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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1997
[_] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 0-24126
FRONTIER AIRLINES, INC.
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(Exact name of registrant as specified in its charter)
Colorado 84-1256945
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(State or other jurisdiction (I.R.S. Employer
of incorporated or organization) Identification No.)
12015 E. 46th Avenue, Denver, CO 80239
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number including area code: (303) 371-7400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
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Title of Class
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The Company's revenues for its fiscal year ended March 31, 1997: $116,500,634.
Aggregate Market Value of Stock held by Non-Affiliates of the Company as of June
30, 1997: $33,009,432, based on a closing average bid and asked price on that
date of $3.78 per share.
The number of shares of the Company's Common Stock outstanding as of June 30,
1997 is 8,844,375.
Transitional Small Business Disclosure Form: Yes: ; No: X .
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TABLE OF CONTENTS
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Page
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PART I
Item 1: Description of Business............................... 1
Item 2: Description of Property............................... 12
Item 3: Legal Proceedings..................................... 13
Item 4: Submission of Matters to a Vote of Security Holders... 13
PART II
Item 5: Market for Common Equity and Related Stockholder
Matters............................................... 13
Item 6: Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 16
Item 7: Financial Statements.................................. 30
Item 8: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 30
PART III
Item 9: Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act.......................................... 30
Item 10: Executive Compensation................................ 33
Item 11: Security Ownership of Certain Beneficial Owners
and Management........................................ 35
Item 12: Certain Relationships and Related Transactions........ 36
Item 13: Exhibits and Reports on Form 8-K...................... 36
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PART I
This report contains forward-looking statements that describe the business and
prospects of Frontier Airlines, Inc. (the "Company") and the expectations of the
Company and management. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
set forth. These risks and uncertainties include, but are not limited to: the
timing of, and expense associated with, expansion and modification of the
Company's operations in accordance with its business strategy or in response to
competitive pressures or other factors such as the Company's commencement of
passenger service and ground handling operations at several airports and
assumption of maintenance operations at DIA with its own employees; general
economic factors and behavior of the fare-paying public and the federal
government, such as the crash in May 1996 of another low-fare carrier's aircraft
that resulted in a federal investigation of the carrier, suspension of the
carrier's operations and increased federal scrutiny of low-fare carriers
generally that may increase the Company's operating costs or otherwise adversely
affect the Company; actions of competing airlines, such as increasing capacity
and pricing actions of United Airlines, other competitors, and Western Pacific
Airlines, Inc. ("Western Pacific") if the proposed merger with Western Pacific
is not completed; the risk that the merger with Western Pacific is not
completed; the current limited supply of Boeing 737 aircraft and the higher
lease costs associated with such aircraft, which inhibits the Company's ability
to achieve operating economies and implement its business strategy; proposed
changes to the present air transportation excise tax of 10% to another type of
consumer paid tax, charge or other user fees on air transportation and
increasing aviation fuel prices. Because the Company's business, like that of
the airline industry generally, is characterized by high fixed costs relative to
revenues and low profit margins, small fluctuations in the Company's yield per
RPM or expense per ASM can significantly affect operating results.
As discussed in "Proposed Merger with Western Pacific Airlines" below, the
Company signed a Merger Agreement with Western Pacific on June 30,1997. The
discussion contained in this report generally describes the historic business of
the Company and plans of the Company as an independent airline. It does not
discuss the pro forma effect of the Company's merger with Western Pacific or the
operations of a combined company. As such, forward-looking information about
the Company in this report relates to operations of the Company prior to
consummation of the merger or operations of the Company if the merger does not
occur. Further information about the merger and the combined company will be
provided in a proxy statement relating to approval of the merger by shareholders
of the Company.
ITEM 1: DESCRIPTION OF BUSINESS
GENERAL
Frontier Airlines, Inc. is a low-fare, full-service airline based in Denver,
Colorado. Principally serving markets abandoned by Continental Airlines
("Continental") during that carrier's downsizing of its Denver hub in 1993 and
1994, the Company currently operates routes linking its Denver hub to 14
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cities in 11 states covering the western two-thirds of the United States. The
Company's current route system extends from Denver to Los Angeles, San Diego and
San Francisco, California; Chicago and Bloomington/Normal, Illinois;
Seattle/Tacoma, Washington; Las Vegas, Nevada; Phoenix, Arizona; St. Louis,
Missouri; Minneapolis/St. Paul, Minnesota; Salt Lake City, Utah; Omaha,
Nebraska; Albuquerque, New Mexico; and El Paso, Texas. At present, the Company
utilizes four gates at Denver International Airport ("DIA") for approximately 54
daily flight departures and arrivals.
Organized in February 1994, the Company commenced flight operations in July 1994
with two leased Boeing 737-200 jet aircraft. It has since expanded its fleet
to 11 leased jets, including seven Boeing 737-200s and four larger Boeing 737-
300s. The Company has agreed to lease three more Boeing 737-300s, two to be
delivered in August 1997 and one in January 1998, after which it plans to add
new cities to its route system.
The Company's senior management team includes executives with substantial
service in the airline industry, including persons who occupied similar
positions at a former airline called Frontier Airlines that served regional
routes to Denver from 1950 to 1986. From time to time, the former Frontier
Airlines served most of the Company's current and intended markets with jet
equipment from its Denver hub.
PROPOSED MERGER WITH WESTERN PACIFIC AIRLINES
On June 30, 1997, the Company signed an Agreement and Plan of Merger (the
"Merger Agreement") providing for the merger (the "Merger") of the Company with
Western Pacific, a low fare airline based in Colorado Springs, Colorado.
Western Pacific commenced service from DIA on June 29, 1997 and currently
provides 45 daily departures from DIA. Western Pacific operates approximately
68 total departures per day from DIA and Colorado Springs with 19 Boeing 737
aircraft. Western Pacific also owns a majority interest in Mountain Air
Express, a commuter airline that operates out of DIA and Colorado Springs.
Western Pacific's common stock is quoted on the Nasdaq National Market under
the symbol "WPAC". The following discussion is qualified in its entirety by
reference to the Merger Agreement, which is included as an exhibit to this
report. In addition, readers are advised to review the reports of Western
Pacific filed with the Securities and Exchange Commission (File No. 0-27238).
Upon consummation of the Merger, each shareholder of the Company will receive
.75 shares (subject to adjustment in certain circumstances) of common stock of
Western Pacific for each share of the Company's Common Stock held by such
shareholder. The management of Western Pacific will retain managerial control
of Western Pacific after the Merger. Three members of the Company's board of
directors will be granted seats on Western Pacific's board of directors, which
will be increased to nine members. The Company's investment banking firm has
issued an opinion to the Company's Board of Directors that the exchange ratio is
fair to the Company's shareholders from a financial point of view, and Western
Pacific's board of directors has received a similar opinion from its investment
banking firm with respect to Western Pacific.
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The Merger Agreement provides that prior to the completion of the Merger, or
termination of the Merger Agreement if that occurs before the Merger is
completed, the operations of the Company and Western Pacific will generally be
conducted in the ordinary course of business. The Company is prohibited from
leasing additional aircraft, raising capital through equity or debt financings
(except under certain conditions) or making major capital expenditures without
Western Pacific's consent. Certain limitations are placed on Western Pacific's
operations as well. The Merger Agreement provides that each company must pay
the other a termination fee of $4 million in the event either company enters
into a business combination with any other entity, and in certain other
circumstances resulting in termination of the Merger Agreement.
Closing of the Merger is subject to several conditions, including approval of
the Merger by the shareholders of the Company and Western Pacific, regulatory
approval of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act,
effectiveness of a Registration Statement relating to the Western Pacific common
stock to be issued in the Merger, the continued effectiveness of the "fairness
opinions" issued by each of the Company's and Western Pacific's investment
banking firms and the Company obtaining required consents or waivers of consent
to the Merger from aircraft lessors and other third parties. In addition,
either the Company or Western Pacific may terminate the Merger Agreement in the
event of a material adverse change in the financial condition, business,
operations or prospects of the other party to the Merger. There can be no
assurance that the conditions will be met or that the Merger will be
consummated. The failure of the Company and Western Pacific to consummate the
Merger could have a material adverse effect on the Company.
In connection with the Merger, the Company entered into a code share agreement
(the "Code Share Agreement") with Western Pacific which provides that the
parties will jointly market their flight schedules by permitting each party to
assign its airline designator code to flights operated by the other party. The
Code Share Agreement terminates on December 31, 1997; provided, however, that if
the Merger terminates under certain conditions then the Code Share Agreement
will terminate on December 31, 1998.
BUSINESS STRATEGY AND MARKETS
The Company's business strategy is to provide service at low fares to high
volume markets from its Denver hub. The strategy is based on the following:
. Filling gaps in flight frequencies in markets that the Company has
selected from among the approximately 51 Denver routes vacated by
Continental Airlines in 1993 and 1994.
. Stimulating demand by offering a combination of low fares, quality
service and frequent flyer credits in Continental Airlines' OnePass
program.
. Expanding its Denver hub operation and increasing its connecting traffic
through the addition of service to other high volume markets.
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The Company's initial service pattern in 1994 was designed to fill flight voids
on routes to eight relatively small cities in North Dakota and Montana where
there was little or no jet competition to Denver after Continental's flight
terminations. The Company has since refocused its marketing priorities on more
heavily traveled routes --typically markets dominated by one or more major
airlines and characterized by high fares due to the lack of low-fare competition
prior to the Company's entry. In line with its revised marketing strategy, the
Company in 1995 and 1996 suspended service in all eight of its original markets,
and redeployed the aircraft used on these routes to a number of Denver's
largest markets.
The following table sets forth the Company's service commencements and
suspensions for the three-year period from its initiation of flight operations
in July 1994 through June 1997.
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Average
Number
Date Service Date Service of Daily
Denver Market Commenced Suspended Roundtrips
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<S> <C> <C> <C>
Bismarck, ND July 5, 1994 September 10, 1996
Fargo, ND July 5, 1994 September 10, 1996
Grand Forks, ND July 5, 1994 January 14, 1995
Minot, ND July 5, 1994 January 14, 1995
Bozeman, MT August 8, 1994 September 25, 1995
Missoula, MT August 8, 1994 September 25, 1995
Billings, MT September 26, 1994 September 25, 1995
Great Falls, MT September 26, 1994 September 25, 1995
Tucson, AZ October 13, 1994 April 16, 1995
Albuquerque, NM October 13, 1994 2
El Paso, TX October 13, 1994 2(a)
Omaha, NE January 16, 1995 2
Las Vegas, NV January 19, 1995 3(b)
Phoenix, AZ September 25, 1995 2
Chicago (Midway), IL September 25, 1995 3
Los Angeles, CA November 3, 1995 2
Minneapolis, MN November 13, 1995 2
Salt Lake City, UT November 13, 1995 3
San Francisco, CA November 17, 1995 2
Seattle, WA May 1, 1996 3
St. Louis, MO June 1, 1996 2
San Diego, CA June 1, 1996 1
Bloomington,/Normal, IL January 6, 1997 1(c)
</TABLE>
(a) Flights are operated on Denver-Albuquerque-El Paso routings.
(b) Service to be suspended effective August 1, 1997.
(c) Flights are operated on Denver-Omaha-Bloomington/Normal routings.
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The Company plans to introduce low-fare service in additional high volume
markets. Management believes that potential markets for its planned route
expansions can support greater flight capacity than now provided by the
incumbent carriers and that passengers would welcome the restoration of
additional capacity, particularly at the low fares offered by the Company.
MARKETING
The Company's sales efforts are targeted to both the leisure and corporate
travel markets. In the leisure market, the Company offers deeply discounted
fares marketed through newspaper, radio and television advertising along with
special promotions throughout its route system.
To balance the seasonal changes in demand in the leisure market, the Company has
introduced a number of new programs designed to capture a larger share of the
less seasonally affected corporate market. These ongoing programs, launched in
the fall of 1996, include negotiated fares for large companies that sign
contracts for a specified volume of travel, and future travel credits for small
and medium size businesses, and for members of trade and nonprofit associations.
The Company also pursues sales opportunities with meeting and convention
arrangers, government travel offices and vacation clubs. Personal sales calls,
direct mail and telemarketing are the primary tools in attracting this business.
The Company offers air/ground vacation packages to Colorado ski resorts and to
Las Vegas and other destinations on its route system.
An important marketing tool in today's airline environment is the frequent flyer
program. The Company joined Continental's OnePass program in January 1995. The
selection of OnePass was based on the established membership base in the cities
served by the Company and the consistent high marks that the program has
received when compared with other programs.
The Company has implemented marketing strategies to maintain relationships with
travel agencies throughout its route system. The Company communicates with the
travel agents through personal visits by Company executives and sales managers,
mailings of sales literature, telemarketing and advertising in the travel
agents' trade publications.
The Company participates in the four major computer reservation systems used by
the travel agents to make airline reservations. The Company also maintains a
reservations center in Denver, operated by its own personnel. In January 1997,
the Company introduced electronic ticketing for passengers who elect to book
flights through the Company's reservations center. The Company plans to offer
its passengers the option of booking flight reservations through the Company's
Internet site starting in the summer of 1997.
To gain connecting traffic from other carriers, the Company has negotiated
various types of interline agreements with approximately 65 domestic and
international airlines serving cities on the Company's route system. Generally,
the agreements include joint ticketing and baggage services and other
conveniences designed to expedite the connecting process. The Company has code
share agreements
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with Western Pacific and with Aspen Mountain Air with respect to Aspen Mountain
Air's routes between DIA and Aspen. Among various sales benefits, these
agreements provide prominent listings of the carriers' connecting flights in the
travel industry's computer reservations systems.
In March 1997 the Company asked the U.S. Department of Transportation for an
exemption from the "slot" restrictions at New York's LaGuardia Airport, which,
if granted, would permit the Company to operate nonstop Denver-LaGuardia
flights. The Company is unable to predict whether the exemption will be
granted.
PRODUCT PRICING
The Company offers all of its seats at various discount fares, which it
believes reduces the cost of travel in markets it enters by as much as 60
percent. Seat inventories on each flight are managed through a yield management
system. The Company generally offers discounts with three levels of advance
purchase requirements. In contrast to most carriers, the Company does not
currently require travelers to have a Saturday overnight stay to take advantage
of these discount rates. Unlike most other carriers, the Company does not
charge a premium for one-way fares.
COMPETITION
The Airline Deregulation Act of 1978 (the "Deregulation Act") produced a highly
competitive airline industry, freed of certain government regulations that for
40 years prior to the Deregulation Act had dictated where domestic airlines
could fly and how much they could charge for their services. Since then small
carriers such as the Company have entered markets long dominated by large
airlines with substantially greater resources such as United Airlines, American
Airlines, Northwest Airlines and Delta Air Lines.
As shown in the following chart as of June 1997, the Company competes
principally with United Airlines, the dominant carrier at DIA with a market
share of approximately 70%. This gives United a significant competitive
advantage compared to the Company and other carriers serving DIA.
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ROUTES FROM DENVER TO: COMPETING AIRLINES DAILY ROUND TRIPS
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<S> <C> <C> <C>
Competing
Frontier Airlines
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San Francisco, California United Airlines 2 18
Minneapolis, Minnesota United Airlines, Northwest Airlines 2 14
Salt Lake City, Utah United Airlines, Delta Air Lines, Trans 3 13
World Airlines
Los Angeles, California United Airlines 2 21
Phoenix, Arizona United Airlines, America West Airlines 2 18
Chicago (Midway), Illinois United Airlines (O'Hare), American 3 20
Airlines (O'Hare),
Las Vegas, Nevada United Airlines, America West Airlines 3 12
Omaha, Nebraska United Airlines 2 6
Albuquerque, New Mexico United Airlines 2 9
El Paso, Texas Southwest Airlines and Delta Air Lines 2* 6
(to and from Albuquerque)
Seattle, Washington United Airlines 3 9
St. Louis, Missouri United Airlines, Trans World Airlines 2 10
San Diego, California United Airlines 1 7
Bloomington/Normal, Illinois 1** 0
</TABLE>
* Operated via Albuquerque, New Mexico
** Operated via Omaha, Nebraska
Western Pacific commenced operations at DIA on June 29, 1997. Simultaneously
with execution of the Merger Agreement between the Company and Western Pacific,
the parties entered into a Code Share Agreement which is effective as of August
1, 1997 and remains in effect through December 31, 1997. If the Merger is not
consummated, Western Pacific will compete with the Company in six or more of the
Company's major markets. Western Pacific's nonstop frequencies from Denver in
markets in which the Company operates are:
Daily Jet
Market Round Trips
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Denver-Los Angeles 4
Denver-San Francisco 4
Denver-Phoenix 3
Denver-Chicago (Midway) 2
Denver-Seattle 2
Denver-San Diego 2
While United Airlines' competitive reaction to the Company's market entries had
generally been limited to matching its lowest fares on a capacity controlled
basis, the Company believes that United began engaging in a number of predatory
practices in the fall of 1996, following the Company's report of its second
quarterly profit. In a written complaint submitted to the U.S. Department of
Justice ("DOJ") in February 1997, the Company requested the DOJ to investigate
eight separate
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counts of potential antitrust violations. These include "capacity dumping"
(adding an excessive volume of flight capacity in several of the Company's key
markets), alleged pricing abuses, "exclusive dealing" with corporate customers,
and other tactics. The Company is unable to predict what action, if any, the DOJ
will take.
AIRCRAFT
As of June 1997, the Company operates 11 leased Boeing 737 twinjet aircraft in
all-coach seating configurations. The age of these aircraft, their passenger
capacities and their lease expirations are shown in the following table:
Aircraft No. of Year of Passenger Lease
Model Aircraft Manufacture Seats Expiration
- ---------- -------- ----------- --------- ------------
B-737-200 5 1968-1969 108 July-October
1999
B-737-200A 2 1981 119 2001
B-737-300 4 1985, 1986, 136(2), 2000(2),
1991, 1997 138(2) 2004, 2005
In addition to the 11 Boeing 737 aircraft currently in operation, the Company
has lease agreements for three additional new Boeing 737-300 aircraft, two with
scheduled deliveries in August 1997 and one with a scheduled delivery in January
1998. The lease terms for the two August 1997 aircraft are 96 and 84 months,
respectively, and 84 months for the January 1998 aircraft. See Note 5 to the
Financial Statements.
The demand for Boeing 737 aircraft has increased markedly in the past two years.
The Company is seeking to lease additional aircraft in order to expand its
service and route system. However, there can be no assurance that additional
suitable aircraft will be available to the Company at favorable lease rates and
terms, or at the times needed for implementation of the Company's plan of
operation. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation-Liquidity and Capital Resources."
MAINTENANCE AND REPAIRS
All aircraft maintenance and repairs are accomplished in accordance with the
Company's maintenance program approved by the United States Federal Aviation
Administration ("FAA"). Spare or replacement parts are maintained by the Company
primarily in Denver. Certain of these parts are supplied through a contractual
arrangement with a major airline, with others purchased or leased from other
airline or vendor sources. There are two categories of aircraft maintenance and
repair: routine servicing and checks accomplished on a daily or weekly schedule,
and major maintenance. Routine maintenance is performed principally by the
Company's mechanics at its own maintenance facilities in Denver, Colorado, and
El Paso, Texas. The Company's major maintenance has been performed by the
Tramco subsidiary of B.F. Goodrich, and by US Airways.
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The Company terminated a contract with Continental Airlines for routine
maintenance at Denver in August 1996. Since that time the Company has trained,
staffed and supervised its own maintenance work force at Denver. The Company
leases a portion of Continental Airlines' hangar at DIA where it presently
performs its own maintenance through the "B" check level. Major maintenance
continues to be performed by outside FAA approved contractors.
Under its aircraft lease agreements, the Company pays all expenses relating to
the maintenance and operation of the Company's aircraft, and the Company is
required under its lease agreements to pay monthly maintenance reserve deposits
to the lessors based on usage. Maintenance reserve deposits will be applied
against the cost of major maintenance, which is scheduled to occur in late 1997
for three of the Company's aircraft. To the extent not used for major
maintenance during the lease terms, maintenance reserve deposits are returned to
the aircraft lessors upon redelivery of the aircraft.
The Company's monthly completion factors for its fiscal years ending March 31,
1997 and 1996 ranged from 94% to 99.8% and from 95% to 99%, respectively. The
completion factor is the percentage of the Company's scheduled flights that were
operated by the Company (i.e., not canceled). Flights not completed were
canceled principally as a result of mechanical problems, and to a lesser extent,
weather. There can be no assurance that the Company's aircraft will continue to
be sufficiently reliable over longer periods of time.
FUEL
During the fiscal years ending March 31, 1997 and 1996, jet fuel accounted for
16.6% and 15.4%, respectively, of the Company's operating expenses. The Company
has arrangements with major fuel suppliers for substantial portions of its fuel
requirements, and management believes that such arrangements assure an adequate
supply of fuel for current and anticipated future operations. However, the
Company has not entered into any agreements that fix the price of fuel over any
period of time. Jet fuel costs are subject to wide fluctuations as a result of
sudden disruptions in supply beyond the Company's control. Therefore, the future
availability and cost of jet fuel cannot be predicted with any degree of
certainty. The Company's average fuel price per gallon including taxes and
into-plane fees was 83.1c for the fiscal year ended March 31, 1997, with the
monthly average price per gallon during the same period ranging from a low of
74.2c to a high of 91.2c. As of June 11, 1997, the price per gallon was 73.3c.
Newer aircraft are more fuel efficient than the Company's Boeing 737-200
aircraft due to improved aircraft airframe design and engine technology.
Significant increases in the price of jet fuel would result in a higher increase
in the Company's overall total costs than those of competitors whose entire
fleet consists of more fuel efficient aircraft such as the Company's Boeing 737-
300 aircraft. Increases in fuel prices or a shortage of supply could have a
material adverse affect on the Company's operations and financial results. The
Company's ability to pass on increased fuel costs to passengers through price
increases or fuel surcharges may be limited, particularly given the Company's
low fare strategy.
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INSURANCE
The Company carries $500 million per aircraft per occurrence in property damage
and passenger and third-party liability insurance, and insurance for aircraft
loss or damage as required by its aircraft lease agreements, and customary
coverage for other business insurance. While the Company believes such insurance
is adequate, there can be no assurance that such coverage will fully protect it
against all losses which it might sustain. Moreover, the Company's insurance for
aircraft loss or damage carries a deductible requiring the Company to pay up to
the first $500,000 of loss or damage unless the aircraft is determined to be a
total loss. The Company's property damage and passenger and third-party
liability insurance coverage exceeds the minimum amounts required by the United
States Department of Transportation ("DOT") regulations.
EMPLOYEES
As of June 15, 1997, the Company had 800 employees, including 700 full-time and
100 part-time personnel. The Company's employees included 120 pilots, 156 flight
attendants, 186 customer service agents, 116 reservations agents, 66 mechanics
and related personnel, 119 general management personnel, and 46 personnel
performing other miscellaneous functions. The Company considers its relations
with its employees to be good.
The Company believes it operates with lower personnel costs than many
established airlines, principally due to lower base salaries and greater
flexibility in the utilization of personnel. There can be no assurance that the
Company will continue to realize these advantages over established or other air
carriers for any extended period of time. None of the Company's employees is
represented by a labor union, although labor unions have approached certain of
the Company's employees concerning potential representation. If unionization of
the Company's employees occurs, the Company's costs could materially increase.
Training, both initial and recurring, is required for many employees. Pilots,
flight attendants, ground service personnel, reservationists and mechanics are
trained by the Company. FAA regulations require pilots to be licensed as
commercial pilots, with specific ratings for aircraft to be flown and to be
medically certified as physically fit. Licenses and medical certification are
subject to periodic continuation requirements including recurrent training and
recent flying experience. Mechanics, quality control inspectors and flight
dispatchers must be licensed and qualified for specific aircraft. Flight
attendants must have initial and periodic competency fitness training and
certification. Training programs are subject to approval and monitoring by the
FAA. Management personnel directly involved in the supervision of flight
operations, training, maintenance and aircraft inspection must meet experience
standards prescribed by FAA regulations. Employees performing safety-sensitive
functions are subject to pre-employment and subsequent random drug and alcohol
testing.
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GOVERNMENT REGULATION
All interstate air carriers are subject to regulation by the DOT and the FAA
under the Federal Aviation Act. The DOT's jurisdiction extends primarily to the
economic aspects of air transportation, while the FAA's regulatory authority
relates primarily to air safety, including aircraft certification and
operations, crew licensing and training and maintenance standards.
In general, regulation of interstate air carriers in terms of market entry and
exit, pricing and inter-carrier agreements has been greatly reduced subsequent
to enactment of the Deregulation Act. As a result, the level of regulation to
which the Company and other airlines is subject has been greatly reduced. By the
same token, the availability to the Company of regulatory protection from
competition has been virtually eliminated.
U.S. Department of Transportation. The Company holds a Certificate of Public
Convenience and Necessity ("DOT Certificate") issued by the DOT which allows the
Company to engage in air transportation. Pursuant to law and DOT regulation,
each United States carrier must qualify as a United States citizen, which
requires that its President and at least two-thirds of its Board of Directors
and other managing officers be comprised of United States citizens; that not
more than 25% of its voting stock may be owned by foreign nationals, and that
the carrier not be otherwise subject to foreign control.
U.S. Federal Aviation Administration. The Company also holds an operating
certificate ("FAA Certificate") issued by the FAA pursuant to Part 121 of the
Federal Aviation Regulations. The FAA has jurisdiction over the regulation of
flight operations generally, including the licensing of pilots and maintenance
personnel, the establishment of minimum standards for training and maintenance,
and technical standards for flight, communications and ground equipment. The
Company must have and maintains FAA certificates of airworthiness for all of its
aircraft. The Company's flight personnel, flight and emergency procedures,
aircraft and maintenance facilities are subject to periodic inspections and
tests by the FAA.
In May 1996, a relatively new domestic airline, as is the Company, sustained an
accident in which one of its aircraft was destroyed and all persons on board
were fatally injured. In June 1996, that airline agreed at the FAA's request to
cease all of its flight operations for an indefinite period of time. Although
the FAA has subsequently, after an intensive and lengthy investigation, allowed
the new domestic airline to resume its operations, should the Company experience
a similar accident, it is probable that there would be a material adverse effect
on the Company's business.
The DOT and FAA also have authority under the Aviation Safety and Noise
Abatement Act of 1979, the Airport Noise and Capacity Act of 1990 ("ANCA") and
Clean Air Act of 1963 to monitor and regulate aircraft engine noise and exhaust
emissions. The Company is required to comply with all applicable FAA noise
control regulations and with current exhaust emissions standards. According to
FAA rules, each new entrant airline such as the Company must presently have at
least 50% of its fleet in compliance with the FAA's Stage 3 noise level
requirements. The balance of each airlines'
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fleet must be brought into compliance with Stage 3 in phases, with 75%
compliance by January 1999 and full compliance by January 2000. The Company's
aircraft fleet is currently in compliance with Stage 3 noise level requirements.
As a result of litigation and pressure from airport area residents, airport
operators have taken local actions over the years to reduce aircraft noise.
These actions have included regulations requiring aircraft to meet prescribed
decibel limits by designated dates, curfews during night time hours,
restrictions on frequency of aircraft operations and various operational
procedures for noise abatement. ANCA recognizes the right of airport operators
with special noise problems to implement local noise abatement procedures as
long as such procedures do not interfere unreasonably with the interstate and
foreign commerce of the national air transportation system. ANCA generally
requires FAA approval of local noise restrictions on Stage 3 aircraft and
establishes a regulatory notice and review process for local restrictions on
Stage 2 aircraft. An agreement between the City and County of Denver and another
city adjacent to DIA precludes the use of Stage 2 aircraft, such as certain of
the Company's Boeing 737-200 aircraft, on one of DIA's runways. On occasion,
this results in longer taxi times for the Company's aircraft than would
otherwise be the case. However, this has not had a material adverse effect on
the Company's operations. The Company's operations could be adversely affected
if additional restrictions are imposed at DIA or if locally-imposed regulations
become restrictive at any other cities on the Company's routes.
Miscellaneous. All air carriers are also subject to certain provisions of the
Communications Act of 1934 because of their extensive use of radio and other
communication facilities, and are required to obtain an aeronautical radio
license from the Federal Communications Commission ("FCC"). To the extent that
the Company is subject to FCC requirements, it takes all necessary steps to
comply with those requirements.
The Company's operations may become subject to additional federal regulatory
requirements in the future under certain circumstances. For example, if the
Company's employees were to unionize, the Company's labor relations would be
covered under Title II of the Railway Labor Act of 1926 and would be subject to
the jurisdiction of the National Mediation Board. During a period of past fuel
scarcity, air carrier access to jet fuel was subject to allocation regulations
promulgated by the Department of Energy. To the extent that the Company seeks to
provide international air transportation in the future, it will be required to
obtain additional authority from the DOT and become subject to other regulatory
requirements imposed by affected foreign jurisdictions.
ITEM 2: DESCRIPTION OF PROPERTY
The Company has leased approximately 24,800 square feet of office space in
Denver with terms ending in 1999 and 2001 at a current annual cost of $329,700
for the fiscal year ending March 31, 1998. This facility provides space for the
Company's reservation center together with space for administrative activities
including senior management, purchasing, accounting, sales, marketing,
advertising and human resources.
-12-
<PAGE>
Each airport location requires leased space associated with gate operations,
ticketing and baggage operations. The ticket counters, gates and airport office
facilities at each of the airports the Company serves are leased from the
appropriate airport authority or subleased from other airlines.
The Company has entered into an airport lease and facilities agreement with the
City and County of Denver at DIA that expires in 2005. The Company subleases
ticket counter space and four gates at DIA from Continental Airlines until March
1, 2000 and a portion of Continental Airline's hangar at DIA until September 30,
1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation-Liquidity and Capital Resources."
ITEM 3: LEGAL PROCEEDINGS
In February 1997, the Company filed a complaint with the DOJ alleging that
United Airlines has engaged in predatory, anticompetitive and monopolistic
practices at DIA. The complaint asks the agency to investigate eight separate
counts of potential antitrust violations. The eight counts range from "capacity
dumping" in markets served by competitors to alleged abuses relating to United's
pricing practices, "exclusive dealing" with corporate customers and commuter
carriers, and other tactics used by United to allegedly drive competitors from
its markets. The Company is unable to predict what action, if any, the DOJ will
take in response to this complaint.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no matter
was submitted to a vote of security holders of the Company through the
solicitation of proxies or otherwise.
PART II
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq SmallCap Market ("Nasdaq")
under the symbol "FRNT." The following table sets forth the range of high and
low bid prices per share for the Common Stock for the periods indicated as
reported by Nasdaq. Market quotations represent prices between dealers and do
not reflect retail mark-ups, mark-downs or commissions. There was no market for
the Common Stock prior to the Company's initial public offering on May 20, 1994.
As of June 23, 1997, there were 392 holders of record of the Common Stock.
-13-
<PAGE>
<TABLE>
<CAPTION>
Price Range of
Quarter Ended Common Stock
- ------------- ---------------------
High Low
---------- ---------
<S> <C> <C>
June 30, 1996................................ $ 6 $ 4 11/16
September 30, 1995........................... 5 3/4 3 1/4
December 31,1995............................. 8 1/4 4 3/8
March 31,1996................................ 7 3/8 5 1/8
June 30, 1996................................ 10 5/16 7
September 30, 1996........................... 9 3/4 6 3/4
December 31, 1996............................ 6 29/32 3 1/4
March 31, 1997............................... 4 2 5/8
</TABLE>
WARRANTS AND OPTIONS
The Company issued 2,670,000 warrants to purchase common stock in conjunction
with a private placement and its initial public offering. Each warrant entitled
the warrant holder to purchase one share of common stock for $5.00. These
warrants were subject to redemption at $.05 per warrant by the Company on 45
days written notice if certain conditions were met. The Company met these
conditions in May 1996 and on May 14, 1996, the Company notified the warrant
holders of the Company's intent to exercise its redemption rights with respect
to the warrants not exercised on or before June 28, 1996. Warrant holders
exercised 2,666,133 of the warrants, resulting in net proceeds to the Company
totaling $13,275,000.
At completion of the Company's initial public offering, an underwriter acquired
options to purchase up to 110,000 shares of common stock exercisable at a price
equal to $5.525 per share. Additionally, the underwriter was granted up to
110,000 warrants to purchase common stock at a price equal to $.325 per warrant
and $5.00 per share of common stock. The underwriters in a secondary public
offering by the Company received a warrant to purchase 168,500 shares of common
stock at $5.55 per share. The options and warrants issued to underwriters in
connection with the initial and secondary public offerings expire, respectively,
on May 20, 1999 and September 18, 2000.
In October 1995, the Company issued to each of two of its Boeing 737-300
aircraft lessors a warrant to purchase 100,000 shares of Common Stock for an
aggregate purchase price of $500,000. In June 1996, the Company issued two
warrants to a Boeing 737-200 lessor, each warrant entitling the lessor to
purchase 70,000 shares of common stock for an aggregate price of $503,300 per
warrant. In connection with a Boeing 737-300 aircraft to be delivered in August
1997, the Company has issued to the lessor a warrant to purchase 55,000 shares
of Common Stock for an aggregate purchase price of $385,000. Warrants issued
to aircraft lessors, to the extent not earlier exercised, expire upon expiration
of the aircraft leases in March 2000, May and June 2001, and September 2005.
-14-
<PAGE>
As of June 15, 1997, the Company has granted stock options to purchase up to
1,931,250 shares of Common Stock, 1,781,250 of which options are currently
exercisable at exercise prices ranging from $1.00 to $9.00 per share.
DIVIDEND POLICY
Except for the Rights Dividend Distribution described below, the Company has not
declared or paid dividends on its Common Stock. The Company currently intends
to retain any future earnings to fund operations and the continued development
of its business, and, thus, does not expect to pay any cash dividends on its
Common Stock in the foreseeable future. Future cash dividends, if any, will be
determined by the Board of Directors and will be based upon the Company's
earnings, capital requirements, financial condition and other factors deemed
relevant by the Board of Directors.
RIGHTS DIVIDEND DISTRIBUTION
In February 1997, the Company's Board of Directors declared a dividend
distribution of one right (a "Right") for each outstanding share of the
Company's no par value common stock ("Common Stock") to shareholders of record
at the close of business on March 15, 1997. Except as described below, each
Right, when exercisable, entitles the registered holder to purchase from the
Company one share of the Company's Common Stock, at a purchase price of $17.50
per share (the "Purchase Price"), subject to adjustment. The Rights expire at
the close of business on February 20, 2007, unless earlier redeemed or exchanged
by the Company as described below. The description and terms of the Rights are
set forth in a Rights Agreement, as amended by an amendment dated June 30, 1997
(as so amended, the "Rights Agreement").
The Rights are exercisable upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons other
than the Company, its subsidiaries or any person receiving newly-issued shares
of Common Stock directly from the Company or indirectly via an underwriter in
connection with a public offering by the Company (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding shares of Common Stock (the "Stock Acquisition Date"), or
(ii) 10 business days following the commencement of a tender offer or exchange
offer that would result in a person or group beneficially owning 20% or more of
such outstanding shares of Common Stock.
If any person becomes an Acquiring Person other than pursuant to a Qualifying
Offer (as defined below), each holder of a Right has the right to receive, upon
exercise, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. Notwithstanding any of the foregoing, all Rights that are
beneficially owned by any Acquiring Person will be null and void. However,
Rights are not exercisable in any event until such time as the Rights are no
longer redeemable by the Company as set forth below.
-15-
<PAGE>
A "Qualifying Offer" means a tender offer or exchange offer for, or merger
proposal involving, all outstanding shares of Common Stock at a price and on
terms determined by at least a majority of the Board of Directors who are not
officers or employees of the Company and who are not related to the Person
making such offer, to be fair to and in the best interests of the Company and
its shareholders. The Merger Agreement between the Company and Western Pacific
constitutes a Qualifying Offer.
If after the Stock Acquisition Date the Company is acquired in a merger or other
business combination transaction in which the Common Stock is changed or
exchanged or in which the Company is not the surviving corporation (other than a
merger that follows a Qualifying Offer) or 50% or more of the Company's assets
or earning power is sold or transferred, each holder of a Right shall have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Right.
The Purchase Price payable, and the number of shares of Common Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Stock, (ii) if holders of the Common Stock are granted certain rights or
warrants to subscribe for Common Stock or convertible securities at less than
the current market price of the Common Stock, or (iii) upon the distribution to
holders of the Common Stock of evidences of indebtedness or assets or of
subscription rights or warrants.
At any time until ten days following the Stock Acquisition Date, the Company may
redeem the Rights in whole at a price of $.01 per Right. Upon the action of the
Board of Directors ordering redemption of the Rights, the Rights will terminate
and the only right of the holders of Rights will be to receive the $.01
redemption price.
While the distribution, if any, of the Rights will not be taxable to
shareholders or to the Company, shareholders may, depending upon the
circumstances, recognize taxable income if the Rights become exercisable for
Common Stock (or other consideration) of the Company or for common stock of the
acquiring company.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's flight operations began on July 5, 1994 with two Boeing 737-200
aircraft operating eight daily flights between Denver, Colorado and four North
Dakota cities. Since that time, the Company has increased the number of markets
it serves and the number of flights offered. The Company placed three additional
Boeing 737-200 aircraft in service in 1994 and added four cities in Montana to
its route system. In October 1995, the Company leased two Boeing 737-300
aircraft which were placed in service during November 1995 in conjunction with
adding four new, high
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<PAGE>
volume routes linking Denver to Los Angeles and San Francisco, California,
Minneapolis-St. Paul, Minnesota, and Salt Lake City, Utah. The Company
significantly rescheduled its flights in 1995 through the elimination of Minot
and Grand Forks, North Dakota and all four of its Montana destinations, and the
addition of Omaha, Nebraska, Las Vegas, Nevada, Chicago (Midway), Illinois and
Phoenix, Arizona to its schedule. Flights to Seattle/Tacoma commenced on May 1,
1996, and flights to San Diego, California and St. Louis, Missouri commenced on
June 1, 1996 in conjunction with the addition of two additional Boeing 737-200
jets to the Company's fleet.
Flights to Bismarck and Fargo, North Dakota, the last two of the Company's eight
original markets, were suspended on September 10, 1996. Including subsequent
deliveries of two more Boeing 737-300 jets, one in November 1996 and one in May
1997, the Company presently operates a fleet of 11 Boeing 737s on routes between
Denver and 14 cities in 11 states spanning the western two-thirds of the United
States. The Company's newest destination, Bloomington-Normal, Illinois, was
added on January 6, 1997, as an extension of its service between Denver and
Omaha, Nebraska.
The Company has leased three more Boeing 737-300s, two to be delivered in August
1997 and one in January 1998, at which time it plans to add new cities to its
route system or additional frequencies to markets presently being served.
Subject to future aircraft availability, the Company plans to lease additional
jets in the 737 series to permit the Company to further expand its lines of
service. The Merger Agreement between the Company and Western Pacific requires
Western Pacific's concurrence in any such additional leases. Demand and
competition for Boeing 737 aircraft has increased significantly in the past two
years.
The Company modified its initial operating plan and expanded operations during
the fiscal years ended March 31, 1996 and March 31, 1997. Therefore, the
Company's results of operations for the fiscal years ended March 31, 1996 and
1997 are not necessarily comparable or indicative of future operating results.
Effective in September 1996, the Company began performing scheduled maintenance
on its aircraft using its own mechanics, with the exception of major maintenance
cycles which continue to be performed by FAA approved contractors.
RESULTS OF OPERATIONS
The Company incurred a net loss of $12,186,332 or $1.49 per share for the year
ended March 31, 1997 as compared to a net loss of $5,582,000 or $1.23 per share
for the year ended March 31, 1996. The increase in net loss was attributable to
the increase in operating expenses exceeding the increase in revenues discussed
below. During the year ended March 31, 1996, the Company modified its initial
operating strategy from serving "local" passengers (those either beginning or
ending their trips in Denver) and "connecting" passengers (those transferring to
or from other airlines for flights to destinations beyond Denver) and developed
its own connecting hub at Denver and to providing service to Denver's largest
markets that are more dependent on local traffic and less dependent on
connecting traffic. The Company began the implementation of its new business
strategy in late September 1995. As a result of the completion of the first
phase of its new business and marketing strategy, the Company had its first
profitable quarter during the quarter ended March 31, 1996 with net income of
$816,000 and its second
-17-
<PAGE>
profitable quarter during the quarter ended June 30, 1996 of the fiscal year
ended March 31, 1997 with net income of $1,336,000. Beginning in August 1996,
the Company experienced higher fuel costs, short-term lease expenses for
aircraft to replace its aircraft during scheduled maintenance cycles, intensive
increased competition from DIA's dominant carrier, United Airlines, increased
maintenance expenses as it commenced in-house maintenance operations in
September 1996, and the return of the 10% passenger excise tax on August 27,
1996. Because of United Airlines' competitive activity, the Company was unable
to adjust its fares to permit recovery of these increased expenses. Management
believes alleged anticompetitive practices by United in the Denver market have
had, and, to the extent they continue, will have a material adverse effect on
the Company's revenues and results of operations. (See Part I, Item 3: Legal
Proceedings.)
Small fluctuations in the Company's yield per RPM or expense per ASM can
significantly affect operating results because the Company, like other airlines,
has high fixed costs and low operating margins in relation to revenues. Airline
operations are highly sensitive to various factors, including the actions of
competing airlines and general economic factors, which can adversely affect the
Company's liquidity, cash flows and results of operations.
The following table sets forth certain quarterly and annual financial and
operating data regarding the Company for the year ended March 31, 1997 and
annual financial and operating data for the year ended March 31, 1996.
-18-
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED YEAR ENDED
------------------------------ -------------- ---------
JUNE 30, 1996 SEPTEMBER 30, DECEMBER 31, MARCH 31, 1997 MARCH 31, 1997 MARCH 31,
------------- ------------- ------------ -------------- -------------- ---------
1996 1996 1996
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Passenger revenue $ 27,570,000 $ 29,518,000 $ 24,503,000 32,167,000 $ 113,758,000 $ 68,530,000
Revenue passengers
carried 271,000 308,000 272,000 329,000 1,180,000 758,000
Revenue passenger miles
(RPMs)(1) 190,541,000 220,982,000 193,316,000 235,100,000 839,939,000 479,887,000
Available seat miles
(ASMs)(2) 313,216,000 363,667,000 354,103,000 388,734,000 1,419,720,000 844,161,000
Passenger load
factor(3) 60.8% 60.8% 54.6% 60.5% 59.2% 56.9%
Break-even load
factor(4) 58.3% 66.0% 73.1% 66.9% 66.0% 61.8%
Block hours(5) 7,297 8,384 8,089 8,689 32,459 20,783
Average daily block hour
utilization(6) 10.97 10.24 9.86 10.09 10.29 9.93
Yield per RPM(7) 14.47c 13.36c 12.68c 13.68c 13.54c 14.28c
Yield per ASM(8) 8.80c 8.12c 6.92c 8.27c 8.01c 8.12c
Expense per ASM 8.62c 8.98c 9.46c 9.39c 9.13c 9.04c
Passenger revenue per
block hour $ 3,778.27 $ 3,520.75 $ 3,029.18 $ 3,702.04 $ 3,504.67 $ 3,297.41
Average fare(9) 98 92 86 94 93 88
Average aircraft in service 7.3 9.6 10.3 11.0 9.6 5.7
Operating income (loss) $ 1,138,000 ($2,547,000) ($8,318,000) ($3,434,000) ($13,161,000) ($5,933,000)
Net income (loss) $ 1,336,000 ($2,189,000) ($8,043,000) ($3,290,000) ($12,186,000) ($5,582,000)
</TABLE>
(1) "Revenue passenger miles," or RPMs, are determined by multiplying the
number of fare-paying passengers carried by the distance flown.
(2) "Available seat miles," or ASMs, are determined by multiplying the number
of seats available for passengers by the number of miles flown.
(3) "Passenger load factor" is determined by dividing revenue passenger miles
by available seat miles.
(4) "Break-even load factor" is the passenger load factor that will result in
operating revenues being equal to operating expenses, assuming constant
revenue per passenger mile and expenses.
(5) "Block hours" represent the time between aircraft gate departure and
aircraft gate arrival.
(6) "Average daily block hour utilization" represents the total block hours
divided by the weighted average number of aircraft days in service.
(7) "Yield per RPM" is determined by dividing passenger revenues by revenue
passenger miles.
(8) "Yield per ASM" is determined by dividing passenger revenues by available
seat miles.
(9) "Average fare" excludes revenue included in passenger revenue for non-
revenue passengers, administrative fees, and revenue recognized for unused
tickets that are greater than one year from issuance date.
-19-
<PAGE>
The following table provides information regarding the Company's operating
revenues and expenses for the year ended March 31, 1996.
<TABLE>
<CAPTION>
REVENUE/
AMOUNT PERCENT BLOCK HOUR YIELD/ASM YIELD/RPM
----------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
- --------
Passenger $68,530,000 97.4% $3,297.41 8.12c 14.28c
Cargo 1,148,000 1.6% 55.29 0.14c 0.24c
Other 714,000 1.0% 34.36 0.08c 0.15c
----------- ----- --------- --------- ---------
Total operating revenues $70,393,000 100.0% $3,387.06 8.34c 14.67c
=========== ===== ========= ========= =========
EXPENSE/ EXPENSE/
AMOUNT PERCENT BLOCK HOUR ASM
----------- ------- --------- ---------
<S> <C> <C> <C> <C>
EXPENSES
- --------
Flight operations $28,019,000 39.8% $1,348.17 3.32c
Aircraft and traffic servicing 18,487,000 26.3% 889.53 2.19c
Maintenance 11,732,000 16.7% 564.50 1.39c
Promotion and sales 14,219,000 20.2% 684.16 1.68c
General and administrative 3,321,000 4.7% 159.79 .40c
Depreciation and amortization 547,000 0.8% 26.32 .06c
----------- ----- --------- ---------
Total operating expenses $76,325,000 108.4% $3,672.47 9.04c
=========== ===== ========= =========
The following table provides information regarding the Company's operating
revenues and expenses for the year ended March 31, 1997.
REVENUE/
AMOUNT PERCENT BLOCK HOUR YIELD/ASM YIELD/RPM
----------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
- --------
Passenger $113,758,000 97.6% $3,504.67 8.01c 13.54c
Cargo 1,956,000 1.7% 60.26 0.14c 0.23c
Other 787,000 0.7% 24.25 0.06c 0.09c
------------ ----- --------- --------- ---------
Total operating revenues $116,501,000 100.0% $3,589.17 8.21c 13.87c
============ ===== ========= ========= =========
EXPENSE/ EXPENSE/
AMOUNT PERCENT BLOCK HOUR ASM
----------- ------- --------- ---------
<S> <C> <C> <C> <C>
EXPENSES
- --------
Flight operations $ 52,651,000 45.2% $1,622.08 3.71c
Aircraft and traffic servicing 24,849,000 21.3% 765.55 1.75c
Maintenance 24,946,000 21.4% 768.54 1.76c
Promotion and sales 21,526,000 18.5% 663.18 1.52c
General and administrative 4,618,000 4.0% 142.27 .33c
Depreciation and amortization 1,072,000 0.9% 33.03 .08c
------------ ----- --------- ---------
Total operating expenses $129,662,000 111.3% $3,994,64 9.13c
============ ===== ========= =========
</TABLE>
REVENUES
General. Airline revenues are primarily a function of the number of passengers
carried and fares charged by the airline. The Company believes that revenues
will gradually increase in a new market over a 60 to 120 day period as market
penetration is achieved. This occurred during the
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<PAGE>
year ended March 31, 1996 in January, September and November 1995 when the
Company commenced service between Denver and Omaha, Nebraska, Las Vegas, Nevada,
Chicago (Midway), Illinois, Phoenix, Arizona, Los Angeles and San Francisco,
California, Minneapolis-St. Paul, Minnesota and Salt Lake City, Utah. During the
year ended March 31, 1997, the Company commenced service between Denver and
Seattle/Tacoma, San Diego and St. Louis in May and June, 1996, and between
Denver and Bloomington, Illinois via Omaha in January 1997.
The Company's results are highly sensitive to changes in fare levels. Fare
pricing policies have a significant impact on the Company's revenues. Following
is a table of the Company's average fares:
Quarter Ended Average Fare
------------- ------------
June 30, 1995 $96
September 30, 1995 $85
December 31, 1995 $80
March 31, 1996 $93
June 30, 1996 $98
September 30, 1996 $92
December 31,1996 $86
March 31, 1997 $94
In connection with the modification in the Company's strategy, the Company
reduced fares to maximize traffic and revenue. During the quarter ended
September 30, 1995, the Company reduced its fares system-wide in order to
"stimulate" markets and match competitors' fares. During the quarter ended
December 31, 1995, the Company's average fare decreased to $80 as a result of
introductory fares for its two new markets added in late September 1995 and the
four new markets added during the month of November 1995. The Company's average
fare for the quarters ended March 31, 1996 and June 30, 1996 increased to $93
and $98, respectively, largely as a result of the Company's new yield management
system, the elimination of introductory fares, and the expiration of excise
taxes on air transportation effective January 1, 1996. On August 27, 1996, the
10% excise tax on air transportation was reinstated through December 31, 1996.
The decrease in the average fare of $98 for the quarter ended June 30, 1996 to
$92 for the quarter ended September 30, 1996 and to $86 for the quarter ended
December 31, 1996 was largely due to alleged anticompetitive activity by United
Airlines in the Denver market which precluded the Company from adjusting fares
to recover increased costs, including the reinstatement of the 10% excise tax.
The excise tax expired again on December 31, 1996, was subsequently reinstated
on March 7, 1997 and is scheduled to expire again on September 30, 1997.
Management believes that the excise tax or some other type of tax will be
reinstated immediately upon expiration of the present tax and may be as high as
10% of the fare. Given the elasticity of passenger demand, the Company believes
that increases in fares will result in a decrease in passenger demand. To
maintain passenger traffic in the face of an excise tax increase may require
some downward adjustment in net fares realized by the Company. The Company
cannot completely predict future fare levels, which depend to a substantial
degree on actions of competitors. When sale prices or other price changes are
made by competitors in the
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<PAGE>
Company's markets, the Company believes that it must, in most cases, match these
competitive fares in order to maintain its market share. Passenger revenues are
seasonal in each market.
Passenger Revenue. Passenger revenues totaled $113,758,000 for the year ended
March 31, 1997 compared to $68,530,000 for the year ended March 31, 1996, or an
increase of 66%. The number of revenue passengers carried was 1,180,000 for the
year ended March 31, 1997 compared to 758,000 for the year ended March 31, 1997
or an increase of 56%. The average fare for the year ended March 31, 1997 was
$93 compared to the average fare for the year ended March 31, 1996 of $88. The
Company had an average of 9.6 aircraft in service during the year ended March
31, 1997 compared to an average of 5.7 aircraft during the year ended March 31,
1996 for an increase in ASMs of 575,559,000 or 68%.
An airline's break-even load factor is the passenger load factor that will
result in operating revenues being equal to operating expenses, assuming
constant revenue per passenger mile and expenses. For the year ended March 31,
1997, the Company's break-even load factor was 66% compared to a passenger load
factor of 59.2%. For the year ended March 31, 1996 the Company's break-even
load factor was 61.8% compared to a passenger load factor of 56.9%. The
Company's break-even load factor increased over the prior comparable period as
increased price competition kept the Company from increasing fares to compensate
for the higher fuel prices, short term aircraft lease expenses, and increased
maintenance expenses associated with the Company's maintenance facility which
began operations in September 1996. The increase in these expenses began during
August 1996, which increased the break-even load factor from 58.3% for the
quarter ended June 30, 1996 to 66% for the quarter ended September 30, 1996.
The Company experienced the full impact of these increased expenses in the
quarter ended December 31, 1996, as the break-even load factor increased to
73.1%. The break-even load factor decreased to 68.1% for the quarter ended
March 31, 1997 largely as a result in the increase in the average fare from $86
to $94 during the quarter ended March 31, 1997.
The improvement in the Company's load factor from 56.9% to 59.2% for year ended
March 31, 1997 over the prior comparable period reflects the result of the
Company's change in business strategy to provide service to higher volume
markets. However, management believes that its load factor for the year ended
March 31, 1997 could have been higher but was adversely affected by increased
competitive fare pricing and by the public's initial reaction to two significant
airline accidents which occurred during the year ended March 31, 1997. One of
the accidents involved a low fare carrier and the other involved a major
national airline. In both accidents the aircraft was destroyed and all
passengers and crew were killed.
Cargo revenues, consisting of revenues from freight and mail service, totaled
$1,956,000 and $1,148,000 for the years ended March 31, 1997 and 1996,
representing 1.7% and 1.6% of total operating revenues, respectively. This
adjunct to the passenger business is highly competitive and depends heavily on
aircraft scheduling, alternate competitive means of same day delivery service
and schedule reliability.
Other revenues, comprised principally of liquor sales and excess baggage fees,
totaled $787,000 and $714,000 or less than 1% of total operating revenues for
each of the years ended March 31, 1997 and 1996.
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<PAGE>
OPERATING EXPENSES
Operating expenses include those related to flight operations, aircraft and
traffic servicing, maintenance, promotion and sales, general and administrative
and depreciation and amortization. Total operating expenses increased to 111.3%
of revenue for the year ended March 31, 1997 compared to 108.4% of revenue for
the year ended March 31, 1996. Operating expenses increased as a percentage of
revenue largely as result of an increase in flight operations expenses. Flight
operations expenses were impacted by increased fuel prices, short-term lease
expenses to replace aircraft undergoing scheduled maintenance and an increase in
maintenance expenses as a result of the Company's start-up of its own
maintenance facility to perform routine maintenance at Denver. As a result,
total operating expenses for the year ended March 31, 1997 increased 70% over
the prior comparable period.
Flight Operations. Flight operations expenses of $52,650,000 and $28,019,000
were 45.2% and 39.8% of total revenue for the year ended March 31, 1997 and
1996, respectively. Flight operations expenses include all expenses related
directly to the operation of the aircraft including fuel, lease and insurance
expenses, pilot and flight attendant compensation, in flight catering, crew
overnight expenses, flight dispatch and flight operations administrative
expenses.
Aircraft fuel expenses include both the direct cost of fuel including taxes as
well as the cost of delivering fuel into the aircraft. Aircraft fuel costs of
$21,551,000 for 25,926,000 gallons used and $11,775,000 for 16,706,000 gallons
used resulted in an average fuel cost of 83.1c and 70.5c per gallon and
represented 40.9% and 42.0% of total flight operations expenses for the years
ended March 31, 1997 and 1996, respectively. The average fuel cost per gallon
increased for the year ended March 31, 1997 over the comparable prior period due
to an overall increase in the cost of fuel and the loss of the fuel tax
exemption for the entire 1997 fiscal year. In 1993, the United States increased
taxes on domestic fuel, including aviation fuel, by 4.3 cents per gallon. This
tax increase was first imposed on the Company and other airlines effective
October 1, 1995. Fuel prices are subject to change weekly as the Company does
not purchase supplies in advance for inventory. Fuel consumption for the years
ended March 31, 1997 and 1996 averaged 799 and 804 gallons per block hour,
respectively. Fuel consumption per block hour decreased as a result of more
fuel efficient aircraft and an increase in the average length of haul.
Aircraft lease and insurance expenses, excluding short-term aircraft lease
expenses, totaled $15,983,000 (13.7% of total revenue) and $7,980,000 (11.3% of
total revenue) for the years ended March 31, 1997 and 1996, respectively, or an
increase of 100.3%. The increase is partially attributable to the increase in
the average number of aircraft in service to 9.6 from 5.7 for the years ended
March 31, 1997 and 1996, respectively, and partially due to higher lease
expenses on larger and newer aircraft fleet additions. Beginning August 1996
and November 1995, the Company entered into short-term aircraft lease agreements
in order to add a partial spare aircraft to its fleet to improve the Company's
on-time performance and completion factors for the year ended March 31, 1997,
and to substitute for aircraft in the Company's fleet which rotated out of
service for scheduled maintenance for the years ended March 31, 1997 and 1996.
The final short-term aircraft lease
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agreement terminated March 31, 1997. Total expenses associated with the short-
term aircraft lease agreements totaled $3,359,000 during the months of August
through December 1996 and $526,000 for the months of November 1995 through
December 1995. The Company paid a premium for short-term lease agreements and
does not anticipate future short-term agreements due to the addition of aircraft
to its fleet.
Pilot and flight attendant compensation totaled $6,671,000 and $4,025,000 or
5.7% for each of the years ended March 31, 1997 and 1996, or an increase of
65.8%. Pilot and flight attendant compensation increased principally as a
result of a 68.4% increase in the average number of aircraft in service and an
increase of 56.1% in block hours. During the fiscal year ended March 31, 1997,
the Company added two leased aircraft to its fleet in June 1996 and December
1996. During the fiscal year ended March 31, 1996 the Company added two leased
aircraft to its fleet in October 1995. The Company pays pilot and flight
attendant salaries for training consisting of approximately six and three weeks,
respectively, prior to scheduled increases in service, causing the compensation
expense for the years ended March 31, 1997 and 1996 to appear high in
relationship to the average number of aircraft in service. When the Company is
not in the process of adding aircraft to its system, it expects that pilot and
flight attendant expense per aircraft will normalize. With a scheduled
passenger operation, and with salaried rather than hourly crew compensation, the
Company's expenses for flight operations are largely fixed, with flight catering
and fuel expenses the principal exception.
Aircraft and Traffic Servicing. Aircraft and traffic servicing expenses were
$24,849,000 and $18,487,000 for the years ended March 31, 1997 and 1996,
respectively, and represented 21.3% and 26.3% of total revenue. These include
all expenses incurred at airports served by the Company, as well as station
operations administration and flight operations ground equipment maintenance.
Station expenses include landing fees, facilities rental, station labor and
ground handling expenses. Station expenses as a percentage of revenue decreased
during the year ended March 31, 1997 over the year ended March 31, 1996 as a
result of the Company's rental costs (in particular, the gate rentals at DIA)
which are largely fixed costs, remaining relatively constant as compared to the
increase in revenue. Additionally, the Company began its own "above wing"
operations at DIA (including passenger check-in at ticket counters, concourse
gate operations and cabin cleaning) effective April 1996, Los Angeles
International Airport in June 1996, Chicago (Midway) in July 1996, Seattle-
Tacoma in August 1996, and El Paso, Texas effective October 1996 rather than
contracting these services through a third party supplier. Aircraft and traffic
servicing expenses will increase with the addition of new cities; however, the
increased existing gate utilization at DIA is expected to reduce per unit
expenses.
Maintenance. Maintenance expenses of $24,946,000 and $11,732,000 were 21.4% and
16.7% of total revenue for the years ended March 31, 1997 and 1996,
respectively. These include all maintenance, labor, parts and supplies expenses
related to the upkeep of the aircraft. Routine maintenance is charged to
maintenance expense as incurred while major engine overhauls and heavy
maintenance checks are accrued each quarter. Maintenance cost per block hour
was $769 and $565 per block hour for the years ended March 31, 1997 and 1996,
respectively. Continental Airlines had been providing routine aircraft
maintenance services for the Company at Denver. Continental
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discontinued this service in mid-September 1996. As a result of the discontinued
service, the Company hired its own aircraft mechanics to perform routine
maintenance and subleased a portion of a hangar from Continental at DIA in which
to perform this work. The performance of this work by the Company, together with
the cost of leasing adequate hangar space, increased the Company's maintenance
cost per block hour. Management believes that these costs will normalize as it
adds additional aircraft to its fleet.
During the year ended March 31, 1997, the Company revised the timing of its
scheduled maintenance and related estimates for its engine maintenance reserves.
The revised estimate resulted in an additional reserve accrual of approximately
$765,000 which approximates $23 of the total maintenance cost per block hour of
$768 for the year ended March 31, 1997.
Promotion and Sales. Promotion and sales expenses totaled $21,526,000 and
$14,219,000 and were 18.5% and 20.2% of passenger revenue for the years ended
March 31, 1997 and 1996, respectively. These include advertising expenses,
telecommunications expenses, wages and benefits for reservationists and
reservations supervision as well as marketing management and sales personnel.
Credit card fees, travel agency commissions and computer reservations costs are
included in these costs. The promotion and sales expenses per passenger were
$18.24 and $18.75 for the years ended March 31, 1997 and 1996, respectively.
The 51c reduction is largely a result of a decrease in interline service charges
and communication expenses.
The Company's interline service charges decreased as a result of a 2.8%
reduction in the percentage of interline revenue to total revenues. Interline
revenue is for travel on the Company's flights ticketed by another airline on
connecting traffic. The decrease in interline revenue as a percentage of total
revenues is a result of route reductions in regional markets.
Advertising expenses of $2,482,000 were 2.2% of passenger revenues for the year
ended March 31, 1997, compared to approximately $1,619,000 or 2.4% of passenger
revenues for the year ended March 31, 1996. As new cities are added to the
Company's flight schedule, advertising and marketing promotions are designed and
implemented to increase awareness of the Company's new service, name and brand
awareness. Advertising expenses decreased as a percentage of passenger revenues
as the Company entered four new markets during the year ended March 31, 1997
compared to six new markets during the year ended March 31, 1996, offset by an
increase in advertising expenses during the year ended March 31, 1997 as a
result of increased fare competition by United Airlines.
General and Administrative. General and administrative expenses for the years
ended March 31, 1997 and 1996 totaling $4,618,000 and $3,321,000 were 4.0% and
4.7% of total revenue, respectively. These expenses include the wages and
benefits for the Company's executive officers and various other administrative
personnel. Legal and accounting expenses, supplies and other miscellaneous
expenses are also included in this category. The overall increase in general
and administrative expenses is largely a result of an increase in employee
benefits and office rent with the increase in the number of full and part-time
employees from 533 in March 1996 to 738 in March 1997 and an increase in revenue
accounting fees as a result of a 55.6% increase in revenue passengers carried.
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Depreciation and Amortization. Depreciation and amortization expense of
$1,072,000 and $547,000 were approximately one percent of total revenue for the
years ended March 31, 1997 and 1996, respectively. These expenses include
depreciation of office equipment, ground station equipment, and other fixed
assets of the Company. Amortization of start-up and route development costs are
not included as these expenses have been expensed as incurred.
Nonoperating Income (Expenses). Total net nonoperating income totaled $975,000
for the year ended March 31, 1997 compared to $351,000 for the year ended March
31, 1996, or an increase of 178% principally a result of an increase in interest
income of 146%. Interest income increased over the prior comparable period as a
result of increases in cash which occurred during the first quarter of the year
ended March 31, 1997 as a result of profitable operations during that quarter, a
private placement of the Company's Common Stock in April 1996, and capital
raised from the exercise of the Company's warrants.
Expenses per ASM. The Company's expenses per ASM for the years ended March 31,
1997 and 1996 were 9.13c and 9.04c, respectively, or an increase of 1%.
Expenses per ASM increased over the comparable period as a result of increased
flight operation expenses resulting from an increase in short-term aircraft
lease and fuel expenses and increased maintenance expenses largely a result of
the Company's start-up of its own maintenance facility, offset by economies of
scale as the fixed costs were spread across a larger base of operations.
Expenses per ASM are influenced to some degree by the utilization of aircraft
and by the seating configuration that each airline employs. For example, with
the 108 seat all coach seating configuration selected by the Company on five of
its Boeing 737-200 aircraft, the expenses per ASM of the Company are higher by
11% when compared with the 120 seat alternative used by many carriers.
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet reflected cash, cash equivalents and short-term
investments of $10,286,000 at March 31, 1997. At March 31, 1997, total current
assets were $31,470,000 as compared to $32,745,000 of total current liabilities,
resulting in a working capital deficit of $1,275,000. At March 31, 1996, total
current assets were $25,797,000 as compared to $25,844,000 of total current
liabilities, resulting in a working deficit of $47,000.
Cash used by operating activities for the year ended March 31, 1997 was
$6,409,000. This is largely attributable to the Company's net loss for the
period and increases in trade receivables and maintenance deposits, offset by
increases in accounts payable, other accrued expenses, and air traffic
liability. Cash used by operating activities for the year ended March 31, 1996
was $828,000. This is attributed primarily to the Company's net loss for the
period, increases in trade receivables, maintenance and other deposits, prepaid
expenses and other assets and a decrease in other accrued expenses, offset by an
increase in accounts payable, air traffic liability, and accrued maintenance
expenses.
Cash used in investing activities for the year ended March 31, 1997 was
$5,549,000. Restricted cash increased $600,000 for collateral for a letter of
credit given to an aircraft lessor in lieu of a cash security
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deposit for the Boeing 737-300 aircraft leased in November 1996. The Company
spent $2,628,000 for initial lease acquisition security deposits for two Boeing
737-200 and partial security deposits for four Boeing 737-300 aircraft leased
during the year ended March 31, 1997 with one delivered in May 1997 and the
remaining three to be delivered during the Company's fiscal year ending March
31, 1998. The Company made capital expenditures totaling $3,435,000 for
equipment, spare engine, aircraft parts, and aircraft improvements, maintenance
equipment for its maintenance facility which began operations in September 1996,
ground equipment, computer equipment, and leasehold improvements.
Cash used in investing activities totaled $3,895,000 for the year ended March
31, 1996. The Company spent $1,661,000 for initial lease acquisition security
deposits for the two Boeing 737-300 aircraft leased in November 1995 and the
remaining as security deposit requirements on the five Boeing 737-200 aircraft
leased in 1994. The Company made capital expenditures totaling $1,098,000 for
spare parts, ground equipment, computer equipment, leasehold improvements and
maintenance equipment and was partially offset by miscellaneous equipment sales
as a result of closing operations in Montana.
Cash provided by financing activities for the years ended March 31, 1997 and
1996 was $15,885,000 and $7,248,000, respectively. In April 1996, the Company
completed a private placement of its Common Stock that resulted in net proceeds
of approximately $2,721,000. In May 1996, the Company notified the warrant
holders of the Company's intent to exercise its redemption rights with respect
to warrants not exercised on or before June 28, 1996. The Company received net
proceeds from the exercise of these warrants of approximately $13,278,000.
During the year ended March 31, 1996, the Company completed a secondary public
offering of the Company's Common Stock with net proceeds of $6,305,000. The
Company currently has no lines of credit.
Five of the Company's Boeing 737-200 aircraft are leased under operating leases
which originally expired in 1997. The leases provide for up to two renewal
terms of two years each with no increase in basic rent. The Company renewed the
leases for the first two-year renewal period and these leases now expire in the
year 1999. Under these leases, the Company was required to make security
deposits and makes deposits for maintenance of these leased aircraft. These
deposits totaled $625,000 and $3,644,000, respectively, at March 31, 1997.
The Company leased two Boeing 737-300 aircraft under operating leases in
November 1995, which expire in the year 2000. The Company was required to make
security deposits and makes deposits for maintenance of these leased aircraft.
Security and maintenance deposits for these aircraft totaled $1,505,000 and
$2,776,000, respectively, at March 31, 1997. These aircraft are compliant with
FAA Stage 3 noise regulations. The Company has issued to each of the two Boeing
737-300 aircraft lessors a warrant to purchase 100,000 shares of the Company's
Common Stock at an aggregate purchase price of $500,000. These warrants, to the
extent not earlier exercised, expire upon the expiration dates of the aircraft
leases.
In June 1996, the Company leased two additional Boeing 737-200 aircraft under
operating leases which expire in the year 2001. The Company was required to
make security deposits totaling $858,000. Commencing July 1996 the Company was
required to make monthly deposits for maintenance for these leased aircraft. At
March 31, 1997, these deposits totaled $1,469,000. These aircraft were "hush-
kitted"
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by the lessor at its expense during 1996 making them compliant with FAA
Stage 3 noise regulations. The Company has issued to the aircraft lessor two
warrants, each of which entitles the lessor to purchase 70,000 shares of the
Company's Common Stock at an aggregate purchase price of $503,300 per warrant.
In November 1996, the Company took delivery of a leased Boeing 737-300 aircraft
which it placed in scheduled service in December 1996. The lease term for this
aircraft is eight years from date of delivery. The Company was required to
secure the aircraft lease with a letter of credit totaling $600,000. The
Company is required to make monthly cash deposits for maintenance for this
aircraft. As of March 31, 1997, the Company had made maintenance deposits
associated with this leased aircraft totaling $259,000.
During the year ended March 31, 1997, the Company entered into four operating
lease agreements for four additional new Boeing 737-300 aircraft with scheduled
deliveries during the Company's fiscal year ended March 31, 1998. The Company
took delivery of one of these aircraft in May 1997, two have scheduled
deliveries in August 1997 and the fourth is scheduled for delivery in January
1998. Delivery of the January 1998 aircraft is subject to the Company
maintaining certain financial covenants which, if not met, permit the lessor to
terminate the lease prior to delivery. In connection with the Boeing 737-300
aircraft to be delivered in August 1997, the Company has issued to the lessor a
warrant to purchase 55,000 shares of Common Stock at an aggregate purchase price
of $385,000. At March 31, 1997, the Company had made security deposits totaling
$1,818,750 with respect to these aircraft and is required to make additional
security deposits between July 1997 and April 1998 totaling $1,292,500 with
respect to these aircraft leases. Two each of these lease agreements have seven
and eight year terms from date of delivery, respectively. Two of these leases
have up to two one year renewal terms and a third may be renewed for up to three
one year terms. The Company is required to pay monthly cash deposits to each
aircraft lessor based on flight hours and cycles operated to provide funding of
future scheduled maintenance costs.
Management is continuing to take steps designed to improve the Company's
operating performance. Effective September 11, 1996, the Company eliminated its
Bismarck and Fargo, North Dakota destinations due to the unprofitability of
these routes. The aircraft used to serve these destinations were redeployed to
more heavily traveled routes elsewhere on the Company's route system.
Effective January 28, 1997, the Company introduced electronic ticketing.
Passengers who call the Company directly are presently given the option of
receiving a paper ticket or a confirmation number in lieu of a paper ticket.
Electronic ticketing will save the Company postage and handling costs, the cost
of paper tickets, and reduced revenue accounting fees because the accounting for
electronic ticketing is automated. The Company plans to offer its passengers
the option of booking flight reservations through the Company's Internet site
starting in the summer of 1997.
The Company is exploring various means to reduce expenses. These include further
reductions in credit card fees and addition of an in-house revenue accounting
system. The Company believes that it can reduce its airport operating expenses
at certain cities by performing its own "above wing" operations rather than
continuing to contract out these services. Since April 1996, conversions to the
Company's own "above wing" operations occurred at nine of the Company's 15
airport stations.
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The Company has a contract with a credit card processor that requires the
Company to provide a letter of credit to match the total amount of air traffic
liability associated with credit card customers if the Company does not meet
certain financial covenants and if the credit card processor requests that the
collateral be increased. Although the Company was not in default under the
financial covenants required by the contract as of July 1, 1997, there can be no
assurance that in the future the Company will be able to meet these financial
covenants. If it were in default as of July 1, 1997, the Company could be
required under this contract to increase the collateral amount from its present
level of $2,000,000 to $4,537,000, which would increase the Company's current
restricted investment balance accordingly.
The Company's suppliers currently provide goods, services and operating
equipment on open credit terms. If such terms were modified to require immediate
cash payments, the Company's cash position would be materially and adversely
affected.
Under the terms of the Merger Agreement with Western Pacific, additional
aircraft leases by the Company would require Western Pacific's approval. The
Company's goal is to lease a number of additional aircraft to serve additional
cities from Denver. The Company believes that such a route system would
facilitate a greater volume of connecting traffic as well as a stable base of
local traffic and offset the impact of higher DIA-related operating costs
through more efficient gate utilization. The proceeds from the private placement
completed in April 1996 and the exercise of the warrants in June 1996 have
provided additional working capital for the Company and, subject to aircraft
availability, will enable it to further expand its operations through the
leasing of additional aircraft. The expansion of the Company's operations will
entail the hiring of additional employees to staff flight and ground operations
in its new markets and significant initial costs such as deposits for airport
and aircraft leases. Because of the expansion of the Company's business and the
competitiveness of the airline industry, which often requires quick reaction by
management to changes in market conditions, the Company may require additional
capital to maintain or further expand its business.
Effective February 11, 1997, United Airlines commenced service using its low
fare United "Shuttle" between Denver, on the one hand, and Phoenix and Las Vegas
on the other hand, two markets in which the Company provides service, as well as
additional United Airlines flights in certain of the Company's other markets.
This additional competition, as well as other competitive activities by United
(see Part I, Item 3 "Legal Proceedings") and other carriers, have had and could
continue to have a material adverse effect on the Company's revenues and results
of operations.
The Company has incurred substantial operating losses in 1997 and 1996 and has a
working capital deficit at March 31, 1997. In addition, the Company has
substantial contractual commitments for leasing and maintaining aircraft. The
Company believes that its existing cash balances coupled with improved operating
results projected for fiscal 1998 will be adequate to fund the Company's
operations at least through March 31, 1998. There can be no assurances,
however, that the Company will be successful in improving its operating results
in fiscal 1998. If its operating results do not improve, or if the Merger
Agreement with Western Pacific does not close, the Company anticipates that it
would be required to obtain additional capital or other financing to fund its
operations.
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ITEM 7: FINANCIAL STATEMENTS.
The Company's financial statements are filed as a part of this report
immediately following the signature page.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not, during the past two years and through the date of this
report, had a change in its independent certified public accountants or had a
disagreement with such accountants on any matter of accounting principles,
practices or financial statement disclosure.
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table contains the name, age and position with the Company of each
executive officer and director of the Company as of June 1997. Their respective
backgrounds are described following the table. Each of these officers devotes
his or her full-time efforts to the affairs of the Company.
NAME AGE POSITION
---- --- --------
Samuel D. Addoms 57 President, Chief Executive Officer, Chief Financial
Officer and Director
Jimmie P. Wyche 62 Executive Vice President-Operations
Jon L. Bartram 59 Vice President-Maintenance
William B. Durlin 71 Vice President-Technical Services
Jeff S. Potter 37 Vice President-Marketing
Elissa A. Potucek 40 Vice President, Controller and Treasurer
Robert M. Schulman 64 Vice President-Corporate Communications
Arthur T. Voss 54 Vice President-Administration and General Counsel;
Secretary
Paul Stephen Dempsey 46 Director and Vice Chairman of the Board of
Directors
B. LaRae Orullian 64 Director and Chair of the Board of Directors
William B. McNamara 65 Director
D. Dale Browning 59 Director
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SAMUEL D. ADDOMS is President, Chief Executive Officer, Chief Financial Officer
and a director of the Company, having earlier served as Executive Vice
President, Treasurer and a director of the Company during its early development
in 1993 through September 1994 when he was elected to the position of President.
He was elected Chief Executive Officer effective January 1, 1995. Before
commencing his involvement in the development of the Company in 1993, he was
associated with some 15 firms for the previous ten years, either as an officer,
director or consultant. These include Gelco Corporation, Connecting Point of
America and Communications World, Inc. His 35 years of management experience
include positions as President and Vice President-Finance of Monfort of
Colorado, President of the Denver National Bank and Vice President of the
Continental Illinois National Bank in Chicago.
JIMMIE P. WYCHE has been Executive Vice President-Operations of the Company
since August 1995. Prior to that he had been Vice President-Flight Operations
of the Company since its inception in February 1994. From 1989 to early 1994
Mr. Wyche was a jet captain with Skyways International, headquartered in
Houston, Texas. From 1987 to 1989, he served as Director-Flight Operations with
Ports of Call, a Denver-based charter airline. He served in various capacities
with the former Frontier Airlines, Inc. between 1961 and 1985, starting as a
pilot and then in a succession of management positions including Assistant Chief
Pilot, Chief Pilot and Vice President-Flight Operations. He has over 15,500
flying hours.
JON L. BARTRAM has been Vice President-Maintenance of the Company since December
1994. From 1993 to 1994 he served as Vice President-Maintenance Operations for
DynAir Tech of Texas. He held a number of key maintenance positions with Alaska
Airlines between 1987 and 1993 including Director-Production Planning and
Director-Base Maintenance. He was an Air Carrier Inspector for the Federal
Aviation Administration between 1986 and 1987. Before this, he served with he
former Frontier Airlines, Inc., for 27 years (1959-1986) in a succession of
maintenance management positions including Director-Base Maintenance and
Director-Technical Services.
WILLIAM B. DURLIN has been Vice President-Technical Services of the Company
since August 1995. Prior to that he had been Vice President, Maintenance and
Engineering of the Company since February 1994. Between 1990 and 1993 he served
as a consultant to aircraft leasing companies. From 1989 to 1990 he was Vice
President-Maintenance and Engineering of Hawaiian Airlines, Inc. in Honolulu,
Hawaii. From 1987 to 1988 he was Director of Aircraft Sales for United
Airlines. He served in various capacities with the former Frontier Airlines,
Inc. from 1948 to 1986, most recently as Vice President-Aircraft Procurement and
Vice President-Engineering and Quality Control.
JEFF S. POTTER has been Vice President-Marketing of the Company since July 1995.
From 1993 to 1995 he was Regional Director of Commercial Marketing-Pacific and
Asia, for McDonnell Douglas Corporation, Long Beach, California. He served from
1992 to 1993 as Director-Domestic Schedule Development for Northwest Airlines in
Minneapolis, Minnesota, having earlier held a succession of marketing management
positions with Continental Airlines (1988-1991), Houston, Texas; Northwest
Airlines (1986-1988), Minneapolis, Minnesota; Pacific Southwest Airlines (1985-
1986), San Diego, California; and the former Frontier Airlines, Inc. (1981-
1985), Denver, Colorado.
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ELISSA A. POTUCEK has been Controller/Treasurer of the Company since June 1995
and was promoted to Vice President in September 1996. From 1991 to 1995 she was
Controller of Richardson Operating Company and Richardson Production Company, an
oil and gas company based in Denver, Colorado. She served from 1990 to 1991 as
Controller of Coral Companies, Inc., Denver, Colorado, having earlier held
accounting positions with US West Paging, Inc. (1988-1989), Denver, Colorado,
and KPMG Peat Marwick LLP (1985-1988), Denver, Colorado.
ROBERT M. SCHULMAN has been Vice President-Corporate Communications of the
Company since its inception in February 1994. From 1986 to 1993 he was
President of BSI Communications, a consulting firm specializing in public
relations programs for airlines and travel agencies, while concurrently (1990-
1992) participating in the development and start-up of Reno Air, Inc., Reno
Nevada. He served with the former Frontier Airlines, Inc. from 1974 to 1986,
most recently as Senior Director-Corporate Communications. From 1972 to 1974 he
was Public Information Officer of the Air Line Pilots Association, Washington,
D.C.; from 1970 to 1972, Regional Manager-Public Relations of Eastern Airlines,
Inc., Washington, D.C.; and from 1967 to 1970, Director-Corporate Communications
of Mohawk Airlines, Inc., Utica, New York.
ARTHUR T. VOSS has been Vice President-Administration, General Counsel and
Secretary of the Company since September 1995 and Vice President, General
Counsel and Secretary of the Company since its inception in February 1994. From
1991 to present, Mr. Voss has been the Vice President-Legal of Professional Fee
Examiners, Inc. a professional fee auditing firm based in Denver, Colorado. He
was Vice President-Legal of Aeronautics Leasing, Inc., an aircraft leasing firm
based in Golden, Colorado, from 1990 to 1991. From 1986 to 1989 he served as
Vice President and General Counsel of Aspen Airways, Inc. He held various
management positions in the Legal Department of the former Frontier Airlines,
Inc. from 1971 to 1985, most recently as Associate General Counsel.
PAUL STEPHEN DEMPSEY has been a director of the Company since July 1994 and Vice
Chairman of the Board of Directors since December 1996. He is Professor of Law
and Director of the Transportation Law Program at the University of Denver,
College of Law, Denver, Colorado, having been associated with the institution
since 1979. He served as Legal Advisor to the Chairman, U.S. Interstate
Commerce Commission, in 1981 and 1982; Attorney-Advisor to the former Civil
Aeronautics Board's Office of General Counsel, and its Bureau of Pricing and
Domestic Aviation, 1977-1979; and Attorney-Advisor to the Interstate Commerce
Commission's Office of Proceedings, Interstate Commerce, 1975-1977. Dr. Dempsey
holds the following degrees: A.B.J., J.D., University of Georgia; LL.M., George
Washington University; and D.C.L., McGill University. A Fulbright Scholar, he
has written more than 40 law review articles, scores of editorials for the news
media and six books on topics relating to air transportation.
B. LARAE ORULLIAN has been a director of the Company since July 1994 and Chair
of the Board of Directors since September 1995. She is Chair of the Board and a
director of Colorado Business Bank-Denver Colorado; Vice Chair of Colorado
Business Bank-Littleton, Colorado; a director of Colorado Business Bankshares,
Inc., a bank holding company; Chair of Colorado Blue Cross/Blue Shield; and
Chair of Rocky Mountain Administrative Services Corporation. She is a past
National
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President and former Chair of Girl Scouts of the U.S.A., and is currently active
in or serves on the boards of 11 other organizations including the American
Bankers Association Education Foundation Advisory Board, the Colorado Governor's
Board of Ethics and the Downtown Denver Improvement Association.
WILLIAM B. MCNAMARA has been a director of the Company since May 1996. A
retired 35-year airline executive specializing in financial management, he most
recently served with Continental Airlines, Inc. (1987-1994) as Vice President-
Finance. From 1983 to 1987 he was Staff Vice President-Finance with New York
Air, Inc. Before that he served in a succession of positions with Trans World
Airlines, Inc., for 22 years including service as Staff Vice President-Marketing
Administration.
D. DALE BROWNING has been a director of the company since July 1996. A long-
term bank and bank card executive, he has served since 1995 as President and
Chief Executive Office of ProCard, Inc., Golden Colorado, and from 1993 to 1995
as a Senior Consultant to Visa International. He was President and Chief
Executive Officer of the Colorado National Bank of Denver from 1986 through
1993, having concurrently served as Vice Chairman and Chief Operating Officer of
Colorado National Bankshares and as Chief Executive Officer of Rocky Mountain
BankCard System. In 1982 he founded Plus System, Inc., an international
automatic teller machine network, and served as President of that company until
1992.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain officers and persons holding 10% of the Company's Common
Stock to file reports with the Securities and Exchange Commission regarding
their ownership and regarding their acquisitions and dispositions of the
Company's Common Stock. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that, during the fiscal year ended March 31, 1997, all filing
requirements applicable to its executive officers, directors and greater than
10% beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes the cash and noncash compensation awarded to,
earned by or paid to the chief executive officer of the Company (no officer of
the Company had total salary and bonus exceeding $100,000) in the fiscal years
ended March 31, 1997, 1996 and 1995.
-33-
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------ -------------
OTHER ANNUAL
COMPENSATION STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) $ GRANTED
- --------------------------- ---- --------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Samuel D. Addoms, 1997 $79,846 0 0 0
Chief Executive Officer 1996 $48,229 0 0 0
1995 $53,260 0 0 0
</TABLE>
DIRECTOR COMPENSATION
For the year ended March 31, 1997, the Company paid each director who is not a
Company employee $5,000 for serving in that capacity. For the Company's fiscal
year beginning April 1, 1997 and ending March 31, 1998, the Company has agreed
to pay each such director $10,000 for serving as a director. Directors who are
also employees of the Company receive no additional compensation for serving as
directors. The Company reimburses all of its directors for travel and out-of-
pocket expenses in connection with their attendance at meetings of the Board of
Directors. The Company's outside directors are also eligible to receive stock
options under the Company's 1994 Stock Option Plan. During the year ended March
31, 1997, the Company granted nonqualified options to purchase 10,000 shares at
exercise prices of $7.75 per share and $9.00 per share, respectively, to each of
Messrs. McNamara and Browning, nonqualified options to purchase 5,000 shares at
$7.75 per share to each of Mr. Dempsey and Ms. Orullian, and nonqualified
options to purchase 20,000 shares to Mr. Dempsey at $4.00 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information regarding options held by the
Chief Executive Officer of the Company at the end of fiscal 1997. There were no
options granted to or exercised by the Chief Executive Officer of the Company
during the fiscal year ended March 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
---------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON OPTIONS AT OPTIONS AT
NAME EXERCISE (#) VALUE MARCH 31, 1997 (#) MARCH 31, 1997 (1)
- ------------------ ----------- REALIZED ($) -------------------------- --------------------------
-----------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Samuel D. Addoms None N/A 212,500 0 $ 717,188 0
</TABLE>
(1) Based on the closing bid price of the Common Stock on the Nasdaq SmallCap
Market of $3.375 per share on March 31, 1997.
-34-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 30, 1997 by (i) each director
of the Company and (ii) all directors and executive officers as a group. To the
knowledge of the Company, no person owns beneficially more than five percent of
the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER PERCENTAGE OF OWNED OWNERSHIP (1)
------------------------------------ ------------------- -------------
<S> <C> <C>
Samuel D. Addoms
12015 East 46/th/ Avenue
Denver, Colorado 80239 257,918 (2) 2.9%
Paul S. Dempsey
12015 East 46/th/ Avenue
Denver, Colorado 80239 27,000 (3) *
B. LaRae Orullian
12015 East 46/th/ Avenue
Denver, Colorado 80239 25,000 (4) *
William B. McNamara
12015 East 46/th/ Avenue
Denver, Colorado 80239 20,000 (5) *
D. Dale Browning
12015 East 46/th/ Avenue
Denver, Colorado 80239 20,000 (5) *
All directors and executive officers as a group (12 persons) 974,490 (6) 11.2%
* Less than 1%.
</TABLE>
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date of filing of this report upon the exercise of
options, warrants or convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that options, warrants or
convertible securities are held by such person (but not those held by any
other person) and which are exercisable within 60 days of the date of this
report have been exercised and converted. This table assumes a base of
8,844,375 shares of Common Stock outstanding as of the date of this report,
before any consideration is given to other outstanding options, warrants or
convertible securities.
(2) Includes 212,500 shares held under option, all of which are currently
exercisable, and 1,418 allocated ESOP shares.
(3) Includes 25,000 shares held under option, all of which are currently
exercisable.
(4) Consists of 25,000 shares held under option, all of which are currently
exercisable.
(5) Consists of 20,000 shares held under option, all of which are currently
exercisable.
(6) Includes 862,769 shares held under option by the Company's directors and
executive officers, which are exercisable within 60 days of this report,
and 9,721 allocated ESOP shares.
-35-
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
One of the Company's outside directors, Paul S. Dempsey, provides legal services
to the Company at a fixed hourly rate. During the fiscal year ending March 31,
1997, the Company paid Mr. Dempsey approximately $8,000 for such services.
ITEM 13(a): EXHIBITS.
Exhibit
Numbers Description of Exhibits
- ------- -----------------------
3.1 Amended and Restated Articles of Incorporation of the Company. (1)
3.2 Amended Bylaws of the Company (June 9, 1997). (5)
4.1 Specimen Common Stock certificate of the Company. (1)
4.2 The Amended and Restated Articles of Incorporation and Amended Bylaws
of the Company are included as Exhibits 3.1 and 3.2.
4.3 Form of Warrant. (1)
4.4 Rights Agreement, dated as of February 20, 1997, between Frontier
Airlines, Inc. and American Securities Transfer & Trust, Inc,
including the form of Rights Certificate and the Summary of Rights
attached thereto as Exhibits A and B, respectively, incorporated by
reference to Frontier Airlines, Inc. Registration Statement on Form 8-
A dated March 11, 1997. (6)
4.4(a) Amendment to Rights Agreement dated June 30, 1997. (5)
10.1 Office Lease. (1)
10.2 Office Lease Supplements and Amendments. (5)
10.3 1994 Stock Option Plan. (1)
10.4 Amendment No. 1 to 1994 Stock Option Plan. (2)
10.4(a) Amendment No. 2 to 1994 Stock Option Plan (5)
10.5 Registration Rights Agreement. (1)
10.6 Sales Agreement. (1)
-36-
<PAGE>
10.7 Airport Use and Facilities Agreement, Denver International Airport
(2)
10.8 Aircraft Lease Agreement dated as of July 26, 1994. (2)
10.8(a) Assignment and Assumption Agreements dated as of March 28, 1997 and
March 20, 1997 between USAirways, Inc. and First Security Bank,
National Association ("Trustee") and Frontier Airlines, Inc. (5)
10.8(b) Amendment No. 1, dated June 5, 1997, to Lease Agreement dated as of
July 26, 1994 between Frontier Airlines, Inc. and First Security
Bank, National Association. (5)
10.9 Code Sharing Agreement. (5)
10.10 Aircraft Lease Agreement dated as of October 20, 1995 (MSN 23177).
(3)
10.11 Aircraft Lease Agreement dated as of October 20, 1995 (MSN 23257).
(3)
10.12 Aircraft Lease Agreement dated as of May 1, 1996. (3)
10.13 Aircraft Lease Agreement dated as of June 3, 1996. (3)
10.14 Aircraft Lease Agreement dated as of June 12, 1996. Portions of this
Exhibit have been excluded from the publicly available document and
an order granting confidential treatment of the excluded material
has been received. (3)
10.15 Operating Lease Agreement dated November 1, 1996 between the Company
and First Security Bank, National Association. Portions of this
Exhibit have been excluded from the publicly available document and
an order granting confidential treatment of the excluded material
has been received. (4)
10.16 Aircraft Lease Agreement (MSN 28760) dated as of December 12, 1996
between the Company and Boullion Aircraft Holding Company, Inc.
Portions of this Exhibit have been excluded from the publicly
available document and an order granting confidential treatment of
the excluded material has been received. (4)
10.16(a) Amendment No. 1 to Aircraft Lease Agreement (MSN 28760) dated May
20, 1997. Portions of this Exhibit have been excluded from the
publicly available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
10.17 Aircraft Lease Agreement (MSN 28662) dated as of December 12, 1996
between the Company and Boullion Aircraft Holding Company, Inc.
Portions of this
-37-
<PAGE>
Exhibit have been excluded from the publicly available document and
an order granting confidential treatment of the excluded material
has been received. (4)
10.17(a) Amendment No. 1 to Aircraft Lease Agreement (MSN 28662) dated May
20, 1997. Portions of this Exhibit have been excluded from the
publicly available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
10.18 Aircraft Lease Agreement (MSN 28563) dated as of March 25, 1997
between the Company and General Electric Capital Corporation.
Portions of this Exhibit have been excluded from the publicly
available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
10.19 Space and Use Agreement with Continental Airlines, as amended.
Portions of this Exhibit have been excluded from the publicly
available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
10.20 Letter of Understanding with Continental Airlines dated August 16,
1996. Portions of this Exhibit have been excluded from the publicly
available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
10.21 Service Agreement between Frontier Airlines, Inc. and Greenwich Air
Services, Inc. dated May 19, 1997. Portions of this Exhibit have
been excluded from the publicly available document and an
application for an order granting confidential treatment of the
excluded material has been made. (5)
10.22 Agreement between Frontier Airlines, Inc. and Dallas Aerospace, Inc.
dated April 17, 1997. Portions of this Exhibit have been excluded
from the publicly available document and an application for an order
granting confidential treatment of the excluded material has been
made. (5)
10.23 General Services Agreement between Frontier Airlines, Inc. and
Tramco, Inc. dated as of August 6, 1996. (5)
10.24 General Terms Engine Lease Agreement between Frontier Airlines, Inc.
and Terandon Leasing Corporation dated as of August 15, 1996, as
assigned to U.S. Bancorp Leasing and Financial on February 19, 1997.
Portions of this Exhibit have been excluded from the publicly
available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
-38-
<PAGE>
10.25 Lease Agreement between Frontier Airlines, Inc. and Aircraft
Instrument and Radio Company, Inc. dated December 11, 1995. Portions
of this Exhibit have been excluded from the publicly available
document and an application for an order granting confidential
treatment of the excluded material has been made. (5)
10.26 Agreement and Plan of Merger between Western Pacific Airlines, Inc.
and Frontier Airlines, Inc. dated June 30, 1997. (5)
23.1 Consent of KPMG Peat Marwick LLP (5)
27.1 Financial Data Schedule (5)
________________
(1) Incorporated by reference from the Company's Registration Statement on Form
SB-2, Commission File No. 33-77790-D, declared effective May 20, 1994.
(2) Incorporated by reference from the Company's Annual Report on Form 10-KSB,
Commission File No. 0-4877, filed on June 29, 1995.
(3) Incorporated by reference from the Company's Annual Report on Form 10-KSB,
Commission File No. 0-4877, filed on June 24, 1996.
(4) Incorporated by reference from the Company's Quarterly Report on Form 10-
QSB, Commission File No. 0-4877, filed on February 13, 1997.
(5) Filed herewith.
(6) Incorporated by reference from the Company's Report on Form 8-K filed on
March 12, 1997.
ITEM 13(b): REPORTS ON FORM 8-K.
Form 8-K filed on March 12, 1997 relating to Rights Agreement dated as of
February 20, 1997.
-39-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FRONTIER AIRLINES, INC.
Date: July 8, 1997 By: /s/ Samuel D. Addom
------------------------------------------
Samuel D. Addoms, Principal Executive
Officer and Principal Financial Officer
Date: July 8, 1997 By: /s/ Elissa A. Potucek
------------------------------------------
Elissa A. Potucek, Vice President, Controller,
Treasurer and Principal Accounting Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: July 8, 1997 /s/ Samuel D. Addoms, Director
----------------------------------------------
Samuel D. Addoms, Director
Date: July 8, 1997 /s/ William B. McNamara, Director
----------------------------------------------
William B. McNamara, Director
Date: July 8, 1997 /s/ Paul Stephen Dempsey, Director
----------------------------------------------
Paul Stephen Dempsey, Director
Date: July 8, 1997 /s/ B. LaRae Orullian, Director
----------------------------------------------
B. LaRae Orullian, Director
Date: July 8, 1997 /s/ D. Dale Browning, Director
----------------------------------------------
D. Dale Browning, Director
-40-
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE STOCKHOLDERS AND BOARD OF DIRECTORS
FRONTIER AIRLINES, INC.:
We have audited the accompanying balance sheet of Frontier Airlines, Inc. as of
March 31, 1997 and the related statements of operations, stockholders' equity,
and cash flows for the years ended March 31, 1997 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Frontier Airlines, Inc. as of
March 31, 1997 and the results of its operations and its cash flows for the
years ended March 31, 1997 and 1996 in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
June 20, 1997, except as to Note 12, which is as of June 30, 1997
F-1
<PAGE>
FRONTIER AIRLINES, INC.
BALANCE SHEET--MARCH 31, 1997
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 10,286,453
Restricted investments 2,000,000
Trade receivables, net of allowance for doubtful
accounts of $71,713 7,451,342
Maintenance deposits (note 5) 6,968,379
Prepaid expenses and other assets (note 2) 3,449,871
Inventories 997,102
Deferred lease expenses 289,579
Note receivable - current portion 27,288
------------
Total current assets 31,470,014
Security, maintenance and other deposits (note 5) 6,596,660
Property and equipment, net (note 3) 4,340,982
Note receivable - long-term portion 31,762
Deferred lease and other expenses 918,994
Restricted investments 734,133
------------
$ 44,092,545
============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 8,045,533
Air traffic liability 13,058,632
Other accrued expenses (note 4) 3,318,043
Accrued maintenance expense (note 5) 8,277,115
Note payable 9,812
Current portion of obligations under capital
leases (note 5) 35,700
------------
Total current liabilities 32,744,835
Accrued maintenance expense (note 5) 1,408,363
Obligations under capital leases, excluding current
portion (note 5) 56,444
------------
Total liabilities 34,209,642
-------------
Stockholders' equity
Preferred stock, no par value, authorized
1,000,000 shares; none issued and outstanding -
Common stock, no par value, stated value of
$.001 per share, authorized 20,000,000
shares; 8,844,375 shares issued and outstanding 8,844
Additional paid-in capital 35,764,710
Accumulated deficit (25,890,651)
-------------
Total stockholders' equity 9,882,903
-------------
Commitments and contingencies (notes 5, 7, 11 and 12)
$ 44,092,545
=============
See accompanying notes to financial statements.
F-2
<PAGE>
FRONTIER AIRLINES, INC.
STATEMENTS OF OPERATIONS--YEARS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Revenues:
Passenger $ 113,758,027 $ 68,530,051
Cargo 1,956,150 1,148,357
Other 786,457 714,167
-------------- -------------
Total revenues 116,500,634 70,392,575
-------------- -------------
Operating expenses:
Flight operations 52,650,575 28,019,390
Aircraft and traffic servicing 24,849,388 18,486,719
Maintenance 24,945,636 11,732,102
Promotion and sales 21,526,345 14,218,814
General and administrative 4,617,982 3,320,700
Depreciation and amortization 1,072,160 547,514
-------------- -------------
Total operating expenses 129,662,086 76,325,239
-------------- -------------
Operating loss (13,161,452) (5,932,664)
-------------- -------------
Nonoperating income (expenses):
Interest income 1,033,508 419,756
Other, net (58,388) (68,774)
-------------- -------------
Total nonoperating income, net 975,120 350,982
-------------- -------------
Net loss $ (12,186,332) (5,581,682)
============== =============
Loss per common share $(1.49) (1.23)
============== =============
Weighted average shares outstanding 8,156,302 4,536,914
============== =============
See accompanying notes to financial statements.
</TABLE>
F-3
<PAGE>
FRONTIER AIRLINES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY--YEARS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
Common stock
----------------------------
Additional Total
Stated paid-in Accumulated stockholders'
Shares value capital deficit equity
------------ ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCES,
MARCH 31, 1995 3,443,300 $ 3,443 9,761,686 (8,122,637) 1,642,492
Contribution of common
stock to employee stock
ownership plan 137,340 - 721,000 - 721,000
Issuance of compensatory
common stock options - - 60,500 - 60,500
Sale of common stock
and warrants, net of
offering costs of
$1,230,000 1,840,000 1,978 7,279,532 - 7,281,510
Issuance of warrants - - 577,200 - 577,200
Net loss - - - (5,581,682) (5,581,682)
---------- ------------ ----------- ---------- ---------
BALANCES,
MARCH 31, 1996 5,420,640 5,421 18,399,918 (13,704,319) 4,701,020
Sale of common stock,
net of offering costs
of $279,385 678,733 679 2,720,615 2,721,294
Exercise of common
stock warrants, net
of issuance costs of
$55,518 2,666,133 2,666 13,275,145 13,277,811
Contribution of common
stock to employee
stock ownership plan 78,869 78 499,922 500,000
Issuance of warrants 869,110 869,110
Net loss (12,186,332) (12,186,332)
---------- ------------ ----------- ---------- ---------
BALANCES,
MARCH 31, 1997 8,844,375 $ 8,844 35,764,710 (25,890,651) 9,882,903
========== ============ =========== ========== =========
See accompanying notes to financial statements.
</TABLE>
F-4
<PAGE>
FRONTIER AIRLINES, INC.
STATEMENTS OF CASH FLOWS--YEARS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (12,186,332) $ (5,581,682)
Adjustments to reconcile net loss to net cash used
by operating activities:
Employee stock ownership plan compensation
expense 500,000 721,000
Issuance of compensatory common stock options
- 60,500
Depreciation and amortization 1,322,916 603,014
Loss on sale of equipment 4,708 62,940
Changes in operating assets and liabilities:
Restricted investments 82,458 (842,574)
Trade receivables (1,579,184) (2,289,183)
Security, maintenance and other deposits (1,608,524) (5,149,965)
Prepaid expenses and other assets (562,954) (2,269,203)
Inventories (427,926) (362,581)
Note receivable 10,950 -
Accounts payable 3,643,071 1,590,072
Air traffic liability 1,858,072 7,384,114
Other accrued expenses 1,323,037 (337,294)
Accrued maintenance expense 1,151,443 5,572,559
------------- ------------
Net cash used by operating activities (6,468,265) (838,283)
------------- ------------
Cash flows used by investing activities:
Increase (decrease) in short-term investments 1,168,200 (1,168,200)
Increase in restricted investments (600,000) -
Aircraft lease deposits (2,682,250) (1,661,250)
Capital expenditures (3,434,789) (1,097,788)
Proceeds from sale of property and equipment - 32,440
------------- ------------
Net cash used in investing activities (5,548,839) (3,894,798)
------------- ------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from issuance of common stock 15,999,455 7,281,510
Proceeds from short-term borrowings 95,911 101,496
Principal payments on short-term borrowings (96,540) (91,055)
Principal payments on obligations under capital leases (54,523) (34,357)
------------- ------------
Net cash provided by financing activities 15,944,303 7,257,594
------------- ------------
Net increase in cash and cash equivalents 3,927,199 2,524,513
Cash and cash equivalents, beginning of year 6,359,254 3,834,741
------------- ------------
Cash and cash equivalents, end of year $ 10,286,453 6,359,254
============= ============
</TABLE>
SUPPLEMENTAL INFORMATION:
In the years ended March 31, 1997 and 1996 the Company issued warrants to
aircraft lessors with an estimated fair market value totaling $869,110 and
$577,200, respectively. The unamortized portion of deferred lease expense
totaled $1,139,703 at March 31, 1997.
In the year ended March 31, 1996, the Company sold equipment and accepted a
promissory note in lieu of cash for $70,000.
Interest of $20,435 and $22,671 was paid in cash during the year ended March 31,
1997 and 1996. No income taxes were paid in the years ended March 31, 1997 and
1996.
See accompanying notes to financial statements.
F-5
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS--MARCH 31, 1997
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND INDUSTRY RISKS
Frontier Airlines, Inc. (the Company) was incorporated in the State of
Colorado on February 8, 1994 and is engaged in the business of operating a
commercial airline based in Denver, Colorado which currently serves
selected midwestern and western cities. The Company commenced airline
operations on July 5, 1994.
The airline industry is highly competitive primarily due to the effects of
the Airline Deregulation Act of 1978, which has substantially eliminated
government authority to regulate domestic routes and fares and has
increased the ability of airlines to compete with respect to flight
frequencies and fares. The Company's results are highly sensitive to
changes in fare levels. The Company cannot predict future fare levels,
which can change rapidly, and are subject to actions by the Company's
competitors.
The airline industry is also characterized by low gross profit margins,
with fixed costs that are high in relation to revenues. Accordingly, a
shortfall from expected revenue levels can have a material adverse effect
on profitability and liquidity, including the Company's. The Company's
connecting hub is located at Denver International Airport (DIA). DIA
opened in March 1995. Financed through revenue bonds, DIA depends on
landing fees, gate rentals and other income from airlines, the traveling
public and others to pay debt service and support operations. Management
believes that the Company's operating costs at DIA will continue to
substantially exceed those that other airlines incur at hub airports in
other cities.
The airline industry is significantly affected by general economic
conditions. Because a substantial portion of business and personal airline
travel is discretionary, the industry tends to experience severe adverse
financial results during general economic downturns. The Company's
business also is seasonal, which can affect the Company's results of
operations from quarter to quarter.
Fuel is a major component of operating expense for all airlines. Both the
cost and availability of fuel are subject to many economic and political
factors and events occurring throughout the world. The future cost and
availability of fuel to the Company cannot be predicted, and substantial
sustained price increases or the unavailability of adequate fuel supplies
could have a material adverse effect on the Company's operations and
profitability.
F-6
<PAGE>
PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
For financial statement purposes, the Company considers cash and short-term
investments with an original maturity of three months or less to be cash
equivalents.
RESTRICTED INVESTMENTS
Restricted investments include certificates of deposit and government
treasury bills which secure certain letters of credit issued primarily to
companies which process credit card sale transactions and certain airport
authorities. Restricted investments are carried at cost, which management
believes approximates market value. Maturities are for one year or less
and the Company intends to hold restricted investments until maturity.
INVENTORIES
Inventories consist of expendable parts, supplies and aircraft fuel and are
stated at the lower of cost or market. Inventories are accounted for on a
first-in, first-out basis and are charged to expense as they are used.
The Company has two aircraft parts agreements for the Company's 11 Boeing
737 aircraft discussed in note 5, one with another air carrier and another
with an aircraft parts supplier. The Company is required to pay a monthly
consignment fee to each of these lessors, based on the value of the
consigned parts, and to replenish any such parts when used with a like
part. At March 31, 1997, the Company held consigned parts and supplies in
the amount of approximately $7,105,944, which are not included in the
Company's balance sheet.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Major additions, betterments
and renewals are capitalized. Depreciation and amortization is provided
for on a straight-line basis to estimated residual values over estimated
depreciable lives as follows:
F-7
<PAGE>
Flight equipment 5-20 years
Improvements to leased aircraft Life of improvements or term of
lease, whichever is less
Ground property, equipment, and 3-5 years or term of lease
leasehold improvements
Assets utilized under capital leases are amortized over the lesser of the
lease term or the estimated useful life of the asset using the straight-
line method. Amortization of capital leases is included in depreciation
expense.
MAINTENANCE
Routine maintenance and repairs are charged to operations as incurred.
Under the terms of its aircraft lease agreements, the Company is required
to make monthly maintenance deposits based on usage; such deposits are
applied against the cost of major airframe maintenance checks and landing
gear and engine overhauls. These deposits are expensed in the month the
usage was incurred and a liability for accrued maintenance is established.
Deposit balances remaining at lease termination remain with the lessor and
any remaining liability for maintenance checks is reversed against the
deposit balance. Additionally, a provision is made for the estimated costs
of scheduled major overhauls required to be performed on leased aircraft
and components under the provisions of the aircraft lease agreements if the
required monthly deposit amounts are not adequate to cover the entire cost
of the scheduled maintenance. Accrued maintenance expense expected to be
incurred beyond one year is classified as long-term.
REVENUE RECOGNITION
Passenger, cargo, and other revenues are recognized when the transportation
is provided or after the tickets expire and are net of excise taxes.
Revenues which have been deferred are included in the accompanying balance
sheet as air traffic liability.
PASSENGER TRAFFIC COMMISSIONS AND RELATED EXPENSES
Passenger traffic commissions and related expenses are expensed when the
transportation is provided and the related revenue is recognized.
Passenger traffic commissions and related expenses not yet recognized are
included as a prepaid expense.
FREQUENT FLYER AWARDS
The Company had maintained a frequent travel award program that provided
awards to program members based on accumulated segments flown, which was
discontinued effective September 11, 1996. The Company allows its
passengers to accumulate mileage on Continental Airlines' OnePass frequent
flyer program. The cost of providing mileage on the
F-8
<PAGE>
OnePass program is based on an agreed upon rate per mileage credit, which
is paid to Continental Airlines on a monthly basis.
LOSS PER COMMON SHARE
Loss per common share is computed based on the weighted average number of
common shares and, if dilutive, common stock equivalent shares (options and
warrants) outstanding during the respective periods.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method
prescribed by Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. Under the asset and liability method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and
tax bases of the existing assets and liabilities. A valuation allowance
for net deferred tax assets is provided unless realizability is judged by
management to be more likely than not. The effect on deferred taxes from a
change in tax rates is recognized in income in the period that includes the
enactment date.
RECLASSIFICATIONS
Certain 1996 financial statement balances have been reclassified to conform
to the 1997 presentation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of its monetary assets and liabilities
based upon existing interest rates related to such assets and liabilities
compared to current rates of interest for instruments with a similar nature
and degree of risk. The Company estimates that the carrying value of all
of its monetary assets and liabilities approximates fair value as of March
31, 1997.
