AIRPORT OPERATING AGREEMENT McGhee Tyson Airport Dated as of January 31, 2003 Between Metropolitan Knoxville Airport Authority and SkyWest Airlines, Inc.
TABLE OF CONTENTS ARTICLE 1 DEFINITIONS...2 Section 1.01 Affiliate...2 Section 1.02 Agreement...3 Section 1.03 Aircraft Arrival(s)...3 Section 1.04 Aircraft Loading Bridge(s)...3 Section 1.05 Aircraft Operator...3 Section 1.06 Aircraft Parking Position(s)...3 Section 1.07 Airfield...3 Section 1.08 Airport...3 Section 1.09 Air Transportation...4 Section 1.10 "Authority...4 Section 1.11 Certificated Maximum Gross Landing Weight...4 Section 1.12 Common Use Premises...4 Section 1.13 Common Use Formula...4 Section 1.14 Concourse...5 Section 1.15 Concourse Gate Position...5 Section 1.16 Enplaned Passengers...5 Section 1.17 Exclusive Use Premises...5 Section 1.18 FAA...5 Section 1.19 Fiscal Year...5 Section 1.20 Host Airline...5 Section 1.21 Joint Use Premises...5 Section 1.22 Joint Use Formula...6 Section 1.23 Knoxville Airport Lease and Use Agreement...6 Section 1.24 Landing Fee(s)...6 Section 1.25 Landing Fee Rate...6 Section 1.26 Non-Preferential User...6 Section 1.27 Passenger Hold Room...6 Section 1.28 Passenger Facilities Charge...6 Section 1.29 Preferential Assignment...7 Section 1.30 Preferential Use Premises...7 Section 1.31 Preferential Use Formula...7 Section 1.32 Premises...7 Section 1.33 President of the Authority...7 Section 1.34 Revenue Passengers...8 Section 1.35 Signatory Airlines...8 Section 1.36 Terminal Building...8 Section 1.37 Terminal Complex...8 Section 1.38 Total Landed Weight...8 Section 1.39 TSA or "Transportation Security Administration"...8 ARTICLE 2 TERM...9 i
ARTICLE 3 RIGHTS OF AIRLINE...9 Section 3.01 Rights of Airline...9 Section 3.02 Airline Premises...11 ARTICLE 4 MAINTENANTCE, OPERATION, USE AND CONDTION OF AIRPORT 11 Section 4.01 Maintenance and Operation...11 Section 4.02 Alterations, Additions or Replacements...11 Section 4.03 Airport Security - Federal Aviation Regulations and TSA Regulations...11 Section 4.04 Porter Service...12 Section 4.05 Customer Service...12 ARTICLE 5 AIRLINE RATES AND CHARGES...12 Section 5.01 Rates and Charges....12 Section 5.02 Landing Fees...12 Section 5.03 Exclusive Use and Preferential Use Premises...13 Section 5.04 Joint Use Premises...13 Section 5.05 Common Use Premises...14 Section 5.06 Payment of Terminal Complex Rental Rates...14 ARTICLE 6 STATISTICAL INFORMATION...14 ARTICLE 7 OTHER FEES AND CHARGES...15 ARTICLE 8 RULES AND REGULATIONS...16 ARTICLE 9 INDEMNITY AND INSURANCE...17 Section 9.01 Indemnity...17 Section 9.02 Airline Public Liability Insurance...18 Section 9.03 Workers Compensation Insurance...18 Section 9.04 Airline Insurance On Automobiles And Other Ground Vehicles...19 Section 9.05 Certificate(s) of Insurance....19 ARTICLE 10 ASSIGNMENT AND SUB-USE...20 ARTICLE 11 TAXES...20 ARTICLE 12 DEFAULT AND CANCELLATION...21 Section 12.01 Events of Default...21 Section 12.02 Remedies Upon Default...22 Section 12.03 Late Charges...22 ARTICLE 13 PROHIBITED USES...23 Section 13.01 Prohibited Uses...23 Section 13.02 Oil, Fuel and Other Materials....23 ii
ARTICLE 14 FEDERAL GRANTS AND NON-DISCRIMINATION...24 Section 14.01 Non-Discrimination...24 Section 14.02 Federal Grants...25 ARTICLE 15 MISCELLANEOUS...25 Section 15.01 Non-Waiver of Rights...25 Section 15.02 Invalidity of Clauses...26 Section 15.03 Headings...26 Section 15.04 Remedies...26 Section 15.05 Bankruptcy Provisions...26 Section 15.06 Governing Law...27 Section 15.07 Non-Liability...27 Section 15.08 Notices....27 Section 15.09 Exhibits...28 Section 15.10 Entire Agreement....28 EXHIBIT A TERMINAL COMPLEX 30 EXHIBIT A-1 EXCLUSIVE USE PREMISES 31 EXHIBIT A-2 PREFERENTIAL USE AND JOINT USE PREMISES 32 EXHIBIT A-3 COMMON USE PREMISES 33 iii
AIRPORT OPERATING AGREEMENT THIS AIRPORT OPERATING AGREEMENT ( Agreement ) made and entered into as of the 31 st day of January, 2003, by and between the METROPOLITAN KNOXVILLE AIRPORT AUTHORITY, a public corporation of the State of Tennessee ( Authority ) and Name of Airline: Address: SKYWEST AIRLINES, INC. 444 South River Road St. George, UT 84790 Steve Dwiggins Contact: Telephone: (435) 634-3426 Fax: (435) 634-3405 duly incorporated in Utah, and authorized to do business in the State of Tennessee, hereinafter referred to as Airline. W I T N E S S E T H: WHEREAS, Authority owns and operates the McGhee Tyson Airport, located in Blount County, Tennessee; and, under its governmental responsibilities, operates the Airport for the accommodation of air commerce and transportation; and WHEREAS, Authority has the right to lease and license the use of property on the Airport and has full power and authority to enter into this Agreement in respect thereof; and WHEREAS, Airline, as duly authorized by competent governmental authority, is engaged in the business of commercial air transportation of persons, property, cargo or mail at the Airport and elsewhere; and WHEREAS, Airline is an Affiliate, as hereinafter defined, of Delta Air Lines ( Host Airline ) and currently shares Exclusive and/or Preferentially Assigned space in the Terminal Page 1
Building with said Host Airline and requires certain rights and privileges in connection with its use of the Airport and the Terminal Complex, and the Authority is willing to assign, license and grant the same to Airline on the terms and conditions hereinafter stated; NOW, THEREFORE, for and in consideration of the agreements set forth herein, Authority and Airline do hereby covenant, agree and bind themselves as follows: ARTICLE 1 DEFINITIONS Capitalized terms used in this Agreement and not otherwise defined shall have the following meanings: Section 1.01 Affiliate means an airline that is either (i) the parent corporation of a Signatory Airline, or (ii) a wholly owned subsidiary of such Signatory Airline s parent corporation, or (iii) which is a wholly owned subsidiary of such Signatory Airline. In order for an airline to be an Affiliate hereunder, one party must own a controlling interest in the other. For purposes of this Agreement, an airline that is a party to a valid code sharing arrangement with a Signatory Airline, although not an Affiliate, will be treated as an Affiliate for the purpose of computing and invoicing such airline for its share of the Joint Use Premises and Common Use Premises. Airlines which do not share Exclusive Use or Preferential Use Premises with a Signatory Airline, and otherwise fail to satisfy the foregoing definition shall not be deemed to be an Affiliate for purpose of this Agreement. Affiliates must enter into an operating agreement with the Authority. Page 2
