Airline Services Agreement, by and between Shuttle America Corporation and Mokulele Flight Service, Inc., dated as of October 8, 2008

Section 2.01 Capacity Purchase.  Mokulele agrees to purchase the capacity of each Covered Aircraft for the period beginning on the date such aircraft is presented for service by Shuttle under this Agreement and ending on the last day of the Term, in each case unless such aircraft is earlier withdrawn pursuant to Article VIII, all under the terms and conditions set forth herein and for the consideration described in Article III.  Subject to the terms and conditions of this Agreement, Shuttle shall provide all of the scheduled service capacity of the Covered Aircraft solely to Mokulele and use the Covered Aircraft solely to operate the Scheduled Flights.  Except as provided in Section 2.01(e), the Covered Aircraft may not be used by Shuttle for any other purpose without the express prior written consent of Mokulele.  During the Term (as such term is defined in Section 8.01) and so long as Mokulele is not in default under this Agreement or the Loan Agreement (as such term is defined in Section 2.05), Shuttle shall not enter into any agreement with any other air carrier to operate aircraft on routes within the state of Hawaii.

 

(a) Fares, Rules and Seat Inventory; Reservations Capabilities.  Mokulele shall establish and publish all fares and related tariff rules for all seats on the Covered Aircraft.  Shuttle shall not publish any fares, tariffs, or related information for the Covered Aircraft.  In addition, Mokulele shall have complete control over all seat inventory and revenue management decisions for the Covered Aircraft, including overbooking levels, discount seat levels and allocation of seats among various fare buckets.  All costs associated with system configuration and interface for Mokulele’s requirements will be paid directly by Mokulele.

 

(b) Flight Schedules.  Mokulele shall, in its sole discretion, establish and publish all schedules for the Covered Aircraft (such scheduled flights, together with Charter Flights and ferry flights required to accommodate such scheduled flights and Charter Flights or otherwise made at Mokulele’s request, 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 Charter Flights arranged by Mokulele; provided that such schedules shall be subject to Reasonable Operating Constraints.  Shuttle shall remain in sole operational control of the Covered Aircraft at all times.  Subject to the notice requirement set forth in Section 4.08 regarding international service, Mokulele will provide Shuttle with a preliminary schedule in a Standard Schedule Input Message (“SSIM”) file format or Microsoft Excel format 45 days prior to the first day of the month to which the preliminary schedule relates.  Shuttle will review the proposed schedule and provide feedback to Mokulele no later than 14 days following receipt of the preliminary schedule by Shuttle.  Mokulele will send Shuttle a Final Monthly Schedule, together with operational assumptions for the month (the “Operational Assumptions”), including without limitation the weighted average number of Covered Aircraft, estimated passengers, revenue passenger miles, departures, block hours, and flights hours, based on the Final Monthly Schedule, no later than two Business Days following receipt of Shuttle’s comments to the preliminary schedule.  Following delivery of the Final Monthly Schedule, however, Mokulele may make such adjustments to the proposed Final Monthly Schedule as it deems appropriate (subject to Reasonable Operating Constraints).

 

(c) Start Up Dates.  The Covered Aircraft shall be placed into service under the terms and conditions of this Agreement on such dates as are provided on Exhibit B.

 

(d) Spare Aircraft.  The Spare Aircraft shall be used by Shuttle solely as an operational and maintenance spare to replace Covered Aircraft that are out of service due to scheduled maintenance, unscheduled maintenance or aircraft damage or to cover for other irregular operations, provided, there shall be no Spare Aircraft available for operations hereunder on or after March 1, 2009.

 

(e) Shuttle Charters or Other Operations.  Shuttle shall be permitted to operate the Covered Aircraft to fly charters so long as such operation does not adversely affect the performance by Shuttle of its obligations under this Agreement.

 

Section 2.02 Flight-Related Revenue.  [*], Shuttle acknowledges and agrees that all revenues resulting from the sale and issuance of passenger tickets associated with the operation of the Covered Aircraft and all other sources of revenue associated with the operation of the Covered Aircraft, including without limitation fees related to ticket changes, unaccompanied minors, excess baggage and nonrevenue pass travel, revenues relating to the transportation of cargo or mail, and revenues associated with food, beverage, passenger entertainment, duty-free services, and guaranteed or incentive payments from airport, local or municipal authorities in connection with scheduling flights to such airport or locality, are the sole property of and shall be retained by Mokulele (or, if received by Shuttle, shall be promptly accounted for and remitted to Mokulele).

 

Section 2.03 Pass Travel.  Shuttle operational personnel traveling to provide critical repair services, management personnel traveling on business in connection with this Agreement, and dead heading Shuttle crews will be entitled to travel on flights operated by Shuttle or Mokulele as “must ride” passengers.  Commuting Shuttle crew members and all other Shuttle employees will be entitled to travel on Mokulele and Mokulele Connect flights at a priority category one level below the lowest category for Mokulele employees and subject to the fare policies applicable to individuals traveling at that priority level.  To the extent permitted by existing arrangements, Mokulele employees will be entitled to (x) travel on Scheduled Flights operated by Shuttle under the category of travel and fare policies to which they are entitled to travel on Mokulele flights, and (y) will be entitled to travel on all other Shuttle operated flights at a category one level below the lowest category for Shuttle employees.

Section 2.04 Conversion of Covered Aircraft.  Mokulele will be responsible for all costs and expenses of preparing each Covered Aircraft prior to its being placed into service hereunder in accordance with the specifications and cabin configurations as required by Exhibit C.

