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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): January 19, 1998
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SKYWEST, INC.
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(Exact name of registrant as specified in its charter)
UTAH 0-14719 87-0292166
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(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation) Identification No.)
444 South River Road
St. George, Utah 84790
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(Address of principal executive offices, including zip code)
(435) 634-3000
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(Registrant's telephone number, including area code)
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TABLE OF CONTENTS
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ITEM 5. OTHER EVENTS.................................................................................. 1
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS............................................................. 1
b. Exhibits............................................................................. 1
SIGNATURE.............................................................................................. 2
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ITEM 5. OTHER EVENTS.
On January 19, 1998, SkyWest Airlines, Inc. ("SkyWest"), a wholly-owned
operating subsidiary of SkyWest, Inc. (the "Registrant"), and United Air Lines,
Inc. ("United") entered into a United Express Agreement (the "United Express
Agreement"), pursuant to which SkyWest has operated as a United Express
carrier at United's hub in Los Angeles, California since October 1, 1997.
Contemporaneously with the execution of the United Express Agreement, SkyWest
and United entered into an Addendum to the United Express Agreement (the "United
Express Addendum"), pursuant to which SkyWest will also operate as the United
Express carrier at United's hub in San Francisco, California, beginning June 1,
1998. Under the United Express Agreement, SkyWest presently offers 120 scheduled
daily United Express departures coordinated to connect with United's flights
from Los Angeles International Airport. The United Express Addendum contemplates
that SkyWest will offer approximately 168 scheduled daily departures coordinated
to connect with United's flights from San Francisco International Airport. The
United Express Agreement expires in September 2002 with respect to operations in
Los Angeles and in May 2008 with respect to operations in San Francisco, subject
to termination by United upon 180 days' notice. United may, however, terminate
the United Express Agreement for cause upon 30 days' written notice.
Copies of the United Express Agreement, United Express Addendum and a
press release relating thereto are attached as exhibits to this Current Report
on Form 8-K as Exhibits 99.1, 99.2 and 99.3 respectively.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
b. Exhibits.
99.1 -- United Express Agreement dated January 19, 1998
99.2 -- Addendum to United Express Agreement dated January
19, 1998
99.3 -- Press Release dated January 19, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SKYWEST, INC.
/s/ Bradford R. Rich
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Bradford R. Rich, Executive Vice President
and Chief Financial Officer
Date: January 21, 1998
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EXHIBIT 99.1
United Contract No. 135135
UNITED EXPRESS(R) AGREEMENT
BETWEEN
UNITED AIR LINES, INC.
AND
SKYWEST AIRLINES, INC.
Disclosure Regarding Confidential Information:
Portions of pages 42 and 45 of, and Appendices D, E, F, G, H and I attached to,
this Exhibit 99.1 to a Current Report on Form 8-K (consisting of portions of 10
multiple pages) have been omitted from this exhibit filed with the Securities
and Exchange Commission (the "Commission") by SkyWest, Inc. The omitted
portions, which are the subject of an application for confidential treatment and
have been filed separately with the Commission, are identified in this exhibit
by the placement of the following symbol: +.
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TABLE OF CONTENTS
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I. DEFINITIONS 2
II. SCOPE AND TERM 5
III. SUPPORT SERVICES AND FACILITIES 5
A. General 5
B. Special Support Services 5
1. Use of the United Designator Code 6
2. Use of Apollo Services 6
3. Participation in United's Mileage Plus Program 6
4. Use of United Ticket Stock, Baggage Tags,
Ticket Wallets and City Timetables 6
5. Credit Card Sales and Rejects and Bad Checks 7
6. Denied Boarding 7
7. Ticket and Baggage Handling Fees 7
8. Customer Service Training 8
9. Cooperative Advertising 8
C. Communications 8
D. Reservations 8
1. Reservations Functions 8
2. Apollo Services Activities 9
3. CRS Fees 10
E. Operations 10
1. Scheduled Service Update 10
2. No Flight Dispatch Duty 10
3. Compliance with Statutes 11
4. Weather Information Service 11
F. Station Support Services 11
G. Tariffs and Schedule Publication 12
1. General 12
2. Passenger Fare Tariffs 13
3. Air Freight and Mail Rates 13
4. Timetables 14
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III. SUPPORT SERVICES AND FACILITIES (CONT'D)
H. Sales Settlement 14
1. Payments to United 14
2. Set Off Amounts 15
3. Modified Procedures 16
4. Audits 16
I. Advertising and Promotions 16
1. Advertising Support 16
2. Right to Advertise Using Marks 17
3. Prior Approval of United 17
J. Automation 17
1. Use and Protection 17
2. Installation and Training 18
3. Standards of Use 19
4. Maintenance, Repair and Modification 20
5. Downtime 21
6. No Warranty; Release 21
7. Ownership and Liens 21
L. Other Supplies 22
M. Contractor Assistance 22
IV.
AIR SERVICES TO BE PROVIDED BY CONTRACTOR 22
A. Schedules and Charters to be operated by Contractor 22
1. City Pairs and Frequencies 22
2. Code Share Limitation, Delta Option and Gates 23
3. United Schedule Consent Required 23
4. Adverse Impact Concurrence Required 24
5. Charter 25
6. Changes Input to Reservations Systems 25
B. Aircraft to Be Used 25
1. Aircraft Types 25
2. Technical Specifications 25
3. Substitute Aircraft 26
4. Frequency Change 26
5. Mark Change 27
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IV. AIR SERVICES TO BE PROVIDED BY CONTRACTOR (CONT'D)
C. Inventory 27
D. Operation of Additional City Pairs 28
E. Flight Crews to Be Used 28
F. LAX Gates 28
V. OPERATING RESTRICTIONS 29
A. United Express Operations Only 29
B. No Operation Outside Agreement 29
C. Serverability and Remedy 29
VI. LICENSE 30
A. Grant of License 30
B. Terms and Conditions Governing License 31
1. United's Marks 31
2. Standards of Service 31
3. Aircraft Ground Handling Procedures 32
4. Liability for Operations 33
5. Non-Exclusivity 33
6. Reversion of Marks 33
C. Infringement 33
VII. ADDITIONAL UNDERTAKINGS 34
A. Bulk Purchases 34
B. Uniforms 34
C. Passes and Reduced Rate Travel 34
D. Signage 34
E. Environmental 35
VIII. CONTRACTOR FEES AND PROGRAM FEES 35
A. Contract Fees 35
B. Program Fees 36
C. Payment 36
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VIII. CONTRACTOR FEES AND PROGRAM FEES (CONT'D)
D. Additional Personnel 37
E. Airport Charges 37
F. Prorates 37
IX. MAINTENANCE AND FUELING 38
X. U.S. MAIL 38
XI. INSURANCE 38
A. Insurance Types 38
B. 30-Day Notice 40
C. Alterations 40
D. Failure to Maintain Insurance 40
XII. LIABILITY AND INDEMNIFICATION 40
A. Employer's Liability and Workers' Compensation 40
B. Indemnification by Contractor 41
C. Indemnification by United 42
D. Contractor's Supplies Liability 42
E. Indemnity for Information 43
F. United Definitions 44
XIII. REPORTS 44
A. Close-Out Entries 44
B. Boarding Information 45
C. Operating Performance 45
D. Financial Statements 45
E. Inspection 45
F. Daily Passengers 45
G. Government Filings 46
H. Copy of Government Reports 46
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XIV. INDEPENDENT CONTRACTORS AND WAIVER OF CONTROL 46
A. Independent Contractors 46
B. Employees 47
C. Unauthorized Obligations 47
D. Contractor Flights 48
XV. DEFAULT AND TERMINATION 48
A. Bankruptcy 48
B. Covenant Default 49
C. Default by Contractor 50
D. Similar Agreements 51
E. Non-Compliance with Standards 51
F. Consequence of Termination 51
G. United's Liquidated Damages 52
H. Operating Performance Standards 55
XVI. ASSIGNMENT, MERGER AND ACQUISITION 55
XVII. CHANGE OF LAW 58
XVIII. TAXES, PERMITS AND LICENSES. 59
XIX. REVIEW 60
XX. JURISDICTION 61
XXI. NOTICES 61
XXII. APPROVALS AND WAIVERS 62
XXIII. GOVERNING LAW 63
XXIV. CUMULATIVE REMEDIES 63
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XXV. FORCE MAJEURE 63
XXVI. SEVERABILITY AND CONSTRUCTION 64
XXVII. ACKNOWLEDGMENT 64
XXVIII. CONFIDENTIALITY 64
XXIX. RELATED AGREEMENTS 65
XXX. ENTIRE AGREEMENT 66
XXXI. REFERENCES TO TIME PERIODS 66
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APPENDICES
Appendix A United's Marks
Appendix B Airport Services
Appendix C Contractor Support Services
Appendix D Contract City Pairs
Appendix E Point to Point City Pairs
Appendix F Contract Fees
Appendix G Contract City Pairs Incentive Program
Appendix H Program Fees
Appendix I Liability Insurance
Appendix J Participation in United's Travel Certificate Program
Appendix K Safety Standards for United Airlines and United Express Carriers
ADDENDA
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SFO Addendum
SFO Appendix B Airport Services
SFO Appendix D Contract City Pairs
SFO Appendix F Contract Fees
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UNITED EXPRESS(R) AGREEMENT
This Agreement, dated as of October 1, 1997, is between UNITED AIR
LINES, INC., a Delaware corporation, with its worldwide headquarters located at
1200 E. Algonquin Road ("United"), and SKYWEST AIRLINES, INC., a Utah
corporation, having its principal mailing address at 444 S. River Rd., St.
George, Utah 84790 ("CONTRACTOR").
WITNESSETH:
WHEREAS, United holds a certificate of public convenience and necessity
issued pursuant to the Federal Aviation Act of 1958 authorizing United to engage
in air transportation of persons, property and mail, and is a major airline
providing scheduled air service in both national and international markets;
WHEREAS, Contractor is an air carrier engaged in air transportation of
persons and property pursuant to the Economic Regulations of the Department of
Transportation ("DOT") and provides high frequency, short-haul scheduled service
in particular regions;
WHEREAS, United owns various trademarks, service marks, trade names,
logos, emblems, uniform designs and distinctive exterior and interior color
decor and patterns for its aircraft, including, but not limited to, the service
mark United Express (hereinafter referred to individually and collectively as
"UNITED'S MARKS" or "MARKS");
WHEREAS, United has entered into agreements with several regional
carriers to provide air transportation services under the United Express mark
for city pairs where it is generally uneconomic for United to operate such
services;
WHEREAS, in connection with entering into this Agreement, the parties
acknowledge it is their desire to expand their business relationship;
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WHEREAS, United will provide Contractor, pursuant to the terms of this
Agreement, a non-exclusive license to use one or more of United's Marks in
connection with Contractor's United Express Services.
NOW, THEREFORE, in consideration of the foregoing premises, mutual
covenants and obligations hereinafter contained and subject to securing any and
all necessary corporate and Federal, State and local regulatory approvals, and
where necessary, airport consents or approvals, the parties agree as follows:
I. DEFINITIONS
A. "APOLLO SERVICES" means the computerized Apollo Reservations and
Ticketing Service (or any similar or substitute service offered by or on behalf
of United), which performs flight, hotel, rental car and other travel related
services, reservations and ticket issuance functions.
B. "CONTRACT FEE" shall have the meaning set forth in ARTICLE
VIII.
C. "CONTRACTOR LOCATION" means any airport terminal facility where
Contractor provides Contractor's United Express Services pursuant to this
Agreement and only Contractor has employees stationed (including any terminal
facility where Contractor provides Contractor's United Express Services pursuant
to this Agreement that is different from the terminal facility from which United
operates in the same airport).
D. "CONTRACTOR'S UNITED EXPRESS SERVICES" means the services or
operations provided and maintained by Contractor or its affiliates in connection
with providing scheduled air transportation service as a United Express Carrier
and related ground and other services to United and its affiliates pursuant to
the terms of this Agreement (including, without limitation, the services
required under ARTICLE IV).
E. "CUSTOMER SERVICE POLICIES AND PROCEDURES" means the procedures
prescribed by United from time to time (including but not limited to United's
"Series 65" regulations and customer service resources contained in the Apollo
Services system) which describe United's approved procedures for various
activities relating to the provision of air transportation services.
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F. "DEFAULT" means, individually or collectively, a SECTION A DEFAULT,
a SECTION B DEFAULT, a SECTION C DEFAULT, a SECTION D DEFAULT, and a SECTION E
DEFAULT, each as defined in ARTICLE XV.
G. "DESIGNATED PERSONNEL" means all Contractor employees in job
classifications requiring direct public contact who provide Contractor's United
Express Services.
H. "EFFECTIVE DATE" shall have the meaning set forth in ARTICLE II.
I. "ENVIRONMENTAL COST" means any cost incurred by, arising out of or
in connection with complying with ARTICLE VII.E of this Agreement or remedying
or preventing pollution or threat to the environment related to Contractor's
United Express Services, including, without limitation, all on-site and off-site
activities or release into the environment (air, soil or water) involving any
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products.
J. "ENVIRONMENTAL LAWS" means all federal, state, local and foreign
laws and regulations relating to pollution or the environment, including,
without limitation, laws and regulations relating to storage, release, disposal,
transport or handling of chemicals, pollutants, contaminants, wastes, toxic
substances, petroleum and petroleum products.
K. "GROUND HANDLING DUTIES" means the provision of one or more of the
following: (1) lavatory service, (2) overnight cabin cleaning, (3) loading and
unloading of baggage, mail and freight, (4) receipt and dispatch, and (5)
baggage delivery.
L. "JOINT LOCATION" means any airport terminal where Contractor
provides Contractor's United Express Services pursuant to this Agreement and
both United and Contractor have employees stationed at such terminal facility.
M. "MARKS" or "UNITED MARKS" shall have the meaning set forth in the
recitals of this Agreement.
N. "PROGRAM FEE" shall have the meaning set forth in ARTICLE VIII.
O. "RELATED AGREEMENTS" shall have the meaning set forth in ARTICLE
XXIX.
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P. "REVENUE PASSENGER" means each passenger traveling on Contractor in
connection with Contractor's United Express Services who holds a ticket
(electronic or otherwise), flight coupon, voucher or other form of document that
(i) entitles that passenger to board an aircraft and (ii) is issued pursuant to
or in connection with a published or unpublished fare. Passengers traveling on a
purchased ticket (including airline industry reduced rate tickets), wholesaler
voucher, or voucher issued as denied boarding compensation, shall be considered
to be Revenue Passengers. In addition, passengers traveling on a free ticket as
(or as part of) a Mileage Plus(R) award or a free ticket issued in conjunction
with a two-for-one fare or other similar fare established by United, shall be
considered to be Revenue Passengers. A passenger traveling on any other type of
free, or service charge-based, ticket, including, but not limited to, a site
inspection ticket, or wholesaler compensation ticket, any travel agent or
wholesaler traveling on a positive space or space available ticket, and each
employee of United, Contractor or any other carrier traveling on either a
positive space or space available ticket, shall not be considered a Revenue
Passenger for purposes of the calculations relating to the Contract Fees and the
Program Fees.
Q. "SUPPORT SERVICES" means those activities set forth in ARTICLE III
which are related to the operation of airline services except during flight.
R. "TERMINATION DATE" shall have the meaning set forth in ARTICLE II.
S. "UNITED EXPRESS CARRIER" means an air carrier which has been
contractually given a non-exclusive license to use the mark United Express and
one or more of United's other Marks in connection with providing air
transportation service to United pursuant to an agreement between United and
such air carrier.
T. "UNITED LOCATION" means any airport terminal facility where
Contractor and United both have operations and only United has employees
stationed in such terminal facility.
U. "UNITED'S ACTUAL COST" means any and all cost or costs to United,
not including any markup by United or any additional administrative service
charge imposed by United.
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II. SCOPE & TERM
A. The scope of this Agreement pertains to Contractor's operations
between the city pairs set forth on the Appendices hereto, and as they may be
amended in accordance herewith from time to time.
B. This Agreement becomes effective at 12:01 a.m., Chicago, Illinois
time, on October 1, 1997 (the "EFFECTIVE DATE") and shall terminate on September
30, 2002 (the "TERMINATION DATE"), unless it is terminated at an earlier date
pursuant to one or more of the provisions of this Agreement.
C. This Agreement may be terminated by United for convenience upon 180
days' prior written notice to Contractor, which notice shall not be given
earlier than September 30, 1999.
III. SUPPORT SERVICES AND FACILITIES
A. GENERAL
1. SUPPORT SERVICES. United and Contractor will provide
Support Services and facilities to the extent and in the manner set forth in the
subsequent provisions of this ARTICLE III. All such Support Services and
facilities set forth in this ARTICLE III will be furnished only with respect to
Contractor's United Express Services.
