [***] | [***] | [***] | ||||||
Airframe MX | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] |
* these amounts will not be subject to escalation over the Term
Note 1 The pilot rates set for the above in this Attachment A reflect the rate increases provided for in Section 1.1 of the Eighteenth Amendment. In the event of any expiration or termination of the Rate Increase Period (as defined in Section 1.1(b) of the Eighteenth Amendment), the pilot rates and total flight crew rates shall be as follows:
Original 38 | +9 (Amd. 12) |
+4/6 (Amd. 13/14) |
+7 (Amd. 16) | |||||||
COST CATEGORY | UNIT | CRJ 900 | CRJ 900 | CRJ 900 | CRJ 900 | |||||
Flight Crew & Maintenance |
BLOCK HOUR |
|||||||||
Pilot | [***] | [***] | [***] | [***] | ||||||
Flight Attendant | [***] | [***] | [***] | [***] | ||||||
Total | [***] | [***] | [***] | [***] |
Following any such expiration or termination of the Rate Increase Period, rates for Mesas pilots may be adjusted once during the remainder of the term of the Code Share Agreement to reflect an increase to the pay scale for the pilots of not more than [***] to account for any new or renegotiated collective bargaining agreement, provided that such adjusted rate shall not be billed to American until after such adjusted rate is effective and paid to Mesas pilots.
Note 2 In addition to the Aircraft (as defined below), Mesa may, subject to the terms and conditions of this Note 2, in its discretion and at its sole expense, arrange for and utilize substitute CRJ-900 aircraft or CRJ-200 aircraft in American Eagle/US Airways Express livery (as applicable based on the terms of the Code Share Agreement) or neutral livery to provide the Flight Services under this Code Share Agreement during those periods, but only during those periods, when any of the Original Aircraft, the Twelfth Amendment New Aircraft, the Thirteenth Amendment New Aircraft, the Fourteenth Amendment New Aircraft or the Sixteenth Amendment New Aircraft (collectively, Aircraft) may be out of service due to unforeseen and irregular maintenance requirements; provided that (i) each substitute CRJ-200 aircraft shall be subject to compliance with flight interior and exterior standards and shall be approved by American in writing before being used as a substitute aircraft pursuant to this Note 2, and (ii) Mesa may only utilize regional jet aircraft other than CRJ-900 or CRJ-200 aircraft to the extent that American has permitted such use in advance in writing. For clarification purposes only, Mesa may operate such a substitute aircraft in US Airways Express or neutral livery in lieu of an Aircraft in US Airways Express livery and Mesa may operate such a substitute aircraft in American Eagle or neutral livery in lieu of an Aircraft in American Eagle livery, but may not operate a substitute aircraft in US Airways Express livery in lieu of an Aircraft in American Eagle livery or a substitute aircraft in American Eagle livery in lieu of an Aircraft in US Airways Express livery, without the prior written consent of American.
a) |
Notwithstanding anything in the Code Share Agreement to the contrary, and assuming approval is granted, usage of substitute CRJ-200 aircraft shall be paid as follows: |
1. |
Rates paid for operation of this aircraft will be $[***] per block hour and $[***] per departure plus any fuel costs associated with these substitute operations. Such rate shall be reduced by [***] after the [***] Flight of such aircraft in a calendar month, reduced by [***] after the [***] Flight of the calendar month, and [***] after the [***] Flight of the calendar month. Any CRJ-200 Flights operated as a result of Aircraft Damage cause by American shall be excluded from the calculation and not subject to reductions pursuant to this paragraph. |
2. |
In addition, the amount paid to Mesa will be further adjusted by any interrupted trip or passenger inconvenience costs to include, without limitation, such things as meals and hotels for displaced passengers, as well as an amount of $[***] per passenger downgraded from first class to coach class (excluding CRJ-200 flights operated because of Aircraft Damage caused by American). |
b) |
If a substitute aircraft shall be utilized for more than two (2) consecutive days, Mesa and American shall mutually agree upon the route that shall be covered by the substitute aircraft. |
c) |
For clarification purposes only, is a substitute aircraft is used in accordance with the terms hereof, the applicable provisions of the Code Share Agreement shall also apply to the Flight Services operated by such substitute aircraft, including, without limitation, if the respective Flight is not operated for any reason. |
d) |
The provisions of this Note 2 replace Section 9(d)(ii) of the Tenth Amendment in its entirety. |
Attachment B
American Cancellation and Delay Codes
1. |
Controllable Cancellation Codes |
CODE | GROUP | DESCRIPTION | ||
XCC |
CREWS | FLIGHT CREW UNAVAILABLE | ||
YCC | CREWS | BALANCE OF FLIGHT CREW UNAVAILABLE | ||
XCL | CREWS | PILOT LEGALITY | ||
YCL | CREWS | BALANCE OF PILOT LEGALITY | ||
XRC | CREWS | FLIGHT CREW REFUSED AIRCRAFT | ||
YRC | CREWS | BALANCE OF FLIGHT CREW REFUSED AIRCRAFT | ||
XFA | CREWS | FLIGHT ATTENDANT CAUSED | ||
YFA | CREWS | BALANCE OF FLIGHT ATTENDANT CAUSED | ||
XFL | CREWS | FLIGHT ATTENDANT LEGALITY | ||
YFL | CREWS | BALANCE OF FLIGHT ATTENDANT LEGALITY | ||
XOP | OPERATIONAL | OPERATIONAL DECISION | ||
YOP | OPERATIONAL | BALANCE OF OPERATIONAL DECISION | ||
XZP | OPERATIONAL | PRE-EMPTIVE OPERATIONAL DECISION | ||
YZP | OPERATIONAL | BALANCE OF PRE-EMPTIVE OPERATIONAL | ||
XM0 | MAINTENANCE/DAMAGE | MAINTENANCE MECHANICAL INBOUND | ||
YM0 | MAINTENANCE/DAMAGE | BALANCE OF MAINTENANCE MECHANICAL | ||
XMl | MAINTENANCE/DAMAGE | MAINTENANCE MECHANICAL OUTBOUND | ||
YMl | MAINTENANCE/DAMAGE | BALANCE OF MAINTENANCE MECHANICAL OUTBOUND | ||
XM2 | MAINTENANCE/DAMAGE | MATERIAL SERVICEABILITY | ||
YM2 | MAINTENANCE/DAMAGE | BALANCE OF MATERIAL SERVICEABILITY | ||
XM3 | MAINTENANCE/DAMAGE | PARTS & MATERIALS/TOOLING/TEST EQUIPMENT SHORTAGE | ||
YM3 | MAINTENANCE/DAMAGE | BALANCE OF PARTS & MATERIALS/TOOLING/TEST EQUIPMENT SHORTAGE | ||
XM4 | MAINTENANCE/DAMAGE | MAINTENANCE SERVICING | ||
YM4 | MAINTENANCE/DAMAGE | BALANCE OF MAINTENANCE SERVICING | ||
XM5 | MAINTENANCE/DAMAGE | TECHNICAL DATA | ||
YM5 | MAINTENANCE/DAMAGE | BALANCE OF TECHNICAL DATA | ||
XM6 | MAINTENANCE/DAMAGE | PRECAUTIONARY INSPECTION | ||
YM6 | MAINTENANCE/DAMAGE | BALANCE OF PRECAUTIONARY lNSPECTION | ||
XM7 | MAINTENANCE/DAMAGE | SCHEDULED MAINTENANCE | ||
YM7 | MAINTENANCE/DAMAGE | BALANCE OF SCHEDULED MAINTENANCE | ||
XM8 | MAINTENANCE/DAMAGE | ONBOARD COMPUTER/COMPONENT RESET | ||
YM8 | MAINTENANCE/DAMAGE | BALANCE OF ONBOARD COMPUTER/COMPONENT | ||
XM9 | MAINTENANCE/DAMAGE | MAINTENANCE/ENGINEERING DEPARTMENT | ||
YM9 | MAINTENANCE/DAMAGE | BALANCE OF MAINTENANCE/ENGINEERING | ||
XD3 | MAINTENANCE/DAMAGE | FLIGHT DECK/CABIN CREW DAMAGE | ||
YD3 | MAINTENANCE/DAMAGE | BALANCE OF FLIGHT DECK/CABIN CREW DAMAGE | ||
XD4 | MAINTENANCE/DAMAGE | PASSENGER DAMAGE | ||
YD4 | MAINTENANCE/DAMAGE | BALANCE OF PASSENGER DAMAGE | ||
XD9 | MAINTENANCE/DAMAGE | MAINTENANCE DAMAGE | ||
YD9 | MAINTENANCE/DAMAGE | BALANCE OF MAINTENANCE DAMAGE |
Attachment B to Eighteenth Amendment to Code Share Agreement
2. |
Controllable On-Time Departure Codes |
CODE | GROUP | DESCRIPTION | ||
FA0 | FLIGHT CREW/CREW SCHEDULING | FLIGHT ATTENDANT COMPLETION OF DUTIES/OTHER | ||
FAl | FLIGHT CREW/CREW SCHEDULING | FLIGHT ATTENDANT REST/LEGALITY | ||
FA2 | FLIGHT CREW/CREW SCHEDULING | FLIGHT ATTENDANT CONNECTION | ||
FA3 | FLIGHT CREW/CREW SCHEDULING | FLIGHT ATTENDANT BROKEN THRU FLIGHT | ||
FA4 | FLIGHT CREW/CREW SCHEDULING | FLIGHT ATTENDANT LATE | ||
FA5 | FLIGHT CREW/ CREW SCHEDULING | FLIGHT ATTENDANT SICK OR NO SHOW | ||
FA6 | FLIGHT CREW/CREW SCHEDULING | BOARDING HELD/INTERRUPTED | ||
FA7 | FLIGHT CREW/CREW SCHEDULING | FLIGHT ATTENDANT GATE CHECKED BAGS | ||
FA8 | FLIGHT CREW/CREW SCHEDULING | RE SEATING PASSENGERS | ||
FP0 | FLIGHT CREW/CREW SCHEDULING | PILOT COMPLETION OF DUTIES/OTHER | ||
FPl | FLIGHT CREW/CREW SCHEDULING | PILOT REST/LEGALITY | ||
FP2 | FLIGHT CREW/CREW SCHEDULING | PILOT CONNECTION | ||
FP3 | FLIGHT CREW/CREW SCHEDULING | PILOT BROKEN THRU FLIGHT | ||
FP4 | FLIGHT CREW/CREW SCHEDULING | PILOT LATE | ||
FP5 | FLIGHT CREW/CREW SCHEDULING | PILOT SICK OR NO SHOW | ||
FC0 | FLIGHT CREW/CREW SCHEDULING | CREW SCHEDULING OTHER | ||
FCl | FLIGHT CREW/CREW SCHEDULING | PILOT AND FLIGHT ATTENDANT REST | ||
FC2 | FLIGHT CREW/CREW SCHEDULING | PILOT AND FLIGHT ATTENDANT CONNECTION | ||
FC3 | FLIGHT CREW/CREW SCHEDULING | PILOT AND FLIGHT ATTENDANT BROKEN | ||
FC4 | FLIGHT CREW/CREW SCHEDULING | PILOT AND FLIGHT ATTENDANT LATE TO | ||
FC5 | FLIGHT CREW/CREW SCHEDULING | CREW SWAP/CREW RECOVERY | ||
FC6 | FLIGHT CREW/CREW SCHEDULING | IN TERMINATE/OUT ORIGINATE | ||
FC7 | FLIGHT CREW/CREW SCHEDULING | UNSCHEDULED CREW REST | ||
MT | MAINTENANCE/DAMAGE | MAINTENANCE | ||
MTl | MAINTENANCE/DAMAGE | MAINTENANCE MECHANICAL DELAY | ||
MT2 | MAINTENANCE/DAMAGE | PARTS DEFECTIVE FROM STOCK |
Attachment B to Eighteenth Amendment to Code Share Agreement
CODE | GROUP | DESCRIPTION | ||
MT3 | MAINTENANCE/DAMAGE | PARTS & MATERIALS/TOOLING/TEST | ||
MT4 | MAINTENANCE/DAMAGE | DELAY FROM SCHEDULED MAINTENANCE TASK | ||
MT5 | MAINTENANCE/DAMAGE | DEFERRAL MANAGEMENT/TECHNICAL | ||
MT6 | MAINTENANCE/DAMAGE | PRECAUTIONARY INSPECTION | ||
MT7 | MAINTENANCE/DAMAGE | LATE DELTVERY OF AIRCRAFT | ||
MT8 | MAINTENANCE/DAMAGE | ONBOARD COMPUTER/COMPONENT RESET | ||
MT9 | MAINTENANCE/DAMAGE | MAINTENANCE/ENGINEERING PERSONNEL | ||
DA3 | MAINTENANCE/DAMAGE | LIGHT DECK/CABIN CREW DAMAGE | ||
DA4 | MAINTENANCE/DAMAGE | PASSENGER DAMAGE | ||
DA9 | MAINTENANCE/DAMAGE | MAINTENANCE DAMAGE | ||
OL2 | OPERATIONS/LOAD PLANNING | ADJUSTING PASSENGER/BINS AFTER INITIAL LOAD | ||
OL4 | OPERATIONS/LOAD PLANNING | MOVING PASSENGERS/BAGS FOR WEIGHT | ||
OP3 | OPERATIONS/LOAD PLANNING | LATE FLIGHT RELEASE | ||
IT8 | INFORMATION TECHNOLOGY | REGIONAL CARRIERS IT ENVIRONMENT |
Attachment B to Eighteenth Amendment to Code Share Agreement
Exhibit 10.12.1
EXECUTION VERSION
CREDIT AND GUARANTY AGREEMENT
Dated as of August 12, 2016
by and among
MESA AIRLINES, INC.,
and
MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C.,
as the Borrowers,
MESA AIR GROUP, INC.,
as a Guarantor,
THE OTHER GUARANTORS PARTY HERETO FROM TIME TO TIME,
CIT BANK, NA.,
as Administrative Agent,
and
THE OTHER LENDERS PARTY HERETO
Arranged By:
CIT BANK, N.A.,
as Sole Lead Arranger and Book Runner
TABLE OF CONTENTS
Page | ||||||||||
Article 1 |
DEFINITIONS AND ACCOUNTING TERMS |
1 | ||||||||
|
1.01 |
Defined Terms |
1 | |||||||
1.02 |
Other Interpretive Provisions |
36 | ||||||||
1.03 |
Accounting Terms |
37 | ||||||||
1.04 |
Rounding |
38 | ||||||||
1.05 |
Times of Day |
38 | ||||||||
1.06 |
Letter of Credit Amounts |
38 | ||||||||
1.07 |
Financial Covenant Defaults |
38 | ||||||||
Article 2 |
THE COMMITMENTS AND CREDIT EXTENSIONS |
38 | ||||||||
2.01 |
2.01 Loans |
38 | ||||||||
2.02 |
Borrowings |
39 | ||||||||
2.03 |
Letters of Credit and Letter of Credit Fees |
40 | ||||||||
2.04 |
Swingline Loans |
47 | ||||||||
2.05 |
Prepayments |
50 | ||||||||
2.06 |
Termination or Reduction of Total Revolving Commitments |
51 | ||||||||
2.07 |
Repayment of Loans |
52 | ||||||||
2.08 |
Interest |
52 | ||||||||
2.09 |
Fees |
53 | ||||||||
2.10 |
Computation of Interest and Fees |
53 | ||||||||
2.11 |
Evidence of Debt |
53 | ||||||||
2.12 |
Payments Generally |
54 | ||||||||
2.13 |
Sharing of Payments |
55 | ||||||||
2.14 |
Handling of Proceeds of Collateral; Cash Dominion; Revolving Loan Account; Cash Management Procedures |
56 | ||||||||
2.15 |
Uncommitted Facilities Increase |
58 | ||||||||
2.16 |
Defaulting Lenders |
60 | ||||||||
Article 3 |
TAXES, YIELD PROTECTION AND ILLEGALITY |
63 | ||||||||
3.01 |
Taxes |
63 | ||||||||
3.02 |
Illegality |
67 | ||||||||
3.03 |
Inability to Determine Rate |
67 | ||||||||
3.04 |
Increased Cost and Reduced Return; Capital Adequacy |
67 | ||||||||
3.05 |
Funding Losses |
68 | ||||||||
3.06 |
Matters Applicable to all Requests for Compensation |
69 | ||||||||
3.07 |
Survival |
69 | ||||||||
Article 4 |
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS |
69 | ||||||||
4.01 |
Conditions of Initial Credit Extension |
69 | ||||||||
4.02 |
Conditions to all Credit Extensions |
74 | ||||||||
4.03 |
Satisfaction of Conditions |
74 | ||||||||
Article 5 |
REPRESENTATIONS AND WARRANTIES |
75 | ||||||||
5.01 |
Existence, Qualification and Power |
75 |
Mesa Credit and Guaranty Agreement Page i
TABLE OF CONTENTS
(continued)
Page | ||||||||||
5.02 |
Authorization; No Contravention |
75 | ||||||||
5.03 |
Governmental Authorization; Other Consents |
75 | ||||||||
5.04 |
Binding Effect |
76 | ||||||||
5.05 |
Financial Statements; No Material Adverse Effect |
76 | ||||||||
5.06 |
Litigation |
77 | ||||||||
5.07 |
No Default |
77 | ||||||||
5.08 |
Ownership of Collateral; Liens |
77 | ||||||||
5.09 |
Environmental Compliance |
77 | ||||||||
|
5.10 |
Insurance |
78 | |||||||
5.11 |
Taxes |
78 | ||||||||
5.12 |
ERISA Compliance |
78 | ||||||||
5.13 |
Subsidiaries |
79 | ||||||||
5.14 |
Margin Regulations; Investment Company Act, Use of Proceeds |
79 | ||||||||
5.15 |
Disclosure |
80 | ||||||||
5.16 |
Compliance with Laws |
80 | ||||||||
5.17 |
Intellectual Property; Licenses, Etc |
81 | ||||||||
5.18 |
Brokers Fees |
81 | ||||||||
5.19 |
Labor Matters |
81 | ||||||||
5.20 |
Business Locations |
81 | ||||||||
5.21 |
Perfection of Security Interests in the Collateral |
81 | ||||||||
5.22 |
Solvency |
81 | ||||||||
5.23 |
Material Contracts |
82 | ||||||||
5.24 |
Accounts |
82 | ||||||||
5.25 |
Patriot Act |
82 | ||||||||
5.26 |
OFAC |
82 | ||||||||
Article 6 |
AFFIRMATIVE COVENANTS |
82 | ||||||||
6.01 |
Financial Statements |
82 | ||||||||
6.02 |
Certificates: Other Information |
84 | ||||||||
6.03 |
Notices |
86 | ||||||||
6.04 |
Payment of Obligations: Tax Returns |
87 | ||||||||
6.05 |
Preservation of Existence, Material Contracts, Etc |
87 | ||||||||
6.06 |
Maintenance of Properties |
88 | ||||||||
6.07 |
Maintenance of Insurance |
88 | ||||||||
6.08 |
Compliance with Laws |
88 | ||||||||
6.09 |
Books and Records |
88 | ||||||||
6.10 |
Inspection Rights |
88 | ||||||||
6.11 |
Use of Proceeds |
89 | ||||||||
6.12 |
Additional Subsidiaries |
89 | ||||||||
6.13 |
ERISA Compliance |
90 | ||||||||
6.14 |
Pledged Assets |
90 | ||||||||
6.15 |
Covenant with Respect to Environmental Matters |
90 | ||||||||
6.16 |
Lenders Meetings |
91 | ||||||||
6.17 |
Post-Closing Covenants |
91 | ||||||||
6.18 |
Patriot Act; OFAC |
91 |
Mesa Credit and Guaranty Agreement Page ii
TABLE OF CONTENTS
(continued)
Page | ||||||||||
6.19 |
Asset Monitoring and Inspections; Field Exams; Inventory Tracking System |
92 | ||||||||
|
6.20 |
Separateness |
92 | |||||||
(A) |
Borrowing Base Determinations and Prepayments |
92 | ||||||||
6.21 |
Certificated Air Carrier |
93 | ||||||||
Article 7 |
NEGATIVE COVENANTS |
93 | ||||||||
7.01 |
[Reserved] |
93 | ||||||||
7.02 |
Liens |
93 | ||||||||
7.03 |
[Reserved] |
93 | ||||||||
7.04 |
Fundamental Changes |
93 | ||||||||
7.05 |
Dispositions |
94 | ||||||||
7.06 |
[Reserved] |
94 | ||||||||
7.07 |
Change in Nature of Business |
94 | ||||||||
7.08 |
Transactions with Affiliates and Insiders |
94 | ||||||||
7.09 |
Burdensome Agreements |
95 | ||||||||
7.10 |
Use of Proceeds |
95 | ||||||||
7.11 |
Amendments of AAR Related Documents; Amendments to Certain Agreements |
95 | ||||||||
7.12 |
Organization Documents; Fiscal Year; Legal Name, State of Formation and Form of Entity |
95 | ||||||||
7.13 |
Ownership of Subsidiaries |
96 | ||||||||
7.14 |
Sale and Leaseback Transactions |
96 | ||||||||
Article 8 |
FINANCIAL COVENANTS |
96 | ||||||||
8.01 |
Financial Covenants |
96 | ||||||||
Article 9 |
EVENTS OF DEFAULT AND REMEDIES |
97 | ||||||||
9.01 |
Events of Default |
97 | ||||||||
9.02 |
Remedies upon Event of Default |
99 | ||||||||
9.03 |
[Reserved] |
100 | ||||||||
9.04 |
Application of Funds |
100 | ||||||||
Article 10 |
GUARANTY |
101 | ||||||||
10.01 |
The Guaranty |
101 | ||||||||
10.02 |
Obligations Unconditional |
101 | ||||||||
10.03 |
Reinstatement |
102 | ||||||||
10.04 |
Waivers |
103 | ||||||||
10.05 |
Remedies |
103 | ||||||||
10.06 |
Contribution by Guarantors |
104 | ||||||||
10.07 |
Guarantee of Payment; Continuing Guarantee |
105 | ||||||||
10.08 |
Subordination of Other Obligations |
105 | ||||||||
Article 11 |
THE ADMINISTRATIVE AGENT |
105 |
Mesa Credit and Guaranty Agreement Page iii
TABLE OF CONTENTS
(continued)
Page | ||||||||||
11.01 |
Appointment and Authorization of Administrative Agent |
105 | ||||||||
11.02 |
Delegation of Duties |
106 | ||||||||
|
11.03 |
Liability of Administrative Agent |
106 | |||||||
11.04 |
Reliance by Administrative Agent |
107 | ||||||||
11.05 |
Notice of Default |
107 | ||||||||
11.06 |
Credit Decision; Disclosure of Information by Administrative Agent |
108 | ||||||||
11.07 |
Indemnification of Administrative Agent |
108 | ||||||||
11.08 |
Administrative Agent in its Individual Capacity |
109 | ||||||||
11.09 |
Successor Administrative Agent |
109 | ||||||||
11.10 |
Administrative Agent May File Proofs of Claim |
110 | ||||||||
11.11 |
Collateral and Guaranty Matters |
110 | ||||||||
11.12 |
Other Agents; Arrangers and Managers |
112 | ||||||||
11.13 |
Additional Secured Parties |
112 | ||||||||
11.14 |
Exclusive Right to Enforce Rights and Remedies |
112 | ||||||||
Article 12 |
MISCELLANEOUS |
113 | ||||||||
12.01 |
Amendments, Etc |
113 | ||||||||
12.02 |
Notices and Other Communications; Facsimile Copies |
115 | ||||||||
12.03 |
No Waiver; Cumulative Remedies |
117 | ||||||||
12.04 |
Attorney Costs, Expenses |
117 | ||||||||
12.05 |
Indemnification by the Loan Parties |
118 | ||||||||
12.06 |
Payments Set Aside |
119 | ||||||||
12.07 |
Successors and Assigns |
119 | ||||||||
12.08 |
Confidentiality |
123 | ||||||||
12.09 |
Set-off |
125 | ||||||||
12.10 |
Interest Rate Limitation |
126 | ||||||||
12.11 |
Counterparts |
126 | ||||||||
12.12 |
Integration |
126 | ||||||||
12.13 |
Survival of Representations and Warranties |
126 | ||||||||
12.14 |
Severability |
126 | ||||||||
12.15 |
Replacement of Lenders |
127 | ||||||||
12.16 |
Governing Law |
128 | ||||||||
12.17 |
Waiver of Right to Trial by Jury |
128 | ||||||||
12.18 |
USA Patriot Act Notice |
129 | ||||||||
12.19 |
Nonliability of Lenders |
129 | ||||||||
12.20 |
Contractual Recognition of Bail-In |
130 | ||||||||
Article 13 |
APPOINTMENT OF THE BORROWER REPRESENTATIVE; |
|||||||||
JOINT AND SEVERAL LIABILITY OF THE BORROWERS; |
||||||||||
SUBORDINATION |
131 | |||||||||
13.01 |
Borrower Representative |
131 | ||||||||
13.02 |
Joint and Several Liability of Borrowers |
131 | ||||||||
13.03 |
Subordination to Payment of Obligations |
133 |
Mesa Credit and Guaranty Agreement Page iv
SCHEDULES
1.01(a) |
Eligibility Schedule |
|
1.01(b) |
Excluded Accounts |
|
1.01(c) |
Maintenance Burn Factor |
|
1.01(d) |
Initial Spare Engines |
|
2.01 |
Conunitments and Pro Rata Shares |
|
5.10 |
Insurance |
|
5.13 |
Capitalization |
|
5.17 |
IP Rights |
|
5.19 |
Labor Matters |
|
5.20(a) |
Locations of Tangible Personal Property 5.20(b) Locations of Chief Executive Office |
|
5.23 |
Material Contracts |
|
5.24 |
Accounts |
|
6.17 |
Post-Closing Covenants |
|
12.02 |
Certain Addresses for Notices |
EXHIBITS
A-1 |
Form of Loan Notice |
|
A-2 |
Form of Swingline Loan Notice |
|
B-1 |
Form of Revolving Note |
|
B-2 |
Form of Swingline Note |
|
C |
Form of Compliance Certificate |
|
D |
Form of Assignment and Assumption Agreement |
|
E |
Form of Solvency Certificate |
|
F |
Form of Borrowing Base Certificate |
|
G-1 |
Form of U.S. Tax Compliance Certificate |
|
G-2 |
Form of U.S. Tax Compliance Certificate |
|
G-3 |
Form of U.S. Tax Compliance Certificate |
|
G-4 |
Form of U.S. Tax Compliance Certificate |
Mesa Credit and Guaranty Agreement Page v
CREDIT AND GUARANTY AGREEMENT
This CREDIT AND GUARANTY AGREEMENT is entered into as of August 12, 2016 among, MESA AIRLINES, INC. , a Nevada corporation ( Mesa ), and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C. , an Arizona limited liability company ( Mesa Inventory Management ), and such other Persons joined hereto as a Borrower from time to time (each a Borrower and together, the Borrowers ), MESA AIR GROUP, INC. , a Nevada corporation ( Holdings ), as a guarantor, the other Guarantors (as hereinafter defined) from time to time party hereto, the Lenders (as hereinafter defined) from time to time party hereto, and CIT BANK, N.A. ( CIT ), as Administrative Agent.
The Borrowers have requested that the Lenders provide $35,000,000 in credit facilities for the purposes set forth herein and the Lenders are willing to do so on the terms and conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms . As used in this Agreement, the following terms shall have the meanings set forth below:
AAR means AAR Supply Chain, Inc. (formerly known as AAR Parts Trading, Inc.), AAR Aircraft & Engine Sales & Leasing, Inc. or any of their Affiliates.
AAR Cooperation Agreement means (a) any agreement (in form and substance satisfactory to the Administrative Agent) among AAR and Administrative Agent, on behalf of the Secured Parties, pursuant to which, among other things, (i) such AAR Aircraft & Engine Sales & Leasing, Inc. and certain affiliates thereof and Administrative Agent agree to cooperate with respect to their respective property located at the Spare Parts Locations.
AAR Related Documents means all agreements, documents and instruments referenced in the AAR Cooperation Agreement.
Accounts means all of the Loan Parties present and future: (a) accounts (as defined in the UCC); (b) instruments, documents, chattel paper (including electronic chattel paper) (all as defined in the UCC); (c) reserves and credit balances arising in connection with or pursuant to this Agreement; (d) guaranties; (e) other supporting obligations, payment intangibles and letter of credit rights (all as defined in the UCC); (f) property, including notes and deposits, of the Loan Parties account debtors securing the obligations owed by such account debtors to the Loan Parties; and (g) all proceeds of any of the foregoing.
Acquisition , by any Person, means the acquisition by such Person, in a single transaction or in a series of related transactions, of (a) all or substantially all of the Property of another Person, (b) all or substantially all of a division or operating group of another Person, or
Mesa Credit and Guaranty Agreement Page 1
(c) all of the Capital Stock of another Person, in each case whether or not involving a merger or consolidation with such other Person and whether for cash, property, services, assumption of Indebtedness, securities or otherwise.
Additional Lender has the meaning specified in Section 2.15(d) .
Adjusted OLV means, with respect to each Borrowing Base Certificate Date, (x) the NBV of all Eligible Spare Parts Inventory multiplied by (y) the applicable OLV Ratio.
Administrative Agent means CIT in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
Administrative Agents Bank Account means the Administrative Agents bank account number 754292753, ABA No. 021000021 at JPMorgan Chase Bank NA in New York, New York, Reference: Mesa Airlines.
Administrative Agents Office means the Administrative Agents address and, as appropriate, account as set forth on Schedule 12.02 or such other address or account as the Administrative Agent may from time to time notify the Borrowers and the Lenders.
Administrative Questionnaire means an Administrative Questionnaire in a form supplied by the Administrative Agent.
Advance Rate means, with respect to a Spare Engine, an amount equal to:
(a) at any time the Engine Overhaul Percentage for such Spare Engine is greater than 40%, 77.5%;
(b) at any time the Engine Overhaul Percentage for such Spare Engine is greater than 35% but not more than 40%, 67.5%;
(c) at any time the Engine Overhaul Percentage for such Spare Engine is greater than 30% but not more than 35%, 62.5%; and
(d) at any time the Engine Overhaul Percentage for such Spare Engine is 30% or less, 0.0%.
Affiliate means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
Agent-Related Persons means the Administrative Agent, together with its Affiliates, and its Approved Funds, and the officers, directors, employees, agents, advisors, auditors and Controlling Persons and attorneys-in-fact of such Persons, Affiliates and Approved Funds, provided , however, that for the purposes of this Agreement, no Agent-Related Person shall be deemed an Affiliate of the Borrowers or the Guarantors.
Aggregate Payments has the meaning set forth in Section 10.06 .
Mesa Credit and Guaranty Agreement Page 2
Agreement means this Credit and Guaranty Agreement, as amended, modified, restated, supplemented and extended from time to time.
Applicable Margin means the following percentages per annum: (a) with respect to Revolving Loans, 3.25% for Base Rate Loans and 4.25% for LIBOR Loans; (b) with respect to Letters of Credit, 4.25%; and (c) with respect to Swingline Loans, all of which shall be Base Rate Loans, 3.25%.
Appraisal means the appraisals of the Eligible Spare Engines and Eligible Spare Parts Inventory that the Borrowers are required to deliver to the Administrative Agent under Section 6.02(h) .
Appraised Current Market Value means the current market value (as defined by ISTAT) of the applicable Eligible Spare Engine as reflected on the most recent Appraisal for such Eligible Spare Engine as adjusted for the condition, specification, maintenance record and use of such Eligible Spare Engine at the time of such determination.
Appraiser means ICF SH&E or such other appraiser certified by ISTAT and approved by the Administrative Agent in its sole discretion.
Approved Fund means (a) any Person (other than a natural person) engaged in making, purchasing, holding, or investing in commercial loans and similar extensions of credit and that is advised, administered, or managed by a Lender, an Affiliate of a Lender (or an entity or an Affiliate of an entity that administers, advises or manages a Lender); (b) with respect to any Lender that is an investment fund, any other investment fund that invests in loans and that is advised, administered or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor; and (c) any third party which provides warehouse financing to a Person described in the preceding clause (a) or (b) (and any Person described in said clause (a) or (b) shall also be deemed an Approved Fund with respect to such third party providing such warehouse financing).
Arranger means CIT Bank, N.A., in its capacity as sole lead arranger and book runner.
ASA OLV means the orderly liquidation value (as defined by the American Society of Appraisers) based on a twelve month liquidation time period.
Assignment and Assumption means an Assignment and Assumption Agreement substantially in the form of Exhibit D .
Attorney Costs means and includes all reasonable and documented out-of-pocket fees, expenses and disbursements of any law firm or other external counsel.
Attributable Indebtedness means, on any date, in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.
Audited Pre-Closing Financial Statements means the audited consolidated balance sheet of the Loan Parties and their Subsidiaries for the Fiscal Year ended September 30, 2015,
Mesa Credit and Guaranty Agreement Page 3
and the related consolidated statements of income, shareholders equity and cash flows of the Loan Parties and their Subsidiaries for such Fiscal Year, including the notes thereto.
Availability Period means, with respect to the Revolving Commitments, the period from and including the Closing Date to the earliest of (a) the date that is five (5) Business Days before the Revolving Loan Maturity Date, (b) the date of termination of the Revolving Commitments pursuant to Section 2.06 , and (c) the date of termination of the commitment of each Lender to make Loans pursuant to Section 9.02 and of the obligation of the L/C Issuer (or the Support Provider, as the case may be) to make (or cause to make) L/C Credit Extensions pursuant to Section 9.02 .
Aviation Authority means the Federal Aviation Administration (or any successor agency thereto).
Bail-In Action shall mean the exercise of any Write-down and Conversion Powers.
Bail-In Legislation shall mean (i) in relation to any EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time, and (ii) in relation to any other state, any analogous law or regulation from time to time which requires contractual recognition of any Write-down and Conversion Powers contained in that law or regulation, where regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organization.
Bankruptcy Code means Title 11 of the United States Code entitled Bankruptcy, as now and hereafter in effect, or any successor statute.
Base Rate means for any day a fluctuating rate per annum equal to the highest of: (a) the Federal Funds Rate plus 1/2 of 1%; (b) the rate of interest in effect for such day as publicly announced from time to time by JPMorgan Chase Bank as its prime rate in effect for such day; or (c) the most recently available LIBO Base Rate plus 1%. Any change in the prime rate announced by JPMorgan Chase Bank shall take effect without notice to the Borrowers at the opening of business on the day specified as the effective date of change in the public announcement or publication of such change. The Base Rate is not necessarily the lowest rate of interest charged by Lenders in connection with extensions of credit. If JPMorgan Chase Bank ceases to announce its prime rate, the Administrative Agent may select a reasonably comparable index or source to use as the basis for the Base Rate. For the avoidance of doubt, the Base Rate will in no event be less than 0.0% per annum.
Base Rate Loan means a Loan that accrues interest by reference to the Base Rate in accordance with the terms of this Agreement.
Borrower Representative means Mesa Airlines, Inc., in its capacity as the borrowing agent on behalf of itself and the Borrowers.
Mesa Credit and Guaranty Agreement Page 4
Borrowers has the meaning specified in the introductory paragraph hereto, together with all permitted successors and assigns of such Person and any other Person joining this Agreement as a Borrower pursuant to Section 6.12 hereof or otherwise.
Borrowing means (a) a borrowing consisting of simultaneous Loans (other than Swingline Loans) of the same Type and, in the case of LIBOR Loans, having the same Interest Period made by the Lenders pursuant to Sections 2.01 and 2.02 or (b) a borrowing of a Swingline Loan made by Swingline Lender pursuant to Section 2.04 .
Borrowing Base means an amount equal to:
(a) 65% of the Adjusted OLV of the Expendable Spare Parts constituting part of the Eligible Spare Parts Inventory (provided that, this clause (a) shall not exceed 25% of the total Borrowing Base at any time); plus
(b) 75% of the Adjusted OLV of Rotable Spare Parts constituting part of the Eligible Spare Parts Inventory; plus
(c) the aggregate sum, with respect to all Eligible Spare Engines, of (x) the Appraised Current Market Value of an Eligible Spare Engine multiplied by (y) the applicable Advance Rate for such Eligible Spare Engine; plus
(d) the aggregate sum, with respect to all Eligible On-wing Engines, of (x) (1) the Appraised Current Market Value of an Eligible On-wing Engine minus (2) the applicable Maintenance Burn Factor, multiplied by (y) the applicable Advance Rate for such Eligible On-wing Engine; minus
(e) the Minimum Availability Block; minus
(f) such reserves established from time to time by the Administrative Agent in its Permitted Discretion or otherwise by the terms of this Agreement.
Borrowing Base Certificate means a certificate, signed by a Responsible Officer of the Borrower Representative, in the form of Exhibit F or another form which is acceptable to the Administrative Agent in its sole discretion.
Borrowing Base Certificate Date means the date twenty five (25) days after the end of each fiscal month (or more frequently as requested by the Administrative Agent following an Event of Default).
Borrowing Base Deficiency means the circumstance existing at any time the aggregate amount of all Loans and Letter of Credit Liabilities exceeds the Borrowing Base.
Business Day means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, either New York or in the state where the Administrative Agents Office is located or, with respect to a Letter of Credit, the state where the L/C Issuers (or the Support Providers, as the case may be) office is located and, if such day relates to any LIBOR Loan or any Base Rate Loan bearing
Mesa Credit and Guaranty Agreement Page 5
interest at a rate based on the LIBO Rate, means any such day meeting the above requirements on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.
Businesses means, at any time, a collective reference to the businesses operated by the Borrowers and their Subsidiaries at such time.
Cape Town Convention shall mean the official English language texts of the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the Protocol) which were signed in Cape Town, South Africa on November 16, 2001.
Capital Expenditures means, with respect to any Person, all expenditures which, in accordance with GAAP, would be required to be capitalized and shown on the balance sheet of such Person, including expenditures in respect of Capital Leases.
Capital Lease means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of such person.
Capital Stock means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interest in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
Cash Collateralize means to pledge and deposit with or deliver to the Administrative Agent (or with and to a bank designated by the Administrative Agent to be held in a deposit account subject to a control agreement), for the benefit of the Administrative Agent (on behalf of itself, the Support Providers, L/C Issuers and the other Secured Parties), as collateral for the total Letter of Credit Liabilities or other contingent Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent, the Support Provider and the L/C Issuer, if the L/C Issuer is a Lender (which documents are hereby consented to by the Lenders). Derivatives of the term Cash Collateralize have corresponding meanings. Cash Collateral shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral.
Cash Control Period means the period of time commencing upon the occurrence of an Event of Default and the delivery by the Administrative Agent of a notice of control to the applicable financial institution and ending on the earlier of (a) the written waiver of such Event of Default by the Required Lenders, or (b) the Termination Date.
Cash Equivalents means, as of any date of determination, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality
Mesa Credit and Guaranty Agreement Page 6
thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit of (i) any Lender, (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short term commercial paper rating from S&P is at least Al or the equivalent thereof or from Moodys is at least P1 or the equivalent thereof (any such bank being an Approved Bank ), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated Al (or the equivalent thereof) or better by S&P or PI (or the equivalent thereof) or better by Moodys and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by any Person with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) Investments, classified in accordance with GAAP as current assets, in money market mutual funds (as defined in Rule 2(a).7 of the Investment Company Act) registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing clauses (a) through (d) .
Certificated Air Carrier means a Citizen of the United States holding an air carrier operating certificate issued by the Secretary of Transportation of the United States pursuant to Chapter 447 of the Transportation Code for aircraft capable of carrying ten or more individuals or 6,000 pounds or more of cargo or that otherwise is certified or registered to the extent required to fall within the purview of Section 1110 of the Bankruptcy Code or any analogous provision of the Bankruptcy Code.
Change in Law means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority. For purposes of this Agreement, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, guidelines and directives in connection therewith, (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, and (iii) CRD IV, shall, in each case, be deemed to have been adopted and gone into effect after the date of this Agreement.
CFC means a controlled foreign corporation as such term is defined in Section 957 of the Internal Revenue Code.
Change of Control means, at any time, (i) any Person or group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) shall have acquired beneficial ownership of
Mesa Credit and Guaranty Agreement Page 7
fifty percent (50%) or more on a fully diluted basis of the voting interest in the Capital Stock of Holdings; (ii) any Person or group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) shall have acquired a voting interest permitting such Person or group to appoint a majority of the members of the board of directors of Holdings; or (iii) Holdings shall cease to beneficially own and control one hundred percent (100%), on a fully diluted basis, of the economic and voting interests in the Capital Stock of any Borrower or any Guarantor.
CIT has the meaning specified in the introductory paragraph hereto.
Citizen of the United States has the meaning given to such term in Section 40102(a)(15) of the Transportation Code and as that statutory provision has been interpreted by the United State Department of Transportation pursuant to its policies.
Closing Date means August 12, 2016.
Closing Date Facilities has the meaning specified in Section 2.15(c).
Collateral means, collectively, all personal Property with respect to which Liens in favor of the Administrative Agent are granted (or were intended to be granted) pursuant to and in accordance with the terms of the Collateral Documents.
Collateral Access Agreements means an agreement in form and substance reasonably satisfactory to Administrative Agent pursuant to which, among other things, a mortgagee or lessor of real property on which collateral is stored or otherwise located, or a warehouseman, processor or other bailee of inventory or other property owned by any Loan Party, acknowledges the Liens of Administrative Agent and waives or subordinates any Liens held by such Person on such property, and, in the case of any such agreement with a mortgagee or lessor, permits Administrative Agent reasonable access to and use of such real property following the occurrence and during the continuance of an Event of Default to assemble, complete and sell any Collateral stored or otherwise located thereon, together with the customary indemnities in favor of such mortgagee and/or lessor for losses, claims, damages, costs and expenses caused by such access subject to customary exclusions.
Collateral Documents means, collectively, the Security Agreement, the Collateral Access Agreements, the Securities Account Control Agreement(s), the Deposit Account Control Agreement(s) and such other security documents as may be executed and delivered by the Loan Parties pursuant to the terms of Section 6.14.
Commitment means, as to each Lender, the Revolving Commitment set forth opposite such Lenders name on Schedule 2.01 or in the Register, as applicable, as the same may be reduced or modified at any time and from time to time pursuant to the terms hereof
Commitment Letter means the commitment letter dated July 16, 2016, issued by CIT and accepted by Mesa and Holdings.
Compliance Certificate means a certificate substantially in the form of Exhibit C .
Mesa Credit and Guaranty Agreement Page 8
Connection Income Taxes means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
Consolidated Capital Expenditures means, for any period, for the Consolidated Group on a consolidated basis, all Capital Expenditures, as determined in accordance with GAAP, provided , that Consolidated Capital Expenditures shall not include expenditures made with proceeds of any Involuntary Disposition to the extent such expenditures are used to purchase Property that is the same as or similar to the Property subject to such Involuntary Disposition and (ii) any Acquisition permitted hereunder.
Consolidated EBITDAR means, for any period for the Consolidated Group on a consolidated basis (without duplication), an amount equal to Consolidated Net Income for such period plus the following, without duplication, to the extent deducted and not already added back in calculating such Consolidated Net Income: (a) Consolidated Interest Charges for such period, (b) the provision for federal, state, local and foreign income taxes payable by the Consolidated Group for such period, (c) the amount of depreciation and amortization expense for such period, (d) Consolidated Rental Charges for such period, (e) transaction fees and legal and professional advisor costs related to this Agreement and the Loan Documents (subject to a cap of $900,000), and (f) other non-cash charges, expenses or losses ( provided , in each case, that if any non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDAR to such extent, and including amortization of any prepaid cash item that was paid in a prior period, and minus the following to the extent included in calculating such Consolidated Net Income: (v) Consolidated Interest Income, (w) income tax credits (to the extent not netted from income taxes payable), (x) any extraordinary, unusual or non-recurring income receipts or gains (including gains on the sale of assets outside the ordinary course of business) and related tax effects thereon, (y) Consolidated Rental Income, and (z) other non-cash income, receipts of gains (excluding any such non-cash item of income to the extent it represents a receipt of cash in any future period, all as determined in accordance with GAAP.
Consolidated Funded Indebtedness means Funded Indebtedness of the Consolidated Group on a consolidated basis determined in accordance with GAAP.
Consolidated Group means Holdings, the Loan Parties and their Subsidiaries.
Consolidated Interest Charges means, for any period, the interest expense (including any rent expense for such period under Capital Leases that is treated as interest in accordance with GAAP) of the Consolidated Group for such period with respect to all outstanding Indebtedness of the Consolidated Group (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance financing to the extent such costs are allocable to such period in accordance with GAAP), determined on a consolidated basis in accordance with GAAP.
Consolidated Interest and Rental Coverage Ratio means, as of any date of determination, the ratio of (i) Consolidated EBITDAR for the period of the four (4) Fiscal
Mesa Credit and Guaranty Agreement Page 9
Quarters most recently ended to (ii) the sum of (x) Consolidated Interest Charges and (y) Consolidated Rental Charges for such period.
Consolidated Interest Income means, for any period, the interest income of the Consolidated Group for such period, determined on a consolidated basis in accordance with GAAP.
Consolidated Net Income means, for any period for the Consolidated Group on a consolidated basis, the net income of the Consolidated Group for such period as determined in accordance with GAAP, provided that there shall be excluded from Consolidated Net Income (a) the income (or deficit) of any Person (other than a Subsidiary of a Borrower) in which a Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by such Borrower or such Subsidiary in the form of dividends or similar distributions, (b) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration of payment or dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation, governing document or Law applicable to such Subsidiary and (c) the income (or deficit) of any Subsidiary of Holdings that is not a Loan Party.
Consolidated Rental Charges means, for any period, the rental expense of each member of the Consolidated Group for such period with respect to all outstanding leases of any property (whether real, personal or mixed) by such Person (but excluding any Capital Leases), determined on a consolidated basis in accordance with GAAP.
Consolidated Rental Income means, for any period, the rental income of each member of the Consolidated Group for such period with respect to all outstanding leases of any property (whether real, personal or mixed) by such Person, determined on a consolidated basis in accordance with GAAP.
Consolidated Total Leverage Ratio means, as of any date of determination, the ratio of (a) the sum of (x) Consolidated Funded Indebtedness as of such date and (y) (i) Consolidated Rental Charges for the period of the four (4) Fiscal Quarters most recently ended multiplied by (ii) six (6), to (b) Consolidated EBITDAR for the period of the four (4) Fiscal Quarters most recently ended.
Consolidated Unfinanced Capital Expenditure means any Consolidated Capital Expenditure to the extent not financed with Funded Indebtedness within ninety (90) days of the incurrence of the Capital Expenditure (excluding (i) any Funded Indebtedness included as part of the determination of Revolving Exposure, (ii) any amounts associated with down payments for Engines or aircraft and (iii) any pre-delivery payments).
Consolidated Unrestricted Cash means, as of any date of determination, the unrestricted cash of the Consolidated Group, determined in accordance with GAAP.
Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound.
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Contributing Guarantors has the meaning set forth in Section 10.06.
Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto. Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, power to vote 5% or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent.
Controlled Account means each bank account that is established by the Borrowers pursuant to Section 2.14(c) of this Agreement.
CRD IV means Directive 2013/36/EU of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directive 2006/48/EC and 2006/49/EC.
Credit Extension means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.
Debtor Relief Laws means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
Default means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.
Default Excess means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lenders Pro Rata Share of the aggregate outstanding principal amount of all Revolving Loans (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded their respective Pro Rata Shares of all Revolving Loans) over the aggregate outstanding principal amount of all Revolving Loans of such Defaulting Lender.
Default Rate means (a) when used with respect to Obligations other than Letter of Credit Fees and LIBOR Loans, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Margin applicable to Base Rate Loans plus (iii) 2% per annum; (b) when used with respect to a LIBOR Loan, an interest rate equal to (i) the LIBO Rate applicable to such LIBOR Loan plus (ii) the Applicable Margin applicable to LIBOR Loans plus (iii) 2% per annum; and (c) when used with respect to Letter of Credit Fees, a rate equal to (i) the Applicable Margin then applicable to Letters of Credit plus (ii) 2% per annum, in all cases to the fullest extent permitted by applicable Laws. Interest accruing at the Default Rate shall be immediately payable upon demand.
Defaulting Lender means any Lender that has at any time after the Closing Date (a) defaulted in its obligation under this Agreement to make a Revolving Loan or to fund its participation in any Letter of Credit, Support Agreement or Swingline Loan required to be made or funded by it hereunder within three (3) Business Days of the date when due (unless such
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failure is the subject of a good faith dispute), (b) failed to pay over to the Administrative Agent or any Lender any other amount required to be paid by it hereunder within three (3) Business Days of the date when due (unless such failure is the subject of a good faith dispute), (c) notified the Administrative Agent or a Loan Party in writing that it does not intend to satisfy any such obligation or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under agreements in which it commits to extend credit generally, (d) failed within three (3) Business Days after the request of the Administrative Agent to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Revolving Loans and participations in then outstanding Letters of Credit, Support Agreements and Swingline Loans, or (e) (i) been (or has a parent company that has been) determined by any Governmental Authority having regulatory authority over such Person or its assets to be insolvent, or the assets or management of which has been taken over by any Governmental Authority, or (ii) become (or has a parent company that has become) the subject of a bankruptcy or insolvency proceeding under any Debtor Relief Laws, unless in the case of any Lender subject to this clause (e), the Borrowers, Administrative Agent, L/C Issuer, Support Provider and Swingline Lender shall each have determined that such Lender intends, and has all approvals required to enable it, to continue to perform its obligations as a Lender hereunder.
Delayed Draw Release Date Agreement means that certain Delayed Draw Release Date Agreement, dated on or about the Closing Date, by and among Mesa Air Group, Inc., the subsidiary guarantors party thereto, and the Existing Agent, with respect to the release of certain commitments and obligations under the Existing Credit Agreement.
Deposit Account Control Agreement means an agreement among a Loan Party, a depository institution, and the Administrative Agent, which agreement is in a form reasonably acceptable to the Administrative Agent and which provides the Administrative Agent with control (as such term is used in Article 9 of the UCC) over the deposit account(s) described therein, as the same may be amended, modified, extended, restated, replaced, or supplemented from time to time, and contains such other terms and conditions as Administrative Agent may require, including a requirement that such depository institution shall wire, or otherwise transfer, in immediately available funds, on a daily during a Cash Control Period, to Administrative Agents Bank Account all funds received or deposited into such deposit account.
Disposition or Dispose means the sale, transfer, license, lease or other disposition (including any Sale and Leaseback Transaction) of any Collateral by any Loan Party or any Subsidiary (including the Capital Stock of any Subsidiary), including any Sale and Leaseback Transaction and including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
Disqualified Capital Stock means any Capital Stock which, by its terms (or by the terms of any security or any other Capital Stock into which it is convertible or for which it is exchangeable) or upon the happening of any event or condition, (i) matures or becomes mandatorily redeemable (other than solely for Capital Stock that is not Disqualified Capital Stock) pursuant to a sinking fund obligation or otherwise (except as a result of a customarily defined change of control or asset sale and only so long as any rights of the holders thereof after such change of control or asset sale shall be subject to the prior repayment in full of the Obligations (other than contingent indemnification obligations to the extent no claim giving rise
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thereto has been asserted) and the termination of all Commitments and Letters of Credit, (ii) becomes redeemable at the option of the holder thereof (other than solely for Capital Stock that is not Disqualified Capital Stock), in whole or in part, (iii) provides for scheduled payments of dividends in cash or (iv) becomes convertible into or exchangeable for indebtedness for borrowed money or any other Disqualified Capital Stock, in whole or in part, in each case on or prior to the date that is one hundred eighty (180) calendar days after the Revolving Loan Maturity Date at the time of issuance.
Dollar and $ mean lawful money of the United States.
Domestic Subsidiary means any Subsidiary that is organized under the laws of any political subdivision of the United States.
E-System has the meaning specified in Section 12.04 .
Earn-Out Obligations means, with respect to any Person, earn-outs and similar payment obligations of such Person.
EEA Member Country shall mean any member state of the European Union, Iceland, Liechtenstein and Norway.
Eligibility Schedule means Schedule 1.01(a) .
Eligible Spare Engine means any of the Spare Engines that satisfy the Spare Engine Eligibility Requirements listed on the Eligibility Schedule.
Eligible On-wing Engine means any of the Spare Engines that fail to satisfy the Spare Engine Eligibility Requirements listed in paragraph 5 of the Eligibility Schedule.
Eligible Spare Parts Inventory means Spare Parts that satisfy the Spare Parts Eligibility Requirements.
Engine means (i) each aircraft engine owned by a Loan Party from time to time including those specific engines owned by a Loan Party that are listed by Manufacturer, model and Manufacturers serial number in any Security Agreement Supplement, and whether or not either initially or from time to time installed on an airframe; and (ii) any and all Parts that are from time to time incorporated or installed in or attached to any such engine and any and all Parts removed therefrom unless the Lien of the Security Agreement shall not apply to such Parts in accordance with Section 2.01 of the Security Agreement.
Engine Overhaul has the meaning set forth on Schedule 1.01(c).
Engine Overhaul Interval means, (i) with respect to each Initial Spare Engine, an amount equal to 13,000 flight hours and (ii) with respect to any other Spare Engine, subject to agreement by the Administrative Agent and Mesa (each acting reasonably), an amount equal to the number of flight hours advised by the Appraiser with respect to such Spare Engine; provided that, in the case of clause (ii), if the Administrative Agent and Mesa do not agree on a mutually
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acceptable interval on any Spare Engine, such Spare Engine shall be excluded from the calculation of the Borrowing Base until an agreement can be reached.
Engine Overhaul Percentage means, with respect to any Spare Engine, the quotient (expressed as a percentage) obtained by dividing (x) the difference between (1) the applicable Engine Overhaul Interval for such Spare Engine less (2) the flights hours accumulated on such Spare Engine since the last Engine Overhaul by (y) the applicable Engine Overhaul Interval for such Spare Engine.
Environmental Laws means the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601, et seq .), the Hazardous Materials Transportation Act (49 U.S.C. § 5101, et seq .), the Resource Conservation and Recovery Act (42 U.S.C. § 6901, et seq .), the Federal Clean Water Act (33 U.S.C. § 1251 et seq .), the Clean Air Act (42 U.S.C. § 7401 et seq .), the Toxic Substances Control Act (15 U.S.C.,§ 2601 et seq .), the Safe Drinking Water Act (42 U.S.C. § 300f to 300j-26 et seq .), the Oil Pollution Act of 1990 (33 U.S.C. § 2701 et seq .) and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq .), as such laws may be amended or otherwise modified from time to time, and any other federal, state, local, foreign and other applicable statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions and common law relating to pollution, the protection of the environment, natural resources, human health or the release of any materials into the environment, including those related to Hazardous Materials, hazardous substances or wastes, indoor and outdoor air emissions, soil, groundwater, wastewater, surface water, stormwater, wetlands, sediment and discharges of wastewater to public treatment systems.
Environmental Liability means any liability, contingent or otherwise (including any liability for damages, losses, punitive damages, consequential damages, costs of environmental investigation and remediation, fines, penalties, indemnities or expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants)), of the Borrowers or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
ERISA means the Employee Retirement Income Security Act of 1974, and any successor thereto.
ERISA Affiliate means any corporation, trade or business (whether or not incorporated) under common control with a Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions relating to Section 412 of the Internal Revenue Code). Any former ERISA Affiliate of a Borrower or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of a Borrower or any of its Subsidiaries within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of a Borrower or any of its
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Subsidiaries and with respect to liabilities arising after such period for which a Borrower or any of its Subsidiaries could be liable under the Internal Revenue Code or ERISA.
ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to a Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make a required installment under Section 412(m) of the Internal Revenue Code with respect to a Pension Plan; (c) a withdrawal by a Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (d) a complete or partial withdrawal by a Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA; (e) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (f) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (g) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Borrower or any ERISA Affiliate; (h) the occurrence of an act or omission which could give rise to the imposition on a Borrower or any ERISA Affiliate of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (1), or Section 4071 of ERISA in respect of any Plan; (i) the assertion of a material claim (other than routine claims for benefits) against any Plan other than a Multiemployer Plan or the assets thereof, or against the Borrowers or any ERISA Affiliate in connection with any Plan; (j) receipt from the IRS of notice of the failure of any Pension Plan (or any other Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; (k) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan; (I) the commencement of any administrative investigation, audit or other administrative proceeding by the Department of Labor, IRS or other Governmental Authority, including any voluntary compliance submission through the IRSs Employee Plans Compliance Resolution System or the Department of Labors Voluntary Fiduciary Correction Program; (m) the occurrence of a non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code; or (n) the receipt by a Borrower or any of its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency or that it intends to terminate or has terminated.
Eurodollar Reserve Percentage means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as Eurocurrency liabilities). The LIBO Rate for each outstanding LIBOR Loan shall be
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adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.
Event of Default has the meaning specified in Section 9.01.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Excluded Account means any deposit account (i) that is used solely for payment of payroll, bonuses, other compensation and related expenses or (ii) that is a local depository account for the deposit of funds by account debtors in the ordinary course of business, provided that, (A) the aggregate balance on deposit at any time in all Excluded Accounts described in clause (i) shall not exceed 105% of the amount to be applied for the pay period next ending, (B) the aggregate balance on deposit at any time in all Excluded Accounts described in clause (ii) shall not exceed $750,000 at any time and (C) the Excluded Accounts are listed on Schedule 1.01(b) and maintained with banks reasonably satisfactory to the Administrative Agent.
Excluded Subsidiary means (1) any Subsidiary of Holdings (other than any Loan Party) that is, and continues to be, (a) a Foreign Subsidiary that is a CFC, (b) a Domestic Subsidiary that is (i) a direct or indirect Subsidiary of a Foreign Subsidiary that is a CFC or (ii) a Foreign Subsidiary Holdco, (c) a Subsidiary that is, after application of the Uniform Commercial Code or other relevant laws regarding anti-assignment clauses, prohibited by applicable law, rule or regulation or by any contractual obligation existing on the Closing Date (or, if later, the date it became a Subsidiary) from guaranteeing the Obligations (in each case, other than any contractual obligation entered into between one or more Loan Parties or its direct or indirect parent) or which would require Governmental Approval to provide a guarantee unless such consent, approval, license or authorization has been received and in the case of any prohibition arising from a contractual obligation, such contractual obligation was not entered into in contemplation of circumventing a Loan Partys obligation to pledge the Capital Stock of such Subsidiary as collateral security or (d) a not-for-profit Subsidiary; and (2) Mesa In-Flight, Inc., a Colorado corporation, so long as it does not engage in any substantive business activities.
Excluded Taxes means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower Representative under Section 12.15 ) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 3.01 , amounts with respect to such Taxes were payable either to such Lenders assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipients failure to comply with Section 3.01(f) and (d) any U.S. federal withholding Taxes imposed under FATCA.
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Existing Agent means Obsidian Agency Services, Inc. and its successors and assigns, as administrative agent under the Existing Credit Agreement.
Existing Credit Agreement means that certain Credit and Security Agreement among Mesa Air Group, Inc., as borrower, the lenders named therein, and the Existing Agent, dated as of June 16, 2014, as theretofore amended.
Expendable Spare Parts means a Spare Part that, once used, cannot be reused and, if not serviceable, generally cannot be overhauled or repaired.
Extraordinary Receipts means any cash received by or paid to or for the account of any Loan Party related to the Collateral, not in the ordinary course of business (and not consisting of proceeds described in any of Section 2.05(b)(ii) ) including without limitation amounts received in respect of indemnity obligations of a seller under any agreement governing foreign, United States, state or local tax refunds to the extent not included in the calculation of Consolidated EBITDAR and pension plan reversions; provided that Extraordinary Receipts shall exclude any single or related series of amounts received in an aggregate amount less than $250,000 in any Fiscal Year.
EU Bail-in Legislation Schedule means the document described as such and published by the Loan Market Association (or any successor person) from time to time.
Facilities means, at any time, the facilities and real properties owned, leased, managed or operated by any Loan Party or any Subsidiary, from which any Loan Party or any Subsidiary provides or furnishes goods or services.
Fair Share has the meaning set forth in Section 10.06 .
Fair Share Contribution Amount has the meaning set forth in Section 10.06 .
FATCA means Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Internal Revenue Code.
Federal Funds Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day, provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Administrative Agent on such day on such transactions as determined by the Administrative Agent, in its sole discretion.
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Fee Letter means the Commitment Letter.
Fiscal Quarter means a fiscal quarter of any Fiscal Year.
Fiscal Year means the fiscal year of the Loan Parties and their Subsidiaries ending on September 30 of each calendar year.
Foreign Lender means a Lender that is not a U.S. Person.
Foreign Subsidiary means any Subsidiary that is not a Domestic Subsidiary.
Foreign Subsidiary Holdco means a Subsidiary and all or substantially all of whose assets consist of Capital Stock of one or more Foreign Subsidiaries that are CFCs and conducts no material business other than the ownership of such Capital Stock.
FRB means the Board of Governors of the Federal Reserve System of the United States.
Fronting Exposure means, at any time there is a Defaulting Lender, with respect to the L/C Issuer (or the Support Provider, as the case may be), such Defaulting Lenders Pro Rata Share of the outstanding Letter of Credit Liabilities other than Letter of Credit Liabilities as to which such Defaulting Lenders participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.
Funded Indebtedness means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations for borrowed money, whether current or long-term (including the Obligations) and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) all purchase money indebtedness;
(c) the principal portion of all obligations under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business);
(d) the maximum amount available to be drawn under letters of credit (including standby and commercial), bankers acceptances, bank guaranties, surety bonds and similar instruments;
(e) all obligations in respect of the deferred purchase price of Property or services (other than trade accounts payable in the ordinary course of business);
(f) Attributable Indebtedness in respect of Capital Leases;
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(g) all preferred stock or other Disqualified Capital Stock providing for mandatory redemptions, sinking fund or like payments prior to the Termination Date;
(h) Earn-Out Obligations if, and only to the extent, such obligation has not been paid in full in cash when initially due and payable;
(i) all indebtedness of the types specified in clauses (a) through (h) above secured by (or for which the holder of such Funded Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed; and
(j) all Guarantees with respect to indebtedness of the types specified in clauses (a) through (i) above of another Person.
Funding Guarantor has the meaning set forth in Section 10.06 .
GAAP means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, consistently applied and as in effect from time to time.
Governmental Approvals means any and all governmental licenses, authorizations, registrations, permits, certificates, franchises, qualifications, accreditations, consents and approvals required under any applicable Law and required in order for any Person to carry on its business as now conducted, of each Governmental Authority issued or required under Laws applicable to the business of any Borrower or any of its Subsidiaries or to the transactions described herein (including any Acquisitions and the Loans made hereunder) or necessary in the sale, furnishing, or delivery of goods or services under Laws applicable to the business of any Borrower or any of its Subsidiaries.
Governmental Authority means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
Guarantee means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to
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protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term Guarantee as a verb has a corresponding meaning.
Guaranteed Obligations has the meaning set forth in Section 10.01 .
Guarantor means each of Holdings, and all future direct or indirect Subsidiaries of Holdings (other than the Borrowers and any Excluded Subsidiaries), and any other Person joining this Agreement as a Guarantor hereunder from time to time.
Guaranty means the guaranty made by each Guarantor in favor of the Administrative Agent, the Lenders and the other Secured Parties pursuant to Article 10 .
Hazardous Materials means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, lead-based paint, toxic mold or fungus, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
Holdings means Mesa Air Group, Inc., a Nevada corporation.
Incremental Facilities has the meaning specified in Section 2.15(a) .
Incremental Facilities Amendment has the meaning specified in Section 2.15(d) .
Incremental Facility Closing Date has the meaning specified in Section 2.15(d).
Incremental Revolving Commitments has the meaning specified in Section 2.15(a) .
Incremental Revolving Lender has the meaning specified in Section 2.15(d) .
Indebtedness means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all Funded Indebtedness;
(b) Synthetic Leases, Sale and Leaseback Transactions and Securitization Transactions;
(c) all obligations in respect of Disqualified Capital Stock; and
(d) all Guarantees with respect to outstanding indebtedness of the types specified in clauses (b) and (c) above of any other Person.
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Indemnified Liabilities has the meaning set forth in Section 12.05 .
Indemnified Taxes means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
Indemnitees has the meaning set forth in Section 12.05 .
Information has the meaning set forth in Section 12.08 .
Initial Spare Engine has the meaning set forth on Schedule 1.01(d) .
Interest Payment Date means (a) as to any LIBOR Loan, the last day of each Interest Period applicable to such LIBOR Loan and Revolving Loan Maturity Date (as applicable), provided, that if any Interest Period for a LIBOR Loan exceeds three (3) months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (other than a Swingline Loan), the last Business Day of each calendar quarter and the Revolving Loan Maturity Date; and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid.
Interest Period means, as to each LIBOR Loan, the period commencing on the date such LIBOR Loan is disbursed or converted to or continued as a LIBOR Loan and ending on the date one (I), two (2), three (3) or six (6) months thereafter or, if approved by all affected Lenders, the Administrative Agent and the Borrowers, twelve (12) months thereafter, as selected by the Borrower Representative in its Loan Notice, provided , that:
(a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the Revolving Loan Maturity Date.
Interim Pre-Closing Financial Statements means, collectively, (i) the unaudited consolidated financial statements of the Loan Parties and their Subsidiaries for the Fiscal Quarter ended March 31, 2016 and the related consolidated statements of income or operations, shareholders equity and cash flows, for the Fiscal Quarter ended on that date.
Internal Revenue Code means the Internal Revenue Code of 1986, as amended, and any successor thereto.
International Registry has the meaning given to international registry in the Cape Town Convention.
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Investment means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of any of the Capital Stock of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, or (c) an Acquisition. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment or any returns of capital.
Involuntary Disposition means any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any Property of any Loan Party.
IP Rights has the meaning set forth in Section 5.17 .
IRS means the United States Internal Revenue Service.
ISP means, with respect to any standby Letter of Credit, the International Standby Practices 1998 published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).
Issuer Documents means with respect to any Letter of Credit, the Letter Credit Application and any other document, agreement and instrument entered into by the applicable L/C Issuer and the Borrower Representative on behalf of Borrowers or in favor of such L/C Issuer and relating to any such Letter of Credit.
ISTAT means the International Society of Transport Aircraft Trading.
Laws means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, compacts, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
L/C Credit Extension means (a) the issuance, extension or increase of a Letter of Credit, and (b) with respect to any Supported Letter of Credit, the entry into any Support Agreement by the Administrative Agent or its Affiliate.
L/C Issuer means (a) Bank of America, N.A., (b) a Lender willing and able to issue Letters of Credit and reasonably acceptable to the Administrative Agent, or (c) one or more banks, trust companies or other financial institutions (including Affiliates of a Lender or the Administrative Agent) in each case expressly identified by or reasonably acceptable to the Administrative Agent from time to time, in its sole discretion, as an L/C Issuer for purposes of issuing one or more Letters of Credit pursuant to the terms of this Agreement.
Lender means each Person identified as a Lender on the signature pages hereto and its successors and assigns and, as the context requires, includes the L/C Issuer to the extent it is a
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party to this Agreement. Unless the context otherwise requires, the term Lenders includes the Swingline Lender.
Lender Letter of Credit means a Letter of Credit issued by an L/C Issuer that is also, at the time of issuance of such Letter of Credit, a Lender.
Lender Parties has the meaning specified in Section 12.07(g) .
Lending Office means, as to any Lender, the office or offices of such Lender described as such in such Lenders Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower Representative and the Administrative Agent.
Letter of Credit means a standby or documentary (trade) letter of credit issued in U.S. Dollars for the account of any Borrower by an L/C Issuer pursuant to the terms of this Agreement.
Letter of Credit Fee has the meaning specified in Section 2.03(c) .
Letter of Credit Liabilities means, at any time of calculation, the sum of the following (without duplication): (a) the amount then available for drawing under all outstanding Letters of Credit, in each case without regard to whether any conditions to drawing thereunder can then be met, and (without duplication) the amount of any outstanding Support Agreement related to a Letter of Credit, and (b) the aggregate of all Unreimbursed Amounts. For all purposes of this Agreement, if as of any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be outstanding in the amount that remains available to be drawn. The Letter of Credit Liability of any Revolving Lender at any time shall be equal to its Pro Rata Share of the total Letter of Credit Liabilities at such time.
Letter of Credit Sublimit means an amount equal to the lesser of (a) the total Revolving Commitments and (b) $7,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the total Revolving Commitments.
LIBO Base Rate means,
(1) for any Interest Period with respect to any LIBOR Loan:
(a) the rate per annum equal to the rate determined by the Administrative Agent to be the London Interbank Offered Rate benchmark rate which is calculated and distributed by the ICE Benchmark Administration Data Service ( ICE ) (or any successor thereto) for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:45 a.m. (London time) (or such other time as confirmed by ICE (or any successor thereto)) two (2) Business Days prior to the first day of such Interest Period, or
(b) if the rate referenced in the preceding clause (a) does not appear through such service or such service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate which is calculated and distributed
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daily by ICE (or any successor thereto) as an average ICE Benchmark Administration Limited Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:45 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, or
(c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as the rate of interest at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Loan being made, continued or converted by JPMorgan Chase Bank and with a term equivalent to such Interest Period would be offered by JPMorgan Chase Banks London Branch (or such other major bank as is reasonably acceptable to the Administrative Agent if JPMorgan Chase Bank is no longer offering to acquire or allow deposits in the London interbank eurodollar market) to major banks in the London interbank eurodollar market at their request at approximately 11:45 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period.
(2) for any day with respect to an interest rate calculation for a Base Rate Loan:
(a) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate which is calculated and distributed daily by ICE (or any successor thereto) as an average ICE Benchmark Administration Limited Interest Settlement Rate for deposits in Dollars (for delivery on such day) with a term equivalent to one (1) month, determined as of approximately 11:45 a.m. (London time) two (2) Business Days prior to such day, or
(b) if the rate referenced in the preceding clause (a) does not appear through such service or such service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate through such other service that displays an average ICE Benchmark Administration Limited Interest Settlement Rate for deposits in Dollars (for delivery on such day) with a term equivalent to one (1) month, determined as of approximately 11:45 a.m. (London time) two (2) Business Days prior to such day, or
(c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded upward to the next 1/100th of 1%) determined by the Administrative Agent as the rate of interest at which deposits in Dollars (for delivery on such day in same day funds) with a term equivalent to one (1) month, determined as of approximately 11:00 a.m. (London time) two (2) Business Days prior to such day in the approximate amount of such Base Rate Loan by JPMorgan Chase Bank and with a term equivalent to one (1) month would be offered by JPMorgan Chase Banks London Branch (or such other major bank as is reasonably acceptable to the Administrative Agent if JPMorgan Chase Bank is no longer offering to acquire or allow deposits in the London interbank eurodollar market) to major banks in the London interbank eurodollar market at their request at approximately 11:45 a.m. (London time) two (2) Business Days prior to such day.
LIBO Rate means (1) for any Interest Period with respect to any LIBOR Loan, a rate per annum determined by the Administrative Agent to be equal to the quotient obtained by
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dividing (i) the LIBO Base Rate for such LIBOR Loan for such Interest Period by (ii) one minus the Eurodollar Reserve Percentage for such LIBOR Loan for such Interest Period and (2) for any day with respect to any Base Rate Loan bearing interest at a rate based on the LIBO Rate, a rate per annum determined by the Administrative Agent to be equal to the quotient obtained by dividing (i) the LIBO Base Rate for such Base Rate Loan for such day by (ii) one minus the Eurodollar Reserve Percentage for such Base Rate Loan for such day. In no event shall the LIBO Rate equal less than 0.0%.
LIBOR Loan means any Loan (other than Swingline Loans and Base Rate Loans bearing interest at a rate based on the LIBO Rate) which accrues interest solely by reference to the LIBO Rate plus the Applicable Margin, in accordance with the terms of this Agreement.
Lien means any mortgage, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing).
Loan means an extension of credit by a Lender to any Borrower under Article 2 in the form of a Revolving Loan and/or a Swingline Loan.
Loan Documents means this Agreement, each Note, each Letter of Credit, each Collateral Document, each Request for Credit Extension, each Issuer Document, each Compliance Certificate, each Borrowing Base Certificate, the Fee Letter, the AAR Cooperation Agreement and each other document, instrument or agreement from time to time executed by any Loan Party or any Subsidiary or any Responsible Officer thereof and delivered in connection with the transactions contemplated by this Agreement; provided , however , that all Issuer Documents executed by or on behalf of any Loan Party and delivered concurrently herewith or at any time hereafter shall not constitute Loan Documents solely for the purposes of Sections 9.01(a) , (b) , (c) , (d) and (j) hereof or Section 11.14 .
Loan Notice means a notice of (a) a Borrowing of Revolving Loans, (b) a conversion of Loans from one Type to the other pursuant to Section 2.02(a) , or (c) a continuation of LIBOR Loans pursuant to Section 2.02(a) , which, if in writing, shall be substantially in the form of Exhibit A-1 .
Loan Parties means, collectively, each Borrower and each Guarantor party hereto.
Maintenance Bum Factor has the meaning set forth on Schedule 1.01(c) .
Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, assets, or liabilities (actual or contingent), condition (financial or otherwise) of the Loan Parties and their Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any material Loan Document to which it is a party (as determined by the Administrative Agent in its reasonable discretion); (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Loan Parties, taken as a whole, of any Loan Document to which they are parties; or (d) a material adverse effect on the validity, perfection or priority of a Lien in
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favor of the Administrative Agent for the benefit of the Secured Parties on any material portion of the Collateral.
Material Contract means any lease of real or personal property, contract or other arrangement to which any Loan Party or any of its Subsidiaries is a party (other than the Loan Documents), (i) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect or (ii) that constitutes ten percent (10%) of revenue. Without limiting the foregoing, each of the contracts listed in Schedule 5.23 shall be deemed to constitute a Material Contract hereunder.
Minimum Availability Block means an amount equal to (i) Zero ($0) Dollars at all times when the amount of Consolidated Unrestricted Cash exceeds the aggregate amount of all outstanding Loans and Letter of Credit Liabilities by at least Ten Million Dollars ($10,000,000) and (ii) the product of (x) ten percent (10%) multiplied by (y) the Borrowing Base amount determined without regard to clause (e) of the definition thereof, at all other times.
Moodys means Moodys Investors Service, Inc. and any successor thereto.
Multiemployer Plan means any employee pension benefit plan (as defined in Section 3(2) of ERISA) that is described in Sections 4001(a)(3) or 3(37) of ERISA and that is sponsored or maintained by any Borrower or any ERISA Affiliate or to which any Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding six (6) plan years, has made or been obligated to make contributions.
NBV means the net book value reflected on the Borrowers financial statements of the Eligible Spare Parts Inventory as determined in accordance with GAAP consistently applied and as adjusted from time to time on the books and records of either Borrower in accordance with GAAP.
Net Cash Proceeds means the aggregate cash and Cash Equivalents proceeds (including insurance proceeds and condemnation awards) received by any Loan Party or any Subsidiary in respect of any Disposition or Involuntary Disposition net of (a) direct third-party costs incurred in connection therewith (including legal, accounting and investment banking fees, underwriting discounts, and sales commissions payable to third parties unrelated to Loan Parties), (b) taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), and (c) the amount necessary to retire any Indebtedness secured by a Permitted Lien on the related Property; it being understood that Net Cash Proceeds shall include any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received by any Borrower or any Subsidiary in any Disposition or Involuntary Disposition.
Note or Notes means each Revolving Note and/or the Swingline Note, individually or collectively, as appropriate.
Notice of L/C Credit Event means a notice from a Responsible Officer of Borrower Representative to Administrative Agent with respect to any issuance or amendment (including any increase or extension) of a Letter of Credit specifying: (i) the date of issuance or amendment of a Letter of Credit; (ii) the identity of the L/C Issuer with respect to such Letter of Credit; (iii)
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the expiry date of such Letter of Credit; (iv) the proposed terms of such Letter of Credit (or amendment thereof), including the face amount; and (v) the transactions that are to be supported or financed with such Letter of Credit or increase thereof.
Obligations means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party now or hereinafter arising from time to time under this Agreement and any other Loan Document or otherwise with respect to any Loan (including the obligation to pay principal and interest thereon and all fees and other costs and liabilities with respect thereto), Letter of Credit, Support Agreement, Reimbursement Obligation or Unreimbursed Amount, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
OFAC means The Office of Foreign Assets Control of the U.S. Department of the Treasury.
OFAC Sanctions means the country or list based economic and trade sanctions administered and enforced by OFAC.
OLV means the orderly liquidation value of Eligible Spare Parts Inventory, which shall equal the ASA OLV of all Eligible Spare Parts owned by the Person in question, as reflected in Appraisals conducted from time to time by the Appraiser engaged by Administrative Agent.
OLV Ratio means, with respect to each Borrowing Base Certificate Date, the ratio (expressed as a percentage) of the OLV of all Eligible Spare Parts Inventory divided by the NBV of all Eligible Spare Parts Inventory (in each case as reflected in the most recent Appraisals), it being understood that the OLV Ratio shall be established in connection with each Appraisal and will remain static until the next issued Appraisal.
Organization Documents means, (a) with respect to any corporation, the charter, certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
Other Connection Taxes means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or
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perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
Other Taxes means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 12.15).
Participant has the meaning set forth in Section 12.07(d) .
Participant Register has the meaning specified in Section 12.07(d) .
Parts means, with respect to an Engine, any and all appliances, parts, instruments, appurtenances, accessories, rotables, avionics, furnishings, seats, and other equipment of whatever nature (other than (a) complete Engines or engines, and (b) any items leased by the applicable Loan Party from a third party, so long as title thereto shall remain vested in such third party) that may from time to time be incorporated or installed in or attached to such Engine or which have been removed therefrom, unless the Lien of the Security Agreement shall not be applicable to such Part in accordance with Section 2.01 of the Security Agreement. For the avoidance of doubt, a Pledged Spare Part shall not constitute a Part unless and until it has been incorporated or installed in or attached to an Engine or which may thereafter be removed therefrom unless the Lien of the Security Agreement shall not be applicable thereto in accordance with Section 2.01 of the Security Agreement.
Patriot Act has the meaning specified in Section 5.28 .
PBGC means the Pension Benefit Guaranty Corporation or any successor thereto.
Pension Plan means any employee pension benefit plan (as defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Section 412 and 430 of the Internal Revenue Code or Tide IV of ERISA and is sponsored or maintained by any Borrower or any ERISA Affiliate or to which any Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or with respect to which any Borrower or any ERISA Affiliate may have any liability or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding six (6) plan years.
Permitted Discretion means a determination made in the exercise of commercially reasonable (from the perspective of an asset based lender) business judgment.
Permitted Liens means, at any time, Liens in respect of Property of the Loan Parties and their Subsidiaries permitted to exist at such time pursuant to the terms of Section 7.02 .
Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
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Plan means any employee benefit plan as defined in Section 3(3) of ERISA which is or was sponsored or maintained by the Borrowers, any of their Subsidiaries or any of their respective ERISA Affiliates.
Platform Spare Parts has the meaning set forth on the Eligibility Schedule. Pledged Spare Parts has the meaning specified in the Security Agreement.
Proceedings means any actual or threatened civil, equitable or criminal proceeding litigation, action, suit, claim, investigation (governmental or judicial or otherwise), dispute indictment or prosecution, pleading, demand or the imposition of any fine or penalty or similar matter.
Pro Forma Basis means, for purposes of calculating any financial covenant (including for purposes of determining the Applicable Margin), that any Disposition, Involuntary Disposition, any Investment, any Disposition that results in a Loan Party or a Subsidiary ceasing to be a Subsidiary of Holdings or any incurrence or assumption of Indebtedness shall be deemed to have occurred as of the first day of the four (4) Fiscal Quarter period most recently ended prior to the date of such transaction for which the Borrowers have delivered financial statements pursuant to Section 6.01(a) , 6.01(b) or 6.01(d) . In connection with the foregoing, (a) with respect to any such Disposition or Involuntary Disposition (i) income statement and cash flow statement items (whether positive or negative) attributable to the Property or Person disposed of or so designated shall be excluded to the extent relating to any period occurring prior to the date of such transaction and (ii) Indebtedness which is retired shall be excluded and deemed to have been retired as of the first day of the applicable period and (b) with respect to any Investment or designation of a Subsidiary as a Subsidiary, (i) income statement items attributable to the Person or Property acquired or so designated shall be included to the extent relating to any period applicable in such calculations to the extent (A) such items are supported by financial statements or other information reasonably satisfactory to the Administrative Agent and Required Lenders and (B) such items are not otherwise included in such income statement items for the Loan Parties and their respective Subsidiaries in accordance with GAAP or in accordance with any defined terms set forth in Section 1.01 ; and (ii) any Indebtedness incurred or assumed by any Loan Party or any Subsidiary (including the Person or Property acquired) in connection with such transaction and any Indebtedness of the Person or Property acquired which is not retired in connection with such transaction (A) shall be deemed to have been incurred as of the first day of the applicable period and (B) if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination.
Pro Forma Financial Statements has the meaning set forth in Section 4.01(q) .
Properly Contested means, with respect to any obligation of a Loan Party, (a) the obligation is subject to a bona fide dispute regarding amount or the Loan Partys liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP; (d) non-payment could not reasonably be expected to result in a Material Adverse Effect, nor result in forfeiture or sale of any assets of such Loan Party pending resolution of such
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contest proceedings and the payment of any liabilities resulting therefrom; (e) no Lien (other than a Permitted Lien) is imposed on assets of such Loan Party; and (1) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.
Pro Rata Share means, with respect to any Lender at any time, with respect to such Lenders Revolving Commitment, and Revolving Letter of Credit Liabilities and Swingline Exposures at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Revolving Commitment of such Lender at such time and the denominator of which is the amount of the total Revolving Commitments at such time, provided that if commitments of each Lender to make Revolving Loans have been terminated pursuant to Section 9.02 , then the Pro Rata Share of each Lender shall be determined based on the Pro Rata Share of such Lenders Revolving Exposure. The initial Pro Rata Share of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
Property means any interest of any kind in any property or asset, whether real, personal or mixed, or tangible or intangible, including Capital Stock.
Rating Agencies has the meaning set forth in Section 12.08(b).
Recipient means (a) the Administrative Agent, (b) any Lender, (c) any L/C Issuer and (d) any Support Provider, as applicable.
Register has the meaning set forth in Section 12.07(c).
Registrar has the meaning set forth in Section 12.07(c).
Regulation U and Regulation X mean, respectively, Regulations U and X of the Board of Governors of the Federal Reserve System or any successor, as the same may be amended or supplemented from time to time.
Reimbursement Obligation means the Borrowers obligation to immediately reimburse or pay all Unreimbursed Amounts with respect to all Letters of Credit and Support Agreements, as more fully described in Section 2.03(d).
Reimbursement Loan has the meaning given to such term in Section 2.03(d)(ii).
Reportable Event means any of the events set forth in Section 4043(c) of ERISA, other than events for which the thirty-day notice period has been waived.
Representatives has the meaning set forth in Section 12.08(b).
Request for Credit Extension means (a) with respect to a Borrowing, a Loan Notice or Swingline Loan Notice, as the case may be, and (b) with respect to an L/C Credit Extension, a Notice of L/C Credit Event.
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Required Lenders means Lenders holding in the aggregate at least fifty-one percent (51%) of (i) the Revolving Commitments or (ii) if the Revolving Commitments have been terminated, the Revolving Exposures. The Revolving Commitments (or, if the Revolving Commitments have terminated, the Revolving Exposure) held or deemed held by any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders, including any minimum head-count.
Resolution Authority shall mean anybody which has the authority to exercise any Write-down and Conversion Powers.
Responsible Officer means the chief executive officer, president, chief financial officer or treasurer of a Loan Party, or any other person that has primary responsibility for the operation of this Agreement and the other Loan Documents. Any document delivered hereunder that is executed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
Revolving Availability means, at any time, an amount equal to (a) the total Revolving Commitments less (b) the total Revolving Exposures at such time, provided , that Revolving Availability shall equal $0 while any Default or Event of Default exists and remains outstanding.
Revolving Commitment means, as to each Lender, its obligation to (a) make Revolving Loans to the Borrowers pursuant to Sections 2.01 and 2.03 (for Reimbursement Loans) and (b) and to acquire participations in Letter of Credit Liabilities and Swingline Loans pursuant to Section 2.03 and Section 2.04 , respectively, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lenders name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. The initial aggregate amount of the Revolving Commitments of all Revolving Lenders is $35,000,000.
Revolving Commitment Fee Percentage means, on any date of determination, (a) at any time the Revolving Commitment Utilization is less than twenty-five percent (25%), an amount equal to 0.75% per annum, (b) at any time the Revolving Commitment Utilization is equal to or greater than twenty-five percent (25%), but not more than fifty percent (50%), an amount equal to 0.50% per annum, and (c) at any time the Revolving Commitment Utilization is greater than fifty percent (50%), an amount equal to 0.375% per annum.
Revolving Commitment Increase has the meaning specified in Section 2.15(a).
Revolving Commitment Utilization means, as of any date of determination, an amount equal to (x) the sum of (1) the total outstanding amount of Revolving Loans (excluding Swingline Loans) and (2) the total Letter of Credit Liabilities, divided by (y) the total Revolving Commitment.
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Revolving Exposure means, with respect to any Lender at any time, the sum of (a) the outstanding principal amount of such Lenders Revolving Loans, (b) its Pro Rata Share of outstanding Letter of Credit Liabilities and (c) its Swingline Exposure at such time.
Revolving Lenders means, as of any date of determination, Lenders having a Revolving Commitment, or after the Revolving Commitments have terminated, Lenders holding any portion of the outstanding Revolving Loan.
Revolving Loan has the meaning specified in Section 2.01(a).
Revolving Loan Account means the loan account on the Administrative Agents books, in the name of the Borrower Representative on behalf of the Borrowers, in which the Borrowers will be charged with all Obligations when due or incurred by the Administrative Agent or any Lender.
Revolving Loan Maturity Date means the third anniversary of the Closing Date. Revolving Note has the meaning specified in Section 2.11(a).
Rotable Spare Parts means a Spare Part that wears over time and can be repeatedly restored to a serviceable condition over a period approximating the life of the flight equipment to which it relates.
S&P means Standard & Poors Ratings Services, a division of The McGraw Hill Companies, Inc. and any successor thereto.
Sale and Leaseback Transaction means, with respect to any Loan Party or any Subsidiary, any arrangement, directly or indirectly, with any Person whereby such Loan Party or such Subsidiary shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred.
Sanctioned Entity means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, or (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.
Sanctioned Person means a Person named on the OFAC-maintained list of Specially Designated Nationals (as defined by OFAC).
SEC means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
Secured Parties means, collectively, the Administrative Agent, all other Agents, the Arranger, the Bookrunner, the Lenders, the Support Provider and the L/C Issuer (solely to the extent such L/C Issuer also is the Administrative Agent or a Lender).
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Securities Account Control Agreement means an agreement, among a Loan Party, a securities intermediary, and the Administrative Agent, which agreement is in a form reasonably acceptable to the Administrative Agent and which provides the Administrative Agent with control (as such term is used in Articles 8 and 9 of the UCC) over the securities account(s) described therein, as the same may be as amended, modified, extended, restated, replaced, or supplemented from time to time.
Securitization Transaction means any financing transaction or series of financing transactions (including factoring arrangements) pursuant to which any Borrower or any Subsidiary may sell, convey or otherwise transfer, or grant a security interest in, accounts, payments, receivables, rights to future lease payments or residuals or similar rights to payment to a special purpose subsidiary or affiliate of any Person.
Security Agreement means the Security and Pledge Agreement dated on or about the Closing Date executed in favor of the Administrative Agent by each of the Loan Parties which is a party thereto, as the same may be as amended, modified, extended, restated, replaced or supplemented from time to time.
Security Agreement Supplement means any supplement to the Security Agreement that is delivered from time to time pursuant to the terms of the Security Agreement in the form attached as Exhibit A thereto.
Solvency Certificate means a certificate substantially in the form of Exhibit E.
Solvent means, with respect to any Person on a particular date, that on such date (a) the fair value of the assets of such Person and its consolidated Subsidiaries, taken as a whole, exceed their liabilities, including contingent liabilities, (b) the present fair saleable value of the assets of such Person and its consolidated Subsidiaries, taken as a whole, is not less than the amount that will be required to pay the probable liabilities of such Person and its consolidated Subsidiaries, taken as a whole, or their debts as they become absolute and matured, (c) the remaining capital of such Person and its consolidated Subsidiaries, taken as a whole, is not unreasonably small to conduct their business, and (d) such Person and its consolidated Subsidiaries, taken as a whole, will not have incurred debts and do not have the present intent to incur debts, beyond their ability to pay such debts as they mature. In computing the amount of contingent liabilities of any Person on any date, such liabilities shall be computed at the amount that, in the judgment of the Administrative Agent, in light of all facts and circumstances existing at such time, represents the amount of such liabilities that reasonably can be expected to become actual or matured liabilities.
Spare Engines means the spare engines for which any Borrower has a 100% ownership interest free and clear of all rights, claims or Liens (other than Permitted Liens).
Spare Engines Eligibility Requirements has the meaning set forth on the Eligibility Schedule.
Spare Parts means any and all appliances, engines, parts, instruments, appurtenances, accessories, rotables, furnishings, avionics, seats and other equipment of whatever nature (including, but not limited to, spare parts, as defined at 49 U.S.C.§ 40102(a)(43) and appliances as defined at 49 U.S.C.§ 40102(a)(1 I )) (other than complete airframes, Engines or
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propellers, unless being surveyed) that are now or hereafter maintained as spare parts or appliances by or on behalf of the Loan Parties at the Spare Parts Locations described in the initial Mortgage Supplement or in any subsequent Mortgage Supplement.
Spare Parts Eligibility Requirements has the meaning set forth on the Eligibility Schedule.
Spare Parts Location means any of the locations described in the initial Security Agreement Supplement, and any subsequent Security Agreement Supplement at which Pledged Spare Parts are held by or on behalf of the Loan Parties.
Standing Transfer Instructions means those certain instructions from the Borrowers to each bank that maintains a Controlled Account on behalf of the Borrowers which instruct such bank to automatically transfer all deposits made in any Controlled Account to an account of the Administrative Agent on a daily basis.
Subsidiary of a Person means a corporation, partnership, limited liability company or other business entity of which a majority of the shares of Capital Stock having ordinary voting power for the election of directors or other governing body (other than Capital Stock having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a Subsidiary or to Subsidiaries shall refer to a Subsidiary or Subsidiaries of the Loan Parties.
Support Agreement means a guaranty, reimbursement agreement or other arrangement or agreement whereby a Support Provider agrees to guaranty or otherwise provide for the reimbursement of drawings under a Letter of Credit on behalf of the Borrower or another party obligated to make such reimbursement.
Support Provider means the Administrative Agent or one of its Affiliates who agrees (in its sole discretion) to provide a Support Agreement.
Supported Letter of Credit means a Letter of Credit issued by an L/C Issuer in reliance on one or more Support Agreements.
Swingline Exposure means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Pro Rata Share of the total Swingline Exposure at such time.
Swingline Lender means CIT, in its capacity as lender of Swingline Loans hereunder. Swingline Loan means a Loan made pursuant to Section 2.04.
Swingline Loan Notice means a notice of a Borrowing of Swingline Loans which, if in writing, shall be substantially in the form of Exhibit A-2.
Swingline Loan Sublimit means an amount equal to the lesser of (a) the total Revolving Commitments and (b) $1,000,000. The Swingline Loan Sublimit is part of, and not in addition to, the total Revolving Commitments.
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Swingline Note has the meaning specified in Section 2.11(a).
Synthetic Lease means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing arrangement whereby the arrangement is considered borrowed money indebtedness for tax purposes but is classified as an operating lease or does not otherwise appear on a balance sheet under GAAP.
Taxes means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Termination Date means the date that (a) all Obligations (other than contingent obligations in respect of Letters of Credit) have been paid in full in cash, (b) no commitments or other obligations of any Lender to provide funds to the Borrowers remain outstanding, (c) no Lender Letter of Credit or Supported Letter of Credit remains outstanding (or, to the extent outstanding, such Letters of Credit have been Cash Collateralized as provided in Section 2.03(g)) , (d) to the extent requested by the Administrative Agent, receipt by the Secured Parties of liability releases from the Loan Parties in form and substance reasonably acceptable to the Administrative Agent and (e) all contingent obligations have been Cash Collateralized with Administrative Agent in a manner and amounts reasonably acceptable to Administrative Agent.
Transportation Code means Title 49 of the United States Code, as amended and in effect from time to time, and the regulations promulgated pursuant thereto.
Type means, with respect to any Loan, its character as a Base Rate Loan or a LIBOR Loan.
UCC means the Uniform Commercial Code as in effect in any applicable jurisdiction.
UCP means, with respect to any commercial Letter of Credit, the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce.
Unfunded Pension Liability means the excess of a Pension Plans benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plans assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Sections 412 and 430 of the Internal Revenue Code for the applicable plan year.
United States and U.S. mean the United States of America.
Unreimbursed Amount means the amount of any drawing under a Letter of Credit or payment under a Support Agreement which has not yet been reimbursed by the Borrowers (through direct payment or by the making of a Revolving Loan).
U.S. Person means any Person that is a United States Person as defined in Section 7701(a)(30) of the Internal Revenue Code.
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U.S. Tax Compliance Certificate has the meaning assigned to such term in Section 3.01(f).
Weighted Average Life to Maturity means, when applied to any Indebtedness as of any date of determination, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (b) the then outstanding principal amount of such Indebtedness.
Wholly Owned Subsidiary means any Person 100% of whose Capital Stock is at the time owned by a Loan Party directly or indirectly through other Persons 100% of whose Capital Stock is at the time owned, directly or indirectly, by such a Loan Party.
Withholding Agent means any Loan Party and the Administrative Agent.
Write-down and Conversion Powers means:
(1) in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule; and
(2) in relation to any other applicable Bail-In Legislation,
(a) any powers under that Bail-In Legislation to cancel, transfer or dilute shares issued by a person that is a bank or investment firm or other financial institution or affiliate of a bank, investment firm or other financial institution, to cancel, reduce, modify or change the form of a liability of such a person or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers; and
(b) any similar or analogous powers under that Bail-In Legislation.
1.02 Other Interpretive Provisions . With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include , includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or
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otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Persons successors and assigns, (iii) the words herein , hereof and hereunder , and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such Law and any reference to any Law or regulation shall, unless otherwise specified, refer to such Law or regulation as amended, modified or supplemented from time to time, and (vi) the words asset and property shall be construed to have the same meaning and effect and to refer to any and all real and personal property and tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
(b) In the computation of periods of time from a specified date to a later specified date, the word from means from and including; the words to and until each mean to but excluding; and the word through means to and including.
(c) Article and section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
1.03 Accounting Terms .
(a) Except as otherwise specifically prescribed herein, all accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Pre-Closing Financial Statements.
(b) Together with each Compliance Certificate, the Borrower Representative will provide a written summary of any changes in GAAP that materially impact the calculation of the financial covenants in Article 8 contained in such Compliance Certificate. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and any of the Borrowers, the Administrative Agent or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower Representative on behalf of the Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders), provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower Representative shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.
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(c) Notwithstanding the above, all calculations of the financial covenants in Article 8 (including for purposes of determining compliance with such financial covenants) shall be made on a Pro Forma Basis.
(d) All financial statements delivered hereunder shall be prepared without giving effect to any election under Statement of Financial Accounting Standards Accounting Standards Codification No. 825 Financial Instruments, or any successor thereto (including pursuant to the Accounting Standards Codification) (or any similar accounting principle) permitting a Person to value its financial liabilities at the fair value thereof.
1.04 Rounding . Any financial ratios required to be maintained by the Borrowers pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
1.05 Times of Day . Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
1.06 Letter of Credit Amounts . Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or the Issuer Document related thereto, whether or not such maximum face amount is in effect at such time.
1.07 Financial Covenant Defaults . For the purposes of Sections 9.01 and 4.02 , a breach of a covenant contained in Section 8.01 shall be deemed to have occurred as of any date of determination by the Administrative Agent and as of the last day of any specified period of measurement regardless of whether or when the financial statements reflecting such breach are delivered to the Administrative Agent. All determinations made by the Administrative Agent in this regard shall be conclusive absent manifest error.
ARTICLE 2
THE COMMITMENTS AND CREDIT EXTENSIONS
2.01 Loans .
(a) Revolving Loans . Subject to the terms and conditions set forth herein, each Revolving Lender severally (and neither jointly nor jointly and severally) agrees to make loans to the Borrower Representative for the benefit of the Borrowers (each such loan, a Revolving Loan ) in Dollars from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of such Revolving Lenders Revolving Commitment, provided , that after giving effect to any Borrowing of Revolving Loans, (i) the total Revolving Exposure of all Revolving Lenders shall not exceed the total Revolving Commitments of all Revolving Lenders, and (ii) the Revolving Exposure of each Revolving Lender shall not exceed such Revolving Lenders Revolving Commitment. Within the limits of each Revolving Lenders Revolving Commitment, and subject to the other
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terms and conditions hereof, the Borrower Representative on behalf of the Borrowers may borrow under this Section 2.01(a) , prepay under Section 2.05 , and re-borrow under this Section 2.01(a) . The Revolving Loans may be Base Rate Loans or LIBOR Loans, as further provided herein, provided however, that all Borrowings of Revolving Loans made on the Closing Date shall be made as Base Rate Loans.
2.02 Borrowings, Conversions and Continuations of Loans .
(a) Each Borrowing, each conversion of Loans from one Type to the other, and each continuation of LIBOR Loans shall be made upon the Borrower Representatives irrevocable notice (and if in writing, in the form of the Loan Notice) to the Administrative Agent, which may be delivered by telephone or e-mail request (or such other means as may be agreed upon by the Administrative Agent in its sole discretion). Each such notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three (3) Business Days prior to the requested date of any Borrowing of, conversion to or continuation of LIBOR Loans or of any conversion of LIBOR Loans to Base Rate Loans, and (ii) one (1) Business Day prior to the requested date of any Borrowing of Base Rate Loans (or any conversion to Base Rate Loans). Each telephonic notice by the Borrower Representative pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Loan Notice, appropriately completed and executed by a Responsible Officer of the Borrower Representative. Subject to Section 2.03(d) with respect to Reimbursement Loans, each Borrowing of, conversion to or continuation of LIBOR Loans shall be in a principal amount of $250,000 or a whole multiple of $50,000 in excess thereof (or such other amounts as the Administrative Agent may approve in its sole discretion). Each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $250,000 or a whole multiple of $50,000 in excess thereof (or such other amounts as the Administrative Agent may approve in its sole discretion). Each Loan Notice pursuant to this Section 2.02(a) (whether telephonic or written) shall specify (i) whether the Borrower Representative is requesting a Borrowing, a conversion of Loans from one Type to the other, or a continuation of LIBOR Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower Representative fails to specify a Type of Loan in a Loan Notice or if the Borrower Representative fails to give a timely notice requesting a conversion or continuation, then the applicable Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable LIBOR Loans. If the Borrower Representative requests a Borrowing of, conversion to, or continuation of LIBOR Loans in any such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one (1) month.
(b) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Pro Rata Share of the applicable Loans, and if no timely notice of a conversion or continuation is provided by the Borrower Representative as required by Section 2.02(a) with respect to any continuation of a LIBOR Borrowing, the Administrative Agent shall notify each Lender of the details of any automatic conversion of such LIBOR Borrowing to Base Rate Loans as described in the preceding subsection. In the case of a
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Borrowing, each Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agents Office not later than 1:00 p.m. on the Business Day specified in the applicable Loan Notice without setoff, defense, counterclaim or claims in recoupment. Upon satisfaction of the conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01) , the Administrative Agent shall make all funds so received available to the Borrower Representative in like funds as received by the Administrative Agent by wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower Representative, provided , that if, on the date of a Borrowing of Revolving Loans, there are Unreimbursed Amounts outstanding, then the proceeds of such Borrowing shall be applied, first, to the payment in full of any such Unreimbursed Amounts, and second , to the Borrower Representative as provided above.
(c) Except as otherwise provided herein, a LIBOR Loan may be continued or converted only on the last day of the Interest Period for such LIBOR Loan. During the existence of a Default or an Event of Default, no Loans may be requested as, converted to or continued as LIBOR Loans without the consent of the Administrative Agent or Required Lenders, and the Administrative Agent or Required Lenders may demand that any or all of the then outstanding LIBOR Loans be converted immediately to Base Rate Loans.
(d) The Administrative Agent shall promptly notify the Borrower Representative and the Lenders of the interest rate applicable to any Interest Period for LIBOR Loans upon determination of such interest rate. The determination of the LIBO Rate by the Administrative Agent shall be conclusive in the absence of manifest error.
(e) After giving effect to all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than four (4) Interest Periods in effect with respect to outstanding Loans.
(f) Notwithstanding the foregoing, this Section 2.02 shall not apply to Swingline Loans except as otherwise required by Section 2.04.
2.03 Letters of Credit and Letter of Credit Fees.
(a) Letter of Credit.
(i) At any time prior to the thirtieth (30th) day preceding the Revolving Loan Maturity Date, the Revolving Commitment may be used by Borrowers, in addition to the making of Revolving Loans hereunder, for the issuance or arrangement of Letters of Credit and of Support Agreements related thereto pursuant to the terms, and subject to the conditions, set forth herein.
(ii) No Letter of Credit or Support Agreement shall be issued, arranged, increased, amended or extended hereunder if:
(A) such issuance, increase, amendment or extension would violate or be prohibited or enjoined by applicable Law or any decree request or directive of any Governmental Authority or would subject the L/C Issuer, Support
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Provider or the Lenders to any restriction, reserve or capital requirement not in effect on the Closing Date, or would impose any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer, Support Provider or Lenders in good faith deems material to it;
(B) any Lender is at such time a Defaulting Lender, unless the L/C Issuer (or Support Provider) has entered into arrangements, including the delivery of Cash Collateral, satisfactory to the L/C Issuer (or such Support Provider) (in its sole discretion) with the Borrowers or such Lender to eliminate the L/C Issuers (or such Support Providers) actual or potential Fronting Exposure (after giving effect to Section 2.16(d)) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other Letter of Credit Liabilities as to which the L/C Issuer (or such Support Provider) has actual or potential Fronting Exposure, as it may elect in its sole discretion;
(C) the Administrative Agent determines that one or more applicable conditions contained in Article 4 has not been satisfied;
(D) after giving effect to such issuance, increase or extension, (x) the aggregate Letter of Credit Liabilities under all Letters of Credit exceed the Letter of Credit Sublimit, (y) the total Revolving Exposure of all Lenders exceeds the aggregate Revolving Commitments of all Lenders, or (z) the Revolving Exposure of any Lender exceeds such Lenders Revolving Commitment; or
(E) such issuance of a Letter of Credit or Support Agreement would result in there being more than ten (10) Letters of Credit and Support Agreements (in the aggregate) outstanding at such time.
(F) Additionally, no Letter of Credit shall be amended (including any increase in its amount or extension of its term) if such Letter of Credit in its amended form would not be permitted under the terms hereof or if the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
(iii) Each Letter of Credit shall expire by its terms within one year after the date of issuance and in any event at least thirty (30) days prior to the Revolving Loan Maturity Date. Notwithstanding the foregoing, a Letter of Credit may provide for automatic extensions of its expiry date for one or more successive one (1) year periods, provided that (A) no renewal term may extend the term of the Letter of Credit to a date that is later than the thirtieth (30th) day prior to the Revolving Loan Maturity Date, (B) the L/C Issuer that issued such Letter of Credit has the right (either on its own initiative or at the direction of the Administrative Agent or Support Provider issuing a Support Agreement with respect thereto) not to extend such expiry date and to terminate such Letter of Credit on each such annual expiration date with the giving of notice and (C) no such extension shall be permitted (and the Administrative Agent may notify the L/C Issuer not to so extend such Letter of Credit) if the L/C Issuer, the Support Provider, or the Administrative Agent
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has determined that such Letter of Credit would not be permitted in its revised (as extended) form under the terms hereof, or the Administrative Agent has determined that one or more of the applicable conditions specified in Article 4 or in this Section 2.03 for Letter of Credit issuance is not then satisfied. Each letter of credit issued or renewed by the L/C Issuer on account of this Agreement or any Support Agreement, and each Support Agreement delivered by a Support Provider on account of this Agreement, in each case shall be conclusively deemed to constitute a Letter of Credit or a Support Agreement, as applicable, issued, renewed or delivered in full compliance with this Agreement for all purposes hereunder.
(iv) Nothing in this Agreement (other than as provided in Section 2.03(a) as to the L/C Issuer or the Support Provider) shall be construed to obligate any Lender, the Administrative Agent or its Affiliates to arrange, issue, increase the amount of or extend the expiry date of any Letter of Credit or Support Agreement, which act or acts, if any, shall be subject to agreements to be entered into from time to time between the applicable Borrower and such Person.
(b) Letter of Credit Procedure . (i) Should a Borrower wish to have a Letter of Credit issued or an existing Letter of Credit amended (including any increase in the amount thereof or extension of the expiry date thereof), Borrower Representative shall deliver to the Administrative Agent a Notice of L/C Credit Event at least five (5) Business Days before the proposed date of issuance or amendment.
(ii) Each L/C Issuer that is a party to this Agreement shall give the Administrative Agent prompt written notice (and Borrowers shall cause each L/C Issuer not a party to this Agreement to give the Administrative Agent prompt written notice) of each issuance or amendment of a Letter of Credit, each payment made by such L/C Issuer in respect of such Letter of Credit issued by it, and any other information requested by the Administrative Agent with respect to such Letter of Credit or amendment.
(c) Letter of Credit Fee . Borrowers shall pay to Administrative Agent, for the benefit of the Revolving Lenders, a letter of credit fee with respect to the Letter of Credit Liabilities for each Letter of Credit, computed for each day from the date of issuance of such Letter of Credit to the date that is the last day a drawing is available under such Letter of Credit, at a rate per annum equal to the Applicable Margin then applicable to Letters of Credit (the Letter of Credit Fee ) times the daily maximum amount available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit); provided , however , any Letter of Credit Fees otherwise payable for the account of a Defaulting Lender with respect to any Letter of Credit as to which such Defaulting Lender has not provided Cash Collateral satisfactory to the L/C Issuer (or the Support Provider, as the case may be) pursuant to this Section 2.03 shall be payable, to the maximum extent permitted by applicable Law, to the other Revolving Lenders in accordance with the upward adjustments in their respective Pro Rata Share allocable to such Letter of Credit pursuant to Section 2.16(d) , with the balance of such fee, if any, payable to the L/C Issuer (or the Support Provider, as the case may be) for its own account. Letter of Credit Fees shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of
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Credit, on the Revolving Loan Maturity Date and thereafter on demand. Notwithstanding anything to the contrary contained herein, while an Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate. In addition, Borrowers shall pay promptly to the L/C Issuer (or reimburse the Support Provider for) any other fees, costs or expenses that it may charge in connection with any Letter of Credit.
(d) Reimbursement Obligations of Borrowers , Reimbursement Loans and Lender Participations . (i) If an L/C Issuer shall make a payment under a Letter of Credit or a Support Provider shall make a payment under a related Support Agreement, L/C Issuer or the Support Provider, as applicable, shall notify the Borrower Representative thereof. Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit or by the Support Provider under a Support Agreement, so long as the Borrower Representative has received telephonic notice of such payment prior to 10:00 a.m. on such date, and otherwise on the following Business Day, the applicable Borrowers shall promptly (but in any event on the same day) satisfy its Reimbursement Obligation by paying to the L/C Issuer or Support Provider (or to the Administrative Agent for the account of the L/C Issuer or Support Provider), as applicable, the full outstanding amount of such Unreimbursed Amount. Such Borrower shall also pay interest, on demand, on all Unreimbursed Amounts for each day until such Unreimbursed Amount is satisfied at a rate per annum equal to the sum of two percent (2%) plus the interest rate applicable to Revolving Loans (which are Base Rate Loans) for such day.