 

Section 2.05 Conditions Precedent.  As conditions precedent to the obligations of Shuttle pursuant to this Agreement, Mokulele shall (i) enter into an administrative services agreement in form and substance satisfactory to Shuttle in respect of certain administrative and support services to be provided to Mokulele by Shuttle and (ii) enter into a loan agreement in form and substance satisfactory to Shuttle in respect of the proposed financing by Shuttle (the “Loan Agreement”) and satisfy all conditions precedent therein; provided that Shuttle may terminate this Agreement if the foregoing conditions precedent are not satisfied on or prior to October 12, 2008.  In the event of such a termination by Shuttle, Mokulele shall reimburse Shuttle for expenses incurred by Shuttle or its Affiliates (including reasonable expenses of counsel) in connection with (x) the negotiation of this Agreement, the Loan Agreement and all related agreements and (y) preparations by Shuttle to perform any of the foregoing; provided that such reimbursement shall not exceed [*].

 

 

Section 3.01 Base and Incentive Compensation.  For and in consideration of the aircraft and services to be provided by Shuttle hereunder, Mokulele shall pay Shuttle the base and incentive compensation as provided in Exhibit D hereto, subject to the terms and conditions set forth in this Article III.

 

Section 3.02 Periodic Adjustment of Base Compensation.  The rates under this Agreement set forth in Appendix 1 to Exhibit D hereto shall remain in effect throughout the Term of this Agreement, provided, the rates on Appendix 1 to Exhibit D hereto will be adjusted from time to time as described in Exhibit D, and, provided further, that the rates on Appendix 1 to Exhibit D designated as “Subject to Escalation” will remain in effect through December 31, 2008, and thereafter shall be adjusted on each January 1, beginning with January 1, 2009, as follows:  the new rates, applicable beginning on such January 1, shall equal the rates in effect on the immediately preceding December 31 multiplied by ([*] + (Annual Change in PPI [*])), where PPI = the annual Producer Price Index, Commodities, Finished Goods (not seasonally adjusted), Series ID:  WPUSOP3000 as published by the Bureau of Labor Statistics for January of the applicable year, provided further, annual adjustments will not decrease from the prior year and will not increase more than [*] over the prior year.  Adjustments will be calculated as soon as the PPI for the prior year is published by the Bureau of Labor Statistics and the adjusted rates will be applied retroactively to the 1st day of the calendar year and paid as part of the next monthly payment.

 

Section 3.03 Shuttle Expenses.  Except as provided otherwise in Section 3.04, Shuttle shall pay in accordance with commercially reasonable practices all expenses incurred in connection with Shuttle’s provision of Regional Airline Services.

 

Section 3.04 Mokulele Expenses

 

(a) Certain Expenses.  Mokulele shall incur directly those expenses relating to the Regional Airlines Services that are described in Paragraph 6 of Exhibit D.

 

(b) Design Changes.  Mokulele shall be responsible for any reasonable out-of-pocket expenses relating to interior and exterior design changes to the Covered Aircraft and other product-related changes required by Mokulele, including facility-related design changes and the cost of changes in aircraft livery, in each case that occur outside of the Covered Aircraft specifications, livery and other requirements of Exhibit C to this Agreement or as otherwise specified in this Agreement.

 

Section 3.05 Audit Rights; Financial Information.  Shuttle shall make available for inspection by Mokulele and its outside auditors and advisors, within a reasonable period of time after Mokulele makes a written request therefor, all of Shuttle’s books and records (including all financial and accounting records and operations reports, and records of other subsidiaries or affiliates of Shuttle, if any) as necessary to audit any reimbursement of Pass-Thru Costs or other expenses set forth in Paragraph 6 of Exhibit D hereto.  In connection with such audit, Mokulele and its 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 Shuttle’s Chief Financial Officer or such other employees or agents of Shuttle knowledgeable about such records.  Upon the reasonable written request of Mokulele or its outside auditors or advisors, Shuttle will cooperate with Mokulele and its outside auditors and advisors to permit Mokulele and its outside auditors and advisors access to RAI Holding’s outside auditors for purposes of reviewing such records.

 

Section 3.06 Billing and Payment; Reconciliation.

 

(a) Billing and Payment.  No later than ten calendar days prior to the beginning of the month covered by a Final Monthly Schedule and the Operational Assumptions for a given month pursuant to Section 2.01(b), Shuttle shall present a reasonably detailed written invoice for amounts due under this Agreement in respect of the Base Compensation for the Scheduled Flights during the month to which such Final Monthly Schedule and Operational Assumptions pertain, calculated in accordance with Paragraph 2 of Exhibit D.  Mokulele shall pay Shuttle the amount due under such invoice (the “Invoiced Amount”), subject to Mokulele’s right to dispute any calculations set forth on such invoice that do not comply with the terms of this Agreement, net of amounts owed by Shuttle to Mokulele, as follows:

 

(i) Thirty-four percent (34%) of the Invoiced Amount on the later of the first Business Day of the covered month or the third Business Day following receipt by Mokulele of the invoice, by electronic transfer of funds to a bank account designated by Shuttle;

 

(ii) Thirty-three percent (33%) of  the Invoiced Amount on the 10th calendar day of the covered month, or if such day is not a Business Day, the next Business Day thereafter, by electronic transfer of funds to a bank account designated by Shuttle; and

 

(iii) Thirty-three percent (33%) of the Invoiced Amount on the 20th calendar day of the covered month, or if such day is not a Business Day, the next Business Day thereafter, by electronic transfer of funds to a bank account designated by Shuttle.

 

(b) Reconciliation.  Not later than 15 days following the end of each month, Shuttle and Mokulele shall reconcile actual amounts due in respect of such month for the Fixed Cost and Variable Cost elements set forth in Appendix 1 to Exhibit D with the estimated amounts included in the Invoiced Amount for such elements for such month in accordance with the terms and conditions set forth in Exhibit D.  On or before the 5th day following the end of such reconciliation period (or if such day is not a Business Day, the next Business Day), such reconciled amounts for such month to the extent applicable:  (i) shall be paid by Mokulele to Shuttle, together with any payment to be made by Mokulele pursuant to Section 3.06(a)(iii) above, or (ii) shall be paid by Shuttle to Mokulele or set off by Mokulele against any other amounts owing to Shuttle under this Agreement.