STOCK BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 Accounting for Stock-
Based Compensation (SFAS No. 123), was adopted by the Company effective
April 1, 1996. As permitted under SFAS No. 123, the Company has elected to
follow Accounting Principles Board Opinion No. 25 Accounting for Stock
Issued to Employees ("APB 25") and related Interpretations in accounting
for its employee stock options. Under APB 25, because the exercise price
of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized. The Company has included the pro forma disclosures required by
SFAS No. 123 in Note 8.
F-9
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121 Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
(SFAS No. 121), was adopted by the Company effective April 1, 1997. SFAS
No. 121 required that impairment losses be recorded on long-lived assets
used in operations when indicators of impairment are present and either the
undiscounted future cash flows estimated to be generated by those assets or
the fair market value are less than the assets' carrying amount. The
adoption of SFAS No. 121 had no effect on the Company's financial
statements.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 Earnings Per Share (SFAS No.
128). SFAS No. 128 specifies the computation, presentation and disclosure
requirements for earnings per share for entities with publicly held common
stock or potential common stock. This Statement simplifies the computation
of earnings per share and is required to be adopted by the Company in the
year ended March 31, 1998. The Company has not yet evaluated the effects
of adopting this Statement.
(2) PREPAID EXPENSES AND OTHER ASSETS
The March 31, 1997 prepaid expenses and other assets is comprised of the
following:
<TABLE>
<CAPTION>
<S> <C>
Prepaid passenger traffic commissions and related expenses $1,484,746
Prepaid aircraft rentals 808,176
Prepaid rent 260,102
Prepaid insurance 189,518
Prepaid landing fees 141,120
Other prepaid expenses and other assets 566,209
----------
$3,449,871
==========
</TABLE>
(3) PROPERTY AND EQUIPMENT, NET
As of March 31, 1997 property and equipment consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Flight equipment and improvements to leased aircraft $3,251,284
Ground property, equipment and leasehold improvements 2,923,658
----------
6,174,942
Less accumulated depreciation and amortization (1,833,960)
----------
Property and equipment, net $4,340,982
==========
</TABLE>
F-10
<PAGE>
Property and equipment includes certain office equipment under capital leases.
At March 31, 1997, office equipment recorded under capital leases was $183,698
and accumulated amortization was $104,479.
(4) OTHER ACCRUED EXPENSES
The March 31, 1997 other accrued expenses is comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Accrued salaries and benefits $1,950,001
Federal excise taxes payable 522,061
Deferred rent and lease payments 319,551
Passenger facility charges 291,898
Other 234,532
----------
$3,318,043
==========
</TABLE>
(5) LEASE COMMITMENTS
AIRCRAFT LEASES
At March 31, 1997, the Company operated 11 aircraft which are accounted for
under operating lease agreements with initial terms ranging from 2 to 8
years with certain leases that allow for renewal options. Security
deposits related to aircraft leased and in service at March 31, 1997
totaled $2,988,500 and are included in security, maintenance and other
deposits on the balance sheet.
In addition to scheduled future minimum lease payments, the Company is
required to pay to each aircraft lessor monthly cash deposits based on
flight hours and cycles operated to provide funding for certain scheduled
maintenance costs of leased aircraft. The lease agreements provide that
the Company shall pay taxes, maintenance, insurance, and other operating
expenses applicable to the leased property. At March 31, 1997, aircraft
maintenance deposits totaled $8,142,176 and are reported as a component of
security, maintenance and other deposits on the balance sheet.
During the year ended March 31, 1997, the Company entered into four
operating lease agreements for four additional new Boeing 737-300 aircraft
with scheduled deliveries during the Company's fiscal year ended March 31,
1998. The Company took delivery of one of these aircraft in May 1997, two
have scheduled deliveries in August 1997 and the fourth is scheduled for
delivery in January 1998. Delivery of the January 1998 aircraft is subject
to the Company maintaining certain financial covenants which, if not met,
permit the lessor to terminate the lease prior to delivery. At March 31,
1997, the Company had made security deposits totaling $1,818,750 with
respect to these aircraft and is required to make additional security
deposits between July 1997 and April 1998 totaling $1,292,500 with respect
to these
F-11
<PAGE>
aircraft leases. Two each of these lease agreements have 7 and 8
year terms from date of delivery, respectively. Two of these leases have
up to two one year renewal terms and a third may be renewed for up to three
one year terms. The Company is required to pay monthly cash deposits to
each aircraft lessor based on flight hours and cycles operated to provide
funding of future scheduled maintenance costs.
Any cash deposits paid to aircraft lessors for future scheduled maintenance
costs to the extent not used during the lease term remain with the lessor,
and any remaining liability for maintenance checks is reversed against the
deposit balance. Maintenance deposits are unsecured and may be subject to
the risk of loss in the event the lessors were not able to satisfy their
obligations under the lease agreements.
OTHER LEASES
The Company leases a spare engine, office space and office equipment for
its headquarters, airport facilities, certain ground equipment, and
automobiles. The Company also leases certain airport gate facilities on a
month-to-month basis.
At March 31, 1997, commitments under capital and noncancelable operating
leases (excluding maintenance deposit requirements) with terms in excess of
one year were as follows:
Capital Operating
Leases Leases
--------- ------------
Year ended March 31:
1998 $ 44,433 $ 29,593,591
1999 44,433 34,305,536
2000 16,656 30,110,931
2001 - 18,746,062
2002 - 17,844,752
Thereafter - 49,853,152
-------- ------------
Total minimum lease payments 105,522 180,454,024
============
Less amount representing interest (13,377)
--------
Present value of obligations under
capital leases 92,145
Less current portion of obligations under
capital leases 35,700
--------
Obligations under capital leases,
excluding current portion $ 56,445
--------
F-12
<PAGE>
The obligations under capital leases have been discounted at imputed
interest rates ranging from 10.5% to 12.2%.
Rental expense under operating leases, including month-to-month leases, for
the years ended March 31, 1997 and 1996 was $25,336,749 and $12,625,175,
respectively.
(6) INCOME TAXES
The Company has not recognized any income tax benefit related to net operating
losses incurred for the years ended March 31, 1997 and 1996 because the benefit
of the net operating losses were offset by an increase in the valuation
allowance for net deferred tax assets.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at March 31, 1997 are presented below:
<TABLE>
<CAPTION>
Deferred tax assets:
<S> <C>
Net operating loss carryforwards $ 7,603,000
Start-up cost deferred for tax purposes 198,000
Accrued maintenance not deductible for
tax purposes 717,000
Accrued vacation and health insurance liability
not deductible for tax purposes 395,000
Other 117,000
-----------
Total gross deferred tax assets 9,030,000
Less valuation allowance (8,934,000)
-----------
96,000
-----------
Deferred tax liabilities:
Equipment depreciation and amortization (96,000)
-----------
Net deferred taxes $ -
===========
</TABLE>
The valuation allowance for deferred tax assets as of March 31, 1996 was
$4,950,000. The increase in the valuation allowance for the year ended
March 31, 1997 was $3,989,000. At March 31, 1997, the Company had net
operating loss carryforwards of approximately $19,134,000, which expire in
the years 2010 to 2012.
F-13
<PAGE>
(7) WARRANTS
The Company issued 2,670,000 warrants to purchase common stock in conjunction
with a private placement and its initial public offering. Each warrant entitled
the warrant holder to purchase one share of common stock for $5.00. These
warrants were subject to redemption at $.05 per warrant by the Company on 45
days written notice if certain conditions were met. The Company met these
conditions in May 1996 and on May 14, 1996, the Company notified the warrant
holders of the Company's intent to exercise its redemption rights with respect
to the warrants not exercised on or before June 28, 1996. 2,666,133 of the
warrants were exercised with net proceeds to the Company totaling $13,275,000.
At completion of the Company's initial public offering, an underwriter acquired
options to purchase up to 110,000 shares of common stock exercisable at a price
equal to $5.525 per share. Additionally, the underwriter was granted up to
110,000 warrants to purchase common stock at a price equal to $.325 per warrant
and $5.00 per share of common stock. The underwriters in a secondary public
offering by the Company received a warrant to purchase 168,500 shares of common
stock at $5.55 per share. The options and warrants issued to underwriters in
connection with the initial and secondary public offerings expire, respectively,
on May 20, 1999 and September 18, 2000.
In October 1995, the Company issued to each of two of its Boeing 737-300
aircraft lessors a warrant to purchase 100,000 shares of Common Stock for an
aggregate purchase price of $500,000. In June 1996, the Company issued two
warrants to a Boeing 737-200 lessor, each warrant entitling the lessor to
purchase 70,000 shares of common stock at an aggregate exercise price of
$503,300 per warrant. In connection with a Boeing 737-300 aircraft to be
delivered in August 1997, the Company has issued to the lessor a warrant to
purchase 55,000 shares of Common Stock at an aggregate purchase price of
$385,000. Warrants issued to aircraft lessors, to the extent not earlier
exercised, expire upon expiration of the aircraft leases in March 2000, May and
June 2001, and September 2005.
(8) STOCK OPTION PLAN
The Company has a stock option plan whereby the Board of Directors or its
Compensation Committee may issue options to purchase shares of the Company's
common stock to employees, officers, and directors of the Company.
Under the plan, the Company has reserved an aggregate of 2,250,000 shares of
common stock for issuance pursuant to the exercise of options. With certain
exceptions, options issued through March 31, 1997 generally vest one year from
the date of grant and expire from March 9, 1999 to December 1, 2006. At March
31, 1997, 338,750 options are available for grant under the plan.
F-14
<PAGE>
A summary of the Plan's stock option activity and related information for the
years ended March 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------------
Weighted- Weighted-
Average Average
Options Exercise Price Options Exercise Price
------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding-beginning of year 1,731,250 $1.27 1,631,250 $1.17
Granted 180,000 7.40 100,000 3.07
------------------------------------------------------
Outstanding-end of year 1,911,250 $1.85 1,731,250 $1.27
======================================================
Exercisable at end of year 1,761,250 $1.39 1,671,250 $1.20
</TABLE>
(8) STOCK OPTION PLAN (CONTINUED)
Exercise prices for options outstanding under the plan as of March 31, 1997
ranged from $1.00 to $9.00 per option share. The weighted-average remaining
contractual life of those options is 6.3 years. A summary of the outstanding
and exercisable options at March 31, 1997, segregated by exercise price ranges,
is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Weighted-
Average Weighted-
Weighted- Remaining Average
Exercise Price Options Average Contractual Exercisable Exercise
Range Outstanding Exercise Price Life (in years) Options Price
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.00 - $ 2.75 1,600,000 $1.09 5.8 1,600,000 $4.50
$3.13 - $ 4.00 151,250 3.55 8.3 131,250 3.48
$7.75 - $ 9.00 160,000 7.83 9.2 30,000 8.17
----------------------------------------------------------------------
1,911,250 $1.85 6.3 1,761,250 $1.39
======================================================================
</TABLE>
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to March
31, 1995 under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1997 and
1996, respectively: risk-free interest rate of 6.55% and 6.08%, dividend yields
of 0% and 0%; volatility factors of the expected market price of the Company's
common stock of 85.39% and 60.86%, and a weighted-average expected life of the
options of 7 years for each year.
F-15
<PAGE>
The Company applies APB Opinion 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost is recognized for options granted
at a price equal to the fair market value of the common stock. Had compensation
cost for the Company's stock-based compensation plan been determined using the
fair value of the options at the grant date, the Company's net loss for the
years ended March 31, 1997 and 1996, would have been $12,633,987 and $5,628,091,
and loss per common share would have been $1.55 and $1.24 per share
respectively.
(9) EMPLOYEE STOCK OWNERSHIP PLAN
The Company has established an Employee Stock Ownership Plan (ESOP) which inures
to the benefit of each permanent employee of the Company, except those employees
covered by a collective bargaining agreement that does not provide for
participation in the ESOP. Company contributions to the ESOP are discretionary
and vary from year to year. In order for an employee to receive an allocation
of company common stock from the ESOP, the employee must be employed on the last
day of the ESOP's plan year, with certain exceptions. The Company's annual
contribution to the ESOP, if any, will be allocated among the eligible employees
of the Company as of the end of each plan year in proportion to the relative
compensation (as defined in the ESOP) earned that plan year by each of the
eligible employees. The ESOP does not provide for contributions by
participating employees. Employees will vest in contributions made to the ESOP
based upon their years of service with the Company. A year of service is an
ESOP plan year during which an employee has at least 1,000 hours of service.
Vesting generally occurs at the rate of 20% per year, beginning after the first
year of service, so that a participating employee will be fully vested after
five years of service. Distributions from the ESOP will not be made to employees
during employment. However, upon termination of employment with the Company,
each employee will be entitled to receive the vested portion of his or her
account balance.
The initial Company contribution to the ESOP was made on June 22, 1995 and
consisted of 137,340 shares of Common Stock, of which 27,468 shares relate to
the plan year ended March 31, 1995 and 109,872 shares relate to the period from
April 1, 1995 to December 31, 1995. During the year ended March 31, 1997, the
Company contributed 78,869 shares to the plan. The Company recognized
compensation expense during the year ended March 31, 1997 of $500,000 related to
its contribution to the ESOP.
(10) CONCENTRATION OF CREDIT RISK
The Company does not believe it is subject to any significant concentration of
credit risk relating to trade receivables. At March 31, 1997, 75% of the
Company's trade receivables relate to tickets sold to individual passengers
through the use of major credit cards, travel agencies approved by the Airlines
Reporting Corporation, tickets sold by other airlines and used by passengers on
Company flights, or the United States Postal Service. These receivables are
short-term, generally being settled shortly after sale or in the month following
ticket usage.
(11) CONTINGENCIES
F-16
<PAGE>
The Company is party to legal proceedings and claims which arise during the
ordinary course of business. In the opinion of management, the ultimate outcome
of these matters will not have a material adverse effect upon the Company's
financial position or results of operations.
(12) SUBSEQUENT EVENTS
On June 30, 1997, the Board of Directors of the Company approved an Agreement
and Plan of Merger (the "Merger Agreement") providing for the merger (the
"Merger") of the Company with Western Pacific Airlines, Inc. ("Western
Pacific"). Upon consummation of the Merger, each shareholder of the Company
will receive .75 shares (subject to adjustment in certain circumstances) of
common stock of Western Pacific for each share of the Company's Common Stock
held by such shareholder. The management of Western Pacific will retain
managerial control of Western Pacific after the Merger. Three members of the
Company's board of directors will be granted seats on Western Pacific's board of
directors, which will be increased to nine members. The Company's investment
banking firm has issued an opinion to the Company's Board of Directors that the
provisions of the Merger Agreement are fair to the Company's shareholders from a
financial point of view, and Western Pacific's board of directors has received a
similar opinion from its investment banking firm with respect to Western
Pacific.
The Merger Agreement provides that prior to the completion of the Merger, or
termination of the Merger Agreement if that occurs before the Merger is
completed, the operations of the Company and Western Pacific will generally be
conducted in the ordinary course of business. The Company is prohibited from
leasing additional aircraft, raising capital through equity or debt financings
(except under certain conditions) or making major capital expenditures without
Western Pacific's consent. Certain limitations are placed on Western Pacific's
operations as well. The Merger Agreement provides that each company must pay
the other a termination fee of $4 million in the event either company enters
into a business combination with any other entity, and in certain other
circumstances resulting in termination of the Merger Agreement.
Closing of the Merger is subject to several conditions, including approval of
the Merger by the shareholders of the Company, regulatory approval of the Merger
under the Hart-Scott-Rodino Antitrust Improvements Act, effectiveness of a
Registration Statement relating to issuance of Western Pacific common stock in
the Merger and the continued effectiveness of the "fairness opinions" issued by
each of the Company's and Western Pacific's investment banking firms. In
addition, either the Company or Western Pacific may terminate the Merger
Agreement in the event of a material adverse change in the financial condition,
business, operations or prospects of the other party to the Merger. There can be
no assurance that the conditions will be met or that the Merger will be
consummated. The failure of the Company and Western Pacific to consummate the
Merger could have a material adverse effect on the Company.
In connection with the Merger, the Company entered into a code share agreement
(the "Code Share Agreement") with Western Pacific which provides that the
parties will jointly market their flight schedules by permitting each party to
assign its airline designator code to flights operated by the other party. The
Code Share Agreement terminates on December 31, 1997; provided, however, that if
the
F-17
<PAGE>
Merger terminates under certain conditions then the Code Share Agreement
will terminate on December 31, 1998.
F-18
<PAGE>
Exhibit 3.2
BYLAWS
OF
FRONTIER AIRLINES, INC.
(As Amended June 9, 1997)
<PAGE>
INDEX TO BYLAWS
OF
FRONTIER AIRLINES, INC.
Page
----
ARTICLE 1 - Offices
- -------------------
Section 1.01 Business Offices.......................... 1
Section 1.02 Registered Office......................... 1
ARTICLE 2 - Shareholders
- ------------------------
Section 2.01 Annual Meeting............................ 1
Section 2.02 Special Meetings.......................... 1
Section 2.03 Place of Meetings......................... 1
Section 2.04 Notice of Meetings........................ 1
Section 2.05 Waiver of Notice.......................... 2
Section 2.06 Closing of Transfer Books; Record Date.... 2
Section 2.07 Voting List............................... 3
Section 2.08 Proxies................................... 3
Section 2.09 Quorum and Manner of Acting............... 3
Section 2.10 Extraordinary Matters..................... 4
Section 2.11 Voting of Shares.......................... 4
Section 2.12 Voting of Shares by Certain Holders....... 4
Section 2.13 Action Without a Meeting.................. 5
ARTICLE 3 - Board of Directors
- ------------------------------
Section 3.01 General Powers............................ 6
Section 3.02 Number, Tenure and Qualifications......... 6
Section 3.03 Resignation............................... 6
Section 3.04 Removal................................... 6
Section 3.05 Vacancies................................. 6
Section 3.06 Regular Meetings.......................... 6
Section 3.07 Special Meetings.......................... 7
Section 3.08 Meetings by Telephone..................... 7
Section 3.09 Notice of Meetings........................ 7
Section 3.10 Waiver of Notice.......................... 7
Section 3.11 Presumption of Assent..................... 8
Section 3.12 Quorum and Manner of Acting............... 8
Section 3.13 Action Without a Meeting.................. 8
Section 3.14 Executive and Other Committees............ 8
Section 3.15 Compensation.............................. 9
ARTICLE 4 - Officers
- --------------------
Section 4.01 Number and Qualifications................. 9
Section 4.02 Election and Term of Office............... 9
Section 4.03 Compensation.............................. 10
Section 4.04 Resignation............................... 10
Section 4.05 Removal................................... 10
Section 4.06 Vacancies................................. 10
<PAGE>
Section 4.07 Authority and Duties........... 10
Section 4.08 Surety Bonds................... 12
ARTICLE 5 - Stock
- -----------------
Section 5.01 Issuance of Shares............. 12
Section 5.02 Stock Certificates;
Uncertificated Shares........ 12
Section 5.03 Consideration for Shares....... 12
Section 5.04 Lost Certificates.............. 13
Section 5.05 Transfer of Shares............. 13
Section 5.06 Holders of Record.............. 13
Section 5.07 Shares Held for Account of
Another...................... 13
Section 5.08 Transfer Agents, Registrars and
Paying Agents................ 13
ARTICLE 6 - Indemnification
- ---------------------------
Section 6.01 Definitions.................... 14
Section 6.02 Right to Indemnification....... 15
Section 6.03 Advancement of Expenses........ 15
Section 6.04 Burden of Proof................ 15
Section 6.05 Notification and Defense of
Claim........................ 15
Section 6.06 Enforcement.................... 16
Section 6.07 Proceedings by a Party......... 17
Section 6.08 Subrogation.................... 17
Section 6.09 Other Payments................. 17
Section 6.10 Insurance...................... 17
Section 6.11 Other Rights and Remedies...... 17
Section 6.12 Applicability; Effect.......... 17
Section 6.13 Severability................... 18
<PAGE>
ARTICLE 7 - Miscellaneous
- -------------------------
Section 7.01 Voting of Securities by the Corporation... 18
Section 7.02 Seal...................................... 18
Section 7.03 Fiscal Year............................... 19
Section 7.04 Amendments................................ 19
<PAGE>
BYLAWS
OF
FRONTIER AIRLINES, INC.
ARTICLE 1: Offices
- -------------------
Section 1.01 Business Offices. The corporation may have such offices,
----------------
either within or outside Colorado, as the board of directors may from time to
time determine or as the business of the corporation may require.
Section 1.02 Registered Office. The registered office of the
-----------------
corporation required by the Colorado Corporation Code to be maintained in
Colorado shall be as set forth in the articles of incorporation, unless changed
as provided by law.
ARTICLE 2: Shareholders
- ------------------------
Section 2.01 Annual Meeting. An annual meeting of the shareholders
--------------
shall be held for the purpose of electing directors and for the transaction of
such other business as may come before the meeting on such date and at such time
as the board of directors shall fix in the notice of meeting; the first annual
meeting shall be held not later than September 30, 1995, and subsequent annual
meetings shall be held within 14 months of the annual meeting prior thereto.
Failure to hold an annual meeting as required by these bylaws shall not
invalidate any action taken by the board of directors of officers of the
corporation.
Section 2.02 Special Meetings. Special meetings of the shareholders,
----------------
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the president or the board of directors, and shall be called by the
president at the request of the holders of not less than 10% of all the
outstanding shares of the corporation entitled to vote at the meeting.
Section 2.03 Place of Meetings. Each meeting of the shareholders
-----------------
shall be held at such place, either within or outside Colorado, as may be
designated in the notice of meeting, or, if no place is designated in the
notice, at the principal office of the corporation if in Colorado, or if the
principal office is not located in Colorado, at the registered office of the
corporation in Colorado.
Section 2.04 Notice of Meetings. Except as otherwise required by law,
------------------
written notice of each meeting of the shareholders stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called shall be given, either personally
(including delivery by private courier) or by first class, certified or
registered mail,
<PAGE>
to each shareholder of record entitled to notice of such meeting, not less than
10 nor more than 50 days before the date of the meeting, except that if the
authorized shares of the corporation are to be increased, at least 30 days
notice shall be given, and if the sale, lease, exchange or other disposition of
all or substantially all of the property and assets of the corporation not in
the usual and regular course of business is to be voted on, at least 20 days
notice shall be given. Such notice shall be deemed to be given, if personally
delivered, when delivered to the shareholder, and, if mailed, when deposited in
the United States mail, addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid, but if three successive notices mailed to the last known address of any
shareholder of record are returned as undeliverable no further notices to such
shareholder shall be necessary until another address for such shareholder is
made known to the corporation. If a meeting is adjourned to another time or
place, notice need not be given if the time and place thereof are announced at
the meeting, unless the adjournment is for more than 30 days or if after the
adjournment a new record date is fixed, in either of which case notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote
at the meeting in accordance with the foregoing provisions of this Section 2.04.
Section 2.05 Waiver of Notice. Whenever notice is required by law,
----------------
the articles of incorporation or these bylaws to be given to any shareholder, a
waiver thereof in writing signed by the shareholder entitled to such notice,
whether before, at or after the time stated therein, shall be equivalent to the
giving of such notice. By attending a meeting, a shareholder (a) waives
objection to lack of notice or defective notice of such meeting unless the
shareholder, at the beginning of the meeting, objects to the holding of the
meeting or the transacting of business at the meeting, and (b) waives objection
to consideration at such meeting of a particular matter not within the purpose
or purposes described in the notice of such meeting unless the shareholder
objects to considering the matter when it is presented.
Section 2.06 Closing of Transfer Books; Record Date. For the purpose
--------------------------------------
of determining shareholders entitled to notice of or to vote at any meeting of
the shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the board of directors may provide that the stock
transfer books shall be closed for any stated period not exceeding 50 days. In
lieu of closing the stock transfer books the board of directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than 50 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock transfer books shall be closed or a record date fixed for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of the shareholders, such books shall be closed for at least, or such
record shall be fixed not less than, 10 days immediately preceding such meeting
(30 days if the authorized stock
<PAGE>
is to be increased, 20 days if the sale, lease, exchange or other disposition of
all or substantially all of the property and assets of the corporation not in
the usual and regular course of business is to be considered). If the stock
transfer books are not so closed or no record date is so fixed, the date on
which notice of the meeting is mailed or the date on which the resolution of the
board of directors declaring the dividend is adopted, as the case may be, shall
be the record date for such determination of shareholders. When a determination
of shareholders entitled to vote at any meeting of the shareholders has been
made as provided in this Section, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of the closing has
expired. Notwithstanding the foregoing provisions of this Section, the record
date for determining shareholders entitled to take action without a meeting as
provided in Section 2.13 below shall be the date specified in such Section.
Section 2.07 Voting List. The officer or agent having charge of the
-----------
stock transfer books for shares of the corporation shall make, at least 10 days
before each meeting of the shareholders, a complete record of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
For a period of 10 days before such meeting, this record shall be kept on file
at the principal office of the corporation, whether within or outside Colorado,
and shall be subject to inspection by any shareholder for any purpose germane to
the meeting at any time during usual business hours. Such record shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder for any purpose germane to the meeting
during the whole time of the meeting. The original stock transfer books shall
be prima facie evidence as to who are the shareholders entitled to examine such
record or transfer books or to vote at any meeting of the shareholders.
Section 2.08 Proxies. At any meeting of the shareholders, a
-------
shareholder may vote by proxy executed in writing by the shareholder or his duly
authorized attorney-in-fact. Such proxy shall be filed with the secretary of
the corporation before or at the time of the meeting. No proxy shall be valid
after 11 months from the date of its execution, unless otherwise provided in the
proxy.
Section 2.09 Quorum and Manner of Acting. At all meetings of
---------------------------
shareholders, a majority of the outstanding shares of the corporation entitled
to vote, represented in person or by proxy, shall constitute a quorum. If a
quorum is present, the affirmative vote of a majority of the shares represented
at the meeting and entitled to vote on the subject matter shall be the act of
the shareholders, unless the vote of a greater proportion or number or voting by
classes is otherwise required by the laws of Colorado, the articles of
incorporation or these bylaws. In the absence of a quorum, a majority of the
shares so represented may
<PAGE>
adjourn the meeting from time to time for a period not to exceed 60 days at any
one adjournment. At any such adjourned meeting, at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the original meeting.
Section 2.10 Extraordinary Matters. Repealed in its entirety, June 9,
---------------------
1997.
Section 2.11 Voting of Shares. Subject to the provisions of Section
----------------
3.06, each outstanding share of record, regardless of class, is entitled to one
vote, and each outstanding fractional share of record is entitled to a
corresponding fractional vote, on each matter submitted to a vote of the
shareholders either at a meeting thereof or pursuant to Section 2.13, except to
the extent that the voting rights of the shares of any class or classes are
limited or denied by the articles of incorporation as permitted by the Colorado
Corporation Code. In the election of directors each record holder of stock
entitled to vote at such election shall have the right to vote the number of
shares owned by him for as many persons as there are directors to be elected,
and for whose election he has the right to vote. Cumulative voting shall not be
allowed.
Section 2.12 Voting of Shares by Certain Holders.
-----------------------------------
(a) Shares Held or Controlled by the Corporation. Neither treasury
--------------------------------- -----------
shares nor shares held by another corporation if a majority of the shares
entitled to vote for the election of directors of such other corporation is held
by this corporation, shall be voted at any meeting or counted in determining the
total number of outstanding shares at any given time.
(b) Shares Held by Another Corporation. Shares standing in the name
----------------------------------
of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe or, in the absence of such provision,
as the board of directors of such corporation may determine.
(c) Shares Held by More Than One Person. Shares standing of record in
-----------------------------------
the names of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or if
two or more persons have the same fiduciary relationship respecting the same
shares, voting with respect to the shares shall have the following effects: (i)
if only one person votes, his act binds all; (ii) if two or more persons vote,
the act of the majority so voting binds all; (iii) if two or more persons vote,
but the vote is evenly split on any particular matter, each faction may vote the
shares in question proportionally, or any person voting the shares of a
beneficiary, if any, may apply to any court of competent jurisdiction in
Colorado to appoint an additional person to act with the persons so voting the
shares, in which case the shares shall be voted as determined by a majority of
such persons; and (iv) if a tenancy is held in unequal interests, a majority or
even
<PAGE>
split for the purposes of subparagraph (iii) shall be a majority or even split
in interest. The foregoing effects of voting shall not be applicable if the
secretary of the corporation is given written notice of alternative voting
provisions and is furnished with a copy of the instrument or order wherein the
alternative voting provisions are stated.
(d) Shares Held in Trust or by a Personal Representative. Shares
-------------------------------------- --------------
held by an administrator, executor, guardian, conservator or other personal
representative may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name.
(e) Shares Held by a Receiver. Shares standing in the name of a
-------------------------
receiver may be voted by such receiver and shares held by or under the control
of a receiver may be voted by such receiver without the transfer thereof into
his name if authority so to do is contained in an appropriate order of the court
by which such receiver was appointed.
(f) Pledged Shares. A shareholder whose shares are pledged shall be
--------------
entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
(g) Redeemable Shares Called for Redemption. Redeemable shares that
---------------------------------------
have been called for redemption shall not be entitled to vote on any matter and
shall not be deemed outstanding shares on and after the date on which written
notice of redemption has been mailed to shareholders and a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
irrevocable instruction and authority to pay the redemption price to the holders
of the shares upon surrender of certificates therefor.
Section 2.13 Action Without a Meeting. Any action required or
------------------------
permitted to be taken at a meeting of the shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof. Such consent
(which may be signed in counterparts) shall have the same force and effect as a
unanimous vote of the shareholders and may be stated as such in any document.
Unless the consent specifies a different effective date, action taken without a
meeting pursuant to a consent in writing as provided herein shall be effective
when all shareholders entitled to vote have signed the consent. The record date
for determining shareholders entitled to take action without a meeting is the
date the first shareholder signs the consent. All consents signed pursuant to
this Section 2.13 shall be delivered to the secretary of the corporation for
inclusion in the minutes or for filing with the corporate records.
<PAGE>
ARTICLE 3: Board of Directors
- ------------------------------
Section 3.01 General Powers. The business and affairs of the
--------------
corporation shall be managed by its board of directors, except as otherwise
provided in the Colorado Corporation Code, the articles of incorporation or
these bylaws.
Section 3.02 Number, Tenure and Qualifications. The number of
---------------------------------
directors of the corporation shall be not less than three nor more than
thirteen, with the actual number being set or changed, from time to time, by
resolutions of the then existing board. Except as provided in Sections 2.01 and
3.05, directors shall be elected at each annual meeting of the shareholders.
Each director shall hold office until the next annual meeting of the
shareholders and thereafter until his successor shall have been elected and
qualified, or until his earlier death, resignation or removal. Directors must
be at least 18 years old but need not be residents of Colorado or shareholders
of the corporation.
Section 3.03 Resignation. Any director may resign at any time by
-----------
giving written notice to the president or to the board of directors. A
director's resignation shall take effect at the time specified in the notice
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3.04 Removal. At a meeting called expressly for that purpose,
-------
the entire board of directors or any lesser number may be removed, with or
without cause, by a vote of the holders of a majority of shares then entitled to
vote at an election of directors; except that if the holders of shares of any
class of stock are entitled to elect one or more directors by the provisions of
the articles of incorporation, the provisions of this Section 3.04 shall apply,
with respect to the removal of a director or directors so elected by such class,
to the vote of the holders of the outstanding shares of that class and not to
the vote of the outstanding shares as a whole. Any reduction in the authorized
number of directors shall not have the effect of shortening the term of any
incumbent director unless such director is also removed from office in
accordance with this Section 3.04.
Section 3.05 Vacancies. Unless otherwise required in the articles of
---------
incorporation, any vacancy occurring in the board of directors, including
vacancies due to an increase in the number of directors, may be filled by the
affirmative vote of a majority of the remaining directors though less than a
quorum, or by the affirmative vote of two directors if there are only two
directors remaining, or by a sole remaining director, or by the shareholders if
there are no directors remaining.
Section 3.06 Regular Meetings. A regular meeting of the board of
----------------
directors shall be held immediately after and at the same place as the annual
meeting of the shareholders, or as soon
<PAGE>
thereafter as conveniently may be, at the time and place, either within or
outside Colorado, determined by the board, for the purpose of electing officers
and for the transaction of such other business as may come before the meeting.
Failure to hold such meeting, however, shall not invalidate any action taken by
any officer then or thereafter in office. The board of directors may provide, by
resolution, the time and place, either within or outside Colorado, for the
holding of additional regular meetings without other notice than such
resolution.
Section 3.07 Special Meetings. Special meetings of the board of
----------------
directors may be called by or at the request of the president or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any convenient place, either within or outside
Colorado, as the place for holding any special meeting of the board called by
them.
Section 3.08 Meetings by Telephone. Unless otherwise provided by the
---------------------
articles of incorporation, one or more members of the board of directors may
participate in a meeting of the board by means of conference telephone or
similar communications equipment by which all persons participating in the
meeting can hear each other at the same time. Such participation shall
constitute presence in person at the meeting.
Section 3.09 Notice of Meetings. Notice of each meeting of the board
------------------
of directors (except those regular meetings for which notice is not required)
stating the place, day and hour of the meeting shall be given to each director
at least five days prior thereto by the mailing of written notice by first
class, certified or registered mail, or at least two days prior thereto by
personal delivery (including delivery by private courier) of written notice or
by telephone, telegram, telex, cablegram or other similar method, except that in
the case of a meeting to be held pursuant to Section 3.08 notice may be given by
telephone not less than 5 hours prior thereto. The method of notice need not be
the same to each director. Notice shall be deemed to be given when deposited in
the United States mail, with postage thereon prepaid, addressed to the director
at his business or residence address, when delivered or communicated to the
director or when the telegram, telex, cablegram or other form of notice is
personally delivered to the director or delivered to the last address of the
director furnished by him to the corporation for such purpose. Neither the
business to be transacted at nor the purpose of any meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting
unless otherwise required by statute.
Section 3.10 Waiver of Notice. Whenever notice is required by law,
----------------
the articles of incorporation or these bylaws to be given to the directors, a
waiver thereof in writing signed by the director entitled to such notice,
whether before, at or after the time stated therein, shall be equivalent to the
giving of such notice. By attending or participating in a meeting, a director
waives any required notice of such meeting unless, at the beginning of the
meeting, he objects to the holding of the meeting or the transacting of business
at the meeting.
<PAGE>
Section 3.11 Presumption of Assent. A director who is present at a
---------------------
meeting of the board of directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless he objects
at the beginning of the meeting to the holding of the meeting or the transacting
of business at the meeting, contemporaneously requests that his dissent to the
action taken be entered in the minutes of such meeting or gives written notice
of his dissent to the presiding officer of such meeting before its adjournment
or to the secretary of the corporation immediately after adjournment of such
meeting. The right of dissent as to a specific action taken at a meeting of the
board is not available to a director who votes in favor of such action.
Section 3.12 Quorum and Manner of Acting. Except as otherwise may be
---------------------------
required by law, the articles of incorporation or these bylaws, a majority of
the number of directors fixed in accordance with these bylaws, present in
person, shall constitute a quorum for the transaction of business at any meeting
of the board of directors, and the vote of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the board of
directors. If less than such majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time without further
notice other than an announcement at the meeting, until a quorum shall be
present. No director may vote or act by proxy or power of attorney at any
meeting of directors.
Section 3.13 Action Without a Meeting. Any action required or
------------------------
permitted to be taken at a meeting of the directors may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by all of the directors.
Such consent (which may be signed in counterparts) shall have the same force and
effect as a unanimous vote of the directors and may be stated as such in any
document. Unless the consent specifies a different effective date, action taken
without a meeting pursuant to a consent in writing as provided herein is
effective when all directors have signed the consent. All consents signed
pursuant to this Section 3.13 shall be delivered to the secretary of the
corporation for inclusion in the minutes or for filing with the corporate
records.
Section 3.14 Executive and Other Committees. The board of directors,
------------------------------
by resolution adopted by a majority of the full board, may designate from among
its members an executive committee and one or more other committees, each of
which, to the extent provided in the resolution establishing such committee,
shall have and may exercise all of the authority of the board of directors in
the management of the business and affairs of the corporation, except that no
such committee shall have the power or authority to (a) declare dividends or
distributions, (b) approve, recommend or submit to the shareholders actions or
proposals required by law to be approved by the shareholders, (c) fill vacancies
on the board of directors or any committee thereof, including any committee
authorized by this Section 3.14, (d) amend the bylaws, (e) approve
<PAGE>
a plan of merger not requiring shareholder approval, (f) reduce earned or
capital surplus, (g) authorize or approve the reacquisition of shares of the
corporation, unless pursuant to a general formula or method specified by the
board of directors, or (h) authorize or approve the issuance or sale of, or any
contract to issue or sell, shares of the corporation's stock or designate the
terms of a series of a class of shares. The delegation of authority to any
committee shall not operate to relieve the board of directors or any member of
the board from any responsibility imposed by law. Subject to the foregoing, the
board of directors may provide such powers, limitations and procedures for such
committees as the board deems advisable. To the extent the board of directors
does not establish other procedures, each committee shall be governed by the
procedures set forth in Sections 3.06 (except as they relate to an annual
meeting) and 3.07 through 3.13 as if the committee were the board of directors.
Each committee shall keep regular minutes of its meetings, which shall be
reported to the board of directors when required and submitted to the secretary
of the corporation for inclusion in the corporate records.
Section 3.15 Compensation. By resolution of the board of directors,
------------
notwithstanding any personal interest of a director in such action, a director
may be paid his expenses, if any, of attendance at each meeting of the board of
directors and each meeting of any committee of the board of which he is a member
and may be paid a fixed sum for attendance at each such meeting or a stated
salary, or both a fixed sum and a stated salary. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
ARTICLE 4: Officers
- --------------------
Section 4.01 Number and Qualifications. The officers of the
-------------------------
corporation shall consist of a president, a secretary, a treasurer and such
other officers, including a chairman of the board, one or more vice presidents
and a controller, as may from time to time be elected or appointed by the board.
In addition, the board of directors or the president may elect or appoint such
assistant and other subordinate officers, including assistant vice presidents,
assistant secretaries and assistant treasurers, as it or he shall deem necessary
or appropriate. Any number of offices may be held by the same person, except
that no person may simultaneously hold the offices of president and secretary.
All officers must be at least 18 years old.
Section 4.02 Election and Term of Office. Except as provided in
---------------------------
Sections 4.01 and 4.06, the officers of the corporation shall be elected by the
board of directors annually at the first meeting of the board held after each
annual meeting of the shareholders as provided in Section 3.06. If the election
of officers shall not be held as provided herein, such election shall be held as
soon thereafter as conveniently may be. Each officer shall hold office until
his successor shall have been duly elected
<PAGE>
and shall have qualified, or until the expiration of his term in office if
elected or appointed for a specified period of time, or until his earlier death,
resignation or removal.
Section 4.03 Compensation. Officers shall receive such compensation
------------
for their services as may be authorized or ratified by the board of directors
and no officer shall be prevented from receiving compensation by reason of the
fact that he is also a director of the corporation. Election or appointment as
an officer shall not of itself create a contract or other right to compensation
for services performed as such officer.
Section 4.04 Resignation. Any officer may resign at any time, subject
-----------
to any rights or obligations under any existing contracts between the officer
and the corporation, by giving written notice to the president or to the board
of directors. An officer's resignation shall take effect at the time specified
in such notice, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.05 Removal. Any officer may be removed at any time by the
-------
board of directors, or, in the case of assistant and other subordinate officers,
by the board of directors or the president (whether or not such officer was
appointed by the president) whenever in its or his judgment, as the case may be,
the best interests of the corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer shall not in itself create
contract rights.
Section 4.06 Vacancies. A vacancy in any office, however occurring,
---------
may be filled by the board of directors, or, if such office may be filled by the
president as provided in Section 4.01, by the president, for the unexpired
portion of the term.
Section 4.07 Authority and Duties. The officers of the corporation
--------------------
shall have the authority and shall exercise the powers and perform the duties
specified below and as may be additionally specified by the president, the board
of directors or these bylaws (and in all cases where the duties of any officer
are not prescribed by the bylaws or by the board of directors, such officer
shall follow the orders and instructions of the president), except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law:
(a) President. The president shall, subject to the direction and
---------
supervision of the board of directors, (i) be the chief executive officer of the
corporation and have general and active control of its affairs and business and
general supervision of its officers, agents and employees; (ii) unless there is
a chairman of the board, preside at all meetings of the shareholders and the
board of directors; (iii) see that all orders and resolutions of the board of
directors are carried into effect; and (iv) perform all other duties incident to
the office of president
<PAGE>
and as from time to time may be assigned to him by the board of directors.
(b) Vice Presidents. The vice president, if any (or if there is more
---------------
than one then each vice president), shall assist the president and shall perform
such duties as may be assigned to him by the president or by the board of
directors. The vice president, if there is one (or if there is more than one
then the vice president designated by the board of directors, or if there be no
such designation then the vice presidents in order of their election), shall, at
the request of the president, or in his absence or inability or refusal to act,
perform the duties of the president and when so acting shall have all the powers
of and be subject to all the restrictions upon the president. Vice presidents
may be designated as "Senior," "Executive," or "Assistant" vice presidents, at
the election of the board of directors, and shall have such powers and perform
such duties as may be assigned to them by the president or by the board of
directors.
(c) Secretary. The secretary shall: (i) keep the minutes of the
---------
proceedings of the shareholders, the board of directors and any committees of
the board; (ii) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by law; (iii) be custodian of the
corporate records and of the seal of the corporation; (iv) keep at the
corporation's registered office or principal place of business within or outside
Colorado a record containing the names and addresses of all shareholders and the
number and class of shares held by each, unless such a record shall be kept at
the office of the corporation's transfer agent or registrar; (v) have general
charge of the stock books of the corporation, unless the corporation has a
transfer agent; and (vi) in general, perform all duties incident to the office
of secretary and such other duties as from time to time may be assigned to him
by the president or by the board of directors. Assistant secretaries, if any,
shall have the same duties and powers, subject to supervision by the secretary.
(d) Treasurer. The treasurer shall: (i) be the principal financial
---------
officer of the corporation and have the care and custody of all its funds,
securities, evidences of indebtedness and other personal property and deposit
the same in accordance with the instructions of the board of directors; (ii)
receive and give receipts and acquittances for moneys paid in on account of the
corporation, and pay out of the funds on hand all bills, payrolls and other just
debts of the corporation of whatever nature upon maturity; (iii) unless there is
a controller, be the principal accounting officer of the corporation and as such
prescribe and maintain the methods and systems of accounting to be followed,
keep complete books and records of account, prepare and file all local, state
and federal tax returns, prescribe and maintain an adequate system of internal
audit and prepare and furnish to the president and the board of directors
statements of account showing the financial position of the corporation and the
results of its operations; (iv) upon request of the board, make such reports to
it
<PAGE>
as may be required at any time; and (v) perform all other duties incident to
the office of treasurer and such other duties as from time to time may be
assigned to him by the board of directors or the president. Assistant
treasurers, if any, shall have the same powers and duties, subject to the
supervision by the treasurer.
Section 4.08 Surety Bonds. The board of directors may require any
------------
officer or agent of the corporation to execute to the corporation a bond in such
sums and with such sureties as shall be satisfactory to the board, conditioned
upon the faithful performance of his duties and for the restoration to the
corporation of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
ARTICLE 5: Stock
- -----------------
Section 5.01 Issuance of Shares. The issuance or sale by the
------------------
corporation of any shares of its authorized capital stock of any class,
including treasury shares, shall be made only upon authorization by the board of
directors, except as otherwise may be provided by law. No shares shall be
issued until full consideration has been received therefor. Every issuance of
shares shall be recorded on the books maintained for such purpose by or on
behalf of the corporation.
Section 5.02 Stock Certificates; Uncertificated Shares. The shares of
---------------------------------- ------
stock of the corporation shall be represented by certificates, except that the
board of directors may authorize the issuance of any class or series of stock of
the corporation without certificates as provided by law. If shares are
represented by certificates, such certificates shall be signed in the name of
the corporation by the chairman or vice chairman of the board of directors or by
the president or a vice president and by the treasurer or an assistant treasurer
or by the secretary or an assistant secretary and sealed with the seal of the
corporation or with a facsimile thereof. The signatures of the corporation's
officers on any certificate may also be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar. In case any
officer who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of its issue. Certificates of stock shall be in such
form consistent with law as shall be prescribed by the board of directors.
Section 5.03 Consideration for Shares. Shares shall be issued for
------------------------
such consideration expressed in dollars (but not less than the par value
thereof, if any) as shall be fixed from time to time by the board of directors.
Treasury shares shall be disposed of for such consideration expressed in dollars
as may be fixed from time to time by the board. Such consideration may consist,
in whole or in part, of money, other property, tangible or intangible,
<PAGE>
or labor or services actually performed for the corporation, but neither the
promissory note of a subscriber or direct purchaser of shares from the
corporation, nor the unsecured or nonnegotiable promissory note of any other
person, nor future services shall constitute payment or part payment for shares.
Section 5.04 Lost Certificates. In case of the alleged loss,
-----------------
destruction or mutilation of a certificate of stock the board of directors may
direct the issuance of a new certificate in lieu thereof upon such terms and
conditions in conformity with law as it may prescribe. The board of directors
may in its discretion require a bond in such form and amount and with such
surety as it may determine before issuing a new certificate.
Section 5.05 Transfer of Shares. Upon presentation and surrender to
------------------
the corporation or to the corporation's transfer agent of a certificate of stock
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, payment of all transfer taxes, if any, and the
satisfaction of any other requirements of law, including inquiry into and
discharge of any adverse claims of which the corporation has notice, the
corporation or the transfer agent shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transfer on the
books maintained for such purpose by or on behalf of the corporation. No
transfer of shares shall be effective until it has been entered on such books.
The corporation or the corporation's transfer agent may require a signature
guaranty or other reasonable evidence that any signature is genuine and
effective before making any transfer. Transfers of uncertificated shares shall
be made in accordance with applicable provisions of law.
Section 5.06 Holders of Record. The corporation shall be entitled to
-----------------
treat the holder of record of any share of stock as the holder in fact thereof,
and accordingly shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person whether or not it
shall have express or other notice thereof, except as may be required by the
laws of Colorado.
Section 5.07 Shares Held for Account of Another. The board of
----------------------------------
directors, in the manner provided by the Colorado Corporation Code, may adopt a
procedure whereby a shareholder of the corporation may certify in writing to the
corporation that all or a portion of the shares registered in the name of such
shareholder are held for the account of a specified person or persons. Upon
receipt by the corporation of a certification complying with such procedure, the
persons specified in the certification shall be deemed, for the purpose or
purposes set forth therein, to be the holders of record of the number of shares
specified in place of the shareholder making the certification.
Section 5.08 Transfer Agents, Registrars and Paying Agents. The
--------------------------------------- ------
board of directors may at its discretion appoint one or more transfer agents,
registrars or agents for making payment
<PAGE>
upon any class of stock, bond, debenture or other security of the corporation.
Such agents and registrars may be located either within or outside Colorado.
They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE 6: Indemnification
- ---------------------------
Section 6.01 Definitions. For purposes of this Article 6, the
-----------
following terms shall have the meanings set forth below:
(a) Code. The term "Code" means the Colorado Corporation Code as it
----
exists on the date of the adoption of this Article and as it may hereafter be
amended from time to time, but in the case of any amendment, only to the extent
that the amendment permits the corporation to provide broader indemnification
rights than the Colorado Corporation Code permitted the corporation to provide
at the date of the adoption of this Article and prior to the amendment.
(b) Corporation. The term "corporation" means the corporation and, in
-----------
addition to the resulting or surviving corporation, any domestic or foreign
predecessor entity of the corporation in a merger, consolidation or other
transaction in which the predecessor's existence ceased upon consummation of the
transaction.
(c) Expenses. The term "expenses" means the actual and reasonable
--------
expenses (including but not limited to expenses of investigation and preparation
and fees and disbursements of counsel, accountants or other experts) incurred by
a party in connection with a proceeding.
(d) Liability. The term "liability" means the obligation to pay a
---------
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan) or expense incurred with respect to a
proceeding.
(e) Party. The term "party" means any individual who was, is, or is
-----
threatened to be made, a named defendant or respondent in a proceeding by reason
of the fact that he is or was a director, officer or employee of the corporation
and any individual who, while a director, officer or employee of the corporation
is or was serving at the request of the corporation as a director, officer,
partner, trustee, employee, fiduciary or agent of any other foreign or domestic
corporation or of any partnership, joint venture, trust, other enterprise or
employee benefit plan. A party shall be considered to be serving an employee
benefit plan at the corporation's request if his duties to the corporation also
impose duties on or otherwise involve services by him to the plan or to
participants in or beneficiaries of the plan.
(f) Proceeding. The term "proceeding" means any threatened, pending
----------
or completed action, suit or proceeding, or any appeal therein, whether civil,
criminal, administrative,
<PAGE>
arbitrative or investigative (including an action by or in the right of the
corporation), and whether formal or informal.
Section 6.02 Right to Indemnification. The corporation shall
------------------------
indemnify any party to a proceeding against liability incurred in, relating to
or as a result of the proceeding to the fullest extent permitted by law
(including without limitation in circumstances in which, in the absence of this
Section 6.02, indemnification would be (a) discretionary under the Code or (b)
limited or subject to particular standards of conduct under the Code).
Section 6.03 Advancement of Expenses. In the event of any proceeding
-----------------------
in which a party is involved or which may give rise to a right of
indemnification under this Article, following written request to the corporation
by the party, the corporation shall pay to the party, to the fullest extent
permitted by law (including without limitation in circumstances in which, in the
absence of this Section 6.02, advancement of expenses would be (a) discretionary
under the Code or (b) limited or subject to particular standards of conduct
under the Code), amounts to cover expenses incurred by the party in, relating to
or as a result of such proceeding in advance of its final disposition.
Section 6.04 Burden of Proof. If under applicable law the entitlement
---------------
of a party to be indemnified or advanced expenses hereunder depends upon whether
a standard of conduct has been met, the burden of proof of establishing that the
party did not act in accordance with such standard shall rest with the
corporation. A party shall be presumed to have acted in accordance with such
standard and to be entitled to indemnification or the advancement of expenses
(as the case may be) unless, based upon a preponderance of the evidence, it
shall be determined that the party has not met such standard. Such
determination and any evaluation as to the reasonableness of amounts claimed by
a party shall be made by the board of directors of the corporation or such other
body or persons as may be permitted by the Code. Subject to any express
limitation of the Code, if so requested by the party, such determination and
evaluation as to the reasonableness of the amounts claimed by the party shall be
made by independent counsel who is selected by the party and approved by the
corporation (which approval shall not be unreasonably withheld). For purposes
of this Article, unless otherwise expressly stated, the termination of any
proceeding by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere or its equivalent,
shall not create a presumption that a party did not meet any particular standard
of conduct or have any particular belief or that a court has determined that
indemnification is not permitted by applicable law.
Section 6.05 Notification and Defense of Claim. Promptly after
---------------------------------
receipt by a party of notice of the commencement of any proceeding, the party
shall, if a claim in respect thereof is to be made against the corporation under
this Article, notify the corporation in writing of the commencement thereof;
provided,
<PAGE>
however, that delay in so notifying the corporation shall not constitute a
waiver or release by the party of any rights under this Article. With respect to
any such proceeding: (a) the corporation shall be entitled to participate
therein at its own expense; (b) any counsel representing the party to be
indemnified in connection with the defense or settlement thereof shall be
counsel mutually agreeable to the party and to the corporation; and (c) the
corporation shall have the right, at its option, to assume and control the
defense or settlement thereof, with counsel satisfactory to the party. If the
corporation assumes the defense of the proceeding, the party shall have the
right to employ its own counsel, but the fees and expenses of such counsel
incurred after notice from the corporation of its assumption of the defense of
such proceeding shall be at the expense of the party unless (i) the employment
of such counsel has been specifically authorized by the corporation, (ii) the
party shall have reasonably concluded that there may be a conflict of interest
between the corporation and the party in the conduct of the defense of such
proceeding, or (iii) the corporation shall not in fact have employed counsel to
assume the defense of such proceeding. Notwithstanding the foregoing, if an
insurance carrier has supplied directors' and officers' liability insurance
covering a proceeding and is entitled to retain counsel for the defense of such
proceeding, then the insurance carrier shall retain counsel to conduct the
defense of such proceeding unless the party and the corporation concur in
writing that the insurance carrier's doing so is undesirable. The corporation
shall not be liable under this Article for any amounts paid in settlement of any
proceeding effected without its written consent. The corporation shall not
settle any proceeding in any manner that would impose any penalty or limitation
on a party without the party's written consent. Consent to a proposed settlement
of any proceeding shall not be unreasonably withheld by either the corporation
or the party.
Section 6.06 Enforcement. The right to indemnification and
-----------
advancement of expenses granted by this Article shall be enforceable in any
court of competent jurisdiction if the corporation denies the claim, in whole or
in part, or if no disposition of such claim is made within 90 days after the
written request for indemnification or advancement of expenses is received. If
successful in whole or in part in such suit, the party's expenses incurred in
bringing and prosecuting such claim shall also be paid by the corporation.
Whether or not the party has met any applicable standard of conduct, the court
in such suit may order indemnification or the advancement of expenses as the
court deems proper (subject to any express limitation of the Code). Further,
the corporation shall indemnify a party from and against any and all expenses
and, if requested by the party, shall (within 10 business days of such request)
advance such expenses to the party, which are incurred by the party in
connection with any claim asserted against or suit brought by the party for
recovery under any directors' and officers' liability insurance policies
maintained by the corporation, regardless of whether the party is unsuccessful
in whole or in part in such claim or suit.
<PAGE>
Section 6.07 Proceedings by a Party. The corporation shall indemnify
----------------------
or advance expenses to a party in connection with any proceeding (or part
thereof) initiated by the party only if such proceeding (or part thereof) was
authorized by the board of directors of the corporation.
Section 6.08 Subrogation. In the event of any payment under this
-----------
Article, the corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of the indemnified party, who shall execute all
papers and do everything that may be necessary to assure such rights of
subrogation to the corporation.
Section 6.09 Other Payments. The corporation shall not be liable
--------------
under this Article to make any payment in connection with any proceeding against
or involving a party to the extent the party has otherwise actually received
payment (under any insurance policy, agreement or otherwise) of the amounts
otherwise indemnifiable hereunder. A party shall repay to the corporation the
amount of any payment the corporation makes to the party under this Article in
connection with any proceeding against or involving the party, to the extent the
party has otherwise actually received payment (under any insurance policy,
agreement or otherwise) of such amount.
Section 6.10 Insurance. So long as any party who is or was an
---------
officer or director of the corporation may be subject to any possible proceeding
by reason of the fact that he is or was an officer or director of the
corporation (or is or was serving in any one or more of the other capacities
covered by this Article during his tenure as officer or director), if the
corporation maintains an insurance policy or policies providing directors' and
officers' liability insurance, such officer or director shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage applicable to any then current officer or director of the
corporation, or the corporation shall purchase and maintain in effect for the
benefit of such officer or director one or more valid, binding and enforceable
policy or policies of directors' and officers' liability insurance providing, in
all respects, coverage at least comparable to that provided to any then current
officer or director at the corporation.
Section 6.11 Other Rights and Remedies. The rights to
-------------------------
indemnification and advancement of expenses provided in this Article shall be in
addition to any other rights to which a party may have or hereafter acquire
under any law, provision of the articles of incorporation, any other or further
provision of these bylaws, vote of the shareholders or directors, agreement or
otherwise. The corporation shall have the right, but shall not be obligated, to
indemnify or advance expenses to any agent of the corporation not otherwise
covered by this Article in accordance with and to the fullest extent permitted
by the Code.
Section 6.12 Applicability; Effect. The rights to indemnification
---------------------
and advancement of expenses provided in this
<PAGE>
Article shall be applicable to acts or omissions that occurred prior to the
adoption of this Article, shall continue as to any party during the period such
party serves in any one or more of the capacities covered by this Article, shall
continue thereafter so long as the party may be subject to any possible
proceeding by reason of the fact that he served in any one or more of the
capacities covered by this Article, and shall inure to the benefit of the estate
and personal representatives of each such person. Any repeal or modification of
this Article or of any Section or provision hereof shall not affect any rights
or obligations then existing. All rights to indemnification under this Article
shall be deemed to be provided by a contract between the corporation and each
party covered hereby.
Section 6.13 Severability. If any provision of this Article shall be
------------
held to be invalid, illegal or unenforceable for any reason whatsoever (a) the
validity, legality and enforceability of the remaining provisions of this
Article (including without limitation, all portions of any Sections of this
Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Article (including, without limitation, all
portions of any Section of this Article containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent of this
Article that each party covered hereby is entitled to the fullest protection
permitted by law.
ARTICLE 7: Miscellaneous
- -------------------------
Section 7.01 Voting of Securities by the Corporation. Unless
---------------------------------------
otherwise provided by resolution of the board of directors, on behalf of the
corporation the president or any vice president shall attend in person or by
substitute appointed by him, or shall execute written instruments appointing a
proxy or proxies to represent the corporation at, all meetings of the
shareholders of any other corporation, association or other entity in which the
corporation holds any stock or other securities, and may execute written waivers
of notice with respect to any such meetings. At all such meetings and
otherwise, the president or any vice president, in person or by substitute or
proxy as aforesaid, may vote the stock or other securities so held by the
corporation and may execute written consents and any other instruments with
respect to such stock or securities and may exercise any and all rights and
powers incident to the ownership of said stock or securities, subject, however,
to the instructions, if any, of the board of directors.
Section 7.02 Seal. The corporate seal of the corporation shall be in
----
such form as adopted by the board of directors, and any officer of the
corporation may, when and as required, affix or
<PAGE>
impress the seal, or a facsimile thereof, to or on any instrument or document of
the corporation.
Section 7.03 Fiscal Year. The fiscal year of the corporation shall be
-----------
as established by the board of directors.
Section 7.04 Amendments. The directors may amend or repeal these
----------
bylaws unless the articles of incorporation reserve such power exclusively to
the shareholders in whole or in part or the shareholders, in amending or
repealing a particular bylaw provision, provide expressly that the directors may
not amend or repeal such bylaw. The shareholders may amend or repeal the bylaws
even though the bylaws may also be amended or repealed by the directors.
(END)
<PAGE>
Exhibit 4.4(a)
AMENDMENT NO. 1
TO
RIGHTS AGREEMENT
This Amendment No. 1 to Rights Agreement (the "Agreement"), between
Frontier Airlines, Inc., a Colorado corporation (the "Company"), and American
Securities Transfer & Trust, Inc., a Colorado corporation (the "Rights Agent")
is made as of June 30, 1997.
RECITAL
The Company and the Rights Agent wish to amend the Rights Agreement, dated
February 20, 1997 (the "Rights Agreement") between the Company and the
Rights Agent.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the Company and the Rights Agent agree as follows:
Pursuant to Section 27 of the Rights Agreement, the Rights Agreement is
hereby amended as follows:
1. The first sentence of Section 1(a) is hereby amended in its entirety
to read as follows:
"Acquiring Person" means any Person that, together with all Affiliates
and Associates of such Person, is the Beneficial Owner of 20% or more
of the shares of Common Stock then outstanding, but shall not include
(i) the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan, (ii) any Person who would
otherwise become an Acquiring Person solely as a result of a reduction
in the number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Company, unless and until
such Person shall purchase or otherwise become the Beneficial Owner of
additional shares of Common Stock constituting one-half of one percent
or more of the then outstanding shares of
<PAGE>
Common Stock other than pursuant to a Qualifying Offer or (iii) any
Person that becomes the Beneficial Owner of 20% or more of the shares
of Common Stock pursuant to a Qualifying Offer.
2. Section 1(l) is hereby amended in its entirety to read as follows:
"Qualifying Offer" means a tender offer or exchange offer for, or
merger proposal involving, all outstanding shares of Common Stock at a
price and on terms determined by at least a majority of the members of
the Continuing Directors who are not officers or employees of the
Company and who are not representatives, nominees, Affiliates or
Associates of the Person making such offer, to be (a) at a price that
is fair to Shareholders (taking into account all factors that such
members of the Board deem relevant) and (b) otherwise in the best
interests of the Company and its Shareholders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
FRONTIER AIRLINES, INC.
By:_________________________________________
President and Chief Executive Officer
AMERICAN SECURITIES TRANSFER & TRUST, INC.
By:_________________________________________
Name:_____________________________________
Title:____________________________________
-2-
<PAGE>
EXHIBIT 10.2
OFFICE LEASE
BETWEEN
ORIAM LIMITED LIABILITY CO.
---------------------------
"LANDLORD"
--------
AND
FRONTIER AIRLINES, INC.
-----------------------
"TENANT"
------
FOR SPACE AT
THE BUILDING KNOWN AS
"AIRPORT PLAZA"
12015 E. 46th Ave.,
Denver, Colorado 80239
DATED
This 31st Day of January, 1996
PART I - BASIC LEASE TERMS
PART II - GENERAL PROVISIONS
PART III - EXHIBITS AND ADDENDA
<PAGE>
OFFICE LEASE
------------
PART I
BASIC LEASE TERM SHEET
----------------------
BUILDING: Airport Plaza
-------------------------------
LEASE DATE: January 29, 1996
-------------------------------
LANDLORD: Oriam Limited Liability Company
-------------------------------
Address: 12015 E. 46th Ave., Suite #300
-------------------------------
Denver, CO 80239
-------------------------------
TENANT: Name: Frontier Airlines, Inc.
-------------------------------
Address: 12015 E. 46th Ave., Suite #300
-------------------------------
Denver, CO 80239
-------------------------------
(Address for Notice if
different than above):
_______________________________________
_______________________________________
BROKER OF RECORD: _______________________________________
<TABLE>
<CAPTION>
TENANT'S BROKER (if any): N/A
---------------------------------------------------------------------
<S> <C> <C>
LEASED PREMISES:
Suite Number: #500 Floor: Fifth
----------------------------- ----------------------------------
Address: 12015 E. 46th Ave., Denver, CO 80239
---------------------------------------------------------------------------
Tenant's Rentable Area: 10,571 RSF
---------------------------------------------------------------------
LEASE TERM:
Lease Commencement Date: February 1, 1996, or DBO, whichever occurs later. See "Other" below.
---------------------------------------------------------------------
Lease Expiration Date: January 31, 2001
---------------------------------------------------------------------
</TABLE>
Lease Period: Five (5) years, plus -0- months
-------- --------
BASE RENT: $559,382.08 total aggregate Base Rent, payable in monthly
----------
installments as follows:
a) From February 1, 1996 through June 30, 1996, a five (5) month rate of
- --------------------------------------------------------------------------------
$25,546.60 divided into five (5) equal monthly installments of $5,109.32 due and
- --------------------------------------------------------------------------------
payable on the first day of each month.
- ---------------------------------------
b) From July 1, 1996 through June 30, 1997, a twelve (12) month rate of
- --------------------------------------------------------------------------------
$79,282.56 divided into twelve (12) equal monthly installments of $6,606.88 due
- --------------------------------------------------------------------------------
and payable on the first day of each month.
- -------------------------------------------
c) From July 1, 1997 through January 31, 2001, a forty-three (43) month rate of
- --------------------------------------------------------------------------------
$454,553.00 divided into forty-three (43) equal monthly installments of
- --------------------------------------------------------------------------------
$10,571.00 due and payable on the first day of each month.
- ----------------------------------------------------------
"BUILDING OPERATING COST" REFERENCE (Article 6):
BASE YEAR: Calendar Year 1994 [Paragraph 6B(2)], or
--
EXPENSE STOP: $ N/A per square foot [Paragraph 6B (3)]
--------
TENANT'S PRO RATA SHARE (of Building for Building Operating Costs):
___________________ %
SECURITY DEPOSIT: $ -0-
-----------------------------
PERMITTED USE: Airline Reservations, Storage, and General Office
-------------------------------------------------
PARKING:
Number of Parking Spaces: N/A
-------------------------------------------
Location of Parking Spaces: N/A
-------------------------------------------
GUARANTOR:
Name: None
----------------------------------------------------------------
OTHER: As part of the agreement to these lease terms, FRONTIER agrees to
return to the possession of the landlord the space currently leased on the
fourth floor -- namely suites 470, 470A, and 480. The surrender of these suites
is to be made as promptly as possible. Frontier agrees to pay the current fourth
floor specs rent for February. Upon occupance of the firth floor, the February
rental charges will be prorated between the fourth and fifth floor figures based
on the move-in date for the fifth floor space.
------------------- --------------------
Landlord's Initials Tenant's Initials
<PAGE>
THIS BASIC LEASE TERM SHEET, together with the General Provisions
incorporated as Part II and any Exhibits, Riders, Addenda and Guaranty
incorporated as Part III, all constitute the entire Lease between the
above-described Tenant and Landlord for the Leased Premises described
above, made and entered into as of the Lease Date specified above.
THIS Agreement is executed as of the date first above written.
"LANDLORD"
Oriam Limited Liability Company
------------------------------------
a Colorado limited liability company
------------------------------------
By: /s/
----------------------------------
Its: Managing Partner
-------------------------------
"TENANT"
Frontier Airlines, Inc.
------------------------------------
a Colorado corporation
------------------------------------
ATTEST:
/s/ By: /s/ Arthur T. Voss
- ----------------------- ------------------------------------
Its: Vice President
--------------------------------
___________________ ___________________
Landlord's Tenant's
Initials Initial
2
<PAGE>
Work Agreement
--------------
[Landlord Version]
LANDLORD: Oriam Limited Liability Company
-------------------------------
TENANT: Frontier Airlines, Inc.
-----------------------
Landlord to induce Tenant, and Tenant to induce Landlord to enter into the
Lease (which is hereby incorporated by reference to the extent that the
provisions of this Work Agreement may apply thereto) and in consideration of the
mutual covenants hereinafter contained, Landlord and Tenant mutually agree as
follows:
1. Definitions. The terms defined in this paragraph, for purposes of this
-----------
Work Agreement, shall have the meanings herein specified, and, in addition to
the terms defined herein, terms defined in the Lease shall, for purposes of this
Work Agreement, have the meanings therein specified.
1. "Building Standard" means the quality of materials, finishing and
- -----------------
workmanship specified in writing by Landlord for the Building.
2. "Landlord's Architect" means W.E. Kieding and Associates.
- --------------------
3. "Tenant Improvements" shall have the same meaning as specified in the
- -------------------
Lease.
2. Completion of Leased Premises.
-----------------------------
1. (a) Tenant shall meet with Landlord's representative on or before
-
January 30, 1996 to finalize layout drawings for the Leased Premises
sufficiently complete to permit Landlord to prepare and complete structural,
mechanical and electrical drawings for the portion of the Tenant Improvements to
be contracted by Landlord. Such final layout drawings shall include: (i)
partition layout and door location; (ii) electrical outlet locations; (iii)
Tenant's telephone systems location of outlets; and (iv) light switches. Based
upon such Tenant approved drawings with Tenant's requirements indicated thereon,
Landlord shall direct its engineers to prepare mechanical, electrical and
structural drawings incorporating such data.
(b) Landlord's contractor shall perform all work in, on, and about the
Leased Premises in accordance with Building Standard, unless otherwise agreed to
in writing by Landlord and Tenant. The cost of Tenant Improvements to be made
by Landlord which exceed Building Standard (including non-standard
architectural, structural, mechanical, fire protection, telephone system and
electrical work), shall be at Tenant's expense. Tenant shall, unless waived by
Landlord, deposit 50% of the estimated cost of all Tenant Improvements which
Tenant is to pay the cost of, with Landlord prior to commencement of such work,
and Tenant shall pay 25% at middle of Tenant Improvement construction and 25%
within five days after completion of Tenant Improvements. Such billing may be
made periodically as the work is completed. Unless otherwise agreed to in
writing by Landlord and Tenant, all work involved in the completion of Tenant
Improvements shall be carried out by Landlord's Contractor under the sole
direction of Landlord. Tenant and Landlord shall cooperate with each other and
with Landlord's Contractor to promote the efficient and expeditious completion
of such work.
2. Changes to the approved Working Drawings may be made only by written
-
direction to Landlord on a form approved by Landlord, which direction must be
signed by an authorized representative of Tenant. Landlord may require, as a
condition to any change, that Tenant deposit with Landlord, as a condition to
Landlord's consent to such change, all costs which Landlord estimates Landlord
will incur by virtue of such change, including, but not limited to, the costs of
design, labor, materials, supplies, architectural services, engineering,
estimating, printing, and incidental expenses, and any additional costs incurred
by Landlord as a result of such change, shall be paid for in full by Tenant upon
billing by Landlord.
3. Only with Landlord's express written permission shall Tenant ever
-
alter or modify or in any manner disturb:
(a) Any system or installation of the Building, including, but not
limited to, Central (as defined below) plumbing system, Central electrical
system, Central heating, ventilating and air conditioning systems, Central
fire protection and fire alert systems, Central building maintenance
systems, Central structural systems, elevators, and anything located within
the Central core of the Building; or
(b) Any Branch (as defined below) of any system or installation of the
Building which is located within the Leased Premises, including, but not
limited to, Branch electrical system, Branch heating, ventilating and air
conditioning system, and Branch fire protection and alert system.
For the purposes of this Section 2.3, "Central" shall be defined as that portion
-------
of any Building system or component which is within the core and/or common to
and/or serves or exists for the benefit of other tenants in the Building, and
"Branch" shall be defined as that portion of any Building system or component
- -------
which serves to connect or extend Central systems into the Leased Premises.
4. Commencement of Rent. Tenant's obligation for the payment of Rent due
- --------------------
under the Lease shall commence on the Lease Commencement Date. No abatement of
Rent shall occur pursuant to paragraph 3 of the Lease if the delay in completion
of occupancy for the Leased Premises is due to:
(a) Tenant's failure to furnish promptly information concerning
Tenant's requirements for finishing the Leased Premises or constructing
Tenant Improvements;
(b) Tenant's failure to promptly meet with Landlord's representative
as required by Section 2.1(a), or to promptly approve the Working Drawings,
as required by paragraph (b) of Section 2.01 of this Work Agreement;
(c) Tenant's changes in any of the Working Drawings as finally
approved;
(d) Tenant's request for Tenant Upgrades and related work; or
(e) any unauthorized act or omission by Tenant or its agents.
1
<PAGE>
3. Miscellaneous Provisions.
------------------------
1. For purposes of this Work Agreement, whenever Landlord's consent or
-
approval is required, such consent or approval shall not be unreasonably
withheld.
2. Anything in the Lease to the contrary notwithstanding, notice and
-
other items to be delivered pursuant to this Work Agreement shall be effective
upon receipt of same by the party to whom such notice or item is directed.
3. Should any provision of the Lease be in conflict with this Work
-
Agreement, the terms of this Work Agreement shall control.
If the foregoing correctly sets forth our understanding, kindly acknowledge
your approval in the space provided below for that purpose.
"LANDLORD"
Oriam: Limited Liability Company,
---------------------------------
a Colorado Limited Liability Company
-------------------------------------
By: /s/
------------------------------
Its: Manager
------------------------
"TENANT"
Frontier Airlines, Inc.
-----------------------
a Colorado corporation
----------------------
ATTEST:
______________________ By: /s/ Arthur T. Voss
--------------------------------
Its: VP
---------------------------
<PAGE>
OFFICE LEASE
------------
PART I
BASIC LEASE TERM SHEET
----------------------
<TABLE>
<CAPTION>
BUILDING: Airport Plaza
------------------------------------------------------------------------------------------------------
LEASE DATE: October 23, 1996
------------------------------------------------------------------------------------------------------
LANDLORD: Oriam Limited Liability Company, a Colorado limited liability company
------------------------------------------------------------------------------------------------------
<S> <C>
Address: 12015 E. 46th Ave., Suite #300
------------------------------------------------------------------------------------------------------
Denver, CO 80239
------------------------------------------------------------------------------------------------------
TENANT: Name: Frontier Airlines, Inc., a Colorado corporation
------------------------------------------------------------------------------------------------------
Address: 12015 E. 46th Ave., Suite #200
------------------------------------------------------------------------------------------------------
Denver, CO 80239
------------------------------------------------------------------------------------------------------
BROKER OF RECORD: KRM & Co.
-------------------------------------------------------------------------------------------------
TENANT'S BROKER (if any): N/A
-------------------------------------------------------------------------------------------------
LEASED PREMISES:
Suite Number: #601 Floor: Sixth (6th)
---------------------------------------------------- ----------------------------------------
Address: 12015 E. 46th Ave., Denver, CO 80239
------------------------------------------------------------------------------------------------------------
Tenant's Rentable Area: +/-2,924 RSF (rentable square feet) Note: The rentable square footage is subject to change upon
final review of architectural drawings.
LEASE TERM:
Lease Commencement Date: November 1, 1996, or DBO, if later
----------------------------------------------------------------------------------------------------
Lease Expiration Date: July 14, 1999
----------------------------------------------------------------------------------------------------
Lease Period: 2 (two) years, plus 8 (eight) months and 14 (fourteen) days with 0 (zero) Options to Renew of 0
------- --------- ------------- -------- -
(zero) years.
------
</TABLE>
BASE RENT: $94,913.82 total aggregate Base Rent, payable in monthly
---------
installments as follows:
From November 1, 1996 through June 30, 1996 for Suite #601 a 32 (thirty-
---------------- ------------- ---- ----------
two) month rate of $93,568.00 divided into 32 (thirty-two) equal monthly
- ---- --------- ---------------
installments of $2,924.00 due and payable on the first day of each month.
--------
From July 1, 1999 through July 14, 1999 for Suite #601 a daily rate of
------------ ------------- ----
$96.13 divided into one (1) monthly installment of $1,345.82 due and payable on
- ------ ------- --------
the first day of each month.
"BUILDING OPERATING COST" REFERENCE (Article 6):
BASE YEAR: Calendar Year 1994 [Paragraph 6B(2)], or
--
TENANT'S PRO RATA SHARE (of Building for Building Operating Costs): 4.627%
-----
(Percentage refers to this Suite (#601) only.)
SECURITY DEPOSIT: $2,924.00 (Equivalent to first month's rent.)
--------
PERMITTED USE: General office use and dispatch.
-----------------------------------------------------------------
PARKING:
Number of Parking Spaces: N/A
--------------------------------------------
Location of Parking Spaces: Adjacent to office building
--------------------------------------------
THIS BASIC TERM SHEET, together with the General provisions
incorporated as Part II and any Exhibits, Riders, Addenda and Guaranty
incorporated as Part III, all constitute the entire Lease between the
above-described Tenant and Landlord for the Leased Premises described
above, made and entered into as of the Lease Date specified above.
/s/ /s/
- ----------------- -----------------
Landlord's Tenant's
Initials Initials
<PAGE>
OFFICE LEASE
------------
PART I
BASIC LEASE TERM SHEET
----------------------
BUILDING: Airport Plaza
------------------------------------------------------
LEASE DATE: October 23, 1996
------------------------------------------------------
LANDLORD: Oriam Limited Liability Company, a Colorado limited
------------------------------------------------------
liability company
------------------------------------------------------
Address: 12015 E. 46th Ave., Suite #300
------------------------------------------------------
Denver, CO 80239
------------------------------------------------------
TENANT: Name: Frontier Airlines, Inc., a Colorado corporation
------------------------------------------------------
Address: 12015 E. 46th Ave., Suite 200
------------------------------------------------------
Denver, CO 80239
------------------------------------------------------
(Address for Notice if ------------------------------------------------------
different than above): ------------------------------------------------------
BROKER OF RECORD: KRM & Co.
----------------------------------------------
TENANT'S BROKER (if any): N/A
----------------------------------------------
LEASED PREMISES:
Suite Number: #601 Floor: Sixth (6th)
----------- -----------------------
Address: 12015 E. 46th Ave., Denver, CO 80239
-------------------------------------------------------
Tenant's Rentable Area: 3228 RSF (rentable square feet).
----
LEASE TERM:
Lease Commencement Date: November 1, 1996
Lease Expiration Date: July 14, 1999
Lease Period: 2 (two) years, plus 8 (eight) month(s) and 14
------- --------- --
(fourteen) day(s) with __________ Option(s) to Renew of ___ year(s).
BASE RENT: $104,753.82 total aggregate Base Rent, payable in monthly
----------
installments as follows:
From November 1, 1996 through June 30, 1999 for Suite #601 a 32 (thirty-
---------------- ------------- ---- ----------
two) month rate of $103,296.00 divided into 32 (thirty-two) equal monthly
- ---- ----------- ----------------
installments of $3,228.00 due and payable on the first day of each month.
---------
From July 1, 1999 through July 14, 1999 for Suite #601 a daily rate of
------------ ------------- ----
$104.13 divided into 1 (one) monthly installment of $1,457.82 due and payable on
- ------- ------- ---------
the first day of each month.
"BUILDING OPERATING COST" REFERENCE (Article 6):
BASE YEAR: Calendar Year 1994 [Paragraph 6B(2)], or
--
EXPENSE STOP: $ N/A per square foot [Paragraph 6B(3)].
--------------
TENANT'S PRO RATA SHARE (of Building for Building Operating Costs): 5.107%
-----
SECURITY DEPOSIT: $6,456.00 (Equivalent to first and last month's rent.)
--------
PERMITTED USE: General Office and Airline Reservations
-----------------------------------------------------------
PARKING:
Number of Parking Spaces: N/A
-------------------------------
Location of Parking Spaces: Adjacent to office building
-------------------------------
GUARANTOR:
Name: _____________________________________________________________________
Address: __________________________________________________________________
THIS BASIC LEASE TERM SHEET, together with the General Provisions
incorporated as Part II and any Exhibits, Riders, Addenda and
Guaranty incorporated as Part III, all constitute the entire Lease
between the above-described Tenant and Landlord for the Leased
Premises described above, made and entered into as of the Lease Date
specified above.
/s/ /s/
- -------------- --------------------
Landlord's Tenant's
Initials Initials
0127504.01
<PAGE>
Exhibit 10.4(a)
AMENDMENT NO. 2 TO FRONTIER AIRLINES, INC.
1994 STOCK OPTION PLAN
WHEREAS the Board of Directors of Frontier Airlines, Inc. (the
"Company") on May 14, 1996 adopted a resolution that the number of shares of
common stock available for grant of stock options under the Company's 1994 Stock
Option Plan be increased by 500,000 to a total of 2,250,000; and,
WHEREAS the foregoing increase in the number of shares of common stock
available for grant of stock options was approved by vote of the Company's
shareholders at the annual meeting of shareholders held on September 13, 1996.
NOW, THEREFORE, the Frontier Airlines, Inc. 1994 Stock Option Plan is
hereby amended as set forth below.
Section 3(a) of the Frontier Airlines, Inc. 1994 Stock Option Plan is deleted
and replaced by the following:
3. Stock Subject to the Plan
-------------------------
(a) Subject to adjustment as provided in Section 10 below, the
aggregate number of shares of Stock ("Shares") to be delivered upon exercise of
all Options granted under the Plan shall not exceed two million two hundred
fifty thousand (2,250,000).
Dated the 19th day of September, 1996.
FRONTIER AIRLINES, INC.
By: /s/ Samuel D. Addoms
-----------------------------------
President
<PAGE>
EXHIBIT 10.8(a)
Acknowledgement and Consent
---------------------------
Acknowledgement and Consent (this "Consent") of Frontier Airlines, Inc. dated as
of March 28, 1997.
Recitals: US Airways, Inc., (formerly USAir, Inc., "US Airways"), as lessor and
- --------
Frontier Airlines, Inc. ("Lessee"), as lessee, entered into that certain Lease
Agreement dated as of July 26, 1994 (the "Lease") whereby US Airways agreed to
lease to Lessee and Lessee agreed to lease from US Airways the Boeing 737-201
Airframe and the Engines identified in the Assignment (defined below). US
Airways and First Security Bank, National Association, not in its individual
capacity but solely as Owner Trustee ("Trustee"), as trustee for the S-C
Parties, have entered into an Assignment and Assumption Agreement (the
"Assignment") dated as of March 28, 1997, whereby US Airways has assigned to the
Trustee all of the right, title and interest of US Airways in and to the
Assigned Documents and the Aircraft. The Trustee desires that Lessee
acknowledge and consent to the Assignment and reaffirm its representations,
warranties and obligations to the Trustee.
Accordingly, the Trustee and Lessee agree as follows:
1. Defined Terms. Unless otherwise defined herein or the context requires
-------------
otherwise, all capitalized terms used herein shall have the meanings
assigned to them in the Assignment.
2. Acknowledgement and Consent. Lessee hereby acknowledges and consents to
---------------------------
the Assignment (a copy of which is attached hereto as Exhibit "A"), and all
of the terms and conditions contained therein.
3. Representations, Warranties and Obligations. All representations and
-------------------------------------------
warranties of Lessee in the Assigned Documents were true and correct when
made and, on the Closing Date, will be true and correct. Lessee further
affirms its liability to the Trustee for all of its obligations and duties
under the Assigned Documents. In reliance upon US Airways' agreement to be
responsible therefor and US Airways' performance thereof, Lessee
acknowledges and agrees that Trustee shall not be bound by or subject to
any of the duties obligating or responsibilities described in Section 4 of
the Assignment.
<PAGE>
PAGE 2 OF 4
4. Notices. Pursuant to Section 19.2 of the Lease and Section 7.5 of the
-------
Supplementary Agreement, all requests, notices and other communications to
the "Lessor" shall, from the date of this Consent, be addressed to the
Trustee, as follows (or to such other address as the Trustee shall specify
from time to time):
First Security Bank, National Association
Corporate Trust Department
79 South Main Street - 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
with copies to:
Soros Fund Management LLC
888 Seventh Avenue
New York, New York 10106
Attention: Michael C. Neus
Facsimile: 212-664-0544
and
S-C Domestic Holdings VII LLC
c/o Curacao Corporation Company N.V.
Kaya Flamboyan 9
Willemstad, Curacao N.A.
Attention: Ben Jansen
Facsimile: 5999 32 20 01
and
C-S Aviation Services, Inc.
888 Seventh Avenue, Suite 2901
New York, New York 10106
Attention: Thomas Seery
Facsimile: 212-246-0102
5. Payments. All payments other than Hourly Rent to be made to "Lessor" under
--------
the Assigned Documents shall, from the date of this Consent, be made to the
following bank account (or to such other account as the Trustee shall
specify from time to time):
Citibank New York
ABA No.: 021 0000 89
Account Name: For further credit to
Citibank London
Account No. 10990765
Account Name: S-C Domestic Holdings II LLC
Account No. 8228825
<PAGE>
PAGE 3 OF 4
All payments of Hourly Rent to be made to "Lessor" under the Assigned
Documents shall, from the date of this Consent, be made to the following
bank account (or such other account as the Trustee shall specify from time
to time):
Citibank New York
ABA No.: 021 000 089
Account Name: For further credit
to Citibank London
Account No.: 10990765
Account Name: S-C Aircraft Holdings LLC
Account No.: 8300631
6. Insurance. Lessee will cooperate in having the Trustee, the S-C Parties
---------
and US Airways named as additional insureds under the liability insurance,
and the Trustee named as sole loss payee under the hull insurance procured
by Lessee under the Lease.
7. Miscellaneous. This Consent may be executed by the parties hereto in
-------------
separate counterparts, each fully executed set of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument. This Consent shall be
governed by the laws of the State of New York. The respective rights and
obligations set forth in this Consent shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
<PAGE>
PAGE 4 OF 4
The undersigned has executed this Acknowledgement and Consent.
Frontier Airlines, Inc.
By: ___________________________
Title: ________________________
Agreed:
First Security Bank, National
Association, as Trustee
By: ___________________________
Title: ________________________
<PAGE>
EXHIBIT "A"
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment"), dated as of March
28, 1997, by and between US Airways, Inc. ("US Airways"), a Delaware
corporation, formerly known as USAir, Inc., and FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee ("Trustee").
RECITALS:
--------
US Airways and Trustee desire to effect (a) the transfer by US Airways to
Trustee of all of the right, title and interest of US Airways (except as
excluded in Section 4 below) in, under and with respect to, among other things,
(i) the Aircraft Lease Agreement (as supplemented by the Lease Supplement
defined below and to the extent relating to the Aircraft, the "Lease"), dated as
of July 26, 1994, between US Airways and Frontier Airlines, Inc. (the,
"Lessee"), as supplemented by Lease Supplement No. 4, dated September 9, 1994
(the "Lease Supplement"), (ii) Supplementary Agreement, dated as of June 6, 1994
between US Airways and Lessee, as it relates to the Aircraft (defined below),
(iii) all certificates, opinions, and other documents relating to the Operative
Document as they relate to the Boeing 737-201 airframe with manufacturer's
serial number 19421 and United States Registration Number N205AU and the Pratt &
Whitney model JT8D-9A aircraft engines (which engines have 750 or more rated
takeoff horsepower or the equivalent) with manufacturer's serial numbers 654736
and 667183 (such airframe and the engines (as further defined in the Lease), the
"Aircraft") (all of the foregoing collectively, the "Assigned Documents"), (iv)
the Aircraft, (v) the Hourly Rent Balances and the security deposits of Lessee
as they relate to the Aircraft (collectively, the "Assigned Accounts"), and (vi)
the proceeds from all of the foregoing; and (b) the assumption by Trustee of the
obligations of US Airways (except as excluded in Section 4 below) to the extent
arising after the Effective Date under the Assigned Documents. The Lease was
recorded by the Federal Aviation Administration on August 22, 1994 and assigned
Conveyance No. EE007565. The Lease Supplement was recorded by the Federal
Aviation Administration on November 7, 1994 and assigned Conveyance No. LL08354.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have meaning ascribed thereto in the Lease unless the context in which such term
is used requires another meaning.
<PAGE>
2. Assignment. US Airways does hereby sell, convey, assign, transfer and
----------
set over to Trustee, effective as of the date first above written (the
"Effective Date"), all of its right, title and interest in, under and to the
Assigned Documents, the Assigned Accounts and all other contracts, agreements,
documents or instruments in respect of the aircraft to which US Airways is a
party and relating to the Operative Agreements or the Aircraft and any proceeds
therefrom, together with all other documents and instruments evidencing any of
such right, title and interest.
3. Assumption. Trustee hereby undertakes and assumes all of the duties
----------
and obligations of US Airways relating to the period after the Effective Date
pursuant to the Assigned Documents and any other contracts, agreements,
documents or instruments relating thereto to which US Airways is a party or by
which it is bound, and hereby confirms that it shall be deemed a party to and be
bound by the Assigned Documents and each other contract, agreement, document or
instrument in respect of the Aircraft relating thereto to which US Airways is a
party or by which it is bound as if named therein as "Lessor".
4. Excluded Obligations. Notwithstanding anything to the contrary set
--------------------
forth in this Assignment, US Airways is not assigning to Trustee and US Airways
shall remain responsible for, and Trustee is not assuming from US Airways: (a)
the duties and obligations described on Schedule A, (b) the duties and
obligations of US Airways that relate to any period on or prior to the Effective
Date, (c) any other duties and obligations of US Airways relating to parts or
engine consignments, spare parts or spare engines, and (d) without limiting the
foregoing, the right of US Airways to receive any Rent due or accrued to US
Airways prior to the Effective Date and any indemnity relating to events
occurring prior to the Effective Date.
5. Release of US Airways. Except for obligations not assumed as provided
---------------------
in Section 4 hereof and for which US Airways shall remain responsible, US
Airways shall have no further duty or obligation to Lessee under the Assigned
Documents, the Assigned Accounts or under any other contract, agreement,
document or other instrument relating thereto to which US Airways is a party or
by which it is bound (other than this Agreement).
6. Further Assignment. In furtherance of the within assignments, US
------------------
Airways assigns and grants to Trustee all right to collect for the account of
Trustee all items sold, transferred or assigned to Trustee pursuant hereto; to
institute and prosecute all proceedings that Trustee may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in or to the
items sold, transferred or assigned; to defend and compromise any and all
actions, suits or proceedings as to
<PAGE>
title to or interest in the Aircraft or any of the property acquired by Trustee;
and to do all such acts and things in relating thereto as Trustee shall deem
advisable.
7. Payments. US Airways hereby covenants and agrees to pay over to
--------
Trustee, if and when received following the Effective Date, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of US Airways that, under Section 2 hereof, belong to Trustee, and
Trustee hereby covenants and agrees to pay over to US Airways, if and when
received following the Effective Date, any amounts (including any sums payable
as interest in respect thereof) paid to or for the benefit of Trustee that,
under Section 2 hereof, belong to US Airways.
8. Further Assurances. Each party to this Assignment and Assumption
------------------
Agreement agrees to execute, acknowledge, deliver, file, record and publish such
further certificates, amendments, instruments or documents, and to do all such
further acts and things, as may be required by law, or as may reasonably be
necessary or advisable to carry out the intents and purposes of this Assignment
and Assumption Agreement.
9. Expenses. Each party hereto shall bear its own legal fees incurred in
--------
connection with the transactions described herein.
10. Governing Law. This Assignment and Assumption Agreement shall be
-------------
governed by and construed in accordance with the laws of the State of New York.
11. Headings. Section headings used in this Assignment are for convenience
--------
only and shall not be used in interpreting or construing this Assignment and
Assumption Agreement and shall not affect the meaning or construction of this
Assignment and Assumption Agreement.
12. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
a. If to US Airways:
----------------
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Attention: Director - Aircraft Sales
Facsimile: 703-418-7515
with a copy at the same address to the attention of US Airways'
General Counsel, facsimile number (703) 418-5252
<PAGE>
b. If to Trustee:
-------------
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
Facsimile: 801-246-5053
13. Entire Agreement. This Assignment constitutes the entire agreement
----------------
among the parties hereto and supersedes all prior agreements and understandings,
both written and oral, with respect to the subject matter hereof. There are no
representations and warranties of any party hereto except as expressly set forth
herein.
14. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained in this Assignment shall survive the Effective Date.
15. Counterparts. This Assignment may be executed by the parties hereto in
------------
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
16. Successors and Assigns. The respective rights and obligations set
----------------------
forth in this Assignment shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.
[remainder of page left blank intentionally]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Assignment
and Assumption Agreement as of the day and year set forth above.
US AIRWAYS, INC.
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
<PAGE>
SCHEDULE A
Excluded Obligations
--------------------
(a) (S)2.6 of the Supplementary Agreement (license of maintenance and
weight and balance programs)
(b) (S)4.2(f) of the Supplementary Agreement (US Airways' representations)
(c) (S)5.2(f) of the Supplementary Agreement (sub-clause (i), second
sentence (hushkit procurement assistance); sub-clause (ii) first,
second and third sentences (DFDR Program))
(d) (S)5.3 of the Supplementary Agreement (spare parts consignment)
(e) (S)5.4 of the Supplementary Agreement (US Airways-provided maintenance
work)
(f) Without limiting the applicability or scope of the foregoing, all
obligations of US Airways to Lessee arising under the Assigned
Documents which shall have arisen or occurred on or before the date
set forth in the introductory paragraph of this Assignment.
EACH OF THE FOREGOING EXCLUDED OBLIGATIONS DESCRIBED IN PARAGRAPHS (A) - (E)
SHALL REMAIN THE OBLIGATIONS OF US AIRWAYS DURING THE BASE LEASE TERM AND ANY
RENEWAL TERM.
<PAGE>
Acknowledgement and Consent
---------------------------
Acknowledgement and Consent (this "Consent") of Frontier Airlines, Inc. dated as
of March 28, 1997.
Recitals: US Airways, Inc., (formerly USAir, Inc., "US Airways"), as lessor and
- --------
Frontier Airlines, Inc. ("Lessee"), as lessee, entered into that certain Lease
Agreement dated as of July 26, 1994 (the "Lease") whereby US Airways agreed to
lease to Lessee and Lessee agreed to lease from US Airways the Boeing 737-201
Airframe and the Engines identified in the Assignment (defined below). US
Airways and First Security Bank, National Association, not in its individual
capacity but soley as Owner Trustee ("Trustee"), as trustee for the S-C Parties,
have entered into an Assignment and Assumption Agreement (the "Assignment")
dated as of March 28, 1997, whereby US Airways has assigned to the Trustee all
of the right, title and interest of US Airways in and to the Assigned Documents
and the Aircraft. The Trustee desires that Lessee acknowledge and consent to
the Assignment and reaffirm its representations, warranties and obligations to
the Trustee.
Accordingly, the Trustee and Lessee agree as follows:
1. Defined Terms. Unless otherwise defined herein or the context requires
-------------
otherwise, all capitalized terms used herein shall have the meanings
assigned to them in the Assignment.
2. Acknowledgement and Consent. Lessee hereby acknowledges and consents to
---------------------------
the Assignment (a copy of which is attached hereto as Exhibit "A"), and all
of the terms and conditions contained therein.
3. Representations, Warranties and Obligations. All representations and
-------------------------------------------
warranties of Lessee in the Assigned Documents were true and correct when
made and, on the Closing Date, will be true and correct. Lessee further
affirms its liability to the Trustee for all of its obligations and duties
under the Assigned Documents. In reliance upon US Airways' agreement to be
responsible therefor and US Airways' performance thereof, Lessee
acknowledges and agrees that Trustee shall not be bound by or subject to
any of the duties obligating or responsibilities described in Section 4 of
the Assignment.
<PAGE>
PAGE 2 OF 4
4. Notices. Pursuant to Section 19.2 of the Lease and Section 7.5 of the
-------
Supplementary Agreement, all requests, notices and other communications to
the "Lessor" shall, from the date of this Consent, be addressed to the
Trustee, as follows (or to such other address as the Trustee shall specify
from time to time):
First Security Bank, National Asssociation
Corporate Trust Department
79 South Main Street - 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
with copies to:
S-C Domestic Holdings VII LLC
c/o Curacao Corporation Company N.V.
Kaya Flamboyan 9
Willemstad, Curacao N.A.
Attention: Ben Jansen
Facsimile: 5999 32 20 01
and
Soros Fund Managment LLC
888 Seventh Avenue
New York, New York 10106
Attention: Michael C. Neus
Facsimile: 212-664-0544
and
C-S Aviation Services, Inc.
888 Seventh Avenue, Suite 2901
New York, New York 10106
Attention: Thomas Seery
Facsimile: 212-246-0102
5. Payments. All payments other than Hourly Rent to be made to "Lessor" under
--------
the Assigned Documents shall, from the date of this Consent, be made to the
following bank account (or to such other account as the Trustee shall
specify from time to time):
Citibank New York
ABA No.: 021000089
Account Name: Further Credit to
Citibank London
Account No.: 10990765
Account Name: S-C Domestic Holdings II LLC
Account No.: 8228825
<PAGE>
PAGE 3 OF 4
All payments of Hourly Rent to be made to "Lessor" under the Assigned
Documents shall, from the date of this Consent, be made to the following
bank account (or such other account as the Trustee shall specify from time
to time):
Citibank New York
ABA No.: 021 000 089
Account Name: For further credit
to Citibank London
Account No.: 10990765
Account Name: S-C Aircraft Holdings LLC
Account No.: 8300631
6. Insurance. Lessee will cooperate in having the Trustee, the S-C Parties
---------
and US Airways named as additional insureds under the liability insurance,
and the Trustee named as sole loss payee under the hull insurance procured
by Lessee under the Lease.
7. Miscellaneous. This Consent may be executed by the parties hereto in
-------------
separate counterparts, each fully executed set of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument. This Consent shall be
governed by the laws of the State of New York. The respective rights and
obligations set forth in this Consent shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
<PAGE>
PAGE 4 OF 4
The undersigned has executed this Acknowledgement and Consent.
Frontier Airlines, Inc.
By: ___________________________
Title: ________________________
Agreed:
First Security Bank, National
Association, as Trustee
By: ___________________________
Title: ________________________
<PAGE>
EXHIBIT "A"
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment"), dated as of
March 28, 1997, by and between US Airways, Inc. ("US Airways"), a Delaware
corporation, formerly known as USAir, Inc., and FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee ("Trustee").
RECITALS:
---------
US Airways and Trustee desire to effect (a) the transfer by US Airways
to Trustee of all of the right, title and interest of US Airways (except as
excluded in Section 4 below) in, under and with respect to, among other things,
(i) the Aircraft Lease Agreement (as supplemented by the Lease Supplement
defined below, and to the extent relating to the Aircraft, the "Lease"), dated
as of July 26, 1994, between US Airways and Frontier Airlines, Inc. (the,
"Lessee"), as supplemented by Lease Supplement No. 2, dated July 26, 1994 (the
"Lease Supplement"), (ii) Supplementary Agreement, dated as of June 6, 1994
between US Airways and Lessee, as it relates to the Aircraft (defined below),
(iii) all certificates, opinions, and other documents relating to the Operative
Document as they relate to the Boeing 737-201 airframe with manufacturer's
serial number 19423 and United States Registration Number N207AU and the Pratt &
Whitney model JT8D-9A aircraft engines (which engines have 750 or more rated
takeoff horsepower or the equivalent) with manufacturer's serial numbers 667219
and 667196 (such airframe and the engines (as further defined in the Lease), the
"Aircraft") (all of the foregoing collectively, the "Assigned Documents"), (iv)
the Aircraft, (v) the Hourly Rent Balances and the security deposits of Lessee
as they relate to the Aircraft (collectively, the "Assigned Accounts"), and (vi)
the proceeds from all of the foregoing; and (b) the assumption by Trustee of the
obligations of US Airways (except as excluded in Section 4 below) to the extent
arising after the Effective Date. The Lease was recorded by the Federal Aviation
Administration on August 22, 1994 and assigned Conveyance No. EE007565. The
Lease Supplement was recorded by the Federal Aviation Administration on August
22, 1994 and assigned Conveyance No. EE007565.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have meaning ascribed thereto in the Lease unless the context in which such term
is used requires another meaning.
<PAGE>
2. Assignment. US Airways does hereby sell, convey, assign, transfer and
----------
set over to Trustee, effective as of the date first above written (the
"Effective Date"), all of its right, title and interest in, under and to the
Assigned Documents, the Assigned Accounts and all other contracts, agreements,
documents or instruments in respect of the aircraft to which US Airways is a
party and relating to the Operative Agreements or the Aircraft and any proceeds
therefrom, together with all other documents and instruments evidencing any of
such right, title and interest.
3. Assumption. Trustee hereby undertakes and assumes all of the duties
----------
and obligations of US Airways relating to the period after the Effective Date
pursuant to the Assigned Documents and any other contracts, agreements,
documents or instruments relating thereto to which US Airways is a party or by
which it is bound, and hereby confirms that it shall be deemed a party to and be
bound by the Assigned Documents and each other contract, agreement, document or
instrument in respect of the Aircraft relating thereto to which US Airways is a
party or by which it is bound as if named therein as "Lessor".
4. Excluded Obligations. Notwithstanding anything to the contrary set
--------------------
forth in this Assignment, US Airways is not assigning to Trustee and US Airways
shall remain responsible for, and Trustee is not assuming from US Airways: (a)
the duties and obligations described on Schedule A, (b) the duties and
obligations of US Airways that relate to any period on or prior to the Effective
Date, (c) any other duties and obligations of US Airways relating to parts or
engine consignments, spare parts or spare engines, and (d) without limiting the
foregoing, the right of US Airways to receive any Rent due or accrued to US
Airways prior to the Effective Date and any indemnity relating to events
occurring prior to the Effective Date.
5. Release of US Airways. Except for obligations not assumed as provided
---------------------
in Section 4 hereof and for which US Airways shall remain responsible, US
Airways shall have no further duty or obligation to Lessee under the Assigned
Documents, the Assigned Accounts or under any other contract, agreement,
document or other instrument relating thereto to which US Airways is a party or
by which it is bound (other than this Agreement).
6. Further Assignment. In furtherance of the within assignments, US
------------------
Airways assigns and grants to Trustee all right to collect for the account of
Trustee all items sold, transferred or assigned to Trustee pursuant hereto; to
institute and prosecute all proceedings that Trustee may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in or to the
items sold, transferred or assigned; to defend and compromise any and all
actions, suits or proceedings as to
<PAGE>
title to or interest in the Aircraft or any of the property acquired by Trustee;
and to do all such acts and things in relating thereto as Trustee shall deem
advisable.
7. Payments. US Airways hereby covenants and agrees to pay over to
--------
Trustee, if and when received following the Effective Date, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of US Airways that, under Section 2 hereof, belong to Trustee, and
Trustee hereby covenants and agrees to pay over to US Airways, if and when
received following the Effective Date, any amounts (including any sums payable
as interest in respect thereof) paid to or for the benefit of Trustee that,
under Section 2 hereof, belong to US Airways.
8. Further Assurances. Each party to this Assignment and Assumption
------------------
Agreement agrees to execute, acknowledge, deliver, file, record and publish such
further certificates, amendments, instruments or documents, and to do all such
further acts and things, as may be required by law, or as may reasonably be
necessary or advisable to carry out the intents and purposes of this Assignment
and Assumption Agreement.
9. Expenses. Each party hereto shall bear its own legal fees incurred
--------
in connection with the transactions described herein.
10. Governing Law. This Assignment and Assumption Agreement shall be
-------------
governed by and construed in accordance with the laws of the State of New York.
11. Headings. Section headings used in this Assignment are for
--------
convenience only and shall not be used in interpreting or construing this
Assignment and Assumption Agreement and shall not affect the meaning or
construction of this Assignment and Assumption Agreement.
12. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
a. If to US Airways:
-----------------
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Attention: Director - Aircraft Sales
Facsimile: 703-418-7515
with a copy at the same address to the attention of US Airways'
General Counsel, facsimile number (703) 418-5252
<PAGE>
b. If to Trustee:
--------------
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
Facsimile: 801-246-5053
13. Entire Agreement. This Assignment constitutes the entire agreement
----------------
among the parties hereto and supersedes all prior agreements and understandings,
both written and oral, with respect to the subject matter hereof. There are no
representations and warranties of any party hereto except as expressly set forth
herein.
14. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained in this Assignment shall survive the Effective Date.
15. Counterparts. This Assignment may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.
16. Successors and Assigns. The respective rights and obligations set
----------------------
forth in this Assignment shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.
[remainder of page left blank intentionally]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment and Assumption Agreement as of the day and year set forth above.
US AIRWAYS, INC.
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
<PAGE>
SCHEDULE A
Excluded Obligations
---------------------
(a) (S)2.6 of the Supplementary Agreement (license of maintenance and
weight and balance programs)
(b) (S)4.2(f) of the Supplementary Agreement (US Airways' representations)
(c) (S)5.2(f) of the Supplementary Agreement (sub-clause (i), second
sentence (hushkit procurement assistance); sub-clause (ii) first,
second and third sentences (DFDR Program))
(d) (S)5.3 of the Supplementary Agreement (spare parts consignment)
(e) (S)5.4 of the Supplementary Agreement (US Airways-provided maintenance
work)
(f) Without limiting the applicability or scope of the foregoing, all
obligations of US Airways to Lessee arising under the Assigned
Documents which shall have arisen or occurred on or before the date
set forth in the introductory paragraph of this Assignment.
EACH OF THE FOREGOING EXCLUDED OBLIGATIONS DESCRIBED IN PARAGRAPHS (A) - (E)
SHALL REMAIN THE OBLIGATIONS OF US AIRWAYS DURING THE BASE LEASE TERM AND ANY
RENEWAL TERM.
<PAGE>
Acknowledgement and Consent
---------------------------
Acknowledgement and Consent (this "Consent") of Frontier Airlines, Inc. dated as
of March 28, 1997.
Recitals: US Airways, Inc., (formerly USAir, Inc., "US Airways"), as lessor and
- --------
Frontier Airlines, Inc. ("Lessee"), as lessee, entered into that certain Lease
Agreement dated as of July 26, 1994 (the "Lease") whereby US Airways agreed to
lease to Lessee and Lessee agreed to lease from US Airways the Boeing 737-201
Airframe and the Engines identified in the Assignment (defined below). US
Airways and First Security Bank, National Association, not in its individual
capacity but solely as Owner Trustee ("Trustee"), as trustee for the S-C
Parties, have entered into an Assignment and Assumption Agreement (the
"Assignment") dated as of March 28, 1997, whereby US Airways has assigned to the
Trustee all of the right, title and interest of US Airways in and to the
Assigned Documents and the Aircraft. The Trustee desires that Lessee
acknowledge and consent to the Assignment and reaffirm its representations,
warranties and obligations to the Trustee.
Accordingly, the Trustee and Lessee agree as follows:
1. Defined Terms. Unless otherwise defined herein or the context requires
-------------
otherwise, all capitalized terms used herein shall have the meanings
assigned to them in the Assignment.
2. Acknowledgement and Consent. Lessee hereby acknowledges and consents to
---------------------------
the Assignment (a copy of which is attached hereto as Exhibit "A"), and all
of the terms and conditions contained therein.
3. Representations, Warranties and Obligations. All representations and
-------------------------------------------
warranties of Lessee in the Assigned Documents were true and correct when
made and, on the Closing Date, will be true and correct. Lessee further
affirms its liability to the Trustee for all of its obligations and duties
under the Assigned Documents. In reliance upon US Airways' agreement to be
responsible therefor and US Airways' performance thereof, Lessee
acknowledges and agrees that Trustee shall not be bound by or subject to
any of the duties obligating or responsibilities described in Section 4 of
the Assignment.
<PAGE>
PAGE 2 OF 4
4. Notices. Pursuant to Section 19.2 of the Lease and Section 7.5 of the
-------
Supplementary Agreement, all requests, notices and other communications to
the "Lessor" shall, from the date of this Consent, be addressed to the
Trustee, as follows (or to such other address as the Trustee shall specify
from time to time):
First Security Bank, National Association
Corporate Trust Department
79 South Main Street - 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
with copies to:
S-C Domestic Holdings VII LLC
c/o Curacao Corporation Company N.V.
Kaya Flamboyan 9
Willemstad, Curacao N.A.
Attention: Ben Jansen
Facsimile: 5999 32 20 01
and
Soros Fund Management LLC
888 Seventh Avenue
New York, New York 10106
Attention: Michael C. Neus
Facsimile: 212-664-0544
and
C-S Aviation Services, Inc.
888 Seventh Avenue, Suite 2901
New York, New York 10106
Attention: Thomas Seery
Facsimile: 212-246-0102
5. Payments. All payments other than Hourly Rent to be made to "Lessor" under
--------
the Assigned Documents shall, from the date of this Consent, be made to the
following bank account (or to such other account as the Trustee shall
specify from time to time):
Citibank New York
ABA No.: 021 000 089
Account Name: For further credit to
Citibank London
Account No.: 10990765
Account Name: S-C Domestic Holdings II LLC
Account No.: 8228825
<PAGE>
PAGE 3 OF 4
All payments of Hourly Rent to be made to "Lessor" under the Assigned
Documents shall, from the date of this Consent, be made to the following
bank account (or such other account as the Trustee shall specify from time
to time):
Citibank New York
ABA No.: 021 000 089
Account Name: For further credit
to Citibank London
Account No.: 10990765
Account Name: S-C Aircraft Holdings LLC
Account No.: 8300631
6. Insurance. Lessee will cooperate in having the Trustee, the S-C Parties
---------
and US Airways named as additional insureds under the liability insurance,
and the Trustee named as sole loss payee under the hull insurance procured
by Lessee under the Lease.