2. APPROVAL OF SUPPORT SERVICES. United reserves the right to
approve or disapprove the implementation of any Support Services or facilities
offered to Contractor for Contractor's United Express Services by any third
party at any location. Such approval shall not be unreasonably withheld.
B. SPECIAL SUPPORT SERVICES
In addition to other services to be made available to or provided by
Contractor pursuant to this Agreement, and as summarized in and in accordance
with APPENDIX B and C (airport and support services), Contractor agrees to use
the following services and facilities for Contractor's United Express Services
to the extent provided by United or its designees:
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1. USE OF THE UNITED DESIGNATOR CODE. All scheduled air
transportation provided by Contractor as a part of Contractor's United Express
Services will be displayed in Apollo Services, the Official Airline Guide
("OAG") and all other computerized reservations systems, using the appropriate
United designator code, "UA" or "UA*," and a flight number within a range of
flight numbers assigned by United.
2. USE OF APOLLO SERVICES. In selling and providing air
transportation services, Contractor will only use Apollo Services, including
United's automated check-in, United's ticketing (including United's electronic
ticketing service, E-Ticket(sm)) and boarding passes, advance seat reservation
system, and United's automated baggage tag printing and baggage tracing systems.
3. PARTICIPATION IN UNITED'S MILEAGE PLUS PROGRAM. At United's
discretion, all passengers traveling on a flight segment included in
Contractor's United Express Services, whether or not in conjunction with a
United flight segment, will be awarded mileage credits for United's Mileage Plus
Program. Contractor shall not participate in the frequent traveler program of
any other carrier, unless otherwise mutually agreed between United and
Contractor in any Mileage Plus Participation Related Agreement referenced in
ARTICLE XXIX or under another writing between the parties.
4. USE OF UNITED TICKET STOCK, BAGGAGE TAGS, TICKET WALLETS
AND CITY TIMETABLES. In selling air transportation of passengers and property,
both on-line and off-line, Contractor will use only United passenger ticket
stock, ticket wallets and baggage tags in connection with Contractor's United
Express Services. United will provide to Contractor all United passenger ticket
stock, city timetables, United airway bills, United cargo bills and other
shipping documentation for all Contractor's United Express Services, but ticket
wallets and baggage tags for Joint Locations and United Locations only; and
provided that such quantities do not exceed reasonable levels. Contractor shall
reimburse United, at United's Actual Cost, for all documentation requested by
Contractor in excess of reasonable levels. Ticket wallets, baggage tags, and
other passenger processing documents approved by United will be acquired by
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Contractor for all Contractor Locations through a supplier designated by United.
Contractor shall be required to convert to the use of different ticket wallets,
baggage tags and other passenger processing documents upon 45 days' prior
written notice to Contractor by United.
5. CREDIT CARD SALES AND REJECTS, AND BAD CHECKS. Contractor
will use only credit-industry or airline-industry standard credit card vouchers
and receipts in connection with credit card sales for tickets, cargo, excess
baggage or other services on Contractor's United Express Services. United will
absorb all credit card discount fees, credit card reject fees and bad check
expenses for tickets and vouchers written by United for passage or freight in
connection with Contractor's United Express Services; provided that Contractor
complies with United's check and credit card acceptance procedures outlined in
United's Customer Service Policies and Procedures, otherwise Contractor will
reimburse United for the expenses of such discount fees, credit card rejects and
bad checks. Contractor will absorb all credit card discount fees, credit card
reject fees and bad check expenses for tickets and vouchers written by
Contractor for passage or freight in connection with Contractor's United Express
Services.
6. DENIED BOARDING. United will absorb all denied boarding
expenses incurred in the city pair markets under this Agreement; provided,
however, that United reserves the right to bill Contractor, and Contractor shall
reimburse United, for denied boarding expenses resulting from weight
restrictions or other operational circumstances.
7. TICKET AND BAGGAGE HANDLING FEES. All ticket handling,
baggage handling and other service charges and fees assessed by carriers other
than United relating to Contractor's services (including, but not limited to,
Contractor's United Express Services) will be absorbed by Contractor.
8. CUSTOMER SERVICE TRAINING. On a schedule, at a place, to an
extent, for a number of persons, and in a manner, determined by United, it will
provide to Contractor instructor training United deems sufficient to permit
Contractor's instructors to be able to provide and train others to provide
customer services for Contractor's United Express Services.
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9. COOPERATIVE ADVERTISING. United will work with Contractor,
within a budget and during periods acceptable to United, to develop and
implement advertising efforts which support Contractor's United Express
Services.
C. COMMUNICATIONS
1. TELEPHONE AND DATA LINES. United will provide and maintain
or arrange for the provision of reservations telephone lines connecting the city
served by Contractor in connection with Contractor's United Express Services
with United's Reservations Centers. United will establish, operate and maintain
or arrange for the provision of the data circuits from Contractor's airport
ticket offices and other selected locations linking the United-approved data
processing equipment at those locations with Apollo Services. United will
determine, at its sole discretion, the necessity and feasibility of installing
all such communications equipment.
2. PROTECTION OF CIRCUITS. Contractor will take all necessary
precautions to protect the data circuits provided for Contractor's use pursuant
to this Agreement by United or its designee.
D. RESERVATIONS
1. RESERVATIONS FUNCTIONS. United agrees to provide the
following reservations functions for Contractor's United Express Services:
a. Answering reservations telephones, providing information,
schedules, fares, making bookings and providing other services normally
associated with airline reservations services in accordance with United's
established procedures.
b. Providing personnel so that telephone calls are answered at
a service level determined by United.
c. Answering all calls terminating on specified telephone
lines as United or United Express, at United's option.
d. To the extent practicable, reaccommodate and notify
passengers of confirmation on United, Contractor and other airlines and
clearance from wait-list.
e. Review and process inbound prepaid ticket advices.
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f. Provide reservations services to the hearing impaired via a
special telephone number during normal business hours.
2. APOLLO SERVICES ACTIVITIES. Contractor agrees to use Apollo
Services for the following activities for Contractor's United Express Services
to the extent provided by United:
a. Establishment, maintenance, display and change of passenger
name records (PNRs).
b. Confirmation of passenger against seat inventory on
Contractor's United Express Services and United's scheduled flights and on other
airlines where flight availability is maintained in Apollo Services.
c. Maintenance of seat availability for Contractor's United
Express Services scheduled flights.
d. Transmission of availability status messages (AVS) for
Contractor's United agreement in accordance with Standard Industry Passenger
Procedures (SIPP).
e. Process inbound reservations messages received from ARINC
addressed to Contractor.
f. Routing of all inbound messages received from ARINC, other
than stated in ARTICLE III.D.2(E) above, to a computer message queue.
3. CRS FEES. Contractor will pay all computerized reservation
system fees for reservations made on Contractor's United Express Service flights
pursuant to a separate agreement between Contractor and the company operating
and providing Apollo Services to its subscribers. Further, Contractor will pay
United for all fees charged to United at United's Actual Cost, or charged to
Contractor at Contractor's Actual Cost, for bookings on Contractor that are
received from other airlines whose computerized reservations systems are used by
their subscribers.
E. OPERATIONS
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1. SCHEDULED SERVICE UPDATE. Contractor will provide accurate
updates of its flights' planned and actual departure and arrival times
(including updates of irregularities) in Apollo Services as soon as the planned
flight schedule is changed and the flight departs and arrives or suffers an
irregularity. In the event of flight delays, cancellations or other schedule
irregularities affecting Contractor's United Express Service flights, and as
soon as information concerning such irregularities is available, Contractor
shall update Apollo Services to reflect such information and, when requested by
United, notify the designated United organization. For purposes of this
Agreement, such scheduled and actual departure and arrival and irregularity
information shall be known as "FLIFO." If Contractor fails ten (10) times in any
consecutive thirty (30) day period to update FLIFO in a timely and accurate
manner as soon as it becomes evident to Contractor that a schedule deviation
shall take place, then upon notification by United to Contractor, Contractor
shall pay United damages of Five Hundred Dollars ($500.00) for each occurrence
over and above the first ten (10) occurrences. Such damages may be collected by
set offs against other amounts owed by United to Contractor hereunder.
2. NO FLIGHT DISPATCH DUTY. Except as otherwise provided on
APPENDIX B, Contractor will be solely responsible for, and United will have no
obligations or duties with respect to, the dispatch of Contractor's flights. For
the purposes of this ARTICLE III.E.2, the term flight dispatch will include, but
will not be limited to, all planning of aircraft itineraries and routings,
fueling and flight release.
3. COMPLIANCE WITH STATUTES. Contractor hereby represents,
warrants and covenants that all air transportation services performed by it
pursuant to this Agreement or otherwise will be conducted in full compliance
with all applicable statutes, orders, rules and regulations, whether now in
effect or hereafter promulgated, of all governmental agencies having
jurisdiction over Contractor's operations, including, but not limited to, the
Federal Aviation Administration ("FAA") and the DOT. Contractor's compliance
with such governmental statutes, orders, rules and regulations will be the sole
and exclusive obligation of Contractor and United will have no obligation,
responsibility, or liability, whether direct or indirect, with respect
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to such matters. Additionally, Contractor will comply during the term of this
Agreement with the United/United Express Safety Standards, as described on
APPENDIX K.
4. WEATHER INFORMATION SERVICE. From time to time and upon the
request of Contractor or its flight crews, United may furnish Contractor's
flight crews with such U.S. Weather Bureau information or data as may be
available to United; provided, (i) that in furnishing any such weather
information or data to Contractor, neither United nor its employees or agents
will be responsible or liable for the accuracy thereof and, (ii) that any and
all such costs associated with such weather information or data will be paid by
Contractor.
F. STATION SUPPORT SERVICES
1. United will provide or cause to be provided, at its
expense, to Contractor certain support services as set forth on APPENDIX B, at
the Joint Locations set forth in APPENDIX B; provided that United shall have the
right to add, delete or otherwise modify the services described on APPENDIX B,
if United provides Contractor with thirty (30) days' prior written notice of
such modification. Contractor will provide or cause to be provided at least
those services and facilities set forth in APPENDIX C. All such station support
services will be provided as of the Effective Date of this Agreement unless
otherwise stated.
2. When Contractor is ready to make use of such access, United
will provide to Contractor, for its United Express Carrier operations at Los
Angeles International Airport ("LAX"), non-exclusive access to and use of the
remote passenger processing facility and related ramp space that United has at
LAX for United Express Carrier operations. Use and space will be allocated in a
manner that seeks to meet the reasonable needs of all involved United Express
Carriers. In this connection, United will provide passengers transportation
between this remote facility and the main terminal in which United is located.
G. TARIFFS AND SCHEDULE PUBLICATION
1. GENERAL.
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a. For those markets set forth on APPENDIX D, United
shall have the sole right and power to establish and modify, from time to time,
the fare/rate classes and fare/rate levels (including through fares) for all
Contractor's United Express Services in these markets in a manner consistent
with pricing (including joint fares) established by United. United shall comply
with applicable governmental regulations pertaining to public disclosure of
fares, rates and rules tariffs.
b. For those markets set forth on APPENDIX E,
Contractor shall have the right and power to establish and modify, from time to
time, the fare/rate classes and fare/rate levels for all Contractor's United
Express Services in these markets in a manner consistent with pricing (including
joint fares) established by Contractor, subject to United's concurrence that
such change does not adversely affect Contractor's services in such markets or
the United Express service or brand. Contractor shall comply with applicable
governmental regulations pertaining to public disclosure of fares, rates and
rules tariffs.
2. PASSENGER FARE TARIFFS.
a. Upon execution of this Agreement, all passenger
fare tariffs published for Contractors' United Express Services shall be
included as part of United's tariffs. Prior to the Effective Date, Contractor
shall notify the Airline Tariff Publishing Company or any successor company
performing the same or equivalent services ("ATPCO") that United is authorized
to supply, modify or withdraw such fare information data related to Contractor's
United Express Services.
b. Contractor shall notify ATPCO that United is
authorized to supply, modify or withdraw such rates with ATPCO. United may file
changes to such fares from time to time with ATPCO as UA fares.
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3. AIR FREIGHT AND MAIL RATES.
a. For those markets set forth on APPENDIX D, United
shall have the sole right and power to establish and modify from time to time
all air freight and cargo rates and mail rates covering mail, general commodity,
small package and priority air freight shipments and all other air
transportation services (other than mail delivery) for Contractor's United
Express Services in these markets. All such air freight rates for Contractor's
United Express Services shall be included as part of United's air freight and
cargo rates tariffs. Contractor shall notify ATPCO that United is authorized to
supply, modify or withdraw such rates with ATPCO.
b. For those markets set forth on APPENDIX E,
Contractor shall, on or before the Effective Date, furnish to United all of
Contractor's air freight and cargo rates covering mail, general commodity, small
package and priority air freight shipments and all other air transportation
services for Contractor's United Express Services in these markets. As of the
Effective Date, all such air freight rates for Contractor's United Express
Services shall be included as part of United's air freight and cargo rates
tariffs. Contractor shall notify United promptly of all its air freight rates
and any changes thereto, and hereby authorizes United to include such rates in
its tariffs and to file such rated with ATPCO on Contractor's behalf. Contractor
shall notify ATPCO that United is authorized to supply, modify or withdraw such
rates with ATPCO. Upon thirty (30) days' prior written notice, United may
require Contractor to pay United for United's Actual Costs of such tariff
filings. Contractor shall only be responsible for paying for those tariff
filings made after the expiration of said thirty (30) day notice period.
4. TIMETABLES. United will reflect Contractor's United Express
Services in computerized reservations systems, United's internal reservations
system, and joint city timetables as UA flights and connections to United will
be listed as UA connections. United will provide information such that
references in computerized reservations systems, United's internal reservations
system, and joint city timetables to Contractor's United Express Services will
also contain notations indicating that such services are performed by Contractor
as an independent contractor under the appropriate United Marks. A similar
notation will be made in the OAG or
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any successor publication commonly used by the airline industry for the
dissemination of schedule information.
H. SALES SETTLEMENT
1. PAYMENTS TO UNITED. Contractor will wire transfer from each
Contractor bank account to United, an amount equal to Contractor's Total Net
Sales Receipts collected at each Contractor Location ("TOTAL NET SALES
RECEIPTS") equals total gross sales receipts for all passenger tickets, airway
bills, cargo bills, mail fees and other tickets issued by Contractor for
Contractor's United Express Services less refunds thereon paid out by
Contractor) collected during the applicable period for all tickets (including,
air freight) sold or exchanged by Contractor in connection with Contractor's
United Express Services. The frequency of the wire transfer will be once a week,
on Tuesdays, for all Total Net Sales Receipts collected during that week.
Contractor's wire transfer will be made by 11:00 a.m. local time to the
following bank account:
The First National Bank of Chicago
ABA No.: 071000013
One First National Plaza
Chicago, Illinois 60670
Credit To: United Airlines Special Account #51-67795
Reference: SKYWEST AIRLINES, INC.
Contractor will also require its employees and agents to forward to United, on a
daily basis, all auditors ticket coupons, airway bills, cargo bills, all lift
documentation, reports, exchange orders and refund detail issued by Contractor
in connection with Contractor's United Express Services during the previous day
in accordance with the sales and reporting procedures specified by United.
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2. SET OFF AMOUNTS. In addition to the terms of ARTICLE
VIII, and the other provisions hereof, but subject to the terms of ARTICLE XII,
the payment for transportation furnished by Contractor shall be reduced in order
to set off:
(i) amounts owed by Contractor to United for:
(a) actual loss of revenue resulting from a
failure on the part of Contractor to properly effect a sale
pursuant to United's Customer Service Policies and Procedures
applicable to the sale of tickets;
(b) fraudulent, grossly negligent or
erroneous acts of employees of Contractor which cause United
to suffer a loss;
(c) any Program Fees specified in ARTICLE
VIII;
(d) the currently effective industry
standard rate of commission settlement under ATC Resolution
5.60 for tickets issued under such resolution for the markets
referenced under ARTICLE IV.A.1.(II) and listed on APPENDIX E;
(e) unreported sales on United tickets
assigned to Contractor;
(f) refunds for interrupted flights or
failures to carry out Contractor services made on United
refund documents; and
(g) any ATPCO tariff filing fee pursuant to
ARTICLE III.G;
(ii) such other adjustments as may be mutually agreed
to by the parties from time to time; and
(iii) Any other amounts owed by Contractor to United.
United will notify Contractor of all such adjustments made and will
provide Contractor with supporting documentation for such adjustments.
Contractor shall have the right to object to any such adjustment by providing
United with written notice of its objection, together with supporting
documentation, within 30 days of the notice provided by United describing such
adjustments. United agrees to negotiate, in good faith, with Contractor in order
to resolve all such disputes within 30 days of Contractor's notice to United.
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3. MODIFIED PROCEDURES. United and Contractor by mutual
written agreement may establish alternative or modified passenger sales
procedures in order to accommodate tickets and exchange orders issued by
air carriers which are not participants in ACH.