Agreement shall mean this Airport Operating Agreement including all Exhibits attached hereto, as amended from time to time. Section 1.02 Aircraft Arrival(s) shall mean the arrival at the Airport of any Aircraft Operator s aircraft. As long as Airline provides scheduled passenger service to the Airport, Aircraft Arrivals shall not include any flight that arrives at or returns to the Airport because of maintenance, mechanical, meteorological, or other precautionary reason. All flights conducted for aircrew training shall be considered an Aircraft Arrival and charged in accordance with the rate specified in Article 5 of this Agreement. Section 1.03 Aircraft Loading Bridge(s) or Loading Bridge(s) shall mean the enclosed second-level walkways connected to the Passenger Hold Rooms in the Terminal Complex by which passengers enplane and deplane parked aircraft. Section 1.04 Aircraft Operator shall mean any entity, including Airline, operating aircraft into and out of the Airport under Part 121 or Part 135 of the FARs, or the practical equivalent of said Parts, and using the Terminal Complex. Section 1.05 Aircraft Parking Position(s) shall mean the locations on the Terminal Complex Apron where aircraft park in order to enplane and deplane passengers. Section 1.06 Airfield shall mean those portions of the Airport which provide for the landing, takeoff, taxiing, movement, or staging of aircraft including navigational aids, hazard designation and warning devices, airfield security roads, fencing, lighting, runway protection zones, aviation easements and interests in property utilized in connection therewith. Section 1.07 Airport shall mean the McGhee Tyson Airport located in Blount County, Tennessee. Page 3
Section 1.08 Air Transportation shall mean the conduct of the business of commercial air transportation of persons, property, cargo and mail. Section 1.09 Authority shall mean the Metropolitan Knoxville Airport Authority, a public corporation of the State of Tennessee. Section 1.10 Certificated Maximum Gross Landing Weight or CMGLW shall mean the current maximum allowable gross landing weight, expressed in 1,000 pound units or fraction thereof, of aircraft operated by Airline and certificated by the Federal Aviation Administration. Section 1.11 Common Use Premises shall mean the baggage claim area and the functionally related equipment in the Terminal Building to be used in common by Airline and other Aircraft Operators. The Common Use Premises in the Terminal Building are described on Exhibit A-3. Section 1.12 Common Use Formula shall mean the formula used to allocate certain specified charges for the Common Use Premises among the Aircraft Operators such that 20% of such charge is allocated among all Aircraft Operators that use the Common Use Premises in equal shares and 80% of such charge is allocated to each Aircraft Operator in the proportion that its Enplaned Passengers at the Airport during the immediately preceding month bears to the Enplaned Passengers of all Aircraft Operators at the Airport during such month. For purposes of the allocation of the 20% charge, the term Aircraft Operators shall include Host Airlines and their Affiliates as a single entity. At the sole discretion of the Authority, the Common Use Charges of an Affiliate may be combined with the Common Use Charges of its Host Airline for billing purposes. Page 4
Section 1.13 Concourse shall mean the two-level building connected to the Main Terminal Building and used to enplane and deplane passengers. Section 1.14 Concourse Gate Position shall mean an Aircraft Parking Position, Loading Bridge (if any) and Passenger Hold Room in an area in the Concourse assigned to the Host Airline or another Aircraft Operator for the purpose of enplaning and/or deplaning passengers. Section 1.15 Enplaned Passengers shall mean the Revenue Passengers boarded on aircraft operated by Airline or other Aircraft Operators using the facility in question at the Airport during the period used for cost allocation. At the sole discretion of the Authority, the Enplaned Passengers of an Affiliate may be combined with the Enplaned Passengers of its Host Airline for purposes of such cost allocation. Section 1.16 Exclusive Use Premises shall mean those premises which Airline s Host Airline has the right to use exclusively. Affiliate s Host Airline s Exclusive Use Premises in the Terminal Building are described on Exhibit A-1. Section 1.17 FAA or Federal Aviation Administration shall mean the Federal Aviation Administration created under the Federal Aviation Act of 1958 and/or such successor agencies as may from time to time have similar jurisdiction over Airline and/or the Airport. Section 1.18 Fiscal Year shall mean the 12-month period beginning on the 1st day of July of any year. Section 1.19 Host Airline shall mean Affiliate s Host Airline as defined in the Whereas Clause at the beginning of this Agreement. Section 1.20 Joint Use Premises shall mean the center Concourse between Passenger Hold Rooms in the Terminal Complex to be used jointly by Airline and all other Aircraft Page 5
Operators. The Joint Use Premises in the Terminal Complex are described on Exhibit A-2. Section 1.21 Joint Use Formula shall mean the formula used to allocate certain specified charges for the Joint Use Premises among the Aircraft Operators such that 100% of such charge is allocated among all Aircraft Operators in the proportion that each Aircraft Operator s Enplaned Passengers at the Airport during the immediately preceding month bears to the Enplaned Passengers of all Aircraft Operators at the Airport during such month. At the sole discretion of the Authority, the Joint Use Charges of an Affiliate may be combined with the Joint Use Charges of its Host Airline for billing purposes. Section 1.22 Knoxville Airport Lease and Use Agreement shall mean the Airport Lease and Use Agreement executed by the Signatory Airlines. Section 1.23 Landing Fee(s) shall mean the payment required of Airline each month for the use of the Airfield. Section 1.24 Landing Fee Rate shall mean the rate multiplied by each 1,000 pounds of CMGLW or fraction thereof to calculate Landing Fees. Section 1.25 Non-Preferential User shall mean an Aircraft Operator that is not an Affiliate and does not have any Preferentially Assigned Aircraft Parking Positions and/or Passenger Hold Rooms and/or Loading Bridges at the Airport. Section 1.26 Passenger Hold Room shall mean an area in or adjoining the Concourse used by Airline for the assembly and processing of passengers. Section 1.27 Passenger Facilities Charge or PFC shall mean any charge imposed from time to time by Authority on passengers enplaning aircraft at the Airport pursuant to the Aviation Safety and Capacity Expansion Act of 1990 (Pub. L. 101-508), enacted November 5, 1990, as amended, and the implementing regulations ( FARs ) promulgated thereunder from Page 6
