Document:

Exhibit 10(a)

                              EMPLOYMENT AGREEMENT
                              --------------------

         THIS EMPLOYMENT AGREEMENT  ("Agreement") is made and entered into as of
this 4th day of August,  2003, by and between Margo Caribe,  Inc., a Puerto Rico
corporation (which, together with any successor thereto, is hereinafter referred
to as the "Company") and TULIO FIGUEROA (the "Employee").

         WHEREAS,  the Company believes that it is in the best interests of such
entity to enter into this  Agreement  with the  Employee  in order to assure the
services of an executive with the experience and abilities of the Employee, and

         WHEREAS,  the Employee desires to enter into this employment  agreement
with the Company.

         NOW THEREFORE,  in consideration of the foregoing and of the respective
covenants  and  agreements  of the  parties  herein  contained,  it is agreed as
follows:

         1. Employment.

                  (a)  The   Employee   is  hereby   employed   as  Senior  Vice
President-Sales  and Marketing  with primary  responsibility  over the Company's
sales and marketing employees.  The Employee shall have such other duties as may
from time to time be prescribed by the Board of Directors of the Company. In the
performance  of such duties the Employee  shall  report to the  President of the
Company. The Employee shall also carry out the directives of the senior officers
of Margo Caribe, Inc. ("Margo").

                                                                               1

<PAGE>

                  (b)  The   Employee   shall   devote  his  best   efforts  and
substantially all business time and attention to the business and affairs of the
Company and its subsidiaries.

         2. Competitive Activities.

                  (a) The Employee agrees that during the term of this Agreement
and for a period of one (1) year after the Employee  ceases to be an employee of
the  Company or of an  affiliate  of Margo (the  "Noncompete  Period")  that the
Employee will not,  within the  Commonwealth of Puerto Rico or any region in the
United  States or Mexico in which  Margo or its  affiliates  engages in business
during the term of this Agreement (a) compete with Margo,  its  subsidiaries and
other  affiliates,  (b) engage in substantially  the same business as Margo, its
subsidiaries  and other affiliates or (c) provide  comparable  services as those
provided by Margo,  its subsidiaries and other affiliates to the past or present
clients and customers of Margo, its subsidiaries  and other  affiliates.  During
the  Noncompete  Period the Employee also agrees not (y) to interfere or attempt
to interfere with the  relationships  between Margo,  its  subsidiaries or other
affiliates and any of Margo's,  its  subsidiaries' or its other affiliates' then
current or potential customers,  vendors or suppliers or (z) to employ,  solicit
for employment or otherwise  contract for the services of any employee of Margo,
its  subsidiaries  or other  affiliates  or who  shall  subsequently  become  an
employee of Margo, its  subsidiaries or other  affiliates  during the Noncompete
Period.  For  purposes  of this  Agreement,  the  Employee  will be deemed to be
engaged in such activities if he is a 1% or more shareholder, officer, director,
partner,  agent,  employee,  member  or  representative  of  any  person,  firm,
corporation,  partnership,  limited  liability  company or other business entity
which is engaged in such activities.

                                                                               2

<PAGE>

                  (b) The Employee  agrees and  acknowledges  that, by virtue of
the  Employee's  employment  hereunder,  the Employee  will maintain an intimate
knowledge of the activities and affairs of Margo and its subsidiaries, including
trade secrets and other  confidential  matters.  Such  information is considered
secret  and is  disclosed  to  Employee  in  confidence.  During  and  after his
employment by the Company, Employee shall not directly or indirectly disclose or
use any such  information  except as required in the course of his employment by
the Company.

                  (c) The Employee  recognizes  that the services to be rendered
under this Agreement are special,  unique and  extraordinary  in character,  and
that in the event of breach by the Employee of the terms and  conditions of this
paragraph, the Company or Margo shall be entitled, if it so elects, to institute
and prosecute proceedings, either in law or in equity, to obtain damages for any
breach of the terms or condition of this  Agreement,  or to enforce the specific
performance  thereof by the Employee,  or to enjoin the Employee from performing
services for any other person,  firm,  corporation,  limited liability  company,
partnership or other entity falling within the scope of this Agreement.

         3. Compensation.

                  (a) Salary.  During the term of this  Agreement,  the Employee
shall be entitled to an annual salary established by the Board of Directors. The
annual  salary  hereunder as of the  Commencement  Date (as defined in Section 5
hereof)  shall be equal to $108,000  per year.  The  Employee's  salary shall be
payable not less  frequently  than monthly.  Any  adjustments in salary or other
compensation shall in no way limit or reduce any other obligation

                                                                               3

<PAGE>

of the Company hereunder. The Employee's salary in effect hereunder from time to
time shall not thereafter be reduced.

                  (b) Performance Bonus. During the term of this Agreement,  the
Employee  shall  also be  entitled  to receive  an annual  incentive  bonus (the
"Performance  Bonus").  The Performance  Bonus for any calendar year (or portion
thereof) shall be computed according to the criteria established by the Board of
Directors of the Company or Margo's senior officers.

                  (c) Restricted Stock Options. Upon the execution of this
Agreement,  the Employee  shall be entitled to receive an award of 10,000 shares
of Margo's  Common Stock  pursuant to Margo's 2003  Restricted  Stock Plan.  The
restrictions  on  20% of  such  restricted  stock  award  shall  lapse  on  each
anniversary of the execution of this  Agreement,  and further  provided that any
unvested  portion of the restricted  stock award shall not be forfeited upon the
termination  of the  Employee's  employment  whether  for  cause  or not  unless
otherwise required under the terms of the 2003 Restricted Stock Plan.

                  (d)  Expenses.  During the term of the  Employee's  employment
hereunder,  the Employee shall be entitled to receive prompt  reimbursement  for
all  reasonable  expenses  incurred  by him in  performing  services  hereunder,
provided that the Employee  properly  accounts  therefor in accordance  with the
then existing  policy of Margo.  The Company will also reimburse the Employee in
the amount of $700 per month for car allowance.  Nothing  contained herein shall
authorize  the Employee to make any political  contributions,  including but not
limited to payments for dinners and  advertising in any political  party program
or any other payment to any person, which might be deemed a bribe, kick- back or
otherwise an improper payment or contribution under

                                                                               4

<PAGE>

existing  law  or  under  Margo's  policy  or  practice  and no  portion  of the
compensation payable hereunder is for such purpose.

                  (e)  Withholding.  Payments  of any  compensation  under  this
Agreement shall be subject to reduction by the amount of any applicable federal,
Commonwealth  of Puerto Rico,  state or  municipal  income  withholding,  social
security,  state  disability  insurance or similar or other taxes or other items
which may be required or authorized to be deducted by law or custom.

                  (f)    No Additional Compensation.  No additional compensation
shall be due to Employee for services performed to the Company or any subsidiary
or affiliate of the Company.

         4. Benefits.

                  During  the  term of this  Agreement,  the  Employee  shall be
entitled to  participate  in those  benefit plans  generally  available to other
officers of the Company.  Nothing  herein shall obligate the Company to continue
any existing benefit plan or to establish any replacement benefit plan.

         5. Term.

                  The term of employment  under this Agreement shall be a period
of twelve (12) months  commencing on the date hereof (the  "Commencement  Date")
and ending on July 31,  2004  (such  period,  the  "Initial  Term"),  subject to
earlier  termination as provided herein. This Agreement will automatically renew
itself on a year to year  basis  after the end of the  Initial  Term  unless the
Company notifies the Employee, or the Employee notifies the Company, as the case
may be, with at least thirty (30) days prior

                                                                               5

<PAGE>

written  notice to the day of  termination  of this  Agreement or any  automatic
renewal thereof.

         6. Vacations.

                  The Employee shall be entitled, without loss of pay, to absent
himself voluntarily from the performance of his employment under this Agreement,
all such voluntary absences to count as vacation time, provided that:

                  (a) During the term of employment  under this  Agreement,  the
Employee shall be entitled to paid vacation at least  equivalent to fifteen (15)
working  days  per  year to be taken in  accordance  with the  plans,  policies,
programs or practices of Margo as in effect from time to time; and,

                  (b)      The timing of vacations shall be scheduled in a
reasonable manner by the Employee subject to approval by the
President of the Company.

         7. Termination of Employment; Death.

                  (a) The Company may terminate the Employee's employment at any
time. If the employment of the Employee is involuntarily terminated,  other than
for "cause" as provided in this Section  7(a) the Company  shall have no further
obligation to the Employee under this  Agreement,  except that the company shall
pay the  Employee his salary  throughout  the  remainder of the then  applicable
twelve-month  period. The terms  "termination" or "involuntarily  terminated" in
this  Agreement  shall refer to the  termination  of the  employment of Employee
without the Employee's express written consent.

                                                                               6

<PAGE>

         In case of  termination  of the  Employee's  employment for cause or by
resignation, the Company shall pay the Employee his salary through and including
the date of  termination or  resignation,  and the Company shall have no further
obligation to the Employee under this Agreement.  The term "cause" shall include
termination for personal dishonesty, incompetence, willful misconduct, breach of
a fiduciary duty, insubordination,  failure to perform stated duties, failure to
comply with Company politics and procedures, willful violation of any law, rule,
or regulation (other than traffic violations or similar minor offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.

                  (b) In the event of the death of the Employee  during the term
of employment  under this  Agreement and prior to the  termination of Employee's
employment hereunder for any other reason, the Employee's estate, or such person
as the Employee may have previously designated in writing,  shall be entitled to
receive from the Company the salary of the Employee  through and  including  the
last day of the calendar month in which the Employee's death occurs.

                  (c) The provisions of Section 2 shall survive any termination
of this Agreement.

         8. Permanent Disability.

                  (a) If the Employee  shall  become  disabled  permanently  (as
defined in Margo's then current  disability  plan) during the term of employment
under this  Agreement  and prior to the  termination  of  Employee's  employment
hereunder for any other reason,  the Company shall have no further obligation to
the Employee under this Agreement except that the Company shall pay

                                                                               7

<PAGE>

the Employee his salary and Performance Bonus through and including the last day
of the  calendar  month in which  the  Employee  is  determined  to be  disabled
permanently.

         9. No Assignments.

                  (a) This Agreement is personal to each of the parties  hereof,
and  neither  party may  assign or  delegate  any of its  rights or  obligations
hereunder  without  first  obtaining  the  written  consent of the other  party;
provided,  however,  that if the Company  merges or  consolidates  into  another
entity  controlled  by it or any  affiliate  of the  Company,  or enters  into a
reorganization  transaction in which the shareholders of the Company immediately
prior  to any  such  transaction  become  the  shareholders  or  members  of the
resulting  entity,  then this  Agreement  shall be transferred to such resulting
entity.

                  (b) This  Agreement  and all rights of the Employee  hereunder
shall inure to the benefit of and be enforceable by the Employee's  personal and
legal   representatives,    executors,   administrators,    successors,   heirs,
distributees,  devisees  and  legatees.  If the  Employee  should  die while any
amounts  would still be payable to the  Employee  hereunder  if the Employee had
continued to live, all such amounts,  unless otherwise provided herein, shall be
paid in accordance  with the terms of this Agreement to the Employee's  devisee,
legatee or other  designee or if there is no such  designee,  to the  Employee's
estate.

         10. Notice.

                  For the  purposes  of this  Agreement,  notices  and all other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed to have been duly given when

                                                                               8

<PAGE>

personally  delivered  or sent by  certified  mail,  return  receipt  requested,
postage  prepaid,  addressed to the last known  respective  address of the party
hereto  (provided  that all  notices to the  Company  shall be  directed  to the
attention  of the Chief  Executive  Officer  of the  Company  with a copy to the
Secretary  of such entity and  provided  further  that a copy of any such notice
shall be delivered or sent to Margo Caribe,  Inc. Call Box 1370, Dorado,  Puerto
Rico, 00646-1370 Attn: J. Fernando Rodriguez, or to such other address as either
party may have furnished to the other in writing in accordance herewith.

         11. Amendments.

                  No amendments or additions to this Agreement  shall be binding
unless in  writing  and  signed  by both  parties,  except  as herein  otherwise
provided.

         12. Paragraph Headings.

                  The  paragraph  headings  used in this  Agreement are included
solely  for  convenience  of  reference  and  shall  not  affect,  or be used in
connection with, the interpretation of this Agreement.

         13. Severability.

                  The provisions of this Agreement shall be deemed severable and
the  invalidity  or  unenforceability  of any  provision  shall not  affect  the
validity or unenforceability of the other provisions hereof.

                                                                               9

<PAGE>

         14. Governing Law.

                  This   Agreement   shall  be  governed  by  the  laws  of  the
Commonwealth of Puerto Rico.

         15. Other Matters.

                  (a) Except as provided in Section  9(b),  any amounts  payable
hereunder  are personal to the Employee and are not  transferable  or assignable
either by the Employee's act or by operation of law, and no assignee, trustee in
bankruptcy,  receiver or other party  whomsoever  shall have any right to demand
any such amounts or any other right with respect thereto.

                  (b) The  Employee  understands  that  payment  of any  amounts
hereunder,  including any bonus,  is not held or set aside in trust and that (1)
the Company may seek to retain, offset, attach or similarly place a lien on such
funds in circumstances  where the Employee has been discharged for cause and, in
addition,  shall  be  entitled  to do so for  (x)  malfeasance  damaging  to the
Company, (y) conversion by the Employee of an opportunity of the Company, or (z)
a  violation  of the  Company's  conflict of  interest  policy,  in each case as
determined  by  arbitration  as provided  hereinafter,  and (2) in the event the
Company  is  unable  to  make  any  payment  under  this  Agreement  because  of
receivership,  insolvency,  bankruptcy  or similar  status or  proceedings,  the
Employee will be treated as a general unsecured  creditor of the Company and may
be entitled to no priority under applicable law with respect to such payments.

                                                                              10

<PAGE>

         16. Arbitration.

                  Any dispute or controversy arising under or in connection with
this Agreement shall be settled  exclusively by arbitration in San Juan,  Puerto
Rico, in accordance with the rules of the American Arbitration  Association then
in effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.

         17. Execution in Counterparts.

                  This  Agreement may be executed in any number of  counterparts
and by the  parties  hereto  in  separate  counterparts,  each of which  when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
day and year first above written.

         SECTION 16 OF THIS AGREEMENT CONTAINS A BINDING  ARBITRATION  PROVISION
WHICH MAY BE ENFORCED BY THE PARTIES.

                                             Margo Caribe, Inc.

                                       By: /s/ J. Fernando Rodriguez
                                           -------------------------------
                                              J. Fernando Rodriguez
                                              President and Chief Operating
                                              Officer

                                              EMPLOYEE

                                             /s/ Tulio Figueroa
                                             --------------------------------
                                              Tulio Figueroa

                                                                              11Exhibit 10.1

 

CONFIDENTIAL INFORMATION
CONTAINED IN THIS EXHIBIT HAS BEEN OMITTED FROM PUBLIC FILING PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND
EXCHANGE COMMISSION.  THE OMITTED
INFORMATION, WHICH APPEARS ON 21 PAGES OF THIS EXHIBIT AND HAS BEEN IDENTIFIED
WITH THE SYMBOL “****,” HAS BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.

 

United Contract No. 163798

 

 

United Express® Agreement

 

between

 

United Air Lines, Inc.

 

and

 

SkyWest Airlines, Inc.

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE

  	
   

  	
  TITLE

  	 

	
   

  	
   

  	
   

  	 

	
  I.

  	
  DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  II.

  	
  SCOPE, TERM, AND CONDITIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  SCOPE

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  TERM

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  CONDITIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  BANKRUPTCY PROVISION FOR SKYWEST UNITED
  EXPRESS AGREEMENT

  
	
   

  	
   

  	
   

  
	
  III.

  	
  SUPPORT SERVICES AND FACILITIES

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  GENERAL

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  SPECIAL SUPPORT SERVICES

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  COMMUNICATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  RESERVATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  OPERATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  F.

  	
  STATION SUPPORT SERVICES

  
	
   

  	
   

  	
   

  
	
   

  	
  G.

  	
  TARIFFS AND SCHEDULE PUBLICATION

  
	
   

  	
   

  	
   

  
	
   

  	
  H.

  	
  SALES SETTLEMENT

  
	
   

  	
   

  	
   

  
	
   

  	
  I.

  	
  ADVERTISING AND PROMOTIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  J.

  	
  AUTOMATION

  
	
   

  	
   

  	
   

  
	
   

  	
  K.

  	
  OTHER
  SUPPLIES

  
	
   

  	
   

  	
   

  
	
   

  	
  L.

  	
  CONTRACTOR ASSISTANCE

  
	
   

  	
   

  	
   

  
	
  IV.

  	
  AIR SERVICES TO BE PROVIDED BY CONTRACTOR

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  AIRCRAFT TO BE USED

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  SCHEDULES AND CHARTERS TO BE OPERATED BY
  CONTRACTOR

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  INVENTORY

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  FLIGHT CREWS TO BE USED

  
						

 

i

 

	
   

  	
  E.

  	
  INFLIGHT
  SALES

  
	
   

  	
   

  	
   

  
	
  V

  	
  OPERATING RESTRICTIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  UNITED EXPRESS OPERATIONS ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  NO OPERATION OUTSIDE AGREEMENT

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  SEVERABILITY AND REMEDY

  
	
   

  	
   

  	
   

  
	
  VI.

  	
  LICENSE

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  GRANT OF LICENSE

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  TERMS AND CONDITIONS GOVERNING LICENSE

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  INFRINGEMENT

  
	
   

  	
   

  	
   

  
	
  VII.

  	
  ADDITIONAL UNDERTAKINGS

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  BULK
  PURCHASES

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  FUEL

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  PURCHASE BY UNITED OF PASS THROUGH COST
  ITEMS

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  UNIFORMS

  
	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  PASSES AND REDUCED RATE TRAVEL

  
	
   

  	
   

  	
   

  
	
   

  	
  F.

  	
  SIGNAGE

  
	
   

  	
   

  	
   

  
	
   

  	
  G.

  	
  ENVIRONMENTAL

  
	
   

  	
   

  	
   

  
	
  VIII.

  	
  RATES PAYABLE TO CONTRACTOR

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  RATES

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  MARKUP

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  OPERATING GOALS

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  WIRE TRANSFER AND RECONCILIATION

  
	
   

  	
   

  	
   

  
	
  IX.

  	
  FEES PAYABLE TO UNITED

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  RETROACTIVITY PAYMENTS

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  PROGRAM
  FEES

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  PAYMENT

  

 

ii

 

	
   

  	
  D.

  	
  ADDITIONAL PERSONNEL

  
	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  GOVERNMENT ASSISTANCE

  
	
   

  	
   

  	
   

  
	
  X.

  	
  MAINTENANCE AND FUELING

  
	
   

  	
   

  	
   

  
	
  XI.

  	
  U.S.
  MAIL

  
	
   

  	
   

  	
   

  
	
  XII.