4. AUDITS. United may conduct on-site audits, from time to
time, of (i) tickets, air way bills, cargo bills, exchange orders, refunds and
other records relating to sales and refund activity pertaining to Contractor's
United Express Services and (ii) all financial records related to Contractor's
United Express Services (including, but not limited to, work papers of
accountants) pertaining to the calculation of the fees payable to Contractor
related to Contractor's United Express Services.
I. ADVERTISING AND PROMOTIONS
1. ADVERTISING SUPPORT. The parties will promote each other's
services throughout the term of this Agreement through sales, advertising, and
promotional support to enhance the interline exchange of passengers between the
parties, consistent with all applicable laws and regulations. The parties will
confer periodically to determine the nature and scale of such promotional
efforts and to reasonably allocate any costs associated therewith. The terms
governing participation in United's Travel Certificate Program are set forth in
APPENDIX J.
2. RIGHT TO ADVERTISE USING MARKS. Additionally and to the
extent Contractor is licensed to use the Marks, Contractor may in its capacity
as a United Express Carrier and at its sole expense use the marks to advertise
Contractor's United Express Services. However, any and all such advertisements
using one or more of the United Marks will identify United as the owner of said
Marks (including in any state company name registrations required of
Contractor), and to the extent that any Mark is registered, will so specify.
Notwithstanding the above, no advertisement, solicitation, document or other
material using any United Mark will be published or otherwise promulgated
without United's prior inspection and approval. No advertising that relates in
any way to United, United Express or Contractor's United Express Services will
be placed by Contractor with an outside advertising agency unless United has
given
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its prior consent regarding copy, layout and the specific media plan. In
addition, where United has agreed to share the costs of any such advertising,
Contractor will obtain the prior consent of United regarding the funds to be
expended for such advertising.
3. PRIOR APPROVAL OF UNITED. Contractor agrees that it will
not use (or attempt to register) any United trade name or service mark,
including, but not limited to, the names "UNITED AIR LINES, Inc.," "UNITED
AIRLINES," or "UNITED," or United's logo in any advertising, or other document
or material without first obtaining United's prior approval of each such use.
J. AUTOMATION
1. USE AND PROTECTION. Contractor will use internal United
Apollo Services automation. Contractor agrees to comply with and abide by all
terms and restrictions imposed by United on the use of Apollo Services and
associated Automation Equipment, as defined below. Contractor agrees that all
instructions, procedures and manuals provided by United in connection with
Contractor's use of Apollo Services and Automation Equipment ("AUTOMATION
INFORMATION") are and will remain the property of United. Contractor
acknowledges that Apollo Services contains software which is confidential and
proprietary information of United or its affiliates (such as Galileo
International Partnership) or any successor thereto. Contractor further agrees
that it will not (nor will it permit) any such software and Automation
Information to be duplicated, copied or otherwise reproduced or furnished or
disclosed to any other party or to Contractor's employees other than such
employees who have a need to know and who are aware of and understand the
confidential and proprietary nature of the software and Automation Information.
2. INSTALLATION AND TRAINING. United may install or cause to
be installed a minimum of one terminal plus associated equipment for printing
messages, data, air tickets, boarding passes and baggage tags ("AUTOMATION
EQUIPMENT") at Contractor's airport locations and selected administrative
locations. United will determine, in the exercise of its sole discretion and
judgment, the necessity and feasibility of installing Automation Equipment. Any
and all
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modifications, enhancements, improvements or developments pertaining to the
Automation Equipment, or other new related technology, may be made available to
Contractor by United, in its sole discretion, under terms and conditions to be
determined by United on a case-by-case basis. United will train Contractor
instructors, as applicable, in the proper use of Apollo Services and Automation
Equipment as described in the Customer Service/Reservations Handbook or any
other related United guidelines. Contractor agrees to establish a training
program with internal instructors. Only qualified personnel who have
satisfactorily completed a United prescribed training program will be permitted
to operate any Automation Equipment (hereinafter "DESIGNATED USERS"). United
may, at its discretion, monitor or test the proficiency level of Designated
Users. If United determines that their proficiency levels are insufficient for
the proper use of the Automated Equipment or Apollo Services, then Contractor
must arrange for its Designated Users to undertake any further training which
United determines necessary to bring such Designated Users to the desired
proficiency level.
3. STANDARDS OF USE.
(i) To maintain an effective interconnection between
Apollo Services and the Automation Equipment and to prevent misuse thereof,
Contractor agrees that Apollo Services and the Automation Equipment will be used
and operated (a) in strict accordance with operating instructions provided by
United or its affiliates in the Customer Services Policies and Procedures,
Series 5-18, and any other related United or affiliate guidelines, and (b)
solely for the performance of the specific business functions designated by
United. Any undesignated business use and all nonbusiness uses are strictly
prohibited. Prohibited uses include, but are not limited to, personal messages,
servicing subscribers, travel agencies, or any other third party, training any
other party or any other use designated as prohibited in the Apollo Services
Manual. Contractor will maintain a list of all employees and agents who have
access to Apollo Services and their assigned file number and passwords. United
may at any time deny access to Apollo Services to any employee of Contractor if
such employee is found by United to have abused Apollo Services
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or the Automation Equipment. Contractor will take all precautions necessary to
prevent unauthorized operation or use of Apollo Services and the Automation
Equipment.
(ii) Contractor will not alter or change the Apollo Services
display as provided by United or its affiliate without the consent of United as
reflected in an amendment to this Agreement. Contractor may not provide Apollo
Services or its data base to any other person or entity without the consent of
United as reflected in an amendment to this Agreement.
(iii) Except as expressly permitted in this Agreement or other
written agreement with United, Contractor will not (nor permit) Apollo Services
(including, but not limited to, its software, data bases, intellectual property,
and customer information) to be used (as a basis for any software development or
otherwise), commercially exploited, copied, redistributed, retransmitted,
published, sold, rented, leased, marketed, sublicensed, pledged, assigned,
disposed of, encumbered, transferred, or otherwise altered, modified or
enhanced, without the express written permission of United.
(iv) Contractor will not engage in any speculative booking or
reservation of space for any airline, hotel, rental car company, or any other
vendor's service or product available through Apollo Services.
4. MAINTENANCE, REPAIR AND MODIFICATION.
(i) United will provide or cause to be provided to Contractor
repair and maintenance services required for the Automation Equipment at
United's expense. To maintain an effective interconnection between the
Automation Equipment and Apollo Services and to preserve the functional
integrity of the Automation Equipment, neither contractor nor any third party,
other than a third party designated by United, will attempt to perform or
perform maintenance, repair work, alterations or modifications, of any nature
whatsoever, to the Automation Equipment. Contractor agrees to maintain a record
of each occasion upon which repair or maintenance service is provided, including
service required outside of normal business hours, and to make such records
available to United for inspection upon its request. Contractor will provide
free positive space travel on Contractor's flights for United's Computer
Terminal
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Technicians or replacements ("CTTS") when such travel is for the purpose of
repairing Apollo Services or any Automation Equipment.
(ii) Contractor will reimburse United for the costs
of any such repairs or maintenance attributable to Contractor's gross
negligence.
(iii) United or its designee will have the right to
enter upon any Contractor location during Contractor's business hours for the
purpose of monitoring Contractor's operation of the Automation Equipment and
Apollo Services, inspecting the Automation Equipment, performing such repairs or
maintenance as may be necessary, or removing the Automation Equipment; provided,
however, that United will not during the course of such monitoring, inspection,
repair, or removal unreasonably interfere with Contractor's business.
5. DOWNTIME. United will notify Contractor of any scheduled or
pre-announced downtimes of Apollo Services.
6. NO WARRANTY; RELEASE.
a. UNITED MAKES NO WARRANTY, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE AUTOMATION EQUIPMENT OR
APOLLO SERVICES.
b. CONTRACTOR HEREBY WAIVES AND RELEASES UNITED AND
ITS AFFILIATES, AND THEIR SUCCESSORS FROM ANY AND ALL OTHER OBLIGATIONS AND
LIABILITIES AND ALL RIGHTS, CLAIMS AND REMEDIES OF CONTRACTOR AGAINST UNITED OR
ITS AFFILIATES, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, DUE TO ANY
DEFECTS, ERRORS (INCLUDING, WITHOUT LIMITATION, ANY ERRORS IN RESERVATIONS
AVAILABILITY RECORDS), MALFUNCTIONS OR INTERRUPTIONS OF SERVICE TO APOLLO
SERVICES OR THE AUTOMATION EQUIPMENT, INCLUDING ANY LIABILITY, OBLIGATION,
RIGHT, CLAIM, OR REMEDY IN TORT, AND INCLUDING ANY
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LIABILITY, OBLIGATION, RIGHT, CLAIM OR REMEDY FOR LOSS OF REVENUE OR PROFIT OR
ANY OTHER DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES.
7. OWNERSHIP AND LIENS. It is understood and agreed that: (i)
all Automation Equipment will remain the sole property of United; (ii)
Contractor will not remove any identifying marks from any Automation Equipment;
(iii) Contractor will not subject the Automation Equipment to any lien or
encumbrance; and (iv) Contractor will return the Automation Equipment to United
immediately upon the termination of this Agreement.
L. OTHER SUPPLIES
1. Contractor will pay United for United's Actual Cost for all
forms, documents, papers and supplies which are required in the normal course of
Contractor's United Express Services under this Agreement and which are
furnished by United or its designated vendors; provided, however, that United
will absorb the cost of:
a. Baggage tags and ticket wallets, at Joint Locations and
United Locations, and
b. Passenger ticket stock, at Contractor Locations, United
Locations and Joint Locations.
2. Contractor will provide and only use its own flight
interruption manifests for the rerouting of passengers resulting from denied
boarding or the delay or cancellation of Contractor's United Express Services.
M. CONTRACTOR ASSISTANCE
Contractor will furnish United with all information as United may
require to carry out the services and functions contemplated by this ARTICLE
III.
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IV. AIR SERVICES TO BE PROVIDED BY CONTRACTOR
A. SCHEDULES AND CHARTERS TO BE OPERATED BY CONTRACTOR
1. CITY PAIRS AND FREQUENCIES. Commencing on the
Effective Date of this Agreement, Contractor will provide Contractor's United
Express Services between the city pairs, and with the flight frequencies and
aircraft, (i) set forth on APPENDIX D, as amended from time to time (the
"CONTRACT CITY PAIRS"), subject to rational utilization and flexibility as
mutually agreed and as necessary to maximize operational efficiencies, revenue
and yield for the parties, and (ii) set forth on APPENDIX E, as amended from
time to time (the "POINT-TO-POINT CITY PAIRS" or "PTP CITY PAIRS").
2. CODE SHARE LIMITATION, DELTA OPTION AND GATES.
(i) With respect to all flight operations by
Contractor to/from Los Angeles International Airport, Contractor will not enter
into a marketing or code share relationship with any other carrier without the
prior written concurrence of United. (ii) Notwithstanding the foregoing,
Contractor may continue to provide Delta Airlines, Inc. ("DELTA") with limited
code share service as a Delta Connection carrier in the following city pairs:
between LAX, on the one hand and BFL, FAT, MRY, PSP, SAN, SBA, SNA and SJC, on
the other hand.
(iii) Contractor will make its best efforts to secure
for the benefit of United the long-term rights/leasehold interests in gates 63
and 65 at LAX (or other similarly adjacent gates in Satellite 6) and all
associated space, including, but not limited to, associated ticket counter,
back-office, baggage, lower-level, and ramp space.
3. UNITED SCHEDULE CONSENT REQUIRED. For markets under
ARTICLE IV.A.1.(I), Contractor may operate its scheduled air service as a United
Express Carrier only with United's prior written consent, which consent may be
withdrawn at any time by United upon ninety (90) days' prior written notice to
Contractor. United hereby gives its consent for Contractor to operate as a
United Express Carrier in such markets that are set forth in APPENDIX D.
Contractor will ensure that any of its requests for changes in the use by
Contractor of the "UA" or "UA*" code on future routes or in the flight
frequencies or city pairs, or any of them, as
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operated or served by Contractor pursuant to ARTICLE IV.A.1.(I) above (whether
necessitated by altered connections, operating experience or other reason) must
be submitted to United:
(i) at least ninety (90) days prior to the effective
date of such change, for changes affecting United Locations or
involving new city pairs, or
(ii) at least sixty (60) days prior to the effective date
of such change, for changes other than those either affecting
United Locations or involving new city pairs; and
all such changes must be approved in advance by United. The requests for such
changes, and the approvals thereof, must be made in writing, by mail, facsimile,
telegram, telecopy, or other electronic message transmittal. If upon review of
Contractor's request, the parties mutually agree to make a Contractor requested
change, and the automation equipment needed to implement said change is
available, then such change will be made as soon as reasonably practicable
within the aforementioned ninety (90) day period. Within the operating
capability of the aircraft used by Contractor, as described in ARTICLE IV.B,
Contractor will comply with all requests by United to increase, decrease or in
any other way adjust or terminate the flight frequencies or city pairs, or both,
as operated and served pursuant to ARTICLE IV.A.1.(I).
4. ADVERSE IMPACT CONCURRENCE REQUIRED. For markets under
ARTICLE IV.A.1.(II), Contractor may operate its scheduled air service as a
United Express Carrier only with United's prior written consent, which consent
may be withdrawn at any time by United upon ninety (90) days' prior written
notice to Contractor. United hereby gives its consent for Contractor to operate
as a United Express Carrier in such markets that are set forth in APPENDIX E.
However, Contractor will have the right to modify and change the frequency or
level of service for its United Express Carrier flights in the ARTICLE
IV.A.1.(II) markets; provided, that Contractor will ensure that it acquires
United's written concurrence that such changes by Contractor in the flight
frequencies or level of service does not adversely affect Contractor's services
in the Contract City Pairs, Contractor's United Express Services or the United
Express brand. In all such cases of Contractor change, Contractor will pay for
any and all personnel,
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equipment, supplies, facilities or materials which United determines, from time
to time are necessary to meet United's obligations under Contractor's United
Express Services. Also, Contractor will notify United of changes to its fares
and schedules for the ARTICLE IV.A.1.(II) markets only as necessary to
facilitate the input of such information into tariffs, computerized reservations
systems, the OAG, and like administrative tasks. Notwithstanding any other
provision herein to the contrary, United reserves the right to require that the
service in any present or future PTP City Pair be reduced or terminated under
the United Express program.
5. CHARTER. United agrees that Contractor shall be permitted,
when absolutely necessary or commercially and operationally required, to provide
charter flights with the same aircraft used in Contractor's United Express
Services, from time to time, provided that Contractor is able to provide such
charter flight service without interrupting or otherwise adversely affecting
Contractor's United Express Services for scheduled flights. Contractor shall
provide at least sixty (60) days' advance written notice to United of proposed
charters and Contractor shall be permitted to retain all revenues from such
charters. In the case of each such charter, Contractor hereby represents and
warrants that it will not (and it will not permit others to) operate, promote or
otherwise market the charter under the United Express name, the UA or UA*
designator code or any other United Marks or identification (only excepting the
unavoidable use of United Express liveried aircraft and permanent airport
signage).
6. CHANGES INPUT TO RESERVATIONS SYSTEMS. Changes to
Contractor's schedules as set forth in this ARTICLE IV.A and which otherwise are
in accordance with the terms and conditions of this Agreement will be submitted
by Contractor for input into United's internal reservations system and
computerized reservations systems. At no time may Contractor make any changes to
flights operated by United or any other carrier.
B. AIRCRAFT TO BE USED
1. AIRCRAFT TYPES. Unless otherwise agreed by United,
Contractor will provide Contractor's United Express Services described in this
ARTICLE IV with the aircraft described on APPENDIX D and E.
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2. TECHNICAL SPECIFICATIONS.
a. The aircraft and any replacement aircraft utilized
by Contractor pursuant to this ARTICLE IV.B will bear those United Marks which
are expressly designated by United, whether included on APPENDIX A or otherwise
established by United. Technical specifications covering aircraft colors,
schemes, United Marks and other elements of exterior and interior aircraft decor
will be provided to Contractor by United. Contractor will have all aircraft used
to provide Contractor's United Express Services painted and decorated with the
exterior and interior color decors and patterns specified by United, in
accordance with the technical specifications referenced in this ARTICLE IV.B.2
and pursuant to a mutually agreeable conversion schedule and which painting
Contractor shall complete by SEPTEMBER 30, 1998. Contractor will be responsible
for the conversion of its aircraft which will be used in Contractor's United
Express Services in accordance with such technical specifications and for
maintaining all of its aircraft.
b. In addition to the use of the United Marks on its
aircraft, Contractor will use and display a suitable sign or insignia on the
exterior of its aircraft identifying Contractor as the operator of the services
being provided pursuant to this Agreement. The use and display of such sign or
insignia will be subject to the prior written approval of United as to its
nature, size and location on Contractor's aircraft.