time to time, and any interest or investment earnings thereon. Section 1.28 Preferential Assignment shall mean the right of Airline to use Concourse Gate Positions (including Loading Bridge(s) where applicable) on a preferential but non-exclusive use basis. Section 1.29 Preferential Use Premises shall mean the Passenger Hold Rooms in the Terminal Complex over which Affiliate or its Host Airline has been given a Preferential Assignment subject to the Authority s right to assign Non-Preferential Users on such Concourse Gate Positions when not required by the Affiliate or its Host Airline. The Preferential Use Premises in the Terminal Building are described on Exhibit A-2. Section 1.30 Preferential Use Formula shall mean the formula used to allocate certain specified charges for the use of Preferential Use Premises among the Signatory Airlines, such that for each Passenger Hold Room over which a Signatory Airline has a Preferential Assignment, such Airline shall pay an amount equal to the annual rental rate per square foot established for Preferential Use Hold Room space multiplied by the total square feet of Preferential Use space, divided by twelve (12) representing the total number of Concourse Gate Positions. Section 1.31 Premises shall mean the total of the Host Airline s Exclusive Use, Preferential Use, Joint Use and Common Use Premises. Section 1.32 President of the Authority shall mean the person designated by Authority from time to time to manage the Airport for Authority and to act for Authority with respect to the rights and obligations of Authority under this Agreement or such person s duly authorized designated representative. Page 7
Section 1.33 Revenue Passengers shall mean all passengers carried by Airline. Without limiting the generality of the foregoing, Revenue Passengers shall also include persons for whom Airline has provided the particular Air Transportation on a substantially complimentary basis such as employees of Airline, family members of such employees, persons traveling on buddy passes, employees of other airlines, and those passengers redeeming frequent flyer awards and travel vouchers. Section 1.34 Signatory Airlines shall mean an airline that is a party to a Knoxville Airport Lease and Use Agreement with the Authority. Section 1.35 Terminal Building shall mean the Main Terminal Building exclusive of the Concourse. Section 1.36 Terminal Complex shall mean the Terminal Building, Concourse, terminal roadway, public parking areas and other areas and facilities serving the Terminal Building, as more particularly shown on a plan of the Terminal Area attached as Exhibit A. Section 1.37 Total Landed Weight shall mean the sum of CMGLW of all Aircraft Arrivals over a stated period of time. Section 1.38 TSA or Transportation Security Administration shall mean the Administration created under the Aviation and Transportation Security Act of 2001 and/or such successor agencies as may from time to time have similar jurisdiction over Airline and/or the Airport. Page 8
ARTICLE 2 TERM This Agreement shall be effective as of January 31, 2003 (the Effective Date ) and all obligations including fees and charges payable pursuant hereto shall become effective as of such date. The Agreement may be terminated by either party giving 30 days written notice of termination to the other but such termination shall not relieve either party from any obligation that accrued hereunder prior to such termination. The Term of this Agreement shall automatically terminate, without notice, if Airline ceases to be an Affiliate of its Host Airline. Upon the termination of this Agreement, Airline shall be treated as a non-signatory Airline, operating at the Airport month to month without an agreement. ARTICLE 3 RIGHTS OF AIRLINE Section 3.01 Rights of Airline. Airline is hereby granted and accepts the following rights with respect to the Airport: A. Right to Use Airport. Airline, its directors, employees, passengers, guests, contractors, and invitees, shall have the right to use (in common with other duly authorized users) the Airfield and the public areas of the Terminal Complex, together with all facilities, improvements, equipment and services that have been or may be provided for common use of such facilities and areas. B. Right to Operate Aircraft. Airline shall have the non-exclusive right to land, take off, fly over, taxi, push and tow any aircraft of its choice in areas of the Airport designated for such purpose by the President of the Authority (subject to any design Page 9
limitations of such areas) and to park, load and unload such aircraft at the Aircraft Parking Position(s) assigned to Airline s Host Airline subject to any such design limitations. C. Non-exclusivity. It is expressly understood and agreed that the rights granted to Airline under this Agreement are non-exclusive, and Authority reserves the right to grant similar privileges to others engaged in Air Transportation at the Airport. D. Passenger Processing, Aircraft Ground Handling and Fueling. Airline s Host Airline must advise the Authority, in writing, of any agreements between the Host Airline and Airline for the sublease or other use of the Host Airline s facilities, the processing of Airline s or Host Airline s passengers and the ground handling of Airline s or Host Airline s aircraft before Airline begins operations at the Host Airline s Premises. E. Right to Install Signs. Airline shall have the right to install signs in its Host Airline s Exclusive Use Premises and in its Host Airline s Preferential Use Premises. The number, size, type, design and location shall be subject to the prior written approval of the President of the Authority. Any signs not approved by the President of the Authority may be removed by the President of the Authority without liability to Airline for such removal. F. Employee Parking. Authority shall make available to Airline s employees employed at the Airport during the period they are assigned to duty at the Airport reasonably adequate automobile parking facilities. Authority may, at its discretion, charge employees of Airline and others, including but not limited to airline flight crews that are not based at the Airport, a vehicular parking fee. Page 10