(ii) If any Borrower fails to pay its Reimbursement Obligation when due, the Borrower Representative shall be deemed to have immediately requested that Revolving Lenders make a Revolving Loan (a Reimbursement Loan ) , which shall be a Base Rate Loan, in a principal amount equal to the amount of such Unreimbursed Amount, the proceeds of which shall be applied to satisfy such Reimbursement Obligation. Administrative Agent shall promptly notify Revolving Lenders of any such deemed request and each Revolving Lender shall make available to Administrative Agent not later than 12:00 p.m. on the Business Day following such notification from Administrative Agent such Revolving Lenders Pro Rata Share of such Revolving Loan. Each Revolving Lender hereby absolutely and unconditionally agrees to fund such Revolving Lenders Pro Rata Share of the Reimbursement Loan, unaffected by any circumstance whatsoever, including without limitation (A) the occurrence and continuance of a Default or an Event of Default (but the funding of such a Revolving Loan shall not act as a cure or waiver of any Default or Event of Default other than the non-payment of such Unreimbursed Amount), (B) the fact that, whether before or after giving effect to the making of any such Revolving Loan, the Revolving Exposure exceeds or will exceed the Revolving Commitment, (C) the surrender or impairment of any security for the performance or observance of any of the terms of this Agreement, or (D) the failure of any condition in Article 4 to have been satisfied. Administrative Agent shall apply the gross proceeds of each such Revolving Loan in satisfaction of such Borrowers Reimbursement Obligation.
(iii) Concurrently with the issuance of each Support Agreement and Letter of Credit, each such Revolving Lender shall be deemed to have purchased and received, without recourse or warranty, an undivided interest and participation, to the extent of such Lenders Pro Rata Share of the Revolving Commitment, in and to the
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liabilities and obligations in respect of such Letters of Credit and Support Agreements and the corresponding Reimbursement Obligations and Unreimbursed Amounts which may arise therefrom. Such Lenders participation obligation shall be absolute and unconditional and shall not be affected by any circumstances whatsoever. If, notwithstanding the provision of Section 2.03(d)(i) or (E), any portion of an Unreimbursed Amount remains outstanding (whether due to Borrowers failing to honor their Reimbursement Obligation, or if a Reimbursement Loan cannot for any reason be made, or otherwise) or if any reimbursement received by Support Provider or any L/C Issuer from any Borrower is or must be returned or rescinded upon or during any bankruptcy or reorganization of any Loan Party or otherwise (including any Revolving Loan made pursuant to Section 2.03(d)(ii1) , each Revolving Lender shall be irrevocably and unconditionally obligated to fund its participation in such Unreimbursed Amount by paying to Administrative Agent for the account of the Support Provider or L/C Issuer, as applicable, its Pro Rata Share of such Unreimbursed Amount. To the extent any such Revolving Lender shall not have made such amount available to Administrative Agent, as applicable, by 12:00 p.m. on the Business Day on which such Lender receives such notice from Administrative Agent, (A) such Lender shall pay interest on such amount to Administrative Agent on demand accruing daily at the Federal Funds Rate, for the first three (3) days following such Lenders receipt of such notice, and thereafter at the Base Rate plus the Applicable Margin in respect of Revolving Loans that are Base Rate Loans and (B) the Administrative Agent may apply any subsequent payment that such Lender otherwise is entitled to receive under this Agreement to the satisfaction of such Lenders obligation. Any Revolving Lenders failure to fund its participation amount shall not relieve any other Lender of its obligation hereunder to fund such participation, but no Revolving Lender shall be responsible for the failure of any other Lender to fund its participation.
(iv) Notwithstanding the foregoing, payment of any such Lenders participation described in Section 2.03(d)(iii) , and further disbursement of such payment to the L/C Issuer or Support Provider, shall in no way extinguish the Borrowers related Reimbursement Obligation and any such Reimbursement Obligation not paid by Borrower or refinanced by Reimbursement Loans shall be due and payable on demand together with interest as described in Section 2.03(d)(i).
(e) Repayment to Lenders . (i) Until a Lender funds its Reimbursement Loan or participation pursuant to Section 2.03(d) , interest with respect to any Unreimbursed Amount shall be for the account of the L/C Issuer or Support Provider, as the case may be. Once the Administrative Agent has received from any Lender such Lenders portion of the Reimbursement Loan or participation, the Administrative Agent shall distribute to such Lender (in the same funds as those received by the Administrative Agent, and whether such funds are directly from the Borrowers or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), such Lenders Pro Rata Share of any principal payments received by the Administrative Agent in respect of such Unreimbursed Amount or Reimbursement Loan, plus any interest received by the Administrative Agent which have accrued on such Unreimbursed Amount or Reimbursement Loan for the period after such Lender funded such participation or Reimbursement Loan.
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(ii) If any payment received by the Administrative Agent pursuant to Section 2.03(d) is required to be returned under any circumstances (including pursuant to any settlement entered into by the L/C Issuer or the Support Provider, as the case may be, in its discretion), each Revolving Lender shall pay to the Administrative Agent for its own account or for the account of the L/C Issuer or Support Provider, as the case may be, its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.
(f) Absolute Obligations . The obligations of each Borrower to pay its Reimbursement Obligations and its obligation to repay the Reimbursement Loans and the obligations of the Lenders to fund their portion of Reimbursement Loans or participations under Section 2.03(d) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including the following:
(i) any lack of validity or enforceability of, or any amendment or waiver of or any consent to departure from, any Letter of Credit, Support Agreement or any related document;
(ii) the existence of any claim, set-off, defense or other right which any Person may have at any time against the beneficiary of any Letter of Credit, the L/C Issuer (including any claim for improper payment), Support Provider, Administrative Agent, any Lender or any other Person, whether in connection with any Loan Document or any unrelated transaction, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;
(iii) any statement or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever other than in respect of the gross negligence or willful misconduct of the L/C Issuer as determined by a non appealable decision of a court of competent jurisdiction;
(iv) any affiliation between the L/C Issuer, the Administrative Agent and/or the Support Providers; or
(v) to the extent permitted under applicable law, any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.
(g) Deposit Obligations of Borrowers . Upon the request of the Administrative Agent or the L/C Issuer (or the Support Provider, as the case may be), (x) if the L/C Issuer (or the Support Provider, as the case may be) has honored any full or partial drawing request under any Letter of Credit (as if any Support Provider has made a payment under a Support Agreement) and such drawing (or payment) has resulted in any Unreimbursed Amounts or (y) in the event any Letters of Credit, Support Agreements or Unreimbursed Amounts are outstanding at the time that Borrowers prepay or are required to repay the Obligations or the Revolving Commitment is terminated, Borrowers shall (i) Cash Collateralize one hundred and five percent (105%) of the
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aggregate outstanding Letter of Credit Liabilities and such Cash Collateral shall be available to Administrative Agent, for its benefit and the benefit of issuers of Lender Letters of Credit and Support Providers, to reimburse payments of drafts drawn under such Letters of Credit and pay any fees and expenses related thereto and (ii) prepay the fee payable under Section 2.03(e) with respect to such Letters of Credit for the full remaining terms of such Letters of Credit. At any time that there shall exist a Defaulting Lender, promptly upon the request of the Administrative Agent, the L/C Issuer (or the Support Provider, as the case may be) or the Swingline Lender, the Borrowers shall deliver to the Administrative Agent Cash Collateral in an amount sufficient to cover all Fronting Exposure (after giving effect to Section 2.16(d) and any Cash Collateral provided by the Defaulting Lender). Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 2.03 in respect of Letters of Credit shall be held and applied in satisfaction of the specific Letter of Credit Liabilities, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may be provided herein. Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or other obligations shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender) or (ii) the Administrative Agents good faith determination that there exists excess Cash Collateral; provided , however , (x) that Cash Collateral furnished by or on behalf of a Loan Party shall not be released during the continuance of a Default or an Event of Default and (y) the Person providing Cash Collateral and the L/C Issuer (or the Support Provider, as the case may be) may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations. Each Borrower hereby grants to the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Parties, a security interest in all such cash, deposit accounts and all balances therein pledged, deposited with or delivered to the Administrative Agent and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts at a bank designated by the Administrative Agent.
(h) Applicability of ISP98 and UCP . Unless otherwise expressly set forth in the applicable Letter of Credit, (i) the rules of the ISP shall apply to each standby Letter of Credit and (ii) the rules of the UCP shall apply to each commercial Letter of Credit.
(i) Letters of Credit Issued for Subsidiaries . Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary of the Borrowers, the Borrowers shall be obligated to pay any Unreimbursed Amount. The Borrowers hereby acknowledge that the issuance of Letters of Credit or any Support Agreement for the account of any such Subsidiary inures to the benefit of the Borrowers and that the Borrowers business derives substantial benefits from the businesses of such Subsidiaries.
(j) Role of L/C Issuer and Others , Conflicts . (i) The L/C Issuer, its correspondents, participants or assignees, the Administrative Agent, the Support Providers and the Agent Related Persons (collectively, the Released Persons ) shall have no responsibility to obtain any document (other than the L/C Issuers obligation to obtain any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or
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accuracy of any such document or the authority of the Person executing or delivering any such document. No Released Person shall be liable to any Loan Party or any Lender for (A) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (B) any action taken or omitted in the absence of gross negligence or willful misconduct of such Released Person as determined by a final non appealable decision of a court of competent jurisdiction; or (C) the due execution, effectiveness, validity or enforceability of any Issuer Document or any other document or instrument related to any Letter of Credit or Support Agreement. Each Loan Party and their Subsidiaries hereby assume all risks of the acts or omissions of any beneficiary or transferee with respect to the use of any Letter of Credit. No Released Person shall be liable or responsible for any of the matters described in Section 2.03(f) , provided , that anything in such clauses to the contrary notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrowers, to the extent, but only to the extent, of any direct (as opposed to consequential, punitive or exemplary) damages suffered by the Borrowers which the Borrowers prove were caused by the L/C Issuers willful misconduct or gross negligence or the L/C Issuers willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit, each as determined by a final non appealable decision of a court of competent jurisdiction. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
(ii) In the event of any conflict between the terms hereof and the terms of any Issuer Documents, the terms hereof shall control.
(iii) The failure of the L/C Issuer to agree to or to conform with the terms of this Agreement (particularly if the L/C Issuer is not a party to this Agreement) shall in no way limit the obligations of the Loan Parties hereunder or subject the Administrative Agent, Support Providers or any Agent-Related Person to any liability.
2.04 Swingline Loans.
(a) Swingline Facility . Subject to all of the terms and conditions of this Agreement (including the applicable conditions set forth in Article 4), the Swingline Lender may, in its sole discretion and in reliance upon the representations and warranties of the Borrowers set forth herein and the agreements of the other Lenders set forth in Sections 2.04(c) and 2.04(d) make Swingline Loans to the Borrower Representative on behalf of the Borrowers, from time to time during the Availability Period, for the purposes identified in Section 6.11 , notwithstanding the fact that the aggregate amount of the outstanding Swingline Loans, when added to the Swingline Lenders Pro Rata Share of the outstanding Revolving Loans and Letter of Credit Liabilities, from time to time may exceed the amount of such Lenders Revolving Commitment; provided , that, after giving effect to any Borrowing of a Swingline Loan, (i) the total Revolving Exposures shall not exceed the total Revolving Commitments, (ii) the Revolving Exposure of any Lender shall not exceed such Lenders Revolving Commitment (except that in
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the case of the Swingline Lender, the Swingline Lenders Revolving Exposure (excluding all Swingline Exposure) plus the principal balance of all outstanding and the proposed Swingline Loans shall not exceed the sum of such Revolving Exposure (other than Swingline Exposure) plus the Swingline Loan Sublimit), and (iii) the total Swingline Exposure shall not exceed the Swingline Loan Sublimit. Each Swingline Loan shall be a Base Rate Loan. No Swingline Loan shall be used for the purpose of funding the payment of the principal of any other Swingline Loan. Immediately upon the making of a Swingline Loan, each Revolving Lender shall be deemed to have purchased, and hereby irrevocably and unconditionally agrees to purchase, from the Swingline Lender, a risk participation in such Swingline Loan in an amount equal to the product obtained by multiplying such Lenders Pro Rata Share by the amount of such Swingline Loan. Swingline Loans may be prepaid and re-borrowed from time to time during the Availability Period. All Swingline Loans shall be paid in full no later than the earlier of the tenth (10th) Business Day following the Borrowing of such Swingline Loan and the Revolving Loan Maturity Date.
(b) Funding Procedures for Swingline Loans . In order to request a Swingline Loan, the Borrower Representative shall give to the Administrative Agent and Swingline Lender a Swingline Loan Notice (or telephonic notice to be confirmed promptly with a Swingline Loan Notice) of a proposed Borrowing consisting of a Swingline Loan, specifying the amount of the requested Swingline Loan, not later than 11:00 a.m. on the Business Day of the proposed Borrowing. Subject to the foregoing, on the Business Day of the proposed Borrowing, the Swingline Lender may make the proceeds of the requested Swingline Loan available to the Borrower Representative by crediting an account of the Borrower Representative that has been designated for such purpose in writing by the Borrower Representative to the Swingline Lender. Each Swingline Loan shall be in a minimum amount of $250,000 and in integral multiples of $50,000 in excess of that amount.
(c) Repayment of Swingline Loans with Revolving Loans . Regardless of whether the conditions set forth in Sections 4.01 and 4.02 have been or are capable of being satisfied and without limiting the requirement of the Borrowers to repay the Swingline Loans as set forth in the last sentence of Section 2.04(a) , on any Business Day the Swingline Lender may, in its sole discretion, give notice to the Lenders that some part or all of the outstanding Swingline Loans are to be repaid on the next succeeding Business Day with a Borrowing of Revolving Loans constituting Base Rate Loans made pursuant to Section 2.01 (but not subject to the minimum borrowing requirements of Section 2.02) in the same manner and with the same force and effect as if the Borrower Representative had submitted a Loan Notice therefor pursuant to Section 2.02 . Swingline Lender hereby agrees that it shall request such a settlement of all of the outstanding Swingline Loans from Revolving Lenders at least once every ten (10) Business Days. Each Lender holding a Revolving Commitment shall make the amount of its Revolving Loan available to the Administrative Agent, in immediately available funds, at Administrative Agents Office, not later than 11:00 a.m. on the applicable funding date. The Administrative Agent shall make the proceeds of such Revolving Loans available to the Swingline Lender on such funding date by causing an amount of immediately available funds equal to the proceeds of all such Revolving Loans received by the Administrative Agent to be credited to an account of the Swingline Lender at such office of the Administrative Agent or shall make such proceeds available to the Swingline Lender in such other manner as shall be satisfactory to the Administrative Agent and the Swingline Lender.
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(d) Participations in Swingline Loans . If for any reason a requested Borrowing of Revolving Loans pursuant to Section 2.04(c) is not or cannot be effected, the Revolving Lenders will, as of the date such proposed Borrowing otherwise would have occurred but adjusted for any payments received in respect of such Swingline Loan(s) by or for the account of the Borrowers on or after such date and prior to such purchase, immediately fund their respective participations in the outstanding Swingline Loans as necessary to cause such Lenders to share in such Swingline Loan(s) proportionately in accordance with their respective Pro Rata Shares. Whenever, at any time after any Revolving Lender has funded its purchase of a participating interest in a Swingline Loan, the Swingline Lender receives any payment on account thereof, the Swingline Lender will distribute to such Lender its proportionate share of such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lenders participating interest was outstanding and funded), provided , that in the event any such payment received by the Swingline Lender is subsequently set aside or is required to be refunded, returned or repaid, such Lender will repay to the Swingline Lender its proportionate share thereof.
(e) Failure to Pay by Lenders . If any Lender shall fail to perform its obligation to make a Revolving Loan pursuant to Section 2.04(c) or to fund its purchase of a participation in Swingline Loans pursuant to Section 2.04(d) , the amount in default shall bear interest for each day from the day such amount is payable until fully paid at a rate per annum equal to (i) for the first three (3) days, the Federal Funds Rate and (ii) thereafter, the Base Rate plus the Applicable Margin in respect of Revolving Loans which are Base Rate Loans, and such obligation may be satisfied by application by the Administrative Agent (for the account of the Swingline Lender) of any payment that such Lender otherwise is entitled to receive under this Agreement. Pending repayment, each such advance shall be secured by such Lenders participation interest, if any, in the Swingline Loans and any security therefor, and the Swingline Lender shall be subrogated to such Lenders rights hereunder in respect thereof.
(f) Lenders Obligations Absolute . The obligation of each Lender to make Revolving Loans pursuant to Section 2.04(c) and to purchase participations in Swingline Loans pursuant to Section 2.04(d) shall be unconditional and irrevocable, shall not be subject to any qualification or exception whatsoever, shall be made in accordance with the terms and conditions of this Agreement under all circumstances and shall be binding in accordance with the terms and conditions of this Agreement under all circumstances, including the following circumstances: (i) any lack of validity or enforceability of this Agreement, any of the other Loan Documents or any other instrument, document or agreement relating to the transactions that are the subject thereof; (ii) the existence of any claim, defense, set-off or other right that any Borrower, any Guarantor or any Lender may have at any time against the any Agent-Related Person, the Swingline Lender, any other Lender, or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any related transactions; (iii) the surrender or impairment of any security for the performance or observance of any of the terms of this Agreement; (iv) the occurrence or continuance of any Default or failure of any condition in Article 4 to have been satisfied upon funding the Swingline Loan or thereafter; (v) any adverse
(g) change in the condition (financial or other) of any Borrower or any Guarantor; or (vi) any other reason.
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2.05 Prepayments .
(a) Voluntary Prepayments of Loans.
(i) Revolving Loans . Subject to the limitations set forth in this Section 2.05(a) , the Borrowers may, upon notice from the Borrower Representative to the Administrative Agent, at any time or from time to time voluntarily prepay Revolving Loans in whole or in part without premium or penalty, provided that (i) such notice must be received by the Administrative Agent not later than 1:00 p.m. (A) three (3) Business Days prior to any date of prepayment of LIBOR Loans, and (B) one (1) Business Day prior to the date of prepayment of Base Rate Loans; (ii) any such prepayment of LIBOR Loans shall be in a principal amount of $250,000 or a whole multiple of $50,000 in excess thereof (or, if less, the entire principal amount thereof then outstanding) and (iii) any such prepayment of Base Rate Loans shall be in a principal amount of $250,000 or a whole multiple of $50,000 in excess thereof (or, if less, the entire principal amount thereof then outstanding). Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lenders Pro Rata Share of such prepayment. If such notice is delivered by the Borrower Representative, the Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, unless such notice is made in connection with the prepayment in full of all Loans and the termination of all commitments under this Agreement, in which case no prepayment shall be required hereunder if the condition to such commitment termination is not satisfied as contemplated by Section 2.06 . Any prepayment of a LIBOR Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05 . Notwithstanding the foregoing, the Borrowers may not voluntarily prepay any Loans that are LIBOR Loans unless such Loans are prepaid at the end of the applicable Interest Period or unless the Borrowers pay all breakage costs associated with such prepayment as provided in Section 3.Q5 hereof.
(ii) Application of Voluntary Prepayments of Revolving Loans . Prepayments of Revolving Loans pursuant to this Section 2.05(a) shall not reduce the total Revolving Commitments. Each such prepayment shall be applied to the Revolving Loans of the applicable Lenders in accordance with their respective Pro Rata Shares.
(iii) Prepayment of Swingline Loans . The Borrowers may prepay Swingline Loans, in whole or in part, at any time and from time to time. The Borrowers shall, prior to or contemporaneously with making any such prepayment, give the Swingline Lender such notice of prepayment (written notice or telephonic notice confirmed in writing to the Swingline Lender) as is sufficient to enable the Swingline Lender to apply such prepayment properly to the repayment of Swingline Loans.
(b) Mandatory Prepayments of Loans.
(i) Total Revolving Exposure . If, for any reason (a) the total Revolving Exposures at any time exceed the total Revolving Commitments then in effect,
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(b) the aggregate Letter of Credit Liabilities exceed the Letter of Credit Sublimit, or (c) the total Swingline Exposure exceeds the Swingline Loan Sublimit, the Borrowers shall immediately prepay the Revolving Loans and/or Cash Collateralize the Letter of Credit Liabilities, or prepay the Swingline Loans, as applicable, in an aggregate amount equal to any such excess (each such prepayment to be applied as set forth in clause (v) below).
(ii) Dispositions and Involuntary Dispositions . The Borrowers shall prepay the Revolving Loans and thereafter, all other Obligations, promptly following the occurrence of any Disposition or Involuntary Disposition, in an aggregate amount equal to 100% of the Net Cash Proceeds of such Disposition of Collateral or Involuntary Disposition of Collateral (each such prepayment to be applied as set forth in clause (v) below) excluding the proceeds of any voluntary Disposition described in clause (i) of Section 7.05.
(iii) Extraordinary Receipts . Upon receipt by any Loan Party of any Extraordinary Receipts, the Borrower shall prepay the Revolving Loans and thereafter, all other Obligations in an aggregate amount equal to one hundred percent (100%) of such Extraordinary Receipts and shall be applied as set forth in clause (v) below.
(iv) Borrowing Base Deficiency . If, on any Borrowing Base Certificate Date, a Borrowing Base Deficiency exists, the applicable Loan Parties shall immediately prepay Swingline Loans and Revolving Loans and/or Cash Collateralize the Letter of Credit Liabilities, in an aggregate amount necessary to reduce such Borrowing Base Deficiency to zero (each such prepayment to be applied as set forth in clause (v) below).
(v) Application of Mandatory Prepayments . All amounts required to be paid pursuant to this Section 2.05(b) shall be applied as follows: (x) to the Swingline Loans, to the full extent thereof, (y) after all Swingline Loans have been repaid, to the Revolving Loans to the full extent thereof and, (z) after all Swingline Loans and Revolving Loans have been repaid, to Cash Collateralize any Letter of Credit Liabilities.
(c) Within the parameters of the applications set forth above, prepayments shall be applied first to Base Rate Loans and then to LIBOR Loans in direct order of Interest Period maturities. Prepayments of the Revolving Loans pursuant to this Section 2.05(c) shall not reduce the total Revolving Commitments. All prepayments under this Section 2.05(c) shall be subject to Section 3.05 , but otherwise shall be without premium or penalty, and shall be accompanied by a payment of all interest accrued on the principal amount prepaid through the date of prepayment.
2.06 Termination or Reduction of Total Revolving Commitments . The Borrowers may, upon prior written notice from the Borrower Representative to the Administrative Agent, terminate the total Revolving Commitments or from time to time permanently reduce the total Revolving Commitments; provided , however that (a) any such notice shall be received by the Administrative Agent not later than 1:00 p.m. (i) ten (10) Business Days prior to the date of termination or (ii) three (3) Business Days prior to the date of reduction, (b) any such partial reduction shall be in an aggregate amount of $1,000,000 or any whole multiple of $100,000 in
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excess thereof, (c) after giving effect to any reduction of the total Revolving Commitments, the total Revolving Commitments shall not be less than (i) the total Revolving Exposures or (ii) the sum of the Letter of Credit Sublimit and the Swingline Loan Sublimit, (d) any termination of all Revolving Commitments shall be accompanied by a prepayment in full of all Revolving Loans and all Letter of Credit Liabilities shall be Cash Collateralized in accordance with the terms of Section 2.03(g) , and (e) the Administrative Agent shall not be required to release its Lien on any Collateral in connection with any termination (other than on the Termination Date) or reduction. The Administrative Agent will promptly notify the Revolving Lenders of any such notice of termination or reduction of the Revolving Commitments. Any reduction of the total Revolving Commitments shall be applied to the Revolving Commitment of each Lender according to its Pro Rata Share. All fees accrued with respect thereto until the effective date of any termination or reduction of the total Revolving Commitments shall be paid on the effective date of such termination or reduction. Any notice of termination of the total Revolving Commitments delivered by the Borrower Representative pursuant to this Section 2.06 shall be irrevocable, provided that a notice of termination of the Revolving Commitments may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower Representative (by notice to the Administrative Agent at least one (1) Business Day prior to the specified effective date) if such condition is not satisfied.
2.07 Repayment of Loans.
(a) Revolving Loans . On the Revolving Loan Maturity Date, the Borrowers shall repay to the Administrative Agent, for the ratable benefit of the Lenders, the aggregate principal amount of all Revolving Loans outstanding on such date.
(b) Swingline Loans . The Borrowers shall repay each Swingline Loan as provided in Section 2.04(a).
2.08 Interest .
(a) Subject to the provisions of subsection (b) below, (i) each LIBOR Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the sum of (A) the LIBO Rate for such Interest Period plus (B) the Applicable Margin; and (ii) each Base Rate Loan bear interest on the outstanding principal amount thereof from the applicable borrowing or conversion date at a rate per annum equal to the (A) Base Rate plus (B) the Applicable Margin.
(b) After the occurrence and during the continuation of an Event of Default, at the election of the Administrative Agent or the Required Lenders (unless an Event of Default exists pursuant to Section 9.01(a) , Section 9.01(f) or Section 9.01(g) , in which event such an election shall be deemed to have automatically occurred without any further action of the Administrative Agent or the Required Lenders), the Borrowers shall pay interest on the principal amount of all outstanding Loans and any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder or under any other Loan Document at a rate per annum equal to the Default Rate to the fullest extent permitted by applicable Laws, commencing upon the occurrence of such Event of Default, notwithstanding when such election is made.
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(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law whether or not allowed in such proceeding.
2.09 Fees.
(a) Unused Revolving Commitments Fee . The Borrowers shall pay, or cause to be paid, to the Administrative Agent for the account of each Revolving Lender in accordance with its Pro Rata Share, an unused fee equal to the product of (i) the Revolving Commitment Fee Percentage times (ii) the average daily amount by which the total Revolving Commitments exceed the sum of (y) the total outstanding amount of Revolving Loans (excluding Swingline Loans) and (z) the total Letter of Credit Liabilities. This unused fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article 4 is not met, and shall be due and payable monthly in arrears on the first day of each month, commencing with the first such date to occur after the Closing Date, and on the Revolving Loan Maturity Date; provided that no such unused fee shall accrue on the Revolving Commitment of a Defaulting Lender so long as such Lender shall be a Defaulting Lender (not including any portion thereof reallocated to non-Defaulting Lenders pursuant to Section 2.16(d) hereof).
(b) Other Fees . The Borrowers shall pay the fees in the amounts and at the times specified in the Fee Letter, and in furtherance of the foregoing, the Borrowers hereby assume the obligations of each Person (other than a Secured Party) arising under the Fee Letter. Such fees shall be fully earned when paid and shall be non-refundable for any reason whatsoever.
2.10 Computation of Interest and Fees . All computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed, except that interest computed by reference to clause (b) of the definition of Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid.
2.11 Evidence of Debt.
(a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender with respect to this Agreement shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrowers and the interest and payments thereon with respect to this Agreement and the other Loan Documents. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the
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Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrowers shall execute and deliver to such Lender (through the Administrative Agent) a promissory note, which shall evidence such Lenders Loans in addition to such accounts or records. Each such promissory note shall (i) in the case of Revolving Loans, be substantially in the form of Exhibit B-1 (a Revolving Note ) , and (ii) in the case of Swingline Loans, be substantially in the form of Exhibit B-2 (the Swingline Note ) . Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto, but any failure to do so shall not limit or otherwise affect the Borrowers Obligations hereunder.
(b) In addition to the accounts and records referred to in subsection (a) , each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swingline Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.
2.12 Payments Generally.
(a) All payments to be made by the Borrowers of principal, interest, fees and other Obligations shall be absolute and unconditional and shall be made without condition or deduction for any counterclaim, defense, recoupment, setoff or rescission. Except as otherwise expressly provided herein, all payments by the Borrowers hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agents Office (or, in the case of Swingline Loans and if so directed in writing by Swingline Lender, delivered directly to the Swingline Lender) in Dollars and in immediately available funds not later than 12:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lenders Lending Office. All payments received by the Administrative Agent after 12:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the definition of Interest Period, if any payment to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
(c) Unless any Borrower or any Lender has notified the Administrative Agent, prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that any Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrowers or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in immediately available funds, then:
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(i) if any Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in immediately available funds at the Federal Funds Rate from time to time in effect; and
(ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof, in immediately available funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrowers to the date such amount is recovered by the Administrative Agent (the Compensation Period ) at a rate per annum equal to (i) for the first three (3) days, the Federal Funds Rate and (ii) thereafter, the Base Rate plus the Applicable Margin in respect of Revolving Loans which are Base Rate Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lenders Loan included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agents demand therefor, the Administrative Agent may make a demand therefor upon the Borrowers, and the Borrowers shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Revolving Commitment or to prejudice any rights which the Administrative Agent or the Borrowers may have against any Lender as a result of any default by such Lender hereunder.
A notice of the Administrative Agent to any Lender or the Borrower Representative with respect to any amount owing under this subsection (c) shall be conclusive, absent manifest error.
(d) The obligations of the Lenders hereunder to make Loans are several and not joint. The failure of any Lender to make any Loan or to fund any participation on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or purchase its participation.
2.13 Sharing of Payments . If, other than as provided elsewhere in this Agreement, in the Fee Letter, in any Assignment and Assumption permitted hereunder or in any participation agreement with a Participant permitted hereunder, any Lender shall obtain on account of the Loans made by it, or Letter of Credit Liabilities or Swingline Exposures held by it, any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them, and/or such subparticipations in Letter of Credit Liabilities and Swingline Exposures held by them, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans or such participations, as the case may be, pro rata with each of them, provided , that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances
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described in Section 12.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lenders ratable share (according to the proportion of (i) the amount of such paying Lenders required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. The Borrowers agree that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by Law, exercise all its rights of payment (including the right of set-off, but subject to Section 12.09) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.13 and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.
2.14 Handling of Proceeds of Collateral; Cash Dominion; Revolving Loan Account; Cash Management Procedures.
(a) Collection of Accounts and Other Proceeds . The Borrowers, at their expense, will enforce and collect payments and other amounts owing on all Accounts in the ordinary course of the Borrowers business subject to the terms hereof. The Borrowers shall deposit and agree to direct all of their account debtors to deposit payments on all Accounts directly to one or more Controlled Accounts. Notwithstanding the foregoing, should any Borrower ever receive any payment on an Account or other proceeds of the sale of Collateral, including checks, cash, receipts from credit card sales and receipts, notes or other instruments or property with respect to any Collateral, such Borrower agrees to hold such proceeds separate from such Borrowers other property and funds, and to deposit such proceeds directly into the bank account(s) maintained pursuant to this subsection within three (3) Business Days.
(b) Transfer of Funds . During a Cash Control Period, the Administrative Agent shall have the right, at the Administrative Agents election in its sole discretion, to require that funds remaining on deposit in any Controlled Account be transferred to the Administrative Agents Bank Account on each Business Day, and the Borrowers shall take all actions required by the Administrative Agent or by any bank at which any Controlled Account is maintained in order to effectuate the transfer of funds in this manner. All amounts so received will, for purposes of calculating Revolving Availability and interest, be credited to the Revolving Loan Account on the date of deposit in the Administrative Agents Bank Account. No checks, drafts or other instruments received by the Administrative Agent shall constitute final payment to the Administrative Agent unless and until such instruments have actually been collected.
(c) New Bank Accounts . Each Borrower agrees not to open any new bank account into which proceeds of Collateral are to be delivered or deposited unless such bank account is established at CIT (unless such account constitutes an Excluded Account). Any such
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bank account shall constitute a Controlled Account for purposes of this Agreement. Notwithstanding anything to the contrary in this Section 2.14 , the Borrowers may maintain one or more accounts constituting Excluded Accounts, provided that if such account ceases to be an Excluded Account, (i) Borrowers shall cause such account to be a Controlled Account within thirty (30) days of such event and (ii) pending such account becoming a Controlled Account, Borrowers shall cause the daily transfer of funds in such account into another Controlled Account.
(d) Collective Borrowing Arrangement . The Borrowers have informed the Administrative Agent that: (i) in order to increase the efficiency, profitability and productivity of each Borrower, the Borrower Representative has established a centralized cash management system for the Borrowers that entails, in part, central disbursement and operating accounts for each of the Borrowers in which the Borrower Representative provides the working capital needs of each of the other Borrowers and manages and timely pays the accounts payable of each of the other Borrowers; (ii) the Borrower Representative further enhances the operating efficiencies of the other Borrowers by purchasing, or causing to be purchased, in the Borrower Representatives name for its account, all or substantially all materials, supplies, inventory and services required by the other Borrowers, resulting in a reduction in operating costs of the other Borrowers; and (iii) all of the Borrowers presently engage in an integrated operation that requires financing on an integrated basis, and each Borrower expects to benefit from the continued successful performance of such integrated operations. Therefore, in order to best utilize the borrowing powers of the Borrowers in the most effective and cost efficient manner and to avoid adverse effects on the operating efficiencies of each Borrower and the existing back office practices of the Borrowers, each Borrower has requested that all Revolving Loans, the Swingline Loans be disbursed, and Letters of Credit be issued, solely upon the request of the Borrower Representative and to bank accounts managed solely by the Borrower Representative, it being the intent and desire of the Borrowers that the Borrower Representative manage for the benefit of each Borrower the expenditure and usage of such funds.
(e) Revolving Loan Account . The Administrative Agent may charge the Revolving Loan Account for all loans and advances made by the Administrative Agent and the Lenders to the Borrower Representative, or otherwise for the Revolving Loan Account, and for any other Obligations, including out-of-pocket expenses of the Administrative Agent, when due and payable hereunder. Interest on the Revolving Loans shall be paid as set forth in Section 2.08 hereto. In no event shall prior recourse to any Account or other security granted to or by the Borrowers be a prerequisite to the Administrative Agents or the Lenders rights to demand payment of any of the Obligations. In addition, neither the Administrative Agent nor any Lender shall have any obligation whatsoever to perform in any respect any Borrowers contracts or obligations relating to the Accounts.
(f) Cash Management Procedures . Each Borrower agrees to cause CIT to be its principal depositary and treasury services financial institution, including for the maintenance of operating, administrative, treasury services, cash management, collection activity and other deposit accounts for the conduct of its business.
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2.15 Uncommitted Facilities Increase.
(a) At any time prior to the second anniversary of the Closing Date, subject to the terms and conditions set forth herein and subject to the consent of each Lender, the Borrower Representative may, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request to add one or more increases in the Revolving Commitments (a Revolving Commitment Increase or the Incremental Revolving Commitments ; individually an Incremental Facility and collectively the Incremental Facilities ); provided that at the time of each such request and upon the effectiveness of each Incremental Facility Amendment (as defined below), no Default, Event of Default or Borrowing Base Deficiency has occurred and is continuing or shall result therefrom. Borrower Representative may seek commitments for the Incremental Facilities from the existing Lenders, or if the Administrative Agent consents, Additional Lenders who will become Lenders in connection therewith (and meet the requirements of an Eligible Assignee), and for the avoidance of doubt, no Secured Party shall have any obligation to provide or arrange any Additional Incremental Facility or commitment related thereto.
(b) Notwithstanding anything to contrary herein, the aggregate principal amount of all Incremental Facilities (including commitments therefor) shall not exceed $15,000,000 and not more than two (2) Incremental Facilities may be requested hereunder. Each Incremental Facility shall be in an integral multiple of $1,000,000 and be in an aggregate principal amount that is not less than $5,000,000; provided that such amount may be less than the applicable minimum amount if such amount represents all the remaining availability hereunder as set forth above.
(c) The terms, provisions and documentation of the Incremental Revolving Commitments shall be on the same terms and conditions of this Agreement, except as agreed (unless otherwise set forth in this Section 2.15) among the Borrowers, each Lender and the applicable Additional Lender(s) providing such Incremental Revolving Commitments and except that:
(i) if the Applicable Margin (which, for such purposes only, shall be deemed to include all upfront or similar fees or original issue discount (with original issue discount being equated to interest based on an assumed four-year life to maturity or, if shorter, the actual Weighted Average Life to Maturity) payable to all Additional Lenders providing such Incremental Facility (but excluding the portion of structuring, arrangement, commitment or similar fees not shared with all such Additional Lenders in connection therewith)) relating to any Incremental Facility exceeds the then Applicable Margin (which, for such purposes only, shall be deemed to include all upfront or similar fees or original issue discount (with original issue discount being equated to interest based on an assumed four-year life to maturity or, if shorter, the actual Weighted Average Life to Maturity) payable to all Lenders providing the Revolving Commitments extended on the Closing Date (the Closing Date Facilities ) immediately prior to the effectiveness of the applicable Incremental Facility Amendment by more than 0.50%, the Applicable Margin relating to the Closing Date Facilities shall be adjusted to be equal to the Applicable Margin (which, for such purposes only, shall be deemed to include all upfront or similar fees or original issue discount (with original issue discount being
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equated to interest based on an assumed four-year life to maturity or, if shorter, the actual Weighted Average Life to Maturity) payable to all Additional Lenders providing such Incremental Facilities (but excluding structuring, arrangement, commitment or similar fees not shared with all such Additional Lenders in connection therewith)) relating to such Incremental Facilities minus 0.50%,
(ii) and any Incremental Revolving Commitments will be subject to the same pro rata borrowing, Letter of Credit participations and prepayment and commitment reduction provisions as the existing Revolving Commitments,
(iii) such Incremental Facilities (a) shall not be secured by any Lien on any asset of any Person that does not also secure the then outstanding Closing Date Facilities or (b) shall not be guaranteed by any Person other than a Loan Party under the then outstanding Closing Date Facilities.
(d) Each notice from the Borrowers pursuant to this Section 2.15(d) shall set forth the requested amount and proposed terms of the relevant Incremental Revolving Commitments, as applicable. If the Administrative Agent does not receive within a time period proscribed by the Administrative Agent sufficient commitments from existing Lenders to effectuate the Incremental Revolving Commitments, as applicable, any additional bank, financial institution, existing Lender or other Person that constitutes an entity of the type that would be an Eligible Assignee electing to extend Incremental Revolving Commitments shall be determined by the Borrower (subject to the consent of (y) the Administrative Agent and (z) the L/C Issuer (or if applicable, the Support Provider) and the Swingline Lender solely with respect to Incremental Revolving Commitments) (any such bank, financial institution, existing Lender or other Person being called an Additional Lender ) and, if not already a Lender, shall become a Lender under this Agreement pursuant to an amendment (an Incremental Facility Amendment ) to this Agreement and, as appropriate, the other Loan Documents, executed by (in form and substance mutually acceptable to each of) the Loan Parties, each Lender, such Additional Lender, the Administrative Agent, and in the case of any Incremental Revolving Commitments, each L/C Issuer (or if applicable, the Support Provider) and Swingline Lender, and shall join as a Lender (and in any event, shall be bound by and subject to) the AAR Cooperation Agreement. For the avoidance of doubt, no L/C Issuer (or if applicable, Support Provider) and Swingline Lender is required to act as such for any Additional Revolving Commitments unless they so consent. No Incremental Facility Amendment shall require the consent of any Lenders other than the Additional Lenders with respect to such Incremental Facility Amendment. Ultimate allocation of any Incremental Revolving Commitments to Lenders and/or Additional Lenders shall be made at the sole discretion of the Administrative Agent.
Upon each increase in the Revolving Credit Commitments pursuant to this Section 2.15 , each Revolving Lender immediately prior to such increase will automatically and without further action be deemed to have assigned to each Lender providing a portion of the Incremental Revolving Commitment (each an Incremental Revolving Lender ) in respect of such increase, and each such Incremental Revolving Lender will automatically and without further act be deemed to have assumed, a portion of such Revolving Lenders participations hereunder in outstanding Letters of Credit and Swingline Loans such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding
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(i) participations hereunder in Letters of Credit and (ii) participations hereunder in Swingline Loans held by each Revolving Lender (including each such Incremental Revolving Lender) will equal the percentage of the aggregate Revolving Commitments of all Revolving Lenders represented by such Revolving Lenders Revolving Commitment. The Administrative Agent and the Lenders hereby agree that the minimum borrowings, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence. Commitments in respect of any Incremental Revolving Commitments shall become Commitments under this Agreement. Subject to Section 2.15 , the effectiveness of any Incremental Facility Amendment shall, unless otherwise agreed to by the Administrative Agent, each Lender and the Additional Lenders, be subject to the satisfaction on the date thereof (each, an Incremental Facility Closing Date ) of each of the conditions set forth in Article 4 (it being understood that (x) all references to the date of such Credit Extension in Article 4 shall be deemed to refer to the Incremental Facility Closing Date and (y) the Incremental Facility Closing Date shall be deemed to be the initial Credit Extension).
2.16 Defaulting Lenders . If any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a) such Defaulting Lenders Revolving Commitment and outstanding Revolving Loans shall be excluded for purposes of calculating the fee payable to Revolving Lenders in respect of Section 2.09(a) , and such Defaulting Lender shall not be entitled to receive any fee pursuant to Section 2.09(a) with respect to such Defaulting Lenders Revolving Commitment or Revolving Loans (in each case not including any fee in connection with any portion of such Defaulting Lenders Revolving Commitment that has been reallocated to non-Defaulting Lenders pursuant to Section 2.16(d) hereof).
(b) the Revolving Commitments and Loans of such Defaulting Lender shall not be included in determining whether all Lenders or the Required Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 12.01).
(c) in the event a Defaulting Lender has defaulted on its obligation to fund any Revolving Loan, or purchase any participation pursuant to Section 2.03(d) or Section 2.04(d) hereof, until such time as the Default Excess with respect to such Defaulting Lender has been reduced to zero, any prepayments or repayments on account of the Revolving Loans or participations purchased pursuant to Section 2.03(d) or Section 2.04(d) , in each case to the extent they would be otherwise be payable to such Defaulting Lender, shall be applied first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second , to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the L/C Issuer, Support Provider or Swingline Lender hereunder; third, to Cash Collateralize the L/C Issuers (or the Support Providers, as the case may be) Fronting Exposure with respect to such Defaulting Lender; fourth , as the Borrowers may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth , if so determined by the Administrative Agent and the Borrowers, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lenders potential future funding obligations with respect to Loans under this
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Agreement and (y) Cash Collateralize the L/C Issuers (or the Support Providers, as the case may be) future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement; sixth, to the payment of any amounts owing to the Lenders, the L/C Issuer, the Support Provider or Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the L/C Issuer, the Support Provider or Swingline Lender against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement; seventh , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrowers as a result of any judgment of a court of competent jurisdiction obtained by the Borrowers against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement; and eighth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided, that , if (x) such payment is a payment of the principal amount of any Loans or Letter of Credit Liabilities in respect of which such Defaulting Lender has not fully funded its appropriate share and (y) such Loans or Letter of Credit Liabilities were made at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be applied solely to the pay the Loans of, and Letter of Credit Liabilities owed to, all non-Defaulting Lenders on a mg rata basis prior to being applied to the payment of any Loans of, or Letter of Credit Liabilities owed to, such Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.16(c) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(d) If any Swingline Loans or Letter of Credit Liabilities are outstanding at the time a Lender becomes a Defaulting Lender then:
(i) so long as no Default or Event of Default then exists, all or any part of such Swingline Loans and Letter of Credit Liabilities shall be reallocated among the non-Defaulting Revolving Lenders in accordance with their respective Pro Rata Shares of the total Revolving Commitments (calculated without regard to such Defaulting Lenders Revolving Commitments), provided that no Revolving Lenders Revolving Exposure shall exceed its Revolving Commitment;
(ii) if the reallocation described in paragraph (i) above cannot, or can only partially, be effected, the Borrowers shall within one Business Day following notice by the Administrative Agent (A) first, prepay the amount of the Swingline Loans equal to Defaulting Lenders Pro Rata Share thereof after giving effect to any partial reallocation pursuant to paragraph (i) above and (B) second, Cash Collateralize such Defaulting Lenders Pro Rata Share of Letter of Credit Liabilities (after giving effect to any partial reallocation pursuant to paragraph (i) above) in accordance with the procedures set forth in Section 2.03(g) and for so long as any such Letter of Credit Obligations are outstanding;
(iii) if the Borrowers Cash Collateralize any portion of such Defaulting Lenders Pro Rata Share of Letter of Credit Obligations pursuant to this Section 2.16(d) , the Borrowers shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.03(c) with respect to the portion of such Defaulting Lenders Pro Rata Share of
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Letter of Credit Obligations which have been Cash Collateralized (and the Defaulting Lender shall not be entitled to receive any such fees);
(iv) if the Defaulting Lenders Pro Rata Share of Letter of Credit Obligations are reallocated pursuant to this Section 2.16(d) , then the letter of credit fees payable to the non-Defaulting Lenders pursuant to Section 2.03(c) shall be adjusted accordingly; and
(v) if any Defaulting Lenders Pro Rata Share of Letter of Credit Liabilities is not Cash Collateralized or reallocated pursuant to this Section 2.16(d) , then without prejudice to any rights or remedies of the applicable Support Provider or L/C Issuer hereunder, all letter of credit fees payable under Section 2.03(c) with respect to such Defaulting Lenders Pro Rata Share of Letter of Credit Liabilities shall be payable to the L/C Issuer or if applicable, the Support Provider.
(e) So long as any Lender is a Defaulting Lender, the Swingline Lender shall not be required to fund any Swingline Loan, and no L/C Issuer or Support Provider shall be required to issue, extend or increase any Letter of Credit or Support Agreement, in each case unless it is reasonably satisfied that the related exposure will be 100% covered by the Revolving Commitments of the non-Defaulting Lenders and/or Cash Collateral will be provided by the Borrowers in accordance with Section 2.03(g) , and participating interests in any such newly issued, extended or increased Letter of Credit or Support Agreement or newly made Swingline Loan shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.16(d)(i) (and Defaulting Lenders shall not participate therein).
(f) No reallocation permitted pursuant to Section 2.16(d) shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a non-Defaulting Lender as a result of such non-Defaulting Lenders increased exposure following such reallocation.
(g) In the event that the Administrative Agent, the L/C Issuer, the Support Provider and the Swingline Lender each agrees in writing that a Defaulting Lender has adequately remedied all matters which caused such Lender to become a Defaulting Lender, then the Pro Rata Shares of Swingline Loans and Letter of Credit Obligations of the Revolving Lenders shall be readjusted to reflect the inclusion of such Lenders Revolving Commitment and on such date such Lender shall purchase at par such of the Revolving Loans of the other Lenders (other than Swingline Loans) or participations in the Revolving Loans as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Revolving Loans or participations in accordance with its Pro Rata Share; provided , that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrowers while that Lender was a Defaulting Lender; provided , further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender
(h) to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender having been a Defaulting Lender.
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(i) The rights and remedies with respect to a Defaulting Lender under this Section 2.16 are in addition to any other rights and remedies which the Borrower, the Administrative Agent, the L/C Issuer, the Support Provider or the Swingline Lender, as applicable, may have against such Defaulting Lender.
ARTICLE 3
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Payments Free of Taxes . Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Law. If any applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(b) Payment of Other Taxes by the Loan Parties . The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
(c) Indemnification by the Loan Parties . The Loan Parties shall jointly and severally indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower Representative by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(d) Indemnification by the Lenders . Each Lender shall severally indemnify the Administrative Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes attributable to such Lenders failure to comply with the provisions of Section 12.07(d) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable
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expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).
(e) Evidence of Payments . As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 3.01, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(f) Status of Lenders . (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower Representative and the Administrative Agent, at the time or times reasonably requested by the Borrower Representative or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower Representative or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower Representative or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrower Representative or the Administrative Agent as will enable the Borrower Representative or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.01(f)(ii)(A) , (ii)(B) and (ii)(D) below) shall not be required if in the Lenders reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii) Without limiting the generality of the foregoing,
(A) any Lender that is a U.S. Person shall deliver to the Borrower Representative and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower Representative and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower
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Representative or the Administrative Agent), whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the interest article of such tax treaty and with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the business profits or other income article of such tax treaty;
(2) executed copies of IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Internal Revenue Code, (x) a certificate substantially in the form of Exhibit 0-1 to the effect that such Foreign Lender is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, a 10 percent shareholder of a Borrower within the meaning of Section 881(c)(3)(B) of the Internal Revenue Code, or a controlled foreign corporation described in Section 881(c)(3)(C) of the Internal Revenue Code (a U.S. Tax Compliance Certificate ) and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable; or
(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate substantially in the form of Exhibit G-2 or Exhibit G-3 , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit G-4 on behalf of each such direct and indirect partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower Representative and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or the Administrative Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit
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the Borrower Representative or the Administrative Agent to determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Lender shall deliver to the Borrower Representative and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower Representative or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation reasonably requested by the Borrower Representative or the Administrative Agent as may be necessary for the Borrower Representative and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), FATCA shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower Representative and the Administrative Agent in writing of its legal inability to do so.
(g) Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 3.01 (including by the payment of additional amounts pursuant to this Section 3.01) , it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
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(h) Survival . Each partys obligations under this Section 3.01 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
3.02 Illegality . If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBOR Loans, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or take deposits of Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrowers through the Administrative Agent, any obligation of such Lender to make or continue LIBOR Loans or to convert Base Rate Loans to LIBOR Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrowers that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all LIBOR Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBOR Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Loans. Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or converted. Each Lender agrees to use reasonable efforts consistent with legal and regulatory requirements to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be disadvantageous to such Lender or cost any additional amount.
3.03 Inability to Determine Rate . If the Administrative Agent determines that for any reason adequate and reasonable means do not exist for determining the LIBO Base Rate for any requested Interest Period with respect to a proposed LIBOR Loan, or that the LIBO Base Rate for any requested Interest Period with respect to a proposed LIBOR Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, the Administrative Agent will promptly notify the Borrowers and all Lenders. Thereafter, the obligation of the Lenders to make or maintain LIBOR Loans shall be suspended until the Administrative Agent revokes such notice. Upon receipt of such notice, the Borrowers may revoke any pending request for a Borrowing of, conversion to or continuation of LIBOR Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.
3.04 Increased Cost and Reduced Return; Capital Adequacy . (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge, liquidity requirement or other similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the LIBO Rate) or the L/C Issuer or Support Provider;
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(ii) subject any Lender or the L/C Issuer or Support Provider to any Tax of any kind whatsoever with respect to this Agreement, any Letter of Credit or Support Agreement, any participation in a Letter of Credit or any Loan made by it (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes); or
(iii) impose on any Lender, the Support Provider or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Loans made by such Lender or any Letter of Credit or Support Agreement, or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the Support Provider or L/C Issuer of participating in, issuing or maintaining any Lender Letter of Credit or continuing its obligation under any Support Agreement (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, Support Provider, or the L/C Issuer, the Borrowers will pay to such Lender, Support Provider, or L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender, Support Provider or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.
(b) Without duplication of amounts payable in paragraph (a) above, if any Lender determines that any Change in Law affecting such Lender or any lending office of such Lender or Lenders holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lenders capital or on the capital of such Lenders holding company, if any, as a consequence of its obligations hereunder or under or in respect of any Letter of Credit or Support Agreement, to a level below that which such Lender or such Lenders holding company could have achieved but for such Change in Law (taking into consideration such Lenders policies and the policies of such Lenders holding company with respect to capital or liquidity adequacy), then from time to time the Borrowers will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lenders holding company for any such reduction suffered.
3.05 Funding Losses . Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrowers shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:
(a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(b) any failure by the Borrowers (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrowers; or
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(c) any assignment of a LIBOR Loan on a day other than the last day of the Interest Period therefor as a result of (i) a request by the Borrowers pursuant to Section 12.15 , (ii) an assignment by any Lender that is a Lender on the Closing Date pursuant to Section 12.07(b) as part of the primary syndication of the Commitments and Loans following the Closing Date or (iii) an assignment by any Lender in connection with an Incremental Facility pursuant to Section 2.15;
including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. Lenders shall provide Borrower Representative with a notice (with a copy to the Administrative Agent) setting forth in reasonable detail the basis for Lenders demand, which shall be conclusive absent manifest error. Borrowers shall pay such amount within ten days after receipt of such notice.
For purposes of calculating amounts payable by the Borrowers to the Lenders under this Section 3.05 , each Lender shall be deemed to have funded each LIBOR Loan made by it at the LIBO Base Rate used in determining the LIBO Rate for such Loan by a matching deposit or other borrowing in the London interbank market for a comparable amount and for a comparable period, whether or not such LIBOR Loan was in fact so funded.
3.06 Matters Applicable to all Requests for Compensation.
(a) A certificate of the Administrative Agent or any Lender, Support Provider, or L/C Issuer claiming compensation under this Article 3 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, the Administrative Agent or such Lender, Support Provider or L/C Issuer may use any reasonable averaging and attribution methods. The Borrowers shall pay the Administrative agent, Lender, Support Provider or L/C Issuer the amount shown as due on any such certificate within ten (10) days of receipt thereof.
(b) Upon any Lenders making a claim for compensation under Section 3.01 or 3.04 , the Borrowers may replace such Lender in accordance with Section 12.15.
3.07 Survival . All of the Borrowers obligations under this Article 3 shall survive the Termination Date.
ARTICLE 4
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
4.01 Conditions of Initial Credit Extension . The obligation of each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent, except as provided under Section 6.18:
(a) Loan Documents . Receipt by the Administrative Agent of executed counterparts of this Agreement, the Security Agreement, the Fee Letter, the AAR Cooperation Agreement, the other Loan Documents to be executed as of the Closing Date and the agreements and the other documents executed in connection herewith and therewith and the Notes (if
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requested), each properly executed by a Responsible Officer of the signing Loan Party and each other Person a party thereto.
(b) Organization Documents , Resolutions , Etc . Receipt by the Administrative Agent of the following, each of which shall be originals or facsimiles (followed promptly by originals), dated as of a recent date before the Closing Date and in form and substance satisfactory to the Administrative Agent and its legal counsel:
(i) copies of the Organization Documents of each Loan Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation or organization, where applicable, and certified by a secretary or assistant secretary of such Loan Party to be true and correct as of the Closing Date;
(ii) such resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof (A) executing any agreement, certificate or other document required to be delivered hereby or (B) authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; and
(iii) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and is validly existing, in good standing and qualified to engage in business in its state of organization or formation, in the state in which its principal place of business is located, and in each other state in which a failure to be so qualified would have a Material Adverse Effect.
(c) Filings , Registrations and Recordings . Receipt by the Administrative Agent of each document (including any UCC financing statements, Aviation Authority filings and registrations with the International Registry, as applicable) required by the Collateral Documents or under Law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for its benefit and the benefit of the Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than Permitted Liens), which shall be in proper form for filing, registration or recordation.
(d) Controlled Accounts . (i) The Loan Parties shall have established one or more Controlled Accounts with respect to the collection of Accounts and the deposit of the proceeds thereof, and (ii) if any Controlled Account is not held at CIT, the Loan Parties shall have entered into a Deposit Account Control Agreement (in form and substance reasonably acceptable to the Administrative Agent) as required by the Administrative Agent with the applicable depository bank with respect to each such account other than the Excluded Accounts.
(e) Collateral Access Agreements . Receipt by the Administrative Agent of all Collateral Access Agreements required by the Administrative Agent, landlord waivers and bailee
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letters, as applicable, with respect to all Collateral locations, in each case in form and substance reasonably acceptable to the Administrative Agent.
(f) Opinions of Counsel . Receipt by the Administrative Agent of favorable opinions of (i) DLA Piper LLP (US), special counsel to the Loan Parties; (ii) any local counsel to the Loan Parties; and (iii) Aviation Authority Counsel; in each case, addressed to the Administrative Agent and each Secured Party, dated as of the Closing Date, and in form and substance satisfactory to the Administrative Agent.
(g) Evidence of Insurance . Receipt by the Administrative Agent of (i) ACORD insurance evidencing insurance coverages and amounts satisfactory to the Administrative Agent and appropriate endorsements in favor of the Administrative Agent with respect thereto and (ii) aviation insurance in accordance with the Security Agreement.
(h) Lien Searches . Receipt by the Administrative Agent of UCC, Aviation Authority and International Registry and other Lien searches considered necessary by the Administrative Agent and other evidence as requested by Administrative Agent that no Liens exist other than Permitted Liens.
(i) Repayment of Existing Indebtedness . Receipt by the Administrative Agent of evidence that the portion of the loans and other obligations owed under the Existing Credit Agreement as described in the Delayed Draw Release Date Agreement and under any other agreements with respect to any Indebtedness secured by the Collateral and not constituting Indebtedness hereunder have been repaid or will be repaid with the initial Loans made hereunder on the Closing Date and the commitments described in the Delayed Draw Release Date Agreement or thereunder have been terminated, and the Administrative Agent shall have received a copy of the Delayed Draw Release Date Agreement and other customary termination or release documentation associated therewith.
(j) AAR Related Documents . Receipt by the Administrative Agent of a copy, certified by a Responsible Officer of the Borrower Representative as true and complete, of each of the AAR Related Documents, in each case, including schedules and exhibits thereto and together with all amendments, modifications, supplements and waivers thereof, along with the AAR Cooperation Agreement.
(k) Third Party Consents . Receipt by the Administrative Agent of evidence reasonably satisfactory to the Administrative Agent that the Loan Parties have obtained all required consents and approvals of all Persons including all requisite Governmental Authorities and counterparties to Material Contracts, to the execution, delivery and performance of the Loan Documents.
(l) Fees . Receipt by the Administrative Agent and the Lenders of any fees required to be paid on or before the Closing Date under this Agreement and the Fee Letter.
(m) Attorney Costs . The Loan Parties shall have paid all Attorney Costs of the Administrative Agent, plus such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing
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proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Loan Parties and the Administrative Agent).
(n) Compliance with Laws . Each Loan Party shall be in compliance with all applicable Law, and shall have provided the Administrative Agent with true and correct copies of each of the accreditation, license and, certifications required by Section 5.01 below.
(o) Compliance with Agreements . Each Loan Party shall be in compliance with all material agreements, and shall have provided the Administrative Agent with true and correct copies of each Material Contract.
(p) No Litigation . There exists no pending or threatened Proceeding against the Loan Parties, or any of their respective Affiliates or respective assets in any court or administrative forum, (i) which if adversely determined could reasonably be expected to have a Material Adverse Effect or (ii) that involves this Agreement, any other Loan Document.
(q) Financial Statements; Projections . Receipt by the Administrative Agent of
(i) an unaudited pro forma consolidated balance sheet and income statement of Holdings and its Subsidiaries as of and for the twelve-month period ending on June 30, 2016, prepared after giving effect to the transactions contemplated hereby as if such transactions had occurred as of such date (with respect to the balance sheet) or at the beginning of such period (with respect to such income statement) (the Pro Forma Financial Statements ):
(ii) the Audited Pre-Closing Financial Statements;
(iii) the Interim Pre-Closing Financial Statements;
(iv) satisfactory projections through September 30, 2019; and
(v) such other information as the Administrative Agent may reasonably request.
(r) Information Supplements . All supplements, if any, required to be delivered to the Arranger under the paragraph entitled Information in the Commitment Letter.
(s) No Material Adverse Change . There shall not have occurred since September 30, 2015 any developments or events which individually or in the aggregate with other such circumstances has had or could reasonably be expected to have a Material Adverse Effect with respect to the Loan Parties and their respective Subsidiaries, taken as a whole, or any of their respective assets.
(t) Closing Certificate . Receipt by the Administrative Agent of a certificate executed by a Responsible Officer of the Borrower Representative certifying that the conditions specified in Sections 4.01(s) and (u)-(aa) and Sections 4.02(a) , (b) , (c) and (d) have been satisfied and that the representations and warranties contained in Article 5 are true and correct as of the Closing Date.
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(u) Capital Structure . The Administrative Agent shall have received confirmation of ownership and capital structure of the Loan Parties and be satisfied with the constituent documents of the Loan Parties and related investment agreements.
(v) Patriot Act . Receipt by the Administrative Agent and Lenders, at least ten (10) days prior to the Closing Date, of all documentation and other information about the Loan Parties required under applicable know your customer and anti-money laundering rules and regulations, including the PATRIOT Act, that has been requested by the Administrative Agent and the Lenders at least ten (10) Business Days prior to the Closing Date.
(w) Background Checks . Receipt by the Administrative Agent of background checks on Holdings key management and stockholders, in each case, in form and substance reasonably satisfactory to the Administrative Agent.
(x) Solvency . Receipt by the Administrative Agent of a Solvency Certificate from the Chief Financial Officer of Holdings, substantially in the form of Exhibit E hereto.
(y) Minimum EBITDAR . Receipt by the Administrative Agent of a certificate of the Borrower Representatives chief financial officer, in form, substance and detail satisfactory to the Administrative Agent demonstrating that the Consolidated EBITDAR of the Consolidated Group (as adjusted in a manner satisfactory to the Administrative Agent) for the twelve month period ended June 30, 2016 is equal to or greater than $185,000,000.
(z) Maximum Closing Date Leverage . Receipt by the Administrative Agent of (i) a certificate of the Borrower Representatives chief financial officer, in form, substance and detail satisfactory to the Administrative Agent, demonstrating that (i) the Consolidated Total Leverage Ratio on the Closing Date, does not exceed 6.71 to 1.00 calculated on a Pro Forma Basis after giving effect to the initial finding of the Loans (and the application of the proceeds thereof) and based on Consolidated EBITDAR determined pursuant to clause (y) above and (ii) evidence that the Revolving Availability after giving effect to the initial funding of the Loans (and the application of the proceeds thereof) shall not be less than $18,000,000.
(aa) Audit; Appraisals; Physical Examination . The Administrative Agent (directly or via a third party audit firm) shall have conducted a physical examination and appraisal of the Collateral and the Borrowers and Guarantors Spare Parts Inventory and Eligible Spare Engines (including all books and records related thereto) and the results of such examination and appraisal shall be reasonably satisfactory to the Administrative Agent in all respects. Receipt by the Administrative Agent of a desktop Appraisal of the Collateral dated June 30, 2016 in form and substance reasonably satisfactory to the Administrative Agent.
(bb) Other . Receipt by the Administrative Agent and the Lenders of such other documents, instruments, agreements and information as reasonably requested by the Administrative Agent or any Lender, including, but not limited to, information regarding litigation, tax, accounting, labor, insurance, pension liabilities (actual or contingent), real estate leases, environmental matters, material contracts, debt agreements, property ownership, contingent liabilities, employment agreements, non-compete agreements and management of the Loan Parties and their respective Subsidiaries.
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4.02 Conditions to all Credit Extensions . The obligation of each Lender and the L/C Issuer and Support Provider to honor any Request for Credit Extension (or provide a Support Agreement), whether on the Closing Date or at any time thereafter, is subject to the following conditions precedent:
(a) The representations and warranties of each Loan Party contained in Article 5 or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects (provided , that if any representation or warranty is by its terms qualified by concepts of materiality, such representation shall be true and correct in all respects) on and as of such date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Section 4.02 , the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01.
(b) No Default or Event of Default shall exist, or would result from such proposed Credit Extension.
(c) After giving effect to such Credit Extension, (i) the total Revolving Exposures shall not exceed the total Revolving Commitments, (ii) no Borrowing Base Deficiency shall exist, calculated using the Borrowing Base as of the most recent Borrowing Base Certificate Date, and (iii) the Loan Parties shall be in compliance on a Pro Forma Basis with the financial covenants set forth in Article 8 computed using the covenant levels and financial information for the most recently ended quarter for which information is available.
(d) The Administrative Agent and, if applicable, the applicable L/C Issuer (or the Support Provider, as the case may be) shall have received a Request for Credit Extension in accordance with the requirements hereof.
(e) The proceeds of such Credit Extension will be used to finance a Permitted Use.
Each Request for Credit Extension submitted by the Borrower Representative shall be deemed to be a representation and warranty by the Loan Parties that the conditions specified in Section 4.02 have been satisfied on and as of the date of the applicable Credit Extension.
4.03 Satisfaction of Conditions . In determining the satisfaction of the conditions specified in this Article 4 , to the extent any item is required to be satisfactory to (a) any individual Lender, such item shall be deemed satisfactory to each Lender which has not notified the Administrative Agent in writing (with reasonable detail relating to why such Lender views a condition as not having been satisfied) prior to the Closing Date or the date on which a Credit Extension has been requested to be made, as applicable, that the respective item or matter does not meet its satisfaction or (b) the Required Lenders, such item shall be deemed satisfactory to the Required Lenders unless the Required Lenders have notified the Administrative Agent in writing (with reasonable detail relating to why the Required Lenders view a condition as not having been satisfied) prior to the Closing Date or the date on which a Credit Extension has been
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requested to be made, as applicable, that the respective item or matter does not meet their satisfaction, in each case, regardless of whether Administrative Agent has knowledge that such condition is satisfied, provided , that the occurrence of the Closing Date or the making of a Credit Further, the execution and delivery to the Administrative Agent by a Lender of a counterpart of this Agreement (or if applicable, an Assignment and Assumption) shall be deemed confirmation by such Lender that (a) the decision of such Lender to execute and deliver to the Administrative Agent an executed counterpart of this Agreement (or become a Lender hereunder) was made by such Lender independently and without reliance on an Agent or any other Lender and (b) all documents made available to such Lender were acceptable to such Lender. No Credit Extension shall release any Loan Party from any liability for failure to satisfy one or more of the applicable conditions contained in this Article 4.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
The Loan Parties hereby represent and warrant to the Administrative Agent and the Lenders that, both immediately before and after giving effect to any Credit Extension:
5.01 Existence, Qualification and Power . Each Loan Party (a) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite Permits to (i) own its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, except where the failure to have such Permits, either singularly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, and (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
5.02 Authorization; No Contravention . The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not (a) contravene the terms of any Loan Partys Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, (i) any Contractual Obligation to which any Loan Party is a party or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which any Loan Party or the Collateral of any Loan Party is subject; (c) violate any Law (including Regulation U or Regulation X issued by the FRB); or (d) result in a limitation on any licenses, permits or other Governmental Approvals applicable to the business, operations or properties of any Loan Party except, in each case, to the extent such conflict, breach, contravention, violation or limitation could not be reasonably expected to have a Material Adverse Effect.
5.03 Governmental Authorization; Other Consents . No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery
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or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, other than (i) those that have already been obtained and are in full force and effect, (ii) filings to perfect the Liens created by the Collateral Documents and (iii) those the failure of which to obtain or make could not reasonably be expected to have a Material Adverse Effect.
5.04 Binding Effect . Each Loan Document has been duly executed and delivered by each Loan Party that is party thereto. Each Loan Document constitutes a legal, valid and binding obligation of each Loan Party that is party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable Debtor Relief Laws or by equitable principles relating to enforceability.
5.05 Financial Statements; No Material Adverse Effect.
(a) The Audited Pre-Closing Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Loan Parties and their Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material Indebtedness and other liabilities, direct or contingent in accordance with GAAP, of the Loan Parties and their Subsidiaries as of the date thereof, including liabilities for taxes, commitments and Indebtedness.
(b) The Interim Pre-Closing Financial Statements and the Pro Forma Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Loan Parties and their Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments; and (iii) show all material Indebtedness and other liabilities, direct or contingent in accordance with GAAP, of the Loan Parties and their Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.
(c) From the date of the Audited Pre-Closing Financial Statements and the Interim Pre-Closing Financial Statements to and including the Closing Date, there has been no Disposition by the Loan Parties and their Subsidiaries, or any Involuntary Disposition, of any material part of the business or Property of the Loan Parties and their Subsidiaries, taken as a whole, and no purchase or other acquisition by any of them of any business or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of the Loan Parties and their Subsidiaries, taken as a whole, in each case, which is not reflected in the foregoing financial statements or in the notes thereto and has not otherwise been disclosed in writing to the Lenders on or prior to the Closing Date.
(d) The financial statements delivered pursuant to Sections 6.01(a) and 6.01(b) have been prepared in accordance with GAAP (except as may otherwise be permitted under Sections 6.01(a) and 6.01(b)) and present fairly (on the basis disclosed in the footnotes to such financial statements) in all material respects the consolidated financial condition, results of
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operations and cash flows of the Loan Parties and their respective Subsidiaries as of the dates thereof and for the periods covered thereby.
(e) Since September 30, 2015, there has been no event or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.
5.06 Litigation . There are no Proceedings pending or, to the knowledge of the Loan Parties, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or (b) if determined adversely, could reasonably be expected to have a Material Adverse Effect.
5.07 No Default.
(a) No Loan Party is (i) in breach of or in default under any Material Contract, or (ii) in breach of or in default under any Contractual Obligation that could reasonably be expected to have a Material Adverse Effect.
(b) No Default or Event of Default has occurred and is continuing.
5.08 Ownership of Collateral; Liens . Each of the Loan Parties and its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all Collateral necessary or used in the ordinary conduct of its business. No Collateral is subject to any Liens, other than Permitted Liens.
5.09 Environmental Compliance . Except as could not reasonably be expected to have a Material Adverse Effect:
(a) Each of the Facilities and all of Loan Partys and any Subsidiarys operations at the Facilities are in compliance with all applicable Environmental Laws, and neither Loan Party nor any Subsidiary has committed a violation of any Environmental Law with respect to the Facilities or the Businesses, and no Responsible Officer of any Loan Party has knowledge or reason to believe that there are conditions relating to the Facilities or the Businesses that could be reasonably expected to give rise to liability of Loan Party or any Subsidiary under any applicable Environmental Laws.
(b) None of the Facilities contains, or to the knowledge of any Responsible Officer of any Loan Party, has previously contained, any Hazardous Materials at, on or under the Facilities in amounts or concentrations that constitute or constituted a violation of, or could be reasonably expected to give rise to liability under, Environmental Laws.
(c) Neither any Loan Party nor any Subsidiary has received any written or verbal notice of, or inquiry from any Governmental Authority regarding, any violation, alleged
(d) violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the
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Facilities or the Businesses, nor does any Responsible Officer of any Loan Party have knowledge or reason to believe that any such notice will be received or is being threatened.
(e) Hazardous Materials have not been transported or disposed of from the Facilities, or generated, treated, stored or disposed of at, on or under any of the Facilities or any other location, in each case by or on behalf of any Loan Party or any Subsidiary in violation of, or in a manner that would be reasonably expected to give rise to liability under, any applicable Environmental Law.
(f) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Responsible Officers of the Loan Parties, threatened, under any Environmental Law to which any Loan Party or any Subsidiary is or is reasonably expected to be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to any Loan Party, any Subsidiary, the Facilities or the Businesses.
(g) There has been no release or, to the knowledge of the Responsible Officers of the Loan Parties, threat of release of Hazardous Materials at or from the Facilities by or on behalf of any Loan Party or any Subsidiary, or arising from or related to the operations (including disposal) of any Loan Party or any Subsidiary in connection with the Facilities or otherwise in connection with the Businesses, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws.
5.10 Insurance . The properties of the Loan Parties and their Subsidiaries are insured with financially sound and reputable insurance companies (none of which are Affiliates of the Loan Parties), in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the applicable Loan Party or the applicable Subsidiary operates. The aviation insurance coverage of the Loan Parties complies with the requirements of the Security Agreement and the insurance coverage in effect on the Closing Date is outlined as to carrier, policy number, expiration date, type, amount and deductibles on Schedule 5.10.
5.11 Taxes . The Loan Parties and their respective Subsidiaries have filed all federal, state and other material tax returns and reports required to be filed, and have paid all federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being Properly Contested. As of the Closing Date, there is no material proposed tax assessment against any Loan Party or Subsidiary.
5.12 ERISA Compliance.
(a) Each Plan and each Loan Party is in compliance in all material respects with the applicable provisions of ERISA, the Internal Revenue Code and the regulations and published interpretations thereunder, and other applicable federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Internal Revenue Code has a currently effective favorable determination letter (or in the case of a volume submitter or prototype plan is the
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subject of a currently effective favorable opinion letter) from the IRS or an application for such letter is currently being processed by the IRS with respect thereto (and each Plan has been timely amended to reflect changes in the applicable qualification requirements under Section 401(a) of the Internal Revenue Code and any applicable IRS guidance issued thereunder) and, to the best knowledge of the Loan Parties, nothing has occurred which would prevent, or cause the loss of, such qualification. Each Loan Party and each ERISA Affiliate has made all required contributions to each Plan subject to Sections 412 and 430 of the Internal Revenue Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 or 430 of the Internal Revenue Code has been made with respect to any Plan. Each Loan Party and each ERISA Affiliate has in all material respects performed all their obligations under each Plan according to their terms, including filing or furnishing to the IRS, Department of Labor or other Governmental Authority, or to participants or beneficiaries of each Plan, any reports, returns, notices and other documentation required to be filed or furnished.
(b) There are no pending or, to the knowledge of the Loan Parties, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability and no other Plan providing retiree welfare benefits has any unfunded liability for benefits; (iii) no Loan Party or any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) no Loan Party or any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) no Loan Party or any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
5.13 Subsidiaries . Set forth on Schedule 5.13 is a complete and accurate list of the name and jurisdiction of organization of each Loan Party and each Subsidiary as of the Closing Date (or following the delivery of the first Compliance Certificate hereunder, as of the date of the most recently delivered Compliance Certificate), together with (a) the number of shares of each class of Capital Stock of any Loan Party outstanding as of the Closing Date and (b) the number and percentage of outstanding shares of each class owned (directly or indirectly) by any Loan Party or any Subsidiary as of the Closing Date. None of the shares of Capital Stock of any Subsidiary is subject to any outstanding options, warrants, rights of conversion or purchase and all other similar rights with respect thereto. The outstanding Capital Stock of each Loan Party and each Subsidiary is validly issued, and, in the case of any Loan Party that is a corporation, fully paid and non-assessable. No Subsidiary of Holdings has outstanding any shares of Disqualified Capital Stock.
5.14 Margin Regulations; Investment Company Act, Use of Proceeds.
(a) The Loan Parties are not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the
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meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. No proceeds of any Borrowing shall be used for the purpose of purchasing or carrying margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock.
(b) None of the Loan Parties, any Person Controlling any Loan Party or any Subsidiary is or is required to be registered as an investment company under the Investment Company Act of 1940.
(c) No proceeds of any Borrowing will be used in violation of Section 6.11 .
5.15 Disclosure . No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that, with respect to any projected financial information, the Loan Parties represent that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and at the time made available to Administrative Agent and the Lenders. Notwithstanding the foregoing, Administrative Agent and Lenders acknowledge that the pro forma financial statements and other economic forecasts and information of a general industry nature delivered by Borrowers hereunder are not factual representations and that the actual financial results of the Borrowers may differ from the pro forma financial statements and other economic forecasts submitted from time to time and such variations may be material.
5.16 Compliance with Laws . Each of the Loan Parties and each Subsidiary has operated at all times in compliance with the requirements of all Laws and all orders, writs, conditions of participation, contracts, standards, policies, injunctions, decrees, and Governmental Approvals applicable to it, its properties or the Facilities, except in such instances in which (a) such Law or order, writ, condition of participation, contract, standard, policy, injunction or decree is being Properly Contested, or (b) the failure to comply therewith where noncompliance individually or in the aggregate could not reasonably be expected to result in a Material Adverse Effect. Without limiting the generality of the foregoing:
(i) neither any Loan Party nor any Subsidiary thereof is in receipt of any written notice of any material violation of any Law, statute, rule, regulation, ordinance, code, judgment, order writ, decree, permit, concession, franchise or other governmental approval applicable to it or any of its property, which notice, individually or in the aggregate could reasonably be expected to result in an Exclusion Event or a Material Adverse Effect; and
(ii) neither any Loan party nor any Subsidiary or any Affiliate thereofis in violation of and shall not violate any of the country or list based economic and trade sanctions administered and enforced by OFAC that are described or referenced at http://ustreas.gov/offices/enforcement/ofac/ or as otherwise published from time to time.
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5.17 Intellectual Property; Licenses, Etc . The Loan Parties and their Subsidiaries own, or possess the legal right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, IP Rights ) that are necessary for the operation of their respective businesses without conflict with the rights of any other Person. Set forth on Schedule 5.17 is a list of all IP Rights registered or pending registration with the United States Copyright Office or the United States Patent and Trademark Office and owned by any Loan Party, or that any Loan Party has the right to use, as of the Closing Date (or following the delivery of the first Compliance Certificate hereunder, as of the date of the most recently delivered Compliance Certificate). No claim has been asserted and is pending by any Person challenging or questioning the use of any IP Rights or the validity or effectiveness of any IP Rights, nor does any Loan Party know of any such claim, and, to the knowledge of the Responsible Officers of the Loan Parties, the use of any IP Rights by any Loan Party or any Subsidiary or the granting of a right or a license in respect of any IP Rights from any Loan Party or any Subsidiary does not infringe on the rights of any Person. As of the Closing Date, (or following the delivery of the first Compliance Certificate hereunder, as of the date of the most recently delivered Compliance Certificate), none of the IP Rights owned by any of the Loan Parties is subject to any licensing agreement or similar arrangement except as set forth on Schedule 5.17.
5.18 Broker s Fees . Neither any Loan Party nor any Subsidiary has any obligation to any Person in respect of any finders, brokers, investment banking or other similar fee in connection with any of the transactions contemplated under the Loan Documents.
5.19 Labor Matters . Except as set forth on Schedule 5.19 , there are no collective bargaining agreements or Multiemployer Plans covering the employees of any Loan Party or any Subsidiary as of the Closing Date, and neither any Loan Party nor any Subsidiary has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five (5) years.
5.20 Business Locations . Set forth on Schedule 5.20(a) is a list of all locations where any Collateral (excluding the location of moveable assets, which are moved from location to location in the ordinary course of business) is located as of the Closing Date (or following the delivery of the first Compliance Certificate hereunder, as of the date of the most recently delivered Compliance Certificate). Set forth on Schedule 5.20(b) is the state of organization, chief executive office, tax payer identification number and organizational identification number of each Loan Party as of the Closing Date.
5.21 Perfection of Security Interests in the Collateral . The Collateral Documents create valid security interests in, and Liens on, the Collateral purported to be covered thereby, which security interests and Liens are currently perfected security interests and Liens (except to the extent perfection is deferred pursuant to Schedule 6.17) , prior to all other Liens other than Permitted Liens as of the Closing Date. The exact legal name of each Loan Party is as set forth on the signature pages hereto as of the Closing Date.
5.22 Solvency . Both before and after giving effect to (a) the Loans to be made or extended on the Closing Date or such other date as Loans requested hereunder are made or extended, the issuance of the guaranties of the Obligations and the pledge of assets as security
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therefor by all of the Loan Parties, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of the Loan Parties, (c) the consummation of the transactions contemplated in the Loan Documents, (d) the occurrence of each Interest Payment Date, and (e) the payment and accrual of all transaction costs in connection with the foregoing, the Loan Parties individually and taken as a whole are Solvent.
5.23 Material Contracts . Schedule 5.23 contains a true, correct and complete list of all Material Contracts in effect as of the Closing Date, and except as described thereon, all such Material Contracts are in full force and effect and no material breaches, defaults or events of default currently exist thereunder.
5.24 Accounts . Schedule 5.24 sets forth a complete accurate list as of the Closing Date of all deposit accounts and all securities accounts maintained by each Loan Party, together with a description thereof and such Schedule correctly identifies the name and address of each depository or broker dealer where the account is maintained, the name in which the account is held, the purpose of the account, and the complete account number thereof.
5.25 Patriot Act . Each Loan Party and its Subsidiaries are in compliance with the (i) Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V) and any other enabling legislation or executive order relating thereto, and (ii) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001) (the Patriot Act ). No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
5.26 OFAC . Neither any Loan Party nor any Subsidiary or any Affiliate thereof is in violation of any of the OFAC Sanctions. Neither any Loan Party nor any Subsidiary thereof, nor to the knowledge of such Loan Party or any of its Subsidiaries, any director, officer, employee, agent, Affiliate or representative thereof (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in a Sanctioned Entity, (c) derives revenues from investments in, or transactions with a Sanctioned Person or a Sanctioned Entity or (d) is owned or controlled by a Sanctioned Entity or a Sanctioned Person.
ARTICLE 6
AFFIRMATIVE COVENANTS
On the Closing Date and at all times thereafter until and including the Termination Date, the Loan Parties shall and shall cause each Subsidiary to:
6.01 Financial Statements . Deliver to the Administrative Agent for the benefit of each Lender:
(a) Annual Financial Statements . As soon as available, but in any event within one hundred twenty (120) days after the end of each Fiscal Year (commencing with the
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Fiscal Year ending September 30, 2016) of the Loan Parties and their Subsidiaries, consolidated and consolidating balance sheets of the Loan Parties and their Subsidiaries as at the end of such Fiscal Year, and the related consolidated and consolidating statements of income, shareholders equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures as of the end of and for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, and in the case of the consolidated financial statements audited and accompanied by a report and opinion of Deloitte & Touche LLP or other independent certified public accountants of nationally recognized standing reasonably acceptable to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any going concern or like qualification or exception or any qualification or exception as to the scope of such audit (other than to the extent such qualification relates solely to the occurrence of the Revolving Loan Maturity Date within one year following the date of such report);
(b) Quarterly Financial Statements . As soon as available, but in any event within forty-five (45) days after the end of each Fiscal Quarter (commencing with the Fiscal Quarter ended June 30, 2016) of each Fiscal Year of the Loan Parties and their Subsidiaries, consolidated and consolidating balance sheets of the Loan Parties and their Subsidiaries as at the end of such Fiscal Quarter, and the related consolidated and consolidating statements of income, shareholders equity and cash flows for such Fiscal Quarter and for the portion of the Fiscal Year then ended, setting forth in each case in comparative form the figures as of the end of and for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, all in reasonable detail and certified by a Responsible Officer of the Borrower Representative as fairly presenting in all material respects the financial condition, results of operations, shareholders equity and cash flows of Loan Parties and their Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;
(c) Management Discussion and Analysis . Concurrently with any delivery under clause (a) or (b) of this Section 6.01 , a management discussion and analysis describing any differences in the reported fmancial results as between the periods covered and that in the same periods during the immediately preceding Fiscal Year, and as between such periods and the same periods included in the budget delivered pursuant to Section 6.02(b) below, which shall include, among any other information or explanation reasonably requested by the Administrative Agent, an explanation of any revenues, Consolidated EBITDAR, Consolidated Capital Expenditures and new or lost customers that would assist the Lenders to better understand the results being reported; and
(d) Monthly Reports . As soon as available, but in any event within thirty (30) days after the end of each calendar month (excluding each March, June, September and December) of the Loan Parties and their Subsidiaries, consolidated and consolidating balance sheets of the Loan Parties and their Subsidiaries as at the end of such month, and the related consolidated and consolidating statements of income or operations for such month, setting forth in each case in comparative form the figures as of the end of and for the corresponding month of the previous Fiscal Year and to any budget provided pursuant to Section 6.02(b) , all in reasonable detail and certified by a Responsible Officer of the Borrower Representative as fairly presenting in all material respects the financial condition, results of operations, shareholders
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equity and cash flows of the Loan Parties and their Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.
6.02 Certificates: Other Information . Deliver to the Administrative Agent for the benefit of each Lender, in form and detail reasonably satisfactory to the Administrative Agent:
(a) Compliance Certificate . Concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and 6.01(b) , (solely in the case of financial statements with respect to a month that coincides with the end of any Fiscal Quarter) a duly completed Compliance Certificate executed by a Responsible Officer of the Borrower Representative, and such Compliance Certificate shall: (i) include such supplements to Schedules 5.13 , 5.17, 5.20(a) , and 5.20(b) as are necessary such that, as supplemented, such Schedules would be accurate and complete as of the date of such Compliance Certificate, provided , however , that in the event that any item included in such supplement shall constitute or result in a Default or an Event of Default hereunder, in no event shall the delivery of such supplement constitute a waiver of such Default or Event of Default by the Administrative Agent or any Lender, (ii) specify any information required to be delivered pursuant to the Security Agreement that has not already been identified in a written notice delivered to the Administrative Agent in accordance with the Security Agreement, and (iii) either confirm that there has been no material change in the Loan Parties insurance coverage since delivery of the immediately prior Compliance Certificate or identify any such change thereto;
(b) Annual Budget . Within forty-five (45) days after the end of each Fiscal Year, the annual business plan and budget of the Loan Parties and their respective Subsidiaries containing, among other things, projected financial statements (including, without limitation, consolidated and consolidating balance sheets of the Loan Parties and their Subsidiaries as at the end of each such Fiscal Quarter, and the related consolidated and consolidating statements of income or operations, retained earnings, shareholders equity and cash flows for each such Fiscal Quarter) for each Fiscal Quarter through the Revolving Loan Maturity Date;
(c) Audit Letters . Copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Loan Parties and their Subsidiaries by independent accountants in connection with the accounts or books of the Loan Parties and their Subsidiaries, or any audit of any of them;
(d) Public Company Reporting . (i) to the extent that any Loan Party is a public company, promptly after the same are available (and in any event within ten (10) days thereof), copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of any Loan Party, and copies of all annual, regular, periodic and special reports and registration statements which any Loan Party may file or be required to file with the SEC under Section 13 or 15(d) of the Exchange Act (other than Form 10-K and Form 10-Q) or to a holder of any Indebtedness owed by any Loan Party or any Subsidiary in its capacity as such a holder and not otherwise required to be delivered to the Administrative Agent pursuant hereto, (ii) all reports and written information to and from the United States Environmental Protection Agency, or any state or local agency responsible for environmental matters, the United States Occupational Health and Safety Administration or any
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successor agencies or authorities concerning environmental, health or safety matters, and (iii) all material reports and written information to and from any state or local agency responsible for health and safety matters, or any successor agencies or authorities concerning environmental, health or safety matters;
(e) Insurance Report . By the last day of each Fiscal Year, a report provided by the applicable insurance carrier outlining all material insurance coverage maintained as of the date of such report by the Loan Parties and their Subsidiaries and all material insurance coverage planned to be maintained by the Loan Parties and their Subsidiaries in the immediately succeeding Fiscal Year;
(f) Quarterly Collateral Verification . Concurrently with the delivery of the financial statements referred to in Section 6.01(b) , an officers certificate (i) either confirming that there has been no change in the information set forth in the then existing schedules to the Security Agreement or identifying any such changes thereto and (ii) certifying that all UCC financing statements (including fixtures filings, as applicable), Aviation Authority filings, International Registry registrations or other appropriate filings, recordings or registrations, have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the Loan Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period);
(g) Borrowing Base Certificate . No later than each Borrowing Base Certificate Date, a Borrowing Base Certificate in accordance with Section 6.21; in addition to the foregoing, the Loan Parties shall deliver their preliminary calculation of the Borrowing Base no later than two (2) Business Days prior to each Borrowing Base Certificate Date in accordance with Section 6.21;
(h) Appraisals . Within (i) thirty (30) days after the end of each Fiscal Quarter ending each March 31 and September 30, a physical Appraisal completed by the Appraiser as of the end of such Fiscal Quarter for all Eligible Spare Engines and Eligible Spare Parts Inventory, in form and substance reasonably acceptable to the Administrative Agent and (ii) twenty (20) days after the end of each Fiscal Quarter ending each March 31, June 30, September 30 and December 31, a desktop Appraisal completed by the Appraiser as of the end of such Fiscal Quarter for all Eligible Spare Engines and Eligible Spare Parts Inventory, in form and substance reasonably acceptable to the Administrative Agent; and
(i) Additional Information . Promptly (and in any event within two (2) Business Days after a request therefor), such additional information regarding the business, financial or corporate affairs of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request (including as required under the Patriot Act).
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6.03 Notices.
(a) (i) Promptly (and in any event within two (2) Business Days after a Responsible Officer has knowledge thereof) notify the Administrative Agent and each Lender in writing of the occurrence of any Default and (ii) promptly (and in any event within two (2) Business Days) notify the Administrative Agent and each Lender in writing of the occurrence of any Event of Default.
(b) Promptly (and in any event within two (2) Business Days after a Responsible Officer has knowledge thereof) notify the Administrative Agent and each Lender in writing of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect.
(c) Promptly (and in any event within two (2) Business Days after a Responsible Officer has knowledge thereof) notify the Administrative Agent and each Lender in writing of the occurrence of any ERISA Event.
(d) Promptly (and in any event within two (2) Business Days) notify the Administrative Agent and each Lender in writing of any material change in accounting policies or financial reporting practices by any Loan Party or any Subsidiary.
(e) Promptly (and in any event within two (2) Business Days), notify the Administrative Agent and each Lender, in writing, of the threat (subject to a Responsible Officer having knowledge thereof) or institution of, or any material development in, any Proceeding against or affecting any Loan Party (i) in which the amount involved or relief sought is in excess of $5,000,000, (ii) which could reasonably be expected to have a Material Adverse Effect, (iii) which seeks injunctive relief, (iv) which alleges criminal misconduct by any Loan Party, (v) which alleges material violations of any Laws or Governmental Approvals, or (vi) which alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liability.
(f) Promptly (and in any event within two (2) Business Days of such event), notify the Administrative Agent and each Lender, in writing, of (i) any loss, damage or destruction to the Collateral in the amount of $250,000 or more individually, whether or not covered by insurance and (ii) any change in the information which would require a material correction or material addition to Schedule I to the Security Agreement.
(g) Immediately notify the Administrative Agent and each Lender, in writing, upon the occurrence of, upon a Responsible Officer becoming aware of, or upon receipt of notice from a third party of, (i) any Loan Partys default pursuant to the terms of any Material Contract or lease to which such Loan Party is a party or (ii) the termination of, or the intent or threat to terminate, any such Material Contract or lease.
(h) Upon the written request of the Administrative Agent following the occurrence of any event or the discovery of any condition which the Administrative Agent or the Required Lenders reasonably believe has caused (or could be reasonably expected to cause) the representations and warranties set forth in Section 5.09 to be untrue in any material respect, furnish or cause to be furnished to the Administrative Agent, at the Loan Parties expense, a
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report of an environmental assessment of reasonable scope, form and depth, (including, where appropriate, invasive soil or groundwater sampling) by a consultant reasonably acceptable to the Administrative Agent as to the nature and extent of the presence of any Hazardous Materials on any Facilities and as to the compliance by any Loan Party or any of its Subsidiaries with Environmental Laws at such Facilities. If the Loan Parties fail to deliver such an environmental report within ninety (90) days after receipt of such written request then the Administrative Agent may arrange for same, and the Loan Parties hereby grant to the Administrative Agent and its representatives access to the Facilities to reasonably undertake such an assessment (including, where appropriate, invasive soil or groundwater sampling). The reasonable cost of any assessment arranged for by the Administrative Agent pursuant to this provision will be payable by the Loan Parties on demand and added to the obligations secured by the Collateral Documents.
(i) Promptly (and in any event within two (2) Business Days) notify the Administrative Agent and each Lender in writing of the occurrence of any Disposition of Collateral or receipt of Extraordinary Receipts.
Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Borrower Representative setting forth details of the occurrence referred to therein and stating what action the Borrowers have taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.
6.04 Payment of Obligations: Tax Returns.
(a) Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all federal, material state income tax and other material tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being Properly Contested; and (b) all lawful claims which, if unpaid, would by law become a Lien upon its Collateral unless the same are being Properly Contested.
(b) Timely file or cause to be timely filed all federal, material state income tax and other material tax returns and are required to be filed.
6.05 Preservation of Existence, Material Contracts, Etc.
(a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or Section 7.05 .
(b) Preserve, renew and maintain in full force and effect its good standing and qualification to do business under the Laws of the jurisdiction of its organization and in any other jurisdiction where failure to so maintain good standing or qualification would have or would reasonably be expected to constitute a Material Adverse Effect.
(c) Preserve, renew and maintain all Governmental Approvals as are necessary for the conduct of its business as currently conducted and herein contemplated.
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(d) Preserve, register and renew whenever applicable all of its material registered patents, copyrights, trademarks, trade names and service marks.
(e) Maintain all Material Contracts to which it is a party without any defaults that give rise to a right of any counterparty thereto to terminate or accelerate thereunder.
6.06 Maintenance of Properties.
(a) Maintain, preserve and protect all of its property owned or used in the operation of its business in good working order and condition, ordinary wear and tear excepted.
(b) Make all necessary repairs thereto and renewals and replacements thereof.
(c) Use the standard of care typical in the industry in the operation and maintenance of its Facilities.
6.07 Maintenance of Insurance . Maintain or cause to be maintained, with financially sound and reputable insurers rated not less than A-, Class VII by Bests, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the applicable Loan Party or the applicable Subsidiary operates, and maintain aviation insurances in accordance with the terms of the Security Agreement with respect to all Collateral.
6.08 Compliance with Laws . Comply with the requirements of all Laws and Governmental Approvals applicable to it (including Environmental Laws) and all orders, writs, injunctions and decrees applicable to it or to its business or Property, except in such instances in which such requirement of Law or order, writ, injunction or decree is being Properly Contested or except as could not reasonably be expected to have a Material Adverse Effect.
6.09 Books and Records.
(a) Maintain proper books of record and account, in which full, true and correct entries shall be made of all financial transactions and matters involving the assets and business of such Loan Party or such Subsidiary, as the case may be, in each case in accordance with GAAP.
(b) Maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over such Loan Party or such Subsidiary, as the case may be.
6.10 Inspection Rights . Permit (a) representatives and independent contractors of the Administrative Agent to visit and inspect any of its properties, to examine its corporate, financial and operating records, and conduct audits and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrowers and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Loan Parties, provided, so long as no Event of Default has occurred and is continuing, the Loan Parties shall only be obligated to reimburse the Administrative Agent and any such representative
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or independent contractor for the expenses of one such visit and inspection per calendar year, and (b) representatives and independent contractors of the Administrative Agent to conduct an semi-annual audit of the Collateral at the expense of the Borrowers and upon reasonable advance notice to the Borrowers, provided, that when a Default or an Event of Default exists the Administrative Agent (or any of its respective representatives or independent contractors) may do any of the foregoing at the expense of the Loan Parties at any time during normal business hours and without advance notice and, in the case of Collateral audits, as frequently as deemed necessary by the Administrative Agent. A representative of each Lender shall have the right to accompany the Administrative Agent in connection with all such inspections, audits and examinations (at such Lenders sole cost and expense if a Default or an Event of Default has not occurred and is continuing). The inspection right provided under this Section 6.10 shall be separate and apart from the physical Appraisals required under Section 6.02(h).
6.11 Use of Proceeds.
(a) Use proceeds of the Revolving Loans and Swingline Loans (x) to refinance Indebtedness under the Existing Credit Facilities, (y) to finance working capital requirements and (z) for other general corporate purposes (each, a Permitted Use ).
(b) Notwithstanding the foregoing, in no event shall the proceeds of the Credit Extensions be used in contravention of any Law or of any Loan Document.
6.12 Additional Subsidiaries . Simultaneously with (or such longer period as the Administrative Agent may provide at its sole option) any Acquisition or the formation of any Subsidiary:
(a) notify the Administrative Agent thereof in writing, together with the following information with respect to the target of such Acquisition: (i) jurisdiction of formation, (ii) number of shares of each class of Capital Stock outstanding, (iii) number and percentage of outstanding shares of each class owned (directly or indirectly) by any Loan Party or any Subsidiary and (iv) number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and all other similar rights with respect thereto; and
(b) within thirty (30) days (in each case, or such later date as may be approved in writing by the Administrative Agent at its sole option) of any Subsidiary (other than an Excluded Subsidiary) being formed, cause each Subsidiary formed to (A) become a Borrower or Guarantor (to be determined by the Administrative Agent absent the prior direction of and the Required Lenders in their sole discretion) by executing and delivering to the Administrative
(c) Agent a joinder agreement or such other document as the Administrative Agent may reasonably request for such purpose, and (B) deliver to the Administrative Agent documents of the types referred to in Sections 4.01(b) , (c) , and (d) and take any actions required under Section 6.14 , and, if requested by the Administrative Agent, favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (A)), all in form, content and scope reasonably satisfactory to the Administrative Agent.
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6.13 ERISA Compliance . Do, and cause each of its ERISA Affiliates to do, each of the following: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Internal Revenue Code and other federal or state Law; (b) cause each Plan that is qualified under Section 401(a) of the Internal Revenue Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 , Section 430 or Section 431 of the Internal Revenue Code.
6.14 Pledged Assets . (a) To the extent not delivered to the Administrative Agent on or before the Closing Date (including in respect of after-acquired property and Persons that become Subsidiaries of any Loan Party after the Closing Date), the Loan Parties will promptly (and in any event within ten (10) Business Days) deliver to the Administrative Agent such modifications to the terms of the Loan Documents (or, to the extent applicable as determined by the Administrative Agent, such other documents, including Deposit Account Control Agreements), in each case in form and substance reasonably satisfactory to the Administrative Agent and as the Administrative Agent reasonably deems necessary or advisable in order to ensure that each Loan Party (including any Person required to become a Guarantor or Borrower pursuant to Section 6.12 hereof) shall effectively grant to the Administrative Agent, for the benefit of the Secured Parties, a valid and enforceable security interest in all Collateral, as security for the Obligations of such Loan Party.
(b) With respect to each Account for which either the perfection, enforceability, or validity of the Administrative Agents Liens in such Account, or the Administrative Agents right or ability to obtain direct payment to the Administrative Agent of the proceeds of such Account, is governed by any federal, state, or local statutory requirements other than those of the UCC, the Loan Parties will take such steps as may be required or as the Administrative Agent may from time to time reasonably request to ensure such perfection, enforceability, validity of the Lien or right to obtain direct payment, including compliance with the Federal Assignment of Claims Act of 1940.
6.15 Covenant with Respect to Environmental Matters . In respect of all environmental matters:
(a) comply in all material respects with the requirements of all federal, state, and local Environmental Laws applicable to the Loan Parties or their Property; notify the Administrative Agent promptly in the event of any spill, release or disposal of Hazardous Material on, or hazardous waste pollution or contamination affecting, the Facilities in material violation of applicable Environmental Laws of which a Loan Party has actual knowledge; forward to the Administrative Agent promptly any written notices relating to such matters received from any Governmental Authority; and pay when due any fine or assessment against the Facilities, provided , that the Loan Parties shall not be required to pay any such fine or assessment so long as the validity thereof shall be Properly Contested; and provided further that, in any event, payment of any such fine or assessment shall be made before any of their Property shall be subjected to a Lien or be seized or sold in satisfaction thereof;
(b) promptly notify the Administrative Agent upon becoming aware of any fact or change in circumstances that would be expected to cause any of the representations and
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warranties contained in Section 5.09 to cease to be true in all material respects (without duplication of any materiality qualifier therein) for any time before the Termination Date;
(c) not become involved, and will not knowingly permit any tenant of the Facilities to become involved, in any operations at the Facilities generating, storing, disposing, or handling Hazardous Materials in material violation of applicable Environmental Laws or any other activity that could lead to the imposition on any Lender or the Administrative Agent of any liability, or the imposition on the Loan Parties or the Facilities of any material liability or any lien under any Environmental Laws;
(d) promptly contain or remove any Hazardous Materials found on the Facilities in violation of any applicable Environmental Law, which containment or removal must be done in compliance with applicable Environmental Laws and at the Borrowers expense; and the Borrowers agree that the Administrative Agent has the right, at its sole option but at the Borrowers expense, to have an environmental engineer or other representative review the work being done; and
(e) indemnify, protect, defend and hold harmless each Indemnitee from and against and all liabilities, obligations, losses, damages (including, consequential damages), penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, the reasonable fees and disbursements of counsel for and consultants of such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), which may be imposed on, incurred by, or asserted against such Indemnitees (whether direct, indirect, or consequential) now or hereafter arising as a result of any claim for environmental cleanup costs, any resulting damage to the environment and any other environmental claims against any Loan Party, any Lender, the Administrative Agent, any other Indemnitee or the Facilities. The provisions of this Section 6.15(e) shall continue in effect and shall survive the Termination Date.
6.16 Lenders Meetings . The Loan Parties will, upon the request of the Administrative Agent, participate in a meeting of the Administrative Agent and Lenders once during each Fiscal Year to be held at the Borrowers corporate offices (or at such other location as may be agreed to by the Borrowers and the Administrative Agent) at such time as may be agreed to by the Borrowers and the Administrative Agent, provided that during the existence of an Event of Default, meetings may be held more frequently than once per Fiscal Year.
6.17 Post-Closing Covenants . The Loan Parties shall satisfy the requirements and/or provide to the Administrative Agent each of the documents, instruments, agreements and information set forth on Schedule 6.17 , in form and substance reasonably acceptable to the Administrative Agent, on or before the date specified for such requirement in such Schedule or such later date to be determined by the Administrative Agent, at its sole option, each of which shall be completed or provided in form and substance satisfactory to the Administrative Agent.
6.18 Patriot Act; OFAC . (a) Comply with the Patriot Act, (b) use no part of the proceeds of the Loans, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any
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improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended, and (c) comply with the OFAC Sanctions.
6.19 Asset Monitoring and Inspections; Field Exams; Inventory Tracking System . (a) The Loan Parties will conduct asset and maintenance monitoring of all Eligible Spare Engines and Eligible Spare Parts consistent with past practices and in accordance with their operating guidelines.
(b) In connection with the Loan Parties asset and maintenance monitoring activities, the Loan Parties will make the Eligible Spare Engines and Eligible Spare Parts Inventory (including any records and any Spare Parts Inventory Tracking system) available for inspection by the Administrative Agent at such times as the Administrative Agent may reasonably request, provided that so long as no Default or Event of Default has occurred and is continuing (i) no such inspection shall unreasonably interrupt the normal business operations of the Loan Parties, (ii) the Administrative Agent shall only be entitled to conduct such inspections of any Spare Parts Locations twice during any twelve-month period.
(c) Not later than thirty (30) days following the Closing Date, the Administrative Agent, the Borrowers and any other relevant Person shall have entered into a collateral assignment of license agreement acknowledged by the provider of such license which permits the Administrative Agent, upon the notification of an Event of Default by the Administrative Agent to such provider, to utilize the relevant software or other intellectual property necessary to use or operate the Tracking System (as defined in the Security Agreement), and covering such other matters relating to the Loan Parties and this Agreement and the other Loan Documents as the Administrative Agent shall reasonably request. If the Borrowers shall institute any replacement Tracking System, at the time of implementation of such replacement Tracking System, the Borrowers and any other relevant Person shall have entered into a collateral assignment of license agreement acknowledged by the provider of such license which permits the Administrative Agent, upon the notification of an Event of Default by the Administrative Agent to such provider, to utilize the relevant software or other intellectual property necessary to use or operate the Tracking System (as defined in the Security Agreement), and covering such other matters relating to the Loan Parties and this Agreement and the other Loan Documents as the Administrative Agent shall reasonably request.
6.20 Separateness . The Loan Parties will observe all corporate formalities necessary to remain legal entities separate and distinct from one another.
6.21 Borrowing Base Determinations and Prepayments . No later than two (2) Business Days prior to each Borrowing Base Certificate Date, the Borrowers shall deliver to the Administrative Agent a preliminary worksheet detailing the calculation of the Borrowing Base. No later than each Borrowing Base Certificate Date, the Borrowers shall calculate the Borrowing Base and deliver a Borrowing Base Certificate substantially in the form of Exhibit F hereto, which shall be executed by a Responsible Officer of the Borrower Representative demonstrating (A) the Borrowers calculation of the OLV Ratio as of such Borrowing Base Certificate Date and(B) that no Borrowing Base Deficiency exists as of such Borrowing Base Certificate Date taking into account (i) any repayment being made on such Borrowing Base Certificate Date, (ii) any prepayment being made pursuant to Section 2.05(b)(iii) on such Borrowing Base Certificate Date,
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(iii) any Credit Extension being made on such Borrowing Base Certificate Date, and (iv) any Disposition occurring. In the case of a Borrowing Base Certificate (or preliminary worksheet) delivered in connection with a Disposition, all calculations shall be done on a pro forma basis assuming that related Disposition has been consummated (including the related payment or Credit Extension).
6.22 Certificated Air Carrier . Mesa shall at all times remain a Certificated Air Carrier.
ARTICLE 7
NEGATIVE COVENANTS
On the Closing Date and at all times thereafter until and including the Termination Date, no Loan Party shall, nor shall it permit any Subsidiary (or when specifically provided below, any Subsidiary) to, directly or indirectly:
7.01 [Reserved] .
7.02 Liens . Create, incur, assume or suffer to exist any Lien upon any Collateral, whether now owned or hereafter acquired, other than the following:
(a) Liens pursuant to any Loan Document in favor of the Administrative Agent and the Lenders;
(b) Liens (other than Liens imposed under ERISA) for taxes, assessments or governmental charges or levies not yet due or which are being Properly Contested;
(c) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business, provided that such Liens secure only amounts not yet due and payable or, if due and payable, (i) are unfiled and no other action has been taken to enforce the same or (ii) are being Properly Contested;
(d) Liens in favor of airport, customs and revenue authorities arising as a matter of law to secure payment of customs duties and in connection with the importation of goods in the ordinary course of business which are not overdue or which are being contested in good faith by appropriate proceedings promptly instituted and diligently pursued; and
(e) Liens consisting of judgment, appeal bonds, judicial attachment liens or other similar Liens arising in connection with court proceedings, provided that the enforcement of such Liens is effectively stayed and all such Liens secure judgments the existence of which do not constitute an Event of Default under Section 9.01(h).
7.03 [Reserved].
7.04 Fundamental Changes . Merge, dissolve, liquidate, consolidate with or into another Person or sell or transfer substantially all of the assets of any Loan Party to another
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Person; provided , however , that, subject to the terms of Sections 6.12 and 6.14 (a) any Loan Party other than Holdings may merge or consolidate with, or sell or transfer substantially all of its assets to, any other Loan Party other than Holdings, provided that, if such transaction involves a Borrower, such Borrower is the surviving (or purchasing) entity, (b) any Wholly Owned Subsidiary that is not a Loan Party may merge or consolidate with, or sell or transfer substantially all of its assets to, any other Wholly Owned Subsidiary that is not a Loan Party or a Loan Party other than Holdings, provided that, if such transaction involves a Loan Party, the Loan Party is the surviving (or purchasing) entity, and (c) any Wholly Owned Subsidiary may dissolve, liquidate or wind up its affairs at any time provided that such dissolution, liquidation or winding up, as applicable, could not reasonably be expected to have a Material Adverse Effect and all of its assets and business is transferred to a Loan Party in any manner satisfactory to the Administrative Agent. Notwithstanding anything in the foregoing to the contrary, no merger, consolidation, or sale or transfer of substantially all its assets, otherwise permitted under any of the foregoing provisos shall be permitted if any Loan Party would not be Solvent after giving effect to such merger, consolidation, sale or transfer.
7.05 Dispositions . Except to the extent otherwise permitted in the Security Agreement, no Borrower will, nor will any Borrower permit any Subsidiary or any other Person acting by, through or under it to, sell, transfer, lease or dispose of any of the Collateral without the prior written consent of the Administrative Agent, which consent may be withheld in the Administrative Agents sole discretion. Notwithstanding the foregoing or anything to the contrary set forth in the Security Agreement, the Borrowers shall be permitted to sell, transfer and dispose of (i) Collateral not constituting Eligible Spare Parts, Platform Spare Parts or Eligible Spare Engines, (ii) Collateral consisting of Eligible Spare Parts or Platform Spare Parts in an amount up to $250,000 per calendar month, and (iii) Collateral consisting of Eligible Spare Engines, in each case, without the consent of the Administrative Agent and without penalty, and solely with respect to clauses (ii) and (iii) above, so long as (A) all of the Net Cash Proceeds from such sales are used to prepay the Loans in accordance with Section 2.05(b) of this Agreement and (B) such sales are for cash only, paid in full at closing, and for a purchase price at no less than Adjusted OLV or Appraised Current Market Value, as applicable; provided , however , if a sale is for a purchase price at less than Adjusted OLV or Appraised Current Market Value, as applicable, the Borrowers shall remit the Net Cash Proceeds to the Administrative Agent plus an amount that when added to such Net Cash Proceeds would equal the Adjusted OLV or Appraised Current Market Value, as applicable for application to the Loans in accordance with Section 2.05(b).