3. SUBSTITUTE AIRCRAFT. In addition to the aircraft
referenced in ARTICLE IV.B.1 above, if requested by United, Contractor will use
reasonable efforts to arrange for, and will make available for its use, such
spare or substitute aircraft as are required to effectively maintain
Contractor's United Express Services.
4. FREQUENCY CHANGE. Notwithstanding the above, in the
event Contractor is unable to operate a particular scheduled frequency with an
aircraft bearing United Marks, Contractor will notify United of such event and
the circumstances of Contractor's inability to so operate and Contractor will be
permitted to operate an aircraft bearing different elements of aircraft exterior
decor than those specified above. If such operations extend beyond a continuous
forty-eight (48) hour period, Contractor must seek and obtain United's approval
for such aircraft
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substitutions; provided that if Contractor purchases or leases a used aircraft
which does not contain appropriate United Marks, Contractor will notify United
and Contractor may operate such aircraft without United's Marks for up to 60
days after the date of purchase or lease of such aircraft by Contractor.
5. MARK CHANGE. United may from time to time change the Marks
to be used for United Express Carriers. At any time during the term of this
Agreement, and in the sole discretion of United, Contractor may be required to
use such new or different Marks, external or internal color decors and patterns
on its aircraft and uniform design as United may determine and to discontinue
use of old marks, external and internal color decors and patterns, and uniform
designs. Upon written notice from United, which will include the specifications
for any such changes in Marks or exterior or interior aircraft decor and
patterns or uniform designs, Contractor will effect such changes in accordance
with the schedule mutually agreed to by the parties. Contractor will pay all
costs it incurs in any painting of its aircraft as a result of a change in
United's specifications.
C. INVENTORY
1. In the case of Contract City Pairs, as referenced in
ARTICLE IV.A.1.(I), United will have the sole right to set and control seat
inventory levels for the aircraft used by Contractor in Contractor's United
Express Services and will take all revenue and inventory risk and will maintain
inventory and pricing responsibility.
2. In the case of PTP City Pairs, as referenced in ARTICLE
IV.A.1.(II), Contractor will set seat inventory levels for the aircraft used by
Contractor in Contractor's United Express Services and will retain all revenue
and inventory risk and will maintain inventory and pricing responsibility.
3. The parties will make their inventory setting decisions in
a manner comparable to that used by each to determine their respective schedules
with consideration for aircraft type, aircraft economics, length of haul, number
of seats and market demands. The
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parties shall provide appropriate and timely notices of inventory changes, from
time to time, to Apollo Services.
D. OPERATION OF ADDITIONAL CITY PAIRS
In order to ensure that the Contractor devotes its resources
to maximize the benefits of this Agreement, Contractor will not provide
Contractor's United Express Services, as a United Express Carrier, in any
additional city pairs, unless the parties agree otherwise in writing.
E. FLIGHT CREWS TO BE USED
1. FLIGHT CREW. All of Contractor's United Express Services
will be operated with Contractor's 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 life of this Agreement, and will be fully
licensed and qualified for the services to be performed hereunder. In addition,
each and every one of Contractor's captains will hold a current Airline
Transport Pilot Certificate. Crew members will also meet any and all
requirements imposed by the insurance policies which are to be maintained
pursuant to ARTICLE XI.
2. FLIGHT ATTENDANTS. Contractor's flight attendants will at
all times possess all necessary training and meet all currently applicable
governmental requirements.
F. LAX GATES
If not fully acquired upon the execution of this Agreement:
1. Contractor will use its best efforts and will work with
United toward United securing leasehold or other similar use rights to gates 67A
and 67B at LAX and all associated space, including, but not limited to,
associated ticket counter, back-office, baggage, lower-level, and ramp space
(the "LAX GATES"). In the event Contractor is successful in securing such rights
for United, United will reimburse Contractor for its hold area and gate space
lease expenses for gates 67A and 67B;
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2. United and Contractor will use their respective best
efforts to obtain any necessary consents of respective lessors and sublessors to
the assignment, transfer, lease, or sublease of the LAX Gates;
3. United and Contractor will use their respective best
efforts to obtain any governmental approvals and consents necessary for the
transfers contemplated by this ARTICLE IV.F; and
4. Until all of the LAX Gates are assigned to United,
Contractor will take all steps reasonably necessary or prudent to maintain in
effect throughout the term and any extension or renewal thereof, the leases for
the LAX Gates.
V. OPERATING RESTRICTIONS
A. UNITED EXPRESS OPERATIONS ONLY
Contractor shall not, and it shall ensure that its affiliates
do not, either directly or indirectly, engage or attempt to engage on its or
their own behalf or on behalf of a third party in any air transportation
business or otherwise provide flight services (other than pursuant to this
Agreement) in any of the city pairs serviced by Contractor under APPENDIX D AND
APPENDIX E, in connection with Contractor's United Express Services.
B. NO OPERATION OUTSIDE AGREEMENT
Contractor will not use any of the services or facilities
afforded to Contractor by United or its affiliates under this Agreement for air
transportation or related services provided by Contractor or its affiliates
outside the scope of this Agreement. Under no circumstances will Contractor or
its affiliates be permitted to operate aircraft bearing United's Marks in city
pairs other than those specified by United pursuant to ARTICLE IV without the
prior written consent of United. Contractor will not, without United's prior
written consent, permit any third party, whether under a lease arrangement or
otherwise, to operate any aircraft bearing United's Marks.
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C. SEVERABILITY AND REMEDY
1. If the restrictions set forth in ARTICLE V.A or V.B or any
part thereof should, for any reason whatsoever, be declared invalid by a court
of competent jurisdiction, the validity or enforceability of the remainder of
such restrictions shall not thereby be adversely affected. In the event that any
time, scope or territorial limitation is deemed to be unreasonable by a court of
competent jurisdiction, then Contractor agrees and submits to the reduction of
either said time, scope or territorial limitation to such a time period, scope
or area as said court shall deem reasonable. In the event the Contractor shall
be in violation of the aforementioned restrictive covenants, then the time
limitation thereof shall be extended for a period of time equal to the period of
time during which such breach or breaches should occur.
2. Contractor acknowledges that United has no adequate remedy
at law and would be irreparably harmed were Contractor to breach or threaten to
breach the provisions of ARTICLE V.A or V.B hereof and, therefore, agrees that
United shall be entitled to injunctive relief to prevent any breach or
threatened breach of ARTICLE V.A or V.B hereof, and to specific performance to
the terms of ARTICLE V.A or V.B in addition to any other legal or equitable
remedy it may have. Contractor also agrees that it shall not raise the defense
that United has an adequate remedy at law in any equity proceeding involving it
relating to ARTICLE V.A or V.B hereof. Nothing in this Agreement shall be
construed as prohibiting United from pursuing any other remedies at law or in
equity that it may have or any other rights that it may have under any other
agreement.
VI. LICENSE
A. GRANT OF LICENSE
Contractor will conduct all operations described in ARTICLE
IV.A above, and any additional operations undertaken by subsequent amendment
hereto, under the Marks set forth in APPENDIX A or other marks designated by
United pursuant to this ARTICLE VI.A and subject to ARTICLE IV.B.5. In
consideration for the services to be provided by Contractor under this
Agreement, United hereby grants to Contractor, upon the terms and conditions
herein contained,
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a nonexclusive, nontransferable right and license to use United's Marks, and
Contractor hereby undertakes the obligation to use the license, in connection
with the services to be rendered by Contractor under this Agreement; provided,
however, that at any time during the term of this Agreement, United may alter,
amend or revoke the license hereby granted and require Contractor's use of any
new or different Marks in conjunction with the air transportation services
provided hereunder as United may determine in the exercise of its sole
discretion and judgment.
B. TERMS AND CONDITIONS GOVERNING LICENSE
1. UNITED'S MARKS. Contractor hereby acknowledges United's
ownership of United's Marks, further acknowledges the validity of United's
Marks, and agrees that it will not do anything in any way to infringe or abridge
United's rights in its marks or directly or indirectly to challenge the validity
of United's Marks.
2. STANDARDS OF SERVICE. Contractor agrees that, in providing
services under this Agreement in conjunction with one or more of the United
Marks, it will comply with all service quality standards prescribed by United
("STANDARDS OF SERVICE"). Standards of Service include, but are not limited to,
United standards for (a) minimum aircraft type, as set forth in ARTICLE IV, (b)
customer service, as set forth in United's Customer Service Policies and
Procedures, (c) minimum customer service training requirements consistent with
United's customer service practices and procedures, (d) inflight amenities and
service, (e) aircraft appearance, (f) Ground Handling Duties, in accordance with
ARTICLE VI.B.3, (g) United/United Express safety programs (and Contractor will
enter into any agreements relating to such programs that are similar to those
offered to other United Express Carriers), and (h) any other quality control
measures designated by United, as such standards may be prescribed by United
from time to time. As necessary, United will provide training to Contractor's
designated instructors in the requirements of United's Customer Service Policies
and Procedures; provided that United will at its expense provide a trainer and
materials, and United agrees that the Standards of Service prescribed by it will
not be unreasonable in light of the facilities and aircraft available to
Contractor. United will have the right, from time to time, to inspect
Contractor's United Express
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Services to determine if they conform to the Standards of Service. In the event
United determines that Contractor is not in compliance with the Standards of
Service, United will notify Contractor and Contractor will promptly rectify any
such noncompliance. Failure on the part of United to conduct such inspections
will not relieve Contractor of its obligations to conform to United's Standards
of Service. At United's discretion, noncompliance by Contractor with any part of
the Standards of Service may result in, but not limited to, restriction or loss
of pleasure travel privileges, suspension of authority to serve city pair
markets, or any other nonexclusive remedy or remedies deemed appropriate by
United under the particular circumstances.
3. AIRCRAFT GROUND HANDLING PROCEDURES. In addition,
Contractor agrees that in providing Contractor's United Express Services, it
will conform to all of its Aircraft Ground Handling Procedures. As used herein,
Aircraft Ground Handling Procedures include, but are not limited to, procedures
for (a) deicing, (b) handling and (c) other aircraft servicing measures, as such
procedures may be prescribed by Contractor from time to time. Contractor agrees
that all Aircraft Ground Handling Procedures prescribed by it will be
established in compliance with all applicable federal, state, local and industry
regulations as well as any additional procedures which United may prescribe from
time to time. Contractor will obtain any and all necessary federal, state, local
and regulatory approvals of such Aircraft Ground Handling Procedures. Once all
necessary approvals are obtained, Contractor will provide a copy of its Aircraft
Handling Procedures to United. At each Joint Location and United Location, as
necessary, Contractor will train United employees in the requirements of
Contractor's Aircraft Handling Procedures; provided that Contractor will provide
a trainer and materials and United will pay all other expenses incurred by its
employees in connection with such training.
4. LIABILITY FOR OPERATIONS. Nothing in this ARTICLE VI.B is
intended to nor will be construed so as to relieve Contractor of any liability
or to impose any liability on United for Contractor's United Express Services by
virtue of any of United's rights under ARTICLES VI.B.2 OR VI.B.3, whether
exercised or not.
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5. NON-EXCLUSIVITY. Nothing in this Agreement is intended nor
will be construed to give Contractor the exclusive right to use United's Marks,
or to abridge United's right to use or to license its Marks, and United hereby
reserves the right to continue use of United's Marks and to license such other
uses of such Marks as United may desire.
6. REVERSION OF MARKS. Upon termination of this Agreement for
any reason, the right to use herein granted for United's Marks will immediately
revert back to United, and Contractor will have no right to use such Marks in
any way. Further, Contractor will at its sole cost and expense immediately upon
termination of this Agreement remove all United's Marks from its aircraft, its
other vehicles, the uniforms of its personnel, its facilities and from any and
all other places or things controlled or formerly controlled by Contractor.
C. INFRINGEMENT
United will, at its expense, defend Contractor against any claim that
the use of any United Mark infringes a registered trademark or service mark of
any third party in the United States, and will pay all costs, damages, and
attorneys' fees that a court finally awards as a result of such claim. To
qualify for such defense and payment Contractor must (i) give United prompt
written notice of any such claim and (ii) allow United to control and fully
cooperate with United in the defense and all related settlement negotiations.
United's obligation hereunder is conditioned on Contractor's agreement that if
any Mark becomes, or in United's opinion is likely to become, the subject of
such a claim, Contractor will permit United at its option either to procure the
right for Contractor to continue using such Mark or to replace or modify such
Mark so that it becomes noninfringing. This ARTICLE VI.C states United's entire
obligation to Contractor regarding infringement or the like.
VII. ADDITIONAL UNDERTAKINGS
A. BULK PURCHASES
Each party may use its good faith efforts to assist the other
in obtaining goods and services useful to the other party in the most economical
manner, including, without limitation,
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fuel, uniforms, supplies and ground equipment. If the parties agree to
participate in a bulk purchase arrangement, the terms of any such bulk purchase
arrangement will be as set forth in a separate agreement between the parties.
B. UNIFORMS
Contractor shall require all of its Designated Personnel to
wear uniforms which are in the United Express colors and styles approved by
United from time to time for the uniforms of Contractor personnel performing
Contractor's United Express Services. Contractor agrees that all such Designated
Personnel employed by Contractor shall wear the above described uniforms by the
dates mutually agreed to by the parties. Any other employees of Contractor who
are visible to the public, other than Designated Personnel, will wear uniforms
as reviewed and approved by United, which approval shall not be unreasonably
withheld.
C. PASSES AND REDUCED RATE TRAVEL
Each party will comply with the terms of a separate agreement
(which has or will be entered into) between them under which are granted to the
employees of the other party certain passes and reduced rate pleasure travel
privileges.
D. SIGNAGE
As of the Effective Date, Contractor will display signage
advertising its operations as a United Express Carrier in all Contractor
Locations and in those Joint Locations specified by United. All signage must be
approved by United prior to its use by Contractor, and Contractor shall be
responsible for the acquisition, installation and maintenance of all such
signage approved by United.
E. ENVIRONMENTAL
With respect to all matters which relate to or may affect the
environment, Contractor agrees to conduct its operations (including its
compliance with Environmental Laws) in a prudent manner consistent with United's
policies and practices related to environmental matters including, without
limitation, taking reasonable preventive measures consistent with such policies
and practices to avoid liabilities related to environmental matters.
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VIII. CONTRACT FEES AND PROGRAM FEES
A. CONTRACT FEES
1. For and in consideration of the passenger bookings,
transportation services, facilities and other services to be provided by
Contractor hereunder, the right to control inventory and receive and retain all
of the air fares, cargo rates, mail charges and all other revenue received by
Contractor and United under this subsection and other valuable consideration
provided under this Agreement, United shall pay Contractor a flat rate per
departure plus an amount per Revenue Passenger pursuant to Contractor's United
Express flights operated in the city-pair markets set forth on APPENDIX D
("CONTRACT FEES").
2. The Contract Fees, which are cost driven based upon fixed
and variable costs per passenger, are reflected on APPENDIX F. Contractor will
control its costs in the city pairs under APPENDIX D such that the base cost
items do not increase at a rate greater than the rest of Contractor's system
over which it operates its equipment listed on APPENDIX D. Contractor and United
agree to review the Contract Fees set forth on APPENDIX F during the third and
sixth month after the Effective Date, within 30 days after each anniversary of
the Effective Date, and after any event or occurrence that either party
reasonably deems to be likely to result in a significant impact on any material
provision of this Agreement.
3. United and Contractor have developed a per Revenue
Passenger incentive and risk factor that, with respect to Contractor's operation
as a United Express Carrier, is based upon (i) +, (ii) +, (iii) +, and (iv) +
carried on all city pairs under APPENDIX D, all as measured against
pre-determined and mutually agreeable goals. The incentive program, unless
otherwise agreed in writing, is reflected on APPENDIX G.
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B. PROGRAM FEES
1. For and in consideration of the reservations, support
services, facilities and other services to be provided to Contractor hereunder,
the license granted to Contractor for the specified use of United's Marks, and
other valuable consideration provided under this Agreement, Contractor shall pay
United a per Revenue Passenger fee pursuant to Contractor's United Express
flights operated in the city-pair markets set forth on APPENDIX E ("PROGRAM
FEES").
2. The Program Fees are reflected on APPENDIX H.
C. PAYMENT
United will pay Contractor each week the applicable Contract
Fees and Contractor will pay United each month the applicable Program Fees, for
all Revenue Passengers boarded during the preceding week, in the case of United
payment, and the preceding month, in the case of Contractor payment.
(i) Payment of estimated amounts for transportation furnished
by Contractor pursuant to ARTICLE VIII.A for the markets set forth on APPENDIX
D, will be made by United weekly through wire transfer to Contractor's bank, the
account information for which Contractor shall provide to United on or before
the Effective Date, and reconciliation will be monthly based on actual
departures and ticket lift processed by United's Interline Accounting
Department.