Section 3.02 Airline Premises. Airline shall operate from its Host Airline s Premises subject to the Authority s rights (as described in Section 3.02 of the Knoxville Airport Lease and Use Agreement) to permit any Non-Preferential User that desires to operate at the Airport and has a need for a Concourse Gate Position for its flights to use a Concourse Gate Position over which Airline s Host Airline has a Preferential Assignment when the same is/are not required by Airline or its Host Airline for one of their scheduled flights. ARTICLE 4 MAINTENANCE, OPERATION, USE AND CONDITION OF AIRPORT Section 4.01 Maintenance and Operation. During any period that Airline is using the Terminal Complex Airline shall be responsible for maintaining the portions of such facilities used by Airline in a neat, orderly, sanitary and presentable condition. Section 4.02 Alterations, Additions or Replacements. Airline shall make no alterations, additions or replacements to Premises. Section 4.03 Airport Security - Federal Aviation Regulations (FARs) and TSA Regulations. Airline shall comply with all applicable regulations of the FAA and the TSA relating to Airport security so as to prevent or deter unauthorized persons from obtaining access to the air operations area of Airport. Security measures for the screening of persons, baggage and other property entering aircraft boarding areas of the Terminal Complex, and other security measures related to passengers at the Airport are the responsibility of the TSA and controlled by its regulations. Authority shall have no obligations whatsoever relating to the provision or the administration of such security measures, the security checkpoint, the collection of use charges Page 11
therefor, or the payment of the costs of such facilities. Section 4.04 Porter Service. Airline agrees that the Authority may provide porter service for the arriving and departing passengers of any airline that does not provide such service for its passengers using its own employees or through an independent contractor. Section 4.05 Customer Service. Airline will provide the Authority with a current local phone number that the public or passengers may call in order to page passengers, obtain information regarding missing baggage and to handle customer complaints. If Airline s failure to provide the Authority with a current local phone number results in the Authority using its staff personnel to respond to inquiries from the public or passengers, the Authority will charge Airline a reasonable fee to recover its costs. In addition, Airline agrees to have a representative remove unclaimed luggage from the Airport s baggage claim device no later than 30 minutes after the last bag from one of Airline s flights reaches the baggage claim area and place it in a secure area. Airline also agrees to have a representative available on the Airport to respond to customer questions and complaints regarding damaged or missing luggage for at least 30 minutes after the last bag from Airline s last daily flight arrives in the baggage claim area. ARTICLE 5 AIRLINE RATES AND CHARGES Section 5.01 Rates and Charges. For the rights and privileges granted to Airline under this Agreement, Airline shall pay fees and charges as set forth in this Section. Section 5.02 Landing Fees. Airline shall pay to Authority Landing Fees which shall be calculated at a Landing Fee Rate per 1,000 pounds of CMGLW that the Authority has Page 12
established for all Aircraft Operators at the Airport. The Landing Fee shall be adjusted at least annually during the term of this Agreement. Airline shall furnish the Authority on or before the tenth (10th) day of each and every month with a written report in the form referred to in Article 6. Upon receipt of such report Authority will invoice Airline for Landing Fees computed by multiplying the CMGLW of all the Airline s Aircraft Arrivals at the Airport during the preceding calendar month by the Landing Fee Rate for that Fiscal Year. If Airline should fail to furnish Authority with the report required by Article 6 on or before the tenth (10th) day of such month, Authority shall compute Airline s Landing Fees, using, at the Authority s option, Airline s published schedule, the FAA s tower logs for the Airport or any other reasonable approximations of Airline s CMGLW. After the delivery to Authority of an accurate report for the month in question, Authority shall make an appropriate adjustment to Airline s Landing Fees based upon the information submitted by Airline. Any resulting deficits or credits from the recalculation shall be applied to Airline s Landing Fee requirement for the next succeeding month. Notwithstanding anything to the contrary, Airline shall pay a minimum Landing Fee of twenty-five dollars ($25.00) for any Aircraft used by Airline and landing in commercial service at the Airport. Airline shall pay a Landing Fee of twenty-five dollars ($25.00) for any aircraft flight conducted for aircrew training at the Airport. Section 5.03 Exclusive Use and Preferential Use Premises. No additional rental payment shall be required for Airline s use of its Host Airline s Exclusive Use and Preferential Use Premises at the Terminal and any Loading Bridges attached to such premises. Section 5.04 Joint Use Premises. Airline shall be allocated a share of the Joint Use Page 13