  	
  INSURANCE

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  INSURANCE TYPES

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  30-DAY
  NOTICE

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  ALTERATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  FAILURE TO MAINTAIN INSURANCE

  
	
   

  	
   

  	
   

  
	
  XIII.

  	
  LIABILITY AND INDEMNIFICATION

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  EMPLOYER’S LIABILITY AND WORKERS’
  COMPENSATION

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  INDEMNIFICATION BY CONTRACTOR

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  INDEMNIFICATION BY UNITED

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  CONTRACTOR’S SUPPLIES LIABILITY

  
	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  INDEMNITY FOR INFORMATION

  
	
   

  	
   

  	
   

  
	
   

  	
  F.

  	
  UNITED DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  XIV.

  	
  REPORTS

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  CLOSE-OUT ENTRIES

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  BOARDING INFORMATION

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  OPERATING PERFORMANCE

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  INSPECTION

  
	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  FINANCIAL STATEMENTS

  
	
   

  	
   

  	
   

  
	
   

  	
  F.

  	
  BENCHMARKING

  
	
   

  	
   

  	
   

  
	
   

  	
  G.

  	
  GOVERNMENT FILINGS

  
	
   

  	
   

  	
   

  
	
   

  	
  H.

  	
  COPY OF GOVERNMENT REPORTS

  

 

iii

 

	
  XV.

  	
  INDEPENDENT CONTRACTORS AND UNAUTHORIZED OBLIGATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  INDEPENDENT CONTRACTORS

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  EMPLOYEES

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  UNAUTHORIZED OBLIGATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  CONTRACTOR OPERATED FLIGHTS

  
	
   

  	
   

  	
   

  
	
  XVI.

  	
  DEFAULT AND TERMINATION

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  OPERATIONS DEFAULT

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  COVENANT DEFAULT

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  DEFAULT BY CONTRACTOR

  
	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  SIMILAR AGREEMENTS

  
	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  NON-COMPLIANCE WITH STANDARDS

  
	
   

  	
   

  	
   

  
	
   

  	
  F.

  	
  CONSEQUENCES OF TERMINATION

  
	
   

  	
   

  	
   

  
	
   

  	
  G.

  	
  UNITED’S LIQUIDATED DAMAGES

  
	
   

  	
   

  	
   

  
	
   

  	
  H.

  	
  RESTRICTED ACTIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  I.

  	
  CALL
  OPTION

  
	
   

  	
   

  	
   

  
	
  XVII.

  	
  ASSIGNMENT, MERGER AND ACQUISITION

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  ASSIGNMENT

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  MERGER

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  ACQUISITION

  
	
   

  	
   

  	
   

  
	
  XVIII.

  	
  CHANGE
  OF LAW

  
	
   

  	
   

  	
   

  
	
  XIX.

  	
  TAXES, PERMITS AND LICENSES

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  TRANSACTION TAXES

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  PAYROLL
  TAXES

  
	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  PERMITS AND LICENSES

  
	
   

  	
   

  	
   

  
	
  XX.

  	
  REVIEW

  
	
   

  	
   

  	
   

  
	
  XXI.

  	
  JURISDICTION

  

 

iv

 

	
  XXII.

  	
  NOTICES

  
	
   

  	
   

  
	
  XXIII.

  	
  APPROVALS AND WAIVERS

  
	
   

  	
   

  
	
  XXIV.

  	
  GOVERNING
  LAW

  
	
   

  	
   

  
	
  XXV.

  	
  CUMULATIVE REMEDIES

  
	
   

  	
   

  
	
  XXVI.

  	
  FORCE
  MAJEURE

  
	
   

  	
   

  
	
   

  	
  A.

  	
  FORCE
  MAJEURE

  
	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  EFFECT ON MARKUP

  
	
   

  	
   

  
	
  XXVII.

  	
  SEVERABILITY AND CONSTRUCTION

  
	
   

  	
   

  
	
  XXVIII.

  	
  ACKNOWLEDGMENT

  
	
   

  	
   

  
	
  XXIX.

  	
  CONFIDENTIALITY

  
	
   

  	
   

  
	
  XXX.

  	
  RELATED AND THIRD PARTY AGREEMENTS

  
	
   

  	
   

  
	
  XXXI.

  	
  ENTIRE
  AGREEMENT

  
	
   

  	
   

  
	
  XXXII.

  	
  REFERENCES TO TIME PERIODS

  
	
   

  	
   

  
	
  XXXIII.

  	
  SIGNATURE

  
	
   

  	
   

  
	
  APPENDIX A

  
	
   

  
	
  APPENDIX B

  
	
   

  
	
  APPENDIX C

  
	
   

  
	
  APPENDIX D

  
	
   

  
	
  APPENDIX E

  
	
   

  
	
  APPENDIX F

  
	
   

  
	
  APPENDIX G

  
	
   

  
	
  APPENDIX H

  
	
   

  
	
  APPENDIX I

  
	
   

  
	
  APPENDIX J

  
	
   

  
	
  APPENDIX K

  
	
   

  
	
  APPENDIX L

  
	
   

  
	
  APPENDIX M

  

 

v

 

UNITED EXPRESSÒ
AGREEMENT

 

This
Agreement, dated as of July 31, 2003, is between UNITED AIR LINES, INC., a
Delaware corporation, with its worldwide headquarters located at 1200 E.
Algonquin Road, Elk Grove Township, IL 60007 (“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 holding a Certificate of Public Convenience and necessity
issued pursuant to the Federal Aviation Act of 1958 authorizing it to engage in
air transportation of persons and property and provides high frequency,
short-haul scheduled service in particular regions;

 

WHEREAS,
Contractor is willing to cause one or more of its wholly-owned subsidiaries to
perform service on behalf of United;

 

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
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 uneconomical for United to operate such services;

 

WHEREAS,
United will provide Contractor, pursuant to the terms of this Agreement, a
non-exclusive license to use one or more of the United Marks in connection with
Contractor’s United Express Services.

 

NOW,
THEREFORE, in consideration of the foregoing premises, mutual covenants and
obligations hereinafter contained, the parties agree as follows:

 

I.                                         DEFINITIONS

 

A.            “Aircraft Used in United Express Service”

 

means the type
and amount of aircraft set forth in Appendix B that are used by Contractor in
delivering Contractor’s United Express Services.

 

B.            “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.

 

1

 

C.            “Carrier Controlled Costs”

 

means
non-station carrier controlled costs and station carrier controlled costs, both
as defined on Appendix E.

 

D.            “Contractor Location”

 

means any
airport terminal facility where Contractor provides Contractor’s United Express
Services pursuant to this Agreement and Contractor, but not United, 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).

 

E.              “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).

 

F.              “Current Aircraft”

 

means for
CRJ-200s, those thirty five (35) aircraft with the oldest lease dates, which
were in the Contractor’s United fleet as of approximately April, 2004 and for
Turboprops, all aircraft in Contractor’s United fleet as of the Effective Date,
as set forth in Appendix B.

 

G.            “Default”

 

means,
individually or collectively, a Section A Default, a Section B Default,
a Section C Default, a Section D Default, or a Section E Default,
each as defined in Article XVI.

 

H.            “Designated Personnel”

 

means all of
Contractor’s employees who provide Contractor’s United Express Services in job
classifications requiring direct public contact, including without limitation,
all  customer service, ramp service,
pilots, and flight attendants.

 

I.                 “Effective Date”

 

means
January 1, 2003.

 

J.              “Environmental Laws”

 

means all
federal, state, local and foreign laws and regulations, and airport rules,
regulations and policies relating to pollution or the environment, including,
without limitation, laws,  regulations
and rules relating to emissions to the air, discharges to surface and
subsurface waters, safe drinking water, the storage, release, disposal,
transport or handling of chemicals, pollutants, contaminants, wastes, hazardous
substances, petroleum and petroleum products, and aircraft noise, vibration,
exhaust and overflight.

 

2

 

K.            “Growth Aircraft”

 

means those
types and amounts of aircraft that are added to Contractor’s Aircraft Used in
United Express Service starting in May 2003., as set forth in Appendix B.

 

L.             “Ground Handling”

 

means
providing services in accordance with United Express Service Standards relating
to one or more of the following: (1) customer service ticket counter, (2)
customer service gates (3) ground handling ramp, including mail and freight,
(4) receipt and dispatch.

 

M.          “Joint Location”

 

means any
airport terminal where Contractor’s United Express Services are provided and
both United and Contractor have employees stationed.

 

N.            “Marks” or “United Marks”

 

shall have the
meaning set forth in the recitals of this Agreement.

 

O.           “Pass Through Costs”

 

means
non-station pass-through costs and station pass-through costs, both as defined
on 

Appendix
E.

 

P.             “Point to Point Aircraft”

 

means turboprop aircraft operated by Contractor that fly between the
Point to Point City Pairs set forth in Appendix L and as mutually agreed by
both parties according to Article IV.A.1.a.iv.

 

Q.           “Program Fees”

 

shall have the
meaning set forth in Article IX

 

R.            “United Rates”

 

shall have the
meanings set forth in Article VIII

 

S.             “Related Agreements”

 

shall have the
meaning set forth in Article XXX

 

T.             “Revenue Passenger”

 

means each
passenger traveling on aircraft operated by 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 of Contractor and (ii) is issued pursuant
to or in connection with a published or unpublished fare.  Passengers traveling on a purchased ticket
(including ID50 airline industry reduced rate tickets), wholesaler voucher, or
voucher issued as denied boarding compensation, shall be considered to be
Revenue Passengers.  In addition, each
passenger traveling on a free ticket as (or as part of) a Mileage PlusÒ
award or a free ticket issued in conjunction with a two-for-one fare or other
similar fare established by United, shall be considered  a Revenue

 

3

 

Passenger.  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 any 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.   Each Revenue Passenger shall be considered
when calculating any monthly incentive payment.

 

U.             “Supplemental Aircraft” or “Supplemental
Growth Aircraft”

 

means those
CRJ-200 aircraft newly added to Contractor’s Aircraft Used in United Express
starting in December 2003

 

V.            “Support Services”

 

means those
activities set forth in Article III which are related to the operation of
airline services except during flight.

 

W.        “Termination Date”

 

shall mean,
with respect to the Article II specified aircraft types and ground
operations, the applicable expiration, removal, or cancellation dates set forth
in Article II.

 

X.            “United Express Carrier”

 

means an air
carrier that has been contractually given a non-exclusive license to use one or
more of the  United Marks in connection
with providing air transportation service to United pursuant to an agreement
between United and such air carrier.

 

Y.             “United Express Best Practice Operating
Performance”

 

means for each
of the four operating metrics outlined in Article VIII Paragraph C, the straight
average of the twelve operating performance metrics generated by taking the
best performing metric of all United Express Carriers in each month over a
calendar year (whether the number be the highest or lowest) .

 

Z.             “United Express Service Standards” or “Service
Standards”

 

means the
procedures prescribed by United that describe United’s approved standards,
policies, requirements and procedures for various activities relating to the
provision of air transportation services.  
These Service Standards are provided in Appendix I.

 

AA. “United Location”

 

means any
airport terminal facility where Contractor and United both have operations and
United, but not Contractor, has employees stationed.

 

4

 

BB.   “United’s Actual Cost”

 

means any and
all costs  and expenses actually
incurred by United, not including any markup by United, any allocation of
administrative or overhead expenses, 
and any administrative service charge imposed by United.

 

II.                                     SCOPE, TERM, AND CONDITIONS

 

A.            SCOPE

 

The scope of
this Agreement extends to Contractor’s United Express Services between the city
pairs authorized by United from time to time using the type and amount of
Contractor’s aircraft that are authorized by United from time to time.

 

B.            TERM

 

This Agreement
is effective as of the Effective Date and shall terminate with respect to
the  particular aircraft and number of
aircraft, and Ground Handling for those respective aircraft, as set forth
below:

 

1.               Regional Jets Term. 
Regional Jet (“RJ”) Current Aircraft and RJ Growth Aircraft,
including any options thereon executed by United, will be divided into three
(3) tranches of 28, 28 and 29 aircraft, respectively (“RJ Tranches”).  The term of this Agreement for (a) the first
RJ Tranche, which shall consist of the 28 RJ aircraft having the earliest lease
expiration dates, will expire ****, (b) the second RJ Tranche of 28 RJ aircraft
will expire on ****, and (c) the third RJ Tranche, which shall consist of the
29 RJ aircraft having the latest lease expiration dates, will expire on
****.  Upon expiration of this Agreement
for each RJ Tranche, and if United and Contractor do not thereupon extend the
term of this Agreement  for such RJ
Tranche, then ramp down of the aircraft for such RJ Tranche out of the terms
and conditions of this Agreement will take place gradually over the one year
following termination, in equal increments of aircraft in the RJ aircraft
tranche per month.

 

2.               TurboProps Term.  Subject to the following provisos of this paragraph, this
Agreement shall expire for each turboprop aircraft (“TurboProp”) at the end of
Contractor’s current individual lease term for each such aircraft, and
Contractor will ensure that a fleet of turboprops is maintained, as outlined in
Appendix B.  However, in addition to the
foregoing, Contractor will continue to operate turboprops incremental to
Appendix B as mutually agreed in the existing point to point markets as
outlined in this Agreement.  Subject to
the foregoing, the term of this Agreement on all turboprops will terminate on
the earlier of their respective individual lease terms and ****.

 

3.               Ground Operations Term.  The term of this Agreement for all Ground
Handling (the “Ground Operations Term”) shall terminate two (2) years after the
Effective Date unless the parties agree to one or more extensions; provided,
however, that after the first 12 months of the Ground Operations Term, United
may terminate the Ground Operations Term upon 90 day’s written notice given at
any time during the term of this Agreement, such termination to be applicable,
at United’s discretion, to all Ground Handling, Ground Handling at one or more
stations, or specific categories of Ground Handling at one or more stations.

 

C.            CONDITIONS

 

1.               Renewal Option.  Upon expiration of this Agreement, for each RJ Tranche and for
each TurboProp, United may renew the term hereof for each RJ Tranche aircraft
and for each TurboProp for an

 

5

 

additional term of five (5)
years, on the then existing terms and conditions, upon one(1) year’s prior
written notice prior to the end of such term.

 

2.               Pre- and Post-Petition.  Contractor and United agree to waive all
pre- and post-petition claims related to the United Express Agreement between
Contractor and United in effect before the Effective Date of this Agreement,
including any and all revenue related to prorate markets.

 

3.               Pilot
Consideration for 70-seat
Regional Jet Employment for Furloughed United Pilots.  Contractor acknowledges that United has been required to furlough
some of its pilots over the past several years.  As additional consideration, Contractor has agreed to provisions
outlined in Letter Number 03-22, “Job Opportunities for Furloughed United
Pilots” between United and the Air Line Pilot Association dated August 21,
2003, the express terms of which are incorporated herein by reference. United
retains the right to recall furloughed pilots hired by Contractor. Should
United decide to recall aforementioned pilots within 18 months of any pilot’s
Contractor hire date, United will reimburse Contractor for Contractor’s pilot
prorated training costs of **** per CRJ pilot and **** per turboprop pilot,
prorated by the number of months remaining until that pilot’s eighteen (18)
month anniversary as compared to the full cost over eighteen (18) months. Each
such reimbursement shall be made, through the Airline Clearing House, by the
end of the calendar month during which such pilot is recalled by United.

 

D.            BANKRUPTCY
PROVISION FOR SKYWEST UNITED EXPRESS AGREEMENT

 

Except as
provided in this paragraph, United’s obligations under this Agreement shall be
allowable post-petition, administrative expense obligations of United’s
bankruptcy estate under Section 503 of the Bankruptcy Code. If United rejects
or breaches this Agreement, Contractor shall have, subject to objection as
provided below, allowed post-petition administrative expense claims as provided
in the Bankruptcy Code.  In addition,
and notwithstanding the foregoing, this Agreement shall be terminated upon the
happening of either of the following events: (i) United fails to confirm a plan
of reorganization (the “Plan”) in its Chapter 11 bankruptcy case (the “Case”)
under which United continues to operate as an airline, and thereafter discontinues
all flight operations, or (ii) the Case is dismissed or converted to a case
under Chapter 7 of the Bankruptcy Code and as a result thereof United suspends
or discontinues flight operations.  In
the event of such termination, United shall be deemed to have breached the
Agreement as of the Effective Date of such termination (the “Breach Date”) and
Contractor shall have, subject to objection as provided below, allowed
administrative expense claims (the “Claims”) (a) for any obligations of United
under this Agreement arising before the Breach Date, provided, however,
that this administrative expense claim shall be limited to actual services
rendered at the contract rate and shall not include any claim for future
damages or lost profits resulting from such termination, (b) for any amounts,
contractually obligated as of the Breach Date, paid by Contractor for which
Contractor has not been previously reimbursed by United (i) to United Express
passengers, (ii) under interline and clearinghouse agreements and (iii) to
Contractor’s United Express employees and (c) for any sums Contractor is liable
to third parties in connection with the manufacture, purchase, lease or
financing of aircraft undertaken as part of Contractor’s commitments under this
Agreement and maintenance equipment and spare parts associated with such
aircraft , including, but not limited to, deposits, down payments, prepayments
and financing and similar fees; provided, however, that
Contractor shall take commercially reasonable actions to mitigate its damages
from termination of this Agreement.  All
of Contractor’s obligations to United under the Agreement shall immediately
terminate as of the Breach Date.   Any
party in interest, including United, shall retain the right, during the normal
claims objection process, to object to the amount (but not the administrative
claim character or priority) of any claim filed by Contractor.  In addition, subject to Contractor’s rights
of setoff and recoupment under Section 553 of the Bankruptcy Code,
Contractor

 

6

 

agrees to refund to United any
amounts prepaid on account of services to be performed after the Breach Date.

 

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 to Contractor pursuant to
this Agreement, and as summarized in and in accordance with Appendix C
(Ground Handling) and Appendix D (Contractor Support Services),
United agrees that it or its designees will provide and Contractor agrees to
use the following services and facilities for Contractor’s United Express
Services,  whether provided by United or
its designee:

 

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
by United in Apollo Services, the Official Airline Guide (“OAG”) and all other
computerized reservations systems where United and United Express flights
appear, 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 Contractor’s United Express Services, Contractor will only use Apollo
Services, including United’s automated check-in, United’s ticketing (including
United’s electronic ticketing service, E-TicketSM) and boarding passes, advance
seat reservation system and United’s automated baggage tag printing and baggage
tracing systems.

 

3.               Participating in United’s Mileage PlusÒ
Program. At United’s discretion, all passengers with paid tickets 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 or any other frequent flyer program
as specifically approved by United. 
Contractor shall not participate in the frequent traveler program of any
other carrier in connection with Contractor’s United Express Services, unless
otherwise mutually agreed in advance and in writing between United and
Contractor.  United has sole discretion
concerning decisions relating to accrual or redemption of award travel on
Contractor’s United Express flights.  In
addition, United will bear the cost of providing redemption travel and receive
all revenue and benefits from the sale of frequent flyer credits (e.g. miles)
related to Contractor’s United Express service.