7.06 [Reserved].
7.07 Change in Nature of Business . Engage to any material extent in any business different from the business conducted by the Loan Parties and their Subsidiaries on the Closing Date and businesses reasonably related thereto.
7.08 Transactions with Affiliates and Insiders . Enter into or permit to exist any transaction or series of transactions with any officer, director or Affiliate of such Person other than (a) transactions between the Loan Parties, (b) intercompany transactions expressly permitted by Section 7.04 or 7.05 , (c) customary and reasonable compensation and reimbursement of expenses of officers and directors, and (d) except as otherwise specifically limited in this
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Agreement, other transactions which are entered into in the ordinary course of such Persons business on terms and conditions substantially as favorable to such Person as would be obtainable by it in a comparable arms length transaction with a Person other than an officer, director or Affiliate.
7.09 Burdensome Agreements . (a) Enter into or permit to exist any Contractual Obligation that encumbers or restricts the ability of any Loan Party or any Subsidiary to (i) pay dividends or make any other distributions to any Loan Party on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (ii) pay any Indebtedness or other obligation owed to any Loan Party, (iii) make loans or advances to any Loan Party, (iv) sell, lease or transfer any of its Collateral to any Loan Party, (v) grant any Lien on any of its Collateral to secure the Obligations pursuant to the Loan Documents or any renewals, refinancings, exchanges, refundings or extension thereof or (vi) act as a Loan Party pursuant to the Loan Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (i)-(vi) above) for (A) this Agreement and the other Loan Documents, (B) any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (C) customary restrictions and conditions contained in any agreement relating to the sale of any Collateral permitted under Section 7.05 pending the consummation of such sale, and (D) customary restrictions on assignment contained in leases, licenses and other contracts entered into in the ordinary course of business with third parties and not for the purpose of circumventing any provision of this Agreement; or
(b) Enter into or permit to exist any Contractual Obligation that requires the grant of any security for any obligation (other than Permitted Liens) if such property is given as security for the Obligations.
7.10 Use of Proceeds . Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose.
7.11 Amendments of AAR Related Documents; Amendments to Certain Agreements.
(a) Amend or otherwise modify the terms of any AAR Related Document to the extent such amendment or modification could have a Material Adverse Effect.
(b) Pay any Earn-Out Obligations prior to the due date for such obligations or when a Default or an Event of Default is continuing.
7.12 Organization Documents; Fiscal Year; Legal Name, State of Formation and Form of Entity.
(a) Amend, modify or change its Organization Documents in a manner which is adverse to the interests of the Administrative Agent or the Lenders.
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(b) Change its Fiscal Year.
(c) Change its name or its state of formation or form of organization without providing thirty (30) days prior written notice to the Administrative Agent, provided that nothing herein shall permit any Loan Party to change its state of formation in a state or jurisdiction outside the United States.
(d) Make any significant change in accounting treatment or reporting practices, except as required by GAAP.
7.13 Ownership of Subsidiaries . Notwithstanding any other provisions of this Agreement to the contrary, (i) permit any Person (other than any Borrower or any Wholly Owned Subsidiary) to own any Capital Stock of any Subsidiary, except to qualify directors where required by applicable law or to satisfy other requirements of applicable law with respect to the ownership of Capital Stock of Foreign Subsidiaries, or (ii) create, incur, assume or suffer to exist any Lien on any Capital Stock of any Subsidiary other than pursuant to the Loan Documents.
7.14 Sale and Leaseback Transactions . Enter into any Sale and Leaseback Transaction involving Collateral included in the calculation of Borrowing Base in the most recently delivered Borrowing Base Certificate.
ARTICLE 8
FINANCIAL COVENANTS
8.01 Financial Covenants . So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Loan Parties agree that:
(a) Consolidated Interest and Rental Coverage Ratio . The Consolidated Interest and Rental Coverage Ratio as of the end of each Fiscal Quarter ending on the dates set forth below shall not be less than the ratio set forth opposite such Fiscal Quarter:
Fiscal Quarter Ended |
Consolidated Interest and Rental Coverage Ratio |
|
September 2016 | 1.20 to 1.00 | |
December 2016 | 1.20 to 1.00 | |
March 2017 | 1.20 to 1.00 | |
June 2017 | 1.20 to 1.00 | |
September 2017 | 1.20 to 1.00 | |
December 2017 | 1.20 to 1.00 | |
March 2018 | 1.50 to 1.00 | |
June 2018 | 1.50 to 1.00 | |
September 2018 | 1.75 to 1.00 | |
December 2018 | 1.75 to 1.00 |
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Thereafter | 2.00 to 1.00 |
(b) Consolidated Unfinanced Capital Expenditures. The Consolidated Unfinanced Capital Expenditures shall not be greater than $12,500,000 during any Fiscal Year.
ARTICLE 9
EVENTS OF DEFAULT AND REMEDIES
9.01 Events of Default . Any of the following shall constitute an Event of Default:
(a) Non-Payment . Any Borrower or any other Loan Party fails to pay when and as required to be paid pursuant to this Agreement or any other Loan Document, (i) any amount of principal of any Loan or any Letter of Credit Liabilities, or (ii) within three (3) Business Days after the same becomes due, any interest on any Loan or any Letter of Credit Liabilities, or any commitment fee, utilization fee or other fee due hereunder, or (iii) within five (5) Business Day after the same becomes due, any other amount payable hereunder or under any other Loan Document; or
(b) Specific Covenants . Any Loan Party fails to perform or observe any term, covenant or agreement contained in any of Sections 6.01 , 6.02 , 6.03 , 6.05 (with respect to each Borrowers existence), 6.07 , 6.10 , 6.11 , 6.12 , 6.14 , 6.18 , 6.19 , 6.22 , Article 7 , Article 8 or Article 10 ; or
(c) Other Defaults . (i) An event of default has occurred under any other Loan Document, (ii) any of the Material Contracts listed in paragraphs 8 and 9 of Schedule 5.23 are terminated, or (iii) any Loan Party fails to perform, observe or comply with any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document or any Material Contract and such failure continues for thirty (30) days after the earlier of (x) a Responsible Officer of any Loan Party becoming aware of such failure or (y) notice thereof to any Loan Party by the Administrative Agent or any Lender; or
(d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made (except to the extent already qualified by knowledge, materiality or Material Adverse Effect, in which case it shall be true and correct in all respects and shall not be incorrect or misleading in any respect); or
(e) Cross-Default . (i) Any Loan Party or any Subsidiary fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of one or more items of Indebtedness having an aggregate principal amount (including undrawn committed or available amounts) of more than $5,000,000; or (ii) any Loan Party or any Subsidiary fails to observe or perform any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is
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to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, and a forbearance or similar limitation on the exercise of such rights and remedies, including the right to terminate, is not in effect within five (5) Business Days of the occurrence of the default or breach. Upon the cure or waiver of any such default or breach, the Event of Default under this Section 9.01(e) caused by such default or breach shall be automatically cured; or
(f) Insolvency Proceedings, Etc . Any Loan Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors, or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its Property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its Property is instituted without the consent of such Person and such Person fails to challenge such Proceeding or such Proceeding is challenged but continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or
(g) Inability to Pav Debts; Attachment . (i) Any Loan Party or any of its Subsidiaries becomes unable to or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the Property of any such Loan Party or any Loan Party otherwise becomes insolvent; or
(h) Judgments . There is entered against any Loan Party or any of its Subsidiaries (i) one or more final judgments or orders for the payment of money (including a disgorgement order issued by a Governmental Authority) in an aggregate amount exceeding $2,500,000 (to the extent not covered by independent third-party insurance as to which the insurer has not disclaimed its obligation to cover), or (ii) one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of ten (10) consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or
(i) ERISA . (i) An ERISA Event occurs which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $2,500,000, or (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $2,500,000; or
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(j) Invalidity of Loan Documents . My Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect or ceases to give the Administrative Agent, for the benefit of the Lenders, a valid and perfected Lien in any Collateral purported to be covered by the Loan Documents with the priority required by the relevant Loan Document (except to the extent perfection is deferred pursuant to the terms of Schedule 6.17); or any Loan Party or any other Affiliate of a Loan Party contests in any manner the validity or enforceability of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or
(k) Change of Control . There occurs any Change of Control; or
(l) Controlled Account . There shall occur any rescission, revocation or modification of any instruction or agreement regarding any Controlled Accounts, including but not limited to the Standing Transfer Instructions, or any such instruction or agreement is amended or terminated without the written consent of the Administrative Agent, provided , however , that so long as a Loan Party is diligently attempting to remedy such action, the Loan Parties shall have an additional period of time as may be necessary to cure, not to extend beyond the earlier of the Maturity Date and five (5) Business Days after the earlier of (x) a Responsible Officer of any Loan Party becoming aware of such action or (y) notice thereof to any Loan Party by the Administrative Agent or any Lender to complete such remedy.
9.02 Remedies upon Event of Default . Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent may, and upon the direction of the Required Lenders shall, take any or all of the following actions:
(a) declare the commitment of each Lender to make Loans and any obligation of the L/C Issuers or Support Providers to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any
(c) other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Loan Parties;
(d) require that the Borrowers Cash Collateralize the total Letter of Credit Liabilities (in an amount equal to 105% the total Letter of Credit Liabilities as of such date) and prepay Letter of Credit fees; and
(e) exercise on behalf of itself and the other Secured Parties any and all rights and remedies available to it and the Lenders under the Loan Documents or applicable law;
provided , however , that upon the occurrence of any Event of Default described in Section 9.01(f) or 9.01(g) , the obligation of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions and Support Providers to issue Support Agreements shall
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automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Loan Parties to Cash Collateralize the total Letter of Credit Liabilities as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender. Except as expressly provided for herein, presentment, demand, protest and all other notices (including notice of acceleration and notice of intent to accelerate) of any kind are hereby waived by the Borrowers.
9.03 [Reserved].
9.04 Application of Funds . Upon the occurrence and during the continuance of an Event of Default (or after the Loans have otherwise become due and payable and the Letter of Credit Liabilities have been required to be Cash Collateralized as set forth in the proviso to Section 9.02) , any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order upon the Administrative Agents election or the direction of the Required Lenders:
(a) First, to payment of that portion of the Obligations constituting fees, indemnities, expenses, protective advances and other amounts (including Attorney Costs and amounts payable under Article 3) payable or reimbursable to the Administrative Agent in its capacity as such;
(b) Second , to payment of that portion of the Obligations constituting fees payable to the Lenders, ratably among them in proportion to the fees payable to them;
(c) Third , to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and Unreimbursed Amounts and fees, premiums and scheduled periodic payments, and any interest accrued thereon, ratably among the Secured Parties in proportion to the respective amounts described in this clause (c) held by them;
(d) Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans and Unreimbursed Amounts, to Cash Collateralize that portion of Letter of Credit Liabilities comprised of the aggregate undrawn amount of Letters of Credit and Support Agreements (together with aggregate facing and similar fees and expenses of the issuers of the Letters of Credit that will accrue on such Letters of Credit through the stated expiry of such Letters of Credit (assuming no drawings thereon before stated expiry date)), ratably among the Secured Parties in proportion to the respective amounts described in this clause (d) held by them;
(e) Fifth , to the payment of any other unpaid Obligations to Cash Collateralize any other contingent Obligations which are not yet due and payable but with respect to which a claim has been or may reasonably be expected to be asserted by the applicable Secured Party in an amount estimated by Administrative Agent to be the amount of related costs, expenses and indemnification Obligations that may become due and payable; and
(f) Last , the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrowers or as otherwise required by Law.
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Subject to Section 2.03(c) , amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit and Support Agreements pursuant to clause (d) above shall be applied to satisfy drawings under such Letters of Credit and Support Agreements if and as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit and Support Agreements have either been fully drawn or expired, and all Unreimbursed Amounts have been paid, such remaining amount shall be applied to other Obligations, if any, in the order set forth above.
ARTICLE 10
GUARANTY
10.01 The Guaranty . Each Guarantor hereby guarantees to each Secured Party and the Administrative Agent as hereinafter provided, as primary obligor and not as surety, the prompt payment and performance of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof. Each Guarantor hereby further agrees that if any of the Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), each Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal (collectively, the Guaranteed Obligations ).
Subject to Section 10.06 and the last sentence of this Section 10.01 below, the Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which the Administrative Agent or any Secured Party may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of any Guaranteed Obligations to be paid when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), the Guarantors will, upon demand pay, or cause to be paid, in cash, to the Administrative Agent for the ratable benefit of Secured Parties, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for any Borrowers becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against any Borrower for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to the Secured Parties as aforesaid.
Notwithstanding any provision to the contrary contained herein or in any other of the Loan Documents, the Guaranteed Obligations of each Guarantor under this Agreement and the other Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under the Debtor Relief Laws.
10.02 Obligations Unconditional . The Guaranteed Obligations of each Guarantor under Section 10.01 are joint and several and absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Loan Documents or any
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other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 10.02 that the obligations of each Guarantor hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrowers or any other Guarantor for amounts paid under this Article 10 until the Termination Date. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder, which shall remain joint and several and absolute and unconditional as described above:
(a) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any of the Loan Documents or any other agreement or instrument referred to in the Loan Documents shall be done or omitted;
(c) the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Loan Documents or any other agreement or instrument referred to in the Loan Documents shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Administrative Agent or any Secured Party or Secured Parties as security for any of the Obligations shall fail to attach or be perfected;
(e) any of the Obligations shall be determined to be void or voidable (including for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including any creditor of any Guarantor); or
(f) any other action or inaction shall occur that might constitute a surety defense.
10.03 Reinstatement . The Guaranteed Obligations of any Guarantor under this Article 10 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Administrative Agent and each Secured Party on demand for all reasonable costs and expenses (including fees and expenses of counsel) incurred by the Administrative Agent or such Secured Party in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference,
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fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. This paragraph shall survive any termination of this Agreement.
10.04 Waivers .
(a) Each Guarantor hereby waives, to the fullest extent permitted by Law, for the benefit of the Administrative Agent and each Secured Party: (a) any right to require the Administrative Agent or any Secured Party, as a condition of payment or performance by such Guarantor, to (i) proceed against any Borrower, any other guarantor (including any other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from any Borrower, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any deposit account or credit on the books of the Administrative Agent and Secured Parties in favor of any Borrower or any other Person, or (iv) pursue any other remedy in the power of the Administrative Agent and the Secured Parties whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of any Borrower or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of any Borrower or any other Guarantor from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal or any law, rule, regulation, or order of any jurisdiction affecting any term of the Guaranteed Obligations; (d) any defense based upon the Administrative Agents or any Secured Partys errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantors obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantors liability hereunder or the enforcement hereof, (iii) any rights to set offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that the Administrative Agent and the Secured Parties protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default under any Loan Document or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to any Borrower and notices of any of the matters referred to in Section 10.02 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof. Each Guarantor agrees that such Guarantor shall have no right of recourse to security for the Obligations, except through the exercise of rights of subrogation to the extent permitted by Section 10.02 ; provided , however , Guarantor agrees that such rights shall be automatically (and without any further action) irrevocably waived and released if such security is acquired by a Person as a result of the exercise of the remedies under the Loan Documents.
10.05 Remedies . Each Guarantor agrees that, to the fullest extent permitted by law, as between such Guarantor, on the one hand, and the Administrative Agent and the Secured Parties, on the other hand, the Obligations may be declared to be forthwith due and payable as provided in
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Section 9.02 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 9.02) for purposes of Section 10.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Obligations being deemed to have become automatically due and payable), the Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by each Guarantor for purposes of Section 10.01 . Each Guarantor acknowledges and agrees that its Guaranteed Obligations hereunder are secured in accordance with the terms of the Collateral Documents and that the Secured Parties may exercise their remedies thereunder in accordance with the terms thereof.
10.06 Contribution by Guarantors . All Guarantors desire to allocate among themselves (collectively, the Contributing Guarantors ) , in a fair and equitable manner, their respective obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor (a Funding Guarantor ) under this Guaranty such that its Aggregate Payments exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in an amount sufficient to cause each Contributing Guarantors Aggregate Payments to equal its Fair Share as of such date. Fair Share means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the ratio of (i) the Fair Share Contribution Amount with respect to such Contributing Guarantor to (ii) the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors multiplied by (b) the aggregate amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. Fair Share Contribution Amount means, with respect to a Contributing Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code or any comparable applicable provisions of state law, provided , solely for purposes of calculating the Fair Share Contribution Amount with respect to any Contributing Guarantor for purposes of this Section 10.06 , any assets or liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor. Aggregate Payments means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this Guaranty (including in respect of this Section 10.06) , minus (2) the aggregate amount of all payments received on or before such date by such Contributing Guarantor from the other Contributing Guarantors as contributions under this Section 10.06 . The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Contributing Guarantors of their obligations as set forth in this Section 10.06 shall not be construed in any way to limit the liability of any Contributing Guarantor hereunder. Each Guarantor is a third party beneficiary to the contribution agreement set forth in this Section 10.06 and a right to receive any Fair Share Contribution Amount shall be deemed an asset of the Guarantor entitled to such amount.
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10.07 Guarantee of Payment; Continuing Guarantee . The guarantee in this Article 10 is an absolute and unconditional guaranty of payment and not of collection, is a continuing and irrevocable guarantee, and shall apply to all Obligations whenever arising.
10.08 Subordination of Other Obligations . Any Indebtedness of any Borrower or any Guarantor or any Subsidiary now or hereafter owing to any Loan Party (the Obligee ) is hereby subordinated in right of payment to the Obligations (and any Lien now or hereafter securing such Indebtedness is hereby subordinated in priority to the Liens of Administrative Agent now or hereafter securing any of the Obligations), and any such Indebtedness collected or received by the Obligee after an Event of Default has occurred and is continuing shall be held in trust for the Administrative Agent for its benefit and the benefit of the Secured Parties and shall forthwith be paid over to Administrative Agent for its benefit and the benefit of the Secured Parties to be credited and applied against the Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee under any other provision hereof. No Obligee shall exercise any remedy with respect to such Indebtedness prior to the Termination Date.
ARTICLE 11
THE ADMINISTRATIVE AGENT
11.01 Appointment and Authorization of Administrative Agent . (a) Each Secured Party hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Secured Party or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term agent herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
(b) Each L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each Support Provider shall act on behalf of the Lenders with respect to any Support Agreements entered into by it and the documents associated therewith and each L/C Issuer and Support Provider, respectively, shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Article 11 with respect to any acts taken or omissions suffered by such L/C Issuer or Support Provider in connection with Letters of Credit and Support Agreements issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit and Support Agreements as fully as if the term Administrative Agent as used in this Article 11 and in the definition of Agent-Related Person included such L/C Issuer or Support Provider
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with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the L/C Issuers or Support Providers.
(c) Swingline Lender shall act on behalf of the Lenders with respect to any Swingline Loan made by it and the documents associated therewith, and the Swingline Lender shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Article 11 with respect to any acts taken or omissions suffered by the Swingline Lender in connection with the Swingline Loans made by it or proposed to be made by it as fully as if the term Administrative Agent as used in this Article 11 and in the definition of Agent-Related Person included the Swingline Lender with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the Swingline Lender.
11.02 Delegation of Duties . The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through its, or its Affiliates, agents, employees or attorneys-in-fact and shall be entitled to obtain and rely upon the advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of the Administrative Agents gross negligence or willful misconduct (as finally determined in a non-appealable decision of a court of competent jurisdiction).
11.03 Liability of Administrative Agent . No Agent-Related Person shall be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby, and each Loan Party and Secured Party hereby waives and agrees not to assert any right, claim or cause of action based thereon, except to the extent of liabilities resulting from its own gross negligence or willful misconduct in connection with its duties expressly set forth herein, as fmally determined in a non-appealable decision of a court of competent jurisdiction. Without limiting the foregoing, no Agent-Related Person shall be: (i) responsible or have any obligation to any other Secured Party for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any recital, statement, warranty or representation in, this Agreement, any other Loan Document or any related agreement, document or order; (ii) required or have any obligation to ascertain, monitor or enforce or to make any inquiry concerning the performance or observance by any Loan Party and any Lender of any of the terms, conditions, covenants, or agreements of this Agreement or any of the other Loan Documents; (iii) responsible for or have any duty to ascertain or monitor or to inquire into whether a condition set forth in any Loan Document is satisfied, or waived, including any condition set forth in Article 4 hereof; (iv) responsible or have any obligation to any other Secured Party for the state or condition of any properties of the Loan Parties constituting Collateral for the Obligations or any information contained in the books or records of the Loan Parties; (v) responsible or have any obligation to any other Secured Party for the validity, enforceability, collectability, effectiveness or genuineness of this Agreement or any other Loan Document or any other certificate, document or instrument furnished in connection therewith; (vi) liable with respect to or arising out of any assignment or participation of the Obligations, or disclosure of any information, to any Secured Party or such Secured Partys representatives, Approved Funds or Affiliates; or (vii) responsible or have any obligation to any other Secured Party to assure that the Collateral exists or is owned by the Loan Parties or is cared for, protected, or insured or has been encumbered, or that the Liens granted to the
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Administrative Agent therein have been properly or sufficiently or lawfully created, perfected (or continue to be perfected), protected, or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the rights, authorities, and powers granted or available to the Administrative Agent pursuant to any of the Loan Documents. In addition to and not in limitation of the foregoing, it is understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Administrative Agent may act in any manner it may deem appropriate, in its sole discretion, given the Administrative Agents own interest in the Collateral in its capacity as one of the Secured Parties and that the Administrative Agent shall have no other duty or liability whatsoever to any Secured Party as to any of the foregoing, including, without limitation, the preparation, form or filing of any Uniform Commercial Code financing statement, amendment or continuation or of any other type of document related to the creation, perfection, continuation or priority of any Lien as to any property of the Loan Parties.
11.04 Reliance by Administrative Agent . (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Secured Parties against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Secured Parties. Notwithstanding the foregoing, the Administrative Agent shall not be required to take, or to omit to take, any action that is, in the opinion of the Administrative Agent or its counsel, contrary to any Loan Document or applicable Requirement of Law.
(b) For purposes of determining compliance with the conditions specified in Article 4 , each Lender that has signed this Agreement (or an addendum or joinder to this Agreement) shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required hereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.
11.05 Notice of Default . The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default and/or Event of Default, unless the Administrative Agent shall have received written notice from a Lender or any Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a notice of default. The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default and/or
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Event of Default as may be directed by the Required Lenders in accordance with Article 9 , provided, that unless and until the Administrative Agent has received any such direction in accordance with Section 11.04 , the Administrative Agent may (but shall not be obligated to) take any action, or refrain from taking any action, with respect to such Default and/or Event of Default as it shall deem advisable or in the best interest of the Lenders.
11.06 Credit Decision; Disclosure of Information by Administrative Agent . Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by any Agent-Related Person hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrowers and the other Loan Parties hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrowers and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, no Agent-Related Person shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person.
11.07 Indemnification of Administrative Agent . The Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided , however , that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Agent-Related Persons own gross negligence or willful misconduct; provided , however , that no action taken in furtherance of the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 11.07 . Without limitation of the foregoing, each Lender shall reimburse each Agent-Related Person upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by any Agent-Related Person in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this
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Agreement, any other Loan Document, or any document contemplated by or referred to herein. The obligations of the Lenders hereunder shall not diminish the obligations of the Borrowers to indemnify and reimburse the Agent-Related Parties for such amounts. The Administrative Agent may in its discretion first seek payment from the Lenders hereunder before seeking payment from the Borrowers for such amounts or may seek payments first from the Borrowers. In any event, any amounts received from Borrowers as reimbursement for amounts already reimbursed by Lenders shall be paid to Lenders in accordance with the terms hereof. The undertaking in this Section 11.07 shall survive the Termination Date and the resignation of the Administrative Agent.
11.08 Administrative Agent in its Individual Capacity . Administrative Agent and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Administrative Agent were not the Administrative Agent, Support Provider or an L/C Issuer hereunder and without notice to or consent of any Secured Party. The Secured Parties acknowledge that, pursuant to such activities, Administrative Agent or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans, Administrative Agent and/or its Affiliates (as applicable) shall have the same rights and powers under this Agreement as any other Secured Party and may exercise such rights and powers as though it were not the Administrative Agent, and the terms Lender and Lenders include the Administrative Agent and/or its Affiliates (as applicable) in its individual capacity.
11.09 Successor Administrative Agent . The Administrative Agent may resign as the Administrative Agent upon ten (10) days notice to the Lenders (or without any such notice if in connection with the consummation of the purchase of certain of the Obligations pursuant an intercreditor arrangement), provided that any such resignation by the Administrative Agent may also constitute its resignation as the L/C Issuer, Support Provider and Swingline Lender (if applicable). If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders (or the Affiliates thereof) a successor administrative agent for the Lenders, which successor administrative agent shall (unless an Event of Default has occurred and is continuing) be subject to the approval of the Borrower Representative (which approval shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders, a successor administrative agent from among the Lenders (or the Affiliates thereof). Upon the acceptance of its appointment as successor administrative agent hereunder, the Person acting as such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent (and Support Provider, L/C Issuer and Swingline Lender (if the retiring Administrative Agent desires to resign therefrom)) and the respective terms Administrative Agent, Support Provider, L/C Issuer and Swingline Lender shall mean such successor administrative agent, Letter of Credit issuer, support provider, and swingline lender, and the retiring Administrative Agents appointment, powers and duties in such capacities shall be terminated without any other further act or deed on its behalf. After any retiring Administrative
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Agents resignation hereunder as the Administrative Agent, the provisions of this Article 11 and Sections 12.04 and 12.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement or while it was actively engaged in transferring its rights and obligations as Administrative Agent to the successor administrative agent. If no successor administrative agent has accepted appointment as the Administrative Agent by the date ten (10) days following a retiring Administrative Agents notice of resignation, the retiring Administrative Agents resignation shall nevertheless thereupon become effective and the Required Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor administrative agent as provided for above. No Person may be removed from its capacity as Administrative Agent.
11.10 Administrative Agent May File Proofs of Claim . In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan, Letter of Credit Liabilities or Swingline Exposure shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Loan Parties) shall be entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Letter of Credit Liabilities, Swingline Exposures and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Secured Parties and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Secured Parties and the Administrative Agent and their respective agents and counsel and all other amounts due the Secured Parties and the Administrative Agent under Sections 2.09 and 12.04) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Secured Party to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Secured Parties, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 12.04 .
11.11 Collateral and Guaranty Matters . The Secured Parties irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Guarantor and any Lien on any Collateral granted to or held by the Administrative Agent under any Loan Document (i) upon the Termination Date, (ii) that is transferred or to be transferred as part of or in connection with any Disposition permitted hereunder or under any other Loan Document, or (iii) as approved in accordance with Section 12.01 , and to execute in connection with such events such payoff letters and related documentation in form and substance satisfactory to Administrative Agent, in its sole
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discretion, as shall in Administrative Agents sole discretion be deemed advisable. In connection with any such release, each Lender, the L/C Issuer and the Support Providers hereby direct the Administrative Agent, and the Administrative Agent agrees that it shall, upon the reasonable request of the Borrower Representative (and except in the case where the Termination Date has actually occurred, so long as no Default or Event of Default then exists), to (i) promptly execute and deliver or file such documents and perform other actions reasonably requested to release the guaranties and the Liens and (ii) deliver to the Loan Parties any portion of such Collateral so released in the possession of the Administrative Agent or as otherwise required under any Loan Documents or applicable Law, in each case without recourse, representation or warranty. Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agents authority to release or subordinate its interest in particular types or items of Collateral, pursuant to this Section 11.11.
The Secured Parties hereby irrevocably authorize Administrative Agent (absent, with respect to any particular transaction, Administrative Agent receiving contrary written bidding instructions from the Required Lenders before such transaction), to credit bid all or any portion of the Obligations (including, to credit bid all or any portion of the Obligations (including accepting some or all of the Collateral in satisfaction of some or all of the Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code of the United States, including under Section 363, 1123 or 1129 of the Bankruptcy Code of the United States, or any similar Laws in any other jurisdictions to which a Loan Party is subject, (b) at any other sale or foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable Law. In connection with any such credit bid and purchase, the Obligations owed to the Secured Parties shall be entitled to be, and shall be, credit bid on a ratable basis (with Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that would vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) in the asset or assets so purchased (or in the Capital Stock or debt instruments of the acquisition vehicle or vehicles that are used to consummate such purchase). In connection with any such bid Administrative Agent shall be authorized (i) to form one or more acquisition vehicles to make a bid, (ii) to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by Administrative Agent with respect to such acquisition vehicle or vehicles, including any disposition of the assets or Capital Stock thereof shall be governed, directly or indirectly, by the vote of the Required Lenders, irrespective of the termination of this Agreement and without giving effect to the limitations on actions by the Required Lenders contained in clauses (a) through (h) of Section 12.01 of this Agreement (provided that, in any event, the consent of each Lender shall be required for any amendment that would treat or attempts to treat a Lender or a class of Lenders in a manner different than all other Lenders), and (iii) to the extent that Obligations that are assigned to an acquisition vehicle are not used to acquire Collateral for any reason (as a result of another bid being higher or better, because the amount of Obligations assigned to the acquisition vehicle exceeds the amount of debt credit bid by the acquisition vehicle or otherwise), such Obligations shall automatically be reassigned to the Lenders pro rata and the Capital Stock and/or debt instruments issued by any acquisition vehicle on account of the Obligations that had been
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assigned to the acquisition vehicle shall automatically be cancelled, without the need for any Secured Party or any acquisition vehicle to take any further action.
11.12 Other Agents; Arrangers and Managers . None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a syndication agent, documentation agent, co-agent, book manager, lead manager, arranger, lead arranger or co-arrange? (each, an Additional Titled Agent ) shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, no Additional Titled Agent shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any Additional Titled Agent in deciding to enter into this Agreement or in taking or not taking action hereunder. At any time that any Lender serving as an Additional Titled Agent shall have transferred to any other Person (other than any Affiliates) all of its interests in the Loans, such Lender shall be deemed to have concurrently resigned as such Additional Titled Agent.
11.13 Additional Secured Parties . The benefit of the provisions of the Loan Documents directly relating to the Collateral or any Lien granted thereunder shall extend to and be available to any Secured Party that is not a Lender, L/C Issuer or Support Provider as long as, by accepting such benefits, such Secured Party agrees, as among the Administrative Agent and all other Secured Parties, that such Secured Party is bound by (and, if requested by the Administrative Agent, shall confirm such agreement in a writing in form and substance acceptable to the Administrative Agent) this Article 11 , Section 2.13 (Sharing of Payments), Section 12.08 (Confidentiality) and Section 12.09 (Setoff) as each may be in effect from time to time, and the decisions and actions of the Administrative Agent and the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders) to the same extent a Lender is bound, provided , however , that, notwithstanding the foregoing, (a) such Secured Party shall be bound by Section 11.07 (Indemnification of Administrative Agent) only to the extent of liabilities, costs and expenses with respect to or otherwise relating to the Collateral held for the benefit of such Secured Party, in which case the obligations of such Secured Party thereunder shall not be limited by any concept of ratability or similar concept, (b) except as set forth specifically herein as to such Secured Party (rather than the Secured Parties generally), each of the Administrative Agent, the Lenders, the L/C Issuers and the Support Providers shall be entitled to act at its sole discretion, without regard to the interest of such Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby, and without any duty or liability to such Secured Party or any such Obligation and (c) except as set forth specifically herein as to such Secured Party (rather than the Secured Parties generally), such Secured Party shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under any Loan Document.
11.14 Exclusive Right to Enforce Rights and Remedies . Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them or in respect of the Collateral are hereby granted to, and shall be vested exclusively in, and all actions and Proceedings in connection with any such enforcement shall be instituted and maintained
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exclusively by, Administrative Agent (or its agents or designees) in accordance with the Loan Documents for the benefit of the applicable Secured Parties; provided that the foregoing shall not prohibit (i) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (ii) each of the L/C Issuer, any Support Provider and the Swingline Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer, Support Provider or Swingline Lender, as the case may be) hereunder and under the other Loan Documents, (iii) any Lender or Participant from exercising setoff rights in accordance with Section 12.09 , (iv) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a Proceeding relative to any Loan Party under any Bankruptcy Code or other Debtor Relief Law or (v) any Lender or other Secured Party from exercising any express right or remedy of such Lender under the Loan Documents where the Administrative Agent does not have the power and authority under the Loan Documents to act on behalf of such Lender or other Secured Party; and provided , further, that if at any time there is no Person acting as the Administrative Agent hereunder and under the other Loan Documents, then (A) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 9.02 and (B) in addition to the matters set forth in Section 11.04 and Section 12.09 , any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
ARTICLE 12
MISCELLANEOUS
12.01 Amendments, Etc . Except as provided in Section 2.15 as in effect on the date hereof, no amendment or waiver of any provision of any Loan Document (other than the Fee Letter, the Collateral Access Agreements, the Deposit Account Control Agreements, the Issuer Documents, agreements hereafter executed solely in respect of Schedule 6.17) , and no consent to any departure by any Borrower or any other Loan Party therefrom, shall be effective unless in writing executed by (1) in the case of any amendment, consent or waiver to cure any ambiguity, omission, defect or inconsistency or granting a new Lien for the benefit of the Secured Parties or extending any existing Lien over additional property or adding additional Subsidiaries of Holdings or other pledgors as parties thereto, the Administrative Agent and the applicable Borrower or Loan Party, (2) in the case of any amendment necessary to implement the terms of a Commitment Increase in accordance with the terms hereof, the Administrative Agent, the Borrowers and the Additional Lenders, and (3) in the case of any other amendment, consent or waiver, the Required Lenders (or the Administrative Agent with the consent of the Required Lenders) and the applicable Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, provided, that no such amendment, waiver or consent shall:
(a) extend the expiry or increase the amount of the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 9.02) without the written consent of such Lender (it being understood and agreed that a waiver or amendment of any condition precedent set forth in Section 4.02 or of any Default or Event of Default shall not be considered an extension or increase in Commitments of any Lender);
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(b) postpone any date fixed by this Agreement or any other Loan Document for any payment of principal (excluding mandatory prepayments), Unreimbursed Amounts, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;
(c) reduce or forgive the principal of, or the rate of interest specified herein on, any Loan or Unreimbursed Amounts, or any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby, provided , that only the consent of the Required Lenders shall be necessary to amend the definition of Default Rate or to waive any obligation of the Borrowers to pay interest at the Default Rate, and no change to the definition of Consolidated Total Leverage Ratio or in the component definitions thereto shall be considered to be a reduction or forgiveness of interest;
(d) change Section 2.13 or Section 9.04 or the definition of Pro Rata Share in a manner that would alter the sharing or application of payments required thereby without the written consent of each Lender;
(e) change any provision of this Section 12.01 or the definition of Required Lenders or any other provision of any Loan Document specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights thereunder or make any determination or grant any consent thereunder without the written consent of each Lender;
(f) release all or substantially all of the Collateral, consensually subordinate the Liens of Administrative Agent on the Collateral or consensually subordinate the Obligations to other indebtedness or liabilities (except in accordance with this Agreement (as in effect on the date hereof) or in accordance with financing to one or more Loan Parties, pursuant to Section 364 of the Bankruptcy Code or any similar proceeding under any Debtor Relief Law) without the written consent of each Lender; or
(g) unless otherwise permitted under this Agreement on the date hereof, release any Borrower; or release all or substantially all of the Guarantors from their obligations under the Loan Documents (or otherwise limit such Guarantors liability) without the written consent of each Lender directly affected thereby;
and, provided further , that (i) no amendment, waiver or consent shall, unless in writing and executed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (ii) to the extent that an L/C Issuer or Support Provider (as the case may be) is a party to this Agreement, no amendment, waiver or consent shall, unless in writing and executed by the L/C Issuers or Support Providers in addition to the Lenders required above, affect the rights or duties of any L/C Issuers or Support Providers under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and executed by the Swingline Lender in addition to the Lenders required above, affect the rights or duties of the Swingline Lender under this Agreement; (iv) the Fee Letter, the Collateral Access Agreements, the Deposit Account Control Agreements and the Issuer Documents may be amended, or rights or privileges thereunder waived, in a writing executed only by the required parties thereto; (v) no amendment, waiver or consent shall, unless in writing signed by Required Lenders, amend or modify the terms of Section 2.05(b)(v) in a
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manner that would alter the application of mandatory prepayments; (vi) no amendment, waiver or consent shall unless in writing and signed by all Revolving Lenders, amend the percentage specified in the definition of Required Lenders. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that (i) the Revolving Commitment of such Lender may not be increased without the consent of such Defaulting Lender and (ii) any waiver, amendment or modification requiring the consent of each affected Lender which affects such Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender.
Each waiver or consent under any Loan Document shall be effective only in the specific instance and for the specific purpose for which it was given.
12.02 Notices and Other Communications; Facsimile Copies.
(a) General . Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (which includes messages sent by electronic mail or other electronic transmission). All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or (subject to subsection (c) below) electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(i) if to the Borrower Representative or the Loan Parties, to the Borrower Representative, at the address, facsimile number, electronic mail address or telephone number specified for the Borrower Representative on Schedule 12.02 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Administrative Agent;
(ii) if to the Administrative Agent, the L/C Issuer, the Support Provider, or Swingline Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 12.02 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrower Representative and Administrative Agent; and
(iii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrower Representative and the Administrative Agent.
All such notices and other communications shall be deemed to be delivered or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when received by the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered, provided , however , that notices and other communications to the Administrative
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Agent pursuant to Article 2 shall not be effective until actually received by such Person. In no event shall a voicemail message be effective as a notice, communication or confirmation hereunder.
(b) Effectiveness of Facsimile Documents and Signatures . Loan Documents may be transmitted and/or executed by facsimile, or by electronic mail. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually signed originals and shall be binding on all Loan Parties, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually signed original thereof, provided , that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.
(c) Limited Use of Electronic Mail . Electronic mail and internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 6.01 and Section 6.02 , and to deliver any other notices and other communications and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose without the consent of the Administrative Agent.
(d) Reliance by Administrative Agent and Lenders . The Administrative Agent and the Lenders shall be entitled to rely and act upon, and shall not incur any liability for relying upon, any notices (including telephonic Loan Notices) purportedly delivered by or on behalf of any Loan Party or the Borrower Representative even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrowers shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly delivered by or on behalf of any Loan Party or Borrower Representative. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.
(e) Public Materials . Borrowers hereby acknowledges that (a) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of Loan Parties hereunder (collectively, Borrower Materials ) by posting the Borrower Materials on any E-System and (b) certain of the Lenders (each, a Public Lender ) may have personnel who do not wish to receive material non-public information with respect to Holdings or its Subsidiaries, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons securities. Borrowers hereby agree that so long as a Loan Party is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a Rule 144A private offering or is actively contemplating issuing any such securities it will, if requested by the Administrative Agent, use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked PUBLIC which, at a minimum, shall mean that the word PUBLIC shall appear prominently on the first page thereof; (x) by marking Borrower
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Materials PUBLIC, the Loan Parties shall be deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any material nonpublic information (although it may be sensitive and proprietary) with respect to any Loan Party or its securities for purposes of United States Federal and state securities laws (provided , however , that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 12.08); (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of any E-System designated Public Side Information; and (z) the Administrative Agent shall treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of any E-System not designated Public Side Information. Notwithstanding the foregoing, Borrowers shall be under no obligation to mark the Borrower Materials PUBLIC.
12.03 No Waiver; Cumulative Remedies . No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, 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.
12.04 Attorney Costs, Expenses . Any action taken by any Loan Party under or with respect to any Loan Document, even if required under any Loan Document or at the request of any Secured Party, shall be at the expense of such Loan Party, and no Secured Party shall be required under any Loan Document to reimburse any Loan Party therefor except as expressly provided therein. The Borrowers agree (a) to pay or reimburse the Administrative Agent for all reasonable documented out-of-pocket costs and expenses incurred in connection with the development, preparation, negotiation and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation, syndication and administration of the transactions contemplated hereby and thereby, including all reasonable documented out-of-pocket Attorney Costs and costs and expenses in connection with the use of IntraLinks, SyndTrak, StuckyNet, or other similar information transmission systems in connection with this Agreement (each being an E- System ), and (b) to pay or reimburse the Administrative Agent, the L/C Issuer and each Support Provider and each Lender for all reasonable documented out-of-pocket costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights following the occurrence and during the continuance of a Default or an Event of Default or the exercise of remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any workout or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs. The foregoing costs and expenses shall include all due diligence, search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses (including travel, courier, reproduction, printing and delivery expenses) incurred by the applicable Persons and the cost of independent public accountants, consultants and other outside experts retained by the Administrative Agent or any Lender. All amounts due under this Section 12.04 shall be deemed part of the Obligations when incurred and
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shall be payable within ten (10) Business Days after demand therefor. The agreements in this Section 12.04 shall survive the Termination Date.
12.05 Indemnification by the Loan Parties . The Loan Parties agree jointly and severally to indemnify and hold harmless each Agent-Related Person, each Lender, the L/C Issuer, Support Providers, each Secured Party and the respective Affiliates of all such Persons, and the directors, officers, employees, counsel, trustees, advisors, agents, financing sources, managed funds, controlling persons, attorneys-in-fact, and members of all of the foregoing Persons (collectively, the Indernnitees ) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs incurred by each Indemnitee and other costs of investigation or defense, including those incurred upon any appeal), of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance, syndication or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Loan or Letter of Credit or Support Agreement or the use or proposed use of the proceeds therefrom (including any refusal by any L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by any Borrower, any Subsidiary or any other Loan Party, or any Environmental Liability related in any way to any Borrower, any Subsidiary or any other Loan Party, or (d) any actual or prospective claim, litigation, investigation or Proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding), whether brought by a third party or by any Loan Party, and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the Indemnified Liabilities ), provided , that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements (w) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through the Internet or any E-System in connection with this Agreement, nor shall any Indemnitee have any liability for any punitive, special, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether arising or occurring before or after the Closing Date) . All amounts due under this Section 12.05 shall be payable within ten (10) Business Days after demand therefor. The agreements in this Section 12.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender and the Termination Date. To the extent that the indemnification set forth in this Section 12.05 may be unenforceable, each Loan Party shall contribute the maximum portion which it is permitted to pay and satisfy under applicable Law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them. Without limiting the generality of any provision of this Section 12.05 , to the fullest extent permitted by law, each Loan Party hereby waives all rights for contribution or any other rights of recovery with respect to liabilities, losses, damages, costs and expenses arising under or relating to Environmental
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Laws that it might have by statute or otherwise against any Indemnitee, except to the extent that such items are determined by a final and non-appealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. No Loan Party shall, without the prior written consent of each applicable Indemnitee, effect any settlement of any pending or threatened proceedings in respect of which indemnity could have been sought hereunder by such Indemnitee unless such settlement (i) includes an unconditional release of such Indemnitee in form and substance reasonably satisfactory to such Indemnitee from all liability or claims that are the subject matter of such proceedings and (ii) does not include any statement as to or any admission of fault, culpability, wrong doing or a failure to act by or on behalf of any Indemnitee. This Section 12.05 shall not apply with respect to Taxes other than any Taxes that represent liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements arising from any non-Tax related Indemnified Liability.
12.06 Payments Set Aside . To the extent that any payment by or on behalf of any Loan Party is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid or turned-over to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied (along with any Lien previously terminated with respect to such obligation) shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, the Termination Date had not occurred and such termination had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The provisions of this paragraph shall survive any termination of this Agreement.
12.07 Successors and Assigns.
(a) Successors and Assigns Generally . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, the Indemnitees and to the extent provided in Section 11.13 each other Secured Party, provided that (x) neither any Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and (y) no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section 12.07 , (ii) by way of participation in accordance with the provisions of subsection (d) of this Section 12.07 or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section 12.07 (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section 12.07 , the Indemnitees and to the extent provided in
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Section 11.13 each other Secured Party) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lenders . Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it), provided that any such assignment shall be subject to the following conditions:
(i) Minimum Amounts .
(A) in the case of an assignment of the entire remaining amount of the assigning Lenders Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of a Lender, no minimum amount need be assigned; and
(B) in any case not described in subsection (b)(i)(A) of this Section 12.07 , the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if Trade Date is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $1,000,000, in the case of any assignment of a Revolving Commitment, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower Representative, otherwise consents (each such consent not to be unreasonably withheld, conditioned or delayed).
(ii) Proportionate Amounts . Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations under this Agreement with respect to the Loan or the Commitment assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate tranches or facilities on a non-pro rata basis.
(iii) Required Consents . The consent of the Administrative Agent shall be required for any assignment. No consent of any other party shall be required for any assignment except (A) to the extent required by subsection (b)(i)(B) of this Section 12.07 and (B) the consent of the Borrower Representative (such consent not to be unreasonably withheld, conditioned or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment, or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund of a Lender, provided that the Borrower Representative shall be deemed to have consented to any such assignment if the Administrative Agent has not received an objection thereto in writing within ten (10) Business Days after the Borrower Representatives receipt of notice of such assignment.
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(iv) Assignment and Assumption . The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 (unless waived by the Administrative Agent at its sole option), and the assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
(v) No Assignment to certain Persons . No such assignment may be made to any Loan Party or any Defaulting Lender or any of their respective Affiliates or Subsidiaries. No such assignment shall be made to a natural person. No such Assignment may be made to any Person that owns a greater than 50% equity investment in a Certificated Air Carrier.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section 12.07 , from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01 , 3.04, 3.05, 12.04 and 12.05 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request of the assignee Lender made itself or through the Administrative Agent, the Borrowers (at their expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section 12.07.
For purposes of determining compliance with Section 12.07(b)(v) , the Administrative Agent and assigning Lender may rely upon the representations and warranties of the proposed assignee Lender; it being agreed that neither the Administrative Agent nor any assigning Lender shall have any duty of inquiry to determine such compliance.
(c) Register . The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrowers (the Registrar ) , shall maintain at the Administrative Agents Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, the principal amounts of the Loans owing to, and the Letter of Credit Liabilities and Swingline Exposure held by, each Lender pursuant to the terms hereof from time to time (the Register ). No assignment or transfer of a Loan or a Commitment (other than a pledgee described in subsection (f) below) shall be effective unless and until registered in the Register. The entries in the Register shall be conclusive absent manifest error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by any Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. Each Borrower hereby
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designates the entity serving as the Administrative Agent to serve as such Borrowers non-fiduciary agent solely for purposes of maintaining the Register as provided in this Section, and each Borrower hereby agrees that the entity serving as Registrar and its Affiliates, and their respective officers, directors, employees and agents shall constitute Indemnitees under Section 12.05 . At the written request of the registered Lender, the Registrar shall note a collateral assignment of a Loan on the Register as described in subsection (f) below and, provided that the Registrar has received the name and address of such collateral assignee, the Registrar (i) shall not permit any further transfers of the Loan on the Register absent receipt of written consent to such transfers from such collateral assignee and (ii) shall record the transfer of the Loan on the Register to such collateral assignee (or such collateral assignees designee, nominee or assignee) upon written request by such collateral assignee and compliance with the other provisions of this Agreement governing collateral assignments.
(d) Participations . Any Lender may at any time, without the consent of, or notice to, the Borrower Representative, any Loan Party, the Administrative Agent, the L/C Issuer, the Support Provider or the Swingline Lender, sell participations to any Person (other than a natural person or any Loan Party (each, a Participant ) in all or a portion of such Lenders rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it (including such Lenders Letter of Credit Liabilities and Swingline Exposure)), provided that (i) such Lenders obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) each Borrower, each other Loan Party, the Administrative Agent and the Lenders, the L/C Issuer and Swingline Lender shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement, provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso of Section 12.01 (clauses (a) through (g)) that affects such Participant. Subject to subsection (e) of this Section, each Borrower and each other Loan Party agrees that each Participant shall be entitled to the benefits of Sections 3.01 , 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.09 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.
Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participants interest in the Loans or other obligations under the Loan Documents (the Participant Register ); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a Participants interest in any Commitments, Loans, Letters of Credit or other Obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such
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Commitment, Loan, Letter of Credit or other Obligation is in registered form under Section 51103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(e) Limitations upon Participant Rights . A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower Representatives prior written consent and such Participant shall in any event be subject to replacement pursuant to Section 12.15 in the event it exercises such rights. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower Representative is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 3.01 as though it were a Lender.
(f) Certain Pledges . Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank and any pledge to a trustee as security for the benefit of the noteholders and other securityholders or creditors of a Lender, provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto until the provisions of this Section regarding assignment are satisfied with respect to such pledge or assignment.
(g) Consent to Disclosure; Cooperation of Loan Parties . Subject to the provisions of Section 12.08 , each Loan Party authorizes each Lender to disclose to any prospective participant or assignee of a Commitment or Loan, any and all information in such Lenders possession concerning the Loan Parties and their financial affairs which has been delivered to such Lender by or on behalf of the Loan Parties pursuant to this Agreement, or which has been delivered to such Lender by or on behalf of the Loan Parties in connection with such Lenders credit evaluation of the Loan Parties prior to entering into this Agreement. If necessary, each Loan Party agrees to (i) execute any documents (including new Revolving Notes) reasonably required to effectuate and acknowledge each assignment of a Commitment or Loan to an assignee in accordance with Section 12.07 , (ii) make the Loan Parties management available to meet with the Administrative Agent and prospective participants and assignees of Commitments or Loans and (iii) assist the Administrative Agent or the Lenders in the preparation of information relating to the financial affairs of the Loan Parties as any prospective participant or assignee of a Commitment or Loan reasonably may request.
12.08 Confidentiality .
(a) Each Loan Party acknowledges that (i) from time to time financial advisory, investment banking and other services may be offered or provided to it (in connection with this Agreement or otherwise) by each Lender or by one or more affiliates of such Lender
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and (ii) information delivered to each Lender by the Loan Parties may be provided to each such affiliate, it being understood that any such affiliate receiving such information shall be bound by the provisions of Section 12.08(b) as if it were a Lender under this Agreement.
(b) Each of the Administrative Agent and each Lender severally (and not jointly) agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its Affiliates and Approved Funds and to its and its Affiliates and Approved Funds respective partners, directors, officers, employees, agents, consultants, counsel, accountants, advisors, controlling persons, managed funds, financing sources, actual and prospective investors, and other representatives who Administrative Agent reasonably believes need to know such Information in connection with the transactions contemplated by this Agreement (collectively, the Representatives ) (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), or to Rating Agencies, (ii) to the extent requested or required by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), including, without limitation, any regulatory filings, (iii) to the extent required by applicable Laws or by any subpoena or similar judicial or legal process, (iv) to any other party to the Loan Documents, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or Proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) to (A) any actual or prospective assignee of a Lender, assignee or successor of Administrative Agent, or pledgee of or Participant in any of its rights or obligations under this Agreement, or (B) any actual or prospective counterparty to any swap or derivative transaction relating to any Borrower or any other Loan Party and its obligations, provided that such parties agree to be bound by confidentiality provisions substantially similar to those hereunder, and to the Representatives of the foregoing parties in clauses (A) and (B), (vii) with the consent of the Borrower Representative, (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Administrative Agent, any Lender, or any of their respective Representatives on a non-confidential basis from a source other than the Loan Parties not known by such party to be bound by a duty of confidentiality to any Loan Party or (ix) for purposes of establishing a due diligence defense. The terms of this provision shall supersede and replace any previous agreement regarding the confidentiality of the Information and, other than with respect to Material Contracts, shall terminate upon the later of (x) termination of the Commitments and the payment of the Obligations and (y) two (2) years following the disclosure of such information.
For purposes of this Section, (i) Information means, all information received from any Loan Party or any of its Subsidiaries relating to any Loan Party or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to or in the possession of the Administrative Agent, any other Secured Party or their Representatives on a non-confidential basis prior to disclosure by any Loan Party or any of its Subsidiaries, as evidenced by contemporaneous written records, and (ii) Rating Agencies means Moodys, S&P, Fitch Ratings Ltd., or any other nationally recognized rating agency or service. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord
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to its own confidential information. Notwithstanding anything herein to the contrary, Information shall not include, and the Administrative Agent and each other Secured Party may disclose without limitation of any kind, any information with respect to the tax treatment and tax structure (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Administrative Agent or such other Secured Party relating to such tax treatment and tax structure, provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Loans and transactions contemplated hereby.
(c) No Borrower or Affiliate thereof will issue any press releases or other public disclosure using the name of the Administrative Agent or its Affiliates or any other Lender or its Affiliates or referring to this Agreement or the other Loan Documents without at least three (3) Business Days prior notice to Administrative Agent or such Lender and without the prior written consent of Administrative Agent or such Lender, which consent shall not be unreasonably withheld, conditioned or delayed, unless (and only to the extent that) such Borrower or Affiliate is required to do so under law and then, in any event, such Borrower or Affiliate will consult with such Lender before issuing such press release or other public disclosure. The Borrowers hereby consent to the publication by any Secured Party of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement (such material may, without limitation, include a description of the Loan Parties and the use of any identifying trademark or other marks of a Loan Party). Each Secured Party reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.
12.09 Set-off . In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender and any Affiliate of a Lender is authorized at any time and from time to time, with the prior written consent of the Administrative Agent, but without prior notice to the Borrowers or any other Loan Party (any such notice being waived by the Borrowers on their own behalf and on behalf of each Loan Party), to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender or such Affiliate to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or indebtedness. Each Lender agrees promptly to notify the Borrowers and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. Any Lender exercising a right to set-off shall purchase for cash (and the other Lenders shall sell) interests in each of such other Lenders Pro Rata Share of the Obligations as would be necessary to cause all Lenders to share the amount so set-off with each other Lender in accordance with their respective Pro Rata Share of the Obligations.
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12.10 Interest Rate Limitation . Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the Maximum Rate ) . If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrowers. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
12.11 Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
12.12 Integration . This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter, including the Commitment Letter (other than in respect of any terms that expressly survive the termination or expiration thereof following the delivery of this Agreement), provided that the Fee Letter shall survive the effectiveness of this Agreement and the initial Credit Extensions hereunder and shall continue to be in full force and effect after the Closing Date in accordance with their terms. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control, provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof
12.13 Survival of Representations and Warranties . All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.
12.14 Severability . If any provision of this Agreement or any other Loan Document is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The
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invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
12.15 Replacement of Lenders . If (i) any Lender requests compensation under Section 3.04 , (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 , unless such Lender has waived its right to such additional amount, (iii) a Lender (a Non-Consenting Lender ) does not consent to a proposed change, waiver, discharge or termination with respect to any Loan Document that has been approved by the Required Lenders as provided in Section 12.01 but requires unanimous consent of all Lenders or all Lenders directly affected thereby (as applicable), (iv) it is, and continues to be, unlawful for any Lender to fund or maintain LIBOR Loans, as provided in Section 3.02 , or (v) any Lender is a Defaulting Lender, then Administrative Agent or the Borrower Representative may, at its sole option, expense and effort, and upon notice to such Lender and, in the case of an election made by the Borrower Representative, the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 12.07) , all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a) the Borrowers shall have paid to the Administrative Agent the assignment fee specified in Section 12.07(b) , if any;
(b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and Unreimbursed Amounts, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts);
(c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01 , such assignment will result in a reduction in such compensation or payments thereafter;
(d) such assignment does not conflict with applicable Laws; and
(e) in the case of any such assignment resulting from a Non-Consenting Lenders failure to consent to a proposed change, waiver, discharge or termination with respect to any Loan Document, the applicable replacement Lender consents to the proposed change, waiver, discharge or termination, provided that the failure by such Non-Consenting Lender to execute and deliver an Assignment and Assumption shall not impair the validity of the removal of such Non-Consenting Lender and the mandatory assignment of such Non-Consenting Lenders Commitments and outstanding Loans and participations in outstanding Letters of Credit pursuant to this Section 12.15 shall nevertheless be effective without the execution by such Non-Consenting Lender of an Assignment and Assumption.
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A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers or Administrative Agent to require such assignment and delegation cease to apply.
12.16 Governing Law.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
(b) Each Loan Party irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against any Secured Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that any Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction. Each Loan Party hereby irrevocably waives, to the fullest extent not prohibited by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
12.17 Waiver of Right to Trial by Jury . EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CON TRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Mesa Credit and Guaranty Agreement Page 128
12.18 USA Patriot Act Notice . Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of the Loan Parties and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Loan Parties in accordance with the Patriot Act.
12.19 Nonliability of Lenders . The relationship between the Loan Parties on the one hand and the Lenders and the Administrative Agent on the other hand shall be solely that of borrower or guarantor, as applicable, and lender. Neither the Administrative Agent nor any Lender or other Secured Party has any fiduciary relationship with or duty to any Loan Party arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Loan Parties, on the one hand, and the Administrative Agent and the Lenders and other Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. Neither the Administrative Agent nor any Lender or any other Secured Party undertakes any responsibility to any Loan Party to review or inform any Loan Party of any matter in connection with any phase of any Loan Partys business or operations. The Loan Parties agree that neither the Administrative Agent nor any Lender or other Secured Party shall have liability to any Loan Party (whether sounding in tort, contract or otherwise) for losses suffered by any Loan Party in connection with, arising out of, or in any way related to the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought.
NO SECURED PARTY SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY OTHERS OF ANY INFORMATION OR OTHER MATERIALS OBTAINED THROUGH INTRALINKS OR OTHER SIMILAR INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT, NOR SHALL ANY SECURED PARTY HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER REPRESENTATIVE ON BEHALF OF ITSELF AND EACH OTHER LOAN PARTY, HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ARISING OUT OF ITS ACTIVITIES IN CONNECTION HEREWITH OR THEREWITH (WHETHER BEFORE OR AFTER THE CLOSING DATE).
The Loan Parties acknowledge that they have been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party. No joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Agents, Lenders or among the Loan Parties and the Lenders and the Agents. The Loan Parties further acknowledge that each Lender or one or more of its affiliates may be a financial and securities firm and that such Lender or such affiliates may from time to time effect transactions, for its own or its affiliates account or the account of customers, and hold positions in loans, securities or options on loans or securities of a Loan Party and its affiliates and of other companies that may be the subject of the transactions contemplated by this Agreement. The Loan Parties further acknowledge and agree that (a) no
Mesa Credit and Guaranty Agreement Page 129
fiduciary, advisory or agency relationship between a Loan Party and the Secured Parties (or any of them) is intended to be or has been created in respect of any of the transactions contemplated by this Agreement, irrespective of whether any Secured Party or its affiliates has advised or is advising any Loan Party on other matters, (b) the Secured Parties, on the one hand, and the Loan Parties, on the other hand, have an arms-length business relationship that does not directly or indirectly give rise to, nor does any Loan Party rely on, any fiduciary duty on any Secured Partys part, (c) each Loan Party is capable of evaluating and understanding, and each Loan Party understands and accepts, the terms, risks and conditions of the transactions contemplated by this Agreement and the other Loan Documents, (d) the Secured Parties have not provided any legal, accounting, regulatory or tax advice with respect to the transactions and each Loan Party has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate and it is not relying on CIT for such advice, (e) the Loan Parties have been advised that the Secured Parties and their respective affiliates are or may be engaged in a broad range of transactions that may involve interests that differ from any Loan Partys interests and that the Secured Parties and their respective affiliates have no obligation to disclose such interests and transactions to any Loan Party by virtue of any fiduciary, advisory or agency relationship, (f) the Loan Parties will not assert and waive, to the fullest extent not prohibited by law, any claims any Loan Party may have against any Secured Party or its affiliates for breach of fiduciary duty or alleged breach of fiduciary duty, and agree that the Secured Parties and their respective affiliates shall have no liability (whether direct or indirect) to any Loan Party in respect of such a fiduciary duty claim or to any Person asserting a fiduciary duty claim on behalf of or in right of any Loan Party, including a Loan Partys stockholders, employees or creditors, and (g) should the Secured Parties or their respective affiliates have any other business with any Loan Party or any Loan Partys affiliates, nothing herein shall limit or otherwise diminish such Loan Partys or such Loan Partys affiliates obligations thereunder or with respect thereto.
12.20 Contractual Recognition of Bail-In . Notwithstanding any other term of any Loan Document or any other agreement, arrangement or understanding between the parties hereto, each party hereto acknowledges and accepts that any liability of any party hereto to any other party hereto under or in connection with the Loan Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:
(a) any Bail-In Action in relation to any such liability, including (without limitation):
(i) a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;
(ii) a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and
(iii) a cancellation of any such liability; and
(b) a variation of any term of any Loan Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
Mesa Credit and Guaranty Agreement Page 130
ARTICLE 13
APPOINTMENT OF THE BORROWER REPRESENTATIVE; JOINT AND SEVERAL
LIABILITY OF THE BORROWERS; SUBORDINATION
13.01 Borrower Representative . Eneh Borrower hereby irrevocably appoints the Borrower Representative, as the agent for such Borrower on its behalf, to (i) request Loans from the Lenders, (ii) request L/C issuer to issue Letters of Credit and Support Providers to issue Support Agreements, (iii) to give and receive notices under the Loan Documents and (iv) take all other action which the Borrower Representative or the Borrowers are permitted or required to take under this Agreement.
13.02 Joint and Several Liability of Borrowers.
(a) Joint and Several Liability . Each Borrower hereby agrees that such Borrower is jointly and severally liable for, and hereby absolutely and unconditionally guarantees to the Administrative Agent and other Secured Parties and their respective successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of, all Obligations owed or hereafter owing to the Administrative Agent and other Secured Parties by each other Borrower. Each Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, that its obligations under this Section 13.02 shall not be discharged until payment and performance, in full, of the Obligations has occurred, and that its obligations under this Section 13.02 shall be absolute, unconditional and irrevocable, irrespective of, and unaffected by, (i) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, any Obligation or any agreement, document or instrument to which any Borrower is or may become a party; (ii) the absence of any action to enforce any Obligation or the waiver or consent by the Administrative Agent or any other Secured Party with respect to any of the provisions governing any Obligation; (iii) the insolvency of any Borrower or Subsidiary; and (iv) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor. Each Borrower shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder.
(b) Waivers by Borrowers . Each Borrower expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel the Administrative Agent or other Secured Parties to marshal assets or to proceed in respect of the Obligations guaranteed hereunder against any other Borrower or Subsidiary, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Borrower. Each Borrower consents and agrees that the Administrative Agent or the other Secured Parties may, at any time and from time to time, without notice or demand, whether before or after an actual or purported termination, repudiation or revocation of this Agreement by any Borrower, and without affecting the enforceability or continuing effectiveness hereof as to such Borrower: (i) with the consent of the other Borrowers, supplement, restate, modify, amend, increase, decrease, extent, renew or otherwise change the time for payment or the terms of this Agreement or any part thereof, including any increase or decrease of the rate(s) of interest thereon; (ii) with the consent of the other Borrowers, supplement, restate, modify, amend, increase, decrease, or
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enter into or give any agreement with respect to, this Agreement or any part thereof, or any of the Security Documents; (iii) waive, approve or consent to any action, condition, covenant, default, remedy, right, representation or term of this Agreement or any other Loan Document; (iv) accept partial payments; (v) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer or enforce any security or guarantees, and apply any security and direct the order or manner of sale thereof as the Agents or Lenders in their sole and absolute discretion may determine; (vi) release any person from any personal liability with respect to this Agreement or any part thereof; (vii) settle, release on terms satisfactory to the Required Lenders or by operation of applicable Laws or otherwise liquidate or enforce any security or guaranty in any manner, consent to the transfer of any security and bid and purchase at any sale; or (viii) consent to the merger, change or any other restructuring or termination of the corporate or partnership existence of any Borrower or any other person, and correspondingly restructure the obligations evidenced hereby, and any such merger, change, restructuring or termination shall not affect the liability of any Borrower or the continuing effectiveness hereof, or the enforceability hereof with respect to all or any part of the obligations evidenced hereby. It is agreed among each Borrower, the Administrative Agent and Lenders that the foregoing consents and waivers are of the essence of the transaction contemplated by this Agreement and the other Loan Documents and that, but for the provisions of this Section 13.02 and such waivers, the Administrative Agent and Lenders would decline to enter into this Agreement.
(c) Benefit of Guaranty . Each Borrower agrees that the provisions of this Section 13.02 are for the benefit of the Administrative Agent and the other Secured Parties and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Borrower and the Administrative Agent or the other Secured Parties, the obligations of such other Borrower under the Loan Documents.
(d) Waiver of Subrogation , Etc . Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, each Borrower hereby expressly and irrevocably waives any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor, including, without limitation, any defense based upon any statute or rule of law that provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal, and any defense of the statute of limitations in any action hereunder or in any action for the collection or performance of any obligations hereby guaranteed. Each Borrower acknowledges and agrees that this waiver is intended to benefit the Administrative Agent and Lenders and other Secured Parties and shall not limit or otherwise affect such Borrowers liability hereunder or the enforceability of this Section 13.02 , and that the Administrative Agent, the Lenders and the other Secured Parties and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 13.02(d).
(e) Election of Remedies . If the Administrative Agent or any other Secured Party may, under applicable law, proceed to realize its benefits under any of the Loan Documents, the Administrative Agent or any other Secured Party may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section 13.02 . If, in the exercise of any of its rights and remedies, the Administrative Agent or any other Secured Party shall forfeit any of its rights or remedies, including its right to enter a
Mesa Credit and Guaranty Agreement Page 132
deficiency judgment against any Borrower or any other Person, whether because of any applicable laws pertaining to election of remedies or the like, each Borrower hereby consents to such action by the Administrative Agent or such other Secured Party and waives any claim based upon such action, even if such action by the Administrative Agent or such other Secured Party shall result in a full or partial loss of any rights of subrogation that each Borrower might otherwise have had but for such action by the Administrative Agent or such other Secured Party. Any election of remedies that results in the denial or impairment of the right of the Administrative Agent or any other Secured Party to seek a deficiency judgment against any Borrower shall not impair any other Borrowers obligation to pay the full amount of the Obligations.
(f) Liability Cumulative . The liability of Borrowers under this Section 13.02 is in addition to and shall be cumulative with all liabilities of each Borrower to the Administrative Agent and Lenders under this Agreement and the other Loan Documents to which such Borrower is a party or in respect of any Obligations or obligation of the other Borrower, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.
(g) Stay of Acceleration . If acceleration of the time for payment of any amount payable by the Borrowers under this Agreement is stayed upon the insolvency, bankruptcy or reorganization of any of the Borrowers, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable jointly and severally by the Borrower hereunder forthwith on demand by the Administrative Agent made at the request of the Required Lenders.
(h) Benefit to Borrowers . All of the Borrowers and their Subsidiaries are engaged in related businesses and integrated to such an extent that the financial strength and flexibility of each such Person has a direct impact on the success of each other Person. Each Borrower and each Subsidiary will derive substantial direct and indirect benefit from the extension of credit hereunder.
13.03 Subordination to Payment of Obligations . Each Loan Party hereby subordinates any Indebtedness of any Loan Party or any Subsidiary to such Loan Party to the full and indefeasible payment in full in cash of the Obligations (and any Lien now or hereafter securing such Indebtedness is hereby subordinated in priority to the Liens of Administrative Agent now or hereafter securing any of the Obligations) and any such Indebtedness collected or received by such Loan Party after an Event of Default has occurred and is continuing shall be held in trust for the Administrative Agent for its benefit and the benefit of the Secured Parties to be credited and applied against the Obligations, but without affecting, impairing or limiting in any manner the liability of such Loan Party under any other provision hereof. No Loan Party shall exercise any remedy with respect to such Indebtedness prior to Termination Date.
Signature Pages Follow
Mesa Credit and Guaranty Agreement Page 133
IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed as of the date fast above written.
BORROWERS: |
MESA AIRLINES, INC. |
|
By: |
||
Name: Brian S. Gillman |
||
Title: Executive Vice President, General |
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Counsel and Corporate Secretary |
||
MESA AIR GROUP AIRLINE |
||
INVENTORY MANAGEMENT, L.L.C. |
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By: Mesa Airlines:, Inc., its sole member |
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By: |
||
Name: Brian S. Gillman |
||
Title: Executive Vice President, General |
||
Counsel and Corporate Secretary |
||
GUARANTOR: |
MESA AIR GROUP, INC |
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By: |
||
Name: Brian S. Gillman |
||
Title: Executive Vice President, General |
||
Counsel and Corporate Secretary |
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ADMINISTRATIVE AGENT: |
CIT BANK, N.A. , as Administrative Agent |
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By: |
||
Name: |
||
Title: |
||
LENDER(S): |
CIT BANK, N.A. , as a Lender |
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By: |
||
Name: |
||
Title: |
Mesa Credit and Guaranty Agreement Signature Page
IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed as of the date fast above written.
BORROWERS: |
MESA AIRLINES, INC. |
|
By: |
||
Name: Brian S. Gillman |
||
Title: Executive Vice President, General |
||
Counsel and Corporate Secretary |
||
MESA AIR GROUP AIRLINE |
||
INVENTORY MANAGEMENT, L.L.C. |
||
By: Mesa Airlines:, Inc., its sole member |
||
By: |
||
Name: Brian S. Gillman |
||
Title: Executive Vice President, General |
||
Counsel and Corporate Secretary |
||
GUARANTOR: |
MESA AIR GROUP, INC |
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By: |
||
Name: Brian S. Gillman |
||
Title: Executive Vice President, General |
||
Counsel and Corporate Secretary |
||
ADMINISTRATIVE AGENT: |
CIT BANK, N.A. , as Administrative Agent |
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By: |
||
Name: |
||
Title: |
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LENDER(S): |
CIT BANK, N.A. , as a Lender |
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By: |
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Name: |
||
Title: |
Mesa Credit and Guaranty Agreement Signature Page
SCHEDULE 1.01(a)
ELIGIBILITY
A. Engine Eligibility Requirements
An Engine will constitute an Eligible Spare Engine or Eligible On-wing Engine, as applicable, if it satisfies the following requirements (the Engine Eligibility Requirements):
1. |
The Engine is 100% legally and beneficially owned by Mesa free and clear of all Liens other than Permitted Liens. |
2. |
The Engine is a serviceable General Electric aircraft engine model CF34-8C5. |
3. |
The Engine will not at the time it is initially included in the Borrowing Base (or any time while it is included in the Borrowing Base) have any Parts installed that are not manufactured by the original equipment manufacturer (i.e., no PMA Parts will be permitted). |
4. |
The Engine is a whole engine not subject to part-out or tear down arrangements, and while such Engine is a Spare Engine it shall not be subject to any Part removal (whether to support maintenance for other Engines or otherwise). |
5. |
In the case of an Eligible Spare Engine, is a Spare Engine in Mesas inventory located at a Spare Parts Location (for which Collateral Access Agreements are in place, if applicable) and not attached to an airframe. |
6. |
In the case of an Eligible On-wing Engine, is an Engine attached to (i) an airframe in Mesas fleet beneficially and legally owned by Mesa free and clear of all Liens other than Permitted Liens, or (ii) a Permitted Encumbered Airframe. For purposes of the Engine Eligibility Requirements (a) Permitted Encumbered Airframe means an airframe in Mesas fleet (i) beneficially and legally owned by Mesa free and clear of all Liens other than Permitted Liens and a security interest granted in favor of a secured party that has entered into a Recognition of Rights Agreement or (ii) owned by a third party lessor and leased to Mesa, where such third party lessor has entered into a Recognition of Rights Agreement, and (b) Recognition of Rights Agreement means an agreement in writing in a form satisfactory to the Administrative Agent that the secured party or lessor (as applicable) of a Permitted Encumbered Airframe will not acquire or claim, as against Mesa (or the Administrative Agent as assignee of Mesas rights under such agreement), any right, title or interest in or any adverse right, title or interest to such Engine or any Part thereof as the result of such Engine being installed on such Permitted Encumbered Airframe. |
7. |
At the time the Engine is initially included in a Borrowing Base calculation, (i) the Engine shall have a minimum Engine Overhaul Percentage of 50% and (ii) the Engines life limited parts (LLPs) shall have a minimum of 50% of the flight cycles remaining in its scheduled life (calculated on the basis of the average condition of all LLPs for such Engine). |
8. |
At all times, (i) the Engine shall have a minimum Engine Overhaul Percentage of 30% and (ii) the Engines LLPs shall have a shall have a minimum of 50% of the flight cycles remaining in its scheduled life (calculated on the basis of the average condition of all LLPs for such Engine). |
9. |
The Engine is (or will be upon such Engine becoming Collateral hereunder) subject to a valid and perfected first-priority Lien of the Collateral Documents, and the Administrative Agent shall have received all deliverables under the Loan Documents with respect to the creation and perfection of such Lien (including evidence of such UCC, Aviation Authority, International Registry and such other filings as required by the Administrative Agent to ensure the Administrative Agent has a valid, perfected first-priority security interest in the Engine). |
10. |
The Administrative Agent shall have received Aviation Authority, International Registry and UCC searches, and such other evidence as Administrative Agent may reasonably request, indicating that Mesa owns the Engine, free and clear of all Liens other than Permitted Liens. |
11. |
The Administrative Agent shall have received back-to-birth bills of sale for such Engine. |
12. |
Such other Engines not satisfying the foregoing requirements that are approved in writing by the Administrative Agent (acting at its sole discretion). |
The Engine Eligibility Requirements set forth above may be revised from time to time solely by the Administrative Agent in the Administrative Agents exclusive judgment, exercised in good faith and in a commercially reasonable manner, upon at least two (2) Business Days prior written notice delivered to the Loan Parties, provided that no such change will be applied retroactively, such that all Eligible Engines at the time of such change shall remain Eligible Engines after giving effect to such change.
Notwithstanding the Engine Eligibility Requirements set forth above, the Administrative Agent may (in its sole discretion) reject any Engine as not satisfying such requirements at the time such Engine is presented by the Borrower for inclusion as an Eligible Engine.
B. Eligible Spare Parts Inventory
Spare Parts will constitute Eligible Spare Parts Inventory if they satisfy the following requirements (the Spare Parts Eligibility Requirements):
1. |
The Spare Parts are 100% legally and beneficially owned by Mesa free and clear of all Liens other than Permitted Liens. |
2. |
The Spare Parts are serviceable (with a valid FAA 8130-3 attached) suitable for installation on a Bombardier CRJ700/900 and Embraer ERJ175 (such Spare Parts, the Platform Spare Parts). |
SCHEDULE 1.01(a)
Page 2
3. |
The Spare Parts are not on a bill-and-hold, cash-on-delivery or guaranteed sale basis, or covered by a consignment agreement or negotiable instrument of title or any arrangements similar to any of the foregoing. |
4. |
The Spare Parts are in Mesas inventory located at a Spare Parts Location (for which Collateral Access Agreements are in place, if applicable) and not attached to an airframe or engine. |
5. |
The Spare Parts are (or will be upon such Spare Parts becoming Collateral hereunder) subject to a valid and perfected first-priority Lien of the Collateral Documents, and the Administrative Agent shall have received all deliverables under the Loan Documents with respect to the creation and perfection of such Lien (including evidence of such UCC, Aviation Authority, International Registry and such other filings as required by the Administrative Agent to ensure the Administrative Agent has a valid, perfected first priority security interest in the Spare Parts). |
6. |
The Administrative Agent shall have received evidence satisfactory to the Administrative Agent that title to such Spare Parts is held by Mesa. |
7. |
If the Spare Parts Inventory is sold under a licensed trademark and to the extent required thereunder, the Administrative Agent shall have entered into a licensor waiver letter, in form and substance satisfactory to the Administrative Agent, with the licensor with respect to the rights of the Administrative Agent to use the trademark to sell or otherwise dispose of such inventory following the occurrence and during the continuance of an Event of Default, in connection with Administrative Agents exercise of its rights and remedies with respect thereto. |
8. |
Such other Spare Parts not satisfying the foregoing requirements that are approved in writing by the Administrative Agent (acting at its sole discretion). |
The Spare Parts Eligibility Requirements may be revised from time to time solely by the Administrative Agent in the Administrative Agents exclusive judgment, exercised in good faith and in a commercially reasonable manner, upon at least two (2) Business Days prior written notice delivered to the Loan Parties, provided that no such change will be applied retroactively, such that all Eligible Spare Parts Inventory at the time of such change shall remain Eligible Spare Parts Inventory after giving effect to such change.
SCHEDULE 1.01(a)
Page 3
SCHEDULE 1.01(b)
Excluded accounts
Company or Affiliate |
Depository Institution & Address |
Account Number |
Description of Account |
|||
Mesa Air Group, Inc. |
Wells Fargo Bank, N.A.
241 Washington Ave. Santa Fe, NM 87501 |
Workers Comp | ||||
Mesa Air Group, Inc. |
JP Morgan Chase Bank
201 N. Central, 21st Floor Phoenix, AZ 85001 |
Payroll | ||||
Mesa Air Group, Inc. |
JP Morgan Chase Bank
201 N. Central, 21st Floor Phoenix, AZ 85001 |
UMR | ||||
Mesa Air Group, Inc. |
JP Morgan Chase Bank
201 N. Central, 21st Floor Phoenix, AZ 85001 |
New Workers Comp | ||||
Mesa Airlines, Inc. |
US Bank P.O. Box 1800 St. Paul, MN 55101-0800 |
ACH Clearing House |
SCHEDULE 1.01(b)
Page 1
SCHEDULE 1.01(c)
Maintenance Burn Factor
Maintenance Burn Factor for any Eligible On-wing Engine, on any date of determination, means an amount equal to the sum of the Engine Overhaul Amount and the LLP Refurbishment Amount.
Engine Overhaul Amount means, on any date of determination, an amount equal to (i) US$100 (the Engine Overhaul Rate) multiplied by (ii) the number of engine flight hours of operation of the Eligible On-wing Engine since (x) the date of the last Engine Overhaul of such Eligible On-wing Engine or (y) the date of the most recent physical maintenance and specification adjusted Appraisal of such Eligible On-wing Engine, whichever is more recent. The Engine Overhaul Rate described above is in 2016 US Dollars, and shall be increased for inflation on January 1 of each calendar year (commencing January 1, 2017) by a percentage amount equal to three percent (3%) by adding: (i) the product of (x) the then current Engine Overhaul Rate multiplied by (y) the value of .03, and (ii) the then current Engine Overhaul Rate, as the same has been previously increased in accordance with this paragraph. In addition to the annual escalation set forth in this paragraph, Administrative Agent may further modify the Engine Overhaul Rate as may be necessary, in its reasonable discretion, to reflect any changes in rates or costs for an Engine Overhaul and for changes in Mesas operation of the Engine, including, but not limited to, repetitive operations in harsh environments (which shall be defined as any airport location considered by the engine Manufacturers severity standards to possess any or all of the following characteristics: high temperature, high altitude, polluted, sandy or desert environments) (Harsh Operating Conditions).
LLP Refurbishment Amount means, on any date of determination, an amount equal to (i) US$100 (the LLP Refurbishment Rate) multiplied by (ii) the number of flight cycles of operation of the Eligible On-wing Engine since the date of the most recent physical maintenance and specification adjusted Appraisal of such Eligible On-wing Engine. The LLP Refurbishment Rate described above is in 2016 US Dollars, and shall be increased for inflation on January 1 of each calendar year (commencing January 1, 2017) so that it equals the sum of the then current Cost Per Cycle of each Engine life limited part. The Cost Per Cycle of each such Engine life limited part of such Eligible On-wing Engine shall be determined by dividing (x) the then current manufacturers catalogue list price of each Engine life limited part by (y) the Engine manufacturers then published Chapter 5 Life for each respective Engine life limited part. In addition to the annual escalation set forth in this paragraph, Administrative Agent may further modify the LLP Refurbishment Rate as may be necessary, in its reasonable discretion, to reflect any changes in rates or costs for an LLP Refurbishment and for changes in Mesas operation of the Engine, including, but not limited to, Harsh Operating Conditions.
Engine Overhaul means any engine shop visit having a workscope that at a minimum, includes a complete refurbishment or full overhaul of the high pressure compressor module and high pressure turbine module and combustion module section of the relevant Engine, accomplished in accordance with the Engine manufacturers Workscope Planning Guide applicable to the Engine.
SCHEDULE 1.01(c)
Page 1
SCHEDULE 1.01(d)
Initial spare engines
Manufacturer |
Manufacturers Model |
Serial Number |
||
General Electric | CF34-8C5 | 965258 | ||
General Electric | CF34-8C5 | 965222 | ||
General Electric | CF34-8C5 | 965246 | ||
General Electric | CF34-8C5 | 965213 | ||
General Electric | CF34-8C5 | 965252 |
SCHEDULE 1.01(d)
Page 1
SCHEDULE 2.01
Commitments and Pro Rata Shares
Lender |
Revolving
|
Revolving
|
||
CIT Bank, N.A. |
$35,000,000 | 100% | ||
TOTALS |
$35,000,000 | 100% |
SCHEDULE 2.01
Page 1
SCHEDULE 5.10
Insurance
Summary of Current Insurance Coverage | ||||||||||
Expiration Date |
Insurance Coverage
|
Policy |
Program Type |
Total Limits Covered |
Company Retention/Deductible |
|||||
3/23/2017 |
AUTOMOBILE LIABILITY | C N A Paramount: | Combined Single Limit | $1,000,000 + $25,000,000 Excess Policy A1AL000019115AM | N/A | |||||
Personal Injury Protection | Statutory | N/A | ||||||||
Medical Payments | $5,000 | N/A | ||||||||
Uninsured /Underinsured Motorist Coverage | Statutory Minimum | N/A | ||||||||
Hired and Non-Owned Auto Liability ( if Any Basis ) | $1,000,000 | $100 | ||||||||
Hired Auto Physical Damage | Actual Cash Value | $1,000 | ||||||||
3/23/2017 |
PROPERTY | C N A Paramount: | Blanket Personal Property | $4,887,695 | $25,000 unless Location and Coverage schedule shows different | |||||
Blanket Improvements and Betterments | Included in personal Property | $25,000 unless Location and Coverage schedule shows different | ||||||||
Blanket Electronic Data Processing | Included in personal Property | $25,000 unless Location and Coverage schedule shows different | ||||||||
Blanket Extra Expense | $l00,000 | $25,000 unless Location and Coverage schedule shows different | ||||||||
Blanket Real Property | NA | $25,000 unless Location and Coverage schedule shows different | ||||||||
Real Property - El Paso Hangar | $675,000 | $25,000 unless Location and Coverage schedule shows different | ||||||||
Real Property - Houston Hangar | $4,040,000 | $25,000 unless Location and Coverage schedule shows different | ||||||||
Flood & Earthquake | $5,000,000 | $50,000 | ||||||||
Extra Expense (HDQ) | $2,221,000 | $25,000 unless Location and Coverage schedule shows different | ||||||||
Business Interruption (DFW Only) | $20,000 | $25,000 unless Location and Coverage schedule shows different | ||||||||
12/15/2016 |
AVIATION INSURANCE | Allianz: United Insurance Co - Cell 9: | Aviation Liability | $750,000,000 CSL for liability including passenger war risk liability | $0 with respect to Bodily Injury and Property Damage | |||||
Allianz: United Insurance Co - Cell 9: | Aviation Hull | Per fleet schedule on file at insured value to maximum of $40,000,000 | $250,000 | |||||||
National Union Fire (AIG): Catlin:
|
Aircraft Hull Deductible Insurance | $225,000 per accident / each aircraft maximum subject to annual aggregate of $4,000,000 | $25,000 per any one accident / each aircraft | |||||||
Allianz: United Insurance Co - Cell 9: | War Risk Liability(Third party/non-passenger) | $250,000,000 annual aggregate | Guaranteed Cost | |||||||
United Insurance Company - Cell Number 9: | Excess War Risk Liability (Third party/non-passenger) | $500,000,000 Excess of primary for 3rd party/non-passenger war risk liability | $0; Primary policy providing $250,000,000 | |||||||
United Insurance Company - Cell Number 9: | War Risk Hull | per fleet schedule value to max of $40,000,000; subject to $350,000,000 annual aggregate | $250,000 | |||||||
Allianz: | Mexican Liability | 2,500,000 Limit | N/A | |||||||
12/31/2016 |
WC & EMPLOYERS LIABILITY | Starr Indemnity | WC & Employers Liability | Statutory Limits - $100,000,000/1,000,000/$1,000,000 | $500,000/accident/Employee | |||||
1/1/2017 |
HEALTH AND WELFARE | |||||||||
United Medical Resources | Employee Medical Benefits | EE Deductibles | Company Limits | |||||||
United Medical Resources | Value A EPO Plan | $725 Individual, $2,175 Family | Self-Insured, Company pays 70% after deductible | |||||||
United Medical Resources | Value B EPO Plan | $3,000 Individual, $6,000 Family | Self-Insured, Company pays 70% after deductible | |||||||
United Medical Resources | 60% EPO Plan | $6,350 Individual, $12,000 Family | Self-Insured, Company pays 100% after deductible | |||||||
United Medical Resources | Premium EPO Plan | N/A | Self-Insured, Company pays 80% after deductible | |||||||
United Medical Resources | Premium PPO Plan | In-Network: $500 Individual, $1,500 Family - Out-Network: $1,000 Individual, $3,000 Family | Self-Insured, Company pays 80%/50% after deductible | |||||||
United Medical Resources | All Plans | All Plans | Stop Loss Coverage through UMR after $250,000 | |||||||
United Medical Resources | Employee Dental Benefits | $50/Person, $100/Family | $1,500 Dental Annual Max, $2,000 Orthodontic Lifetime Max | |||||||
Vision Service Plan | Employee Vision Benefits | Fully Employee paid plan | N/A | |||||||
Unum Provident Life Insurance Company | STD Short-Term Disability | Fully Employee paid plan-N/A | N/A-Unum pays claims | |||||||
Unum Provident Life Insurance Company | LTD Long-Term Disability | N/A | N/A- Unum Pays Claims we only pay a flat fee for the coverage per employ | |||||||
OTHER | ||||||||||
3/1/2017 |
Federal Insurance Co. (Chubb): | D&0 Excess Side A DIC | $5,000,000 | $20,000,000 | ||||||
3/1/2017 |
Axis Insurance Company: | D&0 Excess | $10,000,000 | $10,000,000 | ||||||
3/1/2017 |
National Union Insurance Company (AIG) | D&0 Primary | $10,000,000 | $150,000 | ||||||
1/7/2018 |
ENVIROMENTAL | |||||||||
Beazley: | Environmental Site | $5,000,000 | $15,000 | |||||||
3/1/2017 |
CRIME | |||||||||
Travelers: | Employee Theft | $1,000,000 | $50,000 | |||||||
ERISA Fidelity | $1,000,000 | $0 | ||||||||
Employee Theft of client property | $500,000 | $50,000 | ||||||||
Forgery or Alteration | $1,000,000 | $50,000 | ||||||||
On Premises | $1,000,000 | $50,000 | ||||||||
In Transit | $1,000,000 | $50,000 | ||||||||
Money Orders and Counterfeit Money | $1,000,000 | $50,000 | ||||||||
Computer Fraud | $1,000,000 | $50,000 | ||||||||
Computer Program and Electronic Data Restoration | $100,000 | $2,500 | ||||||||
Funds Transfer Fraud | $1,000,000 | $50,000 | ||||||||
Personal Accounts Forgery or Alteration | $1,000,000 | $50,000 | ||||||||
Identity Fraud Expense Reimbursement | $25,000 |
SCHEDULE 5.13
Capitalization
Name |
Jurisdiction of
|
Holders of Capital Stock |
Number of Share
of Capital Stock
|
Number of Outstanding Shares of Each Class Owned |
Percentage of
Share of Each
|
|||||
Mesa Air Group, Inc. | Nevada | Numerous shareholders | 4,030,591 | N/A | N/A | |||||
Mesa Airlines, Inc. | Nevada | Mesa Air Group, Inc. | 1,000 | 1,000 | 100% | |||||
Mesa Air Group Airline Inventory Management, L.L.C. |
Arizona | Mesa Airlines, Inc. | Mesa Airlines, Inc. is the sole member | N/A | N/A | |||||
Mesa Angels Foundation, Inc. | Arizona | Mesa Air Group, Inc. | N/A | N/A | N/A | |||||
Mesa In-Flight, Inc. | Colorado | Mesa Air Group, Inc. | 100 | 100 | 100% |
SCHEDULE 5.13
Page 1
SCHEDULE 5.17
IP Rights
1. |
License Agreement, dated June 30, 1999, between Mesa Air Group, Inc. and RPA/Airline Automation Services. |
2. |
MX1 Master Agreement, dated March 2, 2015, between Mesa Airlines, Inc. and Mxi Technologies I Ad. |
SCHEDULE 5.17
Page 1
SCHEDULE 5.19
Labor Matters
Collective Bargaining Agreements
3. |
Agreement between Mesa Airlines, Inc., Freedom Airlines, Inc. and The Air Line Pilots in the Service of Mesa Airlines, Inc., Freedom Airlines, Inc., as represented by the Airline Pilots Association, International dated December 10, 2008 |
1. |
Agreement Between Association of Flight Attendants CWA, AFL-CIO Representing the Flight Attendants and Mesa Airlines, Inc. and Freedom Airlines, Inc. dated February 19, 2010 |
Multiemployer Plans
None.
SCHEDULE 5.19
Page 1
SCHEDULE 5.20(a)
Locations of Tangible Personal Property
1. |
4346 E. Elwood Street, Suites 102 & 103, Phoenix, AZ 85040 |
2. |
23321 Autopilot Drive, Sterling, VA 20166 |
3. |
850 E. Teton Road, Hangar 2 on South Side, Tucson, AZ 85706 |
4. |
1161 Standiford Lane, Hangar #3, Louisville, KY 40213 |
5. |
1910 W. Airfield Drive, Bldg. B, Suite 300, Dallas, TX 75261 |
6. |
301 George Perry Blvd., Suite B, El Paso, TX 79925 |
7. |
16951 John F. Kennedy Blvd., Houston, TX 77032 |
8. |
3917 Airlane Drive, Phoenix, AZ 85034 |
9. |
4210 S. 37th St., Phoenix, AZ 85040 |
10. |
2710 East Old Tower Rd., Phoenix, AZ 85034 |
SCHEDULE 5.20 (a)
Page 1
SCHEDULE 5.20(B)
Location of Chief Executive Office
Loan Party |
State of
Organization |
Chief Executive
Office |
Tax Payer
Identification Number |
Organizational
Identification Number |
||||
Mesa Air Group, Inc. | Nevada |
410 N. 44th Street,
Suite 700 Phoenix, AZ 85008 |
85-0302351 | NV19961131050 | ||||
Mesa Airlines, Inc. | Nevada |
410 N. 44th Street,
Suite 700 Phoenix, AZ 85008 |
85-04448000 | NV19961185315 | ||||
Mesa Air Group Airline Inventory Management, L.L.C. |
Arizona Street,
Suite 700 Phoenix, AZ |
410 N. 44th
85008 |
48-292015 | L10577220 |
SCHEDULE 5.20 (b)
Page 1
SCHEDULE 5.23
Material Contracts
1. |
Aircraft Parts Consignment Access Agreement dated August 15, 2005, between AAR Aircraft & Engine Sale & Leasing and Mesa Air Group, Inc. (CRJ700/900 inventory access, contract #27428), as amended from time to time. |
2. |
Component Support Agreement, dated August 16, 2005, between AAR Parts Trading, Inc. and Mesa Airlines, Inc. |
3. |
Employment Agreement, dated March 1, 2011, between Mesa Air Group, Inc. and Jonathan G. Ornstein, as amended by Amendment No. 1, dated April 2014, and Amendment No. 2, dated May 24, 2016. |
4. |
Employment Agreement, dated March 1, 2011, between Mesa Air Group, Inc. and Michael J. Lotz, as amended by Amendment No. 1, dated April 2014, and Amendment No. 2, dated May 24, 2016. |
5. |
Employment Agreement, dated March 2014, between Mesa Air Group, Inc. and Brian S. Gillman, as amended by Amendment No. 1, dated May 24, 2016. |
6. |
Agreement, dated December 10, 2008, among Mesa Airlines, Inc., Freedom Airlines, Inc. and The Air Line Pilots in the Service of Mesa Airlines, Inc., Freedom Airlines, Inc., as represented by the Airline Pilots Association, International. |
7. |
Agreement, dated February 19, 2010, between Association of Flight Attendants CWA, AFL-CIO Representing the Flight Attendants and Mesa Airlines, Inc. and Freedom Airlines, Inc. |
8. |
Code Share and Revenue Sharing Agreement, dated March 20, 2001, between US Airways, Inc. and Mesa Airlines, Inc., as amended from time to time. |
9. |
Capacity Purchase Agreement, dated August 29, 2013, among United Airlines, Inc., Mesa Airlines, Inc., and Mesa Air Group, Inc., as amended from time to time. |
10. |
Bombardier CRJ700/900 Landing Gear Service Agreement, dated June 12, 2012, between Goodrich Aerospace Canada and Mesa Airlines, Inc. |
11. |
Fleet Maintenance Cost Support Agreement, dated May 18, 2001, between Bombardier acting through Bombardier Aerospace Regional Aircraft and Mesa Air Group, Inc. |
12. |
RE220RJ APU Maintenance Support Agreement, dated February 1, 2013, between Mesa Airlines, Inc. and Honeywell International contract # 84372 |
SCHEDULE 5.23
Page 1
13. |
OnPoint Overhaul Engine Services Agreement for CF34-8 engines, dated July 1, 2013, between GE Engine Services and Mesa Airlines, Inc. |
14. |
General Terms Equipment Lease Agreement between AAR Parts Trading and Mesa Air Group, dated October 8, 2013 Landing Gear Lease |
15. |
Agreement between AAR Aircraft Services and Mesa Airlines, dated October 3, 2002 Heavy Maintenance agreement #26707, amended from time to time |
16. |
Component Maintenance Agreement CRJ700/900 between AAR Aircraft Component Services and Mesa Air Group, dated August 16, 2005 contract #27431, amended from time to time |
17. |
Line Maintenance Agreement between AAR Aircraft Services and Mesa Air Group, dated January 16, 2013 on-call maintenance support |
18. |
Lease, dated June 1, 2007, between Engine Lease Finance Corporation and Mesa Airlines, Inc. (CF34-3B1 MSN 950424). |
19. |
Lease, dated June 1, 2007, between Engine Lease Finance Corporation and Mesa Airlines, Inc. (CF34-3B1 MSN 950426). |
20. |
Engine Lease Agreement, dated August 8, 2013, between Wells Fargo Bank Northwest, NA and Mesa Airlines, Inc. (CF34-3A1 MSN 807393). |
21. |
Engine Lease Agreement, dated July 22, 2013, between Wells Fargo Bank Northwest, NA and Mesa Airlines, Inc. (CF34-3A1 MSN 807383). |
22. |
Engine Lease Agreement, dated July 22, 2013, between Wells Fargo Bank Northwest, NA and Mesa Airlines, Inc. (CF34-3A1 MSN 807403). |
23. |
Lease Agreement, dated January 7, 2014, between Wells Fargo Bank, NA and Mesa Airlines, Inc. (CF34-8C5B1 MSN 965316). |
24. |
Lease Agreement between NAS Investments 75 and Mesa Airlines, dated November 6, 2013; CF34-8C5 MSN 965207 |
25. |
Engine Lease Agreement, dated August 15, 2013, between Labyrinth General Partner and Mesa Airlines, Inc. (CF34-8C5 MSN 194107). |
26. |
Engine Lease Agreement, dated May 22, 2014, between Regional One and Mesa Airlines, Inc. (CF34-8C5B1 MSN 965275). |
27. |
Engine Lease Agreement, dated May 22, 2014, between Regional One and Mesa Airlines, Inc. (CF34-8C5B1 MSN 965267). |
28. |
Engine Lease Agreement, dated June 1, 2013, between Regional One and Mesa Airlines, Inc. (CF34-8C5B1 MSN 965228). |
SCHEDULE 5.23
Page 2
29. |
Engine Purchase and Sale Agreement, dated December 19, 2013, between Regional One and Mesa Airlines, Inc. (CF34-8C5B1 MSN 965321). |
30. |
Engine Lease Agreement, dated July 15, 2013, between Regional One and Mesa Airlines, Inc. (CF34-8C5B1 MSN 965665). |
31. |
Consent to Use and Occupancy Agreement, dated September 9, 2013, between Louisville Regional Airport Authority and Mesa Airlines, Inc. |
32. |
City of Phoenix Aviation Department Land Lease Agreement No. 134356, dated January 1, 2012, between City of Phoenix and Mesa Airlines, Inc. |
33. |
Hangar, Office, Shop and Storage Space Lease, dated July 1, 2013, between Metropolitan Washington Airports Authority and Mesa Air Group, Inc. |
34. |
Agreement for the Lease of Aircraft Maintenance Hangar, dated February 2009, between City of Charlotte and Mesa Airlines, Inc., as amended from time to time. |
35. |
Three Gateway Office Lease, dated November 1, 1998, between DMB Property Ventures Limited Partners and Mesa Air Group, Inc., as amended from time to time. |
36. |
Note Purchase Agreement, dated as of December 14, 2015, among Mesa Airlines, Inc., Wilmington Trust Company, U.S. Bank National Association and United Airlines, Inc. |
37. |
Credit Agreement, dated as of August 12, 2015, among Mesa Airlines, Inc. and Export Development Canada, as amended from time to time. |
38. |
Credit Agreement, dated as of January 18, 2016, between Mesa Airlines, Inc. and Export Development Canada. |
39. |
Credit Agreement, dated as of June 27, 2016, between Mesa Airlines, Inc. and Export Development Canada. |
40. |
Lease, dated February 3, 2015, by and between the City of Houston, Texas and Mesa Airlines, Inc. |
41. |
Air Cargo Center Agreement, dated October 28, 2014, between the City of El Paso, Texas and Mesa Airlines, Inc. |
42. |
Land Lease Agreement, dated January 1, 2012, by and between the City of Phoenix and Mesa Airlines, Inc. |
43. |
Hangar, Office, Shop and Storage Space Lease, dated July 1, 2013, by and between the Metropolitan Washington Airports Authority and Mesa Air Group. |
SCHEDULE 5.23
Page 3
44. |
Net Lease, dated September 11, 2015, by and between Aero DFW, LP and Mesa Air Group. |
45. |
Multi-Tenancy Industrial Lease, dated as of October 24, 2012, by and between Elwood HA, L.L.0 and Mesa Air Group, Inc. |
46. |
Multi-Tenant Industrial Lease, dated June 1, 2012, by and between Presson Broadway, LLC and Mesa Airlines, Inc. |
47. |
Sublease, dated May 1, 2014, between Swift Aviation Services, Inc. and Mesa Air Group, Inc. |
48. |
Consent to Use and Occupancy Agreement, dated September 9, 2013, by and between the Louisville Regional Airport Authority, Macquarie Aviation North America 2, Inc. and Mesa Airlines, Inc. |
49. |
TIC Industrial Lease, dated January 21, 2013, between Tucson Airport Authority and Mesa Airlines, Inc. |
50. |
Credit and Security Agreement, dated June 16, 2014, by and among Mesa Air Group, Inc., the lenders named therein and Obsidian Agency Services, Inc., as administrative agent. |
Debt Instruments
Description |
MSN/
ESN |
FAA
N-Number |
Outstanding
Balance |
Maturity
Date |
Lender | |||||
Aircraft Financing |
15066 | N241LR | 7,048,685 | April 2022 | EDC | |||||
Aircraft Financing |
15068 | N944LR | 7,622,825 | June 2022 | EDC | |||||
Aircraft Financing |
15075 | N945LR | 7,708,139 | May 2022 | EDC | |||||
Aircraft Financing |
15076 | N943LR | 7,074,602 | May 2022 | EDC | |||||
Aircraft Financing |
15077 | N242LR | 7,557,769 | April 2022 | EDC | |||||
Aircraft Financing |
15104 | N946LR | 7,801,789 | May 2022 | EDC | |||||
Aircraft Financing |
15124 | N326MS | 12,074,077 | May 2024 | EDC | |||||
Aircraft Financing |
15126 | N329MS | 12,074,077 | May 2024 | EDC | |||||
Aircraft Financing |
15234 | N245LR | 11,214,313 | May 2024 | EDC | |||||
Aircraft Financing |
15239 | N246LR | 11,214,313 | May 2024 | EDC | |||||
Aircraft Financing |
15273 | N247LR | 12,429,197 | May 2024 | EDC | |||||
Aircraft Financing |
15274 | N248LR | 12,429,197 | May 2024 | EDC | |||||
Aircraft Financing |
15275 | N249LR | 12,535,666 | June 2024 | EDC | |||||
Aircraft Financing |
15233 | N244LR | 11,310,375 | June 2024 | EDC | |||||
Aircraft Financing |
10258 | N516LR | 10,631,752 | Jan 2022 | EDC | |||||
Aircraft Financing |
10259 | 14518LR | 10,065,031 | Jan 2022 | EDC | |||||
Aircraft Financing |
10260 | N519LR | 10,742,861 | Jan 2022 | EDC | |||||
Aircraft Financing |
15039 | N939LR | 10,012,541 | Jan 2021 | EDC | |||||
Aircraft Financing |
15042 | N942LR | 10,616,565 | Jan 2021 | EDC | |||||
Aircraft Financing |
15056 | N956LR | 10,180,835 | Jan 2021 | EDC | |||||
Aircraft Financing (Senior) |
15373 | N952LR | 20,139,143 | Mar 2027 | EDC |
SCHEDULE 5.23
Page 4
Description |
MSN/
ESN |
FAA
N-Number |
Outstanding
Balance |
Maturity
Date |
Lender | |||||
Aircraft Financing (Senior) | 15374 | N953LR | 20,272,189 | Apr 2027 | EDC | |||||
Aircraft Financing (Senior) | 15378 | N958LR | 20,405,858 | May 2027 | EDC | |||||
Aircraft Financing (Senior) | 15377 | N957LR | 20,406,020 | May 2027 | EDC | |||||
Aircraft Financing (Senior) | 15376 | N955LR | 20,406,529 | May 2027 | EDC | |||||
Aircraft Financing (Senior) | 15379 | N959LR | 20,541,261 | Jun 2027 | EDC | |||||
Aircraft Financing (Senior) | 15375 | N954LR | 20,538,555 | Jun 2027 | EDC | |||||
Aircraft Financing (Subordinated) | 15373 | N952LR | 1,130,728 | Mar 2027 | Bombardier | |||||
Aircraft Financing (Subordinated) | 15374 | N953LR | 1,124,869 | Apr 2027 | Bombardier | |||||
Aircraft Financing (Subordinated) | 15378 | N958LR | 1,119,041 | May 2027 | Bombardier | |||||
Aircraft Financing (Subordinated) | 15377 | N957LR | 1,119,041 | May 2027 | Bombardier | |||||
Aircraft Financing (Subordinated) | 15376 | N955LR | 1,119,041 | May 2027 | Bombardier | |||||
Aircraft Financing (Subordinated) | 15379 | N959LR | 1,113,242 | Jun 2027 | Bombardier | |||||
Aircraft Financing (Subordinated) | 15375 | N954LR | 1,113,242 | Jun 2027 | Bombardier | |||||
Aircraft Financing | 10094 | N509MJ | 5,939,931 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 10109 | N512MJ | 5,113,057 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 10111 | N513MJ | 5,113,057 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 10116 | N514MJ | 5,848,057 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 10117 | N515MJ | 5,113,057 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 15011 | N911FJ | 6,119,448 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 15012 | N912FJ | 5,981,309 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 15013 | N913FJ | 5,337,435 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 15014 | N914FJ | 5,337,471 | Feb 2019 | BRAFCO | |||||
Aircraft Financing | 15015 | N915FJ | 6,274,025 | Mar 2019 | BRAFCO | |||||
Aircraft Financing | 15016 | N916FJ | 5,492,204 | Mar 2019 | BRAFCO | |||||
Aircraft Financing | 15017 | N917FJ | 7,043,626 | Nov 2019 | BRAFCO | |||||
Aircraft Financing | 15018 | N918FJ | 7,354,355 | Nov 2019 | BRAFCO | |||||
Aircraft Financing | 15019 | N919FJ | 7,043,627 | Nov 2019 | BRAFCO | |||||
Aircraft Financing | 15020 | N920FJ | 7,043,627 | Nov 2019 | BRAFCO | |||||
Aircraft Financing | 15021 | N921FJ | 7,043,627 | Nov 2019 | BRAFCO | |||||
Aircraft Financing | 15123 | N951LR | 8,308,401 | Jul 2022 | Tennenbaum | |||||
Aircraft Financing | 15118 | N950LR | 8,308,401 | Jul 2022 | Tennenbaum | |||||
Aircraft Financing | 15119 | N948LR | 8,308,401 | Jul 2022 | Tennenbaum | |||||
Aircraft Financing | 15116 | N947LR | 8,308,401 | Jul 2022 | Tennenbaum | |||||
Aircraft Financing (A Tranche) | 17000530 | N88331 | 16,763,493 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (A Tranche) | 17000531 | N88332 | 16,763,493 | Jan 2028 | 2015-EETC-A |
SCHEDULE 5.23
Page 5
Description |
MSN/
ESN |
FAA
N-Number |
Outstanding
Balance |
Maturity
Date |
Lender | |||||
Aircraft Financing (A Tranche) | 17000532 | N82333 | 16,763,493 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (A Tranche) | 17000534 | N86334 | 16,855,190 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (A Tranche) | 17000538 | N88335 | 16,872,078 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (A Tranche) | 17000548 | N86336 | 17,111,000 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (A Tranche) | 17000551 | N87337 | 17,111,000 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (A Tranche) | 17000552 | N82338 | 17,123,000 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (A Tranche) | 17000559 | N87339 | 17,123,000 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (A Tranche) | 17000562 | N87340 | 17,123,000 | Jan 2028 | 2015-EETC-A | |||||
Aircraft Financing (B Tranche) | 17000530 | N88331 | 4,178,533 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000531 | N88332 | 4,178,533 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000532 | N82333 | 4,178,533 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000534 | N86334 | 4,191,600 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000538 | N88335 | 4,195,333 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000548 | N86336 | 4,503,000 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000551 | N87337 | 4,503,000 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000552 | N82338 | 4,506,000 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000559 | N87339 | 4,506,000 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (B Tranche) | 17000562 | N87340 | 4,506,000 | Jan 2024 | 2015-EETC-B | |||||
Aircraft Financing (C Tranche) | 17000530 | N88331 | 3,049,451 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (C Tranche) | 17000531 | N88332 | 3,049,451 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (C Tranche) | 17000532 | N82333 | 3,049,451 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (C Tranche) | 17000534 | N86334 | 2,965,514 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (C Tranche) | 17000538 | N88335 | 2,965,514 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (C Tranche) | 17000548 | N86336 | 2,946,000 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (C Tranche) | 17000551 | N87337 | 2,946,000 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (C Tranche) | 17000552 | N82338 | 2,901,000 | Jan 2028 | 2015-EETC-C |
SCHEDULE 5.23
Page 6
Description |
MSN/
ESN |
FAA
N-Number |
Outstanding
Balance |
Maturity
Date |
Lender | |||||
Aircraft Financing (C Tranche) | 17000559 | N87339 | 2,901,000 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (C Tranche) | 17000562 | N87340 | 2,901,000 | Jan 2028 | 2015-EETC-C | |||||
Aircraft Financing (Senior) | 17000563 | N88341 | 21,500,000 | June 2028 | NordLB | |||||
Aircraft Financing (Senior) | 17000570 | N80342 | 21,500,000 | June 2028 | NordLB | |||||
Aircraft Financing (Senior) | 17000571 | N89343 | 21,500,000 | July 2028 | NordLB | |||||
Aircraft Financing (Senior) | 17000572 | N86344 | 21,500,000 | July 2028 |
Commonwealth
Bank of Australia |
|||||
Aircraft Financing (Subordinated) | 17000563 | N88341 | 2,930,000 | June 2028 | United | |||||
Aircraft Financing (Subordinated) | 17000570 | N80342 | 2,930,000 | June 2028 | United | |||||
Aircraft Financing (Subordinated) | 17000571 | N89343 | 2,930,000 | July 2028 | United | |||||
Aircraft Financing (Subordinated) | 17000572 | N86344 | 2,930,000 | July 2028 | United | |||||
Spare Engine Financing |
965201,
966250, 965504 |
N/A | 7,049,781 | Sept 2020 | MidFirst | |||||
Notes (Engine Maintenance) | N/A | N/A | 3,549,961 | Sept 2020 | EDC | |||||
Notes (Engine Maintenance) | N/A | N/A | 5,378,286 | Oct 2020 | EDC | |||||
Notes (Engine Maintenance) | N/A | N/A | 5,400,925 | 1/31/20 4/30/20 | EDC | |||||
Notes | N/A | N/A | 35,020 | Sept 2016 | Management |
Aircraft Leases
Aircraft Type |
FAA
N-Number |
Serial
Number |
Engines |
Lease
Maturity |
Lessor | |||||||
ESN 1 | ESN 2 | |||||||||||
CRJ-700 |
N501MJ | 10047 | 965299 | 965318 | 9/30/2019 | GECAS | ||||||
CRJ-700 |
N502MJ | 10050 | 965301 | 965302 | 9/30/2019 | GECAS | ||||||
CRJ-700 |
N503MJ | 10058 | 965341 | 965325 | 10/28/2019 | GECAS | ||||||
CRJ-700 |
N504MJ | 10066 | 965355 | 965322 | 10/28/2019 | GECAS | ||||||
CRJ-700 |
N505MJ | 10070 | 965367 | 965364 | 10/28/2019 | GECAS | ||||||
CRJ-700 |
N506MJ | 10073 | 965357 | 965370 | 10/29/2019 | GECAS | ||||||
CRJ-700 |
N507MJ | 10077 | 965377 | 965376 | 10/29/2019 | GECAS | ||||||
CRJ-700 |
N508MJ | 10087 | 965387 | 965400 | 10/29/2019 | GECAS | ||||||
CRJ-700 |
N510MJ | 10101 | 965419 | 965440 | 10/29/2019 | GECAS | ||||||
CRJ-700 |
N511MJ | 10104 | 965425 | 965392 | 6/22/2020 | GECAS | ||||||
CRJ-700 |
N521MJ | 10261 | 194507 | 194506 | 1/1/2024 | Sun-EDC | ||||||
CRJ-700 |
N522MJ | 10262 | 194517 | 194518 | 1/1/2024 | Sun-EDC |
SCHEDULE 5.23
Page 7
Aircraft Type |
FAA
N-Number |
Serial
Number |
Engines |
Lease
Maturity |
Lessor | |||||||
ESN 1 | ESN 2 | |||||||||||
CRJ-900 |
N902MJ | 15002 | 194201 | 194202 | 10/28/2021* | GECAS | ||||||
CRJ-900 |
N903MJ | 15003 | 194203 | 194204 | 10/29/2021* | GECAS | ||||||
CRJ-900 |
N904FJ | 15004 | 194205 | 194206 | 6/22/2022* | GECAS | ||||||
CRJ-900 |
N905FJ | 15005 | 194209 | 194208 | 6/22/2022* | GECAS | ||||||
CRJ-900 |
N906FJ | 15006 | 194211 | 194212 | 6/22/2022* | GECAS | ||||||
CRJ-900 |
N 907FJ | 15007 | 194215 | 194216 | 6/22/2022* | GECAS | ||||||
CRJ-900 |
N 908FJ | 15008 | 194217 | 194214 | 6/22/2022* | GECAS | ||||||
CRJ-900 |
N909FJ | 15009 | 194221 | 194222 | 6/22/2022* | GECAS | ||||||
CRJ-900 |
N910FJ | 15010 | 194225 | 194224 | 6/22/2022* | GECAS | ||||||
CRJ-900 |
N243LR | 15064 | 194409 | 194426 | 6/9/2021 | Falko | ||||||
CRJ-900 |
N922FJ | 15022 | 194249 | 194248 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N923FJ | 15023 | 194251 | 194250 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N924FJ | 15024 | 194255 | 194252 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N925FJ | 15025 | 194253 | 194254 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N926LR | 15026 | 194257 | 194256 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N927LR | 15027 | 194259 | 194258 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N928LR | 15028 | 194261 | 194260 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N929LR | 15029 | 194263 | 194262 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N930LR | 15030 | 194265 | 194266 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N931LR | 15031 | 194267 | 194268 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N932LR | 15032 | 194269 | 194270 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N933LR | 15033 | 194271 | 194272 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N934FJ | 15034 | 194273 | 194274 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N935LR | 15035 | 194275 | 194276 | 3/31/2024 | RASPRO | ||||||
CRJ-900 |
N938LR | 15038 | 194287 | 194286 | 3/31/2024 | RASPRO |
* |
Specified lease maturity dates reflect 24 month extension to from orig . nal maturity dates pursuant to Master Agreement dated May 27, 2014 between Mesa Air Group, Inc. and GECAS. |
SCHEDULE 5.23
Page 8
SCHEDULE 5.24
Accounts
Deposit Accounts
Loan Party |
Description of Account |
Depository Institution and Address |
Account Number |
|||
Mesa Air Group, Inc. |
Money Market (Restricted Cash) |
JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
A/R | JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
Concentration | JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
Electronic Disbursements | JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
Payroll | JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
New Workers Comp | JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
UMR | JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
Go Team (Emergency Response) |
JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
A/P | JP Morgan Chase Bank 201 N.Central, 21st Floor Phoenix, AZ 85001 | ||||
Mesa Air Group, Inc. |
Workers Comp |
Wells Fargo Bank, N.A. 241 Washington Ave. Santa Fe, NM 87501 |
||||
Mesa Air Group, Inc. |
Money Market |
Merrill Lynch 9560 Wilshire Blvd. 3 rd Floor Beverly Hills, CA 90212 |
Securities Accounts
None.