 

(c) Reimbursed Costs.  From time to time it is anticipated that Shuttle may incur certain costs and expenses in connection will the provision of Regional Airline Services under this Agreement for which Shuttle will be reimbursed by Mokulele.  These costs and expenses are indicated as “Pass-Thru Costs” on Appendix 1 to Exhibit D.  Shuttle will pay all Pass-Thru Costs in advance, and will submit to Mokulele an invoice together with all supporting documentation for all Pass-Thru Costs incurred.  Mokulele will reimburse Shuttle for all uncontested Pass-Thru Costs within five Business Days following receipt of the invoice and supporting documentation by electronic transfer of funds to a bank account designated by Shuttle will provide any additional supporting information and documentation to Mokulele for any Pass-Thru Costs contested by Mokulele at Shuttle’s earliest convenience.  Any disputed Pass-Thru Costs not resolved within 30 days of receipt of the invoice by Mokulele will be resolved in accordance with the arbitration provisions of this Agreement.

 

*Confidential

Section 3.07 Security Payment. Mokulele shall pay Shuttle the sum of [*] by paying [*] on or prior to each date on which a Covered Aircraft (as described by Exhibit B) is placed into service hereunder (such amounts collectively referred to herein as the “Security Payment”); [*].  The Security Payment shall be the property of Shuttle.  If a default by Mokulele shall occur hereunder and be continuing, then, in addition to any other rights that Shuttle may have hereunder or under applicable law, Shuttle may at any time as an agreed remedy set off all or any portion of the amount of the Security Payment in full or partial payment for amounts constituting or corresponding to any amounts owed by Mokulele to Shuttle hereunder.  If Shuttle exercises any such right of set-off, Mokulele shall immediately upon demand from Shuttle pay to Shuttle an amount equal to such set-off.  [*].

Section 4.01 Crews, Etc.  Shuttle shall be responsible for providing all crews (flight and cabin) and maintenance personnel necessary to operate the Scheduled Flights and for all aspects (personnel and other) of dispatch control.  Flight crews will be domiciled in Honolulu, Hawaii and any other location deemed suitable for Shuttle’s staffing requirements.  Shuttle pilots will wear neutral uniforms with Shuttle logo items.  Shuttle flight attendants will wear neutral uniforms with accessories displaying approved Mokulele Marks and designs.  Shuttle flight attendants will obtain Mokulele branded accessories through Mokulele or its approved vendor (subject to the vendor’s approval), and Mokulele will be responsible for all costs and expenses, including shipping, relating to their orders.  Notwithstanding the foregoing, at its election, Mokulele may provide alternative “Hawaii style” uniforms for pilots and flight crew; provided that, any such alternate uniforms would be subject to the approval of Shuttle and provided at the sole cost and expense of Mokulele.

 

Section 4.02 Governmental Regulations.  Shuttle has and shall maintain all certifications, permits, licenses, certificates, exemptions, approvals, plans, and insurance required by governmental authorities, including, without limitation, FAA, DOT and TSA, to enable Shuttle to perform the services required by this Agreement.  All flight operations, dispatch operations and all other operations and services undertaken by Shuttle pursuant to this Agreement shall be conducted, operated and provided by Shuttle in compliance with all U.S. and foreign governmental laws, regulations and requirements, 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 Shuttle in compliance with all laws, regulations and governmental requirements, Shuttle’s own operations manuals and maintenance manuals and procedures, and all applicable equipment manufacturers’ manuals and instructions.

 

Section 4.03 Quality of Service.  At all times, Shuttle shall provide Regional Airline Services with appropriate standards of care, but in no event lower than such standards provided by Shuttle for its other scheduled airline partners as well as such standards held by Mokulele as of the date of this Agreement.  Mokulele 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 Shuttle.  Shuttle shall achieve at least the comparable quality of airline service as provided by Shuttle for its other scheduled airline partners and by Mokulele, subject to limitations imposed by the type of aircraft used by Shuttle and its route network.  Shuttle shall comply with all airline customer service commitments and policies of Mokulele as of the date hereof, including without limitation the employee conduct, appearance and training policies in place as of the date hereof, and shall handle customer-related services in a professional, businesslike and courteous manner.  In connection therewith, Shuttle shall maintain adequate aircraft staffing levels, to achieve a level of operations that routinely meet or exceed the on-time performance Target Threshold and the completion factor Target Threshold as set forth in Appendix 2 to Exhibit D.  Shuttle shall provide Mokulele with timely communication regarding the status of all Scheduled Flights.  At either party’s request, Shuttle and Mokulele will meet to discuss and review Shuttle’s customer service and handling procedures and policies and its employees’ conduct, appearance and training standards and policies.  Mokulele shall give Shuttle not less than 15 days prior written notice of any non-safety-related breach of this Section 4.03 prior to exercising any remedy regarding such breach.

Section 4.04 Incidents or Accidents.  Shuttle shall promptly notify Mokulele of all irregularities involving a Scheduled Flight or Covered Aircraft operated by Shuttle, 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.  Shuttle shall furnish to Mokulele as much detail as practicable concerning such irregularities and shall cooperate with Mokulele at Shuttle’s own expense in any appropriate investigation.  Mokulele shall promptly notify Shuttle of all irregularities involving ground handling in respect of Scheduled Flights or Covered Aircraft, including, without limitation, 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.  Mokulele shall furnish to Shuttle as much detail as practicable concerning such irregularities and shall cooperate with Shuttle at Mokulele’s own expense in any appropriate investigation.