Premises rental based upon the application of the Joint Use Formula defined in Section 1.22. Airline and its Host Airline shall be jointly and severally liable for payment of Airline s portion of Joint Use Premises rent. Section 5.05 Common Use Premises. Airline shall be allocated a share of the Common Use Premises rental based upon the application of the Common Use Formula defined in Section 1.13. Airline and its Host Airline shall be jointly and severally liable for payment of Airline s portion of Common Use Premises rent. Section 5.06 Payment of Terminal Complex Rental Rates. Each month, after the fact, Authority will invoice Airline and/or its Host Airline for Airline s use of Joint Use Premises and Common Use Premises based on the monthly report submitted by Airline in accordance with Article 6. If Airline should fail to furnish Authority with the report required by Article 6 on or before the tenth (10th) day of any month, Authority shall compute Airline s rental for the Joint Use Premises and the Common Use Premises by using any reasonable method determined by Authority to approximate Airline s Revenue Passengers. Notwithstanding the foregoing, for billing purposes, Authority may, at its sole discretion, combine Airline s share of the Joint Use Premises Rent and Common Use Premises Rent with similar charges of its Host Airline. ARTICLE 6 STATISTICAL INFORMATION Airline shall furnish to the Authority on or before the 10th day of each month a written report in form satisfactory to the Authority showing the number of enplaned and deplaned passengers, Airline s total number of Aircraft Arrivals by type of aircraft, the CMGLW of each type of aircraft and the weight of air mail and air cargo (if any) loaded and unloaded by Airline Page 14
at the Airport during the immediately preceding month. Such report shall also state the number of Aircraft Arrivals, by type of aircraft for which Airline provided ground handling services of any kind for other Aircraft Operators, and the names and addresses of the operators of such aircraft so that the Authority may submit to such operators appropriate invoices for Landing Fees and other charges. Upon the request of the President of the Authority, but not more than annually, Airline shall provide the President of the Authority with a certification of the then current CMGLW for each aircraft type then operated by Airline. ARTICLE 7 OTHER FEES AND CHARGES Except as provided elsewhere in this Agreement, or in other agreements entered into by Authority and Airline, Authority shall not charge against or collect further rentals, fees, licenses, service or operating taxes, tolls or charges from Airline, its passengers, employees, shippers and receivers of freight and express; or its suppliers of material, contractors or furnishers of services; for the Premises, facilities, rights, licenses, and privileges granted to Airline in this Agreement. Notwithstanding the foregoing, the Authority expressly reserves the right to assess and collect: A. A separate and additional charge pursuant to a separate written agreement with Airline, its shippers and receivers of freight and express, or its suppliers of material, contractors or furnishers of services for any premises or facilities, rights, licenses or privileges granted by the Authority and not expressly included herein. B. Charges for parking of motor vehicles in the public parking areas of Airport. Page 15
C. Charges for miscellaneous items, activities or services as determined from time to time by the President of the Authority, whether or not specified herein, including, but not limited to the STS phone system, public address system, LEO charges, staff fees, badges, keys, etc. D. Reasonable catering fees on in-flight food and beverage companies which cater Airline s flights departing from Airport, regardless of whether such companies have kitchens located on, or off Airport; and reasonable rentals for any facilities which such caterers may lease on Airport. ARTICLE 8 RULES AND REGULATIONS The Authority may adopt and enforce reasonable and lawful rules and regulations (as amended from time to time), which Airline agrees to observe and obey, with respect to the use of the Airport and its appurtenances, facilities, improvements, equipment and services; provided that such rules and regulations shall not be inconsistent with the provisions of this Agreement or other agreements between the Authority and Airline relating to the use of the Airport, and provided further that if such rules and regulations are inconsistent with the provisions of this Agreement or such other agreements, the more stringent applies. Airline, its officers, agents, servants, employees, contractors, licensees and any other person whom the Airline has a right to control shall comply with all present and future laws, ordinances, orders, directives, rules and regulations of the federal, state and municipal governments which may be applicable to its operations at the Airport. Airline agrees to pay, or guarantees payment of all lawful fines or penalties as may be Page 16
assessed by the Authority or against the Authority for violations of federal, state or local laws, ordinances, rules or regulations, or Airport rules and regulations adopted pursuant to this Article 8, by Airline or its employees within thirty (30) days after notice of such fines or penalties. ARTICLE 9 INDEMNITY AND INSURANCE Section 9.01 Indemnity. Airline shall protect, defend, indemnify, and hold Authority, its commissioners, agents, officers and employees completely harmless from and against any and all liabilities, losses, suits, claims, judgments, penalties, fines or demands arising by reason of injury or death of any person or damage to any property or any other reason (including but not limited to reasonable attorney fees, court costs, and expert fees), of any nature whatsoever, and from fines or other penalties resulting from any civil, criminal or administrative proceeding or order, arising out of or incidental to this Agreement and the Airline s use or occupancy of the Premises, or any environmental matters relating to the Premises, including but not limited to expert, investigation and/or remediation costs and expenses of any site remediation required or requested under RCRA, CERCLA or any other state, federal or local law or regulation or the acts or omissions of Airline s directors, officers, agents, employees, contractors, subcontractors or licensees; however, the above indemnity shall not apply to any injury, death or damage to the extent caused solely by the negligence or willful misconduct of any Non-Preferential User of Aircraft Parking Position(s) preferentially assigned to Airline or of Authority, its officers, directors, agents, or employees. Authority shall give reasonable notice of any such claims or actions. The provisions of this section shall survive the expiration or early termination of this Agreement for claims or actions occurring prior to the termination of this Agreement. Page 17