SCHEDULE 5.24
Page 1
SCHEDULE 6.17
Post-Closing Covenants
(a) No later than August 31, 2016 (or such later date as may be agreed by the Administrative Agent in its sole discretion), the Borrowers shall deliver to the Administrative Agent a desktop Appraisal completed by the Appraiser as of the Fiscal Quarter ending June 30, 2016 for all Eligible Spare Engines and Eligible Spare Parts Inventory, in form and substance reasonably acceptable to the Administrative Agent.
(b) The Borrowers agree to establish at CIT, Controlled Accounts constituting (i) business money market accounts no later than two (2) weeks following the Closing Date (or such later date as may be agreed by the Administrative Agent in its sole discretion) and with a minimum initial balance of $10,000,000, (ii) deposit accounts for accounts receivable and wire payments no later than six (6) weeks following the Closing Date (or such later date as may be agreed by the Administrative Agent in its sole discretion) and (iii) deposit accounts for check writing and payroll no later than ten (10) weeks following the Closing Date (or such later date as may be agreed by the Administrative Agent in its sole discretion).
Failure to provide any of the above referenced documents or complete the above referenced undertakings shall constitute an Event of Default (with no grace period) under this Agreement.
SCHEDULE 6.17
Page 1
SCHEDULE 12.02
Certain Addresses for Notices
Borrower Representative
Address: 410 N. 44th Street, Suite 700
Phoenix, AZ 85008
Facsimile number: + 1 602-685-4551
Electronic mail address: Brian.Gillman@mesa-air.com ; Legal@mesa-air.com
Telephone number: +1 602-685-4051
Administrative Agent
Address: 11 West 42nd Street
New York, NY 10036
Attention: Nitin Sharma; Ethan Ho
Electronic mail address: nitin.sharma@cit.com; ethan.ho@cit.com
Telephone number: +1 212-771-9583; +1 213-613-2515
With a copy to:
Address: 1 CIT Drive
Livingston, NJ 07039
Attention: Chief Counsel
Electronic mail address: nick.defabrizio@cit.com
Telephone number: +1 973-740-5671
SCHEDULE 12.02
Page 1
EXHIBIT A-1
FORM OF LOAN NOTICE
, 20
Reference is made to the Credit and Guaranty Agreement, dated as of August 12, 2016 (as it may be amended, amended and restated, joined, supplemented or otherwise modified from time to time, the Credit Agreement), by and among MESA AIRLINES, INC., a Nevada corporation and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company, and such other Persons joined thereto as a Borrower from time to time (each a Borrower and together, the Borrowers), MESA AIR GROUP, INC., a Nevada corporation, as a guarantor, the other the Guarantors from time to time party thereto, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to Section 2.02 of the Credit Agreement, Borrowers desire that Lenders make the following Loans to Borrowers in accordance with the applicable terms and conditions of the Credit Agreement on , 20 :
1. Revolving Loans
Base Rate Loans: |
$[ , , ] | |
LIBOR Loans, with an initial Interest Period Of month(s): |
$[ , , ] |
If this notice is being delivered to request a Credit Extension, Borrower Representative hereby certifies that all of the representations and warranties contained in Article 5 of the Credit Agreement are true and correct in all material respects as of the date hereof ( provided , that if any representation or warranty is by its terms qualified by concepts of materiality, such representation shall be true and correct in all respects) on and as of such date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date; and other conditions to such Credit Extension specified in Article 4 of the Credit Agreement are satisfied as of the date hereof.
Pursuant to Section 2.02 of the Credit Agreement, Borrowers desire to convert or to continue the following Loans, each such conversion and/or continuation to be effective as of , 20 :
1. Revolving Loans
$[ , , ] |
LIBOR Loans to be continued with Interest Period of [ ] month(s) |
|
$[ , , ] |
Base Rate Loans to be converted to LIBOR Loans with Interest Period of [ ] month(s) |
|
$[ , , ] |
LIBOR Loans to be converted to Base Rate Loans |
EXHIBIT A-1
Page 1
Borrower Representative hereby certifies that as of the date hereof, no event exists or would result from the consummation of the conversion and/or continuation contemplated hereby that would constitute an Event of Default or a Default.
(Signature Page Follows)
EXHIBIT A-1
Page 2
The foregoing is made and delivery as of the date first set forth above.
BORROWER REPRESENTATIVE: |
||
MESA AIRLINES, INC. |
By: |
|
|
Name: |
||
Title: |
EXHIBIT A-1
Page 3
EXHIBIT A-2
FORM OF SWINGLINE LOAN NOTICE
, 20
Reference is made to the Credit and Guaranty Agreement, dated as of August 12, 2016 (as it may be amended, amended and restated, joined, supplemented or otherwise modified from time to time, the Credit Agreement), by and among MESA AIRLINES, INC., a Nevada corporation and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company, and such other Persons joined thereto as a Borrower from time to time (each a Borrower and together, the Borrowers), MESA AIR GROUP, INC., a Nevada corporation, as a guarantor, the other the Guarantors from time to time party thereto, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to Section 2.04(b) of the Credit Agreement, Borrowers desire that Lenders make the following Loans to Borrowers in accordance with the applicable terms and conditions of the Credit Agreement on ,20
1. Swingline Loans $[ , , ]
Borrower Representative hereby certifies that all of the contained in Article 5 of the Credit Agreement are true and correct in all material respects as of the date hereof (provided , that if any representation or warranty is by its terms qualified by concepts of materiality, such representation shall be true and correct in all respects) on and as of such date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date; and other conditions to such Credit Extension specified in Article 4 of the Credit Agreement are satisfied as of the date hereof.
(Signature Page Follows)
EXHIBIT A-2
Page 1
The foregoing is made and delivery as of the date first set forth above.
BORROWER REPRESENTATIVE: |
||
MESA AIRLINES, INC. |
By: |
|
|
Name: |
||
Title: |
EXHIBIT A-2
Page 2
EXHIBIT B-1
FORM OF REVOLVING NOTE
$[ ]
,20 New York, New York
FOR VALUE RECEIVED, each of the undersigned (each, together with any other Person becoming a Borrower under the Credit Agreement, being a Borrower and collectively, the Borrowers), jointly and severally promises to pay to the order of [REVOLVING LENDER] (Payee), or its registered assigns, in accordance with the terms of the Credit Agreement (as defined below), the lesser of (a) [ ] ($[ ]) and (b) the unpaid principal amount of all advances made by Payee to Borrowers as Revolving Loans under the Credit Agreement referred to below.
Borrowers also jointly and severally promise to pay interest on the unpaid principal amount of each Revolving Loan, from the date of such Revolving Loan until such principal amount is paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Credit Agreement, dated as of August 12, 2016 (as it may be amended, restated, supplemented or otherwise modified, the Credit Agreement), by and among Borrowers, such other Persons joined thereto as a Loan Party from time to time, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Credit Agreement.
This Note is one of the Revolving Notes and is issued pursuant to and is entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the Administrative Agents Office or at such other place as is set forth in the Credit Agreement or as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Assumption effecting the assignment or transfer of the obligations evidenced hereby shall have been accepted by Administrative Agent and recorded in the Register, each Borrower, Administrative Agent and Lenders shall be entitled to deem and treat Payee as the owner and holder of this Note and the obligations evidenced hereby for the purpose of receiving payment of, or on account of, the principal, interest and other amounts due on this Note and for all other purposes, notwithstanding notice to the contrary (subject to the rights of any collateral assignee of this Note as set forth in Section 12.07(f) of the Credit Agreement).
This Note is subject to mandatory prepayment, and to prepayment at the option of the Borrowers, in each case, as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWERS AND PAYEE HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
EXHIBIT B-1
Page 1
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
During the continuance of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement and the other Loan Documents.
The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrowers, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency prescribed in the Credit Agreement.
Borrowers hereby jointly and severally promise to pay all costs and expenses, including reasonable attorneys fees, in accordance with the terms of the Credit Agreement, incurred in the collection and enforcement of this Note. Borrowers and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand, notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder.
[Remainder of page intentionally left blank]
EXHIBIT B-1
Page 2
IN WITNESS WHEREOF, each of the undersigned has caused this Revolving Note to be duly executed and delivered by its officer or other signatory thereunto duly authorized as of the date and at the place first written above.
MESA AIRLINES, INC., for itself and as |
||
Borrower Representative |
By: |
|
|
Name: |
||
Title: |
MESA AIR GROUP AIRLINE |
||
INVENTORY MANAGEMENT, L.L.C. |
By: |
MESA AIRLINES, |
|
INC., its sole member |
By: |
|
|
Name: |
||
Title: |
EXHIBIT B-1
Page 3
EXHIBIT B-2
FORM OF SWINGLINE NOTE
$[ ]
,20__ |
New York, New York |
FOR VALUE RECEIVED, each of the undersigned (each, together with any other Person becoming a Borrower under the Credit Agreement, being a Borrower and collectively, the Borrowers), jointly and severally promises to pay to the order of [CIT BANK, N.A. 1 (Payee), or its registered assigns, in accordance with the terms of the Credit Agreement (as defined below), the lesser of (a) [_________] DOLLARS ($[_______] and (b) the unpaid principal amount of all advances made by Payee to Borrowers as Swingline Loans under the Credit Agreement referred to below.
Borrowers also jointly and severally promise to pay interest on the unpaid principal amount of each Swingline Loan, from the date of such Loan until such principal amount is paid in full, at the rates and at the times which shall be determined in accordance with the provisions of that certain Credit Agreement, dated as of August 12, 2016 (as it may be amended, restated, supplemented or otherwise modified, the Credit Agreement), by and among Borrowers, such other Persons joined thereto as a Loan Party from time to time, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Credit Agreement.
This Note is issued pursuant to and is entitled to the benefits of the Credit Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Swingline Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the Administrative Agents Office or at such other place as is set forth in the Credit Agreement or as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Unless and until an Assignment and Assumption effecting the assignment or transfer of the obligations evidenced hereby shall have been accepted by Administrative Agent and recorded in the Register, each Borrower, Administrative Agent and Lenders shall be entitled to deem and treat Payee as the owner and holder of this Note and the obligations evidenced hereby for the purpose of receiving payment of, or on account of, the principal, interest and other amounts due on this Note and for all other purposes, notwithstanding notice to the contrary (subject to the rights of any collateral assignee of this Note as set forth in Section 12.07(1) of the Credit Agreement).
This Note is subject to mandatory prepayment, and to prepayment at the option of Borrowers, in each case, as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWERS AND PAYEE HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
1 |
Should be payable to Swingline Lender, not any individual Lender. |
EXHIBIT B-2
Page 1
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
During the continuance of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued and unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement and the other Loan Documents.
The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of Borrowers, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency prescribed in the Credit Agreement.
Borrowers hereby jointly and severally promise to pay all costs and expenses, including reasonable attorneys fees, in accordance with the terms of the Credit Agreement, incurred in the collection and enforcement of this Note. Borrowers and any endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand, notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder.
[Remainder of page intentionally left blank]
EXHIBIT B-2
Page 2
IN WITNESS WHEREOF, each of the undersigned has caused this Swingline Note to be duly executed and delivered by its officer or other signatory thereunto duly authorized as of the date and at the place first written above.
MESA AIRLINES, INC., for itself and as |
||
Borrower Representative |
By: |
|
|
Name: |
||
Title: |
MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C. |
||
By: MESA AIRLINES, INC., its sole member |
By: |
|
|
Name: |
||
Title: |
EXHIBIT B-2
Page 3
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFIES AS FOLLOWS:
1. The undersigned hereby makes this Compliance Certificate (this Certificate) as the Treasurer of MESA AIRLINES, INC., a Nevada corporation (the Borrower Representative).
2. The undersigned has reviewed the terms of that certain Credit Agreement, dated as of August 12, 2016 (as it may be amended, restated, supplemented or otherwise modified, the Credit Agreement; the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among Borrower Representative, the other Loan Parties from time to time party thereto, each of the Lenders party thereto, and CIT BANK, N.A., as Administrative Agent, and has made, or has caused to be made under his or her supervision, a review in reasonable detail of the transactions and condition of the Loan Parties and their Subsidiaries during the accounting period covered by the attached financial statements. Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Credit Agreement.
3. The examination described in paragraph 2 above did not disclose, and none of the undersigned have knowledge of, the existence of any condition or event which constitutes an Event of Default or a Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth in a separate attachment, if any, to this Certificate, describing in reasonable detail, the nature of the condition or event, the period during which it has existed and the action which the applicable Loan Party has taken, is taking, or proposes to take with respect to each such condition or event.
4. The financial statements delivered with this Certificate present fairly in all material respects the financial condition and results of operations of the Loan Parties and their Subsidiaries, on a consolidated and consolidating basis, in accordance with GAAP consistently applied, subject, in the case of monthly or quarterly financial statements, to normal year-end audit adjustments and the absence of footnotes. No change in GAAP or the application thereof has occurred since the Closing Date which affects the financial statements delivered with this Certificate or if such change in GAAP or in the application thereof has occurred, include a statement describing the effect of such change on the financial statements accompanying this Certificate.
5. All representations and warranties by each Loan Party and its Subsidiaries in the Loan Documents are true and correct in all material respects on and as of the date hereof, except that (i) if any such representation or warranty specifically refers to an earlier date, then such representation or warranty is true and correct in all material respects as of such earlier date, (ii) if any such representation or warranty is qualified as to materiality or Material Adverse Effect, then such representation or warranty is true and correct in all respects on and as of the date hereof and (iii) for purposes hereof, the representations and warranties contained in Section 5.05(e) 2 of the Credit Agreement shall be deemed to refer
2 |
Absence of a Material Adverse Effect representation |
EXHIBIT C
Page 1
to the most recent financial statements delivered pursuant to Section 6.01(a) 3 of the Credit Agreement.
6. No supplement to Schedule 5.13 , 5.17 , 5.20(a) or 5.20(b) is necessary to ensure that such schedules will be accurate and complete as of the date hereof [or, if such changes or supplements are necessary, include supplemental versions of any applicable schedules with this Certificate].
[Remainder of Page Intentionally Blank; Signatures Follow]
3 |
Annual financial statements only. |
EXHIBIT C
Page 2
The foregoing certifications, together with the computations set forth in the Annex A hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered [ENTER DATE] pursuant to Section 6.02(a) of the Credit Agreement.
MESA AIRLINES, INC., for itself and as |
||
Borrower Representative |
||
By: |
|
|
Name: |
||
Title: Treasurer |
EXHIBIT C
Page 3
ANNEX A TO
COMPLIANCE CERTIFICATE 4
4 |
If the methodology of calculating any financial covenant on this Annex A conflicts with the terms of the Credit Agreement, the terms of the Credit Agreement shall govern and control. |
EXHIBIT C
Page 4
EXHIBIT D
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this Assignment) is dated as of the Effective Date set forth below and is entered into by and between [NAME OF ASSIGNOR] (the Assignor) and [NAME OF ASSIGNEE] (the Assignee) . Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as it may be amended, supplemented or otherwise modified from time to time, the Credit Agreement), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto (the Standard Terms and Conditions) are hereby agreed to and incorporated herein by reference and made a part of this Assignment as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, the interest in and to all of the Assignors rights and obligations as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignors outstanding rights and obligations under the respective facilities identified below (including, to the extent included in any such facilities, letters of credit and swingline loans) (the Assigned Interest) . Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and the Credit Agreement, without representation or warranty by the Assignor.
1 |
Assignor: |
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2 |
Assignee: |
[, an Affiliate/Approved Fund* * ] | ||
3 |
Borrower(s) |
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4 |
Administrative Agent: |
CIT Bank, N.A., as the administrative agent under the Credit Agreement | ||
5 |
Credit Agreement: |
The $35,000,000 Credit Agreement dated as of August 12, 2016, by and among Borrower(s), the other Loan Parties party thereto from time to time, each of the Lenders party thereto and Administrative Agent. |
* |
Select (if applicable). |
EXHIBIT D
Page 1
6. Assigned Interest:
Facility Assigned |
Aggregate
Lenders |
Amount of
Assigned |
Percentage
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*** |
$ | $ | % | |||
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$ | $ | % | |||
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$ | $ | % |
Effective Date: _________, 20__ [DATE TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
** |
Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. |
*** |
Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. Revolving Commitment etc.). |
EXHIBIT D
Page 2
7. Notice and Wire Instructions:
[NAME OF ASSIGNOR] | [NAME OF ASSIGNEE] | |||
Notices : |
Notices : |
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Attention: |
Attention: |
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Telecopier: |
Telecopier: |
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with a copy to: |
with a copy to: |
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Attention: |
Attention: |
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Telecopier: |
Telecopier: |
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Wire Instructions : |
Wire Instructions : |
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EXHIBIT D
Page 3
The terms set forth in this Assignment are hereby agreed to:
ASSIGNOR
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[NAME OF ASSIGNOR]
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By: |
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Title: |
ASSIGNEE | ||
[NAME OF ASSIGNEE] |
By: |
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Title: |
Consented to and Accepted:
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CIT BANK, N.A., as Administrative Agent
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By: |
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Name: |
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Title: |
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[Consented to: ****] |
MESA AIRLINES, INC., as Borrower Representative |
By: |
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Name: |
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Title: |
**** |
To be added only if the consent of the Borrower Representative is required by the terms of the Credit Agreement. |
EXHIBIT D
Page 4
ANNEX 1
STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT
AND ASSUMPTION AGREEMENT
Representations and Warranties.
Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim [created by it] and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with any Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document delivered pursuant thereto, other than this Assignment (herein collectively the Loan Documents), or any collateral thereunder, (iii) the financial condition of any Borrower or any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by any Borrower or any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.
Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it is an Eligible Assignee, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement and other Loan Documents and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, the other Loan Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and to purchase the Assigned Interest on the basis of which it has made such analysis and decision and (v) if it is a Foreign Lender, attached to the Assignment is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at that time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
Acknowledgements and Covenants by Assignee . Assignee acknowledges and agrees that this Assignment is subject to Assignees compliance with, and that Assignee shall be bound by the following additional terms and covenants in connection with the transfer of the Assigned Interests:
(i) |
Assignee will not (A) have the right to receive information, reports or other materials provided solely to Lenders by the Administrative Agent or any other |
EXHIBIT D
Page 5
Lender, except to the extent made available to the Borrowers, (B) attend or participate in meetings attended solely by the Lenders and the Administrative Agent, or (C) access any electronic site established for the Lenders or confidential communications from counsel to or financial advisors of the Administrative Agent or the Lenders; |
(v) |
Assignee will not be entitled to bring actions against the Administrative Agent, in its role as such or receive advice of counsel or other advisors to the Administrative Agent or any other Lenders or challenge the attorney client privilege of their respective counsel; and |
(vi) |
the portion of any Loans held by Assignee required to be held by Lenders in order for such Lenders to constitute Required Lenders shall be disregarded in determining Required Lenders at any time or to meet any minimum head-count; and. |
Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
General Provisions . This Assignment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Assignment and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the state of New York without regard to any conflicts of laws principles thereof that would call for the application of the laws of any other jurisdiction.
EXHIBIT D
Page 6
EXHIBIT E
FORM OF CERTIFICATE REGARDING SOLVENCY
DATED: [ , 20 ]
The undersigned Chief Financial Officer, solely in his or her capacity as a duly authorized officer of MESA AIR GROUP, INC., a Nevada corporation (Holdings), and not in an individual capacity, hereby makes this Certificate Regarding Solvency, in order to induce CIT BANK, N.A . (CIT) and the other Lenders (as defined below) and CIT, as administrative agent for the Lenders (in such capacity Administrative Agent), to consummate certain financial accommodations pursuant to the terms and conditions of that certain Credit and Guaranty Agreement, dated as of the date hereof (as amended, amended and restated, joined, supplemented, extended and/or modified from time to time, the Credit Agreement), by and among MESA AIRLINES, INC., a Nevada corporation and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company, Holdings, the other Loan Parties from time to time party thereto, Administrative Agent, and the lenders and other financial institutions from time to time party thereto (collectively, Lenders) . Unless otherwise defined herein, capitalized terms used in this certificate shall have the meanings ascribed thereto in the Credit Agreement.
The undersigned, in his or her capacity as an officer and not in an individual capacity, hereby certifies to Lenders and Administrative Agent that:
1. The undersigned is familiar with the business and financial affairs of the Loan Parties, including, without limitation, the transactions contemplated by the Credit Agreement and the matters hereinafter described.
2. The undersigned has reviewed the Credit Agreement and the definitions and provisions contained in the Credit Agreement, together with each of the other Loan Documents, and has made, or has caused to be made under his or her supervision, such examination or investigation as is necessary to enable the undersigned person to express an informed opinion as to the matters referred to herein.
3. Based upon the review and examination described in paragraph 2 above, the Loan Parties, collectively, are Solvent, before and after giving effect to the initial Credit Extensions (and the disbursement and application of the proceeds thereof).
[Signature Page Follows]
EXHIBIT E
Page 1
IN WITNESS WHEREOF , the undersigned has executed this Certificate as of the date first written above.
MESA AIR GROUP, INC., |
By: |
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Name: |
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Title: Chief Financial Officer |
EXHIBIT E
Page 2
EXHIBIT F
FORM OF BORROWING BASE CERTIFICATE
To: CIT BANK, N.A., as Administrative Agent
Please refer to the Credit Agreement dated as of August 12, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement) among MESA AIRLINES, INC., a Nevada corporation and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company, and such other Persons joined thereto as a Borrower from time to time (each a Borrower and together, the Borrowers), MESA AIR GROUP, INC., a Nevada corporation, as a guarantor, the other the Guarantors from time to time party thereto, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. This Borrowing Base Certificate (this Certificate), together with supporting calculations attached hereto, is delivered to you pursuant to the terms of the Credit Agreement. Capitalized terms used but not otherwise defined herein shall have the same meanings herein as in the Credit Agreement.
The Borrower Representative hereby certifies and warrants to the Administrative Agent and the Lenders that at the close of business on (the Calculation Date):
(i) |
the Borrowing Base was $ , computed as set forth on the schedule attached hereto; |
(ii) |
the location of any pooled Spare Parts are set forth on the schedule attached hereto; |
(iii) |
the location of each Eligible Spare Engine is set forth on the schedule attached hereto; and |
(iv) |
no PMA Parts have been installed on any Eligible Spare Engine. |
The Borrower Representative has caused this Certificate to be executed and delivered by its officer thereunto duly authorized on ,
[Signature Page Follows]
EXHIBIT F
Page 1
(Signature Page to Borrowing Base Certificate)
Borrower Representative: |
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MESA AIRLINES, INC., |
By: |
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Name: |
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Title: |
EXHIBIT F
Page 2
SCHEDULE TO BORROWING BASE CERTIFICATE
DATED AS OF [ ]
[CALCULATION SCHEDULE TO BE ATTACHED]
POOLED SPARE PARTS | LOCATION | |
ELIGIBLE SPARE ENGINES | LOCATION | |
ESN [965258] | ||
ESN 965222 | ||
ESN [965246] | ||
ESN [965213] | ||
ESN [965252] | ||
[others] |
EXHIBIT F
Page 3
EXHIBIT G - 1
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to the Credit and Guaranty Agreement, dated as of August 12, 2016 (as it may be amended, amended and restated, joined, supplemented or otherwise modified from time to time, the Credit Agreement), by and among MESA AIRLINES, INC., a Nevada corporation and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company, and such other Persons joined thereto as a Borrower from time to time (each a Borrower and together, the Borrowers), MESA AIR GROUP, INC., a Nevada corporation, as a guarantor, the other the Guarantors from time to time party thereto, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Section 3.01(f)(ii)(B) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code (the Code), (iii) it is not a ten percent shareholder of a Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to a Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrowers with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrowers and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrowers and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF LENDER] |
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By: |
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Name: |
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Title: |
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Date: , 20[ ] |
EXHIBIT G-1
Page 1
EXHIBIT G - 2
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to the Credit and Guaranty Agreement, dated as of August 12, 2016 (as it may be amended, amended and restated, joined, supplemented or otherwise modified from time to time, the Credit Agreement), by and among MESA AIRLINES, INC., a Nevada corporation and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company, and such other Persons joined thereto as a Borrower from time to time (each a Borrower and together, the Borrowers), MESA AIR GROUP, INC., a Nevada corporation, as a guarantor, the other the Guarantors from time to time party thereto, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Section 3.01(f)(ii)(B) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code (the Code), (iii) it is not a ten percent shareholder of a Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to a Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF PARTICIPANT] |
By: |
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Name: |
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Title: |
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Date: , 20[ ] |
EXHIBIT G-2
Page 1
EXHIBIT G - 3
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to the Credit and Guaranty Agreement, dated as of August 12, 2016 (as it may be amended, amended and restated, joined, supplemented or otherwise modified from time to time, the Credit Agreement), by and among MESA AIRLINES, INC., a Nevada corporation and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company, and such other Persons joined thereto as a Borrower from time to time (each a Borrower and together, the Borrowers), MESA AIR GROUP, INC., a Nevada corporation, as a guarantor, the other the Guarantors from time to time party thereto, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Section 3.01(f)(ii)(B) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code (the Code), (iv) none of its direct or indirect partners/members is a ten percent shareholder of a Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to a Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-RIMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
EXHIBIT G-3
Page 1
[NAME OF PARTICIPANT] |
By: |
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Name: |
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Title: |
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Date: , 20[ ] |
EXHIBIT G-3
Page 2
EXHIBIT G - 4
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to the Credit and Guaranty Agreement, dated as of August 12, 2016 (as it may be amended, amended and restated, joined, supplemented or otherwise modified from time to time, the Credit Agreement), by and among MESA AIRLINES, INC., a Nevada corporation and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company, and such other Persons joined thereto as a Borrower from time to time (each a Borrower and together, the Borrowers), MESA AIR GROUP, INC., a Nevada corporation, as a guarantor, the other the Guarantors from time to time party thereto, the Lenders from time to time party thereto and CIT BANK, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
Pursuant to the provisions of Section 3.01(f)(ii)(B) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code (the Code), (iv) none of its direct or indirect partners/members is a ten percent shareholder of a Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to a Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Administrative Agent and the Borrowers with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrowers and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrowers and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
EXHIBIT G-4
Page 1
[NAME OF LENDER] |
By: |
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Name: |
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Title: |
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Date: , 20[ ] |
EXHIBIT G-4
Page 2
Exhibit 10.12.2
[Amendment No. 1 to Credit Agreement]
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT dated June 5, 2017 (this Amendment ) is entered into between MESA AIRLINES, INC., ( Mesa ) and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., (together with Mesa, the Borrowers ), MESA AIR GROUP, INC., (the Guarantor ) and CIT BANK, N.A., a national banking association, as lender and administrative agent (Administrative Agent ).
WHEREAS , the Borrowers, Guarantor and the Administrative Agent have entered into that certain Credit and Guaranty Agreement dated as of August 12, 2016 (as amended, supplemented or otherwise modified from time to time, the Credit Agreeme nt ); and
WHEREAS , subject to the terms and conditions of this Amendment, the parties hereto have agreed to amend the Credit Agreement as provided herein.
NOW THEREFORE , in consideration of the mutual agreements contained herein, the parties hereto hereby agree as follows:
SECTION 1. Definitions . Terms used but not defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement.
SECTION 2. Amendment to Article 1.01 of the Credit Agreement . The following new definition will be added, in the appropriate alphabetical order, to Article 1.01 of the Credit Agreement:
El Paso Location means the Eligible Spare Parts Inventory located at 301 George Perry Blvd., Suite B, El Paso, TX 79925 (Locations of Tangible Personal Property #6 on Schedule 5.20(a)) .
SECTION 3. Amendment to Article 6 of the Credit Agreement . The following will be added as new Article 6.23:
6.23 El Paso Location . The Borrowers shall provide the Administrative Agent with evidence of rental payments for the El Paso Location twenty five (25) days after the end of each fiscal month.
SECTION 4. Amendment to Schedule 1.01(a) to the Credit Agreement . Schedule 1.01(a) Part B of the Credit Agreement is hereby amended by adding the following new Section 9:
9. The OLV with respect to Spare Parts located at the El Paso Location shall be capped at $1,500,000.
SECTION 5. Waiver of Landlord Consent . The Administrative Agent hereby agrees to waive the requirement for a Collateral Access Agreement to be provided by the Borrowers, pursuant to Part B, Section 4 of Schedule 1.01(a) to the Credit Agreement, in respect of the El Paso Location.
[Amendment No. 1 to Credit Agreement]
SECTION 6. Ratification . Except as expressly amended hereby, each and all of the terms, provisions and covenants of the Credit Agreement shall remain unchanged and in full force and effect.
SECTION 7. Governing Law . This Amendment shall be governed by, construed and enforced in accordance with the laws of the state of New York, without regard to choice of law principles.
SECTION 8. Counterparts . This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. Delivery by telecopier or other electronic transmission of an executed counterpart of a signature page to this Amendment shall be effective as delivery of an original executed counterpart of this Amendment.
SECTION 9. Severability . The provisions of this Amendment are intended to be severable. If any provision of this Amendment shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
[Amendment No. 1 to Credit Agreement]
IN WITNESS WHEREOF , the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Amendment as of the date first above written.
MESA AIRLINES, INC. | ||
By: |
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Name: Brian S. Gillman |
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Title: EVP & General Counsel |
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MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C. |
||
By: |
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Name: Brian S. Gillman |
||
Title: EVP & General Counsel |
||
MESA AIR GROUP, INC. | ||
By: |
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Name: |
Brian S. Gillman |
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Title: EVP & General Counsel |
||
CIT BANK, N.A. | ||
By: |
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Name: |
||
Title: |
[Amendment No. 1 to Credit Agreement]
IN WITNESS WHEREOF , the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Amendment as of the date first above written.
MESA AIRLINES, INC. | ||
By: |
|
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Name: | ||
Title: | ||
MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C. |
||
By: |
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Name: | ||
Title: | ||
MESA AIR GROUP, INC. | ||
By: |
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Name: | ||
Title: | ||
CIT BANK, N.A. | ||
By: |
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Name: | ||
Title: |
Exhibit 10.12.3
[Amendment No. 2 to Credit Agreement]
AMENDMENT NO. 2 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT dated June , 2017 (this Amendment ) is entered into between MESA AIRLINES, INC., ( Mesa ) and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., (together with Mesa, the Borrowers ), MESA AIR GROUP, INC., (the Guarantor ) and CIT BANK, NA. , a national banking association, as lender and administrative agent ( Administrative Agent ),
WHEREAS , the Borrowers, Guarantor and the Administrative Agent have entered into that certain Credit and Guaranty Agreement dated as of August 12, 2016, as amended by Amendment No, 1 to Credit Agreement dated June 5, 2017 (as further amended, supplemented or otherwise modified from time to time, the Credit Agreement ); and
WHEREAS , subject to the terms and conditions of this Amendment, the parties hereto have agreed to amend the Credit Agreement as provided herein.
NOW THEREFORE , in consideration of the mutual agreements contained herein, the parties hereto hereby agree as follows:
Section 1. Waiver of Software License Agreement .
(a) The Administrative Agent hereby agrees to waive the requirement for a collateral assignment of license agreement to be provided by the Borrowers, pursuant to Article 6.19(c) of the Credit Agreement.
(b) In lieu of this requirement, the Borrowers hereby agree to provide detailed monthly reporting of all their Spare Parts Inventory. Such monthly report is to be in substantially similar digital form and substance to the example extract report attached here as Exhibit A, and is to be provided to the Administrative Agent twenty five (25) days after the end of each fiscal month,
(c) Should a Default or Event of Default have occurred and be continuing, the Administrative Agent is entitled to request, at any frequency and in form and substance satisfactory to the Administrative Agent, additional Spare Parts Inventory data.
Section 2. Ratification . Except as expressly amended hereby, each and all of the terms, provisions and covenants of the Credit Agreement shall remain unchanged and in full force and effect.
Section 3. Governing Law . This Amendment shall be governed by, construed and enforced in accordance with the laws of the state of New York, without regard to choice of law principles.
Section 4. Counterparts . This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. Delivery by telecopier or other electronic transmission of an executed counterpart of a signature page to this Amendment shall be effective as delivery of an original executed counterpart of this Amendment.
Section 5. Severability . The provisions of this Amendment are intended to be severable. If any provision of this Amendment shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or
[Amendment No. 2 to Credit Agreement]
unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
[Amendment No. 2 to Credit Agreement]
IN WITNESS WHEREOF , the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Amendment as of the date first above written.
MESA AIRLINES, INC. | ||
By: |
|
|
Name: | ||
Title: | ||
MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C. |
||
By: |
|
|
Name: | ||
Title: | ||
MESA AIR GROUP, INC. | ||
By: |
|
|
Name: | ||
Title: | ||
CIT BANK, N.A. | ||
By: |
|
|
Name: | ||
Title: |
[Amendment No. 2 to Credit Agreement]
EXHIBIT A
Example Spare Parts Inventory Report
REAL_INVTY
Location | Bin Location | Vendor PIN | Desc |
Part
Type |
Batch # | |||||
IAH |
INSPECTION | 4124T90G03 | ROTOR ASSY-HIGH PRESSURE TUR8 | R | 2088582 | |||||
IAH |
H BULK | 1703781A | AIR DRIVEN GENERATOR | R | 1822666 | |||||
IAD |
HANGAR FLOOR | WE3800770-3 | APU AUX POWER UNIT | R | 2082931 | |||||
PHQ |
IHR | WE3800770-3 | APU AUX POWER UNIT | R | 2072699 | |||||
PHX |
BULK | W63800770-3 | APU AUX POWER UNIT | R | 2093667 | |||||
EHQ |
ENG TRAINING | CF34-8C5 | ENGINE, GE TURBOFAN (CRJ-900) | R | 1709604 | |||||
ERQ |
IHR | CF34-8C5B1 | ENGINE, GE TURBOFAN | R | 2058888 | |||||
1701317A | GENERATOR, INTEGRATED DRIVE | R | 2091434 | |||||||
IAH |
H BULK | 1701317A | GENERATOR, INTEGRATED DRIVE | R | 1891785 | |||||
IAH |
H BULK | 415200-1017 | HORIZONTAL STABILIZER ACTUATOR | R | 1859737 | |||||
IAH |
ENGINE SHOP | 4125T07G09 | NOZZLE ASSY-STAGE 1 HPT | R | 1991377 | |||||
PHX |
21.09-A | 670BA36006K5 | KIT, AIR LEAK BLEED | K | 0403922 | |||||
IAH |
H BULK | 1701317A | GENERATOR, INTEGRATED DRIVE | R | 1960424 | |||||
IAH |
ENGINE SHOP | 4124T90G03 | ROTOR ASSY-HIGH PRESSURE TURB | R | 1991399 | |||||
EHQ |
IHR | CN626-1000-003 | AFT CORE COWL ASSY | A | 1990862 | |||||
CN626-1000-003 | AFT CORE COWL ASSY | R | 2080036 | |||||||
IAH |
ENGINE SHOP | CN626-1000-003 | AFT CORE COWL ASSY | R | 1697279 | |||||
EHQ |
ENGINE SHOP | CN626-1000-003 | AFT CORE COWL ASSY | R | 1692725 | |||||
IAD |
HANGAR FLOOR | CN626-1000-003 | AFT CORE COWL ASSY | R | 2038880 | |||||
52000-21 | STRUT ASSY, NLG DRESSED SHOCK | R | 2085973 | |||||||
IAH |
03.01-C-ESDS | HG2100AB02 | INERTIAL REFERENCE UNIT | R | 1778555 | |||||
52000-9 | STRUT ASSY, NLG DRESSED SHOCK | R | 2038444 | |||||||
PHQ |
R1-08-D | 52000-17 | STRUT ASSY, NLG DRESSED SHOCK | R | 1658358 | |||||
IAH |
ES1 | 4144T59G02 | HPT STATOR ASSY | R | 2088593 | |||||
EHQ |
ENGINE SHOP | CF34-3B1 | ENGINE-G.E (TBS) | R | 1524992 | |||||
EHQ |
ENGINE SHOP | CF34-3B1 | ENGINE-G.E (TBS) | R | 1584308 | |||||
PHX |
BULK | CC670-14002-7 | ASSY, FLAP VANE INBOARD | R | 2078172 | |||||
IAH |
02-01-D-ESDS | 415300-1005 | HORIZONTAL STABILIZER ACTUATOR | R | 2079088 | |||||
DFW |
BULK-2 | TY2152-15A | ACTUATOR, FEEDBACK | R | 2089508 | |||||
DFW |
LINE-BULK | TY2152-15A | ACTUATOR, FEEDBACK | R | 2073341 | |||||
IAH |
INSPECTION | 415300-1005 | HORIZONTAL STABILIZER ACTUATOR | R | 2091529 | |||||
1000700-5 | AIR CYCLE MACHINE | R | 2098422 | |||||||
DFW |
BULK-2 | 766277B | GENERATOR, INTEGRATED DRIVE | R | 2080949 | |||||
PHX |
BULK | 766277B | GENERATOR, INTEGRATED DRIVE | R | 2094633 |
[Amendment No. 2 to Credit Agreement]
REAL_INVTY
Location | S/N | Last Task | PRICE | EXTDPRICE | Status |
Pending (y) |
A/c
Installed |
In transfer | ||||||||||||||
IAH |
RDUC1523 | REP | 585,000 | 585,000 | 0 | |||||||||||||||||
IAH |
0784 | NEW | 430,201 | 430,201 | 0 | |||||||||||||||||
IAD |
P-224 | REP | 394,770 | 394,770 | 0 | |||||||||||||||||
PHQ |
P-431 | REP | 394,770 | 394,770 | UNS | 0 | ||||||||||||||||
PHX |
P-251 | REP | 394,770 | 394,770 | 0 | |||||||||||||||||
EHQ |
194480 | NRA | 351,118 | 351,118 | UNS | 0 | ||||||||||||||||
EHQ |
965468 | REP | 351,118 | 351,118 | UNS | 0 | ||||||||||||||||
2343 | NEW | 350,000 | 350,000 | UNS | 0 | |||||||||||||||||
IAH |
2409 | REP | 350,000 | 350,000 | 0 | |||||||||||||||||
IAH |
00362 | INS | 349,729 | 349,729 | 0 | |||||||||||||||||
IAH |
JMM2447A | REP | 349,428 | 349,428 | 0 | |||||||||||||||||
PHX |
NEW | 22,501 | 337,520 | 0 | ||||||||||||||||||
IAH |
0670 | OVH | 312,738 | 312,738 | 0 | |||||||||||||||||
IAH |
RDUC1291 | REP | 306,360 | 308,360 | 0 | |||||||||||||||||
EHQ |
SB/0758 | NEW | 290,715 | 290,715 | UNS | 0 | ||||||||||||||||
SB/0285 | NEW | 290,715 | 290,715 | UNS | 0 | |||||||||||||||||
IAH |
SB0503 | RFO | 290,715 | 290,715 | 0 | |||||||||||||||||
EHQ |
SB/0063 | REP | 290,715 | 290,715 | UNS | 0 | ||||||||||||||||
IAD |
SB0748 | REP | 290,715 | 290,715 | 0 | |||||||||||||||||
MA1055 | REP | 287,500 | 287,500 | UNS | 0 | |||||||||||||||||
IAH |
56070996 | REP | 272,791 | 272,791 | 0 | |||||||||||||||||
MA1008 | OVH | 260,833 | 260,833 | UNS | 0 | |||||||||||||||||
PHQ |
MA0130 | NRA | 260,833 | 260,833 | UNS | 0 | ||||||||||||||||
IAH |
RDUD1505 | REP | 251,232 | 251,232 | 0 | |||||||||||||||||
EHQ |
807105C | INS | 250,000 | 250,000 | UNS | 0 | ||||||||||||||||
EHQ |
807108C | UNK | 250,000 | 250,000 | UNS | 0 | ||||||||||||||||
PHX |
15274 | REP | 247,300 | 247,300 | 0 | |||||||||||||||||
IAH |
30378 | REP | 240,178 | 240,178 | 0 | |||||||||||||||||
DFW |
477 | INS | 233,374 | 233,374 | 0 | |||||||||||||||||
DFW |
821 | INS | 233,374 | 233,374 | 0 | |||||||||||||||||
IAH |
4034 | REP | 226,968 | 226,968 | 0 | |||||||||||||||||
2013100026 | NEW | 221,632 | UNS | 0 | ||||||||||||||||||
DFW |
0962 | OVH | 218,516 | 218,616 | 0 | |||||||||||||||||
PHX |
0402 | OVH | 218,307 | 218,307 | 0 |
[Amendment No. 2 to Credit Agreement]
REAL_INVTY
Location | In repair | Avl Qty | A/C Type | A/C Series | Owner Code | CHAPTER NO, PARENT SIN | ||||||
IAH |
0 | 1 | CRE5 | 795 | 72 | |||||||
IAN |
0 | 1 | EMB | 175 | AAR3 | 24 | ||||||
IAD |
0 | 1 | CRJ | 079 | AAR2 | 49 | ||||||
PHQ |
0 | 1 | CRJ | 079 | AAR2 | 49 | ||||||
PHX |
0 | 1 | CRJ | 079 | AAR2 | 49 | ||||||
EHQ |
0 | 1 | CRJ | 900 | 72 | |||||||
EHQ |
0 | 1 | CRJ | 700 | 72 | |||||||
1 | 0 | EMB | 175 | AAR3 | 24 | |||||||
IAH |
0 | 1 | EMB | 175 | AAR3 | 24 | ||||||
IAH |
0 | 1 | EMB | 175 | AAR3 | 27 | ||||||
IAH |
0 | 1 | CRJ | 079 | 72 | |||||||
PHX |
0 | 15 | CRJ | 900 | 38 | |||||||
IAH |
0 | 1 | EMB | 175 | AAR3 | 24 | ||||||
IAH |
0 | 1 | CRE6 | 795 | 72 | |||||||
EHQ |
0 | 1 | CRJ | 079 | 72 | |||||||
1 | 0 | CRJ | 079 | 72 | ||||||||
IAH |
0 | 1 | CRJ | 079 | 72 | |||||||
EHQ |
0 | 1 | CRJ | 079 | 72 | |||||||
IAD |
0 | 1 | CRJ | 079 | 72 | |||||||
1 | 0 | CRJ | 079 | 32 | ||||||||
IAH |
0 | 1 | EMB | 178 | AAR3 | 34 | ||||||
1 | 0 | CRJ | 900 | 32 | ||||||||
PHQ |
0 | 1 | CRJ | 700 | 32 | |||||||
IAH |
0 | 1 | CRJ | 795 | 72 | |||||||
EHQ |
0 | 1 | CRJ | 200 | 72 | |||||||
EHQ |
0 | 1 | CRJ | 200 | 72 | |||||||
PHX |
0 | 1 | CRJ | 279 | 27 | |||||||
IAH |
0 | 1 | EMB | 175 | AAR3 | 27 | ||||||
OFW |
0 | 1 | CRJ | 079 | AAR1 | 78 | ||||||
OFW |
0 | 1 | CRJ | 079 | AAR1 | 78 | ||||||
IAH |
0 | 1 | EMB | 175 | AAR3 | 27 | ||||||
1 | 0 | EMB | 175 | 21 | ||||||||
DFW |
0 | 1 | CRJ | 079 | 24 | |||||||
PHX |
0 | 1 | CRJ | 079 | AAR2 | 24 |
Exhibit 10.12.4
[Amendment No, 3 to Credit Agreement]
AMENDMENT NO. 3 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT dated 2017 (this Amendment ) is entered into between MESA AIRLINES , INC ., ( Mesa ) and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C. , (together with Mesa, the Borrowers ), MESA AIR GROUP , INC ,; (the Guarantor ) and CIT BANK , N.A. , a national banking association, as lender and administrative agent ( Administrative Agent ).
WHEREAS , the Borrowers, Guarantor and the Administrative Agent have entered into that certain Credit and Guaranty Agreement dated as of August 12, 2016, as amended by Amendment No. 1 to Credit Agreement dated June 5, 2017, as amended by Amendment No. 2 to Credit Agreement dated June 27, 2017 (and as further amended, supplemented or otherwise modified from time to time, the Credit Agreement ); and
WHEREAS , subject to the terms and conditions of this Amendment, the parties hereto have agreed to amend the Credit Agreement as provided herein,
NOW THEREFORE , in consideration of the mutual agreements contained herein, the parties hereto hereby agree as follows:
Section 1. Definitions . Tends used but not defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement.
Section 2. Amendment to Article 1.01 of the Credit Agreement . The definition of Borrowing Base Certificate Date will be deleted in its entirety and replaced with the following:
Borrowing Base Certificate Date means (a) the date twenty five (25) days after the end of each fiscal month, (b) each date (limited to once per calendar month) a Borrowing is made in connection with the purchase of (i) any Eligible Spare Engines or (ii) any Eligible Spare Parts Inventory in a single transaction with an aggregate purchase price in excess of $1,000,000, or (c) the date of any Disposition (or more frequently as requested by the Administrative Agent following an Event of Default).
Section 3. Amendment to Article 2.05(b)(ii) of the Credit Agreement . Article 2.05(b)(ii) of the Credit Agreement will be deleted in its entirety and replaced with the following:
(ii) Dispositions and Involuntary Dispositions . The Borrowers shall prepay the Revolving Loans and thereafter, all other Obligations, promptly following the occurrence of any Disposition or Involuntary Disposition that results in a Borrowing Base Deficiency, in an aggregate amount necessary to reduce such Borrowing Base Deficiency to zero (each such prepayment to be applied as set forth in clause (v) below) excluding the proceeds of any voluntary Disposition described in clause (i) of Section 7.05.
Section 4. Amendment to Article 6.01(c) of the Credit Agreement . Article 6.01(c) of the Credit Agreement is amended by adding the words (but only with respect to the First, Second and Third Fiscal Quarters ) following the words Concurrently with any delivery under clause (a) or (b).
[Amendment No, 3 to Credit Agreement]
Section 5. Amendment to Article 6.02(g) of the Credit Agreement . Article 6.02(g) of the Credit Agreement will be deleted in its entirety and replaced with the following:
(g) Borrowing Base Certificate . No later than each Borrowing Base Certificate Date, a Borrowing Base Certificate in accordance with Section 6.21. In the event that the figures in the Borrowing Base Certificate do not reconcile with the final Appraisal figures referred to in Section 6,02(h), the Borrowers will provide a revised Borrowing Base Certificate together with the Appraisals;
Section 6. Amendment to Article 6,02(h) of the Credit Agreement . Article 6.02(h) of the Credit Agreement will be deleted in its entirety and replaced with the following:
(h) Appraisals . Within (i) thirty (30) days after the end of each Fiscal Quarter ending each June 30 and December 31, a physical Appraisal completed by the Appraiser as of the end of such Fiscal Quarter for all Eligible Spare Engines and Eligible Spare Parts Inventory, in form and substance reasonably acceptable to the Administrative Agent and (ii) thirty (30) days after the end of each Fiscal Quarter ending each March 31 and September 30 only, a desktop Appraisal completed by the Appraiser as of the end of such Fiscal Quarter for all Eligible Spare Engines and Eligible Spare Parts Inventory, in form and substance reasonably acceptable to the Administrative Agent; and Amendment to Article 6.21 of the Credit Agreement . The first sentence of Article 6.21 of the Credit Agreement shall be deleted in its entirety.
Section 8. Amendment to Article 7,05 of the Credit Agreement . Article 7.05 of the Credit Agreement will be deleted in its entirety and replaced with the following:
7.05 Dispositions . Except to the extent otherwise perniitted in the Security Agreement, no Borrower will, nor will any Borrower permit any Subsidiary or any other Person acting by, through or under it to, sell, transfer, lease or dispose of any of the Collateral without the prior written consent of the Administrative Agent, which consent may be withheld in the Administrative Agents sole discretion. Notwithstanding the foregoing or anything to the contrary set forth in the Security Agreement, the Borrowers shall be permitted to sell, transfer and dispose of (i) Collateral not constituting Eligible Spare Parts, Platform Spare Parts or Eligible Spare Engines, (ii) Collateral consisting of Eligible Spare Parts or Platform Spare Parts in an amount up to $250,000 per calendar month, and (iii) Collateral consisting of Eligible Spare Engines, in each case, without the consent of the Administrative Agent and without penalty, and solely with respect to clauses (ii) and (iii) above, so long as the Net Cash Proceeds from such sales are used to prepay the Loans in accordance with Section 2,05(b) of this Agreement.
Section 9. Ratification . Except as expressly amended hereby, each and all of the turns, provisions and covenants of the Credit Agreement shall remain unchanged and in full force and effect.
Section 10. Governing Law . This Amendment shall be governed by, construed and enforced in accordance with the laws of the state of New York, without regard to choice of law principles.
[Amendment No, 3 to Credit Agreement]
Section 11. Counterparts . This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. Delivery by telecopier or other electronic transmission of an executed counterpart of a signature page to this Amendment shall be effective as delivery of an original executed counterpart of this Amendment.
Section 12. Severability . The provisions of this Amendment are intended to be severable. If any provision of this Amendment shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
[Amendment No, 3 to Credit Agreement]
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Amendment as of the date first above written.
MESA AIRLINES, INC. | ||
By: |
|
Name: | ||
Tittle: | ||
MESA AIR GROUP AIRLINE | ||
INVENTORY MANAGEMENT, L.L.C. |
By: |
|
Name: | ||
Tittle: |
MESA AIR GROUP, INC. | ||
By: |
|
Name: | ||
Tittle: |
CIT BANK, N.A. | ||
By: |
|
Name: | ||
Tittle: |
Exhibit 10.12.5
[Amendment No. 4 to Credit Agreement]
AMENDMENT NO. 4 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 4 TO CREDIT AGREEMENT dated April 27, 2018 (this Amendment ) is entered into between MESA AIRLINES, INC., ( Mesa ) and MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., (together with Mesa, the Borrowers ), MESA AIR GROUP, INC., (the Guarantor ) and CIT BANK, N.A., a national banking association, as lender and administrative agent ( Administrative Agent ),.
WHEREAS, the Borrowers, Guarantor and the Administrative Agent have entered into that certain Credit and Guaranty Agreement dated as of August 12, 2016, as amended by Amendment No. 1 to Credit Agreement dated June 5, 2017, as amended by Amendment No. 2 to Credit Agreement dated June 27, 2017, as amended by Amendment No. 3 to Credit Agreement dated September 19, 2017 (and as further amended, supplemented or otherwise modified from time to time, the Credit Agreement ); and
WHEREAS, subject to the terms and conditions of this Amendment, the parties hereto have agreed to amend the Credit Agreement as provided herein.
NOW THEREFORE, in consideration of the mutual agreements contained herein, the parties hereto hereby agree as follows:
Section 1. Definitions . Terms used but not defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement.
Section 2. Amendment to Article 8.01(a) of the Credit Agreement . Article 8.01(a) of the Credit Agreement will be deleted in its entirety and replaced with the following:
(a) Consolidated Interest and Rental Coverage Ratio . The Consolidated Interest and Rental Coverage Ratio as of the end of each Fiscal Quarter ending on the dates set forth below shall not be less than the ratio set forth opposite such Fiscal Quarter:
Fiscal Quarter Ended |
Consolidated
|
|
September 2016 | 1.20 to 1.00 | |
December 2016 | 1.20 to 1.00 | |
March 2017 | 1.20 to 1.00 | |
June 2017 | 1.20 to 1.00 | |
September 2017 | 1.20 to 1.00 | |
December 2017 | 1.20 to 1.00 | |
March 2018 | 1.30 to 1.00 | |
June 2018 | 1.30 to 1.00 | |
September 2018 | 1.40 to 1.00 | |
December 2018 | 1.50 to 1.00 | |
Thereafter | 1.75 to 1.00 |
[Amendment No. 4 to Credit Agreement]
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Amendment as of the date first above written.
MESA AIRLINES, INC. |
||
By: |
||
Name: |
||
Title: |
||
MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C. |
||
By: |
||
Name: |
||
Title: |
||
MESA AIR GROUP, INC. |
||
By: |
||
Name: |
||
Title: |
||
CIT BANK, N.A. |
||
By: |
||
Name: |
||
Title: |
Exhibit 10.13.1
EXECUTION VERSION
MORTGAGE AND SECURITY AGREEMENT
(MESA SPARE PARTS FACILITY)
dated as of August 12, 2016
made by
MESA AIRLINES, INC.,
MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C.,
AND THE OTHER GRANTORS REFERRED TO HEREIN,
as Grantors
in favor of
CIT BANK, N.A.
as Collateral Agent
EXECUTION VERSION
TABLE OF CONTENTS
Page | ||||||
ARTICLE 1 | DEFINITIONS | 5 | ||||
Section 1.01 | Definitions | 5 | ||||
ARTICLE 2 | COVENANTS OF THE GRANTORS | 8 | ||||
Section 2.01 | Engines | 8 | ||||
Section 2.02 | Pledged Spare Parts | 13 | ||||
Section 2.03 | Insurance | 16 | ||||
Section 2.04 | Inspection | 17 | ||||
Section 2.05 | Other Representations, Warranties and Covenants | 17 | ||||
ARTICLE 3 | EVENT OF LOSS | 20 | ||||
Section 3.01 | Event of Loss with Respect to an Engine | 20 | ||||
Section 3.02 | Event of Loss with Respect to a Pledged Spare Part | 20 | ||||
ARTICLE 4 | REMEDIES | 20 | ||||
Section 4.01 | Event of Default | 20 | ||||
Section 4.02 | Remedies with Respect to Collateral | 21 | ||||
Section 4.03 | Waiver of Appraisement, Etc | 23 | ||||
Section 4.04 | Application of Proceeds | 23 | ||||
Section 4.05 | Remedies Cumulative | 23 | ||||
Section 4.06 | Discontinuance of Proceedings | 24 | ||||
ARTICLE 5 | TERMINATION OF MORTGAGE | 24 | ||||
Section 5.01 | Termination of Mortgage | 24 | ||||
Section 5.02 | Certification by the Grantors | 24 | ||||
ARTICLE 6 | MISCELLANEOUS | 24 | ||||
Section 6.01 | No Legal Title to Collateral in Lender | 24 | ||||
Section 6.02 | Sale of Collateral by Collateral Agent is Binding | 25 | ||||
Section 6.03 | Benefit of Mortgage | 25 | ||||
Section 6.04 | Notices | 25 | ||||
Section 6.05 | Governing Law | 25 | ||||
Section 6.06 | Jurisdiction and Waiver of Right to Trial by Jury | 25 | ||||
Section 6.07 | Grantors Duties | 25 | ||||
Section 6.08 | Counterparts | 25 | ||||
Section 6.09 | Waiver; Amendment | 26 | ||||
Section 6.10 | Obligations Absolute | 26 | ||||
Section 6.11 | Successors and Assigns | 26 | ||||
Section 6.12 | Conflicts with Other Loan Documents | 26 |
i
ARTICLE 7 | COLLATERAL AGENT | 27 | ||||
EXHIBITS | ||||||
Exhibit A | Form of Mortgage Supplement | |||||
Exhibit B | Form of Grantor Supplement | |||||
Exhibit C | Insurance Provisions |
ii
MORTGAGE AND SECURITY AGREEMENT
(MESA SPARE PARTS FACILITY)
THIS MORTGAGE AND SECURITY AGREEMENT (MESA SPARE PARTS FACILITY) dated as of August 12, 2016 (this Mortgage ) is made by MESA AIRLINES, INC., a Nevada corporation ( Mesa ), MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company ( Mesa Inventory ) and each other Loan Party who becomes an Additional Grantor hereunder (each, a Grantor and together with Mesa and Mesa Inventory, the Grantors ), in favor of CIT BANK, N.A., acting as administrative agent and collateral agent (in such capacity, the Collateral Agent ) for the Lenders.
BACKGROUND
A. Pursuant to that certain Credit and Guaranty Agreement dated August 12, 2016 (as the same may be amended, restated, amended and restated, modified, supplemented, renewed or replaced from time to time, the Credit Agreement ) among Grantors, the Loan Parties party thereto, the Lenders party thereto, the Collateral Agent, as administrative agent, the Lenders have agreed to make certain Loans to the Borrowers. All capitalized terms used in this Mortgage without definition have the meanings specified in the Credit Agreement.
B. In order to induce the Secured Parties to enter into the Credit Agreement and the other Loan Documents and in order to induce the Lenders to make the Loans as provided for in the Credit Agreement, each Grantor has agreed to execute and deliver this Mortgage to the Collateral Agent for the ratable benefit of the Lenders (the Collateral Agent, Lenders and the Administrative Agent collectively referred to herein as the Secured Parties ).
GRANTING CLAUSE
In order to secure the prompt and complete payment and performance when due of the Obligations of each Grantor and each Borrower under the Credit Agreement and each of the other Loan Documents, to secure the performance and observance by each Grantor and each Borrower of all the agreements, covenants and provisions contained herein and in the Loan Documents to which they are a party for the benefit of the Collateral Agent on behalf of the Secured Parties and each of the other Indemnitees, and for the uses and purposes and subject to the terms and provisions hereof, and in consideration of the premises and of the covenants herein contained, and of other good and valuable consideration to the parties to the Loan Documents, the receipt and adequacy whereof are hereby acknowledged, each Grantor, as of the date hereof if it is a party to this Mortgage as of the date hereof, or otherwise as of the date on which such Grantor becomes a party to this Mortgage by the execution and delivery of a Grantor Supplement, has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Collateral Agent, its successors and assigns, for the security and benefit of the Secured Parties, a first priority continuing security interest in and first priority mortgage Lien on all estate, right, title and interest of each Grantor in, to and under the following described property, rights, interests and privileges whether now or hereafter acquired and subject to the Lien hereof (which collectively, including all property hereafter specifically subjected to the
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
Lien of this Mortgage by any instrument supplemental hereto, are herein called the Collateral ):
(1) each Engine (each such Engine having 550 or more rated take-off horsepower or the equivalent thereof) as the same is now and will hereafter be constituted, whether now or hereafter acquired and subjected to the Lien hereof, and whether or not any such Engine shall be installed in or attached to any airframe and all substitutions or replacements therefor, as provided in this Mortgage, together with all Parts of whatever nature that are from time to time included in any Engine , whether now or hereafter acquired and subjected to the Lien hereof, and all renewals, substitutions, replacements, additions, improvements, accessories and accumulations with respect to any of the foregoing, and all records, logs, manuals, maintenance data and inspection, modification and overhaul records and other related materials with respect to any of the foregoing (as may be required to be maintained by the Grantors under an FAA (or similar aviation authority) approved maintenance program);
(2) all Spare Parts currently owned or hereafter acquired by the Grantors, including, without limitation, Repairable Spare Parts, Rotable Spare Parts, Expendable Spare Parts and Life Limited Parts, and all substitutions or replacements therefor (collectively, the Qualified Spare Parts ); provided, however, that the following shall be excluded from the Lien of this Mortgage: any Qualified Spare Part so long as it is incorporated in, installed on, attached or appurtenant to, or being used on, an aircraft or engine (such Qualified Spare Parts, giving effect to such exclusions, the Pledged Spare Parts );
(3) the rights of the Grantors under any warranty or indemnity, express or implied, regarding title, materials, workmanship, design or patent infringement or related matters in respect of the Pledged Spare Parts;
(4) (i) the Engine Warranties and (ii) any relevant purchase agreement and bill of sale related to the Engines, in each case to the extent the same relate to continuing rights of the Grantors in respect of any warranty, indemnity or agreement, express or implied, as to title, materials, or workmanship, with respect to an Engine, together in each case under this clause 4 with all rights, powers, privileges, options and other benefits of the Grantors thereunder with respect to such Engine, including, without limitation, the right to make all waivers and agreements, to give and receive all notices and other instruments or communications, to take such action upon the occurrence of a default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, as shall be permitted thereby or by Law, and to do any and all other things that either Grantor is or may be entitled to do thereunder;
(5) all proceeds with respect to the requisition of title to or use of each Engine or any Part thereof, or any Pledged Spare Parts, all insurance proceeds or indemnity payments with respect to any of the foregoing and any other proceeds of any kind resulting from an Event of Loss;
(6) the Accounts and all moneys and securities now or hereafter paid or deposited or required to be paid or deposited to the Accounts or with the Collateral Agent by or for the
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account of the Grantors pursuant to the terms hereof and held or required to be held in the Accounts or by the Collateral Agent hereunder;
(7) any and all property that may, from time to time hereafter, in accordance with the provisions of the Loan Documents, by delivery or by Mortgage Supplement or by other writing of any kind, for the purposes hereof be in any way subjected to the Lien and security interest hereof or be expressly conveyed, mortgaged, assigned, transferred, deposited hereunder, in which a security interest may be granted by the Grantors and/or pledged by the Grantors, or any Person authorized to do so on its behalf or with its consent, to and with the Collateral Agent, who is hereby authorized to receive the same at any and all times as and for additional security hereunder;
(8) all rents, issues, profits, revenues and other income of the property subjected or required to be subjected to the Lien of this Mortgage;
(9) all right, title, interest, associated rights, claims and demands of the Grantors, in, to and under any interchange agreement, pooling agreement or similar contract related to any Engine or Pledged Spare Part or otherwise in respect of any of same;
(10) all records, logs, manuals, maintenance data and inspection, modification and overhaul records and other related materials with respect to any of the Pledged Spare Parts (as may be required to be maintained by the Grantors under an FAA (or similar aviation authority) approved maintenance program;
(11) any relevant software license or other intellectual property related to the use and/or operation by Holdings, the Grantors or any other Person of the Tracking System, including, without limitation, the inventory management software associated with the Tracking System; and
(12) all proceeds of the foregoing, including, without limitation, all causes of action, claims, associated rights and warranties now or hereafter held by the Grantors in respect of any of the items listed above and, to the extent related to any property described in said clauses or such proceeds, all books, correspondence, credit files, records, invoices and other papers.
HABENDUM CLAUSE
To have and to hold all and singular the aforesaid property unto the Collateral Agent, its successors and assigns, and for the uses and purposes and subject to the terms and provisions set forth in this Mortgage.
1. It is expressly agreed that anything herein contained to the contrary notwithstanding, the Grantors shall remain liable under each of the contracts and agreements included in the Collateral to which it is a party to perform all of the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and neither the Collateral Agent nor any of the Secured Parties shall have any obligation or liability under any such contracts and agreements to which a Grantor is a party by reason of or arising out of the assignment hereunder, nor shall the Collateral Agent or any Secured Party be required or obligated in any manner to perform or fulfill any obligations of the Grantors, or to make any
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payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.
2. Each Grantor does hereby designate the Collateral Agent the true and lawful attorney-in-fact of each Grantor, irrevocably, for good and valuable consideration and coupled with an interest and with full power of substitution (in the name of each Grantor or otherwise), subject to the terms and conditions of this Mortgage, to ask, require, demand, receive, sue for, compound and give acquittance for any and all moneys and claims for moneys due (in each case including insurance and requisition proceeds and indemnity payments) and to become due to either Grantor under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith, to file any claims or take any action or institute any proceedings that the Collateral Agent may deem to be necessary or advisable in the premises as fully as either Grantor itself could do generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral, as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and to do, at the Collateral Agents option and the Grantors expense, at any time, or from time to time, all acts and things that the Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and to effect the intent of this Mortgage. Without limiting the foregoing, the Collateral Agent shall have the right under such power of attorney in its discretion to file any claim or take any other action or proceedings, either in its own name or in the name of the Grantors or otherwise, that the Collateral Agent may reasonably deem necessary or appropriate to protect and preserve the right, title and interest of the Collateral Agent in and to the security intended to be afforded hereby. Each Grantor agrees that after the occurrence and during the continuance of an Event of Default, promptly upon receipt thereof, it will transfer to the Collateral Agent any and all moneys from time to time received by such Grantor constituting part of the Collateral, for distribution by the Collateral Agent pursuant to the Credit Agreement and this Mortgage.
3. Each Grantor agrees that at any lime and from time to time upon the written request of the Collateral Agent, each Grantor, at its sole cost and expense, will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Collateral Agent may reasonably deem necessary in obtaining the full benefits of the assignment hereunder and/or intended to be effected hereunder and of the rights and powers herein granted and/or intended to be granted hereunder including, without limitation, taking such steps as may be required to establish, maintain or enforce the Lien intended to be granted hereunder in full force and effect (whether under the UCC, the Transportation Code, the Cape Town Convention or the Law of any other jurisdiction under which any Engine, any Pledged Spare Part or other portion of the Collateral may be registered).
4. Each Grantor does hereby warrant and represent that none of the Collateral is currently subject to any assignment, pledge or other Lien (other than Permitted Liens), and hereby covenants that it will not otherwise assign or pledge, so long as the Lien of this Mortgage has not been discharged in accordance with the terms hereof, any of its rights, title or interests hereby assigned to any Person other than the Collateral Agent.
5. It is hereby further agreed that any and all property described or referred to in the Granting Clause hereof that is hereafter acquired by the Grantors shall ipso facto, and without
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any other conveyance, assignment or act on the part of the Grantors or the Collateral Agent, become and be subject to the Lien herein granted as fully and completely as though specifically described herein.
FURTHER AGREEMENTS
Each Grantor and the Collateral Agent further agree as follows::
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions . (a) For all purposes of this Mortgage, except as otherwise expressly provided or unless the context otherwise requires:
(1) each of the Grantor , Collateral Agent, any Lender or any other Person includes any successor in interest to it and any permitted transferee, permitted purchaser or permitted assignee of it;
(2) the terms defined in this Article 1 have the meanings assigned to them in this Article 1, and include the plural as well as the singular;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, as in effect from time to time;
(4) the words herein, hereof and hereunder and other words of similar import refer to this Mortgage as a whole and not to any particular Article, Section or other subdivision;
(5) all references in this Mortgage to Articles, Sections and Exhibits refer to Articles, Sections and Exhibits of this Mortgage; and
(6) the terms international interest and prospective international interest has the meaning given to them in (or as appropriate, shall be construed in accordance with) the Cape Town Convention.
(b) For all purposes of this Mortgage, the following capitalized terms have the following respective meanings:
AAR means AAR Supply Chain, Inc. (formerly known as AAR Parts Trading, Inc.), AAR Aircraft & Engine Sales & Leasing, Inc. or any of their Affiliates.
AAR Agreements means (i) the Component Support Agreement (Contract No. 29994), dated October 2014, between AAR Parts Trading, Inc. and Mesa (the AAR Support Agreement ), and (ii) the Aircraft Parts Consignment Access Agreement (Contract No. 27428), dated August 15, 2005, between AAR Aircraft & Engine Sales & Leasing, Inc. and Mesa Air Group, Inc. (the AAR Consignment Agreement ).
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AAR Parts means Rotable Spare Parts owned by AAR and stored at the Spare Parts Locations under the AAR Agreements.
Additional Grantor has the meaning specified in Section 6.09(c).
Additional Insured means each Lender, the Collateral Agent, the Administrative Agent, each other Secured Party under the Credit Agreement and each of their respective Affiliates, officers, directors, shareholders, members, managers, partners, agents, employees and attorneys-in-fact and their respective successors and assigns.
Additional Part has the meaning specified in Section 2.01(g).
Collateral has the meaning specified in the Granting Clause.
Collateral Agent has the meaning specified in the first paragraph of this Mortgage.
Engine means (i) each aircraft engine owned by the Grantor from time to time including those specific engines owned by the Grantor that is listed by Manufacturer, model and Manufacturers serial number in any Mortgage Supplement, and whether or not either initially or from time to lime installed on an airframe; and (ii) any and all Parts that are from time to time incorporated or installed in or attached to any such engine and any and all Parts removed therefrom unless the Lien of this Mortgage shall not apply to such Parts in accordance with Section 2.01.
Engine Warranties means all warranties and assurances, including rights to intellectual property necessary for the operation of an Engine, relating to such Engine and related equipment manufactured by the relevant engine manufacturer.
Equipment means, individually or collectively, as the context may require, the Engines and the Pledged Spare Parts that are the subject of this Mortgage and deemed to be Collateral hereunder.
Event of Loss means, with respect to any item of Equipment, any of the following events with respect to such property: (i) the loss of such property or of the use thereof due to the destruction of or damage to such property that renders repair uneconomic or that renders such property permanently unfit for normal use by the Grantor for any reason whatsoever; (ii) any damage to such property that results in an insurance settlement with respect to such property on the basis of a total loss, or a constructive or compromised total loss; (iii) the theft, hijacking or disappearance of such property, or the confiscation, condemnation, or seizure of, or requisition or taking of title to, or use of, such property by any governmental or purported governmental authority (other than a requisition for use by the United States Government), which in the case of any event referred to in this clause (iii) shall have resulted in the loss of title or possession of such property by the Grantor for a period in excess of 30 consecutive days; (iv) as a result of any Law, rule, regulation, order or other action by the FAA or other governmental body having jurisdiction, use of such property in the normal course of the business of air transportation shall have been prohibited for a period in excess of 180 consecutive days; (v) the requisition for use by any government of registry of the relevant Engine (other than the United States Government)
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or any instrumentality or agency thereof; and (vi) any divestiture of title to an Engine treated as an Event of Loss pursuant to Sections 2.01(c)(i) and 3.01 hereof.
Expendable Spare Part means a Spare Part that, once used, cannot be reused and, if not serviceable, generally cannot be overhauled or repaired.
Grantor has the meaning specified in the first paragraph of this Mortgage.
Grantor Supplement means any supplement to this Mortgage that is delivered from time to time pursuant to the terms hereof in the form of Exhibit B hereto.
Life Limited Parts means a Spare Part that (i) has a finite operating life that is defined by hours, cycles or calendar limit and (ii) cannot be overhauled or repaired when it reaches its life limit.
Manufacturer means, with respect to any item of Equipment, the manufacturer thereof, and its successors and assigns.
Mortgage means this Mortgage and Security Agreement (Mesa Spare Parts Facility), as the same may from time to time be amended, restated, amended and restated, supplemented or otherwise modified.
Mortgage Supplement means any supplement to this Mortgage that is delivered from time to time pursuant to the terms hereof in the form of Exhibit A hereto.
Parts means, with respect to an Engine, any and all appliances, parts, instruments, appurtenances, accessories, rotables, avionics, furnishings, seats, and other equipment of whatever nature (other than (a) complete Engines or engines, and (b) any items leased by the Grantor from a third party, so long as title thereto shall remain vested in such third party) that may from time to time be incorporated or installed in or attached to such Engine or which have been removed therefrom, unless the Lien of this Mortgage shall not be applicable to such Part in accordance with Section 2.01. For the avoidance of doubt, a Pledged Spare Part shall not constitute a Part unless and until it has been incorporated or installed in or attached to an Engine or which may thereafter be removed therefrom unless the Lien of this Mortgage shall not be applicable thereto in accordance with Section 2.01.
Pledged Spare Parts has the meaning specified in clause (2) of the Granting Clause of this Mortgage.
PMA Parts means Parts not manufactured or originally sourced by the Engine Manufacturer.
Recognition of Rights Agreement has the meaning specified in the Credit Agreement.
Repairable Spare Part means a Spare Part that can be economically restored to a serviceable condition, but has a life that is materially shorter than the life of the flight equipment to which it relates (for the avoidance of doubt, a Repairable Spare Part cannot be a Rotable Spare Part and vice versa).
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Rotable Spare Part means a Spare Part that wears over time and can be repeatedly restored to a serviceable condition over a period approximating the life of the flight equipment to which it relates.
Spare Parts means any and all appliances, engines, parts, instruments, appurtenances, accessories, rotables, furnishings, avionics, seats and other equipment of whatever nature (including, but not limited to, spare parts, as defined at 49 U.S.C.§ 40102(a)(43) and appliances as defined at 49 U.S.C.§ 40102(a)(11)) (other than complete airframes, Engines or propellers, unless being surveyed) that are now or hereafter maintained as spare parts or appliances by or on behalf of the Grantor at the Spare Parts Locations described in the initial Mortgage Supplement or in any subsequent Mortgage Supplement.
Spare Parts Locations means any of the locations described in the initial Mortgage Supplement, and any subsequent Mortgage Supplement at which Pledged Spare Parts are held by or on behalf of the Grantor.
Tracking System means the Grantors (or the Grantors vendors, as the case may be) computer system for identifying, monitoring and tracking the location, condition and status of the Pledged Spare Parts on a per unit basis, and any and all improvements, upgrades or replacement systems.
United States Government means the federal government of the United States or any instrumentality or agency thereof.
ARTICLE 2
COVENANTS OF THE GRANTORS
Each Grantor hereby represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Mortgage, as follows:
Section 2.01 Engines .
(a) Maintenance . Each Grantor, at its own cost and expense, shall: maintain, service, repair, test and overhaul (or cause to be maintained, serviced, repaired, tested and overhauled) each Engine (w) in accordance with Mesas FAA-approved maintenance program for the make and model of the asset in question, (x) so as at all times to keep such Engine in as good an operating condition as when initially subjected to the Lien hereof, ordinary wear and tear excepted and (y) in the same or better manner as Mesa maintains, services, repairs or overhauls similar engines owned or operated by Mesa in similar circumstances; (ii) maintain or cause to be maintained in English all records, logs and other materials required to be maintained in respect of such Engines by the FAA; and (iii) promptly furnish or cause to be furnished to the Collateral Agent such information as may be required to enable the Collateral Agent to file any reports required to be filed by the Collateral Agent with any governmental authority because of such Persons interest in such Collateral hereunder.
(b) Operation . Neither Grantor shall maintain, use, service, repair, overhaul or operate any Engine in violation of any Law or any rule, regulation, treaty, order or certificate
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of any Governmental Authority, aviation authority in any foreign country or airport authority having jurisdiction, or in violation of any airworthiness certificate, license or registration relating to such Engine issued by any such authority. In the event that any such Law, rule, regulation, treaty, order, certificate, license or registration requires alteration of any Engine, the Grantors will conform thereto or obtain conformance therewith at no expense to the Collateral Agent. Notwithstanding the foregoing, the Grantors may contest in good faith the validity or application of any such Law, rule, regulation, treaty, order, certificate, license, registration or violation in any reasonable manner that does not involve any material danger of the sale, forfeiture, or loss of any Engine, any danger of criminal liability or civil penalty for the Collateral Agent or any Secured Party or impair the Collateral Agents or any Secured Partys interest in such Engine or any Loan Document, including the Lien of this Mortgage. If the indemnities or insurance from the United States Government specified in Section 2.03, or some combination thereof in amounts equal to amounts required by Section 2.03, have not been obtained, the Grantors will not operate or locate an Engine, or permit any other Person to operate or locate an Engine, in or to any area excluded from coverage by any insurance required to be maintained by the terms of Section 2.03.
(c) Possession . Neither Grantor shall, without the prior written consent of the Collateral Agent, lease (whether by way of a finance lease, operating lease, or otherwise) or otherwise in any manner deliver, transfer or relinquish possession of any Engine; provided that, so long as no Event of Default shall have occurred and be continuing at the time of such delivery, transfer or relinquishment of possession or installation and so long as such action shall not deprive the Collateral Agent of the perfected and enforceable Lien of this Mortgage on such Engine, and subject in all cases to any limitations or requirements set forth in the Credit Agreement, the Grantors may, without the prior written consent of the Collateral Agent, so long as the Grantors shall comply with any other applicable requirements of this Mortgage:
(i) subject such Engine to normal interchange or pooling agreements or similar arrangements, in each case customary in the commercial airline industry and entered into by the Grantors in the ordinary course of its business with any Certificated Air Carrier; provided , that (A) no transfer of the registration of any airframe on which such Engine is installed shall be effected in connection therewith, (B) no such interchange or pooling agreement or arrangement contemplates, requires or results in the transfer of title to such Engine, (C) if the Grantors title to such Engine shall be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine, and the Grantors shall comply with Section 3.01 hereof in respect thereof and (D) upon entering into such arrangement, the Grantors shall provide notice thereof to the Collateral Agent and shall furnish copies of the relevant agreements associated therewith to the Collateral Agent;
(ii) deliver possession of such Engine to the Manufacturer thereof or to any other Person for testing, service, repair, maintenance or overhaul work on such Engine or any part of any thereof or for alterations or modifications therein or additions thereto to the extent required or permitted by the terms hereof;
(iii) install an Engine on an airframe owned by the Grantors which airframe is free and clear of all Liens, except: (A) Permitted Liens, (B) the rights of Certificated Air Carriers under interchange agreements that would be permitted under
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clause (i) above, provided that Grantors title to such Engine shall not be divested as a result thereof and (C) mortgage Liens or other security interests, provided, that (as regards this clause (C)), (x) such mortgage Liens or other security interests effectively provide that such Engine shall not become subject to the Lien of such mortgage or security interest, notwithstanding the installation thereof on such airframe, and (y) the Grantors shall use commercially reasonable efforts to obtain a Recognition of Rights Agreement within ten (10) Business Days of such installation;
(iv) install an Engine on an airframe leased to the Grantors or purchased by the Grantors subject to a conditional sale or other security agreement, provided that (x) such airframe is free and clear of all Liens, except: (A) the rights of the parties to the lease or conditional sale or other security agreement covering such airframe, or their assignees and (B) Liens of the type permitted by subparagraph (iii) of this Section 2.01(c), and (y) such lease, conditional sale or other security agreement effectively provides that such Engine shall not become subject to the Lien of such lease, conditional sale or other security agreement or any other right, title or interest of such lessor, seller or secured party, notwithstanding the installation thereof on such airframe, and the Grantors shall use commercially reasonable efforts to obtain a Recognition of Rights Agreement within ten (10) Business Days of such installation;
(v) transfer possession of such Engine to the United States or any instrumentality or agency thereof pursuant to the Civil Reserve Air Fleet Program so long as the Grantors shall promptly notify the Collateral Agent (x) upon transferring possession of such Engine to the United States or any agency or instrumentality thereof pursuant to this clause (v) and (y) in the case of a transfer involving the Civil Reserve Air Fleet Program, of the name and the address of the Contracting Office Representative for the Military Airlift Command of the United States Air Force to whom notice must be given;
(vi) transfer possession of such Engine to the United States or any instrumentality or agency thereof pursuant to a lease, contract or other instrument, a copy of which shall be provided to Collateral Agent and provided that the Collateral Agent is provided prompt written notice thereof; or
(vii) provided that no Event of Default has occurred and is continuing, and to the extent expressly permitted by the Credit Agreement, sell or dispose of such Engine, with the proceeds of such sale or disposition being distributed in the manner specified in the Credit Agreement and with such Engine being released from the terms hereof.
The rights of any transferee who receives possession by reason of a transfer permitted by this Section 2.01(c) shall be during the period of such possession, subject and subordinate to, all the terms of this Mortgage, including, without limitation, the covenants contained in this Article 2, including the inspection rights contained in Section 2.04, and the Collateral Agents right to repossess an Engine, as applicable, and to avoid and terminate any such arrangement upon such repossession (and the Collateral Agent may require specific subordinations of said interest be obtained and filed or registered to perfect the same), and the
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Grantors shall remain primarily liable for the performance of all of the terms of this Mortgage, and the terms of any such arrangement shall not permit any Person to take any action not permitted to be taken by the Grantors in this Mortgage with respect to such Engine. No interchange agreement, pooling agreement or other relinquishment of possession of an Engine shall in any way discharge or diminish any of the Grantors obligations to the Collateral Agent under this Mortgage or constitute a waiver of the Collateral Agents rights or remedies hereunder or under any Loan Document, and the Grantors shall notify the Collateral Agent of the location of each Engine in each Borrowing Base Certificate.
In the case of any arrangement entered into pursuant to this Section 2.01(c), the Grantors will include in the documentation relating thereto appropriate provisions that make such arrangement expressly subject and subordinate to this Mortgage, including the Collateral Agents and each Lenders right to avoid or otherwise terminate such arrangement in the exercise of its rights to repossession hereunder. No such arrangement shall be entered into unless the Grantors shall reimburse the Collateral Agent for all of its reasonable and documented out-of-pocket fees and expenses (including reasonable fees and disbursements of outside counsel) incurred in connection therewith.
The Collateral Agent acknowledges that any consolidation or merger of the Grantors or conveyance, transfer or lease of all or substantially all of the Grantors assets permitted by and in conformance with the Credit Agreement shall not be prohibited by this Section 2.01.
Any arrangement entered into pursuant to this Section 2.01(c) shall not permit any further leasing of the applicable Engine.
(d) Placard . On or prior to the Closing Date, or as soon thereafter as practicable (and, in any event, within sixty (60) days of the Closing Date), if permitted by applicable Law, the Grantors agree to affix to each Engine constituting Collateral and maintain (or cause to be affixed and maintained), at its expense, a placard bearing the inscription:
THIS ENGINE IS MORTGAGED TO
CIT BANK, N.A., AS COLLATERAL AGENT
(such nameplate to be replaced, if necessary, with a nameplate reflecting the name of any successor Collateral Agent, in each case as permitted under the Loan Documents).
Such placards may be removed temporarily in the course of maintenance of the applicable Engine. Except as above provided, the Grantors will not allow the name of any Person to be placed on any Engine as a designation that might be interpreted as a claim of ownership.
(e) Replacement of Parts . The Grantors, at their own cost and expense, will promptly replace or cause to be replaced all Parts associated with an Engine that may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason whatsoever, except as otherwise provided in Section 2.01(g). All replacement Parts shall be owned by the Grantors free and clear of all Liens (except Permitted Liens, pooling arrangements permitted by Section 2.01(f) hereof and replacement parts temporarily installed on an emergency basis) and shall be in as good an
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operating condition as, and shall have a value and utility at least equal to, the Parts replaced assuming such replaced Parts were in the condition and repair required to be maintained by the terms hereof. All Parts at any time removed from any Engine shall remain the property of the Grantors and subject to the Lien of this Mortgage, no matter where located, and shall be used, maintained, overhauled and/or repaired, as the case may be, in accordance with Section 2.02(c) hereof. Immediately upon any replacement Part becoming incorporated or installed in or attached to an Engine, without further act (subject only to Permitted Liens and any pooling arrangement permitted by Section 2.01(0 hereof and except replacement parts temporarily installed on an emergency basis), such replacement Part shall become the property of the Grantors and subject to the Lien of this Mortgage and be deemed a Part for all purposes hereof to the same extent as the Parts originally incorporated or installed in or attached to such Engine. The Grantors will notify the Collateral Agent within five (5) Business Days after any PMA Parts are installed on any Engine.
(f) Pooling of Parts . Any Part removed from any Engine as provided in Section 2.01(e) hereof may be subjected by the Grantors to a pooling arrangement of the type that is permitted by, and in accordance with the terms of, Section 2.01(c)(i) hereof; provided that, the Grantors shall notify the Collateral Agent of the location of such Part in each Borrowing Base Certificate. In addition, any replacement Part when incorporated or installed in or attached to an Engine in accordance with such Sections may be owned by any Certificated Air Carrier subject to such a pooling arrangement, provided , that the Grantors, at their expense, as promptly thereafter as practicable, either (i) causes such replacement Part to become subject to the Lien of this Mortgage, free and clear of all Liens other than Permitted Liens or (ii) replaces or causes to be replaced such replacement Part with a further replacement Part owned by the Grantors, which shall become the property of the Grantors and subject to the Lien of this Mortgage, free and clear of all Liens other than Permitted Liens.
(g) Alterations, Modifications and Additions . The Grantors, at their own expense, will make (or cause to be made) such alterations and modifications in and additions to each Engine as may be required to be made from time to time so as to comply with any Law, rule, regulation or order of any Governmental Authority of any jurisdiction in which any Engine may be located; provided , however , that the Grantors may, in good faith, and by appropriate proceedings contest the validity or application of any such Law, rule, regulation or order (commencement of such contest to occur within 45 days of the date on which a Grantor is required to make such alterations or modifications) in any reasonable manner that does not materially adversely affect the Collateral Agent or any Secured Party or any of their respective legal and economic interests in or to such Engine, subject any such Person to material risk of any civil or any criminal penalties, or involve any material risk of loss or forfeiture of title to any Engine. In addition, subject to the last sentence of this Section 2.01(g), the Grantors, at their own expense, may from time to lime make such alterations and modifications in and additions to any Engine as the Grantors may deem desirable in the proper conduct of its business, including removal of Parts that the Grantors deem to be obsolete or no longer suitable or appropriate for use on such Engine; provided that no such alteration, modification, removal or addition impairs the condition or airworthiness of such Engine, or materially diminishes the utility of such Engine below the condition, airworthiness, or utility thereof immediately prior to such alteration, modification, removal or addition assuming such Engine was then in the condition required to be maintained by the terms of this Mortgage; provided further that if any such alteration,
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modification, removal or addition materially diminishes the current market value of such Engine below the current market value thereof immediately prior to such alteration, modification, removal or addition, then the Grantors shall promptly notify the Collateral Agent thereof. All Parts incorporated or installed in or attached or added to an Engine as the result of such alteration, modification or addition (except those parts that are excluded from the definition of Parts or that may be removed by the Grantors pursuant to the next sentence) (the Additional Parts ) shall, without further act, become subject to the Lien of this Mortgage. Notwithstanding the foregoing sentence, the Grantors may, at their own expense, so long as no Event of Default shall have occurred and be continuing, remove or suffer to be removed any Additional Part, provided that such Additional Part (i) is in addition to, and not in replacement of or substitution for, any Part originally incorporated or installed in or attached to such Engine or any Part in replacement of or substitution for any such Part and (ii) is not required to be incorporated or installed in or attached or added to such Engine pursuant to the first sentence of this paragraph (c). Upon the removal thereof as provided above, such Additional Part shall no longer be deemed to be subject to the Lien of this Mortgage or part of such Engine from which it was removed and may be sold or otherwise disposed of by the Grantors in the ordinary course of its business.
Section 2.02 Pledged Spare Parts .
(a) Tracking System . The Grantors shall at all times maintain the Tracking System in at least as favorable a condition as the condition it was in as at the Closing Date and its perpetual inventory procedures for Pledged Spare Parts that provide a continuous internal audit of Pledged Spare Parts. Notwithstanding the limitations in Section 2.04, at reasonable times during normal business hours and upon reasonable notice to the Grantors (as often as may be reasonably requested), the Collateral Agent shall be entitled to access and inspect the Tracking System to monitor the types, quantities and locations of any Pledged Spare Parts and to ensure the Grantors compliance with the terms hereof. Such inspection right shall not be exercised in a manner that is unduly disruptive to the operation or maintenance of the Tracking System or the business operations of the Grantors. If requested by the Collateral Agent, the Grantors will use commercially reasonable efforts to obtain a written acknowledgment of the Collateral Agents access and inspection rights hereunder from any third party that owns or operates the Tracking System.
(b) Spare Parts Locations . Each Grantor represents, warrants and agrees that prior to any utilization or disposition thereof that is permitted hereunder or under the Credit Agreement, the Pledged Spare Parts shall be maintained by or on behalf of the Grantors at one or more of the Spare Parts Locations, and that the nature of its interest in and to each such location (e.g., owner, leasehold, tenant) is and shall remain as described to the Collateral Agent pursuant to the Loan Documents. The Grantors will promptly notify the Collateral Agent in writing if any of the representations, warranties or agreements contained in the preceding sentence become inaccurate in any respect with respect to any of the Pledged Spare Parts or its interest therein. The Grantors will not change or permit the change any of the Spare Parts Locations from their respective locations on the date hereof without reasonable advance written notice to the Collateral Agent of such change. Except as otherwise permitted under this Mortgage, the Grantors shall keep and maintain all Pledged Spare Parts at one or more of the Spare Parts Locations and shall not suffer or permit any Pledged Spare Part to be stored at any other location
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unless, in each case, the Grantors provide prior written notice to the Collateral Agent. The Grantors shall ensure that each Spare Parts Location is a secure facility, adequate for warehousing and storing the Pledged Spare Parts and is at all times covered by property, casualty and premises liability coverage reasonably acceptable and evidenced to the Collateral Agent. Upon adding a location that is to become a Spare Parts Location in accordance herewith, and upon request of the Collateral Agent, the Grantors will furnish to the Collateral Agent, at Grantors sole expense:
(i) a Mortgage Supplement duly executed by the applicable Grantor, identifying each location that is to become a Spare Parts Location and specifically subjecting the Pledged Spare Parts at such location to the Lien of this Mortgage.
(ii) a Collateral Access Agreement for such Spare Parts Location (unless it is owned by Grantors free and clear of any Liens).
(iii) if requested by the Collateral Agent, an opinion of counsel to the Grantors, dated the date of execution of such Mortgage Supplement, in form and substance satisfactory to the Collateral Agent, addressed to the Secured Parties, stating that such Mortgage Supplement has been duly filed for recording, in accordance with the provisions of any applicable Laws, and, if requested by the Collateral Agent, either: (i) no other filing or recording is required, under any applicable Law, in any other place within the United States (or other applicable jurisdiction) in order to perfect the Lien of this Mortgage on the Pledged Spare Parts held at the pertinent Spare Parts Location or (ii) if any such other filing or recording shall be required that said filing or recording has been accomplished in such other manner and places, which shall be specified in such opinion of counsel, as are necessary to perfect the Lien of this Mortgage with respect to such Pledged Spare Parts; and
(iv) a certificate from an authorized officer of the Grantors stating that, in the opinion of such officer, all conditions precedent provided for in this Mortgage relating to the subjection of such property to the Lien of this Mortgage have been complied with.
(c) Possession, Use and Maintenance .
(i) Possession . Without the prior written consent of the Collateral Agent, neither Grantor may sell, lease (whether by way of a finance lease, operating lease or otherwise), transfer or relinquish possession of any Pledged Spare Part to anyone except as permitted by the provisions of Section 2.02(c)(ii) of this Mortgage and except that the Grantors shall have the right, in the ordinary course of business, (x) to transfer possession of any Pledged Spare Part to the manufacturer thereof or any other organization for testing, overhaul, repairs, maintenance, alterations or modifications (to the extent required or permitted by the terms hereof) or to any Person for the purpose of transport to any of the foregoing, (y) to subject any Pledged Spare Part to a maintenance servicing agreement arrangement entered into in the ordinary course of business or (z) to transfer any Pledged Spare Part between any Spare Parts Locations.
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(ii) Use; Modifications .
(A) Use . The Grantors shall have the right, at any time and from time to time at their own cost and expense, without the necessity of any release from or consent by the Collateral Agent, to:
(1) incorporate in, install on, attach or make appurtenant to, or use in, any aircraft, engine, spare part or appliance leased to or owned by the Grantors, any Pledged Spare Part, free from the Lien of this Mortgage;
(2) dismantle any Pledged Spare Part that has become worn out or obsolete or unfit for use, and to scrap, sell or dispose of any such Pledged Spare Part or any salvage resulting from such dismantling, free from the Lien of this Mortgage; and
(3) in each event described in the foregoing (1) and (2), any such Pledged Spare Part shall cease to be a Pledged Spare Part hereunder.
(B) Permitted Sales and Modifications . Provided that no Event of Default has occurred and is continuing and to the extent expressly permitted by the Credit Agreement, the Grantors may sell or dispose of Pledged Spare Parts, with the proceeds of such sale or disposition being applied in the manner specified in the Credit Agreement and with such Pledged Spare Parts being released from the terms hereof. In addition, the Grantors may modify or alter any Pledged Spare Part as the Grantors may deem appropriate in the proper conduct of their business, so long as the Grantors remain in compliance at all times with the requirements of Section 2.02(c)(iii) below, after giving effect to any such modification or alteration.
(iii) Maintenance . The Grantors:
(A) shall maintain, or cause to be maintained, at all times the Pledged Spare Parts in accordance with, all applicable Laws and regulations issued by the FAA and all applicable Laws issued by any other Governmental Authority having jurisdiction over the Grantors or any such Pledged Spare Parts, including making any modifications, alterations, replacements and additions necessary therefor, and shall utilize, or cause to be utilized, the same manner and standard of maintenance with respect to each model of Spare Part included in the Pledged Spare Parts as is utilized for such model of Spare Part owned by the Grantors and not included in the Pledged Spare Parts;
(B) shall maintain, or cause to be maintained in English, all records, logs and other materials required by the FAA or under applicable Laws to be maintained in respect of the Pledged Spare Parts and shall not modify its record retention procedures in respect of the Pledged Spare Parts unless such modification is consistent with Mesas FAA approved maintenance program;
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provided however that such modification shall not materially diminish the value of the Pledged Spare Parts, taken as a whole; and
(C) shall maintain, or cause to be maintained on a timely basis, the Pledged Spare Parts in good working order (other than during periods of maintenance, repair, inspection and testing) and condition and shall perform all maintenance thereon necessary for that purpose, excluding Spare Parts that have become worn out or unfit for use, beyond economic repair or become obsolete or scrap. Notwithstanding anything herein to the contrary, all Rotable Spare Parts and Repairable Spare Parts that are Pledged Spare Parts and, to the extent customary, all Expendable Spare Parts and Life Limited Parts that are Pledged Spare Parts, located at Spare Parts Locations other than as excluded above, shall have a current and valid serviceable tag and shall be in compliance with such tag, in each case in compliance with applicable FAA regulations.
Section 2.03 Insurance .
(a) Obligation to Insure . The Grantors shall comply with, or cause to be complied with, each of the provisions of Exhibit C hereto, which provisions are hereby incorporated by reference as if set forth in full herein.
(b) Insurance for Own Account . Nothing in this Section 2.03 shall limit or prohibit (x) the Grantors from maintaining the policies of insurance required under Exhibit C with higher limits than those specified in Exhibit C or other insurance for their own account or (y) the Collateral Agent or any Additional Insured from obtaining insurance for its own account (and any proceeds payable under such separate insurance shall be payable as provided in the policy relating thereto); provided, however, that no insurance may be obtained or maintained that would limit or otherwise adversely affect the coverage of any insurance required to be obtained or maintained by the Grantors pursuant to this Section 2.03 and Exhibit C.
(c) Application of Insurance Proceeds . As between the Grantors and the Collateral Agent, it is agreed that all insurance proceeds will be distributed in accordance with the terms of Exhibit C. If either the Collateral Agent or either Grantor receives a payment of such insurance proceeds in excess of its entitlement pursuant to this Mortgage, it shall promptly pay such excess to the other party.
(d) Indemnification by Government in Lieu of Insurance . Notwithstanding any provisions of this Section 2.03 requiring insurance, the Collateral Agent agrees to accept, in lieu of insurance against any risk, indemnification from, or insurance provided by, the Government of the United States or any agency or instrumentality thereof the obligations of which are supported by the full faith and credit of the Government of the United States, against such risk in an amount that, when added to the amount of insurance against such risk maintained by the Grantors, shall be at least equal to the amount of insurance against such risk otherwise required by this Section 2.03. The Grantors shall furnish to the Collateral Agent and to the Additional Insureds, in advance of attachment of such indemnity or insurance, a certificate of a responsible financial or legal officer of the Grantors confirming in reasonable
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
detail the amount and scope of such indemnification or insurance and that such indemnification or insurance complies with the preceding sentence.
(e) Application of Payments During Existence of an Event of Default . Any amount described in this Section 2.03 that is payable or creditable to, or retainable by, the Grantors shall not be paid or credited to, or retained by, the Grantors if at the time such payment, credit or retention would otherwise occur, an Event of Default shall have occurred and be continuing, but shall instead be held by or paid over to the Collateral Agent as security for the obligations of the Grantors under this Mortgage and the Loan Documents. At such time as there shall not be continuing any Event of Default, such amount shall be paid to the Grantors to the extent not previously applied in accordance with this Mortgage.
Section 2.04 Inspection . At reasonable limes and on at least fifteen (15) days prior written notice to the Grantors, the Secured Party or its authorized representatives may (but not more than twice per calendar year in respect of an Engine or the Pledged Spare Parts; provided that such limitation shall not be applicable if an Event of Default has occurred and is continuing) inspect any Engine or Pledged Spare Parts and inspect and make copies of the books, logs and records of the Grantors relating to the maintenance of such Engine or Pledged Spare Parts and shall keep any information or copies obtained thereby confidential on the same terms set forth in Section 12.08 of the Credit Agreement. Any such inspection of the Pledged Spare Parts or any Engine shall be during normal business hours and shall be limited to a visual, walk-around inspection, but shall not include opening any panels, bays or the like without the express written consent of the Grantors; provided that, so long as no Event of Default shall have occurred and be continuing, no exercise of such inspection right shall interfere with the normal operation or maintenance of the Pledged Spare Parts or any Engine by, or the business of, the Grantor. The Grantors will give such Secured Party notice of the next scheduled overhaul or other maintenance visit with respect to an Engine no later than 10 Business Days prior to its occurrence and afford such Person an opportunity to be present at the same without interfering (so long as no Event of Default has occurred and is continuing) in any material respect with the maintenance, operations or business of the Grantors. The Secured Parties shall not have any duty to make any such inspection nor shall any such Persons incur any liability or obligation by reason of not making any such inspection.
Section 2.05 Other Representations, Warranties and Covenants .
(a) Title . Each Grantor hereby represents, warrants and covenants that (i) it has good and marketable title to (x) each item of Equipment listed on its respective Mortgage Supplement executed and delivered on the Closing Date and will have good and marketable title to each item of Equipment listed on each of its respective subsequent Mortgage Supplement at the time of execution and delivery thereof; (y) each of the Pledged Spare Parts on the Closing Date; (ii) it will have good title to any other Collateral that is subject to this Mortgage or that becomes subject to this Mortgage from time to time hereafter; (iii) any Engines covered hereby from time to time are correctly described by Manufacturer, model and serial number as set forth on the Manufacturers serial plate for said items of Equipment, in each case subject to Permitted Liens; and (iv) Mesa owns and through the Maturity Date will continue to own all Spare Parts stored at any Spare Parts Location, other than the AAR Parts.
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
(b) Necessary Filings . Upon (x) the filing of this Mortgage with the FAA in accordance with the Transportation Code and the regulations thereunder and with any applicable Governmental Authority in any other jurisdiction as deemed necessary or advisable by the Collateral Agent, (y) the appropriate registrations with the International Registry and (z) the filing of financing statements (and continuation statements at periodic intervals) with respect to the security and other interests created hereby under the UCC as in effect in any applicable jurisdiction and affixing the placard referred to in Section 2.01(d) herein, (i) all filings, registrations and recordings (including, without limitation, the filing of financing statements under the UCC) necessary under the Laws of the United States (or any state thereof) or any other jurisdiction to create, preserve, protect and perfect the security interest granted by the Grantors to the Collateral Agent hereby in respect of the Collateral have been accomplished or, as to Collateral to become subject to the security interest of this Mortgage as provided herein from time to time after the date hereof, will be filed simultaneously with such Collateral being subject to the Lien of this Mortgage, and (ii) the security interest granted to the Collateral Agent pursuant to this Mortgage in and to the Collateral will constitute a perfected security interest therein prior to the rights of all other Persons therein, but subject to no other Liens (other than Permitted Liens), and is entitled to all the rights, priorities and benefits afforded by the Transportation Code, and other relevant United States Law and any applicable Laws as enacted in any other relevant jurisdiction to perfected security interests or Liens.
(c) No Liens . The Grantors are, and as to Collateral acquired by them from time to time after the date hereof will be, the owner of all Collateral free from any Lien, or other right, title or interest of any Person (other than Permitted Liens), and the Grantors shall promptly, at their own expense, (i) defend the Collateral against all claims and demands of all Persons (other than Persons lawfully claiming by, through or under the Collateral Agent) at any time claiming the same or any interest therein adverse to the Collateral Agent and (ii) take such action as may be necessary to duly discharge any Lien (other than a Permitted Lien) arising at any time.
(d) Other Financing Statements . There is no financing statement (or similar statement or instrument of encumbrance under the Law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral (other than Permitted Liens and other than any financing statements or FAA filings that relate to transactions for which all obligations have been paid in full and for which there is no commitment on the part of any Person to advance funds or perform any obligation that would otherwise be secured by any collateral described in such financing statement), and so long as any of the Obligations remain unpaid, the Grantors will not execute or authorize or permit to be filed in any public office any financing statement or statements (or similar statement or instrument of encumbrance under the Law of any jurisdiction) relating to the Collateral other than with respect to Permitted Liens.
(e) Patriot Act; OFAC . Without limiting the generality of the Grantors obligations under Section 6.18 of the Credit Agreement, the Grantor: (a) represents and warrants, as of the Closing Date, that the Grantors and each of their Subsidiaries are in compliance with the provisions described therein, (b) covenants that the Grantors and each of their Subsidiaries shall be and remain in compliance with such provisions at all times while the Lien of this Mortgage is in effect, and (c) further covenants that neither Grantor nor any of their Subsidiaries shall enter into any agreement with respect to any item of Equipment secured hereby that would place the Grantors or any of their Subsidiaries in violation of such provisions.
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
(f) Recourse . This Mortgage is made with full recourse to each Grantor and pursuant to and upon all the representations, warranties, covenants and agreements on the part of each Grantor contained herein, in the other Loan Documents and otherwise in writing in connection herewith or therewith.
(g) Filings . The Grantors will take, or cause to be taken, at their sole cost and expense, such action with respect to (x) the recording, filing, re-recording and re-filing of this Mortgage and each Mortgage Supplement in the office of the FAA, pursuant to the Transportation Code, and in such other places as may be required under any applicable Law or regulation (in the United States or elsewhere), (y) the appropriate registrations of any and all prospective international interests or international interests (as such terms are defined in the Cape Town Convention) created hereby or thereby with the International Registry and (z) any financing statements or other instruments as are necessary, and reasonably requested by the Collateral Agent, in order to maintain so long as this Mortgage is in effect, the perfection and preservation of the Lien created by this Mortgage, and will furnish to the Collateral Agent timely notice of the necessity of such action, together with, if requested by the Collateral Agent, such instruments, in execution form, and such other information as may be reasonably required to enable the Collateral Agent to take such action or otherwise reasonably requested by the Collateral Agent. To the extent permitted by applicable Law, each Grantor hereby authorizes the Collateral Agent to execute and file financing statements or continuation statements without the Grantors signature appearing thereon. The Grantors shall pay the costs of, or incidental to, any recording or filing, including, without limitation, any filing of financing or continuation statements, concerning the Collateral.
(h) Section 1110 of the Bankruptcy Code . The Collateral Agent is entitled to the benefits of Section 1110 of the Bankruptcy Code, subject to the Grantors rights thereunder, with respect to the right to take possession of any of the Engines and the Pledged Spare Parts and to enforce any of its other rights or remedies as provided in this Mortgage in the event of a case under Chapter 11 of the Bankruptcy Code in which Mesa is a debtor, all subject to the provisions and limitations of the Bankruptcy Code. The Grantors hereby confirm to the Collateral Agent that all Engines and Pledged Spare Parts subjected to the Lien of this Mortgage shall have been first placed in service after October 22, 1994.