 

Section 4.05 Emergency Response.  Shuttle shall adopt Mokulele’s Emergency Response Plan for aircraft accidents or incidents.  In the event of an accident or incident involving a Covered Aircraft or Scheduled Flight, Mokulele will have the right to manage the emergency response efforts on behalf of Shuttle with full cooperation from Shuttle and if such right is exercised, Shuttle acknowledges and agrees that Mokulele representatives will conduct all public communications, and that Shuttle will make no public statements, regarding such accident or incident.

 

Section 4.06 Safety Matters.  In the event of a reasonable safety concern, Mokulele shall have the right, at its own cost, to inspect, review, and observe Shuttle’s operations of Scheduled Flights.  Notwithstanding the conduct or absence of any such review, Shuttle 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, and nothing in this Section 4.06 or otherwise in this Agreement is intended or shall be interpreted to make Mokulele responsible for such safety matters.

 

Section 4.07 Codeshare Terms.  Shuttle agrees to operate all Scheduled Flights using the Mokulele flight code and flight numbers assigned by Mokulele, or such other flight codes and flight numbers as may be assigned by Mokulele (to accommodate, for example, a Mokulele alliance partner), and otherwise under the codeshare terms set forth in Exhibit E.

 

Section 4.08 Slots and Route Authorities.  Should Mokulele schedule Covered Aircraft on international routes, Mokulele will provide Shuttle notice of such intent no fewer than 150 days in advance of the intended start date.  To the extent permitted under applicable laws and regulations, Mokulele will obtain the necessary slots, route authorities or other approval required for such service at its own cost and expense, provided such items may be held and controlled by Mokulele.  If it is required that Shuttle, as the operator of the Scheduled Flights, obtain the authorities and approvals, or if Mokulele is prohibited from holding such authorities and approvals in its own name, Shuttle will use its commercially reasonable efforts to obtain all necessary licenses, permits, route authorities or slots (collectively referred to as “Permits”) and complete all necessary filings and registrations, and Mokulele shall reimburse Shuttle for its reasonable costs and expenses, in order to obtain such Permits and initiate such service.  During the Term, Shuttle will operate Scheduled Flights on these routes solely on behalf of Mokulele.

 

Section 4.09 Use of Mokulele Marks.  Mokulele hereby grants to Shuttle the non-exclusive and non-transferable rights to use the Mokulele Marks as provided in, and Shuttle shall use the Mokulele Marks, in accordance with the terms and conditions of Exhibit C.

 

Section 4.10 Use of Shuttle Marks.  Shuttle hereby grants to Mokulele the non-exclusive and non-transferable rights to use the Shuttle Marks as provided in, and Mokulele shall use the Shuttle Marks in accordance with, the terms and conditions of Exhibit F.

 

Section 4.11 Catering Standards.

 

(a) Station Services.  Mokulele or its designated agents shall provide all airport passenger and aircraft ground handling at all airports served by Scheduled Flights.

 

(b) Onboard Services.  Mokulele will determine, in its sole discretion, and at its sole cost, meal/beverage service parameters and scheduling for Scheduled Flights.  Mokulele has the right to conduct onboard service audits on Scheduled Flights to ensure service standards are being met.  Shuttle flight attendants providing Regional Airline Services will be trained on meal and beverage service procedures, including liquor and duty-free sales and cash handling, and will collect all on-board revenue for liquor and duty-free sales.  Shuttle will provide sufficient galley service ship’s equipment to operate onboard services, such as ovens, coffee makers and trash bins.  Mokulele will provide all, at its sole expense, liveried catering items, such as cups and napkins, and all food, liquor and other beverage items.

 

 

Section 5.01 Use of Covered Aircraft.  Shuttle agrees that, except as otherwise directed or approved in writing by Mokulele in Mokulele’s sole discretion or as provided in Section 2.01(e) herein with respect to the Spare Aircraft, the Covered Aircraft may be used only to provide Regional Airline Services.

 

Section 5.02 Mokulele Obligations.  Mokulele shall provide to Shuttle, at no cost to Shuttle, the following support services (either directly or by contracting with third party vendors or by contracting with Shuttle pursuant to a separately negotiated handling agreement):

 

(a) all airport passenger service and aircraft ground handling at all airports served, including without limitation:

 

(i)	all ticket counter and gate check-in services;

 

(ii)	all passenger enplaning and deplaning services, including sky cap and wheelchair services;

 

(iii)

aircraft loading and unloading services, including airside busing;

 

(iv)	passenger ticketing;

 

(v)	jet bridges and air stairs, including maintenance and cleaning;

 

(vi)	janitorial services;

 

(vii)

deicing services;

 

(viii)

aircraft towing and push back; and

 

(ix)	airport security services.

 

(b) all Mokulele logo items, such as drink cups, napkins, pillows, blankets and inflight magazines;

 

(c) lavatory service and light aircraft cleaning (“turn cleaning”) at Honolulu International Airport (HNL), heavy interior cleaning at all aircraft overnight locations that are not Shuttle maintenance locations, and, upon the written request of Shuttle, at other cities served by the Covered Aircraft;

 

(d) denied boarding amenities and travel voucher compensation certificates consistent with Mokulele customer service programs;

 

(e) customer reaccommodations due to schedule disruption;

 

(f) interface and all technological support necessary to ensure accurate and reliable dynamic transfer of operational data from Mokulele to Shuttle’s system operational control center in Indianapolis, Indiana, a data interface of Shuttle’s ACARS to Mokulele’s reservation systems, and of Shuttle’s system control with Mokulele’s flight information data;

 

(g) capital expenditures for aircraft ground handling;

 

(h) advertising and sales programs;

 

(i) operations space at Honolulu International Airport (HNL) (the “Honolulu Operations Space”), including gates, holdrooms, and airport concourse space for offices, break rooms, parts storage, crew lounges, and flight operations, all as agreed to by the parties;

 

(j) hangar access as needed;

 

(k) nightly engine power washing program and exterior aircraft wash program;

 

(l) interface of Shuttle’s system control with Mokulele FLIFO data;

 

(m) hangar space for one RON Covered Aircraft at Honolulu International Airport (HNL); and

 

(n) engine washes as required by Shuttle.