(ii) Payment for transportation furnished by Contractor
pursuant to ARTICLE VIII.B for the markets set forth on APPENDIX E, will be made
by Contractor monthly through the Airline Clearing House, Inc. ("ACH"), in
accordance with ACH rules and procedures. Should the ACH be disbanded or
otherwise cease to function, settlement will be accomplished directly between
the parties. United may, at any time, elect to invoice Contractor for such
amounts in which case such amounts will be paid by Contractor within forty-five
(45) days after the date of the invoice therefor. If invoiced, any past due
amount will accrue interest at a rate not to exceed 1-1/2% per month compounded
or the maximum rate permitted by law, whichever is less from the date due
thereof to the date of payment.
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D. ADDITIONAL PERSONNEL
It is hereby mutually agreed and understood by the parties
hereto that the aforesaid Program Fees contemplate that, in the performance of
the support services described in ARTICLE III hereof, United will use the
personnel normally in its employ or third parties selected by United and the
equipment and facilities which it owns or leases. In the event United is
requested by Contractor to (i) employ, retain or otherwise furnish additional
personnel or (ii) obtain, by purchase, lease or otherwise, any additional
facilities or equipment, or (iii) incur in any manner whatsoever any additional
expenses or disbursements in connection with its performance of this Agreement
which are not included in the calculation of the Program Fees, Contractor will
reimburse United in full for all such amounts; provided, that prior to incurring
any additional costs or expenses or making any such disbursements, United will
obtain the prior written approval of Contractor.
E. AIRPORT CHARGES
If there are any airport or other charges, Contractor will
either pay such charges directly (or reimburse United, if already paid by
United, for any such charges relating to Contractor's operations).
F. PRORATES
1. United shall be entitled to 100% of the fares and prorates
received by United or Contractor in connection with any joint fares attributable
to passengers, mail or freight traveling on such Contractor's United Express
Services for cities served jointly with any other carriers for the city-pair
markets under APPENDIX D. United shall have the sole right to establish and
negotiate prorate agreements with such carriers.
2. Notwithstanding the foregoing, with respect to connecting
passengers between United and Contractor city-pair operated flights under
APPENDIX E, United and Contractor will agree to prorates or a prorate
methodology, with the prorates to be fair to both carriers and based upon some
"Y" fare based formula with "Y" to be defined by mutual agreement.
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IX. MAINTENANCE AND FUELING
United will have no responsibility for maintenance or fueling of
Contractor's aircraft.
X. U.S. MAIL
United and Contractor agree to cooperate in making bids for mail
carriage.
XI. INSURANCE
A. INSURANCE TYPES
During the term of this Agreement and any renewal thereof,
Contractor agrees to procure and maintain in full force and effect, at its own
expense, a policy or policies of insurance with an insurance company or
companies that are rated at least A- (excellent) by A.M. Best Company, or an
equivalent rating bureau, and satisfactory to United, which provides at a
minimum the following insurances:
1. Comprehensive Airline Liability Insurance, including but
not limited to Aircraft Liability, Passenger Liability, Comprehensive General
Liability Insurance, Cargo Liability and Baggage Liability Insurance, with
combined single limits for each and every loss and each aircraft of not less
than (a) U.S. $+ or (b) U.S. $+ per available seat, or (c) the limits that
Contractor has in place, whichever is greatest. Any policies of insurance
carried in accordance with this ARTICLE XI.A.1 will also contain or be endorsed
to contain those provisions set forth in the attached APPENDIX I;
2. Aircraft Hull All Risks Insurance, including ground and
flight coverage on the Aircraft, including its engines and all its parts when
installed or temporarily detached from the Aircraft, subject to policy
deductibles of (a) in the case of other than Canadair RJ Aircraft, + percent
(+%) of the insured value of each Aircraft or $+ whichever is greater, and (b)
in the case of Canadair RJ Aircraft, + percent (+%) of the insured value of each
Aircraft or $+, whichever is greater. Any policies of insurance carried in
accordance with this
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ARTICLE XI.A.2 will also contain or be endorsed to contain those provisions set
forth in the attached APPENDIX I; and.
3. Insurance for the Automation Equipment and communications
equipment against all risk of loss or damage, including, without limitation, the
risks of fire, theft and such other risks as are customarily insured in a
standard all-risk policy. Such insurance shall also provide the following:
a. Full replacement value coverage for the Automation
Equipment provided under this Agreement;
b. Full replacement value coverage for the communications
equipment which value is stipulated to be not less than $2000.00 per modem;
c. An endorsement naming United as a co-insured and as a
loss payee to the extent of its interest in the Automation Equipment and the
communications equipment; and
d. An endorsement requiring the insurer to give United at
least 30 days' prior written notice of any intended cancellation, nonrenewal,
material change in coverage or any default in the payment of a premium.
2. Prior to the installation of the Automation Equipment and
the communications equipment, United must receive from the insurer certificates
of insurance evidencing the insurance and endorsements specified in this ARTICLE
XI.A.3.
B. 30-DAY NOTICE
On or before the Effective Date of this Agreement, and not
less than thirty (30) days before the expiration or termination date of any
insurances required to be maintained by Contractor under ARTICLES XI.A above,
Contractor will furnish United with certificates of insurance evidencing
compliance with the foregoing requirements, unless otherwise provided in writing
between the parties.
C. ALTERATIONS
United has the right to make reasonable alterations in the
requirements set forth in this ARTICLE XI above, in respect of the types and
scope of coverage and amounts of insurance,
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any such alteration being deemed reasonable if readily available and if it
becomes the custom in the industry.
D. FAILURE TO MAINTAIN INSURANCE
In the event that Contractor fails to acquire or maintain
insurance as herein provided, United may at its option secure such insurance on
Contractor's behalf at Contractor's expense.
XII. LIABILITY AND INDEMNIFICATION
A. EMPLOYER'S LIABILITY AND WORKERS' COMPENSATION
Each party hereto assumes full responsibility for its employer's
liability and Workers' Compensation liability to its own 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 benefits, pensions or
annuities now or hereafter imposed upon employers by the government of the
United States or by any state or local governmental body with respect to such
employees measured by the wages, salaries, compensation or other remuneration
paid to such employees, or otherwise, and each party further agrees to make such
payments and to make and file all reports and returns, and to do everything to
comply with the laws imposing such taxes, contributions or other payments.
B. INDEMNIFICATION BY CONTRACTOR
Contractor hereby assumes liability for and agrees to indemnify,
release, defend, protect, save and hold United, its officers, directors, agents,
and employees harmless from and against any
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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, its officers, directors, employees or
agents, by reason of any injuries to or deaths of persons or the loss of, damage
to, or destruction of property, including the loss of use thereof, arising out
of, in connection with, or in any way related to any act, error, omission,
operation, performance or failure of performance of Contractor or its officers,
directors, employees and agents, regardless of any negligence either active,
passive, or otherwise on the part of United, its officers, directors, agents or
employees (but excluding the reckless and willful misconduct of United, its
officers, directors, agents or employees) which is in any way related to the
services of Contractor contemplated by or provided pursuant to this Agreement,
or any other service, act, omission, operation, performance, failure of
performance or use, operation, maintenance, storage or possession of any
aircraft, whether or not bearing United's exterior decor, colors, and logo, and
whether or not used in the performance of services contemplated hereby or in
connection with any other services permitted by ARTICLE IV or otherwise. United
will give Contractor prompt and timely notice of any claim made or suit
instituted against United which in any way results in indemnification hereunder,
and Contractor will have the right to compromise or participate in the defense
of same to the extent of its own interest.
C. INDEMNIFICATION BY UNITED
United hereby assumes liability for and agrees to indemnify, release,
defend, protect, save and hold Contractor, its officers, directors, agents, and
employees harmless 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
Contractor, its officers, directors, employees or agents, by reason of any
injuries to or deaths of persons or the loss of, damage to, or destruction of
property, including the loss of use thereof, arising out of, in connection with,
or in any way related to any act, error, omission, operation, performance or
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failure of performance of United or its officers, directors, employees or
agents, which is in any way related to the services of United contemplated by or
provided pursuant to this Agreement. Contractor will give United prompt and
timely notice of any claim made or suit instituted against Contractor which in
any way results in indemnification hereunder, and United will have the right to
compromise or participate in the defense of same to the extent of its own
interest.
D. CONTRACTOR'S SUPPLIES LIABILITY
Contractor hereby assumes liability for and agrees to indemnify,
release, defend, protect, save and hold United, its officers, directors, agents,
and employees from and against any and all liabilities, damages, 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, its officers,
directors, employees, or agents by reason of any losses or damages incurred on
account of the loss, misapplication, theft or forgery of passenger tickets,
exchange orders, or other supplies furnished by or on behalf of United to
Contractor, or the proceeds thereof, whether or not such proceeds have been
deposited in a bank and whether or not such loss is occasioned by the insolvency
or bankruptcy of either the purchaser of the aforesaid passenger tickets,
exchange orders, or other documents or of a bank in which Contractor may have
deposited such proceeds, other than a loss caused by a bank to which funds have
been transmitted at the express direction of United. Contractor's responsibility
hereunder for passenger tickets, exchange orders, and other supplies will
commence immediately upon the delivery of said passenger tickets, exchange
orders, and other supplies into the possession of Contractor or any duly
authorized officer, agent or employee of Contractor. United will furnish
Contractor prompt and timely notice of any claims made, or suits instituted
against United which in any way may result in the indemnification hereunder, and
Contractor will have the right to compromise or participate in the defense of
same to the extent of its own interest.
E. INDEMNITY FOR INFORMATION
Contractor hereby assumes liability for and agrees to release, defend,
protect, save, indemnify and hold United, its officers, directors, employees and
agents harmless from all
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abilities, damages, losses, claims, demands, suits, fines or judgments including
but not limited to attorneys' and witness' fees, costs and expenses incident
thereto, of Contractor and any third person, express or implied, arising by law
or otherwise, as a result of, or related to, any errors in information provided
by United under this Agreement, regardless of any negligence of United either
active, passive or otherwise (but excluding the willful misconduct of United).
Contractor's waiver and release to United in this ARTICLE XII applies to any
liability, obligation, right, claim, or remedy in tort and including any
liability, obligation, right, claim, or remedy for loss of revenue or profit or
any other direct, indirect, incidental, special, or consequential damages.
F. UNITED DEFINITIONS
As used in this ARTICLE XII for purposes of identifying an indemnified
party, all references to United include United's parent company, and any
subsidiary or affiliate of United or its parent company, and their respective
employees, officers, directors and agents. For purposes of this ARTICLE XII any
passenger who connects in any city from a flight on United or Contractor (the
"CARRYING PARTY") within four (4) hours after the end of such flight to a flight
of the other party (the "CONNECTING PARTY") become passengers of the Connecting
Party when such passenger enters the hold room or waiting area to which they
were deplaned in such city from the Carrying Party's flight to such on-line
city. A passenger of the Carrying Party who does not have a connecting flight
with the other party hereto and prior to entering the hold room or waiting area
after deplaning from the Carrying Party's flight in the Connection City is a
passenger of the Carrying Party. For purposes of this ARTICLE XII, neither
loading bridges, hallways, stairways, nor ramp areas will be considered part of
the hold room or waiting area.
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XIII. REPORTS
A. CLOSE-OUT ENTRIES
Upon departure of each Contractor flight from Contractor
Locations and Joint Locations, close-out entries shall be made by Contractor in
Apollo Services as required by United and as specified in the Standards of
Service. If Contractor fails ten (10) times in any consecutive thirty (30) day
period to perform flight close-out, as outlined above, where such occurrence is
caused by or arising out of an act or omission of Contractor, then upon
notification by United to contractor, Contractor shall pay United damages of
Five Hundred Dollars ($500.00) for each occurrence over and above the first ten
(10) occurrences.
B. BOARDING INFORMATION
Information reports containing data covering boarding, and
other information agreed to by the parties, for Contractor's operations
hereunder will be produced from the close-out entries and provided by United to
Contractor, on a monthly basis 15 days after the month end.
C. OPERATING PERFORMANCE
Contractor will furnish to United within three (3) days after
the end of each month a detailed report of its operating performance, which
report will include information on Contractor's performance during the preceding
month for each of the items designated by United, including, but not limited to,
Operating Performance Standards and aircraft appearance.
D. FINANCIAL STATEMENTS
Contractor will furnish to United, (i) within 25 days after
the end of each calendar quarter, unaudited financial statements including
Contractor's then current corporate balance sheet and profit and loss statement,
and (ii) within 90 days after the end of Contractor's fiscal year, Contractor's
then current, audited financial statements including, either separately or on a
consolidated basis, the balance sheet and the profit and loss statement,
together with associated footnotes, and a copy of the independent auditor's
report.
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E. INSPECTION
United may inspect Contractor's corporate records and accounts
related to Contractor's United Express Services, from time to time, upon
reasonable notice during the life of this Agreement.
F. DAILY PASSENGERS
Each day Contractor will furnish to United (Attention: WHQNC)
daily operating reports for the preceding day which will include the number of
Revenue Passengers boarded; the number of scheduled flight departures; the
number and percentage (compared to schedule) of actual flight departures; the
reason for each flight cancellation; number of flight departures on time within
five minutes; percentage of flight arrivals within fifteen minutes; and the
month-to-date numbers and percentages for each measurement listed above.
G. GOVERNMENT FILINGS
Contractor will be responsible for filing all reports relating
to its operations with the DOT, FAA or any state or airport authority, and
Contractor will 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 during the life of this Agreement.
H. COPY OF GOVERNMENT REPORTS
Contractor will promptly furnish United with a copy of every
report that Contractor prepares, whether or not such report is filed with the
FAA, NTSB or any other governmental agency, relating to any accident or incident
involving an aircraft used by Contractor in performing services under this
Agreement, whether or not such aircraft bears any of United's Marks, 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.
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XIV. INDEPENDENT CONTRACTORS AND WAIVER OF CONTROL
A. INDEPENDENT CONTRACTORS
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 Contractor's designated representative. Nothing
contained in this Agreement is intended to limit or condition Contractor's
control over its operations or the conduct of its business as an air carrier,
and Contractor and its principals assume all risks of financial losses which may
result from the operation of the air services to be provided by Contractor
hereunder.
B. EMPLOYEES
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 United's 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.
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C. UNAUTHORIZED OBLIGATIONS
1. Nothing in this Agreement authorizes United to make any
contract, agreement, warranty, or representation on Contractor's behalf, or to
incur any debt or obligation in Contractor's name ("CONTRACTOR UNAUTHORIZED
OBLIGATION"); and United hereby agrees to defend, indemnify, save, release and
hold Contractor, its officers, directors, employees and agents harmless from any
and all liabilities, claims, judgments and obligations which arise as a result
of or in connection with, or by reason of any such Contractor Unauthorized
Obligation made by United, its officers, directors, employees, agents or
independent contractors in the conduct of United's operations.
2. Nothing in this Agreement authorizes Contractor to make any
contract, agreement, warranty, or representation on United's behalf, or to incur
any debt or obligation in United's name ("UNITED UNAUTHORIZED OBLIGATION"); and
Contractor hereby agrees to defend, indemnify, save, release and hold United,
its officers, directors, employees and agents harmless from any and all
liabilities, claims, judgments and obligations which arises as a result of or in
connection with, or by reason of any such United Unauthorized Obligation made by
Contractor, its officers, directors, employees, agents or independent
contractors in the conduct of Contractor's operations. Contractor hereby agrees
to disclose and to require its directors, officers, employees, agents and
independent contractors to disclose to all third parties with whom they do
business on or after the Effective Date of this Agreement that all
responsibilities and obligations are solely those of Contractor and that no
claim shall be made against United for failure of performance or improper
performance on Contractor's part.
D. CONTRACTOR FLIGHTS
The fact that Contractor's operations are conducted under
United's Marks and listed under the UA designator code will not affect their
status as flights operated by Contractor for purpose of this Agreement or any
other agreement between the parties, and Contractor agrees to advise all third
parties, including passengers, of this fact.