7. Miscellaneous. This Consent may be executed by the parties hereto in
-------------
separate counterparts, each fully executed set of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument. This Consent shall be
governed by the laws of the State of New York. The respective rights and
obligations set forth in this Consent shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
<PAGE>
PAGE 4 OF 4
The undersigned has executed this Acknowledgement and Consent.
Frontier Airlines, Inc.
By: ___________________________
Title: ________________________
Agreed:
First Security Bank, National
Association, as Trustee
By: ___________________________
Title: ________________________
<PAGE>
EXHIBIT "A"
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment"), dated as of
March 28, 1997, by and between US Airways, Inc. ("US Airways"), a Delaware
corporation, formerly known as USAir, Inc., and FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee ("Trustee").
RECITALS:
--------
US Airways and Trustee desire to effect (a) the transfer by US Airways
to Trustee of all of the right, title and interest of US Airways (except as
excluded in Section 4 below) in, under and with respect to, among other things,
(i) the Aircraft Lease Agreement (as supplemented by the Lease Supplement
defined below, and to the extent relating to the Aircraft, the "Lease"), dated
as of July 26, 1994, between US Airways and Frontier Airlines, Inc. (the,
"Lessee"), as supplemented by Lease Supplement No. 1, dated July 26, 1994 (the
"Lease Supplement"), (ii) Supplementary Agreement, dated as of June 6, 1994
between US Airways and Lessee, as it relates to the Aircraft (defined below),
(iii) all certificates, opinions, and other documents relating to the Operative
Document as they relate to the Boeing 737-201 airframe with manufacturer's
serial number 20212 and United States Registration Number N212US and the Pratt &
Whitney model JT8D-9A aircraft engines (which engines have 750 or more rated
takeoff horsepower or the equivalent) with manufacturer's serial numbers 667191
and 667215 (such airframe and the engines (as further defined in the Lease), the
"Aircraft") (all of the foregoing collectively, the "Assigned Documents"), (iv)
the Aircraft, (v) the Hourly Rent Balances and the security deposits of Lessee
as they relate to the Aircraft (collectively, the "Assigned Accounts"), and (vi)
the proceeds from all of the foregoing; and (b) the assumption by Trustee of the
obligations of US Airways (except as excluded in Section 4 below) to the extent
arising after the Effective Date under the Assigned Documents. The Lease was
recorded by the Federal Aviation Administration on August 22, 1994 and assigned
Conveyance No. EE007565. The Lease Supplement was recorded by the Federal
Aviation Administration on August 22, 1994 and assigned Conveyance No. EE007565.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein without definition
-----------
shall have meaning ascribed thereto in the
<PAGE>
Lease unless the context in which such term is used requires another meaning.
2. Assignment. US Airways does hereby sell, convey, assign,
----------
transfer and set over to Trustee, effective as of the date first above written
(the "Effective Date"), all of its right, title and interest in, under and to
the Assigned Documents, the Assigned Accounts and all other contracts,
agreements, documents or instruments in respect of the aircraft to which US
Airways is a party and relating to the Operative Agreements or the Aircraft and
any proceeds therefrom, together with all other documents and instruments
evidencing any of such right, title and interest.
3. Assumption. Trustee hereby undertakes and assumes all of the
----------
duties and obligations of US Airways relating to the period after the Effective
Date pursuant to the Assigned Documents and any other contracts, agreements,
documents or instruments relating thereto to which US Airways is a party or by
which it is bound, and hereby confirms that it shall be deemed a party to and be
bound by the Assigned Documents and each other contract, agreement, document or
instrument in respect of the Aircraft relating thereto to which US Airways is a
party or by which it is bound as if named therein as "Lessor".
4. Excluded Obligations. Notwithstanding anything to the contrary
--------------------
set forth in this Assignment, US Airways is not assigning to Trustee and US
Airways shall remain responsible for, and Trustee is not assuming from US
Airways: (a) the duties and obligations described on Schedule A, (b) the duties
and obligations of US Airways that relate to any period on or prior to the
Effective Date, (c) any other duties and obligations of US Airways relating to
parts or engine consignments, spare parts or spare engines, and (d) without
limiting the foregoing, the right of US Airways to receive any Rent due or
accrued to US Airways prior to the Effective Date and any indemnity relating to
events occurring prior to the Effective Date.
5. Release of US Airways. Except for obligations not assumed as
---------------------
provided in Section 4 hereof and for which US Airways shall remain responsible,
US Airways shall have no further duty or obligation to Lessee under the Assigned
Documents, the Assigned Accounts or under any other contract, agreement,
document or other instrument relating thereto to which US Airways is a party or
by which it is bound (other than this Agreement).
6. Further Assignment. In furtherance of the within assignments,
------------------
US Airways assigns and grants to Trustee all right to collect for the account of
Trustee all items sold, transferred or assigned to Trustee pursuant hereto; to
institute and prosecute all proceedings that Trustee may deem proper in order to
collect, assert or enforce any claim, right or title of any
<PAGE>
kind in or to the items sold, transferred or assigned; to defend and compromise
any and all actions, suits or proceedings as to title to or interest in the
Aircraft or any of the property acquired by Trustee; and to do all such acts and
things in relating thereto as Trustee shall deem advisable.
7. Payments. US Airways hereby covenants and agrees to pay over to
--------
Trustee, if and when received following the Effective Date, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of US Airways that, under Section 2 hereof, belong to Trustee, and
Trustee hereby covenants and agrees to pay over to US Airways, if and when
received following the Effective Date, any amounts (including any sums payable
as interest in respect thereof) paid to or for the benefit of Trustee that,
under Section 2 hereof, belong to US Airways.
8. Further Assurances. Each party to this Assignment and
------------------
Assumption Agreement agrees to execute, acknowledge, deliver, file, record and
publish such further certificates, amendments, instruments or documents, and to
do all such further acts and things, as may be required by law, or as may
reasonably be necessary or advisable to carry out the intents and purposes of
this Assignment and Assumption Agreement.
9. Expenses. Each party hereto shall bear its own legal fees
--------
incurred in connection with the transactions described herein.
10. Governing Law. This Assignment and Assumption Agreement shall
-------------
be governed by and construed in accordance with the laws of the State of New
York.
11. Headings. Section headings used in this Assignment are for
--------
convenience only and shall not be used in interpreting or construing this
Assignment and Assumption Agreement and shall not affect the meaning or
construction of this Assignment and Assumption Agreement.
12. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given if delivered to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
a. If to US Airways:
----------------
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Attention: Director - Aircraft Sales
Facsimile: 703-418-7515
<PAGE>
with a copy at the same address to the attention of US Airways'
General Counsel, facsimile number (703) 418-5252
b. If to Trustee:
-------------
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
Facsimile: 801-246-5053
13. Entire Agreement. This Assignment constitutes the entire
----------------
agreement among the parties hereto and supersedes all prior agreements and
understandings, both written and oral, with respect to the subject matter
hereof. There are no representations and warranties of any party hereto except
as expressly set forth herein.
14. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained in this Assignment shall survive the Effective Date.
15. Counterparts. This Assignment may be executed by the parties hereto in
------------
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
16. Successors and Assigns. The respective rights and obligations set
----------------------
forth in this Assignment shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.
[remainder of page left blank intentionally]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Assignment
and Assumption Agreement as of the day and year set forth above.
US AIRWAYS, INC.
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
<PAGE>
SCHEDULE A
Excluded Obligations
--------------------
(a) (S)2.6 of the Supplementary Agreement (license of maintenance and
weight and balance programs)
(b) (S)4.2(f) of the Supplementary Agreement (US Airways' representations)
(c) (S)5.2(f) of the Supplementary Agreement (sub-clause (i), second
sentence (hushkit procurement assistance); sub-clause (ii) first,
second and third sentences (DFDR Program))
(d) (S)5.3 of the Supplementary Agreement (spare parts consignment)
(e) (S)5.4 of the Supplementary Agreement (US Airways-provided maintenance
work)
(f) Without limiting the applicability or scope of the foregoing, all
obligations of US Airways to Lessee arising under the Assigned
Documents which shall have arisen or occurred on or before the date
set forth in the introductory paragraph of this Assignment.
EACH OF THE FOREGOING EXCLUDED OBLIGATIONS DESCRIBED IN PARAGRAPHS (A) - (E)
SHALL REMAIN THE OBLIGATIONS OF US AIRWAYS DURING THE BASE LEASE TERM AND ANY
RENEWAL TERM.
<PAGE>
Acknowledgement and Consent
---------------------------
Acknowledgement and Consent (this "Consent") of Frontier Airlines, Inc. dated as
of March 28, 1997.
Recitals: US Airways, Inc., (formerly USAir, Inc., "US Airways"), as lessor and
- --------
Frontier Airlines, Inc. ("Lessee"), as lessee, entered into that certain Lease
Agreement dated as of July 26, 1994 (the "Lease") whereby US Airways agreed to
lease to Lessee and Lessee agreed to lease from US Airways the Boeing 737-201
Airframe and the Engines identified in the Assignment (defined below). US
Airways and First Security Bank, National Association, not in its individual
capacity but solely as Owner Trustee ("Trustee"), as trustee for the S-C
Parties, have entered into an Assignment and Assumption Agreement (the
"Assignment") dated as of March 28, 1997, whereby US Airways has assigned to the
Trustee all of the right, title and interest of US Airways in and to the
Assigned Documents and the Aircraft. The Trustee desires that Lessee
acknowledge and consent to the Assignment and reaffirm its representations,
warranties and obligations to the Trustee.
Accordingly, the Trustee and Lessee agree as follows:
1. Defined Terms. Unless otherwise defined herein or the context requires
-------------
otherwise, all capitalized terms used herein shall have the meanings
assigned to them in the Assignment.
2. Acknowledgement and Consent. Lessee hereby acknowledges and consents to
---------------------------
the Assignment (a copy of which is attached hereto as Exhibit "A"), and all
of the terms and conditions contained therein.
3. Representations, Warranties and Obligations. All representations and
-------------------------------------------
warranties of Lessee in the Assigned Documents were true and correct when
made and, on the Closing Date, will be true and correct. Lessee further
affirms its liability to the Trustee for all of its obligations and duties
under the Assigned Documents. In reliance upon US Airways' agreement to be
responsible therefor and US Airways' performance thereof, Lessee
acknowledges and agrees that Trustee shall not be bound by or subject to
any of the duties obligating or responsibilities described in Section 4 of
the Assignment.
<PAGE>
PAGE 2 OF 4
4. Notices. Pursuant to Section 19.2 of the Lease and Section 7.5 of the
-------
Supplementary Agreement, all requests, notices and other communications to
the "Lessor" shall, from the date of this Consent, be addressed to the
Trustee, as follows (or to such other address as the Trustee shall specify
from time to time):
First Security Bank, National Association
Corporate Trust Department
79 South Main Street - 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
with copies to:
S-C Domestic Holdings VII LLC
c/o Curacao Corporation Company N.V.
Kaya Flamboyan 9
Willemstad, Curacao N.A.
Attention: Ben Jansen
Facsimile: 5999 32 20 01
and
Soros Fund Management LLC
888 Seventh Avenue
New York, New York 10106
Attention: Michael C. Neus
Facsimile: 212-664-0544
and
C-S Aviation Services, Inc.
888 Seventh Avenue, Suite 2901
New York, New York 10106
Attention: Thomas Seery
Facsimile: 212-246-0102
5. Payments. All payments other than Hourly Rent to be made to "Lessor" under
--------
the Assigned Documents shall, from the date of this Consent, be made to the
following bank account (or to such other account as the Trustee shall
specify from time to time):
Citibank New York
ABA No.: 021 000 089
Account Name: Further Credit to
Citibank London
Account No.: 10990765
Account Name: S-C Domestic Holdings II LLC
Account No.: 8228825
<PAGE>
PAGE 3 OF 4
All payments of Hourly Rent to be made to "Lessor" under the Assigned
Documents shall, from the date of this Consent, be made to the following bank
account (or such other account as the Trustee shall specify from time to time):
Citibank New York
ABA No.: 021 000 089
Account Name: For further credit
to Citibank London
Account No.: 10990765
Account Name: S-C Aircraft Holdings LLC
Account No.: 8300631
6. Insurance. Lessee will cooperate in having the Trustee, the S-C Parties
---------
and US Airways named as additional insureds under the liability insurance,
and the Trustee named as sole loss payee under the hull insurance procured
by Lessee under the Lease.
7. Miscellaneous. This Consent may be executed by the parties hereto in
-------------
separate counterparts, each fully executed set of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument. This Consent shall be
governed by the laws of the State of New York. The respective rights and
obligations set forth in this Consent shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
<PAGE>
PAGE 4 OF 4
The undersigned has executed this Acknowledgement and Consent.
Frontier Airlines, Inc.
By: ___________________________
Title: ________________________
Agreed:
First Security Bank, National
Association, as Trustee
By: ___________________________
Title: ________________________
<PAGE>
EXHIBIT "A"
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment"), dated as of
March 28, 1997, by and between US Airways, Inc. ("US Airways"), a Delaware
corporation, formerly known as USAir, Inc., and FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee ("Trustee").
RECITALS:
---------
US Airways and Trustee desire to effect (a) the transfer by US Airways
to Trustee of all of the right, title and interest of US Airways (except as
excluded in Section 4 below) in, under and with respect to, among other things,
(i) the Aircraft Lease Agreement (as supplemented by the Lease Supplement
defined below, and to the extent relating to the Aircraft, the "Lease"), dated
as of July 26, 1994, between US Airways and Frontier Airlines, Inc. (the,
"Lessee"), as supplemented by Lease Supplement No. 3, dated July 27, 1994 (the
"Lease Supplement"), (ii) Supplementary Agreement, dated as of June 6, 1994
between US Airways and Lessee, as it relates to the Aircraft (defined below),
(iii) all certificates, opinions, and other documents relating to the Operative
Document as they relate to the Boeing 737-201 airframe with manufacturer's
serial number 20214 and United States Registration Number N214AU and the Pratt &
Whitney model JT8D-9A aircraft engines (which engines have 750 or more rated
takeoff horsepower or the equivalent) with manufacturer's serial numbers 653726
and 707333 (such airframe and the engines (as further defined in the Lease), the
"Aircraft") (all of the foregoing collectively, the "Assigned Documents"), (iv)
the Aircraft, (v) the Hourly Rent Balances and the security deposits of Lessee
as they relate to the Aircraft (collectively, the "Assigned Accounts"), and (vi)
the proceeds from all of the foregoing; and (b) the assumption by Trustee of the
obligations of US Airways (except as excluded in Section 4 below) to the extent
arising after the Effective Date under the Assigned Documents. The Lease was
recorded by the Federal Aviation Administration on August 22, 1994 and assigned
Conveyance No. EE007565. The Lease Supplement was recorded by the Federal
Aviation Administration on August 22, 1994 and assigned Conveyance No. EE007565.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have meaning ascribed thereto in the Lease unless the context in which such term
is used requires another meaning.
<PAGE>
2. Assignment. US Airways does hereby sell, convey, assign, transfer
----------
and set over to Trustee, effective as of the date first above written (the
"Effective Date"), all of its right, title and interest in, under and to the
Assigned Documents, the Assigned Accounts and all other contracts, agreements,
documents or instruments in respect of the aircraft to which US Airways is a
party and relating to the Operative Agreements or the Aircraft and any proceeds
therefrom, together with all other documents and instruments evidencing any of
such right, title and interest.
3. Assumption. Trustee hereby undertakes and assumes all of the duties
----------
and obligations of US Airways relating to the period after the Effective Date
pursuant to the Assigned Documents and any other contracts, agreements,
documents or instruments relating thereto to which US Airways is a party or by
which it is bound, and hereby confirms that it shall be deemed a party to and be
bound by the Assigned Documents and each other contract, agreement, document or
instrument in respect of the Aircraft relating thereto to which US Airways is a
party or by which it is bound as if named therein as "Lessor".
4. Excluded Obligations. Notwithstanding anything to the contrary set
--------------------
forth in this Assignment, US Airways is not assigning to Trustee and US Airways
shall remain responsible for, and Trustee is not assuming from US Airways: (a)
the duties and obligations described on Schedule A, (b) the duties and
obligations of US Airways that relate to any period on or prior to the Effective
Date, (c) any other duties and obligations of US Airways relating to parts or
engine consignments, spare parts or spare engines, and (d) without limiting the
foregoing, the right of US Airways to receive any Rent due or accrued to US
Airways prior to the Effective Date and any indemnity relating to events
occurring prior to the Effective Date.
5. Release of US Airways. Except for obligations not assumed as
---------------------
provided in Section 4 hereof and for which US Airways shall remain responsible,
US Airways shall have no further duty or obligation to Lessee under the Assigned
Documents, the Assigned Accounts or under any other contract, agreement,
document or other instrument relating thereto to which US Airways is a party or
by which it is bound (other than this Agreement).
6. Further Assignment. In furtherance of the within assignments, US
------------------
Airways assigns and grants to Trustee all right to collect for the account of
Trustee all items sold, transferred or assigned to Trustee pursuant hereto; to
institute and prosecute all proceedings that Trustee may deem proper in order to
collect, assert or enforce any claim, right or title of any kind in or to the
items sold, transferred or assigned; to defend and compromise any and all
actions, suits or proceedings as to title to or interest in the Aircraft or any
of the property acquired by Trustee; and to do all such acts and things in
relating thereto as Trustee shall deem advisable.
<PAGE>
7. Payments. US Airways hereby covenants and agrees to pay over to
--------
Trustee, if and when received following the Effective Date, any amounts
(including any sums payable as interest in respect thereof) paid to or for the
benefit of US Airways that, under Section 2 hereof, belong to Trustee, and
Trustee hereby covenants and agrees to pay over to US Airways, if and when
received following the Effective Date, any amounts (including any sums payable
as interest in respect thereof) paid to or for the benefit of Trustee that,
under Section 2 hereof, belong to US Airways.
8. Further Assurances. Each party to this Assignment and Assumption
------------------
Agreement agrees to execute, acknowledge, deliver, file, record and publish such
further certificates, amendments, instruments or documents, and to do all such
further acts and things, as may be required by law, or as may reasonably be
necessary or advisable to carry out the intents and purposes of this Assignment
and Assumption Agreement.
9. Expenses. Each party hereto shall bear its own legal fees incurred
--------
in connection with the transactions described herein.
10. Governing Law. This Assignment and Assumption Agreement shall be
-------------
governed by and construed in accordance with the laws of the State of New York.
11. Headings. Section headings used in this Assignment are for
--------
convenience only and shall not be used in interpreting or construing this
Assignment and Assumption Agreement and shall not affect the meaning or
construction of this Assignment and Assumption Agreement.
12. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
a. If to US Airways:
-----------------
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Attention: Director - Aircraft Sales
Facsimile: 703-418-7515
<PAGE>
with a copy at the same address to the attention of US Airways'
General Counsel, facsimile number (703) 418-5252
b. If to Trustee:
--------------
First Security Bank, N.A.
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
Facsimile: 801-246-5053
13. Entire Agreement. This Assignment constitutes the entire agreement
----------------
among the parties hereto and supersedes all prior agreements and understandings,
both written and oral, with respect to the subject matter hereof. There are no
representations and warranties of any party hereto except as expressly set forth
herein.
14. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained in this Assignment shall survive the Effective Date.
15. Counterparts. This Assignment may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.
16. Successors and Assigns. The respective rights and obligations set
----------------------
forth in this Assignment shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.
[remainder of page left blank intentionally]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment and Assumption Agreement as of the day and year set forth above.
US AIRWAYS, INC.
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
<PAGE>
SCHEDULE A
Excluded Obligations
---------------------
(a) (S)2.6 of the Supplementary Agreement (license of maintenance and
weight and balance programs)
(b) (S)4.2(f) of the Supplementary Agreement (US Airways' representations)
(c) (S)5.2(f) of the Supplementary Agreement (sub-clause (i), second
sentence (hushkit procurement assistance); sub-clause (ii) first,
second and third sentences (DFDR Program))
(d) (S)5.3 of the Supplementary Agreement (spare parts consignment)
(e) (S)5.4 of the Supplementary Agreement (US Airways-provided maintenance
work)
(f) Without limiting the applicability or scope of the foregoing, all
obligations of US Airways to Lessee arising under the Assigned
Documents which shall have arisen or occurred on or before the date
set forth in the introductory paragraph of this Assignment.
EACH OF THE FOREGOING EXCLUDED OBLIGATIONS DESCRIBED IN PARAGRAPHS (A) - (E)
SHALL REMAIN THE OBLIGATIONS OF US AIRWAYS DURING THE BASE LEASE TERM AND ANY
RENEWAL TERM.
<PAGE>
Acknowledgement and Consent
---------------------------
Acknowledgement and Consent (this "Consent") of Frontier Airlines, Inc. dated as
of March 20, 1997.
Recitals: US Airways, Inc. (formerly USAir, Inc., "US Airways"), as lessor and
- --------
Frontier Airlines, Inc. ("Lessee"), as lessee, entered into that certain Lease
Agreement dated as of July 26, 1994 (the "Lease") whereby US Airways agreed to
lease to Lessee and Lessee agreed to lease from US Airways the Boeing 737-201
Airframe and the Engines identified in the Assignment (defined below). US
Airways and First Security Bank, National Association, not in its individual
capacity but solely as Owner Trustee ("Trustee"), as trustee for the S-C
Parties, have entered into an Assignment and Assumption Agreement (the
"Assignment") dated as of March 20, 1997, whereby US Airways has assigned to the
Trustee all of the right, title and interest of US Airways in and to the
Assigned Documents and the Aircraft. The Trustee desires that Lessee
acknowledge and consent to the Assignment and reaffirm its representations,
warranties and obligations to the Trustee.
Accordingly, the Trustee and Lessee agree as follows:
1. Defined Terms. Unless otherwise defined herein or the context requires
-------------
otherwise, all capitalized terms used herein shall have the meanings
assigned to them in the Assignment.
2. Acknowledgement and Consent. Lessee hereby acknowledges and consents to
---------------------------
the Assignment (a copy of which is attached hereto as Exhibit "A"), and
all of the terms and conditions contained therein.
3. Representations, Warranties and Obligations. All representations and
-------------------------------------------
warranties of Lessee in the Assigned Documents were true and correct
when made and, on the Closing Date, will be true and correct. Lessee
further affirms its liability to the Trustee for all of its obligations
and duties under the Assigned Documents. In reliance upon US Airways'
agreement to be responsible therefor and US Airways' performance
thereof, Lessee acknowledges and agrees that Trustee shall not be bound
by or subject to any of the duties obligating or responsibilities
described in Section 4 of the Assignment.
<PAGE>
PAGE 2 OF 4
4. Notices. Pursuant to Section 19.2 of the Lease and Section 7.5 of the
-------
Supplementary Agreement, all requests, notices and other communications to
the "Lessor" shall, from the date of this Consent, be addressed to the
Trustee, as follows (or to such other address as the Trustee shall specify
from time to time):
First Security Bank, National Association
Corporate Trust Department
79 South Main Street - 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
with copies to:
S-C Domestic Holdings VII LLC
c/o Curacao Corporation Company N.V.
Kaya Flamboyan 9
Willemstad, Curacao N.A.
Attention: Ben Jansen
Facsimile: 5999 32 20 01
and
Soros Fund Management LLC
888 Seventh Avenue
New York, New York 10106
Attention: Michael C. Neus
Facsimile: 212-664-0544
and
C-S Aviation Services, Inc.
888 Seventh Avenue, Suite 2901
New York, New York 10106
Attention: Thomas Seery
Facsimile: 212-246-0102
5. Payments. All payments other than Hourly Rent to be made to "Lessor" under
--------
the Assigned Documents shall, from the date of this Consent, be made to the
following bank account (or to such other account as the Trustee shall
specify from time to time):
Citibank New York
ABA No.: 021 000 089
Account Name: For further credit to
Citibank London
Account No.: 10990765
Account Name: S-C Domestic Holdings II LLC
Account No. 8228825
<PAGE>
PAGE 3 OF 4
All payments of Hourly Rent to be made to "Lessor" under the Assigned
Documents shall, from the date of this Consent, be made to the following
bank account (or such other account as the Trustee shall specify from time
to time):
Citibank New York
ABA No.: 021 000 089
Account Name: For further credit
to Citibank London
Account No.: 10990765
Account Name: S-C Aircraft Holdings LLC
Account No.: 8300631
6. Insurance. Lessee will cooperate in having the Trustee, the S-C Parties
---------
and US Airways named as additional insureds under the liability
insurance, and the Trustee named as sole loss payee under the hull
insurance procured by Lessee under the Lease.
7. Miscellaneous. This Consent may be executed by the parties hereto in
-------------
separate counterparts, each fully executed set of which when so executed
and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument. This Consent shall
be governed by the laws of the State of New York. The respective rights
and obligations set forth in this Consent shall be binding on and inure
to the benefit of the parties hereto and their respective successors and
assigns.
<PAGE>
PAGE 4 OF 4
The undersigned has executed this Acknowledgement and Consent.
Frontier Airlines, Inc.
By: ___________________________
Title: ________________________
Agreed:
First Security Bank, National
Association, as Trustee
By: ___________________________
Title: ________________________
<PAGE>
EXHIBIT "A"
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment"), dated as of
March 20, 1997, by and between US Airways, Inc. ("US Airways"), a Delaware
corporation, formerly known as USAir, Inc. and FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee ("Trustee").
RECITALS:
---------
US Airways and Trustee desire to effect (a) the transfer by US Airways
to Trustee of all of the right, title and interest of US Airways (except as
excluded in Section 4 below) in, under and with respect to, among other things,
(i) the Aircraft Lease Agreement (as supplemented by the Lease Supplement
defined below, and to the extent relating to the Aircraft, the "Lease"), dated
as of July 26, 1994, between US Airways and Frontier Airlines, Inc. (the,
"Lessee"), as supplemented by Lease Supplement No. 5, dated October 4, 1994 (the
"Lease Supplement"), (ii) Supplementary Agreement, dated as of June 6, 1994
between US Airways and Lessee, as it relates to the Aircraft (defined below),
(iii) all certificates, opinions, and other documents relating to the Operative
Document as they relate to the Boeing 737-201 airframe with manufacturer's
serial number 20215 and United States Registration Number N217US and the Pratt &
Whitney model JT8D-9A aircraft engines (which engines have 750 or more rated
takeoff horsepower or the equivalent) with manufacturer's serial numbers 667241
and 667213 (such airframe and the engines (as further defined in the Lease), the
"Aircraft") (all of the foregoing collectively, the "Assigned Documents"), (iv)
the Aircraft, (v) the Hourly Rent Balances and the security deposits of Lessee
as they relate to the Aircraft (collectively, the "Assigned Accounts"), and (vi)
the proceeds from all of the foregoing; and (b) the assumption by Trustee of the
obligations of US Airways (except as excluded in Section 4 below) to the extent
arising after the Effective Date. The Lease was recorded by the Federal Aviation
Administration on August 22, 1994 and assigned Conveyance No. EE007565. The
Lease Supplement was recorded by the Federal Aviation Administration on November
7, 1994 and assigned Conveyance No. LL08355.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, it is hereby agreed as follows:
1. Definitions. Capitalized terms used herein without definition shall have
-----------
meaning ascribed thereto in the Lease unless the context in which such term is
used requires another meaning.
<PAGE>
2. Assignment. US Airways does hereby sell, convey, assign, transfer and set
----------
over to Trustee, effective as of the date first above written (the "Effective
Date"), all of its right, title and interest in, under and to the Assigned
Documents, the Assigned Accounts and all other contracts, agreements, documents
or instruments in respect of the aircraft to which US Airways is a party and
relating to the Operative Agreements or the Aircraft and any proceeds therefrom,
together with all other documents and instruments evidencing any of such right,
title and interest.
3. Assumption. Trustee hereby undertakes and assumes all of the duties and
----------
obligations of US Airways relating to the period after the Effective Date
pursuant to the Assigned Documents and any other contracts, agreements,
documents or instruments relating thereto to which US Airways is a party or by
which it is bound, and hereby confirms that it shall be deemed a party to and be
bound by the Assigned Documents and each other contract, agreement, document or
instrument in respect of the Aircraft relating thereto to which US Airways is a
party or by which it is bound as if named therein as "Lessor".
4. Excluded Obligations. Notwithstanding anything to the contrary set forth in
--------------------
this Assignment, US Airways is not assigning to Trustee and US Airways shall
remain responsible for, and Trustee is not assuming from US Airways: (a) the
duties and obligations described on Schedule A, (b) the duties and obligations
of US Airways that relate to any period on or prior to the Effective Date, (c)
any other duties and obligations of US Airways relating to parts or engine
consignments, spare parts or spare engines, and (d) without limiting the
foregoing, the right of US Airways to receive any Rent due or accrued to US
Airways prior to the Effective Date and any indemnity relating to events
occurring prior to the Effective Date.
5. Release of US Airways. Except for obligations not assumed as provided in
---------------------
Section 4 hereof and for which US Airways shall remain responsible, US Airways
shall have no further duty or obligation to Lessee under the Assigned Documents,
the Assigned Accounts or under any other contract, agreement, document or other
instrument relating thereto to which US Airways is a party or by which it is
bound (other than this Agreement).
6. Further Assignment. In furtherance of the within assignments, US Airways
------------------
assigns and grants to Trustee all right to collect for the account of Trustee
all items sold, transferred or assigned to Trustee pursuant hereto; to institute
and prosecute all proceedings that Trustee may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the items sold,
transferred or assigned; to defend and compromise any and all actions, suits or
proceedings as to
<PAGE>
title to or interest in the Aircraft or any of the property acquired by Trustee;
and to do all such acts and things in relating thereto as Trustee shall deem
advisable.
7. Payments. US Airways hereby covenants and agrees to pay over to Trustee, if
--------
and when received following the Effective Date, any amounts (including any sums
payable as interest in respect thereof) paid to or for the benefit of US Airways
that, under Section 2 hereof, belong to Trustee, and Trustee hereby covenants
and agrees to pay over to US Airways, if and when received following the
Effective Date, any amounts (including any sums payable as interest in respect
thereof) paid to or for the benefit of Trustee that, under Section 2 hereof,
belong to US Airways.
8. Further Assurances. Each party to this Assignment and Assumption Agreement
------------------
agrees to execute, acknowledge, deliver, file, record and publish such further
certificates, amendments, instruments or documents, and to do all such further
acts and things, as may be required by law, or as may reasonably be necessary or
advisable to carry out the intents and purposes of this Assignment and
Assumption Agreement.
9. Expenses. Each party hereto shall bear its own legal fees incurred in
--------
connection with the transactions described herein.
10. Governing Law. This Assignment and Assumption Agreement shall be governed
-------------
by and construed in accordance with the laws of the State of New York.
11. Headings. Section headings used in this Assignment are for convenience
--------
only and shall not be used in interpreting or construing this Assignment and
Assumption Agreement and shall not affect the meaning or construction of this
Assignment and Assumption Agreement.
12. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
a. If to US Airways:
-----------------
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Attention: Director - Aircraft Sales
Facsimile: 703-418-7515
with a copy at the same address to the attention of US Airways'
General Counsel, facsimile number (703) 418-5252
<PAGE>
b. If to Trustee:
--------------
First Security Bank, National Association
79 South Main Street, 3rd Floor
Salt Lake City, Utah 84111
Attention: Corporate Trust Administration
Facsimile: 801-246-5053
13. Entire Agreement. This Assignment constitutes the entire agreement among
----------------
the parties hereto and supersedes all prior agreements and understandings, both
written and oral, with respect to the subject matter hereof. There are no
representations and warranties of any party hereto except as expressly set forth
herein.
14. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained in this Assignment shall survive the Effective Date.
15. Counterparts. This Assignment may be executed by the parties hereto in
------------
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
16. Successors and Assigns. The respective rights and obligations set forth in
----------------------
this Assignment shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns.
[remainder of page left blank intentionally]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Assignment and Assumption Agreement as of the day and year set forth above.
US AIRWAYS, INC.
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, AS OWNER TRUSTEE
BY: ____________________________
NAME: __________________________
TITLE: _________________________
DATED: _________________________
<PAGE>
SCHEDULE A
Excluded Obligations
---------------------
(a) (S)2.6 of the Supplementary Agreement (license of maintenance and
weight and balance programs)
(b) (S)4.2(f) of the Supplementary Agreement (US Airways' representations)
(c) (S)5.2(f) of the Supplementary Agreement (sub-clause (i), second
sentence (hushkit procurement assistance); sub-clause (ii) first,
second and third sentences (DFDR Program))
(d) (S)5.3 of the Supplementary Agreement (spare parts consignment)
(e) (S)5.4 of the Supplementary Agreement (US Airways-provided maintenance
work)
(f) Without limiting the applicability or scope of the foregoing, all
obligations of US Airways to Lessee arising under the Assigned
Documents which shall have arisen or occurred on or before the date
set forth in the introductory paragraph of this Assignment.
EACH OF THE FOREGOING EXCLUDED OBLIGATIONS DESCRIBED IN PARAGRAPHS (A) - (E)
SHALL REMAIN THE OBLIGATIONS OF US AIRWAYS DURING THE BASE LEASE TERM AND ANY
RENEWAL TERM.
<PAGE>
EXHIBIT 10.8(b)
AMENDMENT NO. 1 TO
LEASE AGREEMENT
THIS AMENDMENT NO. 1 TO LEASE AGREEMENT (this "Amendment") is entered into
as of June 5, 1997, by and between First Security Bank, National Association, a
national banking association, not in its individual capacity but solely as Owner
Trustee under that certain Trust Agreement, dated as of December 20, 1996, as
successor-in-interest to US Airways, Inc., formerly known as USAir, Inc.
("Lessor"), and Frontier Airlines, Inc., a Colorado corporation ("Lessee").
R E C I T A L S:
A. Lessor and Lessee have entered into the Lease Agreement, dated as of
July 26, 1994 (as amended, modified and supplemented to the date hereof and
hereby, the "Lease"). Capitalized terms used herein and not otherwise defined
shall have the meanings set forth or incorporated by reference in the Lease.
B. The Boeing Model 737-201 aircraft bearing manufacturer's serial no.
20212 was leased under the Lease pursuant to Lease Supplement No. 1, dated July
26, 1994 ("Lease Supplement No. 1").
C. The Boeing Model 737-201 aircraft bearing manufacturer's serial no.
19423 was leased under the Lease pursuant to Lease Supplement No. 2, dated July
26, 1994 ("Lease Supplement No. 2").
D. The Boeing Model 737-201 aircraft bearing manufacturer's serial no.
20214 was leased under the Lease pursuant to Lease Supplement No. 3, dated July
27, 1994 ("Lease Supplement No. 3").
E. The Boeing Model 737-201 aircraft bearing manufacturer's serial no.
19421 was leased under the Lease pursuant to Lease Supplement No. 4, dated
September 9, 1994 ("Lease Supplement No. 4").
F. The Boeing Model 737-201 aircraft bearing manufacturer's serial no.
20215 (together with the aircraft described in paragraphs (B) through (E), the
"Aircraft") was leased under the Lease pursuant to Lease Supplement No. 5, dated
October 4, 1994 ("Lease Supplement No. 5").
G. Lessor and Lessee desire to extend the Term of the Lease for each of
the Aircraft as hereinafter provided.
AMENDMENT NO.1 TO LEASE AGREEMENT PAGE 1
<PAGE>
H. The Lease, together with Lease Supplement No. 1, Lease Supplement No. 2
and Lease Supplement No. 3 was recorded by the Federal Aviation Administration
on August 22, 1994 and assigned Conveyance No. EE007565. Lease Supplement No. 4
was recorded by the Federal Aviation Administration on November 7, 1994 and
assigned Conveyance No. LL08354, and Lease Supplement No. 5 was recorded by the
Federal Aviation Administration on November 7, 1994 and assigned Conveyance No.
LL08355.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual agreements herein contained, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, Lessor
and Lessee agree as follows:
1. Pursuant to Section 18.1 of the Lease, Lessee has notified Lessor that
Lessee has elected to extend the Term of the Lease for one Renewal Term with
respect to each of the Aircraft. Lessor and Lessee hereby confirm such
extensions, and agree that the Expiration Date of the Term, as extended by the
Renewal Term, for each Aircraft shall be as follows:
<TABLE>
<CAPTION>
Manufacturer's Expiration
Serial Number Date
------------- ----
<S> <C>
N212US July 26, 1999
N207AU July 26, 1999
N214AU July 27, 1999
N205AU September 9, 1999
N217US October 4, 1999
</TABLE>
2. Lessee hereby confirms that it shall pay Basic Rent for each of the
Aircraft during such Renewal Term in accordance with Section 4.1 of the Lease.
3. Except as amended hereby, the Lease shall remain unmodified and in
full force and effect.
AMENDMENT NO.1 TO LEASE AGREEMENT PAGE 2
<PAGE>
4. Lessee hereby represents and warrants that this Amendment has been
duly authorized by all necessary action and, assuming due authorization,
execution, and delivery thereof by Lessor, constitutes Lessee's valid and
binding obligation.
5. THIS AMENDMENT, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AS APPLICABLE TO CONTRACTS EXECUTED AND
DELIVERED IN SUCH STATE BY CITIZENS THEREOF TO BE PERFORMED WHOLLY WITHIN SUCH
STATE, WITHOUT REFERENCE TO ANY PRINCIPLES OF CONFLICT OF LAWS.
6. This Amendment may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
[This space intentionally left blank.]
AMENDMENT NO.1 TO LEASE AGREEMENT PAGE 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first written above.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee,
as Lessor
By:____________________________________
Its:___________________________________
FRONTIER AIRLINES, INC.,
as Lessee
By:____________________________________
Its:___________________________________
AMENDMENT NO.1 TO LEASE AGREEMENT PAGE 4
<PAGE>
Exhibit 10.9
CODESHARE AGREEMENT
-------------------
This CODESHARE AGREEMENT ("Agreement") is entered into as of the 30th day
of June, 1997 by and between Western Pacific Airlines, Inc., a Delaware
corporation ("WestPac") and Frontier Airlines, Inc., a Colorado corporation
("Frontier").
WHEREAS, the parties hereto have entered into an agreement to merge
Frontier into WestPac (the "Merger Agreement") and
WHEREAS, pending completion of the Merger including receipt of all
necessary approvals and consents, the parties wish to enter into a joint
marketing relationship, generally known as a code share agreement; and
WHEREAS, each party desires to allow the other party to assign its two
letter airline designator code to flights operated by the other party;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, Frontier and WestPac agree as follows:
1.0. DEFINITIONS
-----------
1.1. In addition to the terms defined elsewhere in this Agreement, the
following terms used in this Agreement have the meanings indicated below:
"Airline Guides" means the printed and electronic data versions of the
"Official Airline Guide" and "ABC World Airlines Guide," and their respective
successors.
"Applicable Law" means all applicable laws of any jurisdic tion, including
without limitation securities laws, tax laws, tariff and trade laws, ordinances,
judgments, decrees, injunctions, writs and orders or like actions of any
competent authority and the rules, regulations, orders, interpretations,
licenses and permits of any competent authority.
"Codeshare Flights" has the meaning given in Section 2.1.
"Codeshare Passenger" means a passenger traveling on a Marketing Carrier
Ticket.
"CRS" means a computerized reservations system owned or operated by any
entity, including either party to this Agreement, that contains information
about commercial airline schedules, fares, cargo rates, passenger and cargo
tariff rules, and flight availability that is made available to travel agents,
cargo agents, and other non-airline entities to facilitate their ability to make
reservations and issue tickets and air waybills.
<PAGE>
"Marketing Carrier" means the party whose Code is shown in the carrier code
box of a flight coupon for a Codeshare Flight but which is not the Operating
Carrier.
"Marketing Carrier Ticket" means a ticket issued by the Marketing Carrier,
Operating Carrier or a third party showing the Marketing Carrier's Code in the
carrier box of the flight coupon.
"Marketing Flight(s)" means a Codeshare Flight when shown only as a flight
of the Marketing Carrier.
"Operating Carrier" means the party having operational control of an
aircraft used for a given Codeshare Flight.
"Ticketing Carrier" means a party to this Agreement or a third party, as
the case may be, whose traffic documents are used to issue a ticket.
2.0. CODESHARE SERVICE
-----------------
2.1. The parties will mutually designate certain flights ("Codeshare
Flights") on the city-pair(s) identified in Exhibit A to this agreement on which
the parties will share their two letter designator codes ("W7" for WestPac and
"F9" for Frontier, both being referred to as the "Codes"), as published in the
Airlines Guides or CRS's from time to time. The sharing of Codes for Codeshare
Flights will occur from and after the respective Implementation Date shown on
Exhibit A, unless otherwise agreed by the parties.
2.2. The parties will prepare a procedures manual containing detailed
procedures for implementing this Agreement. The procedures manual, including
the amendments or additions the parties may make from time to time (in
accordance with changes in Applicable Law or for other mutually agreed reasons),
is incor porated into and made a part of this Agreement. However, any current
or future provisions of the procedures manual which conflict with this Agreement
will not be deemed to amend this Agreement and will be superseded by the
Agreement to the extent they are inconsistent or incompatible, unless the
parties otherwise agree in writing. The foregoing manual, as amended and supple
mented from time to time, is referred to in this Agreement as the"Procedures
Manual". The parties agree to complete and agree on the initial Procedures
manual no later than 15 days before the first date that a Codeshare Flight is
conducted (the "Implemen tation Date", as contemplated in Exhibit A).
2.3. The Operating Carrier must provide at least the same standard of
in-flight services to Codeshare Passengers as it provides to its own passengers
and, must perform its services with respect to Codeshare Passengers in a first
quality manner, reasonably in accordance with the standards of customer service
established by the Marketing Carrier. Current general passenger service
procedures and policies for the Codeshare Flights will be detailed in the
Procedures Manual. In order to ensure a con sistently high standard of
passenger service, the parties will establish a joint quality monitoring group
(consisting of personnel from the parties' respective reservations, scheduling,
yield management, airport services and other relevant departments) no later than
30 days before the
-2-
<PAGE>
Implementation Date which will meet as necessary to review, refine and improve
passenger service procedures during the term of this Agreement, but no less
frequently than once during each quarter.
2.4. The parties will use commercially reasonable efforts to coordinate
their schedules to maximize the convenience, and minimize the waiting time, of
passengers connecting to and from Codeshare Flights to connecting flights
operated by the parties, although neither party is obligated to operate a
specific flight or schedule (each party retaining the right to determine the
final service schedule of its flights). Each party will assign individuals to
serve as schedule coordinators to exchange schedule information on a regular
basis and to meet when necessary to improve the coordination of the parties'
flight schedules.
2.5. In the event of flight cancellations or other schedule
irregularities, the Operating Carrier is required to reaccommodate Codeshare
Passengers in accordance with the same criteria applied to its own passengers
and as further detailed in the Procedures Manual.
2.6. The text and delivery of in-flight announcements that relate to the
Codeshare Passengers will be agreed in advance by the parties, subject to
Applicable Law, and will be further detailed in the Procedures Manual.
2.7. In the event this Agreement is silent with respect to which party's
policies and procedures are applicable to a Codeshare Flight, and absent any
other agreement, Procedure Manual provision or applicable Law, the policies and
procedures of the Operating Carrier apply.
2.8. The Operating Carrier agrees to employ prudent safety and loss
prevention policies. The Operating Carrier has final authority and
responsibility concerning the operation and safety of the aircraft and its
passengers. In emergencies, the parties will adhere to the emergency procedures
for Codeshare Passengers contained in the Procedures Manual.
2.9. Neither party to this Agreement shall propose to the other any
agreement on: (a) price, (b) routes, (c) frequency of service, (d) schedules
(except for adjustments in time necessary to facilitate connections as provided
for in Section 2.4 hereof), or (e) types of equipment used on routes. Each party
shall make its own decisions on those matters unilaterally without consulting
the other party.
3.0. COST SHARING
------------
3.1. Each party will bear its expenses associated with implementing and
managing the cooperative services contemplated in this Agreement, in accordance
with the following general principles;
(a) Each party will generally bear its own out-of-pocket and other
expenses that must be incurred, if any, in order to bring its facilities,
equipment and personnel to a minimum level shown in industry experience to be
necessary to implement and manage the cooperative services contemplated in this
Agreement. Following implementation of the Codeshare
-3-
<PAGE>
Flights, each party will bear its own expenses for ongoing maintenance of the
improvements mentioned herein and for the marketing of their respective
services. Ongoing joint marketing and promotional expenses related to the
Codeshare services will be mutually agreed upon both with respect to the scope
and the manner in which such expenses will be borne.
(b) The expenses of mutually agreed joint facili ties and any
future projects that will substantially benefit the parties' codeshare alliance
will be shared equally, except as otherwise agreed. The expenses of developing
and placing any roadside, exterior, check in, concourse, gate and baggage
service signage at airports served by the Codeshare Flights in order to
facilitate travel on Codeshare Flights will be borne by the party whose name
and/or logo is being added.
4.0. INVENTORY CONTROL AND PROCEDURES
--------------------------------
4.1. The Marketing Carrier will have access to the Operating Carrier's
inventory through an automated computerized interface which both parties will
maintain throughout the term of this Agreement to expedite the sale of inventory
on the Codeshare Flights. Detailed procedures for implementing and maintaining
seat inventory access will be contained in the Procedures Manual.
4.2. The parties will map inventory classes of the Marketing Flights to
inventory classes of the Operating Carrier on the Codeshare Flights, as set
forth in the Procedures Manual. The parties will endeavor to map the average
coupon value of the Marketing Carrier's inventory classes to comparable classes
of the Operating Carrier to provide nondiscriminatory access for bookings made
by the Marketing Carrier for passengers yielding comparable revenue values; it
being understood, however, that the Operating Carrier retains ultimate control
over the opening, closing and other management of seat inventory availability on
Codeshare Flights.
4.3. The Marketing Carrier will be able to book Codeshare Passengers up
to the same maximum seat inventory (including authorized overbooking) available
to the Operating Carrier for a Codeshare Flight.
4.4. The Operating Carrier and the Marketing Carrier will each assign
one or more individuals to serve as inventory control coordinators, who will, to
the extent permitted by applicable law, exchange information routinely and
conference as necessary to assure that reasonable seat inventory on Codeshare
Flights is made available to the Marketing Carrier.
5.0. MARKETING AND PRODUCT DISPLAY
-----------------------------
5.1. Subject to Applicable Law, each party will treat Marketing Flights
of the party at least as favorably as its own flights with respect to
advertising, promotion and distribution activities.
5.2. The parties will jointly market the Codeshare Flights in accordance
with a jointly developed marketing plan. The marke ting plan may, except to the
extent prohibited by Applicable
-4-
<PAGE>
Law, take into account the following: product, market objectives, performance
measurements and reporting, strategies, activity plans, communications plans and
budgets.
5.3. Each party covenants and represents that its respective advertising
and promotions will be in compliance with Applicable Law. The Marketing Carrier
will disclose, through industry-approved schedule mechanisms (to be defined in
the Procedures Manual - e.g., CRSs and Airline Guides), to consumers and travel
agents and others selling the Codeshare flights, as well as through appropriate
advertising and point-of-sale disclosures, that each Codeshare flight is
actually a flight of and operated by the Operating Carrier.
5.4. Each party will include the Marketing Flights in all published
listings of industry schedules, including Airline Guides, CRSs and reservations
Systems of the parties and other airlines with which each party exchanges
interline reservations and traffic.
5.5. The Marketing Carrier may show the Marketing Flights, to the extent
permitted by Applicable Law, in Airline guides, CRSs and reservations Systems as
using the Marketing Carrier's Code. Any costs incurred for the publication of
Marketing Flights or connections to and from such flights in the Airline Guides,
CRSs and Reservations Systems will be borne by the party whose Code is displayed
on such published flight.
6.0. TRAFFIC DOCUMENT ISSUANCE/SETTLEMENT; OTHER PAYMENT
---------------------------------------------------
6.1. Passenger traffic documents for use on Codeshare Flights may be
issued by either party, or third parties with whom the parties from time to time
have interline traffic agreements, as for any other flight of the Marketing
Carrier or Operating Carrier.
6.2. The acceptance of passenger traffic documents used in connection
with the Codeshare Flights, and settlements between the parties for documents
honored by the parties, will be governed by the same procedures as those set
forth in the IATA Interline Traffic Agreement IATA Revenue Accounting Manual and
ACH Manual. The Ticketing Carrier, whether it be the Marketing Carrier or a
third party will receive the standard industry interline service charge. The
proration of through fares on Codeshare Flights utilizing the services of both
parties hereto shall be as mutually agreed by the parties.
6.3. Unless otherwise mutually agreed by both parties and specifically
set forth in the Procedures Manual, all tickets (including Marketing Carrier
Tickets) used and honored on Codeshare flights will be uplifted and retained by
the Operating Carrier, which is responsible for processing and billing of such
documents using normal IATA interline settlement process. Marketing Carrier
tickets will be treated for billing purposes as if they showed the Code of the
Operating Carrier in the carrier code box of the flight coupon. The Ticketing
Carrier, whether it be the Marketing Carrier or a third party, will receive the
standard interline service charge.
7.0. PASSENGER RESERVATIONS
----------------------
-5-
<PAGE>
7.1. The Marketing Carrier will pay any segment booking fees assessed by
any CRS (including one owned in whole or in part by either party) for bookings
on Marketing Flights.
8.0. INVOLUNTARY REROUTING AND DENIED BOARDING
-----------------------------------------
8.1. The parties will adhere to the procedures for involuntary rerouting
and denied boarding of passengers that will be contained in the Procedures
Manual and otherwise in accordance with Applicable Law. The Operating Carrier
will pay denied boarding compensation or otherwise compensate passengers,
including Codeshare Passengers, for denied boarding as further detailed in the
Procedures Manual.
9.0. BAGGAGE
-------
9.1. With respect to baggage of passengers traveling on Codeshare
Flights, the parties will adhere to the procedures in the Procedures Manual.
10.0. TRAINING
--------
10.1. Except as otherwise agreed, each party will provide or arrange for,
at its own cost, all required initial and recurring training of its own
personnel to facilitate the Codeshare Flights and operations at airports served
by Codeshare Flights, reserva tions and ticket offices, and other points of
contact between the parties and with the public. This training will include
passenger service, reservations and sales activities, and in-flight service
involving the Codeshare Flights, all as more fully described in the Procedures
Manual.
11.0. SECURITY
--------
11.1. The Operating Carrier reserves the right to apply the provisions of
its own security programs with regard to the carriage of all passengers,
baggage, and cargo on board Codeshare Flights. Such provisions will include any
then applicable procedures used for the physical screening of passengers,
baggage or cargo, interviewing of passengers, or selective loading of baggage or
cargo.
11.2. The parties agree to cooperate in matters of security procedures,
requirements, and obligations at all airports served by Codeshare Flights.
12.0. FREE AND REDUCED RATE TRANSPORTATION
------------------------------------
12.1. All airline industry non-revenue (i.e., "ID" tickets) travel on
Codeshare Flights will be administered by the Operating Carrier according to the
terms and conditions contained in any relevant agreements between the Operating
Carrier and other parties, including the Marketing Carrier.
-6-
<PAGE>
12.2. All other free or discounted travel (i.e., "AD" tickets, Tour
Conductor, Escort, Familiarization, etc.) on Codeshare Flights by passengers
ticketed by the Marketing Carrier will be administered in accordance with
separate agreements of the parties.
13.0. TRADEMARKS AND CORPORATE IDENTIFICATION
---------------------------------------
13.1. It is understood and agreed that the logos, trade marks, service
marks and trade names of WestPac and its Affiliates will be and remain at all
times their exclusive property and that the logos, trademarks, service marks and
trade names of Frontier will be and remain at all times the exclusive property
of Frontier regardless of whether such marks and names are registered or
registrable. Neither party may use the logos, trademarks, service marks and
trade names of the other party without the other party's prior written consent.
13.2. Frontier grants to WestPac, and WestPac accepts, a non-exclusive,
non-transferable, royalty-free license for the term of this Agreement to use the
service mark "Frontier", subject to the further terms and conditions of this
Agreement. This license is limited to the use of the Frontier Licensed
Trademark in con nection with the advertising and promotion of the cooperative
air transportation services contemplated by this Agreement and only within the
United States.
13.3. WestPac grants to Frontier, and Frontier accepts, a non-exclusive,
non-transferable, royalty-free license for the terms of this Agreement to use
the service mark "Western Pacific Airlines", subject to the further terms and
conditions of this Agreement. This license is limited to the use of the Western
Pacific Licensed Trademark in connection with the advertising and promotion of
the cooperative air transportation services contem plated by this Agreement and
only within the United States.
14.0. TAXES
-----
14.1. Any net or gross income or franchise taxes (or taxes of a similar
nature) on the revenues or income or any measure thereof from the sale of air
transportation are the responsibility of the Operating Carrier to the extent
those segments are flown by the Operating Carrier.
14.2. Each Party further agrees to indemnify, defend and hold the other
party harmless from and against Taxes levied upon or advanced by the indemnified
party but that ultimately the indem nifying party would be responsible for
paying and resulting from any transaction or activity contemplated under this
Agreement. If a party receives notice from any taxing authority with respect to
an assessment or potential assessment or imposition of any Tax (collectively an
"Assessment"), that the other party would be responsible for paying, either
directly or through an indemnifi cation claim under Section 18 hereof, then the
party so notified must inform the other party in writing within 10 days and the
claim will be the responsibility of the indemnifying party as to its defense and
settlement. The foregoing indemnity obligation survives the termination of this
Agreement.
15.0. LIABILITY
---------
-7-
<PAGE>
15.1. NEITHER PARTY WILL BE LIABLE FOR ANY CONSEQUENTIAL, PUNITIVE OR
EXEMPLARY DAMAGES, INCLUDING LOST REVENUES, LOST PROFITS, OR LOST PROSPECTIVE
ECONOMIC ADVANTAGE, ARISING FROM ANY PERFORMANCE OR FAILURE TO PERFORM UNDER
THIS AGREEMENT, EVEN IF SUCH PARTY KNEW OR SHOULD HAVE KNOWN OF THE EXISTENCE OF
SUCH DAMAGES, AND EACH PARTY RELEASES AND WAIVES ANY CLAIMS AGAINST THE OTHER
PARTY REGARDING SUCH DAMAGES.
16.0. COVENANT TO COMPLY WITH ALL LAWS
--------------------------------
16.1. Each party undertakes to comply with the requirements of any
applicable Workers' Compensation legislation, and will keep covered by legally
mandated insurance all persons employed by it in connection with this Agreement.
Each party will, upon request by the other party, provide evidence of such
insurance coverage and compliance with such legal obligations.
16.2. If either party believes that any provisions of this Agreement are
contrary to any Applicable Law, that party will notify the other party promptly,
in writing together with a description of the perceived violation and supporting
written materials that facilitate the other party's investigation of such
perceived violation. If both parties agree that there is an actual or potential
violation of Applicable Law, the affected provisions will be treated in
accordance with Section 32.1 as regards sever ability and modification of this
Agreement.
17.0. PUBLICITY
---------
17.1. Except as required by Applicable Law, neither party may issue any
written press release concerning this Agreement without the prior written
consent of the other party (which consent will not be unreasonably withheld or
delayed).
18.0. INDEMNIFICATION
---------------
18.1. WestPac shall defend, indemnify and hold harmless Frontier, its
officers, directors, affiliates, employees, agents and representatives from and
against any and all claims, Assess ments, causes of action, lawsuits and damages
arising from or in connection with WestPac's responsibilities, obligations, and
performance under this Agreement and arising from its carriage.
18.2. Frontier shall defend, indemnify and hold harmless WestPac, its
officers, directors, affiliates, employees, agents and representatives from and
against any and all claims, Assessments, causes of action, lawsuits and damages
arising from or in connec tion with Frontier's responsibilities, obligations,
and performance under this Agreement and arising from its carriage.
18.3. Liability and Insurance
-----------------------
(a) The Operating Carrier shall undertake any liabilities
arising out of its operation, and shall procure and maintain
for the benefit of the
-8-
<PAGE>
Marketing Carrier, during the term of this Agreement,
with insurance carriers of known financial
responsibility, insurance of the type and in the
amounts listed below.
(1) Comprehensive Airline Liability insurance, including
Comprehensive General Liability and Cargo Liability
Insurance, in an amount not less than Five Hundred
Million United States Dollars ($500,000,000) per any
one occur rence. Said policy (i) shall be primary
without right of contribution from any insurance
carried by the Marketing Carrier, (ii) shall name the
Marketing Carrier and its affiliates, subsidiaries, and
their respective directors, officers, agents, servants,
and employees as additional insured, (iii) shall
contain a cross liability clause and a breach of
warranty clause in favor of the Marketing Carrier, and
(iv) shall specifically ensure the Operating Carrier's
Indemnification provision included in this Agreement;
and
(2) Hull All risk Insurance including War Risk Insurance,
and such policy shall include a waiver of subrogation
in favor of the Marketing Carrier, and shall
specifically ensure the indemnification provision
included in this Agreement; and
(3) Worker's Compensation and Employer's Liability
Insurance, or such other similar insurance carried
outside of the United States, in accordance with
statutory limits.
(b) The Operating Carrier shall provide the Marketing Carrier with
certificates of insurance evidencing said coverage. The
certificates shall indicate that the above coverage shall not
be cancelled or materially altered without thirty (30) days'
advance written notice to the Marketing Carrier. Notice with
respect to war and allied perils coverage being seven (7)
days, or such lesser period as is or may be available, in
accor dance with policy conditions.
18.4. The party issuing the ticket and whose flight number is noted on
the ticket is liable for and shall indemnify the other party for any costs,
damages or expenses resulting from any failure by the first mentioned party to
enforce visa and passport require ments for its passengers or any refusal of
entry of its passengers.
18.5. In the event that a ticket issued by WestPac to a passenger of a
Codeshare Flight operated by Frontier shall fail to be issued in such format or
shall fail to contain such wording as shall enable Frontier to have the benefit
of any limitations of liability as provided by the Warsaw Convention or any
other Convention otherwise applicable to Frontier, then WestPac shall defend,
-9-
<PAGE>
indemnify and hold harmless Frontier, its officers, directors, affiliates,
employees, agents and representatives from and against any and all damages,
claims, judgments and costs whatsoever incurred as a result of such failure.
18.6. In the event a ticket issued by Frontier to a passenger of a
Codeshare Flight operated by WestPac shall fail to be issued in such format or
shall fail to contain such wording as shall enable WestPac to have the benefit
of any limitations of liability as provided by the Warsaw convention or any
other Convention otherwise applicable to WestPac, then Frontier shall defend,
indemnify and hold harmless WestPac, its officers, directors, affiliates,
employees, agents and representatives from and against any and all damages,
claims, judgments and costs whatsoever incurred as a result of such failure.
19.0. TERM
----
19.1. This Agreement shall become effective as of the date hereof and
shall continue thereafter until December 31, 1997, or such later date as the
parties may agree in writing provided, in the event the Merger Agreement does
not close for any reason other than because the condition set forth in Section
6.3(i) of the Merger Agreement is not fulfilled, this Agreement may be
terminated at any time upon sixty (60) days prior written notice by either party
to the other. This Agreement will not be implemented until the receipt of all
necessary Government and other approvals.
20.0. DEFAULT
-------
20.1. In the event either party hereto shall become insolvent, liquidate
or cease paying its debts as they mature or shall make an assignment for the
benefit of creditors, or shall file for protection from its creditors under any
applicable laws relating to bankruptcy or insolvency or a trustee or receiver or
liquidator shall be appointed for such party ("Defaulting Party") or a
substantial part of its property, or bankruptcy, liquidation, insolvency or
similar proceedings shall be instituted by or against the Defaulting Party under
the laws of any jurisdiction, or in the event either party ceases to be in
business of providing passenger air transportation, or if either party's
authority to engage in air transportation is suspended, revoked, modified or
amended in a material way, and in each and every such case the other party at
its option may immediately terminate this Agreement upon Notice to the other
party. In the event that either party shall materially breach any of the terms,
covenants, conditions of this Agreement, including the material terms of the
Procedures Manual, the other party may give written notice of such breach and,
in the event such breach is not cured within thirty (30) days of the giving of
such notice, the other party shall have the option to terminate this Agreement
forthwith by further written notice to the party in breach, without prejudice to
any rights or remedies which the other party may have.
21.0. APPLICABLE LAW AND DISPUTE SETTLEMENT
-------------------------------------
21.1. This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
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<PAGE>
21.2. Without prejudice to each parties' rights as set forth in the
Agreement, in the event of any dispute concerning the interpretation and
application of this Agreement or concerning any rights or obligations based
upon, arising from, or related to this Agreement, the Parties shall enter
promptly into negotiations and each party shall in good faith take all practical
measures to achieve a prompt settlement. If in such negotiations, the parties
are unable to resolve the dispute within ten (10) business days of the
commencement thereof, such dispute will be resolved by binding arbitration to be
held in Denver, Colorado in accordance with the rules of the American
Arbitration Association or such other entity which may be agreed upon by the
parties.
22.0. GOVERNMENTAL AND REGULATORY APPROVALS
-------------------------------------
22.1. The parties shall use diligence and all commercially reasonable
efforts to cooperate with each other to obtain approval which may be necessary
from any government authority in the United States.
23.0. FORCE MAJEURE
-------------
23.1. Neither party shall be liable for any loss, injury, damage or delay
whatsoever resulting, directly or indirectly from one or more of the following
occurrences: a force majeure, act of God, seizure under legal process,
governmental sanctions, quaran tine restrictions, fire, fog, flood, or other
weather related reason, failure or refusal on the part of any government or
govern mental agency to grant or issue approvals, clearances, exemptions,
permits or operating authority, or rescission or revocation thereof by any
government or governmental agency, damage to or destruction of aircraft or other
flight equipment, mechanical difficulties or breakdowns, unavailability of fuel,
riot or civil commotion, strikes, lock-outs or labor disputes, war, or any other
acts, matters or things whether or not of a similar nature which are beyond the
control of either party. Either party will be relieved from its duties and
obligations under this Agreement only for such period of time that the effect of
any such occurrence precludes the party's performance.
23.0. NOTICES
-------
23.1. All notices to be provided under this Agreement shall be either
personally delivered or sent by prepaid registered mail, telex, or telefax to
the parties hereto at the following addresses:
(a) If to Frontier to the attention of
FRONTIER AIRLINES, INC.
12015 East 46th Avenue
Denver, Colorado 80239
Attn: Chief Executive Officer
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<PAGE>
(b) If to WestPac to the attention of
WESTERN PACIFIC AIRLINES, INC.
2864 South Circle Drive
Suite 1100
Colorado Springs, CO 80906
Attn: Chief Executive Officer
(c) or, in each case, to such other
person and place as WestPac or
Frontier furnish to the other
party in writing.
25.0. REPRESENTATIONS AND WARRANTIES
------------------------------
25.1. Each party hereto represents and warrants to the other that (a) it
is a duly incorporated and validly existing corporation in good standing; (b) it
is an air carrier duly authorized to engage in air transportation; (c) it has
the requisite corporate power and authority to enter into and perform its
obligations under this agreement; (d) the execution and delivery of, and the
perform ance by it of its obligations under this Agreement have been duly
authorized by all necessary corporate action; (e) assuming the Agreement is duly
executed by both parties it is a valid and binding obligation of it, enforceable
by its terms except as enforceability may be limited by the effect of
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and the application of general principles of equity and public policy;
and (f) neither the execution nor delivery of this document will conflict with
or contravene any law or judgement applicable to it or any terms of its
certificate of incorporation, bylaws, or any other governing document, or
conflict with, result in a material breach of or constitute a material default
under any agreements to which it is a party.
26.0. ANNEXES AND CAPTIONS
--------------------
26.1. The Exhibit to this Agreement is an integral part of and has the
same force and effect as if fully incorporated into the body of this Agreement.
26.2. The captions and section headings used in this Agreement are for
convenience only, and may not be used in inter preting the Agreement.
27.0. ASSIGNMENT
----------
27.1. Neither party may assign, or otherwise convey this Agreement or any
of its rights, or delegate or subcontract any of its duties under this
agreement, without the prior written consent of the other party.
-12-
<PAGE>
28.0. ENTIRE AGREEMENT; AMENDMENTS
----------------------------
28.1. This Agreement contains the entire agreement between the parties
relating to its subject matter, and supersedes any prior understandings or
agreements between the parties regarding the same subject matter. This
Agreement may not be amended or modified except in writing signed by a duly
authorized representative of each party.
29.0. SEVERABILITY
------------
22.1. Except as otherwise provided in this Agreement, if any indication
is received in writing by either party from any compe tent authority to the
effect that any part of this Agreement contravenes any Applicable Law and cannot
qualify for a clearance or exemption, or if any part of this Agreement is, or
will become, or will be declared illegal or unenforceable in any jurisdiction
for any reason (including both by reason of legislation or by reason of the
decision of any competent authority), such part will be severed from this
agreement in the jurisdiction in question and such contravention, illegality,
invalidity or unenforceability will not in any way prejudice or affect the
remaining parts of this Agreement which will continue in full force and effect.
30.0. RELATIONSHIP OF THE PARTIES
---------------------------
30.1. This Agreement is non-exclusive and does not preclude either party
from entering into or maintaining marketing relation ships, including code-
sharing, with other airlines, except as to the specific route(s) identified in
------
Exhibit A which the parties may only jointly promote and operate as cooperative
services in accordance with this Agreement.
30.2. Each party is engaged and will be acting strictly as an independent
contractor in its own separate business in performing this Agreement. Each party
retains complete and exclusive control over its personnel and operations and the
conduct of its business. Neither party nor its officers, employees or agents may
in any manner make any representation or take any action which may give rise to
the existence of any employment, agency, partnership, fiduciary duty or other
like relationship between the parties. The employees, agents and independent
contractors of each party are and will remain employees, agents and independent
contractors of such party for all purposes, and under no circum stances will be
deemed to be employees, agents or independent contractors of the other party.
neither party will have super visory power or control over any employees, agents
or independent contractors employed or engaged by the other party (except that
the Operating Carrier will have supervisory control over all passengers during
any Codeshare Flight, including any employee, agents or contractors of the
Marketing Carrier who are on board any such flight).
31.0. TIME
----
31.1. Time is of the essence in the performance o the obligations of this
Agreement.
32.0. FURTHER ASSURANCES
------------------
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<PAGE>
32.1. Each party will do and perform such further acts and execute and
deliver such further instruments and documents at such party's expense, as may
be required by Applicable Law or as may be reasonably requested by the other
party to carry out and effectuate the purposes of this Agreement.
33.0. COUNTERPARTS
------------
33.1. This Agreement may be executed and delivered by the parties in
separate and identical counterparts, each of which when so executed and
delivered will be an original, but all of which taken together will constitute
one and the same instrument.
SIGNATURES ON NEXT PAGE
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<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this Agreement as of the date indicated in the preamble.
WESTERN PACIFIC AIRLINES, INC. FRONTIER AIRLINES, INC.
By:__________________________ By:____________________________
Name: Name:
Title: Title:
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<PAGE>
EXHIBIT A
LIST OF CODESHARE CITY PAIRS
W7* F9*
--- ---
DEN-ABQ DEN-ABQ
DEN-BMI DEN-BMI
DEN-ELP DEN-ELP
DEN-MDW DEN-MDW
DEN-LAS DEN-LAS
DEN-LAX DEN-LAX
DEN-MSP DEN-MSP
DEN-OMA DEN-OMA
DEN-PHX DEN-PHX
DEN-STL DEN-STL
DEN-SLC DEN-SLC
DEN-SAN DEN-SAN
DEN-SFO DEN-SFO
DEN-SEA DEN-SEA
DEN-ATL DEN-ATL
DEN-CPR DEN-CPR
DEN-CYS DEN-CYS
DEN-DFW DEN-DFW
DEN-GJT DEN-GJT
DEN-IAH DEN-IAH
DEN-MCI DEN-MCI
DEN-EWR DEN-EWR
DEN-OKC DEN-OKC
DEN-MCO DEN-MCO
DEN-SAF DEN-SAF
DEN-TUL DEN-TUL
DEN-IAD DEN-IAD
DEN-GUC DEN-GUC
DEN-IND DEN-IND
DEN-PDX DEN-PDX
<PAGE>
*IMPLEMENTATION DATE: AUGUST 1, 1997
<PAGE>
Confidential treatment has been sought for portions of this document marked with
"*" and such portions have been separately filed with the SEC.
EXHIBIT 10.16(a)
BOULLIOUN
AIRCRAFT HOLDING COMPANY, INC.
May 15, 1997
Frontier Airlines, Inc.
12039 E. 46th Avenue, Suite 200
Denver, Colorado 80239
Attention: Mr. Arthur T. Voss
Vice President-Administration and General Counsel
Re: Amendment No. 1 to Aircraft Lease Agreement (MSN 28760)
-------------------------------------------------------
Dear Sir or Madam:
Reference is hereby made to that certain Aircraft Lease Agreement (MSN 28760),
dated as of December 12, 1996 (the "Lease Agreement"), between Boullioun
Aircraft Holding Company, Inc. ("Lessor") and Frontier Airlines, Inc.
("Lessee"). Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Lease Agreement.
Lessor and Lessee hereby agree that Section 4.1 of Schedule 2 to the Lease
Agreement is deleted in its entirety and replaced by Attachment 1 hereto.
Other than as amended as set forth herein, the Lease Agreement shall remain in
full force and effect.
Lessor and Lessee hereby agree that this letter agreement shall be an "Operative
Document" for all purposes of the Lease Agreement.
<PAGE>
Frontier Airlines, Inc.
May 15, 1997
Page 2
If the foregoing is acceptable to you, please indicate by signing and returning
a copy of this letter to Thomas O. Kaluza before 5:00 p.m. (Seattle time) on May
21, 1997.
BOULLIOUN AIRCRAFT HOLDING COMPANY, INC.
By: /s/
----------------------------------------------
Title: Senior Vice President, Marketing
The foregoing is hereby accepted and agreed to
this 20th day of May, 1997.
FRONTIER AIRLINES, INC.
By: /s/ Arthur T. Voss
----------------------------------------------
Title: Vice President
<PAGE>
CONFIDENTIAL TREATMENT SOUGHT FOR PORTIONS
OF DOCUMENT MARKED WITH " * "
Attachment 1
(MSN 28760)
4.1 TERMINATION TRIGGERS.
If any one or more of the following is true, then Lessor may, at its
sole option, terminate the Lease Agreement and the other Operative Documents by
notice to Lessee:
4.1.1 A Default shall have occurred at any time (even if not then
continuing).
4.1.2 *
4.1.3 *
4.1.4 *
4.1.5 *
4.1.6 [Intentionally left blank]
4.1.7 [Intentionally left blank]
4.1.8 Notwithstanding Section 6.2.1.3 of the Lease Agreement,
prior to the Delivery Date Lessee or one or more of its shareholders enters into
an agreement (whether preliminary or final) (1) providing for or allowing Lessee
to consolidate with or merge into any other corporation or for any other
corporation to consolidate with or merge into Lessee or (2) to effect a change
in the Person, or group of Persons, who or which control Lessee. For purposes
of this section, "control" means the power, directly or indirectly, to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities or by contract or otherwise.
The accounting terms used in this Section 4.1 shall be interpreted with
reference to generally accepted accounting principles, as set forth in the
statements of financial accounting standards issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants, and
as applied on a basis consistent with prior periods.
#127540.02
<PAGE>
Confidential treatment has been sought for portions of this document marked with
"*" and such portions have been separately filed with the SEC.
EXHIBIT 10.17(a)
BOULLIOUN
AIRCRAFT HOLDING COMPANY, INC.
May 15, 1997
Frontier Airlines, Inc.
12039 E. 46th Avenue, Suite 200
Denver, Colorado 80239
Attention: Mr. Arthur T. Voss
Vice President-Administration and General Counsel
Re: Amendment No. 1 to Aircraft Lease Agreement (MSN 28662)
-------------------------------------------------------
Dear Sir or Madam:
Reference is hereby made to that certain Aircraft Lease Agreement (MSN 28662),
dated as of December 12, 1996 (the "Lease Agreement"), between Boullioun
Aircraft Holding Company, Inc. ("Lessor") and Frontier Airlines, Inc.
("Lessee"). Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Lease Agreement.
Lessor and Lessee hereby agree that Section 4 of Schedule 2 to the Lease
Agreement is deleted in its entirety and replaced by Attachment 1 hereto.
Other than as amended as set forth herein, the Lease Agreement shall remain in
full force and effect.
Lessor and Lessee hereby agree that this letter agreement shall be an "Operative
Document" for all purposes of the Lease Agreement.
<PAGE>
Frontier Airlines, Inc.
May 15, 1997
Page 2
If the foregoing is acceptable to you, please indicate by signing and returning
a copy of this letter to Thomas O. Kaluza before 5:00 p.m. (Seattle time) on May
21, 1997.
BOULLIOUN AIRCRAFT HOLDING COMPANY, INC.
By: /s/
---------------------------------------------------------
Title: Senior Vice President, Marketing
The foregoing is hereby accepted and agreed to
this 20th day of May, 1997.
FRONTIER AIRLINES, INC.
By: /s/ Arthur T. Voss
---------------------------------------------------------
Title: Vice President
<PAGE>
CONFIDENTIAL TREATMENT SOUGHT FOR PORTIONS
OF DOCUMENT MARKED WITH " * "
Attachment 1
(MSN 28662)
SECTION 4. TERMINATION OF LEASE PRIOR TO DELIVERY.
4.1 TERMINATION TRIGGERS.
If any one or more of the following is true, then Lessor may, at its
sole option, terminate the Lease Agreement and the other Operative Documents by
notice to Lessee:
4.1.1 A Default shall have occurred at any time (even if not then
continuing).
4.1.2 [Intentionally left blank]
4.1.3 [Intentionally left blank]
4.1.4 [Intentionally left blank]
4.1.5 [Intentionally left blank]
4.1.6 [Intentionally left blank]
4.1.7 [Intentionally left blank]
*
4.2 EFFECT OF TERMINATION.
If Lessor does so terminate the Lease Agreement and the other Operative
Documents, neither Lessor nor Lessee shall have any further rights or
obligations thereunder and Lessor shall return all but US$125,000 of the
Security Deposit then held by Lessor (and Lessor shall retain such US$125,000
for its own benefit and without any claim thereon by Lessee).
<PAGE>
4.3 COOPERATION.
Lessee shall cooperate with Lessor, and will provide to Lessor such
information as may be requested by Lessor, to allow Lessor to determine as soon
as practicable whether any of the circumstances set forth in Section 4.1 of this
Schedule 2 has occurred. Lessee acknowledges and agrees that Lessor may make
such determination on the basis of the information available to it from time to
time.
#127532.02
<PAGE>
EXHIBIT 10.18
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED WITH
"*" AND SUCH PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SEC.
EXECUTION COPY
AIRCRAFT LEASE AGREEMENT
Dated as of
March 25, 1997
between
GENERAL ELECTRIC CAPITAL CORPORATION
as
Lessor
and
FRONTIER AIRLINES, INC.
as
Lessee
in respect of
Aircraft : Boeing 737-300
Serial No: 28563
U.S. Reg. No.: N
----------
Note: This Aircraft Lease Agreement has been executed in several counterparts
of which this is Counterpart No. [ ]. See Clause 16.15 hereof for
information concerning the distinction between various counterparts.
<PAGE>
INDEX
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C>
1. Interpretation......................................................... 1
1.1 Definitions................................................... 1
1.2 Construction.................................................. 17
2. Representations and Warranties......................................... 17
2.1 Lessee's Representations and Warranties....................... 17
2.2 Lessee's Further Representations and Warranties............... 19
2.3 Repetition.................................................... 20
2.4 Lessor's Representations and Warranties....................... 20
3. Conditions Precedent................................................... 21
3.1 Conditions Precedent........................................... 21
3.2 Further conditions precedent................................... 24
3.3 Waiver......................................................... 24
4. Commencement........................................................... 26
4.1 Leasing....................................................... 26
4.2 Delivery...................................................... 26
4.3 Delayed Delivery.............................................. 26
4.4 Licenses...................................................... 27
4.5 Inspection.................................................... 27
4.6 Indemnity..................................................... 27
5. Payments............................................................... 27
5.1 Deposit....................................................... 27
5.2 Rental Periods................................................ 27
5.3 Rent.......................................................... 28
5.4 Maintenance Reserves.......................................... 28
5.5 Payments...................................................... 29
5.6 Withholding................................................... 29
5.7 General Tax indemnity......................................... 29
5.8 Sales and Use Taxes........................................... 30
5.9 Information................................................... 31
5.10 Indemnity Payments to be Made on an After-Tax Basis.......... 31
5.11 Default Interest............................................. 31
5.12 Contest...................................................... 32
5.13 Net Lease.................................................... 33
5.14 Security..................................................... 33
6. Manufacturer's Warranties.............................................. 34
6.1 Assignment.................................................... 34
6.2 Proceeds...................................................... 34
6.3 Parts......................................................... 35
6.4 Agreement..................................................... 35
7. Lessor's Covenants..................................................... 35
7.1 Quiet Enjoyment............................................... 35
7.2 Release of Maintenance Reserves............................... 35
7.3 Lessor Obligations Following Expiry Date...................... 36
</TABLE>
I
<PAGE>
<TABLE>
<S> <C>
8. Lessee's Covenants..................................................... 37
8.1 Duration...................................................... 37
8.2 Information................................................... 37
8.3 Lawful and Safe Operation..................................... 38
8.4 Taxes and other Outgoings..................................... 40
8.5 Sub-Leasing and Wet-Leasing................................... 40
8.6 Inspection.................................................... 40
8.7 Title......................................................... 42
8.8 General....................................................... 43
8.9 Records....................................................... 43
8.10 Protection................................................... 43
8.11 Maintenance and Repair....................................... 44
8.12 Removal of Engines and Parts................................. 45
8.13 Installation of Engines and Parts............................ 45
8.14 Non-Installed Engines and Parts.............................. 46
8.15 Pooling of Engines and Parts................................. 47
8.16 Equipment Changes............................................ 47
8.17 Title on an Equipment Change................................. 47
8.18 Third Party.................................................. 48
9. Insurance.............................................................. 48
9.1 Insurances.................................................... 48
9.2 Requirements.................................................. 48
9.3 Change........................................................ 48
9.4 Insurance Covenants........................................... 49
9.5 Failure to Insure............................................. 50
9.6 Continuing Indemnity.......................................... 50
9.7 Application of Insurance Proceeds............................. 50
10. Indemnity.............................................................. 51
10.1 General...................................................... 51
10.2 Duration..................................................... 52
11. Events of Loss......................................................... 52
11.1 Events of Loss............................................... 52
11.2 Substitute Aircraft.......................................... 53
11.3 Requisition.................................................. 54
12. Return of Aircraft..................................................... 54
12.1 Return....................................................... 54
12.2 Final Inspection............................................. 54
12.3 Non-Compliance............................................... 55
12.4 Redelivery................................................... 55
12.5 Acknowledgment............................................... 55
12.6 Maintenance Program.......................................... 55
12.7 Fuel......................................................... 55
12.8 Automatic Extension of Term.................................. 55
13. Default............................................................... 56
13.1 Events....................................................... 56
13.2 Rights....................................................... 59
13.3 Deregistration............................................... 63
</TABLE>
II
<PAGE>
<TABLE>
<S> <C>
14. Assignment............................................................. 63
14.1 Lessee's Assignment........................................... 63
14.2 Lessor's Assignment........................................... 63
14.3 Transfer...................................................... 63
15. Illegality............................................................. 64
16. Miscellaneous.......................................................... 64
16.1 Waivers, Remedies Cumulative.................................. 64
16.2 Delegation.................................................... 64
16.3 Certificates.................................................. 64
16.4 Appropriation................................................. 64
16.5 Currency...................................................... 64
16.6 Set-off....................................................... 64
16.7 Severability.................................................. 65
16.8 Remedy........................................................ 65
16.9 Expenses...................................................... 65
16.10 Time of Essence.............................................. 66
16.11 Notices...................................................... 66
16.12 Governing Law and Jurisdiction............................... 67
16.13 Sole and Entire Agreement.................................... 69
16.14 Indemnities.................................................. 69
16.15 Counterparts................................................. 69
16.16 Language..................................................... 69
16.17 No Brokers................................................... 69
17. Disclaimers and Waivers................................................. 70
17.1 Exclusion..................................................... 70
17.2 Waiver........................................................ 70
17.3 Disclaimer of Consequential Damages........................... 71
17.4 Confirmation.................................................. 71
18. Section 1110............................................................ 71
19. Usury Laws.............................................................. 71
20. Modification or Revision................................................ 72
21. Witness................................................................. 73
<CAPTION>
SCHEDULES
<S> <C>
SCHEDULE 1. Description of Aircraft....................................... 74
SCHEDULE 2. Certificate of Technical Acceptance........................... 79
SCHEDULE 3. Operating Condition at Redelivery............................. 85
SCHEDULE 4. Insurances Requirements....................................... 89
SCHEDULE 5. Form of Legal Opinion......................................... 93
SCHEDULE 6. Lease Supplement No. ____..................................... 97
SCHEDULE 7. Form of Lease Termination Certificate......................... 100
SCHEDULE 8. Form of Aircraft Usage Report................................. 102
</TABLE>
III
<PAGE>
AIRCRAFT LEASE AGREEMENT
THIS AGREEMENT is made as of the 25th day of March, 1997 between:-
(1) GENERAL ELECTRIC CAPITAL CORPORATION, a company incorporated under the
laws of New York whose principal place of business is at 260 Long Ridge
Road, Stamford, Connecticut, 06927 ("Lessor"); and
(2) FRONTIER AIRLINES, INC., a company incorporated under the laws of the
State of Colorado whose principal place of business is at 12015 East 46th
Avenue, Denver, Colorado, 80239, United States of America ("Lessee").
WHEREAS: Lessor wishes to lease to Lessee and Lessee is willing to lease
from Lessor the Aircraft on the terms of this Agreement.
IT IS AGREED as follows:-
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following expressions have the meanings set out
opposite:-
After-Tax Basis in the case of any amount payable on an
"After-Tax Basis" to or for the benefit
of any Person (including any amount
payable pursuant to this definition) (a
"Required Payment"), the total amount
that must be paid is the amount such
that, after deduction of the net amount
of all Taxes required to be paid by such
Person with respect to the receipt or
accrual by it of such amount (and
assuming that such Person is subject to
(i) United States Federal income tax at
the highest marginal statutory rate
imposed on corporations for the relevant
period, (ii) United States state and
local income taxes at the composite of
the highest marginal statutory rates
imposed on such Person for the relevant
period, as such composite rate shall be
certified by a financial officer of such
Person, and (iii) income taxes (if any)
imposed by countries outside the United
States at the actual rates imposed on
such Person) the net amount received is
the amount of the Required Payment.
1
<PAGE>
Agreed Value the amount specified for Agreed Value in
Letter Agreement No. 1.
Air Authority Federal Aviation Administration ("FAA").
Aircraft the aircraft described in Part 1 of
Schedule 1, (which term includes where
the context admits a separate reference
to all Engines, Parts and Aircraft
Documents) or any aircraft substituted
in place thereof pursuant to Clause 11.1
or 11.2.
Aircraft Documents the documents, data and records
identified in Part 2 of Schedule 1 and
all additions, renewals, revisions and
replacements from time to time made in
accordance with this Agreement.
Airframe the Aircraft, excluding the Engines and
Aircraft Documents.
Appraisal Procedure the following procedure for determining
the "fair market rental value" of the
Aircraft: (a) Lessor shall select an
independent aircraft appraiser who shall
make a determination of "fair market
rental value" of the Aircraft; and (b)
the fees and expenses of the appraiser
shall be paid by Lessee. "Fair market
rental value" shall mean the value
determined by an appraisal completed on
an "as-is" and "where-is" basis.
APU the auxiliary power unit installed on
the Aircraft on the Delivery Date and
any replacement auxiliary power unit
installed in accordance with this
Agreement.
Boeing The Boeing Company, a Delaware
corporation with its principal office in
Seattle, State of Washington, U.S.A.
Business Day a day (other than a Saturday or Sunday)
on which business of the nature required
by this Agreement is carried out in the
State of Incorporation or where used in
relation to payments on which banks are
open for business in San Francisco and
New York.
2
<PAGE>
Certificated Air Carrier any Person (except the United States
Government) that is a citizen of the
United States of America (as defined in
Section 40102 of Title 49 of the United
States Code) and holding a Certificate
of Public Convenience and Necessity
issued under Section 41102 of Title 49
of the United States Code by the
Department of Transportation or any
predecessor or successor agency thereto,
or, in the event such certificates shall
no longer be issued, any Person (except
the United States Government) that is a
citizen of the United States of America
(as defined in Section 40102 of Title 49
of the United States Code) and legally
engaged in the business of transporting
for hire passengers or cargo by air
predominantly to, from or between points
within the United States of America,
and, in either event, operating
commercial jet aircraft capable of
carrying ten or more individuals or
6,000 pounds or more of cargo, which
also is certificated so as to entitle
Lessor, as a lessor, to the benefits of
Section 1110 of Title 11 of the United
States Code with respect to the
Aircraft.
Cold Section Refurbishment with respect to any Engine the
completion of the following: completely
unstacking either high or low or both
compressor sections, if needed, and
completing the following for the
appropriate section(s): visual
inspection; de-blading discs as
necessary; visual and NDT (Non-
Destructive Testing) inspections as
necessary of all discs; verification
that all snap diameters on discs are
within limits; inspection of all blades
for proper chord dimensions and
cracking; repair or replacement of
blades below minimums; inspection and
repair of stators as necessary; blade-up
of discs using new lock plates; assembly
of rotors in the compressor; balance of
all rotors; and installation of rotors
in the engine.
Cycle one take-off and landing of the
Aircraft.
3
<PAGE>
Damage Notification Threshold the amount specified therefor in Letter
Agreement No. 1.
Default any Event of Default and any event which
with the giving of notice, lapse of
time, determination of materiality or
fulfillment of other condition would
constitute an Event of Default.
Delivery Condition
Requirements the requirements specified on Part 1 of
Schedule 1.
Delivery Date the date on which the Aircraft is
tendered for delivery by Lessor in
accordance with this Agreement.
Delivery Location Seattle, Washington, United States or
such other location as may be nominated
by Lessor.
Deposit all amounts payable pursuant to Clause
5.1.
Dollars and $ the lawful currency of the United States
of America.
Engine whether or not installed on the
Aircraft:-
(a) each engine of the manufacture and
model specified in Part 1 of
Schedule 1 (each of which has 750
or more rated takeoff horsepower or
the equivalent of such horsepower)
which Lessor elects to tender to
Lessee with the Aircraft on the
Delivery Date, such engines being
described as to serial numbers on
the certificate of acceptance to be
executed by Lessee upon delivery of
the Aircraft; or
(b) any engine which has replaced that
engine, title to which has or
should have, passed to Lessor in
accordance with this Agreement;
and in each case includes all modules
and Parts from time to time belonging to
or installed in that engine but excludes
any
4
<PAGE>
properly replaced engine title to which
has, or should have, passed to Lessee
pursuant to this Agreement.
Engine Event of Loss the occurrence with respect to an Engine
only, whether or not installed on the
Airframe, of any of those events
described in provisions (a) through (d)
of the definition of Event of Loss.
Engine Flight Hour means each hour or part thereof an
Engine is operated, elapsing from the
moment that wheels of an aircraft on
which such Engine is installed leave the
ground until the wheels of such aircraft
next touch the ground.
Engine Refurbishment a complete disassembly, inspection and
repair of the modules of an Engine per
the engine manufacturer's maintenance
manual, so that such Engine shall have a
minimum expected on-wing life of 8,000
hours and 6,000 cycles.
ERISA the Employee Retirement Income Security
Act of 1974, as amended.
Event of Default an event or condition specified in
Clause 13.1.
Event of Loss with respect to the Aircraft (including
for the purposes of this definition the
Airframe):-
(a) the actual or constructive total
loss of the Aircraft (including any
damage to the Aircraft which
results in an insurance settlement
on the basis of a total loss, or
requisition for use or hire which
results in an insurance settlement
on the basis of a total loss); or
(b) it being destroyed, damaged beyond
repair or permanently rendered
unfit for normal use for any reason
whatsoever; or
(c) the requisition of title, or other
compulsory acquisition, capture,
5
<PAGE>
seizure, deprivation, confiscation
or detention for any reason of the
Aircraft by the government of the
State of Registration or other
competent authority (whether de
jure or de facto), but excluding
requisition for use or hire not
involving requisition of title; or
(d) the hi-jacking, theft,
condemnation, confiscation, seizure
or requisition for use or hire of
the Aircraft which deprives any
person permitted by this Agreement
to have possession and/or use of
the Aircraft of its possession
and/or use for more than 15 days
(or, if earlier, beyond the Expiry
Date).
Excusable Delay with respect to delivery of the
Aircraft, delay or non-performance due
to or arising out of acts of God or
public enemy, civil war, insurrection or
riot, fire, flood, explosion,
earthquake, accident, epidemic,
quarantine restriction, any act of
government, governmental priority,
allocation, regulation or order
affecting directly or indirectly, the
Aircraft, any manufacturer, Lessor or
any materials or facilities, strike or
labor dispute causing cessation,
slowdown or interruption of work,
inability after due and timely diligence
to procure equipment, data or materials
from manufacturers, suppliers, any
existing owner, seller or lessee in a
timely manner, damage, destruction or
loss, or any other cause to the extent
that such cause is beyond the control of
Lessor whether above mentioned or not
and whether or not similar to the
foregoing.
Expiry Date the day preceding the numerically
corresponding day 96 months after the
Delivery Date or if earlier the date on
which:-
(a) the date Lessor, acting in
accordance with the terms of this
Agreement
6
<PAGE>
terminates the leasing of the
Aircraft to Lessee under this
Agreement; or
(b) Lessor receives the Agreed Value
together with any other amounts
then due and unpaid by Lessee
following an Event of Loss.
FAA the Federal Aviation Administration of
the United States of America and any
successor thereof.
FAR the Federal Aviation Regulations set
forth in Title 14 of the United States
Code of Federal Regulations, as amended
and modified from time to time.
Federal Aviation Act The Transportation Laws of the United
States as set forth at 49 United States
Code et seq. or any similar legislation
of the United States of America enacted
in substitution or replacement thereof.
Financing Statements Uniform Commercial Code Financing
Statements in respect of the Aircraft
and Engines leased hereunder prepared in
a form acceptable for filing with the
applicable Government Entities in the
Habitual Base, the state in which the
chief executive office (as that term is
defined in Article 9 of the Uniform
Commercial Code as in effect in the
Habitual Base) and such other
jurisdiction as Lessor shall reasonably
require.
Flight Hour each hour or part thereof (rounded up to
two decimal places) elapsing from the
moment the wheels of the Aircraft leave
the ground on take off until the wheels
of the Aircraft next touch the ground.
GAAP generally accepted accounting principles
in the United States.
Governing Law the laws of the State of California.
7
<PAGE>
Government Entity (a) any national government, political
subdivision thereof, or local
jurisdiction therein;
(b) any instrumentality, board,
commission, court, or agency of any
thereof, however constituted; and
(c) any association, organization, or
institution of which any of the
above is a member or to whose
jurisdiction any thereof is subject
or in whose activities any of the
above is a participant.
Gross Negligence means any intentional, conscious or
voluntary action or decision which is
taken with wanton, reckless, flagrant
and culpable disregard for the
consequences of such action or decision.
Habitual Base the State of Colorado or, subject to the
prior written consent of Lessor, any
other state, country or countries in
which the Aircraft is for the time being
habitually based.
Hot Section Refurbishment with respect to any Engine, the complete
visual inspection and repair as
necessary of the combustion section of
an Engine in an engine repair/overhaul
station including without limitation
complete unstacking of the high pressure
or low pressure turbine or both if
needed; complete visual inspection of
such turbine(s); de-blading of discs as
required; visual and NDT inspections of
all discs as required; verification that
all snap diameters on discs are within
limits; inspection of all blades for
proper chord dimensions and cracking;
repair or replacement of all blades
below minimums; inspection and repair of
stators as necessary; blade-up of discs
using new lock plates; assembly of
rotors in the turbine; balance of all
rotors; and installation of rotors in
the engine.
Indemnitee each of GE Capital Aviation Services,
Inc. ("GECASI"), GE Capital Aviation
Services
8
<PAGE>
Limited ("GECASL"), Lessor, and any of
their respective successors and assigns,
shareholders, subsidiaries, affiliates,
partners, contractors, directors,
officers, servants, agents and employees
and indemnitees; provided, however, that
no such Indemnitee shall be entitled to
an indemnification to the extent such
Indemnitee is manufacturer of the
Aircraft, any Engines, or Parts in its
capacity as such.
Insurances as defined in Clause 9.1 hereof.
Landing Gear the landing gear assembly of the
Aircraft excluding any rotable
components.
Law shall mean and include (a) any statute,
decree, constitution, regulation, order
judgment or other directive of any
Governmental Entity; (b) any treaty,
pact, compact or other agreement to
which any Governmental Entity is a
signatory or party; (c) any judicial or
administrative interpretation or
application of any Law described in (a)
or (b) above; and (d) any amendment or
revision of any Law described in (a),
(b) or (c) above.
Lease Supplement a Lease Supplement, substantially in the
form of Schedule 6 hereto, entered into
between Lessor and Lessee.
Lessee's Maintenance Program the Maintenance Program specifically
approved by the Air Authority for
Lessee's maintenance of the Aircraft.
Lessor Lien (a) any Security Interest whatsoever
from time to time created by or
through Lessor in connection with
the financing of the Aircraft;
(b) any other Security Interest in
respect of the Aircraft which
results from acts of or claims
against Lessor not related to the
transactions contemplated by or
permitted under this Agreement; and
9
<PAGE>
(c) Security Interests in respect of
the Aircraft for Lessor Taxes.
Lessor Taxes Taxes:-
(a) imposed as a direct result of
activities of Lessor in the
jurisdiction imposing the Tax
unrelated to Lessor's dealings with
Lessee or to the transactions
contemplated by this Agreement or
the operation of the Aircraft by
Lessee; or
(b) imposed on the net income, profits
or gains of Lessor by any
Government Entity in the United
State of America; provided,
--------
however, that Lessor Taxes shall
-------
not include any Tax imposed by any
government or taxing authority of
any jurisdiction if and to the
extent that such Tax results from
(i) the use, operation, presence or
registration of the Aircraft, the
Airframe, any Engine or any Part in
the jurisdiction imposing the Tax,
or (ii) the situs of organization,
any place of business or any
activity of Lessee or any other
Person having use, possession or
custody of the Aircraft, the
Airframe, any Engine or any Part in
the jurisdiction imposing the Tax;
or
(c) imposed with respect to any period
commencing or event occurring after
the Expiry Date and unrelated to
Lessor's dealings with Lessee or to
the transactions contemplated by
this Agreement;
provided always, that Lessor Taxes shall
not include any income taxes or other
amounts payable and subject to
indemnification in favor of Lessor
pursuant to the Tax Indemnity Agreement.
Letter Agreement No. 1 that certain Letter Agreement No. 1
between Lessor and Lessee dated as of
the date hereof.
10
<PAGE>
Maintenance Performer the Lessee, Tramco, USAir Inc., or such
other Person as is approved by the FAA
to perform maintenance and/or
modification services on commercial
aircraft and/or commercial aircraft
engines, which Person shall be agreed by
Lessor and Lessee to have recognized
standing and experience, suitable
facilities for the level of maintenance
being carried out and suitable equipment
to perform such services on aircraft
and/or engines of the same or improved
model as the Aircraft or, in the case of
engines, the Engines.
Maintenance Program an Air Authority approved maintenance
program for the Aircraft based upon the
Manufacturer's specifications, service
bulletins, planning documents,
maintenance manuals and documents and
encompassing scheduled maintenance
(including block maintenance),
condition-monitored maintenance, and/or
on-condition maintenance of Airframe,
Engines and Parts, including but not
limited to, servicing, testing,
preventive maintenance, repairs,
structural inspections, system checks,
overhauls, approved modifications,
service bulletins, engineering orders,
airworthiness directives, corrosion
control, inspections and treatments.
Maintenance Reserves all amounts payable under Clause 5.4(a).
Major Checks any C-Check, multiple C-Check, D-Check
or annual heavy maintenance visit or
segment thereof suggested for commercial
aircraft of the same model as the
Aircraft by its manufacturer (however
denominated) as set out in Lessee's
Maintenance Program.
Manufacturer Boeing.
Minimum Liability Coverage the amount set forth therefore in Letter
Agreement No. 1.
Mortgage Convention shall mean the Convention for the
International Recognition of Rights in
Aircraft, signed (ad referendum) at
Geneva,
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Switzerland, on June 19, 1948, and
amended from time to time, but excluding
the terms of any adhesion thereto or
ratification thereof containing
reservations to which the United States
of America does not accede.
Operative Documents shall mean this Agreement, all Lease
Supplements hereto, Letter Agreement No.
1, the Tax Indemnity Agreement, any
schedules or documents prepared in
conformance to the Schedules hereto, any
side-letters related hereto and any
amendments, revisions, supplements or
modifications hereto or thereto.
Other Agreements any agreement (other than this
Agreement) made or to be made between
Lessor (or an associate or affiliate
thereof or a trustee-lessor acting for
Lessor as beneficiary, including without
limitation Polaris Holding Company) or
GPA Group plc (or an associate or
affiliate thereof) and Lessee (or an
associate or affiliate thereof).
Part whether or not installed on the
Aircraft:-
(a) any component, furnishing or
equipment (other than a complete
Engine) furnished with the Aircraft
on the Delivery Date; and
(b) any other component, furnishing or
equipment (other than a complete
Engine) title to which has, or
should have passed to Lessor
pursuant to this Agreement;
but excludes any such items title
to which has, or should have,
passed to Lessee pursuant to this
Agreement.
Permitted Lien (a) any lien for Taxes not assessed or,
if assessed, not yet due and
payable, or being contested in good
faith by appropriate proceedings;
(b) any lien of a repairer, mechanic,
carrier, hangarkeeper or other
similar
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lien arising in the ordinary course
of business or by operation of Law
in respect of obligations which are
not overdue or are being contested
in good faith by appropriate
proceedings; and
(c) any Lessor Lien.
but only if (in the case of both (a) and
(b)) (i) adequate resources have been
provided by Lessee for the payment of
the Taxes or obligations; and (ii) such
proceedings, or the continued existence
of the lien, do not give rise to any
likelihood of the sale, forfeiture or
other loss of the Aircraft or any
interest therein or of criminal
liability on Lessor.
Person any individual person, corporation,
partnership, firm, joint stock company,
joint venture, trust, estate,
unincorporated organization,
association, Government Entity, or
organization or association of which any
of the above is a member or a
participant.
Redelivery Location a location on Lessee's route system in
the United States designated by Lessor,
or such other location as Lessor and
Lessee shall agree.
Related Agreements any agreement (other than this
Agreement) made or to be made between or
with Lessor (or an associate or
affiliate thereof or a trustee-lessor
acting for Lessor as beneficiary,
including without limitation Polaris
Holding Company) and Lessee (or an
associate or affiliate of Lessee).
Replacement Engine an engine of the same manufacturer and
model, and having equivalent value,
utility, modification status, time
elapsed since Hot Section Refurbishment
and Cold Section Refurbishment and
remaining warranty status as the Engine
it is intended to replace under Clause
11.1(c), or at Lessee's option,
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an engine of the same manufacturer as
such Engine but of an improved model,
and otherwise of an equivalent value and
utility and suitable for installation
and use on the Airframe without
impairing the value or utility of the
Airframe and compatible with the
remaining installed Engine.
Rent all amounts payable pursuant to Clause
5.3.
Rental Period each period ascertained in accordance
with Clause 5.2.
Rent Date the first day of each Rental Period.
Return Occasion the date on which the Aircraft is
redelivered to Lessor in accordance with
Clause 12 hereof.
Scheduled Delivery Month August, 1997.
Security Interest any mortgage, charge, pledge, lien,
assignment, hypothecation, right of set-
off or any agreement or arrangement
having the effect of creating a Security
Interest other than a Permitted Lien.
State of Incorporation State of Colorado.
State of Registration United States of America.
Subsidiary (a) in relation to any reference to
accounts, any company whose
accounts are consolidated with the
accounts of Lessee in accordance
with GAAP;
(b) for any other purpose an entity
from time to time:-
(i) of which another has direct
or indirect control or owns
directly or indirectly more
than 50 per cent of the
voting share capital; or
(ii) which is a direct or indirect
subsidiary of another under
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the laws of the jurisdiction
of its incorporation.
Tax Indemnity Agreement the Tax Indemnity Agreement of even date
herewith between Lessee and Lessor
pertaining to U.S. Federal Income Taxes
and Lessee operations outside the United
States of America.
Taxes any and all present and future taxes,
duties, withholdings, levies,
assessments, imposts, fees and other
governmental charges of all kinds
together with any penalties, fines,
surcharges and interest thereon and any
additions thereto.
Term the period commencing on the Delivery
Date and ending on the Expiry Date,
except that the Term may be extended
beyond the Expiry Date if the Return
Occasion is delayed in the circumstances
specified, and subject to the limitation
described, in Clause 12.3.
United States the United States of America
Warrant the warrant referred to in Clause
3.1(a)(xii).
Wet Lease any arrangement whereby Lessee agrees to
furnish the Aircraft to a third party
pursuant to which the Aircraft (i) shall
be solely within the operational control
of Lessee and shall be operated solely
by regular employees of Lessee
possessing all current certificates and
licenses that would be required under
the Federal Aviation Act for the
performance by such employees of similar
functions within the United States of
America, (ii) shall be maintained by
Lessee in accordance with Lessee's
Maintenance Program and (iii) shall be
and remain subject and subordinate to
all other terms and conditions of this
Agreement; provided, however, that
Lessee shall remain primarily liable for
the performance of all of the terms of
this Agreement (including, without
limitation, its obligations set forth in
Clause
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9 of this Agreement) to the same extent
as if such arrangement had not been
entered into.
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1.2 CONSTRUCTION
(a) In this Agreement, unless the contrary intention is stated, a reference
to:-
(i) each of "Lessor" or "Lessee" or any other person includes without
prejudice to the provisions of this Agreement any successor in title
to it and any permitted assignee;
(ii) words importing the plural shall include the singular and vice
versa;
(iii) any document shall include that document as amended, novated or
supplemented;
(iv) a Clause or a Schedule is a reference to a clause of or a schedule
to this Agreement;
(v) a reference to "Agreement", "the Agreement" or "this Agreement"
shall, unless expressly provided otherwise, mean and include this
Aircraft Lease Agreement and each of the other Operative Documents;
and
(b) the headings in this Agreement are to be ignored in construing this
Agreement.
2. REPRESENTATIONS AND WARRANTIES
2.1 Lessee's Representations and Warranties: Lessee represents and warrants to
Lessor that:-
(a) Status: Lessee is a corporation duly incorporated and validly existing
under the laws of the State of Incorporation and has the corporate power to
own its assets and carry on its business as it is being conducted and is
the holder of all necessary air transportation licenses required in
connection therewith and with the use and operation of the Aircraft;
(b) Power and authority: Lessee has the corporate power to enter into and
perform, and has taken all necessary corporate action to authorize the
entry into, performance and delivery of, this Agreement and the
transactions contemplated by this Agreement;
(c) Legal validity: this Agreement has been duly entered into and delivered by
Lessee, and this Agreement does, and the Operative Documents when executed
and delivered by Lessee will, constitute legal, valid and binding
obligations of Lessee, enforceable in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the enforcement
of creditors' rights generally, and, to the extent that certain remedies
require or may require enforcement by a court of equity, by such principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law) as a court having jurisdiction may impose
and by Laws which may affect some of such remedies but which do not make
the available remedies inadequate for the substantial realization of the
benefits provided herein;
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(d) Non-conflict: the entry into and performance by Lessee of, and the
transactions contemplated by, this Agreement do not and will not:-
(i) conflict with any laws binding on Lessee; or
(ii) conflict with the constitutional documents of Lessee; or
(iii) conflict with or result in default under any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, lease,
bank loan or credit agreement or other agreement which is binding
upon Lessee or any of its assets nor result in the creation of any
Security Interest over any of its assets;
(e) Authorization: all authorizations, consents, registrations and
notifications required in connection with the entry into, performance,
validity and enforceability of, this Agreement and the transactions
contemplated by this Agreement, have been (or will on or before the
Delivery Date have been) obtained or effected (as appropriate) and are (or
will on their being obtained or effected be) in full force and effect;
(f) No Immunity:
(i) Lessee is subject to civil commercial law with respect to its
obligations under this Agreement; and
(ii) neither Lessee nor any of its assets is entitled to any right of
immunity and the entry into and performance of this Agreement by
Lessee constitute private and commercial acts;
(g) Accounts: the audited consolidated accounts of Lessee and its Subsidiaries
most recently delivered to Lessor, including balance sheets and statements
of income and retained earnings:-
(i) have been prepared in accordance with GAAP; and
(ii) fairly represent the consolidated financial condition of Lessee and
its Subsidiaries as at the date to which they were drawn up;
(h) Restricted Countries: Lessee does not hold a contract or other obligation
to operate the Aircraft to or for any of the countries designated under
U.S. Code of Federal Regulations 31 CFR Parts 500-599 including, without
limitation, Cuba, Iraq, Iran, Libya, North Korea, the Bosnia-Serb
controlled areas of the Republic of Bosnia and Herzegovina and the Unita
Rebels of Angola.
(i) Chief Executive's Office: Lessee's Chief Executive Office (as that term is
defined in Article 9 of the Uniform Commercial Code as in effect in the
State of Colorado) is located at 12015 East 46th Avenue, Denver, Colorado,
United States of America;
(j) Certificated Air Carrier: Lessee is a Certificated Air Carrier and Lessor,
as lessor of the Aircraft to Lessee, is entitled to the benefits of Section
1110 of Title 11 of the United States Code with respect to the Aircraft;
and
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<PAGE>
(j) Citizen of the United States: Lessee is a "citizen of the United States"
as defined in Section 40102 of Title 49 of the United States Code.