 

7

 

4.               Use of United Ticket Stock, Baggage Tags and Ticket
Wallets. In selling air transportation of passengers and property,
both on-line and off-line, Contractor will use only United passenger ticket
stock (except for e-tickets), ticket wallets and baggage tags in connection
with Contractor’s United Express Services. 
Unless otherwise agreed, United will provide to Contractor all United
passenger ticket stock, United airway bills, United cargo bills and other
shipping documentation for all Contractor’s United Express Services, and United
will provide to Contractor ticket wallets and baggage tags for Joint Locations
and United Locations only; provided that such quantities do not exceed
reasonable levels. Contractor shall reimburse United, at United’s Actual Cost,
for all documentation requested by Contractor. Ticket wallets, baggage tags and
other passenger processing documents approved by United will be acquired by
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 60 days’ prior written notice to Contractor
by United.

 

5.               Credit Card Sales and Rejects; 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 be responsible
for all credit card discount fees and credit card reject fees for tickets and
vouchers written by United and Contractor for passage or freight in connection
with Contractor’s United Express Services; provided that Contractor complies
with United’s 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 and credit card rejects.  Contractor will take appropriate legal and
disciplinary action against any Contractor employee, who fraudulently abuses
United’s Customer Service Policies and Procedures.

 

6.               Denied Boarding.  In the event of voluntary or involuntary denied boardings,
Contractor shall make a good faith effort to rebook United Express customers on
the next available flight operated by one of United’s code share partners, such
as US Airways, or a Star Alliance partner, provided that the routing is logical
and does not materially inconvenience the customer.

 

7.               Contractor is required to provide to United,
upon written request from United, specific station information regarding the
weight restrictions and aircraft limitations, which could result in denied
boardings.  Such requests shall be made
by United’s Revenue Management Department (WHQIM) and responses from Contractor
shall be provided within two (2) weeks of such request.  However, United reserves the right to bill
Contractor, and Contractor shall reimburse United, for denied boarding expenses
resulting from weight restrictions resulting from Contractor’s failure to
provide the requested information within the prescribed time period, or other
operational circumstances caused directly by Contractor’s failure to respond to
such requests in a timely manner.

 

8.               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 directly
by United.

 

9.               Customer Service Training. On a schedule,
at a place, to an extent, for a number of persons, and in a manner determined
by United, United will provide training for Contractor’s instructors that
United deems sufficient to permit Contractor’s instructors to be able to
provide and train others in the delivery of customer services for Contractor’s
United Express Services.  Contractor
will have no

 

8

 

obligation to pay United for
such training.  Contractor agrees to
adhere to the United Express Service Standards as outlined in Appendix I for
all Customer Service of d Express flights.

 

C.            COMMUNICATIONS

 

1.               Telephone and Data Lines. United, at its
expense, will provide and maintain or arrange for the provision of reservations
telephone lines connecting the cities served by Contractor in connection with
Contractor’s United Express Services with United’s Reservations Centers.  United, at its expense, 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, at its expense, will also provide
and arrange for Contractor’s SOC Communication with Apollo Services.  United will determine, at its sole
discretion, the necessity and feasibility of installing all such communications
equipment.  All other telephone
expenses, such as Contractor’s long distance expenses shall be borne by
Contractor as a station operating expense.

 

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, at its expense, the following reservations functions for Contractor’s
United Express Services:

 

a.               Telephones for
answering reservations calls, providing information regarding schedules and
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, re-accommodating and notifying passengers of confirmation on
United, Contractor and other airlines and clearance from wait-lists.

 

e.               Reviewing and
processing inbound prepaid ticket advices.

 

f.                 Providing
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, which are to be provided by United:

 

a.               Establishment,
maintenance, display and change of passenger name records (“PNRs”).

 

b.              Confirmation of
passenger reservations against seat inventory on Contractor’s United Express
Services and United’s scheduled flights and on other airlines  for whom flight availability is maintained
in Apollo Services.

 

9

 

c.               Maintenance of seat
availability for Contractor’s United Express Services scheduled flights.

 

d.              Transmission of
availability status messages (“AVS”) for Contractor’s United Express Services
scheduled flights to other airlines with which United has an agreement in
accordance with Standard Industry Passenger Procedures (“SIPP”).

 

e.               Process inbound
reservations messages received from ARINC, Incorporated. addressed to
Contractor.

 

f.                 Routing of all
inbound messages received from ARINC, other than as stated in Article III.D.2.d
above, to a computer message queue.

 

3.               CRS Fees. Computer Reservations System fees
(“CRS
Fees”) charged to Contractor as a result of passengers booked on
Contractor’s United Express will be passed through to United without markup and
subject to invoice audit by United.  As
soon as possible, but at United’s reasonable discretion, United shall pay such
CRS fees on behalf of Contractor.

 

4.               Travel Agent Commissions. United will be
responsible for all travel agent commissions charged in connection with the
sale of tickets or other services on Contractor’s United Express Services.

 

E.              OPERATIONS

 

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  experiences an irregularity.  Specifically, this includes updating the
out, off, on and in times for the aircraft within 15 minutes of the occurrence
of each event.  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
delayed flights, Contractor shall provide updates to Customers and Apollo in no
less than 15-minute intervals. For purposes of this Agreement, such scheduled
and actual departure and arrival and irregularity information shall be known as
“FLIFO.”  United will notify Contractor
in writing as soon as practicable after United determines that Contractor has
failed to update FLIFO in a timely and accurate manner.  If Contractor fails ten (10) times in any
consecutive thirty (30) day period (the “FLIFO Threshold”) 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
during such thirty (30) day period regardless of who ground handles
Contractor’s United Express.  United
agrees to bill Contractor any amount owed under this Section within
ninety  (90) days after the end of each
calendar ninety (90) day period during which Contractor has exceeded the FLIFO
Threshold.  Such damages shall be
United’s exclusive remedy for Contractor’s non-compliance with this paragraph
and may be collected by setoffs against other amounts owed by United to Contractor
hereunder.

 

2.               No Flight Dispatch Duty. 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, the term “dispatch” will
include, but will not be limited to, all planning of aircraft itineraries and
routings, fueling and flight release.

 

10

 

3.               Compliance with Statutes. Contractor
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 Department of Transportation
(“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 directly or indirectly, with respect to
such matters except as otherwise expressly provided herein.  Contractor will comply during the term of
this Agreement with the United/United Express Safety Standards, as described on
Appendix
H.

 

4.               Weather Information Service. From time to
time and upon the request of Contractor or its flight crews, United will
furnish Contractor’s flight crews with such U.S. Weather Bureau information or
data as may be available to United; provided that (i) 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) any and
all costs or expenses associated with such weather information or data are
Carrier Controlled Costs and will be paid by Contractor.

 

5.               Flight Interruption Manifests.  Contractor shall use United FIMS to rebook
customers who are denied boarding on any United Express flight.  Contractor’s Customer Service employees
shall rebook the customer based on the ticketed class of service.  If Contractor’s employees upgrade the
customer inappropriately, United will bill Contractor for the incremental cost
of the upgrade.   Contractor shall use
reasonable best efforts to rebook customers on United code share (e.g., US
Airways) or Star Alliance partner flights provided it does not materially
inconvenience the passenger.

 

6.               Diversions.  United will pay Contractor under the terms of this Agreement for
all Contractor United Express diverted flights that are completed within four
hours of the scheduled arrival time. 
The cost of busing will be borne by the Contractor at all times and is
not reimbursable by United.   Contractor
will use its best efforts to assure that no bus segment exceeds 120 air miles
as defined in the Apollo mileage database. 
If a diverted flight is not completed within such four hour time frame,
United will pay Contractor for the originally scheduled departure provided that
both of the following conditions apply (i) the diversion is outside of the
control of Contractor and (ii)  the
destination airport was open for FAR Part 121 flights at the time of departure
and forecasted to be open at the time of arrival.  Contractor will pay for any repositioning costs, which costs
shall not be reimbursable by United. Upon request by United, Contractor and
United agree to meet to discuss opportunities to reduce the number of
Contractor diversions and costs associated with such diversions.

 

7.               Ground Delay Program. Except for those
flights operated as a Point to Point aircraft, Contractor will participate in
United’s ground delay program, which stipulates that United may request
Contractor to cancel, and Contractor shall cancel, flights to free ATC slots at
a hub when the FAA or United’s Station Control Center has initiated a Ground
Delay Program (“GDP”).  For each flight
cancellation requested by United as part of the GDP, United shall pay
Contractor the amount that it would otherwise pay had such flight not been
canceled, reduced by fuel maintenance and landing fee costs that would have
otherwise been incurred by completing the canceled flight.  United will reimburse Contractor for the following
costs per rates forth in Appendix E: 
(1) Pilots, (2) Flight Attendants, (3) Training, (5) RON-Remain Over
Night, (6) Interrupted trip expense, (8) Crew scheduling, (9) Dispatch/Flight
operations center.  All payments will be
based upon the scheduled block hours and departures for such scheduled
flights.  No payments will be made for
Pass-Through rates in these categories. 
The Ground

 

11

 

Delay Program will not affect
payments in the following three reimbursement categories:  Fixed & Overhead (Aircraft), Fixed &
Overhead (non-Aircraft) and One-Time Costs.

 

8.               Significantly Delayed Flights. In the event
that Contractor operates more than 10 flights a month at (a) more than three
(3) hours late from the scheduled departure time with a revenue passenger load
factor of less than 25%, OR, (b) more than two (2) hours late with zero revenue
passengers, Contractor shall not be reimbursed for such flight (e.g. flight
segment will be excluded from the monthly operating statistics used in
calculating payments to Contractor). 
However, the exclusion from operating statistics for a flight made under
subparagraph (a) above, shall not apply for those flights that are requested to
be flown by United or must be repositioned 
for scheduled service .

 

9.               Station Operations Center (“SOC”). At
United’s request, Contractor will provide adequate staffing in the United
Airlines SOC of each designated hub city. 
If the sum of the number of departures ground handled and flown in any
single hub city exceeds a monthly average of 100 per day, Contractor will, at
United’s request, provide a full-time SOC representative.  Such staffing will be provided during all
normal hours of operation.  If the sum
of the number of daily departures ground handled and flown does not exceed 100
per day, then Contractor will provide a point of contact and make a
representative available on an “as needed” basis.

 

F.              STATION SUPPORT SERVICES

 

1.               United will provide or cause to be
provided to Contractor, at United’s expense, certain support services at the
United Locations and Joint Locations as set forth on Appendix C.  United shall have the right to add, delete
or otherwise modify Appendix C after one year from the
Effective Date if United provides Contractor with ninety days’ prior written
notice.  United agrees to reimburse
Contractor only for any incremental facility related expenses incurred by
Contractor as a result of a United requested location change under this
paragraph 1.  Such incremental facility
expenses will be Pass Through Costs to United without markup and will be
reconciled as part of the normal monthly reconciliation of Pass Through
Costs.  At Contractor Locations,
Contractor will provide or cause to be provided at least those services and facilities
set forth in Appendix D.  All such
station support services will be provided as of the Effective Date.

 

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.  United will provide
passengers transportation between this remote facility and the main terminal
where United is located.

 

3.               Contractor agrees to handle Ground
Handling operations for any other United Express Carrier, at United’s
reasonable request.  Contractor will
allow United, another United Express Carrier, or any other 3rd party, to handle
its Ground Handling at any non- hub station at United’s reasonable request.

 

G.            TARIFFS AND SCHEDULE PUBLICATION

 

1.               General.

 

a.               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) and fare/rate descriptions for all

 

12

 

Contractor’s United Express
Services in the city pairs served by Contractor under this Agreement, 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,  rules, and tariffs, and shall
pay for any fines or civil penalties incurred by Contractor as a result of
violations by United thereof, and for the cost of defense of such claims of
violations including the cost of defending or negotiating the terms of a
consent order or decree.

 

b.              For those markets set forth on Appendix L,
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 those markets in a manner consistent with pricing
(including joint fares) established by Contractor, subject to United’s
concurrence that a modification will 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.               United shall be entitled to 100% of the
fares and prorates received by United or Contractor in connection with any
fares attributable to passengers who travel on Contractor’s United Express
Services, except fares attributable to passengers who travel between the city
pairs described on Appendix L.  All passenger fare tariffs published for Contractor’s United
Express Services shall be included as part of United’s tariffs.

 

b.              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 rates with ATPCO.  United may file changes to such fares from time to time with
ATPCO as UA fares.

 

3.               Air Freight and
Mail Rates.

 

a.               For all markets operated by Contractor
under this Agreement, 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 DispatchÔ
(SPD) 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 airfreight
rates for Contractor’s United Express Services shall be included as part of
United’s airfreight 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 serviced by Contractor
pursuant to this Agreement, except those markets described by the city-pairs on
Exhibit L, 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 rates 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 for 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.

 

13

 

c.               United shall be entitled to 100% of the
fares and prorates received by United or Contractor in connection with any
fares attributable to mail or freight shipped on Contractor’s United Express
Services, except for fares and prorates attributable to mail or freight shipped
by Contractor on between the city pairs described on Exhibit L.

 

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 Contractor’s United Express
Services flight 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
by United in the OAG or any successor publication commonly used by the airline
industry for the dissemination of schedule information.  Such notations shall comply with all
applicable regulations of DOT.

 

H.            SALES
SETTLEMENT

 

1.               Payments to United.
Contractor will wire transfer to United an
amount equal to Contractor’s Total Net Sales Receipts collected at all
Contractor Locations.  “Total Net Sales
Receipts” equals total gross sales receipts for all passenger tickets, airway
bills, cargo bills, mail fees, reimbursement for operational denied boarding
and other tickets issued by Contractor for Contractor’s United Express Services
(less refunds thereon paid out by Contractor), collected by Contractor during
the applicable period.  The frequency of
the wire transfer will be once a month, on the first Tuesday of every month,
for all Total Net Sales Receipts collected during the preceding month.  Contractor’s wire transfer will be made by
11:00 a.m. local time, St. George, Utah, to the following bank account:

 

Bank One 

1 Bank One Plaza

Chicago, Illinois 60670

ABA No.:  071000013

Credit To:  United Airlines Special
Account # 51-67795

Reference:  SkyWest

 

Contractor
will also require its employees and agents to forward to United, on a daily
basis, all auditors ticket coupons, airway bills, cargo bills, 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.

 

2.               Set Off Amounts. In addition to the terms of Article VIII
and the other provisions hereof, but subject
to the terms of Article XIII, the
payment for transportation furnished by Contractor may be reduced in order to
set off:

 

a.               amounts owed by Contractor to United
for:

 

i.                  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;

 

ii.               fraudulent, grossly negligent or
erroneous acts of employees of Contractor which cause United to suffer a loss;

 

14

 

iii.            Any Program Fees specified in Article VIII;

 

iv.           the currently effective industry standard
rate of commission settlement under ATC Resolution 5.60 for tickets issued
under such resolution for the markets referenced on Appendix L;

 

v.              unreported sales on United tickets
assigned to Contractor;

 

vi.           refunds for interrupted flights or failures
to carry out Contractor services made on United refund documents; and

 

vii.        any ATPCO tariff filing fee pursuant to Article III.G;

 

b.              Such other adjustments as may be mutually
agreed to by the parties from time to time; and

 

c.               Any other amounts owed by Contractor to
United.

 

United will provide Contractor with supporting documentation for such
intended 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 90 days
after its receipt.  United agrees to
negotiate in good faith with Contractor to resolve all such disputes within 90
days after its receipt of Contractor’s notice to United.

 

3.               Modified
Procedures. United and Contractor by mutual
written agreement may establish alternative or modified passenger sales
procedures to accommodate tickets and exchange orders issued by air carriers
which are not participants in the Airline Clearing House, Inc (“ACH”).

 

4.               Audits. United or an outside 3rd party contracted by 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 pertaining to
the calculation of the Pass Through costs related to Contractor’s United
Express Services; provided that such audits do not unreasonably interfere with
Contractor’s business.

 

I.                 ADVERTISING AND PROMOTIONS

 

1.               Travel Certificate
Program. United will allow Contractor to
accept, and Contractor agrees to accept, United/United Express Amenities,
Promotional Discount(s) and/or Free Travel Certificates on Contractor’s flight
segments, whether or not in conjunction with a United flight segment.

 

2.               Right to Advertise
Using Marks. 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, with no reimbursement from United, 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
those United 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 its prior consent regarding copy, layout and the specific
media plan.  In addition,

 

15

 

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) or any successor
thereto.  Contractor further agrees that
it will not (or cause any third party to) duplicate, copy or otherwise
reproduce any such software or Automation Information or furnish or disclose
any such software or Automation Information 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 shall 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 and upgrading Automation Equipment, so long as the quantity and
quality of Automation Equipment installed at Contractor’s airport locations are
sufficient to permit Contractor to satisfy the standards for Contractor’s
United Express Services under this Agreement. 
Any and all 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’s 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 any Designated
User’s proficiency levels are insufficient for the proper use of the Automated
Equipment or Apollo Services, then Contractor must arrange for such Designated
User to undertake any further training which United determines necessary to
bring such Designated Users to the desired proficiency level.

 

3.               Standards of Use.

 

a.               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, United’s Computer Security

 

16

 

Regulations (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
non-business 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 numbers 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
or the Automation Equipment.  Contractor
will take all precautions necessary to prevent unauthorized operation or use of
Apollo Services and the Automation Equipment.

 

b.              Contractor will not alter or change the
Apollo Services display as provided by United or its affiliate without the
written consent of United. Contractor may not provide Apollo Services or its
database to any other person or entity without the written consent of United.

 

c.               Except as expressly permitted in this
Agreement or other written agreement with United, Contractor will not cause any
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.

 

d.              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.

 

a.               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 perform or attempt to perform
maintenance, repair work, alterations or modifications, of any nature
whatsoever, to the Automation Equipment. 
Contractor will provide free positive space travel on Contractor’s
flights for United’s Computer Terminal Technicians or replacements when such
travel is for the purpose of repairing Apollo Services or any Automation
Equipment.

 

b.              Contractor will reimburse United for the
costs of any such repairs or maintenance attributable to Contractor’s willful
misconduct, gross negligence, or persistent, negligent acts or omissions.

 

c.               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.

 

17

 

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 limitations, 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 limitations, any
errors in reservations availability records), malfunctions or interruption of
service to Apollo Services or the Automation Equipment, including 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.

 

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.

 

K.            OTHER
SUPPLIES

 

Contractor
will pay United for United’s Actual Cost of 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 including; provided, however, that United absorb the cost
of:

 

1.               Baggage tags and ticket
wallets at Joint Locations and United Locations, and

 

2.               Passenger ticket stock,
city timetables, United airway bills, United cargo bills and other shipping
documentation at Contractor Locations, United Locations and Joint Locations.

 

L.             CONTRACTOR ASSISTANCE

 

Contractor
will furnish United with all information in Contractor’s possession or that can
be reasonably produced by Contractor that United may require to carry out the
services and functions contemplated by this Article III.