 

Section 5.03 Change of Control.  Upon the occurrence of a Change of Control of Mokulele (excluding a Change of Control involving Shuttle or an affiliate of Shuttle) without the prior written consent of Shuttle (such consent not to be unreasonably withheld), Shuttle shall have the right to terminate this Agreement on 90 days prior written notice, such notice to be delivered not later than 90 days after Shuttle becomes aware of such Change of Control (which termination shall not be effective if the circumstances giving rise to such Change of Control shall no longer exist on the 30th day after the written notice of termination is delivered).

 

Section 5.04 Transfer of Assets.  Mokulele shall not enter into an agreement (or series of agreements) to sell, assign transfer or convey substantially all of its assets to any Person (excluding Shuttle or an affiliate of Shuttle) unless, as part of such agreement, such Person agrees to assume any and all of Mokulele’s rights, duties and obligations arising under this Agreement and Shuttle consents in writing in advance to such sale, assignment, transfer or conveyance.

 

 

Section 6.01 Insurance Coverages.  During the Term, Shuttle shall maintain, or cause to be maintained, in full force and effect for the Covered Aircraft policies of insurance with insurers of recognized reputation and responsibility, in each case in an amount and subject to such terms as are consistent with the insurance carried on similar aircraft operated by Shuttle under similar circumstances.

 

Section 6.02 Evidence of Insurance Coverage.  At the commencement of this Agreement, and thereafter upon Mokulele’s reasonable request, Shuttle shall furnish to Mokulele evidence of such insurance coverage, including certificates certifying that such insurance and endorsements are in full force and effect.

 

 

Section 7.01 Shuttle Indemnification of Mokulele.  Shuttle shall be liable for and hereby agrees to fully defend, release, discharge, indemnify and hold harmless Mokulele, its directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses of any kind, character or nature whatsoever, 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 Mokulele or its 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 any of Shuttle’s or Mokulele’s 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, and (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to (x) any act or omission by Shuttle or any of its directors, officers, employees or agents relating to the provision of Regional Airline Services, (y) the performance, improper performance, or non-performance of any and all obligations to be undertaken by Shuttle or any of its directors, officers, employees or agents pursuant to this Agreement, or (z) the operation, non-operation, or improper operation of the Covered Aircraft or Shuttle’s equipment or facilities at any location, in each case excluding only claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses to the extent resulting from the gross negligence or willful misconduct of Mokulele or its 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).  Shuttle will use commercially reasonable efforts to cause and assure that Shuttle will at all times be and remain in custody and control of all aircraft, equipment, and facilities of, or operated by, Shuttle, and Mokulele and its directors, officers, employees and agents shall not, for any reason, be deemed to be in custody or control, or a bailee, of such aircraft, equipment or facilities.

 

Section 7.02 Mokulele Indemnification of Shuttle.  Mokulele shall be liable for and hereby agrees fully to defend, release, discharge, indemnify, and hold harmless Shuttle, its directors, officers, employees, and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses of any kind, character or nature whatsoever, 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 Shuttle, or its 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 any of Shuttle’s or Mokulele’s 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, and (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to, (x) the performance, improper performance, or nonperformance of any and all obligations to be undertaken by Mokulele or any of its directors, officers, employees or agents pursuant to this Agreement, (y) the operation, non-operation or improper operation of Mokulele’s aircraft, equipment or facilities (excluding, for the avoidance of doubt, Covered Aircraft and any equipment or facilities leased or subleased by Mokulele to Shuttle) at any location, in each case excluding only claims, demands, damages, liabilities, suits judgments, actions, causes of action, losses, costs and expenses to the extent resulting from the gross negligence or willful misconduct of Shuttle or its directors, officers, agents or employees.

 

Section 7.03 Indemnification Claims.  A party entitled to indemnification (the “Indemnified Party”) 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 which the Indemnified Party believes gives rise to a claim for indemnity against the Indemnifying Party hereunder.  The Indemnifying Party shall be entitled, if it accepts financial responsibility for the third party claim, to control the defense of or to settle any such third party claim at its own expense and by its own counsel; provided that the Indemnified Party’s prior written consent (which may not be unreasonably withheld or delayed) must be obtained prior to settling any such third party claim.  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 7.03, 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 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 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.

 

Section 7.04 Employer’s Liability; Independent Contractors; Waiver of Control

 

(a) Employer’s Liability and Workers’ Compensation.  Each party hereto assumes full responsibility for its employer’s and workers’ compensation liability to its respective officers, directors, employees or agents on account of injury or death resulting from or sustained in the performance of their respective service under this Agreement.  Each party, with respect to its own employees, accepts full and exclusive liability for the payment of workers’ compensation and employer’s 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 Shuttle.  The employees, agents, and independent contractors of Shuttle engaged in performing any of the services Shuttle is to perform pursuant to this Agreement are employees, agents, and independent contractors of Shuttle for all purposes, and under no circumstances will be deemed to be employees, agents or independent contractors of Mokulele.  In its performance under this Agreement, Shuttle will act, for all purposes, as an independent contractor and not as an agent for Mokulele.  Notwithstanding the fact that Shuttle has agreed to follow certain procedures, instructions and standards of service of Mokulele pursuant to this Agreement, Mokulele will have no supervisory power or control over any employees, agents or independent contractors engaged by Shuttle in connection with its performance hereunder, and all complaints or requested changes in procedures made by Mokulele will, in all events, be transmitted by Mokulele to Shuttle’s designated representative.  Nothing contained in this Agreement is intended to limit or condition Shuttle’s control over its operations or the conduct of its business as an air carrier.