2.2 Lessee's Further Representations and Warranties: Lessee further represents
and warrants to Lessor that:-
(a) No Default:
(i) no Default has occurred and is continuing or might result from the
entry into or performance of the Operative Documents; and
(ii) no other event or condition has occurred and is continuing which
constitutes (or with the giving of notice, lapse of time,
determination of materiality or the fulfillment of any other
applicable condition or any combination of the foregoing, might
constitute) a material default under any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, lease,
bank loan or credit agreement or other agreement which is binding on
Lessee or any assets of Lessee;
(b) Registration:
(i) except for the filing for recordation of this Agreement and a Lease
Supplement with the FAA, and the filing of any Financing Statements
required (and continuation statements at periodic intervals), no
further filing or recording of this Agreement or of any other
document (including any financing statement under Article 9 of the
Uniform Commercial Code) and no further action, is or will be
necessary under the Laws of the United States, the State of
Incorporation, and the State of Registration, the Habitual Base or
any other states in order to (A) fully establish, perfect and
protect Lessor's title to, and interest in, the Aircraft or any
Engine or Part as against Lessee or any third party, or (B) ensure
the validity, effectiveness and enforceability of this Agreement or
any other Operative Document to which the Lessee is a party; and
(ii) under the laws of the State of Incorporation, the State of
Registration and the Habitual Base the property rights of Lessor in
the Aircraft have been fully established, perfected and protected
and this Agreement will have priority in all respects over the
claims of all creditors of Lessee;
(c) Litigation: no litigation, arbitration or administrative proceedings are
pending or to its knowledge threatened against Lessee which, if adversely
determined, would have a material adverse effect upon its financial
condition or business or its ability to perform its obligations under this
Agreement;
(d) Pari Passu: the obligations of Lessee under the Operative Documents rank at
least pari passu with all other present and future unsecured and
unsubordinated obligations (including contingent obligations) of Lessee,
with the exception of such obligations as are mandatorily preferred by law
and not by virtue of any contract;
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<PAGE>
(e) Material Adverse Change: there has been no material adverse change in the
consolidated financial condition of Lessee and its Subsidiaries or the
financial condition of Lessee since the date to which the accounts most
recently provided to Lessor on or prior to the Delivery Date were drawn up;
(f) Taxes: Lessee has delivered all necessary returns and payments due to the
tax authorities in the State of Incorporation, the State of Registration
and the Habitual Base and is not required by Law to deduct any Taxes from
any payments under this Agreement;
(g) Information: the financial and other information furnished by Lessee in
connection with this Agreement does not contain any untrue statement or
omit to state facts, the omission of which makes the statements therein, in
the light of the circumstances under which they were made, misleading, nor
omits to disclose any material matter to Lessor and all forecasts and
opinions contained therein were honestly made on reasonable grounds after
due and careful inquiry by Lessee; and
(h) ERISA: Lessee is not engaged in any transaction in connection with which it
could be subjected to either a civil penalty assessed pursuant to Section
502 of ERISA or any tax imposed by Section 4975 of the Internal Revenue
Code; no material liability to the Pension Benefit Guaranty Corporation has
been or is expected by Lessee to be incurred with respect to any employee
pension benefit plan (as defined in Section 3 of ERISA) maintained by
Lessee or by any trade or business (whether or not incorporated) which
together with Lessee would be treated as a single employer under Section
4001 of ERISA and Section 414 of the Internal Revenue Code; there has been
no reportable event (as defined in Section 4043(b) of ERISA) with respect
to any such employee pension benefit plan; no notice of intent to terminate
any such employee pension benefit plan has been filed or is expected to be
filed, nor has any such employee pension benefit been terminated; no
circumstance exists or is anticipated that constitutes or would constitute
grounds under Section 4042 of ERISA for the Pension Benefit Guaranty
Corporation to institute proceedings to terminate, or to appoint a trustee
to manage the administration of, such an employee pension benefit plan; and
no accumulated funding deficiency (as defined in Section 302 of ERISA or
Section 412 of the Internal Revenue Code), whether or not waived, exists
with respect to any such employee pension benefit plan.
2.3 Repetition: The representations and warranties in Clause 2.1 and Clause 2.2
will survive the execution of this Agreement. The representations and
warranties contained in Clause 2.1 and Clause 2.2 will be deemed to be
repeated by Lessee on the Delivery Date with reference to the facts and
circumstances then existing. The representations and warranties contained
in Clause 2.1 will be deemed to be repeated by Lessee on each Rent Date as
if made with reference to the facts and circumstances then existing.
2.4 Lessor's Representations and Warranties: Lessor represents and warrants to
Lessee that:-
20
<PAGE>
(a) Status: Lessor is a company duly incorporated and validly existing under
the laws of the State of New York and has the corporate power to own its
assets and carry on its business as it is now being conducted;
(b) Power and authority: Lessor has the corporate power to enter into and
perform, and has taken all necessary corporate action to authorize the
entry into, performance and delivery of, the Operative Documents and the
transactions contemplated by the Operative Documents;
(c) Legal validity: the Operative Documents constitute Lessor's legal, valid
and binding obligation;
(d) Non-conflict: the entry into and performance by Lessor of, and the
transactions contemplated by, the Operative Documents do not and will not:-
(i) conflict with any laws binding on Lessor; or
(ii) conflict with the constitutional documents of Lessor; or
(iii) conflict with any document which is binding upon Lessor or any of
its assets;
(e) Authorization: so far as concerns the obligations of Lessor, all
authorizations, consents, registrations and notifications required under
the laws of the State of New York in connection with the entry into,
performance, validity and enforceability of, and the transactions
contemplated by, the Operative Documents by Lessor have been (or will on or
before the Delivery Date have been) obtained or effected (as appropriate)
and are (or will on their being obtained or effected be) in full force and
effect; and
(f) No Immunity:
(i) Lessor is subject to civil commercial law with respect to its
obligations under the Operative Documents; and
(ii) neither Lessor nor any of its assets is entitled to any right of
immunity and the entry into and performance of the Operative
Documents by Lessor constitute private and commercial acts.
3. CONDITIONS PRECEDENT
3.1 Conditions Precedent: Lessor's obligation to deliver and lease the Aircraft
under this Agreement is subject to satisfaction of each of the following
conditions:-
(a) receipt by Lessor from Lessee not later than 5 Business Days prior to the
Delivery Date of the following satisfactory in form and substance to
Lessor:-
(i) Constitutional Documents: a copy of the constitutional documents of
Lessee including without limitation articles of incorporation,
bylaws and a current certificate of good standing issued by the
secretary of the state for the State of Incorporation;
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<PAGE>
(ii) Resolutions: a copy of a resolution of the board of directors of
Lessee approving the terms of, and the transactions contemplated by,
this Agreement, resolving that it enter into this Agreement, and
authorizing a specified person or persons to execute this Agreement
and the other Operative Documents and accept delivery of the
Aircraft on its behalf;
(iii) Opinion: evidence that opinions substantially in the form of
Schedule 5 will be issued on the Delivery Date by legal counsel
acceptable to Lessor;
(iv) FAA Opinion: a draft of an opinion of Crowe & Dunlevy P.C. or other
counsel acceptable to Lessor who are recognized specialists with
regard to FAA registration matters in form acceptable to Lessor as
to the due filing for recordation of this Agreement, to be delivered
in executed final form to Lessor and Lessee upon such filing and
recordation;
(v) Approvals: evidence of the issue of each approval, license and
consent which may be required in relation to, or in connection with,
the performance by Lessee of any of its obligations hereunder
(including, without limitation, any consent to the export of the
Aircraft from the Habitual Base and consent to the deregistration of
the Aircraft upon the termination of the leasing of the Aircraft
under this Agreement);
(vi) Licenses: copies of Lessee's Certificate of Convenience and
Necessity, Radio License, FAR Part 121 operator's certificates and
all other licenses, certificates and permits required by Lessee in
relation to, or in connection with, the operation of the Aircraft;
(vii) Process Agent: a letter from the process agent appointed by Lessee
in this Agreement accepting that appointment;
(viii) Certificate: a certificate of a duly authorized officer of Lessee:-
(a) setting out a specimen of each signature referred to in Clause
3.1(a)(ii);
(b) certifying that each copy document specified in this Clause is
correct, complete and in full force and effect;
(c) certifying that Lessee's representations and warranties
contained in Clause 2.1 and 2.2 are true and correct on the
Delivery Date as if given on such date; and
(d) certifying that there has been no material change in Lessee's
Constitutional Documents since originally delivered by Lessee
to Lessor;
(ix) Air Traffic Control: a letter from Lessee addressed to Transport
Canada or other relevant air traffic control authority pursuant to
which Lessee authorizes
22
<PAGE>
the addressee to issue to Lessor, upon Lessor's request from time to
time, a statement of account of all sums due by Lessee to the
authority in respect of all aircraft (including, without limitation,
the Aircraft) operated by Lessee;
(x) Deregistration Power: an irrevocable power of attorney authorizing
Lessor or such other person as Lessor may from time to time specify
to do any thing or act or to give any consent or approval which may
be required to obtain deregistration of the Aircraft and to export
the Aircraft from the Habitual Base upon termination of the leasing
of the Aircraft under this Agreement, duly notarized and legalized;
(xi) Certificate of Lease Termination: a certificate of lease termination
executed by a duly authorized officer of Lessee, substantially in
the form of Schedule 7 hereto, acknowledging that this Agreement is
no longer in effect with respect to the Aircraft and Engines, which
certificate Lessor will hold in escrow to be filed at the FAA upon
the expiration of the Term or other termination of the leasing of
the Aircraft to the Lessee hereunder.
(xii) Warrant: evidence of the grant by Lessee to Lessor of a warrant
entitling Lessor to purchase 55,000 shares of Lessee's common stock
no par value at an aggregate purchase price for all such shares of
$385,000, such shares carrying demand registration rights by Lessor
and such other rights as Lessor may require, to be set forth in a
side letter dated as of the date of this Agreement concerning such
warrant. It is understood and acknowledged that upon delivery of the
Aircraft, such warrant shall be deemed solely as additional
consideration to induce Lessor to deliver the Aircraft to Lessee and
shall then and thereafter cease to have any attribute or character
of a security or other deposit. Such warrant shall expire at 5:00
p.m. Denver, Colorado, local time on the Expiry Date;
(xiii) Side Letter Concerning Warrant: a side letter dated as of the date
of this Agreement concerning the issuance of a Warrant for the
purchase by Lessor of shares of Lessee's common stock as set forth
in subclause (xii) above in form and substance satisfactory to
Lessor;
(xiv) Documentary Fee: the $5,000 documentary fee specified in Clause
16.9(e); and
(xv) General: such other documents as Lessor may reasonably request;
(b) the receipt by Lessor on or before the Delivery Date of:-
(i) Opinions: a signed original of each of the opinions referred to in
Clause 3.1(a)(iii) and 3.1(a)(iv);
(ii) Payments: all sums due to Lessor under this Agreement on or before
the Delivery Date including, without limitation, the first payment
of Rent;
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(iii) Insurances: certificates of insurance, an undertaking from Lessee's
insurance broker and other evidence satisfactory to Lessor that
Lessee is taking the required steps to ensure due compliance with
the provisions of this Agreement as to Insurances with effect on and
after the Delivery Date;
(iv) Lease Supplement No. 1: in the form of Schedule 6 hereto, to be
dated the Delivery Date, fully completed and executed by Lessor and
Lessee, and filed for recording at the FAA;
(v) Certificate of Technical Acceptance: in the form of Schedule 2
hereto, to be dated and fully completed, and executed by Lessor and
Lessee certifying that Lessee has completed its inspection of the
Aircraft in accordance with Clause 4.5 hereof and that Aircraft
conforms to the provisions set forth therein and is in all respects
acceptable to Lessee, or if not so acceptable, then setting forth
discrepancies and corrective action to be taken;
(vi) Accounts: the latest available accounts of Lessee as described in
Clause 8.2(b)(i) and (ii);
(vii) Documents: a confirmation of receipt of the Aircraft Documents
delivered with the Aircraft on the Delivery Date;
(viii) UCC-1 Financing Statements: in form acceptable to Lessor, and
suitable for filing in the States of Colorado and California and
signed by Lessee; and
(ix) General: such other documents as Lessor may reasonably request.
(c) receipt by Lessor of such information and documents relating to the
proposed Maintenance Program as Lessor may require and Lessor having agreed
the proposed Maintenance Program on or prior to the Delivery Date; and
(d) evidence that on the Delivery Date that all filings, registrations,
recordings and other actions have been or will be taken which are necessary
or advisable to ensure the validity, effectiveness and enforceability of
this Agreement and the Assignments and to protect the property rights of
Lessor in the Aircraft or any Part.
3.2 Further conditions precedent: The obligations of Lessor to deliver and
lease the Aircraft under this Agreement are subject to the further
conditions precedent that:-
(a) the representations and warranties of Lessee under Clauses 2.1 and 2.2 are
correct and would be correct if repeated on delivery of the Aircraft under
this Agreement; and
(b) no Default has occurred and is continuing or might result from the leasing
of the Aircraft to Lessee under this Agreement.
3.3 Waiver: The conditions specified in Clauses 3.1 and 3.2 are for the sole
benefit of Lessor and may be waived or deferred in whole or in part and
with or without conditions by Lessor. If any of those conditions are not
satisfied on the Delivery Date and Lessor
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(in its absolute discretion) nonetheless agrees to deliver the Aircraft to
Lessee, Lessee will ensure that those conditions are fulfilled within 15 days
after the Delivery Date and Lessor may treat as an Event of Default the failure
of Lessee to do so.
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4. COMMENCEMENT
4.1 Leasing: Lessor will lease the Aircraft to Lessee and Lessee will take the
Aircraft on lease in accordance with this Agreement for the duration of the
Term. Lessor will deliver and Lessee will accept the Aircraft on the day in
the Scheduled Delivery Month notified by Lessor to Lessee at least 5
Business Days in advance of such date or such other day as may be agreed.
In the event (a) Lessee is unwilling or unable to accept delivery of the
Aircraft on the date notified by Lessor as the Delivery Date, and (b) the
Aircraft meets Delivery Condition Requirements then Lessee's obligation to
pay Rent hereunder shall commence on such Delivery Date notwithstanding
that Lessee has not accepted possession of the Aircraft. After delivery the
Aircraft and every Part will be in every respect at the sole risk of
Lessee, who will bear all risk of loss, theft, damage or destruction to the
Aircraft from any cause whatsoever.
4.2 Delivery: The Aircraft will be delivered to and accepted by Lessee at the
Delivery Location or such other location as may be agreed. Lessee will
effect acceptance of the Aircraft by execution and delivery to Lessor of
the duly completed and executed Certificate of Acceptance in the form of
Schedule 2 and a duly completed and executed Lease Supplement No. 1 in the
form of Schedule 6 hereto and by authorizing the filing at the FAA of an
executed copy of such Lease Supplement with an executed copy of this
Agreement attached thereto.
4.3 Delayed Delivery: If owing to:-
(a) any seller, manufacturer or existing lessee of the Aircraft delaying in the
delivery of, or failing to deliver, the Aircraft to Lessor for any reason
(other than because of any default of Lessor in the performance of its
obligations under an agreement with that seller, manufacturer or lessee
unless the default arises from any act or omission of Lessee) whether or
not in circumstances entitling that seller, manufacturer or lessee to
terminate that agreement;
(b) any purchase agreement for the Aircraft terminating prior to delivery of
the Aircraft (other than because of any default of Lessor in the
performance of its obligations under that agreement unless the default
arises from any act or omission of Lessee);
(c) any Excusable Delay; or
(d) notification of any defect or non-conformity pursuant to Clause 4.5; Lessor
delays in the delivery of, or fails to deliver, the Aircraft under this
Agreement:-
(i) Lessor will not be responsible for any losses, including loss of
profit, costs or expenses arising from or in connection with the
delay or failure suffered or incurred by Lessee;
(ii) subject to Clause 4.5, Lessee will not be entitled to terminate this
Agreement or to reject the Aircraft when tendered for delivery by
Lessor, on the grounds of any such delay;
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<PAGE>
(iii) in the case of termination of a purchase agreement, Lessor may at
any time after the termination terminate this Agreement; and
(iv) upon any such termination or termination pursuant to Clause 4.5
neither Lessor nor Lessee will have any further obligation to the
other under this Agreement other than as expressly set out in this
Agreement, except that Lessor will repay to Lessee the Deposit and
shall return the warrant certificate representing the Warrant.
4.4 Licenses: Lessee will at its expense obtain all licenses, permits and
approvals which may be necessary to export the Aircraft from the Delivery
Location. Lessor will furnish such data and information as may be
reasonably requested by Lessee in connection with obtaining any such
license, permit or approval.
4.5 Inspection: Prior to the Delivery Date, subject to any applicable purchase
or lease agreement, Lessor will give Lessee an opportunity:-
(a) to inspect the Aircraft at the Delivery Location; and
(b) to assign up to 2 representatives to participate as observers in a
demonstration flight to demonstrate the condition of the Aircraft.
If Lessee notifies Lessor promptly prior to the Delivery Date of any defect
or non-conformity with Schedule 1 observed during the inspection or
demonstration flight, Lessor will correct or procure the correction of the
defect or non-conformity as promptly as practicable (except to the extent
otherwise agreed or to the extent in the opinion of Lessor it is
impracticable or prohibitively expensive to do so). Subject to Clause 4.3,
Lessor may postpone the Delivery Date in such a case to the date which
Lessor notifies Lessee that the defect or non-conformity has been
rectified. Lessee will be entitled to terminate this Agreement if Lessor
notifies it that Lessor does not intend to correct the defect or non-
conformity.
4.6 Indemnity: Lessee will indemnify and hold harmless the Indemnitees from and
against all Claims (as defined in Clause 10) arising from death or injury
to any observer or any employee of Lessee in connection with any
demonstration flight or inspection of the Aircraft by Lessee.
5. PAYMENTS
5.1 Deposit: Lessee shall pay to Lessor a Deposit in the amounts set forth in
the definition of that term in Letter Agreement No. 1 and in accordance
with the schedule set forth therein. So long as no Default or Event of
Default then exists, Lessor shall refund to Lessee all Deposits then held
by Lessor upon return and final acceptance of the Aircraft by Lessor on the
Expiry Date or promptly after receipt of the Agreed Value after an Event of
Loss.
5.2 Rental Periods: The Term will consist of consecutive whole or partial
Rental Periods set forth in Letter Agreement No. 1. The first Rental Period
will commence on the
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Delivery Date and each subsequent Rental Period will commence on the date
succeeding the last day of the previous Rental Period. Each Rental Period
will end on the date immediately preceding the calendar day in the next
month numerically corresponding to the Delivery Date, except that:
(a) if there is no such numerically corresponding day in that month, it will
end on the last day of that month; and
(b) if a Rental Period would otherwise overrun the Expiry Date, it will end on
the Expiry Date.
5.3 Rent: Lessee will pay to Lessor or its order on each Rent Date, Rent in
advance in the amount specified as "Rent" in Letter Agreement No. 1.
Payment must be initiated adequately in advance of the Rent Date to ensure
that Lessor receives credit for the payment on the Rent Date. If a Rental
Period begins on a non-Business Day, the Rent payable in respect of that
Rental Period shall be paid on the Business Day immediately preceding the
date on which such Rental Period commences.
5.4 Maintenance Reserves:
(a) Amount: Lessee will further pay to Lessor Maintenance Reserves in relation
to each calendar month or portion thereof during the Term and for the last
Rental Period of the Term no later than the 10th day following the end of
such calendar month as follows:-
(i) in respect of the Airframe, the product of the Airframe Maintenance
Reserve Rate specified in Letter Agreement No. 1 and the number of
Flight Hours operated by the Aircraft during that calendar month
("Airframe Maintenance Reserves"); and
(ii) in respect of the life-limited Parts ("LLP") for each Engine, the
product of the Life-Limited Parts Reserve Rate specified in Letter
Agreement No. 1 and the number of Engine Flight Hours (or fraction
thereof) operated by the Engine during that calendar month ("Engine
LLP Refurbishment Reserves"); and
(iii) in respect of Engine Refurbishment for each Engine, the product of
the Engine Refurbishment Reserve Rate specified in Letter Agreement
No. 1 and the number of Engine Flight Hours (or fraction thereof)
operated by the Engine during that calendar month ("Engine
Refurbishment Reserves"); and
(iv) in respect of the Landing Gear, the product of the Landing Gear
Reserve Rate specified in Letter Agreement No. 1 and the number of
Flight Hours operated by the Landing Gear during that calendar month
("Landing Gear Maintenance Reserves").
(b) Adjustment: Lessor may adjust the amount of Maintenance Reserves after the
Delivery Date upon notice to Lessee not more frequently than annually
utilizing the Escalation Adjustment set forth in Letter Agreement No. 1.
The Engine Reserve Rate may be
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further adjusted not more frequently than annually as provided in Section
III of Letter Agreement No. 1.
5.5 Payments: All payments by Lessee to Lessor under this Agreement will be
made for value on the due date in Dollars and in same day funds settled
through the New York Clearing House System or such other funds as may for
the time being be customary for the settlement in New York City of
international payments in Dollars by telegraphic transfer to Bank of
America, San Francisco, California, ABA No. 121-000-358, Account No. 14993-
03400 or to such other account as Lessor may advise Lessee in writing.
5.6 Withholding: All payments by Lessee pursuant to the Operative Documents
shall be free of all withholdings of any nature whatsoever except to the
extent otherwise required by Law, and if any such withholding is so
required, Lessee shall pay on an After-Tax Basis an additional amount such
that after the deduction of all amounts required to be withheld, the net
amount actually received by Lessor on an After-Tax Basis will equal the
amount that Lessor would have received on an After-Tax Basis if such
withholding had not been required; provided, however, that if Lessee pays
any such additional amount to compensate for the withholding of any Lessor
Tax, Lessor shall repay to Lessee within 30 days after receipt of Lessee's
written request therefor (which request shall include a description in
reasonable detail of the Lessor Tax involved and the calculation of the
additional amount to be repaid) the amount of such additional amount to the
extent attributable to any Lessor Tax.
5.7 General Tax Indemnity:
General:
(i) Lessee will on demand pay and indemnify each Indemnitee against all
Taxes (other than Lessor Taxes) levied or imposed against or upon or
payable by such Indemnitee or Lessee and arising from, with respect
to or in connection with the transactions pursuant to the Operative
Documents (except for the Warrant and the side letter dated as of
March 25, 1997 specifically relating thereto, but save in so far as
any indemnity by Lessee in respect of Taxes is specifically provided
for therein, including (but not limited to) all Taxes relating or
attributable to Lessee, any Operative Document or the Aircraft
directly or indirectly in connection with the importation,
exportation, registration, ownership, leasing, sub-leasing,
purchase, delivery, possession, use, operation, repair, maintenance,
overhaul, transportation, landing, storage, presence or redelivery
of the Aircraft or any part thereof or any rent, receipts, insurance
proceeds, income or other amounts arising therefrom.
(ii) All Taxes indemnified pursuant to this Clause 5.7 shall be paid by
Lessee directly to the appropriate taxing authority (to the extent
permitted by applicable Law) at or before the time prescribed by
applicable Law. After any payment by Lessee of any Tax directly to a
taxing authority, Lessee shall furnish to Lessor, on request, a
certified copy of a receipt for Lessee's payment
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of such Tax or such other evidence of payment of such Tax as is
reasonably obtainable by Lessee and reasonably acceptable to Lessor.
(iii) Any amount payable by Lessee to an Indemnitee pursuant to Clause 5.7
shall be paid within ten days after receipt of a written demand
therefor from the relevant Indemnitee accompanied by a written
statement describing in reasonable detail the basis for such
indemnity and the computation of the amount so payable, provided
that if an amount of any indemnified Tax is being contested in
accordance with Clause 5.12 and Lessee shall have duly performed
(and shall continue to perform) all its obligations under Clause
5.12 with respect to such contest, then payment of the indemnity
with respect to such Tax under Clause 5.12 shall , at Lessee's
election, be deferred until the date the contest has been completed.
5.8. Sales and Use Taxes:
(a) Lessee shall pay to Lessor (or, if permitted by applicable Law and if
requested by Lessor, Lessee shall pay to the relevant tax authority for the
account of Lessor), in addition to the amounts specified as "Rent" in
Letter Agreement No. 1:
(i) all sales, use, rental, value added, goods and services and similar
taxes ("Sales Taxes") required to be paid to the tax authority of
the jurisdiction in which the Delivery Location is situated or to
the jurisdiction in which the Aircraft is habitually based with
respect to the lease of the Aircraft to Lessee pursuant to the
Operative Documents unless Lessee delivers to Lessor on or prior to
the Delivery Date such exemption certificate or other document as
may be acceptable to Lessor to evidence Lessee's entitlement to
exemption from all Sales Taxes imposed by such jurisdiction with
respect to the lease of the Aircraft pursuant to the Operative
Documents; and
(ii) all Sales Taxes required to be paid to the tax authority of any
jurisdiction in which the Aircraft may be used, operated or
otherwise located from time to time unless Lessee delivers to Lessor
such exemption certificates or other documents as may be required by
applicable Law to evidence Lessee's entitlement to exemption from
all Sales Taxes imposed by each such jurisdiction with respect to
the lease of the Aircraft pursuant to the Operative Documents.
(b) Lessee will cooperate with Lessor in connection with the preparation and
filing of any exemption application or similar document that is reasonably
necessary or desirable under applicable Law to avoid the imposition of any
Sales Taxes with respect to the transactions contemplated by the Operative
Documents.
(c) The specific obligations with respect to sales and use taxes set forth in
this Clause 5.8 are in addition to, and are not in substitution for, the
Lessee's obligation to indemnify for sales and use taxes pursuant to Clause
5.7.
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5.9 Information:
(a) If Lessee is required by any applicable Law, or by any third party, to
deliver any report or return in connection with any Taxes for which Lessee
would be obligated to indemnify Lessor under the Operative Documents,
Lessee will complete the same and, on request, supply a copy of the report
or return to Lessor.
(b) If any report, return or statement is required to be made by Lessor with
respect to any Tax for which there is an indemnity obligation of Lessee
under this Clause 5, Lessee will promptly notify Lessor of the requirement
and:
(i) if permitted by applicable Law, make and timely file such report,
return or statement (except for any report, return or statement that
Lessor has notified Lessee that Lessor intends to prepare and file),
prepare such return in such manner as will show the ownership of the
Aircraft in Lessor if required or appropriate, and provide Lessor upon
request a copy of each such report, return or statement filed by
Lessee, or
(ii) if Lessee is not permitted by applicable Law to file any such report,
return or statement, Lessee will prepare and deliver to Lessor a
proposed form of such report, return or statement within a reasonable
time prior to the time such report, return or statement is to be
filed.
Lessee will provide such information and documents as Lessor may reasonably
request to enable Lessor to comply with its tax filing, audit and
litigation obligations.
5.10 Indemnity Payments to be Made on an After-Tax Basis: Lessee agrees that,
with respect to any payment or indemnity pursuant to Clause 5.7 (Tax
Indemnity), Clause 5.8 (Sales and Use Taxes) or Clause 10 (Indemnity) to or
for the benefit of any Indemnitee, Lessee's indemnity obligations shall
include such amount as may be necessary to hold such Indemnitee harmless on
an After-Tax Basis from all Taxes required to be paid by such Indemnitee
with respect to such payment or indemnity (including any payments pursuant
to this Clause 5.10), determined based on the assumption that at the time
each such payment or indemnity accrues to the relevant Indemnitee, such
payment or indemnity will be subject to (i) United States Federal income
tax at the highest marginal statutory tax rate applicable to corporations,
(ii) United States state and local income taxes at the composite of the
highest marginal statutory tax rates applicable to the Indemnitee and (iii)
income taxes (if any) imposed by countries outside the United States at the
actual rates imposed on the relevant Indemnitee.
5.11 Default Interest: If Lessee fails to pay any amount payable under this
Agreement on the due date, Lessee will pay on demand from time to time to
Lessor interest (both before and after judgment) on that amount, from the
due date to the date of payment in full by Lessee to Lessor, at the
Interest Rate specified in Letter Agreement No. 1; provided, however, that
in no event shall such rate exceed the maximum permitted by Law. All such
interest will be compounded monthly and calculated on the basis of the
actual number of days elapsed in the month assuming a 30 day month and a
360 day year.
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5.12 Contest:
(a) If an Indemnitee receives a written claim for any Tax for which Lessee
would be required to pay an indemnity pursuant to Clause 5.7 or Clause 5.8,
such Indemnitee shall notify Lessee promptly of such claim, provided that
any failure to provide such notice will not relieve Lessee of any
indemnification obligation pursuant to Clause 5.7 or Clause 5.8. If
requested by Lessee in writing promptly after receipt of such Indemnitee's
notice, such Indemnitee shall, upon receipt of indemnity satisfactory to it
and at the expense of Lessee (including, without limitation, all costs,
expenses, legal and accountants' fees and disbursements, and penalties,
interest and additions to tax incurred in contesting such claim) in good
faith contest or (if permitted by applicable Law) permit Lessee to contest
such claim by (i) resisting payment thereof if practicable and appropriate,
(ii) not paying the same except under protest if protest is necessary and
proper, or (iii) if payment is made, using reasonable efforts to obtain a
refund of such Taxes in appropriate administrative and judicial
proceedings. Such Indemnitee shall determine the method of any contest
conducted by such Indemnitee and (in good faith consultation with Lessee)
control the conduct thereof. Lessee shall determine the method of any
contest conducted by Lessee and (in good faith consultation with such
Indemnitee) control the conduct thereof. Lessee shall pay in full all
payments of Rent and other amounts payable pursuant to the Operative
Documents, without reduction for or on account of any Tax, while such
contest is continuing. Such Indemnitee shall not be required to contest,
or to continue to contest, a claim for Taxes under this Clause 5.12 if (x)
such contest would result in a risk of criminal penalties or of a sale,
forfeiture or loss of, or the imposition of a Lien (other than a Permitted
Lien) on, the Aircraft, or (y) Lessee shall not have furnished an opinion
of independent tax counsel selected by such Indemnitee and reasonably
satisfactory to Lessee, that a reasonable basis exists for such contest, or
(z) a Default or an Event of Default shall be continuing (unless Lessee
shall have provided security reasonably satisfactory to such Indemnitee
securing Lessee's performance of its obligations under this Clause 5). If
such Indemnitee contests any claim for Taxes by making a payment and
seeking a refund thereof, then Lessee shall advance to such Indemnitee, on
an interest-free basis, an amount equal to the Taxes to be paid by such
Indemnitee in connection with the contest and shall indemnify such
Indemnitee on an After-Tax Basis for any adverse tax consequences to such
Indemnitee of such interest-free advance. Upon the final determination of
any contest pursuant to this Clause 5.12 in respect of any Taxes for which
Lessee shall have made an advance to such Indemnitee in accordance with the
immediately preceding sentence, the amount of Lessee's obligation shall be
determined as if such advance had not been made; any indemnity obligation
of Lessee to such Indemnitee under this Clause 5 and such Indemnitee's
obligation to repay the advance will be satisfied first by setoff against
each other, and any difference owing by either party shall be paid within
ten days after such final determination.
(b) If an Indemnitee obtains a refund of all or any part of any Taxes for which
a full indemnity was paid by Lessee, such Indemnitee shall pay Lessee the
amount of such refund, reduced by any Taxes imposed on such Indemnitee on
receipt or accrual of such refund and increased by any Taxes saved by such
Indemnitee by reason of the deductibility of such payment by such
Indemnitee. If, in addition to such refund, such
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Indemnitee receives an amount of interest on such refund, such Indemnitee
shall pay to Lessee the portion of such interest which is fairly
attributable to such refund, reduced by any Taxes imposed on such
Indemnitee on receipt or accrual of such interest and increased by any
Taxes saved by reason of the deductibility of such payment by such
Indemnitee. Such Indemnitee shall not be required to make any payment to
Lessee pursuant to this Clause 5.12 if, and for so long as, an Event of
Default shall have occurred and be continuing.
(c) Any Indemnitee in its sole discretion (by written notice to Lessee) may
waive its rights to indemnification pursuant to Clause 5.7 with respect to
any claim for any Tax and may refrain from contesting or continuing the
contest of such claim, in which event Lessee shall have no obligation to
indemnify such Indemnitee for the Taxes that are the subject of such claim.
If an Indemnitee agrees to a settlement of any contest conducted pursuant
to this Clause 5.11 without the prior written consent of Lessee, which
consent shall not be unreasonably withheld, then Lessor shall be deemed to
have waived its rights to the indemnification provided for in Clause 5.7
with respect to the Tax liability accepted in such settlement.
5.13 Net Lease: This Agreement is a net lease. Lessee's obligations under this
Agreement are absolute and unconditional irrespective of any contingency
whatsoever including (but not limited to):-
(a) any right of set-off, counterclaim, recoupment, defense or other right
which either party to this Agreement may have against the other;
(b) any unavailability of the Aircraft for any reason, including, but not
limited to, a requisition of the Aircraft or any prohibition or
interruption of or interference with or other restriction against Lessee's
use, operation or possession of the Aircraft;
(c) any lack or invalidity of title or any other defect in title,
airworthiness, merchantability, fitness for any purpose, condition, design,
or operation of any kind or nature of the Aircraft for any particular use
or trade, or for registration or documentation under the laws of any
relevant jurisdiction, or any Event of Loss in respect of or any damage to
the Aircraft;
(d) any insolvency, bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceedings by or against Lessor
or Lessee;
(e) any invalidity or unenforceability or lack of due authorization of, or
other defect in, this Agreement;
(f) and Security Interests with respect to the Aircraft or Taxes; and/or
(g) any other cause which but for this provision would or might otherwise have
the effect of terminating or in any way affecting any obligation of Lessee
under this Agreement.
5.14 Security
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(a) To the fullest extent permitted by Law and by way of continuing security
Lessee as sole beneficial owner charges the Deposit and the Maintenance
Reserves and all rights of Lessee to payment thereof and the debt
represented thereby (the "Charged Monies") to Lessor by way of first fixed
charge as security for Lessee's obligations and liabilities under this
Agreement and the Related Agreements (the "Secured Liabilities"). Except
as expressly permitted under this Agreement, Lessee will not be entitled to
payment of the Charged Monies. Lessee will not assign, transfer or
otherwise dispose of all or part of its rights in the Charged Monies and it
will enter into any additional documents and instruments necessary or
advisable to evidence, create or perfect Lessor's rights to the Charged
Monies;
(b) If Lessee fails to comply with any provision of this Agreement or any Event
of Default has occurred and is continuing, in addition to all rights and
remedies accorded to Lessor elsewhere in this Agreement and under Law as a
secured party in respect of the Charged Monies, Lessor may immediately or
at any time thereafter, without prior notice to Lessee:-
(i) set-off all or any part of the Secured Liabilities against the
liabilities of Lessor in respect of the Charged Monies; or
(ii) apply or appropriate the Charged Monies in or towards the payment or
discharge of the Secured Liabilities in such order as Lessor sees fit; and
(c) If Lessor has exercised the set-off described in sub-clause (b) above,
Lessee shall, following a demand in writing from Lessor, restore the
Charged Monies to the level at which they stood immediately prior to such
set-off.
6. MANUFACTURER'S WARRANTIES
6.1 Assignment: Notwithstanding this Agreement, Lessor will remain entitled to
the benefit of each warranty, express or implied, with respect to the
Aircraft, any Engine or Part so far as concerns any manufacturer, vendor,
subcontractor or supplier. Except to the extent Lessor otherwise directs,
Lessor hereby authorizes Lessee to pursue any claim thereunder in relation
to defects affecting the Aircraft, any Engine or Part and Lessee agrees
diligently to pursue any such claim which arises at its own cost. Lessee
will notify Lessor promptly upon becoming aware of any such claim.
6.2 Proceeds: Except to the extent Lessor otherwise agrees in a particular
case, all proceeds of any such claim will be paid directly to Lessor but if
and to the extent that such claim relates:-
(a) to defects affecting the Aircraft which Lessee has rectified; or
(b) to compensation for loss of use of the Aircraft, an Engine or any Part
during the Term; and
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provided no Default has occurred and is continuing the proceeds will be
paid to Lessee by Lessor but in the case of (a) above only on receipt of
evidence satisfactory to Lessor that Lessee has rectified the relevant
defect.
6.3 Parts: Except to the extent Lessor otherwise agrees in a particular case,
Lessee will procure that all engines, components, furnishings or equipment
provided by the manufacturer, vendor, subcontractor or supplier in
replacement of a defective Engine or Part pursuant to the terms of any
warranty will be installed promptly by Lessee and that title thereto free
of Security Interests vests in Lessor. On installation each part will be
deemed to be a Part. In the case of a Replacement Engine, Lessee will
satisfy and perform each of the conditions and covenants set forth in
Clause 11.1(c), and upon satisfaction of such conditions, such Replacement
Engine will be deemed an "Engine" for all purposes of this Agreement.
6.4 Agreement: To the extent any warranties relating to the Aircraft are made
available under an agreement between any manufacturer, vendor,
subcontractor or supplier and Lessee, this Clause 6 is subject to that
agreement. However Lessee will:-
(a) pay the proceeds of any claim thereunder to Lessor to be applied pursuant
to Clause 6.2 and pending such payment will hold the claim and the proceeds
on trust for Lessor; and
(b) Lessee will take all such steps as are necessary at the end of the Term to
ensure the benefit of any of those warranties which have not expired are
vested in Lessor.
7. LESSOR'S COVENANTS
7.1 Quiet Enjoyment: Lessor will not interfere with the quiet use, possession
and enjoyment of the Aircraft by Lessee but the exercise by Lessor of its
rights under or in connection with this Agreement will not constitute such
an interference. Lessor will procure at Lessee's request an undertaking of
quiet enjoyment for the benefit of Lessee with respect to any prospective
Lessor Lien.
7.2 Release of Maintenance Reserves: Provided no Default has occurred and is
continuing Lessor will release funds to Lessee from the Maintenance
Reserves respecting maintenance work performed upon submission by Lessee to
Lessor within 6 months of the commencement of that maintenance and before
the Expiry Date of an invoice and supporting documentation reasonably
satisfactory to Lessor evidencing:-
(a) with respect to the Airframe, the completion, in accordance with this
Agreement, of those items of maintenance (excluding any repairs arising as
the result of operational or maintenance mishandling) characterized by the
Manufacturer's maintenance planning document and best industry practice as
"D" Check and/or individual structural inspections having an interval of
not less than 20,000 Flight Hours or 6 years for the Aircraft or any lesser
interval for an equivalent major structural inspection if required by the
Manufacturer's maintenance planning document subject to retroactive and
prospective adjustment of the Reserve Rates as deemed appropriate by
Lessor, the lesser of (i) the amount of that invoice and (ii) the amount
equal to the aggregate amount of Airframe Maintenance Reserves paid under
this Agreement at the time of
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commencement of that maintenance less the aggregate amount previously
released by Lessor under this sub-clause;
(b) with respect to any Engine, the performance, in accordance with this
Agreement, of all shop visits requiring engine disassembly (other than (i)
repairs arising as a result of foreign object damage or operational or
maintenance mishandling and/or (ii) removal, installation, maintenance and
repair of Quick Engine Change ("QEC") kits), the lesser of (i) the amount
of that invoice and (ii) the amount equal to the aggregate amount of Engine
Refurbishment Reserves paid in respect of that Engine under this Agreement
at the time of commencement of that maintenance less the aggregate amount
previously paid in respect of that Engine by Lessor under this sub-clause;
(c) with respect to life limited parts within any Engine, the performance, in
accordance with this Agreement, of any such parts replacement (other than
(i) replacement arising as a result of accidents or incidents (whether or
not eligible for recovery under Lessee's insurance), foreign object damage
or operational or maintenance mishandling and/or (ii) removal,
installation, maintenance and repair of QEC kits) and/or (iii) any elective
parts replacement), the lesser of (i) the amount of that invoice and (ii)
the amount equal to the aggregate of Engine LLP Refurbishment Reserves paid
in respect of that Engine under this Agreement at the time of commencement
of that maintenance less the aggregate amount previously paid in respect of
that Engine by Lessor under this sub-clause; and
(d) with respect to the Landing Gear, the performance in accordance with this
Agreement, of all work on the landing gear in the nature of overhaul and
requiring removal and disassembly (other than repairs arising as the result
of operational or maintenance mishandling), the lesser of (i) the amount of
that invoice and (ii) the amount equal to the aggregate amount of Landing
Gear Maintenance Reserves paid under this Agreement at the time of
commencement of that maintenance less the aggregate amount previously paid
by Lessor under this sub-clause.
7.3 Lessor Obligations Following Expiry Date: Within 5 Business Days of:-
(a) redelivery of the Aircraft to Lessor in accordance with and in the
condition required by this Agreement; or
(b) payment to Lessor of the Agreed Value following an Event of Loss after the
Delivery Date;
or in each case such later time as Lessor is reasonably satisfied Lessee
has irrevocably paid to Lessor all amounts which may then be outstanding or
become payable under this Agreement, the other Operative Documents or the
Related Agreements and Lessee, Lessor will pay to Lessee:-
(i) the balance of the Deposit; and
(ii) the amount of any Rent received in respect of any period falling after
the date of redelivery of the Aircraft or payment of the Agreed Value, as
the case may
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be; and shall return to Lessee the warrant certificate, if not
previously exercised, representing the Warrant.
8. LESSEE'S COVENANTS
8.1 Duration: The undertakings in this Clause and in Clause 12 will:-
(a) except as otherwise stated, be performed at the expense of Lessee; and
(b) remain in force until the Expiry Date in accordance with this Agreement and
thereafter to the extent of any accrued rights of Lessor in relation to
those undertakings.
8.2 Information: Lessee will:-
(a) notify Lessor forthwith of the occurrence of any Default or any other event
which might adversely affect Lessee's ability to perform any of its
obligations under this Agreement;
(b) furnish to Lessor:-
(i) upon request, the consolidated management accounts of Lessee
(comprising a balance sheet and profit and loss statement) prepared
for the most recent previous financial quarter;
(ii) as soon as available but not in any event later than 120 days after
the last day of each financial year of Lessee, its audited
consolidated balance sheet as of such day and its audited
consolidated profit and loss statement for the year ending on such
day;
(iii) at the same time as it is issued to the shareholders or creditors of
Lessee, a copy of each notice or circular issued to Lessee's
shareholders or creditors as a group; and
(iv) on request from time to time such other information regarding Lessee
and its business and affairs as Lessor may reasonably request;
(c) keep Lessor informed as to current serial numbers of the Engines and any
engine installed on the Aircraft;
(d) promptly furnish to Lessor all information Lessor from time to time
reasonably requests regarding the Aircraft, any Engine or any Part, its
use, location and condition including, without limitation, the hours
available on the Aircraft and any Engine until the next scheduled check,
inspection, overhaul, refurbishment or shop visit, as the case may be;
(e) on request, within 10 days after the end of any Rental Period, furnish to
Lessor evidence satisfactory to Lessor of payment of all Taxes due during
that or any previous Rental Period;
(f) on request, furnish to Lessor evidence satisfactory to Lessor that all
Taxes and charges incurred by Lessee with respect to the Aircraft,
including without limitation all
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payments due to the relevant air traffic control authorities, have been
paid and discharged in full;
(g) within 7 days after the end of each calendar month during the Term, provide
Lessor with a monthly report on the Aircraft and each Engine in the form
set out in Schedule 8 hereto;
(h) give Lessor not less than 60 days' written notice as to the time and
location of all Major Checks; and
(i) promptly notify Lessor of:-
(i) any loss, theft, damage or destruction to the Aircraft, any Engine or
any Part, or any modification to the Aircraft if the potential cost
may exceed the Damage Notification Threshold; and
(ii) any claim or other occurrence likely to give rise to a claim under the
Insurances (but in the case of hull claims only in excess of the
Damage Notification Threshold) and details of any negotiations with
the insurance brokers over any such claim.
8.3 Lawful and Safe Operation: Lessee will:-
(a) comply with the law for the time being in force in any country or
jurisdiction which may for the time being be applicable to the Aircraft
(including without limitation Laws mandating insurance coverage) or, so far
as concerns the use and operation of the Aircraft or an owner or operator
thereof and take all reasonable steps to ensure that the Aircraft is not
used for any illegal purpose;
(b) not use the Aircraft in any manner contrary to any recommendation of the
manufacturers of the Aircraft, any Engine or any Part or any recommendation
or regulation of the Air Authority or for any purpose for which the
Aircraft is not designed or reasonably suitable;
(c) ensure that the crew and engineers employed by it in connection with the
operation and maintenance of the Aircraft have the qualifications and hold
the licenses required by the Air Authority and applicable Law;
(d) use the Aircraft solely in commercial or other operations for which Lessee
is duly authorized by the Air Authority and applicable Law;
(e) not use the Aircraft for the carriage of:-
(i) whole animals living or dead except in the cargo compartments
according to I.A.T.A. regulations, and except domestic pet animals
carried in a suitable container to prevent the escape of any liquid
and to ensure the welfare of the animal;
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(ii) acids, toxic chemicals, other corrosive materials, explosives,
nuclear fuels, nuclear wastes, or any nuclear assemblies or
components, except as permitted for passenger aircraft under the
"Restriction of Goods" schedule issued by I.A.T.A. from time to time
and provided that all the requirements for packaging or otherwise
contained therein are fulfilled;
(iii) any other goods, materials or items of cargo which could reasonably
be expected to cause damage to the Aircraft and which would not be
adequately covered by the Insurances; or
(iv) any illegal item or substance;
(f) not utilize the Aircraft for purposes of training, qualifying or re-
confirming the status of cockpit personnel except for the benefit of
Lessee's cockpit personnel, and then only if the use of the Aircraft for
such purpose is not disproportionate to the use for such purpose of other
aircraft of the same type operated by Lessee;
(g) not cause or permit the Aircraft to proceed to, or remain at, any location
which is for the time being the subject of a prohibition order (or any
similar order or directive) by:-
(i) any Government Entity of the State of Registration or the Habitual
Base; or
(ii) any Government Entity of the country in which such location is
situated; or
(iii) any Government Entity having jurisdiction over Lessor or the
Aircraft;
(h) obtain and maintain in full force all certificates, licenses, permits and
authorizations required for the use and operation of the Aircraft for the
time being, and for the making of payments required by, and the compliance
by Lessee with its other obligations under, this Agreement;
(i) not operate the Aircraft, or suffer or permit the Aircraft to operate, to
or for any country or entity that is the subject of sanctions under the
U.S. International Economic Emergency Powers Act or U.N. Security Council
directives (presently Iraq, Iran, Libya, the Bosnia-Serb controlled areas
of the Republic of Bosnia and Herzegovina and the Unita Rebels of Angola).
Lessee also covenants and agrees (i) not to operate or locate, or suffer or
permit to be operated or located, the Aircraft in any country restricted
under the U.S. Trading with the Enemy Act and the U.S. Export
Administration Act except as may be permitted by operating in accordance
with the conditions specified by the U.S. Export Administration Regulations
(15 CFR Parts 730-799), General License GATS (15 CFR Part 771.19)
(presently Cuba, Iran, North Korea, Sudan, and Syria), and (ii) not to
operate the Aircraft between Cuba and the United States; and
(j) not use, operate, or locate the Aircraft, or cause suffer or permit the
Aircraft to be used, operated or located during the Term in any manner not
covered by the Insurances or in any area excluded from coverage by the
Insurances or in any manner which would prejudice the interests of the
Indemnitees in the Insurances, the Aircraft, any Engine or any Part.
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8.4 Taxes and other Outgoings: Lessee will promptly pay:-
(a) all license and registration fees, Taxes (other than Lessor Taxes) and
other amounts of any nature imposed by any Government Entity with respect
to the Aircraft, including without limitation the purchase, ownership,
delivery, leasing, possession, use, operation, return, sale or other
disposition of the Aircraft; and
(b) all rent, fees, charges, Taxes (other than Lessor Taxes) and other amounts
in respect of any premises where the Aircraft or any Part thereof is
located from time to time;
except to the extent that in the reasonable opinion of Lessor such payment
is being contested in good faith by appropriate proceedings, in respect of
which adequate resources have been provided by Lessee and non-payment of
which does not give rise to any material likelihood of the Aircraft or any
interest therein being sold, forfeited or otherwise lost or of criminal
liability on the part of Lessor.
8.5 Sub-Leasing and Wet-Leasing: LESSEE WILL NOT, WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR, SUB-LEASE, WET LEASE OR PART WITH POSSESSION OF THE
AIRCRAFT, THE ENGINES OR ANY PART EXCEPT THAT LESSEE MAY PART WITH
POSSESSION (A) WITH RESPECT TO THE AIRCRAFT, THE ENGINES OR ANY PART TO THE
RELEVANT MANUFACTURERS FOR TESTING OR SIMILAR PURPOSES OR TO THE
MAINTENANCE PERFORMER FOR SERVICE, REPAIR, MAINTENANCE OR OVERHAUL WORK, OR
ALTERATION, MODIFICATIONS OR ADDITIONS TO THE EXTENT REQUIRED OR PERMITTED
BY THIS AGREEMENT, AND (B) WITH RESPECT TO AN ENGINE OR PART, AS EXPRESSLY
PERMITTED BY THIS AGREEMENT. LESSEE MAY ENTER INTO A WET LEASE FOR THE
AIRCRAFT, THE ENGINES OR ANY PART FOR A TERM NOT TO CONTINUE BEYOND THE
TERM, ON TERMS CUSTOMARY IN THE INDUSTRY FOR WET LEASES OF SUCH DURATION;
PROVIDED, HOWEVER, THAT LESSEE SHALL REMAIN PRIMARILY LIABLE FOR THE
PERFORMANCE OF ALL OF THE TERMS OF THIS AGREEMENT (INCLUDING WITHOUT
LIMITATION, ITS OBLIGATIONS UNDER CLAUSES 8 AND 9) TO THE SAME EXTENT AS IF
SUCH WET LEASE HAD NOT BEEN ENTERED INTO AND PROVIDED, FURTHER, THAT NO
SUCH WET LEASE INVOLVES OR RELATES TO A CONTRACT OR AN OPERATION PROHIBITED
UNDER CLAUSE 2.1(H) HEREOF.
8.6 Inspection:
(a) Lessor and any person designated by Lessor may at any time visit, inspect
and survey the Aircraft, any Engine or any Part and for such purpose may,
subject to any applicable Air Authority regulation, travel on the flight
deck as observer;
(b) Lessee will pay to Lessor on an After-Tax Basis on demand all reasonable
out-of-pocket expenses incurred by Lessor in connection with any such
visit, inspection or survey; and
(c) Lessor will:-
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(i) have no duty or liability to make, or arising out of making or failing
to make, any such visit, inspection or survey; and
(ii) so long as no Default has occurred and is continuing, not exercise
such right other than on reasonable notice and so as not to disrupt
unreasonably the commercial operations of Lessee, provided, however,
Lessee will take such action as may be reasonably required to
facilitate Lessor's inspection.
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8.7 Title: Lessee will:-
(a) not do or knowingly permit to be done or omit or knowingly permit to be
omitted to be done any act or thing which might reasonably be expected to
jeopardize the rights of Lessor as owner of the Aircraft;
(b) on all occasions when the ownership of the Aircraft, any Engine or any Part
is relevant, make clear to third parties that title is held by Lessor;
(c) not at any time (i) represent or hold out Lessor, GECASI or GACASL as
carrying goods or passengers on the Aircraft or as being in any way
connected or associated with any operation or carriage (whether for hire or
reward or gratuitously) which may be undertaken by Lessee or (ii) pledge
the credit of Lessor;
(d) ensure that there is always affixed, and not removed or in any way
obscured, a fireproof plate (having dimensions of not less than 10 cm. x 7
cm.) in a reasonably prominent position in the cockpit of the Aircraft and
on each Engine stating:-
"This Aircraft/Engine is owned by General Electric Capital Corporation and
is leased to Frontier Airlines, Inc. and may not be operated by any other
person without the prior written consent of General Electric Capital
Corporation";
(e) not create or permit to exist any Security Interest upon the Aircraft, any
Engine or any Part;
(f) not do or permit to be done anything which may reasonably be expected to
expose the Aircraft, any Engine or any Part to penalty, forfeiture,
impounding, detention, appropriation, damage or destruction and without
prejudice to the foregoing, if any such penalty, forfeiture, impounding,
detention or appropriation, damage or destruction occurs, give Lessor
notice and use best endeavors to procure the immediate release of the
Aircraft, any Engine or the Part, as the case may be;
(g) not abandon the Aircraft, the Engine or any Part;
(h) pay and discharge or cause to be paid and discharged when due and payable
or make adequate provision by way of security or otherwise for all debts,
damages, claims and liabilities which have given or might give rise to a
Security Interest over or affecting the Aircraft, any Engine or any Part;
and
(i) not attempt, or hold itself out as having any power, to sell, lease or
otherwise dispose of the Aircraft, any Engine or any Part; and
(j) obtain a waiver of any mechanic's lien or right thereto from any vendor
providing maintenance services for Lessee prior to delivering the Aircraft
or any Engine or Part to such vendor.
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8.8 General: Lessee will:-
(a) not make any substantial change in the nature of the business in which it
is engaged, will preserve its corporate existence (other than in connection
with a solvent reconstruction the terms of which have been approved by
Lessor, such approval not to be unreasonably withheld), and will conduct
its business in an orderly and efficient and will maintain all rights,
privileges, licenses and franchises material thereto or material to
performing its obligations under this Agreement;
(b) ensure that no change will occur in the Habitual Base of the Aircraft
without the prior written consent of Lessor;
(c) not without giving Lessor 30 days prior notice (in accordance with this
Agreement), change its chief executive office (as such term is defined in
Article 9 of the Uniform Commercial Code as in effect in the State of
Colorado) from 12015 East 46th Avenue, Denver, Colorado, 80239, United
States of America;
(d) remain a Certified Air Carrier and maintain, without limitation, its status
so as to fall within the preview of Section 1110 of Title 11 of the United
States Code or any analogous Statute; and
(e) remain a "citizen of the United States" as defined in Section 40102 of
Title 49 of the United States Code.
8.9 Records: Lessee will:-
(a) procure that accurate, complete and current records of all flights made by,
and all maintenance carried out on, the Aircraft (including in relation to
each Engine and Part subsequently installed, before the installation) are
kept; keep the records in such manner as the Air Authority may from time to
time require. All records must be maintained in English. The records will
form part of the Aircraft Documents; and
(b) maintain, with appropriate revisions in English, all Aircraft Documents,
records, logs, and other materials required by applicable Laws and best
practice of major international air transport operators in respect of the
Aircraft.
8.10 Protection: Lessee will:-
(a) maintain the registration of the Aircraft with the Air Authority reflecting
(so far as permitted by applicable Law) the interest of Lessor and not do
or suffer to be done anything which might adversely affect that
registration; and
(b) do all acts and things (including, without limitation, making any filing or
registration with the Air Authority or any other Government Entity or as
required to comply with the Mortgage Convention where applicable) and
execute and deliver all documents (including, without limitation, any
amendment of this Agreement) as may be required by Lessor:-
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(i) following any change or proposed change in the ownership or
financing of the Aircraft; or
(ii) following any modification of the Aircraft, any Engine or any Part
or the permanent replacement of any Engine or Part in accordance
with this Agreement, so as to ensure that the rights of Lessor under
this Agreement apply with the same effect as before; or
(iii) to establish, maintain, preserve, perfect and protect the rights of
Lessor under this Agreement and the interest of Lessor in the
Aircraft.
8.11 Maintenance and Repair: Lessee will:-
(a) keep the Aircraft airworthy in all respects and in good repair and
condition;
(b) not change the Maintenance Performer without providing the Lessor with
prior written notice;
(c) not materially change the Lessee's Maintenance Program or the schedule of
the Lessee's Maintenance Program without the prior written consent of
Lessor;
(d) maintain the Aircraft in accordance with Lessee's Maintenance Program
through the Maintenance Performer and perform (at the respective intervals
provided in Lessee's Maintenance Program) all Major Checks;
(e) maintain the Aircraft in accordance with the standard of maintenance
required by FAR Part 121, Subpart L and any other rules and regulations of
the FAA and in at least the same manner and with at least the same care,
including, without limitation, maintenance scheduling, modification status
and technical condition, as is the case with respect to similar aircraft
owned or otherwise operated by Lessee and as if Lessee were to retain and
continue operating the Aircraft in its fleet after the Expiry Date,
including, without limitation, all maintenance to the Airframe, any Engine
or any Part required to maintain all warranties, performance guarantees or
service life policies in full force and effect except to the extent of
conflict with the rules and regulations of the Air Authority;
(f) subject to Letter Agreement No. 1, comply with all outstanding (i.e. at or
prior to the Expiry Date) mandatory inspection and modification
requirements, airworthiness directives and similar requirements applicable
to the Aircraft, any Engine or Part having a compliance date during the
Term or within 180 days after the Expiry Date and which are required by the
Air Authority and/or mandated by any manufacturer of the Aircraft, any
Engine or Part (an "Airworthiness Directive);
(g) comply with all applicable Laws and the regulations of the Air Authority
and other aviation authorities with jurisdiction over Lessee or the
Aircraft, any Engine or Part regardless of upon whom such requirements are
imposed and which relate to the maintenance, condition, use or operation of
the Aircraft or require any modification or alteration to the Aircraft, any
Engine or Part;
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(h) maintain in good standing a current certificate of airworthiness (in the
appropriate category for the nature of the operations of the Aircraft) for
the Aircraft issued by the Air Authority except where the Aircraft is
undergoing maintenance, modification or repair required or permitted by
this Agreement and will from time to time provide to Lessor a copy on
request;
(i) if required by the Air Authority, maintain a current certification as to
maintenance issued by or on behalf of the Air Authority in respect of the
Aircraft and will from time to time provide to Lessor a copy on request;
and
(j) procure promptly the replacement of any Engine or Part which has become
time, cycle or calendar expired, lost, stolen, seized, confiscated,
destroyed, damaged beyond repair, unserviceable or permanently rendered
unfit for use, with an engine or part complying with the conditions set out
in Clause 8.13(a) and in the case of any Engine which suffers an Engine
Event of Loss, shall procure that such engine complies with the provisions
of Clause 11.1(c).
8.12 Removal of Engines and Parts: Lessee will ensure that no Engine or Part
installed on the Aircraft is at any time removed from the Aircraft other
than:-
(a) if replaced as expressly permitted by this Agreement; or
(b) if the removal is of an obsolete item and is in accordance with Lessee's
Maintenance Program; or
(c) (i) during the course of maintaining, servicing, repairing, overhauling
or testing that Engine or the Aircraft, as the case may be; or
(ii) as part of a normal engine or part rotation program; or
(iii) for the purpose of making such modifications to the Engine or the
Aircraft, as the case may be, as are permitted under this Agreement;
and then in each case (A) with respect to a Part, only if it is reinstalled
or replaced by a part complying with Clause 8.13(a) as soon as practicable
and in any event no later than the Expiry Date, and (B) with respect to an
Engine, title to such Engine shall remain vested in Lessor.
8.13 Installation of Engines and Parts: Lessee will:-
(a) ensure that, except as permitted by this Agreement, no engine or part is
installed on the Aircraft unless:-
(i) in the case of an engine, it is an engine of the same model as, or
an improved or advanced version of the Engine it replaces, which is
in the same or better operating condition, has substantially similar
hours available until the next scheduled checks, inspections,
overhauls and shop visits and has the same or greater value and
utility as the replaced Engine;
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(ii) in the case of a part, it is in as good operating condition, has
substantially similar hours available until the next scheduled
checks, inspections, overhauls and shop visits, is of the same or a
more advanced make and model and is of the same interchangeable
modification status as the replaced Part;
(iii) in the case of a part, it has become and remains the property of
Owner free from Security Interests and on installation on the
Aircraft will without further act be subject to the Head Lease and
this Agreement; and
(iv) in each case, Lessee has full details as to its source and
maintenance records;
(b) if no Default has occurred which is continuing, be entitled to install any
engine or part on the Aircraft by way of replacement notwithstanding Clause
8.13(a) if:-
(i) there is not available to Lessee at the time and in the place that
that engine or part is required to be installed on the Aircraft, a
replacement engine or, as the case may be, part complying with the
requirements of Clause 8.13(a);
(ii) it would result in an unreasonable disruption of the operation of
the Aircraft and/or the business of Lessee to ground the Aircraft
until an engine or part, as the case may be, complying with Clause
8.13(a) becomes available for installation on the Aircraft; and
(iii) as soon as practicable after installation of the same on the
Aircraft but, in any event, no later than the Expiry Date, Lessee
removes any such engine or part and replaces it with the Engine or
Part replaced by it or by an engine or part, as the case may be,
complying with Clause 8.13(a).
8.14 Non-Installed Engines and Parts: Lessee will:-
(a) ensure that any Engine or Part which is not installed on the Aircraft (or
any other aircraft as permitted by this Agreement) is, except as expressly
permitted by this Agreement, properly and safely stored, and kept free from
Security Interests;
(b) notify Lessor whenever any Engine is removed from the Aircraft and, from
time to time, on request procure that any person to whom possession of an
Engine is given acknowledges in writing to Lessor, in form and substance
satisfactory to Lessor, that it will respect the interest of Lessor in the
Engine and will not seek to exercise any rights whatsoever in relation to
it;
(c) (notwithstanding the foregoing provisions of this sub-clause), be
permitted, if no Default has occurred and is continuing, to install any
Engine or Part on an aircraft, or in the case of a Part on an engine:-
(i) owned and operated by Lessee free from Security Interests; or
(ii) leased or hired to Lessee pursuant to a lease or conditional sale
agreement on a long-term basis and on terms whereby Lessee has full
operational control of that aircraft or engine; or
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(iii) acquired by Lessee and/or financed or refinanced, and operated by
Lessee, on terms that ownership of that aircraft or engine, as the
case may be, pursuant to a lease or conditional sale agreement, or a
Security Interest therein, is vested in or held by any other Person;
provided that in the case of (ii) and (iii):-
(1) the terms of any such lease, conditional sale agreement or Security
Interest will not have the effect of prejudicing the interest of
Lessor in that Engine or Part; and
(2) the lessor under such lease, the seller under such conditional sale
agreement or the holder of such Security Interest, as the case may
be, has confirmed and acknowledged in writing to Lessor, in form and
substance satisfactory to Lessor, that it will respect the interest
of Lessor in respect of that Engine or Part and that it will not
seek to exercise any rights whatsoever in relation thereto.
8.15 Pooling of Engines and Parts: Lessee will not enter into nor permit any
pooling agreement or arrangement in respect of an Engine or Part without
the prior written consent of Lessor.
8.16 Equipment Changes:
(a) Lessee will not make any modification or addition to the Aircraft (each an
"Equipment Change"), except for an Equipment Change which:-
(i) is expressly permitted by this Agreement, or
(ii) has the prior written approval of Lessor and which does not diminish
the value, utility, condition, or airworthiness of the Aircraft;
(b) So long as a Default has not occurred and is continuing, Lessee may remove
any Equipment Change if it can be removed from the Aircraft without
diminishing or impairing the value, utility, condition or airworthiness of
the Aircraft; and
(c) Lessee shall indemnify Lessor on an After-Tax Basis for any and all Taxes
payable by Lessor as the case may be, as a result of an Equipment Change.
8.17 Title on an Equipment Change:
(a) Title to all Parts installed on the Aircraft whether by way of replacement,
as the result of an Equipment Change or otherwise (except those installed
pursuant to Clause 8.13(b)) will on installation, without further act, vest
in Lessor subject to this Agreement free and clear of all Security
Interests. Lessee will at its own expense take all such steps and execute,
and procure the execution of, all such instruments as Lessor may require
and which are necessary to ensure that title so passes to Lessor according
to all applicable Laws. At any time when requested by Lessor, Lessee will
provide evidence to Lessor's
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satisfaction (including the provision, if required, to Lessor of one or
more legal opinions) that title has so passed to Lessor;
(b) Lessor may require Lessee to remove any Equipment Change and to restore the
Aircraft to its condition prior to that Equipment Change; and
(c) Except as referred to in Clause 8.17(b) any Engine or Part at any time
removed from the Aircraft will remain the property of Owner until a
replacement has been made in accordance with this Agreement and until title
in that replacement has passed, according to applicable Laws, to Lessor
subject to this Agreement and free of all Security Interests. Upon title
to such replacement so passing to Lessor, title to the replaced Engine or
Part, will, provided no Default has occurred and is continuing, pass to
Lessee.
8.18 Third Party: Lessee will procure that no person (other than Lessor) will
act in any manner inconsistent with its obligations under this Agreement
and that all persons will comply with those obligations as if references to
"Lessee" included a separate reference to those persons.
9. INSURANCE
9.1 Insurances: Lessee will maintain in full force during the Term, and
thereafter as expressly required in this Agreement, insurances in respect
of the Aircraft in form and substance satisfactory to Lessor (the
"Insurances" which expression includes, where the context so admits, any
relevant re-insurance(s)) through such brokers and with such insurers and
having such deductibles and being subject to such exclusions as may be
approved by Lessor from time to time. The Insurances will be effected
either:-
(a) on a direct basis with insurers of recognized standing who normally
participate in aviation insurances in the leading international insurance
markets and led by reputable underwriter(s) approved by Lessor; or
(b) with a single insurer or group of insurers approved by Lessor who does not
retain the risk but effects substantial reinsurance with reinsurers in the
leading international insurance markets and through brokers each of
recognized standing and acceptable to Lessor for a percentage acceptable to
Lessor of all risks insured (the "Reinsurances").
9.2 Requirements: Lessor's current requirements as to required Insurances are
as specified in this Clause and in Schedule 4. Lessor may from time to time
stipulate other requirements for the Insurances so that the scope and level
of cover is maintained in line with best industry practice and the
interests of Lessor protected.
9.3 Change: If at any time Lessor wishes to revoke its approval of any insurer,
reinsurer, insurance or reinsurance, Lessor and/or its brokers will consult
with Lessee and Lessee's brokers (as for the time being approved by Lessor)
regarding whether that approval should be revoked to protect the interests
of the parties insured. If, following the consultation, Lessor considers
that any change should be made, Lessee will then arrange or procure the
arrangement of alternative cover satisfactory to Lessor.
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9.4 Insurance Covenants: Lessee will:-
(a) ensure that all legal requirements as to insurance of the Aircraft, any
Engine or any Part which may from time to time be imposed by the laws of
the State of Registration or any state to, from or over which the Aircraft
may be flown, in so far as they affect or concern the operation of the
Aircraft, are complied with and in particular those requirements compliance
with which is necessary to ensure that (i) the Aircraft is not in danger of
detention or forfeiture, (ii) the Insurances remain valid and in full force
and effect, and (iii) the interests of the Indemnitees in the Insurances
and the Aircraft or any Part are not thereby prejudiced;
(b) not use, cause or permit the Aircraft, any Engine or any Part to be used
for any purpose or in any manner not covered by the Insurances or outside
any geographical limit imposed by the Insurances;
(c) comply with the terms and conditions of each policy of the Insurances and
not do, consent or agree to any act or omission which:-
(i) invalidates or may invalidate the Insurances; or
(ii) renders or may render void or voidable the whole or any part of any
of the Insurances; or
(iii) brings any particular liability within the scope of an exclusion or
exception to the Insurances;
(d) not take out without the prior written approval of Lessor any insurance or
reinsurance in respect of the Aircraft other than those required under this
Agreement unless relating solely to hull total loss, business interruption,
profit commission and deductible risk;
(e) commence renewal procedures at least 30 days prior to expiry of any of the
Insurances and provide to Lessor:-
(i) if requested by Lessor, a written status report of renewal
negotiation 14 days prior to each expiry date;
(ii) telexed telecopy confirmation of completion of renewal prior to each
expiry date; and
(iii) certificates of insurance (and where appropriate certificates of
reinsurance), and broker's (and any reinsurance brokers') letter of
undertaking in a form acceptable to Lessor in English, detailing the
coverage and confirming the insurers' (and any reinsurers')
agreement to the specified insurance requirements of this Agreement
within 7 days after each renewal date;
(f) on request, provide to Lessor copies of documents or other information
evidencing the Insurances;
(g) on request, provide to Lessor evidence that the Insurance premiums have
been paid;
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(h) not make any modification or alteration to the Insurances material and
adverse to the interests of any of the Indemnitees;
(i) be responsible for any deductible under the Insurances; and
(j) provide any other insurance and reinsurance related information, or
assistance, in respect of the Insurances as Lessor may reasonably require.
9.5 Failure to Insure: If Lessee fails to maintain the Insurances in compliance
with this Agreement, each of the Indemnitees will be entitled but not
bound, (without prejudice to any other rights of Lessor under this
Agreement):-
(a) to pay the premiums due or to effect and maintain insurances satisfactory
to it or otherwise remedy Lessee's failure in such manner (including,
without limitation to effect and maintain an "owner's interest" policy) as
it considers appropriate. Any sums so expended by it will become
immediately due and payable by Lessee to Lessor on an After-Tax Basis
together with interest thereon at the rate specified in Clause 5.11, from
the date of expenditure by it up to the date of reimbursement by Lessee;
and
(b) at any time while such failure is continuing to require the Aircraft to
remain at any airport or to proceed to and remain at any airport designated
by it until the failure is remedied to its satisfaction.
9.6 Continuing Indemnity: Lessee shall effect and maintain insurance after the
Expiry Date with respect to its liability under the Indemnity in Clause 10
for 2 years which provides for each Indemnitee to be named as additional
insured. Lessee's obligation in this Clause shall not be affected by Lessee
ceasing to be lessee of the Aircraft and/or any of the Indemnitees ceasing
to have any interest in respect of the Aircraft.
9.7 Application of Insurance Proceeds:-
As between Lessor and Lessee:-
(a) all insurance payments received as the result of an Event of Loss or Engine
Event of Loss occurring during the Term will be paid to Lessor and Lessor
will pay the balance of those amounts to Lessee after deduction of all
amounts which may be or become payable by Lessee to Lessor under this
Agreement (including under Clause 11.1(b));
(b) all insurance proceeds of any property, damage or loss to the Aircraft, any
Engine or any Part occurring during the Term not constituting an Event of
Loss or Engine Event of Loss and in excess of the Damage Notification
Threshold will be applied in payment (or to reimburse Lessee) for repairs
or replacement property upon Lessor being satisfied that the repairs or
replacement have been effected in accordance with this Agreement. Insurance
proceeds in amounts below the Damage Notification Threshold may be paid by
the insurer directly to Lessee. Any balance remaining may be retained by
Lessor;
(c) all insurance proceeds in respect of third party liability will, except to
the extent paid by the insurers to the relevant third party, be paid to
Lessor to be paid directly in
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satisfaction of the relevant liability or to Lessee in reimbursement of any
payment so made; and
(d) notwithstanding Clauses 9.7(a), (b) or (c), if at the time of the payment
of any such insurance proceeds a Default has occurred and is continuing,
all such proceeds will be paid to or retained by Lessor to be applied
toward payment of any amounts which may be or become payable by Lessee in
such order as Lessor sees fit or as Lessor may elect.
To the extent insurance proceeds are paid to Lessee, Lessee agrees to
comply with the foregoing provisions and apply or pay over such proceeds as
so required.
10. INDEMNITY
10.1 GENERAL: LESSEE AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS THE
INDEMNITEES ON AN AFTER-TAX BASIS FROM AND AGAINST ANY AND ALL CLAIMS,
PROCEEDINGS, LOSSES, LIABILITIES, SUITS, JUDGMENTS, COSTS, EXPENSES,
PENALTIES OR FINES (EACH A "CLAIM") (REGARDLESS OF WHEN THE SAME IS MADE OR
INCURRED, WHETHER DURING OR AFTER THE TERM (BUT NOT BEFORE)):-
(A) WHICH MAY AT ANY TIME BE SUFFERED OR INCURRED DIRECTLY OR INDIRECTLY
AS A RESULT OF OR CONNECTED WITH THE POSSESSION, DELIVERY,
PERFORMANCE, MANAGEMENT, OWNERSHIP, REGISTRATION, CONTROL,
MAINTENANCE, CONDITION, SERVICE, REPAIR, OVERHAUL, LEASING, USE,
OPERATION OR RETURN OF THE AIRCRAFT, ANY ENGINE OR PART (EITHER IN
THE AIR OR ON THE GROUND) WHETHER OR NOT THE CLAIM MAY BE
ATTRIBUTABLE TO ANY DEFECT IN THE AIRCRAFT, ANY ENGINE OR ANY PART
OR TO ITS DESIGN, TESTING OR USE OR OTHERWISE, AND REGARDLESS OF
WHEN THE SAME ARISES OR WHETHER IT ARISES OUT OF OR IS ATTRIBUTABLE
TO ANY ACT OR OMISSION, NEGLIGENT OR OTHERWISE, OF ANY INDEMNITEE;
(B) WHICH ARISE OUT OF ANY ACT OR OMISSION WHICH INVALIDATES OR WHICH
RENDERS VOIDABLE ANY OF THE INSURANCES; AND
(C) WHICH MAY AT ANY TIME BE SUFFERED OR INCURRED AS A CONSEQUENCE OF
ANY DESIGN, ARTICLE OR MATERIAL IN THE AIRCRAFT, ANY ENGINE OR ANY
PART OR ITS OPERATION OR USE CONSTITUTING AN INFRINGEMENT OF PATENT,
COPYRIGHT, TRADEMARK, DESIGN OR OTHER PROPRIETARY RIGHT OR A BREACH
OF ANY OBLIGATION OF CONFIDENTIALITY OWED TO ANY PERSON;
BUT EXCLUDING ANY CLAIM IN RELATION TO A PARTICULAR INDEMNITEE TO THE
EXTENT THAT THAT CLAIM IS COVERED PURSUANT
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TO ANOTHER INDEMNITY PROVISION OF THIS AGREEMENT OR TO THE EXTENT IT ARISES
SOLELY AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT
INDEMNITEE, LESSOR TAXES OR A LESSOR LIEN.
10.2 Duration: The indemnities contained in this agreement will continue in full
force following the end of the Term notwithstanding any breach or
repudiation by Lessor or Lessee of this Agreement or any termination of the
lease of the Aircraft hereunder.
11. EVENTS OF LOSS
11.1
(a) Pre-delivery: If an Event of Loss occurs prior to delivery of the Aircraft
to Lessee, Lessor will have the option, exercisable by giving Lessee notice
in writing, to substitute an alternative aircraft of the same manufacture,
model, value and utility as the Aircraft. If Lessor exercises such option,
Lessee shall be obliged to lease such substitute aircraft pursuant to the
terms and conditions of this Agreement and such substitute aircraft shall
constitute the Aircraft for all purposes of this Agreement. Lessor shall
provide Lessee with details of the substitute aircraft as soon as may be
practicable after the occurrence of the Event of Loss. If Lessor advises
Lessee that Lessor does not wish to exercise such option, this Agreement
will immediately terminate and except as expressly stated in this Agreement
neither party will have any further obligation or liability under this
Agreement other than pursuant to Clause 16.9 except that Lessor will return
the Deposit to Lessee; and
(b) Post-delivery: If an Event of Loss occurs after delivery of the Aircraft to
Lessee, Lessee will pay the Agreed Value to Lessor on or prior to the
earlier of (i) 5 Business Days after the Event of Loss and (ii) the date of
receipt of insurance proceeds in respect of that Event of Loss. Subject to
the rights of any insurers and reinsurers or other third party, upon
irrevocable payment in full to Lessor of that amount and all other amounts
which may be or become payable to Lessor under this Agreement, Lessor will
without recourse or warranty (except as to Lessor's Liens) and without
further act, be deemed to have transferred to Lessee all of Lessor's rights
to any Engines and Parts not installed when the Event of Loss occurred, all
on an as-is where-is basis, and will at Lessee's expense, execute and
deliver such bills of sale and other documents and instruments as Lessee
may reasonably request to evidence (on the public record or otherwise) the
transfer and the vesting of Lessor's rights in such Engines and Parts in
Lessee, free and clear of all rights of Lessor and Lessor Liens.
(c) Engine Event of Loss: From the Delivery Date upon an Engine Event of Loss,
Lessee shall give Lessor prompt written notice thereof and shall, within 45
days after such occurrence, convey to Lessor, as replacement for the Engine
suffering such event, title to a Replacement Engine. Each Replacement
Engine shall be free of all Security Interests and shall be in as good an
operating condition as the Engine being replaced, assuming the Engine being
replaced was in the condition and repair required by the terms hereof
immediately prior to the Engine Event of Loss. Upon full compliance by
Lessee with the terms of this Clause 11.1(c), Lessor will transfer to
Lessee title to the
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Engine which suffered the Engine Event of Loss. Prior to or at the time of
any such conveyance, Lessee, at its own expense, will promptly (i) furnish
Lessor with a full warranty bill of sale, in form and substance reasonably
satisfactory to Lessor, with respect to such Replacement Engine; (ii) cause
a lease supplement (in form and substance satisfactory to Lessor)
subjecting such Replacement Engine to this Agreement, to be duly executed
by Lessee, and recorded pursuant to applicable Law; (iii) furnish Lessor
with such evidence of title to such Replacement Engine as Lessor may
reasonably request; (iv) furnish Lessor with an opinion of Lessee's counsel
to the effect that title to such Replacement Engine has been duly conveyed
to Lessor subject to this Agreement, free and clear of all Security
Interests, and that such Replacement Engine is duly leased hereunder; (v)
furnish a certificate signed by a duly authorized financial officer or
executive of Lessee certifying that, upon consummation of such replacement,
no Event of Default will have occurred or be continuing; (vi) furnish
Lessor with such documents as Lessor may reasonably request in connection
with the consummation of the transactions contemplated by this Clause
11.1(c), in each case in form and substance satisfactory to Lessor; and
(vii) furnish such Financing Statements incorporating the Replacement
Engine as may be requested by Lessor. For all purposes hereof, each such
Replacement Engine shall be deemed part of the property leased hereunder,
shall be deemed an "Engine" as defined herein and shall be deemed part of
the same Aircraft as was the Engine replaced thereof. No Engine Event of
Loss covered by this Clause 11.1(c) shall result in any reduction in Rent
or affect Lessee's obligation to pay Engine Maintenance Reserves or the
amount thereof to be paid by Lessee.
Lessee shall indemnify each Indemnitee on an After-Tax Basis for any
adverse tax consequence to such Indemnitee of the replacement of one or
more Engines pursuant to this Clause 11.1.
11.2 Substitute Aircraft:
(a) Without prejudice to the provisions of Clause 11.1 (b), if an Event of Loss
occurs after delivery of the Aircraft to Lessee, Lessor will have the
option, exercisable by giving Lessee notice in writing, to substitute an
alternative aircraft (the "Substitute Aircraft") of the same manufacture
and model as the Aircraft and having a value, utility and condition equal
to or greater than the Aircraft as at the date of occurrence of the Event
of Loss which Substitute Aircraft will be leased by Lessor to Lessee for
the remainder of the Term pursuant to the terms and conditions of this
Agreement. If Lessor exercises such option, the Substitute Aircraft will
constitute the Aircraft for all purposes of this Agreement in respect of
facts and circumstances arising after the date of delivery thereof to
Lessee. Lessor shall provide Lessee with details of the Substitute
Aircraft as soon as may be practicable after the occurrence of the Event of
Loss;
(b) Lessor will use all reasonable endeavors to deliver the Substitute Aircraft
to Lessee as soon as may be practicable following the date of occurrence of
the Event of Loss but not later than 3 months after such date; and
(c) Lessee agrees to enter into such documentation as Lessor may require in
order to reflect the leasing of the Substitute Aircraft as aforesaid
including, without limitation, documentation in respect of the Insurances.
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Lessee shall indemnify each Indemnitee on an After-Tax Basis for any
adverse tax consequence to such Indemnitee of the replacement of the
Aircraft or Airframe pursuant to this Clause 11.2.
11.3 Requisition: During any requisition for use or hire of the Aircraft, any
Engine or Part which does not constitute an Event of Loss:-
(a) the Rent and other charges payable under this Agreement will not be
suspended or abated either in whole or in part, and Lessee will not be
released from any of its other obligations under the Agreement (other than
operational obligations with which Lessee is unable to comply solely by
virtue of the requisition); and
(b) so long as no Default has occurred and is continuing, Lessee will be
entitled to any hire paid by the requisitioning authority in respect of the
Term. Lessee will, as soon as practicable after the end of any such
requisition, cause the Aircraft to be put into the condition required by
this Agreement. Lessor will be entitled to all compensation payable by the
requisitioning authority in respect of any change in the structure, state
or condition of the Aircraft arising during the period of requisition, and
Lessor will apply such compensation in reimbursing Lessee for the cost of
complying with its obligations under this Agreement in respect of any such
change, but so that, if any Default has occurred and is continuing, Lessor
may apply the compensation or hire in or towards settlement of any amounts
owing by Lessee under this Agreement.
12. RETURN OF AIRCRAFT
12.1 Return: On the Expiry Date or redelivery of the Aircraft pursuant to Clause
13.2 or termination of the leasing of the Aircraft under this Agreement
Lessee will, unless an Event of Loss has occurred, at its expense,
redeliver the Aircraft and Aircraft Documents to Lessor at the Redelivery
Location or such other airport as is mutually acceptable to the parties
hereto, in accordance with the procedures and in compliance with the
conditions set forth in Schedule 3, free and clear of all Security
Interests and Permitted Liens (other than Lessor Liens) and in a condition
qualifying for immediate certification of airworthiness by the FAA or as
otherwise agreed by Lessor and Lessee.
12.2 Final Inspection: Immediately prior to redelivery of the Aircraft, Lessee
will make the Aircraft available to Lessor for inspection ("Final
Inspection") in order to verify that the condition of the Aircraft complies
with this Agreement. The Final Inspection will permit, and be of sufficient
duration for, Lessor to:-
(a) inspect the Aircraft Documents;
(b) inspect the Aircraft and uninstalled Parts;
(c) inspect the Engines, including without limitation (i) a borescope
inspection of (A) the low pressure and high pressure compressors and (B)
turbine and combustion areas, (ii) engine condition runs and (iii) review
of Engine trend monitoring data and technical log reports covering the last
ninety (90) days of operation; and
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(d) perform a complete borescope inspection of the APU; and
(e) observe a 2 hour demonstration flight (with Lessor's representatives as on-
board observers).
12.3 Non-Compliance: To the extent that, at the time of Final Inspection, the
condition of the Aircraft does not comply with this Agreement, Lessee will
at Lessor's option:-
(a) immediately rectify the non-compliance and to the extent the non-compliance
extends beyond the Expiry Date, the Term will be automatically extended and
this Agreement will remain in force until the non-compliance has been
rectified as provided in Clause 12.8; or
(b) redeliver the Aircraft to Lessor and indemnify Lessor on an After-Tax
Basis, and provide to Lessor's satisfaction cash as security for that
indemnity, against the cost of putting the Aircraft into the condition
required by this Agreement.
12.4 Redelivery: Upon redelivery Lessee will provide to Lessor, upon Lessor's
request, all documents necessary to export the Aircraft from the Habitual
Base (including, without limitation, a valid and subsisting export license
for the Aircraft) and required in relation to the deregistration of the
Aircraft with the Air Authority.
12.5 Acknowledgment: Provided Lessee has complied with its obligations under
this Agreement, following redelivery of the Aircraft by Lessee to Lessor at
the Redelivery Location, Lessor will deliver to Lessee an acknowledgment
confirming that Lessee has redelivered the Aircraft to Lessor in accordance
with this Agreement.
12.6 Maintenance Program:
(a) Prior to the Expiry Date and upon Lessor's request, Lessee will provide
Lessor or its agent reasonable access to Lessee's Maintenance Program and
the Aircraft Documents in order to facilitate the Aircraft's integration
into any subsequent operator's fleet; and
(b) Lessee will, if requested by Lessor to do so, upon return of the Aircraft
deliver to Lessor a certified true current and complete copy of Lessee's
Maintenance Program. Lessor agrees that it will not disclose the contents
of Lessee's Maintenance Program to any person or entity except to the
extent necessary to monitor Lessee's compliance with this Agreement and/or
to bridge the maintenance program for the Aircraft from Lessee's
Maintenance Program to another program after the Expiry Date.
12.7 Fuel: Upon redelivery of the Aircraft to Lessor, an adjustment will be made
in respect of fuel on board on the Delivery Date and the Expiry Date at the
price then prevailing at the Redelivery Location.
12.8 Automatic Extension of Term: In the event of Lessee's failure to make the
Aircraft available to Lessor for timely inspection pursuant to Clauses 12.1
hereof, non-compliance of the condition of the Aircraft under Clause 12.3
hereof or any other failure of Lessee which prevents timely Redelivery of
the Aircraft to Lessor, the Term of this
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Agreement will be automatically extended and this Agreement will remain in
force until such non-compliance has been rectified, with Lessee being
obligated to pay Rent at a rate specified in Clause 5.3 plus 50 percent on
a per diem basis with respect to the period of such extension.
13. DEFAULT
13.1 Events: Each of the following events will constitute an Event of Default
and a repudiation (but not a termination) of this Agreement by Lessee
(whether any such event or condition is voluntary or involuntary or occurs
by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Government Entity). Lessee acknowledges that the occurrence of any Event of
Default would represent a material default in the performance of its
obligations under this Agreement:-
(a) Non-payment: Lessee fails to make any payment under this Agreement on the
due date; or
(b) Insurance: Lessee fails to comply with any provision of Clause 9 or any
insurance required to be maintained under this Agreement is canceled or
terminated or notice of cancellation is given in respect of any such
insurance; or
(c) Breach: Lessee fails to comply with any other provision of this Agreement
and, if such failure is in the reasonable opinion of Lessor capable of
remedy, the failure continues for 5 days after notice from Lessor to
Lessee; or
(d) Representation: any representation or warranty made (or deemed to be
repeated) by Lessee in or pursuant to this Agreement or in any document or
certificate or statement is or proves to have been incorrect in any
material respect when made or deemed to be repeated; or
(e) Cross Default:
(i) a final judgment for the payment of money not covered by insurance
in excess of Two Hundred Fifty Thousand Dollars ($250,000), or final
judgments for the payment of money not covered by insurance in
excess of Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate, shall be rendered against Lessee and the same shall
remain undischarged for a period of ninety (90) days during which
execution thereof shall not be effectively stayed by agreement of
the parties involved, stayed by court order or adequately bonded; or
(ii) attachments or other Security Interests shall be issued or entered
against substantially all of the property of Lessee and shall remain
undischarged or unbonded for ninety (90) days except for Security
Interests created in connection with monies borrowed or obligations
agreed to by Lessee in the ordinary course of its business; or
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(iii) Lessee shall default in the payment of any sum which by itself is in
excess of $100,000 or any sums which in aggregate exceed $250,000
notwithstanding that any particular individual sum thereof does not
exceed $100,000 of any one or more obligations for the payment of
borrowed money, for the deferred purchase price of property or for
the payment of rent or hire under any lease of aircraft when the same
becomes due if such nonpayment results in or would permit an
acceleration of such indebtedness, or Lessee shall default in the
performance of any other term, agreement, or condition contained in
any agreement or instrument under or by which any such obligation is
created, evidenced or secured, if the effect of such default is to
cause or permit such obligation to become due prior to its stated
maturity; or
(iv) any event of default or termination event, howsoever described,
occurs under the Other Agreements; or
(f) Approvals: any consent, authorization, license, certificate or approval of
or registration with or declaration to any Government Entity in connection
with this Agreement (including, without limitation): -
(i) any authorization required by Lessee to obtain and transfer freely
Dollars (or any other relevant currency) out of any relevant country;
or
(ii) required by Lessee to authorize, or in connection with, the
execution, delivery, validity, enforceability or admissibility in
evidence of this Agreement or the performance by Lessee of its
obligations under this Agreement; or
(iii) the registration of the Aircraft; or
(iv) any airline license or air transport license including, without
limitation, authority to operate the Aircraft under FAR Part 121 and
a Certificate of Public Convenience and Necessity issued under
Section 41102 of Title 49 of the United States Code;
is modified in a manner unacceptable to Lessor or is withheld, or is
revoked, suspended, canceled, withdrawn, terminated or not renewed, or
otherwise ceases to be in full force; or
(g) Bankruptcy, etc.:
(i) Lessee or any Subsidiary consents to the appointment of a custodian,
receiver, trustee or liquidator of itself or all or any material part
of Lessee's property or Lessee's consolidated property, or Lessee or
any Subsidiary admits in writing its inability to, or is unable to,
or does not, pay its debts generally as they come due, or makes a
general assignment for the benefit of creditors, or Lessee or any
Subsidiary files a voluntary petition in bankruptcy or a voluntary
petition seeking reorganization in a proceeding under any bankruptcy
or insolvency Laws (as now or hereafter in effect) or an answer
admitting the material allegations of a petition filed against Lessee
or any Subsidiary in any such
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proceeding, or Lessee or any subsidiary by voluntary petition, answer
or consent seeks relief under the provisions of any other bankruptcy,
insolvency or other similar Law providing for the reorganization or
winding-up of corporations, or provides for an agreement,
composition, extension or adjustment with its creditors, or any
corporate action (including, without limitation, any board of
directors or shareholder action) is taken by Lessee or any Subsidiary
in furtherance of any of the foregoing, whether or not the same is
fully effected or accomplished; or
(ii) an order, judgment or decree is entered by any court appointing,
without the consent of Lessee or any of its Subsidiaries, a
custodian, receiver, trustee or liquidator of Lessee or any
Subsidiary, or of all or any material part of Lessee's property or
Lessee's consolidated property is sequestered, and any such order,
judgment or decree of appointment or sequestration remains in effect,
undismissed, unstayed or unvacated for a period of 30 days after the
date of entry thereof or at any time an order for relief is granted;
or
(iii) an involuntary petition against Lessee or any Subsidiary in a
proceeding under the United States Federal Bankruptcy Laws or other
insolvency Laws (as now or hereafter in effect) is filed and is not
withdrawn or dismissed within 30 days thereafter or at any time an
order for relief is granted in such proceeding, or if, under the
provisions of any Law providing for reorganization or winding-up of
corporations which may apply to Lessee or any Subsidiary, any court
of competent jurisdiction assumes jurisdiction over, or custody or
control of, Lessee or any Subsidiary or of all or any material part
of Lessee's property, or Lessee's consolidated property and such
jurisdiction, custody or control remains in effect, unrelinquished,
unstayed or unterminated for a period of 30 days or at any time an
order for relief is granted in such proceeding; or
(h) Unlawful: it becomes unlawful for Lessee to perform any of its obligations
under this Agreement or this Agreement becomes wholly or partly invalid or
unenforceable; or
(i) Suspension of Business: Lessee or any of its Subsidiaries suspends or
ceases or threatens to suspend or cease to carry on all or a substantial
part of its business; or
(j) Disposal: Lessee or any of its Subsidiaries disposes, conveys or transfers
or threatens to dispose, convey or transfer of all or a material part of
its assets, liquidates or dissolves or consolidates or merges with any
other Person whether by one or a series of transactions, related or not,
other than for the purpose of a reorganization of the terms of which have
received the previous consent in writing of Lessor; or
(k) Rights and Remedies: the existence, validity, enforceability or priority of
the rights of Lessor as owner and the rights of Lessor as lessor in respect
of the Aircraft are challenged by Lessee or any other person claiming by or
through Lessee; or
(l) Delivery: Lessee fails to timely comply with its obligations under Clause 4
to accept delivery of the Aircraft; or
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(m) Ownership, Security Interests and Related Matters: Lessee fails to timely
comply with its obligations under Clause 8.7; or
(n) Transfer: Lessee makes or permits any assignment or transfer of this
Agreement, or any interest herein, or of the right to possession of the
Aircraft, the Airframe, or any Engine; or
(o) Redelivery: Lessee fails to return the Aircraft to Lessor on the Expiry
Date in accordance with Clause 12.
(p) Adverse Change: any event or series of events occurs which, in the
reasonable opinion of Lessor might have a material adverse effect on the
financial condition or operations of Lessee and its Subsidiaries or on the
ability of Lessee to comply with its obligations under this Agreement; or
13.2 Rights: If an Event of Default occurs, Lessor may at its option (and
without prejudice to any of its other rights under this Agreement), at any
time thereafter (without notice to Lessee except as required under
applicable Law):-
(a) by notice to Lessee and with immediate effect on dispatch of such notice
terminate the letting of the Aircraft (but without prejudice to the
continuing obligations of Lessee under this Agreement), whereupon all
rights of Lessee under this Agreement shall cease; and/or
(b) proceed by appropriate court action or actions to enforce performance of
this Agreement, including, without limitation, the payment of all Rent and
all other amounts payable to Lessor or any Indemnitee pursuant to the terms
hereof; and/or
(c) proceed by appropriate court action or actions to recover damages for the
breach of this Agreement which shall include, without limitation: -
(i) all Rent and other amounts which are or become due and payable
hereunder prior to the date Lessor recovers possession of the
Aircraft;
(ii) at Lessor's election, either one of the amounts determined pursuant
to Clause 13.2(e) or Clause 13.2(f) below or any lost profits
suffered by Lessor as a consequence of Lessor's inability to place
the Aircraft with another lessee on financial terms that are as
favorable to Lessor as the terms of this Agreement;
(iii) all costs associated with Lessor's exercise of its remedies
hereunder, including, but not limited to, repossession costs, legal
fees, Aircraft storage costs, Aircraft re-lease or sale costs and
Lessor's internal costs and expenses (including the cost of personnel
time calculated based upon the compensation paid to the individuals
involved on an annual basis and a general Lessor overhead
allocation);
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(iv) any loss, premium, penalty or expense which may be incurred in
repaying funds raised to finance the Aircraft or in unwinding any
financial instrument relating in whole or in part to Lessor's
financing of the Aircraft;
(v) any loss, cost, expense or liability sustained by Lessor due to
Lessee's failure to redeliver the Aircraft in the condition required
by this Agreement; and
(vi) any other losses (including lost profits), damage, expense, cost or
liability which Lessor suffers or incurs as a result of the Event of
Default and/or termination of this Agreement, including an amount
sufficient to fully compensate Lessor for any loss of or damage to
Lessors residual interest in the Aircraft caused by Lessee's default;
and/or
(d) either: -
(i) enter upon the premises where all or any part of the Aircraft is
located and take immediate possession of and, at Lessor's sole
option, remove the same (and/or any engine which is not an Engine but
which is installed on the Airframe, subject to the rights of the
owner, lessor or secured party thereof) or cause it to be redelivered
to Lessor at a location in the United States identified by Lessor (or
such other location as Lessor may require) (the "Return Location"),
by summary proceedings or otherwise, all without liability accruing
to Lessor for or by reason of such entry or taking of possession
whether for the restoration of damage to property, or otherwise,
caused by such entry or taking, except damages caused by gross
negligence or willful misconduct; and Lessor is hereby irrevocably,
by way of security for Lessee's obligations under this Agreement,
appointed attorney for Lessee in causing the redelivery or in
directing the pilots of Lessee or other pilots to fly the Aircraft to
that airport and will have all the powers and authorizations
necessary for taking that action; or
(ii) by serving notice require Lessee to redeliver the Aircraft to Lessor
at a point within the continental United States designated by Lessor;
and/or
(e) sell at private or public sale, as Lessor may determine, or hold, use,
operate or lease to others the Aircraft as Lessor in its sole discretion
may determine, all free and clear of any rights of Lessee; and/or
(f) whether or not Lessor shall have exercised, or shall thereafter at any time
exercise, any of its rights under paragraph (a), paragraph (b), paragraph
(c), paragraph (d), or paragraph (e) of this Clause 13.2, Lessor, by 30
days written notice to Lessee specifying a payment date, may demand that
Lessee pay to Lessor, and Lessee shall pay to Lessor, on the payment date
specified in such notice, as liquidated damages for loss of bargain and not
as a penalty (in lieu of the Rent due for the period commencing after the
date specified for payment in such notice), any unpaid Rent for the
Aircraft and other amounts owing under this Agreement (prorated in the case
of Rent on a daily basis) to and including the payment date specified in
such notice, plus the amount, if any, by which the aggregate Rent for the
remainder of the Term (determined without reference
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to any right of Lessor to terminate the leasing of the Aircraft, whether or
not such right is exercised), discounted periodically (equal to installment
frequency) to present worth at the interest rate of 4 percent (4%) per
annum, exceeds the fair market rental value (determined pursuant to the
Appraisal Procedure) of the Aircraft for the remainder of the Term, after
discounting such fair market rental value periodically (equal to
installment frequency) to present worth as of the payment date specified in
such notice at the interest rate of 4 percent (4%) per annum; and/or
(g) In the event that Lessor, pursuant to Clause 13.2(e) above, shall have
relet the Aircraft under a lease which extends at least to the date upon
which the Term for the Aircraft would have expired but for Lessee's
default, Lessor, in lieu of exercising its rights under Clause 13.2(f)
above with respect to the Aircraft, may, if it shall so elect, demand that
Lessee pay Lessor, and Lessee shall pay Lessor, as liquidated damages for
loss of bargain and not as a penalty (in lieu of the Rent for the Aircraft
due after the time of reletting) any unpaid Rent for the Aircraft due up to
the date of reletting and any other amounts owing under this Agreement,
plus the amount, if any, by which the aggregate Rent for the Aircraft,
which would otherwise have become due over the remainder of the Term
(determined without reference to any right of Lessor to terminate the
leasing of the Aircraft, whether or not such right is exercised),
discounted periodically (equal to installment frequency) to present worth
as of the date of reletting at the interest rate of 4 percent (4%) per
annum, exceeds the aggregate basic rental payments to become due under the
reletting from the date of such reletting to the date upon which the Term
for the Aircraft would have expired but for Lessee's default, discounted
periodically (equal to installment frequency) to present worth as of the
date of the reletting at the interest rate of 4 percent (4%) per annum;
and/or
(h) in lieu of the remedies set forth in paragraphs (a), (c), (d), (e), (f),
and (g) of this Clause 13.2, by 30 days written notice to Lessee specifying
a payment date, Lessor may demand that Lessee pay to Lessor, and Lessee
shall pay to Lessor on the payment date specified in such notice as
liquidated damages for loss of bargain and not as a penalty (in lieu of the
Rent due for the period commencing after the date specified for payment in
such notice), any unpaid Rent for the Aircraft and other amounts payable
under this Agreement (prorated in the case of Rent on a daily basis) to and
including the payment date specified in such notice, plus an amount
equaling the aggregate Rent for the remainder of the Term, discounted
periodically (equal to installment frequency) to present worth at the
interest rate of 4 per cent (4%) per annum;
(i) draw upon the Deposit or the Maintenance Reserves furnished under this
Agreement or the Related Agreements (as those times are defined in such
agreements) and apply such amounts to amounts owing to Lessor hereunder.
Lessee, for itself and for its successors and assigns, hereby agrees that,
to the extent now or hereafter permitted by applicable Law, notwithstanding
any provision of the Federal Bankruptcy Code as amended from time to time,
the title of Lessor to the Aircraft and any right of Lessor to take
possession of the Aircraft in compliance with the provisions of this
Agreement, in each case, upon the occurrence and continuance of
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an Event of Default, shall not be affected by the provisions of the Federal
Bankruptcy Code, as amended from time to time.
In addition to the foregoing, Lessee shall be liable for any and all unpaid
Rent and other amounts payable under this Agreement during or after the
exercise of any of the aforementioned remedies, together with interest on
such unpaid amounts at the Interest Rate set forth in Letter Agreement No.
1, and until satisfaction of all of Lessee's obligations to Lessor
hereunder and (on an After-Tax Basis) for all reasonable legal fees and
other reasonable costs and expenses incurred by Lessor by reason of the
occurrence of any Event of Default or the exercise of Lessor's remedies
with respect thereto, including all costs and expenses incurred in
connection with the return of the Aircraft in accordance with the terms of
Clause 12 hereof or in placing the Aircraft in the condition and with
airworthiness certification as required by such Clause.
In effecting any repossession, Lessor and its representatives and agents,
to the extent permitted by Law, shall: (i) have the right to enter upon any
premises where it reasonably believes the Aircraft, the Airframe, an Engine
or Part to be located; (ii) not be liable, in conversion or otherwise, for
the taking of any personal property of Lessee which is in or attached to
the Aircraft, the Airframe, an Engine or Part which is repossessed;
provided, however, that Lessor shall return to Lessee all personal property
of Lessee or its passengers which was on the Aircraft at the time Lessor
re-takes possession of the Aircraft; (iii) not be liable or responsible, in
any manner, for any inadvertent damage or injury to any of Lessee's
property in repossessing and holding the Aircraft, the Airframe, an Engine
or Part, except for that caused by or in connection with Lessor's gross
negligence or willful acts; (iv) have the right to maintain possession of
and dispose of the Aircraft, the Airframe, an Engine or Part on any
premises owned by Lessee or under Lessee's control; and (v) have the right
to obtain a key to any premises at which the Aircraft, the Airframe, an
Engine or Part may be located from the landlord or owner thereof.
If reasonably required by Lessor, Lessee, at its sole expense, shall
assemble and make the Aircraft, the Airframe, an Engine or Part available
at a place designated by Lessor in accordance with Clause 12 hereof. Lessee
hereby agrees that, in the event of the return to or repossession by Lessor
of the Aircraft, the Airframe, an Engine or Part, any rights in any
warranty (express or implied) previously assigned to Lessee or otherwise
held by Lessee shall without further act, notice or writing be assigned or
reassigned to Lessor, if assignable. Lessee shall be liable to Lessor on an
After-Tax Basis for all reasonable expenses, disbursements, costs and fees
incurred in (i) repossessing, storing, preserving, shipping, maintaining,
repairing and refurbishing the Aircraft, the Airframe, an Engine or Part to
the condition required by Clause 12 hereof and (ii) preparing the Aircraft,
the Airframe, an Engine or Part for sale or lease, advertising the sale or
lease of the Aircraft, the Airframe, an Engine or Part and selling or
releasing the Aircraft, the Airframe, an Engine or Part. Lessor is hereby
authorized and instructed, at its option, to make reasonable expenditures
which Lessor considers advisable to repair and restore the Aircraft, the
Airframe, an Engine or Part to the condition required by Clause 12 hereof,
all at Lessee's sole expense.
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At any public sale of the Aircraft, the Airframe, an Engine or Part
pursuant to this Clause, Lessor may bid for and purchase such property and
Lessee agrees that the amounts paid therefor shall be used in the
computation contemplated herein.
With the exception that the remedy in Clause 13.2(g) can be elected only if
the remedy in Clause 13.2(f) is not elected and the remedy in Clause
13.2(h) can be elected only in lieu of all other remedies save the remedies
in Clauses 13.2(b) and 13.2(i), no remedy referred to in this Clause 13 is
intended to be exclusive, but, to the extent permissible hereunder or under
applicable Law, each shall be cumulative and in addition to any other
remedy referred to above or otherwise available to Lessor at Law or in
equity; and the exercise or beginning of exercise by Lessor of any one or
more of such remedies shall not preclude the simultaneous or later exercise
by Lessor of any or all of such other remedies; provided, however, that
nothing in this Clause 13 shall be construed to permit Lessor to obtain a
duplicate recovery of any element of damages to which Lessor is entitled.
No express or implied waiver by Lessor of any Default or Event of Default
shall in any way be, or be construed to be, a waiver of any future or
subsequent Default.
13.3 Deregistration: If an Event of Default occurs, Lessor may sell or otherwise
deal with the Aircraft free and clear of any leasehold or other interest of
Lessee as if this Agreement had never been made and Lessee will at the
request of Lessor take all steps necessary to effect (if applicable)
deregistration of the Aircraft and its export from the country where the
Aircraft is for the time being situated and any other steps necessary to
enable the Aircraft to be redelivered to Lessor in accordance with this
Agreement including without limitation execution and filing of a
certificate or other instrument of lease termination with the Air Authority
and; Lessee hereby irrevocably and by way of security for its obligations
under this Agreement appoints (which appointment is coupled with an
interest) Lessor as its attorney to execute and deliver any documentation
and to do any act or thing required in connection with the foregoing.
14. ASSIGNMENT
14.1 Lessee's Assignment: LESSEE WILL NOT ASSIGN, TRANSFER (VOLUNTARILY OR
INVOLUNTARILY BY OPERATION OF LAW OR OTHERWISE) OR CREATE OR PERMIT TO
EXIST ANY SECURITY INTEREST OVER, ANY OF ITS RIGHTS UNDER THIS AGREEMENT.
14.2 Lessor's Assignment: Lessor may assign or transfer all or any of its rights
under this Agreement and in the Aircraft. In the case of an assignment
other than by way of security, Lessor will be released from and will have
no further obligation under this Agreement following the assignment of all
its rights under this Agreement and the assumption by the assignee or
transferee of all of Lessor's obligations under this Agreement.
Notwithstanding any such assignment, Lessor will remain entitled to the
benefit of each indemnity and the liability insurances effected under this
Agreement. Lessee will comply with all reasonable requests of Lessor, its
successors and assigns in respect of any such assignment. Lessor will
promptly notify Lessee of any assignment.
14.3 Transfer: If Lessor desires to effect any assignment or transfer of its
rights and obligations under this Agreement, Lessee agrees to cooperate and
take all such steps as
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Lessor may reasonably request to give the transferee the benefit of this
Agreement and to acknowledge the release of Lessor from its obligations
hereunder as of the time of such assignment or transfer.
15. ILLEGALITY
If it is or becomes unlawful in any jurisdiction for Lessor to give effect
to any of its obligations as contemplated by this Agreement or to continue
this Agreement, Lessor may by notice in writing to Lessee terminate the
leasing of the Aircraft under this Agreement and Lessee will forthwith
redeliver the Aircraft to Lessor in accordance with Clause 12. Without
prejudice to the foregoing Lessor will consult in good faith with Lessee as
to any steps which may be taken to restructure the transaction to avoid
that unlawfulness but will be under no obligation to take any such steps.
16. MISCELLANEOUS
16.1 Waivers, Remedies Cumulative: The rights of Lessor under this Agreement:-
(i) may be exercised as often as necessary;
(ii) are cumulative and not exclusive of its rights under any Law; and
(iii) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right will not constitute a
waiver of that right.
16.2 Delegation: Lessor may delegate to any person or persons all or any of the
trusts, powers or discretions vested in it by these presents and any such
delegation may be made upon such terms and conditions and subject to such
regulations (including power to sub-delegate) as Lessor in its absolute
discretion thinks fit.
16.3 Certificates: Save where expressly provided in this Agreement, any
certificate or determination by Lessor as to any rate of interest or as to
any other amount payable under this Agreement will, in the absence of
manifest error, be conclusive and binding on Lessee.
16.4 Appropriation: If any sum paid or recovered in respect of the liabilities
of Lessee under this Agreement is less than the amount then due, Lessor may
apply that sum to amounts due under this Agreement in such proportions and
order and generally in such manner as Lessor may determine at its sole
discretion.
16.5 Currency: Lessee acknowledges that the specification of Dollars in this
Agreement is of the essence and that Dollars shall be the currency of
account in any and all events. Lessee waives any right it may have in any
jurisdiction to pay any amount under this Agreement in a currency other
than Dollars.
16.6 Set-off: Lessor may set off any matured obligation owed by Lessee under
this Agreement, the Related Agreements or under any other agreement between
Lessor (or
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any affiliate or associate of Lessor or a trustee-lessor acting for Lessor
as beneficiary) and Lessee against any obligation (whether or not matured)
owed by Lessor to Lessee, regardless of the place of payment or currency.
If the obligations are in different currencies, Lessor may convert either
obligation at the market rate of exchange available in New York or at its
option London for the purpose of the set-off. If an obligation is
unascertained or unliquidated, Lessor may in good faith estimate that
obligation and set off in respect of the estimate, subject to the relevant
party accounting to the other when the obligation is ascertained or
liquidated. Lessor will not be obliged to pay any amounts to Lessee under
this Agreement so long as any sums which are then due from Lessee under
this Agreement, the Related Agreements or under any other agreement between
Lessor (or any affiliate or associate of Lessor or a trustee-lessor acting
for Lessor as beneficiary) and Lessee remain unpaid and any such amounts
which would otherwise be due will fall due only if and when Lessee has paid
all such sums except to the extent Lessor otherwise agrees or sets off such
amounts against such payment pursuant to the foregoing.