(i) Certificated Air Carrier . Mesa hereby confirms that it is a Certificated Air Carrier under Section 44705 of the Transportation Code, and the Pledged Spare Parts are maintained by or on behalf of the Grantors at the Spare Parts Locations.
(j) Guards and Representatives . If a Default or an Event of Default shall have occurred and is continuing, the Grantors shall (or the Grantors shall cause the relevant Person to) permit the Collateral Agent to station guards and representatives, selected by the Collateral Agent in its sole discretion and acting on behalf of the Collateral Agent and the Lenders, with authority to ensure the safekeeping of all Collateral, at each of the Spare Parts Locations.
(k) Segregation of AAR Parts . Each Grantor (i) represents and warrants that it is currently in compliance with the covenants contained in (A) Section 1(D) of the AAR
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
Consignment Agreement, and (B) Section 8(a) of Schedule 1 of the AAR Support Agreement, and (ii) will continue to comply with such covenants through the Maturity Date.
(l) Payment under Credit Agreement . Each Grantor will duly and punctually pay the outstanding principal amount of and interest on and other amounts due in respect of the Loan in accordance with the terms of the Credit Agreement and the other Loan Documents.
ARTICLE 3
EVENT OF LOSS
Section 3.01 Event of Loss with Respect to an Engine . Upon the occurrence of an Event of Loss (or an event or circumstance that, with the passage of time, would constitute an Event of Loss) with respect to an Engine the Grantors shall forthwith (and in any event, within ten (10) days after such occurrence) give the Collateral Agent written notice thereof and deposit (or, in the event the Collateral Agent, as sole loss payee, shall receive any such amounts, shall pay over) 100% of the Net Cash Proceeds of any insurance claim, indemnity payments or other amounts received in respect thereof immediately upon receipt of such amounts with the Collateral Agent, which amounts shall, subject to the following, be used to prepay a portion of the Loans in accordance with Section 2.05(b) of the Credit Agreement.
Section 3.02 Event of Loss with Respect to a Pledged Spare Part . Upon the occurrence of an Event of Loss (or an event or circumstance that, with the passage of time, would constitute an Event of Loss) with respect to a Pledged Spare Part under circumstances in which there has not occurred an Event of Loss with respect to the related Engine (if any) and the Appraised Current Market Value of the Pledged Spare Parts subject to such Event of Loss is equal to or less than $250,000, the Grantors shall forthwith (and in any event, within ten (10) Business Days (or, to the extent that such Event of Loss relates to more than ten percent (10%) of the Pledged Spare Parts at a particular Spare Parts Location, two (2) Business Days) after such occurrence) give the Collateral Agent written notice thereof and deposit (or, in the event the Collateral Agent, as sole loss payee, shall receive any such amounts, shall pay over) 100% of the Net Cash Proceeds of any insurance claim, indemnity payments or other amounts received in respect thereof immediately upon receipt of such amounts with the Collateral Agent, which amounts shall, subject to the following, be used to prepay a portion of the Loans in accordance with Section 2.05(b) of the Credit Agreement. Notwithstanding the foregoing, in the case of an Event of Loss with respect to a Pledged Spare Part prior to the occurrence of a Default or an Event of Default.
ARTICLE 4
REMEDIES
Section 4.01 Event of Default . It shall be an Event of Default hereunder if under the Credit Agreement an Event of Default shall occur and be continuing thereunder.
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
Section 4.02 Remedies with Respect to Collateral .
(a) Remedies Available . Upon the occurrence and continuance of any Event of Default, the Collateral Agent may do one or more of the following, in each case subject to Article IX of the Credit Agreement; provided , however , that during any period that an Engine is subject to the Civil Reserve Air Fleet Program in accordance with the provisions of Section 2.01(c)(v) hereof and in possession of the United States Government or an agency or instrumentality of the United States, the Collateral Agent shall not, on account of any Event of Default, be entitled to exercise any of the remedies specified in the following clauses (i), (ii) and (iii) in relation to such Engine in such manner as to limit the Grantors control under this Mortgage of the relevant Engine, unless at least sixty (60) days (or such lesser period as may then be applicable under the Air Mobility Command program of the United States Air Force) written notice of default hereunder shall have been given by the Collateral Agent by registered or certified mail to the Grantors with a copy addressed to the Contracting Office Representative for the Air Mobility Command of the United States Air Force under any contract with the Grantors relating to such Engine:
(i) cause the Grantors, upon the written demand of the Collateral Agent, at the Grantors expense, to deliver promptly, and the Grantors shall deliver promptly, all or such part of the items of Equipment as the Collateral Agent may so demand to the Collateral Agent or its order, or the Collateral Agent, at its option, may access the Tracking System (and demand the assistance of the Grantors personnel necessary to utilize the Tracking System) and enter upon the premises where all or any part of any items of Equipment or other Collateral are located and take immediate possession (to the exclusion of the Grantors and all Persons claiming under or through the Grantors) of and remove the same by summary proceedings or otherwise, and/or station guards and representatives on such premises pursuant to Section 2.050) hereof;
(ii) sell all or any part of any items of Equipment or other Collateral at public or private sale, whether or not the Collateral Agent shall at the time have possession thereof, as the Collateral Agent may determine, or otherwise dispose of, hold, use, operate, lease to others or keep idle all or any part of any items of Equipment or other Collateral as the Collateral Agent, in its sole discretion, may determine, all free and clear of any rights or claims of whatsoever kind of the Grantors, any person claiming by, through or under the Grantors and any person holding an interest subordinate to the interests of the Collateral Agent hereunder; provided , however , that the Grantors shall be entitled at any time prior to any such disposition to redeem the Collateral by paying in full all of the Obligations; or
(iii) exercise any or all of the rights and powers and pursue any and all remedies of a secured party under the UCC of the State of New York (whether or not in effect in the jurisdiction in which enforcement is sought) or by any other applicable Law (including the Cape Town Convention, to the extent applicable), or proceed by appropriate court action to enforce the terms or to recover damages for the breach hereof.
Upon every taking of possession of Collateral under this Section 4.02, the Collateral Agent may, from time to time, at the expense of the Grantors, make all such
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
expenditures for maintenance, insurance, repairs, replacements, alterations, additions and improvements to and of the Collateral as it may deem proper. In each such case, the Collateral Agent shall have the right to maintain, use, insure, operate, store, lease, control or manage the Collateral and to carry on business and to exercise all rights and powers of the Grantor relating to the Collateral in connection therewith, as the Collateral Agent shall deem appropriate, including the right to enter into any and all such agreements with respect to the maintenance, use, insurance, operation, storage, leasing, control, management or disposition of the Collateral or any part thereof as the Collateral Agent may determine; and the Collateral Agent shall be entitled to collect and receive directly all tolls, rents, revenues, issues, income, products, proceeds and profits of the Collateral and every part thereof, without prejudice, however, to the right of the Collateral Agent under any provision of this Mortgage to collect and receive all cash held by, or required to be deposited with, the Collateral Agent hereunder. Such tolls, rents, revenues, issues, income, products, proceeds and profits shall be applied to pay the expenses of using, operating, storage, leasing, control, management or disposition of the Collateral, and of all maintenance, insurance, repairs, replacement, alterations, additions and improvements, and to make all payments that the Collateral Agent may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Collateral or any part thereof (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Grantor), and all other payments that the Collateral Agent may be required or authorized to make under any provision of this Mortgage, as well as just and reasonable compensation for the services of the Collateral Agent, and of all Persons engaged and employed by the Collateral Agent.
In addition, the Grantors shall be liable for all legal fees and other costs and expenses incurred by reason of the occurrence of any Event of Default or the exercise of the Collateral Agents remedies with respect thereto, including all costs and expenses incurred in connection with the retaking, return or sale of any items of Equipment or other Collateral in accordance with the terms hereof, which amounts shall, until paid, be secured by the Lien of this Mortgage.
If any Event of Default shall have occurred and be continuing, or the Loans shall have been declared forthwith due and payable pursuant to the Credit Agreement, at the direction of the Secured Parties, the Collateral Agent shall at any time thereafter while any Event of Default shall be continuing, without notice of any kind to the Grantors (except as provided herein) to the extent permitted by Law, carry out or enforce any one or more of the actions and remedies provided in this Article 4 or elsewhere in this Mortgage or otherwise available to a secured party under applicable Law, whether or not any or all of the Collateral is subject to the jurisdiction of such UCC and whether or not such remedies are referred to in this Article 4.
Nothing in the foregoing shall affect the right of each Secured Party to receive all payments of principal of, and interest on, the Obligations held by such Secured Party and all other amounts owing to such Secured Party as and when the same may be due.
(b) Notice of Sale . The Collateral Agent shall give the Grantors at least ten (10) days prior written notice of the date fixed for any public sale of any item of Equipment or the date on or after which any private sale will be held, which notice the Grantors hereby agree is reasonable notice.
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(c) Receiver . If any Event of Default shall occur and be continuing, to the extent permitted by Law, the Collateral Agent shall be entitled, as a matter of right as against the Grantors, without notice or demand and without regard to the adequacy of the security for the Obligations or the solvency of the Grantors, upon the commencement of judicial proceedings by it to enforce any right under this Mortgage, to the appointment of a receiver of the Collateral or any part thereof and of the tolls, rents, revenues, issues, income, products and profits thereof for the recovery of judgment for the indebtedness secured by the Lien created under this Mortgage or for the enforcement of any other proper, legal or equitable remedy available under applicable Law.
(d) Concerning Sales . At any sale under this Article 4, any Secured Party may bid for and purchase the property offered for sale, may make payment on account thereof as herein provided, and, upon compliance with the terms of sale, may hold, retain and dispose of such property without further accountability therefor. Any purchaser shall be entitled, for the purpose of making payment for the property purchased, to deliver any of the Obligations in lieu of cash in the amount that shall be payable thereon as principal or interest. Said Obligations, in case the amount so payable to the holders thereof shall be less than the amounts due thereon, shall be returned to the holders thereof after being stamped or endorsed to show partial payment.
Section 4.03 Waiver of Appraisement, Etc . To the full extent that it may lawfully so agree, each Grantor agrees that it will not at any time insist upon, plead, claim or take the benefit or advantage of, any appraisement, valuation, stay, extension, or redemption Law now or hereafter in force, in order to prevent or hinder the enforcement of this Mortgage or the absolute sale of the Collateral, or any part thereof, or the possession thereof by any purchaser at any sale under this Article 4; but each Grantor, for itself and all who may claim under it so far as it or they now or hereafter lawfully may, hereby waives the benefit of all such Laws. Each Grantor, for itself and all who may claim under it, waives, to the extent that it lawfully may, all right to have the property in the Collateral marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclosure under this Mortgage may order the sale of the Collateral as an entirety.
Section 4.04 Application of Proceeds . After the exercise of remedies pursuant to Section 4.02 hereof, any payments in respect of the Obligations and any proceeds (as defined in the UCC) of the Collateral, when received by the Collateral Agent or any Secured Party in cash or its equivalent, will be applied in the order set forth in and in accordance with the Credit Agreement and the Loan Documents.
Section 4.05 Remedies Cumulative . Each and every right, power and remedy hereby specifically given to the Collateral Agent or otherwise in this Mortgage shall be cumulative and shall be in addition to every other right, power and remedy specifically given under this Mortgage or the other Loan Documents or now or hereafter existing at Law, in equity or by statute or treaty and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension
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of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Event of Default or an acquiescence therein. No notice to or demand on the Grantors in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys fees, and the amounts thereof shall be included in such judgment.
Section 4.06 Discontinuance of Proceedings . In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Mortgage by foreclosure, sale entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the Grantors, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Mortgage, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted (but otherwise without prejudice).
ARTICLE 5
TERMINATION OF MORTGAGE
Section 5.01 Termination of Mortgage . This Mortgage shall terminate upon payment and performance in full of the Obligations hereby secured and shall be released as to an Engine or other Collateral to the extent expressly permitted hereby and by the Credit Agreement. Upon termination, the Grantors may request, at their sole cost and expense, the Collateral Agent to execute and deliver to or as directed in writing by the Grantors an appropriate instrument reasonably required to release the Collateral from the Lien of this Mortgage and the Collateral Agent shall execute and deliver such instrument as aforesaid at the Grantors expense. Except as aforesaid otherwise provided, this Mortgage and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof.
Section 5.02 Certification by the Grantors . At any time that the Grantors desire that the Collateral be released as provided in the foregoing Section 5.01, it shall deliver to the Collateral Agent a certificate signed by an authorized officer stating that the release of the respective Collateral is permitted pursuant to Section 5.01 hereof and the Credit Agreement. The Collateral Agent shall have no liability whatsoever to any Secured Party as the result of any release of Collateral by it as permitted by Section 5.01 hereof.
ARTICLE 6
MISCELLANEOUS
Section 6.01 No Legal Title to Collateral in Lender . No Secured Party shall have legal title to any part of the Collateral. No transfer, by operation of Law or otherwise, of any portion of the Loans or other right, title and interest of a Secured Party in and to the Collateral or
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
this Mortgage shall operate to terminate this Mortgage or entitle any successor or transferee of such Secured Party to an accounting or to the transfer to it of legal title to any part of the Collateral.
Section 6.02 Sale of Collateral by Collateral Agent is Binding . Any sale or other conveyance of any item of Equipment or other Collateral or any interest therein by the Collateral Agent made pursuant to the terms of this Mortgage shall bind the Secured Parties and the Grantors, and shall be effective to transfer or convey all right, title and interest of the Collateral Agent, the Grantors, and the other Secured Parties therein. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Collateral Agent.
Section 6.03 Benefit of Mortgage . Nothing in this Mortgage, whether express or implied, shall be construed to give to any Person other than the Grantors, the Collateral Agent and the Secured Parties any legal or equitable right, remedy or claim under or in respect of this Mortgage.
Section 6.04 Notices . All notices and other communications provided for herein or required hereunder shall be in writing and shall be delivered in the manner described, and to each party at the addresses set forth in Section 12.02 of the Credit Agreement. Each party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to either party hereto in accordance with the provisions of this Mortgage shall be deemed to have been given on the date of receipt.
Section 6.05 Governing Law . THIS MORTGAGE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
Section 6.06 Jurisdiction and Waiver of Right to Trial by Jury . Section 12.16(b) and Section 12.17 of the Credit Agreement are hereby incorporated by reference, mutatis mutandis , as though fully set forth herein.
Section 6.07 Grantors Duties . It is expressly agreed, anything herein contained to the contrary notwithstanding, that the Grantors shall remain liable to perform all of the obligations, if any, assumed by them with respect to the Collateral and neither the Collateral Agent nor any Secured Party shall have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Mortgage, nor shall the Collateral Agent nor any Secured Party be required or obligated in any manner perform or fulfill any of the obligations of the Grantors under or with respect to any Collateral.
Section 6.08 Counterparts . This Mortgage may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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Section 6.09 Waiver; Amendment . (a) No waiver of any provisions of this Mortgage or consent to any departure by the Grantors therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Grantors in any case shall entitle the Grantors to any other or further notice or demand in similar or other circumstances.
(b) Neither this Mortgage nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantors with respect to which such waiver, amendment or modification is to apply.
(c) Upon the execution and delivery by any Loan Party of a Grantor Supplement, (i) such Person shall be referred to as an Additional Grantor and shall be and become a Grantor hereunder, and each reference in this Agreement to Grantor shall also mean and be a reference to such Additional Grantor and (ii) such Additional Grantor shall be a Grantor for all purposes under this Agreement and shall be bound by the obligations of the Grantors hereunder.
Section 6.10 Obligations Absolute . The obligations of each Grantor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Mortgage or any other Loan Document, except as specifically set forth in a waiver granted in accordance with Section 6.09; or (b) any amendment to or modification of any Loan Document or any security for any of the Obligations; whether or not the Grantors shall have notice or knowledge of any of the foregoing, except as specifically set forth in an amendment or modification executed in accordance with Section 6.09.
Section 6.11 Successors and Assigns . This Mortgage shall be binding upon each Grantor and each of its respective successors and permitted assigns and shall inure to the benefit of the Collateral Agent and each of the Secured Parties and their respective successors and assigns; provided , that no Grantor may transfer or assign any or all of its rights or obligations hereunder without the prior written consent of the Collateral Agent. All agreements, statements, representations and warranties made by the Grantors herein or in any certificate or other instrument delivered by either Grantor or on its behalf under this Mortgage shall be considered to have been relied upon by the Secured Parties and shall survive the execution and delivery of this Mortgage and the other Loan Documents regardless of any investigation made by the Secured Parties or on their behalf.
Section 6.12 Conflicts with Other Loan Documents . Unless otherwise expressly provided in this Mortgage, if any provision contained in this Mortgage conflicts with any provision of any other Loan Document, the provision contained in this Mortgage shall govern and control, provided , that the inclusion of supplemental rights or remedies in favor of the Collateral Agent or the Secured Parties in any other Loan Document shall not be deemed a conflict with this Mortgage.
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
ARTICLE 7
COLLATERAL AGENT
The provisions of Article XI of the Credit Agreement are hereby incorporated by reference, mutatis mutandis , as though fully set forth herein, with all references therein to Administrative Agent deemed to be references to Collateral Agent.
* * *
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[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
IN WITNESS WHEREOF , each Grantor and the Collateral Agent have caused this Mortgage and Security Agreement (Mesa Spare Parts Facility) to be duly executed by their respective officers thereunto duly authorized as of the date first written above.
MESA AIRLINES, INC., as Grantor | ||
By: |
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Name: Brian S. Gillman Title: Executive Vice President, General Counsel and Corporate Secretary |
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MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., as Grantor |
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By: | Mesa Airlines, Inc., its sole member | |
By: |
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Name: Brian S. Gillman Title: Executive Vice President, General Counsel and Corporate Secretary |
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CIT BANK, N.A. as Collateral Agent |
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By: |
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Name: Title: |
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
IN WITNESS WHEREOF , each Grantor and the Collateral Agent have caused this Mortgage and Security Agreement (Mesa Spare Parts Facility) to be duly executed by their respective officers thereunto duly authorized as of the date first written above.
MESA AIRLINES, INC., as Grantor | ||
By: |
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Name: Brian S. Gillman Title: Executive Vice President, General Counsel and Corporate Secretary |
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MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., as Grantor |
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By: | Mesa Airlines, Inc., its sole member | |
By: |
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Name: Brian S. Gillman Title: Executive Vice President, General Counsel and Corporate Secretary |
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CIT BANK, N.A. as Collateral Agent |
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By: |
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Name: Title: |
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
EXHIBIT A
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. [1]
(MESA SPARE PARTS FACILITY)
THIS MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. [1] (MESA SPARE PARTS FACILITY) dated , (this Mortgage Supplement ) made by [MESA AIRLINES, INC., a Nevada corporation/ MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company] (the Grantor ), in favor of CIT BANK, N.A., acting as administrative agent and collateral agent (in such capacity, the Collateral Agent ).
BACKGROUND
A. The Mortgage and Security Agreement (Mesa Spare Parts Facility), dated as of August 12, 2016 (the Mortgage ), between, inter alios , the Grantor and the Collateral Agent, provides for the execution and delivery of supplements thereto substantially in the form hereof, which shall particularly describe certain collateral, and shall specifically mortgage the same to the Collateral Agent. Capitalized terms used in this Mortgage Supplement without definition have the meanings specified in the Mortgage (whether by reference to another document or otherwise).
B. The Mortgage was entered into between the Grantor and the Collateral Agent in order to secure the Obligations of the Grantor and each of the other Borrowers under that certain Credit Agreement dated as of August 12, 2016 (as the same may be amended, restated, amended and restated, modified, supplemented, renewed or replaced from time to time, the Credit Agreement ) among Grantor, Mesa Air Group Airline Inventory Management, L.L.C., Mesa Air Group, Inc., the other Loan Parties party thereto, the Lenders party thereto and the Collateral Agent, as administrative agent.
C. The Mortgage relates to the items of Equipment described in Exhibit 1 hereto, and a counterpart of the Mortgage is attached hereto and made a part hereof and this Mortgage Supplement, together with such counterpart of the Mortgage, is being filed for recordation on the date hereof with the FAA, as one document.
NOW, THEREFORE , that to secure the prompt and complete payment and performance when due of the Obligations of the Grantor and each other Borrower under the Credit Agreement and each of the other Loan Documents, to secure the performance and observance by the Grantor and each other Borrower of all the agreements, covenants and provisions contained in the Mortgage and in the Loan Documents to which they are a party for the benefit of the Collateral Agent on behalf of the Secured Parties and each of the other Indemnitees, and for the uses and purposes and subject to the terms and provisions of the Mortgage, and in consideration of the premises and of the covenants contained in the Mortgage, and of other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, the Grantor has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Collateral Agent, its respective successors and assigns,
Exhibit A
Page 1
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
for the security and benefit of the Secured Parties and such other Persons, a first priority continuing security interest in and first priority mortgage Lien on the following described property:
1. The Engines described on Exhibit I hereto (each such engine having 550 or more rated take-off horsepower or the equivalent thereof, whether or not such engines shall be installed in or attached to any airframe) in each case, together with all Parts that are from time to time incorporated or installed in or attached thereto or that shall be removed therefrom, unless the Lien of the Mortgage shall not be applicable to such Part pursuant to the provisions of the Mortgage; and
2. The Pledged Spare Parts maintained by or on behalf of the Grantor at the Spare Parts Locations described in Exhibit I hereto.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the Collateral Agent, its successors and assigns, for the uses and purposes and subject to the terms and provisions set forth in the Mortgage.
This Mortgage Supplement shall be construed as a supplemental Mortgage and shall form a part thereof, and the Mortgage is hereby incorporated by reference herein and is hereby ratified, approved and confirmed.
* * *
Exhibit A
Page 2
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
IN WITNESS WHEREOF , the Grantor has caused this Mortgage Supplement to be duly executed by one of its officers, thereunto duly authorized, on the day and year first above written.
[MESA AIRLINES, INC./ MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C.], as Grantor |
By: |
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Name: | ||
Title: |
Exhibit A
Page 3
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
EXHIBIT 1
TO
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. [1]
(MESA SPARE PARTS FACILITY)
DESCRIPTION OF EQUIPMENT
ENGINES:
Manufacturer |
Manufacturers Model | Serial Number | ||
DESCRIPTION OF SPARE PARTS LOCATIONS:
Exhibit A
Page 4
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
EXHIBIT B
GRANTOR SUPPLEMENT NO. [1]
(MESA SPARE PARTS FACILITY)
THIS GRANTOR SUPPLEMENT NO. [1] (MESA SPARE PARTS FACILITY) dated , (this Grantor Supplement ) made by [LOAN PARTY] , a[ ] (the Grantor ), in favor of CIT BANK, N.A., acting as administrative agent and collateral agent (in such capacity, the Collateral Agent ).
BACKGROUND
A. The Mortgage and Security Agreement (Mesa Spare Parts Facility), dated as of August , 2016 (the Mortgage ), between, inter alios , Mesa Airlines, Inc. and Mesa Air Group Inventory Management, L.L.C., as grantors, and the Collateral Agent, provides for the execution and delivery of grantor supplements thereto substantially in the form hereof, which shall join Additional Grantors to the Mortgage. Capitalized terms used in this Grantor Supplement without definition have the meanings specified in the Mortgage (whether by reference to another document or otherwise).
B. The Mortgage was entered into between the Grantor and the Collateral Agent in order to secure the Obligations of the Grantor and each of the other Borrowers under that certain Credit Agreement dated as of August 12, 2016 (as the same may be amended, restated, amended and restated, modified, supplemented, renewed or replaced from time to time, the Credit Agreement ) among Grantor, Mesa Airlines, Inc., Mesa Air Group Airline Inventory Management, L.L.C., Mesa Air Group, Inc., the other Loan Parties party thereto, the Lenders party thereto and the Collateral Agent, as administrative agent.
NOW, THEREFORE , that to secure the prompt and complete payment and performance when due of the Obligations of the Grantor and each other Borrower under the Credit Agreement and each of the other Loan Documents, to secure the performance and observance by the Grantor and each other Borrower of all the agreements, covenants and provisions contained in the Mortgage and in the Loan Documents to which they are a party for the benefit of the Collateral Agent on behalf of the Secured Parties and each of the other Indemnitees, and for the uses and purposes and subject to the terms and provisions of the Mortgage, and in consideration of the premises and of the covenants contained in the Mortgage, and of other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, the Grantor has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Collateral Agent, its respective successors and assigns, for the security and benefit of the Secured Parties and such other Persons, a first priority continuing security interest in and first priority mortgage Lien on the following described property:
(1) each Engine (each such Engine having 550 or more rated take-off horsepower or the equivalent thereof) as the same is now and will hereafter be constituted, whether now or hereafter acquired and subjected to the Lien hereof, and whether or not any such Engine shall be
Exhibit B
Page 1
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
installed in or attached to any airframe and all substitutions or replacements therefor, as provided in this Mortgage, together with all Parts of whatever nature that are from time to time included in any Engine, whether now or hereafter acquired and subjected to the Lien hereof, and all renewals, substitutions, replacements, additions, improvements, accessories and accumulations with respect to any of the foregoing, and all records, logs, manuals, maintenance data and inspection, modification and overhaul records and other related materials with respect to any of the foregoing (as may be required to be maintained by the Grantor under an FAA (or similar aviation authority) approved maintenance program);
(2) all Spare Parts currently owned or hereafter acquired by the Grantor, including, without limitation, Repairable Spare Parts, Rotable Spare Parts, Expendable Spare Parts and Life Limited Parts, and all substitutions or replacements therefor (collectively, the Qualified Spare Parts ); provided, however, that the following shall be excluded from the Lien of this Mortgage: any Qualified Spare Part so long as it is incorporated in, installed on, attached or appurtenant to, or being used on, an aircraft or engine (such Qualified Spare Parts, giving effect to such exclusions, the Pledged Spare Parts );
(3) the rights of the Grantor under any warranty or indemnity, express or implied, regarding title, materials, workmanship, design or patent infringement or related matters in respect of the Pledged Spare Parts;
(4) (i) the Engine Warranties and (ii) any relevant purchase agreement and bill of sale related to the Engines, in each case to the extent the same relate to continuing rights of the Grantor in respect of any warranty, indemnity or agreement, express or implied, as to title, materials, or workmanship, with respect to an Engine, together in each case under this clause 4 with all rights, powers, privileges, options and other benefits of the Grantor thereunder with respect to such Engine, including, without limitation, the right to make all waivers and agreements, to give and receive all notices and other instruments or communications, to take such action upon the occurrence of a default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, as shall be permitted thereby or by Law, and to do any and all other things that the Grantor is or may be entitled to do thereunder;
(5) all proceeds with respect to the requisition of title to or use of each Engine or any Part thereof, or any Pledged Spare Parts, all insurance proceeds or indemnity payments with respect to any of the foregoing and any other proceeds of any kind resulting from an Event of Loss;
(6) the Accounts and all moneys and securities now or hereafter paid or deposited or required to be paid or deposited to the Accounts or with the Collateral Agent by or for the account of the Grantor pursuant to the terms hereof and held or required to be held in the Accounts or by the Collateral Agent hereunder;
(7) any and all property that may, from time to time hereafter, in accordance with the provisions of the Loan Documents, by delivery or by Mortgage Supplement or by other writing of any kind, for the purposes hereof be in any way subjected to the Lien and security interest hereof or be expressly conveyed, mortgaged, assigned, transferred, deposited hereunder, in which a security interest may be granted by the Grantor and/or pledged by the Grantor, or any
Exhibit B
Page 2
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
Person authorized to do so on its behalf or with its consent, to and with the Collateral Agent, who is hereby authorized to receive the same at any and all times as and for additional security hereunder;
(8) all rents, issues, profits, revenues and other income of the property subjected or required to be subjected to the Lien of this Mortgage;
(9) all right, title, interest, associated rights, claims and demands of the Grantor, in, to and under any interchange agreement, pooling agreement or similar contract related to any Engine or Pledged Spare Part or otherwise in respect of any of same;
(10) all records, logs, manuals, maintenance data and inspection, modification and overhaul records and other related materials with respect to any of the Pledged Spare Parts (as may be required to be maintained by the Grantor under an FAA (or similar aviation authority) approved maintenance program;
(11) relevant software license or other intellectual property related to the use and/or operation by Holdings, the Grantor or any other Person of the Tracking System, including, without limitation, the inventory management software associated with the Tracking System; and
(12) all proceeds of the foregoing, including, without limitation, all causes of action, claims, associated rights and warranties now or hereafter held by the Grantor in respect of any of the items listed above and, to the extent related to any property described in said clauses or such proceeds, all books, correspondence, credit files, records, invoices and other papers.
To have and to hold all and singular the aforesaid property unto the Collateral Agent, its successors and assigns, and for the uses and purposes and subject to the terms and provisions set forth in this Mortgage.
The undersigned Grantor hereby makes each representation, warranty and covenant set forth in Article 2 of the Mortgage and hereby agrees to be bound as a Grantor by all of the terms and provisions of the Mortgage. Each reference in the Mortgage to the Collateral shall be construed to include a reference to the corresponding Collateral hereunder.
This Grantor Supplement shall be construed as a supplemental Mortgage and shall form a part thereof, and the Mortgage is hereby incorporated by reference herein and is hereby ratified, approved and confirmed.
* * *
Exhibit B
Page 3
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
IN WITNESS WHEREOF , the Grantor has caused this Grantor Supplement to be duly executed by one of its officers, thereunto duly authorized, on the day and year first above written.
[LOAN PARTY], as Grantor | ||
By: |
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Name: | ||
Title: |
Exhibit B
Page 4
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
EXHIBIT C
TO
MORTGAGE AND SECURITY AGREEMENT
(MESA SPARE PARTS FACILITY)
INSURANCE PROVISIONS
A. LIABILITY INSURANCE FOR PLEDGED SPARE PARTS .
The Grantors will carry or cause to be carried at all times, at no expense to any Additional Insured, commercial general and airline liability insurance with respect to the Pledged Spare Parts, which is (i) of an amount and scope as may be customarily maintained by the Grantors and other U.S. airlines for equipment similar to the Pledged Spare Parts and (ii) maintained in effect with insurers of nationally or internationally recognized responsibility and rated not less than A-, Class VII by Bests, aviation insurances (such insurers being referred to herein as Approved Insurers ).
B. PROPERTY INSURANCE FOR PLEDGED SPARE PARTS .
The Grantors will carry or cause to be carried at all times, at no expense to any Additional Insured, with Approved Insurers insurance covering all risk physical damage insurance including flood and earthquake, as applicable, including in-transit coverage, to the Pledged Spare Parts in an amount not less than the replacement cost of such Pledged Spare Parts. Collateral Agent shall be named as sole lender loss payee.
Any policies of insurance carried in accordance with this Exhibit C covering the Pledged Spare Parts and any policies taken out in substitution or replacement for any such policies shall provide that (A) (i) all insurance proceeds paid under such policies as a result of the occurrence of an Event of Loss with respect to any Pledged Spare Parts or (ii) any insurance proceeds paid under such policies not involving an Event of Loss with respect to any Pledged Spare Parts and of an amount in excess of $50,000 shall be applied in accordance with Section 3.02 of the Mortgage, and (B) any insurance proceeds not involving an Event of Loss with respect to any Pledged Spare Parts and of an amount equal to or less than $50,000 will be applied in payment (or to reimburse the Grantors) for repairs or for replacement property, and any balance remaining after such repairs or replacement with respect to such damage or loss shall, subject to the terms of the Credit Agreement, be paid over to, or retained by, the Grantors.
C. INSURANCE RELATING TO ENGINES .
(a) In connection with any Engine, the Grantors shall also maintain or cause to be maintained, at no expense to any Additional Insured, in respect of such Engine the following insurances:
(i) Liability: Airline liability insurance for bodily injury and property damage, including passenger legal liability, war risk and allied perils liability per AVN 52E plus such excess coverage for a $750,000,000 limit ( Liability War Risk Insurance ), contractual liability and products liability (exclusive of manufacturers product liability insurance) with
Exhibit C
Page 1
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
respect to the Engine (x) in an amount not less than the greater of (i) the amount that the Grantors may carry from time to time on other similar engines in its fleet (whether owned or leased) and (ii) $750,000,000 per occurrence and (y) with Approved Insurers.
(ii) Property: (A) All-Risk ground and flight and ingestion aircraft hull insurance covering each Aircraft on which any Engine is installed and such Engine while so installed thereon and such aircraft coverage shall automatically increase by the full replacement cost for such Engine, (B) all-risk property damage insurance including flood and/or earthquake, as applicable, covering such Engine while removed from any airframe, and (C) war risk and allied perils insurance, including war, confiscation, expropriation (or appropriation), nationalization and seizure (collectively, Hull War Risk Insurance , and collectively, with Liability War Risk Insurance, War Risk Insurance ) at all times (even when such Engine is grounded or in storage) and in-transit coverage in an amount not less than the full replacement cost for such Engine. Such insurance shall be of the type usually carried by the Grantors with respect to similar engines and covering risks of the kind customarily insured against by the Grantors. Collateral Agent shall be named as sole lender loss payee.
(b) As between the Grantors and the Collateral Agent, (i) all insurance proceeds received as a result of the occurrence of an Event of Loss with respect to any Engine or (ii) any insurance proceeds received not involving an Event of Loss with respect to any Engine and of an amount in excess of $250,000 under policies required to be maintained by the Grantors pursuant to the Mortgage will be applied in accordance with Section 3.01 of this Mortgage. All proceeds of insurance required to be maintained by the Grantors in respect of any property damage or loss not constituting an Event of Loss with respect to any Engine and of an amount equal to or less than $250,000 will be applied in payment (or to reimburse the Grantors) for repairs or for replacement property, so long as no Event of Default has occurred and is continuing, and any balance remaining after such repairs or replacement with respect to such damage or loss shall, subject to the terms of the Credit Agreement, be paid over to, or retained by, the Grantors.
D. GENERAL PROVISIONS .
Any policies of insurance carried in accordance with Sections A, B, and C including any policies taken out in substitution or replacement for such policies:
(i) shall name the Additional Insureds as additional insureds, as their respective interests may appear;
(ii) shall provide that, in respect of the interests of the Additional Insureds in such policies, the insurance shall not be invalidated or impaired by any act or omission (including misrepresentation and nondisclosure) by the Grantors or any other Person and shall insure the Additional Insureds regardless of any breach or violation of any representation, warranty, declaration, term or condition contained in such policies by the Grantors;
(iii) shall provide that, if such insurance is cancelled for any reason whatsoever, or if the same is allowed to lapse for nonpayment of premium, or if any material change is made in the insurance that adversely affects the interest of any of the Additional
Exhibit C
Page 2
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
Insureds, such cancellation, lapse or change shall not be effective as to the Additional Insureds for 30 days (or such lesser period in the case of War Risk Insurance) after receipt by the Additional Insureds of written notice by such insurers of such cancellation, lapse or change, provided that if any notice period specified above is not reasonably obtainable, such policies shall provide for as long a period of prior notice as shall then be reasonably obtainable;
(iv) shall waive any right of recourse, subrogation, setoff, recoupment, counterclaim or other deduction against any Additional Insured;
(v) shall be primary without right of contribution from any other insurance that may be available to any Additional Insured;
(vi) shall provide that all of the liability insurance provisions thereof, except the limits of liability, shall operate in all respects as if a separate policy had been issued covering each party insured thereunder;
(vii) shall provide that none of the Additional Insureds shall be liable for any insurance premium, warranties or representations to insurers;
(viii) deductible amounts shall be subject to Collateral Agents approval and certificates of insurance shall be in such form and contain detail as reasonably acceptable to Collateral Agent; and
(ix) in respect of insurances covering the Engines, the Grantors may procure endorsements to the relevant insurance policies required to be maintained pursuant to Section 2.03 and Section C of this Exhibit C so as to incorporate the terms of AVN67B into such policies, in which event, to the extent that any provision of any such AVN67B endorsement conflicts or is otherwise inconsistent with the requirements of Section 2.03 or Exhibit C (including Sections C and D), then such endorsement shall be deemed to satisfy such requirements to the extent covered by such endorsement. If the terms of AVN67B are incorporated into such policies, the Grantors will cause its insurance broker to issue an undertaking letter to the Additional Insureds confirming that the insurance broker will promptly advise the Additional Insureds upon becoming aware of the cancellation of or any material change in such insurance policies.
E. REPORTS AND CERTIFICATES; OTHER INFORMATION .
On or prior to the Closing Date and on or prior to each renewal date of the insurance policies required hereunder, the Grantors will furnish or cause to be furnished to the Collateral Agent insurance certificates describing in reasonable detail the insurance maintained by the Grantors hereunder and a report, signed by the Grantors regularly retained independent insurance broker (the Insurance Broker ), stating the opinion of such Insurance Broker that all premiums in connection with the insurance then due have been paid and that the insurance terms are in compliance with the requirements of Section 2.03, this Exhibit C and the Credit Agreement. The Grantors will request the Insurance Broker to agree to advise the Collateral Agent in writing of any default in the payment of any premium and of any other act or omission
Exhibit C
Page 3
[Mortgage and Security Agreement (Mesa Spare Parts Facility)]
on the part of the Grantors of which it has knowledge and which might invalidate or render unenforceable, in whole or in part, any insurance on the Pledged Spare Parts or any Engines, if applicable, or cause the cancellation, termination or interruption of such insurance; and, if the Insurance Broker does not so agree, the Grantors shall advise the Collateral Agent in writing of any such default in payment at least 30 days (or such lesser period in the case of War Risk Insurance) prior to the cancellation lapse, or material adverse change of any insurance maintained pursuant to this Exhibit C).
F. RIGHT TO PAY PREMIUMS .
Notwithstanding subparagraph D(vii) above, in the event of cancellation of any insurance due to the nonpayment of premiums, the Collateral Agent shall have the option, in its sole discretion, to pay any such premium in respect of the Pledged Spare Parts or any Engine, if applicable, that is due in respect of the coverage pursuant to the Mortgage and to maintain such coverage, as the Collateral Agent may require, until the scheduled expiry date of such insurance and, in such event, the Grantors shall, upon demand, reimburse the Collateral Agent for amounts so paid by it.
G. SELF-INSURANCE .
For the avoidance of doubt, with respect to the Pledged Spare Parts, the Grantors shall not be entitled to self insure the risks required to be insured against pursuant to Section 2.03 and this Exhibit C. With respect to any Engine, the Grantors shall not be entitled to self insure the risks required to be insured against pursuant to Section 2.03 and this Exhibit C other than an acceptable deductible pursuant to subparagraph D(viii) above.
Exhibit C
Page 4
Exhibit 10.13.2
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 1
(MESA SPARE PARTS FACILITY)
THIS MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 1 (MESA SPARE PARTS FACILITY) dated August 12, 2016 (this Mortgage Supplement ) made by MESA AIRLINES, INC. , a Nevada corporation (the Grantor ), in favor of CIT BANK, N.A. , acting as administrative agent and collateral agent (in such capacity, the Collateral Agent ).
BACKGROUND
A. The Mortgage and Security Agreement (Mesa Spare Parts Facility), dated as of August 12, 2016 (the Mortgage ), between, inter alios , the Grantor and the Collateral Agent, provides for the execution and delivery of supplements thereto substantially in the form hereof, which shall particularly describe certain collateral, and shall specifically mortgage the same to the Collateral Agent. Capitalized terms used in this Mortgage Supplement without definition have the meanings specified in the Mortgage (whether by reference to another document or otherwise).
B. The Mortgage was entered into between the Grantor and the Collateral Agent in order to secure the Obligations of the Grantor and each of the other Borrowers under that certain Credit Agreement dated as of August 12, 2016 (as the same may be amended, restated, amended and restated, modified, supplemented, renewed or replaced from time to time, the Credit Agreement ) among Grantor, Mesa Air Group Airline Inventory Management, L.L.C., Mesa Air Group, Inc., the other Loan Parties party thereto, the Lenders party thereto and the Collateral Agent, as administrative agent.
C. The Mortgage relates to the items of Equipment described in Exhibit 1 hereto, and a counterpart of the Mortgage is attached hereto and made a part hereof and this Mortgage Supplement, together with such counterpart of the Mortgage, is being filed for recordation on the date hereof with the FAA, as one document.
NOW, THEREFORE , that to secure the prompt and complete payment and performance when due of the Obligations of the Grantor and each other Borrower under the Credit Agreement and each of the other Loan Documents, to secure the performance and observance by the Grantor and each other Borrower of all the agreements, covenants and provisions contained in the Mortgage and in the Loan Documents to which they are a party for the benefit of the Collateral Agent on behalf of the Secured Parties and each of the other Indemnitees, and for the uses and purposes and subject to the terms and provisions of the Mortgage, and in consideration of the premises and of the covenants contained in the Mortgage, and of other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, the Grantor has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Collateral Agent, its respective successors and assigns, for the security and benefit of the Secured Parties and such other Persons, a first priority continuing security interest in and first priority mortgage Lien on the following described property:
Mortgage Supplement No. 1 Mesa Airlines
1. The Engines described on Exhibit 1 hereto (each such engine having 550 or more rated take-off horsepower or the equivalent thereof, whether or not such engines shall be installed in or attached to any airframe) in each case, together with all Parts that are from time to time incorporated or installed in or attached thereto or that shall be removed therefrom, unless the Lien of the Mortgage shall not be applicable to such Part pursuant to the provisions of the Mortgage; and
2. The Pledged Spare Parts maintained by or on behalf of the Grantor at the Spare Parts Locations described in Exhibit 1 hereto.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the Collateral Agent, its successors and assigns, for the uses and purposes and subject to the terms and provisions set forth in the Mortgage.
This Mortgage Supplement shall be construed as a supplemental Mortgage and shall form a part thereof, and the Mortgage is hereby incorporated by reference herein and is hereby ratified, approved and confirmed.
* * *
Mortgage Supplement No. 1 Mesa Airlines
[Mortgage Supplement (Mesa Spare Parts Facility)]
IN WITNESS WHEREOF , the Grantor has caused this Mortgage Supplement to be duly executed by one of its officers, thereunto duly authorized, on the day and year first above written.
MESA AIRLINES, INC. , as Grantor |
By: |
|
|
Name: Brian S. Gillman |
||
Title: Executive Vice President, General Counsel and Corporate Secretary |
EXHIBIT 1
TO
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 1
(MESA SPARE PARTS FACILITY)
DESCRIPTION OF EQUIPMENT
ENGINES:
Manufacturer | Manufacturers Model | Serial Number | ||
General Electric |
CF34-8C1 | 965222 | ||
General Electric |
CF34-8C1 | 965258 | ||
General Electric |
CF34-8C1 | 965246 | ||
General Electric |
CF34-8C1 | 965213 | ||
General Electric |
CF34-8C1 | 965252 |
DESCRIPTION OF SPARE PARTS LOCATIONS :
Phoenix, AZ
4346 E. Elwood Street, Suites 102 & 103
Phoenix, AZ 85040
Sterling, VA
23321 Autopilot Drive Sterling, VA 20166
Tucson, AZ
850 E. Teton Road Hangar 2
Tucson, AZ 85706
Louisville, KY
1161 Standiford Lane
Hangar 3
Louisville, KY 40213
Dallas, TX
1910 W. Airfield Drive
Bldg. B, Suite 300
Dallas, TX 75261
El Paso, TX
301 George Perry Blvd.
Suite B
El Paso, TX 79925
Houston, TX
16951 John F. Kennedy Blvd.
Houston, TX 77032
Mortgage Supplement No. 1 Mesa Airlines
Phoenix, AZ
3917 Air Lane
Phoenix, AZ 85034
Phoenix, AZ
4210 S. 37th St.
Phoenix, AZ 85040
Phoenix, AZ
2710 East Old Tower Rd.
Phoenix, AZ 85034
Mortgage Supplement No. 1 Mesa Airlines
Exhibit 10.13.3
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 2
(MESA SPARE PARTS FACILITY)
THIS MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 2 (MESA SPARE PARTS FACILITY) dated August 12, 2016 (this Mortgage Supplement ) made by MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., an Arizona limited liability company (the Grantor ), in favor of CIT BANK, N.A., acting as administrative agent and collateral agent (in such capacity, the Collateral Agent ).
BACKGROUND
A. The Mortgage and Security Agreement (Mesa Spare Parts Facility), dated as of August 12, 2016 (the Mortgage ), between, inter alios , the Grantor and the Collateral Agent, provides for the execution and delivery of supplements thereto substantially in the form hereof, which shall particularly describe certain collateral, and shall specifically mortgage the same to the Collateral Agent. Capitalized terms used in this Mortgage Supplement without definition have the meanings specified in the Mortgage (whether by reference to another document or otherwise).
B. The Mortgage was entered into between the Grantor and the Collateral Agent in order to secure the Obligations of the Grantor and each of the other Borrowers under that certain Credit Agreement dated as of August 12, 2016 (as the same may be amended, restated, amended and restated, modified, supplemented, renewed or replaced from time to time, the Credit Agreement ) among Grantor, Mesa Airlines Inc., Mesa Air Group, Inc., the other Loan Parties party thereto, the Lenders party thereto and the Collateral Agent, as administrative agent.
C. The Mortgage relates to the items of Equipment described in Exhibit 1 hereto, and a counterpart of the Mortgage is attached hereto and made a part hereof and this Mortgage Supplement, together with such counterpart of the Mortgage, is being filed for recordation on the date hereof with the FAA, as one document.
NOW, THEREFORE , that to secure the prompt and complete payment and performance when due of the Obligations of the Grantor and each other Borrower under the Credit Agreement and each of the other Loan Documents, to secure the performance and observance by the Grantor and each other Borrower of all the agreements, covenants and provisions contained in the Mortgage and in the Loan Documents to which they are a party for the benefit of the Collateral Agent on behalf of the Secured Parties and each of the other Indemnitees, and for the uses and purposes and subject to the terms and provisions of the Mortgage, and in consideration of the premises and of the covenants contained in the Mortgage, and of other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, the Grantor has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Collateral Agent, its respective successors and assigns, for the security and benefit of the Secured Parties and such other Persons, a first priority continuing security interest in and first priority mortgage Lien on the following described property:
Mortgage Supplement No. 2 Mesa Inventory
1. The Pledged Spare Parts maintained by or on behalf of the Grantor at the Spare Parts Locations described in Exhibit 1 hereto.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the Collateral Agent, its successors and assigns, for the uses and purposes and subject to the terms and provisions set forth in the Mortgage.
This Mortgage Supplement shall be construed as a supplemental Mortgage and shall form a part thereof, and the Mortgage is hereby incorporated by reference herein and is hereby ratified, approved and confirmed.
* * *
Mortgage Supplement No. 2 Mesa Inventory
[Mortgage Supplement (Mesa Spare Parts Facility)]
IN WITNESS WHEREOF , the Grantor has caused this Mortgage Supplement to be duly executed by one of its officers, thereunto duly authorized, on the day and year first above written.
MESA AIR GROUP AIRLINE INVENTORY MANAGEMENT, L.L.C., as Grantor |
||
By: |
Mesa Airlines, Inc., its sole member |
|
By: |
|
|
Name: Brian S. Gillman Title: Executive Vice President, General Counsel and Corporate Secretary |
EXHIBIT 1
TO
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 2
(MESA SPARE PARTS FACILITY)
DESCRIPTION OF SPARE PARTS LOCATIONS:
Phoenix, AZ
4346 E. Elwood Street, Suites 102 & 103
Phoenix, AZ 85040
Sterling, VA
23321 Autopilot Drive
Sterling, VA 20166
Tucson, AZ
850 E. Teton Road
Hangar 2
Tucson, AZ 85706
Louisville, KY
1161 Standiford Lane
Hangar 3
Louisville, KY 40213
Dallas, TX
1910 W. Airfield Drive
Bldg. B, Suite 300
Dallas, TX 75261
El Paso, TX
301 George Perry Blvd.
Suite B
El Paso, TX 79925
Houston, TX
16951 John F. Kennedy Blvd.
Houston, TX 77032
Phoenix, AZ
3917 Air Lane
Phoenix, AZ 85034
Phoenix, AZ
4210 S. 37th St.
Phoenix, AZ 85040
Mortgage Supplement No. 2 Mesa Inventory
Phoenix, AZ
2710 East Old Tower Rd.
Phoenix, AZ 85034
Mortgage Supplement No. 2 Mesa Inventory
Exhibit 10.13.4
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 3
(MESA SPARE PARTS FACILITY)
THIS MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 3 (MESA SPARE PARTS FACILITY) dated November 23, 2016 (this Mortgage Supplement ) made by MESA AIRLINES, INC., a Nevada corporation (the Grantor ), in favor of CIT BANK, N.A., acting as administrative agent and collateral agent (in such capacity, the Collateral Agent ).
BACKGROUND
A. The Mortgage and Security Agreement (Mesa Spare Parts Facility), dated as of August 30, 2016 (the Mortgage ), between, inter alios, the Grantor and the Collateral Agent, with the following attached thereto (i) Mortgage and Security Agreement Supplement No. 1 (Mesa Spare Parts Facility) dated August 30, 2016 and (ii) Mortgage and Security Agreement Supplement No. 2 (Mesa Spare Parts Facility) dated August 30, 2016, which was recorded by the Federal Aviation Administration on October 5, 2016 as Conveyance No. CW0010632, and provides for the execution and delivery of supplements thereto substantially in the form hereof, which shall particularly describe certain collateral, and shall specifically mortgage the same to the Collateral Agent. Capitalized terms used in this Mortgage Supplement without definition have the meanings specified in the Mortgage (whether by reference to another document or otherwise).
B. The Mortgage was entered into between the Grantor and the Collateral Agent in order to secure the Obligations of the Grantor and each of the other Borrowers under that certain Credit Agreement dated as of August 12, 2016 (as the same may be amended, restated, amended and restated, modified, supplemented, renewed or replaced from time to time, the Credit Agreement ) among Grantor, Mesa Air Group Airline Inventory Management, L.L.C., Mesa Air Group, Inc., the other Loan Parties party thereto, the Lenders party thereto and the Collateral Agent, as administrative agent.
C. The Mortgage Supplement is being filed as a supplement to the Mortgage to cover the items of Equipment described in Exhibit 1 hereto.
NOW, THEREFORE, that to secure the prompt and complete payment and performance when due of the Obligations of the Grantor and each other Borrower under the Credit Agreement and each of the other Loan Documents, to secure the performance and observance by the Grantor and each other Borrower of all the agreements, covenants and provisions contained in the Mortgage and in the Loan Documents to which they are a party for the benefit of the Collateral Agent on behalf of the Secured Parties and each of the other Indemnitees, and for the uses and purposes and subject to the terms and provisions of the Mortgage, and in consideration of the premises and of the covenants contained in the Mortgage, and of other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, the Grantor has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Collateral Agent, its respective successors and assigns, for the security and benefit of the Secured Parties and such other Persons, a first priority
Mortgage Supplement No. 3 Mesa Airlines
continuing security interest in and first priority mortgage Lien on the following described property:
1. The Engines described on Exhibit 1 hereto (each such engine having 550 or more rated take-off horsepower or the equivalent thereof, whether or not such engines shall be installed in or attached to any airframe) in each case, together with all Parts that are from time to time incorporated or installed in or attached thereto or that shall be removed therefrom, unless the Lien of the Mortgage shall not be applicable to such Part pursuant to the provisions of the Mortgage.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the Collateral Agent, its successors and assigns, for the uses and purposes and subject to the terms and provisions set forth in the Mortgage.
This Mortgage Supplement shall be construed as a supplemental Mortgage and shall form a part thereof, and the Mortgage is hereby incorporated by reference herein and is hereby ratified, approved and confirmed.
* * *
Mortgage Supplement No. 3 Mesa Airlines
IN WITNESS WHEREOF, the Grantor has caused this Mortgage Supplement to be duly executed by one of its officers, thereunto duly authorized, on the day and year first above written.
MESA AIRLINES, INC., as Grantor |
By: |
|
|
Name: Title: |
Mortgage Supplement No. 3 Mesa Airlines
EXHIBIT 1
TO
MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. 3
(MESA SPARE PARTS FACILITY)
DESCRIPTION OF EQUIPMENT
ENGINES:
Manufacturer | Manufacturers Model | Serial Number | ||
General Electric General Electric General Electric General Electric General Electric |
CF34-8C5 CF34-8C5 CF34-8C5 CF34-8C1 CF34-8C5 |
195600 195601 195604 965251 194450 |
Mortgage Supplement No. 3 Mesa Airlines
Exhibit 10.16
EXECUTION VERSION
CREDIT AGREEMENT
dated as of August 12, 2015
among
MESA AIRLINES, INC.,
Borrower
and
EXPORT DEVELOPMENT CANADA,
Lender
CF34-8C5 Aircraft Engine Kits
TABLE OF CONTENTS
Page | ||||||||
1. | DEFINITIONS; USAGE | 1 | ||||||
Section 1.01 | Definitions | 1 | ||||||
Section 1.02 | Usage | 8 | ||||||
2. | PURCHASE OF NOTES; PAYMENTS; REPLACEMENT NOTES | 9 | ||||||
Section 2.01 | Purchase of Notes | 9 | ||||||
Section 2.02 | Procedure for Purchase of Notes | 9 | ||||||
Section 2.03 | Replacement Notes | 10 | ||||||
Section 2.04 | Obligations Absolute | 10 | ||||||
Section 2.05 | Amortization | 10 | ||||||
Section 2.06 | Interest | 11 | ||||||
3. | [INTENTIONALLY OMITTED] | 11 | ||||||
4. | PAYMENTS BY BORROWER | 11 | ||||||
Section 4.01 | How Payments Are Made | 11 | ||||||
Section 4.02 | Right to Prepay | 11 | ||||||
Section 4.03 | Mandatory Prepayments | 11 | ||||||
Section 4.04 | Amount of Prepayment | 11 | ||||||
Section 4.05 | Interest on Past Due Amounts | 12 | ||||||
Section 4.06 | Limit on Interest Payable | 12 | ||||||
Section 4.07 | [INTENTIONALLY OMITTED] | 12 | ||||||
Section 4.08 | Changes in Market | 12 | ||||||
Section 4.09 | Application of Payments | 13 | ||||||
5. | BORROWERS REPRESENTATIONS AND WARRANTIES | 13 | ||||||
Section 5.01 | Corporate Standing | 13 | ||||||
Section 5.02 | Corporate Powers | 13 | ||||||
Section 5.03 | Binding Effect | 13 | ||||||
Section 5.04 | Litigation | 13 | ||||||
Section 5.05 | Financial Statements; No Materially Adverse Change | 13 | ||||||
Section 5.06 | Taxes | 14 | ||||||
Section 5.07 | Status as United States Citizen and Air Carrier | 14 | ||||||
Section 5.08 | Governmental Consents | 14 | ||||||
Section 5.09 | Acceptance of Engine Kit | 14 | ||||||
Section 5.10 | Solvency | 14 | ||||||
Section 5.11 | No Governmental Approvals, Notices and Filings | 14 | ||||||
Section 5.12 | Compliance with Laws | 14 |
TABLE OF CONTENTS
(continued)
Page | ||||||||
6. | AFFIRMATIVE COVENANTS | 14 | ||||||
Section 6.01 | Financial Statements | 15 | ||||||
Section 6.02 | [INTENTIONALLY OMITTED] | 15 | ||||||
Section 6.03 | Corporate Existence | 15 | ||||||
Section 6.04 | Merger, etc | 15 | ||||||
Section 6.05 | Citizenship and Air Carrier Status | 16 | ||||||
Section 6.06 | Disposition of Assets | 16 | ||||||
Section 6.07 | ERISA Information | 16 | ||||||
Section 6.08 | Compliance with Laws | 16 | ||||||
7. | CONDITIONS PRECEDENT AND CONDITION SUBSEQUENT | 16 | ||||||
Section 7.01 | Conditions Precedent to First Funding | 16 | ||||||
Section 7.02 | Conditions Precedent to Each Funding | 17 | ||||||
Section 7.03 | Conditions Precedent to Borrowers Obligations | 19 | ||||||
8. | EVENTS OF DEFAULT; REMEDIES | 19 | ||||||
Section 8.01 | Events of Default | 19 | ||||||
Section 8.02 | Remedies | 20 | ||||||
9. | BORROWERS INDEMNITIES | 20 | ||||||
Section 9.01 | General Indemnity | 20 | ||||||
Section 9.02 | General Tax Indemnity | 22 | ||||||
10. | YIELD PROTECTION; ILLEGALITY | 32 | ||||||
Section 10.01 | Additional Costs | 32 | ||||||
Section 10.02 | Breakage Costs; Prepayment Premium | 33 | ||||||
Section 10.03 | Illegality | 34 | ||||||
Section 10.04 | Mitigation | 34 | ||||||
11. | [INTENTIONALLY OMITTED.] | 35 | ||||||
12. | [INTENTIONALLY OMITTED.] | 35 | ||||||
13. | MISCELLANEOUS | 35 | ||||||
Section 13.01 | No Waivers; Cumulative Remedies | 35 | ||||||
Section 13.02 | Notices | 35 | ||||||
Section 13.03 | Transaction Expenses | 35 | ||||||
Section 13.04 | Amendments | 36 | ||||||
Section 13.05 | Successors and Assigns | 36 | ||||||
Section 13.06 | Initial Lenders Representations, Warranties and Agreements | 37 |
TABLE OF CONTENTS
(continued)
Page | ||||||||
Section 13.07 | Governing Law; Jurisdiction; Waiver of Jury Trial | 38 | ||||||
Section 13.08 | Headings | 39 | ||||||
Section 13.09 | Execution in Counterparts | 39 | ||||||
Section 13.10 | Survival of Representations and Warranties | 39 | ||||||
Section 13.11 | Severability | 39 | ||||||
Section 13.12 | Confidentiality | 39 | ||||||
Section 13.13 | Dollars | 40 | ||||||
Section 13.14 | Commitment Fee | 40 | ||||||
Section 13.15 | Arrangement Fee | 41 | ||||||
Section 13.16 | Entire Agreement | 41 |
Exhibit A Form of Fixed Rate Note
Exhibit B Form of Floating Rate Note
Exhibit C Form of Funding Notice
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of August 12, 2015, among (1) MESA AIRLINES, INC. (Borrower), a Nevada corporation, and (2) EXPORT DEVELOPMENT CANADA, a corporation established by an Act of the Parliament of Canada, as lender (Initial Lender).
Borrower, and Lender agree as follows:
1. DEFINITIONS; USAGE
Section 1.01 Definitions. The following terms, when capitalized as below, have the following meanings:
Affiliate: any other Person who controls 50% or more of any class of voting securities of such Person or is controlled by, or is under common control with, such Person. For purposes of this definition, control of any specified Person means having direct or indirect power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise.
After-Tax Basis: a basis such that any payment to be received or receivable by any Person is supplemented by a further payment or payments to that Person so that the sum of all such payments, after deducting all Taxes (taking into account any related credits or deductions) payable by such Person or any of its Affiliates under any law or governmental authority, is equal to the payment due to such Person, provided, that for these purposes, such Person shall be assumed to be subject to tax at the highest marginal rate(s) applicable to such Person with respect to the amounts in question.
Agreement: this Credit Agreement.
Arrangement Fee: defined in Section 13.15.
ASU: the Sector Understanding on Export Credits for Civil Aircraft effective 1 September 2011 made by the Participants to the Arrangement on Officially Supported Export Credits of the Organisation for Economic Co-operation and Development (utilizing the English-language version thereof).
Bankruptcy Code: the Title 11 of the United States Code, 11 U.S.C. Section 101 et seq., as amended, or any successor statutes thereto.
Basic Documents: this Agreement, the Guaranty, and each Note.
Breakage Costs: means the amount (if any) by which: (a) interest calculated at the LIBOR rate then in effect on the principal amount of any Floating Rate Note paid, prepaid or due which the Initial Lender should have received for the period commencing on the date the paid or prepaid amount is received or due and ending on the next Interest Payment Date, had such amount been paid on the next Interest Payment Date; exceeds (b) the interest which the Initial Lender would be able to earn by placing an amount equal to the principal amount paid, prepaid
[Credit Agreement]
or due on deposit at a rate equal to LIBOR determined at approximately 11:00 am, London time, on the day that is two (2) London Banking Days preceding the day such payment or prepayment is made or due, for a period closest to the remainder of the relevant Interest Period.
Business Day: any day, other than a Saturday or Sunday, on which commercial banks are open for business in New York, New York, Toronto, Ontario, Ottawa, Ontario, and Phoenix, Arizona, and if such day is a Funding Date or Payment Date in respect of a Floating Rate Note or relates to a notice by Borrower with respect to any Funding Date in respect of a Floating Rate Note, which is also a day on which dealings in Dollar deposits are carried out in the London interbank market.
Code: the Internal Revenue Code of 1986, including effective date and transition rules (whether or not codified). Any reference to a specific section of the Code shall be deemed to include a reference to any corresponding provision of future law.
Code Share Event: any termination or material adverse change in the terms and conditions of any code share agreement of Borrower, Guarantor or any Affiliate thereof with respect to which following such termination or material adverse change, Borrower, Guarantor or any Affiliate thereof remains responsible for the ownership, leasing or financing of the aircraft that are subject to such code share agreement (and which shall include, without limitation any code share agreement between Borrower, Guarantor or any Affiliate thereof, on the one hand, and American Airlines, Inc. or any Affiliate thereof, on the other hand, pursuant to which Borrower, Guarantor or any Affiliate thereof remains so responsible for the aircraft subject thereto); provided that unless, in the case of termination, such code share agreement shall have been replaced with a code share agreement with another major airline (acceptable to the Lender) in form and substance acceptable to the Lender.
Commitment: defined in Section 2.01(a).
Commitment Fee: defined in Section 13.14.
Commitment Termination Date: defined in Section 2.01(a).
Default: any event or condition that would become an Event of Default upon the giving of notice or lapse of time or both, or any Event of Default.
Default Rate: defined in Section 4.05. Delivery Date: defined in Section 2.01(a). Dollars: and $: United States dollars.
Downpayment: the difference between (x) the NEKP for an Engine Kit less any advance deposits made by Borrower to the Exporter in respect of such Engine Kit (as reflected in the invoice for such Engine Kit) and (y) the Financed Amount for such Engine Kit.
Engine Kit : means a CF34-8C5 aircraft engine kit and all associated services including inter alia, installation, testing and inspection.
2
[Credit Agreement]
Equipment: means up to five (5) Engine Kits to be sold by the Exporter pursuant to the Purchase Agreement.
ERISA: the Employee Retirement Income Security Act of 1974.
ERISA Source of Funds: used by a purchaser of any Note: any source of funds that includes the assets of any Plan, other than a plan exempt from the coverage of ERISA, but in any event excluding any source of funds that the relevant purchaser represents to Borrower:
(1) is an insurance company general account as such term is used in U.S. Department of Labor Prohibited Transaction Class Exemption (PTCE) 95-60 (issued July 12, 1995), and the amount of reserves and liabilities (as defined in the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the NAIC Annual Statement) and before reduction for credits on account of any reinsurance ceded on the coinsurance basis) (the Reserves and Liabilities), for the general account contract(s) held by or on behalf of any Plan, together with the amount of the Reserves and Liabilities for the general account contract(s) held by or on behalf of any other Plans maintained by the same employer (or any affiliate thereof within the meaning of Section V(a)(1) of PTCE 95-60), does not exceed 10% of the total Reserves and Liabilities of such general account plus surplus, as set forth in the NAIC Annual Statement filed with the state of domicile of the insurance company maintaining such general account; or
(2) is a separate account that is maintained solely in connection with that purchasers fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or
(3) is either (a) an insurance company pooled separate account, within the meaning of PTCE 90-1 (issued January 29, 1990), or (B) a bank collective investment fund, within the meaning of PTCE 91-38 (issued July 12, 1991) and, except as consented to by Borrower in writing pursuant to this clause (3), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or
(4) constitutes assets of an investment fund (within the meaning of Part V of PTCE 84-14) managed by a qualified professional asset manager or QPAM (within the meaning of Part V of PTCE 84-14), no employee benefit plans assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of PTCE-84-14) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of PTCE 84-14 are satisfied, and neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of control in Section V(e) of PTCE 84-14) owns a 5% or more interest in Borrower; or
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(5) constitutes assets managed by an in-house asset manager or INHAM (within the meaning of Part IV of PTCE 96-23), the conditions of Part I(a) of PTCE 96-23 are satisfied, and neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of control in Section IV(d) of PTCE 96-23) owns a 5% or more interest in Borrower; or
(6) is a governmental plan; or
(7) is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of such has been consented to by Borrower in writing pursuant to this clause (7).
As used in this definition, employee benefit plan, governmental plan, and separate account have the same meanings as in Section 3 of ERISA.
Event of Default: defined in Section 8.01. Exporter: means Standard Aero Limited.
FATCA: Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantially comparable, any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code).
Financed Amount: the amount equal to the principal amount of the Note issued for an Engine Kit and determined pursuant to the second sentence of Section 2.01(a).
Fixed Rate: for any Fixed Rate Note: the interest rate per annum, which is fixed for the term of such Fixed Rate Note, equal to the sum of (a) the interpolated semi-annual rate to swap floating rate debt to fixed rate debt (offer side) for loans with a maturity closest to the weighted average remaining life of the loan, at 11:00 a.m. New York City time, two (2) Business Days prior to the Funding Date in respect of such Fixed Rate Note (such interpolated rate to be obtained from the Bloomberg page IRSB (US Semi 30/360 column 2 (Ask)) or any substitute or replacement page providing the same service), (b) the Premium Rate and (c) the applicable Margin Benchmark. The Fixed Rate in respect of any Fixed Rate Note shall be determined by the Lenders, which rate shall be conclusive except in the case of manifest error.
Fixed Rate Note: Borrowers promissory note, in the faun of Exhibit A, issued in connection with a designated Engine Kit and accruing interest at the Fixed Rate for such Fixed Rate Note, or a note issued in exchange or replacement for such a note.
Floating Rate: for any Interest Period in respect of any Floating Rate Note: the interest rate per annum, equal to the sum of (a) LIBOR plus (b) the Premium Rate plus (c) the applicable Margin Benchmark.
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Floating Rate Note: Borrowers promissory note, in the form of Exhibit B, issued in connection with a designated Engine Kit and accruing interest at the Floating Rate, or a note issued in exchange or replacement for such a note.
Funding Date: a date on which a Lender purchases the Note relating to a specific Engine Kit.
Funding Notice: defined in Section 2.02.
GAAP: generally accepted accounting principles as in effect in the United States and applied on a basis consistent with that used in the preparation of the financial statements referred to in Section 5.05, except for changes therein with which Borrowers independent public accountants concur that are disclosed in the notes to the relevant financial statements.
Guarantor: Mesa Air Group, Inc., a Nevada corporation.
Guaranty: the document by that name, dated as of the date of this Agreement, issued by the Guarantor for the benefit of the Initial Lender.
Indemnitee: The Lender, or any agent, employee, officer, director, successor, or permitted assign of any of the foregoing.
Initial Lender: Export Development Canada, a corporation established by an Act of the Parliament of Canada.
Interest Period: for a Note, each period beginning on a Payment Date for that Note (or, in the case of the first Interest Period for that Note, beginning on its Funding Date) and ending on (but excluding, for purposes of computing interest) the following Payment Date for that Note.
Interest Rate: for a Note: (a) with respect to any Interest Period for a Floating Rate Note, the applicable Floating Rate for such Interest Period, and (b) with respect to a Fixed Rate Note, the applicable Fixed Rate for such Fixed Rate Note, in either case as elected by Borrower pursuant to Section 2.02.
Lender: Initial Lender and any successor or assign of Initial Lender, including any future holder of a Note.
Liabilities: defined in Section 9.01.
LIBOR: for any Interest Period for a Floating Rate Note: a rate per annum equal to the London interbank rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for one-month Dollar deposits as such rate is displayed on Reuters Screen LIBOR01 Page (or any replacement Reuters page which displays that rate), at approximately 11:00 a.m., London time (or as soon thereafter as practicable), or if such service does not display any such quote, the arithmetic mean of such rates as displayed on Bloomberg BBAM Page at approximately 11:00 a.m., London time (or as soon thereafter as practicable), or if such service does not display any such quote, the arithmetic mean of such rates, as quoted by the London Reference Banks, in any case on the day that is two (2) Business Days prior to the first day of that Interest Period.
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Lien: any mortgage, pledge, assignment, security interest, lien (statutory or other), or other encumbrance of any kind or nature whatsoever (including any conditional sale or other title retention agreement, or any lease in the nature thereof).
London Reference Banks: any four (4) of the following banks: (i) Bank of America, (ii) Citibank, N.A., (iii) Credit Suisse, (iv) Deutsche Bank AG, (v) HSBC, (vi) JP Morgan Chase Bank and (vii) UBS AG.
Majority in Interest of Lenders: as of any date of the determination thereof, holders of Notes holding not less than a majority (greater than 50%) in aggregate outstanding principal amount of the Notes. For all purposes of the foregoing definition, in determining as of any date the then aggregate outstanding principal amount of Notes, there shall be excluded any Notes, if any, held by Borrower or any Affiliate thereof.
Margin Benchmark: for purposes of determining the Floating Rate shall be 0.41% per annum and for purposes of determining the Fixed Rate shall be 0.58% per annum.
Materially Adverse Change: the occurrence and continuation of one or more of the following events (i) a material adverse change in the financial condition, financial results, business or operations of Borrower or Guarantor which could reasonably be expected to materially adversely affect its ability to perform its obligations under the Basic Documents, or (ii) Borrower or Guarantor, as debtor, shall have commenced or there shall be pending or there shall have been commenced against Borrower or Guarantor and be pending a case, proceeding or other action under applicable bankruptcy or insolvency laws or similar legislation.
Maturity Date: for a Note, subject to the second sentence of Section 2.01(a), the five (5) year anniversary of the Funding Date for that Note, or such earlier date as may be determined in accordance with Section 2.01(a) in the case of an Engine Kit in respect of which the Funding Date is later than the Delivery Date.
NEKP: the price for an Engine Kit invoiced by the Exporter, or supplier thereof, after accounting for all price discounts and other cash credits, less all other credits or concessions of any kind related or fairly allocable thereto, as stated in a binding representation by the Exporter and evidenced by invoices under the Purchase Agreement and by the certificate from the Exporter delivered pursuant to Section 7.02(h).
Note: individually, any Fixed Rate Note or Floating Rate Note and Notes shall mean, collectively, all Fixed Rate Notes and Floating Rate Notes.
Obligor: either Borrower or Guarantor, and Obligors shall mean, collectively, Borrower and Guarantor.
Officers Certificate: a certificate signed in the name of Borrower (or, with respect to Section 6.04(d), of the Successor) by the chairman of the board, the president, a vice president, the treasurer or the assistant treasurer of Borrower (or the Successor).
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Other EDC Transaction: any other financing (present or future) by the Initial Lender for, or for the benefit of, the Borrower or Guarantor (or any Affiliate of Borrower or Guarantor) in respect of which the Initial Lender is, at the applicable time, a creditor or interest holder of at least ten percent (10%) of the outstanding debt amount or other interest thereunder.
Payment Date: for a Note, each quarterly anniversary of the Funding Date for that Note, through the Maturity Date for that Note; except that any Payment Date that falls on a day which is not a Business Day shall instead occur on the following Business Day, unless in the case of a Floating Rate Note the following Business Day occurs in the following calendar month, in which case such Payment Date shall instead occur on the preceding Business Day.
Person: any individual, corporation, limited liability company, partnership, joint venture, or other legal or governmental entity.
Plan: an employee benefit plan or individual retirement account subject to Title I of ERISA or to Code Section 4975.
Premium Rate: for any Note, shall be the rate set forth in Section 2.01(b).
Purchase Agreement: for any Engine Kit, the Purchase Agreement, as amended from time to time, dated June 11, 2015, between the Borrower and the Exporter for the purchase and sale of the Equipment.
Regulatory Change: the enactment, adoption, or promulgation, after a Funding Date (in the case of the Initial Lender) or the date a successor Lender acquires its Note(s) pursuant to Section 13.05 hereof (in the case of such successor Lender) (or in the case of such successor Lender, such earlier date (but in no event prior to a Funding Date) as shall enable it to obtain compensation pursuant to Section 10.01 to the extent the transferor Lender was entitled thereto at the time of transfer), of any law or regulation by a United States federal or state government or by the government of a Lenders or such successor Lenders jurisdiction of organization, or any change, after the Funding Date (in the case of a Lender) or the date a successor Lender acquires its Note(s) (in the case of such successor Lender) (or such earlier date), in any such law or regulation, or in the interpretation thereof by any governmental authority, central bank, or comparable agency of the United States or a Lenders or such successor Lenders jurisdiction of organization charged with the responsibility for the administration or application thereof, that imposes, modifies, or deems applicable (a) any reserve (including any reserves arising from the imposition of reserves pursuant to Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time), special deposit, or similar requirement against extensions of credit or other assets of, or deposits with or other liabilities of, such Lender or such successor Lender, as the case may be, including, or by reason of, the loan evidenced by the Note(s) or (b) any capital adequacy requirement requiring the maintenance by a Lender or such successor Lender, as the case may be, of additional capital in respect of the loan evidenced by the Note(s).
Responsible Officer: the President, or the Chief Financial Officer, or any other officer of Borrower, Guarantor or a Lender customarily bearing responsibility for matters relating to the transactions contemplated by the Basic Documents, or any officer of Borrower, Guarantor or the Lender specifically authorized to take responsibility for any matter relating to the transactions contemplated by the Basic Documents.
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Section 1110 Airline: a citizen of the United States (within the meaning of 49 U.S.C. § 40102(a)(15)), who is an air carrier holding a valid air carrier operating certificate issued pursuant to 49 U.S.C. ch. 447 for aircraft capable of carrying 10 or more individuals.
Specified Carrier Bankruptcy Event: United Airlines, Inc. or American Air Group Inc. or any of their respective Affiliates shall have:
(i) applied for or consented to the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of all or a majority of its property, (2) made a general assignment for the benefit of its creditors, (3) commenced a voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (4) filed a petition seeking to take advantage (as debtor) of any other law relating to bankruptcy, insolvency, reorganization, winding up, or composition or readjustment of debts, or (5) failed to controvert in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under the federal Bankruptcy Code; or
(ii) be the subject of a proceeding or case commenced, without its application or consent, in any court of competent jurisdiction, seeking (1) its liquidation, reorganization, dissolution, or winding up, or the composition or readjustment of its debts, (2) the appointment of a trustee, receiver, custodian, liquidator, or the like for it or over all or a majority of its assets, or (3) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding up, or composition or adjustment of debts, and (if it is contesting the proceeding on a reasonable basis and in good faith) such proceeding or case shall have continued undismissed, or an order, judgment, or decree approving or ordering any of the foregoing is entered and shall have continued unstayed and in effect, for a period of ninety (90) days; or an order for relief against it was entered in an involuntary case under the federal Bankruptcy Code.
Specified Default: Default under Section 8.01(a), (e) or (0, or an Event of Default.
Successor: defined in Section 6.04(a).
Taxes: defined in the third paragraph of Section 9.02(a).
Section 1.02 Usage. Any agreement or statute referred to in Section 1.01 means such agreement or statute as from time to time supplemented and amended. A definition in singular form applies to the plural form of the term, and vice versa. References to sections, exhibits, and the like refer to those in or attached to this Agreement unless otherwise specified. Including means including but not limited to. Or means one or more, or all, of the alternatives listed or described. Herein, hereof, hereunder, etc. mean in, of, under, etc. this Agreement (and not merely in, of, under, etc. the section or provision where the reference appears).
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2. PURCHASE OF NOTES; PAYMENTS; REPLACEMENT NOTES
Section 2.01 (a) Purchase of Notes. Subject to the satisfaction of the conditions precedent set forth in Section 7, and on the terms and conditions set forth in this Section 2, on the Funding Date for each Engine Kit, Borrower shall issue to Initial Lender, and Initial Lender shall purchase from Borrower, a Note in a principal amount equal to the Financed Amount for such Engine Kit, bearing interest at the applicable Interest Rate, designated as having been issued in connection with such Engine Kit and otherwise in the form of Exhibit A (for a Fixed Rate Note) or Exhibit B (for a Floating Rate Note), as the case may be. The Financed Amount for each Engine Kit shall not exceed 85% (or such lesser percentage as Borrower shall designate) of its NEKP; provided that, if the Funding Date for an Engine Kit is later than the delivery date of such Engine Kit from the Exporter to Borrower (a Delivery Date), the Financed Amount and the Maturity Date for such Engine Kit shall be adjusted as though the financing for such Engine Kit occurred on such Delivery Date. The aggregate Financed Amount for all of the Engine Kits shall not exceed $11,000,000 (the Commitment). Borrower shall not be obligated to draw down all or any part of the Commitment. The ability of Borrower to issue Notes and the Initial Lenders obligation to purchase Notes in respect of an Engine Kit shall terminate on the six (6) month anniversary of the Delivery Date in respect of such Engine Kit. Notwithstanding the foregoing, the ability of Borrower to issue Notes and the Initial Lenders obligation to purchase Notes pursuant to this Agreement shall terminate on the earlier of (i) the three (3) month anniversary of the Delivery Date in respect of the last Engine Kit and (ii) November 4, 2015 (the Commitment Termination Date).
(b) Premium Rate. The Premium Rate in respect of each Note shall be 2.66% per annum (which includes a 0.05% administration fee in accordance with ASU). The Premium Rate, is not subject to adjustment, so long as no Funding Date occurs later than the Commitment Termination Date.
Section 2.02 Procedure for Purchase of Notes. (a) At least three (3) Business Days prior to each proposed Funding Date, Borrower shall provide a funding notice in respect of such Engine Kit substantially in the form of Exhibit C (Funding Notice) to the Lender and Lenders counsel. The Funding Notice shall be in writing and shall specify (i) the proposed Funding Date, (ii) the Financed Amount for such Engine Kit, (iii) the wiring instructions for the Financed Amount to be disbursed to Borrower (or its designee), (iv) Borrowers election of either the Floating Rate or the Fixed Rate for the Note in respect of such Engine Kit and (v) the Maturity Date for the Note in respect of such Engine Kit. On the appropriate Funding Date, upon fulfillment of the conditions set forth in Section 7, Initial Lender will purchase from Borrower the Note related to the Engine Kit that Borrower designated for that date for a purchase price equal to the face amount thereof (as set forth in Section 2.01(a)) by transferring the Financed Amount for each relevant Engine Kit to Borrower (or its designee). Subject to Section 2.01(a) and the following sentence, the amortization schedule for each Note shall be calculated on the basis that such Note shall be repayable in twenty (20) equal consecutive quarterly installments and shall amortize on a straight-line basis. Promptly upon determination by a Lender of LIBOR for any subsequent Interest Period for each Floating Rate Note, Lender shall give notice thereof to Borrower.
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Section 2.03 Replacement Notes. If (a) any Note becomes mutilated, defaced, lost, stolen, or destroyed or (b) Borrower or a Lender otherwise reasonably requests, then, upon the request of Borrower or any Lender, (x) Borrower shall promptly execute and deliver to Lender a replacement Note for each such Note as to which such a request is made, and (y) such Lender shall surrender to Borrower, in exchange for such replacement Note, the Note being replaced (if not lost, stolen, or destroyed). As conditions precedent to the replacement of any Note, the applicant for a new Note shall furnish to Borrower evidence to Borrowers reasonable satisfaction of the loss, theft, or destruction of such Note alleged to have been lost, stolen, or destroyed, and of the ownership and authenticity of such mutilated, defaced, lost, stolen, or destroyed Note, and also such security and indemnity as Borrower reasonably requires (provided, that the written undertaking of the Initial Lender or any institutional holder of a Note having a net worth (or in the case of a bank, having combined capital, surplus, and undivided profits) of at least $100,000,000 to hold harmless Borrower in respect of the execution, authentication and delivery of such new Note shall be sufficient security and indemnity), and shall pay all expenses and charges of such substitution or exchange. All Notes shall be issued, held, and owned upon the express condition that the foregoing provisions are exclusive in respect of the replacement of mutilated, defaced, lost, stolen, or destroyed Notes and shall preclude (to the extent lawful) any and all other rights and remedies, any present or future law or statute to the contrary notwithstanding. Each replacement Note shall have identical terms as the Note that it replaces, except for such changes as Borrower and the Lenders agree upon (such agreement not to be unreasonably withheld) following a request by any of them for such a change.
Section 2.04 Obligations Absolute. Borrowers obligations under each Note shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of such Note and this Agreement under any and all circumstances whatsoever and irrespective of:
(a) any lack of validity or enforceability of any Basic Document, or any term or provision therein;
(b) the existence of any claim, setoff, defense, or other right that Borrower (or any subsidiary or affiliate of Borrower) or any other Person may at any time have against any Lender or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction;
(c) any other act or omission to act or delay of any kind of the Lenders or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.04, constitute a legal or equitable discharge of Borrowers obligations hereunder.
Section 2.05 Amortization. Borrower shall pay to the Lenders on each Payment Date, the principal amount set forth opposite such date in Schedule I to each Note; provided that, in each such case, the principal installment payable on the Maturity Date for any such Note shall in all cases be in an amount equal to the entire principal amount of such Note outstanding on such date, and such principal installment shall be paid together with all accrued and unpaid interest and all other amounts then due and payable hereunder and under the other Basic Documents.
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Section 2.06 Interest. Borrower shall pay to the Lenders, interest on the unpaid principal amount of each Note for each Interest Period at the Interest Rate for such Interest Period until such Note is paid in full. Accrued interest on the unpaid principal of each Note shall be payable in arrears on each Payment Date therefor and otherwise upon the payment or prepayment thereof (but only on the principal amount so paid or prepaid), except that interest payable at the Default Rate shall be payable from time to time on demand in accordance with Section 4.05.
3. [INTENTIONALLY OMITTED]
4. PAYMENTS BY BORROWER
Section 4.01 How Payments Are Made. Borrower shall make its payments and prepayments of principal and interest due on the Notes, and all other amounts payable by Borrower to any Lender under the Basic Documents, to the credit of such account as such Lender may from time to time notify the Borrower in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due. Any payment made by Borrower to Lender after 3:00 p.m. (New York City time) on any day shall be deemed to have been made on the following Business Day. Subject to the adjustments required by the definition of Payment Date, if any payment due under the Basic Documents comes due on a day which is not a Business Day, such payment shall instead be made on the following Business Day, and interest shall accrue at the applicable rate to the day of payment (except that no additional interest shall accrue on any Fixed Rate Note if the payment thereon is made on such following Business Day).
Section 4.02 Right to Prepay. Provided that no Default has occurred and is continuing, Borrower shall have the right at any time on or after the initial Payment Date in respect of an Engine Kit to prepay all or part of the outstanding principal amount of the Notes issued with respect to the applicable designated Engine Kit; provided that any partial prepayment of the Notes with respect to an Engine Kit shall be in an aggregate principal amount not less than the most recent scheduled principal payment required pursuant to such Notes. Borrower shall give to Lender at least thirty (30) days prior written notice (which notice shall be irrevocable) of such prepayment (which notice shall specify the date on which such prepayment shall be made, and the Notes to which such prepayment applies). Upon any prepayment of any Note under this Section 4.02, Borrower shall pay all accrued and unpaid interest on the principal of that Note to (but excluding) the date of prepayment, and all amounts payable under Section 10.02 with respect to such prepayment. Amounts prepaid shall not be available for re-borrowing.
Section 4.03 Mandatory Prepayments. Upon acceleration of the Notes pursuant to Section 8.02, Borrower shall prepay such Notes, and shall pay all amounts payable under Section 10.02 with respect to such prepayment. To the extent required by Section 10.04, Borrower shall prepay any relevant Notes in accordance with the terms of Section 10.04 and such Notes.
Section 4.04 Amount of Prepayment. Subject to Section 4.06, a Note shall be deemed satisfied in full upon the prepayment of all principal of such Note, the payment of all accrued and unpaid interest on or with respect to such Note as of such prepayment date, the payment of all past-due interest on or with respect to such Note, and the payment of all amounts payable under Section 10.02 with respect to such prepayment.
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Section 4.05 Interest on Past Due Amounts. Any amounts past due (by acceleration or otherwise) and at any time outstanding under any Note or from Borrower under any Basic Document shall (to the extent permitted by law) bear interest, payable on demand, from the due date (and shall be compounded on a quarterly basis) until (but excluding the date of) payment in full, at a rate equal to 2.00% per annum above the Interest Rate for the relevant Note (the Default Rate).
Section 4.06 Limit on Interest Payable. The amount of interest due or payable under this Agreement or any Note shall not in any event exceed the maximum allowable by applicable law, and this sentence shall override any contrary provision in this Agreement or any Note.
Section 4.07 [INTENTIONALLY OMITTED1.
Section 4.08 Changes in Market. If on or prior to 3:00 p.m. on the Business Day three (3) Business Days prior to any Interest Period in respect of a Floating Rate Note, any Lender determines (acting reasonably and in good faith) that:
(x) by reason of circumstances affecting the London interbank market, adequate and reasonable means do not exist for ascertaining LIBOR for such Interest Period in accordance with the definition thereof; or
(y) by reason of circumstances affecting the London interbank market, LIBOR does not accurately reflect the cost to such Lenders of maintaining or funding the loan in respect of such Floating Rate Note for such Interest Period,
then such Lender will promptly so notify Borrower of a substitute basis for determining an alternate interest rate for such Floating Rate Note, which alternate basis shall thereafter apply and be binding upon the Borrower and such Lender; provided that, at the Borrowers request, such Lender and Borrower shall enter into good faith negotiations (for a period of not more than thirty (30) days) with a view to concluding agreement on an acceptable alternate interest rate to be applicable to such Floating Rate Note. In the event the Borrower requests that such Lender enters into negotiations in accordance with the foregoing sentence, in the absence of any agreement being reached during such thirty (30) day period, the Floating Rate for such Interest Period shall be based on the sum of (A) the cost of funds of such Lender (as determined by such Lender in its sole discretion) plus (B) the Premium Rate, and (C) the Margin Benchmark applicable to Floating Rate Notes, which rate will be applied retroactively to the beginning of such Interest Period and continue for only so long as either of the conditions set forth in clauses (x) or (y) above exist. The provisions of this Agreement will be amended to accord with the terms of such substitute basis and Borrower agrees to execute such instruments requested by such Lenders that are in form and substance reasonably satisfactory to Borrower to reflect such amendment. If Borrower receives a notice under this Section 4.08, Borrower may at any time thereafter either (A) prepay, in accordance with Section 4.02 hereof, the affected Floating Rate Notes held by such Lenders or (B) request such Lender to transfer, in accordance with Section 13.05(b) hereof, the affected Floating Rate Notes held by such Lender to a financial institution designated by Borrower, at a price equal to 100% of the unpaid principal amount of such Floating Rate Note, together with accrued and unpaid interest thereon to (but excluding) the date of transfer, plus any amounts due under Section 10.02(a).
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Section 4.09 Application of Payments. Each Lender shall apply payments received by it in respect of a Note under this Agreement (whether at stated maturity, by reason of acceleration, prepayment or otherwise) in the following order of priority: (a) interest due pursuant to Section 4.05 in respect of or related to such Note; (b) Commitment Fees, Arrangement Fees and all other amounts due to such Lender under this Agreement and not otherwise provided for under this Section 4.09 in respect of or related to such Note; (c) interest due pursuant to Section 2.06 in respect of or related to such Note; (d) principal due in respect of or related to such Note; (e) in respect of all other Notes issued hereunder, in or towards payment of the amounts referred to in, and in the respective order of priorities set forth in clauses (a) through (d) of this Section 4.09 as if such references were for amounts due and owing in respect of or related to such other Notes; (f) installments of principal not yet due in inverse order of maturity in respect of or related to the Notes; and (g) all other amounts due under this Agreement and not otherwise provided for in this Section 4.09.
5. BORROWERS REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as follows:
Section 5.01 Corporate Standing. Borrower is a duly organized corporation existing in good standing under the laws of Nevada, has the corporate power and legal authority to own or lease property and to carry on business as a Section 1110 Airline, and is duly qualified to do business in all jurisdictions wherein such qualification is necessary (except in any jurisdictions in which the failure to qualify would result in no Materially Adverse Change).
Section 5.02 Corporate Powers. Borrowers execution, delivery, and performance of the Basic Documents to which it is (or is to become) a party are within Borrowers corporate powers; and the Basic Documents to which it is (or is to become) a party have been duly authorized by all necessary corporate action on Borrowers part, and do not contravene, result in a breach of, or require any consent under any law, judgment, decree, order, or contractual restriction binding on Borrower or any agreement or instrument to which Borrower is a party or to which it or any of its property is subject.
Section 5.03 Binding Effect. The Basic Documents to which Borrower is (or is to become) a party are (or will be when executed and delivered) legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with the terms of this Agreement, except as may be limited by bankruptcy, insolvency, or other similar laws affecting enforcement of creditors rights generally and by general principles of equity.
Section 5.04 Litigation. There are no pending actions or proceedings before any court or administrative agency which may be expected to result in a Materially Adverse Change.
Section 5.05 Financial Statements; No Materially Adverse Change. The audited balance sheet as of September 30, 2014, for Borrower and its consolidated subsidiaries, and the related results of operations for the quarterly fiscal period then ended, have been prepared in accordance with GAAP and correctly present Borrowers financial condition as of such date and results of operations for such period (subject to normal year-end event adjustments). As of the date of this Agreement, there has been no Materially Adverse Change.
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Section 5.06 Taxes. Borrower has filed all tax returns which it is or was required to file, and has paid all taxes shown to be due and payable on those returns or on any assessment received by it, except such taxes of Borrower, if any, as are being contested diligently in good faith, and by appropriate proceedings, and as to which adequate reserves have been provided in accordance with GAAP.
Section 5.07 Status as United States Citizen and Air Carrier. Borrower is a Section 1110 Airline.
Section 5.08 Governmental Consents. Borrowers execution, delivery, and performance of the Basic Documents do not require the consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any federal, state, or foreign governmental authority or agency (including any judicial body).
Section 5.09 Acceptance of Engine Kit. On or prior to each Funding Date, the related Engine Kit shall have been delivered to and accepted by Borrower and Borrower shall have good and marketable title to such Engine Kit free and clear of all Liens.
Section 5.10 Solvency. Borrower (a) has sufficient capital to carry on all businesses and transactions in which it engages or is about to engage, (b) owns property having a value both at fair valuation and at present fair salable value greater than the amount required to pay Borrowers debts, (c) is solvent, (d) will continue to be solvent after assuming all obligations related to the Basic Documents, and (e) is able to pay its debts as they mature.
Section 5.11 No Governmental Approvals, Notices and Filings. No consent or approval of, giving of notice to, registration with, or taking of any action in respect of or by, any federal, state, or local governmental authority is or will be required with respect to Borrowers execution, delivery, or performance of each Basic Document to which it is a party or if any such consent, approval, notice, registration, or action is required, it will have been duly given or obtained on or before the pertinent Funding Date.
Section 5.12 Compliance with Laws. Borrower is in compliance with all applicable laws and regulations, including, without limitation, environmental laws and laws and regulations relating to corruption and bribery, provided that, in the case of such laws and regulations (other than laws and regulations relating to corruption and bribery), Borrower may have complied only to the extent necessary to ensure that non-compliance with such laws could not, individually or in the aggregate, reasonably be expected to have a Materially Adverse Effect.
6. AFFIRMATIVE COVENANTS
So long as any Note, or any amount owed by Borrower under any Basic Document, remains outstanding or unpaid:
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Section 6.01 Financial Statements. Borrower shall furnish to each Lender:
(a) within forty-five (45) days after the end of the first three quarterly periods in each fiscal year of Borrower, a consolidated balance sheet of Guarantor and its consolidated subsidiaries (including Borrower) prepared by it as of the close of such period, together with the related consolidated statements of income for such period; and
(b) within one hundred twenty (120) days after the last day of each fiscal year of Borrower, a consolidated copy of the audited balance sheet of and related statements of income and cash flows of Guarantor and its consolidated subsidiaries (including Borrower) at and as of the end of such fiscal year, each of which shall be prepared in accordance with GAAP and shall be accompanied by an opinion of a firm of independent public accountants of nationally recognized standing that said financial statements fairly present in all material respects the financial condition and results of operations of Guarantor as of, and for, such period in accordance with GAAP.
Section 6.02 [INTENTIONALLY OMITTEDT
Section 6.03 Corporate Existence. Except as permitted by Section 6.04, Borrower shall maintain its existence as a corporation in good standing.
Section 6.04 Merger, etc. Borrower shall not consolidate with or merge into any other corporation, or convey, transfer, or lease all or substantially all of its assets as an entirety to any Person, unless:
(a) the Person formed by such consolidation or merger, or the Person who acquires by conveyance, transfer, or lease all or substantially all of Borrowers assets as an entirety (the Successor) is a Section 1110 Airline;
(b) in the case of such a consolidation, merger, conveyance, transfer, or lease, the Successor: (x) executes and delivers to Lenders an agreement, in form and substance reasonably satisfactory to Lenders, containing an assumption by the Successor of the due and punctual performance and observance of Borrowers obligations under the Basic Documents to which Borrower is then a party (including this covenant), and (y) makes such filings, registrations and recordings, as are necessary to evidence such consolidation, merger, conveyance, transfer, or lease with or to the Successor;
(c) such transaction shall not (1) create any Event of Default, or (2) materially impair Borrowers or the Successors (as the case may be) ability to perform its obligations under the Basic Documents; and
(d) Borrower or the Successor delivers to Lenders, promptly upon consummation of such transaction, an Officers Certificate stating that the conditions precedent set forth in clauses (a), (b), and (c) have been complied with and an opinion of counsel for Borrower or for the Successor, in form and substance reasonably satisfactory to Lenders, (1) stating that the agreements entered into to effect such consolidation, merger, conveyance, transfer, or lease and such assumption agreements have been duly authorized, executed, and delivered by the Successor (or in the case of a merger, by Borrower) and that they (and the Basic
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Documents so assumed) constitute legal, valid, and binding obligations of the Successor (or in the case of a merger, of Borrower), enforceable in accordance with their terms (to the same extent as the Basic Documents so assumed were enforceable against Borrower immediately prior to such transaction), (2) stating that all conditions precedent which are legal in nature provided for in this Agreement and relating to such transaction have been fulfilled and (3) containing such other customary matters Lender reasonably requests.
Upon any such consolidation, conveyance, merger, transfer, or lease, the Successor shall succeed to, shall be substituted for, and may exercise every right and power of Borrower under the Basic Documents to which Borrower is a party, with the same effect as if the Successor had been named as Borrower therein. No such conveyance, transfer, or lease of substantially all Borrowers assets as an entirety shall have the effect of releasing Borrower (or any Successor) from its liability under the Basic Documents to which it is a party..
Section 6.05 Citizenship and Air Carrier Status. Borrower will at all times remain a Section 1110 Airline.
Section 6.06 Disposition of Assets. Except as peimitted by Section 6.04, Borrower will not transfer or assign assets, or pay dividends to any affiliate, subsidiary, or related company, if such a transfer, assignment, or payment would materially impair Borrowers ability to meet its obligations under the Basic Documents.
Section 6.07 ERISA Information. Borrower will cooperate with all reasonable requests by any Lender (including reasonable requests for information) to determine whether any proposed transfer by such Lender of its interest in the Basic Documents would violate ERISA.
Section 6.08 Compliance with Laws. Borrower will comply with all applicable laws and regulations, including, without limitation, environmental laws and laws and regulations relating to corruption and bribery, provided that, in the case of such laws and regulations (other than laws and regulations relating to corruption and bribery), Borrower need comply only to the extent necessary to ensure that non-compliance with such laws could not, individually or in the aggregate, reasonably be expected to have a Materially Adverse Effect.
7. CONDITIONS PRECEDENT AND CONDITION SUBSEQUENT
Section 7.01 Conditions Precedent to First Funding. Initial Lenders obligation to purchase the relevant Note on the first Funding Date is subject to the satisfaction of the following conditions precedent and the Initial Lenders receipt on or before such initial Funding Date of the following, in form and substance reasonably satisfactory to Initial Lender:
(a) an executed copy of this Agreement;
(b) a certificate of Borrowers secretary, dated the Funding Date, certifying attached copies of the resolutions of Borrowers board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party, and showing the names and copies of the specimen signature(s) of Borrowers officer(s) authorized to sign this Agreement and the related documents to which it is (or is to become) a party;
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(c) an executed copy of the Guaranty; and
(d) an executed copy of the Purchase Agreement,
Section 7.02 Conditions Precedent to Each Funding. Initial Lenders obligation to purchase each relevant Note (including each relevant Note on the initial Funding Date) is subject to the additional conditions precedent that:
(a) Initial Lender shall, to the extent set forth below, have received the following, each dated as of the pertinent Funding Date, in form and substance reasonably satisfactory to Initial Lender:
(1) Initial Lender shall have received the Note for the relevant Engine Kit, duly executed by Borrower,
(2) an Officers Certificate certifying: (x) Borrowers representations and warranties in Section 5 of this Agreement are true and accurate as though made on the Funding Date, and (y) no Event of Default exists or will result from Initial Lenders purchase of its Note,
(3) an officers certificate of Guarantor certifying Guarantors representations and warranties in Section 9 of the Guaranty are true and accurate as though made on the Funding Date,
(4) an opinion from Borrowers in-house counsel as to the matters contemplated thereby,
(5) an opinion from Guarantors in-house counsel as to the Guaranty and the matters contemplated thereby,
(6) an opinion from Smith, Gambrell & Russell, LLP, special New York counsel to Borrower and Guarantor as to the matters contemplated hereby,
(7) an anti-corruption declaration and a disclosure consent from the Exporter addressed to the Initial Lender,
(8) a favorable opinion of Vedder Price P.C., special counsel to the Initial Lender, as to the matters contemplated thereby,
(9) such additional opinion(s) and document(s) the Lender requests,
(10) a certificate of Borrowers secretary, dated the Funding Date, certifying attached copies of the resolutions of Borrowers board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party and showing the names and copies of the specimen signature(s) of Borrowers officer(s) authorized to sign this Agreement and the related documents to which it is (or is to become) a party,
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(11) a certificate of Guarantors secretary, dated the Funding Date, certifying attached copies of the resolutions of Guarantors board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party and showing the names and copies of the specimen signature(s) of Guarantors officer(s) authorized to sign the Guaranty and the related documents to which it is (or is to become) a party, and
(12) Initial Lender shall have received a warranty bill of sale from the Exporter pertaining to the relevant Engine Kit;
(b) Borrowers and Guarantors representations and warranties in the Basic Documents shall be true and accurate as though made on and as of such Funding Date;
(c) no Event of Default shall exist or shall result from Initial Lenders purchase of its Note;
(d) all necessary consents, approvals, licenses, permits, declarations, or registrations then required in connection with Borrowers execution, delivery, and performance of the Basic Documents and the transactions contemplated thereby shall have been obtained;
(e) since December 31, 2014, no Materially Adverse Change shall have occurred;
(f) Initial Lender shall have received the following, each dated as of the pertinent Funding Date: (1) the Note issuable to it with respect to the relevant Engine Kit, duly executed by Borrower, and (2) an executed copy of each document referred to in Section 7.02(a)(2) through (12);
(g) Initial Lender shall have received a Funding Notice as referred to in Section 2.02 of this Agreement;
(h) Initial Lender shall have received evidence satisfactory to it that the Financed Amount for an Engine Kit does not exceed the purchase price of such Engine Kit, as evidenced by (I) a purchase invoice from the Borrower or Exporter and (II) a certificate from the Exporter which attests to the NEKP and all price discounts and other cash credits, credits or concessions with respect to the Engine Kit;
(i) Initial Lender shall have received (A) the relevant Arrangement Fee due on such Funding Date pursuant to Section 13.15 and (B) the amount of the Commitment Fee due and owing as of such Funding Date, if any, pursuant to Section 13.14;
(i) no Code Share Event shall have occurred; and
(k) Since the date hereof, no Specified Carrier Bankruptcy Event shall have occurred.
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Section 7.03 Conditions Precedent to Borrowers Obligations. Borrowers obligations on each Funding Date are subject to Borrowers receipt, on or before such Funding Date, of the following, each in form and substance reasonably satisfactory to Borrower:
(a) with respect to the first Funding Date only, this Credit Agreement, executed by the Initial Lender;
(b) with respect to the first Funding Date only, the tax forms referred to in Section 9.02(j); and
(c) such additional opinion(s) and document(s) as Borrower reasonably requests.
8. EVENTS OF DEFAULT; REMEDIES
Section 8.01 Events of Default. Each of the following shall constitute an Event of Default:
(a) (1) Borrower fails to make any payment due from Borrower on any Note or under any Basic Document when due, and such failure continues for five (5) Business Days (as to principal, interest, and amounts payable under Section 4.02 or 4.03) or ten (10) Business Days (as to all other amounts due) after Borrowers receipt of notice of such failure from Initial Lender, or (2) Guarantor fails to make any payment due from Guarantor under the Guaranty when due, and such failure continues for ten (10) Business Days after Guarantors receipt of notice of such failure from Initial Lender;
(b) any representation or warranty made by any Obligor in the Basic Documents, or in any certificate or other document that it furnishes pursuant to the Basic Documents, is incorrect in any material respect when made (and, if the effect(s) of such incorrectness is/are reasonably curable, such effect(s) continue(s) for thirty (30) days after such Obligors receipt of notice of such incorrectness from Initial Lender);
(c) Borrower violates Section 6.03 or 6.05;
(d) any Obligor fails in any material respect to perform any other covenant or agreement in the Basic Documents, and such failure to perform continues for thirty (30) days after such Obligors receipt of notice of such default from Initial Lender (one hundred fifty (150) days after such Obligors receipt of such notice if (1) such covenant or agreement is reasonably curable, and (2) such Obligor is diligently pursuing a cure of such failure);
(e) an Obligor (1) applies for or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of all or a majority of its property, (2) makes a general assignment for the benefit of its creditors, (3) commences a voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (4) files a petition seeking to take advantage (as debtor) of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, or (5) fails to controvert in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under the federal Bankruptcy Code;
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a proceeding or case is commenced, without an Obligors application or consent, in any court of competent jurisdiction, seeking (1) its liquidation, reorganization, dissolution, or winding-up, or the composition or readjustment of its debts, (2) the appointment of a trustee, receiver, custodian, liquidator, or the like of such Obligor or of all or a majority of its assets, or (3) similar relief in respect of such Obligor under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and (if such Obligor is contesting the proceeding on a reasonable basis and in good faith) such proceeding or case continues undismissed, or an order, judgment, or decree approving or ordering any of the foregoing is entered and continues unstayed and in effect, for a period of ninety (90) days; or an order for relief against such Obligor is entered in an involuntary case under the federal Bankruptcy Code;
(g) the Guaranty ceases to be in full force and effect or the Guarantor fails to comply with any material term, condition or covenant set forth in the Guaranty;
(h) so long as the Initial Lender is the holder of at least ten percent (10%) of the Notes in respect of any Engine Kit, an Event of Default or similar event shall have occurred and be continuing under any Other EDC Transaction;
(i) a Code Share Event shall have occurred and be continuing; or
(j) a Specified Carrier Bankruptcy Event shall have occurred and be continuing.
Section 8.02 Remedies. If an Event of Default (other than under Section 8.01 (e) or (f)) exists, Lender may (and upon its receipt of written request by a Majority in Interest of Lenders shall) declare all Notes to be immediately due and payable, whereupon all Notes shall become and be immediately due and payable without presentment, demand, protest, or other notice of any kind, all of which Borrower hereby waives, and all lending commitments hereunder shall terminate. If an Event of Default under Section 8.01(e) or (f) occurs, all Notes automatically shall become immediately due and payable and all lending commitments hereunder automatically shall immediately terminate, without presentment, demand, protest, or notice of any kind, all of which Borrower hereby waives. Upon the occurrence of any Event of Default, Lender may exercise any of its rights and remedies under the Basic Documents.
9. BORROWERS INDEMNITIES
Section 9.01 General Indemnity. (a) General. Borrower assumes liability for, and agrees to indemnify each Indemnitee, on an After-Tax Basis, against, whether or not the transactions contemplated herein or in any of the other Basic Documents are consummated, any and all Liabilities.
Liabilities means any and all liabilities, obligations, losses, damages, penalties, claims (including claims involving negligence, strict or absolute liability, liability in tort, and liabilities arising out of violation of laws or regulatory requirements of any kind), suits, actions, costs, expenses, and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever imposed on, incurred by, or asserted against an Indemnitee, whether or not such Indemnitee is indemnified as to such matter by any other Person, relating to or arising
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out of: (aa) any of the Basic Documents or any of the transactions contemplated herein or therein or the enforcement thereof, including any misrepresentation or breach of warranty of Borrower contained therein or in any document or certificate of Borrower delivered pursuant thereto or the breach of any agreement or covenant by Borrower, or the failure by Borrower to perform any of its obligations under the Basic Documents, or (bb) the manufacture, assembly, design, purchase, acceptance, resale, rejection, refinancing, non-use, alteration, replacement, existence, control, refurbishment, service, removal, redelivery, substitution, ownership, delivery, lease, possession, repossession, return, use, operation, maintenance, condition, overhaul, testing, insuring, transportation, importation, exportation, modification, repair, fitness for use, merchantability, abandonment, sale, return, storage, transfer of title, or other disposition of an Engine Kit, any Note, or any Engine Kit or any part thereof or any accident in connection therewith whether or not relating to loss or damage to any property, or death or injury of, or other loss suffered by, any Person (including latent and other defects, whether or not discoverable, strict tort liability, and any claim for patent, trademark, or copyright infringement), or (dd) the offer or sale of any interest in the Engine Kit or any Note, or (ee) any prohibited transaction within the meaning of ERISA Section 406 or Code Section 4975(c) in any way relating to, arising out of or resulting from the offer, sale, resale, purchase, delivery or holding of any Notes or interest thereon or in any transaction contemplated by the Basic Documents, whether occurring before, on, or after the date hereof, or (ff) any violation of any law, relating to the possession, use or maintenance of the Engine Kit.
However, Borrower shall not be required to indemnify any Indemnitee: (aa) for any Liability arising out of the gross negligence, willful misconduct, misrepresentation, or breach of contract of such Indemnitee (other than gross negligence imputed to an Indemnitee solely by reason of its interest in any Engine Kit), or such Indemnitees ordinary negligence in exercising its right of inspection, (bb) for any Liability constituting Taxes, whether or not Borrower is required to indemnify therefor pursuant to Section 9.02; provided, that this clause (bb) shall not apply to Taxes (x) taken into consideration in making any payment pursuant to this Section 9.01 on an After-Tax Basis, or (y) arising out of any prohibited transaction within the meaning of ERISA Section 406 or Code Section 4975(c) (but in the case of (y) only to the extent occurring because of a misrepresentation by Borrower), (cc) for any Liability attributable to the sale or other transfer of all or part of such Indemnitees interest in any Engine Kit or any Note other than a sale or other transfer as a result of (e.g., such sale or transfer is viewed by the transferor as the transferors exit strategy in connection with such Event of Default), or in connection with the exercise of remedies during the continuance of, an Event of Default, or at Borrowers request or direction, or as required by any of the Basic Documents, or (dd) any Indemnitees liability as a manufacturer or maintenance provider.
Borrower hereby waives and releases any claim now or hereafter existing against any Indemnitee arising out of death or personal injury to personnel or agents of Borrower or any Affiliate, loss or damage to property of Borrower, its agents, or any Affiliate, which may result from or arise out of the items referred to in clause (bb) of the definition of Liabilities set forth in this Section 9.01 while any of the Notes are outstanding, including any latent or patent defect, whether or not discoverable, except to the extent any such claim arises out of the gross negligence, willful misconduct, or misrepresentation of or breach of its obligations under the Basic Documents by such Indemnitee.