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XV. DEFAULT AND TERMINATION
A. BANKRUPTCY
If either party (the "SECTION A DEFAULTING PARTY") becomes
insolvent; if the other party has evidence that the Section A Defaulting Party
is not paying its bills when due without just cause; if the Section A Defaulting
Party takes any step leading to its cessation as a going concern; makes an
assignment for the benefit of creditors or a similar disposition of the assets
of the business; or if the Section A Defaulting Party either ceases or suspends
operations for reasons other than a strike (a "SECTION A DEFAULT"), then the
other party (the "INSECURE PARTY") may immediately terminate this Agreement on
notice to the Section A Defaulting Party unless the Section A Defaulting Party
immediately gives adequate assurance of the future performance of this Agreement
by establishing an irrevocable letter of credit--issued by a U.S. bank
acceptable to the Insecure Party, on terms and conditions acceptable to the
Insecure Party, and in an amount sufficient to cover all amounts potentially due
from the Section A Defaulting Party under this Agreement--that may be drawn upon
by the Insecure Party if the Section A Defaulting Party does not fulfill its
obligations under this Agreement in a timely manner. If bankruptcy proceedings
are commenced with respect to the Section A Defaulting Party and if this
Agreement has not otherwise terminated, then the Insecure Party may suspend all
further performance of this Agreement until the Section A Defaulting Party
assumes or rejects this Agreement pursuant to Section 365 of the Bankruptcy Code
or any similar or successor provision. Any such suspension of further
performance by the Insecure Party pending the Section A Defaulting Party's
assumption or rejection will not be a breach of this Agreement and will not
affect the Insecure Party's right to pursue or enforce any of its rights under
this Agreement or otherwise. If a bankruptcy proceeding is commenced with
respect to Contractor, Contractor and United hereby agree that Contractor's
obligations under this Agreement must be fully performed pursuant to the terms
of this Agreement and that in the event United provides written notice to
Contractor and/or its trustee in bankruptcy of United's demand that this be
terminated, Contractor and/or trustee shall be obligated to reject such
agreements pursuant to Section 365 of the Bankruptcy Code within 30 days of such
notice and release any and all rights thereunder to United.
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B. COVENANT DEFAULT
If either party (the "SECTION B DEFAULTING PARTY") shall
refuse, neglect, or fail to perform, observe, or keep any material covenants,
agreements, terms, or conditions contained herein on its part to be performed,
observed, and kept and such refusal, neglect, or failure (individually and
collectively, a "BREACH") shall continue for a period of thirty (30) days after
written notice to cure such breach to the Section B Defaulting Party thereof (a
"SECTION B DEFAULT"), then the other party may upon thirty (30) days' notice to
the Section B Defaulting Party terminate this Agreement. If a notice of breach
is delivered and a notice of termination is not delivered within forty-five (45)
days thereafter the other party shall be deemed to have waived its right
hereunder to terminate for the particular occurrence of breach for which the
Section B Defaulting Party received notice.
C. DEFAULT BY CONTRACTOR
If Contractor shall refuse, neglect or fail to cure or perform any one
of the following conditions, United may give Contractor written notice to
correct such condition or cure such breach, and if any such condition or breach
shall continue for thirty (30) days after notice to Contractor thereof (a
"SECTION C Default"), then United may terminate this Agreement upon fifteen (15)
days' written notice to Contractor if:
1. Contractor's operations do not meet the Operating
Performance Standards for three (3) consecutive months; or
2. Contractor's financial status discloses a condition whereby
Contractor's ratio of current assets to current liabilities falls below 1:1, or
Contractor has a negative net worth; or
3. Contractor knowingly maintains falsified books or records
or submits false reports; or
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4. Contractor does not maintain all minimum flight frequency
levels for the city pairs set forth on APPENDIX D and APPENDIX E, as modified
from time to time pursuant to ARTICLE IV, for three (3) consecutive months; or
5. Contractor is in breach under the terms of any of the
RELATED AGREEMENTS and the other party thereto has the right to terminate such
agreements in their entirety (following applicable cure periods, if any).
D SIMILAR AGREEMENTS
United may immediately terminate this Agreement pursuant to the
terms of ARTICLE V if Contractor or any of its affiliates are in breach of the
terms of ARTICLE V (a "SECTION D DEFAULT").
E. NON-COMPLIANCE WITH STANDARDS
If Contractor shall refuse, neglect, or fail to perform or
observe the provisions of the Standards of Service or Aircraft Handling
Standards to be performed, observed, and kept with regard to one or more city
pairs under this Agreement and such refusal, neglect, or failure shall continue
for a period of sixty (60) days after written notice to cure such default to
Contractor thereof (a "SECTION E DEFAULT"), then United may upon thirty (30)
days' notice to Contractor terminate this Agreement with regard to the city
pairs involved or as to the entire Agreement, as applicable. If a notice of
default is delivered and a notice of termination is not delivered within
forty-five (45) days thereafter, United shall be deemed to have waived its right
hereunder to terminate for the particular occurrence of breach for which
Contractor received notice.
F. CONSEQUENCES OF TERMINATION
Any termination pursuant to one or more of the provisions of
this Agreement will be without additional liability to the party initiating such
termination and will not be construed so as to relieve any party hereto of any
debts or obligations, monetary or otherwise, to the other party that will have
accrued hereunder prior to the effective date of such termination. Either party
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will be entitled to any and all damages recoverable and remedies
under law or in equity against the other for any material breach hereof. If
either party breaches any term of this Agreement and the other party does not
terminate this Agreement, the breaching party will pay to the non-breaching
party all damages or other costs suffered by such party as a result of such
breach.
G. UNITED'S LIQUIDATED DAMAGES
1. If Contractor wrongfully terminates this Agreement or if
United terminates his Agreement (except under ARTICLE II.C.) pursuant to the
terms of this Agreement, including for Contractor's breach, then Contractor will
pay to United as liquidated damages, and not as a penalty, the DAILY UNITED
DAMAGES (in the case of ARTICLE XV.G.1.A, below), and the DAILY UNITED LOST
TRAFFIC REVENUE (in the case of ARTICLE XV.G.1.B, below), for each day remaining
during the period commencing with the date of termination through the end of the
term of this Agreement; provided, however, if United secures another carrier to
replace Contractor:
a. in the city pairs served by Contractor under ARTICLE IV.A.1
(I) of this Agreement as a United Express Carrier at any of the affected
stations, or determines that United could replace Contractor without increasing
its damages in these city pairs, then the liquidated damages will be adjusted as
follows:
(1) At such time as the average daily Total Net Sales
Receipts (as defined in ARTICLE III.H) received by United from
the replacement carrier or its own operations with respect to
the city pairs previously included in Contractor's United
Express Services for thirty (30) consecutive days (the
"REPLACEMENT CARRIER'S AVERAGE DAILY RECEIPTS") is at least
50% of Contractor's Average Daily Receipts, then from that day
and thereafter, the Daily United Lost Receipts will be reduced
by 50%;
(2) At such time as the Replacement Carrier's Average
Daily Receipts are at least 75% of Contractor's Average Daily
Receipts, then from that day and thereafter the Daily United
Lost Receipts Revenue will be reduced to equal 25% of the
original Daily United Lost Receipts; and
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(3) At such time as the Replacement Carrier's
Average Daily Receipts are at least 100% of Contractor's
Average Daily Receipts, then from that day and thereafter the
Daily United Lost Receipts will be reduced to Zero.
b. in the city pairs served by Contractor under
ARTICLE IV.A.1(II) of this Agreement as a United Express Carrier at any of the
affected stations, or determines that United could replace Contractor without
increasing its damages in these city pairs, then the liquidated damages will be
adjusted as follows:
(1) At such time as the replacement carrier's
average daily connecting passengers to/from United at the
applicable station(s) for thirty (30) consecutive days
("REPLACEMENT CARRIER'S AVERAGE DAILY CONNECTING TRAFFIC") is
at least 50% of Contractor's Average Daily Connecting Traffic,
then from that day and thereafter the Daily United Lost
Traffic Revenue will be reduced by 50% for that particular
station;
(2) At such time as the Replacement Carrier's
Average Daily Connecting Traffic is at least 75% of
Contractor's Average Daily Connecting Traffic, then from that
day and thereafter the Daily United Lost Traffic Revenue will
be reduced to equal 25% of the original Daily United Lost
Traffic Revenue: and
(3) At such time as the Replacement Carrier's
Average Daily Connecting Traffic is at least 100% of
Contractor's Average Daily Connecting Traffic, then from that
day and thereafter the Daily United Lost Traffic Revenue will
be reduced to zero.
c. "CONTRACTOR'S AVERAGE DAILY RECEIPTS" means the
average amount of the daily Total Net Sales Receipts (as defined in ARTICLE
III.H) from Contractor's United Express Services per day over the twelve (12)
month period immediately preceding the date of termination or Contractor's
breach, whichever occurs earlier. The "DAILY UNITED LOST RECEIPTS" shall equal
Contractor's Average Daily Receipts. The amount of the "DAILY UNITED
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DAMAGES" shall equal the sum of (1) the Daily United Lost Receipts (as
adjusted), plus (2) the difference between the Replacement Carrier's Average
Daily Fees minus Contractor's Average Daily Fees; provided that, if the sum of
the amount in clause (1) above plus the amount in clause (2) above is less than
zero, then the "Daily United Damages" shall be zero. "CONTRACTOR'S AVERAGE DAILY
FEES" means the average amount of fees paid by United to Contractor pursuant to
ARTICLE III.H.2 under this Agreement per day over the twelve (12) month period
immediately preceding the date of termination or Contractor's breach, whichever
occurs earlier. "REPLACEMENT CARRIER'S AVERAGE DAILY FEES" means the total
average of the daily fees paid to another carrier, if any, and expenses incurred
by United to replace Contractor's United Express Services for the ARTICLE
IV.A.1.(I) markets.
"CONTRACTOR'S AVERAGE DAILY CONNECTING TRAFFIC" means the average
number of Revenue Passengers connecting with a flight of United to or from
Contractor's United Express Services in the ARTICLE IV.A.1.(II) markets per day
over the twelve (12) month period immediately preceding the date of termination
or Contributor's breach, whichever occurs earlier. The Daily United Lost Traffic
Revenue shall equal Contractor's Average Daily Connecting Traffic times United's
realized Contribution After Traffic Variable Costs for United's system.
"CONTRIBUTION AFTER TRAFFIC VARIABLE COSTS" means the dollar figure derived by
subtracting United's average variable costs per passenger from the average
United fare for travel to, from, or over the cities set forth in ARTICLE II.A.
of this Agreement minus applicable prorates.
2. If this Agreement is terminated in a manner such that
United shall have the right to damages under this ARTICLE XV.G, United shall, in
good faith and in a commercially reasonable manner, secure another carrier to
replace Contractor and take such other reasonable actions so as to mitigate the
damages owed to United hereunder.
3. The inclusion of this ARTICLE XV.G is not intended to
modify, waive or restrict Contractor's rights to exercise any and all remedies
available at law or in equity for United's breach of this Agreement.
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4. The provisions of this ARTICLE XV.G shall not be applicable
to a termination of this Agreement by United pursuant to ARTICLE XV.C as a
result of Contractor's failure to meet Operating Performance Standards
referenced in ARTICLE XV.C.1; provided, that the exclusion of the applicability
of ARTICLE XV.G to ARTICLE XV.C.1 shall not be deemed to be a waiver of any
right which United may have for remedies at law or in equity.
H. OPERATING PERFORMANCE STANDARDS
1. As used in this Agreement, the term "OPERATING PERFORMANCE
STANDARDS" means those OPERATIONAL PERFORMANCE GOALS set forth in each of the
PERFORMANCE LEVELS D set forth on APPENDIX G.
2. If at any time during the course of this Agreement United
changes any of its operating performance standards for any reason, United may
reset the corresponding Contractor Operating Performance Standards after
consultation with Contractor.
XVI. ASSIGNMENT, MERGER AND ACQUISITION
A. ASSIGNMENT
This Agreement may be terminated by either United or
Contractor (the "FIRST PARTY") if there is an assignment of this Agreement or of
any of the rights, duties or obligations of the other party (except an
assignment of the right to money to be received hereunder) without the prior
written consent of the first party. In the event that this Agreement is
assigned, whether by operation of law, transfer of the control of Contractor in
violation of ARTICLE XVI or any Related Agreement or otherwise, without such
consent having been given in writing, the first party will have the right to
terminate this Agreement immediately by telegraphic or written notice to the
other party; provided, however, that a corporate reorganization, that does not
result in a material change in the ultimate ownership of Contractor from the
ownership that existed prior to such transaction, will not be considered an
assignment as long as all of the entities so involved in the corporate
reorganization transaction agree to be bound by this Agreement.
B. MERGER
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In the event Contractor merges with or is controlled or
acquired by another air carrier, or a corporation owning or controlling or
affiliated with or owned or controlled by such an air carrier ("HOLDING
COMPANY"), or a corporation owned, controlled or affiliated with any such
holding company, United will have the option to terminate this Agreement
without liability to Contractor. If any single entity or individual which
presently owns less than ten percent (10%) of Contractor's or a holding
company's outstanding voting stock, or owns no stock at all, acquires ten
percent (10%) or more of such outstanding voting stock or if other unusual
activity occurs concerning Contractor's outstanding voting stock, Contractor
will advise United within ten (10) days of the date on which such entity or
person reaches or exceeds this ten percent (10%) threshold.
C. ACQUISITION
1. For purposes of this ARTICLE XVI.C, "QUALIFYING
TRANSACTIONS" means any (a) merger of Contractor with another company, (b) sale,
transfer or lease by Contractor of its assets, rights or powers (other than in
the ordinary course of business), or (c) issuance or sale of stock in Contractor
representing 5% or more of Contractor's outstanding stock; provided, however,
that (i) a corporate reorganization, that does not result in a material change
in the ultimate ownership of Contractor from the ownership that existed prior to
such transaction, will not be considered a "QUALIFYING TRANSACTION" as long as
all of the entities so involved in the corporate reorganization transaction
agree to be bound by this Agreement and (ii) the sale of Contractor's common
stock in connection with an initial public offering or subsequent public
offering of up to 30%, in the aggregate of Contractor's outstanding common stock
shall not be deemed to be a Qualifying Transaction.
2. Contractor agrees that if it desires or decides to enter
into a Qualifying Transaction, then, prior to taking any such action or entering
into discussions with a third party on such subject matter, Contractor will (a)
give United written notice of its intention (the "NOTICE"), (b) negotiate in
good faith with United to determine terms and conditions on which Contractor and
United could complete such Qualifying Transaction and (c) grant United or any
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United affiliated entity the right of first refusal regarding such proposed
Qualifying Transaction. If United and Contractor are unable to agree on terms
and conditions for the proposed Qualifying Transaction, then within thirty (30)
days after United's receipt of the Notice, Contractor will give United at least
fifteen (15) days' prior written notice of its intention to terminate
negotiations with United and enter into negotiations with third parties;
provided, however, that any resulting agreement with any such third party may
not be on terms more favorable to the third party than those offered by United
or the United affiliated entity, as the case may be, and will be subject to
ARTICLE XVI.C.3.
3. Contractor agrees that promptly after receipt of any offer
by any third party to enter into an agreement for the consummation of a
Qualifying Transaction and prior to Contractor's acceptance thereof, Contractor
will notify United of such event. United or any United affiliated entity will
have a right of first refusal with respect to any such Qualifying Transaction.
If prior to the termination of this Agreement, any third party enters into an
agreement providing for the consummation of a Qualifying Transaction, Contractor
will give United written notice of such third-party agreement, including as part
of such notice a copy of the third-party agreement. Any such third-party
agreement will provide that it will not be effective until a date forty-five
(45) days subsequent to the receipt by United of written notice thereof and that
it will be null and void and of no effect whatsoever if, during such forty-five
(45)day period, United or any United affiliated entity elects to enter into a
Qualifying Transaction upon substantially the same or equivalent terms as are
contained in such third-party agreement; provided that if United is unable to
match such third-party agreement due to United's inability to provide the
specific types of consideration (e.g., stock, rights or assets) to be delivered
by such third party thereunder, Contractor agrees to negotiate in good faith in
order to determine, within such 45-day period, an amount and type of
consideration with an equivalent economic value to Contractor or its affiliates
which could be paid or delivered to Contractor or its affiliates in lieu of such
specific consideration. Contractor agrees that any and all information provided
to any third
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party in connection with a proposed Qualifying Transaction will be provided to
United concurrent with the transfer of such information to such third party.
4. ARTICLES XVI.C.2 AND XVI.C.3 will not apply to any
proposed sale or disposition by Contractor of its aircraft or assets that: (a)
have become worn out or obsolete or are no longer used and useful in
Contractor's day to day business; provided, however, that such sale or
disposition does not impair or negatively affect Contractor's ability to
complete scheduled service on a day to day basis under this Agreement; or (b)
are being replaced with other assets of a similar type which are at least of
equal quality and utility to Contractor in carrying on its day to day business
and meeting its obligation under this Agreement.