 

IV.                                AIR SERVICES TO BE
PROVIDED BY CONTRACTOR

 

A.            AIRCRAFT
TO BE USED

 

1.               Aircraft Types. Unless otherwise agreed by United, Contractor will
provide Contractor’s United Express Services, in accordance with its United
Express Schedule as referenced in Article IV.B.1, and as amended from time to time in accordance with
the terms of this Agreement, using the type and amount of aircraft set forth in
Appendix B.  The aircraft will be scheduled, taking into account heavy
scheduled maintenance requirements and the spare ratio indicated in Article IV.A.2 below, unless

 

18

 

otherwise outlined in Appendix B.  Contractor will also provide United Express Services between “Point-to-Point” city pairs, which are
identified in Appendix L, and as
amended from time to time in accordance with the terms of this Agreement.

 

a.               In accordance with
the terms and conditions of this Agreement, Contractor is authorized to fly the
following aircraft under Contractor’s United Express Services:

 

i.                  35 CRJ-200
Current Aircraft;

 

ii.               15 CRJ-200 Growth
Aircraft, which Contractor shall cause to be delivered by December 31,
2003 as per Appendix B;

 

iii.            30 CRJ-700 Growth
Aircraft, which Contractor shall cause to be delivered by June 30, 2005 as
per Appendix B

 

iv.           5 CRJ-200 Supplemental
Aircraft, which Contractor shall cause to be delivered by January 31, 2004
as per Appendix
B.  At any time prior to
August 31st, 2003, Contractor has the right to cancel its
delivery obligation to United of these five aircraft. At any time after
January 1st, 2005, Contractor has the option to terminate its
obligation to fly any or all of these five (5) Supplemental Aircraft provided
it provides United  at least 90 days
written notice, and provided United does not respond to such notice within 15
days of being notified by Contractor that United requires Contractor to
maintain operation of aforementioned aircraft for the life of this Agreement.

 

v.               Turboprop
Aircraft as outlined on Appendix B.  to
expire at the end of Contractor’s lease obligation with respect to each such aircraft
.. Contractor may continue to operate additional TurboProp Aircraft under United
and Contractor’s existing Pro-Rate relationship as mutually agreed by parties.
This agreement on all turboprops (Pro-Rate and United risk TurboProp Aircraft)
is expected to conclude no later ****.

 

vi.           Options on another 87
CRJ-200 aircraft and CRJ-700 aircraft with a mix and delivery schedule to
be agreed by Contractor and United.

 

b.              Any Aircraft Used in
United Express Service by Contractor pursuant to this Article IV.A 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 the
exterior and interior aircraft decor will be provided to Contractor by
United.  Except as provided herein,
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 at Contractor’s sole expense.  In accordance with the technical
specifications referenced in this Article IV.A.1, Contractor will be
responsible for maintaining all of its aircraft.  Contractor is permitted to operate one (1) CRJ-700 from
Contractor’s United Express fleet as a white tail aircraft.  In addition, Contractor is permitted to
operate no more than 10% of all CRJ-200 (50 seat aircraft) in Contractor’s
United Express fleet as a white tail aircraft.

 

c.               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 such aircraft that identifies
Contractor as the operator of the services being provided pursuant to this
Agreement. The use and display of each 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.

 

19

 

d.              Aircraft
Communications Addressing and Reporting System –ACARS.   Contractor
is required to have ACARS on all its United Express fleet with the exception of
those TurboProp Aircraft, that did not have ACARS as of June 1, 2003.  ACARS shall be installed on all of
Contractor’s Regional Jet aircraft by December 31, 2004

 

2.               Spare Aircraft. In addition to the aircraft referenced in Article IV.A.1 above, if requested by United, Contractor will use
reasonable efforts to arrange for and make available for its use such spare
aircraft as are required to effectively maintain Contractor’s United Express
Services.  Pursuant to this agreement, a
spare aircraft shall be provided such that the ratio of “aircraft in schedule”
divided by “aircraft in fleet” shall not exceed 0.933 for TurboProp Aircraft
and 0.95 for Regional Jets. This is equivalent to one spare for every fifteen
(15) TurboProp Aircraft and one (1) spare for every twenty (20) Regional Jet
aircraft.

 

3.               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
color decors and patterns on its aircraft as United may determine and to
discontinue use of old Marks.  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.  United will pay all costs incurred in complying with the
requirements established in this paragraph.

 

4.               Substitute
Aircraft.  Notwithstanding
the above, in the event Contractor is unable to operate a particular scheduled
frequency with an aircraft bearing United Marks or a generic aircraft allocated
to United, 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 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.

 

B.            SCHEDULES AND CHARTERS TO BE OPERATED BY
CONTRACTOR

 

1.               United Express
Schedule.  Commencing on the Effective Date of this Agreement, Contractor will
provide Contractor’s United Express Services in the markets mutually agreed
upon by Contractor and United.    Subsequently, United will provide at least sixty (60) days
notice of any planned schedule changes. 
United may under extraordinary circumstances provide less than sixty
(60) days notice on city pairs to be served, which Contractor shall use
reasonable efforts to accommodate.   For
any new cities, Contractor and United will determine a mutually viable ramp-up
plan for implementation of service.

 

2.               United
Schedule Consent Required.  United may adjust Contractor’s
schedule from time to time subject to (i) a minimum of sixty (60) days’
prior written notice to Contractor, and (ii) compliance with any regulatory
requirements with respect to service to affected airports.  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
operated or served by Contractor (whether necessitated by altered connections,
operating experience or other reason) must be submitted to United at least ninety
(90) days prior to the effective date of such change.  All such changes must be approved in

 

20

 

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 the change is available, then such change will be made as
soon as reasonably practicable within such ninety (90) day period. Within the
operating capability of the aircraft used by Contractor, as described in Article IV.A, and subject to the
provisions with respect to changes in city pairs as provided above, 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 by Contractor pursuant to this Agreement.

 

3.               Adverse
Impact Concurrence Required. For Point to Point 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
L.  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 do not
adversely affect 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, equipment, supplies,
facilities or materials, which United determines, from time to time are
reasonably necessary to meet United’s obligations under Contractor’s United
Express Services.  Contractor will
notify United of changes to its fares and schedules for the Appendix L
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 Point to Point City Pair be reduced or terminated under the United
Express program.

 

4.               Charter.  Contractor
shall be prohibited from providing charter flights in any aircraft used in
Contractor’s United Express Services, without the prior written consent of
United, which consent shall not be unreasonably withheld. Contractor shall be
permitted to retain all revenues from such approved charters. However,
Contractor agrees to pay United **** use of any chartered aircraft covered
under this Agreement. In the case of each such charter, Contractor hereby
agrees 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 (excepting only the
unavoidable use of United Express liveried aircraft and permanent airport
signage).  Contractor shall provide
written notice to United of any charter flight using aircraft used in
Contractor’s United Express Services prior to the later of (i) the thirtieth
day prior to the date of such charter flight or (ii) five business days after
Contractor’s receipt of the request for such charter flight.  Contractor agrees not to provide any charter
flight using aircraft used in Contractor’s United Express Services if United
provides written notice to Contractor stating that United elects to require
that Contractor not provide such charter flight, so long as Contractor receives
United’s notice prior to the fifth business day after United’s receipt of
Contractor’s notice or prior to the third business day after United’s receipt
of Contractor’s notice only for any notice United receives within ten (10)
business days prior to intended charter flight.

 

5.               Changes Input to
Reservations Systems.  Changes to Contractor’s schedules as set forth in
this Article IV.B 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

 

21

 

computerized reservations
systems.  At no time may Contractor make
any changes to flights operated by United or any other carrier.

 

6.               Operating
Commitment. Contractor agrees to operate
Contractor’s United Express Services to provide air transportation services
scheduled pursuant to this Article IV.B (as modified from time to time) throughout the term of this Agreement.

 

C.            INVENTORY

 

1.               United
will have the sole right to use, set and control availability, levels and use
of all seat inventory for the Aircraft Used in United Express Service.  United will take all revenue and inventory
risk and will maintain inventory and pricing responsibility. Contractor is
prohibited from providing positive space leisure travel, or any other confirmed
leisure travel that requires removal of a seat from inventory, to any person
other than the people outlined in Appendix K, on Contractor’s United Express
flights without the prior written consent of United. All positive space and
leisure travel must be ticketed on United approved ticket stock with
Contractor’s full IATA serial and ticketing numbers. Positive space travel is
permitted for Contractor’s and United’s employees for actual business purposes,
including deadheading flight crews, and for Contractor’s employees and eligible
in emergency situations only. 
Contractor may not issue positive space business travel to anyone other
than Contractor’s own employees. If in any way, Contractor issues tickets in
violation of this provision in any form, within two (2) years of each such
violation, Contractor may be billed via the ACH, and Contractor will pay
United, the full unrestricted fare for the class of service provided on such
route for any such inappropriate ticketing.   
Contractor also agrees to comply with all rules and regulations for
positive space and space available travel as outlined in the Related
Agreements.

 

2.               In
the case of Point-To-Point City Pairs, as referenced in Appendix L,  Contractor
will set seat inventory levels for Aircraft Used in United Express Service and
will retain all revenue and inventory risk and will maintain inventory and
pricing responsibility.

 

D.            FLIGHT
CREWS TO BE USED

 

1.               Flight Crew.  Aircraft
Used in United Express Service will be operated with crews consisting of a
captain or pilot, and a first officer or co-pilot.  All such crew members will at all times meet all currently
applicable governmental requirements, as such requirements may be amended from time
to time during the life of this Agreement, and will be fully licensed and
qualified for the services that they perform hereunder.  In addition, each of Contractor’s captains
will hold a current Airline Transport Pilot Certificate and all Flight Crews to
be used in Contractor’s United Express Services must be qualified to fly
between all city pairs on the Effective Date of this Agreement.  Crew members will also meet all requirements
imposed by the insurance policies that are to be maintained pursuant to
Article XII.

 

2.               Flight Attendants. Contractor’s flight attendants will at all times
possess all necessary training and meet all currently applicable governmental
requirements, as such requirements may be amended from time to time during the
life of this Agreement.

 

E.              INFLIGHT
SALES

 

Contractor
may, at United’s request, be required to sell beer, liquor and other goods on
flights included in Contractor’s United Express Services.  Any additional advertising, goods or
services Contractor would like to sell are subject to United’s approval.  Contractor agrees that such in-flight sales

 

22

 

shall be conducted in a manner
consistent with in-flight sales provided on United’s flights.  Contractor will be solely responsible for
the direct costs associated with such in-flight sales and shall be entitled to
all revenues generated from such in-flight sales from beer, liquor, and sales
commissions from SkyMall. Should the revenues and sales commissions from
aforementioned goods and services not exceed the direct costs and United
continue to request such goods and services (provided, such goods and services
are incremental to goods and services offered on Contractor’s United Express
Service as of the date of this Agreement), United will reimburse Contractor for
the difference between the sum of all revenues and sales commissions received
by Contractor and the direct costs associated with such in-flight sales.    United reserves the right to rescind
approval for SkyMall sales at any time. If United rescinds approval for SkyMall
sales, Contractor will exit any pursuant contracts as soon as allowed under the
provisions of Contractor’s current agreements with SkyMall or any related party
as of the Effective Date of this Agreement.

 

V.                                    OPERATING
RESTRICTIONS

 

A.            UNITED EXPRESS OPERATIONS ONLY

 

Other than
pursuant to this Agreement, Contractor shall not, and it shall ensure that its
subsidiaries do not directly or indirectly, engage or attempt to engage, on its
or their own behalf or on behalf of a third party, in the business of providing
air transportation, marketing or code share relationship at any of United’s
Hubs (DEN, IAD, LAX, ORD, SEA, SFO). 
However, Contractor may fly to the aforementioned United Hubs under code
share or marketing relationships with another carrier as a spoke service from
another carriers’ hubs provided that such spoke services shall not exceed in
total for each market that involves a flight from another carrier’s hub to a
specific United hub a total of  six (6)
arrivals per day. United will consider wholly at its own discretion market by
market exemptions to this clause on a case-by-case basis.

 

B.            NO OPERATION OUTSIDE AGREEMENT

 

Without the
prior written consent of United, Contractor will not use any of the services or
facilities (excluding maintenance service or facilities) afforded to Contractor
by United to provide air transportation or related services to other carriers
or affiliates of Contractor without the consent of United. Under no
circumstances will Contractor or its affiliates be permitted to operate
aircraft bearing the United Marks in city pairs other than those specified by
United pursuant to Article IV, without the prior written
consent of United, other than charters operated as provided in Article IV.B.4.
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 the United Marks.

 

C.            SEVERABILITY AND REMEDY

 

1.               If
the restrictions set forth in Article V.A or V.B or V.C 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.  If 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.  If 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.

 

23

 

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 or
V.C
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
or V.C hereof,
and to specific performance to the terms of Article V.A or V.B or
V.C 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 or V.C 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.B, 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.A.4.  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, a nonexclusive,
nontransferable right and license to use the United Marks, and Contractor
hereby undertakes the obligation to use the licensed United Marks 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 Marks. Contractor hereby acknowledges United’s ownership of
the United Marks, further acknowledges the validity of the United 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 the
United Marks.

 

2.               Service Standards. 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 (“United
Express Service Standards or Service”).  United Express Service Standards include,
but are not limited to, United standards for (a) aircraft types, as referenced
in Article IV.A, (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) in-flight 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),
(h) any other quality control measures designated by United, as such standards
may be prescribed by United from time to time and (i) customer problem
resolution (“CPR”).  As necessary, United will provide training
to Contractor’s designated instructors pursuant to 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 Service
Standards 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 Services to determine if they conform to the United Express
Service Standards. If United determines that Contractor is not in compliance
with the Service

 

24

 

Standards 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
the Service Standards.  If Contractor
fails to comply with any part of the Service Standards and such failure is not
corrected as soon as practicable (and, in any event, within 30 days) after
Contractor’s receipt of written notice of such failure from United, then United
may, at its discretion, restrict or eliminate Contractor’s pleasure travel
privileges, or suspend Contractor’s authority to serve city pair markets, or
impose any other nonexclusive remedy, including breach of contract, or other
remedies available to United.   Other non-exclusive
remedy would include, requiring Contractor to bear costs in excess of normal
guidelines.  The United Express Service
Standards are outlined in Appendix I,
and may be changed by United upon notice given from time to time.

 

3.               Aircraft Ground Handling
Procedures. 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 Ground 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 Ground
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.  
However, Contractor agrees to adhere to the United Express Service
Standards outlined in Appendix I for
all Ground Handing of their United Express flights.

 

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 Article VI.B.2 or Article VI.B.3, whether exercised or not.

 

5.               Non-Exclusivity.  Nothing in
this Agreement is intended nor will be construed to give Contractor the
exclusive right to use the United Marks, or to abridge United’s right to use or
to license the Marks, and United hereby reserves the right to continue use of
the United 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 the United 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 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, indemnify, release, 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

 

25

 

witnesses’ fees, costs and
expenses incident thereto, which may be suffered by, accrue against, be charged
to or be recovered from Contractor as a result of any third-party claim that
the use by Contractor of any United Mark in accordance with the terms of this
Agreement 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
the defense of the claim and all related settlement negotiations and fully
cooperate with United in its defense of the claim and the conduct of any
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 not dispute that United, at its option, may either
procure the right for Contractor to continue using such Mark or to replace or
modify such Mark so that it becomes non-infringing.  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
assist the other in obtaining goods and services useful to the other party,
including, without limitation, fuel, uniforms, supplies and ground equipment,
in a more economical manner.  If United
identifies opportunities for cost savings as a result of bulk purchasing on
behalf of Contractor, Contractor is obligated to participate in the new cost
saving initiative.  If United identifies
Carrier Controlled cost savings, United and Contractor agree to share the
savings.   If United identifies Pass
Through cost savings, United will retain the entire benefit.   If Contractor identifies Pass Through Cost
savings, United and Contractor will share the savings.

 

B.            FUEL

 

United, by or
through it’s subsidiaries, agents or affiliates, shall have the option to
procure fuel and fuel services for or on behalf of Contractor.  Contractor agrees to assist United, its
subsidiaries, agents or affiliates in identifying fuel or fuel service
procurement opportunities, to provide data or analysis pursuant thereto, and to
enter into agreements for the provision of said fuel or fuel services,
including any provisions therein, at the direction of United.  United shall use its best efforts to
accommodate any operational or other requirements of Contractor related to fuel
or fuel services procured for or on behalf of Contractor.

 

C.            PURCHASE BY UNITED OF PASS THROUGH COST
ITEMS

 

1.               Pass Through Purchase Rights. United
reserves the right to assume the responsibility for purchasing products and
services to be used as  Pass Through
Cost items under this Agreement by Contractor.

 

2.               Station Rent as a Pass Through. All
station rent shall be considered a Pass Through expense. Contractor agrees that
it shall not enter into any lease extension or new long-term lease agreement or
any other new contract (not in effect as of the date of this Agreement) that
binds Contractor to any given facility for longer than the term outlined in
Article II Paragraph B 3 without the expressed, written consent of United.
United agrees that approvals for agreements that involve additional space shall

 

26

 

not be unreasonably withheld
provided such space requests by Contractor conform to United’s standards on
space and facilities required to manage the level of Contractor operations at
any given station.

 

D.            UNIFORMS

 

Contractor, at
its own expense, shall pay for and require all of its Designated Personnel and
other employees of Contractor who are visible to the public to wear Contractor
approved uniforms while performing Contractor’s United Express Services as
outlined in Appendix I.

 

E.              PASSES AND REDUCED RATE TRAVEL

 

Each party
will comply with the terms of a separate agreement between them under which are
granted to the employees of the other party certain passes and reduced rate
pleasure travel privileges.  However,
United has the right to retain all revenue generated from reduced rate travel,
including companion passes, both on United and United Express operated flights.

 

F.              SIGNAGE

 

As of the
Effective Date, Contractor will display signage advertising its operations as a
United Express Carrier at all Contractor Locations and at 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 cost of all acquisition, installation and maintenance of
all such signage. However, should United decide to rebreed or change signage
requirements beyond the standards that existed on the Effective Date of this
Agreement, United agrees to pay the incremental costs associated with signage
changes as a Pass Through Costs not subject to Markup.

 

G.            ENVIRONMENTAL

 

1.               With respect to all matters that relate
to or may affect the environment, Contractor agrees to conduct its operations
in a prudent manner, taking reasonable preventive measures to avoid
environmental liabilities, including, without limitations, measures to prevent
unpermitted releases to the environment.

 

2.               Contractor agrees, at its own expense,
to conduct its operations in compliance with all Environmental Laws, including
all environmental rules, regulations, and policies dictated by the applicable
airport authority, including ensuring its employees are trained in the
procedures required to meet all Environmental Laws.