 

(c) Employees, etc., of Mokulele.  The employees, agents, and independent contractors of Mokulele engaged in performing any of the services Mokulele is to perform pursuant to this Agreement are employees, agents, and independent contractors of Mokulele for all purposes, and under no circumstances will be deemed to be employees, agents, or independent contractors of Shuttle.  Shuttle will have no supervision or control over any such Mokulele employees, agents and independent contractors and any complaint or requested change in procedure made by Shuttle will be transmitted by Shuttle to Mokulele’s designated representative.  In its performance under this Agreement, Mokulele will act, for all purposes, as an independent contractor and not as an agent for Shuttle.  Nothing contained in this Agreement is intended to limit or condition Mokulele’s control over its operations (except with respect to operational control over the Covered Aircraft, which shall remain with Shuttle) or the conduct of its business as an air carrier.

 

(d) Shuttle Flights.  The fact that Shuttle’s operations are conducted under Mokulele’s Marks and listed under the MW designator code will not affect their status as flights operated by Shuttle for purposes of this Agreement or any other agreement between the parties, and Shuttle and Mokulele agree to advise all third parties, including passengers, of this fact.

 

Section 7.05 Survival.  The provisions of this Article VII shall survive the termination of this Agreement for a period of seven years.

 

Section 8.01 Term.  The Term of this Agreement shall commence on and shall be effective as of the Effective Date and, unless earlier terminated for Cause or breach shall continue until October 31, 2018 (the “Term”), and on such date the Covered Aircraft shall be completely withdrawn from the capacity purchase provisions of this Agreement and cease to be a Covered Aircraft.

 

Section 8.02 Early Termination

 

(a) By Mokulele for Cause.  Mokulele shall have the right to terminate this Agreement upon written notice following the occurrence of any event that constitutes Cause.  Any termination pursuant to this Section 8.02(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).  The notice of termination provided by Mokulele pursuant to this Section 8.02(a) shall designate a Termination Date (which may be any date between the date of the notice and a date no more than 120 days of the date of the notice), and on such date the Covered Aircraft shall be completely withdrawn from the capacity purchase provisions of this Agreement and cease to be a Covered Aircraft, and the termination date set forth in the notice provided by Mokulele will be the Termination Date for purposes of this Agreement (and such Termination Date pursuant to this Section 8.02(a) shall supersede any other Termination Date that may have been previously established pursuant to another termination).  In the event that Mokulele shall not have delivered written notice of termination pursuant to this Section 8.02(a) within 45 days after Mokulele receives written notice from Shuttle of the occurrence of any event that constitutes Cause by Shuttle, then Mokulele shall be conclusively deemed to have waived any right to terminate this Agreement based upon such event; provided that such waiver shall not apply to any subsequent or continuing event that constitutes Cause.

 

(b) By Mokulele for Breach.  Mokulele may terminate this Agreement, upon two Business Days’ prior written notice, upon the occurrence of a material breach of this Agreement by Shuttle with respect to matters reasonably within its control, which breach shall not have been cured within 60 days after written notice of such breach is delivered by Mokulele to Shuttle (which 60-day notice period may run concurrently with the 15-day notice period, if any, provided pursuant to Section 4.03 for non-safety-related breaches).  Any termination notice provided by Mokulele pursuant to this Section 8.02(b), shall specify a Termination Date that will be no more than 90 days from the date of such notice and on such date the Covered Aircraft shall be completely withdrawn from the capacity purchase provisions of this Agreement and cease to be a Covered Aircraft.  In the event that Mokulele shall not have delivered written notice of termination pursuant to this Section 8.02(b) within 45 days after Mokulele receives written notice from Shuttle of any material breach of this Agreement by Shuttle, then Mokulele shall be conclusively deemed to have waived any right to terminate this Agreement based upon such breach; provided that such waiver shall not apply to any subsequent or continuing breach.

 

(c) By Shuttle for Breach.  Shuttle may terminate this Agreement upon (i) five Business Days prior written notice upon (A) any failure by Mokulele to make any payment or payments under this Agreement aggregating in excess of [*], but specifically excluding any amounts which are the subject of a good faith dispute between the parties, which failure shall not have been cured within five Business Days after written notice of such failure is delivered by Shuttle to Mokulele, or (B) a breach by Mokulele of its covenant contained in Section 5.03 or 5.04, (ii) the occurrence of any other failure by Mokulele to make any payment or payments under this Agreement aggregating in excess of [*], but specifically excluding any amounts which are the subject of a good faith dispute between the parties, which failure shall not have been cured within 20 days after written notice of such breach is delivered by Shuttle to Mokulele, or (iii) the occurrence of any other material breach of this Agreement by Mokulele, which breach shall not have been cured within 60 days after written notice of such breach is received by Mokulele.  In the event that Shuttle shall not have delivered written notice of termination pursuant to this Section 8.02(c) within 45 days after Shuttle receives written notice from Mokulele of any material breach of this Agreement by Mokulele, then Shuttle shall be conclusively deemed to have waived any right to terminate this Agreement based upon such breach; provided that such waiver shall not apply to any subsequent or continuing breach.

 

If this Agreement is terminated by Shuttle under the first paragraph of this  Section 8.02(c), the notice of termination delivered by Shuttle to Mokulele pursuant to Section 8.02(c)(i) shall be irrevocable and shall contain a Termination Date that is no more than 180 days after the date of such notice; provided that in the case of a termination under Section 8.02(c)(i)(A) or (c)(ii), such termination notice shall be void and of no further effect automatically upon the payment by Mokulele prior to such Termination Date of all unpaid amounts giving rise to such termination notice.  As of the Termination Date set forth in a notice of termination, 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.

Section 8.03 Punitive Damages.  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 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.  No party shall be entitled to rescission of this Agreement as a result of breach of any other party’s representations, warranties, covenants or agreements, or for any other matter;  provided, that nothing in this Section 8.03 shall restrict the right of any party to exercise any right to terminate this Agreement pursuant to the terms hereof.