XVII. CHANGE OF LAW
Notwithstanding anything herein to the contrary, in the event there is
any change in the statutes governing the economic regulation of air
transportation, or in the applicable rules, regulations or orders or
interpretation of any such rule, regulation or order of the DOT or other
department of the government having jurisdiction over air transportation, which
change or changes materially affect the rights or obligations of either party
hereto under the terms of this Agreement, then the parties hereto will consult,
no later than thirty (30) days after any of the occurrences described herein, in
order to determine what, if any, changes to this Agreement are necessary or
appropriate, including but not limited to the early termination of this
Agreement. If the parties hereto are unable to agree whether any change or
changes to this Agreement are necessary and proper, or as to the terms of such
changes, or whether this Agreement should be terminated in light of the
occurrences described above, and such failure to reach agreement will continue
for a period of thirty (30) days following the commencement of the consultations
provided for by this ARTICLE XVII, then this Agreement may be terminated by
either party immediately upon providing the other party thirty (30) days' prior
written notice of such termination. Any such termination will be without
additional obligation or liability to both parties
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except that such termination will not relieve either party of any debt or
obligation, monetary or otherwise, accruing hereunder prior to the effective
date of termination.
XVIII. TAXES, PERMITS AND LICENSES
A. TRANSACTION TAXES
Contractor agrees to pay on demand and to indemnify and hold
United harmless from any and all penalties or interest arising out of any real
and personal property, sales and use, occupational, gross receipts, value added,
income, franchise and any other taxes, customs, duties, excise taxes, fees,
charges, or assessments, of any nature whatsoever imposed by any federal, state,
local or foreign government or taxing authority upon Contractor or United with
respect to the performance of this Agreement, or to Contractor's operations, or
the equipment contained therein or services provided thereby, or the revenues
derived therefrom (except for penalties or interests arising out of any tax upon
or measured by United's net income). If a claim is made against United for any
penalties or interest referred to above, United will promptly notify Contractor
and request payment of such claim. If reasonably and in good faith requested by
Contractor in writing, United will upon receipt of indemnity and evidence that
Contractor has made adequate provision for the payment of such penalties or
interest, satisfactory to United, contest the validity, applicability or amount
of such penalties or interest, taxes and other charges at Contractor's expense.
Contractor shall pay United upon demand for all expenses incurred (including,
without limitation, all costs, expenses, losses, legal and accountants' fees,
penalties and interest) in making payment, in protesting or seeking refund of
such penalties or interest.
B. PAYROLL TAXES
Contractor acknowledges that it is responsible for and will
pay to the appropriate authority, and will indemnify and hold United harmless
from, any and all federal or state payroll taxes, FICA, unemployment tax, state
unemployment compensation contribution, disability benefit payments, insurance
costs, and any other assessments or charges which relate directly or indirectly
to the employment by Contractor or Contractor's employees. United acknowledges
that it is
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responsible for and will pay to the appropriate authority, and will indemnify
and hold Contractor harmless from, any and all federal or state payroll taxes,
FICA, unemployment tax, state unemployment compensation contribution,
disability benefit payments, insurance costs, and any other assessments or
charges which relate directly or indirectly to the employment by United or
United's employees.
C. PERMITS AND LICENSES
Contractor will comply with all federal, state, and local
laws, rules and regulations, will timely obtain and maintain any and all
permits, certificates, or licenses necessary for the full and proper conduct of
its operations, and will pay all fees assessed for airport use including but not
limited to landing fees, user airport fees, and prorated airport facility fees.
Contractor further agrees to comply with all mandatory resolutions issued by the
Air Transport Association of America ("ATA") and all nonbinding recommended
resolutions of the ATA which are adopted by United.
XIX. REVIEW
During the term of this Agreement United may, at any time at its
discretion, require a joint review of Contractor's aircraft and facilities to
determine whether Contractor's United Express Services are meeting the
requirements of this Agreement. This review is not intended nor shall it be
construed to relieve Contractor of its responsibility to provide a quality and
airworthy aircraft which satisfies all FAA regulations. In addition, within
thirty (30) days after each calendar quarter United and Contractor will meet to
review Contractor's United Express Services during the preceding calendar
quarter.
XX. JURISDICTION
With respect to any lawsuit, action, proceeding or claim relating to
this Agreement or any other one or more agreements between United and
Contractor (hereinafter, any such lawsuit, action, proceeding, or claim is
collectively referred to as a "LAWSUIT"), each of the parties
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hereto irrevocably (i) submits to the exclusive jurisdiction of the courts of
the State of Illinois and the United States District Court located in the City
of Chicago, Illinois, and (ii) waives any objection which it may have at any
time to the laying of venue of any Lawsuit brought in any court, waives any
claim that any Lawsuit has been brought in any inconvenient forum, and further
waives the right to object, with respect to any Lawsuit, that such court does
not have jurisdiction over such party. Nothing in this Agreement precludes any
party hereto from bringing Lawsuits in any other jurisdiction in order to
enforce any judgment obtained in any Lawsuit referred to in the preceding
sentence, nor will the bringing of such enforcement Lawsuit in any one or more
jurisdictions preclude the bringing of any enforcement Lawsuit in any other
jurisdiction.
XXI. NOTICES
Any and all notices, approvals or demands required to be given in
writing by the parties hereto will be sufficient if sent by certified mail,
postage prepaid, overnight delivery by a nationally recognized delivery company
or hand delivery, to United, addressed to:
United Air Lines, Inc.
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Attn: Senior Vice President-Planning
and to Contractor, addressed to:
SkyWest Airlines, Inc.
444 S. River Rd.
St. George, Utah 84790
Attn: President and CEO
or to such other addresses in the continental United States as the parties may
specify in writing. Notices may be sent by facsimile to the above addresses and
will be deemed delivered two (2)
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hours after the time of their transmission if confirmed in writing on the day
of transmission by certified mail, postage prepaid or overnight delivery.
XXII. APPROVALS AND WAIVERS
A. Whenever this Agreement requires the prior approval or consent of
United, Contractor will make a timely request to United therefor and the consent
will be obtained in writing. United will also consider, in its sole discretion,
other reasonable requests individually submitted in writing by Contractor for
United's consent to a waiver of any obligation imposed by this Agreement.
B. United assumes no liability or obligations to Contractor by
providing any waiver, approval, consent or suggestion to Contractor in
connection with this Agreement, or by reason of any neglect, delay or denial of
any request therefor.
C. No failure by either party to execute any power reserved to it by
this Agreement, or to insist upon strict compliance by the other party with any
obligation or condition hereunder, and no custom or practice of the parties at
variance with the terms hereof will constitute a waiver of such party's right to
demand exact compliance with any of the terms herein. Waiver by such party of
any particular default by the other party will not affect or impair such party's
rights with respect to any subsequent default of the same, similar or different
nature, nor will any delay, forbearance or omission of such party to exercise
any power or right arising out of any breach or default by the other party of
any of the terms or provisions hereof will affect or impair such party's right
to exercise the same or constitute a waiver by such party of any right hereunder
or the right to declare any subsequent breach or default and to terminate this
Agreement prior to the expiration of its term. Subsequent acceptance by such
party of any payments due to it hereunder will not be deemed to be a waiver by
such party of any preceding breach by the other party of any terms, covenants or
conditions of this Agreement.
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XXIII. GOVERNING LAW
This Agreement and any dispute arising thereunder, including any action
in tort, will be governed by and construed and enforced in accordance with the
internal laws of the State of Illinois.
XXIV. CUMULATIVE REMEDIES
Unless and to the extent as may be otherwise expressly stated in the
Agreement, no right or remedy conferred upon or reserved to Contractor or United
by this Agreement is intended to be, nor shall be deemed, exclusive of any other
right or remedy herein or by law or equity provided or permitted, but each will
be cumulative of every other right or remedy.
XXV. FORCE MAJEURE
Except for any payments due hereunder, neither party shall be liable
for delays or failure in performance hereunder caused by acts of God, acts of
terrorism or hostilities, war, strike, labor dispute, work stoppage, fire, act
of government, court order, or any other cause, whether similar or dissimilar,
beyond the control of that party.
XXVI. SEVERABILITY AND CONSTRUCTION
A. Each term or provision of this Agreement will be considered
severable; and if, for any reason, any such term or provision herein is
determined to be invalid and contrary to, or in conflict with, any existing or
future law or regulation by a court or agency having valid jurisdiction, such
will not impair the operation of, or have any other effect upon, other terms or
provisions of this Agreement as may remain otherwise enforceable, and the latter
will continue to be given full force and effect and bind the parties hereto; and
said invalid terms or provisions will be deemed not to be a part of this
Agreement.
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<PAGE> 70
B. The captions appearing in this Agreement have been inserted for
convenience only and will not control, define, limit, enlarge or affect the
meaning of this Agreement or any of its provisions.
XXVII. ACKNOWLEDGMENT
A. Each party expressly disclaims the making of, and acknowledges that
it has not received, any warranty or guarantee, express or implied, as to the
potential volume, profits or success of the business venture contemplated by
this Agreement.
B. Each party acknowledges that it has received, read and understood
this Agreement, and any Supplements, Exhibits and Appendices hereto.
XXVIII. CONFIDENTIALITY
A. Except as required by law or in any proceeding to enforce the
provisions of this Agreement, United and Contractor hereby agree not to
publicize or disclose to any third party the terms or conditions of this
Agreement or any of the Related Agreements without the prior written consent of
the other parties thereto.
B. Except as required by law or in any proceeding to enforce the
provisions of this Agreement, United and Contractor hereby agree not to disclose
to any third party any confidential information or data, both oral and written,
received from the other and designated as such by the other without the prior
written consent of the party providing such confidential information or data.
C. If either party is served with a subpoena or other process requiring
the production or disclosure of any of the agreements, information or data
described in ARTICLES XXVIII.A or XXVIII.B, then the party receiving such
subpoena or other process, before complying with such subpoena or other process,
shall immediately notify the other party of same and permit said other party a
reasonable period of time to intervene and contest disclosure or production.
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<PAGE> 71
D. Upon termination of this Agreement, each party must return to the
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.
XXIX. RELATED AGREEMENTS
A. Contemporaneously with the execution of this Agreement, United and
Contractor will enter into the following additional Agreements:
1. United Mileage Plus United Express
Participation Agreement (UNITED CONTRACT NO. 137334).
2. Reciprocal Interline Agreement/Space
Available Employee and Eligible Travel Agreement (UNITED CONTRACT NO. 137335).
3. Emergency Response Services Agreement
(UNITED CONTRACT NO. 137336).
4. Joint Meeting and Domestic Group Travel
Program Authorization Agreement (UNITED CONTRACT NO. 137337).
5. United Pass Plus United Express
Participation Agreement (UNITED CONTRACT NO. 137338).
B. The agreements enumerated in this ARTICLE XXIX are herein referred
to as the "RELATED Agreements."
C. If Contractor fails to execute any of the Related Agreements as
specified in this ARTICLE XXIX, then this Agreement and all Related Agreements
will terminate immediately upon written notice by United to Contractor.
63
<PAGE> 72
XXX. ENTIRE AGREEMENT
This Agreement, together with the Related Agreements,
including any Appendices, Attachments and Exhibits attached hereto and thereto,
contains the complete, final and exclusive agreement between the parties hereto
with respect to the subject matter hereof, and supersedes all previous
agreements and understandings, oral and written, with respect to such specific
matter (except that where not inconsistent herewith, the Agreement in Principle,
as amended (UNITED CONTRACT NO. 131316), is not superseded), and said Agreement
will not be modified, amended or terminated by mutual agreement or in any manner
except by an instrument in writing, executed by the parties hereto.
XXXI. REFERENCES TO TIME PERIODS
All references to the term "YEAR" in this Agreement shall mean
contract year unless specifically stated otherwise. All references to the term
"MONTH" in this Agreement shall mean a full calendar month; provided that if the
Effective Date shall be other than the first day of a calendar month, then the
first "month" of this Agreement shall commence on the Effective Date and end on
the last day of the month in which the Effective Date occurs. All references to
the term "QUARTER" in this Agreement shall mean a contract quarter. Contract
quarters shall be October 1 through December 31, January 1 through March 31,
April 1 through June 30, and July 1 through September 30; provided that the
first "quarter" of this Agreement shall commence on the Effective Date and
terminate on December 31, 1997. IN WITNESS WHEREOF, the parties hereto have by
their duly authorized officers caused this Agreement to be entered into and
signed as of the day and year first above written.
SKYWEST AIRLINES, INC. UNITED AIR LINES, INC.
By: /s/ Jerry C. Atkin By: /s/ Rono J. Dutta
--------------------- ---------------------
Name: Jerry C. Atkin Name: Rono J. Dutta
--------------------- ---------------------
Title: President and CEO Title: Sr. V.P. Planning
--------------------- ---------------------
UNITED AIR LINES, INC.
By: /s/ Thomas M. Hanley
----------------------------
Name: Thomas M. Hanley
----------------------------
Title: Director, Interline Programs
----------------------------
64
<PAGE> 73
APPENDIX A
UNITED'S MARKS
UNITED EXPRESS
Stylized UNITED EXPRESS lettering
UNITED EXPRESS colors
Stylized letters UA
Uniform Design
Aircraft exterior and interior color decor
Other United Marks approved by United for use by Contractor
65
<PAGE> 74
APPENDIX B
AIRPORT SERVICES
<TABLE>
<CAPTION>
Customer Service/ Customer Service/ Ground Handling Receipt/
Airport Ticket Counter * Gates Ramp Duties ** Dispatch
- ------- ----------------- ---------------- --------------- ---------
<S> <C> <C> <C> <C>
BUR United United United United
LAS United United United United
LAX United Contractor Contractor Contr.
MRY United United United United
PSP United United Contractor Contr.
SBA United United Contractor Contr.
SJC United United United United
</TABLE>
* Also including Small Package service.
** Any unique ground equipment which is needed to service Contractor's
aircraft will be provided by Contractor.
66
<PAGE> 75
APPENDIX C
CONTRACTOR SUPPORT SERVICES
At all locations not set forth on APPENDIX B where Contractor operates scheduled
air transportation as a United Express Carrier (i.e., Contractor Locations),
Contractor will provide the following minimum services:
(a) Contractor's employees shall be fully qualified personnel to
handle Contractor's operations.
(b) Posting of signage and decor appointment as specified by
United.
(c) Adequate check-in areas including passenger waiting room
facilities.
(d) Security facilities, personnel and passenger screening
procedures as are required by applicable orders, rules and
regulations of the FAA and those standards specified by
United.
(e) Capability of operating Automation Equipment (Apollo
Services) for the purpose of providing passenger processing
and operations in the configuration and under the procedures
specified by United.
(f) Baggage handling, delivery and tracing in accordance with
procedures issued by United.
67
<PAGE> 76
APPENDIX D
CONTRACT CITY PAIRS
<TABLE>
<CAPTION>
City Pair Frequency *
- --------- ---------
Winter Summer
October 1 thru June 1 thru
May 31 September 30
-------------- ------------
<S> <C> <C>
LAX - MRY + +
LAX - ONT + +
LAX - PSP + +
LAX - SAN + +
LAX - SJC + +
LAX - SBP + +
LAX - SBA + +
LAX - SMX + +
LAX - YUM + +
LAX - IPL + +
IPL - YUM + +
</TABLE>
* The daily flight frequency reflects the number of roundtrip(s) in a 30 seat
EMB120 aircraft.** The flight frequency will be adjusted to reflect normal
reduced weekend and holiday schedules.
** Contractor's regional jet aircraft are not included in these operations.
68
<PAGE> 77
APPENDIX E
POINT TO POINT CITY PAIRS
<TABLE>
<CAPTION>
City Pair Frequency Aircraft *
- --------- --------- --------
<S> <C> <C>
FAT - ONT + EMB120
LAS - FAT + EMB120
LAS - PSP + EMB120
LAX - SGU + EMB120
SAN - BUR + EMB120
SAN - SBA + EMB120
SBA - SJC + EMB120
</TABLE>
* Contractor's regional jet aircraft are not included in these operations.
69
<PAGE> 78
APPENDIX F
CONTRACT FEES
<TABLE>
<CAPTION>
City Pair Cost Per Departure * Cost Per Revenue Passenger **
- --------- ------------------ --------------------------
<S> <C> <C>
LAX - MRY + +
LAX - ONT + +
LAX - PSP + +
LAX - SAN + +
LAX - SJC + +
LAX - SBP + +
LAX - SBA + +
LAX - SMX + +
LAX - YUM + +
LAX - IPL + +
IPL - YUM + +
</TABLE>
* The cost per departure will be paid for each completed flight operation.
Flights operated in excess of the frequency outlined in Appendix D, must
be approved by United.
** Effective JANUARY 1, 1998, the Cost Per Revenue Passenger (except
IPL-YUM) shall be +
70
<PAGE> 79
APPENDIX G
CONTRACT CITY PAIRS INCENTIVE PROGRAM
1. INCENTIVE PROGRAM. To compensate Contractor further for its investment
and to ensure that Contractor has a meaningful incentive to provide a high
quality operation, United will pay Contractor QUARTERLY INCENTIVE PAYMENTS
according to the QUARTERLY INCENTIVE FORMULA below using the + and +
corresponding to the ACTUAL PERFORMANCE LEVELS attained during the quarter for
each of the three (3) PERFORMANCE CATEGORIES set forth in the attached
PERFORMANCE INCENTIVE SCHEDULE. Any resulting Quarterly Incentive Payments based
upon the LAX City Pair + and + are separate from and based upon a separate set
of + and + than those set forth below for the SFO City Pairs.