Section 9.02 Airline Public Liability Insurance. Airline agrees to carry and keep in force during the term of this Agreement public liability insurance with an insurance company of recognized responsibility and standing in the aviation insurance industry, covering claims for damage for bodily injury, including death, and property damage arising from operations under this Agreement, whether such operations are by Airline or its direct air carriers or contractors, or their agents, representatives or employees. Without limiting its liability as aforesaid, if: A. Airline is a Regional/Commuter Airline (as classified by the FAA) then Airline agrees to carry and keep in force such insurance with limits of liability for death, personal injury and property damage in a sum equal to $50 Million, except with respect to coverage for Non-Passenger Injury the limits shall be in a sum equal to $25 Million, with the Authority, its commissioners, agents, officers and employees as additional insureds under liability coverages, but only as respects the operations of the Named Insured, to the extent of Airline s indemnification obligation under 9.01 hereof, subject to policy terms, conditions, limitations and exclusions. B. Airline is not a Regional/Commuter Airline (as classified by the FAA) then Airline agrees to carry and keep in force such insurance with limits of liability for death, personal injury and property damage in a sum equal to $100 Million with the Authority, its commissioners, agents, officers and employees as additional insureds to the extent of Airline s indemnification obligation under 9.01 hereof. Airline agrees to cause such insurance to cover the contractual liability assumed by Airline under this Agreement. Section 9.03 Workers Compensation Insurance. If the nature of Airline s use or business operations on the Airport are such as to place any or all of its employees under the Page 18
coverage of local workers compensation or similar statutes, Airline shall also keep in force, at its expense, for the term of this Agreement, workers compensation or similar insurance with a company or companies acceptable to the Authority affording the required statutory coverage and containing the requisite statutory limits. Section 9.04 Airline Insurance On Automobiles And Other Ground Vehicles. Within 30 days after the date on which this Agreement is executed and delivered by both parties thereto, Airline, without expense to Authority, shall obtain and cause to be kept in force at all times during the term of this Agreement liability insurance in the form of primary and excess, or layered amounts of insurance covering the operation of Airline s automobiles and other ground vehicles and mobile equipment at the Airport, issued by a company or companies of sound and adequate financial responsibility approved by the Authority in a combined single limit of not less than $10 Million for bodily injury and property damage liability per any one occurrence. All policies of liability insurance referred to above shall include the Authority, its commissioners, agents, officers and employees as additional insureds. Section 9.05 Certificate(s) of Insurance. Airline shall cause its insurer to furnish Authority with a certificate(s) of insurance, for all insurance coverage required of Airline under the terms of this Article 9. Such certificate(s) shall provide that the policies of insurance referred to therein shall not be subject to cancellation, lapse or other material change except after delivery of written notice by certified or registered mail to the Authority s Vice President Finance & Administration at least thirty (30) days prior to the effective date of such cancellation, lapse or material change. Airline, no later than thirty (30) days prior to the effective date of such cancellation, lapse or material change, shall provide Authority with substitute certificate(s) of insurance complying with this Agreement. Page 19
Airline understands and agrees that the minimum limits of the insurance required in this Article 9 may become inadequate during the term of this Agreement, and further agrees that the Authority may raise such minimum requirements to then current airport industry standards. If at any time Airline shall fail to obtain and maintain in force the insurance required herein, Authority may but shall have no obligation to, on written notice to Airline, obtain such insurance for Airline s account and obtain reimbursement within thirty (30) days from Airline. Notwithstanding the foregoing, the Authority may elect to terminate this Agreement immediately upon such failure by Airline. ARTICLE 10 ASSIGNMENT AND SUB-USE Airline shall not assign or transfer this Agreement, or any part thereof, without the prior written consent of the Authority. ARTICLE 11 TAXES Airline shall pay all lawful taxes and assessments levied or assessed against Airline. Page 20
ARTICLE 12 DEFAULT AND CANCELLATION Section 12.01 Events of Default. If any of the following events ( Event(s) of Default ) occurs, Airline shall be deemed to be in default in its obligations under this Agreement: A. Default in the payment of any fees or other charges due to the Authority and continuance of such default for a period of ten (10) days after there has been given a written notice in accordance with Section15.08 hereof by Authority to Airline specifying such default and requiring it to be remedied and stating that such notice is a notice of default hereunder; B. Default in the performance, or breach, of any other covenant or warranty of Airline in this Agreement (other than the payment of any fees or other charges due to Authority) and the continuance of such default or breach for a period of thirty (30) days after there has been given a written notice in accordance with Section 15.08 hereof by Authority to Airline specifying such default or breach and requiring it to be remedied and stating that such notice is a notice of default hereunder; provided, however, that if Airline commences to cure such default within thirty (30) days after receipt of such notice of default and continuously thereafter exercises good faith and due diligence to cure said default, Airline shall be given a reasonable additional time in which to cure such default. C. If Airline files a voluntary petition in bankruptcy, or makes an assignment of all or substantially all of Airline s assets for the benefit of Airline s creditors, or if Airline is adjudicated a bankrupt in any involuntary proceeding in bankruptcy against Airline, or if a receiver or a trustee of Airline s assets is appointed; provided, however, Page 21