16.7 Severability: If a provision of this Agreement is or becomes illegal,
invalid or unenforceable in any jurisdiction, that will not affect:-
(a) the legality, validity or enforceability in that jurisdiction of any other
provision of this Agreement; or
(b) the legality, validity or enforceability in any other jurisdiction of that
or any other provision of this Agreement.
16.8 Remedy: If Lessee fails to comply with any provision of this Agreement,
Lessor may, without being in any way obliged to do so or responsible for so
doing and without prejudice to the ability of Lessor to treat the non-
compliance as a Default or an Event of Default, effect compliance on behalf
of Lessee, whereupon Lessee shall become liable to pay immediately any sums
expended by Lessor together with all costs and expenses (including legal
costs) in connection therewith.
16.9 Expenses: Whether or not the Aircraft is delivered to Lessee pursuant to
this Agreement, Lessee is to pay to Lessor on an After-Tax Basis on
demand:-
(a) all costs associated with perfecting Lessor's rights in the Aircraft
and/or this Agreement in the State of Registration, the Habitual Base
of the Aircraft (and other states as appropriate given the operation
of the Aircraft), including (but not limited to) the provision of
legal opinions, tax advice, stamp duties, translations and
registrations, whether required by Lessor or Lessee.
(b) all expenses (including legal, professional, and out-of-pocket
expenses) incurred or payable by Lessor related to any amendment to
or extension of or other documentation in connection with, or the
granting of any waiver or consent under this Agreement requested by
Lessee or the monitoring of compliance by Lessee with this Agreement;
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(c) all expenses (including legal, survey and other costs) payable or
incurred by Lessor in contemplation of, or otherwise in connection
with, the enforcement of or preservation of any of Lessor's or
Owner's rights under this Agreement, or in respect of the
repossession of the Aircraft;
(d) a $25,000 documentary review fee to defray Lessor's expenses of
review in connection with each and any request for Lessor's consent
to a sub-lease, wet-lease or parting of possession as specified in
Clause 8.5; and
(e) a $5,000 documentary fee to defray a portion of Lessor's expenses in
connection with preparation of this Agreement, receipt whereof is
acknowledged.
All expenses payable pursuant to this Clause 16.9 will be paid in the
currency in which they are incurred by Lessor.
16.10 Time of Essence: The time stipulated in this Agreement for all payments
payable by Lessee to Lessor and the prompt, punctual and performance of
Lessee's other obligations under this Agreement are of the essence of
this Agreement.
16.11 Notices: All notices under, or in connection with, this Agreement will,
unless otherwise stated, be given in writing by letter, facsimile or
SITA. Any such notice is deemed effectively to be given as follows:-
(i) if by letter, on the earlier of the date when delivered or the 7th
day after dispatch;
(ii) if by facsimile or SITA, when transmitted and full transmission has
been separately notified by telephone by the transmitting party.
The address, telex numbers, SITA, facsimile and telephone numbers of
Lessee, Lessor and Owner are as follows:-
Lessee: Address: 12015 East 46th Avenue
Denver, Colorado 80239
United States of America
Attn: General Counsel
SITA: DENGAF9
Facsimile: (303) 371-7007
Telephone: (303) 371-7400
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Lessor: Address: General Electric Capital Corporation
c/o GE Capital Aviation Services, Inc.
201 High Ridge Road
Stamford, CT 06927-4900
Attn: Senior Vice President-Portfolio and
Risk Management, North America
Facsimile: (203) 961-5965
Telephone: (203) 357-4585
With a copy to: Address GE Capital Aviation Services, Inc.
201 Mission Street
Suite 2700
San Francisco, CA 94105
Attn: Senior Vice President-Marketing
Facsimile: (415) 284-7477
Telephone: (415) 284-7400
16.12 Governing Law and Jurisdiction:
(a) THIS AGREEMENT IN ALL RESPECTS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE GOVERNING LAW (WITHOUT REFERENCE TO CONFLICT OF LAWS
PRINCIPLES);
(b) For the benefit of Lessor, Lessee agrees that the courts of the United
States District Court for the Northern District of California and any
California state court sitting in the City of San Francisco, California
are to have nonexclusive jurisdiction to settle any disputes arising out
of or relating to this Agreement and submits itself and its property to
the nonexclusive jurisdiction of the foregoing courts with respect to such
disputes;
(c) Without prejudice to any other mode of service, Lessee: -
(i) appoints The Prentice-Hall Corporation System, Inc., 1455 Response
Road, Suite 250, Sacramento, California, 95815 as its agent for
service of process relating to any proceedings before the California
courts in connection with this Agreement and agrees to maintain the
process agent in California notified to Lessor;
(ii) agrees that failure by a process agent to notify Lessee of the
process shall not invalidate the proceedings concerned;
(iii) consents to the service of process relating to any such proceedings
by prepaid mailing of a copy of the process to Lessee's agent at the
address identified in paragraph (i) or by prepaid mailing by air
mail, certified or registered mail of a copy of the process to
Lessee at the address set forth in Clause 16.11;
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(d) LESSEE: -
(i) WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY OBJECTION WHICH
LESSEE MAY NOW OR HEREAFTER HAVE TO THE COURTS REFERRED TO IN CLAUSE
16.12(B) ABOVE ON GROUNDS OF INCONVENIENT FORUM OR OTHERWISE AS
REGARDS PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT;
(ii) WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY OBJECTION WHICH
LESSEE MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
BROUGHT IN THE COURTS REFERRED TO IN CLAUSE 16.12(B);
(iii) AGREES THAT A JUDGMENT OR ORDER OF ANY COURT REFERRED TO IN CLAUSE
16.12(B) IN CONNECTION WITH THIS AGREEMENT IS CONCLUSIVE AND BINDING
ON IT AND MAY BE ENFORCED AGAINST IT IN THE COURTS OF ANY OTHER
JURISDICTION;
(e) NOTHING IN THIS CLAUSE 16.12 LIMITS THE RIGHT OF LESSOR TO BRING
PROCEEDINGS AGAINST LESSEE IN CONNECTION WITH THIS AGREEMENT: -
(i) IN ANY OTHER COURT OF COMPETENT JURISDICTION; OR
(ii) CONCURRENTLY IN MORE THAN ONE JURISDICTION;
(f) LESSEE IRREVOCABLY AND UNCONDITIONALLY: -
(i) AGREES THAT IF LESSOR BRINGS LEGAL PROCEEDINGS AGAINST IT OR ITS
ASSETS IN RELATION TO THIS AGREEMENT NO IMMUNITY FROM SUCH LEGAL
PROCEEDINGS (WHICH WILL BE DEEMED TO INCLUDE WITHOUT LIMITATION,
SUIT, ATTACHMENT PRIOR TO JUDGMENT, OTHER ATTACHMENT, THE OBTAINING
OF JUDGMENT, EXECUTION OR OTHER ENFORCEMENT) WILL BE CLAIMED BY OR
ON BEHALF OF ITSELF OR WITH RESPECT TO ITS ASSETS;
(ii) WAIVES ANY SUCH RIGHT OF IMMUNITY WHICH IT OR ITS ASSETS NOW HAS OR
MAY IN THE FUTURE ACQUIRE;
(iii) CONSENTS GENERALLY IN RESPECT OF ANY SUCH PROCEEDINGS TO THE GIVING
OF ANY RELIEF OR THE ISSUE OF ANY PROCESS IN CONNECTION WITH SUCH
PROCEEDINGS INCLUDING, WITHOUT LIMITATION, THE MAKING, ENFORCEMENT
OR EXECUTION AGAINST ANY PROPERTY WHATSOEVER (IRRESPECTIVE OF ITS
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USE OR INTENDED USE) OF ANY ORDER OR JUDGMENT WHICH
MAY BE MADE OR GIVEN IN SUCH PROCEEDINGS.
16.13 Sole and Entire Agreement: This Agreement and the other Operative
Documents are the sole and entire agreement between Lessor and Lessee in
relation to the leasing of the Aircraft, and supersede all previous
agreements in relation to that leasing.
16.14 Indemnitees: All rights expressed to be granted to each Indemnitee under
this Agreement (other than Lessor) are given to Lessor on behalf of that
Indemnitee.
16.15 Counterparts: This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. To the extent, if any, that this
Agreement constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction) no
Security Interest in this Agreement may be created through the transfer or
possession of any counterpart other than the counterpart that has been
marked "Counterpart No. 1" on the cover page thereof.
16.16 Language: All notices to be given under this Agreement will be in English.
All documents delivered to Lessor pursuant to this Agreement will be in
English, or if not in English, will be accompanied by a certified English
translation. If there is any inconsistency between the English version of
this Agreement and any version in any other language, the English version
will prevail.
16.17 No Brokers: Lessee hereby represents and warrants that it has not paid,
agreed to pay or caused to be paid directly or indirectly in any form, any
commission, percentage, contingent fee, brokerage or other similar
payments of any kind, in connection with the establishment or operation of
this Agreement, to any employee of Lessor or to any person or entity in
the State of Registration or elsewhere, except to Excluded Persons, as
herein defined. Lessor hereby represents and warrants that it has not
paid, agreed to pay or caused to be paid directly or indirectly in any
form, any commission, percentage, contingent fee, brokerage or other
similar payments of any kind, in connection with the establishment or
operation of this Agreement, to any employee of Lessee or to any person or
entity in the State of Registration or elsewhere, except to Excluded
Persons, as herein defined. For the purposes hereof, the term "Excluded
Persons" shall mean (x) in the case of Lessor, any of its officers,
directors, employees, attorneys or other professional advisors, whether
located in the State of Registration or elsewhere, and (y) in the case of
Lessee, any of its officers, directors, employees, attorneys or other
professional advisors, whether located in the State of Registration or
elsewhere. Each party agrees to indemnify and hold the other harmless from
and against any and all claims, suits, damages, costs and expenses
(including, but not limited to reasonable attorneys' fees) asserted by any
agent, broker or other third party for any commission or compensation of
any nature whatsoever based upon this Agreement or the Operative Documents
or the Aircraft, if such claim damage, cost or expense arises out of any
action or alleged action by the indemnifying party, its employees or
agents.
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17. DISCLAIMERS AND WAIVERS
17.1 Exclusion: THE AIRCRAFT IS TO BE LEASED AND DELIVERED HEREUNDER "AS IS,
WHERE IS" AND LESSEE AGREES AND ACKNOWLEDGES THAT, SAVE AS EXPRESSLY STATED
IN THIS AGREEMENT, LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR
HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN (WHETHER BY VIRTUE OF
HAVING DONE OR FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR FAILED TO
ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS AGREEMENT OR OTHERWISE),
ANY WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO, THE
AIRCRAFT, INCLUDING BUT NOT LIMITED TO: -
(a) THE TITLE, DESCRIPTION, AIRWORTHINESS, COMPLIANCE WITH SPECIFICATIONS,
OPERATION, MERCHANTABILITY, FREEDOM FROM CLAIMS OF INFRINGEMENT OR THE
LIKE, FITNESS FOR ANY PARTICULAR USE OR PURPOSE, VALUE, DURABILITY,
CONDITION, OR DESIGN, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP,
THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, OR AS
TO ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED
(INCLUDING ANY IMPLIED WARRANTY ARISING FROM A COURSE OF PERFORMANCE OR
DEALING OR USAGE OF TRADE) WITH RESPECT TO THE AIRCRAFT, ANY ENGINE OR ANY
PART; OR
(b) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT OR IN TORT
OUT OF ANY NEGLIGENCE OR STRICT LIABILITY OF LESSOR OR OTHERWISE; FOR: -
(i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY
OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY ANY INADEQUACY
THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE
IN CONNECTION THEREWITH;
(ii) THE USE OPERATION, OR PERFORMANCE OF THE AIRCRAFT OR ANY RISKS
RELATING THERETO;
(iii) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS
OR CONSEQUENTIAL DAMAGES;
(iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT
OR REPLACEMENT OF THE AIRCRAFT, ANY ENGINE OR ANY PART; OR
(v) ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
17.2 Waiver: LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL ITS
RIGHTS IN RESPECT OF ANY WARRANTY OR REPRESENTATION,
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EXPRESS OR IMPLIED, ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR
HOWSOEVER AND WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF THE
POSSESSION, OPERATION OR PERFORMANCE OF THE AIRCRAFT, ANY ENGINE OR ANY
PART OR THIS AGREEMENT OR THE OTHER OPERATIVE DOCUMENTS EXCEPT TO THE
EXTENT ARISING UNDER CLAUSE 2.4.
17.3 Disclaimer of Consequential Damages: LESSEE AGREES THAT IT SHALL NOT BE
ENTITLED TO RECOVER, AND HEREBY DISCLAIMS AND WAIVES ANY RIGHT THAT IT MAY
OTHERWISE HAVE TO RECOVER, CONSEQUENTIAL DAMAGES (AS SUCH TERM IS DEFINED
IN SECTION 10520(B) OF THE CALIFORNIA UNIFORM COMMERCIAL CODE) AS A RESULT
OF ANY BREACH OR ALLEGED BREACH BY LESSOR OF ANY OF THE AGREEMENTS,
REPRESENTATIONS OR WARRANTIES OF LESSOR CONTAINED IN THIS AGREEMENT OR THE
OTHER OPERATIVE DOCUMENTS.
17.4 Confirmation: LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF
THIS CLAUSE AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS HAVE BEEN
CALCULATED BASED ON ITS PROVISIONS.
18. SECTION 1110
Lessee acknowledges that Lessor would not have entered into this Agreement
unless it had available to it the benefits of a lessor under Section 1110
of Title 11 of the United States Code. Lessee covenants and agrees with
Lessor that to better ensure the availability of such benefits, Lessee
shall support any motion, petition or application filed by Lessor with any
bankruptcy court having jurisdiction over Lessee, whereby Lessor seeks
recovery of possession of the Aircraft under said Section 1110 and shall
not in any way oppose such action by Lessor unless Lessee shall have
complied with the requirements of said Section 1110 to be fulfilled in
order to entitle Lessee to continued use and possession of the Aircraft
hereunder. In the event said Section 1110 is amended, or if it is repealed
and another statute is enacted in lieu thereof, Lessor and Lessee agree to
amend this Agreement and take such other action not inconsistent with this
Agreement as Lessor reasonably deems necessary so as to afford to Lessor
the rights and benefits as such amended or substituted statute confers upon
owners and lessors of aircraft similarly situated to Lessor.
19. USURY LAWS: The parties intend to contract in strict compliance with the
usury Laws of the States of California and Colorado and, to the extent
applicable, the United States of America. Notwithstanding anything to the
contrary in the Operative Documents, Lessee will not be obligated to pay
any interest in excess of the maximum non-usurious interest rate, as in
effect from time to time, which may by applicable Law be charged,
contracted for, reserved, received or collected by Lessor in connection
with the Operative Documents. During any period of time in which the then-
applicable highest lawful rate is lower than the rate specified in Clauses
5.11 or 13.2, interest will accrue and be payable at such highest lawful
rate; however, if at later times such highest lawful rate is greater than
the rate specified in Clauses 5.11 or 13.2, then Lessee will
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pay interest at the highest lawful rate until the aggregate amount of
interest paid by Lessee equals the amount of interest that would have been
payable in accordance with the interest rate specified in Clauses 5.11 or
13.2.
20. MODIFICATION OR REVISION:
Neither this Agreement nor any term of this Agreement may be modified,
rescinded, changed waived, discharged or terminated except by a writing
signed by the party to be charged. Lessor and Lessee acknowledge their
agreement to the provision of this Clause 20 by their initials below: -
LESSOR: LESSEE:
---------- ------------
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21. IN WITNESS whereof the parties hereto have executed this Agreement on the
date shown at the beginning of this Agreement.
WITNESS SIGNED on behalf of
GENERAL ELECTRIC CAPITAL CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
WITNESS SIGNED on behalf of FRONTIER AIRLINES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
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SCHEDULE 1
PART 1
DESCRIPTION OF AIRCRAFT
AIRCRAFT
- --------
MANUFACTURER: Boeing
MODEL: 737-300
SERIAL NUMBER: 28563
ENGINES
- -------
ENGINE TYPE: CFM-56-3C1
SERIAL NOS: SN [______]; SN [______];
On the Delivery Date the Aircraft shall be in the following condition:-
(a) New, ex factory;
(b) painted in Lessee's livery, provided that Lessor has been furnished with a
detailed working drawing no later than three months prior to the scheduled
Delivery Month and that costs in excess of normal aircraft exterior
painting costs to accommodate the application of Lessee's decorative decals
to the vertical fin and rudder areas shall be reimbursed by Lessee;
(c) have had accomplished all outstanding (i.e. at or prior to the Delivery
Date) mandatory inspection and modification requirements, airworthiness
directives and similar requirements applicable to the Aircraft, any Engine
or Part having a compliance date prior to the Delivery Date or within
90 days after the Delivery Date and which are required by the Air
Authority, and/or the FAA and/or mandated by any manufacturer of the
Aircraft, any Engine or Part;
(d) shall have no open, deferred, continued, carryover or placarded log book
items; and
(e) equipped for US domestic passenger operation under FAR Part 121.
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PART 2
AIRCRAFT DOCUMENTS
A. CERTIFICATES
. FAA Certificate of Airworthiness (on board aircraft)
. Current Aircraft Registration Certificate (on board aircraft)
B. AIRCRAFT STATUS SUMMARIES
. Aircraft record of flight time and cycles (listing of accumulated
hours and cycles as of specific dates)
. Airworthiness Directive Applicability and Compliance Report
. Supplemental Structural Inspection (SSID) Status (if applicable)
. Corrosion Prevention and Control Program Task Status
. List of Major Repairs and Alterations
. List and Status of Life Limited Components
. Check/Inspection Status
. List and Current Status of Time-Controlled Components
. Serialized On-Condition/Condition Monitored Components Inventory of
Installed Units
C. AIRCRAFT MAINTENANCE RECORDS
Airframe inspection, maintenance, modification, and repair documents with
maintenance and/or inspection signatures (as required) and description of
work done.
. Last "A", "B", "C" and "D" Checks (or equivalents)
(In the event that a check is performed in phases, all phases
necessary to constitute a complete block check are required. In the
event that check content varies by multiples of the check, all
multiples necessary to constitute a complete cycle are required.)
. Airworthiness Directive, Service Bulletin and modification compliance
documents including engineering orders, drawings, shop cards, etc., as
necessary to establish method of compliance, quality control
acceptance, and approval authority
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. Supplemental Structural Inspection (SSID) compliance documents and
findings (if applicable)
. Corrosion Prevention and Control Program compliance documents and
findings
. Documentation of major repairs and alterations including engineering
orders, drawings, Supplemental Type Certificates, Master Change
Notice, etc., as necessary to define work done, certification basis,
and approval authority.
. Aircraft weighing records
D. AIRCRAFT HISTORY RECORDS
. Service Difficulty Reports
. Accident or Incident Reports
E. ENGINE RECORDS (for each engine)
. Engine Master Record (record of installation and removal and
accumulated flight time and cycles)
. Airworthiness Directive Applicability and Compliance Report
. Manufacturer Service Bulletin Compliance Report
. List of Operator Modifications Incorporated, if any
. List of Major Repairs and Alterations, if any
. List of Current Status of Life Limited Components
. Check/Inspection Status
. List and Status of Time Controlled Components
. Serialization On-Condition/Condition Monitored Components Inventory of
Installed Units
. Repair, overhaul and inspection documents including FAA Forms 337
. Documents necessary to demonstrate installation and traceability to
new for life limited components currently installed
. Test Cell Records for last test
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F. APU RECORDS
. APU Master Record (record of installation and removal and accumulated
time and cycles)
. Airworthiness Directive Applicability and Compliance Report
. Manufacturer Service Bulletin Compliance Report
. List of Operator Modifications Incorporated, if any
. List and Current Status of Life Limited Components
. List and Status of Time Controlled Components
. Serialized On-Condition/Condition Monitored Components Inventory of
Installed Units
. Repair, overhaul and inspection documents including FAA Forms 337
. Documents necessary to demonstrate installation and traceability to
new for life limited components currently installed
G. COMPONENT RECORDS
. Time Controlled Component Historical Records with installation and
serviceability tags
. Documents necessary to demonstrate installation and traceability to
new for life limited components currently installed
. Installation records and serviceability tags for Serialized On-
condition/Condition Monitored Components (minimum of last twelve
months)
H. MANUALS
Airplane Delivered Used:
. Airplane Flight Manual
. Weight and Balance Control and Loading Manual
. Maintenance Manual (microfilm)
. Wiring Diagram Manual (microfilm)
. Illustrated Parts Catalog (microfilm)
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. Structural Repair Manual (microfilm)
. Engine Maintenance Manual (microfilm)
. Engine Illustrated Parts Manual (microfilm)
. Operator Weight and Balance Manual
. Pilots Handbook
. Minimum Equipment List
I. MISCELLANEOUS TECHNICAL DOCUMENTS
. Maintenance Program Specifications
. Engine Build Specifications
. Reference material necessary for interpretation of status summaries,
i.e. Operator Part Number Cross Reference
. Interior configuration drawings
. Boeing Aircraft Readiness Log
. Loose Equipment Inventory
. FAA Burn Certificates of Aircraft Interiors and seats
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SCHEDULE 2
CERTIFICATE OF TECHNICAL ACCEPTANCE
This Certificate of Technical Acceptance is delivered, on the date set out below
by Frontier Airlines, Inc. ("Lessee"), to GENERAL ELECTRIC CAPITAL CORPORATION
("Lessor"), pursuant to the Aircraft Lease Agreement dated as of the 18th of
November, 1996 between Lessor and Lessee (the "Agreement"). The capitalized
terms used in this Certificate shall have the meaning given to such terms in the
Agreement.
1. DETAILS OF ACCEPTANCE
Lessee hereby confirms to Lessor that Lessee has at [ ] o'clock on this
[ ] day of [ ], 199[ ], at [ ], accepted the following, in accordance with
the provisions of the Agreement:
(a) Boeing Model 737-300 airframe, Manufacturer's Serial No. 28563;
(b) CFM-56-3C1 Engines: -
Engine Manufacturer's Serial Nos.
1) [______]
2) [______]
(Each of which shall have more than 750 rated takeoff horsepower or the
equivalent of such horsepower);
(c) Fuel on Board Status: [ ] (lbs.) (gals.)
(d) Loose Equipment Check List: as per list signed by Lessor and Lessee and
attached hereto; and
(e) Aircraft Documents: as per list signed by Lessor and Lessee and attached
hereto.
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2. HOURS AND CYCLES DATA (as of Delivery Date)
(a) Airframe:
--------
Number of Hours since last phase "D" Check (Heaviest Check): ______ hours
-----------------------------------------------------------
"C" Check (or Equivalent):
-------------------------
Interval:
----------------------------
Time Since:
--------------------------
(b) Landing Gear Overhaul:
---------------------
Number of Cycles Since Last Overhaul:
Left Gear cycles
--------------------------
Right Gear cycles
-------------------------
Nose Gear cycles
--------------------------
Center Gear cycles
------------------------
Interval: Left Gear
---------------------
Right Gear
-------------------------
Nose Gear
--------------------------
Center Gear
------------------------
(c) Engines:
-------
Number of Hours Since Last Heavy Shop Visit:
S/N : hours
------------ -------
S/N : hours
------------ -------
Number of Hours Since Last Hot Section Refurbishment:
S/N : hours
------------ -------
S/N : hours
------------ -------
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Number of Hours Since Last Cold Section Refurbishment:
S/N : hours
------
S/N : hours
------
Hot Section Inspection:
Interval:
---------------------------
Time Since (S/N ):
--------------------------
Time Since (S/N ):
--------------------------
Time Remaining to First Restriction:
Engine S/N:
Hours: Restriction:
---------- ----------
Cycles: Restriction:
---------- ----------
Engine S/N:
Hours: Restriction:
---------- ----------
Cycles: Restriction:
---------- ----------
Average Cycles in Life Limited Parts (see attached Schedule):
---------
(d) Auxiliary Power Unit:
--------------------
Number of APU Hours Since Last Heavy Shop Visit:
hours Date accomplished
---------- ----------
Hot Section Inspection:
Interval:
------------------------
Time Since:
------------------------
(e) Time Controlled Components: [See attached DUJX Report]
--------------------------
(f) Interior Equipment:
------------------
Number of Passenger Seats and Configuration:
---------------
--------------------
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Number of Galleys and Location:
--------- ----------
Number of Lavatories and Location:
--------- ----------
LOPA - Attached
--------- ----------
List of Loose Equipment on Board:
--------------------------------------------- ---------------
--------------------------------------------- ---------------
--------------------------------------------- ---------------
--------------------------------------------- ---------------
--------------------------------------------- ---------------
--------------------------------------------- ---------------
(g) Avionics: Description Model Part
-------- ----------- ----- ----
No.
---
--------------------------------------------- --------- ----------------
--------------------------------------------- --------- ----------------
--------------------------------------------- --------- ----------------
--------------------------------------------- --------- ----------------
--------------------------------------------- --------- ----------------
--------------------------------------------- --------- ----------------
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3. ACCEPTANCE:
The undersigned hereby confirms that the Aircraft, Engines, Parts and
Aircraft Documents are acceptable to it, satisfy all of the Delivery
Condition Requirements and are in the condition for delivery to and
acceptance by Lessee as required under the Agreement, except as described
on the EXCEPTIONS LIST attached hereto. LESSEE'S EXECUTION AND DELIVERY OF
THIS CERTIFICATE SIGNIFIES LESSEE'S ABSOLUTE AND IRREVOCABLE ACCEPTANCE OF
DELIVERY OF THE AIRCRAFT TO IT FOR ALL PURPOSES HEREOF AND OF THE
AGREEMENT.
IN WITNESS WHEREOF, Lessee has, by its duly authorized representative,
executed this Certificate on the date in paragraph 1 above.
LESSEE: FRONTIER AIRLINES, INC.
By:
-------------------------
Title:
-------------------------
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ATTACHMENT
EXCEPTIONS LIST
---------------
The items set forth below represent non-conformities to the Delivery
Condition Requirements as of the Delivery Date, the corrective action (or
payment to Lessee in lieu thereof), if any, to be taken by Lessor and the date
of accomplishment. LESSEE ACKNOWLEDGES AND AGREES THAT LESSOR'S UNDERTAKINGS SET
FORTH HEREIN ARE IN FURTHERANCE OF AND SUBJECT TO THE AIRCRAFT LEASE AGREEMENT
DATED AS OF MARCH 25, 1997 BETWEEN LESSOR AND LESSEE (THE "LEASE"), THAT LESSOR
MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
HEREUNDER AND THAT LESSORS UNDERTAKINGS ARE SUBJECT TO EACH AND EVERY DISCLAIMER
OF LESSOR SET FORTH IN THE LEASE INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH
IN CLAUSE 17 THEREOF.
LESSOR LESSEE
By: By:
------------------------------- -------------------------------
Title: Title:
---------------------------- ----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
ITEM DESCRIPTION AND CORRECTIVE COMPLETION LESSEE'S
NO. ACTION DATE INITIALS
<S> <C> <C> <C>
---------------------------------
1. ---------------------------------
---------------------------------
--------------------------------- ---------------- ----------------
--
2. ---------------------------------
---------------------------------
---------------------------------
--------------------------------- ---------------- ----------------
--
3. ---------------------------------
---------------------------------
---------------------------------
--------------------------------- ---------------- ----------------
--
- ------------------------------------------------------------------------------
</TABLE>
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SCHEDULE 3
OPERATING CONDITION AT REDELIVERY
On the Expiry Date the Aircraft, subject to fair wear and tear generally,
will be in the condition set out below:-
1. GENERAL CONDITION
The Aircraft will:-
(a) be in the same configuration as on the Delivery Date or as reasonably
requested by Lessor;
(b) be clean by commercial airline standards;
(c) have installed the full complement of engines and other equipment, parts,
furnishings and accessories as is normally installed in the Aircraft and
the loose equipment as was installed in the Aircraft at the time of
Delivery, and be in a condition suitable for immediate operation in
commercial service;
(d) have in existence a valid certificate of airworthiness (or if required by
Lessor, a valid export certificate of airworthiness) with respect to the
Aircraft issued by the Air Authority and be in compliance without waiver
with all current FAR Part 121 requirements;
(e) comply with the manufacturer's original specifications or as modified by
Lessee with the approval of Lessor, and as required to meet the regulations
of the Air Authority at the Expiry Date;
(f) have undergone, immediately prior to redelivery, a block 'C' Check so that
all inspections falling due within the next following 3,200 Flight Hours,
3,000 Cycles or the next following 12 months of operation in accordance
with Lessee's Maintenance Program, have been accomplished;
(g) have had accomplished all outstanding (i.e. at or prior to the Expiry Date)
mandatory inspection and modification requirements, airworthiness
directives and similar requirements applicable to the Aircraft, any Engine
or Port having a compliance date during the Term or within 90 days after
the Expiry Date and which are required by the Air Authority, and/or
mandated by any manufacturer of the Aircraft, any Engine or Part, for this
purpose, compliance shall be by terminating action if: the latest date
permitted by such Airworthiness Directive for compliance by terminating
action falls within 90 days after the Expiry Date;
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(h) have installed all applicable vendor's and manufacturer's service bulletin
kits received free of charge by Lessee that are appropriate for the
Aircraft and to the extent not installed, those kits will be furnished free
of charge to Lessor;
(i) have its fuselage, engine cowlings, and vertical fin and rudder freshly
painted in an all white livery and the paint on the wings and the
horizontal stabilizer surfaces shall be clean and in good condition, free
from cracks, peeling, blistering and erosion and shall be uniform in color
and free from areas of local touch up;
(j) have all signs and decals clean, secure and legible;
(k) shall have no open, deferred, continued, carryover or placarded log book
items; and
(l) meet the requirements of FAR Part 36, Appendix C, Stage 3 noise compliance
as then in effect without waiver or restriction.
2. COMPONENTS
(a) Each Flight Hour and Cycle limited component (other than the APU) shall
have not less than 3,200 Flight Hours and 3,000 Cycles (whichever is the
more stringent test) of life remaining to the next expected removal, in
accordance with Lessee's Maintenance Program and shall be supported by
documentation indicating Time Since New, Cycles Since New, Time Since
Overhaul and Cycles Since Overhaul and shall be accompanied by appropriate
certification documentation acceptable to the Air Authority from the last
overhaul or zero time shop visit such as JAR form 1 or FAA form 8130-1;
(b) Each calendar-limited component including safety equipment will have not
less than 12 months life remaining to the next scheduled removal in
accordance with Lessee's Maintenance Program and shall be supported by
documentation indicating Time Since New, Cycles Since New, Time Since
Overhaul, Cycles Since Overhaul and shall be accompanied by appropriate
certification documentation acceptable to the Air Authority from the last
overhaul or zero time shop visit such as JAR form 1 or FAA form 8130-1;
(c) Each life-limited component will be supported by certification
documentation necessary to demonstrate traceability of utilization since
new (i.e. back-to-birth traceability);
(d) Each "on-condition" and "condition monitored" component will be
serviceable;
(e) The APU will be fresh from a burner can change and have not more than 1,500
Flight Hours since the last hot section inspection (including removal and
inspection of the plenum, torus and turbine nozzle), and have not more than
5,000 Flight Hours since last gas path refurbishment in accordance with the
manufacturer's specifications and be free of any defects as determined by
manufacturer limits; and
(f) The installed components as a group will have an average of total flight
time since new of not more than that of the Airframe.
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3. ENGINES
Each Engine will be installed on the Aircraft and if not the engines
installed on the Delivery Date will be accompanied by all documentation
Lessor may require to evidence that title thereto is properly vested in
Owner and will:-
(a) have not less than 4,000 Engine Flight Hours or 3,500 Cycles (whichever is
the more restrictive factor) remaining to next scheduled life limited part
replacement and have an expected on-wing remaining life of not less than
4,000 Engine Flight Hours or 3,500 Cycles (whichever is the more
restrictive factor). The expected life remaining will be determined by the
inspection and checks accomplished by Lessor in accordance with this
Agreement;
(b) not be "on watch". (For purposes of the Agreement "on watch" shall mean
any maintenance condition that would require an Engine removal and/or
reinspection or airworthiness directive action that would require an Engine
removal within 4,000 flight hours and 3,500 Cycles of the Expiry Date); and
(c) be in a condition which can operate at maximum rated take off power at sea
level at a temperature of 45oC.
4. FUSELAGE, WINDOWS AND DOORS
(a) The fuselage will be free of major dents and abrasions, and any dents and
abrasions that require a repetitive inspection or future repair, temporary
repairs, and loose or pulled or missing rivets and all structural repairs
shall be in accordance with the manufacturer's and Air Authority's approved
data for permanent repair;
(b) Windows will be free of delamination, blemishes, crazing and will be
properly sealed; and
(c) Doors will be free moving, correctly rigged and be fitted with serviceable
seals.
5. WINGS AND EMPENNAGE
(a) Leading edges will be free from damage;
(b) Control surfaces will be waxed and polished;
(c) Unpainted cowlings and fairings will be polished; and
(d) Wings will be free of fuel leaks.
6. INTERIOR
(a) Ceilings, sidewalls and bulkhead panels will be clean and free of cracks
and stains;
(b) Carpets and seat covers will be in good condition, clean and free of stains
and meet FAR fire resistance regulations;
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<PAGE>
(c) Seats will be serviceable, in good condition and repainted as necessary;
and
(d) Emergency equipment having a calendar life will have a minimum of 1 year or
100% of its total approved life, whichever is less, remaining.
7. COCKPIT
(a) Fairing panels shall be free of stains and cracks, will be clean secure and
repainted as necessary;
(b) Floor coverings will be clean and effectively sealed;
(c) Seat covers will be in good condition, clean and free of stains and will
conform to FAR fire resistance regulation; and
(d) Seats will be serviceable, in good condition and will be repainted as
necessary.
8. CARGO COMPARTMENTS
(a) Panels will be in good condition; and
(b) Nets will be in good condition.
9. LANDING GEAR
The landing gear and wheel wells will be clean, free of leaks and repaired
as necessary. Wheels and brakes shall be in a half life condition or
better.
(a) The landing gear and wheel wells will be clean, free of leaks and repaired
as necessary.
(b) Each wheel and brake assembly shall be in a half life condition or better.
10. CORROSION
(a) The Aircraft shall be in compliance with the Manufacturer's corrosion
prevention and control program (CPCP) requirements. All CPCP inspections
which would normally be accomplished while access is provided during
structural inspection in accordance with Lessee's Maintenance Program
during the Term shall have been accomplished.;
(b) The entire fuselage will be substantially free from corrosion and will be
adequately treated and an approved corrosion prevention program will be in
operation; and
(c) Fuel tanks will be free from contamination and corrosion and a tank
treatment program will be in operation.
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SCHEDULE 4
INSURANCE REQUIREMENTS
The Insurances required to be maintained are as follows:-
(a) HULL ALL RISKS of Loss or Damage whilst flying and on the ground with
respect to the Aircraft on an "agreed value basis" for the Agreed Value and
with a deductible not exceeding the Deductible Amount set forth in Letter
Agreement No. 1, or such other amount agreed by Lessor from time to time;
(b) HULL WAR AND ALLIED PERILS, being such risks excluded from the Hull All
Risks Policy to the fullest extent available from the leading international
insurance markets including confiscation and requisition by the State of
Registration for the Agreed Value, however, when the Aircraft is being
operated solely in or over the United States of America and/or Canada,
coverage may be limited to such perils as are customarily insured by
comparable airlines, operating similar equipment in similar circumstances;
(c) ALL RISKS (INCLUDING WAR AND ALLIED RISK except when on the ground or in
transit other than by air) property insurance on all Engines and Parts when
not installed on the Aircraft on an "agreed value" basis for their full
replacement value and including engine test and running risks;
(d) AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER, BAGGAGE, CARGO AND MAIL
AND AIRLINE GENERAL THIRD PARTY (INCLUDING PRODUCTS) LEGAL LIABILITY for a
Combined Single Limit (Bodily Injury/Property Damage) of an amount not less
than the Minimum Liability Coverage for the time being any one occurrence
(but in respect of products and personal injury liability this limit may be
an aggregate limit for any and all losses occurring during the currency of
the policy). War and Allied Risks are also to be covered under the Policy
in line with prudent market practice for comparable airlines, operating
similar equipment in similar circumstances;
(e) All required hull and spares insurance (as specified above), so far as it
relates to the Aircraft will: -
(i) name Lessor and its successors and assigns as additional assureds for
their respective rights and interests, warranted, each as to itself
only, no operational interest;
(ii) provide that any loss will be settled jointly with Lessor and Lessee
and will be payable in Dollars to Lessor except where the loss does
not exceed the Damage Notification Threshold, and Lessor has not
notified the insurers to the contrary, in which case the loss will be
settled with and paid to Lessee;
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(iii) if separate Hull "all risks" and "war risks" insurances are arranged,
include a 50/50 provision in accordance with market practice (AVS.
103 is the current market language);
(iv) confirm that the insurers are not entitled to replace the Aircraft in
the event of an insured Event of Loss;
(v) confirm that the insurers will not obtain a valid discharge of the
obligations under the Insurances by payment to the broker,
notwithstanding market practice to the contrary;
(f) All required liability insurances (specified above) will:-
(i) include Lessor, GECASI, GECASL and their respective successors and
assigns and their respective shareholders, subsidiaries, directors,
officers, agents, employees and indemnitees as additional insureds
for their respective rights and interests, warranted, each as to
itself only, no operational interest;
(ii) include a Severability of Interest Clause which provides that the
insurance, except for the limit of liability, will operate to give
each assured the same protection as if there was a separate policy
issued to each assured;
(iii) contain a provision confirming that the policy is primary without
right of contribution and the liability of the insurers will not be
affected by any other insurance of which Lessor or Lessee have the
benefit so as to reduce the amount payable to the additional insureds
under such policies;
(g) All Insurances will:-
(i) be in accordance with normal industry practice of persons operating
similar aircraft in similar circumstances;
(ii) provide cover denominated in Dollars and any other currencies which
Lessor may reasonably require in relation to liability insurance;
(iii) operate on a worldwide basis subject to such limitations and
exclusions as Lessor may agree;
(iv) acknowledge the insurer is aware (and has seen a copy) of this
Agreement and that the Aircraft is owned by Lessor;
(v) provide that, in relation to the interests of each of the additional
assureds the Insurances will not be invalidated by any act or
omission by Lessee, or any other person other than the respective
additional assured seeking protection and shall insure the interests
of each of the additional assureds regardless of any breach or
violation by Lessee, or any other person other than the respective
additional assured seeking protection of any warranty, declaration or
condition, contained in such Insurances;
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<PAGE>
(vi) provide that the insurers will hold harmless and waive any rights of
recourse and/or subrogation against the additional assureds,
including GECASI and GECASL or to be subrogated to any rights of
Lessor against Lessee ;
(vii) provide that the additional assureds will have no obligation or
responsibility for the payment of any premiums due (but reserve the
right to pay the same should any of them elect so to do) and that
the insurers will not exercise any right of set-off or counter-claim
in respect of any premium due against the respective interests of
the additional assureds other than outstanding premiums relating to
the Aircraft, any Engine or Part the subject of the relevant claim;
(viii) provide that the Insurances will continue unaltered for the benefit
of the additional assureds for at least 30 days after written notice
by registered mail or telex of any cancellation, change, event of
non-payment of premium or installment thereof has been sent to
Lessor, except in the case of war risks for which 7 days (or such
lesser period as is or may be customarily available in respect of
war risks or allied perils) will be given, or in the case of war
between the 5 great powers or nuclear peril for which termination is
automatic;
(ix) if reinsurance is a requirement of this Agreement such reinsurance
will (i) be on the same terms as the original insurances and will
include the provisions of this Schedule, (ii) provide that
notwithstanding any bankruptcy, insolvency, liquidation, dissolution
or similar proceedings of or affecting the reinsured that the
reinsurers' liability will be to make such payments as would have
fallen due under the relevant policy of reinsurance if the reinsured
had (immediately before such bankruptcy, insolvency, liquidation,
dissolution or similar proceedings) discharged its obligations in
full under the original insurance policies in respect of which the
then relevant policy of reinsurance has been effected; and (iii)
contain a "cut-through" clause in the following form (or otherwise,
satisfactory to Lessor): "The Reinsurers and the Reinsured hereby
mutually agree that in the event of any claim arising under the
reinsurances in respect of a total loss or other claim where as
provided by the Aircraft Lease Agreement dated March 25, 1997 and
made between Lessor and Lessee such claim is to be paid to the
person named as sole loss payee under the primary insurances, the
Reinsurers will in lieu of payment to the Reinsured, its successors
in interest and assigns pay to the person named as sole loss payee
under the primary insurances effected by the Reinsured that portion
of any loss due for which the Reinsurers would otherwise be liable
to pay the Reinsured (subject to proof of loss), it being understood
and agreed that any such payment by the Reinsurers will (to the
extent of such payment) fully discharge and release the Reinsurers
from any and all further liability in connection therewith"; subject
to such provisions not contravening any law of the State of
Incorporation;
(x) contain a provision entitling Lessor or any insured party to
initiate a claim under any policy in the event of the refusal or
failure of Lessee to do so; and
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(xi) accept and insure the indemnity provisions of this Agreement to the
extent of the risks covered by the policies.
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SCHEDULE 5
FORM OF LEGAL OPINION
To: General Electric Capital Corporation
[Date]
Dear Sirs,
1. You have asked us to render an opinion in connection with the transaction
governed, inter alia, by the under mentioned documents. Words and
expressions used herein will bear the same meanings as defined in an
Aircraft Lease Agreement (the "Lease") dated March 25, 1997 between General
Electric Capital Corporation ("Lessor") and Frontier Airlines, Inc.
("Lessee") in respect of one Boeing 737-300 aircraft with manufacturer's
serial number 28563 together with the two installed engines (the
"Aircraft").
1.1. the Lease;
1.2. the Memorandum and Articles of Association of Lessee;
1.3. all other documents, approvals and consents of whatever nature and wherever
kept which it was, in our judgment and to our knowledge, necessary or
appropriate to examine to enable us to give the opinion expressed below.
2. Having considered the documents listed in paragraph 1 above, and having
regard to the relevant laws of [the State of California] [the State of
Colorado] we are pleased to advise that in our opinion:-
(a) Lessee was duly incorporated in the State of [ ] on [ ] for an
indefinite period as a limited company and is a validly existing separate
legal entity, is subject to suit in its own name, and, to the best of our
knowledge, no steps have been, or are being, taken to appoint a receiver,
liquidator, trustee or similar officer over, or to wind up, Lessee;
(b) Lessee has the corporate power to enter into and perform, and has taken all
necessary corporate action to authorize the entry into, performance and
delivery of, the Lease and the transactions contemplated by the Lease;
(c) the entry into and performance by Lessee of, and the transactions
contemplated by, the Lease do not and will not:-
(i) conflict with any laws binding on Lessee; or
(ii) conflict with the constitutional documents of Lessee; or
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(iii) conflict with or result in default under any document which is
binding upon Lessee or any of its assets or result in the creation of
any Security Interest over any of its assets.
(d) no authorizations, consents, licenses, approvals and registrations (other
than those which have been obtained and of which copies are attached
hereto) are necessary or desirable to be obtained from any governmental or
other regulatory authorities in the United States of America (the "United
States") to enable Lessee:-
(1) to enter into and perform the transactions contemplated by the Lease;
(2) to import the Aircraft into the United States for the duration of the
Term;
(3) to operate the Aircraft in the United States for the transport of
fare-paying passengers; or
(4) to make the payments provided for in the Lease;
(e) except for [the filing and recordation of the Agreement with the FAA and]
the filing of the Financing Statements with [ ] (which filing has been
duly made on or before this date) it is not necessary or desirable, to
ensure the priority, validity and enforceability of all the obligations of
Lessee under the Lease that the Lease be filed, registered, recorded or
notarized in any public office or elsewhere or that any other instrument
relating thereto be signed, delivered, filed, registered or recorded, that
any tax or duty be paid or that any other action whatsoever be taken;
(f) No steps are necessary or desirable to record or perfect Lessor's interest
in the Aircraft in the United States;
(g) on termination of the Lease (whether on expiry or otherwise) as
contemplated in the Lease, Lessor would be entitled:-
(1) to repossess the Aircraft;
(2) to export the Aircraft from the United States;
without requiring any further consents, approvals or licenses from any
governmental or regulatory authority in [];
(h) the Lease has been properly signed and delivered on behalf of Lessee and
the obligations on the part of Lessee contained therein, are valid and
binding on and enforceable against Lessee respectively under the laws of
the United States;
(i) the events described in Clause 13.1(g) of the Lease comprise an accurate
and complete statement of all events and situations provided for by the
laws of the United States which may lead to the cessation of activities,
winding up or dissolution of Lessee;
(j) Lessee is a Certificated Air Carrier;
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(k) Lessee is a "citizen of the United States" as defined in Section 40102 of
Title 49 of the United States Code;
(l) Lessor is entitled to the benefits of Section 1110 of Title 11 of the
United States Code;
(m) Lessee's chief executive office (as defined in the Uniform Commercial Code
in effect in [ ]) is located at [ ];
(n) the obligations of Lessee under the Lease rank at least pari passu with all
other present and future unsecured and unsubordinated (including contingent
obligations) of Lessee;
(o) there is no withholding tax or other Tax to be deducted from any payment
whatsoever which may be made by Lessee pursuant to the Lease; with respect
to any withholdings, the provisions of Clauses 5.6, 5.7 and 5.10 of the
Lease are fully effective; and the arrangements contemplated by the Lease
do not give rise to any charge whatsoever to Taxes in the United States;
(p) there is no applicable usury or interest limitation law in the United
States which may restrict the recovery of payments in accordance with the
Lease;
(q) there are no registration, stamp or other taxes or duties of any kind
payable in the United States in connection with the signature, performance
or enforcement by legal proceedings of the Lease;
(r) Lessor will not violate any law or regulation in the United States nor
become liable to tax in the United States by reason of entering into the
Lease with Lessee, or performing its obligations thereunder;
(s) it is not necessary to establish a place of business in the United States
in order to enforce any provisions of the Lease;
(t) the choice of the Governing Law to govern the Lease will be upheld as a
valid choice of law in any action in the Courts of the United States;
(u) the consent to the jurisdiction by Lessee contained in the Lease is valid
and binding on Lessee and not subject to revocation;
(v) any judgment for a definite sum given by the Courts of the State of
California against Lessee would be recognized and accepted by the Courts of
the United States without re-trial or examination of the merits of the
case;
(w) (i) Lessee is subject to civil commercial law with respect to its
obligations under the Lease; and
(ii) neither Lessee nor any of its assets is entitled to any right of
immunity and the entry into and performance of the Lease by Lessee
constitute private and commercial acts; and
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(x) there are no laws or other rules in the United States (including, without
limitation, Emergency Powers laws) pursuant to which Lessee may be deprived
of the Aircraft by any Government Entity or any other person, other than
Lessor or any assignee of Lessor.
3. We do not purport to be experts on and do not purport to be generally
familiar with or qualified to express legal opinions based on any law other
than the laws of the United States and accordingly express no legal opinion
herein based upon any law other than the laws of the United States.
Yours faithfully,
96
<PAGE>
SCHEDULE 6
LEASE SUPPLEMENT NO. __
LEASE SUPPLEMENT NO. ___, dated _________, 1995, between General Electric
Capital Corporation, a corporation organized under the laws of New York
("Lessor"), and Frontier Airlines, Inc. a corporation organized under the laws
of the State of Colorado ("Lessee").
Lessor and Lessee have previously entered into that certain Aircraft Lease
Agreement dated as of March 25, 1997 (herein referred to as the "Agreement" and
the defined terms therein being hereinafter used with the same meaning). The
Agreement provides for the execution and delivery from time to time of a Lease
Supplement substantially in the form hereof for the purpose of leasing the
aircraft described below under the Agreement as and when delivered by Lessor to
Lessee in accordance with the terms thereof.
The Agreement and this Lease Supplement relate to the Aircraft, Engines and
Parts as more precisely described below. A counterpart of the Agreement is
attached hereto and this Lease Supplement and the Agreement shall form one
document.
In consideration of the premises and other good and sufficient
consideration, Lessor and Lessee hereby agree as follows: -
1. Lessor hereby delivers and leases to Lessee under the Agreement and Lessee
hereby accepts, acknowledges receipt of possession and leases from Lessor
under the Agreement, that certain Boeing Model 737-300 commercial jet
Aircraft, and the two (2) CFM International CFM-56-3-C1 Engines (each of
which Engines has 750 or more rated takeoff horsepower or the equivalent
of such horsepower) described in Schedule 1 hereto, together with the
Aircraft Documents described in the Agreement (the "Delivered Aircraft").
2. The Delivery Date of the Delivered Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
3. The Term for the Delivered Aircraft shall commence on the Delivery Date
and shall end on the Expiry Date.
4. The amount of Rent for the Delivered Aircraft is set forth in Letter
Agreement No. 1 to the Agreement.
5. Lessee hereby confirms to Lessor that (i) the Delivered Aircraft and each
delivered Engine have been duly marked in accordance with the terms of
---------
Clause 8.7(d) of the Agreement, (ii) the Aircraft is insured as required
by the Agreement, (iii) the representations and warranties of Lessee
referred to in Clause 2 of the Agreement are hereby repeated with effect
as of the date first above written, (iv) having inspected the Delivered
Aircraft, Lessee acknowledges that the Delivered Aircraft satisfies all
97
<PAGE>
conditions required for Lessee's acceptance of delivery as set forth in
the Agreement, except as noted in the Exceptions List attached to the
Certificate of Technical Acceptance, and (v) the execution and delivery of
this Lease Supplement signifies absolute and irrevocable acceptance by
Lessee of the Delivered Aircraft for all purposes hereof and of the
Agreement.
6. All of the terms and provisions of the Agreement are hereby incorporated
by reference in this Lease Supplement to the same extent as if fully set
forth herein.
7. This Lease Supplement may be executed in any number of counterparts, each
of such counterparts, shall for all purposes be deemed to be an original;
and all such counterparts shall together constitute but one and the same
Lease Supplement.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
No. __ to be duly executed as of the day and year first above written.
LESSOR, LESSEE,
GENERAL ELECTRIC CAPITAL FRONTIER AIRLINES, INC.
CORPORATION
By: By:
---------------------------- ----------------------------
Name: Name:
-------------------------- --------------------------
Title: Title:
------------------------- -------------------------
98
<PAGE>
SCHEDULE 1
TO
LEASE SUPPLEMENT NO.
One
New Boeing 737-300
Airframe
Registration Mark
-----------------
N_____
Manufacturer's
Serial No. Total Time* Total Cycles*
---------- ---------- ------------
28563
---------- ------------
Installed CFM International, Inc.
Engines
----------------
Model No. Serial No. Total Time* Total Cycles*
- -------- ---------- ---------- ------------
CFM-56-3-C1 [________]
------------- -------------
CFM-56-3-C1 [________]
------------- -------------
Each of the above-described Aircraft Engines is 750 or more rated takeoff
horsepower or its equivalent.
* The total time and total cycles referred to above are as of ____________
Time,_________,____. Such times and cycles are within________hours and
_________cycles of the actual hours and cycles at the time of this Lease
Supplement.
99
<PAGE>
SCHEDULE 7
FORM OF
LEASE TERMINATION CERTIFICATE
The undersigned hereby certify that the Aircraft Lease Agreement dated as of
March 25, 1997 between the undersigned Lessor and undersigned Lessee, and as
further described in the Appendix attached hereto, has terminated and the
aircraft and aircraft engines covered thereby are no longer subject to the terms
thereof. This certificate may be executed in one or more counterparts each of
which when taken together shall constitute one and the same instrument.
DATED this __________ day of ____________________, __________
LESSOR LESSEE
GENERAL ELECTRIC CAPITAL FRONTIER AIRLINES, INC.
CORPORATION
By: By:
------------------------------- ---------------------------
Title: Title:
---------------------------- ------------------------
100
<PAGE>
APPENDIX
--------
FAA Recording Date FAA Conveyance No.
- ------------------ ------------------
101
<PAGE>
SCHEDULE 8
FORM OF AIRCRAFT USAGE REPORT
FOR PERIOD BEGINNING ON __________, 199____
AND ENDING ON ___________, 199____
The undersigned Officer of Frontier Airlines, Inc. ("Lessee") hereby certifies
as follows:
1. This report is submitted to General Electric Capital Corporation ("Lessor")
under that certain Aircraft Lease Agreement dated as of March 25, 1997, between
Lessor and Lessee (the "Lease"), and capitalized terms used and not otherwise
defined herein have the meanings ascribed to them in the Lease.
2. The Aircraft covered by this report is:
Aircraft: Boeing 737-300
Serial No: 28563
U.S. Reg. No.: N_____
3. During the period covered by this report, the Airframe which is the subject
of the Lease was operated for the following number of Flight Hours and Cycles as
such terms are defined in the Lease:
Flight Hours Cycles
--------- ----------
4. During the period covered by this report, the CFM-56-C1 Engines Bearing
respective serial numbers __________ and ____________ which are the subject of
the Lease, where each operated for the following number of Engine Flight Hours
and Cycles, as defined in the Lease:
Engine Flight Hours Cycles
------------------- ------
SN
-------- ------------------ ------------------
SN
-------- ------------------ ------------------
This Aircraft Usage Report is dated __________________, 199_____,
FRONTIER AIRLINES, INC.
By:
--------------------------------
Title:
-----------------------------
102
<PAGE>
EXECUTION COPY
LETTER AGREEMENT NO. 1
As of March 25, 1997
Frontier Airlines, Inc.
12015 East 46th Avenue
Denver, Colorado 80239
United States of America
Re: Letter Agreement No. 1 to Aircraft Lease Agreement dated as of March
25, 1997, between General Electric Capital Corporation, Lessor, and
Frontier Airlines, Inc., Lessee - Definitions of Certain Terms and
Other Matters
Gentlemen:
Reference is made to that certain Aircraft Lease Agreement dated as of March 25,
1997 (the "Lease") between General Electric Capital Corporation as lessor
("Lessor") and Frontier Airlines, Inc. as lessee ("Lessee") for the lease of one
new Boeing Model 737-300 commercial aircraft bearing manufacturer's serial
number 28563 (the "Aircraft"). Terms not otherwise defined herein shall have
the meanings ascribed to them in the Lease.
In order further to preserve the confidentiality of certain of the business
terms of the Lease and the other Operative Documents, Lessor and Lessee have
agreed that certain defined terms used in the Lease and their understanding
respecting certain other matters shall be set forth in this letter rather than
in the body of the Lease.
I. Confidentiality.
---------------
Lessor and Lessee understand that certain commercial and financial
information contained in or provided in connection with the Lease, this
Letter Agreement No. 1, Tax Indemnity Agreement and the other documents
executed or furnished in connection herewith and therewith, is considered
by Lessor and Lessee as privileged and confidential. Lessor and Lessee
each hereby agree, that it will treat Letter Agreement No. 1 and each such
other document as privileged and confidential and will not, without the
prior written consent of the other, disclose or cause to be disclosed, the
terms hereof or thereof to any Person, except to its counsel and auditors,
or except (a) as may be required by applicable Law or governmental
regulation or pursuant to an order, or a valid and binding request, issued
by any court or governmental agency or authority having jurisdiction over
Lessor or Lessee, as the case may be, or (b) as necessary to enable Lessor
to make transfers, assignments or other dispositions to potential
transferees, assignees or participants of its interest in and to this
Agreement.
<PAGE>
Frontier Airlines, Inc.
As of March 25, 1997
Page 2
In connection with any such disclosure or any filing of the information
contained herein or therein pursuant to any such applicable Law or
governmental regulation, Lessor or Lessee, as the case may be, shall
request and use its best reasonable efforts to obtain confidential
treatment of this Letter Agreement No. 1, Tax Indemnity Agreement, such
other documents and such information contained herein or therein or
furnished in connection therewith and the other party will cooperate in
making and supporting any such request for confidential treatment.
II. Definitions of Certain Terms.
----------------------------
Lessor and Lessee agree that the following terms shall have the following
meanings for all purposes of the Lease, the Lease Supplement and this
Letter Agreement No. 1:
Agreed Value:
*
Airframe Maintenance Reserve Rate:
The Airframe Maintenance Reserve Rate initially shall be * per Flight
Hour. Such rate shall be increased annually by the Escalation
Adjustment.
Damage Notification Threshold:
*
Deposit:
The Deposit equal to * is to be paid in cash as follows:
(i) *
(ii) *
(iii) *
(iv) *
<PAGE>
Frontier Airlines, Inc.
As of March 25, 1997
Page 3
Deductible Amount:
*
Life Limited Parts Reserve Rate:
The Life Limited Parts Reserve Rate initially shall be * per Engine
Flight Hour. Such rate shall be increased annually by the Escalation
Adjustment and shall be subject to further adjustment from time to
time on the terms set forth in Section III to this Letter Agreement
No. 1.
Engine Refurbishment Reserve Rate:
The Engine Refurbishment Reserve Rate for each Engine initially shall
be * per Engine Flight Hour. Such rate shall be increased annually by
the Escalation Adjustment and shall be subject to further adjustment
from time to time on the terms set forth in Section III to this Letter
Agreement No. 1.
Escalation Adjustment:
Each Reserve Rate shall escalate at a rate of *, compounded annually,
commencing on the first annual anniversary of the Delivery Date.
Interest Rate:
* per month, but not to exceed the maximum amount permitted by Law.
Landing Gear Reserve Rate:
The Landing Gear Reserve Rate for the landing gear shall be * per
Flight Hour. Such rate shall be increased annually by the Escalation
Adjustment and shall be subject to further adjustment from time to
time on the terms set forth in Section III to this Letter Agreement
No. 1.
Minimum Liability Coverage:
Five Hundred Million Dollars ($500,000,000).
<PAGE>
Frontier Airlines, Inc.
As of March 25, 1997
Page 4
Rent:
The Rent for the Aircraft for each calendar month during the Term of
the Lease shall be payable in ninety six (96) consecutive monthly
installments, in advance on each Rent Date with each such installment
being in the amount of *.
Rental Periods:
The Rental Periods of the Term comprise ninety six (96) consecutive
monthly Rental Periods, which commence on the Delivery Date.
Reserve Rate:
The term "Reserve Rate" shall mean any of the Airframe Reserve Rate,
Engine Refurbishment Reserve Rate, Engine LLP Reserve Rate and
Landing Gear Reserve Rate.
III. Further Adjustment of Reserve Rates.
-----------------------------------
Lessor and Lessee acknowledge that the Engine Reserve Rates specified
herein are based upon the assumption that the Aircraft will operate at 3B1
thrust levels and on a two hour to one cycle ratio (2:1). In the event
that the foregoing assumption proves to be incorrect at any time during the
Term based upon Lessee's actual operating experience during the previous
twelve (12) months, and the hour cycle ratio differs from such assumption
by more than 0.1 during such twelve (12) month period, Lessor shall have
the right, upon written notice to Lessee, to adjust the Engine Reserve
Rates in the case of a decrease in the ratio and Lessor, upon written
request from Lessee, will make such an adjustment in the case of an
increase in the ratio. Any such adjustment shall be based on the following
table:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
PER ENGINE HOUR/CYCLE
---------------------------------------------------------------------
1.5 2.0 2.5
---------------------------------------------------------------------
<S> <C> <C> <C>
Engine Refurbishment Reserves Rates * * *
---------------------------------------------------------------------
Engine LLP Reserve Rates * * *
---------------------------------------------------------------------
</TABLE>
(Note: *this figure shall be increased at a rate of three percent (3%)
compounded annually, commencing on the first annual anniversary of the
Delivery Date).
Actual hour to cycle ratios may fall outside of the amount identified in
the table. In such case, the actual values shall be determined by
extrapolating the closest observed intervals in the table. (For example,
an hour to cycle ratio of 1.7:1 falls in between 1.5:1 and 2.0:1 resulting
in the extrapolated values of * for Engine Refurbishment Reserve Rates
<PAGE>
Frontier Airlines, Inc.
As of March 25, 1997
Page 5
and * for Engine LLP Reserve Rates.) In addition, these rates are
subject to further adjustment by Lessor in the event that Lessee operates
the Engines at other than 3B1 thrust levels.
In the event that Lessee's Maintenance Program is materially revised,
Lessor may make such adjustment as Lessor determines is necessary in its
reasonable discretion to maintain the respective Reserve Rates at levels
which accurately reflect the costs associated with obtaining maintenance
services at prevailing industry rates. Each such notice shall specify the
revised Reserve Rate and the effective date of such revision. Lessee
agrees to advise Lessor, in writing, promptly following the occurrence of
any circumstances or events which would result in the foregoing assumptions
becoming incorrect at any time during the Term.
IV. Airworthiness Directives Cost Sharing.
-------------------------------------
The Lessor shall, if the cost to Lessee of performing an inspection
resulting in modification or terminating action with regard to any
Airworthiness Directive or causing such inspection resulting in
modification or terminating action being performed with regard to such
Airworthiness Directive, exceeds * in respect of any individual item
of the same, provided no Default has occurred and is continuing, on receipt
by Lessor of evidence of payment for and completion of the relevant work,
reimburse Lessee with an amount equal to the solution to the following
formula:-
*
<PAGE>
Frontier Airlines, Inc.
As of March 25, 1997
Page 6
If this Letter Agreement No. 1 to Aircraft Lease Agreement is consistent with
your understanding of the subject matter hereof, please so confirm by executing
this letter where indicated at the end hereof and returning the fully executed
letter to Lessor.
GENERAL ELECTRIC CAPITAL
CORPORATION
as Lessor,
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
The undersigned hereby confirms that the foregoing letter accurately reflects
the understanding of the undersigned with respect to the subject matter of such
letter.
FRONTIER AIRLINES, INC.
as Lessee,
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
EXECUTION COPY
TAX INDEMNITY AGREEMENT
-----------------------
TAX INDEMNITY AGREEMENT dated as of March 25, 1997 (the "Tax Indemnity
Agreement") between FRONTIER AIRLINES, INC. (the "Lessee") and GENERAL ELECTRIC
CAPITAL CORPORATION (the "Lessor").
As inducement to the Lessor to enter into Aircraft Lease Agreement dated as
of March 25, 1997 (the "Lease") with respect to one new Boeing 737-300 Aircraft
bearing Manufacturer's Serial Number 28563 (the "Aircraft") to be entered into
contemporaneously between Lessor and Lessee and in consideration of the mutual
covenants contained herein and therein, the Lessee and the Lessor hereby agree
as follows:
SECTION 1. Definitions.
-----------
(a) The term "Lessor" shall mean the Lessor and for any taxable year in
which the Lessor joins in the filing of a consolidated federal income tax
return, shall include each member of the affiliated group (within the meaning of
Section 1504 of the United States Internal Revenue Code of 1986, as amended, or
any successor provision thereto (the "Code")) of which the Lessor is a member.
(b) "Tax Attribute Period" shall mean the period beginning on the Delivery
Date and ending on December 31, 2003, provided that in the event the
--------
depreciation period for the Aircraft is other than the period specified in Tax
Assumption 2(d)(i) as a result of a Lessee Act (as hereinafter defined), such
period shall end on the last day of the calendar year in which a depreciation
deduction for the Aircraft is allowed or allowable, or would have been
allowable, to the Lessor.
(c) "Reasonable Basis" for a position exists if tax counsel may properly
advise reporting such position on a tax return in accordance with Formal Opinion
85-352 issued by the Standing Committee on Ethics and Professional
Responsibility of the American Bar Association and, for purposes of Sections
6(a) and 7(b), if "substantial authority" for such position exists for purposes
of Section 6662 of the Code and the regulations thereunder.
(d) "Permitted Percentage" shall mean 5% in each of Lessor's taxable
years.
(e) Capitalized terms used herein without definition shall have meanings
ascribed thereto in Schedule 1 to the Lease.
SECTION 2. Assumptions. The transactions described in the Lease have been
-----------
entered into on the assumptions (the "Tax Assumptions") that for Federal income
tax purposes:
1
<PAGE>
(a) at all times during the Term, for federal income tax purposes the
Lease will constitute a "true lease", the Lessor will be treated as the owner
and lessor of the Aircraft and the Lessee will be treated as the lessee of the
Aircraft;
(b) The Lessor's taxable year is the calendar year ending December 31, and
the Lessor ill include all items of income, gain, loss, deduction, or credit
with respect to the transactions contemplated by the Lease using an accrual
method of accounting;
(c) The Lessor, as the owner of the Aircraft for Federal income tax
purposes, will be entitled to the following Federal income tax benefits:
(i) cost recovery deductions for 100% of the Lessor's Cost of the
Aircraft pursuant to Section 168(b) of the Code, commencing in the Lessor's
taxable year in which the Delivery Date occurs, computed (i) on the basis
that the Aircraft is "7-year property" (within the meaning of Section
168(e) of the Code), (ii) by using the 200% declining balance method over a
7 year recovery period, switching to the straight-line method for the first
taxable year of the Lessor during the term for which such method yields a
larger allowance, (iii) assuming salvage value is zero and (iv) using a
half-year convention (the "MACRS Deductions");
(ii) for each taxable year of the Lessor during the Tax Attribute
Period, not more than the Permitted Percentage of any item of income,
deduction or loss with respect to the transactions contemplated by the
Lease will be treated for Federal income tax purposes as derived from, or
allocable to, sources outside the United States; and
(iii) the Lessor will be a domestic corporation subject to a Federal
and state income tax rate of (after giving effect to the deductibility of
such state income taxes for Federal income tax purposes) 40% (the "Assumed
Tax Rate") in 1997 and in each year thereafter, and the Lessor will have
sufficient taxable income to be taxed at the Assumed Tax Rate after full
utilization of the MACRS Deductions.; and
---
(d) The Lessor will not be subject to the minimum tax under Section 55 of
the Code.
The foregoing assumptions will be appropriately modified or adjusted from
time to time to reflect the occurrence of an event for which an indemnity has
been paid pursuant to this Tax Indemnity Agreement.
SECTION 3. No Inconsistent Action. The Lessee agrees that neither it, nor
----------------------
any Person controlled by it, in control of it, or under common control with it,
directly or indirectly, nor any Person claiming by, through or under the Lessee,
nor any sublessee or other user or person in possession of the Aircraft (or any
part thereof) during the Term, nor any Affiliate of any of the foregoing (but
excluding the Lessor or the Lessor or any Person claiming by, through or under
the Lessor (but not so excluding any Person claiming directly or indirectly
through or under the Lease), unless any such Person is in
2
<PAGE>
possession of the Aircraft or any part thereof pursuant to an exercise of
remedies in connection with a Lease Event of Default) (each such Person not so
excluded, a "Lessee Person") will at any time file any returns or other
documents or take any action in dealing with tax authorities (including, without
limitation, any action in connection with the examination of any tax return)
inconsistent with the assumptions set forth in Section 2 hereof or the
representations set forth in Section 5 hereof and the Lessee will file such
returns, take such actions in dealing with tax authorities and execute such
documents as may be reasonably necessary to facilitate accomplishment of the
intent hereof.
SECTION 4. Records and Statements. The Lessee shall, at its expense,
----------------------
maintain such information or records relating to the Aircraft as are regularly
maintained by the Lessee or as may be required by law to be maintained
(including, but not limited to, flight logs). The Lessee shall, at Lessee's
expense, provide or cause to be provided any such records or information, and
such other information customarily maintained by comparable airlines, as the
Lessor may reasonably request from the Lessee to enable the Lessor to fulfill
its tax filing, tax audit, and tax litigation obligations, including, but not
limited to, its Federal income tax filing obligations.
---
SECTION 5. Representations, Warranties and Covenants of Lessee. The
---------------------------------------------------
Lessee represents, warrants and covenants that:
(a) on the Delivery Date, the Aircraft will qualify as 7-year property
within the meaning of Section 168(e) of the Code;
(b) neither Lessee nor any other Lessee Person thereof has claimed or will
claim the MACRS Deductions, or claim to be the owner of the Aircraft in respect
of any period during the Term, or has taken or will take any action or position
(not required by the Lease) inconsistent with the status of the Lessor as the
sole owner of the Aircraft for Federal, state, local and foreign tax purposes,
in each case, with respect to any period after the Delivery Date;
(c) assuming that neither Lessor nor any Affiliate of Lessor is a "tax-
exempt entity" within the meaning of Section 168(h)(2) of the Code during the
Tax Attribute Period, neither the Aircraft nor any part thereof will be "tax-
exempt use property" within the meaning of Section 168(h) of the Code; or
(d) during the Tax Attribute Period, neither the Aircraft nor any part
thereof will be treated as "used predominantly outside the United States" within
the meaning of Section 168(g) of the Code.
SECTION 6. Federal Income Tax Indemnity.
----------------------------
(a) If for any taxable year, (i) as a result of (A) any act or omission on
the part of the Lessee or any Lessee Person (other than the execution and
delivery of the Lease or an act required under the Lease or permitted under
Clause 4.5 of the Lease (provided, however, that the following acts shall not be
treated as required under the Lease for purposes of this paragraph: any,
maintenance, repair, improvements, alterations,
3
<PAGE>
modifications or additions to the Aircraft (or any part thereof), the temporary
or permanent removal from service of the Aircraft (or any part thereof) or the
replacement or substitution of the Aircraft (or any part thereof)), or (B) the
inaccuracy or breach of any representation, agreement, covenant or warranty of
the Lessee contained herein (each such act, omission, inaccuracy, breach or
event, a "Lessee Act"), the Lessor shall suffer a loss, disallowance or deferral
of, shall suffer a delay in claiming, shall not have the right to claim (based
on a written opinion of independent tax counsel selected by the Lessor and
reasonably acceptable to the Lessee that there is not a Reasonable Basis for
claiming the item in question), or shall be required to recapture (a
"Recapture"), all or any portion of the MACRS Deductions (hereinafter referred
to as a "Tax Loss"), then the Lessee, after written notice from the Lessor of
such Tax Loss, shall pay to the Lessor as an indemnity, form time to time as
required, an amount which, after deduction of the amount of all additional
Federal, state, local, and foreign taxes required to be paid by the Lessor in
respect of the receipt or accrual of such amount, shall be equal to the increase
in income taxes payable by (or not refundable to) the Lessor as a result of such
Tax Loss, plus the amount of any actual interest, penalties and additions to tax
payable by the Lessor with respect to such Tax Loss. Further, for purposes of
determining the amounts of the increase in income taxes as a result of the Tax
Loss, the applicable tax rate shall be the Assumed Tax Rate and shall be
calculated on a hypothetical basis (i.e., assuming that the Lessor pays taxes
----
and can fully utilize the MACRS Deductions). Each payment by the Lessee pursuant
to this Section 6(a) shall be made within 30 days after receipt of a written
demand certifying that there has been a Tax Loss, describing in reasonable
detail the Tax Loss in question, the amount of additional income tax, interest,
penalties and additions to tax and the calculation of the payment due in respect
thereof and describing the event or condition that Lessor claims gives rise to
an obligation by the Lessee to indemnify hereunder (but in no event earlier than
five (5) Business Days prior to the date the indemnified tax liability is, or
would be, due); provided that, if a contest of the Tax Loss is being conducted
-------- ----
pursuant to Section 8 hereof, payment (other than payments required under
Section 8), shall not be required from the Lessee until 30 days after the Final
Determination (as hereinafter defined) of such contest.
(b) If, as the result of a Tax Loss, the amount of Federal income taxes
payable by the Lessor for any taxable year shall be less than the amount of such
taxes which would have been payable by the Lessor had such Tax Loss not occurred
(or as the result thereof the Lessor shall receive a refund of Federal income
taxes, which shall be greater than the amount of such refund, if any, which the
Lessor would have received had such Tax Loss not occurred), then the Lessor
shall pay to the Lessee the amount of such increased reduction in taxes (or
refund, including any actual interest (net of any taxes payable with respect to
such interest) received thereon), plus any net additional Federal, state, local
or foreign tax benefits actually realized by the Lessor as the result of any
payment made pursuant to this sentence (such reduction in or increased refund
of income taxes to be determined on a hypothetical basis, i.e., assuming the
----
Lessor can utilize any additional tax benefits resulting form the Tax Loss at
the Assumed Tax Rate; provided, however, that the amount payable by the Lessor
-------- -------
pursuant to this sentence shall not exceed the sum of the amounts previously
paid by the Lessee to the Lessor pursuant to Section 6(a) with respect to such
Tax Loss to the extent not previously taken into account under this provision;
provided, further, that the Lessor shall not be obligated to make any
- -------- -------
4
<PAGE>
payment pursuant to this sentence if a Payment Default or Event of Default under
the Lease shall have occurred and be continuing. If an amount payable by the
Lessor to the Lessee pursuant to this Section 6(b) is not paid when due because
of the occurrence and continuation of such Payment Default or Event of Default,
such amount shall be payable by the Lessor to the Lessee upon the Lessee's
curing such Payment Default or Event of Default. Each payment made by the Lessor
to the Lessee pursuant to this Section 6(b) shall be made within 30 days after
the Lessor files a tax return or received a refund or adjustment from the
Internal Revenue Service which reflects such reduction in federal income tax.
(c) Any taxes that are imposed on the Lessor as a result of the subsequent
disallowance of all or any portion of a reduction (or refund) of the Lessor's
tax liability, which reduction (or refund) was taken into account under Section
6(b), shall be treated as a Tax Loss subject to indemnification under this
Agreement without regard to Section 7 hereof.
(d) (i) If, as a result of the use or operation or location of the
Aircraft outside the United States by any Lessee Person, the Tax Assumption set
forth in Section 2(d)(ii) hereof shall be inaccurate during any taxable year of
the Lessor included in whole or in part within the Tax Attribute Period (an
"Excess Foreign Allocation"), and if as a result thereof the amount of the
foreign tax credits available for utilization by the Lessor for any taxable year
shall be less than the amount of the foreign tax credits that would have been
available for utilization by the Lessor if such Tax Assumption had been accurate
(such event being referred to herein as a "Foreign Tax Credit Loss"), then the
Lessee shall pay to the Lessor as an indemnity an amount which, after deduction
of the amount of all additional federal, state, local and foreign taxes actually
required to be paid by the Lessor in respect of the receipt or accrual of such
amount, is equal to the actual increase in the Federal income taxes payable by
(or not refundable to) the Lessor for such taxable year as a result of such
Foreign Tax Credit Loss, plus the amount of any interest, penalties and
additions to tax payable by the Lessor as a result of such Foreign Tax Credit
Loss. The amounts of any increase in Federal income taxes payable by (or not
refundable to) the Lessor as a result of a Foreign Tax Credit Loss shall be
computed on the assumption that any reduced amount of foreign tax credits of the
Lessor is attributable to an Excess Foreign Allocation and foreign source losses
arising from other equipment leasing transactions that provided the Lessor with
indemnification for the loss of foreign tax credits, on a pro rata basis, prior
to being attributable to any other foreign source deductions or losses of the
Lessor;
(ii) If, as a result of (A) an Excess Foreign Allocation or (B) the
usage or location of the Aircraft outside the United States so that more than
the Permitted Percentage of any item of income or gain with respect to the
transactions contemplated by the Lease during any taxable year following the Tax
Attribute Period is treated as derived from sources outside the United States,
the amount of the foreign tax credits that the Lessor utilizes against its tax
liability for a taxable year exceeds the amount of such foreign tax credits to
which the Lessor would have otherwise been entitled, and provided that no
Payment Default or Event of Default under the Lease shall have occurred and be
continuing (in which event such amounts shall become payable upon the Lessee's
curing
5
<PAGE>
such Payment Default or Event of Default, then the Lessor shall pay to the
Lessee the amount of any actual reduction in its Federal income tax liability
(or actual increase in a refund of Federal income taxes owning to the Lessor),
plus any net additional Federal, state, local and foreign income tax benefits
actually realized by the Lessor as the result of such payment; provided,
--------
however, that the sum of the amounts payable by the Lessor pursuant to this
- -------
sentence shall not exceed the sum of the amounts previously paid by the Lessee
to the Lessor pursuant to this Section 6(d) to the extent not previously taken
into account under this provision and provided, further, however, that no
-------- ------- -------
payment shall be required with respect to clause (B) above unless and until the
usage or location outside the United States has resulted in an aggregate amount
of increased foreign tax credits being available to the Lessor (calculated for
this purpose without regard to the otherwise applicable requirement that foreign
source gain or income exceed the "Permitted Percentage" of 5%) equal to the
aggregate amount of unindemnified tax increases (reduced by any utilization of
foreign tax credit carryovers or carryforwards that would, under principles
applicable to clause (A) above, have resulted in an obligation to made a payment
to the Lessee if the Permitted Percentage during the year in which the
unindemnified tax increase occurred were zero) suffered by the Lessor resulting
from the application of the Permitted Percentages during the Tax Attribute
Period. For purposes of this Section 6(d)(ii), in determining the order in
which the Lessor utilizes any foreign tax credits against the Lessor's Federal
income taxes, the Lessor shall be deemed to utilize (A) first, all foreign tax
credits other than those described in clause (B) of this sentence, and (B) then,
on a pro rata basis, all foreign tax credits, the utilization of which by the
--- ----
Lessor results from either (x) the carryover or the carryforward of foreign tax
credits which were unutilized due to foreign source losses arising from
equipment leasing transactions that provided the Lessor with indemnification for
the loss of foreign tax credits (including this transaction), or (y) foreign
source income or gain generated by such transactions to the extent such foreign
source income or gain is sufficient to give rise to a payment obligation to the
Lessee thereunder (except any such transaction entered into prior to the
Delivery Date which provides that foreign tax credits arising out of such
transaction are deemed utilized prior to or after those credits arising out of
other lease transactions).
Once a foreign tax, the loss of the credit in respect of which Lessor was
indemnified and paid by Lessee in accordance with Section 6(d) hereof, is deemed
to be utilized pursuant to the ordering rules set forth above, it shall not
subsequently be recharacterized as not having been utilized as a result of a
foreign tax liability arising in a subsequent year.
(iii) Each payment by the Lessee pursuant to this Section 6(d) shall
be made within 30 days after receipt of a written demand therefor accompanied by
a written statement describing in reasonable detail the Foreign Tax Credit Loss
in question, the amount of additional Federal income tax, interest, penalties
and additions to tax and the calculation of the payment due in request thereof
(but in no event earlier than five (5) Business Days prior to the date such
additional Federal income taxes are due); provided that, if a contest of the
-------- ----
Foreign Tax Credit Loss is being conducted pursuant to Section 8 hereof, payment
(other than payments required under Section 8) shall not be required from the
Lessee until 30 days after the Final Determination of such contest. Each
6
<PAGE>
payment by the Lessor to the Lessee pursuant to this Section 6(d) in respect of
an actual increase in available foreign tax credits shall be made within 30 days
after the Lessor files a tax return (or receives a refund or adjustment) which
reflects the utilization of such increased foreign tax credit. Notwithstanding
anything herein to the contrary, any taxes that are imposed on the Lessor as a
result of the subsequent disallowance of the reduction of the Lessor's tax
liability, for which reduction the Lessor has made payment pursuant to this
Section 6(d), shall be treated a as Foreign Tax Credit Loss subject to
indemnification under this Agreement without regard to Section 7 hereof.
(e) Upon request of the Lessee, the accuracy of the Lessor's calculation
of the amount or amounts payable to either the Lessor or the Lessee pursuant to
this Section 6 shall be verified by the independent accounting firm regularly
-----------
engaged by the Lessor and, in order to enable such accountants to verify such
adjustments, the Lessor shall provide to such accountants (for their own
confidential use and not be disclosed to the Lessee or any other person) all
information reasonably necessary for such verification, including any computer
analyses used by the Lessor to calculate such amount or amounts. The cost of
such verification shall be borne by the Lessee unless it is the determination of
such verification that the actual amount payable deviates, in a manner favorable
to the Lessee, by more than 5% from the amount originally determined by the
Lessor in which case such cost shall be borne by the Lessor.
SECTION 7. Excluded Events. The Lessor shall not be entitled to any
---------------
payment from the Lessee under Section 6 hereof in respect of any Tax Loss or
Foreign Tax Credit Loss to the extent such Tax Loss or Foreign Tax Credit Loss
would not have occurred but for one or more of the following events:
(a) any voluntary sale, assignment, transfer or other disposition
(including any deemed disposition under Section 338 of the Code or any similar
provision) by the Lessor of any interest in the Aircraft or any part thereof or
the lease, unless such sale, assignment, transfer or other disposition occurs in
connection with the exercise of remedies in connection with an Event of Default
under the Lease that has occurred and is continuing, or any involuntary sale,
assignment, transfer or disposition (including any deemed disposition under
Section 338 of the Code or any similar provision) of any such interest resulting
from the bankruptcy or insolvency of, or proceedings for the relief of debtors,
or foreclosure proceedings, against the Lessor unless, in each case, such
involuntary sale, assignment, transfer, disposition (including any deemed
disposition under Section 338 of the Code or any similar provision) bankruptcy
or insolvency or foreclosure results from such Event of Default;
(b) the failure of the Lessor properly and in a timely manner to claim the
MACRS Deductions or the inclusion by the Lessor of any Recapture in the Lessor's
gross income as reported on its Federal income tax returns, (i) unless the
Lessor shall have received a written opinion of independent tax counsel selected
by the Lessor and reasonably satisfactory to Lessee that no Reasonable Basis
exists for making such claim or failing to so include in gross income or (ii)
unless such failure or inclusion is caused by the Lessee's failure to provide
accurate and timely information pursuant to the Lessee's obligations under this
Agreement or the Lease to furnish information to the Lessor.
7
<PAGE>
(c) except in the case of a Tax Loss resulting from a substitution or
replacement of the Aircraft or any part thereof, any amendment or addition to,
or change in, the Code or Income Tax Regulations, which is enacted or adopted
after the Delivery Date, provided that a change in Federal income tax rates
--------
shall be taken into account in determining the indemnity amounts payable to the
extent specified in Sections 6(a) and 6(d) above;
(d) the failure of the Lease to be a "true lease", or the Lessor to be
treated as the owner of the Aircraft, for Federal income tax purposes, unless,
in either case, as a result of a Lessee Act;
(e) any failure of the Lessor to take in a timely manner all actions in
contesting a claim if the Lessor was required to take such actions pursuant to
Section 8 hereof and such failure precludes the Lessee from exercising its
contest rights under Section 8 hereof;
(f) the willful misconduct or gross negligence of the Lessor or any
Affiliate thereof;
(g) the status for Federal income tax purposes of the Lessor as a "tax-
exempt entity" within the meaning of Section 168(h) of the Code or as a Person
that is not a "United States person" within the meaning of Section 7701(a)(30)
of the Code;
(h) a change in the Lessor's taxable year from the calendar year to a
fiscal year or the Lessor's having a taxable year other than a full calendar
year but only to the extent of a resulting increase in Lessee's indemnity
obligation hereunder;
(i) the failure of the Lessor to have sufficient taxable income or tax
liability for U.S. Federal income tax purposes to benefit from the Federal
income tax benefits described in Section 2(c);
(j) a determination that the basis of the Aircraft is or was not equal to
Lessor's Cost on the Delivery Date;
(k) the application of any federal or state minimum tax, including the
alternative minimum tax imposed under Sections 55 et seq. of the Code;
(l) any Loss to the extent incurred or imposed solely in respect of or
relating to any period after the later of (i) the expiration or earlier
termination of the Lease in accordance with the terms thereof or (ii) delivery
of possession of the Aircraft to the Lessor (or any designee of the Lessor); or
(m) application of the mid-quarter convention described in Section
168(d)(4)(C) of the Code.
8
<PAGE>
SECTION 8. Contest Provisions and Proceedings.
----------------------------------
(a) The Lessor shall promptly (but in no event less than twenty (20) days
prior to the last day for submitting a protest to the Internal Revenue Service)
notify the Lessee in writing of receipt from the Internal Revenue Service of a
written proposed or final revenue agent's report, a 30-day letter or a notice of
deficiency (as described in Section 6212 of the Code), in which an adjustment is
proposed to the Federal income taxes of the Lessor for which the Lessee would be
required to indemnify the Lessor pursuant to this agreement if such adjustment
were sustained. Such notice shall specify the name of Lessor's counsel (if the
existence of a Lessor's counsel is at that point necessary under this
Agreement), the terms of the proposed adjustment, and any action taken or
proposed to be taken by the Internal Revenue Service with respect to the
proposed adjustment. After the giving of such notice, the Lessor shall for at
least 20 days after the giving of such notice forbear (if such forbearance is
permitted by law) payment of any tax (including interest, penalties and
additions to tax thereon) asserted to be payable as a result of such proposed
adjustment. If the Lessee promptly (and in any event within 20 days of receipt
of notice from the Lessor) requests, in writing, the Lessor to do so, the Lessor
shall contest the proposed adjustment, shall consider in good faith any
suggestion made by the Lessee as to the method of pursuing such contest, and,
provided the Lessee is complying with its obligations under this Section 8,
shall not, without the consent of the Lessee, except as provided in the last
sentence of this Section 8(a), settle such proposed adjustment; provided,
--------
however, that the Lessor shall not be obligated to contest such adjustment
- -------
unless (i) independent tax counsel selected by the Lessor and reasonably
acceptable to Lessee ("Tax Counsel") delivers an opinion that there is a
Reasonable Basis for contesting the matter in question, (ii) the amount of the
proposed adjustment is in excess of $50,000, (iii) no Event of Default shall
have occurred and be continuing, (iv) the Lessor has determined, in good faith,
that the contest shall not result in a material risk of the loss or forfeiture
of the Aircraft (unless the Lessee has provided to the Lessor a bond or other
sufficient protection against such risk of loss or forfeiture reasonably
satisfactory to the Lessor) or the imposition of criminal penalties and (v) the
Lessee shall have acknowledged, in writing, that the contest is with respect to
a liability that is the Lessee's responsibility pursuant to this Agreement
except that the Lessee shall not be bound by its acknowledgment of liability if
the Final Determination articulates conclusions of law and fact that clearly and
unambiguously demonstrate that the Lessee has not liability for the contested
amounts hereunder. The Lessor shall afford Lessee reasonable opportunities to
consult the Lessor and shall keep Lessee reasonably informed of the nature of
all actions taken to contest such proposed adjustment, including (x) whether any
action to contest such proposed adjustment will initially be by way of judicial
or administrative proceedings, or both, (y) whether any such proposed adjustment
will be contested by resisting paying thereof or by paying the same and seeking
a refund thereof and (z) if the Lessor shall undertake judicial action with
respect to such proposed adjustment, the court or other judicial body before
which such action will be commenced; but in all cases the Lessor shall have
ultimate discretion to determine the nature (and forum) of, and shall control
the prosecution of, all such action. The Lessor shall upon the conclusion of
any administrative proceedings, promptly notify the Lessee of the outcome of
such proceedings, and shall notify the Lessee at least 60 days in advance of the
last date for filing a petition in the Tax Court. In the event of an
unfavorable resolution of
9
<PAGE>
administrative proceedings, the Lessor shall, if requested by the Lessee in a
timely manner, (x) contest any proposed adjustment beyond the level of
administrative proceedings, (y) consider in good faith any advice offered by the
Lessee's counsel concerning the court of competent jurisdiction in which the
adjustment is most likely to be favorably resolved, and (z) keep the Lessee
reasonably informed as to the progress of any litigation and, if requested by
the Lessee, shall consult with the Lessee's counsel and consider in good faith
any recommendations by the Lessee's counsel concerning the conduct of such
proceedings, and shall permit Lessee's counsel to review and comment in advance
on all submissions to the extent relating to the Loss provided that the final
form and substance of such submissions shall be determined by Lessor's Counsel.
The Lessor shall take such reasonable action during the course of such
proceedings as the Lessor's counsel deems advisable after consultation with the
Lessee's counsel to preserve as a basis for appeal any legal issue that the
Lessee or the Lessee's counsel has identified in writing. The Lessor shall be
required to appeal any adverse judicial determination only if (A) an appeal is
timely requested in writing by the Lessee, and (B) the Lessor is furnished with
an opinion of Tax Counsel selected by the Lessor and reasonably acceptable to
the Lessee that it is more likely than not that Lessor will prevail on such
appeal; provided, however, that in no event shall the Lessor be required to
appeal any adverse decision in the U. S. Supreme Court. At any time, whether
before or after commencing to take the actions set forth in this Section 8, the
Lessor may decline to contest or appeal all or any portion of a proposed
adjustment, or may compromise or settle any such proposed adjustment, by
notifying the Lessee in writing that the Lessee is relieved of its obligation to
indemnify the Lessor with respect to such adjustment or such portion, as the
case may be; provided, however, that (x) the Lessor shall promptly notify the
Lessee of the Lessor's intent to decline to contest or appeal all or any portion
of proposed adjustment, or to compromise or settle all or any portion of a
proposed adjustment and (y) the Lessee shall not be obligated to indemnify the
Lessor hereunder with respect to any other Tax Loss or Foreign Tax Credit Loss
for which a successful contest or appeal is foreclosed as a result of the
failure to take action with respect to such contest or appeal (or the settlement
or compromise of such contest or appeal without the consent of the Lessee), and
the Lessor shall repay to the Lessee such amounts theretofore advanced or paid
by the Lessee related to such adjustment, contest or appeal (other than
reimbursement of costs and expenses of the Lessor), plus interest at the rate
that would have been payable if such contest had been successfully concluded at
such time.
(b) The Lessor shall not be required to take any action pursuant to this
Section 8 unless and until the Lessee shall have agreed in writing to reimburse
the Lessor (on demand and on a basis grossed-up for all applicable Federal,
state, local and foreign taxes for all reasonable fees and expenses, any
statutory or regulatory penalties, interest, additions to tax, or other
liabilities, costs or losses which the Lessor may incur as a result of
contesting the validity of any proposed adjustment (including, without
limitation, any reasonable fees and disbursements of counsel incurred in
connection with taking any action or rendering any opinion described in Section
8(a)). If the Lessor determined to contest any adjustment by paying the
additional tax and suing for a refund, the Lessee shall timely lend to the
Lessor on an interest-free basis an amount equal to the sum of any tax,
interest, penalties and additions to tax required to be paid and shall indemnify
the Lessor in a manner satisfactory to the Lessor against any adverse tax
consequences
10
<PAGE>
resulting from such advance. Upon receipt by the Lessor of a refund (or upon
application of amounts otherwise refundable against other tax liability of the
Lessor) of any amount paid by it, in respect of which amount the Lessor shall
have been paid or advanced an equivalent amount by the Lessee, the Lessor shall
pay to the Lessee the amount of such refund (plus any amounts otherwise
refundable but applied against other tax liability of the Lessor) (which, in the
case of any contest in which a loan has been advanced pursuant to this
paragraph, shall be deemed to be in repayment of the loan advanced by the Lessee
to the extent fairly attributable thereto), together with any interest received
by the Lessor on such refund (or application) that is fairly attributable to the
amount and the period of such payment or advance by the Lessee (net of any taxes
actually payable by the Lessor with respect to the receipt or accrual of such
interest), plus any net additional Federal, state local and foreign tax benefits
actually realized by the Lessor as the result of such payment; and, upon
disallowance of any such refund, the Lessee shall forgive the amount of the loan
fairly attributable thereto and shall pay to the Lessor the balance of the
amount of its indemnity obligation hereunder (including such amount as shall be
equal to the sum, on an after-tax basis, of any tax, interest, penalties or
additions to tax payable with respect to the forgiveness of such loan) (or if
such advance exceeds the amount of such disallowance, the Lessor shall pay such
excess to the Lessee). Any subsequent loss of such refund (or of such
application of amounts otherwise refundable) to the extent having resulted in a
payment to Lessee, shall be treated as a Tax Loss subject to indemnification
pursuant to Section 6 hereof without regard to Section 7 hereof. If the Lessor
receives an award of attorney's fees or related expenses in a contest for which
the Lessee has paid or reimbursed all or any portion of such fees and expenses,
the Lessor shall pay to the Lessee the portion of such award attributable to
such fees and expenses paid or reimbursed by the Lessee.
(c) If any adjustment referred to in this Section 8 shall be proposed and
the Lessee shall have requested the Lessor to contest such adjustment as above
provided and the Lessee shall have duly complied with the terms of this Section
8, then notwithstanding any provision to the contrary in Section 6 hereof, the
Lessee's liability with respect to such adjustment shall become fixed upon a
"Final Determination" of such adjustment. A "Final Determination" with respect
to a Tax Loss shall mean (i) a decision, judgment, decree or other order by any
court of competent jurisdiction, which decision, judgment, decree or other order
has become final after all allowable appeals (in the case of the Lessor as
required under this Section 8) by either party to the action have been exhausted
or the time for filing such appeal has expired, (ii) a closing agreement entered
into under Section 7121 of the Code, or any other settlement agreement entered
into in connection with an administrative or judicial proceeding and with the
consent of the Lessee where required, (iii) the expiration of the time for
instituting suit with respect to the claimed deficiency, or (iv) the expiration
of the time for instituting a claim for refund, or if such a claim was filed,
the expiration of the time for instituting suit with respect thereto.
SECTION 9. Survival of Agreement. The representations, warranties,
---------------------
covenants, obligations and liabilities of the Lessee and the Lessor arising
under this Agreement shall continue in full force and effect, notwithstanding
the expiration or other termination of the Lease, until all such obligations
under this Agreement have been met and all such
11
<PAGE>
liabilities under this Agreement have been paid in full. This Agreement shall
inure to the benefit of any successor or assign to the Lessor or the Lessee
permitted pursuant to the Lease; provided, however, that (a) such successor or
-------- -------
assign which is not a Permitted Transferee as defined in the Lease shall have
specifically agreed in writing to be bound by the terms and conditions of this
Agreement to perform the obligations imposed hereunder on the Lessor or the
Lessee, as the case may be, in accordance with the interest of such successor or
assign in the Aircraft and the Lease, (b) the successor or assign shall not be
entitled to indemnity payment or other rights or benefits greater than the
payments, rights or benefits to which the Lessor or the Lessee, as the case may
be, would have been entitled if no transfer or assignment had occurred, and (c)
in applying the terms hereof to such successor or assign, the terms "Lessor" and
"Lessee" as used herein shall mean such respective successor or assign.
SECTION 10. Notices. Any notice, request, or other communication provided
-------
for in this Agreement shall be given in the manner provided in the Lease.
SECTION 11. Payments. Payments made by the Lessee or the Lessor pursuant
--------
to this Agreement shall be made by wire transfer of immediately available funds
to such bank and/or account in the continental United States as specified by the
other party in written directions to the paying party at least five (5) Business
Days prior to the due date thereof, and if no such direction shall have been
given, by check payable in immediately available funds to the order of such
payee and mailed to such payee by certified mail, postage prepaid, at its
address provided for purposes of the Lease.
SECTION 12. No Setoff. No payment required to be made by the Lessee
---------
pursuant to this Agreement shall be subject to any right of setoff,
counterclaim, defense, abatement, suspension, deferment or reduction; and,
except in accordance with the express terms hereof, neither the Lessor nor the
Lessee shall have the right to terminate this Agreement or to be released,
relieved or discharged from any obligation or liability under this Agreement for
any reason whatsoever.
SECTION 13. Late Payments, Interest. Any late payment by any party hereto
-----------------------
of any of its obligations under this Agreement shall bear interest at the
Interest Rate set forth in Letter Agreement No. 1.
SECTION 14. Exclusive Remedy. The indemnities and other rights provided
----------------
to the Lessor in this Agreement shall be the sole remedy of the Lessor for a
breach or inaccuracy of any representation, warranty or covenant contained
herein or for loss of income tax benefits.
SECTION 15. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California applicable to
contracts made and to be performed entirely within such state.
SECTION 16. Counterparts. This Agreement may be simultaneously executed
------------
in any number of counterparts, each of which so executed shall be deemed to be
an original, and such counterparts together shall constitute and be one and the
same instrument.
12
<PAGE>
SECTION 17. Confidentiality. Lessee and Lessor shall keep this Tax
---------------
Indemnity Agreement confidential and shall not disclose, or cause to be
disclosed, the same to any Person, except (A) to prospective and permitted
transferees of Lessee's or Lessor's interests or their respective counsel or
special counsel, auditors, or other agents who agree to hold such information
confidential, (B) to Lessee's or Lessor's counsel or special counsel, auditors,
or other agents or Affiliates who agree to hold such information confidential,
(C) as may be required by any statute, court or administrative order or decree,
legal process or governmental ruling or regulation, or by Internal Revenue
Service auditors, (D) by mutual agreement by the parties hereto, or (E) such
other Persons as are reasonably deemed necessary by the disclosing party in
order to protect the interests of such party or for the purposes of enforcing
this document by such party; provided that any and all disclosures permitted
--------
above shall be made only to the extent necessary to meet the specific
requirements or needs of the Persons making such disclosures.
SECTION 18. Assignment. This Agreement shall not be assignable by either
----------
party without the consent of the other; provided, however, that either party may
assign this Agreement without such consent in connection with the sale of all of
its interests in the Aircraft and the Lease.
13
<PAGE>
IN WITNESS WHEREOF, the Lessee and the Lessor have caused this instrument
to be duly executed as of the day and year first above written.
FRONTIER AIRLINES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
14
<PAGE>
EX 10.19
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT
MARKED WITH " * " AND SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC
SPACE AND USE AGREEMENT
-----------------------
Continental Airlines, Inc. ("CONTINENTAL"), by its execution of this Space
and Use Agreement ("the Agreement"), grants to Frontier Airlines, Inc.,
hereinafter referred to as "COMPANY," under the terms and conditions stated
herein, certain rights and privileges, including the right to occupy and use the
space referred to herein as "the PREMISES," along with any improvements thereon.
COMPANY, by its execution hereof, hereby accepts and receives the PREMISES
and the obligations, liabilities and responsibilities provided for herein.
COMPANY covenants and agrees to abide by and carry out all the terms, conditions
and provisions hereof.
1. EFFECTIVE DATE: March 2, 1995
--------------
2. COMPANY: The name, address and telephone number of the COMPANY are as
-------
follows:
NAME: Frontier Airlines, Inc.
ADDRESS: 12015 East 46th Avenue
Denver, CO 80239
TELEPHONE: (303) 371-7000
ATTENTION: Arthur T. Voss
Vice President, Human Resources
& General Counsel
3. DESCRIPTION OF PREMISES: Certain space on and within the Denver
-----------------------
International Airport, as well as reasonable rights of ingress and egress and
the use of associated areas, being more fully described on Exhibits A - K,
attached hereto and made a part hereof.
4. USE OF PREMISES: COMPANY is hereby granted the right to use the PREMISES,
---------------
in accordance with the terms and conditions stated herein, for the following
purposes:
A) Commercial airline operations as granted to CONTINENTAL under the BASE
LEASE.
5. PROPERTY OWNER: City and County of Denver, hereinafter referred to as
--------------
"OWNER," has granted to CONTINENTAL, the right to use the PREMISES and certain
other rights and privileges under the following Lease, hereinafter referred to
as the "BASE LEASE":
Lessor: City and County of Denver
<PAGE>
Lessee: Continental Airlines
Dated: January 1, 1993
6. CONSIDERATION/RENTAL: In consideration for the rights granted by
--------------------
CONTINENTAL hereby, COMPANY, agrees to pay to Continental Airlines, Inc., *
annually in twelve, equal monthly installments of * paid in advance, on the
first day of each calendar month. Company further agrees to pay as additional
rental any increases in rental charges to Continental and Continental agrees to
afford Company the benefit of any decreases in rental charges to Continental at
the following:
CONTINENTAL AIRLINES, INC
CREDIT MANAGEMENT
P.O. BOX 100023
HOUSTON, TX 77212
ATTENTION: OUTSIDE SALES & SERVICE
7. TERM: This agreement shall begin on March 2, 1995 and shall continue until
----
March 1, 2000, unless otherwise terminated in accordance with the terms and
provisions hereof.
8. NOTICE: Unless expressly required or permitted herein to be oral, all
------
notices, requests, consents and approvals required to be given to or by either
party shall be in writing, and shall be transmitted either by a commonly
recognized national delivery service or deposited as prepaid, certified,
registered or express United States mail addressed as follows, or to the last
address provided in accordance herewith:
TO CONTINENTAL: TO COMPANY:
Staff Vice President Vice President, Human Resources
Properties & Facilities & General Counsel
Continental Airlines, Inc. Frontier Airlines, Inc.
2929 Allen Parkway, Suite #1401 12015 East 46th Avenue
Houston, TX 77019 Denver, CO 80239
9. SECURITY DEPOSIT: Concurrently with the execution of this Agreement,
----------------
COMPANY shall deliver to CONTINENTAL, as a Security Deposit, $0, which amount
may be commingled with other funds belonging to CONTINENTAL and shall bear no
interest. The amount of the Security Deposit may be adjusted by CONTINENTAL as
provided herein.
10. ADDITIONAL RENTAL / CHARGES / FEES: The COMPANY shall be responsible for
----------------------------------
and pay the following amounts:
None.
-2-
<PAGE>
11. INSURANCE COVERAGE REQUIREMENTS
-------------------------------
Without limiting COMPANY's obligation to indemnify CONTINENTAL, as provided
for in this Agreement, COMPANY shall procure and maintain, at its own cost, at
all times during the term of this agreement, insurance of the following types
and in amounts not less than those indicated, with responsible insurers
satisfactory to CONTINENTAL providing the following coverage:
DESCRIPTION
=====================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
1) Aviation General or Per Occurrence: $500,000,000*
Comprehensive General combined single limits covering bodily
Liability injury and property damage, endorsed to
include Premises Liability and
Contractual Liability.
*COMPANY limits if higher
- ---------------------------------------------------------------------
2) Worker's Compensation Statutory
- ---------------------------------------------------------------------
3) Employer's Liability $10,000,000
=====================================================================
</TABLE>
-3-
<PAGE>
12. SPECIAL PROVISIONS:
------------------
A. ADDITIONAL SPACE - Frontier shall pay to Continental for use of one, two,
----------------
three or four gates at a single rate based on 13,814.60 SF of rented space.
Should Frontier elect to lease a fifth gate from Continental, Frontier shall pay
rental for that gate at the Standard Denver International Airport ("DIA") rate
for 5,000 SF. Should Frontier elect to lease six or more gates from
Continental, then the rent for all gates leased from Continental shall be at the
Standard DIA rate for 5,000 SF.
B. SPECIAL CANCELLATION - COMPANY shall have the right to terminate this
--------------------
Agreement upon 60 days prior written notice to CONTINENTAL in the event COMPANY
(i) terminates all scheduled air service at Denver International Airport ("DIA")
or (ii) Company determines in its reasonable judgment that the cost paid by the
COMPANY for the DIA Concourse A automated baggage system places the COMPANY at
an unacceptable competitive disadvantage compared to the cost paid for the
baggage system at DIA's Concourse C by those air carriers operating at that
concourse. Item (ii) of this Paragraph notwithstanding, Frontier may not
terminate if Continental, at its sole option, for as long as it chooses to do
so, reduces the amount due from Frontier for rental hereunder by the amount of
that difference in costs.
13. STANDARD PROVISIONS:
-------------------
USE OF PREMISES
COMPANY covenants and agrees, for the benefit of CONTINENTAL and OWNER, that it
shall not, by its use and occupancy of the PREMISES, violate any of the
provisions of the BASE LEASE as such BASE LEASE has been and/or may from time to
time be amended, and that it shall faithfully perform and discharge all of the
obligations of CONTINENTAL (except for payment of rental) thereunder, to the
extent that such BASE LEASE terms are appropriate to this Agreement. COMPANY
further covenants that this Agreement shall be, in all respects, subject and
subordinate to the BASE LEASE, and nothing contained in this Agreement shall be
deemed to confer upon COMPANY any rights which are not granted by or are in
conflict with the BASE LEASE. Notwithstanding anything contained herein, (a)
this Agreement shall not be deemed to grant to COMPANY any rights or privileges
which CONTINENTAL does not have under the BASE LEASE, and (b) any act or
omission of CONTINENTAL required by the BASE LEASE shall in no event be deemed a
violation of this Agreement.
ACCEPTANCE OF PREMISES
Company HAS INSPECTED THE PREMISES AND ACKNOWLEDGES THAT Continental HAS MADE NO
REPRESENTATIONS AS TO THE CONDITION THEREOF. Company ACCEPTS THE PREMISES IN
ITS PRESENT CONDITION, AS-IS, WITH ALL FAULTS, LATENT OR KNOWN. Continental
MAKES NO WARRANTIES, GUARANTEES OR REPRESENTATIONS OF ANY KIND, EITHER EXPRESS
OR IMPLIED, ARISING BY LAW OR OTHERWISE,
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PERTAINING TO THIS AGREEMENT OR THE PROPERTY DESCRIBED HEREIN. Company HEREBY
WAIVES AND Continental EXPRESSLY DISCLAIMS ALL WARRANTIES, GUARANTEES AND
REPRESENTATIONS, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING BUT
NOT LIMITING THE GENERALITY OF THE FOREGOING, ANY IMPLIED WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE OR REGARDING THE CONDITION OF THE PROPERTY. IN NO EVENT
SHALL Continental's LIABILITY OF ANY KIND UNDER THIS AGREEMENT INCLUDE ANY
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES EVEN IF Continental
SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF POTENTIAL LOSS OR DAMAGE.
RENTAL
If the term of this Agreement shall commence or end on any day other than the
first and last day, respectively, of a calendar month, such consideration due
for a portion of a month shall be prorated on a per-diem basis, and the first
payment shall be due on or before the effective date hereof.
Any unpaid or past due amounts shall bear interest from the date due until paid,
at 1-1/2% per month, or, at CONTINENTAL's option, the maximum rate allowable by
law, which interest shall be considered as part of the rental payable hereunder.
SECURITY DEPOSIT
A. If at any time during the term of this Agreement, any of the rent herein
reserved, or any other amounts due from COMPANY shall be overdue or unpaid,
or in the event of failure by COMPANY to keep and perform any of the terms,
covenants and conditions of this Agreement to be kept and performed by
COMPANY, then CONTINENTAL, at its option, may appropriate and apply the
entire Security Deposit, or any portion thereof (i) to the payment of such
overdue amounts, and (ii) as compensation to CONTINENTAL for any loss or
damage sustained or suffered by CONTINENTAL due to such breach on the part
of COMPANY. Should CONTINENTAL withdraw any amount from the Security
Deposit as provided herein, COMPANY shall remit to CONTINENTAL, upon
written demand therefor, an amount sufficient to fully replenish the
Security Deposit.
B. If at any time during the term hereof, the rental or other amounts due from
COMPANY hereunder should increase, COMPANY shall remit to CONTINENTAL, upon
written demand therefor, an amount sufficient to increase the Security
Deposit to a level reflecting such increase.
C. COMPANY's failure to remit any increase in, or any replenishment of the
Security Deposit, as required herein, within five (5) days of receipt of
written notice of funds due, shall constitute a default hereunder,
entitling CONTINENTAL to immediately invoke the remedies available to it by
law and this Agreement, including immediate termination of this Agreement.