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(b) Contests. If any claim for a Liability is made against Borrower or any Indemnitee and such party has received notice thereof, such party receiving notice of such Liability shall promptly notify all affected Indemnitees or Borrower, as the case may be, provided, that the failure to provide such notice promptly or to notify Borrower shall not release Borrower from any of its obligations to indemnify hereunder, except to the extent that such failure adversely affects any applicable defense or counterclaim, or otherwise increases the amount Borrower would have been liable for in the absence of such failure. If no Specified Default shall exist, Borrower shall have the right to investigate and defend or (so long as Borrower has acknowledged in writing to the relevant Indemnitee that Borrower is liable to such Indemnitee for such Liability), compromise any Liability for which it may be required to indemnify under this Section 9.01, and each Indemnitee agrees to cooperate with all reasonable requests of Borrower in connection therewith. Notwithstanding any of the foregoing to the contrary, Borrower shall not be entitled to assume responsibility for and control of any such judicial or administrative proceedings or compromise any Liability if (aa) any Specified Default shall exist, or (bb) such proceedings would involve the imposition of criminal liability on an Indemnitee or if such contest will, in the reasonable opinion of such Indemnitee, be inappropriate under applicable standards of professional conduct. The reasonable fees and expenses of such Indemnitees counsel shall be paid by Borrower if any of the circumstances described in clauses (aa) or (bb) above exists. An Indemnitee may participate at its own expense and with its own counsel in any judicial proceeding controlled by Borrower pursuant to the preceding provisions. Each Indemnitee shall cooperate with all reasonable requests of the insurers in the exercise of their rights to investigate, defend, or compromise such claim as may be required by such policy to maintain the insurance coverage provided to the parties thereunder. To the extent that any Indemnitee receives indemnification payments under this Section 9.01, Borrower shall be subrogated to such Indemnitees rights with respect to the transaction or event requiring or giving rise to such indemnity to the extent of any indemnity payment made, other than to any insurance policies maintained by such Indemnitee.
(c) Survival. The indemnities in this Section 9.01 shall survive the expiration or other termination of the Basic Documents as to acts occurring or circumstances existing on or before such expiration or termination.
(d) Payment. Subject to the provisions of clause (b) above, Borrower agrees to pay a claim for any Liability by an Indemnitee within ten (10) Business Days of written demand therefor.
Section 9.02 General Tax Indemnity. (a) General. Borrower agrees that all payments on any Note and all payments by Borrower to any Lender in connection with the transactions contemplated by the Basic Documents shall be free and clear of, and without deduction for, any and all withholdings of any nature whatsoever, except as otherwise provided in the first two paragraphs of this Section 9.02(a). If any deduction or withholding is required with respect to any amount payable on any Note or any other amounts payable by Borrower that are enumerated (and not excepted) above, Borrower shall pay an additional amount such that the net amount actually received by each Indemnitee, after such deduction or withholding, will be equal to all such amounts that would be received by such Indemnitee if no such deduction or withholding had been required. Each Indemnitee shall file and provide to Borrower such returns, statements, or other documentation as shall enable it to claim to the extent possible any reduced rate of Tax
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withholding or any exemption from Tax withholding with respect to any Taxes to which the terms of this Section 9.02(a) apply, in each case, properly available under applicable law or any applicable treaty, provided that, (i) except in the case of Tax withholding required by the United States government on interest income, Borrower shall have provided to such Indemnitee timely notice of the requirement for such returns, statements, or other documentation, (ii) such Indemnitee has in good faith determined it would suffer no adverse tax consequences by providing the applicable return, statement, or other documentation, and (iii) Borrower has agreed to pay, and does pay after demand therefor, on an After-Tax Basis, all costs and expenses incurred by such Indemnitee in providing the applicable return, statement, or other documentation. If and to the extent that such Indemnitee fails to file or provide any such return, statement, or other documentation required pursuant to the preceding sentence and as a result thereof either (1) Tax withholding is required at a rate which is higher than that which would have been applicable had such return, statement or other documentation been filed or provided, or (2) Tax withholding is required which would not have been required had such return, statement, or other documentation been filed or provided, Borrowers obligation to make the increased payment otherwise required by this Section 9.02(a) shall be limited to the amount which would have been required if such Indemnitee had filed or provided such return, statement, or other documentation.
Notwithstanding the foregoing, if any deduction or withholding of Taxes imposed by the United States government (including any such deduction or withholding of Taxes imposed under FATCA) is required by applicable law (after taking into account any applicable treaty) with respect to any amount payable on any Note or under the other Basic Documents (other than to Initial Lender (it being understood and agreed payments to whom shall be governed by the first paragraph of Section 9.02(a))), Borrower shall make, and the Lender shall receive, such payment net of such required deduction or withholding, and Borrower shall not be required to make the additional payment otherwise required by this Section 9.02(a) with respect to such deduction or withholding, except in the case of any such deduction or withholding of Taxes imposed by the United States government (other than such Taxes imposed under FATCA) that is required as a result of any amendment to or change in applicable law, which amendment or change becomes effective after the date the Lender becomes a Lender hereunder (a Change in Law). In the event that there is a Change in Law and a Lender (other than Initial Lender) becomes subject to a deduction or withholding requirement, such Lender shall use reasonable efforts to transfer the affected Note to a branch or Affiliate located in a jurisdiction not affected by such withholding Tax or with respect to which a lower withholding Tax applies, if such transfer would not result in any economic disadvantage or adverse Tax consequences to such Lender and would not otherwise be disadvantageous (except to a de minimis extent) (unless, in the case of any economically quantifiable detriment, Borrower has agreed to indemnify against such detriment in a manner reasonably satisfactory to such Lender). If such transfer is made, such Lender shall, as promptly as practicable, fulfill or cause to be fulfilled the obligations under Section 9.02(j) with respect to any branch or Affiliate. If a Lender receives a payment without a deduction or a withholding that is required by applicable law but is not Borrowers responsibility under this Section 9.02(a), the pertinent Lender shall reimburse Borrower for any amount, including interest and penalties imposed by the United States government, that Borrower is required to make with respect to such payment. Notwithstanding any other provision of this paragraph, a Lender shall be indemnified, to the extent provided for elsewhere in this Section 9.02, for any deduction or withholding that is required because (i) Borrower is not or
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does not remain an entity that is a United States person within the meaning of Code Section 7701(a)(30), or (ii) Borrower is not managed and controlled within the United States, or conducts activities outside the United States, in either case with the consequence that payments are made, deemed, or treated as made by Borrower from outside the United States. Regardless of the applicability of any other provision of this paragraph, if any deduction or withholding is required by applicable law with respect to any Note, Borrower shall promptly pay the full amount of such required deduction or withholding to the appropriate taxing authority and deliver to the Lender as soon as practicable thereafter a receipt issued by such taxing authority or a statement of Borrower confirming the payment to such taxing authority of all amounts so required to be deducted or withheld.
Whether or not any of the transactions contemplated hereby or in any of the other Basic Documents are consummated, subject to Section 9.02(b), Borrower shall pay, and shall indemnify and hold harmless on an After-Tax Basis each Indemnitee from and against, any and all fees, taxes, licenses, levies, imposts, duties, excises, assessments, charges, or withholding of any nature, together with any penalties, fines, additions to tax, or interest thereon, however imposed, whether levied or imposed upon such Indemnitee, Borrower, or any Engine Kit or any part thereof, by any federal, state, or local taxing authority within the United States or any territory or possession thereof, or by any foreign or international taxing authority (all such fees, taxes, licenses, levies, imposts, duties, excises, assessments, charges, withholdings, penalties, fines, additions to tax, and interest being Taxes) relating to: (aa) any Engine Kit, or any interest therein, (bb) the acquisition, manufacture, purchase, mortgaging, initial financing, refinancing, ownership, delivery, non-delivery, redelivery, transport, location, assignment, alteration, improvement, possession, presence, use, replacement, substitution, operation, insurance, installation, modification, rebuilding, overhaul, condition, storage, maintenance, repair, sale, return, abandonment, preparation, transfer of title, acceptance, importation, exportation, rejection, or other disposition of any Engine Kit, or any interest in any of the foregoing; (cc) the Notes, or the issuance, acquisition, transfer, or assumption thereof, or refinancing thereof, or the payment of any amounts thereon; (dd) the execution, delivery, or performance of any of the Basic Documents or any future amendment, supplement, waiver, or consent (thereto requested or consented to by Borrower) or in connection with a Specified Default, or any of the transactions contemplated thereby, or any proceeds or payments or amounts payable under any thereof; (ee) the property or the income or other proceeds with respect to any Engine Kit; or (ff) otherwise with respect to or in connection with the transactions contemplated by the Basic Documents.
Notwithstanding the foregoing, the third paragraph of this Section 9.02(a) shall not obligate Borrower to pay or indemnify for any of the following:
(i) in the case of any Indemnitee, any Taxes (including any withholding Taxes other than withholding Taxes for which an Indemnitee may be indemnified hereunder pursuant to the first and second paragraphs of this Section 9.02(a)) imposed by the United States government or by any state, local or foreign taxing authority based on, or measured by or with respect to gross or net income, net or gross receipts, minimum tax, capital, franchise, net worth, excess profits, value added, or conduct of business of such Indemnitee (other than any such Taxes which are in the nature of sales or use taxes, license or excise taxes, property taxes, ad valorem taxes,
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value added taxes (to the extent not imposed in direct and clear substitution for an income tax), stamp or document taxes, registration or recording taxes, or goods and services or transaction privilege taxes and other than amounts necessary to make payments on an After-Tax Basis), in each case however denominated, as a result of such Indemnitees being organized in, physically holding the Notes in, or conducting business unrelated to the transactions contemplated in the Basic Documents in, the jurisdiction imposing such Tax.
(ii) Taxes imposed with respect to any period following the payment by Borrower of all amounts due and payable under the Basic Documents, except to the extent coinciding with such event;
(iii) Taxes which arise out of or are caused by a breach by an Indemnitee of any of its covenants, representations, and warranties under the Basic Documents;
(iv) any Tax imposed upon or as a result of a transfer or other disposition by or to an Indemnitee of any interest in any Note, Engine Kit, or any part thereof or Basic Document, other than any such transfer or disposition (a) while any Event of Default exists, or (b) in order to effect the transactions or transfers contemplated to occur under the Basic Documents on a Funding Date,
(v) in the case of any Indemnitee, withholding Taxes imposed on any transferee of the interests held by such Indemnitee (other than a transferee who has acquired its interest as a result of a transfer pursuant to an exercise of remedies following an Event of Default) (a) if such Tax would not have been imposed on the original Indemnitee, or (b) to the extent such Tax exceeds the amount of Tax that would have been imposed on the original Indemnitee;
(vi) in the case of any Indemnitee, Taxes to the extent resulting from the gross negligence or willful misconduct of such Indemnitee or any officer, director, agent, or employee of such Indemnitee, other than any such gross negligence or willful misconduct imputed to such Indemnitee by reason of any action or inaction of (a) Borrower, (b) any other Indemnitee, or (c) any officer, director, agent, or employee of any Person described in clauses (a) or (b) above;
(vii) Taxes that have been paid by Borrower as transaction expenses under Section 13.03 and that have been timely and properly paid to the appropriate taxing authority;
(viii) in the case of a Lender, any Tax to the extent that such Tax would not have been imposed but for the failure of such Lender to comply with any certification, documentation, or similar requirements concerning the nationality, residence, or identity of such Lender which, if properly complied with, would have resulted in an exemption from, or a reduced rate of, such Tax for which such Lender was otherwise eligible, provided that Borrower gave such Lender timely notice of such requirement, such Lender would suffer no adverse consequences by so complying, and
25
[Credit Agreement]
Borrower has agreed to pay, and does pay after demand therefor, on an After-Tax Basis, all costs and expenses incurred by such Lender in so complying;
(ix) in the case of a Lender, any Tax imposed by means of withholding, other than any such Tax to be indemnified hereunder solely as and to the extent set forth in the first and second paragraphs of this Section 9.02(a);
(x) in the case of any Indemnitee, Taxes imposed in respect of a prohibited transaction within the meaning of ERISA arising out of a breach by such Indemnitee of its representations or covenants; and
(xi) any Tax imposed under FATCA.
(b) Contests. If any written claim is made against any Indemnitee or if any proceeding is commenced against any Indemnitee for any Taxes as to which Borrower may have indemnity obligation pursuant to Section 9.02(a), such Indemnitee shall notify Borrower of such claim within thirty (30) days after such Indemnitee receives notice of such claim or proceeding; provided, that failure to provide such notice to Borrower shall not affect the obligation of Borrower to provide indemnity hereunder with respect to the Taxes that are the subject of such claim or proceeding unless and except to the extent that (i) such failure (whether by adversely affecting a counterclaim or defense, or otherwise) increases the amount for which Borrower would have been liable in the absence of such failure, or (ii) such failure results in the imposition of, or an increase in the amount of, any penalties, interest, or additions to Tax related to the Tax which is the subject of such claim or proceeding.
Upon Borrowers timely written request, the Indemnitee shall, in good faith, with due diligence, and at Borrowers expense, contest the validity, applicability, or amount of such Taxes by, in such Indemnitees discretion after consultation with Borrower, (aa) resisting payment thereof, (bb) not paying the same except under protest, if protest is necessary and proper, or (cc) if payment is made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; provided, that the Indemnitee shall not be required to take or continue any action pursuant to this sentence unless and until (u) except in the case when the Borrower controls the contest, such claim relates to Taxes for which Borrower may be liable hereunder in an amount in excess of $5,000 or Taxes for which the Borrower may be liable hereunder or otherwise in an aggregate amount in excess of $10,000; (v) such Indemnitee shall have received from Borrower (at Borrowers expense) an opinion of tax counsel to the effect that a reasonable basis exists within the meaning of ABA Formal Opinion No. 83352, or any successor thereto, for contesting such claim; (w) Borrower agrees to pay and shall timely pay, on an After-Tax Basis, on demand to such Indemnitee all reasonable costs and expenses that such Indemnitee actually incurs in connection with and reasonably allocable to contesting such claim (including reasonable legal and accounting fees, penalties, interest, and additions to tax); (x) if a Specified Default has occurred and is continuing, Borrower provides security for its obligations under Section 9.02(a) reasonably satisfactory to such Indemnitee; (y) if the Indemnitee decides after consultation with Borrower to pay the Tax prior to the contest, Borrower shall provide to the Indemnitee an interest-free advance in an amount equal to the Tax which the Indemnitee is required to pay and shall, in such case, pay any additional amount required to hold such Indemnitee harmless against any adverse Tax consequences arising from
26
[Credit Agreement]
such advance (and if such contest is finally determined adversely, the amount of such advance shall be applied against Borrowers obligation to indemnify the Indemnitee against the Tax which is the subject of such contest); and (z) the action to be taken will not involve any risk of criminal liability on the Indemnitee or of a sale, forfeiture, or loss of any Engine Kit, or the creation of any Lien other than Liens for the Taxes being contested unless Borrower posts a bond or other security reasonably satisfactory to the Indemnitee in respect to such risk (other than in the case of a risk of criminal liability).
Any contest required pursuant to the preceding paragraph shall be conducted by Borrower in the name of Borrower, if permitted by law, with respect to (i) any claim which involves only Taxes or claims for which Borrower is required to indemnify hereunder, or (ii) any claim which can be segregated and contested separately without material adverse unindemnified consequences for such Indemnitee, provided, Borrower shall have acknowledged in writing its obligation to indemnify the applicable Indemnitee with respect to such contest without regard to the exclusions in Section 9.02(a)(i) through (xi). Any other contest shall be at the control and discretion of the Indemnitee. If Borrower satisfies the conditions imposed on it in this Section 9.02(b) and an Indemnitee nevertheless fails to contest and refuses to permit Borrower to contest under and as and to the extent required by this Section 9.02(b), then Borrower shall not be obligated to indemnify such Indemnitee for such claim or for any other claim for which a successful contest is adversely affected in any material respect because of such failure to contest or to permit a contest. In addition, the Indemnitee shall not settle, concede, or compromise any contest without Borrowers prior written consent unless the Indemnitee forgoes its right to be indemnified for such claim, and any such settlement, concession, or compromise without the prior written consent of Borrower shall constitute a waiver of such Indemnitees rights to indemnification hereunder with respect to such claim and any other related claim for which a successful contest is adversely affected in any material respect because of such settlement, concession, or compromise. If the settlement proposal of a claim is acceptable to the Indemnitee but is unacceptable to Borrower, Borrower shall inform such Indemnitee of the amount for which Borrower would be willing to settle such claim and such Indemnitee may accept the settlement proposal; provided, that the amount of any indemnity payment which Borrower shall be required to pay to such Indemnitee under Section 9.02(a) in respect of such claim shall not exceed the amount for which Borrower would have been willing to settle such claim. Such Indemnitee shall promptly return such portion of any amounts (including any gross up paid thereon, but excluding the expense of contest), previously advanced by Borrower for the payment of the Taxes which were the subject of the contest, as exceeds the amount to which Borrower did not withhold its consent. If Borrower notifies such Indemnitee that the settlement proposal is unacceptable to Borrower, the Indemnitee shall treat such notification as Borrowers request that such Indemnitee contest such claim for Taxes, in which case Borrowers and such Indemnitees rights and obligations with respect to such taxes shall be as provided in this Section 9.02(b) without regard to the settlement proposal. An Indemnitee will not be required to appeal any decision to the United States Supreme Court or any similar court in a jurisdiction outside the United States.
If any Indemnitee actually obtains a refund (or would have actually received such a refund but for offset by matters not indemnifiable by Borrower under Section 9.02(a)) of all or any part of any Tax paid or reimbursed by Borrower, such Indemnitee shall promptly pay to Borrower the amount equal to the lesser of (x) the amount of such refund (or the amount of such
27
[Credit Agreement]
offset) plus any interest thereon (less any Taxes imposed on such Indemnitee with respect to such interest) received from the relevant taxing authority (or which would have been received with respect to the amount of such an offset) plus the amount of any Tax benefits realized by such Indemnitee as a result of such payment (and net of any net Tax detriment resulting from the receipt of the refund and interest on the refund (after giving effect to such Indemnitees obligations to make payments to Borrower under this sentence)), and (y) the sum of (i) such Tax payment by Borrower to such Indemnitee plus (ii) any interest received by such Indemnitee with respect to such refund or offset plus (iii) any other payment other than the expenses of the contest by Borrower to such Indemnitee theretofore made (and not theretofore repaid to Borrower) pursuant to this Section 9.02(b), it being intended that such Indemnitee shall be entitled to a net tax benefit pursuant to this Section 9.02(b) only if Borrower has been reimbursed for any payments by it to such Indemnitee pursuant to this Section 9.02(b); provided, (a) such amount shall not be payable before such time as Borrower shall have made all payments or indemnities then due and owing to such Indemnitee by Borrower pursuant to the Basic Documents, (b) no Specified Default shall exist, and (c) the amount of such payment by the Indemnitee with respect to a Tax paid or indemnified by Borrower hereunder, together with all payments previously made to Borrower by the Indemnitee with respect to such Tax, shall not exceed the aggregate amount paid by Borrower to the Indemnitee with respect to such Tax pursuant to Section 9.02(a) other than the expenses of the contest. Any subsequent loss or disallowance of such refund (as a result of a redetermination of the claim giving rise to such refund by any taxing authority or as a result of a judicial proceeding with respect to such claim) or tax benefit shall be treated as a Tax subject to indemnification under Section 9.02(a) without regard to the exclusions in Section 9.02(a) and the provisions of this Section 9.02(b). If an Indemnitee receives an award of attorneys fees in a contest for which Borrower has paid an allocable portion of the contest expenses, such Indemnitee shall pay to Borrower that portion of the award that is directly related to the issues contested with respect to a Tax indemnified under this Section 9.02, taking into account the rules applicable to obtaining such an award and any decision of the court in making such award.
Nothing in this Section 9.02 shall require any Indemnitee to contest or permit the contest of a claim which it would otherwise be required to contest pursuant to this Section 9.02 if such Indemnitee waives payment by Borrower of (x) any amount that might otherwise be payable by Borrower under this Section 9.02 by way of indemnity in respect of such claim, and (y) any other amount that might otherwise be payable by Borrower by way of indemnification in respect of any other claim for which a successful contest is adversely affected in any material respect because of such failure to contest. In such event, such Indemnitee shall reimburse Borrower for all amounts paid by or on behalf of Borrower with respect to such non-contested claim other than the expenses of the contest.
(c) Payments and Repayments. All Taxes shall be paid when due and payable to the appropriate taxing authority, and all amounts payable as indemnities pursuant to this Section 9.02 shall be payable, to the extent not theretofore paid, within ten (10) Business Days of written demand by the appropriate Indemnitee (which demand shall include the basis for the indemnity and its computation, each in reasonable detail), except that Taxes being contested pursuant to Section 9.02(b) shall not be required to be paid, subject to clause (y) in the second paragraph of Section 9.02(b), before such contest is finally resolved. If, for any reason, Borrower makes any payment with respect to any Taxes imposed on any Indemnitee in respect
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[Credit Agreement]
of the transactions contemplated by the Basic Documents or on any Engine Kit, which Taxes are not the responsibility of Borrower with respect to such Indemnitee under this Section 9.02, then such Indemnitee shall pay to Borrower within ten (10) Business Days of Borrowers demand therefor an amount that equals the amount paid by Borrower with respect to such Taxes, plus interest at the Interest Rate from the date paid by Borrower to the date repaid to Borrower by such Indemnitee.
(d) Reports and Returns. If any report or return is required to be made with respect to any of Borrowers obligations under this Section 9.02, Borrower shall in a timely and proper fashion, (x) to the extent required or permitted by law, make and file in its own name such return or report, and (y) in the case of any such return or report required to be made in the name of any Indemnitee, inform such Indemnitee of such fact and prepare such return or report for filing by such Indemnitee in a manner reasonably acceptable to the Indemnitee or, where such return or report is required to reflect items in addition to any obligations of Borrower under or arising out of this Section 9.02, provide such Indemnitee with information sufficient to permit such return or report to be properly made with respect to any obligations of Borrower under this Section 9.02 no later than thirty (30) days prior to the filing date of such return or report. Each Indemnitee shall provide to Borrower such information within that Indemnitees possession or control as is reasonably necessary for Borrower to complete and file any such report or return properly.
(e) Receipts and Records. Borrower shall use reasonable efforts to obtain official receipts indicating the payment of all Taxes that are subject to indemnification under this Section 9.02 and that are paid by Borrower, and shall promptly on request send to the Indemnitee each such receipt obtained by Borrower. Within a reasonable time after Borrower receives from an Indemnitee a written request for specified information or copies of specified records reasonably necessary to enable an Indemnitee to fulfill its Tax filing, Tax audit or other Tax obligations or to contest Taxes imposed upon it, Borrower shall provide such information or copies of such records to the requesting party.
(f) Borrower a Primary Obligor. Borrowers obligations under the indemnities provided for in this Agreement are those of a primary obligor whether or not the Indemnitee is also indemnified against the same matter under any other Basic Document or any other document or instrument, and the Person seeking indemnification from Borrower may proceed directly against Borrower without first seeking to enforce any other right of indemnification.
(g) Payments on After-Tax Basis. Each payment and indemnity under this Section 9.02 shall be made on an After-Tax Basis; provided, that if any Indemnitee realizes any credits, deductions, or other tax benefits (or would have realized such a benefit if properly claimed) by reason of such payment or indemnity or, to the extent not otherwise taken into account in the computation of such payment or indemnity, as a result of the imposition or payment of any Tax with respect to which an indemnity has been paid hereunder, such Indemnitee shall pay to Borrower an amount equal to the lesser of (1) the sum of the amount by which such credits, deductions, and other tax benefits reduces the Taxes of such Indemnitee plus any tax benefit realized minus any tax detriment realized as the result of any payment made pursuant to this proviso, and (2) the amount of such payment by Borrower to or for the account
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[Credit Agreement]
of such Indemnitee plus the amount of any other payments (other than the expenses of the contest) by Borrower to or for the account of such Indemnitee theretofore made (and not theretofore repaid to Borrower pursuant to this Section 9.02(g), it being intended that no Indemnitee should be entitled to a net tax benefit pursuant to this Section 9.02(g) unless Borrower shall concurrently be made whole for any payments made by it to such Indemnitee pursuant to this Section 9.02(g)); provided, further, that any amount otherwise due to Borrower pursuant to this sentence shall be withheld to the extent of any payment or indemnity then due from Borrower to or on behalf of such Indemnitee pursuant to the Basic Documents and not made (and any amount so withheld shall not be payable before such time and to such extent as Borrower shall have made such payments or indemnities), and provided, further, no Specified Default shall exist. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of a tax benefit referred to in the first sentence of this Section 9.02(g) in a subsequent taxable year shall be indemnifiable pursuant to this Section 9.02 (without regard to the exclusions in Section 9.02(a) and the provisions of Section 9.02(b)). Notwithstanding anything contained herein or elsewhere in any Basic Document, neither Borrower nor any other Person shall have any right to inspect any Lenders tax returns, books, records or other documents.
In determining the order in which any Indemnitee utilizes withholding or other foreign taxes as a credit against such Indemnitees United States income taxes, such Indemnitee shall be deemed to utilize (i) first, all foreign taxes other than those described in clause (ii) below; provided, that such other foreign taxes which are carried back to the taxable year for which a determination is being made shall be deemed utilized after foreign taxes described in clause (ii) below, and (ii) then, on a pro rata basis, all foreign taxes with respect to which such Indemnitee is entitled to obtain indemnification pursuant to an indemnification provision contained in any loan agreement or other financing document (including this Agreement) that is similar to the indemnification provision in this Section 9.02.
(h) Interest. Borrower will pay to each Indemnitee, on demand, to the extent permitted by applicable law, interest at the Default Rate on the amount of any indemnity not paid when due pursuant to this Section 9.02, until it is paid (such default interest to be compounded on a quarterly basis until such payment). Such interest shall be paid in the same manner as the unpaid amount on which it is due. An Indemnitee will pay to Borrower, on demand, to the extent permitted by applicable law, interest at the Default Rate on the amounts of any payment required hereunder to be made by such Indemnitee to Borrower not paid when due pursuant to this Section 9.02, until it is paid (such default interest to be compounded on a quarterly basis until such payment).
(i) Survival. All indemnities, obligations, adjustments, and payments provided for in this Section 9.02 shall survive, and remain in full force and effect, notwithstanding the expiration or other termination of this Agreement or any other Basic Document. The obligations of Borrower in respect of all such indemnities, obligations, adjustments, and payments are made for the benefit of, and shall be enforceable by, the Indemnitee entitled thereto, without declaring any Basic Document to be in default or taking any other action hereunder or thereunder, and notwithstanding any provision of any other Basic Document.
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[Credit Agreement]
Required Forms. Borrower agrees, to the extent required by applicable law, to withhold from each payment due hereunder or under any Note United States federal withholding Taxes at the appropriate rate, and, on a timely basis, to deposit such amounts with an authorized depository and make such reports, filings, and other reports in connection therewith, and in the manner, required under applicable law. Borrower shall furnish no later than March 15 of each year to each Lender a U.S. Treasury Form 1042S (or similar forms at any relevant time in effect), if applicable, indicating payment in full of any Taxes withheld from any payments by Borrower to such Lender together with all such other information and documents reasonably requested by such Lender and necessary or appropriate to enable such Person to substantiate a claim for credit or deduction with respect thereto for income tax purposes of any jurisdiction with respect to which such Person is required to file a tax return. Provided that each Lender which is a non-U.S. Person has furnished to Borrower (aa) two complete original signed copies of Internal Revenue Service Form W-8BEN or W-8EXP (or similar forms at any relevant time in effect) evidencing such Lenders qualification for a complete exemption from withholding of United States federal income tax on payments made under any Note during the taxable year of such Lender to which such Form W-8BEN or W-8EXP relates, (bb) two complete original signed copies of Internal Revenue Service Form W-8BEN (or similar forms at any relevant time in effect) evidencing such Lenders qualification for a reduction of, or complete exemption from, withholding of United States federal income tax on all payments made under any Note on the basis of any treaty between the United States and the country in which such Lender is a resident (or under the laws of which such Lender is entitled to the benefits of such treaty) during the taxable year of such Lender to which such Form W-8BEN relates, or (cc) two complete original signed copies of Internal Revenue Service Form W-8ECI (or similar forms at any relevant time in effect) evidencing the Lenders complete exemption from withholding of United States federal income tax on interest payments made under and any Note during the taxable year of such Lender to which such Form W-8ECI relates, and provided Lender has furnished to Borrower two complete original signed copies of Internal Revenue Service Form W-8BEN, W-8EXP or Form W-8IMY (or similar forms at any relevant time in effect) with all required attachments, in the event such forms become applicable, then no amount or only the reduced amount required by applicable law shall be withheld from payments under the Notes held by such Lender in respect to United States federal income tax. Each Lender shall indemnify and hold harmless (on an After-Tax Basis) and Borrower against any claim for United States withholding Taxes which Lender improperly fails to withhold on payments to such Lender as a direct result of the failure by such Lender to provide the required certificate or Form or the invalidity of any certificate or Form provided by such Lender pursuant to this Section 9.02(j) (and providing such a certificate or Form shall constitute a representation of the relevant Lender as to such Lenders qualification for complete exemption from United States federal gross income tax withholding or, in the event of a Change in Law for which Borrower is obligated to hold harmless the Lender pursuant to this Agreement, for partial exemption from such withholding),If a payment made to a Lender under any Basic Document would be subject to United States federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrower at the time or times prescribed by applicable law and at such time or times reasonably requested by Borrower, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower as may be necessary for Borrower to comply with its obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment.
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[Credit Agreement]
10. YIELD PROTECTION; ILLEGALITY
Section 10.01 Additional Costs.
(a) Borrower shall pay directly to each Lender from time to time such amounts as are necessary to compensate such Lender, on an After-Tax Basis, for any costs which are attributable to its purchase of any Notes hereunder (and reasonably allocable to such purchase, vis-à-vis all that Lenders other purchases of a similar type), or any reduction in any amount receivable by such Lender in respect of any of such Notes, resulting from any Regulatory Change which imposes or modifies any reserve, special deposit, minimum capital, capital ratio, or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender, or changes in interpretation of such requirements or other similar measures effectively imposed or directed by public controlling bodies. Each Lender will notify Borrower of any event occurring after the date of this Agreement which will entitle that Lender to compensation pursuant to this Section 10.01(a) as promptly as practicable after it obtains knowledge thereof, if it determines to request such compensation. Each Lender will furnish Borrower with a certificate setting forth the basis and amount of each request by such Lender for compensation under this Section 10.01(a). No indemnity shall be payable under this Section 10.01: (aa) for any costs accruing earlier than thirty (30) days prior to the date of such notice by such Lender to Borrower, or incurred as a result of such Lenders failure to give notice as promptly as required by this Section 10.01(a), (bb) unless such Lender is seeking similar compensation for such costs from its borrowers generally in connection with comparable loan financings, or (cc) to any successor Lender or to the extent caused by a Lenders relocation or by its voluntary relocation of its Note(s) in either case to a jurisdiction other than the United States, Australia, Austria, Canada, England, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Sweden, or Switzerland, which (due to a then-existing Regulatory Change, or then-enacted future Regulatory Change) would require indemnification under this Section 10.01 to a greater extent than would the previous jurisdiction, or (dd) to the extent the costs are specific to the Lender and not commercial banks or insurance companies in general in the applicable jurisdiction.
(b) Without limiting the effect of Section 10.01(a) (but without duplication), Borrower shall pay to each Lender on the first Business Day after the last day of each Interest Period, so long as such Lender maintains reserves (including any marginal, supplemental, or emergency reserves) against Eurocurrency liabilities under Regulation D, an additional amount notified to Borrower by such Lender (which notice shall set forth in reasonable detail the basis for the determination of such amount), by not later than the last day of such Interest Period, equal to the product of the following for each day during such Interest Period:
(1) the principal amount of such Lenders Floating Rate Notes outstanding on such day; times
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[Credit Agreement]
(2) the remainder (expressed as a decimal) of (x) a fraction, the numerator of which is LIBOR for such day (expressed as a decimal), and the denominator of which is one minus the interest rate (expressed as a decimal) at which such Lender maintains such reserves on such day, minus (y) such numerator; times
(3) 1/360
(c) Determinations and allocations by any Lender for purposes of this Section 10.01 of the effect of any Regulatory Change pursuant to Section 10.01(a) or (b) on such Lenders costs or rate of return of maintaining any Note, or on amounts receivable by it in respect of any Note, and of amounts required to compensate such Lender under this Section 10.01, shall be made by such Lender reasonably and in good faith and shall be conclusive.
Section 10.02 Breakage Costs; Prepayment Premium.
(a) Borrower shall pay to each Lender, upon such Lenders request, such amount as is sufficient, in such Lenders reasonable opinion, to compensate it for any loss, cost or expense which is attributable to:
(1) any payment, prepayment or purchase of any Floating Rate Note in which such Lender has any interest for any reason (including the acceleration of the maturity of any Floating Rate Notes pursuant to Section 8.02, and the prepayment of any Floating Rate Note pursuant to Section 4.03, but excluding any other transfer of any Floating Note by any Lender, other than a sale or other transfer as a result of, or in connection with the exercise of remedies during the continuance of, an Event of Default, pursuant to an Event of Loss, or at Borrowers request or direction, or as required by any of the Basic Documents) on a date other than Payment Date; or
(2) any failure by Initial Lender (because of a non-satisfaction of any of the conditions precedent specified in Section 7.01 or 7.02) to purchase any Floating Rate Note on a scheduled Funding Date specified by Borrower to Initial Lender;
provided that, in the case of the Initial Lender, the Initial Lenders loss, cost or expense relating to any of the foregoing events shall be deemed to be an amount equal to the Initial Lenders Breakage Costs.
Such amount payable by Borrower (x) shall not include losses, costs, or expenses attributable to any date more than one hundred eighty (180) days after the date of such payment or purchase or such Funding Date, and (y) shall be determined by the affected Lender reasonably and in good faith, which determination shall be conclusive, absent manifest error.
(b) Upon any prepayment of any Fixed Rate Note under Section 4.02 or acceleration of the maturity of a Fixed Rate Note under Section 8.02, in addition to the amounts payable under such section, Borrower shall pay a prepayment premium equal to the excess, if any, of (i) the present value of foregone scheduled principal and interest payments for the principal indebtedness prepaid discounted at a rate equal to the sum of (a) the interpolated semiannual rate to swap floating rate debt to fixed rate debt (offer side) for loans with a maturity
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[Credit Agreement]
closest to the remaining weighted average life to maturity of the remaining outstanding principal amount of such Fixed Rate Note, at 11:00 a.m. New York City time, two (2) Business Days prior to the relevant date of determination thereof (such rate to be obtained from the Bloomberg page IRSB (US Semi 30/360 column 2 (Ask)) or any substitute or replacement page providing the same service) and (b) 0.50% per annum, over (ii) the amount of principal prepaid; provided that, no such amount shall be less than zero;. Such affected Lender will provide Borrower with a certificate setting forth in reasonable detail the basis for and amount of such Lenders request for compensation.
Section 10.03 Illegality. If any change in any applicable state, federal or provincial law or in any interpretation or administration thereof by any governmental authority, central bank, or comparable agency in the United States or Canada charged with the interpretation or administration thereof, shall make it unlawful or contrary to such interpretation or administration for any Lender to make, fund, maintain or hold any of its Note(s) under the Basic Documents (each such event being an Illegality Event), then such Lender shall promptly notify Borrower thereof in writing, and such Lenders obligation to purchase any additional Notes shall be suspended until that Lender may again make, fund, maintain, and hold Notes under the Basic Documents.
Section 10.04 Mitigation. If any Lenders Notes become eligible for compensation pursuant to Section 10.01(a) or (b) or any Lenders obligations to purchase Notes is suspended under Section 10.03 (Notes of such type being herein called Affected Notes), then such Lender (other than the Initial Lender) will promptly designate a different lending office for booking its holdings of Affected Notes, or transfer such Affected Notes to another of its branches or affiliates, if such designation or transfer would eliminate or reduce Borrowers payment obligations under Section 10.01(a) or (b) or would eliminate the application of Section 10.03 as to any of its Affected Notes and, in either case, would not have materially disadvantageous regulatory or tax consequences to such Lender uncompensated for by Borrower reasonably determined by such Lender in good faith; provided that, notwithstanding the foregoing, the Lender shall not be obligated to take any action that would, in its reasonable judgment, cause such Lender to incur any loss or cost reasonably deemed by such Lender to be material, unless Borrower agrees to reimburse Lender hereunder. To the extent that any such designation or transfer does not eliminate such compensation or suspension, such Lender and Borrower shall negotiate in good faith to arrive at a substitute rate. Upon the determination of a substitute rate, the suspension of such Lenders obligation to purchase any Affected Notes shall terminate; and interest on such Affected Notes shall (but only to the extent held by such Lender) accrue at such substitute rate instead of the interest rate(s) at which such Affected Notes would have otherwise accrued. For the avoidance of doubt, if such Lender and Borrower cannot arrive at a substitute rate, then Borrower shall compensate the Lender pursuant to Section 10.01(a) and (b), or such Lenders obligations to purchase Notes shall remain suspended under Section 10.03, as the case may be, and, in addition to Borrowers rights under Section 13.06(b), (x) in the case of such Lenders Notes becoming eligible for compensation under Section 10.01(a) or (b), Borrower shall have the right to prepay such Notes, if any, on and subject to the terms of Section 4.02, provided that no prepayment premium under Section 10.02(b) shall be payable in connection therewith and (y) in the case of an Illegality Event under Section 10.03, Borrower shall prepay such Lenders Notes, together with accrued and unpaid interest on the principal of such Notes to the date of such prepayment and all other amounts then due and payable to such Lender with respect to such Notes, but excluding any amounts payable under Section 10.02, with such prepayment under this clause (y) to be made to such Lender within thirty (30) days of the date of the notice referenced in Section 10.03.
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[Credit Agreement]
11. [INTENTIONALLY OMITTED.]
12. [INTENTIONALLY OMITTED.]
13. MISCELLANEOUS
Section 13.01 No Waivers; Cumulative Remedies. No failure or delay in exercising any power or right under any Basic Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude other or further exercise thereof or the exercise of any other right or power under any Basic Document. No notice to or demand on any party in any case shall, of itself, entitle such party to any other or further notice or demand in similar or other circumstances.
Section 13.02 Notices. All communications and notices provided for under this Agreement shall be in writing (including telecopies), shall be in English, shall be effective on delivery, and shall be addressed as follows (or to such other address as any such party shall designate by notice to each other such party):
if to Borrower: |
Mesa Airlines, Inc. 410 N. 44th Street Suite 700 Phoenix, Arizona 85008 Attention: President and CFO (with a copy to Vice President and General Counsel) Fax: (602) 685-4352 |
|||
if to Initial Lender: |
Export Development Canada 150 Slater Street Ottawa, Ontario Canada KlA 1K3 Attn: Loans Services & Credit Risk Management Transportation Fax: (613) 598-2514 and (613) 598-3186 |
Wherever notice, notify, or similar variations are used in the Basic Documents, they mean the provision of a Notice in accordance with this Section 13.02.
Section 13.03 Transaction Expenses. Borrower will pay on demand all reasonable out-of-pocket expenses in connection with the negotiation, preparation, execution, delivery, and enforcement of the Basic Documents, or in connection with any scheduled closing that is postponed or cancelled, including (a) all reasonable fees and expenses actually incurred of Vedder Price P.C., special counsel to the Initial Lender, (b) all fees and expenses (including legal fees and expenses) of each Lender in connection with actual or proposed amendments, waivers, or consents to or under this Agreement or the other Basic Documents (except for such
35
[Credit Agreement]
amendments, waivers, or consents initiated by any Lender ); and (c) all fees and expenses (including reasonable legal fees and expenses) of each Lender in connection with the actual or proposed enforcement of any Basic Document against Borrower during the existence of any Specified Default. The legal fees and expenses of the Lenders referred to in clauses (b) and (c) may not include those of a Lenders in-house counsel. All reimbursable expenses shall be payable to Lender, as applicable, within thirty (30) days after Borrower receives bills or invoices showing in reasonable detail the components of such expenses (for law firm bills, time expended by attorney or paralegal and expenses by category). Borrower shall not be responsible for any fees or expenses of counsel to the Lenders other than those described in the first sentence of this Section 13.03.
Section 13.04 Amendments. Any provision of the Basic Documents, other than the Purchase Agreement may be amended, terminated, waived, or otherwise modified only in writing by Borrower, and a Majority in Interest of Lenders, and any such amendment, termination, waiver, or other modification shall bind all of the Lenders to the same extent and with the same effect as if each Lender had joined therein. Notwithstanding the foregoing, no amendment, modification, or waiver of the Basic Documents shall, unless in writing and signed by each Lender, be effective to (a) subject such Lender to any additional obligation, (b) reduce the principal of or interest on such Lenders Notes, or any other amounts payable to such Lender hereunder (whether under Section 9 or otherwise), or change the ratable distribution of funds received by Lenders hereunder (including under Section 4 hereof), (c) postpone any date fixed for any payment of the principal of, or interest on, such Lenders Notes or any other amounts payable to such Lender hereunder, (d) amend, modify, or waive this Section 13.04, or (e) increase the Financed Amount.
Section 13.05 Successors and Assigns.
(a) Binding Effect; Consent to Assignment. This Agreement shall bind and benefit each Lender, and Borrower and their successors and assigns, except that Borrower may not assign or transfer its rights under this Agreement without Lenders prior written consent.
(b) Limitations on Transfers. No Lender shall assign, convey, or otherwise transfer any of its interest in the Basic Documents, or offer to do any of the foregoing, (1) in any manner that would result in a violation of 49 U.S.C. subtitle VII, or the Securities Act of 1933, (2) to any ERISA Source of Funds, or (3) to any airline, any airframe manufacturer or engine manufacturer, or any affiliate of an airline or airframe manufacturer or engine manufacturer. A transferring Lender shall provide prior written notice of any transfer (other than the purchase of insurance or reinsurance) to Borrower.
(c) Transfer. Initial Lender shall maintain at its office a register for the purpose of registering transfers and exchanges of registered Notes and in which shall be entered the names and addresses of the owners of such registered Notes and particulars of the registered Notes owned by them. The holder of any registered Note wishing to transfer such Note shall give at least ten (10) Business Days prior written notice thereof to Initial Lender and Borrower and shall, in person or by a duly authorized attorney, surrender to Borrower at its office such Note, duly endorsed by the registered holder or such attorney, or accompanied by a written instrument of transfer duly executed by the registered holder or by such attorney, in form
36
[Credit Agreement]
reasonably satisfactory to Initial Lender, but, in any event, upon issuance of a new Note, such surrendered Note shall be of no further force and effect and Borrower shall have no further obligations thereunder. Upon presentation to Borrower of any Note for transfer, Borrower will execute and deliver to the transferee thereof in exchange therefore a new Note or Notes of the same series and in the same aggregate principal amount and with the same terms as the Note so surrendered, in registered form and in any denomination of $500,000 or more (or the aggregate principal amount of all Notes of such series held by such transferee, whichever is less) as is specified in such instrument of transfer. Nothing in this paragraph shall be interpreted as giving any Lender the right or power to transfer one or more of its Notes or to transfer any right or interest in such Notes to another Person in contravention of Section 13.05(b) without Borrowers prior written consent.
(d) Exchange. The holder of one or more Notes may at any time surrender such Note or Notes for exchange at Initial Lenders office and shall be entitled to receive in exchange therefor a new Note or Notes, of the same series and in the same aggregate principal amount with the same terms as the Note or Notes surrendered, in registered form and in any denomination of $500,000 or more (or the aggregate principal amount of all such Notes of the same series held by such holder, whichever is less).
(e) Effect of Transfer or Exchange. All Notes issued upon any transfer or exchange of Notes shall be the valid obligations of Borrower evidencing the same respective obligations, and entitled to the same security and benefits under this Agreement, as the Notes surrendered upon such transfer or exchange. Initial Lender shall make a notation on each new Note of the date to which interest on the replaced Note(s) has been paid.
(f) Evidence of Ownership. Initial Lender and Borrower shall deem and treat the Person in whose name any registered Note is registered as the absolute owner and holder of such Note for the purpose of mailing payment of all amounts payable by Borrower with respect to such Note and for all other purposes, and Initial Lender and Borrower shall not be affected by any notice to the contrary.
(g) Expenses, Taxes, etc. The transferring or exchanging Lender shall pay all expenses incurred in connection with the transfer or exchange of a Note, including Borrowers and Initial Lenders expenses (including legal fees), stamp taxes, transfer taxes, sales taxes, governmental fees and charges, brokers fees and commissions, any other fees and charges of the same or similar type as any of the foregoing, and other fees and expenses associated with amendments, supplements, waivers, or consents required as a result of any transfer or sale of a Note after the initial issuance on the Funding Date. In addition, for any transfer or exchange of a Note, Borrower may require the transferor to pay a sum sufficient to cover any stamp tax or other governmental charge connected therewith.
(h) No Transfer Within Three Days Before Payment Date. The Initial Lender shall not be required to transfer or exchange any Note during the three-day period preceding a Payment Date.
Section 13.06 Initial Lenders Representations, Warranties and Agreements. (a) Initial Lender represents and warrants that:
37
[Credit Agreement]
(i) it is a corporation established by an Act of the Parliament of Canada, and has all corporate power, authority, and legal right under the laws of Canada to execute, deliver, and carry out the terms of each of the Basic Documents to which it is a party as Lender;
(ii) it has duly authorized the execution and delivery of this Agreement and the other Basic Documents to which it is a party as Lender;
(iii) it is acquiring its interest in any Notes for its own account and not with a view to resale; provided, that any resale is in its sole discretion; and
(iv) no part of the funds used by it to purchase its Notes hereunder shall constitute the assets of any employee benefit plan within the meaning of ERISA or any plan as such a term is defined in Section 406 of ERISA or Code Section 4975.
(b) Each Lender hereby agrees that if (i) such Lender asserts a claim against Borrower for compensation under Section 9.02, (ii) such Lenders Notes become eligible for compensation pursuant to Section 10.01 or (iii) Borrower is required to prepay such Lenders Notes pursuant to Section 10.04 due to an Illegality Event under Section 10.03, Borrower shall have the right (in the case of clause (iii) above, prior the date on which Borrower is required to prepay any such Notes pursuant to Section 10.04) to cause a reputable financial institution designated by Borrower to purchase such Notes, for an amount equal to the unpaid principal amount of such Notes, together with all accrued but unpaid interest thereon through the date of purchase, and concurrently therewith Borrower shall pay to such Lender all amounts payable under Section 10.02 as if such purchase were a prepayment (but without any prepayment premiums in the case of any Notes accruing indemnifiable withholding taxes under Section 9.02 or any Notes subject to Section 10.04) plus all other Secured Obligations then due and payable to such Lender with respect to such Notes (provided, that (x) no Lender shall be required to make any representation or warranty in connection with such sale (other than that it holds title to the pertinent Note), nor to take any action prohibited by applicable law, and (y) Borrower shall indemnify and hold harmless each Lender against any expense, Liability, or Tax arising from any such sale).
Section 13.07 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
38
[Credit Agreement]
TORT, OR ANY OTHER THEORY). EACH PARTY HERETO (1) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (2) ACKNOWLEDGES THAT IT AND OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 13.08 Headings. The section headings used in this Agreement are for convenience only and are not a substantive part of this Agreement.
Section 13.09 Execution in Counterparts. This Agreement may be executed in separate counterparts.
Section 13.10 Survival of Representations and Warranties. All representations and warranties contained in this Agreement or made in writing in connection with this Agreement shall survive the execution and delivery of this Agreement.
Section 13.11 Severability. Any provision hereof prohibited by or unlawful or unenforceable under any applicable law of any jurisdiction shall be ineffective in such jurisdiction without modifying the remaining provisions of this Agreement or its effectiveness in any other jurisdiction. Where, however, the provisions of such applicable law may be waived, they are hereby waived by the parties hereto to the full extent permitted by law, to the end that this Agreement shall be a valid and binding agreement enforceable in accordance with its terms.
Section 13.12 Confidentiality. Each party hereto agrees that it will not disclose, directly or indirectly, to any person not a party hereto or their respective counsel or advisors any information obtained from Borrower hereunder or in connection herewith or any portion of any Basic Document not filed with any governmental agency or authority and available for public inspection, and will use all reasonable efforts to have all such information kept confidential and not used in any way known to such party to be detrimental to Borrower, except that (a) each party may use, retain, and disclose any such information to its special counsel, financial advisors, and public accountants, any potential transferees, any Affiliate, and any governmental agency or instrumentality or other supervisory body (including bank regulators) requesting such disclosure or pursuant to its regulatory or supervisory authority over such party or any Affiliate thereof, provided that such special counsel, financial advisors, public accountants, or potential transferees agree in advance to keep such information confidential, (b) each party may use, retain, and disclose any such information that has been publicly disclosed (other than by such party or any Affiliate thereof in breach of this paragraph) or has rightfully come into the possession of such party or any Affiliate thereof (other than from Borrower) on a non-confidential basis, (c) each party may use, retain, and disclose any such information as required by law, rule, regulation, judicial or administrative process, or any governmental agency, or to the extent required pursuant to Canadas or Initial Lenders international commitments (including, without limitation, as to Initial Lender, any requirement that such information be disclosed by virtue of Initial Lenders status as an agent of Her Majesty in Right of Canada or by virtue of any law, regulation, order-in-council, court or administrative order, or Canadian government policy or by virtue of any
39
[Credit Agreement]
international agreement to which the Government of Canada or Initial Lender is a party, and including, without limitation, in respect of the Organisation for Economic Co-operation and Development (OECD) including Appendix V of the Sector Understanding of Export Credits for Civil Aircraft and the WTO Subsidies and Countervailing Measures Agreement or Canadian government policy), (d) each party may use, retain, and disclose any such information where such information was previously known to the subject party free of any obligation to keep it confidential, (e) each party may use, retain, and disclose any such information to third parties in connection with or in response to any order, decree, judgment, subpoena, notice of discovery, or similar ruling or pleading (provided, that each party shall endeavor in good faith to prevent the disclosure of such information pursuant to any such order, decree, judgment, subpoena, notice of discovery, or similar ruling or pleading) or as part of its normal reporting or review procedure to its auditors, regulators, parent company, or Affiliates, (1) each party may use, retain, and disclose any such information to the extent necessary to obtain appropriate insurance or in order to enforce its rights and performance obligations pursuant to the Basic Documents and (g) Initial Lender shall be entitled to disclose any matters in relation to the transactions contemplated herein to the government of Canada (but Initial Lender must request confidential treatment thereof) and shall be entitled to make publicly available the following information: the name of the Borrower, the financial service provided by the Lender, the dates of the Basic Documents, a general description of the commercial transaction (including country) contemplated hereby, the amount of support in the approximate Canadian dollar range, and the name of the airframe manufacturer and engine manufacturer. For any breach of the foregoing covenants, the injured party shall be entitled to injunctive relief or any other legal or equitable remedies available, including the recovery of damages suffered as a result of such breach, but no such breach shall constitute an Event of Default under the Basic Documents.
Notwithstanding any other provision herein to the contrary, Borrower and each Lender (and each employee, representative, or other agent of any thereof) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by the Basic Documents (including any fact relevant to understanding the federal income tax treatment of such transactions) and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment or tax structure.
Section 13.13 Dollars. All payments due and payable hereunder shall be made in Dollars.
Section 13.14 Commitment Fee. The Borrower shall pay to the Lender an on-going, non-refundable commitment holding fee (the Commitment Fee) in Dollars in an amount equal to 0.20% per annum accruing on the uncancelled and undisbursed balance from time to time of the Commitment, computed on the basis of a 360-day year and the actual number of days elapsed (including the first day but excluding the last day), accruing from the date hereof until the earlier of (i) the date the Commitment is fully disbursed or (ii) the date the undisbursed portion of the Commitment is canceled by either party. The Commitment Fee shall be payable on March 11, June 11, September 11 and December 11 of each year and shall be prorated for any partial month. Upon ten (10) Business Days prior written notice to the Lender, Borrower may cancel all or any part of the undisbursed portion of the Commitment.
40
[Credit Agreement]
Section 13.15 Arrangement Fee. The Borrower agrees to pay on each Funding Date to the Initial Lender an arrangement fee (the Arrangement Fee) in an amount equal to 0.25% of the Financed Amount advanced on such Funding Date. The Arrangement Fee shall be payable in immediately available funds and shall be non-refundable.
Section 13.16 Entire Agreement. This Agreement constitutes the entire contract among the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
* * *
41
[Credit Agreement]
IN WITNESS WHEREOF, Borrower and Lender have executed this Credit Agreement.
MESA AIRLINES, INC., | ||
Borrower | ||
By: |
|
|
Brian . Gillman | ||
Title: | EVP & General Counsel |
EXPORT DEVELOPMENT CANADA, | ||
Lender |
By: | ||
Title: |
By: | ||
Title: |
[Credit Agreement]
IN WITNESS WHEREOF, Borrower and Lender have executed this Credit Agreement.
MESA AIRLINES, INC.,
Borrower |
By: | ||
Title: |
EXPORT DEVELOPMENT CANADA,
Lender |
||
By: |
|
|
Aaron Sapelak | ||
Title: | Senior Associate | |
By: | ||
Title: | Colleen Lalonde | |
Principal |
[Credit Agreement]
EXHIBIT A
FORM OF FIXED RATE NOTE
THIS FIXED RATE NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS FIXED RATE NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE.
FIXED RATE NOTE
ISSUED IN CONNECTION WITH ONE CF34-8C5 ENGINE KIT
(U.S.) , 201
New York, New York
No. 1
The undersigned, MESA AIRLINES, INC., a corporation organized under the laws of the State of Nevada (Maker), for value received hereby promises to pay to or its registered assigns (Payee), at the principal sum of DOLLARS (US$ ), in currency of the United States of America, together with interest thereon, as hereinafter set forth. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Credit Agreement dated as of August 12, 2015 (Credit Agreement), among Maker, as Borrower, and Payee, as Lender.
The principal amount of this Fixed Rate Note shall be payable in installments to be due and payable on each Payment Date, each such installment to be in an amount equal to the amount set forth in Schedule I attached hereto and hereby incorporated herein by this reference, together with interest (calculated on the basis of a 360 day year of twelve thirty day months) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full at a rate of % per annum (the Fixed Rate), payable on each Payment Date and on (the Note Maturity Date). Notwithstanding the foregoing, the final payment shall be an amount sufficient to discharge in full the unpaid principal amount hereof and the accrued and unpaid interest, costs, fees, expenses and all other amounts payable hereunder and under the Credit Agreement, on the Note Maturity Date.
Any amount past due and at any time outstanding under this Fixed Rate Note shall bear interest, payable on demand, in accordance with the terms of Section 4.05 of the Credit Agreement.
Interest shall be calculated as provided for in the Credit Agreement. After giving effect to the adjustments required by the definition of Payment Date, if any payment due hereunder is scheduled to be paid on a day which is not a Business Day, such amount shall instead be made on the following Business Day (except that no additional interest shall accrue if the payment thereon is made on the following Business Day).
EXHIBIT A
Page 1
[Credit Agreement]
Principal and interest and other amounts due hereon shall be payable to Lender in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due and in accordance with the terms of the Credit Agreement. All amounts paid hereunder shall be applied in accordance with the terms of the Credit Agreement.
Each payment to be made on a Payment Date shall be due and payable immediately on such date, without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by Maker.
This Fixed Rate Note is one of the Notes referred to in, and is subject to, the Credit Agreement, which provides for the acceleration of the maturity of this Fixed Rate Note upon the occurrence of an Event of Default, and which provides for the prepayment of this Fixed Rate Note in certain circumstances pursuant to the terms of the Credit Agreement.
Every legal holder of this Fixed Rate Note shall have and may exercise all of the rights and powers given to Payee in this Fixed Rate Note.
This Fixed Rate Note is transferable by the registered owner hereof, or by its attorney duly authorized in writing, only on the register maintained by Initial Lender and only upon surrender and cancellation of this Fixed Rate Note and compliance with the conditions set forth in the Credit Agreement. Upon such transfer, a new registered Fixed Rate Note or Fixed Rate Notes for the same aggregate principal amount will be issued in exchange hereof in accordance with the terms of the Credit Agreement.
Maker of this Fixed Rate Note expressly waives presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect to this Fixed Rate Note or the performance of the obligations under this Fixed Rate Note or any guaranty of this Fixed Rate Note, if any. No renewal or extension of this Fixed Rate Note, no release or surrender of any security for this Fixed Rate Note or any guaranty of this Fixed Rate Note, if any, no release of any person primarily or secondarily liable on this Fixed Rate Note, including Maker and any endorser, if any, no delay in the enforcement of payment of this Fixed Rate Note, and no delay or omission in exercising any right or power under this Fixed Rate Note shall affect the liability of Maker or any endorser of this Fixed Rate Note.
No delay or omission by Payee in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any other power or right. The provisions of this Fixed Rate Note may be waived or amended only in a writing signed by Maker and Payee.
This Fixed Rate Note shall in all respects be governed by and construed in accordance with the laws of state of New York, including all matters of construction, validity and performance.
[Signature follows on next page]
EXHIBIT A
Page 2
[Credit Agreement]
IN WITNESS WHEREOF, Maker has executed this Fixed Rate Note as of the day of , 201.
MESA AIRLINES, INC. |
By: |
Name: | ||
Title: | ||
Maker |
EXHIBIT A
Page 3
[Credit Agreement]
SCHEDULE I
FIXED RATE % PER ANNUM (INCLUSIVE OF THE PREMIUM RATE OF 2.66%
PER ANNUM AND THE MARGIN BENCHMARK OF 0.58% PER ANNUM)
Payment Date |
Principal Payment |
Interest Payment |
Total Payment |
|||
EXHIBIT A
Page 4
[Credit Agreement]
EXHIBIT B
FORM OF FLOATING RATE NOTE
THIS FLOATING RATE NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS FLOATING RATE NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE.
FLOATING RATE NOTE
ISSUED IN CONNECTION WITH ONE CF34-8C5 ENGINE KIT
$ (U.S.) , 201
New York, New York
No. 1
The undersigned, MESA AIRLINES, INC., a corporation organized under the laws of the State of Nevada (Maker), for value received hereby promises to pay to or its registered assigns (Payee), at the principal sum of DOLLARS (US$ ), in currency of the United States of America, together with interest thereon, as hereinafter set forth. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Credit Agreement dated as of August 12, 2015 (Credit Agreement), among Maker, as Borrower, and Payee, as Lender.
The principal amount of this Floating Rate Note shall be payable in installments to be due and payable on each Payment Date, each such installment to be in an amount equal to the amount set forth in Schedule I attached hereto and hereby incorporated herein by this reference, together with interest (calculated on the basis of a 360 day year and the actual number of days elapsed) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full at a rate of the Floating Rate (inclusive of the Premium Rate and Margin Benchmark specified in Schedule I attached hereto), payable on each Payment Date and on , (the Note Maturity Date). Notwithstanding the foregoing, the final payment shall be an amount sufficient to discharge in full the unpaid principal amount hereof and the accrued and unpaid interest, costs, fees, expenses and all other amounts payable hereunder and under the Credit Agreement, on the Note Maturity Date.
Any amount past due and at any time outstanding under this Floating Rate Note shall bear interest, payable on demand, in accordance with the terms of Section 4.05 of the Credit Agreement.
Interest shall be calculated as provided for in the Credit Agreement. After giving effect to the adjustments required by the definition of Payment Date, if any payment due hereunder is scheduled to be paid on a day which is not a Business Day, such amount shall instead be made on the following Business Day, and interest shall accrue at the Floating Rate to the day of payment, unless the following Business Day occurs in the following calendar month, in which case such Payment Date shall instead occur on the preceding Business Day.
EXHIBIT B
Page 1
[Credit Agreement]
Principal and interest and other amounts due hereon shall be payable to Lender for the account of the Payee in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due and in accordance with the terms of the Credit Agreement. All amounts paid hereunder shall be applied in accordance with the terms of the Credit Agreement.
Each payment to be made on a Payment Date shall be due and payable immediately on such date, without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by Maker.
This Floating Rate Note is one of the Notes referred to in, and is subject to, the Credit Agreement, which provides for the acceleration of the maturity of this Floating Rate Note upon the occurrence of an Event of Default, and which provides for the prepayment of this Floating Rate Note in certain circumstances pursuant to the Wails of the Credit Agreement.
Every legal holder of this Floating Rate Note shall have and may exercise all of the rights and powers given to Payee in this Floating Rate Note.
This Floating Rate Note is transferable by the registered owner hereof, or by its attorney duly authorized in writing, only on the register maintained by Initial Lender and only upon surrender and cancellation of this Floating Rate Note and compliance with the conditions set forth in the Credit Agreement. Upon such transfer, a new registered Floating Rate Note or Floating Rate Notes for the same aggregate principal amount will be issued in exchange hereof in accordance with the terms of the Credit Agreement.
Maker of this Floating Rate Note expressly waives presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect to this Floating Rate Note or the performance of the obligations under this Floating Rate Note or any guaranty of this Floating Rate Note, if any. No renewal or extension of this Floating Rate Note, no release or surrender of any security for this Floating Rate Note or any guaranty of this Floating Rate Note, if any, no release of any person primarily or secondarily liable on this Floating Rate Note, including Maker and any endorser, if any, no delay in the enforcement of payment of this Floating Rate Note, and no delay or omission in exercising any right or power under this Floating Rate Note shall affect the liability of Maker or any endorser of this Floating Rate Note.
No delay or omission by Payee in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any other power or right. The provisions of this Floating Rate Note may be waived or amended only in a writing signed by Maker and Payee.
EXHIBIT B
Page 2
[Credit Agreement]
This Floating Rate Note shall in all respects be governed by and construed in accordance with the laws of state of New York, including all matters of construction, validity and performance.
[Signature follows on next page]
EXHIBIT B
Page 3
[Credit Agreement]
IN WITNESS WHEREOF, Maker has executed this Floating Rate Note as of the day of , 201 .
MESA AIRLINES, INC. |
By: |
Name: | ||
Title: | ||
Maker |
EXHIBIT B
Page 4
[Credit Agreement]
SCHEDULE I
PREMIUM RATE = 2.66% PER ANNUM
MARGIN BENCHMARK = 0.41% PER ANNUM
Payment Date |
Principal Payment |
|
EXHIBIT B
Page 5
[Credit Agreement]
EXHIBIT C
FORM OF FUNDING NOTICE
To: EXPORT DEVELOPMENT CANADA, as Lender VEDDER PRICE P.C., as counsel to Lender
Reference is made to § 2.02 of the Credit Agreement dated as of August 12, 2015 (as amended or supplemented from time to time, the Credit Agreement) among Mesa Airlines, Inc., as Borrower (the Borrower) and Export Development Canada, as Lender relating to the proposed financing of one (1) CF34-8C5 engine kit (the Engine Kit). All capitalized terms herein have the same meanings ascribed to them in the Credit Agreement, unless otherwise herein defined.
The Borrower hereby advises that:
1. |
the proposed Funding Date in respect of the Engine Kit is , 201_; |
2. |
the Note in respect of the Engine Kit shall be a [Fixed Rate Note] [Floating Rate Note]; |
3. |
the Financed Amount for the Engine Kit is $ , |
4. |
the wiring instructions for the Financed Amount to be disbursed to [the Borrower] [the Borrowers designee] in respect of the Engine Kit is as follows: |
5. |
the Maturity Date of the Note in respect of the Engine Kit shall be |
EXHIBIT C
Page 1
[Credit Agreement]
MESA AIRLINES, INC. |
By: | ||
Name: | ||
Title: |
Dated this day of , 2015 |
EXHIBIT C
Page 2
Exhibit 10.17.1
EXECUTION VERSION
CREDIT AGREEMENT
dated as of January 18, 2016
between
MESA AIRLINES, INC.,
Borrower
and
EXPORT DEVELOPMENT CANADA,
Lender
CF34-8C5 Aircraft Engine Kits
TABLE OF CONTENTS
Page | ||||||||
1. |
DEFINITIONS; USAGE |
1 | ||||||
Section 1.01 |
Definitions |
1 | ||||||
Section 1.02 |
Usage |
9 | ||||||
2. |
PURCHASE OF NOTES; PAYMENTS; REPLACEMENT NOTES |
10 | ||||||
Section 2.01 |
(a)Purchase of Notes |
10 | ||||||
Section 2.02 |
Procedure for Purchase of Notes |
10 | ||||||
Section 2.03 |
Replacement Notes |
11 | ||||||
Section 2.04 |
Obligations Absolute |
11 | ||||||
Section 2.05 |
Amortization |
11 | ||||||
Section 2.06 |
Interest |
12 | ||||||
3. |
[INTENTIONALLY OMITTED] |
12 | ||||||
4. |
PAYMENTS BY BORROWER |
12 | ||||||
Section 4.01 |
How Payments Are Made |
12 | ||||||
Section 4.02 |
Right to Prepay |
12 | ||||||
Section 4.03 |
Mandatory Prepayments |
12 | ||||||
Section 4.04 |
Amount of Prepayment |
13 | ||||||
Section 4.05 |
Interest on Past Due Amounts |
13 | ||||||
Section 4.06 |
Limit on Interest Payable |
13 | ||||||
Section 4.07 |
[INTENTIONALLY OMITTED] |
13 | ||||||
Section 4.08 |
Changes in Market |
13 | ||||||
Section 4.09 |
Application of Payments |
14 | ||||||
5. |
BORROWERS REPRESENTATIONS AND WARRANTIES |
14 | ||||||
Section 5.01 |
Corporate Standing |
14 | ||||||
Section 5.02 |
Corporate Powers |
14 | ||||||
Section 5.03 |
Binding Effect |
14 | ||||||
Section 5.04 |
Litigation |
14 | ||||||
Section 5.05 |
Financial Statements; No Materially Adverse Change |
15 | ||||||
Section 5.06 |
Taxes |
15 | ||||||
Section 5.07 |
Status as United States Citizen and Air Carrier |
15 | ||||||
Section 5.08 |
Governmental Consents |
15 | ||||||
Section 5.09 |
Acceptance of Engine Kit |
15 | ||||||
Section 5.10 |
Solvency |
15 | ||||||
Section 5.11 |
No Governmental Approvals, Notices and Filings |
15 | ||||||
Section 5.12 |
Compliance with Laws |
15 |
- i -
TABLE OF CONTENTS
(continued)
Page | ||||||||
6. |
AFFIRMATIVE COVENANTS |
16 | ||||||
Section 6.01 |
Financial Statements |
16 | ||||||
Section 6.02 |
[INTENTIONALLY OMITTED] |
16 | ||||||
Section 6.03 |
Corporate Existence |
16 | ||||||
Section 6.04 |
Merger, etc |
16 | ||||||
Section 6.05 |
Citizenship and Air Carrier Status |
17 | ||||||
Section 6.06 |
Disposition of Assets |
17 | ||||||
Section 6.07 |
ERISA Information |
17 | ||||||
Section 6.08 |
Compliance with Laws |
17 | ||||||
7. |
CONDITIONS PRECEDENT AND CONDITION SUBSEQUENT |
17 | ||||||
Section 7.01 |
Conditions Precedent to First Funding |
17 | ||||||
Section 7.02 |
Conditions Precedent to Each Funding |
18 | ||||||
Section 7.03 |
Conditions Precedent to Borrowers Obligations |
20 | ||||||
8. |
EVENTS OF DEFAULT; REMEDIES |
20 | ||||||
Section 8.01 |
Events of Default |
20 | ||||||
Section 8.02 |
Remedies |
22 | ||||||
9. |
BORROWERS INDEMNITIES |
22 | ||||||
Section 9.01 |
General Indemnity |
22 | ||||||
Section 9.02 |
General Tax Indemnity |
24 | ||||||
10. |
YIELD PROTECTION; ILLEGALITY |
33 | ||||||
Section 10.01 |
Additional Costs |
33 | ||||||
Section 10.02 |
Breakage Costs; Prepayment Premium |
35 | ||||||
Section 10.03 |
Illegality |
35 | ||||||
Section 10.04 |
Mitigation |
36 | ||||||
11. |
[INTENTIONALLY OMITTED.] |
36 | ||||||
12. |
[INTENTIONALLY OMITTED.] |
36 | ||||||
13. |
MISCELLANEOUS |
36 | ||||||
Section 13.01 |
No Waivers; Cumulative Remedies |
36 | ||||||
Section 13.02 |
Notices |
37 | ||||||
Section 13.03 |
Transaction Expenses |
37 | ||||||
Section 13.04 |
Amendments |
38 | ||||||
Section 13.05 |
Successors and Assigns |
38 | ||||||
Section 13.06 |
Initial Lenders Representations, Warranties and Agreements |
39 |
- ii -
TABLE OF CONTENTS
(continued)
Page | ||||||||
Section 13.07 |
Governing Law; Jurisdiction; Waiver of Jury Trial |
40 | ||||||
Section 13.08 |
Headings |
40 | ||||||
Section 13.09 |
Execution in Counterparts |
41 | ||||||
Section 13.10 |
Survival of Representations and Warranties |
41 | ||||||
Section 13.11 |
Severability |
41 | ||||||
Section 13.12 |
Confidentiality |
41 | ||||||
Section 13.13 |
Dollars |
42 | ||||||
Section 13.14 |
Commitment Fee |
42 | ||||||
Section 13.15 |
Arrangement Fee |
42 | ||||||
Section 13.16 |
Entire Agreement |
42 |
Exhibit A | Form of Fixed Rate Note | |
Exhibit B | Form of Floating Rate Note | |
Exhibit C | Form of Funding Notice |
-iii-
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of January 18, 2016, between (1) MESA AIRLINES, INC. ( Borrower ), a Nevada corporation, and (2) EXPORT DEVELOPMENT CANADA , a corporation established by an Act of the Parliament of Canada, as lender ( Initial Lender ).
Borrower, and Lender agree as follows:
1. DEFINITIONS; USAGE
Section 1.01 Definitions . The following terms, when capitalized as below, have the following meanings:
Affiliate : any other Person who controls 50% or more of any class of voting securities of such Person or is controlled by, or is under common control with, such Person. For purposes of this definition, control of any specified Person means having direct or indirect power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise.
After-Tax Basis : a basis such that any payment to be received or receivable by any Person is supplemented by a further payment or payments to that Person so that the sum of all such payments, after deducting all Taxes (taking into account any related credits or deductions) payable by such Person or any of its Affiliates under any law or governmental authority, is equal to the payment due to such Person, provided , that for these purposes, such Person shall be assumed to be subject to tax at the highest marginal rate(s) applicable to such Person with respect to the amounts in question.
Agreement : this Credit Agreement.
Amortization Date : defined in Section 2.01(a).
Arrangement Fee : defined in Section 13.15.
ASU : the Sector Understanding on Export Credits for Civil Aircraft effective 1 September 2011 made by the Participants to the Arrangement on Officially Supported Export Credits of the Organisation for Economic Co-operation and Development (utilizing the English-language version thereof).
Bankruptcy Code : the Title 11 of the United States Code, 11 U.S.C. Section 101 et seq., as amended, or any successor statutes thereto.
Basic Documents : this Agreement, the Guaranty, and each Note.
Breakage Costs : means the amount (if any) by which: (a) interest calculated at the LIBOR rate then in effect on the principal amount of any Floating Rate Note paid, prepaid or due which the Initial Lender should have received for the period commencing on the date the paid or prepaid amount is received or due and ending on the next Interest Payment Date, had such
[Credit Agreement]
amount been paid on the next Interest Payment Date; exceeds (b) the interest which the Initial Lender would be able to earn by placing an amount equal to the principal amount paid, prepaid or due on deposit at a rate equal to LIBOR determined at approximately 11:00 am, London time, on the day that is two (2) London Banking Days preceding the day such payment or prepayment is made or due, for a period closest to the remainder of the relevant Interest Period.
Business Day : any day, other than a Saturday or Sunday, on which commercial banks are open for business in New York, New York, Toronto, Ontario, Ottawa, Ontario, and Phoenix, Arizona, and if such day is a Funding Date or Payment Date in respect of a Floating Rate Note or relates to a notice by Borrower with respect to any Funding Date in respect of a Floating Rate Note, which is also a day on which dealings in Dollar deposits are carried out in the London interbank market.
Code : the Internal Revenue Code of 1986, including effective date and transition rules (whether or not codified). Any reference to a specific section of the Code shall be deemed to include a reference to any corresponding provision of future law.
Code Share Event : any termination or material adverse change in the terms and conditions of any code share agreement of Borrower, Guarantor or any Affiliate thereof with respect to which following such termination or material adverse change, Borrower, Guarantor or any Affiliate thereof remains responsible for the ownership, leasing or financing of the aircraft that are subject to such code share agreement (and which shall include, without limitation any code share agreement between Borrower, Guarantor or any Affiliate thereof, on the one hand, and American Airlines, Inc. or any Affiliate thereof, on the other hand, pursuant to which Borrower, Guarantor or any Affiliate thereof remains so responsible for the aircraft subject thereto); provided that unless, in the case of termination, such code share agreement shall have been replaced with a code share agreement with another major airline (acceptable to the Lender) in form and substance acceptable to the Lender.
Commitment : defined in Section 2.01(a).
Commitment Fee : defined in Section 13.14.
Commitment Termination Date : defined in Section 2.01(a).
Coverage Ratio Event : any failure by the Guarantor to deliver the applicable Compliance Certificate (as defined in the Guaranty) as required under the Guaranty or to comply with the financial covenant set forth in Section 10(c)(i) of the Guaranty.
Credit Agreement Amendments : collectively, Credit Agreement No. 1 Amendment, Credit Agreement No. 2 Amendment and Credit Agreement No. 3 Amendment.
Credit Agreement No. 1 Amendment : Amendment No. 1 to Credit Agreement, dated as of the date of this Agreement, amending that certain Credit Agreement dated as of January 31, 2007 among, inter alia, Borrower, Guarantor, Initial Lender and Wilmington Trust Company, not in its individual capacity but solely as loan trustee.
2
[Credit Agreement]
Credit Agreement No. 2 Amendment : Amendment No. 1 to Credit Agreement, dated as of the date of this Agreement, amending that certain Credit Agreement dated as of April 16, 2014 between Borrower and Initial Lender.
Credit Agreement No. 3 Amendment : Amendment No. 1 to Credit Agreement, dated as of the date of this Agreement, amending that certain Credit Agreement dated as of May 23, 2014 between Borrower and Initial Lender.
Default : any event or condition that would become an Event of Default upon the giving of notice or lapse of time or both, or any Event of Default.
Default Rate : defined in Section 4.05.
Delivery Date : in respect of an Engine Kit, the date of delivery of such Engine Kit from the Exporter to the Borrower,
Dollars : and $ : United States dollars.
Downpayment : the difference between (x) the NEKP for an Engine Kit less any advance deposits made by Borrower to the Exporter in respect of such Engine Kit (as reflected in the invoice for such Engine Kit) and (y) the Financed Amount for such Engine Kit.
Engine Kit : means a CF34-8C5 aircraft engine kit and all associated services including inter alia, installation, testing and inspection forming part of the Equipment to be delivered under the Purchase Agreement.
Equipment : means up to twenty-seven (27) Engine Kits to be sold by the Exporter pursuant to the Purchase Agreement.
ERISA : the Employee Retirement Income Security Act of 1974.
ERISA Source of Funds : used by a purchaser of any Note: any source of funds that includes the assets of any Plan, other than a plan exempt from the coverage of ERISA, but in any event excluding any source of funds that the relevant purchaser represents to Borrower:
(1) is an insurance company general account as such term is used in U.S. Department of Labor Prohibited Transaction Class Exemption ( PTCE ) 95-60 (issued July 12, 1995), and the amount of reserves and liabilities (as defined in the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the NAIC Annual Statement ) and before reduction for credits on account of any reinsurance ceded on the coinsurance basis) (the Reserves and Liabilities ), for the general account contract(s) held by or on behalf of any Plan, together with the amount of the Reserves and Liabilities for the general account contract(s) held by or on behalf of any other Plans maintained by the same employer (or any affiliate thereof within the meaning of Section V(a)(1) of PTCE 95-60), does not exceed 10% of the total Reserves and Liabilities of such general account plus surplus, as set forth in the NAIC Annual Statement filed with the state of domicile of the insurance company maintaining such general account; or
3
[Credit Agreement]
(2) is a separate account that is maintained solely in connection with that purchasers fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or
(3) is either (a) an insurance company pooled separate account, within the meaning of PTCE 90-1 (issued January 29, 1990), or (B) a bank collective investment fund, within the meaning of PTCE 91-38 (issued July 12, 1991) and, except as consented to by Borrower in writing pursuant to this clause (3), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or
(4) constitutes assets of an investment fund (within the meaning of Part V of PTCE 84-14) managed by a qualified professional asset manager or QPAM (within the meaning of Part V of PTCE 84-14), no employee benefit plans assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of PTCE-84-14) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of PTCE 84-14 are satisfied, and neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of control in Section V(e) of PTCE 84-14) owns a 5% or more interest in Borrower; or
(5) constitutes assets managed by an in-house asset manager or INHAM (within the meaning of Part IV of PTCE 96-23), the conditions of Part I(a) of PTCE 96-23 are satisfied, and neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of control in Section IV(d) of PTCE 96-23) owns a 5% or more interest in Borrower; or
(6) is a governmental plan; or
(7) is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of such has been consented to by Borrower in writing pursuant to this clause (7).
As used in this definition, employee benefit plan , governmental plan , and separate account have the same meanings as in Section 3 of ERISA.
Event of Default : defined in Section 8.01. Exporter : means Standard Aero Limited.
FATCA : Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantially comparable, any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code).
4
[Credit Agreement]
Financed Amount : the amount equal to the principal amount of the Note issued for an Engine Kit and determined pursuant to the second sentence of Section 2.01(a).
Fixed Rate : for any Fixed Rate Note: the interest rate per annum, which is fixed for the term of such Fixed Rate Note, equal to the sum of (a) the interpolated semi-annual rate to swap floating rate debt to fixed rate debt (offer side) for loans with a maturity closest to the weighted average remaining life of the loan, at 11:00 a.m. New York City time, two (2) Business Days prior to the Funding Date in respect of such Fixed Rate Note (such interpolated rate to be obtained from the Bloomberg page IRSB (US Semi 30/360 column 2 (Ask)) or any substitute or replacement page providing the same service), (b) the Premium Rate and (c) the applicable Margin Benchmark. The Fixed Rate in respect of any Fixed Rate Note shall be determined by the Lenders, which rate shall be conclusive except in the case of manifest error.
Fixed Rate Note : Borrowers promissory note, in the form of Exhibit A, issued in connection with a designated Engine Kit and accruing interest at the Fixed Rate for such Fixed Rate Note, or a note issued in exchange or replacement for such a note.
Floating Rate : for any Interest Period in respect of any Floating Rate Note: the interest rate per annum, equal to the sum of (a) LIBOR plus (b) the Premium Rate plus (c) the applicable Margin Benchmark.
Floating Rate Note : Borrowers promissory note, in the form of Exhibit B, issued in connection with a designated Engine Kit and accruing interest at the Floating Rate, or a note issued in exchange or replacement for such a note.
Funding Date : a date on which a Lender purchases the Note relating to a specific Engine Kit.
Funding Notice : defined in Section 2.02.
GAAP : generally accepted accounting principles as in effect in the United States and applied on a basis consistent with that used in the preparation of the financial statements referred to in Section 5.05, except for changes therein with which Borrowers independent public accountants concur that are disclosed in the notes to the relevant financial statements.
Guarantor : Mesa Air Group, Inc., a Nevada corporation.
Guaranty : the document by that name, dated as of the date of this Agreement, issued by the Guarantor for the benefit of the Initial Lender.
Indemnitee : The Lender, or any agent, employee, officer, director, successor, or permitted assign of any of the foregoing.
Initial Lender : Export Development Canada, a corporation established by an Act of the Parliament of Canada.
5
[Credit Agreement]
Interest Period : for a Note, each period beginning on a Payment Date for that Note (or, in the case of the first Interest Period for that Note, beginning on its Funding Date) and ending on (but excluding, for purposes of computing interest) the following Payment Date for that Note.
Interest Rate : for a Note: (a) with respect to any Interest Period for a Floating Rate Note, the applicable Floating Rate for such Interest Period, and (b) with respect to a Fixed Rate Note, the applicable Fixed Rate for such Fixed Rate Note, in either case as elected by Borrower pursuant to Section 2.02.
Lender : Initial Lender and any successor or assign of Initial Lender, including any future holder of a Note.
Liabilities : defined in Section 9.01.
LIBOR : for any Interest Period for a Floating Rate Note: a rate per annum equal to the London interbank rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for three-month Dollar deposits as such rate is displayed on Reuters Screen LIBOR01 Page (or any replacement Reuters page which displays that rate), at approximately 11:00 a.m., London time (or as soon thereafter as practicable), or if such service does not display any such quote, the arithmetic mean of such rates as displayed on Bloomberg BBAM Page at approximately 11:00 a.m., London time (or as soon thereafter as practicable), or if such service does not display any such quote, the arithmetic mean of such rates, as quoted by the London Reference Banks, in any case on the day that is two (2) Business Days prior to the first day of that Interest Period.
Lien : any mortgage, pledge, assignment, security interest, lien (statutory or other), or other encumbrance of any kind or nature whatsoever (including any conditional sale or other title retention agreement, or any lease in the nature thereof).
London Reference Banks : any four (4) of the following banks: (i) Bank of America, (ii) Citibank, N.A., (iii) Credit Suisse, (iv) Deutsche Bank AG, (v) HSBC, (vi) JP Morgan Chase Bank and (vii) UBS AG.
Majority in Interest of Lenders : as of any date of the determination thereof, holders of Notes holding not less than a majority (greater than 50%) in aggregate outstanding principal amount of the Notes. For all purposes of the foregoing definition, in determining as of any date the then aggregate outstanding principal amount of Notes, there shall be excluded any Notes, if any, held by Borrower or any Affiliate thereof.
Margin Benchmark : for purposes of determining the Floating Rate shall be 0.47% per annum and for purposes of determining the Fixed Rate shall be 0.68% per annum.
Materially Adverse Change : the occurrence and continuation of one or more of the following events (i) a material adverse change in the financial condition, financial results, business or operations of Borrower or Guarantor which could reasonably be expected to materially adversely affect its ability to perform its obligations under the Basic Documents, or (ii) Borrower or Guarantor, as debtor, shall have commenced or there shall be pending or there shall have been commenced against Borrower or Guarantor and be pending a case, proceeding or other action under applicable bankruptcy or insolvency laws or similar legislation.
6
[Credit Agreement]
Maturity Date : for a Note, subject to the second sentence of Section 2.01(a), the four (4) year anniversary of the Funding Date for that Note, or such earlier date as may be determined in accordance with Section 2.01(a) in the case of an Engine Kit in respect of which the Funding Date is later than the Delivery Date.
NEKP : the price for an Engine Kit invoiced by the Exporter, or supplier thereof, after accounting for all price discounts and other cash credits, less all other credits or concessions of any kind related or fairly allocable thereto, as stated in a binding representation by the Exporter and evidenced by invoices under the Purchase Agreement and by the certificate from the Exporter delivered pursuant to Section 7.02(h).
Note : individually, any Fixed Rate Note or Floating Rate Note and Notes shall mean, collectively, all Fixed Rate Notes and Floating Rate Notes.
Obligor : either Borrower or Guarantor, and Obligors shall mean, collectively, Borrower and Guarantor.
Officers Certificate : a certificate signed in the name of Borrower (or, with respect to Section 6.04(d), of the Successor) by the chairman of the board, the president, a vice president, the treasurer or the assistant treasurer of Borrower (or the Successor).
Other EDC Transaction : any other financing (present or future) by the Initial Lender for, or for the benefit of, the Borrower or Guarantor (or any Affiliate of Borrower or Guarantor) in respect of which the Initial Lender is, at the applicable time, a creditor or interest holder of at least ten percent (10%) of the outstanding debt amount or other interest thereunder.
Payment Confirmation Letter : a letter from Exporter in the form of Exhibit D confirming the engine conversion transaction for the engine referenced therein has been completed.
Payment Date : for a Note, each quarterly anniversary of the Funding Date for that Note, through the Maturity Date for that Note; except that any Payment Date that falls on a day which is not a Business Day shall instead occur on the following Business Day, unless in the case of a Floating Rate Note the following Business Day occurs in the following calendar month, in which case such Payment Date shall instead occur on the preceding Business Day.
Person : any individual, corporation, limited liability company, partnership, joint venture, or other legal or governmental entity.
Plan : an employee benefit plan or individual retirement account subject to Title I of ERISA or to Code Section 4975.
Premium Rate : for any Note, shall be the rate set forth in Section 2.01(b), subject to adjustment as provided therein. 7
7
[Credit Agreement]
Purchase Agreement : for any Engine Kit, the Purchase Agreement, as amended from time to time, dated November 17, 2015, between the Borrower and the Exporter for the purchase and sale of the Equipment.
Regulatory Change : the enactment, adoption, or promulgation, after a Funding Date (in the case of the Initial Lender) or the date a successor Lender acquires its Note(s) pursuant to Section 13.05 hereof (in the case of such successor Lender) (or in the case of such successor Lender, such earlier date (but in no event prior to a Funding Date) as shall enable it to obtain compensation pursuant to Section 10.01 to the extent the transferor Lender was entitled thereto at the time of transfer), of any law or regulation by a United States federal or state government or by the government of a Lenders or such successor Lenders jurisdiction of organization, or any change, after the Funding Date (in the case of a Lender) or the date a successor Lender acquires its Note(s) (in the case of such successor Lender) (or such earlier date), in any such law or regulation, or in the interpretation thereof by any governmental authority, central bank, or comparable agency of the United States or a Lenders or such successor Lenders jurisdiction of organization charged with the responsibility for the administration or application thereof, that imposes, modifies, or deems applicable (a) any reserve (including any reserves arising from the imposition of reserves pursuant to Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time), special deposit, or similar requirement against extensions of credit or other assets of, or deposits with or other liabilities of, such Lender or such successor Lender, as the case may be, including, or by reason of, the loan evidenced by the Note(s) or (b) any capital adequacy requirement requiring the maintenance by a Lender or such successor Lender, as the case may be, of additional capital in respect of the loan evidenced by the Note(s).
Responsible Officer : the President, or the Chief Financial Officer, or any other officer of Borrower, Guarantor or a Lender customarily bearing responsibility for matters relating to the transactions contemplated by the Basic Documents, or any officer of Borrower, Guarantor or the Lender specifically authorized to take responsibility for any matter relating to the transactions contemplated by the Basic Documents.
Section 1110 Airline : a citizen of the United States (within the meaning of 49 U.S.C. § 40102(a)(15)), who is an air carrier holding a valid air carrier operating certificate issued pursuant to 49 U.S.C. ch. 447 for aircraft capable of carrying 10 or more individuals.
Security Agreement Amendments : collectively, Security Agreement No. 1 Amendment, Security Agreement No. 2 Amendment and Security Agreement No. 3 Amendment.
Security Agreement No. 1 Amendment : Amendment No. 1 to Security Agreement and Chattel Mortgage, dated as of the date of this Agreement, amending that certain Security Agreement and Chattel Mortgage dated as of January 31, 2007 between the Borrower and Wilmington Trust Company, not in its individual capacity but solely as loan trustee.
Security Agreement No. 2 Amendment : Amendment No. 1 to Security Agreement and Chattel Mortgage, dated as of the date of this Agreement, amending that certain Security Agreement and Chattel Mortgage dated as of April 16, 2014 between the Borrower and Initial Lender, as Mortgagee.
8
[Credit Agreement]
Security Agreement No. 3 Amendment : Amendment No. 1 to Security Agreement and Chattel Mortgage, dated as of the date of this Agreement, amending that certain Security Agreement and Chattel Mortgage dated as of May 23, 2014 between the Borrower and Initial Lender, as Mortgagee.
Specified Carrier Bankruptcy Event : United Airlines, Inc. or American Air Group Inc. or any of their respective Affiliates shall have:
(i) applied for or consented to the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of all or a majority of its property, (2) made a general assignment for the benefit of its creditors, (3) commenced a voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (4) filed a petition seeking to take advantage (as debtor) of any other law relating to bankruptcy, insolvency, reorganization, winding up, or composition or readjustment of debts, or (5) failed to controvert in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under the federal Bankruptcy Code; or
(ii) be the subject of a proceeding or case commenced, without its application or consent, in any court of competent jurisdiction, seeking (1) its liquidation, reorganization, dissolution, or winding up, or the composition or readjustment of its debts, (2) the appointment of a trustee, receiver, custodian, liquidator, or the like for it or over all or a majority of its assets, or (3) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding up, or composition or adjustment of debts, and (if it is contesting the proceeding on a reasonable basis and in good faith) such proceeding or case shall have continued undismissed, or an order, judgment, or decree approving or ordering any of the foregoing is entered and shall have continued unstayed and in effect, for a period of ninety (90) days; or an order for relief against it was entered in an involuntary case under the federal Bankruptcy Code.
Specified Default : Default under Section 8.01(a), (e) or (f), or an Event of Default.
Successor : defined in Section 6.04(a).
Taxes : defined in the third paragraph of Section 9.02(a).
Section 1.02 Usage . Any agreement or statute referred to in Section 1.01 means such agreement or statute as from time to time supplemented and amended. A definition in singular form applies to the plural form of the term, and vice versa. References to sections, exhibits, and the like refer to those in or attached to this Agreement unless otherwise specified. Including means including but not limited to. Or means one or more, or all, of the alternatives listed or described. Herein, hereof, hereunder, etc. mean in, of, under, etc. this Agreement (and not merely in, of, under, etc. the section or provision where the reference appears).
9
[Credit Agreement]
2. PURCHASE OF NOTES; PAYMENTS; REPLACEMENT NOTES
Section 2.01 (a) Purchase of Notes . Subject to the satisfaction of the conditions
precedent set forth in Section 7, and on the terms and conditions set forth in this Section 2, on the Funding Date for each Engine Kit, Borrower shall issue to Initial Lender, and Initial Lender shall purchase from Borrower, a Note in a principal amount equal to the Financed Amount for such Engine Kit, bearing interest at the applicable Interest Rate, designated as having been issued in connection with such Engine Kit and otherwise in the form of Exhibit A (for a Fixed Rate Note) or Exhibit B (for a Floating Rate Note), as the case may be. The Financed Amount for each Engine Kit shall not exceed 80% (or such lesser percentage as Borrower shall designate) of its NEKP; provided that, if the Funding Date for an Engine Kit is later than the three (3) month anniversary of the Delivery Date of such Engine Kit (the Amortization Date ), the Financed Amount and the Maturity Date for such Engine Kit shall be adjusted as though the financing for such Engine Kit occurred on such Amortization Date. The aggregate Financed Amount for all of the Engine Kits shall not exceed $37,000,000 (the Commitment ). Borrower shall not be obligated to draw down all or any part of the Commitment. The ability of Borrower to issue Notes and the Initial Lenders obligation to purchase Notes in respect of an Engine Kit shall terminate on the six (6) month anniversary of the Delivery Date in respect of such Engine Kit. In addition to the foregoing, the ability of Borrower to issue Notes and the Initial Lenders obligation to purchase Notes pursuant to this Agreement shall terminate on the Amortization Date in respect of the last Engine Kit and (ii) October 7, 2018 (the Commitment Termination Date ).
(b) Premium Rate . The Premium Rate in respect of each Note shall initially be 2.49% per annum (which includes a 0.05% administration fee in accordance with ASU). The Premium Rate, is not subject to adjustment, with respect to Funding Dates occurring on or before April 7, 2017 (the Premium Rate Validity Rate ). The Premium Rate will be reset after the Premium Rate Validity Date to the premium rate then prevailing in accordance with the ASU, based upon the Guarantors then valid ASU risk clarification.
Section 2.02 Procedure for Purchase of Notes . (a) At least three (3) Business Days prior to each proposed Funding Date, Borrower shall provide a funding notice in respect of such Engine Kit substantially in the form of Exhibit C ( Funding Notice ) to the Lender and Lenders counsel. The Funding Notice shall be in writing and shall specify (i) the proposed Funding Date, (ii) the Financed Amount for such Engine Kit, (iii) the wiring instructions for the Financed Amount to be disbursed to Borrower (or its designee), (iv) Borrowers election of either the Floating Rate or the Fixed Rate for the Note in respect of such Engine Kit and (v) the Maturity Date for the Note in respect of such Engine Kit. On the appropriate Funding Date, upon fulfillment of the conditions set forth in Section 7, Initial Lender will purchase from Borrower the Note related to the Engine Kit that Borrower designated for that date for a purchase price equal to the face amount thereof (as set forth in Section 2.01(a)) by transferring the Financed Amount for each relevant Engine Kit to Borrower (or its designee). Subject to Section 2.01(a) and the following sentence, the amortization schedule for each Note shall be calculated on the basis that such Note shall be repayable in sixteen (16) equal consecutive quarterly installments and shall amortize on a straight-line basis. Promptly upon determination by a Lender of LIBOR for any subsequent Interest Period for each Floating Rate Note, Lender shall give notice thereof to Borrower.
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Section 2.03 Replacement Notes . If (a) any Note becomes mutilated, defaced, lost, stolen, or destroyed or (b) Borrower or a Lender otherwise reasonably requests, then, upon the request of Borrower or any Lender, (x) Borrower shall promptly execute and deliver to Lender a replacement Note for each such Note as to which such a request is made, and (y) such Lender shall surrender to Borrower, in exchange for such replacement Note, the Note being replaced (if not lost, stolen, or destroyed). As conditions precedent to the replacement of any Note, the applicant for a new Note shall furnish to Borrower evidence to Borrowers reasonable satisfaction of the loss, theft, or destruction of such Note alleged to have been lost, stolen, or destroyed, and of the ownership and authenticity of such mutilated, defaced, lost, stolen, or destroyed Note, and also such security and indemnity as Borrower reasonably requires ( provided, that the written undertaking of the Initial Lender or any institutional holder of a Note having a net worth (or in the case of a bank, having combined capital, surplus, and undivided profits) of at least $100,000,000 to hold harmless Borrower in respect of the execution, authentication and delivery of such new Note shall be sufficient security and indemnity), and shall pay all expenses and charges of such substitution or exchange. All Notes shall be issued, held, and owned upon the express condition that the foregoing provisions are exclusive in respect of the replacement of mutilated, defaced, lost, stolen, or destroyed Notes and shall preclude (to the extent lawful) any and all other rights and remedies, any present or future law or statute to the contrary notwithstanding. Each replacement Note shall have identical terms as the Note that it replaces, except for such changes as Borrower and the Lenders agree upon (such agreement not to be unreasonably withheld) following a request by any of them for such a change.
Section 2.04 Obligations Absolute . Borrowers obligations under each Note shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of such Note and this Agreement under any and all circumstances whatsoever and irrespective of:
(a) any lack of validity or enforceability of any Basic Document, or any term or provision therein;
(b) the existence of any claim, setoff, defense, or other right that Borrower (or any subsidiary or affiliate of Borrower) or any other Person may at any time have against any Lender or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction;
(c) any other act or omission to act or delay of any kind of the Lenders or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.04, constitute a legal or equitable discharge of Borrowers obligations hereunder.
Section 2.05 Amortization . Borrower shall pay to the Lenders on each Payment Date, the principal amount set forth opposite such date in Schedule I to each Note; provided that, in each such case, the principal installment payable on the Maturity Date for any such Note shall in all cases be in an amount equal to the entire principal amount of such Note outstanding on such date, and such principal installment shall be paid together with all accrued and unpaid interest and all other amounts then due and payable hereunder and under the other Basic Documents.
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Section 2.06 Interest . Borrower shall pay to the Lenders, interest on the unpaid principal amount of each Note for each Interest Period at the Interest Rate for such Interest Period until such Note is paid in full. Interest shall be calculated, (i) in the case of a Fixed Rate Note, on the basis of a 360 day year of twelve thirty day months and (ii) in the case of a Floating Rate Note, on the basis of a 360 day year and the actual number of days elapsed. Accrued interest on the unpaid principal of each Note shall be payable in arrears on each Payment Date therefor and otherwise upon the payment or prepayment thereof (but only on the principal amount so paid or prepaid), except that interest payable at the Default Rate shall be payable from time to time on demand in accordance with Section 4.05.
3. [ INTENTIONALLY OMITTED ]
4. PAYMENTS BY BORROWER
Section 4.01 How Payments Are Made . Borrower shall make its payments and prepayments of principal and interest due on the Notes, and all other amounts payable by Borrower to any Lender under the Basic Documents, to the credit of such account as such Lender may from time to time notify the Borrower in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due. Any payment made by Borrower to Lender after 3:00 p.m. (New York City time) on any day shall be deemed to have been made on the following Business Day. Subject to the adjustments required by the definition of Payment Date, if any payment due under the Basic Documents comes due on a day which is not a Business Day, such payment shall instead be made on the following Business Day, and interest shall accrue at the applicable rate to the day of payment (except that no additional interest shall accrue on any Fixed Rate Note if the payment thereon is made on such following Business Day).
Section 4.02 Right to Prepay . Provided that no Default has occurred and is continuing, Borrower shall have the right at any time on or after the initial Payment Date in respect of an Engine Kit to prepay all or part of the outstanding principal amount of the Notes issued with respect to the applicable designated Engine Kit; provided that any partial prepayment of the Notes with respect to an Engine Kit shall be in an aggregate principal amount not less than the most recent scheduled principal payment required pursuant to such Notes. Borrower shall give to Lender at least thirty (30) days prior written notice (which notice shall be irrevocable) of such prepayment (which notice shall specify the date on which such prepayment shall be made, and the Notes to which such prepayment applies). Upon any prepayment of any Note under this Section 4.02, Borrower shall pay all accrued and unpaid interest on the principal of that Note to (but excluding) the date of prepayment, and all amounts payable under Section 10.02 with respect to such prepayment. Amounts prepaid shall not be available for re-borrowing.
Section 4.03 Mandatory Prepayments . Upon acceleration of the Notes pursuant to Section 8.02, Borrower shall prepay such Notes, and shall pay all amounts payable under Section 10.02 with respect to such prepayment. To the extent required by Section 10.04, Borrower shall prepay any relevant Notes in accordance with the terms of Section 10.04 and such Notes. 2
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Section 4.04 Amount of Prepayment . Subject to Section 4.06, a Note shall be deemed satisfied in full upon the prepayment of all principal of such Note, the payment of all accrued and unpaid interest on or with respect to such Note as of such prepayment date, the payment of all past-due interest on or with respect to such Note, and the payment of all amounts payable under Section 10.02 with respect to such prepayment.
Section 4.05 Interest on Past Due Amounts . Any amounts past due (by acceleration or otherwise) and at any time outstanding under any Note or from Borrower under any Basic Document shall (to the extent permitted by law) bear interest, payable on demand, from the due date (and shall be compounded on a quarterly basis) until (but excluding the date of) payment in full, at a rate equal to 2.00% per annum above the Interest Rate for the relevant Note (the Default Rate ).
Section 4.06 Limit on Interest Payable . The amount of interest due or payable under this Agreement or any Note shall not in any event exceed the maximum allowable by applicable law, and this sentence shall override any contrary provision in this Agreement or any Note.
Section 4.07 [INTENTIONALLY OMITTED] .
Section 4.08 Changes in Market . If on or prior to 3:00 p.m. on the Business Day three (3) Business Days prior to any Interest Period in respect of a Floating Rate Note, any Lender determines (acting reasonably and in good faith) that:
(x) by reason of circumstances affecting the London interbank market, adequate and reasonable means do not exist for ascertaining LIBOR for such Interest Period in accordance with the definition thereof; or
(y) by reason of circumstances affecting the London interbank market, LIBOR does not accurately reflect the cost to such Lenders of maintaining or funding the loan in respect of such Floating Rate Note for such Interest Period,
then such Lender will promptly so notify Borrower of a substitute basis for determining an alternate interest rate for such Floating Rate Note, which alternate basis shall thereafter apply and be binding upon the Borrower and such Lender; provided that, at the Borrowers request, such Lender and Borrower shall enter into good faith negotiations (for a period of not more than thirty (30) days) with a view to concluding agreement on an acceptable alternate interest rate to be applicable to such Floating Rate Note. In the event the Borrower requests that such Lender enters into negotiations in accordance with the foregoing sentence, in the absence of any agreement being reached during such thirty (30) day period, the Floating Rate for such Interest Period shall be based on the sum of (A) the cost of funds of such Lender (as determined by such Lender in its sole discretion) plus (B) the Premium Rate, and (C) the Margin Benchmark applicable to Floating Rate Notes, which rate will be applied retroactively to the beginning of such Interest Period and continue for only so long as either of the conditions set forth in clauses (x) or (y) above exist. The provisions of this Agreement will be amended to accord with the terms of such substitute basis and Borrower agrees to execute such instruments requested by such Lenders that are in form and substance reasonably satisfactory to Borrower to reflect such amendment. If Borrower receives a notice under this Section 4.08, Borrower may at any time
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thereafter either (A) prepay, in accordance with Section 4.02 hereof, the affected Floating Rate Notes held by such Lenders or (B) request such Lender to transfer, in accordance with Section 13.05(b) hereof, the affected Floating Rate Notes held by such Lender to a financial institution designated by Borrower, at a price equal to 100% of the unpaid principal amount of such Floating Rate Note, together with accrued and unpaid interest thereon to (but excluding) the date of transfer, plus any amounts due under Section 10.02(a).
Section 4.09 Application of Payments . Each Lender shall apply payments received by it in respect of a Note under this Agreement (whether at stated maturity, by reason of acceleration, prepayment or otherwise) in the following order of priority: (a) interest due pursuant to Section 4.05 in respect of or related to such Note; (b) Commitment Fees, Arrangement Fees and all other amounts due to such Lender under this Agreement and not otherwise provided for under this Section 4.09 in respect of or related to such Note; (c) interest due pursuant to Section 2.06 in respect of or related to such Note; (d) principal due in respect of or related to such Note; (e) in respect of all other Notes issued hereunder, in or towards payment of the amounts referred to in, and in the respective order of priorities set forth in clauses (a) through (d) of this Section 4.09 as if such references were for amounts due and owing in respect of or related to such other Notes; (f) installments of principal not yet due in inverse order of maturity in respect of or related to the Notes; and (g) all other amounts due under this Agreement and not otherwise provided for in this Section 4.09.
5. BORROWERS REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as follows:
Section 5.01 Corporate Standing . Borrower is a duly organized corporation existing in good standing under the laws of Nevada, has the corporate power and legal authority to own or lease property and to carry on business as a Section 1110 Airline, and is duly qualified to do business in all jurisdictions wherein such qualification is necessary (except in any jurisdictions in which the failure to qualify would result in no Materially Adverse Change).
Section 5.02 Corporate Powers . Borrowers execution, delivery, and performance of the Basic Documents to which it is (or is to become) a party are within Borrowers corporate powers; and the Basic Documents to which it is (or is to become) a party have been duly authorized by all necessary corporate action on Borrowers part, and do not contravene, result in a breach of, or require any consent under any law, judgment, decree, order, or contractual restriction binding on Borrower or any agreement or instrument to which Borrower is a party or to which it or any of its property is subject.
Section 5.03 Binding Effect . The Basic Documents to which Borrower is (or is to become) a party are (or will be when executed and delivered) legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with the terms of this Agreement, except as may be limited by bankruptcy, insolvency, or other similar laws affecting enforcement of creditors rights generally and by general principles of equity.
Section 5.04 Litigation . There are no pending actions or proceedings before any court or administrative agency which may be expected to result in a Materially Adverse Change.
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Section 5.05 Financial Statements; No Materially Adverse Change . The audited balance sheet as of September 30, 2014, for Borrower and its consolidated subsidiaries, and the related results of operations for the quarterly fiscal period then ended, have been prepared in accordance with GAAP and correctly present Borrowers financial condition as of such date and results of operations for such period (subject to normal year-end event adjustments). As of the date of this Agreement, there has been no Materially Adverse Change.
Section 5.06 Taxes . Borrower has filed all tax returns which it is or was required to file, and has paid all taxes shown to be due and payable on those returns or on any assessment received by it, except such taxes of Borrower, if any, as are being contested diligently in good faith, and by appropriate proceedings, and as to which adequate reserves have been provided in accordance with GAAP.
Section 5.07 Status as United States Citizen and Air Carrier . Borrower is a Section 1110 Airline.
Section 5.08 Governmental Consents . Borrowers execution, delivery, and performance of the Basic Documents do not require the consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any federal, state, or foreign governmental authority or agency (including any judicial body).
Section 5.09 Acceptance of Engine Kit . On or prior to each Funding Date, the related Engine Kit shall have been delivered to and accepted by Borrower and Borrower shall have good and marketable title to such Engine Kit free and clear of all Liens.
Section 5.10 Solvency . Borrower (a) has sufficient capital to carry on all businesses and transactions in which it engages or is about to engage, (b) owns property having a value both at fair valuation and at present fair salable value greater than the amount required to pay Borrowers debts, (c) is solvent, (d) will continue to be solvent after assuming all obligations related to the Basic Documents, and (e) is able to pay its debts as they mature.
Section 5.11 No Governmental Approvals, Notices and Filings . No consent or approval of, giving of notice to, registration with, or taking of any action in respect of or by, any federal, state, or local governmental authority is or will be required with respect to Borrowers execution, delivery, or performance of each Basic Document to which it is a party or if any such consent, approval, notice, registration, or action is required, it will have been duly given or obtained on or before the pertinent Funding Date.
Section 5.12 Compliance with Laws . Borrower is in compliance with all applicable laws and regulations, including, without limitation, environmental laws and laws and regulations relating to corruption and bribery, provided that, in the case of such laws and regulations (other than laws and regulations relating to corruption and bribery), Borrower may have complied only to the extent necessary to ensure that non-compliance with such laws could not, individually or in the aggregate, reasonably be expected to have a Materially Adverse Effect.
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6. AFFIRMATIVE COVENANTS
So long as any Note, or any amount owed by Borrower under any Basic Document, remains outstanding or unpaid:
Section 6.01 Financial Statements . Borrower shall furnish to each Lender:
(a) within forty-five (45) days after the end of the first three quarterly periods in each fiscal year of Borrower, a consolidated balance sheet of Guarantor and its consolidated subsidiaries (including Borrower) prepared by it as of the close of such period, together with the related consolidated statements of income for such period; and
(b) within one hundred twenty (120) days after the last day of each fiscal year of Borrower, a consolidated copy of the audited balance sheet of and related statements of income and cash flows of Guarantor and its consolidated subsidiaries (including Borrower) at and as of the end of such fiscal year, each of which shall be prepared in accordance with GAAP and shall be accompanied by an opinion of a firm of independent public accountants of nationally recognized standing that said financial statements fairly present in all material respects the financial condition and results of operations of Guarantor as of, and for, such period in accordance with GAAP.
Section 6.02 [INTENTIONALLY OMITTED]
Section 6.03 Corporate Existence . Except as permitted by Section 6.04, Borrower shall maintain its existence as a corporation in good standing.