 

3.               To the extent associated with Contractor’s
activities (including those of its agents), Contractor shall be responsible,
and will indemnify United, for any and all environmental liabilities,
including, without limitation, any penalties or costs associated with any
enforcement action, airport authority action, or private claim, any remediation
or restoration costs, any investigation costs, legal or environmental
consultant costs, or any property damage costs.

 

4.               For any leased areas that are jointly
operated by both Contractor and United, the following additional provisions
apply.

 

a.               Contractor shall
ensure its own activities comply with Environmental Laws, which may include,
when appropriate, coordination with United, such as to identify spill
prevention procedures for

 

27

 

any shared equipment.  If any tanks for ground support equipment
(“GSE”) fueling are shared, both parties must ensure the fuel complies with the
sulfur concentration limitations required under Section 211(g) of the
Clean Air Act, and its implementing regulations at 40 CFR Part 80, (including
any amendments, revisions, or succeeding statues and regulations), and provide
documentation if requested.

 

b.              Except for de
minimis amounts, Contractor shall promptly notify United’s facility
Environmental Coordinator of any spills or leaks of hazardous substances,
including petroleum substances, and provide copies of any written reports
provided to the applicable agencies and airport authorities.

 

c.               Contractor shall
provide copies of any notices of violations for environmental compliance
received from any environmental agency or airport authorities.

 

VIII.                        RATES PAYABLE TO CONTRACTOR

 

A.            RATES

 

As
agreed by United and Contractor and effective on July 1, 2003:

 

1.               Consideration.  For and in consideration of the transportation services,
facilities and other services to be provided by Contractor hereunder, the right
of United to (i) control all aspects of inventory as described in Article IV.C,
(ii) receive and retain all air fares, cargo rates and mail charges received by
Contractor and United, and (iii) receive and retain all other revenue received
by Contractor and United as provided in this Agreement, and other valuable
consideration provided under this Agreement, United shall pay Contractor
specified Carrier
Controlled Costs (together with “Markup” as defined at Article VIII
B) and specified Pass Through Costs for the Reimbursement
Categories as detailed in Appendix E for each aircraft type.

 

2.               Definitions.  Contractor and United agree to the definitions for both Carrier
Controlled and Pass Through Costs in Appendix E. Contractor is
responsible for any and all other costs necessary to operate the aircraft
covered under the terms of this Agreement in accordance with the United Express
Service Standards. United is not responsible for any other costs not
specifically covered in this Agreement.

 

3.               Reimbursement Categories.  The Pass Through Costs and Carrier Controlled Costs
are grouped by “Reimbursement Categories” for each aircraft type. Within each
Reimbursement Category, are specific kinds or types of expenses as outlined in Appendix E.

 

4.               Unit Rate.   Each
Reimbursement Category, whether the costs are Pass Through Costs or Carrier
Controlled Costs, is expressed in terms of one or more “Unit Rates.”  The Unit Rates express the basic measurement
and constitute the driver of costs for each Reimbursement Category.  Each Reimbursement Category has specific
Unit Rates as outlined in Appendix E.

 

5.               Annual Adjustment Factors.  Effective as of each anniversary of the
Effective Date, Contractor and United agree to increase or decrease all Carrier
Controlled Costs, excluding, with respect to Aircraft Used in United Express
Service, aircraft lease payments determined under Generally Accepted Accounting
Principles (with respect to leased aircraft), interest payments on aircraft
acquisition indebtedness, and depreciation taken in accordance with Generally
Accepted Accounting Principles (for Contractor owned aircraft) (such lease and
interest payments, and depreciation are referred to collectively

 

28

 

herein as “Contractor’s
Aircraft Ownership Costs”), within the Reimbursement Categories for the ensuing
contract year by an amount equal to the then applicable Carrier Controlled
Costs multiplied by the applicable “Annual Adjustment Factors” set forth on
Appendix E.  Rates shall be adjusted in
accordance with the procedures set forth in Appendix E.  Except as expressly provided in this
Agreement, the parties do not want to implement, and have not provided for, any
additional rate changes, rate negotiations or rate setting process.  For example, if as of the anniversary of the
Effective Date, for the Completed Block Hours Reimbursement Category, the rate
is **** and the annual adjustment factor ****, then the annual Carrier
Controlled Cost element effective as of such the anniversary of this Agreement
shall be ****.

 

6.               Rate Re-set.  Contractor and United agree to re-set all United Rates for
Carrier Controlled Costs, excluding Contractor’s Aircraft Ownership Costs, to
take effect on January 1, 2008.  At
that time, Unit Rates (not to include Markup or Annual Adjustment Factors),
will be re-set to reflect Contractor’s actual costs in 2007.  ****. In anticipation of this re-set,
Contractor will also provide, on an annual basis, actual cost detail in a
format to be determined by United and will be subject to detailed audit and/or
benchmarking per Article XIV.F. 
The rate reset process shall be complete by March 31, 2008 and
shall be retroactive to Jan 1, 2008.

 

7.               Commercially Reasonable Efforts.  Contractor agrees to use commercially
reasonable efforts to control its Carrier Controlled Costs and Pass Through
Costs.  Failure to use commercially
reasonable efforts to control Pass Through Costs shall be deemed as negligence
on the part of the Contractor and may subject such costs to rejection of
payment by United, in which event Contractor waives its rights to reimbursement
of the applicable Pass Through Cost items. 
The parties agree to discuss any failure by Contractor to use reasonable
efforts to control costs.

 

8.               Aircraft Ownership Cost.

 

a.               Current.  Contractor’s Aircraft Ownership Costs on
Current Aircraft will be reimbursed by United, plus a Markup (assuming an operating
performance at the “B” level), but will not be subject to the application of
any Annual Adjustment Factors.

 

Growth
and Supplemental. 
Subject to the provisions in Article VIII Paragraphs A.8 and A.9
and Article VIII Paragraph B.5, Contractor’s Aircraft Ownership Cost on
Growth Aircraft and on Supplemental Aircraft will be reimbursed by United plus
a Markup.

 

b.              For CRJ-200 Growth Aircraft delivered
during 2003, ****

 

d.              For CRJ-700 Growth Aircraft
delivered during 2003, ****

 

e.               ****

 

9.               ****

 

10.         Ground Station handling. With the exception
of ground station activities outlined in Article VIII, Paragraph A 11, for
all departures ground handled by Contractor, whether operated by Contractor or
operated by another United Express Carrier, United shall pay contractor those
rates outlined in Appendix J for the appropriate station and
equipment type as outlined in Appendix J. For the calculation of fixed
cost Ground Station handling rates, at the beginning of each year and then
again by June 30th, Ground Station fixed costs rates will be
established for the following six months by the methodology in the following
two sentences. For each station, where there are turboprop operations, the

 

29

 

Ground Station fixed cost rate
for Turboprops in Appendix J will
be added to the weighted average of the CRJ fixed cost rate, which shall be
calculated by multiplying the Ground Station fixed cost rate for the CRJ 200 in
Appendix J, by percentage of CRJ
200 scheduled number of departures compared to the total number of CRJ
departures and adding the result generated by multiplying the Ground Station
fixed cost rate for the CRJ 700 in Appendix J,
by percentage of CRJ 700 scheduled number of departures compared to the total
number of CRJ departures. For each station, where there are no turboprop
operations, the Ground Station fixed cost rate will be the weighted average of
the CRJ fixed cost rate, which shall be calculated by multiplying the Ground
Station fixed cost rate for the CRJ 200 in Appendix
J, by percentage of CRJ 200 scheduled number of departures compared
to the total number of CRJ departures and adding the result generated by
multiplying the Ground Station fixed cost rate for the CRJ 700 in Appendix J, by percentage of CRJ 700
scheduled number of departures compared to the total number of CRJ departures.
Each Reimbursement Category, whether the costs are Pass Through Costs or
Carrier Controlled Costs, is expressed in terms of one or more “Unit Rates.”  The Unit Rates express the basic measurement
and constitute the driver of costs for each Reimbursement Category.  Each Reimbursement Category has specific
Unit Rates as outlined in Appendix J.

 

11.         Ground Station handling of other United Express
Carriers.  To the extent United
has any contract in place, which obligates it to pay another United Express
Carrier for ground handling services performed by Contractor, United will not
be liable to pay Contractor for those variable departure rates outlined in Appendix J
only for those departures handled by Contractor for aforementioned United
Express Carrier.  United will also not
be liable to pay Contractor for that portion of fixed costs and Pass Throughs
per station determined by the multiplying the percentage of departures handled
by Contractor for another United Express Carrier (as compared to total
departures handled by Contractor at that station) by the amount of fixed cost
and per month and Pass Throughs for that station outlined in Appendix J.

 

B.            MARKUP

 

For each calendar month that this Agreement
is in effect, United will pay to Contractor a fee (“Markup”) that is determined
as follows:

 

1.               Contractor’s actual measured performance
in four areas, including (a) on-time performance, (b) controllable flight
completion rate, (c) baggage handling, and (d) customer repurchase intent, will
each be assigned a grade (A, B, C, or D) by reference to the table on Appendix
F.  Each such graded category
will carry a weighting as outlined in Appendix F in making the Markup
calculation.

 

2.               Carrier Controlled Costs will then be
allocated into actual costs expended by Contractor for each aircraft type and
for station carrier controlled costs.

 

3.               The percentage of the amount of each
allocated category determined pursuant to paragraph 2 above will then be
multiplied by the percentage assigned at Appendix E to each grade that is given
pursuant to paragraph 1 above.

 

4.               The sum of the products obtained
pursuant to paragraph 3 above will be the Markup for the calendar month for the
applicable calendar month.

 

This Markup is intended to represent
“B-level” performance against Contractor’s Monthly Operating Goals (excluding
aircraft ownership) and will be paid in accordance with the Monthly Incentive
Payment program as detailed below in Article VIII.C.

 

30

 

5.               Markup on Five (5) Supplemental Aircraft.   ****

 

C.            OPERATING
GOALS

 

For each calendar month and for Contractor’s
entire United Express operations, Contractor’s actual Performance Level shall
be measured with respect to each of four Operating Goals.  To establish the Markup to be applied
hereunder, add together the four applicable Markup Points (percentage figures)
associated with the relevant Performance Metrics set forth on Appendix F ,
yielding a sum that is designated as the Total Markup Factor. Multiply the Total
Markup Factor by the total aggregate Carrier Controlled Costs for the month in
question, and the resultant amount is designated as the Markup as detailed in Appendix F.

 

1.               Operating Goals
Methodology.  Contractor’s
Monthly Operating Goals for the calendar year will be established using the
predetermined methodology set forth below and will take effect on
January 1 of each year.  All goals
and adjustments used to create these goals will be calculated using two (2)
decimal points.

 

On a metric by metric basis, for calendar years when United’s Mainline
performance (defined as performance for United Airlines’ domestic flights,
weighted by departures) is better than United Express Best Practice Operating
Performance

 

a.               Contractor’s On-Time Zero (“On-Time Zero
or On-Time”) Operating Goal is calculated as equal to United’s Operating
Mainline Performance (United Airlines’ domestic flights, weighted by
departures), adjusted down 4.00 percentage points then adjusted for regional
differences. Regional differences will be accounted for by taking the resulting
goal generated by the previous sentence and multiplying that number by the
quotient of the weighted average of United Mainline On Time Zero performance
for the hubs in which Contractor operates (weighted by Contractor hub
departures) and the United Mainline System On Time Zero Performance
(performance for United Airlines’ domestic flights, weighted by departures).

 

b.              Contractor’s Controllable Flight
Completion (“Controllable Completion” or “Controllable Flight Completion”)
Operating Goal is equal to United’s system-wide Mainline Operating Performance
(United Airlines’ domestic flights, weighted by departures) for its own
operation adjusted downward by 1.00 percentage points.  Controllable Flight Completion excludes
cancellations due to weather, Air Traffic Control (“ATC”) cancellations,
requests by United to cancel flights in conjunction with the Ground Delay
Program, acts or omissions by United and emergency airworthiness directives.

 

c.               Contractor’s Mishandled Bag (“Mishandled
Bags”) Operating Goal is calculated as equal to United’s system-wide
OperatingPerformance (domestic performance, weighted by departures)  for its own operation adjusted upward by
1.00 points then adjusted for regional differences. Regional differences will
be accounted for by taking the resulting goal generated by the previous
sentence and multiplying that number by the quotient of the weighted average of
United Mainline Mishandled Bag performance (domestic flights, for the hubs in
which Contractor operates (weighed by Contractor hub departures) and the United
Mainline System Mishandled Bag Performance (domestic performance, weighted by
departures).  As of August 31st,
2004, Mishandled Bag will be defined as Contractor performance for all stations
where Contractor performs ground handling services whether for Contractor
flying or another United Express carrier. If United cannot appropriately track
Mishandled Bags to account for previous sentences, then Contractor Mishandled
Bag performance will only be measured on those stations where Contractor
performs ground handling services for Contractor flying.

 

31

 

d.              Contractor’s Year 1 Repurchase Intent (“Repurchase
Intent or RPI”) Operating Goal will be United Express
Best Practice minus 7.00 percentage points. Concurrent with the annual goal
setting process, starting in year 2 and ending in year 6, the 7.00 percentage
points referenced in the previous sentence will be reduced by 1.00 percentage
points each year such that in year 6, and for every year thereafter
Contractor’s Repurchase Intent (“Repurchase Intent or RPI”) ****.

 

On a metric by metric basis, for calendar
years when United’s Mainline performance (domestic flights, weighted by
departures) is worse than United Express Best Practice Operating Performance

 

e.               Contractor’s On-Time Zero (“On-Time
Zero or On-Time”) Operating Goal is calculated as
equal to the United Express Best Practice Operating Performance ****. Regional
differences will be accounted for by taking the resulting goal generated by the
previous sentence and multiplying that number by the quotient of the weighted
average of United Mainline On Time Zero performance (domestic flights, weighted
by departures) for the hubs in which Contractor operates (weighted by
Contractor hub departures) and the United Mainline System On Time Zero
Performance (domestic flights, weighted by departures)

 

f.                 Contractor’s Controllable Flight
Completion(“Controllable Completion” or “Controllable Flight Completion”)
****.  Controllable Flight Completion
excludes cancellations due to weather, Air Traffic Control (“ATC”)
cancellations, requests by United to cancel flights in conjunction with the
Ground Delay Program, acts or omissions by United and emergency airworthiness
directives.

 

g.              Contractor’s Mishandled Bag (“Mishandled
Bags”) Operating Goal is calculated as equal to United Express Best Practice
Performance **** then re-adjusted for regional differences accounting for
regions in which Contractor operates. Regional differences will be accounted
for by taking the resulting goal generated by the previous sentence and
multiplying that number by the quotient of the weighted average of United
Mainline Mishandled Bag performance (domestic flights, weighted by departures)
for the hubs Contractor operates in (weighed by Contractor hub departures) and
the United Mainline System Mishandled Bag Performance (domestic flights,
weighted by departures).  As of
August 31st, 2004,  Mishandled Bag
will be defined as Contractor performance for all stations where Contractor
performs ground handling services whether for Contractor flying or another
United Express carrier. If United cannot appropriately track Mishandled Bags to
account for previous sentences, then Contractor Mishandled Bag performance will
only be measured on those stations where Contractor performs ground handling
services for Contractor flying.

 

h.                                      ****

 

2.               B- Level Performance.  Contractor’s Monthly Operating Goals, as
defined above in Paragraph 1.a – 1.h and adjusted for seasonality using the
Seasonality Adjustment Factors set forth in Appendix F, define the
minimum performance necessary to achieve at least B–Level Performance.

 

3.               Performance Grade Widths.  “Grade Widths” (the range between the lowest
end of each Performance Level) remain constant and will not be changed over the
entire Term of this Agreement and are as set forth in Appendix F.

 

4.                                       Example.  ****

 

5.               Seasonality Adjustment.   At the beginning of each year, after
Contractor’s Monthly Operating Goals for the year have been calculated by the
methodology outlined above but before

 

32

 

Contractor’s Monthly Operating
Goals are set, Contractor may create the final Performance Level goals by
multiplying any of the four Contractor’s
Monthly Operating Goals  by a seasonality factor developed by
Contractor provided that the twelve (12) month straight average of each of
Contractor’s Monthly Operating Goals remains unchanged after seasonality
factors are applied.

 

WIRE TRANSFER AND RECONCILIATION

a.               ****

 

IX.                                FEES PAYABLE TO UNITED

 

A.            RETROACTIVITY PAYMENTS

 

United and
Contractor agree that an amount equal to **** will represent all retroactive
payments owed to United for Program Fees earned by United for the period from
January 1, 2003 until July 1, 2003  
This amount will be paid by Contractor in a single lump sum within 30
days of the signing of this Agreement.

 

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 L (“Program Fees”).

 

2.               The Program Fees
are reflected on Appendix M and will be subject to annual adjustments
consistent with those applied to Carrier Controlled Costs as outlined in Article VIII.A.5
and Appendix
E.

 

C.            PAYMENT

 

Payment for
transportation furnished by Contractor for the markets set forth on Appendix L,
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 therefore.  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.

 

D.            ADDITIONAL
PERSONNEL

 

It is 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.  If 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

 

33

 

incurring any additional costs
or expenses or making any such disbursements, United will obtain the prior
written approval of Contractor.

 

E.              GOVERNMENT ASSISTANCE

 

Any and all
direct or indirect assistance received by Contractor as a result of government
assistance or bail-out plans will be forwarded directly to United to the extent
reimbursed by United to Contractor or included in future payments by United to
Contractor.  Examples include, but are
not limited to, direct payments to Contractor, loan programs, reimbursement of
security fees, and waivers of any and all fees and taxes.

 

****

 

X.                                    MAINTENANCE AND
FUELING

 

United will
have no responsibility under this Agreement for maintenance or fueling of
Contractor’s aircraft.

 

XI.                                U.S.
MAIL

 

United and
Contractor agree to cooperate in making bids for mail carriage.

 

XII.                            INSURANCE

 

A.            INSURANCE
TYPES

 

During the
term of this Agreement, Contractor agrees to procure and maintain in full force
and effect, at its own expense, policies of insurance with insurers of
recognized reputation and responsibility, which provide, unless otherwise
provided in the Aircraft Leases, at a minimum the following insurance:

 

1.               Comprehensive
Airline Liability Insurance, including but not limited to Aircraft Liability,
Passenger Liability, Comprehensive General Liability Insurance, War Risk and
Allied perils, including both passengers and other third parties, Cargo
Liability and Baggage Liability Insurance, with combined single limits for each
and every loss and each aircraft of not less than ****.  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 G.

 

2.               Aircraft hull all
risks insurance, including ground and flight coverage on Contractor’s aircraft,
including its engines and all its parts when installed or temporarily detached
from Contractor’s aircraft on a repair-or-replace basis with a deductible
United has reasonably deemed appropriate.

 

3.               ****  United shall in no way be liable for any
workers’ compensation claims paid by Contractor related to any of Contractor’s
operations.  The Contractor’s insurer
agrees to waive rights of subrogation against United with respect to worker’s
compensation claims.