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D. Within thirty (30) days after expiration or other termination of this
Agreement, and upon vacation of the PREMISES and satisfaction of any and
all events of default by COMPANY, including payment of all amounts due and
past due, the Security Deposit shall be returned in full to COMPANY.
E. In the event any bankruptcy, insolvency, reorganization or other creditor-
debtor proceedings shall be instituted by or against COMPANY, the Security
Deposit shall be deemed to be applied first to any rents and/or other
charges due CONTINENTAL for all periods prior to the institution of such
proceedings, and the balance, if any, of the Security Deposit may be
retained by CONTINENTAL in partial liquidation of CONTINENTAL's damages.
F. COMPANY covenants and agrees that it shall not assign or encumber or
attempt to assign or encumber this Security Deposit, and that CONTINENTAL
shall not be bound by any such assignment, encumbrance or attempt to assign
or encumber.
UTILITIES
CONTINENTAL shall furnish the PREMISES with utilities and services to the extent
that they are furnished to Continental under the BASE LEASE. Continental shall
not be liable for, and COMPANY hereby releases and waives any claims against
CONTINENTAL resulting from any failure or interruption of such services.
COMPANY shall pay Continental, as additional rent, for any extraordinary
electrical, gas or water consumption.
CONDUCT AND WASTE
COMPANY, in its use of the PREMISES, covenants and agrees that it shall:
A. Conduct its operations in an orderly and proper manner. COMPANY shall not
create, generate or permit-the creation or generation of vibrations that
might tend to damage the PREMISES; loud noises; the emission of steam,
gases or unpleasant or noxious odors; nor in any manner annoy, disturb or
be offensive to other tenants of the PREMISES and common areas.
B. Be responsible for the conduct, appearance and behavior of its officers,
employees, agents, contractors, customers and invitees on and in the
vicinity of the PREMISES, and upon objection from CONTINENTAL or OWNER,
shall immediately make every reasonable effort to eliminate any
unsatisfactory conduct, appearance or behavior.
C. Not allow garbage, debris or other waste materials (whether solid, liquid
or gaseous) to collect or accumulate on or in the PREMISES or in access or
service areas. COMPANY shall remove debris and other waste materials from
the PREMISES in accordance with all applicable regulations governing such
activity. COMPANY shall keep all lobbies, vestibules and steps within the
PREMISES free from dirt and rubbish.
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D. It is intended that the standards and obligations imposed by this section
shall be maintained and complied with by COMPANY in addition to its
compliance with any present and future governmental laws, rules and
regulations.
SECURITY
COMPANY shall adopt and enforce appropriate procedures to prevent unauthorized
access to CONTINENTAL's operations areas and aircraft, on the part of its
passengers, employees, vendors, licenses, and invitees. Such procedures shall
include, without limitation, a requirement that all COMPANY's employees visibly
display a photographic identification badge on their person at all times while
within an area covered by this Agreement which is not open to the general
public, and a requirement that all passengers and other persons who are present
in such an area be in the COMPANY of, and escorted by, a properly identified
employee of COMPANY. COMPANY further agrees to indemnify, defend and hold
CONTINENTAL harmless with respect to any one, levy or penalty which may be
imposed upon CONTINENTAL by the Federal Aviation Administration or any other
government authority for violation of any law or regulation pertaining to
aircraft or airport security as a result of any act or omission on the part of
COMPANY, such indemnity to include all attorneys fees and other costs of defense
incurred in connection therewith.
GOVERNMENTAL REQUIREMENTS
COMPANY covenants and agrees, at its sole expense, to procure from all
governing authorities asserting jurisdiction over the operations of COMPANY, all
licenses, certificates, permits or other authorization which may be necessary
for the conduct of its operations. COMPANY shall at all times promptly observe,
comply with and execute the provisions of any and all present and future
federal, state and local laws, rules, regulations, requirements, orders and
directions which may pertain or apply to the operations of COMPANY and its
occupancy of the PREMISES.
RULES, REGULATIONS AND ADMINISTRATION
COMPANY shall be responsible for initiating, maintaining and supervising
safety precautions and programs necessary to prevent injury to persons and
damage to property in, on or about the PREMISES, and shall observe and obey all
present and future rules and regulations issued by CONTINENTAL and OWNER for the
conduct of tenants and subtenants at the PREMISES, including but not limited to
those regulating safety, health and preservation and security of the PREMISES.
MAINTENANCE AND REPAIRS
A. Any construction or alteration of the PREMISES required by COMPANY shall be
made by COMPANY at its sole expense' and only upon prior, written approval
by CONTINENTAL and OWNER.
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B. COMPANY covenants and agrees to maintain the PREMISES, and shall at its
sole cost, make any installations, non-structural repairs, replacements,
redecorating and other maintenance necessary to keep the PREMISES, and all
equipment, fixtures, furnishings and signs therein, in a clean, neat and
orderly condition, all of which shall be in accordance with the standards
of the facility and of a quality and class not inferior to the original
material and workmanship, normal wear and tear and damage by fire or other
casualty excepted. All maintenance and repair work undertaken by COMPANY
shall be performed in a good and workmanlike manner, leaving the PREMISES
free of liens for labor and materials.
C. COMPANY covenants and agrees to maintain the PREMISES and conduct its
operations in such a manner that at no time shall it do or permit to be
done any act or thing in, on or in the vicinity of the PREMISES which will
invalidate or conflict with any fire and casualty insurance policies
covering the PREMISES, or any part thereof, or which may create a hazardous
condition or otherwise increase the risk nominally attendant upon the
operations contemplated hereunder. COMPANY shall promptly observe and
comply with all present and future rules, regulations and orders of the
Fire Underwriters Association or of any other board or organization which
may exercise similar functions.
D. Any increase in fire or casualty insurance premiums attributable to
COMPANY's acts or omissions under this Agreement, shall be promptly
reimbursed by COMPANY, upon receipt of CONTINENTAL's and/or OWNER's invoice
therefor.
SURRENDER
Upon expiration or other termination of this Agreement in accordance with
the provisions herein, COMPANY shall remove all signs, trade fixtures and any
other personal property, repair all damage caused by removal, and surrender the
PREMISES in the clean, neat and orderly condition. required herein. In the
event COMPANY fails to surrender possession as required herein, CONTINENTAL may
reenter and repossess the PREMISES without further notice, any personal property
therein being deemed abandoned by COMPANY. COMPANY hereby waives service of any
notice of intention to reenter and right to redeem that may be granted by
applicable laws.
RIGHT OF ENTRY
CONTINENTAL reserves the right for itself and OWNER to enter upon the
PREMISES at any time during an emergency to take such action as may be required
for the protection of persons and property, and for any other reasonable
purpose, including without limitation, as access to and egress from areas other
than the PREMISES, and to perform such functions as may be necessary for the
maintenance and operation of the PREMISES, for inspection, repairs, alterations
and improvements, and showing to prospective tenants. Such activity shall not
be cause for abatement of any amount payable to CONTINENTAL by COMPANY, and the
term of this Agreement shall not thereby be extended. CONTINENTAL shall make a
reasonable effort to minimize interference with COMPANY's operations during such
activity.
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TAXES
COMPANY agrees to pay, before they become delinquent, all taxes (both
general and special), assessments, fees and charges of any kind whatsoever,
levied or assessed against the PREMISES, and any property of COMPANY located
thereon, and any business conducted by COMPANY thereon. COMPANY agrees to use
its best efforts to cause the PREMISES, and its personal property and business
operations to be assessed and taxed separately from the BASE LEASE and the
PREMISES. On demand by CONTINENTAL, COMPANY shall furnish CONTINENTAL with
satisfactory evidence that such payments required from COMPANY have been made.
In the event that Continental shall be assessed any taxes or fees relative to
the PREMISES or any of COMPANY's leasehold improvements, equipment, furniture,
fixtures, personal property or business operations, COMPANY shall reimburse such
amount to CONTINENTAL within five (5) days after receipt of a written statement
thereof.
FORCE MAJEURE
Notwithstanding anything to the contrary herein contained, neither party
shall be deemed in violation of this Agreement if it is prevented from
performing any of its obligations hereunder by any labor or industrial dispute;
civil disturbance; vandalism or act of a public enemy; shortage of labor, energy
or material; court order, regulation, action or non-action of any governmental
authority; weather condition; natural disaster; act of God; or other
circumstance not reasonably within its control, and which, with the exercise of
due diligence, it is unable to overcome. Each party shall give the other
immediate notice of such interruption, shall make all reasonable efforts to
eliminate it as soon as possible, and at its conclusion, shall resume
performance in accordance with its obligations hereunder. Neither party shall
be required by the foregoing to settle or compromise any strike or other labor
dispute. Either party may terminate this Agreement should such interruption
exceed thirty (30) days.
RELATIONSHIP
The relationship between COMPANY and CONTINENTAL shall be that of
independent contractor for all purposes and no person employed by either shall
be held or construed to be an employee or agent of the other under any
circumstances. Each party assumes full responsibility for any and all liability
to its own employees on account of injury, or death resulting therefrom,
sustained in the course of their employment. Each Party, with respect to its
own employees, accepts full and exclusive liability for payment of Workers'
Compensation and employer's liability insurance premiums with respect to such
employees, and for 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 any government or agency thereof asserting
jurisdiction in respect of such employees measured by the wages, salaries,
compensation or other remuneration paid to such employees, and agrees to make
such payments and to make and file all reports and returns and to do everything
necessary to comply with the laws imposing such taxes, contributions or
payments.
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INDEMNIFICATION
Release
COMPANY hereby covenants and agrees that, anything in this Agreement to the
contrary notwithstanding, CONTINENTAL shall not be liable for (a) any acts or
omissions of, or for any condition resulting from, the operations or activities
of any person, firm or corporation, or its officers, directors, agents,
employees, customers, invitees, vendors, or contractors relating to or arising
out of this Agreement, or (b) any loss or damage to any property or the death or
injury of any persons (including property of COMPANY, or its officers,
directors, employees, agents, customers, vendors, contractors or invitees),
occasioned by theft, fire, acts of God, or any governmental body or authority,
injunction, riot, war, other tenants of the PREMISES, or any other matter beyond
the control of CONTINENTAL, or any damage or inconvenience which may arise
through repair, or alteration of the PREMISES, or failure to make repairs, or
unavailability of utilities or for any cause whatsoever except the gross
negligence or willful misconduct of CONTINENTAL.
Indemnity
Anything in this Agreement to the contrary notwithstanding, and without
limiting COMPANY's obligation to provide insurance pursuant to insurance
provisions herein, COMPANY covenants and agrees that it shall protect,
indemnify, defend and hold harmless, CONTINENTAL, its parent and subsidiaries,
OWNER and their respective predecessors and former, present and future
directors, officers, employees, agents, successors and assigns
(the"lndemnitees"), from and against all liabilities, losses, damages,
penalties, claims, costs, charges and expenses, causes of action and judgements
of any nature whatsoever, including without limitation reasonable attorneys'
fees, costs and related expenses, including, without limitation, fees and
disbursements of counsel incurred by any Indemnitee in any action or proceeding
between COMPANY and any Indemnitee, or between any Indemnitee and any third
party, or otherwise, which may be imposed upon or incurred by the Indemnitees by
reason or arising out of any of the following, except if caused by the gross
negligence or willful misconduct of the Indemnities:
A. Any occupancy, management or use of the PREMISES, or common areas or the
service areas, parking areas, or pedestrian areas in the vicinity of the
PREMISES, by COMPANY or any of its directors, officers, agents,
contractors, servants, employees, licensees, invitees, successors and
assigns;
B. Any act or omission of COMPANY or any of its directors, officers, agents,
contractors, servants, employees, licensees, invitees, successors and
assigns;
C. Any act or omission of Company or any of its directors, officers, agents,
contractors, servants, employees, licensees, invitees, successors and
assigns which causes any accident, injury to or death of any person, or
damage to or destruction of any property occurring on
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or in the vicinity of the PREMISES, including but not limited to aircraft
or interference with CONTINENTAL's operations;
D. Any failure on the part of COMPANY to comply with any of the covenants,
agreements, terms or conditions contained in this Agreement, the BASE LEASE
or any law, rule, regulation, requirement, order or directive for which it
is responsible;
CONTINENTAL shall promptly notify COMPANY of any such claim asserted
against it, and forward copies of all papers or legal process served upon it in
connection with any action or proceeding brought against any Indemnitee by
reason of any such claim.
ENVIRONMENTAL OPERATIONS
COMPANY covenants and agrees:
1) that it shall not cause or permit any hazardous or toxic substance to
be brought upon the PREMISES without the written consent of
CONTINENTAL, and shall advise CONTINENTAL of any known or suspected
environmental contamination;
2) that its operations shall at all times remain in compliance with:
A) CONTINENTAL's written restrictions and requirements governing the
identification and use of chemical products;
B) all orders and regulations promulgated by the Occupational,
Safety and Health Administration and by the Environmental
Protection Agency, and all other federal, state and local laws,
rules, regulations, requirements, orders and directive governing
safety, the environment and hazardous and toxic substances;
3) that it shall:
A) secure at its own expense, all required permits, licenses and
authorizations necessary for such compliance;
B) advise CONTINENTAL of any notice of potential or actual non-
compliance;
C) immediately upon receipt, provide CONTINENTAL with copies of any
notice or notices relating to non-compliance:
D) CONTINENTAL's designated representatives the unrestricted right
to inspect and review its on-premises operations and equipment.
Unless necessary in an
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emergency situation, CONTINENTAL's representatives shall not
purposefully interfere with or inhibit COMPANY's operation.
All notices, copies and correspondence relating to this Section shall be
delivered as described in the NOTICE provision of this Agreement to the
following address, or to any address subsequently provided by proper notice.
Copies of such material shall be hand-delivered to CONTINENTAL's on-site
representative upon request:
CONTINENTAL AIRLINES, INC.
Environmental Health and Safety Department
15333 JFK Boulevard, Suite 425
Houston, TX 77032
ENVIRONMENTAL INDEMNITY
COMPANY covenants and agrees to release, indemnify, hold harmless and
defend CONTINENTAL, its parent and subsidiaries and their respective directors,
officers, employees, agents, successors and assigns from and against any and all
claims, liabilities, losses, expenses, damages, causes of action and judgements
of any nature whatsoever, including but not limited to reasonable attorney,
consultant and expert fees, costs and related expenses; and including, but not
limited to clean-up or other curative measures ordered by the Occupational,
Safety and Health Administration or the Environmental Protection Agency or any
other federal, state or local agency or entity asserting jurisdiction; arising
out of the discharge, disbursal, release or escape of any hazardous substance,
toxic chemical, pollutant, contaminant or irritant, in solid, liquid or gaseous
forms; arising out of or in any manner connected with any act or omission of
COMPANY or its directors, officers, agents, contractors, servants, employees,
licensees, invitees, successors and assigns.
INSURANCE
COMPANY shall cause the required insurance coverages to be duly and properly
endorsed by its insurance underwriters to provide that:
(1) CONTINENTAL, OWNER, and their respective officers, directors, agents
and employees are named as additional insured thereunder to the extent
of COMPANY's obligation to indemnify CONTINENTAL under this Agreement,
where allowed by law.
(2) The policies shall include a standard cross liability clause.
(4) COMPANY's insurance shall be primary insurance and that any other
insurance policy or policies of CONTINENTAL are noncontributory,
secondary or excess insurance.
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(5) COMPANY's policy expressly insures COMPANY's contractual liability
assumed by COMPANY under this Agreement.
(6) COMPANY's insurers waive all rights of subrogation against CONTINENTAL,
its officers, directors agents and employees and its insurers.
(7) CONTINENTAL shall be given thirty (30) days prior, written notice of
any cancellation, or other material or adverse changes.
(8) COMPANY's insurers agree that COMPANY's breach of any warranty set
forth in its policy of insurance will not invalidate the insurance as
to CONTINENTAL.
Upon execution of this Agreement, and upon any reasonable request by
CONTINENTAL, COMPANY shall forthwith supply CONTINENTAL with certificates of
insurance as evidence of the insurance coverage and endorsements required
herein.
COMPANY agrees that the terms of these insurance requirements may be revised,
and the minimum coverages may be increased upon the written demand of
CONTINENTAL, which demand shall be based on reasonable and justifiable grounds.
SURVIVAL OF TERMS
Termination of this Agreement or any part thereof by notice, expiration of
term or otherwise, shall not relieve COMPANY of any liabilities or obligations
accrued on or prior to the date of termination, and the indemnities and
insurance provisions contained or referred to herein shall remain in effect and
shall survive the expiration or other termination of this Agreement.
TERMINATION
Without limiting any rights of CONTINENTAL to terminate this Agreement as may be
afforded by operation of law, this Agreement shall also be terminated at the
option of CONTINENTAL, as follows:
A. Immediately upon the termination or expiration of the BASE LEASE or any
portion thereof, or upon expiration or termination of CONTINENTAL's right
to grant to COMPANY the right to occupy and use the PREMISES as
contemplated herein, in which event COMPANY shall have no claim for the
unexpired term hereof.
B. Immediately and without notice to COMPANY in the event that COMPANY files a
voluntary petition in bankruptcy or that proceedings in bankruptcy shall be
instituted against COMPANY and not dismissed within one hundred twenty
(120) days, or that a court shall take jurisdiction of COMPANY or its
assets pursuant to proceedings brought under the provisions of any federal
reorganization act, or that a receiver of COMPANY's assets shall
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be appointed and such taking or appointment shall not be stayed or vacated
within a period of thirty (30) days.
C. Immediately upon written notice to COMPANY, if COMPANY fails to pay any
installment of rent or additional rent within ten (10) days after such
amount is due.
D. Immediately upon written notice to COMPANY, if COMPANY fails to perform,
keep, and observe any of the covenants, terms and conditions which COMPANY
is obligated herein to perform, keep and observe, except that termination
shall be stayed as long as COMPANY cannot reasonably cure such default
immediately, and as long as COMPANY is diligently proceeding to cure such
default.
E. Immediately by either party upon the acquisition or condemnation of the
PREMISES by eminent domain, in which event COMPANY shall have no claim (I)
for the unexpired term hereof, or (ii) any part of the award made for the
PREMISES, but may claim any award for its personal property.
F. Abandonment of the PREMISES by COMPANY for more than 48 hours, unless due
to circumstances beyond COMPANY's reasonable control.
In the event that this Agreement is terminated in accordance with the
foregoing prior to the expiration of the term hereof, or during any extension
thereof, CONTINENTAL may relet the PREMISES for any term and under any
conditions it may deem satisfactory, which shall not affect or impair
CONTINENTAL's right to recover actual damages occasioned by any default by
COMPANY.
NON-DISCRIMINATION AND EQUAL OPPORTUNITY
COMPANY, for itself, its successors in interest and assigns, as a part of
the consideration hereof, as a covenant running with the land, covenants and
agrees that it shall not discriminate by segregation or otherwise against any
person because of race, color creed or national origin, in providing or refusing
to provide to any person the use of the PREMISES, or any services, privileges,
accommodations, or activities provided by COMPANY, and to be bound by and to
perform in accordance with all applicable provisions and requirements of all
federal, state and local laws, executive orders and regulations issued pursuant
thereto, including without limitation, and to the extent applicable to this
Agreement, the provisions contained within:
A. The Fair Labor Standards Act.
B. The Equal Opportunity clause set forth in 41 CFR Parts 60-1 et seq.,
------
pursuant to the requirements of Section 202 of Executive Order 11246, as
amended, and the implementing regulations of the Office of Federal Contract
Compliance Programs.
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C. Contractual requirements of the Rehabilitation Act of 1973 as set forth in
41 CFR Sec 60-741.4; and of the Vietnam Era Veterans Readjustment Act of
1974 as set orth in 41 CFR Sec. 60-250.4.
D. The requirements of the Occupational Safety and Health Act and regulations
issued thereunder;
E. Titles l, ll, 111, IV, and V of the Americans with Disabilities Act of
1990;
as the foregoing may be amended or replaced, which provisions are
incorporated herein by reference as if set forth in full. By execution of this
Agreement each party represents and warrants compliance with the aforementioned
regulations and will furnish proof thereof on demand.
COMPANY further covenants and agrees to:
1) Indemnify and defend Continental from and against any and all claims,
liabilities, losses and judgements arising out of COMPANY's failure to
comply with these provisions; and
2) Include and require inclusion of these provisions in all agreements
regarding the PREMISES, including, without limitation, those of its
contractors, subcontractors, successors and assigns.
Non-Discrimination Breach
In the event of any breach of any of the above non-discrimination
covenants, CONTINENTAL shall have the right to terminate this Agreement and to
reenter and repossess the PREMISES, and hold the same as if this Agreement had
never been made or issued. This provision shall not be effective until the
procedures of Title 49, CFR Part 21, are followed and completed, including
exercise or expiration of appeal rights.
SEVERABILITY
If any term or provision of this Agreement or the application thereof to
any person or circumstance shall, to any extent, be declared invalid or
unenforceable by a court of competent jurisdiction, such invalidity shall not
affect or impair the remainder of this Agreement or its application to any other
person or circumstance, and this Agreement shall not be affected or impaired
under any circumstance or in any jurisdiction where such provision remains
valid.
TEXAS LAW
THIS AGREEMENT SHALL BE CONSTRUED AND PERFORMANCE THEREOF SHALL BE
DETERMINED ACCORDING TO THE LAWS OF THE STATE OF TEXAS.
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TIME IS OF THE ESSENCE
The parties expressly agree that time is the essence of this Agreement and
of every provision hereof. Failure by a party to complete performance within the
time specified, or within a reasonable time if no time is specified herein,
shall, without prejudice of any other rights or remedies, relieve the other
party of any obligation to accept such performance.
QUIET ENJOYMENT
CONTINENTAL agrees that upon payment of the rents and other payments due,
and performance of the covenants and agreements on the part of COMPANY to be
performed hereunder, COMPANY shall peaceably have and enjoy the PREMISES subject
to an event of Force Majeure and to the terms and conditions herein.
LIENS
COMPANY shall not allow any condition to exist or situation to develop
whereby any party would be entitled, as a matter of law, to a lien against the
PREMISES, and agrees to indemnify, release, defend and hold CONTINENTAL and
OWNER harmless from and against any and all costs, expenses and claims arising
therefrom.
WAIVER
No waiver by either party at any time of any of the terms, conditions,
covenants or agreements herein or of any forfeiture, shall be deemed or taken as
a waiver at any time thereafter of the same or any other term, condition,
covenant, or agreement herein contained, nor of the strict and prompt
performance thereof. No delay, failure or omission of CONTINENTAL to reenter
the PREMISES, or to exercise any right, power, privilege or option shall be
construed to be a waiver of any default or relinquishment thereof, or
acquiescence thereto, and no notice by CONTINENTAL shall be required to restore
or revive any right, power, privilege, option or remedy after waiver by
CONTINENTAL of default in one or more instances. No right, power, privilege,
option or remedy of CONTINENTAL shall be construed as being exhausted or
discharged by the exercise thereof in one or more instances. Each and all of the
rights, powers, privileges, options and remedies given to either party by this
Agreement shall be cumulative, and no one of them shall be exclusive of the
other or exclusive of any remedies provided by law, and the exercise of one
right, power, option or remedy by either party shall not impair its right to any
other right, power, option or remedy except in those cases where it is expressly
so provided.
ASSIGNMENT
This Agreement and the rights and obligations created hereunder may not be
assigned or delegated by COMPANY without the prior written consent of
CONTINENTAL and OWNER; but, subject to the foregoing, this Agreement and the
rights and obligations of the parties hereby created,
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shall be binding upon and inure to the benefit of the parties hereto, their
respective successors, assigns and legal representatives. CONTINENTAL reserves
the right to assign or transfer its interest hereunder without notice.
CAPTIONS
The captions of the articles and sections of this Agreement are inserted
for convenience only, and are not intended and shall not be construed to affect
in any manner the terms and conditions hereof, or the interpretation or
construction thereof.
APPROVAL BY OWNER
The parties hereto agree that this Agreement is subject to the consent and
approval of OWNER. If written consent thereto is not forthcoming within thirty
(30) days of execution of this Agreement, given, either party may, at its
option, rescind its signature and this Agreement shall become null and void, and
the parties shall become discharged from all liabilities hereunder.
ENTIRE AGREEMENT
This Agreement, including any exhibits and inclusions by reference,
contains the entire understanding between the parties hereto, and supersedes and
revokes all previous negotiations, arrangements, letters of intent, offers,
proposals, representations, and information conveyed, whether oral or in
writing, between the parties hereto or their respective representatives or any
person purporting to represent either. COMPANY acknowledges that it has not
been induced to enter into this Agreement by any representation or construction
of this Agreement, and agrees that CONTINENTAL shall have no liability for any
consequences arising as a result of such representation.
No amendment, change or addition to this Agreement shall be binding upon
either party hereto unless in writing and signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the effective date hereof.
CONTINENTAL AIRLINES, INC. FRONTIER AIRLINES, INC.
BY: BY: /s/ Arthur T. Voss
----------------------------- ----------------------------
TITLE: TITLE: Vice President
-------------------------- -------------------------
DATE: DATE: 9/6/95
--------------------------- --------------------------
-17-
<PAGE>
CITY AND COUNTY OF DENVER
BY:_____________________________
TITLE:__________________________
DATE:___________________________
-18-
<PAGE>
EXHIBIT A
Subject to the conditions set forth in the Agreement, the COMPANY shall have:
(1) The right to use for commercial airline operations as granted to
CONTINENTAL under the BASE LEASE the PREMISES as detailed on Exhibits B
through K
-19-
<PAGE>
ATTACHMENT B
FRONTIER AIRLINES SPACE ALLOCATION AND BILLING - DEN
----------------------------------------------------
05-Sep-95
<TABLE>
<CAPTION>
ANNUAL
-------------- MONTHLY JUNE ACH
ROOM # SPACE DESCRIPTION SQ. FT. RATE/(1)/ COST COST BILLING
- ------ ----------------- ------- -------- ---- ---- -------
- --------------------------------------------------------------------------------------------
CONCOURSE AREAS
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ramp Level
- ----------
1514 IDF 72.00 * * * *
1340 A/C Shop 2,615.90 * * * *
1340-1 Men's Locker Room 276.30 * * * *
1340-2 Janitor 50.50 * * * *
1340-3 Women's Locker Room 257.40 * * * *
1340-4 Plumbing Access 40.00 * * * *
1340-5 Office 106.30 * * * *
1340-6 Breakroom 282.60 * * * *
1340-7 Office 128.60 * * * *
1340-8 IDF 89.30 * * * *
1340-9 Office 236.50 * * * *
1340-9A Office 22.20 * * * *
1350-12 GSE Wash Bay 485.40 * * * *
1350-12A Hotsy 94.70 * * * *
1370 Remote Ready Room 90.00 * * * *
NA Circulation 247.00 * * * *
SUBTOTAL --------- ---- ---- -------
5,094.70 * * *
Concourse Level
- ---------------
2505 F9 Gate Lobby - A32 1,996.80 * * *
2347 F9 Gate Lobby - A34 1,953.90 * * * *
2343 F9 Gate Lobby - A36 1,953.90 * * * *
2325 F9 Gate Lobby - A38 1,910.30 * * * *
SUBTOTAL --------- ---- ---- -------
$7,814.90 * * *
RAMP AREA (LINEAR FEET) 560.00 * * * *
CONCOURSE A JOINT USE ALLOCATION/(2)/ * * *
TOTAL CONCOURSE AREAS 12,909.60 * * *
- ----------------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT B
Frontier Airlines Space Allocation and Billing - DEN
----------------------------------------------------
05-Sep-95
Annual Monthly June ACH
---------------
Room # Space Description Sq. Ft. Rate/(1)/ Cost Cost Billing
------ ----------------- ------- --------- ---- ---- -------
- -----------------------------------------------------------------------------------------------------------------
TERMINAL AREAS
- -----------------------------------------------------------------------------------------------------------------
Level Six
- ---------
<S> <C> <C> <C> <C> <C> <C>
NA F9 Tckt Positions (#13-19) 480.00 * * * *
- -----------------------------------------------------------------------------------------------------------------
68B36 Office 425.00 * * * *
--------- ---- ---- ---- ----
SUBTOTAL 905.00 * * * *
- -----------------------------------------------------------------------------------------------------------------
TOTAL TERMINAL AREAS 905.00 * * * *
---- ---- ----
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
TOTAL ALL AREAS/(3)/ 13,814.60 * * * *
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Square footage rates are comprised of tenant finish and basic rental
components.
/(2)/ Concourse A Joint Use costs are allocated based upon $ of total exclusive
square footage.
/(3)/ Please note that variable costs associated with baggage system usage are
not included. These amounts will be billed directly to Frontier Airlines
by the City and County of Denver.
-21-
<PAGE>
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED
WITH " * " AND SUCH PROTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC
FIRST AMENDMENT
This Amendment is made as of the 15th day of November, 1995, but actually
entered into as of the date last set forth below, by and between Continental
Airlines, Inc. ("Continental") and Frontier Airlines, Inc. ("Frontier").
WHEREAS, Continental has leased certain premises in Concourse A of the
Denver International Airport from the City and County of Denver ("Owner"); and
WHEREAS, by that certain Space and Use Agreement dated March 2, 1995 (the
"Agreement"), Continental has granted to Frontier the right to use part of such
premises (the "Premises") and Frontier has accepted the Premises; and
WHEREAS, Continental and Frontier desire to amend the Agreement pursuant to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the terms and covenants contained
herein, the Agreement is hereby amended as follows:
1. Effective as of November 15, 1995 and continuing during the term of
the Agreement, and while Frontier is not in default under its obligations
thereunder or hereunder, after submission to Continental of copies of proper
invoices received by Frontier from the City, Continental will * . Unless
Continental elects to make such payments directly to the City as hereinbelow
provided, such * will be accomplished through the Airline Clearing House on the
latest Airline Clearing House settlement date that is at least five days prior
to the date that such charges are required to be paid to the City, or through
such other agreed upon method as will not require Frontier to pay such charges
to the City prior to reimbursement by Continental; provided, further, that such
reimbursement for the period November 15, 1995 through February 29, 1996 shall
be made on or before February 29, 1996. If elected by Continental, Continental
may pay such amounts required hereunder to be reimbursed by Continental to
Frontier directly to the City. Frontier shall promptly (and in any event prior
to delinquency) remit to City any sums reimbursed to Frontier by Continental
hereunder.
2. Effective * , and while Continental is not in default under its
obligations under Section 1 above, the amount payable by Frontier to Continental
under Paragraph 6 of the Agreement shall be * each at the same time and manner
as payments are required to be paid by Frontier to Continental under Paragraph 6
of the Agreement; provided, that the additional monthly payments for each of the
months of January, February and March of 1996 shall be * , and shall be made on
or before February 29, 1996 (and such increased amount for such months shall not
affect Frontier's obligation for the remaining months of 1996 or thereafter).
If and when, and at each time that, the City of Denver rental rates or charges
for Concourses A or C at Denver International Airport are hereafter increased
-1-
<PAGE>
or decreased, then the * amount (and related monthly payments referred to above,
as such amount is adjusted as herein provided from time to time, shall
thereafter be increased or decreased, as the case may be, so that the annual
amount paid by Frontier to Continental under this Section 2 will be adjusted to
equal the new annual amount that would be obtained by substituting the new
rental rates and charges for the rental rates and charges shown on Exhibit "A",
which is attached hereto and incorporated herein by this reference, and by
thereafter performing the same calculations as are indicated on such Exhibit to
solve for the new annual amount (in place of the * annual amount now set forth
on Exhibit "A") (with all other aspects of the methodology reflected on Exhibit
"A", including, without limitation, the square footages and percentage
allocations reflected thereon, remaining the same). However, in no event shall
any increase in costs for which Continental is required under Section 1 above to
reimburse Frontier cause the annual amount to be paid by Frontier hereunder to
decrease. Frontier shall prepare the new Exhibit "A" reflecting the adjusted
calculations and shall deliver such new Exhibit to Continental for Continental's
approval. Upon approval of such new Exhibit reflecting the new annual amount
referred to above, such Exhibit shall then be deemed a part of this Amendment
without need of any formal amendment.
3. Paragraph 12A of the Space and Use Agreement is deleted and replaced
with a provision stating that if Frontier leases additional Concourse A gate(s)
from Continental, its rent obligation to Continental shall be based on the
actual square feet of the additional leased gate(s) and the actual square feet
of any additional Concourse A space leased from Continental.
4. Paragraph 12B of the Space and Use Agreement relating to Special
Cancellation rights in Frontier as a result of Concourse A Automated Baggage
System charges is deleted.
5. Except as expressly provided in this Amendment, the Agreement is
unmodified and remains in full force and effect. Frontier and Continental agree
that the Agreement, as modified by this Amendment, sets forth the entire
agreement of the parties with respect to the matters addressed therein and
herein and that each such party is fully bound by the terms of the Agreement, as
modified by this Amendment. This Amendment supercedes and replaces that certain
Term Sheet executed by Continental and Frontier relating to the subject matter
hereof.
6. By execution below, the City (i) approves the Agreement and this
Amendment, and (ii) acknowledges and agrees that nothing contained herein shall
be deemed to create any rights in favor of the City to require Continental to
pay to the City any sums attributable to Frontier's use of Concourse A or the
ABS, whether under a third party beneficiary theory or otherwise, and that the
City shall look solely to Frontier for payment of any costs associated with the
ABS or for payment of any other amounts that Frontier may have agreed to pay to
the City.
7. This Amendment shall not be effective until executed by the parties
hereto and the City. This Amendment may be executed in multiple counterparts
(and delivered by facsimile transmission), each of which shall constitute an
original, but all of which together shall constitute one and the same
instrument.
-2-
<PAGE>
Agreed: Agreed:
Continental Airlines, Inc. Frontier Airlines, Inc.
By /s/ H. Shannon By /s/ Arthur T. Voss
-------------------- ------------------
Name Holden Shannon Name Arthur T. Voss
-------------------- ------------------
Title Staff Vice President Title Vice President
-------------------- ------------------
Date 2/12/96 Date 2/7/96
-------------------- ------------------
Agreed:
City and County of Denver
By _______________________________
Name _______________________________
Title ______________________________
Date _______________________________
-3-
<PAGE>
LETTER AGREEMENT
This letter agreement incorporates the City and County of Denver ("OWNER")
comments to the Continental Airlines, Inc. ("CONTINENTAL") sublease agreement
with Frontier Airlines, Inc. ("COMPANY") effective March 2, 1995 and executed by
CONTINENTAL on September 7, 1995 and by COMPANY on September 6, 1995. It is
mutually agreed that, effective March 2, 1995, the sublease agreement will
incorporate the following revisions requested by the OWNER which have been
underlined for clarification purposes only.
Section 3. Description of Premises on page 1. This section will read as
follows:
Certain space on and within the Denver International Airport, as well as
reasonable rights of ingress and egress and the use of associated areas,
being more fully described in Exhibits B-K, attached hereto and made a part
-
hereof.
Section 13. Standard Provisions on page 6. The section heading Use of Premises
will be replaced as follows:
SUBJECT TO BASE LEASE
---------------------
Section 13. Standard Provisions on page 13 Environmental Operations. Item
(3)(B) of this section will read as follows:
advise CONTINENTAL and OWNER of any notice of potential or actual non-
---------
compliance.
Section 13. Standard Provisions on page 14 Environmental Operations. Item
(3)(C) of this section will read as follows:
immediately upon receipt, provide CONTINENTAL and OWNER with copies of any
---------
notice or notices relating to non-compliance.
Section 13. Standard Provisions on page 14 Environmental Operations. Item
(3)(D) of this section will read as follows:
allow CONTINENTAL's and OWNER's designated representatives the unrestricted
----- -----------
right to inspect and review its on-premises operations and
1
<PAGE>
equipment. Unless necessary in an emergency situation, neither
-------
CONTINENTAL's nor OWNER's representatives shall purposely interfere with or
-----------
inhibit COMPANY's operation.
Section 13. Standard Provisions on page 14 Environmental Operations. Shall
include the following paragraph:
As used herein, the term "Hazardous Material" includes any hazardous,
---------------------------------------------------------------------
explosive, radioactive, or toxic substance, material, or waste which is or
--------------------------------------------------------------------------
becomes regulated by any local governmental authority, the state in which
-------------------------------------------------------------------------
the Sublease PREMISES is located or the United States, including, without
-------------------------------------------------------------------------
limitation, any material or substance which is (a) defined or listed as a
-------------------------------------------------------------------------
"hazardous waste," "extremely hazardous waste," "restricted hazardous
---------------------------------------------------------------------
waste," "hazardous substance," "hazardous material," "pollutant," or
--------------------------------------------------------------------
"contaminant" under any Law, (b) a petroleum or petroleum derivative, (c) a
---------------------------------------------------------------------------
flammable explosive, (d) a radioactive material, (e) a polychlorinated
----------------------------------------------------------------------
biphenyl, (f) asbestos or an asbestos derivative, (g) urea formaldehyde
-----------------------------------------------------------------------
foam insulation, or (h) radon gas.
---------------------------------
Section 13. Standard Provisions on page 14 Environmental Indemnity. The
sentence which begins "COMPANY covenants and agrees to release...." will read as
follows:
COMPANY covenants and agrees to release, indemnify, hold harmless and
defend OWNER and CONTINENTAL, its parent and subsidiaries and their
---------
respective directors, officers, employees, agents, successors and assigns
from and against any and all claims, liabilities, losses, expenses,
damages, causes of action and judgments of any nature whatsoever, including
but not limited to reasonable attorney, consultant and expert fees, costs
and related expenses; and including, but not limited to clean-up or other
curative measures ordered by the Occupational, Safety and Health
Administration or the Environmental Protection Agency or any other federal,
state or local agency or entity asserting jurisdiction; arising out of the
discharge, disbursal, release or escape of any hazardous substance, toxic
chemical pollutant, contaminant or irritant, in solid, liquid or gaseous
form; arising out of or in any manner connected with any act or omission of
COMPANY or its directors, officers, agents, contractors, servants,
employees, licensees, invitees, successors and assigns.
2
<PAGE>
Section 13. Standard Provision of page 15 Insurance. Item (1) of this section
will read as follows:
CONTINENTAL, OWNER, and their respective officers, directors, agents and
employees are named as additional insured thereunder to the extent of
COMPANY'S obligations to indemnify them under this Agreement, where allowed
----
by law.
Section 13. Standard Provision on page 15 Insurance. Item (4) of this section
will read as follows:
COMPANY'S insurance shall be primary insurance and that any other insurance
policy or policies of CONTINENTAL and OWNER are noncontributory, secondary
---------
or excess insurance.
Section 13. Standard Provisions on page 15 Insurance. Item (6) of this section
will read as follows:
COMPANY'S insurers waive all rights of subrogation against CONTINENTAL and
---
OWNER, and their respective officers, directors, agents, and employees and
---------------------------
their insurers.
-----
Section 13. Standard Provision on page 15 Insurance. Item (8) of this section
will read as follows:
COMPANY'S insurers agree that COMPANY'S breach of any warranty set forth in
its policy of insurance will not invalidate the insurance as to CONTINENTAL
and OWNER.
---------
Section 13. Standard Provisions on page 17 NON-DISCRIMINATION AND EQUAL
OPPORTUNITY item 1 of the Company covenant and agreement will read as follows:
COMPANY further covenants and agrees to:
1) Indemnify and defend CONTINENTAL and OWNER from and against any and all
---------
claims, liabilities, losses and judgments arising out of COMPANY'S
failure to comply with these provisions; and
3
<PAGE>
Section 13. Standard Provisions on page 18 TEXAS LAW will now read COLORADO
--------
LAW.
Section 13. Standard Provisions on page 20 ENTIRE AGREEMENT. The sentence
which begins "No amendment, change or addition...." Will read as follows:
No amendment, change or addition to the Agreement shall be binding upon
either party hereto unless in writing and signed by the parties hereto and
---
approved by the Manager of Aviation.
-----------------------------------
The parties hereto have caused this Letter Agreement to be executed as of
the effective date hereof.
CONTINENTAL AIRLINES, INC. FRONTIER AIRLINES, INC.
BY:_________________________ BY: /s/ Arthur T. Voss
------------------------------------
TITLE:______________________ TITLE: V.P.
-------------------------------
DATE:______________________ DATE: Effective March 2, 1995
---------------------------
CITY AND COUNTY OF DENVER
BY:_________________________
TITLE:______________________
DATE:______________________
4
<PAGE>
EX 10.20
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED
WITH " * " AND SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC
[Contintenal Airlines Letterhead]
August 16, 1996
Mr. John Hershner
Director of Properties
Frontier Airlines, Inc.
12015 East 46th Avenue
Denver, CO 80239
RE: DIA - CONTINENTAL HANGER FACILITY
Dear John:
After reviewing the Art Voss memorandum of August 9, 1996 and our conversations
this past week, the following will summarize Continental's position:
1. Effective September 23, 1996, Frontier and Continental will negotiate for
the entering into of a sublease agreement for certain hangar, office, and
related maintenance space totaling approximately 43,437 square feet
(approximately 34,384 exclusive and 9,053 common area) located at the
Continental Maintenance Facility at Denver International Airport. The
sublease shall contain the terms and conditions set forth below.
2. Frontier will pay Continental * for this exclusive and joint use space in
equal monthly installments. This amount includes utilities and common M&O
expenses. A * security deposit is required in the form of cash or
irrevocable letter of credit.
3. The term of this sublease agreement will be two years. Frontier or
Continental may terminate this agreement at any time after the first year
upon ten months' written notice. If a third party offers to sublease the
entire hangar from Continental, Frontier will have a right of first refusal
to take the deal on the same terms offered by the third party. If Frontier
declines, Continental may terminate Frontier's sublease with five months'
written notice. In addition, Continental may terminate Frontier's sublease
upon five months' written notice if Continental determines to reoccupy the
entire hangar.
4. This proposal is subject to normal corporate approvals by Continental
Airlines or from any other party from whom approval may be required.
Further, each party agrees that any commitment expressed herein shall not
be binding until fully executed documents are exchanged by both parties and
all necessary approvals have been obtained in written form.
<PAGE>
Mr. John Hershner
August 16, 1996
Page 2
As previously discussed, Frontier will be obligated to pay separately for
maintenance equipment and tooling pursuant to agreement reached between Jon
Bartram and Bill Meehan.
If this letter represents acceptable terms and conditions, please acknowledge by
signing and returning it to my attention. I will begin preparing an agreement
for this transaction. If you have any questions, please do not hesitate to
contact me.
Sincerely,
/s/ Jeffrey W. Kelly FRONTIER AIRLINES, INC.
Jeffrey W. Kelly
Corporate Real Estate
Read, Acknowledged & Accepted
By: /s/ Samuel Addoms
TITLE: President
DATE: August 19, 1996
cc: Blake Burke
Ben Curran
Bill Meehan
Joe Megna
Randy Miller
Holden Shannon
<PAGE>
EX 10.21
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED
WITH " * " AND SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC
[LOGO OF GREENWICH AIR SERVICES, INC. APPEARS HERE]
_______________________________________________________________________________
Miami, Florida
Dallas, Texas
East Granby, Connecticut
Prestwick, Scotland
_______________________________________________________________________________
SERVICE AGREEMENT
BETWEEN
FRONTIER AIRLINES, INC.
AND
GREENWICH AIR SERVICES, INC.
FOR
CFM 56 AND JT8D ENGINES
MAY 19, 1997
_______________________________________________________________________________
CONFIDENTIAL INFORMATION NOTICE
THE INFORMATION CONTAINED IN THIS DOCUMENT IS THE PROPRIETARY PROPERTY OF
GREENWICH AIR SERVICES, INC. AND SHALL NOT BE USED, DISCLOSED TO OTHERS, OR
REPRODUCED WITHOUT THE PRIOR WRITTEN CONSENT OF GREENWICH AIR SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE SUBJECT PAGE
------- ------- ----
<C> <S> <C>
1 Definitions.......................................... 1
2 Term................................................. 3
3 Procedures........................................... 3
4 Delivery - Repair Time............................... 4
5 Pricing/Payment...................................... 5
6 Exchange Parts....................................... 6
7 Missing or Damaged Parts............................. 7
8 Miscellaneous........................................ 7
9 Warranty............................................. 8
10 Indemnity............................................ 8
11 Insurance............................................ 9
12 Limitation of Liability.............................. 9
13 Force Majeure........................................ 10
14 Notices.............................................. 10
15 Renegotiation and Escalation......................... 10
16 Termination.......................................... 11
17 Taxes and Other Charges.............................. 12
18 Governing Law and Severability....................... 12
19 Entire Agreement..................................... 12
Signatures........................................... 13
EXHIBITS
- --------
Exhibit A Schedule 1 - CFM56 & JT8D Time and Material Pricing.. A-1
Schedule 2 - Field Service Pricing................... A-4
Schedule 3 - CFM56 & JT8D Accessory Pricing.......... A-5
Exhibit B Aircraft Engine Service Warranty..................... B-1
Exhibit C Accessory Shops Standard Overhaul Warranty........... C-1
</TABLE>
i
<PAGE>
SERVICE AGREEMENT
THIS AGREEMENT, is made as of this 19th day of May, 1997, by and between
FRONTIER AIRLINES, INC., a Delaware corporation, of 12015 E. 46th Avenue,
Denver, Colorado 80239 ("Customer") and GREENWICH AIR SERVICES, INC., a Delaware
corporation, having its principal place of business at Miami, Florida 33122 and
a mailing address of P.O. Box 522187, Miami, Florida 33152, for itself and on
behalf of its affiliated companies ("Greenwich") .
WITNESSETH:
WHEREAS, Greenwich is a Federal Aviation Administration ("FAA") approved
overhaul, service, and repair facility and operates facilities for the servicing
of aircraft engines, components, Q.E.C. components, and parts thereof at Miami,
Florida; East Granby, Connecticut; Dallas, Texas; and Prestwick, Scotland;
WHEREAS, Customer requires overhaul, check, inspection, modification, repair,
and/or service on its CFM56 and JT8D Engines, assemblies, subassemblies,
components, Q.E.C. components, and parts thereof (collectively, the
"Equipment"); and
WHEREAS, Greenwich agrees to overhaul, check, inspect, modify, repair, and/or
service such CFM56 and JT8D series Engines, modules, related accessories, and
other Equipment as Customer shall furnish to Greenwich for such service during
the period of this agreement;
NOW THEREFORE, and in consideration of the mutual promises and covenants herein
contained, the parties agree as follows.
ARTICLE 1
DEFINITIONS
1.1 Definitions. In addition to terms elsewhere defined in this Agreement, the
terms used in this Agreement shall have the following meanings unless some
other meaning is apparent from the context in which these terms are used.
(A) "Accessories" or "Components" shall mean those items (excluding
Engines) which are renewable and inventory controlled on a unit basis,
usually by serial number, with a potential for reuse through
inspection, overhaul, repair or calibration, as judged by Greenwich
and approved by Customer.
(B) "Basic Workscope" shall mean the document executed by Customer listing
the Services (as hereinafter defined) to be performed by Greenwich
hereunder, including a repair/purchase order covering the cost of
repair.
(C) "Business Day" shall mean any day on which banks are open for business
in Dallas, Texas, U.S.A.
1
<PAGE>
(D) "CLP" shall mean the current manufacturer's list price.
(E) "Condemned", as applied to any part, shall mean a part that is beyond
repair limits or that has repair costs in excess of economical limits
as determined by Greenwich. Greenwich shall take title to and dispose
of all Condemned parts at its own expense, after obtaining Customer's
concurrence on the Condemned classification.
(F) "Customer Engineering Order" or "Modification" shall mean an order,
direction or request from Customer to use parts, procedures, or
modifications not approved by the manufacturer or not contained in the
manuals supplied by the manufacturer.
(G) "Engine" shall mean the CFM56 or JT8D Engine series assembly plus its
essential accessories as described in the CFM56 and JT8D
manufacturer's specification manuals.
(H) "Exchange Part(s)" shall mean those part(s) utilized from Greenwich's
inventory to replace Customer's repairable parts.
(I) "Field Service Support" shall mean any Services provided by Greenwich
at a site other than at the Service Center (as hereinafter defined).
(J) "Overhaul" shall mean to perform such work services as are required to
return the Equipment to "as new" condition or limits as established by
the manufacturer's specifications, or to the condition contemplated by
the parties in any Customer engineering order.
(K) "Refurbish", "Repair" and "Restore" shall mean to perform such work
services as required and authorized to the Equipment to permit the
item to continue its service life.
(L) "Repairable" shall mean the condition of an item which is capable of
being made "serviceable" by subjecting it to certain processes and
procedures as indicated in the appropriate original manufacturer's
overhaul or specification manuals, Customer's engineering order or
Greenwich's engineering order approved by Customer.
(M) "Replacement" shall mean any part or unit which is physically replaced
by a different part or unit from that installed on the Engine at the
time of receipt by Greenwich (not necessarily a part number change).
(N) "Rework" or "Update" shall mean to perform such work services as are
required by service bulletin, technical order, Customer engineering
order, or other document that will alter or modify the item from its
original condition or configuration.
(O) "Service" shall mean those services requested by Customer which
Greenwich agrees
2
<PAGE>
to perform.
(P) "Serviceable Condition" shall mean the condition of a Repaired item
which can be used for the same purpose as a newly manufactured item.
(Q) "Service Center" shall mean any one or all of Greenwich's FAA approved
Repair Stations.
ARTICLE 2
TERM
2.1 Term. This Agreement shall be exclusive for CFM56 Engines and non-
exclusive for JT8D Engines, shall commence upon the date first written
above and, unless sooner terminated pursuant to Section 16 herein, is to
continue through April 30, 2002, and shall continue in effect from year to
year thereafter as long as Customer continues to operate CFM56 or JT8D
series Engines (the "Term") or, unless and until either party shall
terminate the same, by sixty (60) days advance written notice.
ARTICLE 3
PROCEDURES
3.1 Engine Procedures. Greenwich shall furnish all labor, facilities,
equipment, parts, materials, supplies, painting and plating, and testing
devices required to perform the Services required by Customer pursuant
hereto and shall accomplish such Service in a good and workmanlike manner
in accordance with the requirements of the Engine manufacturer, the Federal
Aviation Administration (FAA), the Joint Airworthiness Authority of Europe
(JAA), or Customer; as applicable. The following procedures shall govern
the processing of work by Greenwich on Engines, subject to the terms and
conditions contained herein:
(A) Basic Workscope. With respect to any Engine, Customer shall provide
Greenwich with a Basic Workscope outlining the (a) removal cause; (b)
life limited parts ("LLP") Replacement requirements; (c) extent of
disassembly; and (d) Customer's work specifications, if applicable,
together with a repair/purchase order for the cost of Repairs. The
Basic Workscope may be amended by Customer as agreed with Greenwich.
(B) Receiving Inspection. Upon delivery to Greenwich of any Engine to be
Repaired, Greenwich shall accomplish a standard receiving inspection
to include, as applicable: (a) borescope inspection; (b) Component
inventory; (c) filter contamination check; and (d) external
inspection. Greenwich shall provide copies of the results of this
inspection to Customer.
(C) Disassembly. Greenwich shall disassemble each Engine as requested by
Customer in Article 3.1(A) above.
(D) Inspection. Greenwich shall clean and inspect the disassembled
Engine and promptly thereafter provide Customer with a cost estimate
for the Services required.
3
<PAGE>
Greenwich, upon Customer's request, shall provide a list of known
rotable parts to be scrapped or replaced.
(E) Cost Estimate. Any quotation related to the cost of Services ("Cost of
Services") is provided to and accepted by the Customer only as an
estimate ("Cost Estimate"), is given solely for the purpose of
guidance and not for reliance, and is entirely without prejudice to
the calculation of the Cost of Services in accordance with the
provisions of this Agreement. The Cost of Services performed shall be
based on the actual condition of the Equipment and the actual cost of
the Repair. The Cost of Services shall be as stated in the invoice(s)
and Customer shall be responsible for all invoiced amounts regardless
of the Cost Estimate. Any trailing invoice(s) shall reflect actual
charges which were not available at the time of the earlier invoice(s)
and which have been reconciled with any estimated amounts previously
invoiced to Customer. Upon receipt of Customer's approval of the Cost
Estimate, Greenwich shall Repair the Engine in accordance with the
manufacturer's or Customer's specifications.
(F) Test Procedures. Greenwich shall test the Engine in accordance with
the manufacturer's or Customer's specifications, as designated by
Customer. Following this acceptance test, Greenwich shall preserve
the Engine's fuel and oil systems.
(G) Post Test Procedures. Greenwich shall accomplish a post test
borescope inspection and prepare the Engine for shipment.
(H) Certification Procedures. Greenwich shall accomplish an Engine
records review. If Serviceable, the Engine shall be tagged with an
FAA Serviceable Tag. Greenwich shall compile an Engine records
package and forward such package to Customer.
(I) Redelivery. The Engine shall be made available for redelivery to
Customer as described in Article 4.
(J) Final Invoice. Greenwich shall prepare a final invoice and present
such invoice to Customer for payment as described in Article 5 herein.
3.2 Parts Procedure. Parts not received as part of an Engine will be subject
to a separate procedure as agreed by the parties.
ARTICLE 4
DELIVERY - REPAIR TIME
4.1 Delivery. Customer shall deliver all Engines to Greenwich's designated
freight agent F.O.B. Customer's facility, as designated by Customer.
Greenwich shall redeliver the same items to Customer F.O.B. Greenwich's
designated freight agent at Customer's facility, as designated by Customer.
Customer shall deliver all Parts, Accessories, Components, and other items
shipped separate from an Engine to Greenwich, F.O.B. Greenwich's Texas
facility. Greenwich shall redeliver the same items to Customer or its
designated agent, F.O.B. Greenwich's Texas facility.
4
<PAGE>
4.2 Repair Time.
(A) Engine repairs shall be accomplished by Greenwich in sixty (60)
calendar days (the "Turn Time") from approval of the Cost Estimate to
the date of test acceptance. Such time may be extended under the
Force Majeure provisions of Article 13 herein and/or any delays caused
by Customer in providing required documentation, approvals, or timely
delivery of Customer Furnished Material.
(B) Greenwich shall provide Customer an estimate of the redelivery date
following disassembly, cleaning, and inspection.
(C) If the Turn Time, for any engine, exceeds sixty (60) days, and the
reason for such delay is not a cause set forth in either Section 4.2
(A) or Section 13 herein, and for JT8D engines eighty percent (80%) of
Customer's removals for the previous twelve (12) months have gone to
Greenwich, and Customer is in an AOG condition, Greenwich shall, as
liquidated damages and not as a penalty:
(i) Lease to Customer, under a separate engine lease agreement, a
spare Engine, if available, for Customer's use until redelivery
of the repaired engine. Customer agrees to pay Greenwich hourly
charges for the hours of operation of the Engine, which charges
shall be determined at a rate which is standard in the industry
at the time of such lease. Customer shall make available the
leased spare Engine for shipment to Greenwich within five (5)
days of redelivery of its repaired Engine to Customer's facility,
or the Customer shall pay, in addition to the hourly charges for
Engine operation, the daily lease rate, which is standard in the
industry at the time of lease, from such time until the leased
spare Engine is made available for shipment to Greenwich. Such
spare engine will not be delivered to Customer until the Lease
Agreement is fully executed; or
(ii) in the event that Greenwich is unable to provide a lease Engine
to Customer under this provision and Customer is in an AOG
situation due to circumstances entirely outside Customers
control, Greenwich shall reimburse Customer its daily charge
only, up to a maximum daily charge of two thousand U S Dollars
($2000.00) per day for CFM56 Engine requirement and/or a maximum
daily charge of three hundred twenty-five U S Dollars ($325.00)
per day for JT8D Engine requirement, until redelivery of the
repaired Engine, or upon delivery at Customer's facility of a
lease Engine from Greenwich, or when Customer is no longer in an
AOG situation, whichever occurs first.
ARTICLE 5
PRICING/PAYMENT
5.1 Pricing. Charges for labor, material, outside services, testing and Field
Service Support shall be in accordance with the prices listed on Exhibit A.
5
<PAGE>
5.2 Payment. All payments under this Agreement shall be made via wire
transfer by Customer to Greenwich in United States dollars, immediately
available for use, without any right of set-off or deduction. All sums
past due shall bear interest at the rate of one and one-half percentage
(1.5%) points per month, or at the highest legal interest rate permitted by
law, whichever is lower.
5.3 Payment Terms.
(A) In accordance with Exhibit A hereof, Customer shall pay one hundred
percent (100%) of the Cost Estimate after test acceptance and prior to
redelivery of the Engine.
(B) As set forth in Section 3.1(E) above, Customer agrees that any Cost
Estimate and Initial Invoice is preliminary and may include estimated
charges for rework, subcontractor work, and other related services
when the actual charges for those activities are not available, and is
subject to revision based on the condition of the Equipment and the
actual cost of the repair. Subsequent "trailing" invoices reflecting
the actual charges will be submitted to Customer as soon as
practicable and will be reconciled with the estimated amounts
previously invoiced to Customer. Customer shall pay the "trailing"
invoice within thirty (30) calendar days of receipt.
5.4 Mechanic's Lien/Security Interest. Customer hereby grants to Greenwich a
security interest in all property of Customer in the possession of
Greenwich at any time to secure all amounts owed by Customer to Greenwich
now or in the future, and Greenwich shall have all rights of a secured
party under the Uniform Commercial Code with respect to such property.
ARTICLE 6
EXCHANGE PARTS
6.1 Procedure. Greenwich shall determine which Exchange Parts are required to
Repair the Equipment, and will issue these parts from rotable stock.
Greenwich shall transfer ownership to Customer (without representation of
warranty except as expressly provided herein) of these Exchange parts in
exchange for ownership of the respective parts removed, and provided that
such removed parts are Repairable. During the production process, Customer
may, with reasonable advance notification, review Greenwich's Exchange
Parts documentation and actions. Repairable parts received by Greenwich in
exchange for parts in Serviceable Condition will be Repaired by Greenwich
or an outside source, at Greenwich's sole option. Greenwich shall invoice
Customer for such Repairs and exchange fees as per Exhibit A.
6.2 Condemned Parts. If the part that is removed from Customer's Equipment in
an Exchange Part transaction is subsequently Condemned, then such
transaction shall be void, and the Exchange part provided by Greenwich will
be deemed to have been purchased by Customer at the price provided in the
Price List at Exhibit A, less any exchange fee.
6
<PAGE>
6.3 Scrapped Parts. All scrapped parts determined to be unserviceable and/or
not economically repairable shall become Greenwich's vested property
fifteen (15) days after completion of engine services. During this fifteen
(15) day period, Customer may take possession of such parts and immediately
ship or dispose of said parts at its sole cost and expense. Parts which
become Greenwich's vested property hereunder shall be Greenwich's
responsibility at its sole expense and without any further adjustment to
Customer, to mutilate and dispose of such parts as to preclude any further
use as an Engine part.
6.4 Customer parts provisioning. Customer may, at its discretion, review
Greenwich's list of rotable parts required to repair its Engine. After
this review, Customer may elect to provide certain rotable parts. If
Customer so elects to provide certain rotable parts, it must inform
Greenwich of such election within five calendar days of receipt of the
Greenwich provided rotable parts list as to which parts it intends to
provide. All parts provided by Customer must be serviceable, tagged in
accordance with FAA requirements, and in a condition to be installed on the
Engine. All such parts must be delivered to Greenwich in a timely manner
which does not affect Greenwich's production schedule. If any part is not
received by Greenwich prior to the scheduled installation date of such
part, in an immediately usable condition, Greenwich may, at its sole
option, either delay the turn time day for day until such part is received
and reinduction of the engine into the production schedule can be
accomplished, or provide a Greenwich owned rotable part under the terms of
this Agreement. Charges for Customer supplied parts shall be in accordance
with Exhibit I.
ARTICLE 7
MISSING OR DAMAGED PARTS
7.1 Missing or Damaged Parts. Greenwich shall advise Customer of (i) parts
missing from any Equipment when received at Greenwich's facility; and (ii)
parts found to have been damaged in transit. Should (i) or (ii) occur,
resulting in the excusable delay of redelivery, Greenwich shall provide
notice to Customer. Greenwich may replace such parts with the express
consent of Customer. If neither party can provide Replacements
immediately, then the redelivery date shall be extended by the length of
the delay in receiving the Replacement parts.
ARTICLE 8
MISCELLANEOUS
8.1 Subcontracted Work. Greenwich shall have the right to subcontract any work
it deems necessary to an authorized repair facility; provided, that
Greenwich shall provide Customer with any warranties received from such
subcontractors which are assignable. Greenwich will make its best efforts
to minimize work subcontracted to outside vendors. Upon request, Greenwich
shall provide Customer a list of its subcontractors.
8.2 Work in Process. Upon the expiration or termination of this Agreement,
Greenwich shall complete all work in process in a diligent manner;
provided, that Customer has deposited sufficient monies with Greenwich to
pay the estimated charges for all such work, in
7
<PAGE>
accordance with the price list at Exhibit A.
8.3 Field Service Support. Greenwich shall provide Field Service Support at
the daily rates provided in the price list at Exhibit A.
8.4 Service Center Representatives. Customer may appoint an employee or
representative as Service Center Representative to act as liaison with
Greenwich. The Service Center Representative is authorized to review work,
request additional work, revise the original workscope, and approve (i) the
labor performed, (ii) any parts, materials, or supplies furnished by
Greenwich, and (iii) receive notices for Customer. The Customer
Representative has the authority to request a stoppage of the work being
performed on Customer's Engines; however, any such stoppage and subsequent
restart will result in an adjusted turn time and a minimum additional
charge of twenty five (25) manhours per occurrence to Customer. Greenwich
shall provide the Service Center Representative with a suitable work area
at its Service Center while this Agreement is in force. Customer shall
provide all workman's compensation and other insurance required for such
representatives. Customer agrees to defend, indemnify, save, and hold
harmless Greenwich, its affiliates, directors, officers, agents, and
employees, from and against any and all responsibilities, liabilities,
claims, demands, suits, judgements, damages, losses, costs, and expenses of
any nature or description whatsoever for any injury to or death of any
person associated with or employed by Customer, at Greenwich's facility for
the purposes stated herein.
8.5 Spare Component Support. Greenwich will maintain one each of the following
spare components, available for shipment within forty eight (48) hours to a
location designated by Customer. These components will be provided to
Customer in accordance with the terms of the exchange parts program found
in Article 6 of this Agreement
A. JT8D Gearbox
B. JT8D C1 Fan Assembly
C. JT8D C2 Fan Assembly
8.6 Spare Engine Support. At the end of each calendar year, for the term of
this contract, Greenwich shall credit Customer * for each of the first two
(2) "full restoration" CFM56-3 engines input during the preceding year.
This * maximum credit is specifically for the purpose of offsetting a
portion of the expense associated with Customer's guaranteed spare engine
program.
ARTICLE 9
WARRANTY
9.1 Workmanship. Greenwich warrants its work to be free from defects in
workmanship in the Services it performs hereunder, as set forth in its
Engine Service Warranty contained in Exhibit B and its Accessory Shops
Standard Overhaul Warranty contained in Exhibit C hereto.
9.2 EGT Margin Guaranty. Full performance restoration, including or excluding
LPT repair, provides for EGT margin guaranty of 30 degrees C for B1 powered
CFM56 Engines and 25
8
<PAGE>
degrees C for B2 powered CFM56 Engines.
ARTICLE 10
INDEMNITY
10.1 Indemnity. From and after delivery hereunder, Customer agrees to defend,
indemnify, save, and hold harmless Greenwich, its affiliates, directors,
officers, agents and employees, from and against any and all
responsibilities, liabilities, claims, demands, suits, judgments, damages,
losses, costs, and expenses of any nature or description whatsoever
(including, without limitation, investigation costs and expenses and
attorneys' fees and expenses in connection therewith) for any loss of,
damage to, or destruction of any property (including the Equipment ) or for
any injury to or death of any person, arising from and after the delivery
of the Equipment to Greenwich and arising out of or connected with (i) the
maintenance, operation, Repair, or condition of the Equipment before
delivery hereunder or (ii) the ownership, use, operation, Repair,
maintenance, or disposition by Customer, its successors, assigns, or agents
of the Equipment, regardless of the negligence of Greenwich, its directors,
officers, employees, or agents; provided, however, that Customer shall
9
<PAGE>
not be required to indemnify Greenwich for any claims or liabilities arising
directly from Greenwich's gross negligence or willful misconduct.
ARTICLE 11
INSURANCE
11.1 The following insurance shall be provided:
A. Hangar (or Shop) Keeper's Insurance. Greenwich agrees to maintain
Hangarkeeper's liability insurance protecting Customer from loss,
damage, or destruction of Customer's property in the care, custody, or
control of Greenwich, from which loss, damage, or destruction
Greenwich, subject to Article 10.1, agrees to defend, indemnify, save,
and hold harmless customer.
B. Products Liability Insurance. Greenwich agrees to maintain products
liability insurance in an amount not less than One Hundred Million
U.S. Dollars ($100,000,000.00) for personal injury and property damage
to third parties, from which personal injury or property damage
Greenwich, subject to Article 10.1, agrees to defend, indemnify, save,
and hold harmless customer.
C. Public Liability Insurance. Customer agrees to maintain public
liability insurance in an amount not less than Five Hundred Million
U.S. Dollars ($500,000,000.00). Customer shall cause its insurer to
name Greenwich, its affiliates, directors, officers, employees,
agents, and representatives as additional insureds, and to
specifically state that the indemnification requirements in Article 7
are insured as a contractual obligation.
11.2 Certificates of Insurance. Each party hereto agrees to furnish the other
party, appropriate Certificates of Insurance evidencing its maintenance of
the above insurance, applicable to it, at the commencement of this
Agreement and each renewal thereof. Each party shall maintain the
applicable insurance until two (2) years after the expiration of this
Agreement. In addition, each party hereto agrees to provide the other
party written notice not less than thirty (30) calendar days prior to any
cancellation or adverse material change in the maintenance of the above
Insurance.
ARTICLE 12
LIMITATION OF LIABILITY
12.1 TOTAL LIABILITY. THE TOTAL LIABILITY OF GREENWICH, INCLUDING ITS
SUBCONTRACTORS AND SUPPLIERS, FOR ANY AND ALL CLAIMS, WHETHER IN CONTRACT,
WARRANTY, TORT (INCLUDING NEGLIGENCE OF ANY DEGREE), OR OTHERWISE, ARISING
OUT OF, CONNECTED WITH, OR RESULTING FROM THE PERFORMANCE OR NON-
PERFORMANCE OF THE ACCEPTED WORKSCOPE, SHALL NOT EXCEED GREENWICH'S INVOICE
FOR THE REPAIRED OR OVERHAULED ITEM WHICH GIVES RISE TO THE CLAIM HEREIN,
PROVIDED THAT GREENWICH'S LIABILITY WILL BE LIMITED TO THE LESSER OF THE
COST TO PERFORM SAID REPAIRS OR THE COST TO REPLACE THE ENGINE WITH A
SUBSTITUTE ENGINE OF EQUAL VALUE AND UTILITY.
12.2 DAMAGES. IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, WARRANTY,
TORT, (INCLUDING NEGLIGENCE OF ANY DEGREE), OR OTHERWISE, SHALL GREENWICH,
ITS SUBCONTRACTORS, AND/OR SUPPLIERS, BE LIABLE FOR ANY SPECIAL,
CONSEQUENTIAL, RESULTANT, INCIDENTAL, INDIRECT, OR
10
<PAGE>
EXEMPLARY DAMAGES.
ARTICLE 13
FORCE MAJEURE
13.1 Inability, Delays, and Force Majeure. Greenwich shall not be liable for
any failure to perform or any delays in performance due to acts of God; the
public enemy, war; declared or undeclared, or warlike conditions; inability
to secure parts or material (provided such inability stems from scarcity or
difficulty and not from delays by Greenwich in placing orders);
insurrection or riots; floods; explosions; fires; earthquakes; hurricanes;
any governmental act; failure of transportation; strikes or other labor
disputes; or any other cause beyond its control.
13.2 Customer's Obligation to Pay. Section 13.1 above shall not relieve
Customer of its obligations to pay for Services actually performed.
ARTICLE 14
NOTICES
14.1 Acknowledgment. All notices required or permitted under this Agreement
shall be in writing and shall be delivered personally, facsimiled, sent by
courier service, or express mail, addressed as follows:
If to Greenwich: If to Customer:
---------------------------- -----------------------
Greenwich Air Services, Inc. Frontier Airlines, Inc.
4590 N.W. 36th Street 12015 E. 46th Avenue
Bldg. 23 MIAD Suite 200
Miami, Florida 33122 Denver, CO 80239
Attn: Director of Contracts Attn: Jon Bartram
Phone: 305 526-7000 V.P. of Maintenance
Fax: 305 526-7005 Phone: 303-371-7400
Fax: 303-371-7007
or such other address as either party may designate in writing to the other
party from time to time.
14.2 Effect of Notices. Notices shall be effective and shall be deemed to have
been given when received.
ARTICLE 15
RENEGOTIATION AND ESCALATION
15.1 Renegotiation and Escalation. Pricing and rates shown herein shall be
adjusted in accordance with the following:
(A) Labor. Labor rates, vendor pricing, and test cell fees shown herein
are valid through December 31, 1997. At that time, and each January 1st
thereafter, Greenwich
11
<PAGE>
reserves the right to increase the hourly labor charges and fixed labor
charges by an amount which is proportionate to any increase in the
National Labor Index of the "Hourly Earnings of Aircraft Engine and
Engine Parts Production Workers" SIC 3724, as prepared by the U.S.
Department of Labor, Bureau of Labor Statistics for the previous twelve
(12) month period. Each such increase shall be effective as to units
completed on or after the relevant change date.
(B) Material. Charges for material caps shown herein are valid through
December 31, 1997. At that time, and each January 1st thereafter,
Greenwich reserves the right to increase the such charges by an amount
which is proportionate to any increase to the manufacturer's parts
price book increase. Such increase shall be effective as to units
completed on or after the relevant change date.
15.2 At any time and from time to time after execution of this agreement,
Greenwich may, with Customer=s concurrence, establish new fixed rates for
labor to service Engines, modules, and accessories and new fixed job rates
for special processes, plasmas, platings, coatings, standards, and
exchanges. The new rates shall be effective as to units completed on or
after the date on which Customer is notified of the new rates.
15.3 If, at any time during the term of this Agreement, the Engine related
Services required by Customer decline to a level not supportive of rates
and fees herein offered, then Greenwich may, by written notice to Customer,
request that this Agreement be opened for renegotiation of prices, term of
agreement, and performance times. Within thirty (30) days after receipt of
said notice from Greenwich, the parties hereto will meet to discuss
proposals and counter proposals. Any revision agreed to by the parties
shall be made retroactive to the date that the parties met to commence
renegotiations.
ARTICLE 16
TERMINATION
16.1 Material Provisions. This Agreement may be terminated by either party upon
sixty (60) calendar days advance written notice to the other party for any
failure to comply with any material provision, and shall expire without
further act or deed on the date indicated in such written notice, unless
the failure shall have been completely cured or the party in breach has
substantially performed all acts required to cure the failure prior to the
expiration date, except for reason of termination pursuant to Section 16.2
below.
16.2 Required Payments/Insurance. Greenwich or Customer may terminate this
Agreement on ten (10) calendar days notice if either party fails to make
any of the required payments or to provide the required insurance, unless
such party cures such nonpayment or provides the required insurance within
such time period.
16.3 Effect of Agreement. In the event that either party terminates this
Agreement, any liabilities, obligations, expenses, or charges having
accrued to the parties under this Agreement shall remain in full force and
effect.
16.4 Redelivery of Customer Furnished Material. Upon termination of this
Agreement, Customer furnished material in Greenwich's possession shall be
redelivered to Customer at the Service Center on the date of termination or
the date of completion of work performed, after the payment of all charges
by Customer to Greenwich.
12
<PAGE>
ARTICLE 17
TAXES AND OTHER CHARGES
17.1 Taxes, Duties, or Charges. Any and all taxes, custom duties, brokerage
fees, or other charges, excluding any income taxes payable by Greenwich,
resulting from performance under this Agreement, ("Charges") shall be borne
by Customer.
17.2 Exemption. If Customer is claiming exempt status from the State Sales Tax,
Customer shall, prior to the effective date of this Agreement, provide
Greenwich with a copy of its state sales tax exemption certificate or
affidavit in the form required by the State Department of Revenue.
ARTICLE 18
GOVERNING LAW AND SEVERABILITY
18.1 Governing Law. This Agreement shall be deemed to have been made in Dallas,
Dallas County, Texas, and shall be interpreted, and the rights and
liabilities of the parties hereto determined in accordance with the law of
the State of Texas, U.S.A. without regard to conflicts of law principles.
The parties consent and hereby submit to the exclusive jurisdiction of the
state and federal courts located in Dallas County, Texas, U.S.A. for the
determination of any and all issues between the parties relating to this
Agreement. Nothing in this clause limits the right of Greenwich to bring
proceedings in any other court of competent jurisdiction; nor shall the
bringing or continuing of proceedings in one or more jurisdictions preclude
the bringing or continuing of proceedings in any other jurisdiction,
whether concurrently or otherwise. Customer irrevocably waives any
objection which it may have at any time to the laying of the venue of any
proceedings in any court referred to in this section, to any claim that any
such proceedings have been brought in any inconvenient forum, to any right
to trial by jury in any proceedings, and to any objection to service of
process if such service is by certified mail, return receipt requested, at
the address provided, or updated as provided, herein. Customer agrees to
be subject to the Texas Long Arm Statute for service of process.
18.2 Severability. If any portion of this Agreement shall be determined to be
in violation of or contrary to any law, rule or regulation by a court of
competent jurisdiction, then that portion shall be unenforceable and
deleted from the Agreement. However, the balance of this Agreement shall
remain in full force and effect notwithstanding the unenforceability of
said portion.
ARTICLE 19
ENTIRE AGREEMENT
19.1 Contents. This Agreement contains the entire agreement between the parties
and supersedes all prior and contemporaneous understandings,
representations, warranties, and agreements.
19.2 Non-Waiver of Rights and Remedies. Any failure or delay in the exercise of
any rights or remedies hereunder shall not operate to waive or impair such
rights or remedies. Any waiver
13
<PAGE>
given shall not be construed to require said party to make any future or
further waivers.
19.3 Additional Documentation. The parties agree to cooperate with each other
and to execute any additional documentation as may reasonably be necessary
to give effect to this Agreement.
19.4 Titles/Subtitles. The titles and subtitles given to the sections of this
Agreement are for convenience only and shall not in any manner be deemed to
limit or restrict the context of the article or section to which they
relate. The words "hereof", "hereunder", "herein", "herewith", and similar
terms are not to be deemed restrictive and refer to the entire Agreement
including all Exhibits.
19.5 Modification. This Agreement may only be modified, supplemented, or
amended by a writing duly signed by authorized representatives of both
parties hereto.
19.6 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but both of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year written below.
GREENWICH AIR SERVICES, INC. FRONTIER AIRLINES, INC.
By:_______________________________ By:_____________________________
Name: ____________________________ Name: __________________________
Title: ___________________________ Title:__________________________
Date: _____________________________ Date: __________________________
14
<PAGE>
SCHEDULE 1
EXHIBIT A
FRONTIER AIRLINES - CFM56 & JT8D PRICING
I. JT8D T&M PRICING
1. Labor (Basic & Rework) *
2. Special Processes *
3. Material
A. New *
B. Serviceable *
C. Serviceable LLP *
D. Rotable Scrap *
E. Customer Supplied Material
(a) New Parts: *
(b) Serviceable Parts: *
*
(c) LLP (used
serviceable) *
4. Subcontract Services *
5. Rotable Fee *
6. Test Cell Fee *
7. Fuel & Oil *
8. Transportation *
9. Engine Condition Monitoring *
A-1
<PAGE>
(Waive 12 months following shop visit)
SCHEDULE 1
(cont'd)
II. CFM56 PRICING
1. Time & Material Pricing
A. Labor *
B. Special Processes *
C. Material
a. New *
b. Serviceable *
c. Serviceable LLP *
D. Subcontract *
E. Rotable Fee *
F. Test Cell Fee *
G. Fuel & Oil *
H. Transportation *
I. ECM *
A-2
<PAGE>
SCHEDULE 1
(cont'd)
2. Engine Flat Rates (specific work scopes to be provided)
A. Full Performance Restoration including LPT Repair $ *
through 12/31/97
B. Full Performance Restoration excluding LPT Repair $ *
through 12/31/97
The above flat rates include all basic and rework labor, subcontract
charges, special processes, test cell fee, fuel & oil and rotable
fees. The above flat rates exclude bench check, repair, or overhaul
of accessories, and all material.
3. Material issued Flat Rated engines
A. New Current Manufacturer's Catalog
Price
B. Serviceable Current Manufacturer's Catalog
Price
C. Serviceable LLP Fair Market Value
4. Accessories for Flat Rated engines See Exhibit A-3.B.
Work that is over and above the defined workscope for the Performance
Restoration Flat Rate Repair (with or without penetration of the LLP)
shall be invoiced at the T&M pricing below:
A-3
<PAGE>
EXHIBIT A
SCHEDULE 2
FRONTIER AIRLINES - FIELD SERVICE PRICING
CFM56 & JT8D
A. For each Technical Service Representative charged with providing technical
assistance or support to Operator. Charges applicable from time of
dispatch to return less periods of rest.
1) Monday through Friday Rates (minimum 8 hour daily charge):
0800 to 1700 Hours $ *
1700 to 0800 Hours $ *
2) Saturday Rates (minimum 8 hour daily charge):
0001 to 2400 Hours $ *
3) Sunday and Holiday Rates (minimum 8 hour daily charge):
0001 to 2400 Hours $ *
B. For Contractor-supplied tooling (i.e., borescopes, etc.):
Regular Borescope $ *
Video Borescope $ *
Vibration Survey Equipment $ *
Tooling $ *
C. Operator to be invoiced all reasonable costs to Contractor associated with
travel, baggage and tooling, freight, lodging, meals, rental cars, local
taxes and licenses, etc.
A-4
<PAGE>
EXHIBIT A
SCHEDULE 3
FRONTIER AIRLINES - ACCESSORY PRICING
A. JT8D ACCESSORY PRICING
Basic Labor only to service accessories as applicable to JT8D engines (all
material and rework of parts is additional, if required):
<TABLE>
<CAPTION>
Overhaul Bench Check Exchange
--------- ----------- ---------
<S> <C> <C> <C>
Cable Assy-Thermocouple........ $ * $ * *
Cable - Exciter (Bendix)....... $ * $ * *
(Simmonds)......... $ * $ * *
Control Assy-PRBC.............. $ * $ * $ *
Control-Fuel (JFC-1, -2)....... $ * $ * $ *
(JFC-3).................. $ * $ * $ *
(JFC-6 w/o SB 73-24)........ $ * $ * *
(JFC-6 w/SB 73-24).......... $ * $ * *
Cooler Assy - Oil, Fuel........ $ * $ * *
Exciter (Bendix)............... $ * $ * $ *
(Simmonds)............. $ * $ * $ *
Flyweight Set-Fuel Control
(min. qty. of 10 set/input)
(grind only).................. $ * * *
Heater - Fuel De-icing......... $ * $ * $ *
Lead Assy - Thermocouple....... $ * $ * *
Manifold Assy, Fuel (each)..... $ * * *
Nozzle & Support Assy, Fuel
(JT8D-small)................... $ * * *
(JT8D-200 w/o SB 6169)......... $ * * *
(JT8D-200 w/SB 6169)........... $ * * *
Nozzle, Fuel (only)............ $ * * $ *
Pump Assy, Oil, Main........... $ * * *
Pump, Fuel, Main............... $ * $ * $ *
(TRW, i.e., 243601, 358201
371901 379201, 384301)
(Convert to 378201)........... $ * * $ *
Switch, Differential Fluid
Pressure (Custom)............. $ * $ * *
(P&W)........................ $ * $ * $ *
Valve & Actuator-Air Shutoff... $ * $ * $ *
Valve Assy - Compressor Bleed.. $ * $ * *
Valve Assy-
Fuel Pressurizing & Dump....... $ * $ *
Valve - Oil Drain.............. $ * $ * *
Valve - Start Bleed Control.... $ * $ * *
</TABLE>
Other at Direct Hourly Rate JT8D T&M pricing
A-5
<PAGE>
SCHEDULE 3
(cont'd)
B. CFM56 ACCESSORY PRICING
<TABLE>
<CAPTION>
Overhaul Bench Check Exchange
--------- ----------- ---------
<S> <C> <C> <C>
Main Engine Control........................................ $ * $ * *
Fuel Pump.................................................. $ * $ * *
Fuel Pump with SB 073-085.................................. * $ * *
Sensor, CIT................................................ * $ * *
Heater, Fuel Servo......................................... * $ * $ *
Valve, Turbine Clearance................................... $ * $ * *
Valve, Turbine Clearance
(9th Stage Hsg)........................................... * $ * *
Cable, VBV................................................ * $ * *
Cable, VSV................................................ * $ * *
Motor, Hydraulic Gear...................................... * $ * *
VSV Actuator.............................................. * $ * $ *
VSV Piston................................................ $ * * *
Lube Unit (including service bulletins).................... * $ * $ *
Oil, Heater Exchanger (Secan or Serik)..................... * $ * $ *
Oil Tank................................................... * $ * *
Sensor, Fan Inlet Temperature............................. * $ * *
Sensor, T12............................................... * $ * *
Valve, Start Bleed....................................... * $ * $ *
Ignitor Plug............................................... * $ * *
Exciter.................................................... * $ * *
N1 Speed Sensor (with SB 77-022)........................... * $ * *
Oil Screen (lots of 5 minimum)(each)....................... * $ * *
Oil Screen (less than 5)(each)............................. * * *
Alternator Stator.......................................... * $ * $ *
</TABLE>
(*price is to bench check and modify)
Other at Direct Hourly Labor Rate.......................... CFM56 T&M
Pricing
The above flat rates for both CFM56 and JT8D accessories are for basic labor
only. All material is invoiced separately, as is repair of individual parts or
components.
A-6
<PAGE>
EXHIBIT B
AIRCRAFT ENGINE SERVICE WARRANTY
--------------------------------
Greenwich warrants its serviced Engines against defective workmanship relating
to the work that Greenwich performs. Greenwich will repair any such Engine that
has failed for this reason. Greenwich's obligations are expressly limited to
correction of such defects by Greenwich at its expense and to specific periods
after redelivery of the Engine to Customer, as follows:
If, within one (1) year after redelivery, or within the first one
thousand (1,000) hours or cycles (whichever is greater) of operation,
whichever occurs first, the Engine fails due to a defect warrantable
hereunder, Greenwich shall correct such defect at no cost to Customer.
This warranty covers all defects which Customer can establish after Customer's
notice to Greenwich of the defect as having occurred, provided:
(1) Customer submits written notice of the defect within thirty (30) calendar
days of discovery; and
(2) the Engine is returned to Greenwich's facility, freight prepaid, within
sixty (60) calendar days after discovery, accompanied by a written
description of the nature of the defect; and
(3) after redelivery to Customer, the Engine has not been improperly installed
by Customer or by a subcontractor utilized by Customer; and
(4) subsequent to redelivery, the Engine was operated and maintained in
accordance with FAA and other applicable standards; was used under normal
operating conditions; was not subjected to misuse, abuse, neglect, accident
or incident; was properly stored and was not repaired or altered by anyone
other than Greenwich; and
(5) the Engine is returned with all proper records and necessary documents, all
of which shall be in English; and
(6) the Engine has not been sold to another; and
(7) Customer has met all of its financial obligations under the contract; and
(8) the Engine has not incurred Foreign Object Damage or has not failed as a
result of the failure of Customer supplied material.
Greenwich reserves the right to disclaim liability for costs which are incurred
in correcting any defect but which reasonably would not have occurred had the
workscope not excluded, at Customer's direction, work which otherwise would have
been performed, or which would have included inspection and repairs, that would
have revealed or anticipated the defect. Further, Greenwich shall not warrant
work excluded from Customer's workscope, when such work had been recommended by
Greenwich in writing.
B-1
<PAGE>
This warranty expressly excludes correction of any defect in the Engine if it
must, following redelivery, be removed from operation due to performance or
material defects attributable to inadequacies or deficiencies in design,
materials or tooling as identified in applicable manufacturers' reports and
documents or due to problems generally recognized to be industry-wide.
Greenwich's total liability in connection with the service of Engines is
expressly limited to workmanship and any warranty for material will be the
warranty of the manufacturer of the material and Greenwich shall use its best
efforts to assist in obtaining that warranty for its Customer.
Greenwich reserves the right to determine whether the failure of the Engine
falls under the terms of this warranty and will have the option of repairing,
reworking, restoring or replacing the Engine and returning it to service or
crediting Customer on a prorata basis. If it is determined that the subsequent
repair is covered by this warranty, all freight charges will be reimbursed to
Customer. After repair or rework, to correct any such defect, the Engine will
be returned to Customer at Greenwich's expense.
The warranties provided for herein shall be for the benefit of Customer, and no
other party.
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, GUARANTEES, OR REPRESENTATIONS
OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, AND ANY OTHER LIABILITY OF ANY NATURE WHATSOEVER WITH
RESPECT TO WORK DONE, SERVICES PERFORMED OR PARTS OR MATERIALS PROVIDED BY
GREENWICH. WITHOUT LIMITATION OF THE FOREGOING, GREENWICH SHALL HAVE NO
LIABILITY FOR INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND DUE TO ANY DEFECT IN
WORKMANSHIP, AND CUSTOMER HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO SUCH DAMAGES.
THIS WARRANTY SHALL NOT BE ALTERED EXCEPT BY WRITTEN AMENDMENT TO THIS AGREEMENT
BY AN AUTHORIZED OFFICER OF GREENWICH.
B-2
<PAGE>
EXHIBIT C
ACCESSORY SHOPS
STANDARD OVERHAUL WARRANTY
--------------------------
Greenwich warrants its Accessory Shop's services to be free from defects in
workmanship at the time of delivery. Greenwich's liability is expressly limited
to replacing or repairing, at its option, any part which may be damaged as a
result of such defect, within one (1) year after redelivery of the part, subject
to the following conditions:
(1) Greenwich is notified in writing of the defect within ten (10) calendar
days of discovery.
(2) The assembly is returned to Greenwich freight prepaid, within thirty (30)
calendar days after discovery of the defect.
(3) Customer shall be responsible for costs of removal, reinstallation or
other associated expenditures.
(4) The assembly or part has been operated and maintained in accordance with
current manufacturer's manuals, operator handbooks, written
recommendations, service bulletins and procedures.
(5) Proper records have been kept on the part or assembly, especially
installation dates, where time in service is the only criterion.
(6) The assembly has not experienced any foreign object or external
(casualty) damage.
(7) If warranty request is approved by Greenwich, repairs shall be completed
with continued time applicable to the original overhaul transaction
(8) Warranty claims are subject to proration for time or use.
(9) Upon completion of the warranty work, Customer shall sign a release
indicating that all warranty work has been satisfactorily completed and
that all potential or actual claims related to the warranty work have
been satisfied.
Greenwich will, at its discretion, determine whether or not the failure or
defect is covered under the terms of the warranty. If it is determined that the
subsequent repair is covered by this warranty, this freight charge will be
reimbursed to Customer. The warranties provided for herein shall be for the
benefit of Customer, and no other party.
THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, GUARANTEES, OR REPRESENTATIONS
OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, AND ANY OTHER LIABILITY OF ANY NATURE WHATSOEVER WITH
RESPECT TO WORK DONE, SERVICES PERFORMED OR PARTS OR MATERIALS PROVIDED BY
GREENWICH. WITHOUT LIMITATION OF THE FOREGOING, GREENWICH SHALL HAVE NO
LIABILITY FOR INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND DUE TO ANY DEFECT IN
WORKMANSHIP, AND CUSTOMER HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO SUCH DAMAGES.
THIS WARRANTY SHALL NOT BE
C-1
<PAGE>
ALTERED EXCEPT BY WRITTEN AMENDMENT TO THIS AGREEMENT BY AN AUTHORIZED OFFICER
OF GREENWICH.
C-2
<PAGE>
EX 10.22
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED WITH
"*" AND SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC.
DALLAS AEROSPACE, INC.
ENGINE AGREEMENT
WITH FRONTIER AIRLINES, INC.
FOR
MANAGING REPAIR
OF JT8D ENGINES
This Agreement dated April 17, 1997, is between DALLAS AEROSPACE, INC., a Texas
Corporation having its principal place of business at 1875 North I-35E,
Carrollton, Texas 75006, U.S.A. ("Seller") and FRONTIER AIRLINES, INC., a
Delaware Corporation having its principal place of business at 12015 East 46th
Avenue, Denver, Colorado 80239, U.S.A. ("Buyer") in consideration of their
mutual promises and undertakings set forth below, and intending to be legally
bound hereby. The parties agrees as follows:
1A. Repair Management
-----------------
Subject to all the provisions of this Agreement, Seller agrees to accept
and professionally manage the accomplishment of JT8D repair service on
Buyer's engines removed for repair and redeliver the engines to Buyer.
Seller agrees that it will use its best efforts to meet the estimated
repair schedule. Buyer agrees to accept the terms of management by Seller
described as follows:
Engine shall be repaired for return to service by an FAA Approved Repair
Station as mutually agreed upon.
Buyer represents that it has sole authority to authorize repair of this
engine either as the owner or acting on behalf of the owner and Buyer
accepts full responsibility for payment of all repair bills associated with
this Agreement in accordance with Paragraph 5.
The engine shall be serviced in accordance with the planned workscope
approved by Buyer and managed by Seller as required. Seller will keep
Buyer apprised of those Seller recommended workscope changes and of any
significant increases in charges due to changes in the planned workscope.
Upon completion of necessary repairs, the engine will be tested in
accordance with Pratt & Whitney specifications and will receive a current
maintenance release and a FAA Form 337 prior to delivery to Buyer.
1B. Field Support Exchange Pool
---------------------------
During the term of this Agreement, Seller will furnish to Buyer at no
charge, one (1) Gearbox Assembly (bare), one (1) First Stage Fan Assembly
(-9A), one (1) Second Stage Fan Assembly (-9A/-17) and two (2) Fan Inlet
Case Assembly (non oil dampened/oil dampened) for use on Buyer's equipment.
When one (1) of the Assemblies mentioned above are consumed by Buyer, the
removed assembly will be returned to Seller by Buyer for rework or
replacement. At that time Seller will invoice Buyer for the cost of the
consumed assembly, in accordance with the Labor & Material Charges as
contained in Annex A. Seller will have the removed assembly reworked and
when made serviceable, returned to the Field Support Exchange Pool or offer
a suitable replacement for inclusion in the Exchange Pool. Subject
Assemblies to be returned to Seller by Buyer in like condition and value as
received by Buyer, upon the expiration of this Agreement.
1C. Standby and Lease Engine Charges
--------------------------------
Page 1 of 7
<PAGE>
Seller will provide Buyer with one Standby JT8D-9A Engine in Boeing 737
QEC, less nose cowl, tailpipes and thrust reverser, for use on Buyer's
equipment. Buyer agrees to pay Seller a standby fee and all transportation
cost per Annex A of this Agreement.
In the event that Buyer installs the Standby Engine on Buyer's equipment,
lease charges as stated in Annex A of this Agreement will prevail along
with standard stipulations of the than current Engine Lease Agreement. At
no time will the Engine Lease charges in Annex A be increased or decreased
for the term of this Agreement, without mutual written agreement.
Buyer and Seller will execute an Aircraft Engine Lease Agreement for the
Standby Engine or any other Engines that are sent to Buyer prior to
shipment of any Engine (Annex B). The Aircraft Engine Lease Agreement
will stipulate the Standby and Lease Engine charges as stated in Annex A.
2. Term of Agreement
-----------------
This Agreement shall remain in force for three (3) years from the date of
signing. This Agreement may be canceled by either party upon giving of
one hundred and twenty (120) days written notice to the other party for
failure to comply with any material provision of this Agreement and failing
to correct such non-compliance within five (5) days of written notification
of such non-compliance.
3. Labor and Material Charges
--------------------------
The estimated and final invoice charges for labor and material shall be
invoiced per the terms contained in Annex A.
4. Scheduling and Engine Process Time
----------------------------------
The current average engine process time (turn-time) for bare engine is
about sixty (60) calendar days from date of induction to date of
completion. Seller agrees that it will use its best efforts to meet the
scheduled process time requirements of Buyer.
5. Payment
-------
Seller shall submit estimated invoice for the charges on the engine.
Buyer shall make the following payments:
. Initial (Estimated) Invoice
After engine disassembly and inspection, Seller shall provide an
initial (estimated) invoice for the engine repair charges to Buyer
and payment shall be made in full within thirty (30) days.
. Second Invoice
Upon completion of the engine, an invoice shall be provided to Buyer
for any charge beyond the estimated invoice and payment shall be
made in full within thirty (30) days.
. Final Invoice
After all repairs are complete and outside vendor charges are known, a
final (reconciliation) invoice will be issued for any additional
charges or credits due. Payment shall be made in full within thirty
(30) days.
. Credit Agreement
Page 2 of 7
<PAGE>
Seller may apply a late fee of one percent (1%) per month on any past
due balance. Buyer will be responsible for payment of any
collection costs and reasonable attorney's fees to collect any past
due account.
6. Delays
------
The engine process time is a best efforts estimate only and Seller shall
not be liable to Buyer for any loss or damage sustained by the Buyer or
other party as a result of failure to comply with such date or period for
completion or delivery.
7. Transfer of Engine and Delivery of Records
------------------------------------------
Buyer will be responsible for all transportation cost of the engine.
All required maintenance records will be made available to Seller when
requested.
8. Inspection of Powerplant and Inventory of Powerplant Appliances
---------------------------------------------------------------
Upon induction of the engine, the repair station will conduct an internal
and external inspection to determine the presence of any defects and
perform an inventory of all installed accessories. Seller will advise
Buyer of any inventory discrepancies and of any unreported conditions
found.
9. Engine Determined to be Beyond Economical Repair (BER)
------------------------------------------------------
Seller will assist Buyer in reviewing the options available including but
not limited to the availability of an exchange engine (price to be mutually
agreed upon) or the purchase of the BER engine by Seller, for those engines
determined by Buyer to be BER. For any such BER engine, Buyer may exchange
the engine with a supplier other than Seller, after comparing offers. Any
cost associated with the BER engine by Seller will be invoiced to Buyer in
accordance with the Labor & Material charges as contained in Annex A if the
engine is exchanged with a supplier other than Seller.
10. Scrapped Material
-----------------
Parts deemed scrap will be held by Seller for a material review by Buyer
for thirty (30) days. All scrap material will be disposed of locally
unless otherwise notified in writing by Buyer.
11. Warranty
--------
EACH ENGINE REPAIR STATION WILL WARRANT IT'S OWN REPAIR WORK AGAINST
DEFECTIVE WORKMANSHIP OF REPAIRS PERFORMED, AND SUCH ENGINE REPAIR STATION
WILL BE DIRECTED BY SELLER TO ISSUE SUCH WARRANTY DIRECTLY TO BUYER.
STANDARD WARRANTIES ARE USUALLY FOR TWELVE (12) MONTHS OR TWELVE HUNDRED
(1200) FLIGHT HOURS, WHICHEVER OCCURS FIRST, BUT COULD DIFFER BETWEEN
REPAIR FACILITIES.
ANY SUBCONTRACT WORK PERFORMED SHALL CARRY WITH IT WHATEVER WARRANTIES ARE
OFFERED BY THE SUBCONTRACTOR; AND SUCH WARRANTIES SHALL PASS THROUGH TO
BUYER FROM SELLER.
PARTS PURCHASED IN "FACTORY NEW" CONDITION FROM ORIGINAL EQUIPMENT
MANUFACTURERS (OEM's) OR FAA PARTS MANUFACTURER APPROVAL (PMA) SHALL CARRY
WARRANTIES AGAINST DEFECTS IN MATERIAL OR WORKMANSHIP AS PROVIDED BY THE
OEM OR PMA; AND SUCH WARRANTIES SHALL PASS THROUGH TO BUYER FROM SELLER.
Page 3 of 7
<PAGE>
BUYER ACKNOWLEDGES THAT SELLER IS NOT A REPAIR OR OVERHAUL AGENCY AND DOES
NOT PERFORM REPAIR, OVERHAULS OR ANY OTHER WORK DIRECTLY ON OR TO SUBJECT
PARTS OR ENGINES. AS SUCH, IT IS FULLY ACKNOWLEDGED BY BUYER THAT SELLER
DOES NOT DIRECTLY PROVIDE ANY WARRANTIES EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF SUITABILITY FOR A PARTICULAR PURPOSE, USE OR SERVICE. IN NO
EVENT SHALL SELLER BE LIABLE FOR ANY ACTUAL OR CONSEQUENTIAL DAMAGES
ARISING WITH RESPECT TO MATERIAL, WORK, REPAIRS, OVERHAULS, PURCHASES OR
SERVICES SUPPLIED UNDER OR IN CONNECTION WITH THIS AGREEMENT.
12. Waiver
------
Except as set forth in Section 10. above Buyer hereby waives any right of
action or claims it may have against Seller arising out of the maintenance
or repair of the engine, other than for the gross negligence or willful
misconduct of Seller and Seller's appointed repair stations.
13. Indemnification
---------------
At all times following delivery of each powerplant, Buyer agrees to assume
liability for and to defend, indemnify, protect Seller and it's officers,
directors, employees and agents from and against any an all liabilities,
damage, losses, taxes, (other than taxes on net income) claims, actions,
suits, judgments, demands and/or expenses of whatsoever kind, including
without limitation reasonable legal fees, costs and expenses imposed on,
incurred by, or asserted against Seller, it's officers, directors,
employees and/or agents, or otherwise, for the death of or injury to any
person or persons (other than any officers, directors, employees or agents
of Seller) or for the loss of, damage to, or the destruction of any
property, including any one or more of the powerplants, in any manner
arising or resulting from the ownership, possession, registration, use,
condition, performance, airworthiness, maintenance or modification of the
powerplant or Buyer's operation of the powerplant, or arising or resulting
from any third party or parties using, maintaining, modifying or operating
the powerplant, or from any other cause whatsoever, including the doctrine
of strict liability.
Buyer's indemnity shall not apply to any death or bodily injury, or any
loss of, damage to or destruction of any property or any other liabilities
or claims whatsoever which were caused by the gross negligence or willful
misconduct of Seller or it's officers, directors, employees or agents.
Buyer shall have the obligation to control the negotiation and settlement
of any claim or defense of any action or suit brought against Seller, it's
officers, directors, employees and/or it's agents from which Buyer has
indemnified Seller. Seller shall reasonably assist Buyer, if requested, in
the defense of any such action or suit, at Buyer's expense, without
releasing or waiving any obligation, liability or undertaking on the part
of Buyer.
14 Notices
-------
Any notices required or permitted to be given hereunder shall be in writing
and shall be given to the parties at their respective address shown below,
or to such other address as either party may subsequently notify the other
and shall be deemed given when a copy is sent by facsimile transmission
with the original thereof sent by certified mail.
If to Seller: DALLAS AEROSPACE, INC.
1875 North I-35E
Carrollton, Texas 75006
Attn: George Eddy
Director Product Support
Phone: 972-245-9633 Facsimile: 972-245-9695
Page 4 of 7
<PAGE>
If to Buyer: FRONTIER AIRLINES, INC.
12015 East 46th Avenue
Denver, Colorado 80239
Attn:
------------------------------------
------------------------------------
Phone: ( ) Facsimile: ( )
--- ---------- --- -----------
15. Governing Law and Assignment
----------------------------
This Agreement shall be binding upon its successors and assigns of each
party; however, this Agreement may not be assigned by either party without
the prior written consent of the other party.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas.
Executed by the parties as of the date first written above.
Dallas Aerospace, Inc. Frontier Airlines, Inc.
By: By:
---------------------- ----------------------
Name: Name:
--------------------- ---------------------
Title: Title:
-------------------- --------------------
Date: Date:
--------------------- ---------------------
Page of 5 of 7
<PAGE>
ANNEX A - JT8D SCHEDULE OF CHARGES
<TABLE>
<CAPTION>
A. Engine Shop Charges
Function Charges to Buyer
-------- ----------------
<S> <C>
All Shop Cost *
(Labor, Special Processes, Test Charges, Outside
Services, Expendable Material, etc.)
B. DAI's Subcontract *
C. Material Charges
New Material *
Serviceable Non-Life Limited Material *
Serviceable Life Limited Material *
Exchange Serviceable Rotable Material *
D. Engine Management Services
Engine Management
Repair Cost of $200,000. or more *
Repair Cost of $101,000. to $199,000. *
Repair Cost of $100,000 or less *
E. Standby and Lease Engine Charges
Standby *
Lease Engine *
F. Freight Charges
Engine/Engine Stand *
Modules-Exchange Pool *
Other Parts/Accessories *
</TABLE>
Page 6 of 7
<PAGE>
ANNEX B - AIRCRAFT ENGINE LEASE AGREEMENT
Page 7 of 7
<PAGE>
AIRCRAFT ENGINE LEASE AGREEMENT
THIS AGREEMENT is made as of the 17th day of April between DALLAS
AEROSPACE, INC., a Texas Corporation having its principal place of business at
1875 North I-35E, Carrollton, Texas, 75006, U.S.A. ("Lessor"), and FRONTIER
AIRLINES, INC., a Delaware Corporation having its principal place of business at
12015 East 46th Avenue, Denver, Colorado 80239, U.S.A. (Lessee").
In consideration of the mutual promises and undertakings set forth
below, and intending to be legally bound, the parties hereby agree as follows:
1. Definitions. The following capitalized terms used in this agreement shall
-----------
have the meanings set forth below.
a. "Engine" - An aircraft Engine owned by Lessor of the type(s) and
model(s) described on Schedules A and B attached hereto, together with
all the Pratt & Whitney basic accessories and full Boeing 737 QEC on the
Engine at the time it is delivered by Lessor to Lessee or to a carrier
for transport to Lessee.
b. "Standby/Lease Term" - Will begin on the day when an Engine and
associated records are delivered to the Lessee or to a carrier for
delivery to Lessee (whichever occurs first) and ends on the date on
which the Engine and associated records are returned to Lessor as
provided herein. The Standby/Lease Term Lease term is for ____________
days and may be extended by mutual consent of Lessee and Lessor.
2. Standby/Lease of Engines. At the request of Lessee from time to time during
------------------------
the term of this agreement and subject to all of the provisions hereof,
Lessor shall provide standby/lease Engines to Lessee to be operated by
Lessee.
3. Rental. Lessee shall pay rental to Lessor for the Lease Term at Lessor's
------
rates in effect at the time of the Engine lease. Lessor's current rental
rates for Engines in effect on the date of this agreement are set forth on
Schedule A. All rental rates are exclusive of applicable taxes, which shall
be paid by Lessee in addition to the rental (excluding only taxes on the
income received by Lessor).
4. Standard Terms and Conditions. Each standby/lease of an Engine to Lessee
-----------------------------
pursuant to this agreement shall be subject to Lessor's Standard Terms and
Conditions for Engine Leases (Schedule C), a copy of which is attached hereto
and made a part hereof.
5. Termination. This agreement may be terminated by Lessor as set forth in
-----------
Schedule C, effective upon giving notice of such termination to Lessee,
provided that the provisions of this Agreement will continue to apply to any
Engine which is leased to Lessee at the time of such termination.
Furthermore, any such termination shall not affect the rights or obligations
of the parties hereunder which have accrued or become fixed as of the
effective termination date.
Page 1 of 12
<PAGE>
IN WITNESS WHEREOF, the parties have signed this agreement as of the date
first written above.
FOR DALLAS AEROSPACE, INC. FOR FRONTIER AIRLINES, INC.
(Lessor) (Lessee)
By: By:
------------------------- ---------------------------
Title: Title:
---------------------- ------------------------
Name: Name:
----------------------- -------------------------
Officer of: Officer of:
Dallas Aerospace, Inc.
------------------------------
Page 2 of 12
<PAGE>
SCHEDULE A
to Aircraft Engine Lease Agreement
----------------------------------
A. Lessee shall pay monthly Rental Fees as shown, monthly in advance on the
first day of each month. Operating hour/cycle charges shall be paid on the
15th day of each month following the month in which the operating
hours/cycles were accumulated on the Engine.
<TABLE>
<CAPTION>
Standby Aircraft Engine Standard Rental Rates (US$)
Manufacturer Model Serial Number Per Month
------------ ------ ------------- ---------
<S> <C> <C> <C>
Pratt & Whitney JT8D-9A ________ $ *
Full Boeing
737 QEC
</TABLE>
Once the Engine is removed from standby status and is placed into service by
Lessee than the following rates will immediately take effect:
<TABLE>
<CAPTION>
Leased Aircraft Engine Standard Rental Rates (US$)
Manufacturer Model Serial Number Per Day Per Operating
------------ ------ ------------- ------- -------------
Hour/Cycle*
----------
<S> <C> <C> <C> <C>
Pratt & Whitney JT8D-9A ________ $ * USD $ * USD
Full Boeing per hour or
737 QEC cycle*
*Whichever is greater
</TABLE>
Plus Post Rental Inspection Charges. Upon return of Engine, Lessor will
conduct borescope inspection, comply with a cell run, and subject to the
results of these inspections, issue a Serviceable Yellow Tag. Lessee will
be billed costs of post rental inspection.
B. Standby/Lease charges will commence upon the date in which the engine
leaves Dallas Aerospace's facility and continues until the engine is
received at Lessor's facility in Dallas, Texas.
C. This Lease is contingent upon Lessor receiving JT8D off-wing engines for
repair. The off-wing engine repairs will be determined under a separate
agreement for managing the repairs.
D. Post Lease inspection or repair charges required and paid by Lessor shall
be invoiced to Lessee in the amount of charges paid by Lessor.
E. Prior to shipment of engine Lessee will wire transfer a deposit equal to
five percent (5%) of the stipulated loss value of the Engine as defined
under Schedule C, Section 11 of this Agreement to Lessor's U.S. Bank
Account. Wire transfer instructions are as follows:
Page 3 of 12
<PAGE>
To the Account of Dallas Aerospace, Inc.
Account No. 4054-7609
ABA No. 021000089,
CITIBANK, 399 Park Avenue, New York, NY 10043
F. Lessee agrees to pay as necessary other miscellaneous applicable freight,
transportation, repair, legal, insurance, test and inspection charges which
might arise as described in Schedule "C" Items "3", "4", "5", "7", "11" and
"12".
Page 4 of 12
<PAGE>
SCHEDULE B
to Aircraft Engine Lease Agreement
----------------------------------
Engine Disk Sheet
Page 5 of 12
<PAGE>
SCHEDULE C
to Aircraft Engine Lease Agreement
----------------------------------
STANDARD TERMS AND CONDITIONS FOR ENGINE LEASES
1. Applicability. These terms and conditions shall apply to each lease of an
--------------
Engine by Lessor to Lessee pursuant to the attached Aircraft Engine Lease
Agreement (hereafter referred to as the "Agreement") and shall form a part of
the agreement. Capitalized terms used herein shall have the meanings defined
in the Agreement.