2. QUARTERLY INCENTIVE FORMULA.
<TABLE>
<CAPTION>
QUARTERLY INCENTIVE PAYMENT = A + B.
<S> <C> <C>
where, A = +
where, B = +
QUARTERLY CONTRACT CITY PAIR COST = C + D.
where, C = +
where, D = +
</TABLE>
3. PERFORMANCE INCENTIVE SCHEDULE.
A. METHOD. For each calendar quarter and for Contractor's entire United
Express operations hereunder, determine Contractor's Performance Level (A, B, C
or D) within each of the Performance Categories (+, +, and +) in the Performance
Incentive Schedule below. Then, separately for the LAX and the SFO systems of
City Pairs, identify in the + and + schedule the figures corresponding to the
Performance Levels attained for each of the Performance Categories. Then, for
the LAX system on the one hand and the SFO system on the other, add the three
percentage figures together yielding the + and add the three dollar amounts
together yielding
71
<PAGE> 80
the +. Apply the resulting factors and rates in the
Quarterly Incentive Formula to compute the Quarterly Incentive Payment.
Note: "Departures" and "revenue passengers" are measured by the lift records
processed by United's Revenue Accounting Department.
B. SCHEDULE.
<TABLE>
<CAPTION>
PERFORMANCE CATEGORIES
- ------------------------------------------------------------------------------------
+
- ------------------------------------------------------------------------------------
Jan-Mar Apr-Jun Jul-Sep Oct-Dec
------- ------- ------- -------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
Level A* + + + +
- ------------------------------------------------------------------------------------
Level B + + + +
- ------------------------------------------------------------------------------------
Level C + + + +
- ------------------------------------------------------------------------------------
Level D + + + +
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
+ (OT :05)**
- --------------------------------------
Jan-Mar Apr-Jun Jul-Sep Oct-Dec
------- ------- ------- -------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
Level A + + + +
- ------------------------------------------------------------------------------------
Level B + + + +
- ------------------------------------------------------------------------------------
Level C + + + +
- ------------------------------------------------------------------------------------
Level D + + + +
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
+
Jan-May
and Sep-Nov Jun-Aug, Dec
----------- ------------
<S> <C> <C>
- ------------------------------------------------------------------------------------
Level A + +
- ------------------------------------------------------------------------------------
Level B + +
- ------------------------------------------------------------------------------------
Level C + +
- ------------------------------------------------------------------------------------
Level D + +
- ------------------------------------------------------------------------------------
</TABLE>
72
<PAGE> 81
*
<TABLE>
<CAPTION>
+
LAX CITY PAIR SYSTEM
- --------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
Level A + + +
- ------------------------------------------------------------------------------------
Level B + + +
- ------------------------------------------------------------------------------------
Level C + + +
- ------------------------------------------------------------------------------------
Level D + + +
- ------------------------------------------------------------------------------------
<CAPTION>
SFO CITY PAIR SYSTEM
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
Level A + + +
- ------------------------------------------------------------------------------------
Level B + + +
- ------------------------------------------------------------------------------------
Level C + + +
- ------------------------------------------------------------------------------------
Level D + + +
- ------------------------------------------------------------------------------------
</TABLE>
73
<PAGE> 82
APPENDIX H
PROGRAM FEES
Program Fees payable by Contractor pursuant to ARTICLE VIII.B.1 for Contractor's
United Express flights operated in the city pair markets set forth on APPENDIX E
are as follows:
<TABLE>
<CAPTION>
Travel Date Program Fee
----------- -----------
<S> <C>
10/01/1997 - 12/31/1998 +
01/01/1999 - 12/31/1999 +
01/01/2000 - 12/31/2000 +
01/01/2001 - 12/31/2001 +
01/01/2002 - 09/30/2002 +
</TABLE>
74
<PAGE> 83
APPENDIX I
LIABILITY INSURANCE
Date of Issue:_______________
THIS IS TO CERTIFY TO: UNITED AIR LINES, INC.
that Insurers are providing 100% of the following Liability Insurances:
<TABLE>
<S> <C>
NAME INSURED: __________________________________
Hereinafter referred to as "Contractor")
PERIOD OF INSURANCE: ______ to _____
INSURERS: _____________________
_____________________
POLICY NUMBER: _____________________
GEOGRAPHICAL
LIMITS: Worldwide
AIRCRAFT INSURED: TYPE SERIAL NO. REG. NO.
---- ------ ---------
DESCRIPTION OF
COVERAGE: Comprehensive Airline Liability Insurance, including Aircraft
Liability (all risks), Passenger Liability, Cargo Liability and
Comprehensive General Liability, including Hangarkeepers, Excess
Automobile, Dram Shop Liability, Personal Injury, and Products
Liability coverage.
LIMIT OF
LIABILITY: Combined Single Limit + any one occurrence (except, in the
aggregate, with respect to Products Liability, and Personal Injury
for non-passengers limited to + each offense and in the annual
aggregate); Bodily Injury Liability, Passenger Liability,
Property Damage Liability (including Baggage, which is subject to
policy deductible) and Cargo Liability (Cargo Liability limited to +
per occurrence and subject to policy deductibles). As
respects Aircraft Liability, the limit applies separately to each
occurrence.
</TABLE>
75
<PAGE> 84
SPECIAL PROVISIONS:
The insurers agree that coverage under this policy, by formal endorsement or
otherwise, is extended to insure all relevant terms and conditions of the United
Express Agreement, subject to the policy terms, conditions, limitations and
exclusions, between Contractor and United concerning Contractor's Aircraft,
including any provisions carried forward into such Agreement from any prior
Agreements as respects said Aircraft (hereinafter referred to as "Agreement"),
including, inter alia:
1. The Insurers accept and insure the Indemnity and Hold Harmless
provisions of the Agreement, subject to the policy terms, conditions,
limitations and exclusions.
2. United, its affiliates, and their respective directors, officers,
employees, agents and indemnitees are named as additional parties
insured ("Insureds") to the extent of the liability assumed by
Contractor under the Agreement, subject to the policy terms,
conditions, limitations and exclusions.
3. The Insurers agree that United shall not be liable for, nor have any
obligation to pay any premium due hereunder, and Insurers further agree
that they shall not offset or counter-claim any unpaid premium against
the interest of United.
4. The Insurers agree that all provisions of this insurance, except for
the limits of liability, shall operate in the same manner as if there
were a separate policy issued to each Insured.
5. The Insurers agree that this insurance shall be primary insurance
without any right of contribution from any other insurance which is
carried by United.
6. The Insurers agree to waive their rights of subrogation against United,
its officers, directors, employees and indemnitees, to the extent the
Contractor has waived and released its rights under the Agreement.
7. The Insurers agree that as respects the interest of United, its
directors, officers, employees and indemnitees, this insurance shall
not be invalidated by any action or inaction of the Contractor, its
officers, directors or employees, and shall insure United, its
directors, officers, employees and indemnitees regardless of any
breach or violation of any warranties, declarations, conditions or
exclusions contained in the policy by the Contractor, its officers,
directors or employees.
8. In the event of cancellation for any reason whatever or if any change
of a restrictive nature is made affecting the insurance certified
hereunder, or if this insurance is allowed to lapse due to non-payment
of premium, such cancellation, change or lapse shall not be effective
as to United, its directors, officers, employees and indemnitees for
at least thirty (30) days (ten (10) days in the case of non-payment of
premiums) after written notice by registered mail of such
cancellation, change or lapse shall have been received by United.
9. With respect to claims or causes of action in favor of United or its
directors, officers, agents or employees, they shall not be considered
as additional insured thereunder.
76
<PAGE> 85
APPENDIX J
PARTICIPATION IN UNITED'S TRAVEL CERTIFICATE PROGRAM
United will allow Contractor and Contractor agrees to accept United/United
Express Amenities, Promotional Discount(s) and/or Free Travel Certificates on
Contractor's flight segment(s), whether or not in conjunction with a United
flight segment, in accordance with the following terms and conditions:
1. Settlement of Promotion Certificates. Contractor agrees to:
A. Deduct fifteen percent (15%) of certificate face value from
confidential, agreed prorate, when travel is in conjunction with United flight
segment(s).
B. Absorb entire certificate face value when travel is wholly on
Contractor's flight operation.
2. Settlement of Amenities. For United Travel Certificates (in all dollar
denominations), Contractor agrees to:
A. Deduct fifteen percent (15%) of certificate face value from
confidential, agreed prorate, when travel is in conjunction with United flight
segment(s).
B. Absorb entire certificate face value when travel is wholly on
Contractor's flight operation.
3. Certificate Supplies.
A. Promotional certificates are issued in exchange for
participation in a promotion program. Program categories include: retail,
public service/charities, financial and miscellaneous.
B. United amenities certificates are issued from time to time by
United and United Express Carriers.
4. Terms and conditions regarding use appear on each certificate and must
be strictly adhered to in order for certificate to be valid.
77
<PAGE> 86
APPENDIX K
SAFETY STANDARDS FOR UNITED AIRLINES AND UNITED EXPRESS CARRIERS
We have developed common safety standards to evaluate and effectively manage
safety. We will commit to:
- - Mutual support of one another in implementing these standards by sharing
safety data, information and expertise.
- - Quality maintenance and operations training programs.
- - A carrier internal evaluation program to monitor key safety issues,
including maintenance practices, required inspection items, technical
document control, dangerous goods handling, training records and
qualifications for all personnel.
- - Quality programs to manage outsourcing of services.
- - A formalized maintenance quality assurance program.
- - Implementation of a program to rectify FAA inspection findings.
- - Presence of a voluntary disclosure program.
- - Formal process to routinely bring safety and compliance issues to the
attention of carrier's senior management.
- - Anonymous safety hazard reporting system.
- - A CEO policy statement supporting open safety reporting by employees.
- - Director of Safety, reporting to the highest levels of management,
overseeing the carrier's safety programs.
- - Process for managing required corrective actions from FAA and internal
audit program as well as employee disclosure.
- - Ongoing flight safety education/feedback program.
- - Ground safety program in airport operating areas.
- - Incident investigation process that includes accountability, recommendations
and actions taken.
- - Establishment and maintenance of emergency response procedures and manual.
- - Participation in UAL/industry safety information exchange forums.
78
<PAGE> 1
EXHIBIT 99.2
SFO ADDENDUM
This SFO Addendum, dated as of January 15, 1998, is between
UNITED AIR LINES, INC. ("UNITED"), and SKYWEST AIRLINES, INC.
("CONTRACTOR"), hereby amends and is made a part of the United Express
Agreement, which was effective on October 1, 1997 (the "AGREEMENT"),
between these parties, and this addendum is effective as of June 1,
1998 (the "SFO EFFECTIVE DATE") upon final execution of the Agreement.
1. TERM. The term of this SFO Addendum becomes effective at 12:01 a.m. Chicago,
Illinois time, on the SFO Effective Date, and shall terminate on May 31, 2008,
unless it is terminated at an earlier date pursuant to one or more of the
provisions of the Agreement; provided, however, that this SFO Addendum may be
terminated at any time by United for convenience upon 180 days' prior written
notice to Contractor.
2. APPENDICES. The following additional appendices are added to the Agreement as
set forth on the attached SFO APPENDIX B, D AND F, and for purposes of the terms
of the Agreement that refer to Appendices B, D and F, such references shall
apply equally to SFO Appendix B, D and F.
3. INCLUSION OF AGREEMENT. The terms and conditions of the Agreement which are
not inconsistent with this addendum are hereby included in and made part of
this SFO Addendum.
1
DISCLOSURE REGARDING CONFIDENTIAL TREATMENT:
Portions of Appendix F attached to this Exhibit 99.2 to a Current Report on Form
8-K have been omitted from this exhibit filed with the Securities and Exchange
Commission (the "Commission") by SkyWest, Inc. The omitted portions, which are
the subject of an application for confidential treatment and have been filed
separately with the Commission, are identified in this exhibit by the placement
of the following symbol: +.
<PAGE> 2
SFO APPENDIX B
AIRPORT SERVICES
<TABLE>
<CAPTION>
Customer Service/ Customer Service/ Ground Handling Receipt/
Airport Ticket Counter * Gates Ramp Duties ** Dispatch
- ------- ----------------- ----------------- ------------- --------
<S> <C> <C> <C> <C>
SFO United Contractor Contractor Contractor
</TABLE>
* Also including Small Package service.
** Any unique ground equipment which is needed to service Contractor's
aircraft will be provided by Contractor.
2
<PAGE> 3
SFO APPENDIX D
CONTRACT CITY PAIRS
<TABLE>
<CAPTION>
City Pair Frequency *
- --------- ---------
<S> <C>
ACV - SFO 10
BFL - SFO 5
CIC - SFO 6
FAT - SFO 16
MCE - SFO 3
MOD - SFO 4
MRY - SFO 5
RDD - SFO 8
SBA - SFO 2
SBP - SFO 5
SMF - SFO 16
STS - SFO 4
</TABLE>
* The daily flight frequency reflects the number of roundtrip(s) in a 30 seat
EMB120 aircraft.** The flight frequency will be adjusted to reflect normal
reduced weekend and holiday schedules.
** Contractor's regional jet aircraft are not included in these operations.
3
<PAGE> 4
SFO APPENDIX F
CONTRACT FEES
<TABLE>
<CAPTION>
City Pair Cost Per Departure * Cost Per Revenue Passenger
- --------- ------------------ --------------------------
<S> <C> <C>
ACV - SFO + +
BFL - SFO + +
CIC - SFO + +
FAT - SFO + +
MCE - SFO + +
MOD - SFO + +
MRY - SFO + +
RDD - SFO + +
SBA - SFO + +
SBP - SFO + +
SMF - SFO + +
STS - SFO + +
</TABLE>
* The cost per departure will be paid for each completed flight operation.
Flights operated in excess of the frequency outlined in SFO Appendix D,
must be approved by United.
4
<PAGE> 1
EXHIBIT 99.3
[SKYWEST AIRLINES LOGO]
SKYWEST AIRLINES
444 SOUTH RIVER ROAD
ST. GEORGE, UT 84790
TELEPHONE: (453) 634-3000 / FAX: (435) 634-3505
CONTACT: Lance Starr, Public Affairs Manager (435) 634-3527
FOR IMMEDIATE RELEASE
SKYWEST AIRLINES ANNOUNCES MAJOR WEST COAST EXPANSION
ST. GEORGE, UT, JANUARY 19, 1998 (NASDAQ: SKYW) - SkyWest Airlines announced a
major expansion for its California operation effective June 1, 1998. On that
date, the airline will establish a new West Coast hub as it initiates United
Express service to 12 California destinations from San Francisco International
Airport. The airline initially plans to operate approximately 84 daily
roundtrips and will provide frequent, convenient connections to partner United
Airlines, the largest carrier at San Francisco.
Schedule plans will incorporate service as follows:
Eureka/Arcata 10 Daily Roundtrips
Bakersfield 5 Daily Roundtrips
Chico 6 Daily Roundtrips
Fresno 16 Daily Roundtrips (Hourly Service)
Merced 3 Daily Roundtrips
Modesto 4 Daily Roundtrips
Monterey 5 Daily Roundtrips
Redding 8 Daily Roundtrips
Sacramento 16 Daily Roundtrips (Hourly Service)
San Luis Obispo 5 Daily Roundtrips
Santa Barbara 2 Daily Roundtrips
Santa Rosa 4 Daily Roundtrips
All SkyWest United Express service will feature 30-passenger cabin-class
aircraft. Seventeen new airplanes will be required to support the expansion,
increasing SkyWest's fleet of EMB-120s to 67. "SkyWest is extremely pleased to
have been chosen by United to provide the regional feed it requires at San
Francisco." Commented SkyWest Chief Operating Officer, Ron Reber.
Nearly four months ago, SkyWest entered into a new marketing agreement with
United Airlines, becoming a United Express carrier for the first time in
several primarily Southern California markets. Today, the airlines provides
nearly 300 daily United Express flights, including 120 daily departures from
Los Angeles. Once complete, SkyWest's United Express system will include more
than 450 daily flights and will make SkyWest among the five largest regional
carriers in the United States.
SkyWest Airlines operates nearly 300 daily United Express departures to 15
cities in California, Arizona, Nevada, and Utah, giving travelers access to
United's worldwide network at Los Angeles. SkyWest also operates as a Delta
Connection at its Salt Lake City and Los Angeles hubs and as a Continental
Connection in selected western markets. In total, SkyWest operates nearly 600
daily flight system wide and is the nation's eighth largest regional airline.
This press release, as well as past releases, can be accessed on the SkyWest
Airlines Internet site at: http://www.skywest.com.
(###)