that in the latter event, if any such appointment is involuntary, then it shall not be considered as an Event of Default by Airline unless Airline fails to procure a dismissal thereof within ninety (90) days after the appointment of such receiver or trustee. Section 12.02 Remedies Upon Default. If any Event of Default occurs and is continuing, the Authority may cancel this Agreement by giving Airline at least fifteen (15) days prior written notice. Such cancellation shall be without forfeiture, waiver, or release of the Authority s right to take whatever legal proceedings may appear necessary or desirable to collect any fees or other charges then due or to enforce any obligation, covenant or agreement of Airline under this Agreement or applicable law. No breach by the Authority of any covenant or agreement herein contained shall give rise to a cause of action or claim against the Authority for damages, but Airline shall have the right of specific performance, mandamus, injunction or such other similar relief with respect to any breach or threatened breach hereof by the Authority. Section 12.03 Late Charges. Payment of all fees and charges due and payable by Airline under the terms of this Agreement and not made by Airline by the thirtieth (30th) day after the receipt of Authority s invoice shall be increased by a late charge per day. Such late charge shall be 1/20th of 1 percent per day of the fees and charges invoiced, assessed from the thirty-first (31st) day after the date of receipt of Authority s invoice until date payment is received by Authority. Authority s invoice and Airline s payment shall be deemed to have been received as of the third (3rd) day after the date same is postmarked as having been deposited in first class United States Mail, postage prepaid, addressed to the Airline or Authority at the address established by Section 15.08 hereof. Page 22
ARTICLE 13 PROHIBITED USES Section 13.01 Prohibited Uses. Airline shall not do or permit anything to be done in, on, or at the Airport which will in any way conflict with any law, or ordinance of any governmental agency, or with the Authority s rules and regulations provided for in Article 8, herein, or create a nuisance or in any way obstruct or interfere with the rights of other users of the Airport, or damage any property or persons thereon, or endanger the health and safety of persons using the Airport. Section 13.02 Oil, Fuel and Other Materials. A. Airline shall not cause or permit any gasoline, oil or hazardous, toxic or dangerous waste, substance or material to be used or placed on, under, or about the Airport, including the Premises, or disposed of, in violation of the Authority s Rules and Regulations for the Use of Airports and Facilities or of any governmental laws or regulations or rulings, either federal or state, applicable to environmental concerns, including, without limitation, the Tennessee Oil Pollution and Hazardous Substances Control Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act and the Clean Water Act. In the event Airline becomes aware that any gasoline, oil or hazardous, toxic or dangerous waste, substance or material has been used or placed by it or its agents, servants or employees on the Airport, including the Premises, in violation of any such governmental law, regulation or ruling, Airline shall immediately notify the Authority in writing of such fact, and if such occurrence results from a breach by Airline of its obligations hereunder, Airline shall, at Airline s expense, take such remedial action Page 23
as is necessary to correct any such violation, remove from the Airport such substances and materials giving rise to any such violation, and take such action as is necessary to prevent a recurrence of such violation. B. Airline shall indemnify the Authority; defend it with counsel reasonably acceptable to the Authority; and keep and hold it harmless from and against any and all costs of clean up or other remedial actions, claims, demands, suits, judgments, fines, penalties, costs and expenses including reasonable attorneys fees, environmental consultants and laboratory fees and the cost and expense of investigating and defending any claim or proceeding for violations of any such governmental law, regulation, or ruling resulting from Airline s operations hereunder upon the Airport, including the Premises. The Authority shall give to Airline prompt and reasonable written notice of any such claim or action known to it, and Airline shall have the right to investigate, compromise, and defend the same to the extent of its own interest. ARTICLE 14 FEDERAL GRANTS AND NON-DISCRIMINATION Section 14.01 Non-Discrimination. The Airline, for itself, its personal representatives, successors in interest and assigns, as a part of the consideration hereof, does hereby covenant and agree that (i) no person on the grounds of race, color, national origin, religion, disability, sex or age shall be excluded from participation in, denied the benefits of or otherwise subjected to discrimination in the use of said facilities; (ii) in the construction of any improvements on, over or under the Airline s Premises and the furnishing of services thereon, no person on the grounds of race, color, national origin, religion, disability, sex or age shall be excluded from participation Page 24