 

4.               ****.

 

5.               ****

 

34

 

B.            30-DAY
NOTICE

 

On or before
the Effective Date, and not less than thirty days (seven days notice with
respect to war risk), before the expiration or termination date of any
insurance required to be maintained by Contractor under Article XI.A above,
Contractor will furnish United with certificates of insurance, substantially in
the form of the attached Appendix G, 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, any such
alteration being deemed reasonable if readily available and if it becomes the
custom in the industry.

 

D.            FAILURE TO MAINTAIN INSURANCE

 

If 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.

 

XIII.                        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 and 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 United or its officers,
directors, employees or agents, by reason of any injuries to or deaths of persons,
except for injury or death of United employees, 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 or its officers, directors, employees or agents
(but excluding the reckless and willful misconduct or gross negligence of
United or its officers, directors, employees or agents), which is in any way
related to the services of Contractor contemplated by or provided pursuant to
this Agreement, or otherwise.  United
will give Contractor prompt and timely notice of any claim made or

 

35

 

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 and 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 or its
officers, directors, employees or agents, by reason of any injuries to or
deaths of persons, except for injury or death of Contractor’s employees, 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 United or
its officers, directors, employees or agents regardless of any negligence
either active, passive or otherwise on the part of Contractor or its officers,
directors, employees, or agents (but excluding the reckless and willful
misconduct or gross negligence of Contractor 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 and 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 or 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 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 liabilities, 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 XIII applies to
any

 

36

 

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 XIII
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 XIII
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 XIII,
neither loading bridges, hallways, stairways, nor ramp areas will be considered
part of the hold room or waiting area.

 

XIV.                       REPORTS

 

A.            CLOSE-OUT
ENTRIES

 

****

 

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 ten business days (10) 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.            INSPECTION

 

United may
inspect and audit Contractor’s corporate records and accounts solely related to
Contractor’s United Express Services, from time to time, upon reasonable notice
during the life of this Agreement; provided that such inspections do not
unreasonably interfere with Contractor’s business.  

 

E.              FINANCIAL
STATEMENTS

 

Contractor will furnish to United, (i) within the time frame determined
by the Securities Exchange Commission (SEC) for financial reporting after the
end of the 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 the Contractor’s fiscal
year, Contractor’s then current, audited financial

 

37

 

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.

 

F.              BENCHMARKING

 

In
anticipation of any future rate resetting that may be permitted under this
Agreement, Contractor agrees to participate diligently in a detailed audit
and/or benchmarking process to be determined by United.  This benchmarking process would begin no
earlier than six (6) months prior to the planned effective date of the new
rate.

 

G.            GOVERNMENT
FILINGS

 

Contractor
will be responsible for filing all reports relating to its operations with the
DOT, FAA and other applicable government agencies  (other than any such reports for which United has assumed the
responsibility to file them on Contractor’s behalf), 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.  To
the extent only United is in possession of relevant statistics used in such
reports, United will provide such available statistics to Contractor as
necessary for Contractor to complete these filings.  If United fails to provide such statistics to Contractor
sufficiently in advance of the applicable deadline for such filings, and
Contractor is unable to submit such filings by the deadline because of such
delay, United will reimburse Contractor for any fines or penalties incurred by
Contractor as a result of its failure to submit such filings by the deadline.

 

H.            COPY OF GOVERNMENT REPORTS

 

Contractor
will promptly furnish United with a copy of every final 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 pursuant to this Agreement, when such accident or incident
is claimed to have resulted in the death or injury to any person or the loss
of, major damage to or destruction of any property.

 

XV.                           INDEPENDENT CONTRACTORS AND
UNAUTHORIZED OBLIGATIONS

 

A.            INDEPENDENT CONTRACTORS

 

1.               The
employees, agents and independent contractors of each party hereto (the
“Employer”) engaged in performing any of the services the Employer is to
perform pursuant to this Agreement are employees, agents, and independent
contractors of the Employer for all purposes and under no circumstances will be
deemed to be employees or agents or independent contractors of the other Party
(the “non-Employer”).   The Non-Employer
will have no supervision or control over any such Employer’s employees, agents
and independent contractors and any complaint or requested change in procedure
made by the Non-Employer will be transmitted by it to the Employer’s designated
representatives.  In its performance under
this Agreement, each party will act for all purposes, as an independent
contractor and not as an agent for the other party.

 

2.               Notwithstanding
the fact that Contractor has agreed to follow certain procedures, instructions
and United Express Service Standards 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

 

38

 

procedures made by United will,
in all events, be transmitted by United to Contractor’s designated
representatives.  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 representatives. In
its performance under this Agreement, United will act, for all purposes, as an
independent contractor and not as an agent for Contractor.

 

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 and 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 or its officers, directors, employees, agents or independent
contractors (other than Contractor) 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 and 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
or its officers, directors, employees, agents or independent contractors (other
than United) in the conduct of Contractor’s operations.

 

D.            CONTRACTOR OPERATED FLIGHTS

 

The fact that
Contractor’s operations are conducted under the United Marks and listed under
the UA designator code will not affect their status as flights operated by
Contractor, and Contractor and United agree to advise all third parties,
including passengers, of this fact.

 

XVI.                       DEFAULT AND TERMINATION

 

A.            OPERATIONS
DEFAULT

 

1.               If
either party becomes insolvent; if the other party is not regularly paying its
bills when due without just cause; if either party takes any step leading to
its cessation as a going concern; makes an assignment of substantially all of
its assets for the benefit of creditors or a similar disposition of the assets
of the business; or if either party either ceases or suspends operations for
reasons other than an Article XXVI

 

39

 

Force Majeure condition (a “Section A
Default”), then the other party (the “Insecure Party”) may
terminate this Agreement on not less than 10 days written notice (the “Notice
Period”) to such party (the “Section A Defaulting Party”) unless
the Section A Defaulting Party immediately gives adequate assurance of the
future performance of this Agreement within the Notice Period 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.

 

2.               If
bankruptcy proceedings are commenced with respect to the Section A
Defaulting Party and if this Agreement has not otherwise terminated, then to
the extent permitted by the Bankruptcy Court, the Insecure Party may upon
thirty (30) days’ prior written notice 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, the Aircraft Leases and  the Additional Aircraft Leases must be fully
performed pursuant to the terms of this Agreement, the Aircraft Leases and the
Additional Aircraft Leases, and that in the event United provides written
notice to Contractor and/or its trustee in bankruptcy of United’s demand that
this Agreement, the Aircraft Leases and the Additional Aircraft Lease, 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.

 

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
(other than any such covenant or agreement for which this Agreement provides an
exclusive remedy and other than the covenants described in Article XVI.D), 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 or such longer
period as may be demonstrably  necessary
to complete the cure of such failure (but such longer period may not exceed 60
days after the receipt of the notice to cure) (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 after the end of the 30 or 60 day cure period,
as applicable, 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.  Notwithstanding the foregoing, if United shall permanently cease
operations as a certificated air carrier, Contractor may give written notice
and terminate the Agreement effective immediately after such cessation of
operations.

 

C.            DEFAULT
BY CONTRACTOR

 

1.               ****

 

40

 

D.            SIMILAR
AGREEMENTS

 

United may
immediately terminate this Agreement (i) if Contractor or any of its affiliates
is in breach of the terms of Article V (Operating Restrictions) (a “Section D Default”).

 

E.              NON-COMPLIANCE WITH STANDARDS

 

If Contractor
shall refuse, neglect, or fail to perform or observe the provisions of the
United Express Service Standards or Aircraft Ground Handling Procedures 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 United delivers 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 at United’s
discretion.

 

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 either party hereto of any debts or
obligations, monetary or otherwise, to the other party that accrued hereunder
prior to the effective date of such termination.  Each party will be entitled to any and all damages recoverable
and remedies under law or in equity against the other for any breach by the
other party of this Agreement, regardless of whether the non-breaching party
elects to terminate this Agreement; provided that the liquidated damages
provided for in Article XVI.G shall constitute full payment and the
exclusive remedy for any damages suffered by United.

 

G.            UNITED’S LIQUIDATED DAMAGES

 

1.               If United terminates this Agreement
pursuant to the terms of this Article XVI, including for
Contractor’s breach, then Contractor will pay to United as liquidated damages,
and not as a penalty, the Daily United Damages, for each day remaining during
the period commencing with the date of termination through the end of the term
of this Agreement; provided, however, that if United secures another carrier to
replace Contractor in the city pairs served by Contractor under this Agreement
as a United Express Carrier at any of the affected stations, or if United
determines that United could replace Contractor without increasing its damages
in these city pairs, then the liquidated damages will be adjusted as follows.

 

a.               ****

 

iv.           “Contractor’s Average Daily Fees”
means the average amount of fees paid by United to Contractor pursuant to Article VIII.A
under this Agreement per day over the twelve (12) month period immediately
preceding the date of termination or Contractor’s breach, whichever occurs
earlier.

 

41

 

 

v.              “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.

 

2.               If this Agreement is terminated in a
manner such that United shall have the right to damages under this Article XVI.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 XVI.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.

 

4.               The provisions of this Article XVI.G shall not be applicable
to a termination of this Agreement by United pursuant to Article XVI.C as a result of
Contractor’s failure to meet the conditions referenced in Article XVI.C.1; provided, that the exclusion of
the applicability of Article XVI.G
to Article XVI.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.            RESTRICTED
ACTIONS

 

Contractor
shall not take, nor agree to take, any of the following actions without
United’s prior written consent: (a) dispose of any of United’s assets, or (b)
enter into any agreements with third parties which create liens, claims or
encumbrances on any of United’s assets. 
To the extent that Contractor engages in, invests in or otherwise is
responsible (financially or otherwise) for any business, activity or operation
other than Contractor’s United Express Services, and unless otherwise expressly
agreed in writing with United, Contractor will ensure that the costs and
expenses associated with or allocable to such other businesses, activities or
operations are not charged to or recovered from United in any way.

 

I.                 CALL
OPTION

 

1.               United will have the option to assume
Contractor’s ownership or leasehold interest, as the case may be, in certain
aircraft as more fully described in Article XVI.I.2 (the “Call Option”)
in any one or more of the following circumstances:

 

a.               If Contractor wrongfully terminates this
Agreement, (in which event United will also be entitled to Liquidated Damages
as provided in Article XVI.G); or

 

b.              If United terminates this Agreement for
Contractor’s breach of this Agreement for any one or more of the following
reasons (in which event United will also be entitled to Liquidated Damages as
provided in Article XVI.G)

 

i.                  Contractor’s operating performance
falls below the following three levels for six consecutive months:

 

****

 

c.               If (i) Contractor’s credit rating falls
to a rating of Caa2 (or lower) by Moody’s or a rating of CCC (or lower) by
Standard & Poors (or any equivalent rating by either rating agency or its

 

42

 

successors or assigns), or (ii)
during such period of time that Contractor is not rated by either Moody’s or
Standard & Poors (or their respective successors or assigns), if
Contractor’s tangible net worth falls below $0 (Zero Dollars).  Under this circumstance, United will also
have the obligation to lease or sublease such aircraft to Contractor for use by
Contractor only in the United Express program, provided that subject to the
limitation to be used only in United Express Service, any such sublease from
United shall be at substantially the same terms as the lease assumed by United
and any such lease by United of Contractor-owned aircraft shall be on terms
substantially no less favorable to Contractor than terms in any one existing
lease (specified by Contractor) of Contractor for same type of aircraft.  In no event shall Contractor be deprived of
possession of such aircraft, during the period the Call Option is exercised and
implemented pursuant to this Article XVI.I.1.c. if Contractor
removes any one or more aircraft from the United Express program, without
United’s prior written consent, United will have a Call Option on those
aircraft.

 

2.               The Call Option shall be governed and
limited by the following:

 

a.               The Call Option shall apply to all (but not less
than all, subject to Article XVI.I.1.d above) regional jet aircraft operated by Contractor as United Express
pursuant to the terms of this Agreement at the time of the event or events
described in Article XVI.I.1
above.

 

b.              United shall deliver a notice of its
election to exercise the Call Option within 45 days following the date of
notice of termination of this Agreement or the date of the event in Article XVI.H.1.c
or d
above.

 

c.               Within fourteen days following its
receipt of a notice by United of its election to exercise the Call Option,
Contractor shall provide United with: 
(i) copies of documentation relating to interests to be assumed by
United or retired at United’s expense as a result of the assignment of the
aircraft; (ii) lease rates and other financial information relevant to the
assignment; and (iii) the identity of and contact information for all parties
with an interest in said aircraft.

 

d.              Contractor will require that certain
provisions be contained in all future mortgage, financing, or lease contracts
between Contractor and regional jet creditors or lessors.  These provisions will (i) acknowledge
United’s right to call such regional jets as provided in this Agreement and
(ii) require that the creditor or lessor agree to allow Contractor to assign
Contractor’s mortgage or lease agreement to United (or, at United’s election, a
United affiliate or United Express Carrier subject to United providing any
necessary credit support acceptable to such creditor or lessor), provided that
United (or its designee, if United exercises its election) has a credit rating
of B2 (or higher) by Moody’s or a credit rating of B (or higher) by Standard
& Poors (or any equivalent rating by either rating agency or its successors
or assigns), and that Contractor’s creditor or lessor will accept United or
such designee as the party to such agreement in lieu of Contractor.  In the event that Contractor is unable to
obtain these provisions, then Contractor and United agree to seek a mutually
acceptable way to satisfy the provision of this paragraph d.  If the Call Option is exercised, United will
be responsible for obtaining all consents from lessors, lenders, trustees, or
other parties with an interest in an aircraft, and for the cost of same.  Upon its receipt of notice of exercise of
the Call Option by United, Contractor will reasonably cooperate with United in
its efforts to secure said consents.

 

e.               Subject to receipt of any required
consents from lessors required because the provision in the immediately
preceding paragraph d have not been obtained, Contractor agrees to grant United
a security interest in all future mortgaged regional jets (subject to the Call
Option) and any leasehold interest in any future regional jets (subject to the
Call Option) to perfect its Call Option. 
United

 

43

 

acknowledges that its security
interest will be subordinated to, and will agree to subordinate to, any “senior
creditor.” As used herein, “senior creditor” means any person with an
interest in the aircraft that is a lessor, any person lending funds to such
lessor, any lender providing funds to Contractor to acquire the aircraft, any
successor or assignee of any such person or their interest, any person
refinancing any such interest, and any person holding a lien given priority
under applicable law.

 

f.                 In the case of aircraft leased to
Contractor by parties not affiliated with Contractor, Contractor shall be
entitled to a full release by creditors and lessors of Contractor and its
affiliates from all further liabilities and obligations under said documents
other than obligations relating to periods prior to the date of assignment to
United and United will indemnify Contractor against all liabilities arising
from and after such assignment.  Such
release shall include termination of all guarantees and return of all
applicable deposits, letters of credit, or other collateral, but such release
shall not include (and instead Contractor shall assign to the extent assignable
to United without further compensation, and if not assignable, Contractor shall
subrogate its rights regarding any such deposits or reserves held by or subject
to the security interest of third parties to United or otherwise put United in
the same position as if such rights were assignable) any deposits or reserves
held by or subject to the security interest of third parties related to the
maintenance or operation of the aircraft (including the airframe, any engine,
any landing gear, or other component or part). 
United shall assume all obligations of Contractor with respect to such
lease documentation as of the date of assignment and adjustments shall be made
between the parties for advance or arrears payment of rent.  Such adjustment shall be the difference
between:  (x) the cash amount of rent
actually paid under the lease during its entire term as of the time of the
assignment, and (y) the total rent due during the entire term of the lease
times the percentage of the number of days since the beginning of the lease to
the total number of days in the entire term of the lease. In the event that Contractor is unable to obtain
a release, then Contractor and United agree that Contractor shall be
indemnified by United against all liabilities arising from and after such
assignment in the same manner contemplated above.

 

g.              In the case of aircraft owned by Contractor or its
affiliates, if United elects to exercise its Call Option, the aircraft shall be
sold to United or its designee within 120 days following the date Contractor
provides notice to United of the aircraft related information and delivery
condition, and on the basis of the value which would be obtained in an
arm’s-length transaction between an informed and willing buyer (other than a
lessee currently in possession) under no compulsion to buy or lease and an
informed and willing seller under no compulsion to sell.  The purchase price shall be the fair market
value of the aircraft (but in no event less than the debt secured by such
aircraft), which the parties will in good faith negotiate.  For the purposes of this section, the
aircraft shall be valued in their “as is” condition, with no assumption of
half-life or minimum condition.  If the
parties have not mutually agreed what the fair market value of the aircraft is
within 30 days, then the valuation shall be determined by an appraisal mutually
agreed to by two recognized independent aircraft appraisers, one of whom shall
be chosen by United, and one by Contractor. 
If the two appraisers cannot agree on the valuation within 30 days of
being chosen, then each shall render its own appraisal and shall by mutual
consent choose another appraiser within five days after the end of such 30-day
period.  If, within such five-day
period, such two appraisers fail to appoint a third appraiser, then either
Contractor or United, on behalf of both, may apply to the American Arbitration
Association (or any successor organization thereto) in Chicago, Illinois for
the appointment of a third appraiser. 
With the appointment of the third appraiser by AAA or the parties
agreement to a mutually agreed third appraiser the parties shall submit the
matter of the value of the aircraft to binding arbitration before such third
appraiser (the “Arbitrator”), in
accordance with the commercial arbitration rules of the American Arbitration
Association (the “AAA”).  The AAA shall appoint the Arbitrator.  The Arbitrator shall be authorized to set
such rules regarding hearings, briefing,

 

44

 

discovery, evidence, witnesses and other matters as the Arbitrator
deems to be necessary in order for Contractor and United to conclude the
arbitration proceeding and the Arbitrator to render a decision (the “Decision”) within 30 days after
Contractor’s or United’s submission to arbitration.  The Decision shall be in writing.  As soon as the Arbitrator has delivered his Decision and his
appraisal, that appraisal shall be compared with the appraisals given by the
other two appraisers.  If the
determination of one appraiser is more disparate from the average of all three
determinations than each of the other two determinations, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be final and binding upon
the parties hereto.  If no determination
is more disparate from the average of all three determinations than each of the
other determinations, then such average shall be final and binding upon the
parties thereto.

 

h.              Aircraft shall be delivered to United in
“as is” condition, except that all aircraft will be airworthy.

 

i.                  If market conditions exist such that
Contractor’s financial advisors certify in good faith that mortgages,
financings, or lease financings cannot be arranged without incurring materially
higher costs or rates as a result of the requirements of this Article XVI.I.2,
then United and Contractor will, at United’s choice, either negotiate
provisions of Article XVI.I.2 to permit Contractor to arrange such
financings on terms without incurring materially higher costs or United will
make Contractor whole on such higher costs.