Section 6.04 Merger, etc . Borrower shall not consolidate with or merge into any other corporation, or convey, transfer, or lease all or substantially all of its assets as an entirety to any Person, unless:
(a) the Person formed by such consolidation or merger, or the Person who acquires by conveyance, transfer, or lease all or substantially all of Borrowers assets as an entirety (the Successor ) is a Section 1110 Airline;
(b) in the case of such a consolidation, merger, conveyance, transfer, or lease, the Successor: (x) executes and delivers to Lenders an agreement, in form and substance reasonably satisfactory to Lenders, containing an assumption by the Successor of the due and punctual performance and observance of Borrowers obligations under the Basic Documents to which Borrower is then a party (including this covenant), and (y) makes such filings, registrations and recordings, as are necessary to evidence such consolidation, merger, conveyance, transfer, or lease with or to the Successor;
(c) such transaction shall not (1) create any Event of Default, or (2) materially impair Borrowers or the Successors (as the case may be) ability to perform its obligations under the Basic Documents; and
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(d) Borrower or the Successor delivers to Lenders, promptly upon consummation of such transaction, an Officers Certificate stating that the conditions precedent set forth in clauses (a), (b), and (c) have been complied with and an opinion of counsel for Borrower or for the Successor, in form and substance reasonably satisfactory to Lenders, (1) stating that the agreements entered into to effect such consolidation, merger, conveyance, transfer, or lease and such assumption agreements have been duly authorized, executed, and delivered by the Successor (or in the case of a merger, by Borrower) and that they (and the Basic Documents so assumed) constitute legal, valid, and binding obligations of the Successor (or in the case of a merger, of Borrower), enforceable in accordance with their terms (to the same extent as the Basic Documents so assumed were enforceable against Borrower immediately prior to such transaction), (2) stating that all conditions precedent which are legal in nature provided for in this Agreement and relating to such transaction have been fulfilled and (3) containing such other customary matters Lender reasonably requests.
Upon any such consolidation, conveyance, merger, transfer, or lease, the Successor shall succeed to, shall be substituted for, and may exercise every right and power of Borrower under the Basic Documents to which Borrower is a party, with the same effect as if the Successor had been named as Borrower therein. No such conveyance, transfer, or lease of substantially all Borrowers assets as an entirety shall have the effect of releasing Borrower (or any Successor) from its liability under the Basic Documents to which it is a party.
Section 6.05 Citizenship and Air Carrier Status . Borrower will at all times remain a Section 1110 Airline.
Section 6.06 Disposition of Assets . Except as permitted by Section 6.04, Borrower will not transfer or assign assets, or pay dividends to any affiliate, subsidiary, or related company, if such a transfer, assignment, or payment would materially impair Borrowers ability to meet its obligations under the Basic Documents.
Section 6.07 ERISA Information . Borrower will cooperate with all reasonable requests by any Lender (including reasonable requests for information) to determine whether any proposed transfer by such Lender of its interest in the Basic Documents would violate ERISA.
Section 6.08 Compliance with Laws . Borrower will comply with all applicable laws and regulations, including, without limitation, environmental laws and laws and regulations relating to corruption and bribery, provided that, in the case of such laws and regulations (other than laws and regulations relating to corruption and bribery), Borrower need comply only to the extent necessary to ensure that non-compliance with such laws could not, individually or in the aggregate, reasonably be expected to have a Materially Adverse Effect.
7. CONDITIONS PRECEDENT AND CONDITION SUBSEQUENT
Section 7.01 Conditions Precedent to First Funding . Initial Lenders obligation to purchase the relevant Note on the first Funding Date is subject to the satisfaction of the following conditions precedent and the Initial Lenders receipt on or before such initial Funding Date of the following, in form and substance reasonably satisfactory to Initial Lender:
(a) an executed copy of this Agreement;
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(b) a certificate of Borrowers secretary, dated the Funding Date, certifying attached copies of the resolutions of Borrowers board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party, and showing the names and copies of the specimen signature(s) of Borrowers officer(s) authorized to sign this Agreement and the related documents to which it is (or is to become) a party;
(c) an executed copy of the Guaranty;
(d) an executed copy of the Purchase Agreement;
(e) executed copies of the Credit Agreement Amendments; and
(f) executed copies of the Security Agreement Amendments.
Section 7.02 Conditions Precedent to Each Funding . Initial Lenders obligation to purchase each relevant Note (including each relevant Note on the initial Funding Date) is subject to the additional conditions precedent that:
(a) Initial Lender shall, to the extent set forth below, have received the following, each dated as of the pertinent Funding Date, in form and substance reasonably satisfactory to Initial Lender:
(1) Initial Lender shall have received the Note for the relevant Engine Kit, duly executed by Borrower,
(2) an Officers Certificate certifying: (x) Borrowers representations and warranties in Section 5 of this Agreement are true and accurate as though made on the Funding Date, and (y) no Event of Default exists or will result from Initial Lenders purchase of its Note,
(3) (i) an officers certificate of Guarantor certifying Guarantors representations and warranties in Section 9 of the Guaranty are true and accurate as though made on the Funding Date, and (ii) a compliance certificate certified by the Chief Financial Officer of the Guarantor stating that the Guarantors consolidated available cash and cash equivalents, including any available credit facility, is not less than $35,000,000.
(4) an opinion from Borrowers in-house counsel as to the matters contemplated thereby,
(5) on the initial Funding Date only, an opinion from Guarantors in-house counsel as to the Guaranty and the matters contemplated thereby,
(6) on the initial Funding Date only, an opinion from Smith, Gambrell & Russell, LLP, special New York counsel to Borrower and Guarantor as to the matters contemplated hereby,
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(7) on the initial Funding Date only, a favorable opinion from Daugherty Fowler Peregrin Haught & Jenson, special FAA counsel, in customary form, covering the Security Agreement Amendments;
(8) an anti-corruption declaration and a disclosure consent from the Exporter addressed to the Initial Lender,
(9) a favorable opinion of Vedder Price P.C., special counsel to the Initial Lender, as to the matters contemplated thereby,
(10) such additional opinion(s) and document(s) the Lender requests,
(11) a certificate of Borrowers secretary, dated the Funding Date, certifying attached copies of the resolutions of Borrowers board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party and showing the names and copies of the specimen signature(s) of Borrowers officer(s) authorized to sign this Agreement and the related documents to which it is (or is to become) a party,
(12) on the initial Funding Date only, a certificate of Guarantors secretary, dated such Funding Date, certifying attached copies of the resolutions of Guarantors board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party and showing the names and copies of the specimen signature(s) of Guarantors officer(s) authorized to sign the Guaranty and the related documents to which it is (or is to become) a party, and
(13) Initial Lender shall have received a Payment Confirmation Letter pertaining to the engine to which the relevant Engine Kit relates;
(b) Borrowers and Guarantors representations and warranties in the Basic Documents shall be true and accurate as though made on and as of such Funding Date;
(c) no Event of Default shall exist or shall result from Initial Lenders purchase of its Note;
(d) with respect to the initial Funding Date only, all filings, recordings, registrations and other actions necessary to establish, protect, preserve, and perfect the applicable mortgagees and the other secured parties interests under the Security Agreement Amendments shall have been duly made or taken in the appropriate jurisdictions, and evidence of such filings, registrations, recordings, and other actions provided to the Initial Lender;
(e) all necessary consents, approvals, licenses, permits, declarations, or registrations then required in connection with Borrowers execution, delivery, and performance of the Basic Documents and the transactions contemplated thereby shall have been obtained;
(f) since December 31, 2014, no Materially Adverse Change shall have occurred;
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(g) Initial Lender shall have received the following, each dated as of the pertinent Funding Date: (1) the Note issuable to it with respect to the relevant Engine Kit, duly executed by Borrower, and (2) an executed copy of each document referred to in
Section 7.02(a)(2) through (12);
(h) Initial Lender shall have received a Funding Notice as referred to in Section 2.02 of this Agreement;
(i) Initial Lender shall have received evidence satisfactory to it that the Financed Amount for an Engine Kit does not exceed the purchase price of such Engine Kit, as evidenced by (I) a purchase invoice from the Borrower or Exporter and (II) a certificate from the Exporter which attests to the NEKP and all price discounts and other cash credits, credits or concessions with respect to the Engine Kit;
(j) Initial Lender shall have received (A) the relevant Arrangement Fee due on such Funding Date pursuant to Section 13.15 and (B) the amount of the Commitment Fee due and owing as of such Funding Date, if any, pursuant to Section 13.14;
(k) no Code Share Event shall have occurred; and
(l) Since the date hereof, no Specified Carrier Bankruptcy Event shall have occurred.
Section 7.03 Conditions Precedent to Borrowers Obligations . Borrowers obligations on each Funding Date are subject to Borrowers receipt, on or before such Funding Date, of the following, each in form and substance reasonably satisfactory to Borrower:
(a) with respect to the initial Funding Date only, this Credit Agreement, executed by the Initial Lender;
(b) with respect to the initial Funding Date only, the tax forms referred to in Section 9.02(j); and
(c) such additional opinion(s) and document(s) as Borrower reasonably requests.
8. EVENTS OF DEFAULT; REMEDIES
Section 8.01 Events of Default . Each of the following shall constitute an Event of Default :
(a) (1) Borrower fails to make any payment due from Borrower on any Note or under any Basic Document when due, and such failure continues for five (5) Business Days (as to principal, interest, and amounts payable under Section 4.02 or 4.03) or ten (10) Business Days (as to all other amounts due) after Borrowers receipt of notice of such failure from Initial Lender, or (2) Guarantor fails to make any payment due from Guarantor under the Guaranty when due, and such failure continues for ten (10) Business Days after Guarantors receipt of notice of such failure from Initial Lender;
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(b) any representation or warranty made by any Obligor in the Basic Documents, or in any certificate or other document that it furnishes pursuant to the Basic Documents, is incorrect in any material respect when made (and, if the effect(s) of such incorrectness is/are reasonably curable, such effect(s) continue(s) for thirty (30) days after such Obligors receipt of notice of such incorrectness from Initial Lender);
(c) Borrower violates Section 6.03 or 6.05;
(d) any Obligor fails in any material respect to perform any other covenant or agreement in the Basic Documents, and such failure to perform continues for thirty (30) days after such Obligors receipt of notice of such default from Initial Lender (one hundred fifty (150) days after such Obligors receipt of such notice if (1) such covenant or agreement is reasonably curable, and (2) such Obligor is diligently pursuing a cure of such failure);
(e) an Obligor (1) applies for or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of all or a majority of its property, (2) makes a general assignment for the benefit of its creditors, (3) commences a voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (4) files a petition seeking to take advantage (as debtor) of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, or (5) fails to controvert in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under the federal Bankruptcy Code;
(f) a proceeding or case is commenced, without an Obligors application or consent, in any court of competent jurisdiction, seeking (1) its liquidation, reorganization, dissolution, or winding-up, or the composition or readjustment of its debts, (2) the appointment of a trustee, receiver, custodian, liquidator, or the like of such Obligor or of all or a majority of its assets, or (3) similar relief in respect of such Obligor under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and (if such Obligor is contesting the proceeding on a reasonable basis and in good faith) such proceeding or case continues undismissed, or an order, judgment, or decree approving or ordering any of the foregoing is entered and continues unstayed and in effect, for a period of ninety (90) days; or an order for relief against such Obligor is entered in an involuntary case under the federal Bankruptcy Code;
(g) the Guaranty ceases to be in full force and effect or the Guarantor fails to comply with any material term, condition or covenant set forth in the Guaranty;
(h) so long as the Initial Lender is the holder of at least ten percent (10%) of the Notes in respect of any Engine Kit, an Event of Default or similar event shall have occurred and be continuing under any Other EDC Transaction;
(i) a Code Share Event shall have occurred and be continuing;
(j) a Specified Carrier Bankruptcy Event shall have occurred and be continuing; or
(k) a Coverage Ratio Event shall have occurred and be continuing and shall have become an Event of Default pursuant to the terms of Section 10(c)(ii) or 10(c)(iii) of the Guaranty.
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Notwithstanding the foregoing, upon the occurrence of an Event of Default under Section 8.01(j) above, and provided that no other Event of Default shall have occurred and be continuing, the Lender will, without prejudice to its rights and remedies set out in Section 8.02 below and in its sole and absolute discretion, consult with the Borrower regarding such Event of Default and the Borrowers compliance therewith (which consultation may consider whether any cost overruns are the result of timing issues related to engine event maintenance costs which, absent such issues, would have avoided such Event of Default).
Section 8.02 Remedies . If an Event of Default (other than under Section 8.01 (e) or (f)) exists, Lender may (and upon its receipt of written request by a Majority in Interest of Lenders shall) declare all Notes to be immediately due and payable, whereupon all Notes shall become and be immediately due and payable without presentment, demand, protest, or other notice of any kind, all of which Borrower hereby waives, and all lending commitments hereunder shall terminate. If an Event of Default under Section 8.01(e) or (f) occurs, all Notes automatically shall become immediately due and payable and all lending commitments hereunder automatically shall immediately terminate, without presentment, demand, protest, or notice of any kind, all of which Borrower hereby waives. Upon the occurrence of any Event of Default, Lender may exercise any of its rights and remedies under the Basic Documents.
9. BORROWERS INDEMNITIES
Section 9.01 General Indemnity . (a) General . Borrower assumes liability for, and agrees to indemnify each Indemnitee, on an After-Tax Basis, against, whether or not the transactions contemplated herein or in any of the other Basic Documents are consummated, any and all Liabilities.
Liabilities means any and all liabilities, obligations, losses, damages, penalties, claims (including claims involving negligence, strict or absolute liability, liability in tort, and liabilities arising out of violation of laws or regulatory requirements of any kind), suits, actions, costs, expenses, and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever imposed on, incurred by, or asserted against an Indemnitee, whether or not such Indemnitee is indemnified as to such matter by any other Person, relating to or arising out of: (aa) any of the Basic Documents or any of the transactions contemplated herein or therein or the enforcement thereof, including any misrepresentation or breach of warranty of Borrower contained therein or in any document or certificate of Borrower delivered pursuant thereto or the breach of any agreement or covenant by Borrower, or the failure by Borrower to perform any of its obligations under the Basic Documents, or (bb) the manufacture, assembly, design, purchase, acceptance, resale, rejection, refinancing, non-use, alteration, replacement, existence, control, refurbishment, service, removal, redelivery, substitution, ownership, delivery, lease, possession, repossession, return, use, operation, maintenance, condition, overhaul, testing, insuring, transportation, importation, exportation, modification, repair, fitness for use, merchantability, abandonment, sale, return, storage, transfer of title, or other disposition of an Engine Kit, any Note, or any Engine Kit or any part thereof or any accident in connection
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therewith whether or not relating to loss or damage to any property, or death or injury of, or other loss suffered by, any Person (including latent and other defects, whether or not discoverable, strict tort liability, and any claim for patent, trademark, or copyright infringement), or (dd) the offer or sale of any interest in the Engine Kit or any Note, or (ee) any prohibited transaction within the meaning of ERISA Section 406 or Code Section 4975(c) in any way relating to, arising out of or resulting from the offer, sale, resale, purchase, delivery or holding of any Notes or interest thereon or in any transaction contemplated by the Basic Documents, whether occurring before, on, or after the date hereof, or (ff) any violation of any law, relating to the possession, use or maintenance of the Engine Kit.
However, Borrower shall not be required to indemnify any Indemnitee: (aa) for any Liability arising out of the gross negligence, willful misconduct, misrepresentation, or breach of contract of such Indemnitee (other than gross negligence imputed to an Indemnitee solely by reason of its interest in any Engine Kit), or such Indemnitees ordinary negligence in exercising its right of inspection, (bb) for any Liability constituting Taxes, whether or not Borrower is required to indemnify therefor pursuant to Section 9.02; provided, that this clause (bb) shall not apply to Taxes (x) taken into consideration in making any payment pursuant to this Section 9.01 on an After-Tax Basis, or (y) arising out of any prohibited transaction within the meaning of ERISA Section 406 or Code Section 4975(c) (but in the case of (y) only to the extent occurring because of a misrepresentation by Borrower), (cc) for any Liability attributable to the sale or other transfer of all or part of such Indemnitees interest in any Engine Kit or any Note other than a sale or other transfer as a result of ( e.g. , such sale or transfer is viewed by the transferor as the transferors exit strategy in connection with such Event of Default), or in connection with the exercise of remedies during the continuance of, an Event of Default, , or at Borrowers request or direction, or as required by any of the Basic Documents, or (dd) any Indemnitees liability as a manufacturer or maintenance provider.
Borrower hereby waives and releases any claim now or hereafter existing against any Indemnitee arising out of death or personal injury to personnel or agents of Borrower or any Affiliate, loss or damage to property of Borrower, its agents, or any Affiliate, which may result from or arise out of the items referred to in clause (bb) of the definition of Liabilities set forth in this Section 9.01 while any of the Notes are outstanding, including any latent or patent defect, whether or not discoverable, except to the extent any such claim arises out of the gross negligence, willful misconduct, or misrepresentation of or breach of its obligations under the Basic Documents by such Indemnitee.
(b) Contests . If any claim for a Liability is made against Borrower or any Indemnitee and such party has received notice thereof, such party receiving notice of such Liability shall promptly notify all affected Indemnitees or Borrower, as the case may be, provided , that the failure to provide such notice promptly or to notify Borrower shall not release Borrower from any of its obligations to indemnify hereunder, except to the extent that such failure adversely affects any applicable defense or counterclaim, or otherwise increases the amount Borrower would have been liable for in the absence of such failure. If no Specified Default shall exist, Borrower shall have the right to investigate and defend or (so long as Borrower has acknowledged in writing to the relevant Indemnitee that Borrower is liable to such Indemnitee for such Liability), compromise any Liability for which it may be required to indemnify under this Section 9.01, and each Indemnitee agrees to cooperate with all reasonable
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[Credit Agreement]
requests of Borrower in connection therewith. Notwithstanding any of the foregoing to the contrary, Borrower shall not be entitled to assume responsibility for and control of any such judicial or administrative proceedings or compromise any Liability if (aa) any Specified Default shall exist, or (bb) such proceedings would involve the imposition of criminal liability on an Indemnitee or if such contest will, in the reasonable opinion of such Indemnitee, be inappropriate under applicable standards of professional conduct. The reasonable fees and expenses of such Indemnitees counsel shall be paid by Borrower if any of the circumstances described in clauses (aa) or (bb) above exists. An Indemnitee may participate at its own expense and with its own counsel in any judicial proceeding controlled by Borrower pursuant to the preceding provisions. Each Indemnitee shall cooperate with all reasonable requests of the insurers in the exercise of their rights to investigate, defend, or compromise such claim as may be required by such policy to maintain the insurance coverage provided to the parties thereunder. To the extent that any Indemnitee receives indemnification payments under this Section 9.01, Borrower shall be subrogated to such Indemnitees rights with respect to the transaction or event requiring or giving rise to such indemnity to the extent of any indemnity payment made, other than to any insurance policies maintained by such Indemnitee.
(c) Survival . The indemnities in this Section 9.01 shall survive the expiration or other termination of the Basic Documents as to acts occurring or circumstances existing on or before such expiration or termination.
(d) Payment . Subject to the provisions of clause (b) above, Borrower agrees to pay a claim for any Liability by an Indemnitee within ten (10) Business Days of written demand therefor.
Section 9.02 General Tax Indemnity . (a) General . Borrower agrees that all payments on any Note and all payments by Borrower to any Lender in connection with the transactions contemplated by the Basic Documents shall be free and clear of, and without deduction for, any and all withholdings of any nature whatsoever, except as otherwise provided in the first two paragraphs of this Section 9.02(a). If any deduction or withholding is required with respect to any amount payable on any Note or any other amounts payable by Borrower that are enumerated (and not excepted) above, Borrower shall pay an additional amount such that the net amount actually received by each Indemnitee, after such deduction or withholding, will be equal to all such amounts that would be received by such Indemnitee if no such deduction or withholding had been required. Each Indemnitee shall file and provide to Borrower such returns, statements, or other documentation as shall enable it to claim to the extent possible any reduced rate of Tax withholding or any exemption from Tax withholding with respect to any Taxes to which the terms of this Section 9.02(a) apply, in each case, properly available under applicable law or any applicable treaty, provided that, (i) except in the case of Tax withholding required by the United States government on interest income, Borrower shall have provided to such Indemnitee timely notice of the requirement for such returns, statements, or other documentation, (ii) such Indemnitee has in good faith determined it would suffer no adverse tax consequences by providing the applicable return, statement, or other documentation, and (iii) Borrower has agreed to pay, and does pay after demand therefor, on an After-Tax Basis, all costs and expenses incurred by such Indemnitee in providing the applicable return, statement, or other documentation. If and to the extent that such Indemnitee fails to file or provide any such return, statement, or other documentation required pursuant to the preceding sentence and as a result
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[Credit Agreement]
thereof either (1) Tax withholding is required at a rate which is higher than that which would have been applicable had such return, statement or other documentation been filed or provided, or (2) Tax withholding is required which would not have been required had such return, statement, or other documentation been filed or provided, Borrowers obligation to make the increased payment otherwise required by this Section 9.02(a) shall be limited to the amount which would have been required if such Indemnitee had filed or provided such return, statement, or other documentation.
Notwithstanding the foregoing, if any deduction or withholding of Taxes imposed by the United States government (including any such deduction or withholding of Taxes imposed under FATCA) is required by applicable law (after taking into account any applicable treaty) with respect to any amount payable on any Note or under the other Basic Documents (other than to Initial Lender (it being understood and agreed payments to whom shall be governed by the first paragraph of Section 9.02(a))), Borrower shall make, and the Lender shall receive, such payment net of such required deduction or withholding, and Borrower shall not be required to make the additional payment otherwise required by this Section 9.02(a) with respect to such deduction or withholding, except in the case of any such deduction or withholding of Taxes imposed by the United States government (other than such Taxes imposed under FATCA) that is required as a result of any amendment to or change in applicable law, which amendment or change becomes effective after the date the Lender becomes a Lender hereunder (a Change in Law ). In the event that there is a Change in Law and a Lender (other than Initial Lender) becomes subject to a deduction or withholding requirement, such Lender shall use reasonable efforts to transfer the affected Note to a branch or Affiliate located in a jurisdiction not affected by such withholding Tax or with respect to which a lower withholding Tax applies, if such transfer would not result in any economic disadvantage or adverse Tax consequences to such Lender and would not otherwise be disadvantageous (except to a de minimis extent) (unless, in the case of any economically quantifiable detriment, Borrower has agreed to indemnify against such detriment in a manner reasonably satisfactory to such Lender). If such transfer is made, such Lender shall, as promptly as practicable, fulfill or cause to be fulfilled the obligations under Section 9.02(j) with respect to any branch or Affiliate. If a Lender receives a payment without a deduction or a withholding that is required by applicable law but is not Borrowers responsibility under this Section 9.02(a), the pertinent Lender shall reimburse Borrower for any amount, including interest and penalties imposed by the United States government, that Borrower is required to make with respect to such payment. Notwithstanding any other provision of this paragraph, a Lender shall be indemnified, to the extent provided for elsewhere in this Section 9.02, for any deduction or withholding that is required because (i) Borrower is not or does not remain an entity that is a United States person within the meaning of Code Section 7701(a)(30), or (ii) Borrower is not managed and controlled within the United States, or conducts activities outside the United States, in either case with the consequence that payments are made, deemed, or treated as made by Borrower from outside the United States. Regardless of the applicability of any other provision of this paragraph, if any deduction or withholding is required by applicable law with respect to any Note, Borrower shall promptly pay the full amount of such required deduction or withholding to the appropriate taxing authority and deliver to the Lender as soon as practicable thereafter a receipt issued by such taxing authority or a statement of Borrower confirming the payment to such taxing authority of all amounts so required to be deducted or withheld.
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[Credit Agreement]
Whether or not any of the transactions contemplated hereby or in any of the other Basic Documents are consummated, subject to Section 9.02(b), Borrower shall pay, and shall indemnify and hold harmless on an After-Tax Basis each Indemnitee from and against, any and all fees, taxes, licenses, levies, imposts, duties, excises, assessments, charges, or withholding of any nature, together with any penalties, fines, additions to tax, or interest thereon, however imposed, whether levied or imposed upon such Indemnitee, Borrower, or any Engine Kit or any part thereof, by any federal, state, or local taxing authority within the United States or any territory or possession thereof, or by any foreign or international taxing authority (all such fees, taxes, licenses, levies, imposts, duties, excises, assessments, charges, withholdings, penalties, fines, additions to tax, and interest being Taxes ) relating to: (aa) any Engine Kit, or any interest therein, (bb) the acquisition, manufacture, purchase, mortgaging, initial financing, refinancing, ownership, delivery, non-delivery, redelivery, transport, location, assignment, alteration, improvement, possession, presence, use, replacement, substitution, operation, insurance, installation, modification, rebuilding, overhaul, condition, storage, maintenance, repair, sale, return, abandonment, preparation, transfer of title, acceptance, importation, exportation, rejection, or other disposition of any Engine Kit, or any interest in any of the foregoing; (cc) the Notes, or the issuance, acquisition, transfer, or assumption thereof, or refinancing thereof, or the payment of any amounts thereon; (dd) the execution, delivery, or performance of any of the Basic Documents or any future amendment, supplement, waiver, or consent (thereto requested or consented to by Borrower) or in connection with a Specified Default, or any of the transactions contemplated thereby, or any proceeds or payments or amounts payable under any thereof; (ee) the property or the income or other proceeds with respect to any Engine Kit; or (ff) otherwise with respect to or in connection with the transactions contemplated by the Basic Documents.
Notwithstanding the foregoing, the third paragraph of this Section 9.02(a) shall not obligate Borrower to pay or indemnify for any of the following:
(i) in the case of any Indemnitee, any Taxes (including any withholding Taxes other than withholding Taxes for which an Indemnitee may be indemnified hereunder pursuant to the first and second paragraphs of this Section 9.02(a)) imposed by the United States government or by any state, local or foreign taxing authority based on, or measured by or with respect to gross or net income, net or gross receipts, minimum tax, capital, franchise, net worth, excess profits, value added, or conduct of business of such Indemnitee (other than any such Taxes which are in the nature of sales or use taxes, license or excise taxes, property taxes, ad valorem taxes, value added taxes (to the extent not imposed in direct and clear substitution for an income tax), stamp or document taxes, registration or recording taxes, or goods and services or transaction privilege taxes and other than amounts necessary to make payments on an After-Tax Basis), in each case however denominated, as a result of such Indemnitees being organized in, physically holding the Notes in, or conducting business unrelated to the transactions contemplated in the Basic Documents in, the jurisdiction imposing such Tax.
(ii) Taxes imposed with respect to any period following the payment by Borrower of all amounts due and payable under the Basic Documents, except to the extent coinciding with such event;
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[Credit Agreement]
(iii) Taxes which arise out of or are caused by a breach by an Indemnitee of any of its covenants, representations, and warranties under the Basic Documents;
(iv) any Tax imposed upon or as a result of a transfer or other disposition by or to an Indemnitee of any interest in any Note, Engine Kit, or any part thereof or Basic Document, other than any such transfer or disposition (a) while any Event of Default exists, or (b) in order to effect the transactions or transfers contemplated to occur under the Basic Documents on a Funding Date,
(v) in the case of any Indemnitee, withholding Taxes imposed on any transferee of the interests held by such Indemnitee (other than a transferee who has acquired its interest as a result of a transfer pursuant to an exercise of remedies following an Event of Default) (a) if such Tax would not have been imposed on the original Indemnitee, or (b) to the extent such Tax exceeds the amount of Tax that would have been imposed on the original Indemnitee;
(vi) in the case of any Indemnitee, Taxes to the extent resulting from the gross negligence or willful misconduct of such Indemnitee or any officer, director, agent, or employee of such Indemnitee, other than any such gross negligence or willful misconduct imputed to such Indemnitee by reason of any action or inaction of (a) Borrower, (b) any other Indemnitee, or (c) any officer, director, agent, or employee of any Person described in clauses (a) or (b) above;
(vii) Taxes that have been paid by Borrower as transaction expenses under Section 13.03 and that have been timely and properly paid to the appropriate taxing authority;
(viii) in the case of a Lender, any Tax to the extent that such Tax would not have been imposed but for the failure of such Lender to comply with any certification, documentation, or similar requirements concerning the nationality, residence, or identity of such Lender which, if properly complied with, would have resulted in an exemption from, or a reduced rate of, such Tax for which such Lender was otherwise eligible, provided that Borrower gave such Lender timely notice of such requirement, such Lender would suffer no adverse consequences by so complying, and Borrower has agreed to pay, and does pay after demand therefor, on an After-Tax Basis, all costs and expenses incurred by such Lender in so complying;
(ix) in the case of a Lender, any Tax imposed by means of withholding, other than any such Tax to be indemnified hereunder solely as and to the extent set forth in the first and second paragraphs of this Section 9.02(a);
(x) in the case of any Indemnitee, Taxes imposed in respect of a prohibited transaction within the meaning of ERISA arising out of a breach by such Indemnitee of its representations or covenants; and
(xi) any Tax imposed under FATCA.
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(b) Contests . If any written claim is made against any Indemnitee or if any proceeding is commenced against any Indemnitee for any Taxes as to which Borrower may have indemnity obligation pursuant to Section 9.02(a), such Indemnitee shall notify Borrower of such claim within thirty (30) days after such Indemnitee receives notice of such claim or proceeding; provided , that failure to provide such notice to Borrower shall not affect the obligation of Borrower to provide indemnity hereunder with respect to the Taxes that are the subject of such claim or proceeding unless and except to the extent that (i) such failure (whether by adversely affecting a counterclaim or defense, or otherwise) increases the amount for which Borrower would have been liable in the absence of such failure, or (ii) such failure results in the imposition of, or an increase in the amount of, any penalties, interest, or additions to Tax related to the Tax which is the subject of such claim or proceeding.
Upon Borrowers timely written request, the Indemnitee shall, in good faith, with due diligence, and at Borrowers expense, contest the validity, applicability, or amount of such Taxes by, in such Indemnitees discretion after consultation with Borrower, (aa) resisting payment thereof, (bb) not paying the same except under protest, if protest is necessary and proper, or (cc) if payment is made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; provided , that the Indemnitee shall not be required to take or continue any action pursuant to this sentence unless and until (u) except in the case when the Borrower controls the contest, such claim relates to Taxes for which Borrower may be liable hereunder in an amount in excess of $5,000 or Taxes for which the Borrower may be liable hereunder or otherwise in an aggregate amount in excess of $10,000; (v) such Indemnitee shall have received from Borrower (at Borrowers expense) an opinion of tax counsel to the effect that a reasonable basis exists within the meaning of ABA Formal Opinion No. 83352, or any successor thereto, for contesting such claim; (w) Borrower agrees to pay and shall timely pay, on an After-Tax Basis, on demand to such Indemnitee all reasonable costs and expenses that such Indemnitee actually incurs in connection with and reasonably allocable to contesting such claim (including reasonable legal and accounting fees, penalties, interest, and additions to tax); (x) if a Specified Default has occurred and is continuing, Borrower provides security for its obligations under Section 9.02(a) reasonably satisfactory to such Indemnitee; (y) if the Indemnitee decides after consultation with Borrower to pay the Tax prior to the contest, Borrower shall provide to the Indemnitee an interest-free advance in an amount equal to the Tax which the Indemnitee is required to pay and shall, in such case, pay any additional amount required to hold such Indemnitee harmless against any adverse Tax consequences arising from such advance (and if such contest is finally determined adversely, the amount of such advance shall be applied against Borrowers obligation to indemnify the Indemnitee against the Tax which is the subject of such contest); and (z) the action to be taken will not involve any risk of criminal liability on the Indemnitee or of a sale, forfeiture, or loss of any Engine Kit, or the creation of any Lien other than Liens for the Taxes being contested unless Borrower posts a bond or other security reasonably satisfactory to the Indemnitee in respect to such risk (other than in the case of a risk of criminal liability).
Any contest required pursuant to the preceding paragraph shall be conducted by Borrower in the name of Borrower, if permitted by law, with respect to (i) any claim which involves only Taxes or claims for which Borrower is required to indemnify hereunder, or (ii) any claim which can be segregated and contested separately without material adverse unindemnified consequences for such Indemnitee, provided , Borrower shall have acknowledged in writing its
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obligation to indemnify the applicable Indemnitee with respect to such contest without regard to the exclusions in Section 9.02(a)(i) through (xi). Any other contest shall be at the control and discretion of the Indemnitee. If Borrower satisfies the conditions imposed on it in this Section 9.02(b) and an Indemnitee nevertheless fails to contest and refuses to permit Borrower to contest under and as and to the extent required by this Section 9.02(b), then Borrower shall not be obligated to indemnify such Indemnitee for such claim or for any other claim for which a successful contest is adversely affected in any material respect because of such failure to contest or to permit a contest. In addition, the Indemnitee shall not settle, concede, or compromise any contest without Borrowers prior written consent unless the Indemnitee forgoes its right to be indemnified for such claim, and any such settlement, concession, or compromise without the prior written consent of Borrower shall constitute a waiver of such Indemnitees rights to indemnification hereunder with respect to such claim and any other related claim for which a successful contest is adversely affected in any material respect because of such settlement, concession, or compromise. If the settlement proposal of a claim is acceptable to the Indemnitee but is unacceptable to Borrower, Borrower shall inform such Indemnitee of the amount for which Borrower would be willing to settle such claim and such Indemnitee may accept the settlement proposal; provided, that the amount of any indemnity payment which Borrower shall be required to pay to such Indemnitee under Section 9.02(a) in respect of such claim shall not exceed the amount for which Borrower would have been willing to settle such claim. Such Indemnitee shall promptly return such portion of any amounts (including any gross up paid thereon, but excluding the expense of contest), previously advanced by Borrower for the payment of the Taxes which were the subject of the contest, as exceeds the amount to which Borrower did not withhold its consent. If Borrower notifies such Indemnitee that the settlement proposal is unacceptable to Borrower, the Indemnitee shall treat such notification as Borrowers request that such Indemnitee contest such claim for Taxes, in which case Borrowers and such Indemnitees rights and obligations with respect to such taxes shall be as provided in this Section 9.02(b) without regard to the settlement proposal. An Indemnitee will not be required to appeal any decision to the United States Supreme Court or any similar court in a jurisdiction outside the United States.
If any Indemnitee actually obtains a refund (or would have actually received such a refund but for offset by matters not indemnifiable by Borrower under Section 9.02(a)) of all or any part of any Tax paid or reimbursed by Borrower, such Indemnitee shall promptly pay to Borrower the amount equal to the lesser of (x) the amount of such refund (or the amount of such offset) plus any interest thereon (less any Taxes imposed on such Indemnitee with respect to such interest) received from the relevant taxing authority (or which would have been received with respect to the amount of such an offset) plus the amount of any Tax benefits realized by such Indemnitee as a result of such payment (and net of any net Tax detriment resulting from the receipt of the refund and interest on the refund (after giving effect to such Indemnitees obligations to make payments to Borrower under this sentence)), and (y) the sum of (i) such Tax payment by Borrower to such Indemnitee plus (ii) any interest received by such Indemnitee with respect to such refund or offset plus (iii) any other payment other than the expenses of the contest by Borrower to such Indemnitee theretofore made (and not theretofore repaid to Borrower) pursuant to this Section 9.02(b), it being intended that such Indemnitee shall be entitled to a net tax benefit pursuant to this Section 9.02(b) only if Borrower has been reimbursed for any payments by it to such Indemnitee pursuant to this Section 9.02(b); provided , (a) such amount shall not be payable before such time as Borrower shall have made all payments or
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indemnities then due and owing to such Indemnitee by Borrower pursuant to the Basic Documents, (b) no Specified Default shall exist, and (c) the amount of such payment by the Indemnitee with respect to a Tax paid or indemnified by Borrower hereunder, together with all payments previously made to Borrower by the Indemnitee with respect to such Tax, shall not exceed the aggregate amount paid by Borrower to the Indemnitee with respect to such Tax pursuant to Section 9.02(a) other than the expenses of the contest. Any subsequent loss or disallowance of such refund (as a result of a redetermination of the claim giving rise to such refund by any taxing authority or as a result of a judicial proceeding with respect to such claim) or tax benefit shall be treated as a Tax subject to indemnification under Section 9.02(a) without regard to the exclusions in Section 9.02(a) and the provisions of this Section 9.02(b). If an Indemnitee receives an award of attorneys fees in a contest for which Borrower has paid an allocable portion of the contest expenses, such Indemnitee shall pay to Borrower that portion of the award that is directly related to the issues contested with respect to a Tax indemnified under this Section 9.02, taking into account the rules applicable to obtaining such an award and any decision of the court in making such award.
Nothing in this Section 9.02 shall require any Indemnitee to contest or permit the contest of a claim which it would otherwise be required to contest pursuant to this Section 9.02 if such Indemnitee waives payment by Borrower of (x) any amount that might otherwise be payable by Borrower under this Section 9.02 by way of indemnity in respect of such claim, and (y) any other amount that might otherwise be payable by Borrower by way of indemnification in respect of any other claim for which a successful contest is adversely affected in any material respect because of such failure to contest. In such event, such Indemnitee shall reimburse Borrower for all amounts paid by or on behalf of Borrower with respect to such non-contested claim other than the expenses of the contest.
(c) Payments and Repayments . All Taxes shall be paid when due and payable to the appropriate taxing authority, and all amounts payable as indemnities pursuant to this Section 9.02 shall be payable, to the extent not theretofore paid, within ten (10) Business Days of written demand by the appropriate Indemnitee (which demand shall include the basis for the indemnity and its computation, each in reasonable detail), except that Taxes being contested pursuant to Section 9.02(b) shall not be required to be paid, subject to clause (y) in the second paragraph of Section 9.02(b), before such contest is finally resolved. If, for any reason, Borrower makes any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Basic Documents or on any Engine Kit, which Taxes are not the responsibility of Borrower with respect to such Indemnitee under this Section 9.02, then such Indemnitee shall pay to Borrower within ten (10) Business Days of Borrowers demand therefor an amount that equals the amount paid by Borrower with respect to such Taxes, plus interest at the Interest Rate from the date paid by Borrower to the date repaid to Borrower by such Indemnitee.
(d) Reports and Returns . If any report or return is required to be made with respect to any of Borrowers obligations under this Section 9.02, Borrower shall in a timely and proper fashion, (x) to the extent required or permitted by law, make and file in its own name such return or report, and (y) in the case of any such return or report required to be made in the name of any Indemnitee, inform such Indemnitee of such fact and prepare such return or report for filing by such Indemnitee in a manner reasonably acceptable to the Indemnitee or, where such
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[Credit Agreement]
return or report is required to reflect items in addition to any obligations of Borrower under or arising out of this Section 9.02, provide such Indemnitee with information sufficient to permit such return or report to be properly made with respect to any obligations of Borrower under this Section 9.02 no later than thirty (30) days prior to the filing date of such return or report. Each Indemnitee shall provide to Borrower such information within that Indemnitees possession or control as is reasonably necessary for Borrower to complete and file any such report or return properly.
(e) Receipts and Records . Borrower shall use reasonable efforts to obtain official receipts indicating the payment of all Taxes that are subject to indemnification under this Section 9.02 and that are paid by Borrower, and shall promptly on request send to the Indemnitee each such receipt obtained by Borrower. Within a reasonable time after Borrower receives from an Indemnitee a written request for specified information or copies of specified records reasonably necessary to enable an Indemnitee to fulfill its Tax filing, Tax audit or other Tax obligations or to contest Taxes imposed upon it, Borrower shall provide such information or copies of such records to the requesting party.
(f) Borrower a Primary Obligor . Borrowers obligations under the indemnities provided for in this Agreement are those of a primary obligor whether or not the Indemnitee is also indemnified against the same matter under any other Basic Document or any other document or instrument, and the Person seeking indemnification from Borrower may proceed directly against Borrower without first seeking to enforce any other right of indemnification.
(g) Payments on After-Tax Basis . Each payment and indemnity under this Section 9.02 shall be made on an After-Tax Basis; provided , that if any Indemnitee realizes any credits, deductions, or other tax benefits (or would have realized such a benefit if properly claimed) by reason of such payment or indemnity or, to the extent not otherwise taken into account in the computation of such payment or indemnity, as a result of the imposition or payment of any Tax with respect to which an indemnity has been paid hereunder, such Indemnitee shall pay to Borrower an amount equal to the lesser of (1) the sum of the amount by which such credits, deductions, and other tax benefits reduces the Taxes of such Indemnitee plus any tax benefit realized minus any tax detriment realized as the result of any payment made pursuant to this proviso, and (2) the amount of such payment by Borrower to or for the account of such Indemnitee plus the amount of any other payments (other than the expenses of the contest) by Borrower to or for the account of such Indemnitee theretofore made (and not theretofore repaid to Borrower pursuant to this Section 9.02(g), it being intended that no Indemnitee should be entitled to a net tax benefit pursuant to this Section 9.02(g) unless Borrower shall concurrently be made whole for any payments made by it to such Indemnitee pursuant to this Section 9.02(g)); provided , further , that any amount otherwise due to Borrower pursuant to this sentence shall be withheld to the extent of any payment or indemnity then due from Borrower to or on behalf of such Indemnitee pursuant to the Basic Documents and not made (and any amount so withheld shall not be payable before such time and to such extent as Borrower shall have made such payments or indemnities), and provided , further , no Specified Default shall exist. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of a tax benefit referred to in the first sentence of this Section 9.02(g) in a subsequent taxable year shall be indemnifiable pursuant to this Section 9.02 (without regard
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[Credit Agreement]
to the exclusions in Section 9.02(a) and the provisions of Section 9.02(b)). Notwithstanding anything contained herein or elsewhere in any Basic Document, neither Borrower nor any other Person shall have any right to inspect any Lenders tax returns, books, records or other documents.
In determining the order in which any Indemnitee utilizes withholding or other foreign taxes as a credit against such Indemnitees United States income taxes, such Indemnitee shall be deemed to utilize (i) first, all foreign taxes other than those described in clause (ii) below; provided , that such other foreign taxes which are carried back to the taxable year for which a determination is being made shall be deemed utilized after foreign taxes described in clause (ii) below, and (ii) then, on a pro rata basis, all foreign taxes with respect to which such Indemnitee is entitled to obtain indemnification pursuant to an indemnification provision contained in any loan agreement or other financing document (including this Agreement) that is similar to the indemnification provision in this Section 9.02.
(h) Interest . Borrower will pay to each Indemnitee, on demand, to the extent permitted by applicable law, interest at the Default Rate on the amount of any indemnity not paid when due pursuant to this Section 9.02, until it is paid (such default interest to be compounded on a quarterly basis until such payment). Such interest shall be paid in the same manner as the unpaid amount on which it is due. An Indemnitee will pay to Borrower, on demand, to the extent permitted by applicable law, interest at the Default Rate on the amounts of any payment required hereunder to be made by such Indemnitee to Borrower not paid when due pursuant to this Section 9.02, until it is paid (such default interest to be compounded on a quarterly basis until such payment).
(i) Survival . All indemnities, obligations, adjustments, and payments provided for in this Section 9.02 shall survive, and remain in full force and effect, notwithstanding the expiration or other termination of this Agreement or any other Basic Document. The obligations of Borrower in respect of all such indemnities, obligations, adjustments, and payments are made for the benefit of, and shall be enforceable by, the Indemnitee entitled thereto, without declaring any Basic Document to be in default or taking any other action hereunder or thereunder, and notwithstanding any provision of any other Basic Document.
(j) Required Forms . Borrower agrees, to the extent required by applicable law, to withhold from each payment due hereunder or under any Note United States federal withholding Taxes at the appropriate rate, and, on a timely basis, to deposit such amounts with an authorized depository and make such reports, filings, and other reports in connection therewith, and in the manner, required under applicable law. Borrower shall furnish no later than March 15 of each year to each Lender a U.S. Treasury Form 1042S (or similar forms at any relevant time in effect), if applicable, indicating payment in full of any Taxes withheld from any payments by Borrower to such Lender together with all such other information and documents reasonably requested by such Lender and necessary or appropriate to enable such Person to substantiate a claim for credit or deduction with respect thereto for income tax purposes of any jurisdiction with respect to which such Person is required to file a tax return. Provided that each Lender which is a non-U.S. Person has furnished to Borrower (aa) two complete original signed copies of Internal Revenue Service Form W-8BEN or W-8EXP (or similar forms at any relevant
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[Credit Agreement]
time in effect) evidencing such Lenders qualification for a complete exemption from withholding of United States federal income tax on payments made under any Note during the taxable year of such Lender to which such Form W-8BEN or W-8EXP relates, (bb) two complete original signed copies of Internal Revenue Service Form W-8BEN (or similar forms at any relevant time in effect) evidencing such Lenders qualification for a reduction of, or complete exemption from, withholding of United States federal income tax on all payments made under any Note on the basis of any treaty between the United States and the country in which such Lender is a resident (or under the laws of which such Lender is entitled to the benefits of such treaty) during the taxable year of such Lender to which such Form W-8BEN relates, or (cc) two complete original signed copies of Internal Revenue Service Form W-8ECI (or similar forms at any relevant time in effect) evidencing the Lenders complete exemption from withholding of United States federal income tax on interest payments made under and any Note during the taxable year of such Lender to which such Form W-8ECI relates, and provided Lender has furnished to Borrower two complete original signed copies of Internal Revenue Service Form W-8BEN, W-8EXP or Form W-8IMY (or similar forms at any relevant time in effect) with all required attachments, in the event such forms become applicable, then no amount or only the reduced amount required by applicable law shall be withheld from payments under the Notes held by such Lender in respect to United States federal income tax. Each Lender shall indemnify and hold harmless (on an After-Tax Basis) and Borrower against any claim for United States withholding Taxes which Lender improperly fails to withhold on payments to such Lender as a direct result of the failure by such Lender to provide the required certificate or Form or the invalidity of any certificate or Form provided by such Lender pursuant to this Section 9.02(j) (and providing such a certificate or Form shall constitute a representation of the relevant Lender as to such Lenders qualification for complete exemption from United States federal gross income tax withholding or, in the event of a Change in Law for which Borrower is obligated to hold harmless the Lender pursuant to this Agreement, for partial exemption from such withholding).If a payment made to a Lender under any Basic Document would be subject to United States federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrower at the time or times prescribed by applicable law and at such time or times reasonably requested by Borrower, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower as may be necessary for Borrower to comply with its obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment.
10. YIELD PROTECTION; ILLEGALITY
Section 10.01 Additional Costs .
(a) Borrower shall pay directly to each Lender from time to time such amounts as are necessary to compensate such Lender, on an After-Tax Basis, for any costs which are attributable to its purchase of any Notes hereunder (and reasonably allocable to such purchase, vis-à-vis all that Lenders other purchases of a similar type), or any reduction in any amount receivable by such Lender in respect of any of such Notes, resulting from any Regulatory Change which imposes or modifies any reserve, special deposit, minimum capital, capital ratio,
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[Credit Agreement]
or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender, or changes in interpretation of such requirements or other similar measures effectively imposed or directed by public controlling bodies. Each Lender will notify Borrower of any event occurring after the date of this Agreement which will entitle that Lender to compensation pursuant to this Section 10.01(a) as promptly as practicable after it obtains knowledge thereof, if it determines to request such compensation. Each Lender will furnish Borrower with a certificate setting forth the basis and amount of each request by such Lender for compensation under this Section 10.01(a). No indemnity shall be payable under this Section 10.01: (aa) for any costs accruing earlier than thirty (30) days prior to the date of such notice by such Lender to Borrower, or incurred as a result of such Lenders failure to give notice as promptly as required by this Section 10.01(a), (bb) unless such Lender is seeking similar compensation for such costs from its borrowers generally in connection with comparable loan financings, or (cc) to any successor Lender or to the extent caused by a Lenders relocation or by its voluntary relocation of its Note(s) in either case to a jurisdiction other than the United States, Australia, Austria, Canada, England, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Sweden, or Switzerland, which (due to a then-existing Regulatory Change, or then-enacted future Regulatory Change) would require indemnification under this Section 10.01 to a greater extent than would the previous jurisdiction, or (dd) to the extent the costs are specific to the Lender and not commercial banks or insurance companies in general in the applicable jurisdiction.
(b) Without limiting the effect of Section 10.01(a) (but without duplication), Borrower shall pay to each Lender on the first Business Day after the last day of each Interest Period, so long as such Lender maintains reserves (including any marginal, supplemental, or emergency reserves) against Eurocurrency liabilities under Regulation D, an additional amount notified to Borrower by such Lender (which notice shall set forth in reasonable detail the basis for the determination of such amount), by not later than the last day of such Interest Period, equal to the product of the following for each day during such Interest Period:
(1) the principal amount of such Lenders Floating Rate Notes outstanding on such day; times
(2) the remainder (expressed as a decimal) of (x) a fraction, the numerator of which is LIBOR for such day (expressed as a decimal), and the denominator of which is one minus the interest rate (expressed as a decimal) at which such Lender maintains such reserves on such day, minus (y) such numerator; times
(3) 1/360
(c) Determinations and allocations by any Lender for purposes of this Section 10.01 of the effect of any Regulatory Change pursuant to Section 10.01(a) or (b) on such Lenders costs or rate of return of maintaining any Note, or on amounts receivable by it in respect of any Note, and of amounts required to compensate such Lender under this Section 10.01, shall be made by such Lender reasonably and in good faith and shall be conclusive.
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Section 10.02 Breakage Costs; Prepayment Premium .
(a) Borrower shall pay to each Lender, upon such Lenders request, such amount as is sufficient, in such Lenders reasonable opinion, to compensate it for any loss, cost or expense which is attributable to:
(1) any payment, prepayment or purchase of any Floating Rate Note in which such Lender has any interest for any reason (including the acceleration of the maturity of any Floating Rate Notes pursuant to Section 8.02, and the prepayment of any Floating Rate Note pursuant to Section 4.03, but excluding any other transfer of any Floating Note by any Lender, other than a sale or other transfer as a result of, or in connection with the exercise of remedies during the continuance of, an Event of Default, pursuant to an Event of Loss, or at Borrowers request or direction, or as required by any of the Basic Documents) on a date other than Payment Date; or
(2) any failure by Initial Lender (because of a non-satisfaction of any of the conditions precedent specified in Section 7.01 or 7.02) to purchase any Floating Rate Note on a scheduled Funding Date specified by Borrower to Initial Lender;
provided that, in the case of the Initial Lender, the Initial Lenders loss, cost or expense relating to any of the foregoing events shall be deemed to be an amount equal to the Initial Lenders Breakage Costs.
Such amount payable by Borrower (x) shall not include losses, costs, or expenses attributable to any date more than one hundred eighty (180) days after the date of such payment or purchase or such Funding Date, and (y) shall be determined by the affected Lender reasonably and in good faith, which determination shall be conclusive, absent manifest error.
(b) Upon any prepayment of any Fixed Rate Note under Section 4.02 or acceleration of the maturity of a Fixed Rate Note under Section 8.02, in addition to the amounts payable under such section, Borrower shall pay a prepayment premium equal to the excess, if any, of (i) the present value of foregone scheduled principal and interest payments for the principal indebtedness prepaid discounted at a rate equal to the sum of (a) the interpolated semiannual rate to swap floating rate debt to fixed rate debt (offer side) for loans with a maturity closest to the remaining weighted average life to maturity of the remaining outstanding principal amount of such Fixed Rate Note, at 11:00 a.m. New York City time, two (2) Business Days prior to the relevant date of determination thereof (such rate to be obtained from the Bloomberg page IRSB (US Semi 30/360 column 2 (Ask)) or any substitute or replacement page providing the same service) and (b) 0.50% per annum, over (ii) the amount of principal prepaid; provided that, no such amount shall be less than zero;. Such affected Lender will provide Borrower with a certificate setting forth in reasonable detail the basis for and amount of such Lenders request for compensation.
Section 10.03 Illegality . If any change in any applicable state, federal or provincial law or in any interpretation or administration thereof by any governmental authority, central bank, or comparable agency in the United States or Canada charged with the interpretation or administration thereof, shall make it unlawful or contrary to such interpretation or administration
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[Credit Agreement]
for any Lender to make, fund, maintain or hold any of its Note(s) under the Basic Documents (each such event being an Illegality Event ), then such Lender shall promptly notify Borrower thereof in writing, and such Lenders obligation to purchase any additional Notes shall be suspended until that Lender may again make, fund, maintain, and hold Notes under the Basic Documents.
Section 10.04 Mitigation . If any Lenders Notes become eligible for compensation pursuant to Section 10.01(a) or (b) or any Lenders obligations to purchase Notes is suspended under Section 10.03 (Notes of such type being herein called Affected Notes ), then such Lender (other than the Initial Lender) will promptly designate a different lending office for booking its holdings of Affected Notes, or transfer such Affected Notes to another of its branches or affiliates, if such designation or transfer would eliminate or reduce Borrowers payment obligations under Section 10.01(a) or (b) or would eliminate the application of Section 10.03 as to any of its Affected Notes and, in either case, would not have materially disadvantageous regulatory or tax consequences to such Lender uncompensated for by Borrower reasonably determined by such Lender in good faith; provided that , notwithstanding the foregoing, the Lender shall not be obligated to take any action that would, in its reasonable judgment, cause such Lender to incur any loss or cost reasonably deemed by such Lender to be material, unless Borrower agrees to reimburse Lender hereunder. To the extent that any such designation or transfer does not eliminate such compensation or suspension, such Lender and Borrower shall negotiate in good faith to arrive at a substitute rate. Upon the determination of a substitute rate, the suspension of such Lenders obligation to purchase any Affected Notes shall terminate; and interest on such Affected Notes shall (but only to the extent held by such Lender) accrue at such substitute rate instead of the interest rate(s) at which such Affected Notes would have otherwise accrued. For the avoidance of doubt, if such Lender and Borrower cannot arrive at a substitute rate, then Borrower shall compensate the Lender pursuant to Section 10.01(a) and (b), or such Lenders obligations to purchase Notes shall remain suspended under Section 10.03, as the case may be, and, in addition to Borrowers rights under Section 13.06(b), (x) in the case of such Lenders Notes becoming eligible for compensation under Section 10.01(a) or (b), Borrower shall have the right to prepay such Notes, if any, on and subject to the terms of Section 4.02, provided that no prepayment premium under Section 10.02(b) shall be payable in connection therewith and (y) in the case of an Illegality Event under Section 10.03, Borrower shall prepay such Lenders Notes, together with accrued and unpaid interest on the principal of such Notes to the date of such prepayment and all other amounts then due and payable to such Lender with respect to such Notes, but excluding any amounts payable under Section 10.02, with such prepayment under this clause (y) to be made to such Lender within thirty (30) days of the date of the notice referenced in Section 10.03.
11. [INTENTIONALLY OMITTED.]
12. [INTENTIONALLY OMITTED.]
0. MISCELLANEOUS
Section 13.01 No Waivers; Cumulative Remedies . No failure or delay in exercising any power or right under any Basic Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude other or further exercise thereof or the exercise of any other right or power under any Basic Document. No notice to or demand on any party in any case shall, of itself, entitle such party to any other or further notice or demand in similar or other circumstances.
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[Credit Agreement]
Section 13.02 Notices . All communications and notices provided for under this Agreement shall be in writing (including telecopies), shall be in English, shall be effective on delivery, and shall be addressed as follows (or to such other address as any such party shall designate by notice to each other such party):
if to Borrower: Mesa Airlines, Inc.
410 N. 44th Street
Suite 700
Phoenix, Arizona 85008
Attention: President and CFO (with a copy to Vice President and General Counsel)
Fax: (602) 685-4352
if to Initial Lender: Export Development Canada
150 Slater Street
Ottawa, Ontario
Canada K1A 1K3
Attn: Loans Services & Credit Risk Management Transportation
Fax: (613) 598-2514 and (613) 598-3186
Wherever notice, notify, or similar variations are used in the Basic Documents, they mean the provision of a Notice in accordance with this Section 13.02.
Section 13.03 Transaction Expenses . Borrower will pay on demand all reasonable out-of-pocket expenses in connection with the negotiation, preparation, execution, delivery, and enforcement of the Basic Documents, or in connection with any scheduled closing that is postponed or cancelled, including (a) all reasonable fees and expenses actually incurred of Vedder Price P.C., special counsel to the Initial Lender, (b) all fees and expenses (including legal fees and expenses) of each Lender in connection with actual or proposed amendments, waivers, or consents to or under this Agreement or the other Basic Documents (except for such amendments, waivers, or consents initiated by any Lender ); and (c) all fees and expenses (including reasonable legal fees and expenses) of each Lender in connection with the actual or proposed enforcement of any Basic Document against Borrower during the existence of any Specified Default. The legal fees and expenses of the Lenders referred to in clauses (b) and (c) may not include those of a Lenders in-house counsel. All reimbursable expenses shall be payable to Lender, as applicable, within thirty (30) days after Borrower receives bills or invoices showing in reasonable detail the components of such expenses (for law firm bills, time expended by attorney or paralegal and expenses by category). Borrower shall not be responsible for any fees or expenses of counsel to the Lenders other than those described in the first sentence of this Section 13.03.
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[Credit Agreement]
Section 13.04 Amendments . Any provision of the Basic Documents, other than the Purchase Agreement may be amended, terminated, waived, or otherwise modified only in writing by Borrower, and a Majority in Interest of Lenders, and any such amendment, termination, waiver, or other modification shall bind all of the Lenders to the same extent and with the same effect as if each Lender had joined therein. Notwithstanding the foregoing, no amendment, modification, or waiver of the Basic Documents shall, unless in writing and signed by each Lender, be effective to (a) subject such Lender to any additional obligation, (b) reduce the principal of or interest on such Lenders Notes, or any other amounts payable to such Lender hereunder (whether under Section 9 or otherwise), or change the ratable distribution of funds received by Lenders hereunder (including under Section 4 hereof), (c) postpone any date fixed for any payment of the principal of, or interest on, such Lenders Notes or any other amounts payable to such Lender hereunder, (d) amend, modify, or waive this Section 13.04, or (e) increase the Financed Amount.
Section 13.05 Successors and Assigns .
(a) Binding Effect; Consent to Assignment . This Agreement shall bind and benefit each Lender, and Borrower and their successors and assigns, except that Borrower may not assign or transfer its rights under this Agreement without Lenders prior written consent.
(b) Limitations on Transfers . No Lender shall assign, convey, or otherwise transfer any of its interest in the Basic Documents, or offer to do any of the foregoing, (1) in any manner that would result in a violation of 49 U.S.C. subtitle VII, or the Securities Act of 1933, (2) to any ERISA Source of Funds, or (3) to any airline, any airframe manufacturer or engine manufacturer, or any affiliate of an airline or airframe manufacturer or engine manufacturer. A transferring Lender shall provide prior written notice of any transfer (other than the purchase of insurance or reinsurance) to Borrower.
(c) Transfer . Initial Lender shall maintain at its office a register for the purpose of registering transfers and exchanges of registered Notes and in which shall be entered the names and addresses of the owners of such registered Notes and particulars of the registered Notes owned by them. The holder of any registered Note wishing to transfer such Note shall give at least ten (10) Business Days prior written notice thereof to Initial Lender and Borrower and shall, in person or by a duly authorized attorney, surrender to Borrower at its office such Note, duly endorsed by the registered holder or such attorney, or accompanied by a written instrument of transfer duly executed by the registered holder or by such attorney, in form reasonably satisfactory to Initial Lender, but, in any event, upon issuance of a new Note, such surrendered Note shall be of no further force and effect and Borrower shall have no further obligations thereunder. Upon presentation to Borrower of any Note for transfer, Borrower will execute and deliver to the transferee thereof in exchange therefore a new Note or Notes of the same series and in the same aggregate principal amount and with the same terms as the Note so surrendered, in registered form and in any denomination of $500,000 or more (or the aggregate principal amount of all Notes of such series held by such transferee, whichever is less) as is specified in such instrument of transfer. Nothing in this paragraph shall be interpreted as giving any Lender the right or power to transfer one or more of its Notes or to transfer any right or interest in such Notes to another Person in contravention of Section 13.05(b) without Borrowers prior written consent.
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[Credit Agreement]
(d) Exchange . The holder of one or more Notes may at any time surrender such Note or Notes for exchange at Initial Lenders office and shall be entitled to receive in exchange therefor a new Note or Notes, of the same series and in the same aggregate principal amount with the same terms as the Note or Notes surrendered, in registered form and in any denomination of $500,000 or more (or the aggregate principal amount of all such Notes of the same series held by such holder, whichever is less).
(e) Effect of Transfer or Exchange . All Notes issued upon any transfer or exchange of Notes shall be the valid obligations of Borrower evidencing the same respective obligations, and entitled to the same security and benefits under this Agreement, as the Notes surrendered upon such transfer or exchange. Initial Lender shall make a notation on each new Note of the date to which interest on the replaced Note(s) has been paid.
(f) Evidence of Ownership . Initial Lender and Borrower shall deem and treat the Person in whose name any registered Note is registered as the absolute owner and holder of such Note for the purpose of mailing payment of all amounts payable by Borrower with respect to such Note and for all other purposes, and Initial Lender and Borrower shall not be affected by any notice to the contrary.
(g) Expenses, Taxes, etc . The transferring or exchanging Lender shall pay all expenses incurred in connection with the transfer or exchange of a Note, including Borrowers and Initial Lenders expenses (including legal fees), stamp taxes, transfer taxes, sales taxes, governmental fees and charges, brokers fees and commissions, any other fees and charges of the same or similar type as any of the foregoing, and other fees and expenses associated with amendments, supplements, waivers, or consents required as a result of any transfer or sale of a Note after the initial issuance on the Funding Date. In addition, for any transfer or exchange of a Note, Borrower may require the transferor to pay a sum sufficient to cover any stamp tax or other governmental charge connected therewith.
(h) No Transfer Within Three Days Before Payment Date . The Initial Lender shall not be required to transfer or exchange any Note during the three-day period preceding a Payment Date.
Section 13.06 Initial Lenders Representations, Warranties and Agreements . (a) Initial Lender represents and warrants that:
(i) it is a corporation established by an Act of the Parliament of Canada, and has all corporate power, authority, and legal right under the laws of Canada to execute, deliver, and carry out the terms of each of the Basic Documents to which it is a party as Lender;
(ii) it has duly authorized the execution and delivery of this Agreement and the other Basic Documents to which it is a party as Lender;
(iii) it is acquiring its interest in any Notes for its own account and not with a view to resale; provided , that any resale is in its sole discretion; and
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[Credit Agreement]
(iv) no part of the funds used by it to purchase its Notes hereunder shall constitute the assets of any employee benefit plan within the meaning of ERISA or any plan as such a term is defined in Section 406 of ERISA or Code Section 4975.
(b) Each Lender hereby agrees that if (i) such Lender asserts a claim against Borrower for compensation under Section 9.02, (ii) such Lenders Notes become eligible for compensation pursuant to Section 10.01 or (iii) Borrower is required to prepay such Lenders Notes pursuant to Section 10.04 due to an Illegality Event under Section 10.03, Borrower shall have the right (in the case of clause (iii) above, prior the date on which Borrower is required to prepay any such Notes pursuant to Section 10.04) to cause a reputable financial institution designated by Borrower to purchase such Notes, for an amount equal to the unpaid principal amount of such Notes, together with all accrued but unpaid interest thereon through the date of purchase, and concurrently therewith Borrower shall pay to such Lender all amounts payable under Section 10.02 as if such purchase were a prepayment (but without any prepayment premiums in the case of any Notes accruing indemnifiable withholding taxes under Section 9.02 or any Notes subject to Section 10.04) plus all other Secured Obligations then due and payable to such Lender with respect to such Notes ( provided , that (x) no Lender shall be required to make any representation or warranty in connection with such sale (other than that it holds title to the pertinent Note), nor to take any action prohibited by applicable law, and (y) Borrower shall indemnify and hold harmless each Lender against any expense, Liability, or Tax arising from any such sale).
Section 13.07 Governing Law; Jurisdiction; Waiver of Jury Trial .
(a) THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY). EACH PARTY HERETO (1) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (2) ACKNOWLEDGES THAT IT AND OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 13.08 Headings . The section headings used in this Agreement are for convenience only and are not a substantive part of this Agreement.
40
[Credit Agreement]
Section 13.09 Execution in Counterparts . This Agreement may be executed in separate counterparts.
Section 13.10 Survival of Representations and Warranties . All representations and warranties contained in this Agreement or made in writing in connection with this Agreement shall survive the execution and delivery of this Agreement.
Section 13.11 Severability . Any provision hereof prohibited by or unlawful or unenforceable under any applicable law of any jurisdiction shall be ineffective in such jurisdiction without modifying the remaining provisions of this Agreement or its effectiveness in any other jurisdiction. Where, however, the provisions of such applicable law may be waived, they are hereby waived by the parties hereto to the full extent permitted by law, to the end that this Agreement shall be a valid and binding agreement enforceable in accordance with its terms.
Section 13.12 Confidentiality . Each party hereto agrees that it will not disclose, directly or indirectly, to any person not a party hereto or their respective counsel or advisors any information obtained from Borrower hereunder or in connection herewith or any portion of any Basic Document not filed with any governmental agency or authority and available for public inspection, and will use all reasonable efforts to have all such information kept confidential and not used in any way known to such party to be detrimental to Borrower, except that (a) each party may use, retain, and disclose any such information to its special counsel, financial advisors, and public accountants, any potential transferees, any Affiliate, and any governmental agency or instrumentality or other supervisory body (including bank regulators) requesting such disclosure or pursuant to its regulatory or supervisory authority over such party or any Affiliate thereof, provided that such special counsel, financial advisors, public accountants, or potential transferees agree in advance to keep such information confidential, (b) each party may use, retain, and disclose any such information that has been publicly disclosed (other than by such party or any Affiliate thereof in breach of this paragraph) or has rightfully come into the possession of such party or any Affiliate thereof (other than from Borrower) on a non-confidential basis, (c) each party may use, retain, and disclose any such information as required by law, rule, regulation, judicial or administrative process, or any governmental agency, or to the extent required pursuant to Canadas or Initial Lenders international commitments (including, without limitation, as to Initial Lender, any requirement that such information be disclosed by virtue of Initial Lenders status as an agent of Her Majesty in Right of Canada or by virtue of any law, regulation, order-in-council, court or administrative order, or Canadian government policy or by virtue of any international agreement to which the Government of Canada or Initial Lender is a party, and including, without limitation, in respect of the Organisation for Economic Co-operation and Development (OECD) including Appendix V of the Sector Understanding of Export Credits for Civil Aircraft and the WTO Subsidies and Countervailing Measures Agreement or Canadian government policy), (d) each party may use, retain, and disclose any such information where such information was previously known to the subject party free of any obligation to keep it confidential, (e) each party may use, retain, and disclose any such information to third parties in connection with or in response to any order, decree, judgment, subpoena, notice of discovery, or similar ruling or pleading ( provided , that each party shall endeavor in good faith to prevent the disclosure of such information pursuant to any such order, decree, judgment, subpoena, notice of discovery, or similar ruling or pleading) or as part of its normal reporting or review procedure to its auditors, regulators, parent company, or Affiliates, (f) each party may use, retain, and disclose
41
[Credit Agreement]
any such information to the extent necessary to obtain appropriate insurance or in order to enforce its rights and performance obligations pursuant to the Basic Documents and (g) Initial Lender shall be entitled to disclose any matters in relation to the transactions contemplated herein to the government of Canada (but Initial Lender must request confidential treatment thereof) and shall be entitled to make publicly available the following information: the name of the Borrower, the financial service provided by the Lender, the dates of the Basic Documents, a general description of the commercial transaction (including country) contemplated hereby, the amount of support in the approximate Canadian dollar range, and the name of the airframe manufacturer and engine manufacturer. For any breach of the foregoing covenants, the injured party shall be entitled to injunctive relief or any other legal or equitable remedies available, including the recovery of damages suffered as a result of such breach, but no such breach shall constitute an Event of Default under the Basic Documents.
Notwithstanding any other provision herein to the contrary, Borrower and each Lender (and each employee, representative, or other agent of any thereof) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by the Basic Documents (including any fact relevant to understanding the federal income tax treatment of such transactions) and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment or tax structure.
Section 13.13 Dollars . All payments due and payable hereunder shall be made in Dollars.
Section 13.14 Commitment Fee . The Borrower shall pay to the Lender an on-going, non-refundable commitment holding fee (the Commitment Fee ) in Dollars in an amount equal to 0.20% per annum accruing on the uncancelled and undisbursed balance from time to time of the Commitment, computed on the basis of a 360-day year and the actual number of days elapsed (including the first day but excluding the last day), accruing from the date hereof until the earlier of (i) the date the Commitment is fully disbursed or (ii) the date the undisbursed portion of the Commitment is canceled by either party. The Commitment Fee shall be payable on January 7, April 7, July 7 and October 7 of each year and shall be prorated for any partial month. Upon ten (10) Business Days prior written notice to the Lender, Borrower may cancel all or any part of the undisbursed portion of the Commitment.
Section 13.15 Arrangement Fee . The Borrower agrees to pay on each Funding Date to the Initial Lender an arrangement fee (the Arrangement Fee ) in an amount equal to 0.25% of the Financed Amount advanced on such Funding Date. The Arrangement Fee shall be payable in immediately available funds and shall be non-refundable.
Section 13.16 Entire Agreement . This Agreement constitutes the entire contract between the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
* * *
42
[Credit Agreement]
IN WITNESS WHEREOF, Borrower and Lender have executed this Credit Agreement.
MESA AIRLINES, INC., Borrower |
||
By: |
|
|
Brian S. Gillman | ||
Title: | EVP & General Counsel |
EXPORT DEVELOPMENT CANADA, Lender |
By: |
Title: |
By: |
Title: |
[Credit Agreement]
IN WITNESS WHEREOF, Borrower and Lender have executed this Credit Agreement.
MESA AIRLINES, INC., Borrower |
By: |
Title: |
EXPORT DEVELOPMENT CANADA, Lender |
By: |
|
Aaron Sapelak | ||
Title: | Senior Associate |
By: |
Laura RecoSkie | ||
Title: | Senior Associate |
[Credit Agreement]
EXHIBIT A
FORM OF FIXED RATE NOTE
THIS FIXED RATE NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT ), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS FIXED RATE NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE.
FIXED RATE NOTE
ISSUED IN CONNECTION WITH ONE CF34-8C5 ENGINE KIT .
$ (U.S.) , 201
New York, New York
No. 1
The undersigned, MESA AIRLINES, INC. , a corporation organized under the laws of the State of Nevada ( Maker ), for value received hereby promises to pay to or its registered assigns ( Payee ), at , the principal sum of DOLLARS (US$ ), in currency of the United States of America, together with interest thereon, as hereinafter set forth. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Credit Agreement dated as of January 18, 2016 ( Credit Agreement ), between Maker, as Borrower, and Payee, as Lender.
The principal amount of this Fixed Rate Note shall be payable in installments to be due and payable on each Payment Date, each such installment to be in an amount equal to the amount set forth in Schedule I attached hereto and hereby incorporated herein by this reference, together with interest (calculated on the basis of a 360 day year of twelve thirty day months) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full at a rate of % per annum (the Fixed Rate ), payable on each Payment Date and on , (the Note Maturity Date ). Notwithstanding the foregoing, the final payment shall be an amount sufficient to discharge in full the unpaid principal amount hereof and the accrued and unpaid interest, costs, fees, expenses and all other amounts payable hereunder and under the Credit Agreement, on the Note Maturity Date.
Any amount past due and at any time outstanding under this Fixed Rate Note shall bear interest, payable on demand, in accordance with the terms of Section 4.05 of the Credit Agreement.
Interest shall be calculated as provided for in the Credit Agreement. After giving effect to the adjustments required by the definition of Payment Date, if any payment due hereunder is scheduled to be paid on a day which is not a Business Day, such amount shall instead be made on the following Business Day (except that no additional interest shall accrue if the payment thereon is made on the following Business Day).
EXHIBIT A
Page 1
[Credit Agreement]
Principal and interest and other amounts due hereon shall be payable to Lender in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due and in accordance with the terms of the Credit Agreement. All amounts paid hereunder shall be applied in accordance with the terms of the Credit Agreement.
Each payment to be made on a Payment Date shall be due and payable immediately on such date, without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by Maker.
This Fixed Rate Note is one of the Notes referred to in, and is subject to, the Credit Agreement, which provides for the acceleration of the maturity of this Fixed Rate Note upon the occurrence of an Event of Default, and which provides for the prepayment of this Fixed Rate Note in certain circumstances pursuant to the terms of the Credit Agreement.
Every legal holder of this Fixed Rate Note shall have and may exercise all of the rights and powers given to Payee in this Fixed Rate Note.
This Fixed Rate Note is transferable by the registered owner hereof, or by its attorney duly authorized in writing, only on the register maintained by Initial Lender and only upon surrender and cancellation of this Fixed Rate Note and compliance with the conditions set forth in the Credit Agreement. Upon such transfer, a new registered Fixed Rate Note or Fixed Rate Notes for the same aggregate principal amount will be issued in exchange hereof in accordance with the terms of the Credit Agreement.
Maker of this Fixed Rate Note expressly waives presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect to this Fixed Rate Note or the performance of the obligations under this Fixed Rate Note or any guaranty of this Fixed Rate Note, if any. No renewal or extension of this Fixed Rate Note, no release or surrender of any security for this Fixed Rate Note or any guaranty of this Fixed Rate Note, if any, no release of any person primarily or secondarily liable on this Fixed Rate Note, including Maker and any endorser, if any, no delay in the enforcement of payment of this Fixed Rate Note, and no delay or omission in exercising any right or power under this Fixed Rate Note shall affect the liability of Maker or any endorser of this Fixed Rate Note.
No delay or omission by Payee in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any other power or right. The provisions of this Fixed Rate Note may be waived or amended only in a writing signed by Maker and Payee.
This Fixed Rate Note shall in all respects be governed by and construed in accordance with the laws of state of New York, including all matters of construction, validity and performance.
[Signature follows on next page]
EXHIBIT A
Page 2
[Credit Agreement]
IN WITNESS WHEREOF , Maker has executed this Fixed Rate Note as of the day of , 201_.
MESA AIRLINES, INC. |
By: |
Name: | ||
Title: | ||
Maker |
EXHIBIT A
Page 3
[Credit Agreement]
SCHEDULE I
FIXED RATE - __% PER ANNUM (INCLUSIVE OF THE PREMIUM RATE OF ____%
PER ANNUM AND THE MARGIN BENCHMARK OF 0.68% PER ANNUM)
Payment Date |
Principal Payment |
Interest Payment |
Total Payment |
EXHIBIT A
Page 4
[Credit Agreement]
EXHIBIT B
FORM OF FLOATING RATE NOTE
THIS FLOATING RATE NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT ), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS FLOATING RATE NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE.
FLOATING RATE NOTE
ISSUED IN CONNECTION WITH ONE CF34-8C5 ENGINE KIT .
$ (U.S.) , 201
New York, New York
No. 1
The undersigned, MESA AIRLINES, INC. , a corporation organized under the laws of the State of Nevada ( Maker ), for value received hereby promises to pay to or its registered assigns ( Payee ), at , the principal sum of DOLLARS (US$ ), in currency of the United States of America, together with interest thereon, as hereinafter set forth. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Credit Agreement dated as of January 18, 2016 ( Credit Agreement ), between Maker, as Borrower, and Payee, as Lender.
The principal amount of this Floating Rate Note shall be payable in installments to be due and payable on each Payment Date, each such installment to be in an amount equal to the amount set forth in Schedule I attached hereto and hereby incorporated herein by this reference, together with interest (calculated on the basis of a 360 day year and the actual number of days elapsed) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full at a rate of the Floating Rate (inclusive of the Premium Rate and Margin Benchmark specified in Schedule I attached hereto), payable on each Payment Date and on , (the Note Maturity Date ). Notwithstanding the foregoing, the final payment shall be an amount sufficient to discharge in full the unpaid principal amount hereof and the accrued and unpaid interest, costs, fees, expenses and all other amounts payable hereunder and under the Credit Agreement, on the Note Maturity Date.
Any amount past due and at any time outstanding under this Floating Rate Note shall bear interest, payable on demand, in accordance with the terms of Section 4.05 of the Credit Agreement.
Interest shall be calculated as provided for in the Credit Agreement. After giving effect to the adjustments required by the definition of Payment Date, if any payment due hereunder is scheduled to be paid on a day which is not a Business Day, such amount shall instead be made on the following Business Day, and interest shall accrue at the Floating Rate to the day of payment, unless the following Business Day occurs in the following calendar month, in which case such Payment Date shall instead occur on the preceding Business Day.
EXHIBIT B
Page 1
[Credit Agreement]
Principal and interest and other amounts due hereon shall be payable to Lender for the account of the Payee in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due and in accordance with the terms of the Credit Agreement. All amounts paid hereunder shall be applied in accordance with the terms of the Credit Agreement.
Each payment to be made on a Payment Date shall be due and payable immediately on such date, without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by Maker.
This Floating Rate Note is one of the Notes referred to in, and is subject to, the Credit Agreement, which provides for the acceleration of the maturity of this Floating Rate Note upon the occurrence of an Event of Default, and which provides for the prepayment of this Floating Rate Note in certain circumstances pursuant to the terms of the Credit Agreement.
Every legal holder of this Floating Rate Note shall have and may exercise all of the rights and powers given to Payee in this Floating Rate Note.
This Floating Rate Note is transferable by the registered owner hereof, or by its attorney duly authorized in writing, only on the register maintained by Initial Lender and only upon surrender and cancellation of this Floating Rate Note and compliance with the conditions set forth in the Credit Agreement. Upon such transfer, a new registered Floating Rate Note or Floating Rate Notes for the same aggregate principal amount will be issued in exchange hereof in accordance with the terms of the Credit Agreement.
Maker of this Floating Rate Note expressly waives presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect to this Floating Rate Note or the performance of the obligations under this Floating Rate Note or any guaranty of this Floating Rate Note, if any. No renewal or extension of this Floating Rate Note, no release or surrender of any security for this Floating Rate Note or any guaranty of this Floating Rate Note, if any, no release of any person primarily or secondarily liable on this Floating Rate Note, including Maker and any endorser, if any, no delay in the enforcement of payment of this Floating Rate Note, and no delay or omission in exercising any right or power under this Floating Rate Note shall affect the liability of Maker or any endorser of this Floating Rate Note.
No delay or omission by Payee in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any other power or right. The provisions of this Floating Rate Note may be waived or amended only in a writing signed by Maker and Payee.
EXHIBIT B
Page 2
[Credit Agreement]
This Floating Rate Note shall in all respects be governed by and construed in accordance with the laws of state of New York, including all matters of construction, validity and performance.
[Signature follows on next page]
EXHIBIT B
Page 3
[Credit Agreement]
IN WITNESS WHEREOF , Maker has executed this Floating Rate Note as of the ___ day of , 201_.
MESA AIRLINES, INC. |
By: |
Name: | ||
Title: | ||
Maker |
EXHIBIT B
Page 4
[Credit Agreement]
SCHEDULE I
PREMIUM RATE = ____% PER ANNUM
MARGIN BENCHMARK = 0.47% PER ANNUM
Payment Date |
Principal Payment | |||
EXHIBIT B
Page 5
[Credit Agreement]
EXHIBIT C
FORM OF FUNDING NOTICE
To: EXPORT DEVELOPMENT CANADA, as Lender
VEDDER PRICE P.C., as counsel to Lender
Reference is made to § 2.02 of the Credit Agreement dated as of January 18, 2016 (as amended or supplemented from time to time, the Credit Agreement) between Mesa Airlines, Inc., as Borrower (the Borrower) and Export Development Canada, as Lender relating to the proposed financing of one (1) CF34-8C5 engine kit _____ (the Engine Kit ). All capitalized terms herein have the same meanings ascribed to them in the Credit Agreement, unless otherwise herein defined.
The Borrower hereby advises that:
1. |
the proposed Funding Date in respect of the Engine Kit is , 201_; |
2. |
the Note in respect of the Engine Kit shall be a [Fixed Rate Note][Floating Rate Note]; |
3. |
the Financed Amount for the Engine Kit is $ ; |
4. |
the wiring instructions for the Financed Amount to be disbursed to [the Borrower][the Borrowers designee] in respect of the Engine Kit is as follows: |
5. |
the Maturity Date of the Note in respect of the Engine Kit shall be ; and |
6. |
the Delivery Date for the Engine Kit is . |
EXHIBIT C
Page 1
[Credit Agreement]
MESA AIRLINES, INC. |
By: |
Name: | ||
Title: | ||
Dated this ____ day of , 201_ |
EXHIBIT C
Page 2
[Credit Agreement]
EXHIBIT D
FORM OF PAYMENT CONFIRMATION LETTER
[StandardAero Letterhead]
Payment Confirmation in relation to Export Development Canada (EDC) financed Mesa
Airilnes, Inc. (Mesa) CF34-8 Engine Conversion Serial Number
GE-E
This letter is to confirm the payment of $ from Mesa to StandardAero on for invoice number .
This completes the CF34-8C1 to 8C5B1 Engine conversion transaction for Engine Serial Number GE-E as described in StandardAero Mesa Agreement No. 2015-CF-053, dated June 11, 2015. Signed by a duly authorized signatory of Standard Aero Limited
|
Name: |
Title: |
Date: |
EXHIBIT D
Page 1
Exhibit 10.17.2
EXECUTION VERSION
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this Amendment ) is dated as of March 30, 2017 between MESA AIRLINES, INC. (the Borrower ) and EXPORT DEVELOPMENT CANADA , as lender (the Lender ) and amends that certain Credit Agreement dated as of January 18, 2016 between the Borrower and the Lender (the Credit Agreement ).
WHEREAS, except as otherwise defined in this Amendment, the capitalized terms used herein shall have the meanings attributed thereto in the Credit Agreement; and
WHEREAS, in order to amend the Credit Agreement, the parties have agreed to execute this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:
1. Amendment to Section 1.01 of the Credit Agreement . The definition of Maturity Date contained in Section 1.01 of the Credit Agreement is hereby deleted and amended to be and read in its entirety as follows:
Maturity Date : for a Note, subject to the second sentence of Section 2.01(a), the four (4) year anniversary of the Funding Date for that Note (or such earlier anniversary as EDC shall determine (in its sole and absolute discretion) is necessary in order to remain in compliance with the ASU), or such earlier date as may be determined in accordance with Section 2.01(a) in the case of an Engine Kit in respect of which the Funding Date is later than the Delivery Date.
2. Ratification . Except as amended hereby, the Credit Agreement continues and shall remain in full force and effect in all respects and each of the parties hereby confirms and ratifies its obligations thereunder. From and after the date hereof, each and every reference in the Credit Agreement to this Agreement, herein, hereof or similar words and phrases referring to the Credit Agreement or any word or phrase referring to a section or provision of the Credit Agreement is deemed for all purposes to be a reference to the Credit Agreement or such section or provision as amended pursuant to this Amendment.
3. Counterparts . This Amendment may be signed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same Amendment.
4. Governing Law . This Amendment shall in all respects be governed by and construed in accordance with the laws of the state of New York, including all matters of construction, validity and performance.
* * *
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed by their authorized officers as of the date first written above.
MESA AIRLINES, INC., | ||
as Borrower |
By: |
|
Name: | Brian S. Gillman | |
Title: | EVP & General Counsel |
EXPORT DEVELOPMENT CANADA, | ||
as Lender |
By: |
Name: | ||
Title: |
By: |
Name: | ||
Title: |
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed by their authorized officers as of the date first written above.
MESA AIRLINES, INC., | ||
as Borrower |
By: |
Name: | ||
Title: |
EXPORT DEVELOPMENT CANADA, | ||
as Lender |
By: |
|
Name: | Aaron Sapelak | |
Title: | Financing Manager |
By: |
|
Name: | Colleen Lalonde | |
Title: | Principal |
Exhibit 10.17.3
OMNIBUS AMENDMENT AGREEMENT
THIS OMNIBUS AMENDMENT AGREEMENT is dated as of April , 2018 (this Agreement ) and entered into among MESA AIRLINES, INC. , a Nevada corporation, as borrower (the Borrower ), MESA AIR GROUP, INC. , a Nevada corporation, as guarantor (the Guarantor ) and EXPORT DEVELOPMENT CANADA , a corporation established by an Act of the Parliament of Canada, as lender (the Lender ).
RECITALS
The Borrower and the Lender have entered into that certain Credit Agreement dated as of January 18, 2016, as amended by that certain Amendment No. 1 to Credit Agreement dated as of March 30, 2017 between the Borrower and the Lender (as further amended and supplemented from time to time, the Credit Agreement ).
The Guarantor has entered into that certain Guaranty Agreement dated as of January 18, 2016 in favor of the Lender and, together with each other Lender (as defined in the Credit Agreement), individually, Beneficiary and, collectively, Beneficiaries ) (as amended and supplemented from time to time, the Guaranty Agreement ).
Except as otherwise defined in this Agreement, the capitalized terms used herein shall have the meanings attributed thereto in the Credit Agreement or the Guaranty Agreement, as applicable.
Each of the parties hereto hereby desires, on and subject to the terms set out herein, to amend the Credit Agreement and the Guaranty Agreement in certain respects.
In consideration of the mutual agreements contained herein, the parties hereto agree to amend the Credit Agreement and the Guaranty Agreement, as follows:
Section 1. Amendment to Credit Agreement . Section 4.03 Mandatory Prepayments of the Credit Agreement is hereby deleted and amended to be and read in its entirety as follows:
Section 4.03 Mandatory Prepayments . Notwithstanding anything contained herein to the contrary, the Borrower agrees to prepay the Notes as follows:
(a) Upon acceleration of the Notes pursuant to Section 8.02, Borrower shall prepay such Notes, and shall pay all amounts payable under Section 10.02 with respect to such prepayment;
(b) To the extent required by Section 10.04, Borrower shall prepay any relevant Notes in accordance with the terms of Section 10.04 and such Notes; and
(c) In addition to any other amounts then due and owing, Borrower shall prepay the principal amount of the Notes on the dates and in the amounts specified below (each such prepayment to be applied pursuant to Section 4.09):
1. September 30, 2018 in an amount of $1,000,000.00;
2. December 31, 2018 in an amount of $1,000,000.00;
[Omnibus Amendment Agreement]
3. March 31, 2019 in an amount of $1,000,000.00;
4. June 30, 2019 in an amount of $1,000,000.00; and
5. September 30, 2019 in an amount of $1,000,000.00.
Section 2. Amendment to Definitions .
(a) Definition of Consolidated Fixed Charges . The definition of Consolidated Fixed Charges in the Guaranty Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:
Consolidated Fixed Charges means, for any period, as determined on a Consolidated basis, the aggregate, without duplication, of (a) Consolidated Interest Expense paid in cash, (b) scheduled principal payments on Consolidated Funded Indebtedness (excluding any principal payment required pursuant to Section 4.03(c) of the Credit Agreement), and (c) the aircraft rent paid in cash by any Company under Operating Leases.
(b) Additional Definitions . The following definitions are hereby added to the Guaranty Agreement:
Capital Stock means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a partnership, limited liability company, trust or any other Person (other than a corporation), and any and all warrants, rights or options to purchase any of the foregoing.
Restricted Payment means any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of any class of Capital Stock of Guarantor or Borrower, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares of Capital Stock of Guarantor or Borrower or any option, warrant or other right to acquire any such shares of Capital Stock of Guarantor or Borrower.
Section 3 . Amendment to Section 10(c) of the Guaranty Agreement . Section 10(c) of the Guaranty Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:
(c) Financial Covenants .
(i) Fixed Charge Coverage Ratio. The Guarantor shall not permit the Fixed Charge Coverage Ratio as at the end of any of its fiscal quarters, beginning with the fiscal quarter ending December 31, 2015, to fall below the applicable Fixed Charge Coverage Ratio indicated in this Section 10(c)(i):
2
[Omnibus Amendment Agreement]
Fiscal Quarter Ended |
Applicable Fixed Charge
Coverage Ratio |
Cure Level | ||
12/31/2015 |
l.0x | 0.85x | ||
3/31/2016 |
l.0x | 0.85x | ||
6/30/2016 |
l.0x | 0.85x | ||
9/30/2016 |
l.0x | 0.85x | ||
12/31/2016 |
0.72x | 0.61x | ||
3/31/2017 |
0.72x | 0.61x | ||
6/30/2017 |
0.72x | 0.61x | ||
9/30/2017 |
0.72x | 0.61x | ||
12/31/2017 |
0.95x | 0.81x | ||
3/31/2018 |
0.95x | 0.81x | ||
6/30/2018 |
0.75x | 0.70x | ||
9/30/2018 |
0.85x | 0.77x | ||
12/31/2018 |
0.85x | 0.77x | ||
3/31/2019 |
0.90x | 0.81x | ||
6/30/2019 |
0.90x | 0.81x | ||
9/30/2019 |
0.95x | 0.90x | ||
12/31/2019 and each fiscal quarter thereafter |
l.00x | 0.90x |
(ii) Financial Covenant Cure Right. If, as of any fiscal quarter, the Guarantor breaches the financial covenant set forth in clause (i) above but the Fixed Charge Coverage Ratio as at the end of such fiscal quarter is at or above the Cure Level applicable thereto, then no Event of Default shall arise as a result of such breach provided that the Borrower prepays pursuant to Section 4.02 of the Credit Agreement an aggregate amount of Notes equal to the lesser of Five Million Dollars ($5,000,000) and the then aggregate balance of principal and accrued interest payable under all outstanding Notes (a Cure Prepayment) within fifteen (15) days following the date on which the Guarantors financial reports are due under Section 10(b)(i) or 10(b)(ii), as applicable, in respect of the quarter to which the Cure Prepayment relates. Notwithstanding the foregoing,
3
[Omnibus Amendment Agreement]
Borrower shall not be entitled to make a Cure Prepayment in respect of any breach of the financial covenant set forth in Section 10(c)(i) above (and the breach of such financial covenant shall constitute an Event of Default) if Borrower shall have made a Cure Prepayment with respect to the immediately preceding two fiscal quarters.
Section 4 . Additional Covenant . The Guaranty Agreement is hereby amended by adding the following as a new covenant in Section 10 (immediately following Section 10(c)):
(d) Restricted Payments . In addition to the restrictions set out in Section 6.06 of the Credit Agreement, the Guarantor will not, nor will it permit the Borrower to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment so long as the Fixed Charge Coverage Ratio is less than 1.00x.
Section 5. Fees . In consideration of the Lenders agreement to the terms of this Agreement, the Borrower agrees to pay the Lender on the date hereof a fee in the amount of $35,000.00.
Section 6 . Ratification . Except as amended hereby, the Credit Agreement and the Guaranty Agreement shall continue and remain in full force and effect in all respects and each of the parties hereby confirms and ratifies its obligations thereunder. From and after the date hereof each and every reference in the Credit Agreement and the Guaranty Agreement to this Agreement, herein, hereof or similar words and phrases referring to the Credit Agreement or the Guaranty Agreement or any word or phrase referring to a section or provision of the Credit Agreement or the Guaranty Agreement is deemed for all purposes to be a reference to the Credit Agreement or the Guaranty Agreement or such section or provision as amended pursuant to this Agreement.
Section 7 . This Agreement may be signed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same Agreement.
Section 8 . This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New York, including all matters of construction, validity and performance.
* * *
4
[Omnibus Amendment Agreement]
IN WITNESS WHEREOF , the parties hereto have caused this Omnibus Amendment Agreement to be duly executed by their respective officers as of the day and year first above written.
MESA AIRLINES, INC., | ||
Borrower | ||
By: |
|
Name: | Michael Lotz | |||
Title: | President & CFO |
MESA AIR GROUP, INC., | ||
Guarantor | ||
By: |
|
Name: | Michael Lotz | |||
Title: | President & CFO |
EXPORT DEVELOPMENT CANADA, | ||
Lender |
By: | ||
Name: | ||
Title: |
By: | ||
Name: | ||
Title: |
5
Exhibit 10.18
EXECUTION VERSION
CREDIT AGREEMENT
dated as of June 27, 2016
between
MESA AIRLINES, INC.,
Borrower
and
EXPORT DEVELOPMENT CANADA,
Lender
CF34-8C5 Aircraft Engine Kits
TABLE OF CONTENTS
Page | ||||||||
1. |
DEFINITIONS; USAGE |
1 | ||||||
Section 1.01 |
Definitions |
1 | ||||||
Section 1.02 |
Usage |
9 | ||||||
2. |
PURCHASE OF NOTES; PAYMENTS; REPLACEMENT NOTES |
9 | ||||||
Section 2.01 |
Purchase of Notes; Premium Rate |
9 | ||||||
Section 2.02 |
Procedure for Purchase of Notes |
9 | ||||||
Section 2.03 |
Replacement Notes |
10 | ||||||
Section 2.04 |
Obligations Absolute |
10 | ||||||
Section 2.05 |
Amortization |
11 | ||||||
Section 2.06 |
Interest |
11 | ||||||
3. |
[INTENTIONALLY OMITTED] |
11 | ||||||
4. |
PAYMENTS BY BORROWER |
11 | ||||||
Section 4.01 |
How Payments Are Made |
11 | ||||||
Section 4.02 |
Right to Prepay |
11 | ||||||
Section 4.03 |
Mandatory Prepayments |
12 | ||||||
Section 4.04 |
Amount of Prepayment |
12 | ||||||
Section 4.05 |
Interest on Past Due Amounts |
12 | ||||||
Section 4.06 |
Limit on Interest Payable |
12 | ||||||
Section 4.07 |
[INTENTIONALLY OMITTED] |
12 | ||||||
Section 4.08 |
Changes in Market |
12 | ||||||
Section 4.09 |
Application of Payments |
13 | ||||||
5. |
BORROWERS REPRESENTATIONS AND WARRANTIES |
13 | ||||||
Section 5.01 |
Corporate Standing |
13 | ||||||
Section 5.02 |
Corporate Powers |
13 | ||||||
Section 5.03 |
Binding Effect |
14 | ||||||
Section 5.04 |
Litigation |
14 | ||||||
Section 5.05 |
Financial Statements; No Materially Adverse Change |
14 | ||||||
Section 5.06 |
Taxes |
14 | ||||||
Section 5.07 |
Status as United States Citizen and Air Carrier |
14 | ||||||
Section 5.08 |
Governmental Consents |
14 | ||||||
Section 5.09 |
[Intentionally Omitted] |
14 | ||||||
Section 5.10 |
Solvency |
14 | ||||||
Section 5.11 |
No Governmental Approvals, Notices and Filings |
14 | ||||||
Section 5.12 |
Compliance with Laws |
15 |
TABLE OF CONTENTS
(continued)
Page | ||||||||
6. |
AFFIRMATIVE COVENANTS |
15 | ||||||
Section 6.01 |
Financial Statements |
15 | ||||||
Section 6.02 |
[INTENTIONALLY OMITTED] |
15 | ||||||
Section 6.03 |
Corporate Existence |
15 | ||||||
Section 6.04 |
Merger, etc |
15 | ||||||
Section 6.05 |
Citizenship and Air Carrier Status |
16 | ||||||
Section 6.06 |
Disposition of Assets |
16 | ||||||
Section 6.07 |
ERISA Information |
16 | ||||||
Section 6.08 |
Compliance with Laws |
16 | ||||||
7. |
CONDITIONS PRECEDENT AND CONDITION SUBSEQUENT |
17 | ||||||
Section 7.01 |
Conditions Precedent to First Funding |
17 | ||||||
Section 7.02 |
Conditions Precedent to Each Funding |
17 | ||||||
Section 7.03 |
Conditions Precedent to Borrowers Obligations |
19 | ||||||
8. |
EVENTS OF DEFAULT; REMEDIES |
19 | ||||||
Section 8.01 |
Events of Default |
19 | ||||||
Section 8.02 |
Remedies |
20 | ||||||
9. |
BORROWERS INDEMNITIES |
21 | ||||||
Section 9.01 |
General Indemnity |
21 | ||||||
Section 9.02 |
General Tax Indemnity |
23 | ||||||
10. |
YIELD PROTECTION; ILLEGALITY |
32 | ||||||
Section 10.01 |
Additional Costs |
32 | ||||||
Section 10.02 |
Breakage Costs; Prepayment Premium |
33 | ||||||
Section 10.03 |
Illegality |
34 | ||||||
Section 10.04 |
Mitigation |
34 | ||||||
11. |
[INTENTIONALLY OMITTED.] |
35 | ||||||
12. |
[INTENTIONALLY OMITTED.] |
35 | ||||||
13. |
MISCELLANEOUS |
35 | ||||||
Section 13.01 |
No Waivers; Cumulative Remedies |
35 | ||||||
Section 13.02 |
Notices |
35 | ||||||
Section 13.03 |
Transaction Expenses |
36 | ||||||
Section 13.04 |
Amendments |
36 | ||||||
Section 13.05 |
Successors and Assigns |
37 | ||||||
Section 13.06 |
Initial Lenders Representations, Warranties and Agreements |
38 |
TABLE OF CONTENTS
(continued)
Page | ||||||||
Section 13.07 |
Governing Law; Jurisdiction; Waiver of Jury Trial |
39 | ||||||
Section 13.08 |
Headings |
39 | ||||||
Section 13.09 |
Execution in Counterparts |
39 | ||||||
Section 13.10 |
Survival of Representations and Warranties |
39 | ||||||
Section 13.11 |
Severability |
39 | ||||||
Section 13.12 |
Confidentiality |
40 | ||||||
Section 13.13 |
Dollars |
41 | ||||||
Section 13.14 |
Commitment Fee |
41 | ||||||
Section 13.15 |
Arrangement Fee |
41 | ||||||
Section 13.16 |
Entire Agreement |
41 |
Exhibit A | Form of Fixed Rate Note | |
Exhibit B | Form of Floating Rate Note | |
Exhibit C | Form of Funding Notice | |
Exhibit D | Form of Payment Confirmation Letter |
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of June 27, 2016, between (1) MESA AIRLINES, INC. (Borrower), a Nevada corporation, and (2) EXPORT DEVELOPMENT CANADA, a corporation established by an Act of the Parliament of Canada, as lender (Initial Lender).
Borrower, and Lender agree as follows:
1. DEFINITIONS; USAGE
Section 1.01 Definitions. The following terms, when capitalized as below, have the following meanings:
Affiliate: any other Person who controls 50% or more of any class of voting securities of such Person or is controlled by, or is under common control with, such Person. For purposes of this definition, control of any specified Person means having direct or indirect power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise.
After-Tax Basis: a basis such that any payment to be received or receivable by any Person is supplemented by a further payment or payments to that Person so that the sum of all such payments, after deducting all Taxes (taking into account any related credits or deductions) payable by such Person or any of its Affiliates under any law or governmental authority, is equal to the payment due to such Person, provided, that for these purposes, such Person shall be assumed to be subject to tax at the highest marginal rate(s) applicable to such Person with respect to the amounts in question.
Agreement: this Credit Agreement.
Amortization Date: defined in Section 2.01(a).
Arrangement Fee: defined in Section 13.15.
ASU: the Sector Understanding on Export Credits for Civil Aircraft effective 1 September 2011 made by the Participants to the Arrangement on Officially Supported Export Credits of the Organisation for Economic Co-operation and Development (utilizing the English-language version thereof).
Bankruptcy Code: the Title 11 of the United States Code, 11 U.S.C. Section 101 et seq., as amended, or any successor statutes thereto.
Basic Documents: this Agreement, the Guaranty, and each Note.
Breakage Costs: means the amount (if any) by which: (a) interest calculated at the LIBOR rate then in effect on the principal amount of any Floating Rate Note paid, prepaid or due which the Initial Lender should have received for the period commencing on the date the paid or prepaid amount is received or due and ending on the next Interest Payment Date, had such
[Credit Agreement]
amount been paid on the next Interest Payment Date; exceeds (b) the interest which the Initial Lender would be able to earn by placing an amount equal to the principal amount paid, prepaid or due on deposit at a rate equal to LIBOR determined at approximately 11:00 am, London time, on the day that is two (2) London Banking Days preceding the day such payment or prepayment is made or due, for a period closest to the remainder of the relevant Interest Period.
Business Day: any day, other than a Saturday or Sunday, on which commercial banks are open for business in New York, New York, Toronto, Ontario, Ottawa, Ontario, and Phoenix, Arizona, and if such day is a Funding Date or Payment Date in respect of a Floating Rate Note or relates to a notice by Borrower with respect to any Funding Date in respect of a Floating Rate Note, which is also a day on which dealings in Dollar deposits are carried out in the London interbank market.
Code: the Internal Revenue Code of 1986, including effective date and transition rules (whether or not codified). Any reference to a specific section of the Code shall be deemed to include a reference to any corresponding provision of future law.
Code Share Event: any termination or material adverse change in the terms and conditions of any code share agreement of Borrower, Guarantor or any Affiliate thereof with respect to which following such termination or material adverse change, Borrower, Guarantor or any Affiliate thereof remains responsible for the ownership, leasing or financing of the aircraft that are subject to such code share agreement (and which shall include, without limitation any code share agreement between Borrower, Guarantor or any Affiliate thereof, on the one hand, and American Airlines, Inc. or any Affiliate thereof, on the other hand, pursuant to which Borrower, Guarantor or any Affiliate thereof remains so responsible for the aircraft subject thereto); provided that unless, in the case of termination, such code share agreement shall have been replaced with a code share agreement with another major airline (acceptable to the Lender) in form and substance acceptable to the Lender.
Commitment: defined in Section 2.01(a).
Commitment Fee: defined in Section 13.14.
Commitment Termination Date: defined in Section 2.01(a).
Default: any event or condition that would become an Event of Default upon the giving of notice or lapse of time or both, or any Event of Default.
Default Rate: defined in Section 4.05.
Delivery Date: in respect of an Engine Kit, the date of delivery of such Engine Kit from the Exporter to the Borrower,
Dollars: and $: United States dollars.
Downpayment: the difference between (x) the NEKP for an Engine Kit less any advance deposits made by Borrower to the Exporter in respect of such Engine Kit (as reflected in the invoice for such Engine Kit) and (y) the Financed Amount for such Engine Kit.
2
[Credit Agreement]
Engine Kit : means a CF34-8C5 aircraft engine kit and all associated services including inter alia, installation, testing and inspection forming part of the Equipment to be delivered under the Purchase Agreement.
Equipment: means up to sixty-three (63) Engine Kits to be sold by the Exporter pursuant to the Purchase Agreement.
ERISA: the Employee Retirement Income Security Act of 1974.
ERISA Source of Funds: used by a purchaser of any Note: any source of funds that includes the assets of any Plan, other than a plan exempt from the coverage of ERISA, but in any event excluding any source of funds that the relevant purchaser represents to Borrower:
(1) is an insurance company general account as such term is used in U.S. Department of Labor Prohibited Transaction Class Exemption (PTCE) 95-60 (issued July 12, 1995), and the amount of reserves and liabilities (as defined in the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the NAIC Annual Statement) and before reduction for credits on account of any reinsurance ceded on the coinsurance basis) (the Reserves and Liabilities), for the general account contract(s) held by or on behalf of any Plan, together with the amount of the Reserves and Liabilities for the general account contract(s) held by or on behalf of any other Plans maintained by the same employer (or any affiliate thereof within the meaning of Section V(a)(1) of PTCE 95-60), does not exceed 10% of the total Reserves and Liabilities of such general account plus surplus, as set forth in the NAIC Annual Statement filed with the state of domicile of the insurance company maintaining such general account; or
(2) is a separate account that is maintained solely in connection with that purchasers fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or
(3) is either (a) an insurance company pooled separate account, within the meaning of PTCE 90-1 (issued January 29, 1990), or (B) a bank collective investment fund, within the meaning of PTCE 91-38 (issued July 12, 1991) and, except as consented to by Borrower in writing pursuant to this clause (3), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or
(4) constitutes assets of an investment fund (within the meaning of Part V of PTCE 84-14) managed by a qualified professional asset manager or QPAM (within the meaning of Part V of PTCE 84-14), no employee benefit plans assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an
3
[Credit Agreement]
affiliate (within the meaning of Section V(c)(1) of PTCE-84-14) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of PTCE 84-14 are satisfied, and neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of control in Section V(e) of PTCE 84-14) owns a 5% or more interest in Borrower; or
(5) constitutes assets managed by an in-house asset manager or INHAM (within the meaning of Part IV of PTCE 96-23), the conditions of Part I(a) of PTCE 96-23 are satisfied, and neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of control in Section IV(d) of PTCE 96-23) owns a 5% or more interest in Borrower; or
(6) is a governmental plan; or
(7) is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of such has been consented to by Borrower in writing pursuant to this clause (7).
As used in this definition, employee benefit plan, governmental plan, and separate account have the same meanings as in Section 3 of ERISA.
Event of Default: defined in Section 8.01. Exporter: means Standard Aero Limited.
FATCA: Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantially comparable, any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code).
Financed Amount: the amount equal to the principal amount of the Note issued for an Engine Kit and determined pursuant to the second sentence of Section 2.01(a).
Fixed Rate: for any Fixed Rate Note: the interest rate per annum, which is fixed for the term of such Fixed Rate Note, equal to the sum of (a) the interpolated semi-annual rate to swap floating rate debt to fixed rate debt (offer side) for loans with a maturity closest to the weighted average remaining life of the loan, at 11:00 a.m. New York City time, two (2) Business Days prior to the Funding Date in respect of such Fixed Rate Note (such interpolated rate to be obtained from the Bloomberg page IRSB (US Semi 30/360 column 2 (Ask)) or any substitute or replacement page providing the same service), (b) the Premium Rate and (c) the Margin Benchmark. The Fixed Rate in respect of any Fixed Rate Note shall be determined by the Lenders, which rate shall be conclusive except in the case of manifest error.
Fixed Rate Note: Borrowers promissory note, in the form of Exhibit A, issued in connection with a designated Engine Kit and accruing interest at the Fixed Rate for such Fixed Rate Note, or a note issued in exchange or replacement for such a note.
4
[Credit Agreement]
Floating Rate: for any Interest Period in respect of any Floating Rate Note: the interest rate per annum, equal to the sum of (a) LIBOR plus (b) the Premium Rate plus (c) the Margin Benchmark.
Floating Rate Note: Borrowers promissory note, in the form of Exhibit B, issued in connection with a designated Engine Kit and accruing interest at the Floating Rate, or a note issued in exchange or replacement for such a note.
Funding Date: a date on which a Lender purchases the Note relating to a specific Engine Kit.
Funding Notice: defined in Section 2.02.
GAAP: generally accepted accounting principles as in effect in the United States and applied on a basis consistent with that used in the preparation of the financial statements referred to in Section 5.05, except for changes therein with which Borrowers independent public accountants concur that are disclosed in the notes to the relevant financial statements.
Guarantor: Mesa Air Group, Inc., a Nevada corporation.
Guaranty: the document by that name, dated as of the date of this Agreement, issued by the Guarantor for the benefit of the Initial Lender.
Indemnitee: The Lender, or any agent, employee, officer, director, successor, or permitted assign of any of the foregoing.
Initial Lender: Export Development Canada, a corporation established by an Act of the Parliament of Canada.
Interest Period: for a Note, each period beginning on a Payment Date for that Note (or, in the case of the first Interest Period for that Note, beginning on its Funding Date) and ending on (but excluding, for purposes of computing interest) the following Payment Date for that Note.
Interest Rate: for a Note: (a) with respect to any Interest Period for a Floating Rate Note, the applicable Floating Rate for such Interest Period, and (b) with respect to a Fixed Rate Note, the applicable Fixed Rate for such Fixed Rate Note, in either case as elected by Borrower pursuant to Section 2.02.
Lender: Initial Lender and any successor or assign of Initial Lender, including any future holder of a Note.
Liabilities: defined in Section 9.01.
LIBOR: for any Interest Period for a Floating Rate Note: a rate per annum equal to the London interbank rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for three-month Dollar deposits as such rate is displayed on Reuters Screen LIBOR01 Page (or any replacement Reuters page which
5
[Credit Agreement]
displays that rate), at approximately 11:00 a.m., London time (or as soon thereafter as practicable), or if such service does not display any such quote, the arithmetic mean of such rates as displayed on Bloomberg BBAM Page at approximately 11:00 a.m., London time (or as soon thereafter as practicable), or if such service does not display any such quote, the arithmetic mean of such rates, as quoted by the London Reference Banks, in any case on the day that is two (2) Business Days prior to the first day of that Interest Period.
Lien: any mortgage, pledge, assignment, security interest, lien (statutory or other), or other encumbrance of any kind or nature whatsoever (including any conditional sale or other title retention agreement, or any lease in the nature thereof).
London Reference Banks: any four (4) of the following banks: (i) Bank of America, (ii) Citibank, N.A., (iii) Credit Suisse, (iv) Deutsche Bank AG, (v) HSBC, (vi) JP Morgan Chase Bank and (vii) UBS AG.