2. Credit Approval and Payment. Each lease of an Engine to Lessee shall be
----------------------------
subject to credit approval of Lessee by Lessor's Financial Services
Department. Lessee shall pay the rental and applicable taxes to Lessor
according to the terms of invoices which will be prepared and submitted by
Lessor to Lessee. All payments to Lessor by Lessee hereunder shall be made
in U.S. Dollars and shall be payable at the payment location appearing on
Lessor's invoices to Lessee, or otherwise at Dallas, Dallas County, Texas.
Any invoiced amounts not paid when due shall bear interest at the highest
rate permitted by applicable law from the due date until paid at the lesser
of: (i) the highest lawful rate which may be established in written
agreements, or (ii) 18% per annum. Lessee shall reimburse Dallas Aerospace,
Inc., for reasonable attorney's fees and other legal expenses incurred by
Lessor for the purpose of attempting to collect any past due sums payable by
Lessee hereunder or for the purpose of repossessing an Engine following the
expiration of the Lease Term.
3. Delivery and Redelivery. Lessor will deliver the Engine to Lessee on the
------------------------
Delivery Date F.O.B. the Lessor's facility. The Engine will have a F.A.A.
approved return to service tag affixed to it. Upon termination of the Lease
the Engine will be redelivered F.O.B. to Lessor's facility in Dallas, Texas
in serviceable condition as set forth in this Lease Agreement.
4. Use and Operation. Without the prior written consent of Lessor, the Engines
------------------
shall be operated only by Lessee, and shall continuously remain in the
possession of Lessee except during periods of maintenance and transportation
incident thereto. Any such consent by Lessor shall not excuse Lessee from
performing any of its obligations under the agreement. Lessee shall operate
the Engines in accordance with the recommendations of the manufacturers
thereof, and otherwise in a lawful, safe, and prudent manner. All operations
of the Engines shall be properly recorded in the records for the Engines.
5. Repair and Maintenance. At its sole expense, Lessee shall cause required
----------------------
field-level maintenance to be performed on the Engines in accordance with all
applicable requirements and recommendations of the manufacturers thereof, and
shall promptly repair any damage to an Engine occurring during the Lease Term
in a facility acceptable to Lessor, resulting from improper operation,
foreign object ingestion, accidents or any other causes, whether or not
involving the fault of Lessee; except, with normal wear and tear excepted.
Lessee shall cause all maintenance of, and repairs to, the Engines to be
recorded in the records for the Engines. Each accessory, part, or component
installed on an Engine in connection with a repair shall be identical in
manufacturer and part number to the item which it replaces, shall be
airworthy and in serviceable condition, and if a life-limited or "hard time"
item shall have a remaining life equal to or greater than the remaining life
of the replaced item.
6. Reports. Lessee shall report to Lessor the number of hours and cycles the
--------
Engines have been operated monthly and other information regarding the
location, condition, operation, performance and
Page 6 of 12
<PAGE>
maintenance of the Engines at such times and in such manner as Lessor may
direct. Lessee shall immediately report to Lessor all information regarding
any incident, accident or abnormal occurrence which may have been caused in
whole or part by the condition, operation or performance of an Engine and
which involves actual or potential loss of or damage to an Engine or to other
property, or injury to or death of any person. Lessee shall cooperate with
any investigation of such incident, accident or abnormal occurrence by Lessor
or its representatives.
7. Return Condition, Acceptance and Inspection. At the end of the Lease Term,
--------------------------------------------
or at such time as that Lease Term may be sooner terminated in accordance
with Section 11 below, Lessee shall have an acceptable Engine test and a
borescope acceptable to Lessor performed at an FAA approved facility and
provide a serviceable tag for the Engine from said facility. Lessee shall
promptly return the Engines to Lessor in the same serviceable condition as at
the beginning of the Lease Term, ordinary wear and tear resulting from proper
operation excepted. Lessee shall pay to Dallas Aerospace, Inc., on demand
the cost of repairing the Engine to return it to serviceable condition or for
replacing any accessories, parts, or components of the Engines which are
damaged or missing when the Engines are returned to Lessor.
At all reasonable times, Lessor and its representatives shall have the right
to inspect the Engines while in the possession of Lessee or others and to
examine all log books and other records reflecting the operation and
maintenance of the Engines.
8. Title. At all times, title to the Engines shall remain solely in Lessor.
------
Lessee shall not represent to other persons, firms or governmental
authorities that Lessee has any interest in the Engines, other than as
Lessee. Lessee shall take such actions as Lessor may direct for the purposes
of evidencing Lessor's ownership of the Engines and/or notifying other
persons or firms of such ownership. Lessee shall not permit any lien,
security interest or encumbrance to attach to an Engine as a result of any
act or omission by Lessee, and shall promptly cause the discharge, release,
or termination of any such lien, security interest or encumbrance, at the
expense of Lessee.
9. Warranty. Lessor warrants to Lessee that Lessor has the right to lease to
---------
Lessee. Lessor further warrants to Lessee that the Engines are in airworthy
condition at the beginning of the Lease Term. The sole remedy of Lessee if
an Engine does not conform to the foregoing warranty shall be the repair or
replacement of such Engine or the nonconforming portion thereof by Lessor.
EXCEPT AS SET FORTH ABOVE IN THIS SECTION, DALLAS AEROSPACE, INC., MAKES NO
EXPRESS OR IMPLIED WARRANTY INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE OR ANY IMPLIED WARRANTY
ARISING FROM COURSE OF DEALING OR USAGE OF TRADE IN REGARD TO THE ENGINES.
THE ENGINES ARE LEASED TO AND ACCEPTED BY LESSEE "AS-IS" AND "WITH ALL
------- ---------
FAULTS." LESSOR SHALL NOT BE LIABLE TO LESSEE FOR ANY INCIDENTAL OR
--------
CONSEQUENTIAL DAMAGES INCLUDING, WITHOUT LIMITATION, ANY LOSS OR REVENUES,
PROFITS OR USE EVEN IF LESSOR HAS BEEN NOTIFIED IN ADVANCE OF THE POSSIBILITY
OF SUCH DAMAGES. NO OFFICER, EMPLOYEE OR AGENT OF LESSOR HAS AUTHORITY TO
MODIFY OR EXPAND LESSOR'S LIABILITY UNDER THIS SECTION.
10. Indemnity. Lessee shall defend Lessor and its employees and underwriters
----------
(individually or collectively, the "Indemnified Parties") against any claims
or suits seeking recovery of damages from the Indemnified parties for loss
of or damage to property or for injury to or the death of any person arising
out of the possession, use, operation or condition of an Engine by Lessee or
by others during the Lease Term; except as caused by the negligence or
willful misconduct of the indemnified parties. Lessee shall indemnify the
Indemnified Parties against any sums paid to settle such claims or suits,
any damages and costs awarded by judgment in such suits, and any incidental
costs and expenses
Page 7 of 12
<PAGE>
incurred in connection with the claims or suits (including, without
limitation, reasonable attorney's fees if for any reason Lessee does not
defend the Indemnified Parties as required herein). Lessor shall endeavor to
promptly notify Lessee of any such claims or suits, but any delay in giving
notice to Lessee shall not excuse Lessee from its defense and indemnity
obligations except to the extent, if any, that Lessee is prejudiced by the
delay. Lessor shall furnish reasonable cooperation to Lessee and its
representatives in the defense of such claims or suits at the request and
expense of Lessee. The defense and indemnity obligations of Lessee under
this section shall survive the end of the Lease Term and the expiration or
termination of the agreement.
11. Insurance. During the term of the Agreement, Lessee shall continuously
----------
maintain the following types of insurance coverage with insurance companies
of recognized international standing.
a. physical damage insurance protecting against loss of or damage to the
Engines at all times while an Engine is in the possession of Lessee or
others (whether or not installed on an aircraft) or is being transported
to or from Lessor, in amounts sufficient to cover the full replacement
value of the Engine(s),__________________ Thousand U.S. Dollars
($______.00), with any loss payable to Lessor as its interests may
appear; and
b. aviation liability insurance, including contractual liability coverage
for the indemnity obligation of Lessee hereunder, with minimum limits of
$100 million per occurrence (or such other limits as may be approved by
Lessor), and with Lessor named as an additional insured as to any
liability arising in connection with the agreement.
Upon the execution of the agreement and during the term hereof, Lessee shall
cause Lessor to be furnished with one or more certificates of insurance
reflecting the effectively of the above coverages and endorsements and
providing for not less than thirty days prior written notice to Lessor in
the event of cancellation or modification of the coverages reflected
thereon.
12. Premature Termination of Lease Term. Lessor may terminate the Lease Term
------------------------------------
for an Engine immediately upon the occurrence of any of the following
events:
a. Lessee fails to pay when due any rental charge, overhaul or repair
charge, or other sum owing to Lessor under the agreement or otherwise,
and does not cure such failure within three days after the earlier of:
(i) the date on which Lessee has knowledge of such failure, or (ii) the
date on which Lessor gives notice thereof to Lessee;
b. Lessee fails to comply with any provision of the agreement or to
perform any of its obligations hereunder, and does not cure such failure
within ten days after the date on which Lessor gives notice thereof to
Lessee; or
c. Lessee makes a general assignment for the benefit of creditors, or
generally fails to meet its financial obligations as they become due, or
becomes the subject of voluntary or involuntary bankruptcy proceedings,
or has a receiver or custodian or liquidator appointed for any of its
assets, or ceases to conduct the whole or a substantial portion of its
business in the manner in which such business was conducted on the date
of the agreement.
Lessor shall give notice of any such termination to Lessee, following which
Lessee shall immediately discontinue further operation of the Engines and
shall return the Engines and records to Lessor at Carrollton, Texas or at
such other location as Lessor may direct, at the expense of Lessee.
13. Miscellaneous.
--------------
Page 8 of 12
<PAGE>
a. Notices. All notices required or permitted to be given hereunder shall
-------
be in writing and shall be deemed to have been given when hand-delivered
or sent by next business day delivery service to the party to which they
are directed at the address shown below, or to such other address as
either party shall hereafter notify the other:
(i) If to Lessee, to:
FRONTIER AIRLINES, INC.
12015 East 46th Avenue
Denver, Colorado 80239
Attn:
----------------------------------
Phone: ( )
--- ------------------
Facsimile: ( )
--- ----------------
(ii) If to Lessor, to:
DALLAS AEROSPACE, INC.
1875 North I-35E
Carrollton, Texas 750066
Attn: George Eddy, Director Products Support
Phone: (214) 245-9633
Facsimile: (214) 245-9695
b. No Waiver. No act or failure or delay in acting by either party shall
----------
be deemed to be a waiver of any right or remedy given to it in the
Agreement, except for an express written waiver signed by an authorized
representative of that party.
c. No Assignment. Lessee may not assign the agreement or sublease any
--------------
Engine without the prior written consent of Lessor and any attempted
assignment or sublease by Lessee without such consent shall be of no
legal effect.
d. Successors. The agreement shall be binding upon the successors and
-----------
permitted assigns of Lessee and shall inure to the benefit of the
successors and assigns of Lessor.
e. Severability. If any provision of the agreement should be declared
-------------
illegal or unenforceable by a court of competent jurisdiction, such
declaration shall not affect the legality or enforceability of any other
provision of the agreement.
f. Governing Law. The agreement shall be interpreted in accordance with
--------------
the laws of the state of Texas, excluding any conflicts of law provisions
thereof which would result in the application of the laws of any other
jurisdiction. In any suit arising out of the agreement, Lessee hereby
irrevocably agrees to be subject to the non-exclusive personal
jurisdiction of the courts of the state of Texas and the federal courts
located in the state of Texas and agrees that the venue for such suit is
proper in Dallas, County, Texas. Lessee agrees to be subject to the
Texas Long Arm Statute for service of process.
Page 9 of 12
<PAGE>
g. Entire Agreement. The agreement contains the entire agreement of the
----------------
parties as to the general subject matter hereof and supersedes any prior
negotiations, understandings or agreements regarding such subject matter.
The terms or conditions of any purchase order or other commercial
document pertaining to the leasing of Engines which may be submitted to
Lessor by Lessee shall not be binding upon Lessor.
Page 10 of 12
<PAGE>
EQUIPMENT DELIVERY RECEIPT
FROM: FRONTIER AIRLINES, INC. (Lessee)
TO: DALLAS AEROSPACE, INC. (Lessor)
The undersigned hereby acknowledges that on this______th day of_______, 1996,
Lessor delivered to Lessee that certain JT8D-_____Engine, Manufacturer's Serial
Number__________in Shipping Stand Serial Number_____and certain Engine records
in Lessor's possession required by Lessee, including a copy of the disk profile
attached as Schedule B to the Aircraft Engine Lease Agreement. The undersigned
further acknowledges receipt of and acceptance of the Engine, basic engine
components and all such records in compliance thereof with all the terms and
conditions of that certain Aircraft Engine Lease Agreement dated as of_________,
______, between Lessee and Lessor.
Signed this______th day of______, 199_.
FOR: FRONTIER AIRLINES, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Page 11 of 12
<PAGE>
AIRCRAFT ENGINE LEASE AGREEMENT
STANDARD USAGE REPORT
FOR
FRONTIER AIRLINES, INC.
Date: Return Form By Fax: Dallas Aerospace
------------------------------ Leasing Dept.
972-245-9695
Contact:
---------------------------
Total Operating Cycles Operated for Previous Month:
--------------------
Total Operating Hours Operated for Previous Month:
----------------------
Aircraft Engine Beginning Totals for Previous Month: Hours/ Cycles
----------------------------
Aircraft Engine Ending Totals for Previous Month: Hours/ Cycles
-------------------------------
Please note that Dallas Aerospace, Inc. bills based on total operating
hours/total operating cycles, whichever is greater. We require that both the
operating hours/cycles be reported, for the prior months usage, on this form and
returned to us no later than the 5th day of each month during the Lease Term. We
also request that you list the engines total hours/cycles above for the
beginning and end of the previous months usage.
Frontier Airlines' billing period starts on the 1st day of each month and should
conclude on the last day of each month for each billing period during the Lease
Term.
DEFINITIONS:
Operating Cycle: A completed take-off and landing sequence.
Operating Hour: The engine operating time from start-up to shutdown.
I,____________________________, acknowledge that on this____day of_______,
199_, that the numbers reported above are true and correct according to our
records.
Signature:
---------------------------
Name:
--------------------------------
Title:
-------------------------------
Page 12 of 12
<PAGE>
EX 10.23
SERVICES AGREEMENT
THIS SERVICES AGREEMENT ("Agreement") is made as of this 6 day of August, 1996
by and between TRAMCO, INC., a Washington corporation ("Tramco"), and FRONTIER
AIRLINES, INC., a Colorado corporation ("Customer").
RECITALS
A. Customer desires that Tramco provide Customer with certain modification,
maintenance, repair, overhaul and other services with respect to the
maintenance, repair, overhaul and modification of certain Aircraft (as defined
herein).
B. Tramco desires to provide such services on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereby agree as follows:
AGREEMENTS
1. Definitions. Capitalized terms used but not defined herein shall have
-----------
the meanings given in Exhibit 1 hereto.
2. Airframe Services. Tramco shall provide to Customer the following
-----------------
services (collectively, the "Airframe Services"):
2.1 Heavy Maintenance. Tramco shall provide to Customer Heavy
-----------------
Maintenance, and Customer shall purchase the same from Tramco, subject to and in
accordance with the charges, terms and conditions set forth herein. Scheduling
of the Heavy Maintenance shall be advised by Customer in consultation with
Tramco.
2.2 Modification Work. In addition to the Heavy Maintenance Work,
-----------------
Tramco shall provide to Customer the Modification Work and Customer shall
purchase the same from Tramco, subject to and in accordance with the charges,
terms and conditions set forth herein. Scheduling of the Modification Work
shall be advised by Customer in consultation with Tramco.
3. Workscope, Parts Identification.
-------------------------------
3.1 Workscope. For each Aircraft for which Customer desires that
---------
Tramco perform Airframe Services hereunder, Customer shall be responsible for
developing and delivering to Tramco an initial statement of work at least
fourteen (14) days in advance or such Aircraft's anticipated date for arrival at
the Tramco Airframe facility for Airframe Services which describes work tasks
Tramco is to provide. Tramco will review the initial statement of work and will
advise
-1-
<PAGE>
Customer of any necessary revisions or otherwise clarify details of the
statement of work prior to and, if determined by Tramco to be necessary, during
aircraft inspection. After such review and agreement between Customer and
Tramco as to the statement of work, Customer and Tramco will execute a
definitive, written Workscope prior to Tramco's commencement of any Airframe
Services on the Aircraft, which Workscope will be attached to the applicable
Airframe Services Order.
3.2. Parts Identification. As part of the Workscope, Customer shall
--------------------
identify those certain parts and components (other than Expendable and
Consumable parts typically used or consumed in connection with Airframe
Services) that will need to be procured to accomplish the Workscope. Such parts
and components will include, but are not limited to, the following: hardtime
change components, systems modifications, interior material changes, and other
potential lead-time sensitive items.
3.3. Engineering Services. In the event that Customer will require
--------------------
that Tramco perform any engineering services or technical support as part of or
in connection with any Airframe Services, then Customer will provide to Tramco,
not less than sixty (60) days prior to the delivery of the Aircraft for which
such services are to be provided, a description of the desired engineering
services. Upon agreement by Tramco, the description of such engineering
services shall be included in the Workscope for the Airframe Services.
4. Orders for Airframe Services. Upon finalization of the Workscope
----------------------------
pursuant to Section 3 above and in all events prior to the commencement of
performance of the Airframe Services, Customer and Tramco shall execute a
written services order, substantially in the form of the "Airframe Services
Order" form attached as Exhibit 4 hereto (each, an "Airframe Services Order").
Each Airframe Services Order shall set forth the information required by the
form of Airframe Services Order (including pricing information pursuant to the
terms of Section 5) and shall be attached to a copy of the Workscope relating to
such Airframe Services Order. Upon the mutual agreement of Customer and Tramco
to the terms set forth in an Airframe Services Order, Customer and Tramco each
shall have a copy of such Airframe Services Order signed by a duly authorized
representative. Terms and conditions set forth in any Airframe Services Order
shall apply only to the performance of the Airframe Services on the Aircraft
identified in such Airframe Services Order and, unless expressly referenced in
any additional subsequent Airframe Services Order, shall not apply to any
subsequent Airframe Services Order under this Agreement.
5. Airframe Services Terms and Conditions. Unless otherwise expressly set
--------------------------------------
forth in an Airframe Services Order (and in such case only with respect to the
Airframe Services and Aircraft identified in such Order), charges for Airframe
Services provided to Customer in connection with this Agreement shall be as
follows:
5.1. Estimated Labor Hours. For each Workscope contained in an
---------------------
Airframe Services Order, Customer and Tramco shall mutually agree on the number
of labor hours estimated to be required to complete the Airframe Services set
forth in the Workscope (the "Estimated Labor Hours"). The agreed upon Estimated
Labor Hours shall be set forth in the Airframe Services Order for such
Workscope. Such Estimated Labor Hours shall include, without additional labor
charge, all labor as may be required to complete the Airframe Services in
accordance with the Workscope, but shall not include Additional Work, any
Customer Request Items, Non-Routines, or any changes
-2-
<PAGE>
to the content of the Workscope, any deviation from or failure of the
assumptions and conditions set forth in the Workscope, or similar changes that
would increase the time required to perform the Workscope. Regardless of the
actual number of labor hours expended by Tramco, Tramco shall perform the
Workscope at a charge equal to (i) the number of Estimated Labor Hours
multiplied by the Labor Rate, plus (ii) the number of actual labor hours
expended by Tramco in performance of Additional Work, Customer Request Items,
Non-Routines, or other items outside of the Workscope multiplied by the Labor
Rate, plus (iii) charges for materials and third party services pursuant to
Section 5.2.
5.2. Material Charges. (a) Expendables and Consumables. Tramco
----------------
shall bill Customer for the cost of Expendables and Consumables used by Tramco
in connection with the Airframe Services at the fixed rate specified in the
Airframe Services Order relating to such item of Labor Work. Charges for
Expendables and Consumables will be included in the Invoices.
(b) Other Materials. Parts, materials and third party services
used or consumed in connection with Airframe Services (other than Expendables
and Consumables) shall be charged to Customer at their actual cost plus a mark-
up of twenty percent (20%), provided that no single part, material item or
outside service shall be marked-up in excess of two hundred and fifty dollars
($250.00). Notwithstanding the foregoing, any single part, material item or
outside service with an actual cost to Tramco of $5,000 or greater shall be
billed to Customer at their actual cost plus a mark-up of twenty percent (20%)
with no maximum mark-up amount. For purposes of this Section 5.2, divisions or
business units of The B.F.Goodrich Company other than Tramco shall be considered
third parties and parts or services obtained from such divisions or business
units shall be charged to Customer in accordance with this Section 5.2. Outside
services include, without limitation, non-destructive testing, plating,
machining, fueling/defueling, parts fabrication and oxygen bottle servicing. As
an exception to the foregoing, (i) parts, components and material purchased from
Boeing and charged directly to Customer through a Customer purchase order or
Customer open account; and (ii) parts, components and material furnished by
Customer; shall not be charged to Customer or marked-up by Tramco.
5.3. Labor. The "Labor Rate" shall be the rate per hour specified in
-----
the applicable Airframe Services Order. Except as otherwise provided on the
applicable Airframe Services Order, the Labor Rate shall apply to all categories
of Tramco labor in connection with the Airframe Services, including without
limitation labor incident to expediting services, labor time otherwise
chargeable at applicable overtime rates, engineering services, inspection
services, NDT/NDI, parts research services, AOG services, development
engineering services, direct lead labor time, and direct quality control labor
time.
5.4. Estimates of Delivery. Notwithstanding anything to the contrary
---------------------
contained in this Agreement, any Airframe Services Order or any other
communications between Tramco and Customer, delivery dates or turn-times quoted
or communicated to Customer, whether orally or in writing, from time to time
with respect to Airframe Services shall in all cases be estimates of the time
for completion of performance of such services and in no event shall such
estimates be construed as binding delivery commitments.
-3-
<PAGE>
5.5. Other Terms.
-----------
5.5.1. Scheduling and Capacity. Customer's Designated
-----------------------
Maintenance Representative(s) shall be responsible for scheduling Airframe
Services with Tramco. Aircraft shall be delivered by Customer to Tramco Airframe
on the date(s) specified in the Airframe Services Order, or as may otherwise be
agreed in writing between Customer and Tramco. Customer shall provide Tramco
with not less than fourteen (14) days advance notice of the delivery of any
Aircraft and shall use all reasonable efforts to provide Tramco with at least
sixty (60) days advance notice of the anticipated delivery of Aircraft for
Airframe Services. In all events, Customer shall provide Tramco with written
schedule confirmation not less than fourteen (14) days in advance of the
delivery of any Aircraft for Airframe Services. Performance of Airframe Services
is in all cases subject to availability of space and sufficient capacity at
Tramco.
5.5.2. Ferry and Flight Tests. Customer shall provide its own
----------------------
crew for; pay all expenses related to; and have sole responsibility for the
transportation of all Aircraft to and from the Tramco Airframe facilities,
including any flight test of an Aircraft receiving Airframe Services hereunder.
Tramco will provide technicians to assist in flight test and redelivery.
Customer shall take all action necessary to extend its insurance coverages
required hereunder to such Aircraft and any flight tests thereof.
5.5.3. Technical Data. Customer shall be solely responsible
--------------
for, and shall bear any costs associated with, obtaining any licenses or other
rights from third parties necessary to enable Tramco's use of the Technical Data
in connection with Airframe Services, and such obligation shall be a condition
precedent to any such services hereunder. Not less than seven (7) days prior to
the commencement of any Airframe Services hereunder, Customer shall have
delivered copies to Tramco of all necessary maintenance, repair or overhaul
manuals or instructions, including, without limitation, wiring diagrams,
structural repair manuals, and any approved maintenance program for a particular
Aircraft, which maintenance program will include a manual describing the
relevant maintenance and inspection program, and corresponding maintenance work
cards and forms, together with any other published technical data required to
accomplish the services requested (the "Technical Data"). Without limiting the
generality of the foregoing, Technical Data includes any necessary manuals or
instructions from manufacturers or suppliers of the airframe or components
thereon.
5.5.4. Designated Maintenance Representatives. Customer shall
--------------------------------------
designate in writing one or more representatives of Customer each of whom shall
have authority to authorize and approve for and on behalf of Customer any
Airframe Services or changes thereto, including but not limited to Non-Routine
Maintenance and any Buyer Request Items. One Designated Maintenance
Representative shall be available at the Tramco Airframe repair facility during
normal business hours while the Airframe Services are being provided. Tramco
shall provide at its expense appropriate office accommodations for one
Designated Maintenance Representative at the Tramco Airframe facilities, with
shared secretarial support and access to computers, fax machines and telephones.
Customer shall reimburse Tramco for all out-of-pocket expenses, long-distance
telephone and fax expenses incurred by Tramco on account of the Designated
Maintenance Representatives. Customer shall be responsible for all travel,
lodging and related expenses incurred by the Designated Maintenance
Representatives. Subject to reasonable
-4-
<PAGE>
restrictions imposed by Tramco to safeguard proprietary information and to
maintain the security and safety of the Tramco facility, Tramco will allow the
Designated Maintenance Representatives reasonable access at all reasonable times
(i) to the Tramco records contemplated by Section 6.2.2 of this Agreement, (ii)
to observe the performance of all Airframe Services being performed by Tramco
for Customer, and (iii) to observe and inspect all materials and parts obtained
by Tramco for use or installation on the Aircraft. The Designated Maintenance
Representatives, and all other employees, agents and representatives of
Customer, shall abide by Tramco's security and safety procedures and
restrictions. Customer shall be completely responsible for sickness or injury to
its Designated Maintenance Representatives and other employees, including
without limitation with respect to death or injuries occurring at the Tramco
facility or as a result of actions or inactions (negligent or otherwise) of
Tramco employees, agents or representatives.
5.5.5. Warranty. Tramco shall warrant the Airframe Services
--------
exclusively as set forth in Exhibit 5.5.5 to this Agreement.
6. Customer Payments.
-----------------
6.1. Charges/Invoices. Customer shall compensate Tramco at the rates
----------------
and terms as provided in this Agreement and the applicable Airframe Services
Order for the various services rendered hereunder by Tramco. Charges for costs
or expenses which this Agreement specifically provides are to be incurred by
Tramco for the account of Customer shall be charged to Customer as provided
herein. Such costs and expenses shall be included in the Invoices, but
identified separately.
6.2. Time and Method of Payments.
---------------------------
6.2.1. Invoicing. Upon completion of Airframe Services with
---------
respect to an Aircraft, Tramco will prepare and submit to Customer an invoice or
invoices with respect to such Aircraft listing charges for the Airframe Services
and related parts and materials (the "Invoices"). Prior to redelivery of any
Aircraft to Customer, Customer shall pay to Tramco an amount equal to eighty
percent (80%) of the Estimated Labor Hours, eighty percent (80%) of the
estimated additional labor charges with respect to Airframe Services on such
Aircraft performed by Tramco on a Time and Materials basis, and one hundred
percent (100%) of the estimated charges for materials and third party services
on such Aircraft pursuant to Section 5.2. All such estimates shall not be
construed as a fixed determination of Invoice amounts, and as soon as
practicable following Aircraft redelivery Tramco will submit supplemental or
additional Invoices to reflect actual labor, material and other charges payable
by Customer pursuant to this Agreement. Additional amounts owing by Customer
pursuant to such additional Invoices shall be due and payable in United States
Dollars 30 days from the Invoice date. All Customer payments shall be made by
check or wire transfer to a Tramco account designated by Tramco in writing to
Customer. Any payments made by check shall be sent via overnight air courier
services (e.g. FedEx, UPS) to the Tramco address designated from time to time by
Tramco in writing. Notwithstanding the foregoing and in addition to any other
remedy to which Tramco may be entitled, Tramco may in its sole discretion demand
complete payment for 100% of all labor charges for Airframe Services with
respect to any Aircraft prior to the departure of such Aircraft from
-5-
<PAGE>
Tramco Airframe. In the event Tramco elects to require such payment, Customer
will be notified not less than five (5) days prior to the scheduled departure of
such Aircraft.
6.2.2. Right of Customer to Review Records. On the written
-----------------------------------
request of Customer from time to time during the Term of this Agreement (but not
more frequently than once in any twelve month period) and in addition to the
rights set forth in Section 5.5.4 with respect to Designated Maintenance
Representatives, Customer shall be permitted during normal business hours to
review Tramco's records related exclusively to (a) the manner and quality of
performance of Airframe Services on the Aircraft by Tramco, and (b) the accuracy
of any fees or charges invoiced by Tramco to Customer with respect to Airframe
Services provided by Tramco. The right of Customer to review Tramco records
shall extend to any agent, consultant or advisor of Customer reasonably
acceptable to Tramco which agrees to execute a confidentiality agreement in form
and substance satisfactory to Tramco, and which agrees to abide by applicable
Tramco safety and security restrictions. Notwithstanding the foregoing, neither
Customer nor its agents, consultants or advisors shall have any right to review
any other books and records of Tramco, including without limitation any books
and records relating to Tramco's fees or charges to any other customer or
Tramco's general accounts or financial information.
6.2.3. Disputed Amounts. Any Invoice submitted by Tramco
----------------
shall be final as to Customer unless Customer shall have notified Tramco in
writing (a "Notice of Disagreement") within ninety (90) days of the Invoice date
of a disagreement with respect to all or a portion of any Invoice. Such Notice
of Disagreement shall specify the dollar amount of the disagreement (the
"Disputed Amount") and identify in reasonable detail the basis of Customer's
good faith determination that the invoice amount is incorrect. Customer shall
pay when due all amounts other than Disputed Amounts. Following receipt by
Tramco of a Notice of Disagreement, Tramco and Customer shall use good faith
efforts to resolve such Disputed Amounts. If Tramco and Customer are unable to
satisfactorily resolve such Disputed Amounts within thirty (30) days of receipt
of the Notice of Disagreement, then the Disputed Amount shall be promptly
submitted (by either party) to an independent public accounting firm of national
reputation which shall not have provided professional services to either Tramco
or Customer during the three year period prior to the date of the Notice of
Disagreement (the "Accounting Firm"). Customer and Tramco agree that the
Seattle, Washington office of Price Waterhouse LLP shall serve as the Accounting
Firm, provided that if such firm is unable or unwilling to provide such service
in any instance (including by reason of disqualification under the terms of this
Agreement), then the Seattle, Washington office of Deloitte & Touche LLP shall
serve as the Accounting Firm. If both Price Waterhouse LLP and Deloitte & Touche
LLP are unable or unwilling to serve as the Accounting Firm, then Tramco and
Customer shall mutually agree on the Accounting Firm. The Accounting Firm shall
be instructed to review the Disputed Amounts and to notify Customer and Tramco
as soon as practicable, and in any event not later than sixty (60) days
following the date of submission of the Disputed Amount to the Accounting Firm,
of its determination of the correct amount of the invoice payable by Customer.
Customer and Tramco agree to make available to the Accounting Firm such
information, books and records relating to the Disputed Amounts as may be
reasonably determined by the Accounting Firm to be necessary to complete its
review. The determination of the Accounting Firm shall be final and binding and
Customer shall pay to Tramco within five (5) days following receipt of the
report of the Accounting Firm such amount as the Accounting Firm has determined
is properly payable. The fees and expenses of the Accounting Firm shall be
allocated ratably between the parties in
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<PAGE>
proportion to the dollar amount of adjustment to the Tramco invoice determined
by the Accounting Firm to be appropriate compared to the dollar amount of the
Disputed Amount.
6.2.4. Late Payment Charges. If any Customer payment
--------------------
obligation hereunder is not paid when due, (i) Customer shall pay interest on
such amount calculated from the date such amount is due until the date of
payment in full at the lower of one and one-half percent per month or the
maximum rate allowable under applicable law, and (ii) Tramco shall have the
right upon notice to Customer to suspend performance of Airframe Services and to
terminate this Agreement. No forbearance or course of dealing shall affect these
rights of Tramco.
6.3. Customer as Responsible Party. Customer represents that it has
-----------------------------
all necessary authority to authorize the Airframe Services on the Aircraft.
Notwithstanding any understandings or agreements that Customer may have from
time to time with third parties and without limiting Tramco's rights or remedies
upon Customer's default, Tramco shall look solely to Customer for payment of all
amounts owing under this Agreement and the performance of all obligations of
Customer under this Agreement. Customer shall hold harmless and defend Tramco
from and against any claims or charges asserted by any third parties claiming an
interest in the Aircraft, or questioning the purchase of the Airframe Services
by Customer from Tramco.
7. Material Supply.
---------------
7.1. Material Procurement. Tramco will provide all Expendables and
--------------------
Consumables which are required to perform the Airframe Services. Parts and
components (other than Expendables and Consumables) identified pursuant to
Section 3.2 of this Agreement as required to complete the Workscope or otherwise
necessary for the performance of any Airframe Services will be provided by
Customer or, upon mutual agreement, by Tramco at the charges specified in
Section 5. Customer and Tramco agree to cooperate in order to facilitate timely
procurement of parts and components. All parts and components to be furnished
by Customer in connection with the Airframe Services shall be provided at Tramco
Airframe no later than seven days prior to commencement of the Airframe Services
on the Aircraft for which such part or component is required. In no event shall
Tramco be liable for any delayed or untimely performance hereunder as a result
of (i) failure by Customer to deliver to Tramco any parts or components (other
than Expendables and Consumables) in a timely manner, or (ii) failure by Tramco
to obtain any parts which Customer has requested Tramco to obtain on its behalf.
7.2. Customer Parts and Equipment. Any parts and material delivered
----------------------------
to Tramco Airframe by or on behalf of Customer in connection with the Airframe
Services shall be handled by Tramco through its normal incoming material
receiving inspection routine. A Customer Designated Maintenance Representative
shall be notified by Tramco of the inspection findings, and shall direct Tramco
as to the disposition of inspected items. Tramco will hold any parts and
material determined by Customer to be scrapped, returned to the vendor or
otherwise disposed of, including any parts or materials removed from Customer
Aircraft (collectively, "Excess Material") at Tramco's facilities for a maximum
period of thirty (30) days, after which time Customer shall be responsible for
the removal, shipping and disposition of such Excess Material. With Tramco's
consent and agreement, Excess Material may remain at Tramco's facilities beyond
such thirty (30) day period upon Customer's payment to Tramco of storage fees in
an
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amount which in Tramco's judgment is sufficient to compensate Tramco for all
costs and expenses related to the storage of such Excess Material. Tramco shall
maintain any parts and materials supplied to Tramco by Customer for use in
connection with the Airframe Services (and any Excess Material for the period
specified above) in a physically separated area within the Tramco facilities,
with appropriate identification of such parts and materials as the property of
Customer. Tramco acknowledges and agrees that title to such parts and materials
supplied by Customer (and any Excess Material) shall at all times remain with
Customer. Risk of loss with respect to the Customer supplied parts and
materials and Excess Materials shall remain with Tramco while such items are
located in the Tramco facility, and shall transfer to Customer at the time
physical possession of such parts or materials are delivered to Customer, or
such parts or materials are physically placed on an Aircraft.
8. Taxes. Tramco shall pay any federal, state or local taxes based upon
-----
Tramco's income or profits in connection with payments received under this
Agreement, including any gross receipts or business and occupation taxes.
Customer shall be responsible for the amount of any Washington State sales or
use taxes that result from the delivery of the Airframe Services provided by
Tramco hereunder or the purchase, sale, lease, exchange, transfer, replenishment
or maintenance of parts and supplies and other personal property for use in
connection with the Airframe Services as contemplated hereby, except for
transactions for which an appropriate tax exemption certificate is furnished to
Tramco by Customer. The amount of any such taxes for which Customer is
responsible, if paid by Tramco, shall be billed to Customer from time to time
during the term hereof.
9. Proprietary Rights. Except as otherwise agreed in writing or as
------------------
specifically provided herein, each of Tramco and Customer shall retain all of
their own proprietary rights of any kind in and to their respective patents,
trademarks, names, information, documents, procedures, methods or know-how that
may be used or disclosed in connection with the performance of the Airframe
Services. Any such items disclosed to the other (including without limitation
the terms of this Agreement and any Airframe Service Orders) shall be held in
confidence and shall not be disclosed or provided to any third-party without the
specific prior written approval of the disclosing party, and neither party shall
reproduce any documents reflecting the same except for copies necessary for its
own internal usage. The foregoing obligations shall not apply to any such
information, documents, procedures, methods or know-how which: (i) at the time
of disclosure or thereafter is or becomes generally available to the public
through no fault or action by the receiving party or by its agents,
representatives or employees, (ii) is or becomes available to the receiving
party on a nonconfidential basis from a source other than the disclosing party
or the disclosing party's employees, agents or representatives, which is not
prohibited from disclosing such portions by a contractual, legal or fiduciary
obligation, or (iii) was within the receiving party's possession prior to its
being furnished to the receiving party by or on behalf of the disclosing party,
provided that the source of such information was not bound by a confidentiality
agreement with the disclosing party in respect thereof, or was not subject to
any duty, contractual or otherwise, prohibiting transmission of information to
the disclosing party.
-8-
<PAGE>
10. Certain Record Keeping and FAR Responsibilities.
-----------------------------------------------
10.1 Tramco. Except as otherwise provided herein, in connection with
------
the Airframe Services provided by Tramco hereunder, Tramco shall comply with all
provisions of the FARs applicable thereto, including, but not limited to, Part
145, and shall maintain all required records and documents pursuant thereto.
Such records and documents shall be available for inspection at all times during
Tramco's normal business hours. In no event shall Tramco be deemed to be an
airline for any purpose whatsoever.
10.2 Customer. Notwithstanding anything to the contrary contained
--------
herein, Customer shall have responsibility for and shall maintain all records,
manuals and otherwise comply with all provisions of the FARs applicable to its
operations, including, but not limited to, Part 121, and shall maintain all
required records and documents pursuant thereto. Without limiting the
generality of the foregoing, Customer shall have sole responsibility for
Customer's compliance with records relating to airworthiness directives, ground
and crew qualifications, maintenance of training records and records relating to
parts histories, and creation and maintenance of FAA required manuals, policies
and procedures. During the Term of this Agreement, Tramco will provide
reasonable storage at Tramco Airframe for records of Customer relating to the
Airframe Services.
11. Independent Contractor. In performing its obligations hereunder,
----------------------
Tramco shall in all respects be an independent contractor and shall not be
deemed an employee, agent, partner or franchisee of Customer. No partnership,
corporation, or other entity or relationship is created by this Agreement.
12. Insurance; Liabilities.
----------------------
12.1 Customer Policies and Limits. Customer shall provide and
----------------------------
maintain in effect during the Term and until the expiration of the final
Warranty Period extended for the Airframe Services the insurance coverages
described on Exhibit 12.1 hereto, with limits no less than those indicated on
Exhibit 12.1.
12.2 Tramco Policies and Limits. Tramco shall provide and maintain
--------------------------
in effect during the Term and until the expiration of the final Warranty Period
extended for the Airframe Services the insurance coverages described on Exhibit
12.2 hereto, with limits no less than those indicated on Exhibit 12.2.
12.3 Requirements/Certificates. Insurance coverages required herein
-------------------------
of either party (other than any self-insured portion) shall be provided through
insurance companies rated A or better by Best's, or insurers of comparable
recognized responsibility. The reference to insurance limits in Exhibits 12.1
and 12.2 shall not in any event limit either party's liability to the other.
Within 10 days of the date of this Agreement, and thereafter at the request of
either party, the other party shall furnish one or more certificates of
insurance indicating:
(a) that insurance of the types described above is provided in
at least the limits set forth above;
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<PAGE>
(b) the name of the insurance company or companies carrying
such coverage;
(c) the effective date and expiration dates of such coverage or
policies; and
(d) that thirty (30) days advance written notice will be given
to the parties of any material change or alteration of the policies or coverage.
12.4 Limitations on Liability. In any action brought by either party
------------------------
seeking to obtain damages for breach of this Agreement or for failure to perform
the requirements of this Agreement, no damages or other relief shall be awarded
or permitted based upon expectations of continued performance or future
performance by the defaulting party for the then remaining Term of this
Agreement, and for purposes of such action this Agreement shall be deemed to
have expired effective as of the date of the claimed breach or failure to
perform, regardless of whether this Agreement has in fact been terminated as of
such date or any subsequent date. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, NEITHER TRAMCO NOR CUSTOMER SHALL BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO,
LOSS OF USE, COVER OR LOST PROFITS SUSTAINED OR INCURRED AS A RESULT OF THE
AIRFRAME SERVICES OR THE WARRANTY PROVIDED FOR IN EXHIBIT 3.5.6 TO THIS
AGREEMENT, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT, STRICT
LIABILITY, OR OTHERWISE, AND REGARDLESS OF WHETHER SUCH DAMAGES WERE
FORESEEABLE.
13. Excused Performance. Neither party will be liable for, or be
-------------------
considered to be in breach of or default under this Agreement on account of any
delay or failure to perform as required by this Agreement (other than with
respect to the obligation to make payments pursuant to Section 6 hereof) as a
result of any cause or condition beyond such party's reasonable control,
including, but not limited to: fire, explosions, earthquakes, storms, flood,
wind, drought and acts of God or the elements; court orders; acts, delays and
failures to act by civil, military or other governmental authority; strikes,
lockouts, labor interruptions or slowdowns, riots, insurrections, sabotage and
war; breakdown or destruction of, or damage or casualty to, any equipment,
facilities or other property; interruption, suspension, curtailment or other
disruption of utilities; unavailability of materials, supplies, parts,
equipment, personnel or other necessary items; and, acts or omissions of persons
or entities other than such party (each such event being herein sometimes
referred to as an event of "Force Majeure"). Upon the occurrence of an event or
condition of Force Majeure, Tramco shall have reasonable opportunity to make
alternative satisfactory arrangements to perform its obligations under this
Agreement.
14. Term; Termination.
-----------------
14.1. Term. The term of this Agreement shall commence effective as
----
of the date first specified above and shall continue in effect for an initial
period ending one year after the date of this Agreement (the "Term"). The Term
shall be extended for additional one year terms unless, not less than thirty
(30) days prior to the expiration of the Term then in effect, either party shall
give
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<PAGE>
written notice to the other of its desire to terminate the Agreement as of the
expiration of the Term.
14.2. Termination. Notwithstanding the provisions of Section 14.1,
-----------
either party may terminate this Agreement as follows:
a. At any time with or without cause prior to the expiration
of the Term by giving at least thirty (30) days prior written notice.
b. To the extent permitted by applicable law, immediately upon
written notice in the event that the other party (i) files a voluntary petition
in bankruptcy; (ii) is declared insolvent or bankrupt or makes a general
assignment or other similar arrangement for the benefit of its creditors; (iii)
proceedings in bankruptcy or insolvency are instituted against the other party
and are not dismissed within 60 days thereafter; (iv) a court takes and retains
for at least 60 days jurisdiction of the other party or its assets under any
reorganization or insolvency act; or (v) a receiver of the other party or a
substantial portion of its assets is appointed by a court and is not discharged
or opposed within 60 days.
c. Immediately upon written notice in the event the other
party dissolves or liquidates.
14.3. Completion of Airframe Services. Notwithstanding the
-------------------------------
expiration or termination of this Agreement, Tramco and Customer agree that,
unless otherwise agreed by Tramco and Customer, Tramco shall continue to perform
and complete any Airframe Services required to be performed under any existing
Airframe Services Orders which have not yet been completed as of the date of
termination.
15. Miscellaneous.
-------------
15.1 Notices. All notices (including by facsimile) or other
-------
communications required or permitted by this Agreement shall be in writing and
shall be deemed to have been duly given upon receipt if delivered in person by
Tramco to a Designated Maintenance Representative or otherwise if delivered by
United States mail, postage prepaid, overnight delivery service, or facsimile,
in each case addressed as follows:
(a) if to Customer:
Frontier Airlines, Inc.
12015 East 46th Avenue
Denver, CO 80239-3116
Attention: Jon Bartram
Fax: (303) 371-7007
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<PAGE>
and
(b) if to Tramco:
c/o Tramco, Inc.
11323 30th Ave. W., Paine Field
Everett, Washington 98204
Attention: General Manager, Airframe Services
Fax: 206/347-1034
with copy to:
BFGoodrich Aerospace
250 N. Cleveland-Massillon Road
Akron, Ohio 44334
Attention: Vice President, Legal
Fax: 330/374-3139
or to such other addresses as may be specified by either party hereto pursuant
to notice given by such party in accordance with the provisions of this Section
15.1.
15.2 Benefit of the Agreement. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties hereto and their respective successors
and their permitted assigns.
15.4 Names, Advertising. Each of the parties agrees that they will
------------------
not, without the prior written consent of the other, make any use whatsoever of,
or cause others to make or assist others in making any use whatsoever, of the
respective corporate or trade names of the other (including the corporate or
trade names of their respective subsidiaries and affiliates) or any portion
thereof, or any of their respective trademarks, or any portion thereof, in
connection with any advertising, promotion, publicity or for any other business
purpose that is not directly related to the performance of their respective
obligations hereunder.
15.5 Headings. The headings used in this Agreement are for
--------
convenience only, shall not be deemed to constitute a part hereof, and shall not
be deemed to limit, characterize or in any way affect the provisions of this
Agreement.
15.6 Entire Agreement. This Agreement contains the entire agreement
----------------
and understanding of the parties with respect to the subject matter hereof, and
no other representations, promises, agreements or understandings regarding the
subject matter hereof shall be of any force or effect unless in writing,
executed by the parties hereto subsequent to the date hereof.
15.7 Amendments. This Agreement shall not be modified or amended
----------
except by written instrument specifically referencing this Agreement which is
signed by the parties hereto. The terms and conditions of this Agreement shall
not be altered or changed by, and Tramco hereby objects to, any different or
additional terms contained in any other document (other than an
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<PAGE>
amendment as provided above), including, without limitation, any invoices,
purchase orders or acknowledgment forms submitted by Customer to Tramco.
15.8 Waiver. No waiver of any provision of this Agreement shall be
------
valid or binding unless it is in writing dated subsequent to the date hereof and
signed by the parties hereto. No waiver of any breach, term or condition of
this Agreement by either party shall constitute a subsequent waiver of the same
or any other breach, term or condition. No failure or delay of either party in
exercising any right under this Agreement shall operate as a waiver thereof, nor
shall any partial exercise by either party of any right under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right.
15.9 Assignment. This Agreement may not be assigned by either party
----------
in whole or in part (including for purposes of this Section 15.9 any transfer by
merger, reorganization, sale of a majority of the voting capital stock, or other
transfer by operation of law) without the prior written consent of the other
party. Consent to such assignment in one instance shall not constitute consent
to any other assignment. No assignment shall relieve the assignee from its
obligations under this Agreement. Any assignment or attempted assignment in
violation of the terms of this Section 15.9 shall be void. Notwithstanding the
provisions of this Section 15.9, Tramco may assign this Agreement to The
B.F.Goodrich Company, or to any direct or indirect subsidiary or other affiliate
of Tramco or The B.F.Goodrich Company without the consent of Customer.
15.10 Separable Provisions. If any provision of this Agreement shall
--------------------
be held invalid or unenforceable, the remainder nevertheless shall remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it nevertheless shall remain in full force
and effect in all other circumstances.
15.11 Mandatory Disclosure; Securities Laws Compliance. (a) Customer
agrees that without the prior written consent of Tramco, Customer will not
disclose or provide copies of this Agreement or any Airframe Services Orders to
any third party or entity, including any court or other governmental agency or
body. In the event that Customer receives notification of a legal requirement to
disclose, or becomes legally compelled to disclose, a copy of or the terms of
this Agreement or any Airframe Services Orders or any proprietary information
subject to the provisions of Section 9 of this Agreement (collectively, the
"Information"), whether by deposition, interrogatory, request for documents by a
court or any governmental agency or body, subpoena, or other process or
requirement, whether legal, administrative or otherwise, Customer will provide
Tramco with prompt advance written notice (which shall not be less than five
business days in advance of the time for any such mandatory disclosure) so that
Tramco may seek a protective order, confidential treatment, waiver or other
appropriate protective relief with respect to all or part of such request or
requirement, or waive compliance with the provisions of this Agreement with
respect to all or part of such request or requirement. In the event that such
protective order, confidential treatment, waiver or other remedy is not obtained
prior to the deadline for complying with such request or requirement, and upon
advice of counsel Customer reasonably believes that it is legally compelled to
disclose Information, then Customer may disclose only that portion of the
Information which it is advised in writing by counsel that it is legally
compelled to disclose. Customer will use its best efforts to assist Tramco and
in no event will oppose any action by
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<PAGE>
Tramco to obtain appropriate confidential treatment or protective relief as
contemplated by this Section 15.11
(b) Tramco acknowledges and agrees that Customer may be
required by applicable securities laws to issue a press release and to file this
Agreement with the Securities and Exchange Commission ("SEC"). Customer agrees
that it will provide Tramco with an advance copy of any press release and that
release of such press release or other public communication concerning the
arrangements contemplated hereby will be subject to the reasonable advance
consent of Tramco and will not, in any event disclose any specific pricing,
labor rates or other detailed business terms in such press release. Customer
acknowledges that the public disclosure of the commercial terms of this
Agreement is likely to cause substantial competitive harm to Tramco. Therefore,
Customer agrees to cooperate with Tramco to use all reasonable efforts to obtain
confidential treatment by the SEC of any portions of this Agreement and any
Airframe Services Orders which may be commercially sensitive.
15.12 Counterparts. This Agreement may be executed simultaneously in
-------------
two or more counterparts, including signature by facsimile, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
15.13 Interpretation. This Agreement shall be governed by and
---------------
construed in accordance with the laws of the State of Washington, without
reference to any conflict of laws principles. The language of this Agreement is
and will be deemed to be the language chosen by the parties jointly to express
their mutual understanding. No rule of construction based on which party
drafted the agreement or certain of its provisions will be applied against
either party.
15.14 Authorization. Each of the parties hereby represents and
-------------
warrants to the other that the execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly authorized by
all necessary corporate action, and this Agreement, when duly authorized,
executed and delivered by the other party, will be a valid and binding
obligation of each party, respectively.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TRAMCO, INC. FRONTIER AIRLINES, INC.
By: By: /s/ Jon Bartram
-------------------------------- ---------------------------------
Its Its Vice President-Maintenance
-------------------------------- ---------------------------------
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<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit 1 DEFINITIONS
Exhibit 4 FORM OF AIRFRAME SERVICES ORDER
Exhibit 5.5.5 WARRANTY
Exhibit 12.1 CUSTOMER--REQUIRED INSURANCE COVERAGES AND LIMITS
Exhibit 12.2 TRAMCO--REQUIRED INSURANCE COVERAGES AND LIMITS
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<PAGE>
Exhibit 1
DEFINITIONS
"Additional Work" means any modification work or airframe maintenance services
---------------
not included in the Workscope. Additional Work shall include Buyer Request
Items and Non-Routine Maintenance.
"Aircraft" means Customer's aircraft on which the Airframe Services are to be
--------
performed by Tramco, as further identified in the Airframe Services Order.
"Airframe Services" means Modification Work and Heavy Maintenance.
-----------------
"Airframe Services Order" means the order for Airframe Services entered into
-----------------------
between Tramco and Customer pursuant to Section 4.
"Base Maintenance" means minor maintenance, repair, and inspection activities,
----------------
and record keeping related thereto, on Aircraft at Customer base locations,
including but not limited to "A" checks, "B" checks, service checks, and routine
and non-routine overnight maintenance requirements, including log-book
discrepancies.
"Buyer Request Items" shall mean changes or additions to engineering orders,
-------------------
specifications, or other items of work requested in writing or orally by a
Designated Maintenance Representative, although not specifically required by the
terms of the Workscope.
"Designated Maintenance Representative(s)" shall mean any one or more
----------------------------------------
representatives of Customer designated pursuant to Section 5.5.4 of this
Agreement.
"Discrepancy" shall mean a determination by Tramco of the existence of any
-----------
condition with respect to an Aircraft, or the Airframe Services which varies
from the applicable requirements or standards set forth in the maintenance
program, FAA requirements, or the Technical Data, whether or not this condition
could eventually result in failure of the component or of the Aircraft.
"Estimated Labor Hours" means the number of labor hours estimated pursuant to
---------------------
Section 5.1 with respect to any Airframe Services.
"Expendables and Consumables" means those parts and supplies which are used,
---------------------------
consumed or expended in connection with Airframe Services performed by Tramco
hereunder and which have a unit acquisition cost to Tramco per item less than
$1.00, but excluding any paint and any parts or items special ordered by Tramco
for use on the Aircraft.
"FAA" means the U.S. Federal Aviation Administration or any federal agency or
---
administrative body that assumes its functions or is the successor thereto.
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<PAGE>
"FAR" or "FARs" means any of those certain regulations promulgated by the FAA,
--- ----
including, without limitation, those set forth in Title 14 of the Code of
Federal Regulations, as from time to time in effect.
"Force Majeure" shall mean an event or condition contemplated by Section 11.
-------------
"Heavy Maintenance" means the airframe heavy maintenance to Aircraft as
-----------------
specified in the applicable Airframe Services Order, but excluding Line
---------
Maintenance, Base Maintenance, or any overhaul services with respect to aircraft
engines or any services not permitted by Tramco's FAA Section 145 certificate.
"Labor Rate" shall have the meaning set forth in Section 5.3.
----------
"Line Maintenance" means minor maintenance, repair, and inspection activities,
----------------
and record keeping related thereto, on Aircraft at all remote stations that
Customer services, including, but not limited to, checking fluid levels,
interface with flight crew, visual airframe and systems inspections, and
replacement of minor components.
"Modification Work" means modifications of the interior of Aircraft as specified
-----------------
in the applicable Airframe Services Order.
"Non-Routine Maintenance" means identified corrective work discovered during the
-----------------------
performance of Routine Maintenance or Buyer Request Items or resulting from
findings by Tramco of Discrepancies during the performance of Routine
Maintenance or Buyer Request Items.
"Routine Maintenance" shall mean those items of inspection or work specifically
-------------------
called out in the Workscope.
"Term" means the term of this Agreement as provided in Section 14.
----
"Time and Materials Basis" means: (i) with respect to labor, Tramco will charge
------------------------
the Labor Rate multiplied by the actual number of labor hours performed in
connection with the identified services or statement of work; and (ii) except as
otherwise provided herein, with respect to parts and materials and other direct
charges, Tramco will charge the amounts specified in Section 5.2.
"Tramco Airframe" means the facility of Tramco located in Everett, Washington,
---------------
which performs the Airframe Services and presently operated by Tramco.
"Workscope" means the workscope identifying the services to be performed by
---------
Tramco as part of any Modification Work or Heavy Maintenance, as attached to the
applicable Airframe Services Order.
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<PAGE>
Exhibit 4
Airframe Services Order
under Tramco-Vanguard Agreement dated
, 1996
-----------
<TABLE>
<S> <C>
Aircraft No.
-------------
Workscope: Attached as Exhibit A hereto. The Workscope shall
control over any conflict or inconsistency between the
general descriptions of the Airframe Services
included in this Exhibit 4.
Labor Pricing
Modification Work Fixed Price
(Fixed charge for all labor for
Modification Work identified in the Workscope) $
------------------
Heavy Maintenance Fixed Price
(Fixed charge for all labor for
Heavy Maintenance identified in the Workscope) $
------------------
Labor Rate (applicable to any
Additional Work)
------------------
Material Charges Expendables and Consumables shall be charged at a
fixed rate equal to % of the labor charges
--------
invoiced to Customer as part of all Airframe Services
Estimated date of Aircraft delivery to Tramco
------------------
Estimated duration of Workscope days
------------
Other
------------------
------------------
</TABLE>
This Airframe Services Order is issued and agreed pursuant to that certain
Services Agreement between Tramco, Inc. and Vanguard dated , 1996.
----------
The terms of this Airframe Services Order shall apply only to the Aircraft
described in this Airframe Services Order and the terms of this Airframe
Services Order shall control in the event they conflict with any terms contained
in the Services Agreement. Capitalized terms used herein shall have the same
meanings given in the Services Agreement. The terms of this Airframe Services
Order shall not affect any other Airframe Services performed or to be performed
for Vanguard.
Executed this day of , 199 .
--- --------- --
TRAMCO, INC. VANGUARD AIRLINES, INC.
By By
-------------------------------- ---------------------------------
Name Name
------------------------------ -------------------------------
Title Title
----------------------------- -----------------------------
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<PAGE>
Exhibit 5.5.5
AIRFRAME SERVICES WARRANTY
1 Warranty. Subject to the other provisions contained in this Warranty,
--------
Tramco warrants to Customer that the Airframe Services provided hereunder will
be free from defects in workmanship introduced during Tramco's servicing
thereof. The foregoing warranty shall not apply to any parts, material or third
party services incorporated in such Airframe Services and Tramco makes no
warranty, express or implied, with respect to such parts, material or services.
Tramco workmanship shall not be deemed defective if such workmanship was in
compliance with applicable manufacturer's operating and maintenance instructions
or procedures or applicable governmental regulations for such service in effect
at the time of such service.
2 Warranty Period and Notice.
--------------------------
a. Warranty Period. The warranty set forth in paragraph 1 of this
---------------
Warranty extends for a period of (i) 12 months from the date the serviced
Aircraft is delivered to Customer, or (ii) 1200 flying hours subsequent to the
date the serviced Aircraft is delivered to Customer, whichever is the first to
occur (the "Warranty Period"). In the event that Tramco repairs or re-services
an item under this Warranty, the warranty provided hereunder shall extend to
such repair or re-serviced item for the remainder of the original Warranty
Period applicable to the item and no new Warranty Period shall be established
therefor.
b. Notice. Customer's remedy and Tramco's obligation and liability
------
under this Warranty with respect to each defect, are conditioned upon Customer
providing written notice to Tramco of its warranty claim at the earlier of (i)
-------
the date which is thirty days after the defect is discovered by Customer; or
(ii) the expiration of the Warranty Period.
3 Return and Statement. Customer's remedy and Tramco's obligation and
--------------------
liability under this Warranty with respect to each defect, are also subject to
the following conditions.
a. Return. Customer returns the serviced Aircraft or any part,
------
accessory or component thereof which is subject to a warranty claim hereunder at
its cost, transportation charges prepaid, as soon as reasonably practical to the
Tramco servicing facility or another location as may be mutually agreed between
the parties. In the event that a Warranty Claim is accepted by Tramco in
accordance with the terms hereof, Tramco will reimburse Customer for aircraft
ferry costs at a rate of $3,000 per flight hour, but not to exceed the maximum
total amount of $6,000. The foregoing reimbursement shall only apply if
warranty service requires that the Aircraft be returned to the Tramco servicing
facility and only if the return for warranty service causes an unscheduled
routing of the Aircraft.
b. Statement. Customer provides a written statement to Tramco
---------
describing the nature of the claimed defect.
4. Parts and Material. To the extent assignable, Tramco shall assign to
------------------
Customer any warranties received by Tramco with respect to parts and material
transferred to Customer by Tramco or incorporated by Tramco into the Airframe
Services. Customer shall have sole responsibility for processing and pursuing
any applicable warranty claims against manufacturers and vendors of any such
parts or material.
5 Disclaimer. THE WARRANTY SET FORTH IN THIS WARRANTY AND THE OBLIGATIONS
----------
AND LIABILITIES OF TRAMCO HEREUNDER, ARE IN LIEU OF, AND CUSTOMER HEREBY WAIVES
AND RELEASES ALL OTHER WARRANTIES OR
-19-
<PAGE>
GUARANTEES, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES PROVIDED.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, TRAMCO SHALL NOT BE LIABLE FOR
AND CUSTOMER HEREBY WAIVES AND RELEASES ANY AND ALL CLAIMS WITH RESPECT TO ANY
(A) IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; (B)
IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE
OF TRADE; (C) CLAIM IN TORT, WHETHER OR NOT ARISING IN WHOLE OR IN PART FROM
TRAMCO'S FAULT, NEGLIGENCE, STRICT LIABILITY OR PRODUCT LIABILITY; OR (D) CLAIM
FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, CONSEQUENTIAL DAMAGES, COVER OR
ANY LOSS OF PROFIT, REVENUE OR USE.
TRAMCO'S LIABILITY AND CUSTOMER'S SOLE REMEDY HEREUNDER WITH RESPECT TO SERVICES
PROVIDED HEREUNDER, INCLUDING BREACH OF THE WARRANTY SET FORTH HEREIN, WHETHER
IN TORT, CONTRACT OR OTHERWISE, SHALL BE LIMITED TO, AT TRAMCO'S OPTION,
TRAMCO'S REPAIR OR RE-SERVICE OF THE ITEM OR TASK AND IN NO EVENT SHALL TRAMCO'S
LIABILITY HEREUNDER EXCEED THE COMPENSATION PAID BY CUSTOMER TO TRAMCO FOR THE
SPECIFIC SERVICE PERFORMED. IN THE EVENT THAT THIS DISCLAIMER OR ANY PORTION
HEREOF SHALL BE HELD TO BE INVALID OR UNENFORCEABLE, THE REMAINING PROVISIONS
SHALL REMAIN IN FULL FORCE AND EFFECT.
-20-
<PAGE>
Exhibit 12.1
Customer Insurance Coverages and Limits
---------------------------------------
<TABLE>
<CAPTION>
Coverage Limits
-------- ------
<S> <C>
Aircraft Operations/Aviation Liability $200 million (provided that no more than $20
million of such amount is self-insured)
Commercial General Liability $2 million per occurrence
Automobile Insurance $2 million per occurrence
Workers Compensation Statutory Requirement in each jurisdiction
where employees are located
</TABLE>
-21-
<PAGE>
Exhibit 12.2
Tramco Insurance Coverages and Limits
-------------------------------------
<TABLE>
<CAPTION>
Coverage Limits
-------- ------
<S> <C>
Aircraft Products Liability $200 million (provided that no more than $20
million of such amount is self-insured)
Hangarkeeper's Liability $200 million
Commercial General Liability $2 million per occurrence
Automobile Insurance $2 million per occurrence
Workers Compensation Statutory Requirement in each jurisdiction
where employees are located
</TABLE>
-22-
<PAGE>
EXHIBIT 10.24
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED WITH
"*" AND SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC.
GENERAL TERMS ENGINE LEASE AGREEMENT
BETWEEN
TERANDON LEASING CORPORATION, as Lessor
AND
FRONTIER AIRLINES, INC., as Lessee
<PAGE>
TABLE OF CONTENTS
SECTION TITLE
<TABLE>
<CAPTION>
<S> <C> <C>
1 TERM OF THIS GTA.................................... 1
2. INDIVIDUAL ENGINE LEASES; TERM...................... 1
3. DELIVERY, INSPECTION AND ACCEPTANCE................. 2
4. CHARGES AND PAYMENT................................. 3
5. COMPLIANCE WITH LAWS................................ 4
6. USE AND MAINTENANCE................................. 4
7. RECORDS............................................. 5
8. MODIFICATION........................................ 6
9. RISK OF LOSS........................................ 6
10. NO ABATEMENT OR SET OFF............................. 7
11. RELEASE AND INDEMNITY............................... 7
12. WARRANTY; DISCLAIMER................................ 7
13. INSPECTION.......................................... 8
14. INSURANCE........................................... 8
15. TITLE TO EQUIPMENT..................................10
16. TAXES...............................................10
17. SUBLEASES; ASSIGNMENT...............................11
18. RETURN OF EQUIPMENT.................................11
19. EVENTS OF DEFAULT; REMEDIES.........................13
20. LESSOR'S LENDER.....................................17
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
21. NOTICES.............................................19
22. RECORDING...........................................20
23. BROKERS/FINDERS.....................................20
24. MISCELLANEOUS.......................................20
25. APPLICABLE LAW......................................21
26. JURISDICTION AND VENUE..............................21
27. QUIET ENJOYMENT.....................................21
28. FINANCIAL STATEMENTS................................22
</TABLE>
EXHIBITS
EXHIBIT A -- AIRCRAFT ENGINE LEASE AGREEMENT
EXHIBIT B -- EQUIPMENT DELIVERY RECEIPT
<PAGE>
GENERAL TERMS ENGINE LEASE AGREEMENT
BETWEEN
TERANDON LEASING CORPORATION
AND
FRONTIER AIRLINES, INC.
CONTRACT NUMBER 01
This General Terms Engine Lease Agreement ("GTA") is dated as of August 15,
1996, by and between TERANDON LEASING CORPORATION ("Lessor") with offices
at 180 Harbor Drive, Suite 200, Sausalito, CA 94965 and FRONTIER AIRLINES,
INC. ("Lessee") with offices at 12015 East 46th Avenue, Denver, CO 80239.
In consideration of the premises and mutual promises herein contained, Lessor
and Lessee hereby agree as follows:
1. Term of this GTA
The term of this GTA will commence on the date hereof and will continue
thereafter until canceled by either Lessor or Lessee.
2. Individual Engine Leases; Term
(a) Lessor will lease aircraft engines to Lessee and Lessee will lease
aircraft engines from Lessor from time to time to the extent such engines are
desired by Lessee and are available from Lessor, all upon the terms and
conditions hereof. Such individual engine leases will be initiated by the
execution by Lessee and Lessor of an Aircraft Engine Lease Agreement ("Lease")
substantially in the form of Exhibit A. Each Lease will be for a single engine
described by serial number in such Lease, together with all parts and
attachments thereto ("Engine"), all Engine records in the possession of Lessor
which are requested by Lessee, all Engine records generated by Lessee during the
Lease Term, any QEC unit and any engine stand ("Engine Stand") or other items
related to the Engine (the Engine, such Engine records, QEC unit, Engine Stand
and related items, collectively, the "Equipment"). Each Lease will constitute a
separate lease of the Equipment and will be deemed to incorporate therein all
the terms and conditions of this GTA. Notwithstanding cancellation of this GTA
by either Lessor or Lessee during the term of any Lease, this GTA will remain in
full force and effect as to such Lease.
(b) The term of each Lease will be the period specified in such Lease
("Lease Term"); provided, however, that notwithstanding the expiration of the
-------- -------
Lease Term, all obligations of
<PAGE>
Lessee under the Lease shall continue until the Equipment is returned to Lessor
in the condition required by Section 18 hereof.
(c) Lessee will redeliver the Equipment to Lessor upon the expiration or
earlier termination of the Lease pertaining to such Equipment.
3. Delivery, Inspection and Acceptance
(a) Lessor will deliver the Equipment to Lessee on the Delivery Date and at
the FOB location specified in the applicable Lease. On the Delivery Date, the
Engine will have a Federal Aviation Administration ("FAA") approved return to
service maintenance release tag affixed to it.
(b) On the Delivery Date, Lessee will deliver to Lessor a receipt for the
Equipment substantially in the form of Exhibit B, duly executed by an authorized
representative of Lessee.
(c) Lessor's obligation to deliver any Equipment pursuant to any Lease is
subject to the following conditions precedent:
(i) Receipt by Lessor of the Transaction Fee required by Section
4(b)(i) and the payments required by Section 4(b) (ii) and (iii)
below attributable to Monthly Rent and by Marine Midland Bank
("Lessor's Lender") of the payment required pursuant to Section
4(b)(iv) attributable to the Use Fee;
(ii) Receipt by Lessor's Lender of an Assignment of Lease and Lessee's
Acknowledgment of and Consent to Assignment of Lease, in form and
substance acceptable to Lessor's Lender, executed by Lessee;
(iii) Receipt by Lessor and Lessor's Lender of a legal opinion from
counsel to Lessee in form and substance acceptable to Lessor and
Lessor's Lender;
(iv) Receipt by Lessor and Lessor's Lender of the insurance
certificates required by Section 14(h) below;
(v) Receipt by Lessor and Lessor's Lender of such other documentation
as may be required by Lessor and Lessor's Lender, including but
not limited to, (i) Certified Copy of Resolutions authorizing
Lessee's execution and delivery of this GTA, the Lease and related
documentation and (ii) a Certificate of Incumbency identifying
affairs of the Lessee authorized to enter into the GTA, the Lease
and related documentation on behalf of the Lessee
All documentation required hereunder shall be satisfactory to Lessor and
Lessor's Lender and their respective counsel.
2
<PAGE>
4. Charges and Payment
(a) Lessee will pay to Lessor:
(i) The one-time Transaction Fee specified in each Lease; and
(ii) The Monthly Rent specified in each Lease for each day or
fraction thereof during the term of each such Lease, commencing
with the Delivery Date specified in each such Lease and
continuing until the return of the Equipment in accordance with
the terms of this GTA and each such Lease; and
(iii) The Use Fee specified in each Lease for each hour of Engine
operation or fraction thereof, or each cycle of operation (or
cycle of accumulation in the case of JT8D-200 series engines),
whichever is greater during each successive calendar month of
each Lease Term; and
(iv) The Security Deposit specified in the Lease.
(b) On the Delivery Date, Lessee will make a payment (A) to Lessor
consisting of (i) the Transaction Fee, (ii) the Monthly Rent for the first full
calendar month of the Lease Term and (iii) the pro rated amount of the Monthly
Rent for the period from the Delivery Date to the last day of the calendar month
in which the Delivery Date occurs and will pay (B) to Lessor's Lender for the
account of Lessor (i) the Use Fee for the first thirty (30) days of each Lease
(based on the estimated Daily Flight Hours stated in each such Lease), and (ii)
the Security Deposit.
(c) Thereafter, Lessee will pay Lessor in advance (i) on the first day of
each succeeding calendar month of the Lease Term, the Monthly Rent for such
succeeding month, and will pay Lessor's Lender for the account of Lessor (ii) on
the tenth day of each succeeding calendar month, the Use Fee based on the actual
hours and cycles of operation in such preceding month (or in the case of the
first such month, since the Delivery Date).
(d) During the Lease Term for each Lease, commencing on the first calendar
month in which payment of the Use Fee is due pursuant to (c) (ii) above, Lessee
shall submit to Lessor, in writing, no later than the fifth day of each calendar
month and on the last day of the Lease Term or other termination day, a
statement of the actual hours and cycles of operation
3
<PAGE>
in the prior month (or, in the case of the first such month, since the Delivery
Date, and in the case of the last day of the Lease Term or other termination
day, since the beginning of such final month).
(e) The amount of the payment set forth in subsection (b)(ii) hereof for
each Lease paid in respect of Monthly Rent shall be credited to the account of
Lessee in respect of the payment due in respect of Monthly Rent for the first
full calendar month of the Lease Term. The amount of the payment set forth in
subsection (b)(ii) hereof for each Lease paid in respect of the Use Fee shall be
credited to the account of Lessee in respect of Use Fees payments due for the
last thirty (30) days of the Lease Term.
(f) All payments shall be made by wire transfer of immediately available
funds in U.S. dollars to the account of Lessor or Lessor's Lender as provided in
Section 20 hereof. In respect of any payment not made when due, Lessee shall pay
to Lessor or Lessor's Lender, as the case may be, an amount equal to interest on
such payment at the rate of 18% per annum computed from the due date of such
payment to the actual date such payment is made.
(g) Any payment due on a day which is not a business day in San Francisco,
California shall be due on the next preceding business day.
(h) Except for the right to use of Use Fees as expressly provided in
Section 6(c) below, Lessee shall have no interest in or rights with respect to
Engine Reserves or Use Fees. In the event an Event of Default hereunder occurs
and is continuing, Lessor and/or Lessor's Lender shall have the right to apply
an Engine Reserves or Use Fees to discharge the obligations of Lessee hereunder.
Upon termination of the Lease Term or earlier termination of any Lease the
unapplied Engine Reserves and Use Fees shall be the property of Lessor free and
clear of any interest of the Lessee. Lessee shall not be entitled to any
interest on accumulated Engine Reserves or Use Fees.
5. Compliance with Laws
Lessee will comply in all respects with all laws, ordinances, rules,
regulations and orders of all governmental authorities applicable to the
installation, operation and maintenance of all Equipment.
6. Use and Maintenance
(a) Lessee will use each Engine in a safe manner and in accordance with
the manufacturer's recommended operating procedures and manuals and instructions
in effect from time to time only on commercial transport aircraft owned or
operated by Lessee. Lessee agrees not to operate or locate the Equipment or
permit the Equipment to be operated or located in any area excluded from
insurance coverages required to be maintained pursuant to Section 14 hereof.
Lessee further agrees that each engine shall not be used outside the territorial
limits of the United States without prior consent of Lessor and Lessor's Lender.
4
<PAGE>
(b) During the Lease Term, Lessee will service, repair, overhaul, and
maintain the Engine, subject to subsection (c) below at its sole expense, in
accordance with the Lessee's FAA approved part 121 maintenance program, so as to
keep the Engine in as good operating condition as when delivered to Lessee,
reasonable wear and tear excepted. Such maintenance will include all major shop
visit work as well as line maintenance and replacement of components and parts
as may be required. In addition, Lessee will replace any loss to or repair any
damage to the Engine, regardless of cause. Lessee will advise Lessor and obtain
Lessor's approval before commencing any non-routine repairs, such approval not
to be unreasonably delayed or denied.
(c) Lessee shall be entitled to the use of accumulated Use Fees ("Engine
Reserves") to the extent adequate to cover off wing major shop visit work
required due to normal Exhaust Gas Temperature ("EGT") margin deterioration, and
the replacement or restoration of parts necessary for the engine to meet
manufacturers specification and limitations for reinstallation on an aircraft,
provided Lessee first presents maintenance facility invoices or a workscope
satisfactory to Lessor evidencing the work completed or intended for such
maintenance or repair. Lessee shall have the right to apply Engine Reserves only
if no Event of Default has occurred and is continuing. In the event that Engine
Reserves are not sufficient to pay for such maintenance and repair, Lessee shall
pay any deficiency. The obligations, covenants and liabilities of Lessee under
this provision arising prior to return of the Equipment to Lessor shall continue
in full force and effect notwithstanding any termination arising out of an Event
of Default under any Lease or otherwise, until such time as Lessor has received
all sums and performances to which it is entitled under any Lease.
(d) Lessee will ensure that all replacement parts will be (i) free and
clear of liens, (ii) of the most recent modification status, and (iii) of equal
or better time status and value than the parts replaced, assuming the parts
replaced were in the condition required by this GTA; and upon installation on
the Engine, title to such replacement parts shall immediately vest in Lessor.
All such replacement parts must be of the same manufacturer and model number as
the replaced parts (unless otherwise approved in writing by Lessor or unless
such parts are FAA approved substitutes) and must have been last serviced by an
FAA approved repair facility.
(e) If any modification or repair to any Equipment is required to be made
during the Lease Term by reason of any law, Airworthiness Directive, regulation
or advisory circular promulgated by the FAA or Alert Service Bulletin issued by
the manufacturer of the Engine ("Mandatory Change"), Lessee shall make such
Mandatory Change at Lessee's expense. There shall be no abatement of Monthly
Rent for any out-of-service period required to perform any Mandatory Change.
7. Records
(a) Lessor will deliver to Lessee on the Delivery Date for any Engine all
records for such Engine requested in writing by Lessee reasonably in advance of
such Delivery Date which are in the possession of Lessor.
(b) Lessee will maintain and provide to Lessor complete and accurate
records in English for each Engine. All such records will be deemed Equipment as
of the time generated.
5
<PAGE>
Lessee will report hours and cycles of operation and location of operation of
each Engine to Lessor prior to the fifth day of each calendar month during the
Lease Term of each Lease.
(c) Upon redelivery of the Engine to Lessor, Lessee will return all Engine
records delivered to Lessee by Lessor, together with all Engine records
generated by Lessee.
(d) With respect to any part installed by Lessee during a Lease and not
removed prior to the return of an Engine, the records returned to Lessor will
include:
(i) Manufacturer, part number, description and serial number (if part
is serialized); and
(ii) Historical records, including but not limited to (A)
serviceability status of the part at installation, (B) for a
time-controlled part, total time and cycles, time and cycles
since overhaul as may be applicable and total time and cycles of
the Engine at the time of part installation and (C) for a life-
limited part, documentation tracing usage of the part since new.
8. Modification
Lessee will not make any modifications or alterations to any Equipment,
except for any Mandatory Change, without Lessor's prior written consent.
9. Risk of Loss
Lessee shall bear the entire risk of loss of any Equipment from any and
every cause whatsoever whether or not insured. In the event of actual or
constructive total loss or destruction of any Equipment or damage thereto beyond
economic repair during the Lease Term of a Lease, or the loss of possession of
any Equipment for more than thirty (30) days for any reason, including but not
limited to seizure, requisition, theft, disappearance or otherwise, Lessee will
immediately notify Lessor thereof. In the event of such loss, damage or loss of
possession, or if Lessee fails to redeliver any Equipment in accordance with the
terms hereof, Lessee will pay Lessor upon demand the Agreed Value of such
Equipment as specified in the Lease in full discharge and satisfaction of
Lessee's liability for such loss or destruction, together with all other
payments owing under the Lease through such date, and the Lease will terminate
upon payment of such amount. Upon compliance by Lessee with the terms hereof,
and provided no Event of Default shall have occurred and then be continuing,
Lessor shall pay to Lessee any insurance proceeds theretofore or thereafter
received by Lessor in respect of such Equipment.
10. No Abatement or Set Off
Each Lease is a net lease. Lessee's obligation to pay all charges provided
for herein is absolute and unconditional, and Lessee will not be entitled to any
abatement, reduction of or set
6
<PAGE>
off against rents or other payments due Lessor under any circumstances or for
any reason whatsoever.
11. Release and Indemnity
(a) LESSEE HEREBY RELEASES AND AGREES TO INDEMNIFY, DEFEND AND HOLD
LESSOR, LESSOR'S LENDER AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, DEMANDS,
SUITS, DAMAGES AND LOSSES (INCLUDING WITHOUT LIMITATION ALL REASONABLE
ATTORNEY'S FEES, COSTS AND EXPENSES IN CONNECTION THEREWITH OR INCIDENT
THERETO), FOR DEATHS OF OR INJURIES TO ANY PERSONS WHOMSOEVER (INCLUDING WITHOUT
LIMITATION LESSEE'S EMPLOYEES), AND FOR LOSS OF OR DAMAGE TO OR DELAY IN THE
DELIVERY OF ANY PROPERTY WHATSOEVER (INCLUDING WITHOUT LIMITATION ANY AIRCRAFT
ON WHICH ANY ENGINE MAY BE INSTALLED AND LOSS OF USE THEREOF), IN ANY MANNER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE DELIVERY, OWNERSHIP (INCLUDING
WARRANTY, PRODUCT LIABILITY AND STRICT LIABILITY IN TORT BY VIRTUE OF OWNERSHIP)
LEASING, STORAGE, TRANSPORTING, INSTALLATION, OPERATION, MAINTENANCE OR USE OF
ANY EQUIPMENT WHILE UNDER LEASE, OR THE ATTACHMENT OR DETACHMENT OF ANY
EQUIPMENT IN CONNECTION WITH THE DELIVERY OR REDELIVERY OF ANY SUCH EQUIPMENT
HEREUNDER, REGARDLESS OF NEGLIGENCE, ACTIVE, PASSIVE OR ANY OTHER TYPE, OF
LESSOR, LESSOR'S LENDER AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES OR
AGENTS; PROVIDED THE FOREGOING INDEMNIFICATION WILL NOT APPLY TO ANY CLAIM OR
LIABILITY RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LESSOR,
LESSOR'S LENDER AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS.
(b) IN NO EVENT WILL LESSOR BE LIABLE FOR ANY REASON FOR SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SUCH AS LOST REVENUES, LOST PROFITS OR LOSS
OF PROSPECTIVE ECONOMIC ADVANTAGE, RESULTING FROM ANY PERFORMANCE OR FAILURE TO
PERFORM UNDER THIS AGREEMENT.
12. Warranty; Disclaimer
(a) Lessor warrants it will have good title to the Equipment at the time
of delivery to Lessee and that Lessor has the right to lease such Equipment.
(b) The Equipment is leased and accepted by Lessee in "AS IS" condition
and with all faults. Lessor makes no warranties whatsoever with respect to any
Equipment, express or implied, except the warranties appearing in Section 12(a)
above.
(c) THE WARRANTIES SET FORTH IN THIS SECTION 12 AND THE OBLIGATIONS AND
LIABILITIES OF LESSOR THEREUNDER, ARE EXPRESSLY IN
7
<PAGE>
LIEU OF, AND LESSEE HEREBY WAIVES AND RELEASES LESSOR FROM, ANY AND ALL OTHER
WARRANTIES, AGREEMENTS, GUARANTEES, CONDITIONS, DUTIES, OBLIGATIONS, REMEDIES OR
LIABILITIES, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY AND FITNESS FOR INTENDED USE, WITH
RESPECT TO ANY EQUIPMENT LEASED HEREUNDER OR LESSOR'S PERFORMANCE HEREUNDER. NO
AGREEMENT OR UNDERSTANDING VARYING, ALTERING OR EXTENDING LESSOR'S LIABILITY
WILL BE BINDING ON LESSOR UNLESS IN WRITING AND SIGNED BY LESSEE'S AND LESSOR'S
DULY AUTHORIZED OFFICER OR REPRESENTATIVE.
(d) Provided Lessee is not in default under the Lease, Lessor hereby
assigns to Lessee, for the duration of the Lease Term, any and all assignable
warranties of manufacturers, maintenance facilities and overhaul agencies, of
and for the Equipment, as such warranties may be extended from time to time.
During the Lease Term Lessee shall, at Lessee's expense, take reasonable steps
to enforce the rights arising under any warranties of manufacturers, maintenance
facilities and overhaul agencies applicable to the Equipment and assigned to
Lessor.
13. Inspection
During the Lease Term, Lessee will permit any person designated by Lessor,
or Lessor's Lender, in writing to visit and inspect the Equipment, work
performed on the Equipment by Lessee, and the records maintained in connection
therewith, and to make copies of such records all at such reasonable times and
as often as Lessor or Lessor's Lender may reasonably request, provided that such
inspection does not unreasonably disrupt or interfere with the Lessee's day to
day operation of the Equipment.
14. Insurance
(a) Lessee will procure from a third party rated a Best A insurer and
maintain in full force and effect at all times during the term of each Lease
policies of insurance of the type and in the minimum amounts stated below and
with companies acceptable to Lessor and Lessor's Lender and under terms
reasonably satisfactory to Lessor and Lessor's Lender:
(i) Comprehensive Airline Liability Insurance with an aggregate limit
of not less than Five Hundred Million Dollars ($500,000,000) per
occurrence, naming Lessor and Lessor's Lender and their
respective directors, officers, agents and employees as
additional insureds. Such policy will expressly cover the
obligations assumed by Lessee in Section 11 above.
(ii) Aircraft hull insurance covering all risks, ground and flight, to
the Equipment in a minimum amount not less than the Agreed Value
stated in the Lease for such Equipment. Such policy will include
Lessor and Lessor's Lender as additional insureds as their
interests may appear and shall name Lessor's Lender as sole loss
payee.
8
<PAGE>
(iii) All risk spares insurance, including in transit coverage, on
the Equipment covering any damage which may occur while in
Lessee's care, custody and control but not then attached to an
aircraft in a minimum amount not less than the Agreed Value
stated in the Lease for such Equipment. Such policy will
include Lessor and Lessor's Lender as additional insureds as
their interests may appear and shall name Lessor's Lender as
sole loss payee.
(b) All insurance coverage listed in Section 14(a) above will include war
risk, hijack and confiscation coverage and, if requested by Lessor or Lessor's
Lender, political risk coverage, in amounts requested by Lessor or Lessor's
Lender.
(c) All policies will provide that all insurance carriers, including the
hull insurance carrier for the aircraft on which any Engine may be installed,
waive any and all rights of subrogation that such carriers may or could have
against Lessor, Lessor's Lender and their respective directors, officers, agents
and employees by virtue of such insurance contracts.
(d) Any deductibles in the insurance coverage described in this Section 14
are the sole responsibility of Lessee and will be paid to the designated loss
payee of such insurance.
(e) All of the policies of insurance required of Lessee will include
breach of warranty protection in favor of Lessor and Lessor's Lender.
(f) All policies required of Lessee will provide that such insurance will
be primary insurance and that any other insurance of Lessor and Lessor's Lender
will be secondary or excess insurance.
(g) All policies will provide that Lessor and Lessor's Lender will be
given thirty (30) days prior written notice by the insurers of policy
cancellation or material change thereof except for coverages in Section 14(b)
which will require seven (7) days prior written notice.
(h) Lessee will provide Lessor and Lessor's Lender with certificates of
insurance satisfactory to Lessor and Lessor's Lender evidencing the above
coverage in accordance with Section 3(c).
(i) All losses will be adjusted with Lessor and the Lessor's Lender, as
the case may be, and Lessee.
(j) Lessee's deductibles for any insurance required under Section 14(a)
above shall not exceed $250,000.
(k) All policies will include (i) a severability of interest clause, (ii)
waiver of set-off or counterclaim, and (iii) Lessor's Lender's right, but not
obligation, to pay premiums and be accompanied by a broker's letter of
undertaking.
15. Title to Equipment
9
<PAGE>
Title to Equipment will remain in Lessor at all times. Lessee will not
permit any lien, claim, mortgage or encumbrance ("Liens"), except Liens arising
by or through Lessor ("Lessor's Liens"), to attach to any Equipment. Lessee will
indemnify Lessor and Lessor's Lender for any damage suffered by Lessor or
Lessor's Lender, including costs and expenses incident thereto, occurring as a
result of any Liens not permitted hereunder. Lessee's rights will be solely
those of a lessee and nothing contained herein is intended or will be
interpreted as granting to Lessee any other right, title or interest in or to
any Equipment, whether legal or equitable. Lessee will attach to each Engine a
placard stating:
"THIS ENGINE IS OWNED BY TERANDON LEASING CORPORATION AND IS SUBJECT TO A
FIRST PRIORITY SECURITY INTEREST IN FAVOR OF MARINE MIDLAND BANK"
Lessee will assure that said placard remains affixed to each Engine at all times
during the Lease Term.
16. Taxes
The charges set forth herein and in each Lease, including the Monthly Rent,
Transaction Fee and Use Fee, are exclusive of any duties, charges, imposts or
sale, use, ad valorem, excise, transfer, gross receipts, withholding taxes, or
any other taxes or charges, (including interest, penalties or additions to tax
in respect thereto) which may be imposed by any governmental jurisdiction or
taxing authority, in connection with the lease, ownership, operation, possession
or use of any Equipment, or upon the rentals, receipts or earnings arising
therefrom (collectively, "Taxes"). Lessee will pay, and will indemnify, defend
and hold Lessor and Lessor's Lender harmless on a net after tax basis from and
against any and all Taxes of whatever kind or nature, including costs or
expenses incurred in connection therewith, which may be assessed against,
chargeable to or collectible from any of Lessee, Lessor's Lender or Lessor by
any governmental jurisdiction or taxing authority, foreign, federal, state or
local, and which are based upon, levied or assessed with respect to the lease of
any Equipment or the operation, possession, purchase, ownership, delivery, or
use of such Equipment while under any Lease, or upon the rentals, receipts or
earnings arising therefrom, except Taxes based on the net income of Lessor that
are imposed by the United States of America or any state or local government or
taxing authority in any state of the United States in which Lessor is subject to
tax as a result of business or transactions unrelated to the transactions
contemplated by this GTA and any Lease. Upon demand to Lessor or Lessor's Lender
by any governmental jurisdiction or taxing authority for payment of any Tax
reimbursable hereunder, Lessor or Lessor's Lender will as soon as reasonably
possible notify Lessee and if Lessor or Lessor's Lender pays such Tax, Lessor or
Lessor's Lender will invoice Lessee for the amount of such Tax paid by Lessor or
Lessor's Lender together with an amount, if any, necessary to cause the net
after tax return of Lessor or Lessor's Lender to be the same as would have been
the case if such Tax had not been assessed, and Lessee will immediately
reimburse Lessor or Lessor's Lender for such amount(s).
17. Subleases; Assignment
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Lessee may not assign this GTA or any Lease in whole or in part, sublease
any Equipment or otherwise relinquish possession thereof to anyone other than
Lessor or Lessor's Lender, as the case may be, for any purpose except with the
prior written consent of Lessor and Lessor's Lender; and any such attempted
assignment or sublease will be null and void.
18. Return of Equipment
(a) At the time the Equipment is returned to Lessor, the Equipment shall
have all due maintenance completed in accordance with the Lessee's FAA approved
maintenance program, and shall be in at least the same condition as when
delivered to Lessee, ordinary wear and tear excepted.
(b) At the time the Equipment is returned to Lessor, the time remaining on
the Engine, in hours and cycles, to the next shop visit for engine heavy
maintenance shall be not less than one half the hours and cycles accumulated
between such shop visits. The interval for this calculation will be based upon
the Lessee's mean time between scheduled shop visits for engine heavy
maintenance of the Engine, as determined at the conclusion of the Lease Term. In
addition, in no event shall any life-limited component have less than 3,000
cycles remaining at the time the Engine is returned to Lessor.
(c) Upon return of the Equipment, Lessee shall make a payment to Lessor to
compensate Lessor for any difference between the condition of the Equipment on
the Delivery Date and the condition of the Equipment at the time of return. With
respect to the Engine, Lessee shall compensate Lessor if the number of hours and
cycles on the Engine since the most recent shop visit for engine heavy
maintenance at the time of return is more than the number of such hours and
cycles on the Engine on the Delivery Date. The per-hour and per-cycle charge
payable to Lessor in respect of such difference shall be the shop visit cost
estimated by an FAA approved overhaul facility (acceptable to Lessor) for engine
heavy maintenance of the Engine at the time of redelivery divided by the mean
time (in hours and cycles) between scheduled shop visits for engine heavy
maintenance as set forth in (b) above, but excluding costs for life-limited
parts. In addition, Lessee shall compensate Lessor at the conclusion of the
Lease Term for life used on life-limited parts during the Lease Term, as
determined by the difference between the disk sheets for the Engine on the
Delivery Date and the disk sheets for the Engine at the time of return. The
amount of such compensation shall be calculated by reference to the applicable
manufacturer's parts price catalogue current at the time of redelivery.
(d) Lessee will perform or cause to be performed on each Engine immediately
prior to its return to Lessor, at Lessee's sole expense, a full (compressor and
turbine section) videotaped borescope inspection and a full performance test
cell run. If the borescope inspection or test cell run identifies an Engine
defect, Lessee will immediately notify Lessor of the findings and repair the
same at Lessee's sole expense, except for the expense of work required for EGT
margin deterioration or replacement or restoration of parts as defined in
Section 6(c) of this GTA for which Use Fees may be used by the Lessee.
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(e) Upon expiration of the Lease Term or other termination of a Lease,
Lessee will return the leased Equipment. at Lessee's cost, free of all Liens
other than Lessor's Liens to the delivery location described in the applicable
Lease or, at Lessor's option, to such other location in the continental U.S.
serviced by Lessee as Lessor may designate.
(f) In addition to any other requirements of this GTA, upon return of the
Equipment to Lessor, the Lessee will have affixed to the Engine a current
serviceable tag pursuant to U.S. FAA requirements and issued by an authorized
U.S. domestic FAA facility together with a completed FAA form 337 marked
approved for return to service.
(g) Prior to returning the Equipment to Lessor, Lessee will prepare each
Engine for shipment by (i) capping and plugging all openings of the Engine; (ii)
preserving the Engine for ninety (90) days or more storage; (iii) completely
sealing the Engine with heavy gauge vinyl plastic; and (iv) otherwise preparing
the Engine for shipment in accordance with the manufacturer's
specifications/recommendations. Any trucks used for shipment of the Engine will
be equipped with air ride or air cushion trailers. On any given shipment, such
truck will be dedicated to Engines belonging solely to Lessor; except that
additional items may be transported on the truck, provided that (A) the Engine
may be offloaded at the redelivery location without disturbing any of the
additional items and (B) Lessor will not handle or reposition any of the
additional items on the truck.
(h) Lessee agrees that, at the request of Lessor and at no cost to Lessor,
Lessee shall store and insure the Equipment as required in Section 14 hereof for
up to 60 days following the termination of the Lease.
(i) If the Engine is a JT9D that has been operating during the Lease Term,
Lessee will return such Engine with at least fifty (50) cycles remaining until
the next Diffuser Case Rear Rail Inspection (AD# 86-11-04, SB5591-R4, as
amended).
(j) In the event any Equipment is not returned to Lessor as required by
this Section 18 or at the time and location required by the relevant Lease, in
addition to all other rights and remedies available to Lessor, Lessor may deem
the Lease Term extended as to such Equipment, and Monthly Rent and Use Fees
shall continue to be payable as set forth in Section 4 until such Equipment is
returned in the condition required by this Section 18 and pursuant to all other
terms and conditions of the relevant Lease.
19. Events of Default; Remedies
(a) Event of Default. The occurrence of any of the following events shall
constitute an Event of Default and material breach of this GTA and all Leases
hereunder by Lessee (whether such events shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
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(i) If Lessee shall fail to make any payment due hereunder in the
manner provided herein within five (5) days after the date when
such payment is due;
(ii) If Lessee shall fail to carry and maintain insurance on or in
respect of any Engine in accordance with the provisions of
Section 14 hereof or shall operate any Engine without such
insurance being in full force and effect with regard to such
operations;
(iii) If Lessee shall fail to observe or perform any of its other
obligations hereunder and in any Lease shall fail to cure the
same within ten (10) days after written notice thereof from
Lessor;
(iv) If any representation or warranty of Lessee herein or in any
document or certificate furnished to Lessor in connection
herewith shall be incorrect in any material respect;
(v) If Lessee either temporarily or permanently discontinues business
or sells or otherwise disposes of all or substantially all of its
assets or if Lessee voluntarily suspends all or substantially all
of its commercial airline operations or the franchises,
concessions, permits, rights or privileges required for the
conduct of the business and operations of Lessee are revoked,
canceled or otherwise terminated or the free and continued use
and exercise thereof curtailed or prevented, and as a result
thereof the preponderant business activity of Lessee ceases to be
that of a commercial airline or Lessee no longer is an air
carrier operating under a certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49 of the United
States Code.
(vi) If Lessee shall (A) be insolvent, (B) be generally not paying its
debts (trade or other) as they become due, (C) file, or consent
by answer or otherwise to the filing against it of, a petition of
relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (D) make an
assignment of the benefit of its creditors, (E) consent to the
appointment of a custodian, receiver, trustee or other officer
with similar powers of itself or of any substantial part of its
property or (F) take corporate action for the purpose of any of
the foregoing;
(vii) If a court or governmental authority of competent jurisdiction
shall enter an order appointing, without the consent of Lessee, a
custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of Lessee, or if any such
petition
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shall be filed against Lessee and such petition shall not be
dismissed within thirty (30) days; or
(viii) If a final judgment for the payment of money in excess of
$100,000 shall be rendered against Lessee by any court or
courts of competent jurisdiction (which judgment or judgments
shall be rendered by a court or courts in the United States of
America or in jurisdictions whose judgments are recognized by
courts in the United States of America) and the same shall
remain undischarged for a period of thirty (30) days during
which execution of such judgment shall not be effectively
stayed, or an attachment or attachments or other Lien or Liens
shall be issued or entered against any of the property of
Lessee, for an amount in excess of $100,000 and shall remain
undischarged or unbonded for thirty (30) days.
(b) Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing Lessor may, at its option, declare this
GTA and any Leases hereunder to be in Default; and at any time thereafter, so
long as Lessee shall not have remedied all continuing Events of Default, Lessor
may in its sole discretion elect to do one or more of the following with respect
to the Equipment, to the extent permitted by, and subject to compliance with any
mandatory requirements of, applicable law then in effect:
(i) Lessor may do anything for Lessee's account; including, but
not limited to, the right to apply advance payments made by
the Lessee hereunder, to discharge the obligations of the
Lessee hereunder, that may reasonably be required to cure any
Event of Default and recover from Lessee all reasonable costs,
including reasonable attorneys' fees, incurred in so doing,
plus interest thereon, as calculated in Section 4(f);
(ii) Lessor may proceed by appropriate court action or actions to
enforce performance by Lessee of this GTA and any Leases
hereunder or to recover damages for the breach hereof and
thereof;
(iii) Lessor may:
(A) Terminate any and all Leases between Lessor and Lessee;
(B) Demand that Lessee, and Lessee shall upon such demand,
return any Equipment promptly to Lessor free of any
claims or rights of Lessee in the manner and condition
required by, and otherwise in accordance with, all the
provisions of Section 18 as if such Equipment were being
returned at the end of the Lease Term; or Lessor, at its
option, may enter upon the premises where such Equipment
is located and take immediate possession of and remove
the same by summary proceedings or otherwise free of any
claims or rights of Lessee, all without liability to
Lessor for or by reason of such entry or taking of
possession or removal, whether for the restoration of
damage to property caused by such taking or
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otherwise, and Lessee shall be responsible for any costs
associated with restoring such Equipment to the condition
required by, and in accordance with all the provisions of,
Section 18 as if such Equipment were being returned at the
end of the Lease Term;
(C) Sell any Equipment at public or private sale, as Lessor may
determine, and at which Lessor may bid for and purchase the
same, free of any rights of Lessee and without any duty to
account to Lessee with respect to such sale or for the
proceeds thereof (except to the extent required by Section
19(c) below if Lessor elects to exercise its rights under
said Section), in which event Lessee's obligation to pay
Monthly Rent in respect of such Equipment accruing after
the date of such sale shall terminate; or
(D) Hold, keep idle or lease any Equipment to others, as Lessor
in its sole discretion may determine, free of any rights of
Lessee and without any duty to account to Lessee with
respect to such action or inaction or for any proceeds with
respect thereto, except that Lessee's obligation to pay
Monthly Rent in respect of such Equipment or part thereof
accruing after Lessee shall have been deprived of
possession of such Equipment or part thereof pursuant to
this Section 19 shall be reduced as provided in Section 19
(c) below if Lessor elects to exercise its rights under
said Section in respect of the leasing of such Equipment to
any person other than Lessee.
(c) Lease or Sale. Lessor, at its option, in addition to all other rights
it may have as herein set forth and all other rights granted to it in law or in
equity, may after an Event of Default by Lessee hereunder and upon notice to
Lessee:
(i) lease any Equipment to any third party upon such terms and
conditions as Lessor determines are reasonable at the time and
apply the rental therefrom to the amounts due to Lessor as
provided herein; or
(ii) sell any Equipment, or any part thereof, to the highest bidder at
public auction or at an arms-length private sale, at a price which
Lessor shall reasonably determine is its fair market value.
The total proceeds of any such lease or sale shall be retained by Lessor to
the exclusion of Lessee; provided, however, that the rental payments actually
received by Lessor in respect thereof, to the extent such actually received
rental payments and in respect of a lease charging rental payments in excess of
Monthly Rentals provided herein, only that portion of such rental payments as
equal the Monthly Rental are attributable to the unexpired portion of the Lease
related to such Equipment (calculated from the date of such lease or sale to the
last day of the Lease Term), less Lessor's reasonable expenses incurred in
connection therewith, including all reasonable attorney's fees and expenses,
shall be applied to the total amount due to Lessor under this GTA and such
Lease, and Lessee shall pay to Lessor immediately any deficiency. For
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purposes hereof, the amounts from such sale or lease, prior to the deduction of
expenses, applicable by Lessor to Lessee's account shall be calculated as:
(A) in the case of any lease, the lesser of (x) the Monthly Rent times
the number of months remaining in the Lease, and (y) the monthly rent actually
received under such lease times the number of months remaining in the Lease; and
(B) in the case of any sale, the lesser of (p) the Monthly Rent times
the number of months remaining in the Lease and (q) the sales price divided by
the remaining life (in days) of the Equipment, times the number of days
remaining in the Lease.
(d) Other Elections. On the date on which Lessor shall become entitled to
repossession of any Equipment, Lessor, in addition to all other remedies herein
provided, may declare all sums and all performances due under this GTA to be due
and payable and may institute such action or judicial proceedings as Lessor in
its sole election shall determine. All Monthly Rent under this GTA which would
have accrued from the date of such Event of Default through expiration of the
Lease Term, discounted at the rate of 8% per annum, and any and all costs or
expenses incurred by Lessor in enforcing any of the terms and provisions herein
contained, including without limitation all reasonable attorneys' fees and
expenses incurred by Lessor in the enforcement and/or interpretation of any of
the terms and provisions herein contained, shall be then all due, payable and
performable by Lessee and, from the date of such Event of Default until paid,
shall earn interest at the rate of 18% per annum.
(e) Remedies Cumulative. Each and every power and remedy hereby
specifically given to Lessor shall be in addition to every other power and
remedy specifically so given or now or hereafter existing at law or in equity,
and each and every power and remedy may be exercised from time to time
individually or simultaneously and as often and in such order as may be deemed
expedient by Lessor. All such powers and remedies shall be cumulative and the
exercise of one shall not be deemed a waiver of the right to exercise any other
or others. No delay or omission of Lessor in the exercise of any such power or
remedy and no renewal or extension of any payments due hereunder shall impair
any such power or remedy or shall be construed to be a waiver of any Default or
any acquiescence therein. In the event that Lessor or Lessee shall bring any
suit to enforce any of its rights hereunder, then in such suit, the prevailing
party may recover reasonable expenses, and the amount thereof shall be included
in such judgment to the extent permitted by law.
(f) Lessor's Waiver Election. Lessor may at its election waive any Event
of Default and its consequences and rescind and annul any notice of termination
of this GTA or any Lease by notice to Lessee in writing to that effect, and
thereupon the respective rights of the parties shall be as they would have been
if no Event of Default had occurred and no such notice had been given.
Notwithstanding the provisions of this Section 19, it is expressly understood
and agreed by Lessee that no waiver, rescission or annulment shall extend to or
affect any other or subsequent Default or impair any rights or remedies of
Lessor consequent thereon and that time is of the essence with regard to
Lessee's obligations under this GTA and any Leases hereunder.
(g) Section 1110. Lessee represents and warrants that it is, on the date
of execution of this GTA, and shall continue to be during the term of this GTA
and each Lease, (i) a citizen of
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the United States as defined in Section 40102 of Title 49 of the United States
Code ("Code"), (ii) an air carrier operating under a certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49 of the Code, and
(iii) shall be in satisfaction of all other threshold requirements applicable to
Lessee as a "debtor" under Section 1110 of Title 11 of the Code, ("Section
1110") or any superseding statutes, as the same may be amended from time to
time. Lessor and Lessee agree that each Lease is to be treated as lease for
United States federal income tax purposes and to the extent permitted by law,
Lessee hereby agrees, in accordance with Section 1110 or any superseding
statutes, as amended from time to time, that the title of Lessor to the
Equipment and any right of Lessor, or Lessor's Lender, as the case may be, to
take possession of such Equipment in compliance with the provisions of this GTA
will not be affected by the provisions of Section 362, 363 or 1129 of such Title
11, or other analogous part of any superseding statutes, as amended from time to
time.
20. Lessor's Lender
(a) Lessee acknowledges that Lessor will assign each Lease to Lessor's
Lender and grant a first priority security interest in all Equipment to Lessor's
Lender as security for a loan made by Lessor's Lender to Lessor pursuant to the
Assignment and Consent to Assignment of Lease, in the form attached hereto as
Exhibit C. Lessee specifically consents to such assignment and agrees that
Lessor's Lender shall be entitled to all the benefits of, but shall not be
deemed to have assumed any of Lessor's obligations under, any Lease.
(b) Lessee, until further advised by Lessor's Lender, shall remit all
payments in respect of Monthly Rent, and all other payments due under each
Lease, except Use Fees, Security Deposits, Transaction Fees and payments for the
account of Lessor made pursuant to Sections 11 and 14(a)(i) hereof, by wire
without offset, deduction or abatement for any reason whatsoever to:
ABA #: 121 000 248
Bank: Wells Fargo Bank
San Francisco, CA
Account #: 6001-945518
Acct Name: Terandon Leasing Corporation
Monthly Rent Account
Provided, however, that upon written notice sent by Lessor's Lender to Lessee
certifying that an Event of Default has occurred under the loan facility between
Lessor and Lessor's Lender, the Lessee shall remit all payments specified above
directly to Lessor's Lender, all without offset, deduction or abatement for any
reason whatsoever, at:
Marine Midland Bank
One Marine Midland Center
Buffalo, New York 14203
ABA #: 021-001-088
Account Name: Marine Midland Bank
Account #: 750-16718-1
Attention: Ms. Amy McThomas
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Use Fees and Security Deposits, if any, due under the Lease shall be remitted
without offset, deduction or abatement for any reason whatsoever to:
ABA #: 021 001 088
Bank: Marine Midland Bank
Buffalo, NY
Account #: 750-460512
Acct Name Terandon Leasing Corporation
Maintenance Reserve Deposit Account
Payments, if any, for the account of Lessor's Lender made pursuant to Section 11
and 14 hereof, shall be remitted, without offset, deduction of abatement for any
reason whatsoever to:
Marine Midland Bank
One Marine Midland Center
Buffalo, New York 14203
ABA #: 021-001-088
Account Name: Marine Midland Bank
Account #: 750-16718-1
Attention: Ms. Amy McThomas
Transaction Fees and payments for the account of Lessor made pursuant to
Sections 11 and 14(a)(i) hereof shall be remitted, without offset, deduction or
abatement for any reason whatsoever, to:
ABA #: 121 000 248
Bank: Wells Fargo Bank
525 Miller Avenue
Mill Valley, CA
Account # 0524-026143
Acct Name: Terandon Leasing Corporation
(c) As and when requested by Lessor, Lessee shall execute and deliver to
Lessor's Lender such documents as are usual and customary, including but not
limited to an opinion of Lessee's counsel addressed to Lessor and Lessor's
Lender as to the validity and enforceability of each Lease and an Assignment of
Lease and Lessee's Acknowledgment of and consent to Assignment of Lease in form
and substance acceptable to Lessor's Lender.
21. Notices
All notices or requests given in connection with this GTA or any Lease will
be given in writing and sent prepaid by certified mail, return receipt
requested, telegram, teletype, telex, cable or facsimile transmission to the
person at the address listed below unless either party notifies the other party
of a different address.
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Lessor: Terandon Leasing Corporation
180 Harbor Drive, Suite 200
Sausalito, CA 94965
Attn: Charles F. Willis
Telefax No.: (415) 331-0607
Lessee: Frontier Airlines, Inc.
12015 East 46th Avenue
Denver, CO 80239
Attn: Rolan Meese
Telefax No.: (303) 371-7007
Lessor's Lender: Marine Midland Bank
One Marine Midland Center
15th Floor
Buffalo, NY 14203
Attn: Credit Risk Management
Telefax No: 716 841 2707
22. Recording
Lessor intends to record this GTA and all Leases with the Department of
Transportation, Federal Aviation Administration, FAA Engine Registry, Oklahoma
City, Oklahoma, or such other similar authority in each jurisdiction applicable
to this GTA and any Lease, the costs of which including the costs for any
required translation thereof shall be borne by Lessee. Upon the termination of
this GTA or any Lease for any reason whatsoever, each of the parties will
execute and deliver to the other party promptly such documents as the other
party may reasonably request in order to file a termination of this GTA or any
Lease with the FAA or other authority. Lessee hereby appoints Lessor as its
attorney-in-fact for the sole purposes of executing all such termination
documents.