 

j.                  For each aircraft that United
acquires pursuant to the Call Option, United will purchase from the Contractor
and take delivery of a proportional share of Contractor’s spare engines,
rotable and expendable spare parts, and tools, owned by Contractor to support
the operation of the aircraft type.  The
aggregate proportional share of Contractor’s spare engines, spare parts and
tools shall be determined as the number of aircraft acquired by United as a
percentage of the Contractor’s fleet, by aircraft type.  Spare parts, spare engines and tools will be
purchased by United at their fair market value in their as is condition using
the same valuation assumptions and the same arbitration procedures as set forth
in paragraph (g) above.

 

XVII.                   ASSIGNMENT,
MERGER AND ACQUISITION

 

A.            ASSIGNMENT

 

This Agreement
may be terminated by either United or Contractor (the “First Party”) if the other
party assigns this Agreement or any of its rights, duties or obligations under
this Agreement (except an assignment of the right to money to be received
hereunder and except to any affiliate of Contractor) without the prior written
consent of the First Party.  In the
event that this Agreement is assigned in violation of this Article, 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 succeeding to any of the assets or liabilities of
Contractor prior to such corporate reorganization agree to be bound by this
Agreement.

 

B.            MERGER

 

If Contractor
merges with, or if control of Contractor is acquired by, another air carrier,
or a corporation directly or indirectly owning or controlling or directly or
indirectly owned or controlled by

 

45

 

another air carrier (a “Holding
Company”), or a corporation directly or indirectly owned or
controlled by any such Holding Company, United will have the option to
terminate this Agreement without liability to Contractor.

 

C.            ACQUISITION

 

1.               For purposes of
this Article XVII.C,
“Qualifying Transactions” means any (a) merger of Contractor with another
company, (b) sale, transfer or lease by Contractor of substantially all its
assets, rights or powers (other than in the ordinary course of business), or
(c) issuance or sale by Contractor of its own stock representing 10% or more of
Contractor’s outstanding stock (other than the issuance or sale of stock in
Contractor in a registered public offering under the Securities Act of 1933, as
amended); 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 a
“Qualifying Transaction” as long as all of the entities succeeding to any of
the assets or liabilities of Contractor prior to such corporate reorganization
agree to be bound by this Agreement

 

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 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 will be subject to Article XVII.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 after-tax 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 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.               Article XVII.2
and Article XVII.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

 

46

 

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.

 

XVIII.               CHANGE
OF LAW

 

Notwithstanding
anything herein to the contrary, if 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 continues for a period of
thirty (30) days following the commencement of the consultations provided for
by this Article XVIII,
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 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.

 

XIX.                       TAXES, PERMITS AND LICENSES

 

A.            TRANSACTION
TAXES

 

Contractor
agrees 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 Contractor’s
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 revenues, net income or any franchise tax). 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 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, reasonably
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,

 

47

 

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 of Contractor’s employees.  United acknowledges that it is 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 of 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 non-binding recommended resolutions of the ATA, which are adopted by
United.

 

XX.                           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
that satisfies all FAA regulations.  In
addition, upon request by United, 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.

 

XXI.                       JURISDICTION

 

With respect
to any lawsuit, action, proceeding or claim relating to this Agreement or any
other agreement between United and Contractor (hereinafter, any such lawsuit,
action, proceeding or claim is referred to as a “Lawsuit”), each of the
parties 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 either 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.

 

XXII.                   NOTICES

 

Any and all
notices, approvals or demands required to be given in writing by the parties
hereto will be sufficient if sent by facsimile, 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

 

48

 

Elk Grove Township, Illinois 60007

Attn:  – Director, United Express 

Fax:  847-364-6728

 

and to
Contractor, addressed to:

 

SkyWest Airlines 

Street Address: 444 S. River Road

City, State: St. George, UT 84790

Attn: VP Planning

Fax:  435-634-3305

 

or to such
other addresses in the continental United States as the parties may specify in
writing.

 

XXIII.               APPROVALS AND WAIVERS

 

A.            Whenever
this Agreement requires the prior approval or consent of United, Contractor
will make a timely request to United therefore 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
therefore.

 

C.            Except
as otherwise provided for in this Agreement, 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.

 

XXIV.              GOVERNING LAW

 

This Agreement
and any dispute arising hereunder, including any action in tort, will be
governed by and construed and enforced in accordance with the internal laws of
the State of Illinois.

 

XXV.                  CUMULATIVE REMEDIES

 

Unless and to
the extent as may be otherwise expressly stated in this Agreement, no right or
remedy conferred upon or reserved to Contractor or United by this Agreement is
intended to be, nor shall

 

49

 

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.

 

XXVI.              FORCE MAJEURE

 

A.            FORCE
MAJEURE

 

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, individually or collectively, “Force Majeure” events
beyond the control of Contractor or United.

 

B.            EFFECT
ON MARKUP

 

****

 

XXVII.          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.

 

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.

 

XXVIII.        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
the Appendices hereto.

 

XXIX.              CONFIDENTIALITY

 

A.            Except
as required by law (including federal or state securities laws or regulations)
or by the rules and regulations of any stock exchange or association on which
securities of either party or any of its affiliates are traded, 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 (including federal or state securities laws or regulations)
or by the rules and regulations of any stock exchange or association on which
securities of either party or any of its affiliates are traded, 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

 

50

 

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 Article XXVIII.A or Article 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.

 

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.

 

XXX.                  RELATED AND THIRD PARTY AGREEMENTS

 

A.            United
and Contractor shall enter into agreements listed below in this Article XXX
(the “Related Agreements”). All such Related Agreements will
automatically terminate contemporaneously with the termination of this
Agreement unless termination shall otherwise be effected in accordance with the
terms of such Related Agreements.

 

1.               Reciprocal
Interline Agreement/Space Available Employee and Eligible Travel Agreement
(United Contract No. 145808 dated 1 January 2000)

 

2.               United Express
Positive Space Travel Agreement (United Contract No.  XXXXXX)

 

3.               Emergency Response
Services Agreement (United Contract No. 137336 dated 13 October 1997)

 

XXXI.              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 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.

 

XXXII.          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
calendar quarter; provided that the first “quarter” of this Agreement shall commence
on the Effective Date and terminate on the last day of the calendar quarter in
which the Effective Date occurs. 
Calendar quarters shall be January 1 through March 31,
April 1 through June 30, July 1 through September 30, and
October 1 through December 31.

 

51

 

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.

 

52

 

XXXIII.      SIGNATURES

 

 

	
  SKYWEST AIRLINES,
  INC.

  	
   

  	
  UNITED AIR LINES, INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Bradford R. Rich

  	
   

  	
  Name: Gregory T. Taylor

  
	
   

  	
   

  	
   

  
	
  Title: Executive Vice President, Chief Financial Officer

  	
   

  	
  Title: Senior Vice President - Planning

  
	
   

  	
   

  	
   

  
	
  And Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  And

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: Eric D. Christensen

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: Vice
  President - Planning

  	
   

  	
   

  
											

 

53

 

APPENDIX A

 

UNITED 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

 

54

 

APPENDIX B

 

CONTRACT AIRCRAFT
FLEET PLAN

 

 

****

 

55

 

APPENDIX C

 

GROUND HANDLING

 

****

 

56

 

APPENDIX D

 

CONTRACTOR SUPPORT
SERVICES

 

At all
locations not set forth on Appendix C 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 or other government
agencies 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.

 

57

 

APPENDIX E

 

REIMBURSEMENT
CATEGORIES

 

United shall
pay Contractor the following Reimbursement Category Unit Rates for Contractor’s
United Express flights operated using the aircraft set forth below:

 

RJ Unit Rates

 

	
  Category

  	
   

  	
  Carrier
  Controlled Costs

  	
   

  	
  Unit
  (Driver)

  	
   

  	
  Carrier

  Controlled

  Costs

  (Current)

  	
   

  	
  Carrier

  Controlled

  Cost

  (Growth)

  	
   

  	
  Carrier

  Controlled

  Cost

  (Growth)

  	
   

  	
  Annual

  Adjustment

  Factor*

  
	
  CRJ-200s

  	
   

  	
  CRJ-200s

  	
   

  	
  CRJ-700s

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  

 

 

REIMBURSEMENT
CATEGORIES

 

TurboProp Unit Rates

 

	
  Category

  	
   

  	
  Carrier
  Controlled Costs

  	
   

  	
  Unit
  (Driver)

  	
   

  	
  Controlled

  Costs (Current)

  	
   

  	
  Annual

  Adjustment

  Factor*

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  

 

58

 

DEFINITIONS

 

Cost Type:  Non-station Carrier Controlled

 

	
  Costs

  	
   

  	
  Includes

  	
   

  	
  Does not include

  
	
  (1) Captains &
  FO’s

  	
   

  	
  Wages,
  benefits
  (including health insurance, pensions, 401k, and any other benefits) and incentives
  (including profit-sharing and bonuses and any other incentives) for all paid
  hours

  Hours:
  Includes hours worked, including hours for reserve employees, overtime,
  vacation and sick days

  Tenure:
  Wages should be taken at the tenure of the employees for whom you plan to
  charge UAX Assume paybanding for RJ50 and RJ70

  	
   

  	
  Management or schedulers for this employee category.  Overhead of any kind (corporate or
  otherwise).  Hours do not include those paid for
  training.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (2) Flight
  Attendants

  	
   

  	
  Wages, benefits
  (including health insurance, pensions, 401k, and any other benefits) and incentives
  (including profit-sharing and bonuses and any other incentives) for all paid
  hours

  Hours:
  Includes hours worked, including hours for reserve employees, overtime,
  vacation and sick days

  Tenure:
  Wages should be taken at the tenure of the employees for whom you plan to
  charge UAX Assume paybanding for RJ50 and RJ70

  	
   

  	
  Management or schedulers for this employee category.  Overhead of any kind (corporate or
  otherwise).  Hours do not include those paid for
  training.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (3) Training
  (Recurring & Attrition)

  	
   

  	
  Training expense that occurs annually for all types of employees, new
  planes or attrition.  Excluding
  expenses associated with bringing new aircraft into the system. Includes: Labor payments
  to those employees being trained (including all types of charges mentioned in
  definitions 1 +2).  Trainer
  time and salary.  Equipment and facility
  rental. Training
  administration costs associated with recurring training.  Any training materials required.

  	
   

  	
  Any one-time training (i.e. for new planes) or training
  administration associated with one-time training.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (4) Maintenance
  (excluding management & overhead)

  	
   

  	
  Maintenance labor for mechanics, parts clerks, etc.
  including base wages, benefits and incentives (including premiums for
  longevity, geography, certificates/licenses, etc.).  Hours should include vacation and sick days.  Weighted average tenure should be taken
  into account.

  Also
  includes: Parts, tools, other personnel expenses, and outsourced
  maintenance (components, line, engine, airframe, C&D checks, avionics,
  APU)

  Net of:
  Warranty reimbursement Carrier must specify if they are charging
  out-sourced maintenance at average life or on a cash basis

  Tenure:
  Wages should be taken at the tenure of the employees for whom you plan to
  charge UAX

  	
   

  	
  Maintenance overhead (including hangar rent) or management.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (5) RON (Rest over
  night)

  	
   

  	
  Hotel, transportation, and per diem for pilots and FAs

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (6) Interrupted
  trip expense

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (7) Catering and
  on-board service

  	
   

  	
  Includes all cost associated for providing food (snack and beverage
  service) for passengers (into-plane cost)

  	
   

  	
  Excludes liquor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (8) Crew scheduling

  	
   

  	
  All personnel, systems and other costs associated with crew
  scheduling functions

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (9) Dispatch/flight
  operations center

  	
   

  	
  Flight operations center and all costs associated with it including
  personnel, facilities, management and systems

  	
   

  	
   

  

 

59

 

	
  (10) Corporate
  overhead

  	
   

  	
  HQ:
  Corporate real estate, labor, employee screening and administration.

  Other: Out-sourced services, other depreciation (excluding A/C and GSE
  depreciation) and any other overhead costs spread over multiple cost
  categories (e.g. memberships, office supplies, employee testing,
  IT, other repairs and maintenance, software licensing, parking, safety
  office, flight standards, communications, etc.); includes non-plane interest
  expense if applicable

  	
   

  	
  Excludes A/C and GSE depreciation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (11) Maintenance
  overhead & management

  	
   

  	
  Hangar rent, management, maintenance facilities rent, maintenance
  scheduling VP maintenance

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (12) Pilot admin
  & mgmt

  	
   

  	
  Administration and management

  	
   

  	
  Scheduling (included in #8)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (13) FA admin &
  mgmt

  	
   

  	
  Administration and management

  	
   

  	
  Scheduling (included in #8)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (14) AC ownership

  	
   

  	
  Lease, depreciation, other financing expense, related start-up

  	
   

  	
  Ownership expense before AC in schedule (included in “AC related
  start-up”)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (15) Hull Insurance

  	
   

  	
  Straight hull insurance expense

  	
   

  	
  Insurance administration

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (16) Uniform
  cleaning

  	
   

  	
  Cleaning expense only

  	
   

  	
  Overhead of any kind (corporate or otherwise).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (17) Spare engines

  	
   

  	
  Spare engine ownership expense

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (18) Domicile
  set-up

  	
   

  	
  Includes pilot moving

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (19) Training
  startup (ramp-up)

  	
   

  	
  Training expense that occurs due to new planes taken on. Includes: Labor
  payments to those employees being trained (calculated as in #1 and 2).  Trainer time and salary.  Equipment and facility rental. Training administration
  costs associated with one-time training. 
  Any training materials required. Uniforms &
  headsets. Pilot navigational charts.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (20) Maintenance
  facilities set-up

  	
   

  	
  Will be determined on a case by case basis

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (21) Markup on
  current flying

  	
   

  	
  Best offer’ markup for all of carrier’s existing flying and stations

  	
   

  	
   

  

 

Cost Type:  Non-station Pass-through

 

	
  Costs

  	
   

  	
  Includes

  	
   

  	
  Does not include

  
	
  (22) Fuel & oil

  	
   

  	
  Into-plane cost

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (23) Landing Fees

  	
   

  	
  All landing fees given scheduled stations

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (24) 3rd party was
  risk insurance

  	
   

  	
  War risk insurance

  	
   

  	
  Hull insurance (included above)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (25) PAX liability

  	
   

  	
  Passenger liability insurance

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (26) Branded
  station supplies

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (27) Aircraft
  Property Taxes

  	
   

  	
  All property taxes for aircraft given states flown and landed

  	
   

  	
   

  

 

60

 

Cost Type:  Station Carrier Controlled

 

	
  Costs

  	
   

  	
  Includes

  	
   

  	
  Does not include

  
	
  (28) Station labor

  	
   

  	
  All station employees (above- and below-the-wing) pay including:
  Wages, benefits (including health insurance, pensions, 401k, and any other
  benefits) and incentives (including profit-sharing and bonuses and any other
  incentives) for all paid hours

  Hours: Includes hours worked, including hours for reserve employees,
  overtime, vacation and sick days

  Tenure: Wages should be taken at the tenure of the employees for whom you
  plan to charge UAX Assume paybanding for RJ50 and RJ70

  	
   

  	
  Management or schedulers for this employee category.  Overhead of any kind (corporate or
  otherwise).  Hours do not include
  those paid for training.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (29) FBO expense

  	
   

  	
  Any station sub-contracted 
  work excluding maintenance, maintenance cleaning and including if it’s
  contracted to another airline

  	
   

  	
  Services provided by UA or other carriers (see line 36)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (30) Security
  Expense

  	
   

  	
  TSA and other station security

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (31) Other station
  costs

  	
   

  	
  Station repairs, telecom, skycap, wheelchair, janitorial, personnel
  costs

  	
   

  	
  Any labor

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (32) GSE expense

  	
   

  	
  GSE rent, lease and/or depreciation. GSE maintenance (labor, parts)
  and GSE fuel.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (34) Local
  Management (shift supervisors & mgmt.)

  	
   

  	
  Station management and shift supervisors

  	
   

  	
  Corporate OH or management

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (35) Local Overhead
  (office space rent, office supplies, etc.)

  	
   

  	
  Other station local overhead (e.g. office supplies, utilities, office
  space rent)

  	
   

  	
  Corporate OH

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (36) Station
  handling costs paid to other carriers

  	
   

  	
  Any labor service or other services provided by United or other  carriers

  	
   

  	
   

  

 

Cost Type:  Station Pass-through

 

	
  Costs

  	
   

  	
  Includes

  	
   

  	
  Does not include

  
	
  (33) Terminal rent

  	
   

  	
  Terminal rent

  	
   

  	
  Hangar rent or terminal office rent

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (37) De-icing

  	
   

  	
  Glycol expense (onto-plane, if not included in FBO)

  	
   

  	
   

  

 

61

 

MARKUP TABLE

 

	
   

  	
   

  	
  Current

  CRJ-200

  	
   

  	
  Growth

  CRJ-200

  	
   

  	
  Growth

  CRJ-700

  	
   

  
	
  A

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  B

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  C

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  D

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  ****

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B

  	
   

  	
  ****

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C

  	
   

  	
  ****

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D

  	
   

  	
  ****

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

62

 

APPENDIX F

 

INCENTIVE PROGRAM

 

Performance
Grade Widths For Annual Operating Goals In Years When United Mainline
Performance In Previous Year Exceeds United Express Best Practice Performance
in Previous Year

 

	
   

  	
   

  	
  Bottom of

  A Equals

  	
   

  	
  Bottom Of

  B*

  	
   

  	
  Bottom Of

  C

  	
   

  	
  Level D

  	
   

  
	
  Controllable Completion

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  On-Time Zero

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Mishandled Bags

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Repurchase Intent

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  

 

*W, X, Y, Z = Contractor’s Monthly Operating Goal for the Operating
Category

 

Performance
Grade Widths For Annual Operating Goals Years When United Mainline Performance
In Previous Year Falls Below United Express Best Practice Performance in
Previous Year

 

	
   

  	
   

  	
  Bottom of

  A Equals

  	
   

  	
  Bottom Of

  B*

  	
   

  	
  Bottom Of

  C

  	
   

  	
  Level D

  	
   

  
	
  Controllable Completion

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  On-Time Zero

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Mishandled Bags

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Repurchase Intent

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  

 

*A, B, C, D = Contractor’s Monthly Operating Goal for the Operating
Category

 

63

 

INCENTIVE PROGRAM

 

Schedule 1:

 Example for Current CRJ-200 Flying

 

	
   

  	
   

  	
  Markup Points By Performance Level

  	
   

  	
  Metric

  Weight

  	
   

  
	
  Performance Metric

  	
   

  	
  A

  	
   

  	
  B

  	
   

  	
  C

  	
   

  	
  D

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Controllable
  Flight Completion

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ontime Zero

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mishandled
  Bags

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Repurchase
  Intent

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

64

 

APPENDIX G

 

LIABILITY INSURANCE

 

Issued by:

 

Date of Issue:

 

THIS IS TO
CERTIFY TO: UNITED AIR LINES, INC.