Majority in Interest of Lenders: as of any date of the determination thereof, holders of Notes holding not less than a majority (greater than 50%) in aggregate outstanding principal amount of the Notes. For all purposes of the foregoing definition, in determining as of any date the then aggregate outstanding principal amount of Notes, there shall be excluded any Notes, if any, held by Borrower or any Affiliate thereof.
Margin Benchmark: for purposes of determining the Floating Rate shall be 0.49% per annum and for purposes of determining the Fixed Rate shall be 0.71% per annum.
Materially Adverse Change: the occurrence and continuation of one or more of the following events (i) a material adverse change in the financial condition, financial results, business or operations of Borrower or Guarantor which could reasonably be expected to materially adversely affect its ability to perform its obligations under the Basic Documents, or (ii) Borrower or Guarantor, as debtor, shall have commenced or there shall be pending or there shall have been commenced against Borrower or Guarantor and be pending a case, proceeding or other action under applicable bankruptcy or insolvency laws or similar legislation.
Maturity Date: for a Note, subject to the second sentence of Section 2.01(a), the two (2) year anniversary of the Funding Date for that Note, or such earlier date as may be determined in accordance with Section 2.01(a) in the case of an Engine Kit in respect of which the Funding Date is later than the Delivery Date.
NEKP: the price for an Engine Kit invoiced by the Exporter, or supplier thereof, after accounting for all price discounts and other cash credits, less all other credits or concessions of any kind related or fairly allocable thereto, as stated in a binding representation by the Exporter and evidenced by invoices under the Purchase Agreement and by the certificate from the Exporter delivered pursuant to Section 7.02(h).
Note: individually, any Fixed Rate Note or Floating Rate Note and Notes shall mean, collectively, all Fixed Rate Notes and Floating Rate Notes.
Obligor: either Borrower or Guarantor, and Obligors shall mean, collectively, Borrower and Guarantor.
6
[Credit Agreement]
Officers Certificate: a certificate signed in the name of Borrower (or, with respect to Section 6.04(d), of the Successor) by the chairman of the board, the president, a vice president, the treasurer or the assistant treasurer of Borrower (or the Successor).
Other EDC Transaction: any other financing (present or future) by the Initial Lender for, or for the benefit of, the Borrower or Guarantor (or any Affiliate of Borrower or Guarantor) in respect of which the Initial Lender is, at the applicable time, a creditor or interest holder of at least ten percent (10%) of the outstanding debt amount or other interest thereunder.
Payment Confirmation Letter: a letter from Exporter in the form of Exhibit D confirming the engine conversion transaction for the engine referenced therein has been completed.
Payment Date: for a Note, each quarterly anniversary of the Funding Date for that Note, through the Maturity Date for that Note; except that any Payment Date that falls on a day which is not a Business Day shall instead occur on the following Business Day, unless in the case of a Floating Rate Note the following Business Day occurs in the following calendar month, in which case such Payment Date shall instead occur on the preceding Business Day.
Person: any individual, corporation, limited liability company, partnership, joint venture, or other legal or governmental entity.
Plan: an employee benefit plan or individual retirement account subject to Title I of ERISA or to Code Section 4975.
Premium Rate: for any Note, shall be the rate set forth in Section 2.01(b).
Purchase Agreement: for any Engine Kit, means the Time & Material Agreement, as amended from time to time, dated November 17, 2015, between the Borrower and the Exporter for the purchase and sale of the Equipment.
Purchase Agreement Event: means a breach by Borrower of its obligations under the Purchase Agreement or a cancellation by the Borrower of any of its rights and/or obligations thereunder.
Regulatory Change: the enactment, adoption, or promulgation, after a Funding Date (in the case of the Initial Lender) or the date a successor Lender acquires its Note(s) pursuant to Section 13.05 hereof (in the case of such successor Lender) (or in the case of such successor Lender, such earlier date (but in no event prior to a Funding Date) as shall enable it to obtain compensation pursuant to Section 10.01 to the extent the transferor Lender was entitled thereto at the time of transfer), of any law or regulation by a United States federal or state government or by the government of a Lenders or such successor Lenders jurisdiction of organization, or any change, after the Funding Date (in the case of a Lender) or the date a successor Lender acquires its Note(s) (in the case of such successor Lender) (or such earlier date), in any such law or regulation, or in the interpretation thereof by any governmental authority, central bank, or comparable agency of the United States or a Lenders or such successor Lenders jurisdiction of organization charged with the responsibility for the administration or application thereof, that imposes, modifies, or deems applicable (a) any reserve (including any reserves arising from the
7
[Credit Agreement]
imposition of reserves pursuant to Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time), special deposit, or similar requirement against extensions of credit or other assets of, or deposits with or other liabilities of, such Lender or such successor Lender, as the case may be, including, or by reason of, the loan evidenced by the Note(s) or (b) any capital adequacy requirement requiring the maintenance by a Lender or such successor Lender, as the case may be, of additional capital in respect of the loan evidenced by the Note(s).
Responsible Officer: the President, or the Chief Financial Officer, or any other officer of Borrower, Guarantor or a Lender customarily bearing responsibility for matters relating to the transactions contemplated by the Basic Documents, or any officer of Borrower, Guarantor or the Lender specifically authorized to take responsibility for any matter relating to the transactions contemplated by the Basic Documents.
Section 1110 Airline: a citizen of the United States (within the meaning of 49 U.S.C. § 40102(a)(15)), who is an air carrier holding a valid air carrier operating certificate issued pursuant to 49 U.S.C. ch. 447 for aircraft capable of carrying 10 or more individuals.
Specified Carrier Bankruptcy Event: United Airlines, Inc. or American Air Group Inc. or any of their respective Affiliates shall have:
(i) applied for or consented to the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of all or a majority of its property, (2) made a general assignment for the benefit of its creditors, (3) commenced a voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (4) filed a petition seeking to take advantage (as debtor) of any other law relating to bankruptcy, insolvency, reorganization, winding up, or composition or readjustment of debts, or (5) failed to controvert in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under the federal Bankruptcy Code; or
(ii) be the subject of a proceeding or case commenced, without its application or consent, in any court of competent jurisdiction, seeking (1) its liquidation, reorganization, dissolution, or winding up, or the composition or readjustment of its debts, (2) the appointment of a trustee, receiver, custodian, liquidator, or the like for it or over all or a majority of its assets, or (3) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding up, or composition or adjustment of debts, and (if it is contesting the proceeding on a reasonable basis and in good faith) such proceeding or case shall have continued undismissed, or an order, judgment, or decree approving or ordering any of the foregoing is entered and shall have continued unstayed and in effect, for a period of ninety (90) days; or an order for relief against it was entered in an involuntary case under the federal Bankruptcy Code.
Specified Default: Default under Section 8.01(a), (e) or (f), or an Event of Default.
Successor: defined in Section 6.04(a).
Taxes: defined in the third paragraph of Section 9.02(a).
8
[Credit Agreement]
Section 1.02 Usage. Any agreement or statute referred to in Section 1.01 means such agreement or statute as from time to time supplemented and amended. A definition in singular form applies to the plural form of the term, and vice versa. References to sections, exhibits, and the like refer to those in or attached to this Agreement unless otherwise specified. Including means including but not limited to. Or means one or more, or all, of the alternatives listed or described. Herein, hereof, hereunder, etc. mean in, of, under, etc. this Agreement (and not merely in, of, under, etc. the section or provision where the reference appears).
2. PURCHASE OF NOTES; PAYMENTS; REPLACEMENT NOTES
Section 2.01 Purchase of Notes; Premium Rate.
(a) Subject to the satisfaction of the conditions precedent set forth in Section 7, and on the terms and conditions set forth in this Section 2, on the Funding Date for each Engine Kit, Borrower shall issue to Initial Lender, and Initial Lender shall purchase from Borrower, a Note in a principal amount equal to the Financed Amount for such Engine Kit, bearing interest at the applicable Interest Rate, designated as having been issued in connection with such Engine Kit and otherwise in the form of Exhibit A (for a Fixed Rate Note) or Exhibit B (for a Floating Rate Note), as the case may be. The Financed Amount for each Engine Kit shall not exceed 85% (or such lesser percentage as Borrower shall designate) of its NEKP; provided that, if the Funding Date for an Engine Kit is later than the three (3) month anniversary of the Delivery Date of such Engine Kit (the Amortization Date), the Financed Amount and the Maturity Date for such Engine Kit shall be adjusted as though the financing for such Engine Kit occurred on such Amortization Date. The aggregate Financed Amount for all of the Engine Kits shall not exceed $25,000,000 (the Commitment). Borrower shall not be obligated to draw down all or any part of the Commitment. Any draw down of all or any part of the Commitment may not occur prior to October 1, 2016 and thereafter shall only be permitted on a single Funding Date during each calendar quarter up to and including the Commitment Termination Date (as defined below). The ability of Borrower to issue Notes and the Initial Lenders obligation to purchase Notes in respect of an Engine Kit shall terminate on the six (6) month anniversary of the Delivery Date in respect of such Engine Kit. In addition to the foregoing, the ability of Borrower to issue Notes and the Initial Lenders obligation to purchase Notes pursuant to this Agreement shall terminate on the earlier of (i) the Amortization Date in respect of the last Engine Kit and (ii) September 30, 2017 (the Commitment Termination Date).
(b) The Premium Rate in respect of each Note shall be 2.81% per annum (which includes a 0.05% administration fee in accordance with ASU). The Premium Rate is not subject to adjustment.
Section 2.02 Procedure for Purchase of Notes. (a) At least three (3) Business Days prior to each proposed Funding Date, Borrower shall provide a funding notice in respect of the Engine Kit or Kits to be financed on such date substantially in the form of Exhibit C (Funding Notice) to the Lender and Lenders counsel. The Funding Notice shall be in writing and shall specify (i) the proposed Funding Date, (ii) the Financed Amount for each such Engine Kit, (iii) the wiring instructions for the Financed Amount to be disbursed to Borrower (or its designee), (iv) Borrowers election of either the Floating Rate or the Fixed Rate for the Note in
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respect of each such Engine Kit and (v) the Maturity Date for the Note in respect of each such Engine Kit. On the appropriate Funding Date, upon fulfillment of the conditions set forth in Section 7, Initial Lender will purchase from Borrower the Note related to each Engine Kit that Borrower designated for that date for a purchase price equal to the face amount thereof (as set forth in Section 2.01(a)) by transferring the Financed Amount for each relevant Engine Kit to Borrower (or its designee). Subject to Section 2.01(a) and the following sentence, the amortization schedule for each Note shall be calculated on the basis that such Note shall be repayable in eight (8) equal consecutive quarterly installments and shall amortize on a straight-line basis. Promptly upon determination by a Lender of LIBOR for any subsequent Interest Period for each Floating Rate Note, Lender shall give notice thereof to Borrower.
Section 2.03 Replacement Notes. If (a) any Note becomes mutilated, defaced, lost, stolen, or destroyed or (b) Borrower or a Lender otherwise reasonably requests, then, upon the request of Borrower or any Lender, (x) Borrower shall promptly execute and deliver to Lender a replacement Note for each such Note as to which such a request is made, and (y) such Lender shall surrender to Borrower, in exchange for such replacement Note, the Note being replaced (if not lost, stolen, or destroyed). As conditions precedent to the replacement of any Note, the applicant for a new Note shall furnish to Borrower evidence to Borrowers reasonable satisfaction of the loss, theft, or destruction of such Note alleged to have been lost, stolen, or destroyed, and of the ownership and authenticity of such mutilated, defaced, lost, stolen, or destroyed Note, and also such security and indemnity as Borrower reasonably requires (provided, that the written undertaking of the Initial Lender or any institutional holder of a Note having a net worth (or in the case of a bank, having combined capital, surplus, and undivided profits) of at least $100,000,000 to hold harmless Borrower in respect of the execution, authentication and delivery of such new Note shall be sufficient security and indemnity), and shall pay all expenses and charges of such substitution or exchange. All Notes shall be issued, held, and owned upon the express condition that the foregoing provisions are exclusive in respect of the replacement of mutilated, defaced, lost, stolen, or destroyed Notes and shall preclude (to the extent lawful) any and all other rights and remedies, any present or future law or statute to the contrary notwithstanding. Each replacement Note shall have identical terms as the Note that it replaces, except for such changes as Borrower and the Lenders agree upon (such agreement not to be unreasonably withheld) following a request by any of them for such a change.
Section 2.04 Obligations Absolute. Borrowers obligations under each Note shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of such Note and this Agreement under any and all circumstances whatsoever and irrespective of:
(a) any lack of validity or enforceability of any Basic Document, or any term or provision therein;
(b) the existence of any claim, setoff, defense, or other right that Borrower (or any subsidiary or affiliate of Borrower) or any other Person may at any time have against any Lender or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction;
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(c) any other act or omission to act or delay of any kind of the Lenders or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.04, constitute a legal or equitable discharge of Borrowers obligations hereunder.
Section 2.05 Amortization. Borrower shall pay to the Lenders on each Payment Date, the principal amount set forth opposite such date in Schedule I to each Note; provided that, in each such case, the principal installment payable on the Maturity Date for any such Note shall in all cases be in an amount equal to the entire principal amount of such Note outstanding on such date, and such principal installment shall be paid together with all accrued and unpaid interest and all other amounts then due and payable hereunder and under the other Basic Documents.
Section 2.06 Interest. Borrower shall pay to the Lenders, interest on the unpaid principal amount of each Note for each Interest Period at the Interest Rate for such Interest Period until such Note is paid in full. Interest shall be calculated, (i) in the case of a Fixed Rate Note, on the basis of a 360 day year of twelve thirty day months and (ii) in the case of a Floating Rate Note, on the basis of a 360 day year and the actual number of days elapsed. Accrued interest on the unpaid principal of each Note shall be payable in arrears on each Payment Date therefor and otherwise upon the payment or prepayment thereof (but only on the principal amount so paid or prepaid), except that interest payable at the Default Rate shall be payable from time to time on demand in accordance with Section 4.05.
3. [INTENTIONALLY OMITTED]
4. PAYMENTS BY BORROWER
Section 4.01 How Payments Are Made. Borrower shall make its payments and prepayments of principal and interest due on the Notes, and all other amounts payable by Borrower to any Lender under the Basic Documents, to the credit of such account as such Lender may from time to time notify the Borrower in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due. Any payment made by Borrower to Lender after 3:00 p.m. (New York City time) on any day shall be deemed to have been made on the following Business Day. Subject to the adjustments required by the definition of Payment Date, if any payment due under the Basic Documents comes due on a day which is not a Business Day, such payment shall instead be made on the following Business Day, and interest shall accrue at the applicable rate to the day of payment (except that no additional interest shall accrue on any Fixed Rate Note if the payment thereon is made on such following Business Day).
Section 4.02 Right to Prepay. Provided that no Default has occurred and is continuing, Borrower shall have the right at any time on or after the initial Payment Date in respect of an Engine Kit to prepay all or part of the outstanding principal amount of the Notes issued with respect to the applicable designated Engine Kit; provided that any partial prepayment of the Notes with respect to an Engine Kit shall be in an aggregate principal amount not less than the most recent scheduled principal payment required pursuant to such Notes. Borrower shall give to Lender at least thirty (30) days prior written notice (which notice shall be irrevocable) of such prepayment (which notice shall specify the date on which such prepayment shall be made, and
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the Notes to which such prepayment applies). Upon any prepayment of any Note under this Section 4.02, Borrower shall pay all accrued and unpaid interest on the principal of that Note to (but excluding) the date of prepayment, and all amounts payable under Section 10.02 with respect to such prepayment. Amounts prepaid shall not be available for re-borrowing. Any partial prepayment of a Note shall be applied to the principal installments thereof in the inverse order of maturity.
Section 4.03 Mandatory Prepayments. Upon acceleration of the Notes pursuant to Section 8.02, Borrower shall prepay such Notes, and shall pay all amounts payable under Section 10.02 with respect to such prepayment. To the extent required by Section 10.04, Borrower shall prepay any relevant Notes in accordance with the terms of Section 10.04 and such Notes.
Section 4.04 Amount of Prepayment. Subject to Section 4.06, a Note shall be deemed satisfied in full upon the prepayment of all principal of such Note, the payment of all accrued and unpaid interest on or with respect to such Note as of such prepayment date, the payment of all past-due interest on or with respect to such Note, and the payment of all amounts payable under Section 10.02 with respect to such prepayment.
Section 4.05 Interest on Past Due Amounts. Any amounts past due (by acceleration or otherwise) and at any time outstanding under any Note or from Borrower under any Basic Document shall (to the extent permitted by law) bear interest, payable on demand, from the due date (and shall be compounded on a quarterly basis) until (but excluding the date of) payment in full, at a rate equal to 2.00% per annum above the Interest Rate for the relevant Note (the Default Rate).
Section 4.06 Limit on Interest Payable. The amount of interest due or payable under this Agreement or any Note shall not in any event exceed the maximum allowable by applicable law, and this sentence shall override any contrary provision in this Agreement or any Note.
Section 4.07 [ - INTENTIONALLY OMITTED].
Section 4.08 Changes in Market. If on or prior to 3:00 p.m. on the Business Day three (3) Business Days prior to any Interest Period in respect of a Floating Rate Note, any Lender determines (acting reasonably and in good faith) that:
(x) by reason of circumstances affecting the London interbank market, adequate and reasonable means do not exist for ascertaining LIBOR for such Interest Period in accordance with the definition thereof; or
(y) by reason of circumstances affecting the London interbank market, LIBOR does not accurately reflect the cost to such Lenders of maintaining or funding the loan in respect of such Floating Rate Note for such Interest Period,
then such Lender will promptly so notify Borrower of a substitute basis for determining an alternate interest rate for such Floating Rate Note, which alternate basis shall thereafter apply and be binding upon the Borrower and such Lender; provided that, at the Borrowers request, such Lender and Borrower shall enter into good faith negotiations (for a period of not more than
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thirty (30) days) with a view to concluding agreement on an acceptable alternate interest rate to be applicable to such Floating Rate Note. In the event the Borrower requests that such Lender enters into negotiations in accordance with the foregoing sentence, in the absence of any agreement being reached during such thirty (30) day period, the Floating Rate for such Interest Period shall be based on the sum of (A) the cost of funds of such Lender (as determined by such Lender in its sole discretion) plus (B) the Premium Rate, and (C) the Margin Benchmark applicable to Floating Rate Notes, which rate will be applied retroactively to the beginning of such Interest Period and continue for only so long as either of the conditions set forth in clauses (x) or (y) above exist. The provisions of this Agreement will be amended to accord with the terms of such substitute basis and Borrower agrees to execute such instruments requested by such Lenders that are in form and substance reasonably satisfactory to Borrower to reflect such amendment. If Borrower receives a notice under this Section 4.08, Borrower may at any time thereafter either (A) prepay, in accordance with Section 4.02 hereof, the affected Floating Rate Notes held by such Lenders or (B) request such Lender to transfer, in accordance with Section 13.05(b) hereof, the affected Floating Rate Notes held by such Lender to a financial institution designated by Borrower, at a price equal to 100% of the unpaid principal amount of such Floating Rate Note, together with accrued and unpaid interest thereon to (but excluding) the date of transfer, plus any amounts due under Section 10.02(a).
Section 4.09 Application of Payments. Each Lender shall apply payments received by it in respect of a Note under this Agreement (whether at stated maturity, by reason of acceleration, prepayment or otherwise) in the following order of priority: (a) interest due pursuant to Section 4.05 in respect of or related to such Note; (b) Commitment Fees, Arrangement Fees and all other amounts due to such Lender under this Agreement and not otherwise provided for under this Section 4.09 in respect of or related to such Note; (c) interest due pursuant to Section 2.06 in respect of or related to such Note; (d) principal due in respect of or related to such Note; (e) in respect of all other Notes issued hereunder, in or towards payment of the amounts referred to in, and in the respective order of priorities set forth in clauses (a) through (d) of this Section 4.09 as if such references were for amounts due and owing in respect of or related to such other Notes; (f) installments of principal not yet due in inverse order of maturity in respect of or related to the Notes; and (g) all other amounts due under this Agreement and not otherwise provided for in this Section 4.09.
5. BORROWERS REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
Section 5.01 Corporate Standing. Borrower is a duly organized corporation existing in good standing under the laws of Nevada, has the corporate power and legal authority to own or lease property and to carry on business as a Section 1110 Airline, and is duly qualified to do business in all jurisdictions wherein such qualification is necessary (except in any jurisdictions in which the failure to qualify would result in no Materially Adverse Change).
Section 5.02 Corporate Powers. Borrowers execution, delivery, and performance of the Basic Documents to which it is (or is to become) a party are within Borrowers corporate powers; and the Basic Documents to which it is (or is to become) a party have been duly authorized by all necessary corporate action on Borrowers part, and do not contravene, result in a breach of, or require any consent under any law, judgment, decree, order, or contractual restriction binding on Borrower or any agreement or instrument to which Borrower is a party or to which it or any of its property is subject.
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Section 5.03 Binding Effect. The Basic Documents to which Borrower is (or is to become) a party are (or will be when executed and delivered) legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with the terms of this Agreement, except as may be limited by bankruptcy, insolvency, or other similar laws affecting enforcement of creditors rights generally and by general principles of equity.
Section 5.04 Litigation. There are no pending actions or proceedings before any court or administrative agency which may be expected to result in a Materially Adverse Change.
Section 5.05 Financial Statements; No Materially Adverse Change. The audited balance sheet as of September 30, 2015, for Borrower and its consolidated subsidiaries, and the related results of operations for the quarterly fiscal period then ended, have been prepared in accordance with GAAP and correctly present Borrowers financial condition as of such date and results of operations for such period (subject to normal year-end event adjustments). As of the date of this Agreement, there has been no Materially Adverse Change.
Section 5.06 Taxes. Borrower has filed all tax returns which it is or was required to file, and has paid all taxes shown to be due and payable on those returns or on any assessment received by it, except such taxes of Borrower, if any, as are being contested diligently in good faith, and by appropriate proceedings, and as to which adequate reserves have been provided in accordance with GAAP.
Section 5.07 Status as United States Citizen and Air Carrier. Borrower is a Section 1110 Airline.
Section 5.08 Governmental Consents. Borrowers execution, delivery, and performance of the Basic Documents do not require the consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any federal, state, or foreign governmental authority or agency (including any judicial body).
Section 5.09 [Intentionally Omitted].
Section 5.10 Solvency. Borrower (a) has sufficient capital to carry on all businesses and transactions in which it engages or is about to engage, (b) owns property having a value both at fair valuation and at present fair salable value greater than the amount required to pay Borrowers debts, (c) is solvent, (d) will continue to be solvent after assuming all obligations related to the Basic Documents, and (e) is able to pay its debts as they mature.
Section 5.11 No Governmental Approvals, Notices and Filings. No consent or approval of, giving of notice to, registration with, or taking of any action in respect of or by, any federal, state, or local governmental authority is or will be required with respect to Borrowers execution, delivery, or performance of each Basic Document to which it is a party or if any such consent, approval, notice, registration, or action is required, it will have been duly given or obtained on or before the pertinent Funding Date.
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Section 5.12 Compliance with Laws. Borrower is in compliance with all applicable laws and regulations, including, without limitation, environmental laws and laws and regulations relating to corruption and bribery, provided that, in the case of such laws and regulations (other than laws and regulations relating to corruption and bribery), Borrower may have complied only to the extent necessary to ensure that non-compliance with such laws could not, individually or in the aggregate, reasonably be expected to have a Materially Adverse Effect.
6. AFFIRMATIVE COVENANTS
So long as any Note, or any amount owed by Borrower under any Basic Document, remains outstanding or unpaid:
Section 6.01 Financial Statements. Borrower shall furnish to each Lender:
(a) within forty-five (45) days after the end of the first three quarterly periods in each fiscal year of Borrower, a consolidated balance sheet of Guarantor and its consolidated subsidiaries (including Borrower) prepared by it as of the close of such period, together with the related consolidated statements of income for such period; and
(b) within one hundred twenty (120) days after the last day of each fiscal year of Borrower, a consolidated copy of the audited balance sheet of and related statements of income and cash flows of Guarantor and its consolidated subsidiaries (including Borrower) at and as of the end of such fiscal year, each of which shall be prepared in accordance with GAAP and shall be accompanied by an opinion of a firm of independent public accountants of nationally recognized standing that said financial statements fairly present in all material respects the financial condition and results of operations of Guarantor as of, and for, such period in accordance with GAAP.
Section 6.02 f INTENTIONALLY OMITTED]
Section 6.03 Corporate Existence. Except as permitted by Section 6.04, Borrower shall maintain its existence as a corporation in good standing.
Section 6.04 Merger, etc. Borrower shall not consolidate with or merge into any other corporation, or convey, transfer, or lease all or substantially all of its assets as an entirety to any Person, unless:
(a) the Person formed by such consolidation or merger, or the Person who acquires by conveyance, transfer, or lease all or substantially all of Borrowers assets as an entirety (the Successor) is a Section 1110 Airline;
(b) in the case of such a consolidation, merger, conveyance, transfer, or lease, the Successor: (x) executes and delivers to Lenders an agreement, in form and substance reasonably satisfactory to Lenders, containing an assumption by the Successor of the due and punctual performance and observance of Borrowers obligations under the Basic Documents to which Borrower is then a party (including this covenant), and (y) makes such filings, registrations and recordings, as are necessary to evidence such consolidation, merger, conveyance, transfer, or lease with or to the Successor;
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(c) such transaction shall not (1) create any Event of Default, or (2) materially impair Borrowers or the Successors (as the case may be) ability to perform its obligations under the Basic Documents; and
(d) Borrower or the Successor delivers to Lenders, promptly upon consummation of such transaction, an Officers Certificate stating that the conditions precedent set forth in clauses (a), (b), and (c) have been complied with and an opinion of counsel for Borrower or for the Successor, in form and substance reasonably satisfactory to Lenders, (1) stating that the agreements entered into to effect such consolidation, merger, conveyance, transfer, or lease and such assumption agreements have been duly authorized, executed, and delivered by the Successor (or in the case of a merger, by Borrower) and that they (and the Basic Documents so assumed) constitute legal, valid, and binding obligations of the Successor (or in the case of a merger, of Borrower), enforceable in accordance with their terms (to the same extent as the Basic Documents so assumed were enforceable against Borrower immediately prior to such transaction), (2) stating that all conditions precedent which are legal in nature provided for in this Agreement and relating to such transaction have been fulfilled and (3) containing such other customary matters Lender reasonably requests.
Upon any such consolidation, conveyance, merger, transfer, or lease, the Successor shall succeed to, shall be substituted for, and may exercise every right and power of Borrower under the Basic Documents to which Borrower is a party, with the same effect as if the Successor had been named as Borrower therein. No such conveyance, transfer, or lease of substantially all Borrowers assets as an entirety shall have the effect of releasing Borrower (or any Successor) from its liability under the Basic Documents to which it is a party.
Section 6.05 Citizenship and Air Carrier Status. Borrower will at all times remain a Section 1110 Airline.
Section 6.06 Disposition of Assets. Except as permitted by Section 6.04, Borrower will not transfer or assign assets, or pay dividends to any affiliate, subsidiary, or related company, if such a transfer, assignment, or payment would materially impair Borrowers ability to meet its obligations under the Basic Documents.
Section 6.07 ERISA Information. Borrower will cooperate with all reasonable requests by any Lender (including reasonable requests for information) to determine whether any proposed transfer by such Lender of its interest in the Basic Documents would violate ERISA.
Section 6.08 Compliance with Laws. Borrower will comply with all applicable laws and regulations, including, without limitation, environmental laws and laws and regulations relating to corruption and bribery, provided that, in the case of such laws and regulations (other than laws and regulations relating to corruption and bribery), Borrower need comply only to the extent necessary to ensure that non-compliance with such laws could not, individually or in the aggregate, reasonably be expected to have a Materially Adverse Effect.
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7. CONDITIONS PRECEDENT AND CONDITION SUBSEQUENT
Section 7.01 Conditions Precedent to First Funding. Initial Lenders obligation to purchase the relevant Note on the first Funding Date is subject to the satisfaction of the following conditions precedent and the Initial Lenders receipt on or before such initial Funding Date of the following, in form and substance reasonably satisfactory to Initial Lender:
(a) an executed copy of this Agreement;
(b) a certificate of Borrowers secretary, dated the Funding Date, certifying attached copies of the resolutions of Borrowers board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party, and showing the names and copies of the specimen signature(s) of Borrowers officer(s) authorized to sign this Agreement and the related documents to which it is (or is to become) a party;
(c) an executed copy of the Guaranty; and
(d) an executed copy of the Purchase Agreement (which shall include the addition of the Equipment to the TEAM Time and Material Agreement No. 2015-CF-161).
Section 7.02 Conditions Precedent to Each Funding. Initial Lenders obligation to purchase each relevant Note (including each relevant Note on the initial Funding Date) is subject to the additional conditions precedent that:
(a) Initial Lender shall, to the extent set forth below, have received the following, each dated as of the pertinent Funding Date, in form and substance reasonably satisfactory to Initial Lender:
(1) Initial Lender shall have received the Note for the relevant Engine Kit, duly executed by Borrower,
(2) an Officers Certificate certifying: (x) Borrowers representations and warranties in Section 5 of this Agreement are true and accurate as though made on the Funding Date, and (y) no Event of Default exists or will result from Initial Lenders purchase of its Note,
(3) (i) an officers certificate of Guarantor certifying Guarantors representations and warranties in Section 9 of the Guaranty are true and accurate as though made on the Funding Date, and (ii) a compliance certificate certified by the Chief Financial Officer of the Guarantor stating that the Guarantors consolidated available cash and cash equivalents, including any available credit facility, is not less than $35,000,000.
(4) an opinion from Borrowers in-house counsel as to the matters contemplated thereby,
(5) on the initial Funding Date only, an opinion from Guarantors in-house counsel as to the Guaranty and the matters contemplated thereby,
(6) on the initial Funding Date only, an opinion from Smith, Gambrell & Russell, LLP, special New York counsel to Borrower and Guarantor as to the matters contemplated hereby,
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(7) an anti-corruption declaration and a disclosure consent from the Exporter addressed to the Initial Lender,
(8) a favorable opinion of Vedder Price P.C., special counsel to the Initial Lender, as to the matters contemplated thereby,
(9) such additional opinion(s) and document(s) the Lender requests,
(10) a certificate of Borrowers secretary, dated the Funding Date, certifying attached copies of the resolutions of Borrowers board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party and showing the names and copies of the specimen signature(s) of Borrowers officer(s) authorized to sign this Agreement and the related documents to which it is (or is to become) a party,
(11) on the initial Funding Date only, a certificate of Guarantors secretary, dated such Funding Date, certifying attached copies of the resolutions of Guarantors board of directors evidencing approval of the transactions contemplated by the Basic Documents to which it is (or is to become) a party and showing the names and copies of the specimen signature(s) of Guarantors officer(s) authorized to sign the Guaranty and the related documents to which it is (or is to become) a party, and
(12) Initial Lender shall have received a Payment Confirmation Letter pertaining to the engine to which the relevant Engine Kit relates;
(b) Borrowers and Guarantors representations and warranties in the Basic Documents shall be true and accurate as though made on and as of such Funding Date;
(c) no Event of Default shall exist or shall result from Initial Lenders purchase of its Note;
(d) all necessary consents, approvals, licenses, permits, declarations, or registrations then required in connection with Borrowers execution, delivery, and performance of the Basic Documents and the transactions contemplated thereby shall have been obtained;
(e) since December 31, 2015, no Materially Adverse Change shall have occurred;
(f) Initial Lender shall have received the following, each dated as of the pertinent Funding Date: (1) the Note issuable to it with respect to the relevant Engine Kit, duly executed by Borrower, and (2) an executed copy of each document referred to in Section 7.02(a)(2) through (12);
(g) Initial Lender shall have received a Funding Notice as referred to in Section 2.02 of this Agreement;
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(h) Initial Lender shall have received evidence satisfactory to it that the Financed Amount for an Engine Kit does not exceed the purchase price of such Engine Kit, as evidenced by (I) a purchase invoice from the Borrower or Exporter and (II) a certificate from the Exporter which attests to the NEKP and all price discounts and other cash credits, credits or concessions with respect to the Engine Kit;
(i) Initial Lender shall have received (A) the relevant Arrangement Fee due on such Funding Date pursuant to Section 13.15 and (B) the amount of the Commitment Fee due and owing as of such Funding Date, if any, pursuant to Section 13.14;
(j) The relevant Engine Kit shall have been delivered to and accepted by Borrower and Borrower shall have good and marketable title to such Engine Kit free and clear of all Liens;
(k) no Code Share Event shall have occurred; and
(1) Since the date hereof, no Specified Carrier Bankruptcy Event shall have occurred.
Section 7.03 Conditions Precedent to Borrowers Obligations. Borrowers obligations on each Funding Date are subject to Borrowers receipt, on or before such Funding Date, of the following, each in form and substance reasonably satisfactory to Borrower:
(a) with respect to the initial Funding Date only, this Credit Agreement, executed by the Initial Lender;
(b) with respect to the initial Funding Date only, the tax forms referred to in Section 9.02(j); and
(c) such additional opinion(s) and document(s) as Borrower reasonably requests.
8. EVENTS OF DEFAULT; REMEDIES
Section 8.01 Events of Default. Each of the following shall constitute an Event of Default:
(a) (1) Borrower fails to make any payment due from Borrower on any Note or under any Basic Document when due, and such failure continues for five (5) Business Days (as to principal, interest, and amounts payable under Section 4.02 or 4.03) or ten (10) Business Days (as to all other amounts due) after Borrowers receipt of notice of such failure from Initial Lender, or (2) Guarantor fails to make any payment due from Guarantor under the Guaranty when due, and such failure continues for ten (10) Business Days after Guarantors receipt of notice of such failure from Initial Lender;
(b) any representation or warranty made by any Obligor in the Basic Documents, or in any certificate or other document that it furnishes pursuant to the Basic Documents, is incorrect in any material respect when made (and, if the effect(s) of such incorrectness is/are reasonably curable, such effect(s) continue(s) for thirty (30) days after such Obligors receipt of notice of such incorrectness from Initial Lender);
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(c) Borrower violates Section 6.03 or 6.05;
(d) any Obligor fails in any material respect to perform any other covenant or agreement in the Basic Documents, and such failure to perform continues for thirty (30) days after such Obligors receipt of notice of such default from Initial Lender (one hundred fifty (150) days after such Obligors receipt of such notice if (1) such covenant or agreement is reasonably curable, and (2) such Obligor is diligently pursuing a cure of such failure);
(e) an Obligor (1) applies for or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of all or a majority of its property, (2) makes a general assignment for the benefit of its creditors, (3) commences a voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (4) files a petition seeking to take advantage (as debtor) of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, or (5) fails to controvert in a timely manner, or acquiesces in writing to, any petition filed against it in an involuntary case under the federal Bankruptcy Code;
(f) a proceeding or case is commenced, without an Obligors application or consent, in any court of competent jurisdiction, seeking (1) its liquidation, reorganization, dissolution, or winding-up, or the composition or readjustment of its debts, (2) the appointment of a trustee, receiver, custodian, liquidator, or the like of such Obligor or of all or a majority of its assets, or (3) similar relief in respect of such Obligor under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and (if such Obligor is contesting the proceeding on a reasonable basis and in good faith) such proceeding or case continues undismissed, or an order, judgment, or decree approving or ordering any of the foregoing is entered and continues unstayed and in effect, for a period of ninety (90) days; or an order for relief against such Obligor is entered in an involuntary case under the federal Bankruptcy Code;
(g) the Guaranty ceases to be in full force and effect or the Guarantor fails to comply with any material term, condition or covenant set forth in the Guaranty;
(h) so long as the Initial Lender is the holder of at least ten percent (10%) of the Notes in respect of any Engine Kit, an Event of Default or similar event shall have occurred and be continuing under any Other EDC Transaction;
(i) a Code Share Event shall have occurred and be continuing;
(j) a Specified Carrier Bankruptcy Event shall have occurred and be continuing; or
(k) a Purchase Agreement Event shall have occurred and be continuing.
Section 8.02 Remedies. If an Event of Default (other than under Section 8.01 (e) or (f)) exists, Lender may (and upon its receipt of written request by a Majority in Interest of Lenders shall) declare all Notes to be immediately due and payable, whereupon all Notes shall become and be immediately due and payable without presentment, demand, protest, or other notice of any kind, all of which Borrower hereby waives, and all lending commitments hereunder shall
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terminate. If an Event of Default under Section 8.01(e) or (f) occurs, all Notes automatically shall become immediately due and payable and all lending commitments hereunder automatically shall immediately terminate, without presentment, demand, protest, or notice of any kind, all of which Borrower hereby waives. Upon the occurrence of any Event of Default, Lender may exercise any of its rights and remedies under the Basic Documents.
9. BORROWERS INDEMNITIES
Section 9.01 General Indemnity. (a) General. Borrower assumes liability for, and agrees to indemnify each Indemnitee, on an After-Tax Basis, against, whether or not the transactions contemplated herein or in any of the other Basic Documents are consummated, any and all Liabilities.
Liabilities means any and all liabilities, obligations, losses, damages, penalties, claims (including claims involving negligence, strict or absolute liability, liability in tort, and liabilities arising out of violation of laws or regulatory requirements of any kind), suits, actions, costs, expenses, and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever imposed on, incurred by, or asserted against an Indemnitee, whether or not such Indemnitee is indemnified as to such matter by any other Person, relating to or arising out of: (aa) any of the Basic Documents or any of the transactions contemplated herein or therein or the enforcement thereof, including any misrepresentation or breach of warranty of Borrower contained therein or in any document or certificate of Borrower delivered pursuant thereto or the breach of any agreement or covenant by Borrower, or the failure by Borrower to perform any of its obligations under the Basic Documents, or (bb) the manufacture, assembly, design, purchase, acceptance, resale, rejection, refinancing, non-use, alteration, replacement, existence, control, refurbishment, service, removal, redelivery, substitution, ownership, delivery, lease, possession, repossession, return, use, operation, maintenance, condition, overhaul, testing, insuring, transportation, importation, exportation, modification, repair, fitness for use, merchantability, abandonment, sale, return, storage, transfer of title, or other disposition of an Engine Kit, any Note, or any Engine Kit or any part thereof or any accident in connection therewith whether or not relating to loss or damage to any property, or death or injury of, or other loss suffered by, any Person (including latent and other defects, whether or not discoverable, strict tort liability, and any claim for patent, trademark, or copyright infringement), or (dd) the offer or sale of any interest in the Engine Kit or any Note, or (ee) any prohibited transaction within the meaning of ERISA Section 406 or Code Section 4975(c) in any way relating to, arising out of or resulting from the offer, sale, resale, purchase, delivery or holding of any Notes or interest thereon or in any transaction contemplated by the Basic Documents, whether occurring before, on, or after the date hereof, or (ff) any violation of any law, relating to the possession, use or maintenance of the Engine Kit.
However, Borrower shall not be required to indemnify any Indemnitee: (aa) for any Liability arising out of the gross negligence, willful misconduct, misrepresentation, or breach of contract of such Indemnitee (other than gross negligence imputed to an Indemnitee solely by reason of its interest in any Engine Kit), or such Indemnitees ordinary negligence in exercising its right of inspection, (bb) for any Liability constituting Taxes, whether or not Borrower is required to indemnify therefor pursuant to Section 9.02; provided, that this clause (bb) shall not apply to Taxes (x) taken into consideration in making any payment pursuant
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to this Section 9.01 on an After-Tax Basis, or (y) arising out of any prohibited transaction within the meaning of ERISA Section 406 or Code Section 4975(c) (but in the case of (y) only to the extent occurring because of a misrepresentation by Borrower), (cc) for any Liability attributable to the sale or other transfer of all or part of such Indemnitees interest in any Engine Kit or any Note other than a sale or other transfer as a result of (e.g., such sale or transfer is viewed by the transferor as the transferors exit strategy in connection with such Event of Default), or in connection with the exercise of remedies during the continuance of, an Event of Default, or at Borrowers request or direction, or as required by any of the Basic Documents, or (dd) any Indemnitees liability as a manufacturer or maintenance provider.
Borrower hereby waives and releases any claim now or hereafter existing against any Indemnitee arising out of death or personal injury to personnel or agents of Borrower or any Affiliate, loss or damage to property of Borrower, its agents, or any Affiliate, which may result from or arise out of the items referred to in clause (bb) of the definition of Liabilities set forth in this Section 9.01 while any of the Notes are outstanding, including any latent or patent defect, whether or not discoverable, except to the extent any such claim arises out of the gross negligence, willful misconduct, or misrepresentation of or breach of its obligations under the Basic Documents by such Indemnitee.
(b) Contests. If any claim for a Liability is made against Borrower or any Indemnitee and such party has received notice thereof, such party receiving notice of such Liability shall promptly notify all affected Indemnitees or Borrower, as the case may be, provided, that the failure to provide such notice promptly or to notify Borrower shall not release Borrower from any of its obligations to indemnify hereunder, except to the extent that such failure adversely affects any applicable defense or counterclaim, or otherwise increases the amount Borrower would have been liable for in the absence of such failure. If no Specified Default shall exist, Borrower shall have the right to investigate and defend or (so long as Borrower has acknowledged in writing to the relevant Indemnitee that Borrower is liable to such Indemnitee for such Liability), compromise any Liability for which it may be required to indemnify under this Section 9.01, and each Indemnitee agrees to cooperate with all reasonable requests of Borrower in connection therewith. Notwithstanding any of the foregoing to the contrary, Borrower shall not be entitled to assume responsibility for and control of any such judicial or administrative proceedings or compromise any Liability if (aa) any Specified Default shall exist, or (bb) such proceedings would involve the imposition of criminal liability on an Indemnitee or if such contest will, in the reasonable opinion of such Indemnitee, be inappropriate under applicable standards of professional conduct. The reasonable fees and expenses of such Indemnitees counsel shall be paid by Borrower if any of the circumstances described in clauses (aa) or (bb) above exists. An Indemnitee may participate at its own expense and with its own counsel in any judicial proceeding controlled by Borrower pursuant to the preceding provisions. Each Indemnitee shall cooperate with all reasonable requests of the insurers in the exercise of their rights to investigate, defend, or compromise such claim as may be required by such policy to maintain the insurance coverage provided to the parties thereunder. To the extent that any Indemnitee receives indemnification payments under this Section 9.01, Borrower shall be subrogated to such Indemnitees rights with respect to the transaction or event requiring or giving rise to such indemnity to the extent of any indemnity payment made, other than to any insurance policies maintained by such Indemnitee.
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(c) Survival. The indemnities in this Section 9.01 shall survive the expiration or other termination of the Basic Documents as to acts occurring or circumstances existing on or before such expiration or termination.
(d) Payment. Subject to the provisions of clause (b) above, Borrower agrees to pay a claim for any Liability by an Indemnitee within ten (10) Business Days of written demand therefor.
Section 9.02 General Tax Indemnity. (a) General. Borrower agrees that all payments on any Note and all payments by Borrower to any Lender in connection with the transactions contemplated by the Basic Documents shall be free and clear of, and without deduction for, any and all withholdings of any nature whatsoever, except as otherwise provided in the first two paragraphs of this Section 9.02(a). If any deduction or withholding is required with respect to any amount payable on any Note or any other amounts payable by Borrower that are enumerated (and not excepted) above, Borrower shall pay an additional amount such that the net amount actually received by each Indemnitee, after such deduction or withholding, will be equal to all such amounts that would be received by such Indemnitee if no such deduction or withholding had been required. Each Indemnitee shall file and provide to Borrower such returns, statements, or other documentation as shall enable it to claim to the extent possible any reduced rate of Tax withholding or any exemption from Tax withholding with respect to any Taxes to which the terms of this Section 9.02(a) apply, in each case, properly available under applicable law or any applicable treaty, provided that, (i) except in the case of Tax withholding required by the United States government on interest income, Borrower shall have provided to such Indemnitee timely notice of the requirement for such returns, statements, or other documentation, (ii) such Indemnitee has in good faith determined it would suffer no adverse tax consequences by providing the applicable return, statement, or other documentation, and (iii) Borrower has agreed to pay, and does pay after demand therefor, on an After-Tax Basis, all costs and expenses incurred by such Indemnitee in providing the applicable return, statement, or other documentation. If and to the extent that such Indemnitee fails to file or provide any such return, statement, or other documentation required pursuant to the preceding sentence and as a result thereof either (I) Tax withholding is required at a rate which is higher than that which would have been applicable had such return, statement or other documentation been filed or provided, or (2) Tax withholding is required which would not have been required had such return, statement, or other documentation been filed or provided, Borrowers obligation to make the increased payment otherwise required by this Section 9.02(a) shall be limited to the amount which would have been required if such Indemnitee had filed or provided such return, statement, or other documentation.
Notwithstanding the foregoing, if any deduction or withholding of Taxes imposed by the United States government (including any such deduction or withholding of Taxes imposed under FATCA) is required by applicable law (after taking into account any applicable treaty) with respect to any amount payable on any Note or under the other Basic Documents (other than to Initial Lender (it being understood and agreed payments to whom shall be governed by the first paragraph of Section 9.02(a))), Borrower shall make, and the Lender shall receive, such payment net of such required deduction or withholding, and Borrower shall not be required to make the additional payment otherwise required by this Section 9.02(a) with respect to such deduction or withholding, except in the case of any such deduction or withholding of Taxes
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imposed by the United States government (other than such Taxes imposed under FATCA) that is required as a result of any amendment to or change in applicable law, which amendment or change becomes effective after the date the Lender becomes a Lender hereunder (a Change in Law). In the event that there is a Change in Law and a Lender (other than Initial Lender) becomes subject to a deduction or withholding requirement, such Lender shall use reasonable efforts to transfer the affected Note to a branch or Affiliate located in a jurisdiction not affected by such withholding Tax or with respect to which a lower withholding Tax applies, if such transfer would not result in any economic disadvantage or adverse Tax consequences to such Lender and would not otherwise be disadvantageous (except to a de minimis extent) (unless, in the case of any economically quantifiable detriment, Borrower has agreed to indemnify against such detriment in a manner reasonably satisfactory to such Lender). If such transfer is made, such Lender shall, as promptly as practicable, fulfill or cause to be fulfilled the obligations under Section 9.02(j) with respect to any branch or Affiliate. If a Lender receives a payment without a deduction or a withholding that is required by applicable law but is not Borrowers responsibility under this Section 9.02(a), the pertinent Lender shall reimburse Borrower for any amount, including interest and penalties imposed by the United States government, that Borrower is required to make with respect to such payment. Notwithstanding any other provision of this paragraph, a Lender shall be indemnified, to the extent provided for elsewhere in this Section 9.02, for any deduction or withholding that is required because (i) Borrower is not or does not remain an entity that is a United States person within the meaning of Code Section 7701(a)(30), or (ii) Borrower is not managed and controlled within the United States, or conducts activities outside the United States, in either case with the consequence that payments are made, deemed, or treated as made by Borrower from outside the United States. Regardless of the applicability of any other provision of this paragraph, if any deduction or withholding is required by applicable law with respect to any Note, Borrower shall promptly pay the full amount of such required deduction or withholding to the appropriate taxing authority and deliver to the Lender as soon as practicable thereafter a receipt issued by such taxing authority or a statement of Borrower confirming the payment to such taxing authority of all amounts so required to be deducted or withheld.
Whether or not any of the transactions contemplated hereby or in any of the other Basic Documents are consummated, subject to Section 9.02(b), Borrower shall pay, and shall indemnify and hold harmless on an After-Tax Basis each Indemnitee from and against, any and all fees, taxes, licenses, levies, imposts, duties, excises, assessments, charges, or withholding of any nature, together with any penalties, fines, additions to tax, or interest thereon, however imposed, whether levied or imposed upon such Indemnitee, Borrower, or any Engine Kit or any part thereof, by any federal, state, or local taxing authority within the United States or any territory or possession thereof, or by any foreign or international taxing authority (all such fees, taxes, licenses, levies, imposts, duties, excises, assessments, charges, withholdings, penalties, fines, additions to tax, and interest being Taxes) relating to: (aa) any Engine Kit, or any interest therein, (bb) the acquisition, manufacture, purchase, mortgaging, initial financing, refinancing, ownership, delivery, non-delivery, redelivery, transport, location, assignment, alteration, improvement, possession, presence, use, replacement, substitution, operation, insurance, installation, modification, rebuilding, overhaul, condition, storage, maintenance, repair, sale, return, abandonment, preparation, transfer of title, acceptance, importation, exportation, rejection, or other disposition of any Engine Kit, or any interest in any of the foregoing; (cc) the Notes, or the issuance, acquisition, transfer, or assumption thereof, or
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[Credit Agreement]
refinancing thereof, or the payment of any amounts thereon; (dd) the execution, delivery, or performance of any of the Basic Documents or any future amendment, supplement, waiver, or consent (thereto requested or consented to by Borrower) or in connection with a Specified Default, or any of the transactions contemplated thereby, or any proceeds or payments or amounts payable under any thereof; (ee) the property or the income or other proceeds with respect to any Engine Kit; or (ff) otherwise with respect to or in connection with the transactions contemplated by the Basic Documents.
Notwithstanding the foregoing, the third paragraph of this Section 9.02(a) shall not obligate Borrower to pay or indemnify for any of the following:
(i) in the case of any Indemnitee, any Taxes (including any withholding Taxes other than withholding Taxes for which an Indemnitee may be indemnified hereunder pursuant to the first and second paragraphs of this Section 9.02(a)) imposed by the United States government or by any state, local or foreign taxing authority based on, or measured by or with respect to gross or net income, net or gross receipts, minimum tax, capital, franchise, net worth, excess profits, value added, or conduct of business of such Indemnitee (other than any such Taxes which are in the nature of sales or use taxes, license or excise taxes, property taxes, ad valorem taxes, value added taxes (to the extent not imposed in direct and clear substitution for an income tax), stamp or document taxes, registration or recording taxes, or goods and services or transaction privilege taxes and other than amounts necessary to make payments on an After-Tax Basis), in each case however denominated, as a result of such Indemnitees being organized in, physically holding the Notes in, or conducting business unrelated to the transactions contemplated in the Basic Documents in, the jurisdiction imposing such Tax.
(ii) Taxes imposed with respect to any period following the payment by Borrower of all amounts due and payable under the Basic Documents, except to the extent coinciding with such event;
(iii) Taxes which arise out of or are caused by a breach by an Indemnitee of any of its covenants, representations, and warranties under the Basic Documents;
(iv) any Tax imposed upon or as a result of a transfer or other disposition by or to an Indemnitee of any interest in any Note, Engine Kit, or any part thereof or Basic Document, other than any such transfer or disposition (a) while any Event of Default exists, or (b) in order to effect the transactions or transfers contemplated to occur under the Basic Documents on a Funding Date,
(v) in the case of any Indemnitee, withholding Taxes imposed on any transferee of the interests held by such Indemnitee (other than a transferee who has acquired its interest as a result of a transfer pursuant to an exercise of remedies following an Event of Default) (a) if such Tax would not have been imposed on the original Indemnitee, or (b) to the extent such Tax exceeds the amount of Tax that would have been imposed on the original Indemnitee;
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(vi) in the case of any Indemnitee, Taxes to the extent resulting from the gross negligence or willful misconduct of such Indemnitee or any officer, director, agent, or employee of such Indemnitee, other than any such gross negligence or willful misconduct imputed to such Indemnitee by reason of any action or inaction of (a) Borrower, (b) any other Indemnitee, or (c) any officer, director, agent, or employee of any Person described in clauses (a) or (b) above;
(vii) Taxes that have been paid by Borrower as transaction expenses under Section 13.03 and that have been timely and properly paid to the appropriate taxing authority;
(viii) in the case of a Lender, any Tax to the extent that such Tax would not have been imposed but for the failure of such Lender to comply with any certification, documentation, or similar requirements concerning the nationality, residence, or identity of such Lender which, if properly complied with, would have resulted in an exemption from, or a reduced rate of, such Tax for which such Lender was otherwise eligible, provided that Borrower gave such Lender timely notice of such requirement, such Lender would suffer no adverse consequences by so complying, and Borrower has agreed to pay, and does pay after demand therefor, on an After-Tax Basis, all costs and expenses incurred by such Lender in so complying;
(ix) in the case of a Lender, any Tax imposed by means of withholding, other than any such Tax to be indemnified hereunder solely as and to the extent set forth in the first and second paragraphs of this Section 9.02(a);
(x) in the case of any Indemnitee, Taxes imposed in respect of a prohibited transaction within the meaning of ERISA arising out of a breach by such Indemnitee of its representations or covenants; and
(xi) any Tax imposed under FATCA.
(b) Contests. If any written claim is made against any Indemnitee or if any proceeding is commenced against any Indemnitee for any Taxes as to which Borrower may have indemnity obligation pursuant to Section 9.02(a), such Indemnitee shall notify Borrower of such claim within thirty (30) days after such Indemnitee receives notice of such claim or proceeding; provided, that failure to provide such notice to Borrower shall not affect the obligation of Borrower to provide indemnity hereunder with respect to the Taxes that are the subject of such claim or proceeding unless and except to the extent that (i) such failure (whether by adversely affecting a counterclaim or defense, or otherwise) increases the amount for which Borrower would have been liable in the absence of such failure, or (ii) such failure results in the imposition of, or an increase in the amount of, any penalties, interest, or additions to Tax related to the Tax which is the subject of such claim or proceeding.
Upon Borrowers timely written request, the Indemnitee shall, in good faith, with due diligence, and at Borrowers expense, contest the validity, applicability, or amount of such Taxes by, in such Indemnitees discretion after consultation with Borrower, (aa) resisting payment thereof, (bb) not paying the same except under protest, if protest is necessary and
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[Credit Agreement]
proper, or (cc) if payment is made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; provided, that the Indemnitee shall not be required to take or continue any action pursuant to this sentence unless and until (u) except in the case when the Borrower controls the contest, such claim relates to Taxes for which Borrower may be liable hereunder in an amount in excess of $5,000 or Taxes for which the Borrower may be liable hereunder or otherwise in an aggregate amount in excess of $10,000; (v) such Indemnitee shall have received from Borrower (at Borrowers expense) an opinion of tax counsel to the effect that a reasonable basis exists within the meaning of ABA Formal Opinion No. 83352, or any successor thereto, for contesting such claim; (w) Borrower agrees to pay and shall timely pay, on an After-Tax Basis, on demand to such Indemnitee all reasonable costs and expenses that such Indemnitee actually incurs in connection with and reasonably allocable to contesting such claim (including reasonable legal and accounting fees, penalties, interest, and additions to tax); (x) if a Specified Default has occurred and is continuing, Borrower provides security for its obligations under Section 9.02(a) reasonably satisfactory to such Indemnitee; (y) if the Indemnitee decides after consultation with Borrower to pay the Tax prior to the contest, Borrower shall provide to the Indemnitee an interest-free advance in an amount equal to the Tax which the Indemnitee is required to pay and shall, in such case, pay any additional amount required to hold such Indemnitee harmless against any adverse Tax consequences arising from such advance (and if such contest is finally determined adversely, the amount of such advance shall be applied against Borrowers obligation to indemnify the Indemnitee against the Tax which is the subject of such contest); and (z) the action to be taken will not involve any risk of criminal liability on the Indemnitee or of a sale, forfeiture, or loss of any Engine Kit, or the creation of any Lien other than Liens for the Taxes being contested unless Borrower posts a bond or other security reasonably satisfactory to the Indemnitee in respect to such risk (other than in the case of a risk of criminal liability).
Any contest required pursuant to the preceding paragraph shall be conducted by Borrower in the name of Borrower, if permitted by law, with respect to (i) any claim which involves only Taxes or claims for which Borrower is required to indemnify hereunder, or (ii) any claim which can be segregated and contested separately without material adverse unindemnified consequences for such Indemnitee, provided, Borrower shall have acknowledged in writing its obligation to indemnify the applicable Indemnitee with respect to such contest without regard to the exclusions in Section 9.02(a)(i) through (xi). Any other contest shall be at the control and discretion of the Indemnitee. If Borrower satisfies the conditions imposed on it in this Section 9.02(b) and an Indemnitee nevertheless fails to contest and refuses to permit Borrower to contest under and as and to the extent required by this Section 9.02(b), then Borrower shall not be obligated to indemnify such Indemnitee for such claim or for any other claim for which a successful contest is adversely affected in any material respect because of such failure to contest or to permit a contest. In addition, the Indemnitee shall not settle, concede, or compromise any contest without Borrowers prior written consent unless the Indemnitee forgoes its right to be indemnified for such claim, and any such settlement, concession, or compromise without the prior written consent of Borrower shall constitute a waiver of such Indemnitees rights to indemnification hereunder with respect to such claim and any other related claim for which a successful contest is adversely affected in any material respect because of such settlement, concession, or compromise. If the settlement proposal of a claim is acceptable to the Indemnitee but is unacceptable to Borrower, Borrower shall inform such Indemnitee of the amount for which Borrower would be willing to settle such claim and such Indemnitee may accept the settlement
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[Credit Agreement]
proposal; provided, that the amount of any indemnity payment which Borrower shall be required to pay to such Indemnitee under Section 9.02(a) in respect of such claim shall not exceed the amount for which Borrower would have been willing to settle such claim. Such Indemnitee shall promptly return such portion of any amounts (including any gross up paid thereon, but excluding the expense of contest), previously advanced by Borrower for the payment of the Taxes which were the subject of the contest, as exceeds the amount to which Borrower did not withhold its consent. If Borrower notifies such Indemnitee that the settlement proposal is unacceptable to Borrower, the Indemnitee shall treat such notification as Borrowers request that such Indemnitee contest such claim for Taxes, in which case Borrowers and such Indemnitees rights and obligations with respect to such taxes shall be as provided in this Section 9.02(b) without regard to the settlement proposal. An Indemnitee will not be required to appeal any decision to the United States Supreme Court or any similar court in a jurisdiction outside the United States.
If any Indemnitee actually obtains a refund (or would have actually received such a refund but for offset by matters not indemnifiable by Borrower under Section 9.02(a)) of all or any part of any Tax paid or reimbursed by Borrower, such Indemnitee shall promptly pay to Borrower the amount equal to the lesser of (x) the amount of such refund (or the amount of such offset) plus any interest thereon (less any Taxes imposed on such Indemnitee with respect to such interest) received from the relevant taxing authority (or which would have been received with respect to the amount of such an offset) plus the amount of any Tax benefits realized by such Indemnitee as a result of such payment (and net of any net Tax detriment resulting from the receipt of the refund and interest on the refund (after giving effect to such Indemnitees obligations to make payments to Borrower under this sentence)), and (y) the sum of (i) such Tax payment by Borrower to such Indemnitee plus (ii) any interest received by such Indemnitee with respect to such refund or offset plus (iii) any other payment other than the expenses of the contest by Borrower to such Indemnitee theretofore made (and not theretofore repaid to Borrower) pursuant to this Section 9.02(b), it being intended that such Indemnitee shall be entitled to a net tax benefit pursuant to this Section 9.02(b) only if Borrower has been reimbursed for any payments by it to such Indemnitee pursuant to this Section 9.02(b); provided, (a) such amount shall not be payable before such time as Borrower shall have made all payments or indemnities then due and owing to such Indemnitee by Borrower pursuant to the Basic Documents, (b) no Specified Default shall exist, and (c) the amount of such payment by the Indemnitee with respect to a Tax paid or indemnified by Borrower hereunder, together with all payments previously made to Borrower by the Indemnitee with respect to such Tax, shall not exceed the aggregate amount paid by Borrower to the Indemnitee with respect to such Tax pursuant to Section 9.02(a) other than the expenses of the contest. Any subsequent loss or disallowance of such refund (as a result of a redetermination of the claim giving rise to such refund by any taxing authority or as a result of a judicial proceeding with respect to such claim) or tax benefit shall be treated as a Tax subject to indemnification under Section 9.02(a) without regard to the exclusions in Section 9.02(a) and the provisions of this Section 9.02(b). If an Indemnitee receives an award of attorneys fees in a contest for which Borrower has paid an allocable portion of the contest expenses, such Indemnitee shall pay to Borrower that portion of the award that is directly related to the issues contested with respect to a Tax indemnified under this Section 9.02, taking into account the rules applicable to obtaining such an award and any decision of the court in making such award.
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Nothing in this Section 9.02 shall require any Indemnitee to contest or permit the contest of a claim which it would otherwise be required to contest pursuant to this Section 9.02 if such Indemnitee waives payment by Borrower of (x) any amount that might otherwise be payable by Borrower under this Section 9.02 by way of indemnity in respect of such claim, and (y) any other amount that might otherwise be payable by Borrower by way of indemnification in respect of any other claim for which a successful contest is adversely affected in any material respect because of such failure to contest. In such event, such Indemnitee shall reimburse Borrower for all amounts paid by or on behalf of Borrower with respect to such non-contested claim other than the expenses of the contest.
(c) Payments and Repayments. All Taxes shall be paid when due and payable to the appropriate taxing authority, and all amounts payable as indemnities pursuant to this Section 9.02 shall be payable, to the extent not theretofore paid, within ten (10) Business Days of written demand by the appropriate Indemnitee (which demand shall include the basis for the indemnity and its computation, each in reasonable detail), except that Taxes being contested pursuant to Section 9.02(b) shall not be required to be paid, subject to clause (y) in the second paragraph of Section 9.02(b), before such contest is finally resolved. If, for any reason, Borrower makes any payment with respect to any Taxes imposed on any Indemnitee in respect of the transactions contemplated by the Basic Documents or on any Engine Kit, which Taxes are not the responsibility of Borrower with respect to such Indemnitee under this Section 9.02, then such Indemnitee shall pay to Borrower within ten (10) Business Days of Borrowers demand therefor an amount that equals the amount paid by Borrower with respect to such Taxes, plus interest at the Interest Rate from the date paid by Borrower to the date repaid to Borrower by such Indemnitee.
(d) Reports and Returns. If any report or return is required to be made with respect to any of Borrowers obligations under this Section 9.02, Borrower shall in a timely and proper fashion, (x) to the extent required or permitted by law, make and file in its own name such return or report, and (y) in the case of any such return or report required to be made in the name of any Indemnitee, inform such Indemnitee of such fact and prepare such return or report for filing by such Indemnitee in a manner reasonably acceptable to the Indemnitee or, where such return or report is required to reflect items in addition to any obligations of Borrower under or arising out of this Section 9.02, provide such Indemnitee with information sufficient to permit such return or report to be properly made with respect to any obligations of Borrower under this Section 9.02 no later than thirty (30) days prior to the filing date of such return or report. Each Indemnitee shall provide to Borrower such information within that Indemnitees possession or control as is reasonably necessary for Borrower to complete and file any such report or return properly.
(e) Receipts and Records. Borrower shall use reasonable efforts to obtain official receipts indicating the payment of all Taxes that are subject to indemnification under this Section 9.02 and that are paid by Borrower, and shall promptly on request send to the Indemnitee each such receipt obtained by Borrower. Within a reasonable time after Borrower receives from an Indemnitee a written request for specified information or copies of specified records reasonably necessary to enable an Indemnitee to fulfill its Tax filing, Tax audit or other Tax obligations or to contest Taxes imposed upon it, Borrower shall provide such information or copies of such records to the requesting party.
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(f) Borrower a Primary Obligor. Borrowers obligations under the indemnities provided for in this Agreement are those of a primary obligor whether or not the Indemnitee is also indemnified against the same matter under any other Basic Document or any other document or instrument, and the Person seeking indemnification from Borrower may proceed directly against Borrower without first seeking to enforce any other right of indemnification.
(g) Payments on After-Tax Basis. Each payment and indemnity under this Section 9.02 shall be made on an After-Tax Basis; provided, that if any Indemnitee realizes any credits, deductions, or other tax benefits (or would have realized such a benefit if properly claimed) by reason of such payment or indemnity or, to the extent not otherwise taken into account in the computation of such payment or indemnity, as a result of the imposition or payment of any Tax with respect to which an indemnity has been paid hereunder, such Indemnitee shall pay to Borrower an amount equal to the lesser of (1) the sum of the amount by which such credits, deductions, and other tax benefits reduces the Taxes of such Indemnitee plus any tax benefit realized minus any tax detriment realized as the result of any payment made pursuant to this proviso, and (2) the amount of such payment by Borrower to or for the account of such Indemnitee plus the amount of any other payments (other than the expenses of the contest) by Borrower to or for the account of such Indemnitee theretofore made (and not theretofore repaid to Borrower pursuant to this Section 9.02(g), it being intended that no Indemnitee should be entitled to a net tax benefit pursuant to this Section 9.02(g) unless Borrower shall concurrently be made whole for any payments made by it to such Indemnitee pursuant to this Section 9.02(g)); provided, further, that any amount otherwise due to Borrower pursuant to this sentence shall be withheld to the extent of any payment or indemnity then due from Borrower to or on behalf of such Indemnitee pursuant to the Basic Documents and not made (and any amount so withheld shall not be payable before such time and to such extent as Borrower shall have made such payments or indemnities), and provided, further, no Specified Default shall exist. Any Taxes that are imposed on any Indemnitee as a result of the disallowance or reduction of a tax benefit referred to in the first sentence of this Section 9.02(g) in a subsequent taxable year shall be indemnifiable pursuant to this Section 9.02 (without regard to the exclusions in Section 9.02(a) and the provisions of Section 9.02(b)). Notwithstanding anything contained herein or elsewhere in any Basic Document, neither Borrower nor any other Person shall have any right to inspect any Lenders tax returns, books, records or other documents.
In determining the order in which any Indemnitee utilizes withholding or other foreign taxes as a credit against such Indemnitees United States income taxes, such Indemnitee shall be deemed to utilize (i) first, all foreign taxes other than those described in clause (ii) below; provided, that such other foreign taxes which are carried back to the taxable year for which a determination is being made shall be deemed utilized after foreign taxes described in clause (ii) below, and (ii) then, on a pro rata basis, all foreign taxes with respect to which such Indemnitee is entitled to obtain indemnification pursuant to an indemnification provision contained in any loan agreement or other financing document (including this Agreement) that is similar to the indemnification provision in this Section 9.02.
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(h) Interest. Borrower will pay to each Indemnitee, on demand, to the extent permitted by applicable law, interest at the Default Rate on the amount of any indemnity not paid when due pursuant to this Section 9.02, until it is paid (such default interest to be compounded on a quarterly basis until such payment). Such interest shall be paid in the same manner as the unpaid amount on which it is due. An Indemnitee will pay to Borrower, on demand, to the extent permitted by applicable law, interest at the Default Rate on the amounts of any payment required hereunder to be made by such Indemnitee to Borrower not paid when due pursuant to this Section 9.02, until it is paid (such default interest to be compounded on a quarterly basis until such payment).
(i) Survival. All indemnities, obligations, adjustments, and payments provided for in this Section 9.02 shall survive, and remain in full force and effect, notwithstanding the expiration or other termination of this Agreement or any other Basic Document. The obligations of Borrower in respect of all such indemnities, obligations, adjustments, and payments are made for the benefit of, and shall be enforceable by, the Indemnitee entitled thereto, without declaring any Basic Document to be in default or taking any other action hereunder or thereunder, and notwithstanding any provision of any other Basic Document.
(j) Required Forms. Borrower agrees, to the extent required by applicable law, to withhold from each payment due hereunder or under any Note United States federal withholding Taxes at the appropriate rate, and, on a timely basis, to deposit such amounts with an authorized depository and make such reports, filings, and other reports in connection therewith, and in the manner, required under applicable law. Borrower shall furnish no later than March 15 of each year to each Lender a U.S. Treasury Form 1042S (or similar forms at any relevant time in effect), if applicable, indicating payment in full of any Taxes withheld from any payments by Borrower to such Lender together with all such other information and documents reasonably requested by such Lender and necessary or appropriate to enable such Person to substantiate a claim for credit or deduction with respect thereto for income tax purposes of any jurisdiction with respect to which such Person is required to file a tax return. Provided that each Lender which is a non-U.S. Person has furnished to Borrower (aa) two complete original signed copies of Internal Revenue Service Form W-8BEN or W-8EXP (or similar forms at any relevant time in effect) evidencing such Lenders qualification for a complete exemption from withholding of United States federal income tax on payments made under any Note during the taxable year of such Lender to which such Form W-8BEN or W-8EXP relates, (bb) two complete original signed copies of Internal Revenue Service Form W-8BEN (or similar forms at any relevant time in effect) evidencing such Lenders qualification for a reduction of, or complete exemption from, withholding of United States federal income tax on all payments made under any Note on the basis of any treaty between the United States and the country in which such Lender is a resident (or under the laws of which such Lender is entitled to the benefits of such treaty) during the taxable year of such Lender to which such Form W-8BEN relates, or (cc) two complete original signed copies of Internal Revenue Service Form W-8ECI (or similar forms at any relevant time in effect) evidencing the Lenders complete exemption from withholding of United States federal income tax on interest payments made under and any Note during the taxable year of such Lender to which such Form W-8ECI relates, and provided Lender has furnished to Borrower two complete original signed copies of Internal Revenue Service Form W-8BEN, W-8EXP or Form W-8IMY (or similar forms at any relevant time in effect) with all required attachments, in the event such forms become applicable, then no amount or only the reduced amount required by applicable law shall be withheld from payments under
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the Notes held by such Lender in respect to United States federal income tax. Each Lender shall indemnify and hold harmless (on an After-Tax Basis) and Borrower against any claim for United States withholding Taxes which Lender improperly fails to withhold on payments to such Lender as a direct result of the failure by such Lender to provide the required certificate or Form or the invalidity of any certificate or Form provided by such Lender pursuant to this Section 9.02(j) (and providing such a certificate or Form shall constitute a representation of the relevant Lender as to such Lenders qualification for complete exemption from United States federal gross income tax withholding or, in the event of a Change in Law for which Borrower is obligated to hold harmless the Lender pursuant to this Agreement, for partial exemption from such withholding),If a payment made to a Lender under any Basic Document would be subject to United States federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrower at the time or times prescribed by applicable law and at such time or times reasonably requested by Borrower, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower as may be necessary for Borrower to comply with its obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment.
10. YIELD PROTECTION; ILLEGALITY
Section 10.01 Additional Costs.
(a) Borrower shall pay directly to each Lender from time to time such amounts as are necessary to compensate such Lender, on an After-Tax Basis, for any costs which are attributable to its purchase of any Notes hereunder (and reasonably allocable to such purchase, vis-à-vis all that Lenders other purchases of a similar type), or any reduction in any amount receivable by such Lender in respect of any of such Notes, resulting from any Regulatory Change which imposes or modifies any reserve, special deposit, minimum capital, capital ratio. or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender, or changes in interpretation of such requirements or other similar measures effectively imposed or directed by public controlling bodies. Each Lender will notify Borrower of any event occurring after the date of this Agreement which will entitle that Lender to compensation pursuant to this Section 10.01(a) as promptly as practicable after it obtains knowledge thereof, if it determines to request such compensation. Each Lender will furnish Borrower with a certificate setting forth the basis and amount of each request by such Lender for compensation under this Section 10.01(a). No indemnity shall be payable under this Section 10.01: (aa) for any costs accruing earlier than thirty (30) days prior to the date of such notice by such Lender to Borrower, or incurred as a result of such Lenders failure to give notice as promptly as required by this Section 10.01(a), (bb) unless such Lender is seeking similar compensation for such costs from its borrowers generally in connection with comparable loan financings, or (cc) to any successor Lender or to the extent caused by a Lenders relocation or by its voluntary relocation of its Note(s) in either case to a jurisdiction other than the United States, Australia, Austria, Canada, England, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Sweden, or Switzerland, which (due to a then-existing Regulatory Change, or then-enacted future Regulatory Change) would require indemnification under this Section 10.01 to a greater extent than would the previous jurisdiction, or (dd) to the extent the costs are specific to the Lender and not commercial banks or insurance companies in general in the applicable jurisdiction.
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(b) Without limiting the effect of Section 10.01(a) (but without duplication), Borrower shall pay to each Lender on the first Business Day after the last day of each Interest Period, so long as such Lender maintains reserves (including any marginal, supplemental, or emergency reserves) against Eurocurrency liabilities under Regulation D, an additional amount notified to Borrower by such Lender (which notice shall set forth in reasonable detail the basis for the determination of such amount), by not later than the last day of such Interest Period, equal to the product of the following for each day during such Interest Period:
(1) the principal amount of such Lenders Floating Rate Notes outstanding on such day; times
(2) the remainder (expressed as a decimal) of (x) a fraction, the numerator of which is LIBOR for such day (expressed as a decimal), and the denominator of which is one minus the interest rate (expressed as a decimal) at which such Lender maintains such reserves on such day, minus (y) such numerator; times
(3) 1/360
(c) Determinations and allocations by any Lender for purposes of this Section 10.01 of the effect of any Regulatory Change pursuant to Section 10.01(a) or (b) on such Lenders costs or rate of return of maintaining any Note, or on amounts receivable by it in respect of any Note, and of amounts required to compensate such Lender under this Section 10.01, shall be made by such Lender reasonably and in good faith and shall be conclusive.
Section 10.02 Breakage Costs; Prepayment Premium.
(a) Borrower shall pay to each Lender, upon such Lenders request, such amount as is sufficient, in such Lenders reasonable opinion, to compensate it for any loss, cost or expense which is attributable to:
(1) any payment, prepayment or purchase of any Floating Rate Note in which such Lender has any interest for any reason (including the acceleration of the maturity of any Floating Rate Notes pursuant to Section 8.02, and the prepayment of any Floating Rate Note pursuant to Section 4.02 or 4.03, but excluding any other transfer of any Floating Note by any Lender, other than a sale or other transfer as a result of, or in connection with the exercise of remedies during the continuance of, an Event of Default, pursuant to an Event of Loss, or at Borrowers request or direction, or as required by any of the Basic Documents) on a date other than Payment Date; or
(2) any failure by Initial Lender (because of a non-satisfaction of any of the conditions precedent specified in Section 7.01 or 7.02) to purchase any Floating Rate Note on a scheduled Funding Date specified by Borrower to Initial Lender;
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provided that, in the case of the Initial Lender, the Initial Lenders loss, cost or expense relating to any of the foregoing events shall be deemed to be an amount equal to the Initial Lenders Breakage Costs.
Such amount payable by Borrower (x) shall not include losses, costs, or expenses attributable to any date more than one hundred eighty (180) days after the date of such payment or purchase or such Funding Date, and (y) shall be determined by the affected Lender reasonably and in good faith, which determination shall be conclusive, absent manifest error.
(b) Upon any prepayment of any Fixed Rate Note under Section 4.02 or 4.03 or acceleration of the maturity of a Fixed Rate Note under Section 8.02, in addition to the amounts payable under such section, Borrower shall pay a prepayment premium equal to the excess, if any, of (i) the present value of foregone scheduled principal and interest payments for the principal indebtedness prepaid discounted at a rate equal to the sum of (a) the interpolated semi-annual rate to swap floating rate debt to fixed rate debt (offer side) for loans with a maturity closest to the remaining weighted average life to maturity of the remaining outstanding principal amount of such Fixed Rate Note, at 11:00 a.m. New York City time, two (2) Business Days prior to the relevant date of determination thereof (such rate to be obtained from the Bloomberg page IRSB (US Semi 30/360 column 2 (Ask)) or any substitute or replacement page providing the same service) and (b) 0.50% per annum, over (ii) the amount of principal prepaid; provided that, no such amount shall be less than zero;. Such affected Lender will provide Borrower with a certificate setting forth in reasonable detail the basis for and amount of such Lenders request for compensation.
Section 10.03 Illegality. If any change in any applicable state, federal or provincial law or in any interpretation or administration thereof by any governmental authority, central bank, or comparable agency in the United States or Canada charged with the interpretation or administration thereof, shall make it unlawful or contrary to such interpretation or administration for any Lender to make, fund, maintain or hold any of its Note(s) under the Basic Documents (each such event being an Illegality Event), then such Lender shall promptly notify Borrower thereof in writing, and such Lenders obligation to purchase any additional Notes shall be suspended until that Lender may again make, fund, maintain, and hold Notes under the Basic Documents.
Section 10.04 Mitigation. If any Lenders Notes become eligible for compensation pursuant to Section 10.01(a) or (b) or any Lenders obligations to purchase Notes is suspended under Section 10.03 (Notes of such type being herein called Affected Notes), then such Lender (other than the Initial Lender) will promptly designate a different lending office for booking its holdings of Affected Notes, or transfer such Affected Notes to another of its branches or affiliates, if such designation or transfer would eliminate or reduce Borrowers payment obligations under Section 10.01(a) or (b) or would eliminate the application of Section 10.03 as to any of its Affected Notes and, in either case, would not have materially disadvantageous regulatory or tax consequences to such Lender uncompensated for by Borrower reasonably determined by such Lender in good faith; provided that, notwithstanding the foregoing, the Lender shall not be obligated to take any action that would, in its reasonable judgment, cause such Lender to incur any loss or cost reasonably deemed by such Lender to be material, unless Borrower agrees to reimburse Lender hereunder. To the extent that any such designation or
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transfer does not eliminate such compensation or suspension, such Lender and Borrower shall negotiate in good faith to arrive at a substitute rate. Upon the determination of a substitute rate, the suspension of such Lenders obligation to purchase any Affected Notes shall terminate; and interest on such Affected Notes shall (but only to the extent held by such Lender) accrue at such substitute rate instead of the interest rate(s) at which such Affected Notes would have otherwise accrued. For the avoidance of doubt, if such Lender and Borrower cannot arrive at a substitute rate, then Borrower shall compensate the Lender pursuant to Section 10.01(a) and (b), or such Lenders obligations to purchase Notes shall remain suspended under Section 10.03, as the case may be, and, in addition to Borrowers rights under Section 13.06(b), (x) in the case of such Lenders Notes becoming eligible for compensation under Section 10.01(a) or (b), Borrower shall have the right to prepay such Notes, if any, on and subject to the terms of Section 4.02, provided that no prepayment premium under Section 10.02(b) shall be payable in connection therewith and (y) in the case of an Illegality Event under Section 10.03, Borrower shall prepay such Lenders Notes, together with accrued and unpaid interest on the principal of such Notes to the date of such prepayment and all other amounts then due and payable to such Lender with respect to such Notes, but excluding any amounts payable under Section 10.02, with such prepayment under this clause (y) to be made to such Lender within thirty (30) days of the date of the notice referenced in Section 10.03.
11. [INTENTIONALLY OMITTED.]
12. [INTENTIONALLY OMITTED.]
0. MISCELLANEOUS
Section 13.01 No Waivers; Cumulative Remedies. No failure or delay in exercising any power or right under any Basic Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power preclude other or further exercise thereof or the exercise of any other right or power under any Basic Document. No notice to or demand on any party in any case shall, of itself, entitle such party to any other or further notice or demand in similar or other circumstances.
Section 13.02 Notices. All communications and notices provided for under this Agreement shall be in writing (including telecopies), shall be in English, shall be effective on delivery, and shall be addressed as follows (or to such other address as any such party shall designate by notice to each other such party):
if to Borrower: |
Mesa Airlines, Inc. 410 N. 44th Street Suite 700 Phoenix, Arizona 85008 Attention: President and CFO (with a copy to Vice President and General Counsel) Fax: (602) 685-4352 |
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if to Initial Lender: |
Export Development Canada 150 Slater Street Ottawa, Ontario Canada KlA 1K3 Attn: Loans Services & Credit Risk Management Transportation Fax: (613) 598-2514 and (613) 598-3186 |
Wherever notice, notify, or similar variations are used in the Basic Documents, they mean the provision of a Notice in accordance with this Section 13.02.
Section 13.03 Transaction Expenses. Borrower will pay on demand all reasonable out-of-pocket expenses in connection with the negotiation, preparation, execution, delivery, and enforcement of the Basic Documents, or in connection with any scheduled closing that is postponed or cancelled, including (a) all reasonable fees and expenses actually incurred of Vedder Price P.C., special counsel to the Initial Lender, (b) all fees and expenses (including legal fees and expenses) of each Lender in connection with actual or proposed amendments, waivers, or consents to or under this Agreement or the other Basic Documents (except for such amendments, waivers, or consents initiated by any Lender ); and (c) all fees and expenses (including reasonable legal fees and expenses) of each Lender in connection with the actual or proposed enforcement of any Basic Document against Borrower during the existence of any Specified Default. The legal fees and expenses of the Lenders referred to in clauses (b) and (c) may not include those of a Lenders in-house counsel. All reimbursable expenses shall be payable to Lender, as applicable, within thirty (30) days after Borrower receives bills or invoices showing in reasonable detail the components of such expenses (for law firm bills, time expended by attorney or paralegal and expenses by category). Borrower shall not be responsible for any fees or expenses of counsel to the Lenders other than those described in the first sentence of this Section 13.03.
Section 13.04 Amendments. Any provision of the Basic Documents, other than the Purchase Agreement may be amended, terminated, waived, or otherwise modified only in writing by Borrower, and a Majority in Interest of Lenders, and any such amendment, termination, waiver, or other modification shall bind all of the Lenders to the same extent and with the same effect as if each Lender had joined therein. Notwithstanding the foregoing, no amendment, modification, or waiver of the Basic Documents shall, unless in writing and signed by each Lender, be effective to (a) subject such Lender to any additional obligation, (b) reduce the principal of or interest on such Lenders Notes, or any other amounts payable to such Lender hereunder (whether under Section 9 or otherwise), or change the ratable distribution of funds received by Lenders hereunder (including under Section 4 hereof), (c) postpone any date fixed for any payment of the principal of, or interest on, such Lenders Notes or any other amounts payable to such Lender hereunder, (d) amend, modify, or waive this Section 13.04, or (e) increase the Financed Amount.
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Section 13.05 Successors and Assigns.
(a) Binding Effect; Consent to Assignment. This Agreement shall bind and benefit each Lender, and Borrower and their successors and assigns, except that Borrower may not assign or transfer its rights under this Agreement without Lenders prior written consent.
(b) Limitations on Transfers. No Lender shall assign, convey, or otherwise transfer any of its interest in the Basic Documents, or offer to do any of the foregoing, (1) in any manner that would result in a violation of 49 U.S.C. subtitle VII, or the Securities Act of 1933, (2) to any ERISA Source of Funds, or (3) to any airline, any airframe manufacturer or engine manufacturer, or any affiliate of an airline or airframe manufacturer or engine manufacturer. A transferring Lender shall provide prior written notice of any transfer (other than the purchase of insurance or reinsurance) to Borrower.
(c) Transfer. Initial Lender shall maintain at its office a register for the purpose of registering transfers and exchanges of registered Notes and in which shall be entered the names and addresses of the owners of such registered Notes and particulars of the registered Notes owned by them. The holder of any registered Note wishing to transfer such Note shall give at least ten (10) Business Days prior written notice thereof to Initial Lender and Borrower and shall, in person or by a duly authorized attorney, surrender to Borrower at its office such Note, duly endorsed by the registered holder or such attorney, or accompanied by a written instrument of transfer duly executed by the registered holder or by such attorney, in form reasonably satisfactory to Initial Lender, but, in any event, upon issuance of a new Note, such surrendered Note shall be of no further force and effect and Borrower shall have no further obligations thereunder. Upon presentation to Borrower of any Note for transfer, Borrower will execute and deliver to the transferee thereof in exchange therefore a new Note or Notes of the same series and in the same aggregate principal amount and with the same terms as the Note so surrendered, in registered form and in any denomination of $500,000 or more (or the aggregate principal amount of all Notes of such series held by such transferee, whichever is less) as is specified in such instrument of transfer. Nothing in this paragraph shall be interpreted as giving any Lender the right or power to transfer one or more of its Notes or to transfer any right or interest in such Notes to another Person in contravention of Section 13.05(b) without Borrowers prior written consent.
(d) Exchange. The holder of one or more Notes may at any time surrender such Note or Notes for exchange at Initial Lenders office and shall be entitled to receive in exchange therefor a new Note or Notes, of the same series and in the same aggregate principal amount with the same terms as the Note or Notes surrendered, in registered form and in any denomination of $500,000 or more (or the aggregate principal amount of all such Notes of the same series held by such holder, whichever is less).
(e) Effect of Transfer or Exchange. All Notes issued upon any transfer or exchange of Notes shall be the valid obligations of Borrower evidencing the same respective obligations, and entitled to the same security and benefits under this Agreement, as the Notes surrendered upon such transfer or exchange. Initial Lender shall make a notation on each new Note of the date to which interest on the replaced Note(s) has been paid.
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Evidence of Ownership. Initial Lender and Borrower shall deem and treat the Person in whose name any registered Note is registered as the absolute owner and holder of such Note for the purpose of mailing payment of all amounts payable by Borrower with respect to such Note and for all other purposes, and Initial Lender and Borrower shall not be affected by any notice to the contrary.
(g) Expenses, Taxes, etc. The transferring or exchanging Lender shall pay all expenses incurred in connection with the transfer or exchange of a Note, including Borrowers and Initial Lenders expenses (including legal fees), stamp taxes, transfer taxes, sales taxes, governmental fees and charges, brokers fees and commissions, any other fees and charges of the same or similar type as any of the foregoing, and other fees and expenses associated with amendments, supplements, waivers, or consents required as a result of any transfer or sale of a Note after the initial issuance on the Funding Date. In addition, for any transfer or exchange of a Note, Borrower may require the transferor to pay a sum sufficient to cover any stamp tax or other governmental charge connected therewith.
(h) No Transfer Within Three Days Before Payment Date. The Initial Lender shall not be required to transfer or exchange any Note during the three-day period preceding a Payment Date.
Section 13.06 Initial Lenders Representations, Warranties and Agreements. (a) Initial Lender represents and warrants that:
(i) it is a corporation established by an Act of the Parliament of Canada, and has all corporate power, authority, and legal right under the laws of Canada to execute, deliver, and carry out the terms of each of the Basic Documents to which it is a party as Lender;
(ii) it has duly authorized the execution and delivery of this Agreement and the other Basic Documents to which it is a party as Lender;
(iii) it is acquiring its interest in any Notes for its own account and not with a view to resale; provided, that any resale is in its sole discretion; and
(iv) no part of the funds used by it to purchase its Notes hereunder shall constitute the assets of any employee benefit plan within the meaning of ERISA or any plan as such a term is defined in Section 406 of ERISA or Code Section 4975.
(b) Each Lender hereby agrees that if (i) such Lender asserts a claim against Borrower for compensation under Section 9.02, (ii) such Lenders Notes become eligible for compensation pursuant to Section 10.01 or (iii) Borrower is required to prepay such Lenders Notes pursuant to Section 10.04 due to an Illegality Event under Section 10.03, Borrower shall have the right (in the case of clause (iii) above, prior the date on which Borrower is required to prepay any such Notes pursuant to Section 10.04) to cause a reputable financial institution designated by Borrower to purchase such Notes, for an amount equal to the unpaid principal amount of such Notes, together with all accrued but unpaid interest thereon through the date of purchase, and concurrently therewith Borrower shall pay to such Lender all amounts payable under Section 10.02 as if such purchase were a prepayment (but without any prepayment
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premiums in the case of any Notes accruing indemnifiable withholding taxes under Section 9.02 or any Notes subject to Section 10.04) plus all other amounts then due and payable to such Lender with respect to such Notes (provided, that (x) no Lender shall be required to make any representation or warranty in connection with such sale (other than that it holds title to the pertinent Note), nor to take any action prohibited by applicable law, and (y) Borrower shall indemnify and hold harmless each Lender against any expense, Liability, or Tax arising from any such sale).
Section 13.07 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY). EACH PARTY HERETO (1) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (2) ACKNOWLEDGES THAT IT AND OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 13.08 Headings. The section headings used in this Agreement are for convenience only and are not a substantive part of this Agreement.
Section 13.09 Execution in Counterparts. This Agreement may be executed in separate counterparts.
Section 13.10 Survival of Representations and Warranties. All representations and warranties contained in this Agreement or made in writing in connection with this Agreement shall survive the execution and delivery of this Agreement.
Section 13.11 Severability. Any provision hereof prohibited by or unlawful or unenforceable under any applicable law of any jurisdiction shall be ineffective in such jurisdiction without modifying the remaining provisions of this Agreement or its effectiveness in any other jurisdiction. Where, however, the provisions of such applicable law may be waived, they are hereby waived by the parties hereto to the full extent permitted by law, to the end that this Agreement shall be a valid and binding agreement enforceable in accordance with its terms.
39
[Credit Agreement]
Section 13.12 Confidentiality. Each party hereto agrees that it will not disclose, directly or indirectly, to any person not a party hereto or their respective counsel or advisors any information obtained from Borrower hereunder or in connection herewith or any portion of any Basic Document not filed with any governmental agency or authority and available for public inspection, and will use all reasonable efforts to have all such information kept confidential and not used in any way known to such party to be detrimental to Borrower, except that (a) each party may use, retain, and disclose any such information to its special counsel, financial advisors, and public accountants, any potential transferees, any Affiliate, and any governmental agency or instrumentality or other supervisory body (including bank regulators) requesting such disclosure or pursuant to its regulatory or supervisory authority over such party or any Affiliate thereof, provided that such special counsel, financial advisors, public accountants, or potential transferees agree in advance to keep such information confidential, (b) each party may use, retain, and disclose any such information that has been publicly disclosed (other than by such party or any Affiliate thereof in breach of this paragraph) or has rightfully come into the possession of such party or any Affiliate thereof (other than from Borrower) on a non-confidential basis, (c) each party may use, retain, and disclose any such information as required by law, rule, regulation, judicial or administrative process, or any governmental agency, or to the extent required pursuant to Canadas or Initial Lenders international commitments (including, without limitation, as to Initial Lender, any requirement that such information be disclosed by virtue of Initial Lenders status as an agent of Her Majesty in Right of Canada or by virtue of any law, regulation, order-in-council, court or administrative order, or Canadian government policy or by virtue of any international agreement to which the Government of Canada or Initial Lender is a party, and including, without limitation, in respect of the Organisation for Economic Co-operation and Development (OECD) including Appendix V of the Sector Understanding of Export Credits for Civil Aircraft and the WTO Subsidies and Countervailing Measures Agreement or Canadian government policy), (d) each party may use, retain, and disclose any such information where such information was previously known to the subject party free of any obligation to keep it confidential, (e) each party may use, retain, and disclose any such information to third parties in connection with or in response to any order, decree, judgment, subpoena, notice of discovery, or similar ruling or pleading (provided, that each party shall endeavor in good faith to prevent the disclosure of such information pursuant to any such order, decree, judgment, subpoena, notice of discovery, or similar ruling or pleading) or as part of its normal reporting or review procedure to its auditors, regulators, parent company, or Affiliates, (f) each party may use, retain, and disclose any such information to the extent necessary to obtain appropriate insurance or in order to enforce its rights and performance obligations pursuant to the Basic Documents and (g) Initial Lender shall be entitled to disclose any matters in relation to the transactions contemplated herein to the government of Canada (but Initial Lender must request confidential treatment thereof) and shall be entitled to make publicly available the following information: the name of the Borrower, the financial service provided by the Lender, the dates of the Basic Documents, a general description of the commercial transaction (including country) contemplated hereby, the amount of support in the approximate Canadian dollar range, and the name of the exporter. For any breach of the foregoing covenants, the injured party shall be entitled to injunctive relief or any other legal or equitable remedies available, including the recovery of damages suffered as a result of such breach, but no such breach shall constitute an Event of Default under the Basic Documents.
40
[Credit Agreement]
Notwithstanding any other provision herein to the contrary, Borrower and each Lender (and each employee, representative, or other agent of any thereof) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by the Basic Documents (including any fact relevant to understanding the federal income tax treatment of such transactions) and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment or tax structure.
Section 13.13 Dollars. All payments due and payable hereunder shall be made in Dollars.
Section 13.14 Commitment Fee. The Borrower shall pay to the Lender an on-going, non-refundable commitment holding fee (the Commitment Fee) in Dollars in an amount equal to 0.20% per annum accruing on the uncancelled and undisbursed balance from time to time of the Commitment, computed on the basis of a 360-day year and the actual number of days elapsed (including the first day but excluding the last day), accruing from the date hereof until the earlier of (i) the date the Commitment is fully disbursed or (ii) the date the undisbursed portion of the Commitment is canceled by either party. The Commitment Fee shall be payable on February 5, May 5, August 5 and November 5 of each year and shall be prorated for any partial month. Upon ten (10) Business Days prior written notice to the Lender, Borrower may cancel all or any part of the undisbursed portion of the Commitment.
Section 13.15 Arrangement Fee. The Borrower agrees to pay on each Funding Date to the Initial Lender an arrangement fee (the Arrangement Fee) in an amount equal to 0.25% of the Financed Amount advanced on such Funding Date. The Arrangement Fee shall be payable in immediately available funds and shall be non-refundable.
Section 13.16 Entire Agreement. This Agreement constitutes the entire contract between the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
* * *
41
[Credit Agreement]
IN WITNESS WHEREOF, Borrower and Lender have executed this Credit Agreement.
MESA AIRLINES, INC.,
Borrower |
||
By: |
|
|
Brian S. Gillman | ||
Title: | EVP & General Counsel |
EXPORT DEVELOPMENT CANADA,
Lender |
By: | ||
Title: |
By: | ||
Title: |
[Credit Agreement]
IN WITNESS WHEREOF, Borrower and Lender have executed this Credit Agreement.
MESA AIRLINES, INC.,
Borrower |
By: | ||
Title: |
EXPORT DEVELOPMENT CANADA,
Lender |
||
By: |
|
|
Title: |
Aaron Sapelak Financing-Manager |
|
By: | ||
Title: |
Ryan Smith Financing Manager |
[Credit Agreement]
EXHIBIT A
FORM OF FIXED RATE NOTE
THIS FIXED RATE NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS FIXED RATE NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE.
FIXED RATE NOTE
ISSUED IN CONNECTION WITH ONE CF34-8C5 ENGINE KIT (U. S .)
, 201
New York, New York
No. 1
The undersigned, MESA AIRLINES, INC., a corporation organized under the laws of the State of Nevada (Maker), for value received hereby promises to pay to or its registered assigns (Payee), at the principal sum of DOLLARS (US$ ), in currency of the United States of America, together with interest thereon, as hereinafter set forth. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Credit Agreement dated as of June 27, 2016 (Credit Agreement), between Maker, as Borrower, and Payee, as Lender.
The principal amount of this Fixed Rate Note shall be payable in installments to be due and payable on each Payment Date, each such installment to be in an amount equal to the amount set forth in Schedule I attached hereto and hereby incorporated herein by this reference, together with interest (calculated on the basis of a 360 day year of twelve thirty day months) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full at a rate of % per annum (the Fixed Rate), payable on each Payment Date and on (the Note Maturity Date). Notwithstanding the foregoing, the final payment shall be an amount sufficient to discharge in full the unpaid principal amount hereof and the accrued and unpaid interest, costs, fees, expenses and all other amounts payable hereunder and under the Credit Agreement, on the Note Maturity Date.
Any amount past due and at any time outstanding under this Fixed Rate Note shall bear interest, payable on demand, in accordance with the terms of Section 4.05 of the Credit Agreement.
Interest shall be calculated as provided for in the Credit Agreement. After giving effect to the adjustments required by the definition of Payment Date, if any payment due hereunder is scheduled to be paid on a day which is not a Business Day, such amount shall instead be made on the following Business Day (except that no additional interest shall accrue if the payment thereon is made on the following Business Day).
EXHIBIT A
Page 1
[Credit Agreement]
Principal and interest and other amounts due hereon shall be payable to Lender in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due and in accordance with the terms of the Credit Agreement. All amounts paid hereunder shall be applied in accordance with the terms of the Credit Agreement.
Each payment to be made on a Payment Date shall be due and payable immediately on such date, without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by Maker.
This Fixed Rate Note is one of the Notes referred to in, and is subject to, the Credit Agreement, which provides for the acceleration of the maturity of this Fixed Rate Note upon the occurrence of an Event of Default, and which provides for the prepayment of this Fixed Rate Note in certain circumstances pursuant to the terms of the Credit Agreement.
Every legal holder of this Fixed Rate Note shall have and may exercise all of the rights and powers given to Payee in this Fixed Rate Note.
This Fixed Rate Note is transferable by the registered owner hereof, or by its attorney duly authorized in writing, only on the register maintained by Initial Lender and only upon surrender and cancellation of this Fixed Rate Note and compliance with the conditions set forth in the Credit Agreement. Upon such transfer, a new registered Fixed Rate Note or Fixed Rate Notes for the same aggregate principal amount will be issued in exchange hereof in accordance with the terms of the Credit Agreement.
Maker of this Fixed Rate Note expressly waives presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect to this Fixed Rate Note or the performance of the obligations under this Fixed Rate Note or any guaranty of this Fixed Rate Note, if any. No renewal or extension of this Fixed Rate Note, no release or surrender of any security for this Fixed Rate Note or any guaranty of this Fixed Rate Note, if any, no release of any person primarily or secondarily liable on this Fixed Rate Note, including Maker and any endorser, if any, no delay in the enforcement of payment of this Fixed Rate Note, and no delay or omission in exercising any right or power under this Fixed Rate Note shall affect the liability of Maker or any endorser of this Fixed Rate Note.
No delay or omission by Payee in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any other power or right. The provisions of this Fixed Rate Note may be waived or amended only in a writing signed by Maker and Payee.
This Fixed Rate Note shall in all respects be governed by and construed in accordance with the laws of state of New York, including all matters of construction, validity and performance.
[Signature follows on next page]
EXHIBIT A
Page 2
[Credit Agreement]
IN WITNESS WHEREOF, Maker has executed this Fixed Rate Note as of the day of , 201.
MESA AIRLINES, INC. | ||
By: | ||
Name: | ||
Title: | ||
Maker |
EXHIBIT A
Page 3
[Credit Agreement]
SCHEDULE I
FIXED RATE - % PER ANNUM (INCLUSIVE OF THE PREMIUM RATE OF 2.81%
PER ANNUM AND THE MARGIN BENCHMARK OF 0.71% PER ANNUM)
Payment Date |
Principal Payment |
Interest Payment |
Total Payment |
|||
EXHIBIT A
Page 4
[Credit Agreement]
EXHIBIT B
FORM OF FLOATING RATE NOTE
THIS FLOATING RATE NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS FLOATING RATE NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE.
FLOATING RATE NOTE
ISSUED IN CONNECTION WITH ONE CF34-8C5 ENGINE KIT
$ (U.S.), 201
New York, New York
No. 1
The undersigned, MESA AIRLINES, INC., a corporation organized under the laws of the State of Nevada (Maker), for value received hereby promises to pay to or its registered assigns (Payee), at the principal sum of DOLLARS (US$ ), in currency of the United States of America, together with interest thereon, as hereinafter set forth. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Credit Agreement dated as of June 27, 2016 (Credit Agreement), between Maker, as Borrower, and Payee, as Lender.
The principal amount of this Floating Rate Note shall be payable in installments to be due and payable on each Payment Date, each such installment to be in an amount equal to the amount set forth in Schedule I attached hereto and hereby incorporated herein by this reference, together with interest (calculated on the basis of a 360 day year and the actual number of days elapsed) on the unpaid principal amount hereof from time to time outstanding from and including the date hereof until such principal amount is paid in full at a rate of the Floating Rate (inclusive of the Premium Rate and Margin Benchmark specified in Schedule I attached hereto), payable on each Payment Date and on , (the Note Maturity Date). Notwithstanding the foregoing, the final payment shall be an amount sufficient to discharge in full the unpaid principal amount hereof and the accrued and unpaid interest, costs, fees, expenses and all other amounts payable hereunder and under the Credit Agreement, on the Note Maturity Date.
Any amount past due and at any time outstanding under this Floating Rate Note shall bear interest, payable on demand, in accordance with the terms of Section 4.05 of the Credit Agreement.
Interest shall be calculated as provided for in the Credit Agreement. After giving effect to the adjustments required by the definition of Payment Date, if any payment due hereunder is scheduled to be paid on a day which is not a Business Day, such amount shall instead be made on the following Business Day, and interest shall accrue at the Floating Rate to the day of payment, unless the following Business Day occurs in the following calendar month, in which case such Payment Date shall instead occur on the preceding Business Day.
EXHIBIT B
Page 1
[Credit Agreement]
Principal and interest and other amounts due hereon shall be payable to Lender for the account of the Payee in immediately available funds and in Dollars, no later than 11:00 a.m. (New York City time) on the date when due and in accordance with the terms of the Credit Agreement. All amounts paid hereunder shall be applied in accordance with the terms of the Credit Agreement.
Each payment to be made on a Payment Date shall be due and payable immediately on such date, without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by Maker.
This Floating Rate Note is one of the Notes referred to in, and is subject to, the Credit Agreement, which provides for the acceleration of the maturity of this Floating Rate Note upon the occurrence of an Event of Default, and which provides for the prepayment of this Floating Rate Note in certain circumstances pursuant to the terms of the Credit Agreement.
Every legal holder of this Floating Rate Note shall have and may exercise all of the rights and powers given to Payee in this Floating Rate Note.
This Floating Rate Note is transferable by the registered owner hereof, or by its attorney duly authorized in writing, only on the register maintained by Initial Lender and only upon surrender and cancellation of this Floating Rate Note and compliance with the conditions set forth in the Credit Agreement. Upon such transfer, a new registered Floating Rate Note or Floating Rate Notes for the same aggregate principal amount will be issued in exchange hereof in accordance with the terms of the Credit Agreement.
Maker of this Floating Rate Note expressly waives presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect to this Floating Rate Note or the performance of the obligations under this Floating Rate Note or any guaranty of this Floating Rate Note, if any. No renewal or extension of this Floating Rate Note, no release or surrender of any security for this Floating Rate Note or any guaranty of this Floating Rate Note, if any, no release of any person primarily or secondarily liable on this Floating Rate Note, including Maker and any endorser, if any, no delay in the enforcement of payment of this Floating Rate Note, and no delay or omission in exercising any right or power under this Floating Rate Note shall affect the liability of Maker or any endorser of this Floating Rate Note.
No delay or omission by Payee in exercising any power or right hereunder shall impair such right or power or be construed to be a waiver of any default, nor shall any single or partial exercise of any power or right hereunder preclude the full exercise thereof or the exercise of any other power or right. The provisions of this Floating Rate Note may be waived or amended only in a writing signed by Maker and Payee.
EXHIBIT B
Page 2
[Credit Agreement]
This Floating Rate Note shall in all respects be governed by and construed in accordance with the laws of state of New York, including all matters of construction, validity and performance.
[Signature follows on next page]
EXHIBIT B
Page 3
[Credit Agreement]
IN WITNESS WHEREOF, Maker has executed this Floating Rate Note as of the day of , 201_.
MESA AIRLINES, INC. | ||
By: | ||
Name: | ||
Title: | ||
Maker |
EXHIBIT B
Page 4
[Credit Agreement]
SCHEDULE I
PREMIUM RATE = 2.81% PER ANNUM
MARGIN BENCHMARK = 0.49% PER ANNUM
Payment Date |
Principal Payment |
|||||
EXHIBIT B
Page 5
[Credit Agreement]
EXHIBIT C
FORM OF FUNDING NOTICE
To: EXPORT DEVELOPMENT CANADA, as Lender
VEDDER PRICE P.C., as counsel to Lender
Reference is made to § 2.02 of the Credit Agreement dated as of June 27, 2016 (as amended or supplemented from time to time, the Credit Agreement) between Mesa Airlines, Inc., as Borrower (the Borrower) and Export Development Canada, as Lender relating to the proposed financing of one (1) CF34-8C5 engine kit (the Engine Kit). All capitalized terms herein have the same meanings ascribed to them in the Credit Agreement, unless otherwise herein defined.
The Borrower hereby advises that:
1. the proposed Funding Date in respect of the Engine Kit is , 201_;
2. the Note in respect of the Engine Kit shall be a [Fixed Rate Note] [Floating Rate Note];
3. the Financed Amount for the Engine Kit is $
4. the wiring instructions for the Financed Amount to be disbursed to [the Borrower][the Borrowers designee] in respect of the Engine Kit is as follows:
5. |
the Maturity Date of the Note in respect of the Engine Kit shall be ; and |
6. |
the Delivery Date for the Engine Kit is |
1 |
Form of Funding Notice to be modified, as applicable, for multiple Engine Kits if also being financed on the applicable Funding Date. |
EXHIBIT C
Page 1
[Credit Agreement]
MESA AIRLINES, INC. |
By: |
Name: | ||
Title: | ||
Dated this day of , 201 |
EXHIBIT C
Page 2
[Credit Agreement]
EXHIBIT D
FORM OF PAYMENT CONFIRMATION LETTER
[StandardAero Letterhead]
Payment Confirmation in relation to Export Development Canada (EDC) financed Mesa
Airlines, Inc. (Mesa) CF34-8 Engine Conversion Serial Number
GE-E
This letter is to confirm the payment of $ from Mesa to StandardAero on for invoice number
This completes the CF34-8C1 to 8C5B1 Engine conversion transaction for Engine Serial Number GE-E as described in StandardAero Mesa Agreement No. dated
Signed by a duly authorized signatory of Standard Aero Limited
Name:
Title:
Date:
EXHIBIT D
Page I
Exhibit 23.3
The accompanying consolidated financial statements give effect to (1) a 2.5 -for-1 stock split of the outstanding common stock of Mesa Air Group, Inc. (the Company) and (2) the Amended and Restated Certificate of Incorporation of the Company, which will be completed prior to the effectiveness of the registration statement of which this prospectus is a part. The consent below is in the form which will be furnished by Deloitte & Touche LLP, an independent registered public accounting firm, upon the completion of the items above, which are described in Note 17 to the consolidated financial statements, and assuming that from May 3, 2018 to the date of such completion, no other material events have occurred that would affect the accompanying consolidated financial statements and notes thereto.
/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
July 26, 2018
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Amendment number 1 to Registration Statement 333-226173 of our report dated May 3, 2018 (August , 2018 as to the effects of the stock split and the Amended and Restated Certificate of Incorporation described in Note 17), relating to the financial statements of Mesa Air Group, Inc. appearing in the Prospectus, which is part of this Registration Statement, and to the reference to us under the heading Experts in such Prospectus.
Phoenix, Arizona
August , 2018
SEC 325 EXAMPLE 3 AMENDMENT TO A REGISTRATION STATEMENT
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Amendment No. 1 to Registration Statement No. 333-00000 of our report[s] dated March 15, 20x6, [relating to the financial statements of [ Blank Company ] [and the effectiveness of [ Blank Company ]s internal control over financial reporting,] appearing in the Prospectus, which is a part of such Registration Statement, and to the reference to us under the headings Selected Financial Data and Experts in such Prospectus.
DELOITTE & TOUCHE LLP
[ City, State ] [ if not on letterhead ]
April 15, 20x6
GrafTech example .next page
The accompanying consolidated financial statements give effect to (1) a 3,022,259.23-for-1 stock split of the outstanding common stock of GrafTech International Ltd. (the Company) that will be effected prior to the effectiveness of the registration statement of which this prospectus is a part and (2) the Amended and Restated Certificate of Incorporation of the Company, which will be adopted prior to the effectiveness of the registration statement of which this prospectus is a part. The consent below is in the form which will be furnished by Deloitte & Touche LLP, an independent registered public accounting firm, upon the effective date of the stock split of the Companys outstanding common stock, which is described in Note 16 to the consolidated financial statements, and the adoption of the Amended and Restated Certificate of Incorporation, and assuming that from March 5, 2018 to the date of such completion, no other material events have occurred that would affect the accompanying consolidated financial statements and notes thereto.
/s/ DELOITTE & TOUCHE LLP
Cleveland, Ohio
April 3, 2018
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Amendment No. 3 to Registration Statement No. 333-223791 of our report dated March 5, 2018 (April , 2018 as to the effects of the stock split described in Note 16), relating to the consolidated financial statements of GrafTech International Ltd. and subsidiaries appearing in the Prospectus, which is part of such Registration Statement, and to the reference to us under the heading Experts in such Prospectus.
Cleveland, Ohio
April , 2018