 

 

Section 9.01 Representations and Warranties of Shuttle.  Shuttle represents, warrants and covenants to Mokulele as of the date hereof as follows:

 

(a) Organization and Qualification.  Shuttle is a duly organized and validly existing corporation under the laws of the State of Indiana.  Shuttle has the corporate power and authority to own, operate and use its assets and to provide the Regional Airline Services.

 

(b) Authority Relative to this Agreement.  Shuttle 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 Shuttle.  This Agreement has been duly and validly executed and delivered by Shuttle and is, assuming due execution and delivery thereof by Mokulele and that Mokulele has legal power and right to enter into this Agreement, a valid and binding obligation of Shuttle, enforceable against Shuttle 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.  Neither the execution or delivery of this Agreement nor the performance by Shuttle of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Shuttle’s 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 Shuttle is a party or by which it or any of 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) No Default.  Shuttle 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, where such violation, breach, default or failure would have a material adverse effect on Shuttle or on its ability to provide Regional Airlines Services and otherwise perform its obligations hereunder.

 

(e) Insurance.  Shuttle 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.

 

(f) No Proceedings.  There are no legal or governmental proceedings pending, or investigations commenced of which Shuttle has received notice, in each case to which Shuttle is a party or of which any property or assets of Shuttle is the subject which, if determined adversely to Shuttle, would individually or in the aggregate have a material adverse effect on Shuttle or on Shuttle’s ability to provide Regional Airlines Services and otherwise perform its obligations hereunder; and to the best knowledge of Shuttle, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.

 

(g) Permits.  Shuttle possesses all material certificates, authorizations and permits issued by FAA and other applicable federal, state or foreign regulatory authorities necessary to conduct their respective businesses, to provide Regional Airlines Services and otherwise to perform their respective obligations hereunder, and Shuttle has not 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 Shuttle or on its ability to conduct its businesses, to provide Regional Airlines Services and otherwise to perform its obligations hereunder.

 

Section 9.02 Representations and Warranties of Mokulele.  Mokulele represents and warrants to Shuttle as of the date hereof as follows:

 

(a) Organization and Qualification.  Mokulele is a duly incorporated and validly existing corporation in good standing under the laws of the State of Hawaii.

 

(b) Authority Relative to this Agreement.  Mokulele 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 Mokulele.  This Agreement has been duly and validly executed and delivered by Mokulele and is, assuming due execution and delivery thereof by Shuttle and that Shuttle has legal power and right to enter into this Agreement, a valid and binding obligation of Mokulele, enforceable against Mokulele 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 Mokulele of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Mokulele’s 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 Mokulele 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.  Mokulele 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 Mokulele has received notice, in each case to which Mokulele is a party or of which any property or assets of Mokulele is the subject which, if determined adversely to Mokulele, would individually or in the aggregate have a material adverse effect on Mokulele or on its ability to perform its obligations hereunder; and to the best knowledge of Mokulele, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.  For the avoidance of doubt, the parties hereto acknowledge that the United States Department of Transportation pursuant to 14 C.F.R. Part 204 may review a substantial change of operations and/or a substantial change of ownership of Mokulele in connection with this Agreement and any related transaction.

 

(f) Financial Statements.  The financial statements (including the related notes and supporting schedules) of Mokulele delivered (or, if filed with the Securities and Exchange Commission, made available) to Shuttle immediately prior to the date hereof fairly present in all material respects the consolidated financial position of Mokulele.  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 Mokulele.  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.

 

Section 9.03 Covenants of Mokulele.  Mokulele shall deliver to Shuttle:

 

(a) as soon as available, but in any event within 90 days after the end of each fiscal year of Mokulele, its consolidated balance sheet as at the end of such fiscal year, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, all in reasonable detail and prepared in accordance with GAAP, audited by an independent certified public accountant;

 

(b) as soon as available, but in any event within 20 days after the end of each month, a consolidated balance sheet of Mokulele as at the end of such fiscal month, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal month and for the portion of Mokulele’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal month of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by the chief financial officer of Mokulele as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of Mokulele in accordance with GAAP, subject only to normal year end audit adjustments and the absence of footnotes.

Section 10.01 Transition Arrangements

 

(a) Scheduling.  Subsequent to the execution of this Agreement, and prior to the inservice date of the first Covered Aircraft, Shuttle and Mokulele 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 inservice date of the first Covered Aircraft, Shuttle and Mokulele shall work together to facilitate all other relevant aspects of the commencement of Shuttle’s provision of Regional Airlines Services, including without limitation the provision of passenger-related and technology-related services.

 

Section 10.02 Notices.  All notices made pursuant to this Agreement shall be in writing and shall be deemed given upon (a) a transmitter’s confirmation of a receipt of a facsimile transmission (but only if 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:

 

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 10.02.

 

Section 10.03 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 Shuttle’s rights pursuant to Section 5.03 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.

 

Section 10.04 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.

 

Section 10.05 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.

 

*Confidential

Section 10.06 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 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.

Section 10.07 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 hereby agrees not to publicize or disclose to any third party (x) the terms or conditions of this Agreement, or any exhibit, schedule or appendix hereto or thereto, or any information, data, schedules, route information, fare schedules and rules shared between the parties during the course of performance under this Agreement, without the prior written consent of the other parties thereto, or (y) any confidential information or data, both oral and written, received from the other, whether pursuant to or in connection with this Agreement, and designated as such by the other 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 as otherwise expressly permitted or contemplated by this Agreement.  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, unless expressly requested not to do so by a government agency issuing the subpoena or other process, immediately notify the other parties hereto of 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 and designated as such by the party providing such confidential information or data which is still in the recipient’s 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 10.07 shall survive the termination of this Agreement for a period of ten years.