 

that Insurers
are providing 100% of the following Aircraft Hull & Liability Insurances:

 

	
  NAME INSURED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PERIOD OF INSURANCE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  INSURERS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  POLICY NUMBER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GEOGRAPHICAL LIMITS:

  	
   

  	
  Worldwide Hull War limited to Western Hemisphere with commercial
  insurance; territorial limitations not defined in FAA policy.

  
	
   

  	
   

  	
   

  
	
  AIRCRAFT INSURED:

  	
   

  	
  All aircraft owned or operated by the Named Insured.

  
	
   

  	
   

  	
   

  
	
  DESCRIPTION OF COVERAGE:

  	
   

  	
  Comprehensive Airline Liability Insurance, Contractual Liability,
  including Aircraft Liability, Passenger Liability, War Risk should the FAA
  stop carrying it, including both Passengers and Other Third Parties, Cargo
  Liability and Comprehensive General Liability, including Hangarkeepers,
  Excess Automobile, Host Liquor Liability, Personal Injury, and Products
  Liability/Completed Operations coverage. 
  All Risk Physical Damage Hull Coverage.

  
	
   

  	
   

  	
   

  
	
  LIMIT OF LIABILITY

  	
   

  	
  Combined Single Limits to be specified consistent with Article XI1.
  Aircraft Hull All Risk per the Agreed Value, or up to **** per added
  aircraft.

  

 

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, (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.

 

65

 

2.               United,
its affiliates, and their respective directors, officers, employees, agents and
indemnities are named as additional 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 indemnities, 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 indemnities, 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 indemnities
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 indemnities for at least thirty (30) days
(ten (10) days in the case of non-payment of premiums, seven (7) days notice of
cancellation with respect to war risk) after written notice by registered mail
of such cancellation, change or lapse shall have been mailed to 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.

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  
	
  Authorized
  Representative:

  	
   

  	
   

  
					

 

66

 

APPENDIX H

 

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:

 

Contractor represents and warrants that it is
in compliance with the U.S. Department of Defense (DoD) Quality and Safety
Requirements (and any other applicable governmental quality or safety
requirement) and continues to comply with all applicable Federal Aviation
Regulations (F.A.R.). Contractor further warrants that it shall maintain
compliance with these requirements for the term of this Agreement. Any failure
to maintain such compliance shall immediately be brought to United’s attention
together with the corrective actions taken by Contractor or a correction action
plan. Any non-compliance with any safety requirements or corrective action
plans shall be grounds for partial or complete suspension or termination by
United, without further liability, of this Agreement or any of the terms or
conditions of this Agreement; but, with reservation of all other rights and
remedies available to United. 
Additional safety reviews and audits may be required at United’s
discretion and Contractor shall cooperate with all such reviews and audits.

 

In addition,
Contractor agrees to the following:

 

•                  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 Senior
Management 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 forum.

 

67

 

APPENDIX I

 

UNITED EXPRESS
SERVICE STANDARDS

 

These Service
Standards are meant to provide an overview for United Express carriers of the
service expectations established by United Airlines for the day-to-day delivery
of United’s product. This document is not intended to be an all inclusive
manual of regulations, but to instead serve as a simple, helpful source of
information.  The Service Standards
outlined herein may change from time to time, subject to the needs of the
operation and our product delivery. Any changes to these standards are at the
sole discretion of United Airlines and are not subject to contractual
negotiations.  Provided, however, the
parties have agreed to specific performance goals in this Agreement and nothing
shall be altered or changed that otherwise affects the economics of the Agreement.

 

It is the responsibility of each United Express carrier to maintain an
adequate number of employees at each location and support group or department
and to operate in a safe and reliable manner, which serves the customer at the
levels of service outlined by these Service Standards.

 

CUSTOMER SERVICE

 

Uniforms: United Express employees are
required to wear the United designated uniform for Customer Service personnel.
There is to be no deviation from this uniform and it is to be worn at all times
while on duty. Employees in uniform, on or off duty are not allowed to drink
intoxicating beverages, give the appearance of being intoxicated or visit any
establishment whose primary purpose is to dispense liquor (e.g. bars, saloons,
cocktail lounges, liquor stores). “Uniform” refers to any uniform apparel
bearing the United brand or insignia, or which can be in any way identified
with United Airlines or United Express. Because the actions and appearance of
employees influence, to a considerable extent, the public’s opinion of the
United brand, uniformed employees must be mindful of this and conduct
themselves accordingly.  For complete
information on the uniform and accessory items, review the Customer Service
Uniform Appearance Guidelines.

 

Training: Each United Express carrier is
responsible to train all Customer Service Representative (CSR) employees,
including employees of another carrier who may be contracted to perform these
duties, using the same training modules and computer assisted training provided
by United Airlines. This training will include, but is not limited to, all
functional aspects for customer handling at the ticket counter, gate, or
baggage service.

 

•                  United Airlines
will provide the necessary “Train the Trainer” support, but it is the responsibility
of each United Express carrier to maintain trainer proficiency, knowledge and
skill level.

•                  Each new hire
CSR, or newly assigned CSR, must receive formal United Express customer service
training as soon as possible, but not later than 30 days after the date of
employment or date of assignment. In either case, training must be specific to
the employee’s job function and task assignment. An employee may not work in an
area in which he or she has not been properly trained.

•                  Each CSR must
maintain proficiency in product knowledge, delivery and skill level.

•                  Each United
Express carrier may add to the United training curriculum to meet its
individual carrier needs, but it may not delete any portion of the United
designated curriculum without written approval by United Airlines.

•                  All CSRs must
complete TL17/17 lessons each week within 7 days of issuance.

 

68

 

Service Delivery: In the most basic
interaction with the customer, United’s service standards encompass the
foundation of service, which is: 1) Greet the customer. 2) Use the customer’s
name. 3) Listen to the customers and respond to their needs. 4) Give direction
to the next step. 5) Acknowledge the customer’s importance to United and thank
them for flying United Express.

 

Goals:

****

 

Service Tools:  Customer Problem Resolution, or CPR, was created as a means to
provide customer service employees with the ability to resolve customer
problems on the spot, as they occur. CPR may include certificates for a free
drink, a credit of Mileage Plus miles to a customer’s Mileage Plus account, or
a Travel Certificate to be used towards the purchase of future airline tickets.
Other tools may also include accommodation vouchers for hotels, cab/bus, or
meals. It is the responsibility of the United Express carrier to use and manage
these tools within United Airlines guidelines. The United Express carrier is
accountable for the safeguarding and appropriate use of these very important
customer tools.  The Express carriers
are responsible for cost associated with any accommodation vouchers written as
a result of Contractor’s failure to complete a flight within 3 hours of
scheduled completion time as a result of mechanical issues or crew delays.

 

Flight Close Out:  All flights must be closed out in Apollo/ACI immediately after
departure.  This includes making the
appropriate PB, PFS and PD entries.  All
passenger counts, including revenue and non-revenue passengers, denied
boardings, as well as an accounting of any bags held off due to weight/space
restrictions, should be noted in the open comments field of the flight close
out message. Flight close out must be completed within 10 minutes of flight
departure.

 

Flight Information (FLIFO):  All flights must be updated with
OUT/OFF/ON/IN times within ten (10) minutes of actual occurrence to ensure
accurate information to customers and to employees making operational
decisions.  ETAs and ETDs must also be
entered within ten (10) minutes of the scheduled departure/arrival, and at
every 10 minute interval thereafter for ongoing or rolling delayed flights.

 

Customer Service Supplies:  Each carrier must maintain an adequate
amount of Customer Service supplies to conduct its day-to-day business
operation. Each United Express carrier will use United Airlines designated
supplies and vendors and is responsible for the purchase of those supplies,
except where United handles that carrier.

 

RAMP SERVICE

 

Uniforms: United
Express employees are required to wear the United designated uniform for Ramp
Service personnel. There is to be no deviation from this uniform and it is to
be worn at all times while on duty. Employees in uniform, on or off duty are
not allowed to drink intoxicating beverages, give the appearance of being
intoxicated or visit any establishment whose primary purpose is to dispense
liquor (e.g. bars, saloons, cocktail lounges, liquor stores). “Uniform” refers
to any uniform apparel bearing the United brand or insignia, or which can be in
any way identified with United Airlines or United Express. Because the actions
and appearance of employees influence, to a considerable extent, the public’s
opinion of the United brand, uniformed employees must be mindful of this and
conduct themselves accordingly.

 

•                  In a line
station, employees may combine pieces of the customer service uniform with
pieces of the ramp uniform as long as the shirt or blouse is either the
customer service shirt or blouse, or the ramp knit shirt.

•                  In a hub
station, ramp personal must wear combinations of the United ramp uniform only.

 

69

 

For a review of the Ramp Service uniform, review the Ramp Service
Uniform Guide.

 

Training: 
It is the responsibility of each United Express carrier to train its
Ramp Service employees, including employees of another carrier who may be
contracted to perform these duties. This training will include, but is not
limited to, load planning, baggage handling, ramp safety and security, ramp
driving, aircraft familiarization, aircraft servicing, receipt and dispatch of
aircraft, baggage make-up, baggage transfer, claim area delivery, baggage
scanning, live animal handling, dangerous goods and aircraft de-icing.

 

•                  Each new hire,
or newly assigned Ramp Service employee, must receive formalized training as
soon as possible, but not later than 30 days after his or her date of
employment or date of assignment.

•                  Each Ramp
Service employee must maintain product and delivery proficiency, knowledge and
skill level.

 

Baggage Transfer: In a Hub or connecting
station, each United Express carrier is responsible for the transfer of all
baggage/mail/cargo to United and other airlines.  Transferred bags are delivered as follows:

 

•                  Carry-on
(security checked) bags placed in the pit/hold, are to be removed and delivered
to the customers immediately at planeside.

•                  ‘City Bags’ are
to be delivered directly to the baggage claim area.

•                  ‘Hot Bags’,
whose window of time is determined on a local level by United Airlines, are to
be delivered to the connecting flight at the gate. The gate drop point is to be
determined locally by United.

•                  ‘Cold Bags’,
bags outside the Hot Bag window, are to be delivered to the designated sorter
belt or transfer point.

•                  ‘Interline Bags’
are to be delivered to the designated interline drop point.

 

Goals:

 

•                  Claim Area
Baggage Delivery: ****

•                  Scanning:
****

•                  MBTA ****

•                  Message or
meter to downline station with the transfer bag loading placements referred to
as XBUE (Express Baggage loading message): ****

•                  Baggage
Loading Audits:****

 

Ground Handling: United Express carriers are
responsible for obtaining all applicable federal, state, and local regulatory
approvals for conducting business at each location from which they
operate.  In addition, carriers will
ensure their ground handling procedures will satisfy all federal, state, and
local regulations. Each carrier will provide United with a copy of its station
and ground handling procedures.

 

From time to time, it may become necessary for United to ground handle
United Express, or on very limited occasions for United Express carriers to
ground handle United.. It is the responsibility of the operating carrier to
train the ground handling carrier in all aspects of the required work to be
performed. Such work may include, but is not limited to:

 

70

 

•                  Receipt and
dispatch of aircraft, ramp safety, ramp driving, aircraft differences, aircraft
servicing (potable water and lavatory), aircraft cleaning, towing, baggage
handling, baggage loading and transferring, live animal handling, deicing,
weight and balance, and dangerous goods.

 

Required training may be done one-on-one, group, or train-the-trainer.
In the case of train-the-trainer, it is then the responsibility of the
ground-handling carrier to train other additional personnel. The ground
handling carrier will ensure that proper training records are initiated,
retained and current.

 

The ground-handling carrier will ensure that all required licenses and
logs are maintained and retained as necessary.

 

Each carrier is responsible for acquiring its required licenses.

 

The ground handling carrier will cooperate with any required
governmental or corporate inspection or audit, and will promptly correct any
deficiencies found.

 

The operating carrier is responsible for managing all performance
related criteria. However, the ground handling carrier will make every “best
faith” effort to ensure that all performance requirements are met.

 

The ground handling carrier agrees to keep the operating carrier informed
of any deficiencies, irregularities and breach of procedures or problems of any
type that may negatively impact the operating carrier or its operating
certificate.

 

The ground handling carrier will immediately advise the operating
carrier of any material change in space, parking location, manpower, or any
other shortcoming that may impact either carrier’s operation or costs.

 

The ground handling carrier will use its own ground equipment wherever
possible. However, if additional equipment is needed or specialized equipment
for a particular aircraft type or task is needed, it is the responsibility of
the operating carrier to provide said equipment at no cost to the ground
handler. Any incremental increase in cost associated with ground handling another
carrier will be borne by the operating carrier.

 

IN FLIGHT

 

Uniforms: United Express Flight Attendants are
required to wear the professional uniform designated for flight attendants by
United. There is to be no deviation from this uniform and it is to be worn at
all times while on duty. Employees in uniform, on or off duty are not allowed
to drink intoxicating beverages, give the appearance of being intoxicated or
visit any establishment whose primary purpose is to dispense liquor (e.g. bars,
saloons, cocktail lounges, liquor stores). “Uniform” refers to any uniform
apparel bearing the United brand or insignia, or which can be in any way
identified with United Airlines or United Express. Because the actions and
appearance of employees influence, to a considerable extent, the public’s
opinion of the United brand, uniformed employees must be mindful of this and
conduct themselves accordingly. For complete information on the uniform and
accessory items, review the Customer Service Uniform Appearance Guidelines.

 

Training:  It is the responsibility of each United Express carrier to train
its own Flight Attendants in accordance with its FAA-certified program.

 

71

 

In Flight Service:

 

•                  Wherever
possible, snack and beverage items should be consistent with the products
served by United Airlines.  United
acknowledges that Contractor has priced its rates for inflight service on soda
and peanut-like snacks.

•                  Each United
Express aircraft will be supplied by United with an adequate supply of
Hemispheres and SkyMall Magazines. Hemisphere magazine, SkyMall magazine, and
Contractor’s inflight magazine are the only magazines authorized in the seat
pockets. Exceptions must be approved in writing by United.  United reserves to request SkyMall to be
removed from Contractor’s United Express flights at any time.

•                  In all on board
announcements, it is appropriate to announce the United Express carrier’s name,
but the name “United Express” must be included. For example, “On behalf of SkyWest
Airlines, we would like to thank you for flying United Express today”.

•                  While a
contracted carrier provides basic announcements, United may request that United
Express make promotional announcements on behalf of United from time to time.
Such requests will be honored and executed by the United Express carrier.

 

OPERATIONAL GOALS

 

There are four (4) primary operational Goals that each United Express
carrier is expected to achieve: On-time-zero; Completion (less Weather/ATC/UA
Requested Cancellations); MBTA, and Repurchase Intent. These goals are set at
the beginning of each calendar year and may be adjusted year over year. In
addition, other target goals may be added to help improve the operation, such
as: STAR, Arrival: 14, Block Time, etc. It is expected that each carrier will
use commercially reasonable, but diligent, efforts to achieve these goals,
whether contractual or otherwise. Such goals may be changed or added to, as
operational needs demand.

 

•                  Controllable
Completion: The Controllable flight completion goal shall be defined
as to exclude all cancellations due to weather, ATC restrictions, acts or
omissions caused by United or its employees or agents, cancellations resulting
from emergency airworthiness directives, and requests made by United to cancel
flights to free up ATC slots.

•                  On Time
Zero: The On Time Zero goal is the carriers system wide On Time
Performance.

•                  Mishandled
Baggage-MBTA: (See above definition)

 

Repurchase Intent (RPI) – Marketrak:   United Airlines receives feedback from our
customers through the “Marketrak” survey program on their satisfaction in
flying United Express flights. Each United Express carrier must participate
fully in this program.  Ratings for RPI
are not compared between carriers. Each carrier’s individual rating is compared
to its own historical performance.

 

•                  Repurchase
Intent (RPI):  RPI is based
upon customer response to their intent to repurchase or use again United
Express services as reflected in the Marketrak survey

 

MISCELLANEOUS

 

ACARS: 
Each United Express carrier is to use an ACARS system on all United
Express flights for the purpose of providing timely and accurate Flight
Information (FLIFO).

 

Signage: 
It is the responsibility of each United Express carrier to provide
appropriate and adequate brand signage, which is designated and approved by
United Airlines.  Brand name(s) to be
used on signage is as follows:

 

72

 

•                  United
Handled City: All signage will reflect the United Airlines brand.
United Express signs may be used at the departure gate for United Express
flights at the discretion of United.

•                  Shared
United/United Express Handled City: All signage at the ticket
counter will reflect the United Airlines brand. Signage at the United Express
handled gate(s) will reflect the United Express brand. Signage on the approach
to the airport and on the curb to the airport terminal will primarily reflect
United Airlines, but may, if appropriate, reflect United Express as well.

•                  United
Express Handled City: All signage will reflect the United Express
brand.

 

It is the responsibility of the United Express carrier to ensure that
all federally mandated signage is in place in accordance with regulations.

 

Small Package Dispatch (SPD):  United Express carriers will participate in
United’s SPD program, accepting SPD shipments at the ticket counter up to 30
minutes prior to the departure of each flight and returning SPD shipments to
the designated delivery point within 30 minutes of the arrival of each flight.

 

U.S. Mail: 
United Express carriers will participate with United in the
transportation of U.S. Mail in accordance with applicable guidelines. Each
United Express carrier will work with United in obtaining USPS Air System Contracts
for United designated market.

 

Station Operations Center (SOC) – Hub Locations:
Each United Express carrier will provide adequate staffing in the United
Airlines SOC of each designated hub city. Such Staffing will be provided during
all normal hours of operation.

 

73

 

APPENDIX J

 

GROUND STATION HANDLING RATES

 

 

****

 

74

 

APPENDIX K

 

OFFICER POSITION’S
ENTITLED TO POSITIVE SPACE LEISURE TRAVEL ON

CONTRACTOR’S UNITED EXPRESS FLIGHTS

 

Jerry C. Atkin
CEO and President

 

Bradford R. Rich
Executive Vice President, CFO and Treasurer

 

Ron B. Reber
Executive Vice President and COO

 

75

 

APPENDIX L

 

POINT TO POINT CITY
PAIRS

 

	
  City Pair

  	
   

  	
  Daily
  Roundtrips

  	
   

  	
  Aircraft *

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FAT - ONT

  	
   

  	
  4

  	
   

  	
  EMB120

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LAS - FAT

  	
   

  	
  4

  	
   

  	
  EMB120

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LAS - PSP

  	
   

  	
  3

  	
   

  	
  EMB120

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LAX - SGU

  	
   

  	
  1

  	
   

  	
  EMB120

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SAN - BUR

  	
   

  	
  6

  	
   

  	
  EMB120

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SAN - SBA

  	
   

  	
  3

  	
   

  	
  EMB120

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SBA - SJC

  	
   

  	
  5

  	
   

  	
  EMB120

  

 

*                                         Contractor’s
regional jet aircraft are not included in these operations.

 

76

 

APPENDIX M

 

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
L are as follows:

 

 

	
  Travel Date

  	
   

  	
  Program
  Fee

  	
   

  	
  Annual
  Adjustment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  

 

77

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