in, denied the benefits of, or otherwise subjected to discrimination; and (iii) Airline shall use the Airport in compliance with all other requirements imposed by or pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in Federally Assisted Programs of the Department of Transportation- Effectuation of Title VI of the Civil Rights Act of 1964, and as said regulations may be amended. In the event of breach of any of the above non-discrimination covenants, the Authority shall have the right to terminate this Agreement and to re-enter and repossess Airline s Premises and the facilities thereon, and hold the same as if said Agreement had never been made or issued. This provision shall not be effective until the procedures of Title 49, Code of Federal Regulations, Part 21 are followed and completed, including exercise or expiration of appeal rights. Section 14.02 Federal Grants. This Agreement shall be subordinate to the provisions of any existing and future agreements between the Authority and the United States of America, its boards, agencies, or commissions, relative to the operation or maintenance of the Airport, the execution of which has been, or will be, required as a condition to the expenditure of Federal funds for the development of the Airport. ARTICLE 15 MISCELLANEOUS Section 15.01 Non-Waiver of Rights. Continued performance by either party hereto pursuant to the terms of this Agreement after a default in any of the terms, covenants and conditions herein contained to be performed, kept or observed by the other party hereto, shall not be deemed a waiver of any right to cancel this Agreement for any subsequent default and no Page 25
waiver of any such default shall be construed, or act as a waiver of any subsequent default. Section 15.02 Invalidity of Clauses. The invalidity of any Article, Section, portion, paragraph, provision, or clause of this Agreement shall have no effect upon the validity of any other part or portion hereof. Section 15.03 Headings. The Article and Section titles shown in this Agreement are included only as a matter of convenience and for reference and in no way define, limit, broaden or describe the scope or intent of any provisions of this Agreement. Section 15.04 Remedies. The rights and remedies given to the Authority and Airline in this Agreement are distinct, separate and cumulative, and no one of them, whether or not exercised by either party, shall be deemed to be in exclusion of any of the others herein or by law or in equity provided. In the event that any legal proceedings at law or in equity arise hereunder or in connection herewith (including any appellate proceedings or bankruptcy proceedings), the prevailing party shall be awarded costs, attorneys fees (including reasonable fees and charges for the services of paralegals or other services of professionals working under the supervision of such attorneys and whose time is customarily billed to clients), and reasonable expert witness fees incurred in connection with such legal proceedings. Section 15.05 Bankruptcy Provisions. Article 10 hereof shall not apply to any valid assumption or assignment of this Agreement, the Premises, or any part thereof, by a trustee, or by the Airline as a debtor in possession under Section 365 of the Bankruptcy Code of 1978, as amended; provided, however, that adequate assurance of future performance as provided by Section 365 of the Bankruptcy Code of 1978, as amended, is to be provided, in writing as a condition of the assumption or assignment of this Agreement. Such assurance shall include but Page 26
shall not be limited to: A. Adequate assurance of the reliability of the proposed source for the rental payments due under this Agreement upon the assumption or assignment of this Agreement; B. Adequate assurance that all other consideration due under this Agreement shall be forthcoming after the assumption or assignment of this Agreement; and C. The procurement of a bond from a financially reputable surety covering any costs or damages incurred by the Authority in the event that Airline becomes entitled to and exercises any right to reassign the Premises under this Agreement. Section 15.06 Governing Law. This contract has been executed by, delivered to and accepted by the Authority in the State of Tennessee, and the provisions hereof shall be governed by the laws of Tennessee; and any disputes arising out of or related to this contract shall be resolved in accordance with said laws. The parties agree that any action or legal proceeding arising out of or related to this contract shall be brought in the state courts of Knox County, Tennessee, or in the federal court in the district where the Airport is located; and the parties hereby consent to and waive any objection to jurisdiction or venue in said courts. Section 15.07 Non-Liability. No board member, commissioner, director, officer, agent, or employee of the Authority or Airline shall be charged personally or be held liable by or to the other party under any term or provision of this Agreement, or any amendment thereto, or because of any breach hereof, or because of its execution. Section 15.08 Notices. A. Any request, demand, authorization, direction, notice, consent or waiver provided or permitted to be made upon, given by, or furnished to, the Authority or Airline Page 27
shall be sufficient for every purpose hereunder if in writing and delivered by hand or mailed by certified or registered mail, return receipt requested, postage prepaid and addressed as follows: (1) if to the Authority, at: Metropolitan Knoxville Airport Authority Attention: President of the Authority P.O. Box 15600 Knoxville, TN 37901 (2) if to Airline, at: SkyWest Airlines, Inc. Attn: Steve Dwiggins 444 South River Road St. George, UT 84790 The foregoing addresses may be changed by either party giving to the other party the same type of notice described above providing a substitute address. B. Any such notice or other document shall be deemed to be received as of five days after the date deposited in the mail, if mailed in accordance with Subsection A of this Section. Section 15.09 Exhibits. All Exhibits referred to in this Agreement are deemed to be attached hereto and incorporated herein. Section 15.10 Entire Agreement. This Agreement, together with any Exhibits and Appendices attached hereto, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and, except as otherwise expressly provided herein, any prior agreements, representations or statements made with respect to such subject matter, whether verbal or written, are merged herein. This Agreement may be amended only in writing, executed by duly authorized representatives of the party to be bound. Page 28