 

Section 10.08 Arbitration

 

(a) Agreement to Arbitrate.  Subject to the equitable remedies provided under Section 10.11, 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, shall be resolved by binding arbitration pursuant to the procedures set forth by the International Institute for Conflict Prevention and Resolution (the “CPR”).  Each of the parties agrees that arbitration under this Section 10.08 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 10.08, to compel any other party to participate in arbitration under this Section 10.08.  The governing law for any such action or proceeding shall be the law set forth in Section 10.08(f).

 

(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 New York, New York 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 New York, New York, 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 of the Panel, then the Parties shall request the assistance of the CPR.  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 New York (excluding New York 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 CPR, then either or both Parties shall have the right to cause the process to become administered by the CPR and, thereafter, the arbitration shall be conducted, where applicable or appropriate, pursuant to the administration of the CPR.  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 treble, exemplary or punitive damages of any type under any circumstances regardless of whether such damages may be available under the applicable law.

 

(j) Decision of the Arbitration.  The Panel shall render its final decision and award in writing within 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 its award includes any amount for treble, exemplary or punitive damages.  The Panel’s decision and award shall be final and non-appealable to the maximum extent permitted by law.  Any and all of the Panel’s 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 New York, New York having jurisdiction.

 

(k) 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.

 

Section 10.09 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.

 

Section 10.10 Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective 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.

 

Section 10.11 Equitable Remedies; Certain Liquidated Damages

 

(a) 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 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, may apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any breach of the provisions of this Agreement.

 

 

(b) Certain Liquidated Damages.  If Shuttle shall fail to provide a Covered Aircraft within 30 days of the applicable in-service day reflected on Exhibit B (such Covered Aircraft being referred to herein as a “Delayed Aircraft”), Shuttle will pay to Mokulele following such failure liquidated damages in an amount equal to [*] for each day between the [*] day following the in-service date reflected on Exhibit B and the actual in-service date of such Delayed Aircraft; provided that, in the event such in-service delay is due to circumstances beyond the control of Shuttle and Shuttle provides prior notice of such delay, such liquidated damages shall not in any event exceed [*].

 

The parties agree that the damages to be suffered by Mokulele in connection with Shuttle’s failure to deliver an aircraft on a scheduled in-service date as provided in Exhibit B shall be difficult to calculate, and that the foregoing liquidated damages are a good faith estimate of such damages, and that such liquidated damages are not intended to be a penalty.  The parties further agree that the foregoing liquidated damages shall be Mokulele’s sole and exclusive remedy against Shuttle for any damages suffered solely as a result of Shuttle’s failure to deliver an aircraft on a scheduled in-service date as provided in Exhibit B.

(c) Other Limitations on Seeking Damages.  Neither the right of any party to terminate this Agreement, nor the exercise of such right, shall constitute a limitation on such party’s right to seek damages or such other legal redress to which such party may otherwise be entitled;  provided  that, absent the occurrence of another breach of this Agreement by Shuttle, Mokulele shall not be entitled to seek damages solely for the occurrence of an event of Cause of the type described in clause (iii) or clause (iv) of the definition thereof.

 

Section 10.12 Relationship of Parties.  Nothing in this Agreement shall be interpreted or construed as establishing between the parties a partnership, joint venture or other similar arrangement.

 

Section 10.13 Entire Agreement; No Third Party Beneficiaries.  This Agreement (including the exhibits and schedules hereto) 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.

 

Section 10.14 Governing Law.  Except with respect to matters referenced in Section 10.08(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 New York (excluding New York 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.  Except as otherwise provided in Section 10.08(e), any action arising out of this Agreement or the rights and duties of the parties arising hereunder may be brought, if at all, only in the state or federal courts located in the City and County of New York, New York.

Section 10.15 Right of Set-Off.  If any party hereto shall be in default hereunder to any other party, 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 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.  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 Section 3.06(b)(ii) hereof.

 

Section 10.16 Cooperation with Respect to Reporting.  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.

 

Section 10.17 Reserved.

Section 10.18 Life Limited Parts.  Mokulele and Shuttle shall each cooperate with one another in order to manage and minimize engine life limited parts (“LLP”) expenses for Covered Aircraft.  To that end, Shuttle shall provide annual projections of LLP requirements and supplemental notice of specific engine maintenance events which require LLP replacement as they are scheduled.  Mokulele may, at its option and with Shuttle’s consent (which consent shall not be unreasonably withheld), provide or arrange the provision of used serviceable LLPs that otherwise meet Shuttle’s specifications and reasonable minimum cycle-remaining requirements, to be incorporated into a Covered Aircraft.  In connection with the withdrawal of any Covered Aircraft from the capacity purchase provisions of this Agreement (whether at the end of such aircraft’s scheduled term or otherwise), Mokulele shall pay Shuttle for the pro-rata cost (based on useful life and using the then-current catalogue price for LLPs) of all LLPs consumed for all Scheduled Flights by such Covered Aircraft under this Agreement, and Shuttle shall pay Mokulele for the pro-rata cost (based on useful life and using the then-current catalogue price for LLPs) of all LLPs provided by Mokulele and incorporated into such Covered Aircraft pursuant to the previous sentence and not consumed for any Scheduled Flights under this Agreement.

 

Section 10.19 Original Airline Services Agreement

 

Mokulele, RAI and Shuttle hereby agree that upon the effectiveness of this Agreement, the terms and provisions of the Original Airline Services Agreement which in any manner govern or evidence the obligations arising hereunder, the rights and interests of the RAI and Shuttle and any terms, conditions or matters related to any thereof, shall be and hereby are amended and restated in their entirety by the terms, conditions and provisions of this Agreement, and the terms and provisions of the Original Airline Services Agreement, except as otherwise expressly provided herein, shall be superseded by this Agreement.