23. Brokers/Finders
Lessor and Lessee each represents to the other that there are and will be
no third parties involved as brokers or finders with respect to this GTA or any
Leases entered into for any Equipment, and each party agrees to indemnify and
hold harmless the other from liability for fees, commissions or other claims of
any intermediary arising as a result of actions of the indemnifying party.
24. Miscellaneous
(a) This GTA and each Lease entered into hereunder contain the entire
understanding of the parties with respect to the leasing of Equipment and no
warranties, representations or
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undertakings have been made by either party except as expressly set forth in
this GTA and the respective Lease(s) entered into hereunder.
(b) This GTA has been negotiated between the parties, each party having
had the benefit of legal counsel. The construction or interpretation of any
clause or provision of this GTA or any Lease will not be construed or resolved
against Lessor solely because Lessor drafted any such clause or provision or
otherwise prepared or caused the GTA or Lease documents to be drafted.
(c) This GTA and any Lease may not be amended, changed, waived or
terminated in whole or in part orally, but only by an express instrument in
writing signed by the party against which the enforcement of the change, waiver
or termination is sought and with the prior consent of Lessor's Lender.
(d) This GTA will be binding upon and inure to the benefit of the
respective permitted successors and assigns of the parties.
(e) This GTA may be executed in counterparts. Such counterpart documents,
when taken together, will constitute one and the same instrument. Each Lease
shall be executed in
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at least five (5) serially numbered counterparts, only counterpart 1 of which
shall be deemed chattel paper for financing purposes and shall be so marked.
25. Applicable Law
This GTA and all Leases will be deemed to have been entered into and
performed in the State of California and will be construed in accordance with
the laws of the State of California, without regard to any conflict of laws or
rules which might result in the application of the law of another jurisdiction.
26. Jurisdiction and Venue
The parties (i) agree that any state or federal court located in San
Francisco, California shall have exclusive jurisdiction to hear any suit, action
or proceeding arising out of or in connection with this GTA or any Lease, and
consent and submit to the exclusive jurisdiction of any such court in any such
suit, action or proceeding and (ii) hereby waive, and agree not to assert, by
way of motion, as a defense, or otherwise, in any such suit, action or
proceeding, to the extent permitted by applicable law, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper, or that this GTA or any Lease or the subject
matter of any thereof or any of the transactions contemplated hereby or thereby
may not be enforced in or by such courts.
Service of process may be made against a party either in person, wherever
such party may be found, or by notice as permitted herein to the address of the
party or its agent, if any, for service of process set forth in this GTA. Lessee
specifically appoints The Prentice-Hall Corporation Systems, Inc., 2730 Gateway
Oaks Drive, Suite 100, Sacramento, California 95833, as Lessee's agent to
receive service of process in any such action or proceeding.
To the extent that the Lessee may now or hereafter be entitled, in any
jurisdiction, to claim for itself or its property, immunity from suit, legal
action or other proceeding, for the jurisdiction of any court, from service of
legal process judgment or otherwise) or other legal process or order and, to the
extent that in any such jurisdiction there may now or hereafter be attributed to
itself or its property any such immunity (whether or not claimed), the Lessee
hereby irrevocably and unconditionally waives such immunity to the fullest
extent permitted by applicable law of such jurisdiction.
27. Quiet Enjoyment
So long as no Event of Default hereunder or under any Lease shall have
occurred and be continuing, Lessee shall have the peaceful and quiet enjoyment
of all Equipment free from all claims or interference of Lessor or anyone
claiming by, through or under Lessor.
28. Financial Statements
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During the Base Term, or any Renewal Term of any Lease, Lessee shall
regularly provide Lessor with its quarterly financial statements within sixty
(60) days of the end of each quarter and its audited annual financial statements
within ninety (90) days after the close of the Lessee's fiscal year.
IN WITNESS WHEREOF, the parties have executed this General Terms Engine
Lease Agreement as of the day and year first above written.
TERANDON LEASING FRONTIER AIRLINES, INC.
CORPORATION
By: __________________ By: ____________________________
Name: Lynn Mailliard Name: ____________________________
Title: Corporate Secretary Title: ____________________________
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EXHIBIT A
to
GENERAL TERMS ENGINE LEASE AGREEMENT
COUNTERPART NO. ____ OF ____SERIALLY NUMBERED, MANUALLY EXECUTED COUNTERPARTS.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER UNDER THE UCC,
NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER AND
POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
Aircraft Engine Lease Agreement
-------------------------------
This Aircraft Engine Lease Agreement ("Lease") made and entered into as of
August 15, 1996 by and between TERANDON LEASING CORPORATION ("Lessor") and
FRONTIER AIRLINES, INC. ("Lessee").
W I T N E S S E T H :
ARTICLE I Agreement to Lease
Lessor hereby leases to Lessee and Lessee hereby leases from
Lessor the Equipment described in ARTICLE IV herein, subject to the terms and
provisions of this Lease. This Lease is entered into pursuant to, and by this
reference incorporates all the terms and conditions of, the General Terms Engine
Lease Agreement dated as of August 15, 1996 (the "GTA") between Lessor and
Lessee. Capitalized terms used but not defined herein shall have the respective
meanings given such terms in the GTA.
ARTICLE II Lease Term
The term of this Lease will be * (the "Delivery
------------------
Date"), and ending on * ("Base Lease Term") subject to the Renewal
-----------
Options set forth in Section X hereof.
<PAGE>
ARTICLE III Delivery/Redelivery Locations
The Equipment will be delivered to Lessee FOB Denver, Colorado and upon
termination of the Lease, the Equipment will be redelivered to Lessor FOB a
location in the Continental United States selected by Lessor.
<TABLE>
<CAPTION>
ARTICLE IV Equipment
Engine Engine Engine Total Time Total Cycles Engine Stand
Make Model Serial No. Since New Since New Serial No.
<S> <C> <C> <C> <C> <C>
CFM 56-3B2 721397 13,104 7,922 AA1
</TABLE>
Equipment includes, together with the Engine and Engine Stand
listed above, (i) a QEC unit consisting of all components set forth in Appendix
A hereto, (ii) all Engine parts and attachments, and (iii) all Engine records in
the possession of Lessor requested by Lessee and all Engine records generated by
Lessee during the Lease Term.
The Engine described above is rated in excess of 750 horsepower.
ARTICLE V Agreed Value of Equipment: *
ARTICLE VI Lease Payments:
Transaction Monthly
Fee Rent Use Fee
--- ---- -------
* * *
ARTICLE VII Estimated Daily Flight Hours: 10
ARTICLE VIII Payments Due On Delivery:
Security Advance Prorated Transaction Advance Total
Deposit Monthly Rent Rent Fee Use Fee Payment
- ------- ------------ ---- ----------- ------- -------
* * * * * *
(* Less * deposit already received - total due at delivery is * )
ARTICLE IX Maintenance Costs
2
<PAGE>
Lessee to be responsible for equipment maintenance and repair
costs in accordance with Section 6 of the GTA.
Mandatory Change Costs
- ----------------------
Notwithstanding the terms of Section 6(e) of the GTA, Mandatory Change
costs with respect to the Equipment shall be shared as follows:
Lessee shall be responsible for the first * of the cost of a Mandatory
Change required to be made during the Base Lease Term and which Mandatory Change
is completed during the Base Term or within ninety (90) days thereafter.
Mandatory Change costs in excess of * shall be shared by Lessor and Lessee
depending on the year of Mandatory Change completion on the following basis:
Base Term Lessor/Lessee
Year Cost Sharing
---- ------------
* *
Airworthiness Directives required to be completed, based on hours and
cycles, and due after the lease termination date, will be calculated on the
previous six (6) months' average of hours and cycles.
ARTICLE X Renewal Options
Provided Lessor and Lessee first agree as to the rental to apply for the
applicable Renewal Term, upon 180 days prior written notice, and provided no
Event of Default has occurred and is continuing under the Lease, Lessee may
renew the Lease for *
.
ARTICLE XI Security Deposit
As a condition to delivery of the Equipment, Lessee shall pay to Lessor's
Lender on the Delivery Date and shall maintain at all times during the Lease
Term, as security for this Lease, a security deposit (the "Security Deposit") in
the amount of U.S. * .
3
<PAGE>
Lessee shall not be entitled to any interest on the Security Deposit. Provided
no Event of Default shall have occurred and be continuing, Lessor shall return
the Security Deposit to Lessee upon the return of the Equipment to lessor in the
condition required by, and otherwise in accordance with all the return
provisions of, this Lease. Lessor shall not be required to apply the Security
Deposit to cure any Event of Default under this Lease.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
TERANDON LEASING FRONTIER AIRLINES, INC.
CORPORATION
By: __________________ By: _____________________________
Name: Lynn Mailliard Name: _____________________________
Title: Corporate Secretary Title: _____________________________
4
<PAGE>
EXHIBIT B
to
GENERAL TERMS ENGINE LEASE AGREEMENT
Equipment Delivery Receipt
FROM: FRONTIER AIRLINES, INC.
TO: TERANDON LEASING CORPORATION
The undersigned hereby acknowledges that on this ____ day of ________, 1996,
Terandon Leasing Corporation ("Lessor") delivered to Frontier Airlines, Inc.
("Lessee") that certain CFM56-3B2 Engine, Manufacturer's Serial No. 721397
(the "Engine"), and Engine Stand, Manufacturer's Serial No. AA1 (the
"Engine Stand"), QEC unit consisting of all the components set forth in
Appendix A hereto, and all Engine records in Lessor's possession requested by
Lessee, including a copy of the disk profile attached as Appendix B hereto, at
_____________________________________. The undersigned further acknowledges
receipt and acceptance of the Engine, Engine Stand, QEC unit and all such
records and compliance thereof with all the terms and conditions of that
certain Aircraft Engine Lease Agreement dated as of August _______, 1996,
between Lessee and Lessor.
Signed this ______ day of August, 1996 at _______________________.
FRONTIER AIRLINES, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
B-1
<PAGE>
COUNTERPART NO. ____ OF ____SERIALLY NUMBERED, MANUALLY EXECUTED COUNTERPARTS.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER UNDER THE UCC,
NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER AND
POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
Aircraft Engine Lease Agreement
-------------------------------
This Aircraft Engine Lease Agreement ("Lease") made and entered into as of
August ____, 1996 by and between TERANDON LEASING CORPORATION ("Lessor") and
FRONTIER AIRLINES, INC. ("Lessee").
W I T N E S S E T H :
ARTICLE I Agreement to Lease
Lessor hereby leases to Lessee and Lessee hereby leases from
Lessor the Equipment described in ARTICLE IV herein, subject to the terms and
provisions of this Lease. This Lease is entered into pursuant to, and by this
reference incorporates all the terms and conditions of, the General Terms Engine
Lease Agreement dated as of August 15, 1996 (the "GTA") between Lessor and
Lessee. Capitalized terms used but not defined herein shall have the respective
meanings given such terms in the GTA.
ARTICLE II Lease Term
The term of this Lease will be sixty (60) months, commencing
August ________, 1996 (the "Delivery Date"), and ending on August ________, 2001
("Base Lease Term") subject to the Renewal Options set forth in Section X
hereof.
ARTICLE III Delivery/Redelivery Locations
The Equipment will be delivered to Lessee FOB Denver, Colorado and upon
termination of the Lease, the Equipment will be redelivered to Lessor FOB a
location in the Continental United States selected by Lessor.
ARTICLE IV Equipment
<PAGE>
<TABLE>
<CAPTION>
Engine Engine Engine Total Time Total Cycles Engine Stand
Make Model Serial No. Since New Since New Serial No.
<S> <C> <C> <C> <C> <C>
CFM 56-3B2 721397 13,104 7,922 AA1
</TABLE>
Equipment includes, together with the Engine and Engine Stand
listed above, (i) a QEC unit consisting of all components set forth in Appendix
A hereto, (ii) all Engine parts and attachments, and (iii) all Engine records in
the possession of Lessor requested by Lessee and all Engine records generated by
Lessee during the Lease Term.
The Engine described above is rated in excess of 750
horsepower.
ARTICLE V Agreed Value of Equipment: $3,500,000.00
ARTICLE VI Lease Payments:
<TABLE>
<CAPTION>
Transaction Monthly
Fee Rent Use Fee
--- ---- -------
<S> <C> <C>
$5,000.00 $35,000.00 $85.00 per hour at a
2:1 hour:cycle ratio
</TABLE>
ARTICLE VII Estimated Daily Flight Hours: 10
ARTICLE VIII Payments Due On Delivery:
<TABLE>
<CAPTION>
Security Advance Prorated Transaction Advance Total
Deposit Monthly Rent Rent Fee Use Fee Payment
- ------- ------------ ---- ----- ------- -------
<S> <C> <C> <C> <C> <C>
$105,000.00 $35,000.00 $2,333.00 $5,000.00 $25,000.00 $172,333.00*
</TABLE>
(* Less $50,000.00 deposit already received - total due at delivery is
$122,333.00)
ARTICLE IX Maintenance Costs
2
<PAGE>
Lessee to be responsible for equipment maintenance and repair
costs in accordance with Section 6 of the GTA.
Mandatory Change Costs
- ----------------------
Notwithstanding the terms of Section 6(e) of the GTA, Mandatory
Change costs with respect to the Equipment shall be shared as follows:
Lessee shall be responsible for the first $50,000 of the cost of a
Mandatory Change required to be made during the Base Lease Term and which
Mandatory Change is completed during the Base Term or within ninety (90) days
thereafter. Mandatory Change costs in excess of $50,000 shall be shared by
Lessor and Lessee depending on the year of Mandatory Change completion on the
following basis:
<TABLE>
<CAPTION>
Base Term Lessor/Lessee
Year Cost Sharing
---- ------------
<S> <C>
1 50/50
2 50/50
3 50/50
4 50/50
5 and 90 days 50/50
thereafter
</TABLE>
Airworthiness Directives required to be completed, based on hours and
cycles, and due after the lease termination date, will be calculated on the
previous six (6) months' average of hours and cycles.
ARTICLE X Renewal Options
Provided Lessor and Lessee first agree as to the rental to apply for the
applicable Renewal Term, upon 180 days prior written notice, and provided no
Event of Default has occurred and is continuing under the Lease, Lessee may
renew the Lease for two (2) consecutive periods of two (2) years each (each a
"Renewal Term") on the same terms and conditions otherwise set forth in the
Lease.
ARTICLE XI Security Deposit
As a condition to delivery of the Equipment, Lessee shall pay to
Lessor's Lender on the Delivery Date and shall maintain at all times during the
Lease Term, as security for this Lease, a security deposit (the "Security
Deposit") in the amount of U.S. $105,000.00. Lessee shall not be entitled to any
interest on the Security Deposit. Provided no Event of Default shall have
occurred and be continuing, Lessor shall return the Security Deposit to Lessee
upon the return of the Equipment to lessor in the condition required by, and
otherwise in accordance with
3
<PAGE>
all the return provisions of, this Lease. Lessor shall not be required to apply
the Security Deposit to cure any Event of Default under this Lease.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
TERANDON LEASING FRONTIER AIRLINES, INC.
CORPORATION
By: By:
-------------------------- ----------------------------
Name: Lynn Mailliard Name:
----------------------------
Title: Corporate Secretary Title:
----------------------------
4
<PAGE>
EXHIBIT 10.25
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED "*"
AND SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC.
AGREEMENT
BETWEEN
AIRCRAFT INSTRUMENT & RADIO CO., INC.
AND
FRONTIER AIRLINES INC.
IN RESPECT OF THE
LEASE OF AIRCRAFT TECHNICAL SPARES
December 11, 1995
AIRCRAFT COMPONENT LEASE AGREEMENT made this 11th day of December, 1995
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
between AIRCRAFT INSTRUMENT & RADIO CO., INC. (the "Lessor") of 1853 s.
Eisenhower Ct., Wichita, Kansas U.S.A. and FRONTIER AIRLINES INC. (the "Lessee")
at 12015 E. 46TH Avenue, Denver, Colorado U.S.A.
WHEREAS the Lessor agrees to lease the aircraft technical spares as specified in
Appendix A hereof (hereinafter referred to as "Spares") to the Lessee and the
Lessee agrees to avail of and pay for the Spares on the terms and conditions
hereinafter contained.
IT IS HEREBY AGREED AS FOLLOWS:
1 NATURE OF THE LEASE
-------------------
1.1 The Lessor will lease the Spares to the Lessee. The Lessor will
deliver the Spares to the Lessee FOB the Lessor's facility at 1853 S.
Eisenhower Court, Wichita, KS, U.S.A.
The Spares will be tagged "new", "serviceable" or "overhauled
condition", indicating their condition, upon delivery to the Lessee.
2. OBLIGATIONS OF THE LESSEE
-------------------------
In addition to the obligations elsewhere contained in this Agreement the
Lessee will:
2.1 Provide or arrange for, at its own cost and expense, suitable storage
accommodation for the Spares.
2.2 Give access to the Lessor, and its representatives, from time to time,
for the purpose of auditing and inspecting the Spares. Date and times
of such audits to be agreed between the parties.
2.3 Upon termination of the lease of the Spares, such Spares will be
returned immediately to the Lessor's facility at 1853 S. Eisenhower
Ct., Wichita, Kansas, U.S.A., at the expense of the Lessee.
3. CHARGES AND PAYMENTS
--------------------
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
CONFIDENTIAL TREATMENT HAS BEEN SOUGHT FOR PORTIONS OF THIS DOCUMENT MARKED WITH
"*" AND SUCH PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SEC.
3.1 The Lessor will charge USD * per month (2.2% of total spares value),
for the spares listed in Appendix A.
3.2 The Lessee will pay the Lessor one (1) months payment of USD *
in advance, followed by fifty-nine (59) equal monthly payments of USD
*. Payments will be made by standing order.
3.3 Late payments by the Lessee shall be subject to a late fee at the rate
of 2% per day, of the total monthly lease amount.
3.4 Upon termination of the Lease of the Spares, Lessee will be
responsible and charged for any recertification repair costs, to
return them to Lessor in the same, or better condition as indicated in
Appendix A, with matching vendor tags.
3.5 The Lessee shall pay all costs, charges, fees, and expenses in
connection with the use, possession and operation of the spares,
including maintenance, insurance, state and local taxes (except for
taxes based on the net income of the Lessor), and risk of loss or
other casualty.
4. FORCE MAJEURE
-------------
4.1 Neither party will be liable to the other party for failure to meet
its obligations hereunder due to acts of God or the public enemy,
civil wars, insurrections or riots, floods, explosions, earthquakes or
serious accidents, epidemics or quarantine restrictions, any act of
government, governmental priorities, allocation regulations or orders
affecting material, facilities or completed aircraft, strikes, labor
troubles causing cessation, slow-down or interruption of work,
inability after due and timely diligence to procure materials
accessories, equipment or parts or to obtain any necessary
governmental permission or approval or any other cause to the extent
it is beyond the reasonable control of either party.
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
5. REPRESENTATIONS AND WARRANTIES OF THE LESSOR
--------------------------------------------
5.1 The Lessor warrants it holds title to the Spares and Spares are free
of all liens, charges, claims and encumbrances of any kind whatsoever.
5.2 The Spares will be tagged "new". serviceable" or "overhaul condition",
indicating their condition, upon delivery to Lessee.
6. INDEMNITIES AND LIABILITIES
---------------------------
6.1 The Lessee will not be liable for any loss of or damage to property,
including the Spares, caused by the negligence and/or willful
misconduct of the Lessor.
6.2 The Lessee holds the Lessor harmless from any and all claims, demands,
suits, judgments or causes of action including costs and expenses
incident thereto for or an account of injury to or death of the
Lessee's personnel arising directly out of the performance of this
Agreement unless caused by the negligence and/or willful misconduct of
the Lessor.
7. INSURANCE
---------
7.1 The Lessee shall at its expense, maintain in force, or cause to be
maintained in force, with reputable and substantial insurers All Risks
insurance in respect of the leased spares in an amount not less than
$2,000,000.USD.
7.2 The Lessee shall provide Lessor with a copy of the applicable
Certificate of Insurance showing Aircraft Instrument & Radio Co.,
Inc., as additional Loss Payee.
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
8. LEASE TERM AND RENEWAL
----------------------
8.1 The effective date of this Agreement is the 11th day of December,
1995, and unless otherwise terminated as provided herein (Default),
will continue in full force and effect for a minimum period of five
years.
8.2 Lessee may extend the term of Agreement with respect to spares for two
(2) consecutive one (1), or two (2) year terms. Lessee shall give
Lessor 120 days written notice of Lessee's intent to renew the
Agreement prior to the expiration of the original Agreement term, or
renew al terms, as appropriate. The monthly rental for each renewal
term shall be at fair market value.
8.3 Upon termination of Agreement, Lessee shall have the option to
purchase the spares listed in Appendix "A" of this Agreement at 50% of
the spares fair market value.
9. DEFAULT
-------
9.1 The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:
9.1.1 Lessee fails to pay monthly rent or other charges when due;
9.1.2 Lessee fails to comply with any other material term, condition
or provision of this Agreement and fails to cure such non-
compliance within five (5) days of the receipt of such non-
compliance from Lessor;
9.1.3 Lessee becomes insolvent or ceases to do business as a going
concern;
9.1.4 Lessee makes an assignment for the benefit of creditors or a
petition for bankruptcy, reorganization, or receivership is
filed by or against Lessee; or,
9.1.5 Lessor has grounds for insecurity with respect to the
performance by Lessee of its obligations under this Agreement
and Lessee fails, after a demand for adequate assurances from
Lessor, to provide such assurance within ten (10) days after
the date of Lessor's demand therefor.
<PAGE>
Aircraft Instruments & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
9.6 Upon the occurrence of an "Event of Default", in addition to any
rights Lessor may have to collect damages at law or equity, Lessor
shall have the right to:
9.2.1 terminate this lease without affecting rent monies, or
other charges due under this Agreement;
9.2.2 take possession of the leased spares, wherever located,
without demand or notice and without any court order or
other judicial process or law; and,
9.2.3 take whatever other action or pursue any other remedy
Lessor is permitted under applicable law.
10. ASSIGNMENT AND LAW
------------------
10.1 This Agreement will inure to the benefit of and will be binding upon
each of the parties hereto. It may not be assigned wholly or in part
by either party without the prior written consent of the other
party.
10.2 Irrespective of where executed, this Agreement will be governed and
construed in accordance with the laws of the State of Kansas,
U.S.A., without regard to its conflict of laws rules. Lessee hereby
voluntarily submits itself to the non-exclusive jurisdiction of the
state and federal courts situated in Sedgwick County, Kansas for any
dispute arising hereunder.
10.3 The Lessee shall conform to all applicable Federal, State, County
and Municipal laws, ordinances, codes, priority requirements, and
rules and regulations with respect to performance under this lease
agreement.
10.4 The Lessor shall be permitted to file one (1) or more UCC-1
financing statements as he deems appropriate, or necessary in order
to secure his interest in the leased spares in accordance with the
Uniform Commercial Code. Lessee agrees to cooperate with Lessor in
this regard by, among other things, signing any UCC-1 financing
statement(s) that Lessor decides to file.
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
11. NOTICES AND REQUESTS
--------------------
11.1 All notices and requests in connection with this Agreement will be
given in English and in writing and save as otherwise provided herein
may be given by registered mail, SITA or facsimile and addressed as
follows:
FRONTIER AIRLINES INC.
12015 E. 46th Avenue SITA: HDQF9RP
Denver, Colorado U.S.A. Fax: 303.371.7007
AIRCRAFT INSTRUMENT & RADIO CO., INC.
1853 S Eisenhower Ct. Telex: 417497
Wichita SITA: ICTIRXD
Kansas Fax: 316.945.8014
U.S.A.
or to such other address as the party to receive the notice or
request will designate by notice to the other.
11.2 All notices given by registered mail will be deemed to be received on
the expiration of seventy two hours after the posting of such letter
containing the same. All notices given in the other ways herein
before provided will be deemed to be received simultaneously upon
completion of transmission.
12. MISCELLANEOUS
-------------
12.1 PURCHASE OF ADDITIONAL ROTABLE 737-300 SPARES: At pre-determined
---------------------------------------------
intervals, any rotable 737-300 spares purchased by Lessor to the
Lessee at fair market value, can become subject to the lease
Agreement (by a sale/leaseback amendment), subject to verification of
condition, paperwork, etc. Required spares other than 737-300 may
also be added, subject to Lessor approval.
12.2 CONFIDENTIALITY: The terms of this Agreement will be treated
---------------
confidentially by Lessee and not disclosed to any third party without
Lessor's consent.
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
12.3 ATTORNEY'S FEES: Lessor shall be entitled to recover from Lessee, and
---------------
Lessee agrees to pay, all costs of suit and attorney's fees incurred
by Lessor in the event that Lessor initiates an action, by way of
claim or counterclaim, for the collection of payments due Lessor from
Lessee under this Agreement, or for repossession of leased spares.
Signed on behalf of: Signed on behalf of:
AIRCRAFT INSTRUMENT FRONTIER AIRLINES INC.
& RADIO CO., INC.
By:____________________________ By:_____________________________
MARTIN POTASH ________________________________
President Printed Name
Title:__________________________
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement - Addendum / Appendix "A"
Prepared for Frontier Airlines Inc.
APPENDIX "A"
AGREEMENT/LEASE COMPONENT LISTING
SPARES TOTAL VALUE: $ 1,600,000.USD
MONTHLY LEASE RATE: 2.2%
<TABLE>
<CAPTION>
QTY PART NUMBER DESCRIPTION CONDITION OUTRIGHT PRICE EA.
- ----- ------------- ----------- --------- ------------------
<S> <C> <C> <C> <C>
2 10-631045-1 EXCITER OHC $ *
1 10031-0000-01 INDICATOR SERV $ *
1 107492-2 REGULATOR OHC $ *
1 124-837 INDICATOR OHC $ *
1 162BL804A INDICATOR OHC $ *
1 168925-05-01 FMC OEM SERV $ *
2 172625-6 VALVE OHC $ *
1 182936 OXY PRES OHC $ *
1 1FA14012-6 ACTUATOR OHC $ *
1 20-035008-300 MODULE OHC $ *
1 20041-0000-03 OIL QTY OHC $ *
1 20043-0000-01 XMTR OHC $ *
1 2061-14-1 INDICATOR OHC $ *
1 2083-11-1 MACH ASI OHC $ *
1 2-792-02 BATTERY OHC $ *
1 2120-54-1 INDICATOR OHC $ *
1 315A1803-2 ACTUATOR OHC $ *
</TABLE>
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
APPENDIX "A" - AGREEMENT/LEASE COMPONENT LISTING CONT.
<TABLE>
<CAPTION>
QTY PART NUMBER DESCRIPTION CONDITION OUTRIGHT PRICE EA.
- ----- --------------- ----------- --------- ------------------
<S> <C> <C> <C> <C>
1 3214552-5 VALVE OHC $ *
1 3289562-4 VALVE OHC $ *
1 3289630-2 VALVE OHC $ *
2 3505716-5 STARTER NEW $ *
1 371380 PUMP OHC $ *
1 3810056-106 MODULE OEM SERV $ *
4 40176-7 BATTERY OHC $ *
1 4051600-914 FCC OEM SERV $ *
1 418-20044 XMTR OHC $ *
1 522782 INDICATOR OHC $ *
1 568-1-26713-005 PUMP OHC $ *
1 569670 MOTOR OHC $ *
1 607400-1-1 SELECTOR OHC $ *
1 65-44760-15 ACTUATOR OHC $ *
1 65-52807-39 ACCY UNIT OHC $ *
1 65-52813-16 ACCY UNIT OHC $ *
1 65-52818-9 MODULE OHC $ *
1 65C25465-15 COMPUTER OHC $ *
1 6672M201 MONITOR OHC $ *
1 69-37346-146 MODULE OHC $ *
1 708600-2 PUMP OHC $ *
1 735511B CSD OEM SERV $ *
1 755SUE2-3 ATC OEM SERV $ *
</TABLE>
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "A"
Prepared for Frontier Airlines Inc.
APPENDIX "A" - AGREEMENT/LEASE COMPONENT LISTING CONT.
<TABLE>
<CAPTION>
QTY PART NUMBER DESCRIPTION CONDITION OUTRIGHT PRICE EA.
- --- ------------ ----------- --------- ------------------
<C> <S> <C> <C> <C>
1 772-5005-009 ADI OHC $ *
1 803162-03 COUPLING OHC $ *
1 8063-200 MEC OEM SERV $ *
1 8TJ124GGM1 XMTR OHC $ *
1 965-0648-005 GPWS OEM SERV $ *
1 976J498-2 GENERATOR OHC $ *
1 AR6460M2 SERVO OHC $ *
1 D31354-433 SLIDE OHC $ *
1 D31591-462 SLIDE OHC $ *
1 DG1035AB03 ADAPTOR OEM SERV $ *
2 G1248B1 ANNUN OHC $ *
1 H321AKM1 HORIZON OHC $ *
1 HG1050AD05 IRU OEM SERV $ *
1 SEL0C4W INDICATOR OHC $ *
1 SRDL6D INDICATOR OHC $ *
1 SRL0C7EM INDICATOR OHC $ *
1 UA538551-2 COOLER OHC $ *
1 WL101EED3 INDICATOR OEM SERV $ *
1 WL201EED2 INDICATOR OEM SERV $ *
1 WL202EED3 INDICATOR OEM SERV $ *
</TABLE>
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "B"
Prepared for Frontier Airlines Inc
ADDENDUM TO
LEASE OF AIRCRAFT TECHNICAL SPARES AGREEMENT
The following shall constitute as amendment to the Lease of Aircraft Technical
Spares Agreement between the two parties. To the extent the term(s) of this
addendum conflict with the term(s) of the Lease of Aircraft Technical Spares
Agreement, the term(s) of this addendum shall control and the Lease of Aircraft
Technical Spares Agreement is modified hereby. This addendum is effective upon
approval provided by signature of both parties below.
APPENDIX "B"
AGREEMENT/LEASE COMPONENT LISTING
Monthly Lease Rate: 2.2%
<TABLE>
<CAPTION>
PART NUMBER SERIAL NUMBER DESCRIPTION COND OUTRIGHT PRICE / EA
<S> <C> <C> <C> <C>
10037-1000-0153 1221 INDICATOR F/N *
10033-0000-02 B0557 INDICATOR N/S *
G4239 137 VHF COMM SERV *
30-0906-105 3765 LT WINGTIP STRB LT OHC *
30-0906-104 4451 RT WINGTIP STRB LT OHC *
30-0906-104 4552 RT WINGTIP STRB LT OHC *
2067631-5153 7107 RALT XCEIVER OHC *
3605812-17 261-8050C STARTER OHC *
SRDL0C7E 579 INDICATOR OHC *
622-9353-221 794 INDICATOR OHC *
69-37313-78 D01371 PANEL NEW *
69-37331-48 D01114 MODULE NEW *
69-37321-52 D00841 MODULE N/S *
65-52818-5 M00092 COMPUTER SERV *
G6560-03 795 AUDIO OHC *
2588809-902 03770842 CONTROL PANEL OHC *
27660-08 1842 REGULATOR OHC *
69-37335-88 D00920 MODULE N/S *
166891-01-01 0001023 FMC-CNTL DISP UNIT SERV *
C5C 17260 STANDBY COMPASS SERV *
622-1181-008 6326 VHF TRANSCEIVER OHC *
18-1738-9 0463 FLAP POS XMTR OHC *
CG1135AC01 674 CNTL DISPLAY UNIT SERV *
2041217-0416 5652 WXR R/T (TURB) SERV *
10037-1000-0155 717 INDICATOR OHC *
622-5132-106 2606 RECEIVER XMTR OHC *
</TABLE>
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement-Addendum/Appendix "B"
Prepared for Frontier Airlines Inc.
<TABLE>
<CAPTION>
PART NUMBER SERIAL NUMBER DESCRIPTION COND OUTRIGHT PRICE / EA
<S> <C> <C> <C> <C>
2013-1A 54720 BATTERY PACK ASSY SERV *
2012-1 29046 BATTERY CHGR ASSY SERV *
83000-05603 0156 MODULE F/N *
42-719-02 0995 CONTROL BOX SERV *
39B168-1C 339 INVERTER OHC *
622-2921-006 14754 DME TRANSCEIVER OHC *
622-3257-001 6868 VOR/ILS/NAV RCVR OHC *
30-0909-201 0794 TAIL STROBE LIGHT OHC *
831SG250-20R 28888 OXY PRESS XDUCER F/N *
65-44761-21 8086A AILRN/ELEV PWR UN OHC *
57186-10 145624 AC MTR DRVR PUMP OHC *
5034-1 313 AUDIO SELECT PNL SERV *
5039-1 150 AUDIO SELECT PNL SERV *
622-5135-002 1462 ANTENNA MT DRIVE OHC *
622-5137-001 2141 ANT-WEATHER RADR SERV *
2041234-3422 3155 VHF NAV RECEIVER SERV *
10037-1000-0155 720 INDICATOR OHC *
071-50001-8102 X20191 TCAS ANTENNA SERV *
69-37320-105 D02162 MODULE NEW *
3214446-4 2854C HIGH STAGE VALVE OHC *
4030952-906 88072835 YAW DAMPER CPLR OHC *
30-0909-201 1709RU TAIL STROBE LIGHT OHC *
706400-4 13906 VSV MOTOR N/S *
HS140-3 005689 PWR LVR ANGL MTR F/N *
</TABLE>
Signed on behalf of: Signed on behalf of:
AIRCRAFT INSTRUMENT & RADIO CO., INC. FRONTIER AIRLINES INC.
BY: ____________________________ BY: _____________________________
MARTIN POTASH
PRESIDENT _________________________________
Printed Name
DATE: __________________________ _________________________________
Title
DATE: ___________________________
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement - Addendum / Appendix "C"
Prepared for Frontier Airlines Inc.
ADDENDUM TO
LEASE OF AIRCRAFT TECHNICAL SPARES AGREEMENT
The following shall constitute as amendment to the Lease of Aircraft Technical
Spares Agreement between the two parties. To the extent the term(s) of this
addendum conflict with the term(s) of the Lease of Aircraft Technical Spares
Agreement, the term(s) of this addendum shall control and the Lease of Aircraft
Technical Spares Agreement is modified hereby. This addendum is effective upon
approval provided by signature of both parties below.
APPENDIX "C"
AGREEMENT/LEASE COMPONENT LISTING
<TABLE>
<CAPTION>
Monthly Lease Rate: 2.2%
PART NUMBER SERIAL NUMBER DESCRIPTION COND OUTRIGHT PRICE / EA
<S> <C> <C> <C> <C>
G2610A 186 Annun, Nav Warn OHC *
HG480B42 G1164 Air Data Computer OHC *
4019700-907 85120863 Attitude Director Ind SERV *
65-52817-9 D00908 AP Accessory Unit N/S *
4051601-938 90051303 Mode Control Panel SERV *
R1053M18-2 851108 Mechanical Limiter OHC *
65-52804-217 M01291 Audio Unit SERV *
980-4100 DXUS 5315 Flight Data Recorder OHC *
8901-274 WYG39316 Cmpt Inlet Temp Sns SERV *
2070484-5103 1094 Ralt Ind OHC *
2228401-2 011 Unit SERV *
RMC1018-1 13935 Regulator Assy N/S *
</TABLE>
Signed on behalf of: Signed on behalf of:
AIRCRAFT INSTRUMENT & RADIO CO., INC. FRONTIER AIRLINES INC.
BY: ____________________________ BY: _____________________________
MARTIN POTASH
PRESIDENT _________________________________
Printed Name
DATE: __________________________ _________________________________
Title
DATE: ___________________________
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement - Addendum / Appendix "D"
Prepared for Frontier Airlines Inc.
ADDENDUM TO
LEASE OF AIRCRAFT TECHNICAL SPARES AGREEMENT
The following shall constitute as amendment to the Lease of Aircraft Technical
Spares Agreement between the two parties. To the extent the term(s) of this
addendum conflict with the term(s) of the Lease of Aircraft Technical Spares
Agreement, the term(s) of this addendum shall control and the Lease of Aircraft
Technical Spares Agreement is modified hereby. This addendum is effective upon
approval provided by signature of both parties below.
APPENDIX "D" - REVISION 1*
AGREEMENT/LEASE COMPONENT LISTING
<TABLE>
<CAPTION>
Monthly Lease Rate: 2.2%
PART NUMBER SERIAL NUMBER DESCRIPTION COND OUTRIGHT PRICE / EA
<S> <C> <C> <C> <C>
65C37030-1 NSN Mechanism NEW *
65-52819-23 D01036 Computer SERV *
A42899-10-115 K1303A Servo Pneu OHC *
Altimeter
2588810-903 10801229 Channel Pitch SERV *
Control
HG480B13 H1618 Digtl Air Data OHC *
Computer
384300 5911 Fuel Pump OHC *
745608 U2MR9500571 Heater Assembly OHC *
383152-19-1 23986 Starter OHC *
383152-19-1 19897 Starter OHC *
NA134D2 EL3066 Selcal Decoder OHC *
65-44931-11 0003AL Valve Assembly N/S *
522-4538-002 1146 Passenger OHC *
address
2067635-5114 2017 Altitude OHC *
Indicator
9550604L DEC68-773E Anti-Skid Valve OHC *
42-651-01 392 Anti-Skid Unit OHC *
2587335-12 5120492 Vertical Gyro OHC *
EA1065A2406 1904M Transmitter SERV *
4034559-901 83060696 Distance OHC *
Bearing Ind
3117L-B-2-1-P 5983 Radio Magnetic OHC *
Inc
65-52808-7 D00046 Overhead OHC *
Module Comp
69-37319-86 D02604 Module AC N/S *
2070-03-1 640 Servoed Vert OHC *
Speed Ind
*65-51602-8 SWA104 Control OHC *
393080-117 M370 Total Fuel Qty OHC *
Ind
777-1397-004 4H6052 Horizontal OHC *
Situation Ind
</TABLE>
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement Addendum-Appendix "D"
Prepared for Frontier Airlines Inc.
<TABLE>
<CAPTION>
PART NUMBER SERIAL NUMBER DESCRIPTION COND OUTRIGHT PRICE / EA
<S> <C> <C> <C> <C>
2588812-902 04801213 Roll Channel OHC *
Control
10-353875-4 090304 Ignition OHC *
Exciter
10-353875-4 089076 Ignition OHC *
Exciter
39-353 364 Anti-Skid OHC *
Control Valve
69-37307-112 D01739 Unit N/S *
56019-003 1075-06AA Stab Trim Servo OHC *
56019-003 069-09AA Stab Trim Servo OHC *
39-353 7989 Anti-Skid OHC *
Control Value
40-817 0011 Anti-Skid OHC *
Transducer
40-817 11782 Anti-Skid NEW *
Transducer
EA1065A-2406 1906M Water Qty N/S *
Transmitter
EA1093A-3544 22947-66 Tank Unit OHC *
Assembly
772-5005-005 7C2688 Attitude OHC *
Director Ind
772-5005-005 7G2756 Attitude OHC *
Director Ind
11611-142 121-6 Slide OHC *
D31355-440 *
D31354-438 *
21520-1 1249 Fan OHC *
65-52811-109 D00475 Unit Assembly OHC *
18-1739-2 089B Transmitter OHC *
18-1738-1 0627B Flap Postn OHC *
Transmitter
MI585161 2219 Receiver/ SERV *
Transmitter
MI585162-2 2610 Digital OHC *
Indicator
2041234-3401 4987 VHF Nav NEW *
Receiver
JG865C3 Y-4/1 Electric OHC *
Altimeter Ind
8047-20 9081 Altimeter SERV *
777-1493-004 4129 Single ADF OHC *
Control
2CM9ABY7 N0456 Tach Generator OHC *
JG1052AC03 S-18 Altitude OHC *
Alerter
2588810-903 9801215 Channel Pitch SERV *
Control
69-37317-29 M00811 Mod OHC *
G4026 *
G2584 357 Audio SERV *
69-37307-112 D00145 Engine & APU OHC *
Fire Ctrl
8DJ81WAG4U S4137 Tachometer OHC *
*8DJ81WAG4U S2395 N1 Tach Ind OHC *
8DJ81LYV4 R4872 Tachometer Ind OHC *
G4804 75 NAV/DME VHF OHC *
gray 5v.w
787-6211-003 4158 ATC Transponder OHC *
066-1019-23 20782 DME Transceiver OHC *
066-50001-1001 2215 TA/IVSI SERV *
</TABLE>
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement Addendum-Appendix "D"
Prepared for Frontier Airlines Inc.
<TABLE>
<CAPTION>
PART NUMBER SERIAL NUMBER DESCRIPTION COND OUTRIGHT PRICE / EA
<S> <C> <C> <C> <C>
071-01480-0017 1263 Control Panel SERV *
393026-047 M298 Indicator OHC *
8TJ50GCA3 S-0282P Fuel Flow OHC *
Transmitter
8TJ95GAB3 P0037 Power Supply OHC *
65-52805-315 *
39B168-1-B 1836 Static Inverter SERV *
65-52810-25 D00175 Unit Assembly OHC *
65-73606-29 M00676 Engine OHC *
Accessory Unit
65-52806-110 M00498 Solid State OHC *
Module
*65-52807-26 M00712 Unit Assembly OHC *
65-52809-15 D00004 Unit Assembly OHC *
2067631-5115 5337 Radio Altimeter OHC *
65-52804-79 M00688 Unit OHC *
NA134D2 255AD00059 Selcal Decoder OHC *
255-5 859 Passenger OHC *
Address Amp
522-3949-001 1738 Warning Monitor OHC *
2591201-922 91048010 Compass Coupler OHC *
777-1397-004 2L5388 Horizonal OHC *
Situation Ind
42-651 183 U/T Assembly SERV *
Anti-Skid
EA10934-3679 872 Tank Unit OHC *
Assembly
MI585164-1 1293 Antenna OHC *
Pedestal
*763810-2 GJ4053 Cabin Press OHC *
Control
69-55179-23 M00303 Annun & Dimg OHC *
Module
</TABLE>
Signed on behalf of: Signed on behalf of:
AIRCRAFT INSTRUMENT & RADIO CO., INC. FRONTIER AIRLINES INC.
BY: ____________________________ BY: /s/ Samuel D. Addoms
MARTIN POTASH _____________________________
PRESIDENT
_________________________________
Printed Name
DATE: __________________________ _________________________________
Title
DATE: Nov. 18, 1996
___________________________
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement - Addendum / Appendix "E"
Prepared for Frontier Airlines Inc.
ADDENDUM TO
LEASE OF AIRCRAFT TECHNICAL SPARES AGREEMENT
The following shall constitute as amendment to the Lease of Aircraft Technical
Spares Agreement between the two parties. To the extent the term(s) of this
addendum conflict with the term(s) of the Lease of Aircraft Technical Spares
Agreement, the term(s) of this addendum shall control and the Lease of Aircraft
Technical Spares Agreement is modified hereby. This addendum is effective upon
approval provided by signature of both parties below.
APPENDIX "E" - REVISION 1*
AGREEMENT/LEASE COMPONENT LISTING
<TABLE>
<CAPTION>
Monthly Lease Rate: 2.2%
PART NUMBER SERIAL NUMBER DESCRIPTION COND OUTRIGHT PRICE / EA
<S> <C> <C> <C> <C>
2083-08-1 896 Mach Airspeed Ind OHC *
2070945-4301 1007 VHF Comm OHC *
777-1492-004 6692 ADF Receiver OHC *
157771-01-01 *
15625 3888 Trip & Date Endocer N/S *
GM5341-6 1656 Transducer N/S *
711003-3 840670 Cabin Outflow Vlv As OHC *
711002-5 80C5489 Panel, Control PR OHC *
SRLOC4N 7657 Oil Pressure Ind OHC *
171019-13 2087 Valve SERV *
65075-06 223517A Pump Assembly OHC *
705-7V4 7088 Horizon Gyro OHC *
965-0876-030-B05-B08 *
A100-80 54960 Cockpit Voice Recorder OHC *
93-A152-00 1664 Control OHC *
2067631-0506 5295 Radio Altimeter OHC *
9561006-3R MAR67-10 Skid Control Unit OHC *
75-0149-11 *
*45080-1 65783 Shut-Off Valve NEW *
*162BL901 A602 Indicator OHC *
102AH2AG 35689 Probe SERV *
*WL113AMAJA5 *
*69-37320-104 D01413 Eng-wing tat module OHC *
*393026-047 M796C Indicator OHC *
*65-52807-12 M00048 Flap Acc Unit OHC *
</TABLE>
<PAGE>
Aircraft Instrument & Radio Co., Inc.
Aircraft Component Lease Agreement Addendum-Appendix "E"
Prepared for Frontier Airlines Inc.
<TABLE>
<S> <C> <C> <C> <C>
*R1053M17-2 880402 Actuator N/S *
*393026-047 M373C Indicator OHC *
</TABLE>
Signed on behalf of: Signed on behalf of:
AIRCRAFT INSTRUMENT & RADIO CO., INC. FRONTIER AIRLINES INC.
BY: ____________________________ BY: _____________________________
MARTIN POTASH
PRESIDENT _________________________________
Printed Name
DATE: _____________________________ _________________________________
Title
DATE: ___________________________
<PAGE>
Exhibit 10.26
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of June 30, 1997 (the
"Agreement") by and between Western Pacific Airlines, Inc., a Delaware
- ----------
corporation ("West Pac"), and Frontier Airlines, Inc., a Colorado corporation
--------
("Frontier").
- ----------
R E C I T A L S:
WHEREAS, the Board of Directors of each of West Pac and Frontier have
determined that a business combination between West Pac and Frontier is in the
best interests of their respective companies and stockholders and presents an
opportunity for their respective companies to achieve long-term strategic and
financial benefits, and accordingly have agreed to effect the merger provided
for in this Agreement upon the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, the respective Boards of Directors of West Pac and Frontier have
received the opinions of Lehman Brothers Inc. ("Lehman Brothers") and Smith
---------------
Barney Inc. ("Smith Barney"), respectively, that the Exchange Ratio (as defined
------------
in Section 1.4(a)) is fair to their respective stockholders from a financial
point of view; and
WHEREAS, on the date hereof, the parties hereto have entered into a Code
Sharing Agreement (the "Code Sharing Agreement") in the form attached hereto as
----------------------
Exhibit A; and
- ---------
WHEREAS, it is the intention of the parties to this Agreement that (a) for
federal income tax purposes, the merger provided for in this Agreement shall
qualify as a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"); and (b) for accounting purposes,
----
the merger provided for in this Agreement shall qualify as a "pooling of
interests."
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth in this
Agreement, the parties to this Agreement hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions of this
----------
Agreement, at the Effective Time (as defined in Section 1.3 of this Agreement),
Frontier shall be merged with and into West Pac in accordance with the laws of
the States of Delaware and Colorado, and the terms of this Agreement (the
"Merger"), whereupon (a) the separate corporate existence of Frontier shall
- -------
cease, and (b) West Pac shall be the surviving corporation of the Merger
(sometimes referred to herein as the "Surviving Corporation").
---------------------
<PAGE>
1.2. Closing. Subject to the terms and conditions of this Agreement, the
-------
closing of the Merger (the "Closing") shall take place (a) at the offices of
-------
West Pac located at 2864 South Circle Drive, Suite 1100, Colorado Springs,
Colorado 80906 at 10:00 a.m. on the second business day after all the conditions
set forth in Article VI of this Agreement (other than those that are waived by
the party or parties for whose benefit such conditions exist) are satisfied; or
(b) at such other place, time, and/or date as the parties to this Agreement may
otherwise agree. The date upon which the Closing shall occur is referred to
herein as the "Closing Date."
------------
1.3. Effective Time. If all the conditions to the Merger set forth in
--------------
Article VI of this Agreement have been fulfilled or waived and this Agreement
shall not have been terminated as provided in Article VII hereof, the parties to
this Agreement shall cause certificates of merger to be properly executed and
filed in accordance with the laws of the States of Delaware and Colorado and the
terms of this Agreement as soon as practicable following the Closing. The
parties to this Agreement shall also take such further actions as may be
required under the laws of the States of Delaware and Colorado in connection
with the consummation of the Merger. The Merger shall become effective at such
time as the certificates of merger are duly filed with the Secretaries of State
of the States of Delaware and Colorado or at such later time as is specified in
the certificates of merger (the "Effective Time"). From and after the Effective
--------------
Time, the Surviving Corporation shall possess all the rights, privileges, powers
and franchises and be subject to all of the restrictions, disabilities and
duties of West Pac and Frontier, all as provided under applicable law.
1.4. Conversion of Shares.
--------------------
(a) At the Effective Time:
(i) each share of Common Stock, par value $0.001 per share
("West Pac Common Stock"), of West Pac outstanding immediately prior to
-----------------------
the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, shall remain outstanding and shall represent
one share of West Pac Common Stock, as the Surviving Corporation of the
Merger;
(ii) each share of any class or series of preferred stock of West
Pac outstanding immediately prior to the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, shall
remain outstanding and shall represent one share of such class or series of
preferred stock of the Surviving Corporation; and
(iii) each share of Common Stock, no par value per share ("Frontier
--------
Common Stock"), of Frontier outstanding immediately prior to the Effective
------------
Time, together with each associated right issued pursuant to the terms of
the Rights Agreement (as defined herein), by virtue of the Merger and
without any action on the part of the holder thereof, except as otherwise
provided in this Section 1.4 or Sections 1.8 or 5.2(b) hereof, shall be
converted into the right to receive .75 share of West Pac Common Stock
(such ratio being referred to herein as the "Exchange Ratio").
--------------
2
<PAGE>
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all shares of Frontier Common Stock shall
cease to be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of shares of Frontier Common Stock shall thereafter cease
to have any rights with respect to such shares of Frontier Common Stock, except
for the right to receive (except as otherwise provided in Section 1.8 hereof),
without interest, the West Pac Common Stock and cash for fractional shares of
West Pac Common Stock in accordance with Section 1.6 of this Agreement upon the
surrender of a certificate (each, a "Certificate") representing such shares of
-----------
Frontier Common Stock in accordance with the provisions of this Article I.
(c) At the Effective Time, each share of (i) Frontier Common Stock held
by Frontier as treasury stock or owned by West Pac or any Subsidiary (as defined
in Section 1.4(d) of this Agreement) of West Pac immediately prior to the
Effective Time; and (ii) Preferred Stock, no par value per share ("Frontier
--------
Preferred Stock"), of Frontier, none of which has been issued, shall be
- ---------------
canceled, and no payment shall be made with respect thereto.
(d) For purposes of this Agreement, (i) the word "Subsidiary" when used
----------
with respect to any Person means any corporation or other organization, whether
incorporated or unincorporated, of which (A) at least fifty percent (50%) of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries; or (B) such Person or any other Subsidiary of such Person is a
general partner, it being understood that representations and warranties of a
Person concerning any former Subsidiary of such Person shall be deemed to relate
only to the periods during which such former Subsidiary was a Subsidiary of such
Person; and (ii) the word "Person" means an individual, a corporation, a limited
------
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof, or any affiliate (as that term is defined in the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act")) of any of the foregoing.
------------
1.5. Stock Options. All options and warrants (individually, a "Frontier
------------- --------
Option" and collectively, the "Frontier Options") outstanding at the Effective
- ------ ----------------
Time to purchase securities of Frontier under any stock option plans or
agreements adopted by Frontier or otherwise (the "Frontier Stock Option Plans")
---------------------------
shall remain outstanding following the Effective Time. At the Effective Time,
such Frontier Options, by virtue of the Merger and without any further action on
the part of Frontier or the holder of such Frontier Options, shall be assumed by
West Pac in such manner that West Pac (a) is a corporation (or a parent or a
subsidiary corporation of such corporation) "assuming a stock option in a
transaction to which Section 424(a) applied" within the meaning of Section 424
of the Code; or (b) to the extent that Section 424 of the Code does not apply to
any such Frontier Options, would be such a corporation (or a parent or a
subsidiary corporation of such corporation) were Section 424 applicable to such
option. Each Frontier Option assumed by West Pac shall be exercisable upon the
same terms and conditions as under
3
<PAGE>
the applicable Frontier Stock Option Plan and the applicable option agreement
issued thereunder, except that (x) the unexercised portion of each such Frontier
Option shall be exercisable for that whole number of shares of West Pac Common
Stock (rounded to the nearest whole share, with 0.5 rounded upward) equal to the
number of shares of Frontier Common Stock subject to the unexercised portion of
such Frontier Option multiplied by the Exchange Ratio; and (y) the option
exercise price per share of West Pac Common Stock shall be an amount equal to
the option exercise price per share of Frontier Common Stock subject to such
Frontier Option in effect at the Effective Time divided by the Exchange Ratio
(the option price per share, as so determined, being rounded to the nearest full
cent, with $0.005 rounded upward). No payment shall be made for fractional
interests. The term, exercisability, vesting schedule, status as an "incentive
stock option" under Section 422 of the Code, if applicable, and all of the other
terms of the Frontier Options shall otherwise remain unchanged unless modified
by or as a result of the transaction contemplated by this Agreement. As soon as
practicable after the Effective Time, West Pac shall deliver to the holders of
Frontier Options appropriate notices setting forth such holders' rights pursuant
to such Company Options, as amended by this Section 1.5, as well as notice of
West Pac's assumption of Frontier's obligations with respect thereto (which
occurs by virtue of this Agreement). West Pac shall take all corporate actions
necessary to reserve for issuance such number of shares of West Pac Common Stock
as will be necessary to satisfy exercises in full of all Frontier Options after
the Effective Time. Within forty-five (45) days after the Effective Time, West
Pac shall register the shares of West Pac Common Stock issuable upon exercise of
such Frontier Options with the Securities and Exchange Commission on Form S-8
and, for a period running until the earlier of (i) ten (10) years after the
Effective Time; or (ii) the exercise of all of the Frontier Options, shall
maintain the effectiveness of such Form S-8 Registration Statement unless the
Surviving Corporation is acquired after the Effective Time by any Person that
does not have a class of securities registered under the Exchange Act.
1.6. Exchange of Certificates Representing Frontier Common Stock.
-----------------------------------------------------------
(a) As of the Effective Time, West Pac shall deposit with an exchange
agent selected by West Pac, which shall be West Pac's Transfer Agent or such
other party reasonably satisfactory to Frontier (the "Exchange Agent"), for the
--------------
benefit of the holders of shares of Frontier Common Stock, for exchange in
accordance with this Section 1.6, certificates representing the shares of West
Pac Common Stock and the cash in lieu of fractional shares (such cash and
certificates for shares of West Pac Common Stock, together with any dividends or
distributions with respect thereto (relating to record dates for such dividends
or distributions after the Effective Time), being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to this
-------------
Section 1.6 in exchange for outstanding shares of Frontier Common Stock.
(b) Promptly after the Effective Time, West Pac shall cause the Exchange
Agent to mail to each holder of record of shares of Frontier Common Stock, other
than to holders of Frontier Dissenting Shares (as defined herein) (i) a letter
of transmittal specifying that delivery shall be effected, and risk of loss and
title to such shares of Frontier Common Stock shall pass, only upon delivery of
the Certificates representing such shares to the Exchange Agent and which
4
<PAGE>
shall be in such form and have such other provisions as are agreed to by West
Pac and Frontier; and (ii) instructions for use in effecting the surrender of
such Certificates in exchange for certificates representing shares of West Pac
Common Stock and cash in lieu of fractional shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of the shares represented by such Certificate shall be
entitled to receive in exchange therefor (i) a certificate representing that
number of whole shares of West Pac Common Stock; and (ii) a check representing
the amount of cash in lieu of fractional shares, if any, and unpaid dividends
and distributions, if any, which such holder has the right to receive in respect
of the Certificate surrendered pursuant to the provisions of this Section 1.6,
after giving effect to any required withholding tax, and the shares represented
by the Certificate so surrendered shall forthwith be canceled. No interest will
be paid or accrued on the cash in lieu of fractional shares and unpaid dividends
and distributions, if any, payable to holders of shares of Frontier Common
Stock. In the event of a transfer of ownership of Frontier Common Stock which is
not registered in the transfer records of Frontier, a certificate representing
the proper number of shares of West Pac Common Stock, together with a check for
the cash to be paid in lieu of fractional shares, if any, and unpaid dividends
and distributions, if any, may be issued to such a transferee if the Certificate
representing such Frontier Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) Notwithstanding anything to the contrary contained herein, no
dividends or other distributions declared after the Effective Time on West Pac
Common Stock shall be paid with respect to any shares of Frontier Common Stock
represented by a Certificate until such Certificate is surrendered for exchange
as provided herein. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of West Pac Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of West Pac
Common Stock and not paid, less the amount of any withholding taxes which may be
required thereon; and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of West Pac Common Stock, less the amount of any
withholding taxes which may be required thereon.
(d) If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for certificates for
shares of West Pac Common Stock and cash in lieu of fractional shares, if any,
deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Section 1.6. Certificates surrendered for exchange
by any person constituting an "affiliate" of Frontier for purposes of Rule
145(c) under the Securities Act of 1933, as amended (the "Securities Act"),
--------------
shall not be exchanged until West Pac has received a written agreement from such
person as provided in Section 5.9.
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(e) No fractional shares of West Pac Common Stock shall be issued
pursuant to this Agreement. In lieu of the issuance of any fractional share of
West Pac Common Stock pursuant to Section 1.4(b), cash adjustments will be paid
to holders in respect of any fractional share of West Pac Common Stock that
would otherwise be issuable, and the amount of such cash adjustment shall be
equal to such fractional proportion of the Average Closing Price of a share of
West Pac Common Stock. For purposes hereof, the term "Average Closing Price"
---------------------
shall mean the average of the per share daily closing price of West Pac Common
Stock as quoted on the Nasdaq National Market System ("Nasdaq") (and as reported
------
by the Wall Street Journal or, if not reported thereby, by another authoritative
source) during the ten (10) consecutive trading days ending on the second
trading day prior to the Closing Date.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of West Pac Common Stock) that remains
unclaimed by the former stockholders of Frontier one year after the Effective
Time shall be delivered to the Surviving Corporation. Except for holders of
Frontier Dissenting Shares, any former stockholders of Frontier who have not
theretofore complied with this Section 1.6 shall thereafter look only to the
Surviving Corporation for payment of their shares of West Pac Common Stock, cash
in lieu of fractional shares and unpaid dividends and distributions on the West
Pac Common Stock deliverable in respect of each share of Frontier Common Stock
such stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
(g) None of West Pac, Frontier, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Frontier Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate, the
shares of West Pac Common Stock and cash in lieu of fractional shares, and
unpaid dividends and distributions on shares of West Pac Common Stock as
provided in this Section 1.6, deliverable in respect thereof pursuant to this
Agreement.
1.7. Adjustment of Exchange Ratio. In the event that, subsequent to the
----------------------------
date of this Agreement but prior to the Effective Time, the outstanding shares
of West Pac Common Stock or Frontier Common Stock, respectively, shall have been
changed into a different number of shares or a different class as a result of a
stock split, reverse stock split, stock dividend, subdivision, reclassification,
split, combination, exchange, recapitalization or other similar transaction, the
Exchange Ratio shall be appropriately and proportionately adjusted.
6
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1.8. Dissenting Shares. Notwithstanding anything to the contrary
-----------------
contained in this Agreement, any shares of Frontier Common Stock held by a
person who complies with all of the provisions of applicable law concerning the
rights of such person to dissent from the Merger and to require appraisal of
such person's shares of Frontier Common Stock (the "Frontier Dissenting
-------------------
Shares"), shall not be converted into the right to receive shares of West Pac
- ------
Common Stock pursuant to Section 1.4 of this Agreement but shall entitle the
holder of such Frontier Dissenting Shares to receive such consideration as may
be determined to be due to such holder pursuant to applicable law; provided
however, that any Frontier Dissenting Shares held by a person at the Effective
Time who shall, after the Effective Time, withdraw the demand for appraisal or
lose the right to appraisal, in either case pursuant to applicable law, shall be
deemed to have been converted, as of the Effective Time, into shares of West Pac
Common Stock pursuant to Section 1.4 of this Agreement.
1.9. Taking of Necessary Action; Further Action. If, at any time after
------------------------------------------
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Frontier, the officers and directors of Frontier are fully
authorized to take, and will take, all such lawful and necessary action, so long
as such action is consistent with this Agreement.
ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
2.1. Certificate of Incorporation of the Surviving Corporation. The
---------------------------------------------------------
Certificate of Incorporation of West Pac in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until amended in accordance with applicable law.
2.2. By-Laws of the Surviving Corporation. The By-Laws of West Pac in
------------------------------------
effect immediately prior to the Effective Time shall be the By-Laws of the
Surviving Corporation until amended in accordance with applicable law.
2.3. Directors of the Surviving Corporation. Except as otherwise
--------------------------------------
provided in Section 5.12 hereof, the directors of West Pac at the Effective Time
shall be the directors of the Surviving Corporation and shall hold office until
their successors are duly appointed or elected in accordance with applicable
law.
2.4. Officers of the Surviving Corporation. Except as otherwise provided
-------------------------------------
in Section 5.12 hereof, the officers of West Pac at the Effective Time shall be
the officers of the Surviving Corporation and shall hold office until their
successors are duly appointed or elected in accordance with applicable law.
7
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WEST PAC
West Pac represents and warrants to Frontier that the statements contained
in this Article III are true and correct, except as set forth in the disclosure
schedule delivered by West Pac to Frontier concurrently herewith and identified
as the "West Pac Disclosure Schedule." All exceptions noted in the West Pac
----------------------------
Disclosure Schedule are numbered to correspond to the applicable Sections to
which such exception refers; provided, however, that any disclosure set forth on
any particular schedule shall be deemed disclosed in reference to all applicable
schedules.
3.1. Existence, Good Standing, Corporate Authority. West Pac is a
---------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. West Pac is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of any
other state of the United States in which the character of the properties owned
or leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified or to be in
good standing would not have a material adverse effect on the business, results
of operations or financial condition of West Pac (a "West Pac Material Adverse
-------------------------
Effect"). West Pac has all requisite corporate power and authority to own,
- ------
operate and lease its properties. The copies of West Pac's Restated Certificate
of Incorporation and Bylaws previously delivered to Frontier are true and
correct.
3.2. Authorization, Validity and Effect of Agreements. Subject only to
------------------------------------------------
the approval of this Agreement and the transactions contemplated hereby by the
holders of a majority of the outstanding shares of West Pac Common Stock, West
Pac has the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents to be executed and delivered by West
Pac in connection herewith (the "West Pac Ancillary Documents"). Subject only to
----------------------------
the approval of this Agreement and the transactions contemplated hereby by the
holders of a majority of the outstanding shares of West Pac Common Stock, the
consummation by West Pac of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
the West Pac Ancillary Documents (when executed and delivered pursuant to this
Agreement for value received) will constitute, the valid and legally binding
obligations of West Pac, enforceable against West Pac in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity and the approval of this Agreement and the West Pac Ancillary Documents
by the stockholders of West Pac.
3.3. Compliance with Laws--General.
-----------------------------
(a) West Pac holds all permits, licenses, variances, exemptions, orders
and approvals of any court, arbitrator, tribunal, administrative agency or
commissioner or other governmental
8
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or other regulatory authority or agency ("Governmental Entities") (including,
---------------------
but not limited to, those related to occupational health and safety, controlled
substances, Environmental Laws (as defined herein), Tax (as defined herein)
laws, labor, ERISA (as defined herein), employment and employment practices or
EEOC matters) necessary for the lawful conduct of its business (the "Permits"),
-------
and is in compliance with such Permits, in each case, except where the failure
to hold or comply with such Permits would not have a West Pac Material Adverse
Effect.
(b) West Pac is in substantial compliance with all laws, ordinances or
regulations of all Governmental Entities (including, but not limited to, those
related to occupational health and safety, controlled substances or employment
and employment practices) that are applicable to West Pac, except for any
noncompliance that would not have a West Pac Material Adverse Effect.
(c) As of the date of this Agreement, and as of the Closing, no
investigation, review, inquiry or proceeding by any Governmental Entity with
respect to West Pac is pending, or, to the knowledge of West Pac, threatened
that would have a West Pac Material Adverse Effect.
(d) West Pac is not subject to any agreement, contract or decree with
any Governmental Entities arising out of any current or previously existing
violations of any laws, ordinances or regulations applicable to West Pac,
including, without limitation, any such agreement, contract or decree entered
into with or issued by the U.S. Department of Transportation ("DOT") or the
---
Federal Aviation Administration ("FAA") that would have a West Pac Material
---
Adverse Effect.
3.4. Capitalization.
--------------
(a) The authorized capital stock of West Pac consists of (i) 40,000,000
shares of West Pac Common Stock; (ii) 200,000 shares of Series B Preferred
Stock, par value $0.001 per share ("Series B Preferred"); (iii) 10,000 shares of
------------------
Series C Preferred Stock, par value $0.001 per share ("Series C Preferred"); and
------------------
(iii) 2,837,000 shares of Preferred Stock, $0.001 par value per share. As of May
30, 1997, there were 13,527,977 shares of West Pac Common Stock issued and
outstanding. As of the date hereof, there were 200,000 shares of Series B
Preferred and 10,000 shares of Series C Preferred issued and outstanding. Since
May 30, 1997, no additional shares of capital stock of West Pac have been
issued, except pursuant to the exercise of options outstanding under West Pac's
stock option and employee stock purchase plans (the "West Pac Stock Option
---------------------
Plans"). West Pac has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of West Pac on any matter. All issued and outstanding shares
of West Pac Common Stock, Series B Preferred and Series C Preferred are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights.
(b) There are currently no outstanding, and as of the Closing, there
will be no outstanding (i) securities convertible into or exchangeable for any
capital stock of West Pac, (ii) options, warrants or other rights to purchase or
subscribe to capital stock of West Pac or securities
9
<PAGE>
convertible into or exchangeable for capital stock of West Pac, or (iii)
contracts, commitments, agreements, understandings, arrangements, calls or
claims of any kind relating to the issuance of any capital stock of West Pac.
3.5. Subsidiaries; Other Interests. West Pac does not own any
-----------------------------
Subsidiaries. Except for interests disclosed on the West Pac Disclosure
Schedule, West Pac does not own, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation, partnership, limited
liability company, joint venture, business, trust or entity ((other than
investments in short-term investment securities) and corporate, partnership,
development, cooperative marketing and similar undertakings and arrangements
entered into in the ordinary course of business and other investments the
aggregate market value of which is less than $100,000).
3.6. No Violation. Neither the execution and delivery by West Pac of
------------
this Agreement, nor the consummation by West Pac of the transactions
contemplated hereby in accordance with the terms hereof, will (a) conflict with
or result in a breach of any provisions of the Restated Certificate of
Incorporation or Bylaws of West Pac; (b) result in a breach or violation of, a
default under, or the triggering of any payment or other material obligations
pursuant to, or accelerate vesting under, any of the West Pac Stock Option
Plans, or any grant or award made under any of the foregoing; (c) violate,
conflict with, result in a breach of any provision of, constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, result in the termination, or in a right of termination or
cancellation of, accelerate the performance required by, result in the
triggering of any payment or other material obligations pursuant to, result in
the creation of any lien, security interest, charge or encumbrance upon any of
the material properties of West Pac under, or result in being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any material
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which West Pac is a party, or by which West Pac or
any of its properties is bound or affected, except for any of the foregoing
matters which would not have a West Pac Material Adverse Effect; (d) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
West Pac which would have a West Pac Material Adverse Effect; or (e) other than
the filings provided for in Section 1.3, filings under applicable federal, state
and local regulatory filings, filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), the Exchange Act, the
-------
Securities Act, or applicable state securities and "Blue Sky" laws or filings in
connection with the maintenance of qualification to do business in other
jurisdictions (collectively, the "Regulatory Filings"), require any consent,
------------------
approval or authorization of, or declaration, of or registration with, any
domestic governmental or regulatory authority, the failure to obtain or make
which would have a West Pac Material Adverse Effect.
3.7. Conduct of Business. The business of West Pac is not being
-------------------
conducted in default or violation of any term, condition or provision of (a) its
Articles of Incorporation or By-Laws or similar organizational documents; (b)
any note, bond, mortgage, indenture, contract, agreement, lease or other
instrument or agreement or any kind to which West Pac is now a party or by
which
10
<PAGE>
West Pac or any of its properties or assets may be bound; (c) any federal,
state, local or foreign statute, law, ordinance, rule, regulation or approval
applicable to West Pac, except, with respect to the foregoing clauses (b) and
(c), defaults or violations that would not have a West Pac Material Adverse
Effect.
3.8. Books and Records. West Pac's books, accounts and records are, and
-----------------
have been, in all material respects, maintained in West Pac's usual, regular and
ordinary manner, in accordance with GAAP, and since West Pac's inception, all
material transactions to which West Pac is or has been a party are properly
reflected therein.
3.9. SEC Documents. West Pac has delivered or made available to
-------------
Frontier each registration statement, report, proxy statement or information
statement (as defined in Regulation 14C under the Exchange Act) prepared by it
since January 1, 1995, which reports constitute all of the documents required to
be filed by West Pac with the Securities and Exchange Commission ("SEC") since
---
such date, each in the form (including exhibits and any amendments thereto)
filed with the SEC (collectively, the "West Pac SEC Reports"). As of their
--------------------
respective dates, the West Pac SEC Reports and any West Pac SEC Reports filed
after the date hereof and prior to the Effective Time (a) complied as to form in
all material respects with the applicable requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations thereunder;
and (b) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. West Pac has timely filed with the SEC all reports
required to be filed under Sections 13, 14 and 15(d) of the Exchange Act since
January 1, 1995. Each of the balance sheets of West Pac included in or
incorporated by reference into the West Pac SEC Reports (including the related
notes and schedules) fairly present in all material respects the financial
position of West Pac as of its date (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would not be material in
amount or effect), and each of the consolidated statements of income, retained
earnings and cash flows of West Pac included in or incorporated by reference
into the West Pac SEC Reports (including any related notes and schedules) fairly
present in all material respects the results of operations, retained earnings or
cash flows, as the case may be, of West Pac for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect). The financial
statements of West Pac, including the notes thereto, included in or incorporated
by reference into the West Pac SEC Reports comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, and have been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP") (except as may be indicated in the notes thereto). Since January 1,
----
1995, there has been no material change in West Pac's accounting methods or
principles except as described in the notes to such West Pac financial
statements.
11
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3.10. Proprietary Rights.
------------------
(a) All of West Pac's patents, patent applications, trademarks,
trademark applications, copyrights, trade names, and airline industry specific
computer software (collectively, the "Intellectual Property") are listed in the
---------------------
West Pac Disclosure Schedule. For purposes of this Agreement, the Intellectual
Property, together with all other computer software, software programs, trade
secrets, formulations, service marks, inventions, drawings, designs, customer
lists, proprietary know-how or information or other rights with respect thereto,
are collectively referred to herein as the "Proprietary Rights".
------------------
(b) To West Pac's knowledge, West Pac owns or possesses adequate
licenses or other rights to use any and all of its Proprietary Rights used in or
required for its business as currently conducted free and clear of any liens,
claims or encumbrances, except where the failure to possess such Proprietary
Rights would not have a West Pac Material Adverse Effect.
(c) West Pac has no knowledge of any claims, disputes, actions,
proceedings, suits or appeals pending or threatened against West Pac relating to
any of its Proprietary Rights which, if adversely determined to West Pac, could
reasonably be expected to result in a loss of any of its material Proprietary
Rights or any other loss that could reasonably be expected to have a West Pac
Material Adverse Effect.
(d) To West Pac's knowledge, none of its Proprietary Rights infringe on
the proprietary rights of any third party nor are the Proprietary Rights of any
third party infringing on the Proprietary Rights of West Pac, where such
infringement could reasonably be expected to result in a loss of any of West
Pac's material Proprietary Rights or any other loss that could reasonably be
expected to have a West Pac Material Adverse Effect.
(e) To West Pac's knowledge, West Pac has not disclosed any of its trade
secrets to any Person without obtaining an agreement obligating the recipient to
maintain the confidentiality thereof and West Pac has taken reasonable security
measures to protect the confidentiality and value of its trade secrets.
(f) West Pac has not disposed of or granted any license to use any of
its Proprietary Rights, nor has West Pac granted any options to purchase or
obtain a license to, or any other lien, claim or encumbrance on, any of its
Proprietary Rights.
3.11. Disclosure Documents. The Joint Proxy Statement Prospectus to be
--------------------
delivered to the stockholders of each of West Pac and Frontier in connection
with the approval of the transactions contemplated by this Agreement, or any
amendment or supplement thereto (the "Proxy Statement"), at the time of mailing
---------------
thereof and at the time of the respective meetings of stockholders of Frontier
and West Pac, or, in the case of the Form S-4 (as defined in Section 5.7 of this
Agreement) and each amendment or supplement thereto, at the time it is filed or
becomes effective when filed with the SEC, will not include an untrue statement
of a material fact or omit
12
<PAGE>
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
--------
extent that any such untrue statement of a material fact or omission to state a
material fact was made by West Pac in reliance upon and in conformity with
written information concerning Frontier furnished to West Pac by Frontier
specifically for use in the Proxy Statement.
3.12. Litigation. There are no actions, suits or proceedings pending
----------
against West Pac or, to West Pac's knowledge, threatened against West Pac, at
law or in equity, or before or by any federal or state commission, board,
bureau, agency or instrumentality, none of which, individually or in the
aggregate, would have a West Pac Material Adverse Effect. To West Pac's
knowledge, there is no such action, suit, investigation or proceeding which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated hereby.
3.13. Aviation Act; Aircraft; Assets.
------------------------------
(a) West Pac is an air carrier operating under a Certificate of Public
Convenience and Necessity issued by the DOT under Section 401 of the Federal
Aviation Act of 1958, as amended (the "Aviation Act"), and holding an air
------------
carrier operating certificate and operations specifications issued pursuant to
Part 121 of the Federal Aviation Regulations issued by the FAA under the
Aviation Act (collectively such certificates are called the "Operating
---------
Authorizations"), which Operating Authorizations are in full force and effect,
- --------------
and West Pac is operating in compliance with all rules and regulations of the
FAA, the DOT and the Operating Authorizations, except where the failure to
maintain such Operating Authorizations or comply with such rules and regulations
would not have a West Pac Material Adverse Effect. West Pac does not operate
under any orders pursuant to the Essential Air Service Program of the DOT.
(b) To West Pac's knowledge, all aircraft owned, leased or in the
possession and control of West Pac and all other material assets of West Pac,
are in sound operating condition and are being maintained in all material
respects according to FAA regulatory standards, West Pac's FAA-authorized
maintenance program and all other applicable laws, except where the failure to
maintain such Operating Authorizations or comply with such rules and regulations
would not have a West Pac Material Adverse Effect. A list of all aircraft now
owned, leased or in the possession and control of West Pac is set forth on the
West Pac Disclosure Schedule. West Pac has good and valid title to such assets
and properties that are owned by West Pac, free and clear of any liens, claims
or other encumbrances, other than (i) statutory liens for taxes not yet due,
(ii) liens of carriers, warehousemen, mechanics and materialmen incurred in the
ordinary course of business for sums not yet due; and (iii) liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security. West
Pac has not received notice that any of its assets or properties is in violation
of any existing law or any health, safety or other ordinance, code or
regulation, except for violations that would not have a West Pac Material
Adverse Effect. All material leases of equipment, software
13
<PAGE>
or other personal property to which West Pac is a party are valid and subsisting
leases, and, except as terminated in the ordinary course of business, upon
consummation of the transactions contemplated hereby, shall continue to entitle
West Pac to the use and possession of the personal property purported to be
covered thereby for the terms specified in such leases.
3.14. Material Adverse Change. Since December 31, 1996 to the date of
-----------------------
this Agreement, West Pac has not suffered any change to its business,
operations, assets, liabilities, financial condition or prospects which would
reasonably have a West Pac Material Adverse Effect. Since December 31, 1996 to
the date of this Agreement, (a) West Pac has not entered into any transaction
outside the ordinary course of business which will be required to be disclosed
in West Pac's Form 10-K for the year ended December 31, 1997; (b) West Pac has
not (i) declared, set aside or paid any dividend or made any other distribution
or payment with respect to any shares of its capital stock or other ownership
interests; or (ii) directly or indirectly, redeemed, purchased or otherwise
acquired any shares of its capital stock, or made any commitment for any such
action; or (c) West Pac has not voluntarily elected to alter the manner of
keeping its books, accounts or records, or changed in any manner the accounting
practices therein reflected, except for (i) changes that would not have a West
Pac Material Adverse Effect; or (ii) changes in accounting laws which effect all
airline companies generally.
3.15. Real Property. West Pac does not own any real property. The West
-------------
Pac Disclosure Schedule describes all material real property leased by West Pac
(the "West Pac Real Property"), along with a brief description of the property
----------------------
and all improvements thereon and a brief description of all material leases (the
"West Pac Leases") under which such West Pac Real Property is leased by West
---------------
Pac. Full and complete copies of all the West Pac Leases have been made
available to Frontier. To West Pac's knowledge, all of the West Pac Real
Property and improvements thereon are suitable for the purposes for which they
are currently used. To West Pac's knowledge, none of the West Pac Leases is in
default, no waiver, indulgence or postponement of West Pac's obligations
thereunder has been granted by the lessor and no event has occurred which, with
the passage of time or the giving of notice, or both, would constitute a default
thereunder.
3.16. Material Contracts. West Pac is not a party to or bound by,
------------------
and none of its properties is subject to (a) any loan agreements, promissory
notes, guaranties or other material evidence of indebtedness; (b) any
distributorship, non-employee commission or marketing agent, representative or
franchise agreement providing for the marketing and/or sale of the products or
services of West Pac; (c) any agreement relating to the ownership or control of
any interest in a partnership, corporation, limited liability company, joint
venture or other entity or similar arrangement; (d) any employment contracts or
consulting arrangements entered into by West Pac or agreements or arrangements
with respect to severance or similar matters; (e) any agreement or arrangement
restricting in any manner (i) West Pac's right to compete with any other person
or entity; (ii) West Pac's right to sell to or purchase from any other person or
entity; (iii) the right of any other party to compete with West Pac; or (iv) the
ability of such person or entity to employ any of West Pac's employees; (f) any
secrecy or confidentiality agreement; (g) any contract, agreement or arrangement
containing change of control provisions; (h) any agreement or arrangement
between West Pac and any of its officers, directors or other Affiliates; (i) any
contract, agreement or arrangement requiring
14
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a payment or receipt of funds in excess of $100,000.00 in any twelve month
period; (j) any contract, agreement or arrangement required to be disclosed in a
Form 10-K or 10-Q under the Exchange Act; or (k) any contract not entered into
in the ordinary course of business consistent with past practices (collectively,
the "West Pac Contracts"). All the West Pac Contracts are valid, subsisting, in
------------------
full force and effect in all material respects, and binding upon West Pac in
accordance with their terms, and, to West Pac's knowledge, binding upon the
other parties thereto in accordance with their terms. West Pac is not (with or
without notice or lapse of time or both) in default under any West Pac Contract
nor, to its knowledge, is any other party to any such contract or other
agreement (with or without notice or lapse of time or both) in default
thereunder, except for any defaults that would not have a West Pac Material
Adverse Effect.
3.17. Taxes. West Pac (a) has filed on a timely basis all material
-----
federal, state and foreign tax returns required to be filed by any of them for
tax years ended prior to the date hereof or requests for extensions have been
timely filed and any such request shall have been granted and not expired, and
all such returns are complete and accurate in all material respects; (b) has
paid or accrued all taxes shown to be due and payable on such returns; (c) has
properly accrued all such taxes for such periods subsequent to the periods
covered by such returns; and (d) has "open" years for federal income tax returns
only as set forth in the West Pac Disclosure Schedule.
3.18. Employee Benefit Plans. All employee benefit plans and other benefit
----------------------
arrangements covering employees of West Pac (the "West Pac Benefit Plans") and
----------------------
all employee agreements providing compensation, severance or other benefits to
any employee or former employee of West Pac or any of its Subsidiaries are set
forth in the West Pac Disclosure Schedule. True and complete copies of all West
Pac Benefit Plans, including any related trust or funding vehicles, policies or
contracts, have been made available to Frontier. To the extent applicable, the
West Pac Benefit Plans comply, in all material respects, with the requirements
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
-----
the Code, and any West Pac Benefit Plan intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service (the
"IRS") to be so qualified and has been timely amended and filed with the IRS
---
with respect to changes required by the Tax Reform Act of 1986 and subsequent
legislation. Neither West Pac nor any ERISA Affiliate of West Pac (during the
period of its affiliated status and prior thereto, to its knowledge) maintains,
contributes to or has in the past maintained or contributed to any benefit plan
which is covered by Title IV of ERISA or Section 412 of the Code. Neither West
Pac nor any West Pac Benefit Plan have incurred any liability or penalty under,
and to West Pac's knowledge, there is no instance that West Pac or any West Pac
Benefit Plan may incur any liability or penalty under, Section 4975 of the Code
or Section 502(i) of ERISA. Each West Pac Benefit Plan has been maintained and
administered in all material respects in compliance with its terms and with
ERISA and the Code to the extent applicable thereto. To West Pac's knowledge,
there are no pending or anticipated material claims against or otherwise
involving any of the West Pac Benefit Plans and no suit, action or other
litigation (excluding claims for benefits incurred in the ordinary course of
West Pac Benefit Plan activities) has been brought against or with respect to
any such West Pac Benefit Plan, except for any of the foregoing which would not
have a West Pac Material Adverse Effect. All contributions required to be made
as of the date hereof to the West Pac Benefit Plans have been made or provided
for. Neither West Pac nor any ERISA Affiliate of West Pac (during the period of
its
15
<PAGE>
affiliated status and prior thereto, to its knowledge) has contributed to,
or been required to contribute to, or has any liability or potential liability
to, any "multiemployer plan" (as defined in Sections 3(37) and 4001(a)(3) of
ERISA). Except as required by applicable law or as set forth in the West Pac
Disclosure Schedule, West Pac does not maintain or contribute to any plan or
arrangement which provides or has any liability to provide life insurance or
medical or other employee welfare benefits to any employee or former employee
upon his retirement or termination of employment, and West Pac has never
represented, promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided. The execution
of, and performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any benefit plan, policy, arrangement or agreement or
any trust or loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee. No West Pac Benefit Plan which is an "employee pension plan"
within the meaning of Section 3(3) of ERISA has been completely or partially
terminated. None of the West Pac Benefit Plans has any material unfunded
liabilities which are not reflected in the West Pac SEC Reports. Neither West
Pac nor any of its directors, officers, employees or any other "fiduciary", as
such term is defined in Section 3(21) of ERISA, has any material liability for
failure to comply with ERISA or the Code or failure to act in connection with
the administration or investment of any Plan. For purposes of this Agreement
"ERISA Affiliate" means any business or entity which is a member of the same
- ----------------
"controlled group of corporations," under "common control" or an "affiliated
service group" with an entity within the meanings of Sections 414(b), (c) or (m)
of the Code, or required to be aggregated with the entity under Section 414(o)
of the Code, or is under "common control" with the entity, within the meaning of
Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under
any of the foregoing Sections.
3.19. Labor Matters. West Pac is not a party to, or bound by, any
-------------
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. There is no unfair labor practice or
labor arbitration proceeding pending or, to West Pac's knowledge, threatened
against West Pac relating to its business. To West Pac's knowledge, there are
no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of West
Pac. There is no labor strike, dispute, slowdown or work stoppage pending or
threatened against West Pac nor has West Pac experienced any of the same during
the last three years. All employees of West Pac are employed at will. A list
of West Pac's employees who earned in excess of $50,000.00 during calendar year
1996 or who West Pac reasonably expects will earn in excess of such amount
during calendar year 1997, together with such employee's current job title and
salary history during the last three years, is described in the West Pac
Disclosure Schedule.
3.20. Environmental Matters.
---------------------
(a) West Pac has provided to Frontier, accompanied by a cover letter
specifically identifying each such item and containing a brief description
thereof, true and correct copies of (i) all reports and letters of inspections
of West Pac's business and properties through the date hereof under
16
<PAGE>
all applicable federal, state, foreign and local aviation, transportation,
environmental, health and safety laws and regulations; (ii) all environmental
analyses, environmental audits, reports of inspection, consulting studies and
compilations made by or for West Pac by any non-governmental Person relating to
any property, asset or right of West Pac or non-governmental Person relating to
any property, asset or right of West Pac; and (iii) all correspondence and
summaries of communications with or from any Governmental Entity including,
without limitation, all such correspondence and summaries pursuant to which West
Pac is advised of any noncompliance with any laws or orders or which otherwise
relates to any such noncompliance.
(b) As of the date hereof:
(i) There has been no order, degree, complaint, citation or notice
with regard to air emissions, water discharges, noise emissions, Hazardous
Substances, Environmental Liabilities or other environmental or health
requirement affecting any of the properties occupied or utilized by West Pac
and, to West Pac's knowledge, no facts, circumstances or conditions exist which
could reasonably give rise to such orders, decrees, complaints, citations or
notices.
(ii) To West Pac's knowledge, West Pac is not in violation of any
Environmental Law and has not received any notice from any Governmental Entity,
or any actual, threatened or alleged violation of any Environmental Law by West
Pac or any other Person for whose conduct it is or may be responsible. To West
Pac's knowledge, the conduct of West Pac's business and operations, as conducted
previously and as of the date hereof, complies in all material respects with all
Environmental Laws.
(iii) To West Pac's knowledge, there are not now and there have
not been any Hazardous Substances used, generated or stored or any structures,
fixtures, equipment or other storage vessels including, without limitation,
underground storage tanks, containing Hazardous Substances present upon any of
the premises occupied or utilized by West Pac in the conduct of its business in
violation of applicable Environmental Laws. To West Pac's knowledge, there has
been no spill, discharge, release, contamination or cleanup of any Hazardous
Substances at any of such properties or otherwise including, without limitation,
into or upon the soil, surface water or ground water, such properties leased by
West Pac are clean of all such wastes and substances and none of such properties
leased by West Pac contains any underground treatment or storage tanks or water,
gas or oil wells or other underground improvements.
(iv) To West Pac's knowledge, West Pac has no liability under any
EnvironmentaLaw with respect to any of the premises now or formerly utilized
by West Pac and with respect to any adjacent or neighboring sites or facilities
or any other site or facility.
(c) As used in this Agreement, "Environmental Laws" means any and all
------------------
federal, state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements and
governmental restrictions, whether now or hereafter in effect, relating to human
health, the environment or to emissions, discharges or releases of pollutants,
contaminants, Hazardous
17
<PAGE>
Substances or wastes into the environment, including without limitation, ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof. "Environmental Liabilities"
-------------------------
with respect to any Person means any and all liabilities of or relating to such
Person or any of its Subsidiaries (including any entity which is, in whole or in
part, a predecessor of such Person or any of its Subsidiaries), whether vested
or unvested, contingent or fixed, actual or potential, known or unknown, which
(a) arise under or relate to matters covered by Environmental Laws; and (b)
relate to actions occurring or conditions existing on or prior to the Closing
Date. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise
--------------------
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics, including, without limitation, any substance
regulated under Environmental Laws.
3.21. Takeover Statutes. No "fair price", "moratorium", "control share
-----------------
acquisition" or other similar anti-takeover statute or regulation enacted under
state or federal laws in the United States (each a "Takeover Statute"),
----------------
applicable to West Pac applies to the Merger or any of the other transactions
contemplated hereby.
3.22. Absence of Indemnifiable Claims, etc. There are no outstanding
------------------------------------
losses, claims, damages, costs, expenses, liabilities or judgments which would
entitle any director, officer or employee of West Pac to indemnification by West
Pac under applicable law, the Articles of Incorporation or By-laws of West Pac
or any insurance policy maintained by West Pac.
3.23. Insurance. The West Pac Disclosure Schedule describes all material
---------
insurance policies, to the extent any exist, providing insurance coverage of any
nature to West Pac. To West Pac's knowledge, all of such policies are in full
force and effect, are valid and enforceable in accordance with their terms.
None of West Pac's insurance carriers have threatened to cancel any of West
Pac's insurance policies, or increase the premiums payable under any such policy
by more than 20% from the immediately preceding period of coverage thereunder
3.24. No Brokers. West Pac has not entered into any contract,
----------
arrangement or understanding with any person or firm which may result in the
obligation of Frontier or West Pac to pay any finder's fee, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that West Pac has retained Lehman Brothers and Hanifen Imhoff Inc. as its
financial advisors. Other than the foregoing arrangements, West Pac is not
aware of any claim for payment of any finder's fees, brokerage or agent's
commission or other like payments in connection with the negotiations leading to
this Agreement or the consummation of the transaction contemplated hereby.
3.25. Opinion of Financial Advisor. The Board of Directors of West Pac
----------------------------
has received the opinion of Lehman Brothers to the effect that, as of the date
of this Agreement, the Exchange Ratio is fair to West Pac from a financial point
of view.
18
<PAGE>
3.26. West Pac Common Stock. Subject only to the approval of this
---------------------
Agreement and the transactions contemplated hereby by the holders of a majority
of the outstanding shares of West Pac Common Stock, the issuance and delivery by
West Pac of shares of West Pac Common Stock in connection with the Merger and
this Agreement have been duly and validly authorized by all necessary corporate
action on the part of West Pac. The shares of West Pac Common Stock to be
issued in connection with the Merger and this Agreement, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FRONTIER
Frontier represents and warrants to West Pac that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule delivered by Frontier to West Pac concurrently herewith and
identified as the "Frontier Disclosure Schedule." All exceptions noted in the
----------------------------
Frontier Disclosure Schedule are numbered to correspond to the applicable
Sections to which such exception refers; provided, however, that any disclosure
set forth on any particular schedule shall be deemed disclosed in reference to
all applicable schedules.
4.1. Existence, Good Standing, Corporate Authority. Frontier is a
---------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of Colorado. Frontier is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of any other state of
the United States in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing would not
have a material adverse effect on the business, results of operations or
financial condition of Frontier (a "Frontier Material Adverse Effect").
--------------------------------
Frontier has all requisite corporate power and authority to own, operate and
lease its properties. The copies of Frontier's Amended and Restated Articles of
Incorporation and Bylaws previously delivered to West Pac are true and correct.
4.2. Authorization, Validity and Effect of Agreements. Subject only to
------------------------------------------------
the approval of this Agreement and the transactions contemplated hereby by the
holders of a majority of the outstanding shares of Frontier Common Stock,
Frontier has the requisite corporate power and authority to execute and deliver
this Agreement and all agreements and documents to be executed and delivered in
connection herewith (collectively, the "Frontier Ancillary Documents"). Subject
----------------------------
only to the approval of this Agreement and the transactions contemplated hereby
by the holders of a majority of the outstanding shares of Frontier Common Stock,
the consummation by Frontier of the transactions contemplated hereby has been
duly authorized by all requisite corporate action. This Agreement constitutes,
and the Frontier Ancillary Documents (when executed and delivered pursuant to
this Agreement for value received) will constitute, the valid and legally
binding obligations of Frontier, enforceable against Frontier in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general principles of
equity and approval of this Agreement and the Frontier Ancillary Documents by
the
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<PAGE>
Frontier stockholders.
4.3. Compliance with Laws--General.
-----------------------------
(a) Frontier holds all Permits of any Governmental Entities (including,
but not limited to, those related to occupational health and safety, controlled
substances, Environmental Laws, Tax laws, labor, ERISA, employment and
employment practices or EEOC matters) necessary for the lawful conduct of its
business, and is in compliance with such Permits, in each case, except where the
failure to hold or comply with such Permits would not have a Frontier Material
Adverse Effect.
(b) Frontier is in substantial compliance with all laws, ordinances or
regulations of all Governmental Entities (including, but not limited to, those
related to occupational health and safety, controlled substances or employment
and employment practices) that are applicable to Frontier, except for any
noncompliance that would not have a Frontier Material Adverse Effect.
(c) As of the date of this Agreement, and as of the Closing, no
investigation, review, inquiry or proceeding by any Governmental Entity with
respect to Frontier is pending, or, to the knowledge of Frontier, threatened
that would have a Frontier Material Adverse Effect.
(d) Frontier is not subject to any agreement, contract or decree with
any Governmental Entities arising out of any current or previously existing
violations of any laws, ordinances or regulations applicable to Frontier,
including, without limitation, any such agreement, contract or decree entered
into with or issued by the DOT or the FAA that would have a Frontier Material
Adverse Effect.
4.4. Capitalization.
--------------
(a) The authorized capital stock of Frontier consists of 20,000,000
shares of Frontier Common Stock and 1,000,000 shares of Frontier Preferred
Stock. As of May 30, 1997, there were (i) 8,844,375 shares of Frontier Common
Stock issued and outstanding; (ii) no shares of Frontier Preferred Stock issued
and outstanding; and (iii) 2,714,750 shares of Frontier Common Stock reserved
for issuance upon the exercise of all outstanding Frontier Options. The Frontier
Disclosure Schedule identifies, as of the date thereof, the option holder, the
number of shares subject to each option, the exercise price, the vesting
schedule and the expiration date of each outstanding Frontier Option. Since May
30, 1997, no additional shares of capital stock of Frontier have been issued,
except pursuant to the exercise of options or warrants outstanding under the
Frontier Stock Option Plans. Frontier has no outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or which
are convertible into or exercisable for securities having the right to vote)
with the stockholders of Frontier on any matter. All issued and outstanding
shares of Frontier Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights.
(b) There are currently no outstanding, and, as of the Closing, there
will be no outstanding (i) securities convertible into or exchangeable for any
capital stock of Frontier, (ii) options, warrants
20
<PAGE>
or other rights to purchase or subscribe to capital stock of Frontier or
securities convertible into or exchangeable for capital stock of Frontier, or
(iii) contracts, commitments, agreements, understandings, arrangements, calls or
claims of any kind to which Frontier is a party or is bound relating to the
issuance of any of its capital stock.
4.5. Subsidiaries; Other Interests. Frontier does not own any
-----------------------------
Subsidiaries. Except for interests disclosed on the Frontier Disclosure
Schedule, Frontier does not own, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation, partnership, limited
liability company, joint venture, business, trust or entity ((other than
investments in short-term investment securities) and corporate, partnership,
development, cooperative marketing and similar undertakings and arrangements
entered into in the ordinary course of business and other investments the
aggregate market value of which is less than $100,000).
4.6. No Violation. Neither the execution and delivery by Frontier of
------------
this Agreement, nor the consummation by Frontier of the transactions
contemplated hereby in accordance with the terms hereof, will (a) conflict with
or result in a breach of any provisions of the Amended and Restated Articles of
Incorporation or Bylaws of Frontier; (b) result in a breach or violation of, a
default under, or the triggering of any payment or other material obligations
pursuant to, or accelerate vesting under, any of the Frontier Stock Option
Plans, or any grant or award made under any of the foregoing; (c) violate,
conflict with, result in a breach of any provision of, constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, result in the termination, or in a right of termination or
cancellation of, accelerate the performance required by, result in the
triggering of any payment or other material obligations pursuant to, result in
the creation of any lien, security interest, charge or encumbrance upon any of
the material properties of Frontier under, or result in being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any material
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which Frontier is a party, or by which Frontier or
any of its properties is bound or affected, except for any of the foregoing
matters which would not have a Frontier Material Adverse Effect; (d) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
Frontier which would have a Frontier Material Adverse Effect; or (e) other than
the Regulatory Filings, require any consent, approval or authorization of, or
declaration, of or registration with, any domestic governmental or regulatory
authority, the failure to obtain or make which would have a Frontier Material
Adverse Effect.
4.7. Conduct of Business. The business of Frontier is not being
-------------------
conducted in default or violation of any term, condition or provision of (a) its
Amended and Restated Articles of Incorporation or By-Laws or similar
organizational documents; (b) any note, bond, mortgage, indenture, contract,
agreement, lease or other instrument or agreement or any kind to which Frontier
is now a party or by which Frontier or any of its properties or assets may be
bound; (c) any federal, state, local or foreign statute, law, ordinance, rule,
regulation or approval applicable to Frontier, except, with respect to the
foregoing clauses (b) and (c), defaults or violations that would not have a
Frontier Material Adverse Effect.
21
<PAGE>
4.8. Books and Records. Frontier's books, accounts and records are, and
-----------------
have been, in all material respects, maintained in Frontier's usual, regular and
ordinary manner, in accordance with GAAP, and since Frontier's inception, all
material transactions to which Frontier is or has been a party are properly
reflected therein.
4.9. SEC Documents. Frontier has delivered or made available to West Pac
-------------
each registration statement, report, proxy statement or information statement
(as defined in Regulation 14C under the Exchange Act) prepared by it since
January 1, 1995, which reports constitute all of the documents required to be
filed by Frontier with the SEC since such date, each in the form (including
exhibits and any amendments thereto) filed with the SEC (collectively, the
"Frontier SEC Reports"). As of their respective dates, the Frontier SEC Reports
- ---------------------
and any Frontier SEC Reports filed after the date hereof and prior to the
Effective Time (a) complied as to form in all material respects with the
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations thereunder; and (b) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Frontier has
timely filed with the SEC all reports required to be filed under Section 13, 14
and 15(d) of the Exchange Act since January 1, 1995. Each of the balance sheets
of Frontier included in or incorporated by reference into the Frontier SEC
Reports (including the related notes and schedules) fairly present in all
material respects the financial position of Frontier as of its date (subject, in
the case of unaudited statements, to normal year-end audit adjustments which
would not be material in amount or effect), and each of the statements of
income, retained earnings and cash flows of Frontier included in or incorporated
by reference into the Frontier SEC Reports (including any related notes and
schedules) fairly present in all material respects the results of operations,
retained earnings or cash flows, as the case may be, of Frontier for the periods
set forth therein (subject, in the case of unaudited statements, to normal year-
end audit adjustments which would not be material in amount or effect). The
financial statements of Frontier, including the notes thereto, included in or
incorporated by reference into the Frontier SEC Reports comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, and have been prepared in
accordance with GAAP (except as may be indicated in the notes thereto). Since
January 1, 1995, there has been no material change in Frontier's accounting
methods or principles except as described in the notes to such financial
statements.
4.10. Proprietary Rights.
------------------
(a) All of Frontier's Intellectual Property is listed in the Frontier
Disclosure Schedule.
(b) To Frontier's knowledge, Frontier owns or possesses adequate
licenses or other rights to use any and all of its Proprietary Rights used in or
required for its business as currently conducted free and clear of any liens,
claims or encumbrances, except where the failure to possess such Proprietary
Rights would not have a Frontier Material Adverse Effect.
22
<PAGE>
(c) Frontier has no knowledge of any claims, disputes, actions,
proceedings, suits or appeals pending or threatened against Frontier relating to
any of its Proprietary Rights which, if adversely determined to Frontier, could
reasonably be expected to result in a loss of any of its material Proprietary
Rights or any other loss that could reasonably be expected to have a Frontier
Material Adverse Effect.
(d) To Frontier's knowledge, none of its Proprietary Rights infringe on
the proprietary rights of any third party nor are the Proprietary Rights of any
third party infringing on the Proprietary Rights of Frontier, where such
infringement could reasonably be expected to result in a loss of any of
Frontier's material Proprietary Rights or any other loss that could reasonably
be expected to have a Frontier Material Adverse Effect.
(e) To Frontier's knowledge, Frontier has not disclosed any of its trade
secrets to any Person without obtaining an agreement obligating the recipient to
maintain the confidentiality thereof and Frontier has taken reasonable security
measures to protect the confidentiality and value of its trade secrets.
(f) Frontier has not disposed of or granted any license to use any of
its Proprietary Rights, nor has Frontier granted any options to purchase or
obtain a license to, or any other lien, claim or encumbrance on, any of its
Proprietary Rights.
4.11. Information Supplied. The information supplied or to be supplied
--------------------
by Frontier for inclusion or incorporation by reference in (a) the Proxy
Statement will not, at the time the Proxy Statement is first mailed to the
stockholders of Frontier and West Pac, and at the time such stockholders vote on
adoption of this Agreement, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading; and (b) the Form S-4, together with all amendments and supplements
thereto, will not, at the time the Form S-4 is filed or becomes effective under
the Securities Act and at the Effective Time, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
4.12. Litigation. There are no actions, suits or proceedings pending
----------
against Frontier or, to Frontier's knowledge, threatened against Frontier, at
law or in equity, or before or by any federal or state commission, board,
bureau, agency or instrumentality, none of which, individually or in the
aggregate, would have a Frontier Material Adverse Effect. To Frontier's
knowledge, there is no such action, suit, investigation or proceeding which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated hereby.
4.13. Aviation Act; Aircraft; Assets.
------------------------------
(a) Frontier is an air carrier operating under the Operating
Authorizations, which Operating Authorizations are in full force and effect, and
Frontier is operating in compliance with all rules and regulations of the FAA,
the DOT and the Operating Authorizations, except where the
23
<PAGE>
failure to maintain such Operating Authorizations or comply with such rules and
regulations would not have a Frontier Material Adverse Effect. Frontier does not
operate under any orders pursuant to the Essential Air Service Program of the
DOT.
(b) To Frontier's knowledge, all aircraft owned, leased or in the
possession and control of Frontier and all other material assets of Frontier,
are in sound operating condition and are being maintained in all material
respects according to FAA regulatory standards, Frontier's FAA-authorized
maintenance program and all other applicable laws, except where the failure to
maintain such Operating Authorizations or comply with such rules and regulations
would not have a West Pac Material Adverse Effect. A list of all aircraft now
owned, leased or in the possession and control of Frontier is set forth on the
Frontier Disclosure Schedule. Frontier has good and valid title to such assets
and properties that are owned by Frontier, free and clear of any liens, claims
or other encumbrances, other than (i) statutory liens for taxes not yet due,
(ii) liens of carriers, warehousemen, mechanics and materialmen incurred in the
ordinary course of business for sums not yet due; and (iii) liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security.
Frontier has not received notice that any of its assets or properties is in
violation of any existing law or any health, safety or other ordinance, code or
regulation, except for violations that would not have a Frontier Material
Adverse Effect. All material leases of equipment, software or other personal
property to which Frontier is a party are valid and subsisting leases, and,
except as terminated in the ordinary course of business, upon consummation of
the transactions contemplated hereby, shall continue to entitle Frontier to the
use and possession of the personal property purported to be covered thereby for
the terms specified in such leases.
4.14. Material Adverse Change. Since December 31, 1996, Frontier has
-----------------------
not suffered any change in its businesses, operations, assets, liabilities,
financial condition or prospects which would reasonably have a Frontier Material
Adverse Effect. Since December 31, 1996, (a) Frontier has not entered into any
transaction outside the ordinary course of business which would be required to
be disclosed in Frontier's Forms 10-K for the years ended March 31, 1997 or
1998; (b) Frontier has not (i) declared, set aside or paid any dividend or made
any other distribution or payment with respect to any shares of its capital
stock or other ownership interests; or (ii) directly or indirectly, redeemed,
purchased or otherwise acquired any shares of its capital stock, or made any
commitment for any such action; or (c) voluntarily elected to alter the manner
of keeping its books, accounts or records, or changed in any manner the
accounting practices therein reflected, except for (i) changes that would not
have a Frontier Material Adverse Effect; or (ii) changes in accounting laws that
affect all airline companies generally.
4.15. Real Property. Frontier does not own any real property. The
-------------
Frontier Disclosure Schedule describes all material real property leased by
Frontier (the "Frontier Real Property"), along with a brief description of the
----------------------
property and all improvements thereon and a brief description of all material
leases (the "Frontier Leases") under which such Frontier Real Property is leased
---------------
by Frontier. Full and complete copies of all the Frontier Leases have been made
available to West Pac. To Frontier's knowledge, all of the Frontier Real
Property and improvements thereon are suitable for the purposes for which they
are currently used. To Frontier's knowledge, none of the Frontier Leases
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<PAGE>
is in default, no waiver, indulgence or postponement of Frontier's obligations
thereunder has been granted by the lessor and no event has occurred which, with
the passage of time or the giving of notice, or both, would constitute a default
thereunder.
4.16. Material Contracts. Frontier is not a party to or bound by,
------------------
and none of its properties is subject to (a) any loan agreements, promissory
notes, guaranties or other material evidence of indebtedness; (b) any
distributorship, non-employee commission or marketing agent, representative or
franchise agreement providing for the marketing and/or sale of the products or
services of Frontier; (c) any agreement relating to the ownership or control of
any interest in a partnership, corporation, limited liability company, joint
venture or other entity or similar arrangement; (d) any employment contracts or
consulting arrangements entered into by Frontier or agreements or arrangements
with respect to severance or similar matters; (e) any agreement or arrangement
restricting in any manner (i) Frontier's right to compete with any other person
or entity; (ii) Frontier's right to sell to or purchase from any other person or
entity; (iii) the right of any other party to compete with Frontier; or (iv) the
ability of such person or entity to employ any of Frontier's employees; (f) any
secrecy or confidentiality agreement; (g) any contract, agreement or arrangement
containing change of control provisions; (h) any agreement or arrangement
between Frontier and any of its officers, directors or other Affiliates; (i) any
contract, agreement or arrangement requiring a payment or receipt of funds in
excess of $100,000.00 in any twelve month period; (j) any contract, agreement or
arrangement required to be disclosed in a Form 10-K or 10-Q under the Exchange
Act; or (k) any contract not entered into in the ordinary course of business
consistent with past practices (collectively, the "Frontier Contracts"). All
------------------
the Frontier Contracts are valid, subsisting, in full force and effect in all
material respects, and binding upon Frontier in accordance with their terms,
and, to Frontier's knowledge, binding upon the other parties thereto in
accordance with their terms. Frontier is not (with or without notice or lapse
of time or both) in default under any Frontier Contract nor, to its knowledge,
is any other party to any such contract or other agreement (with or without
notice or lapse of time or both) in default thereunder, except for any defaults
that would not have a Frontier Material Adverse Effect.
4.17. Taxes. Frontier (a) has filed on a timely basis all material
-----
federal, state and foreign tax returns required to be filed by any of them for
tax years ended prior to the date hereof or requests for extensions have been
timely filed and any such request shall have been granted and not expired, and
all such returns are complete and accurate in all material respects; (b) has
paid or accrued all taxes shown to be due and payable on such returns; (c) has
properly accrued all such taxes for such periods subsequent to the periods
covered by such returns; and (d) has "open" years for federal income tax returns
only as set forth in the Frontier Disclosure Schedule.
4.18. Employee Benefit Plans. All employee benefit plans and other
----------------------
benefit arrangements covering employees of Frontier (the "Frontier Benefit
----------------
Plans") and all employee agreements providing compensation, severance or other
benefits to any employee or former employee of Frontier or any of its
Subsidiaries are set forth in the Frontier Disclosure Schedule. True and
complete copies of all Frontier Benefit Plans, including any related trust or
funding vehicles, policies or contracts, have been made available to West Pac.
To the extent applicable, the Frontier Benefit Plans comply, in all material
respects, with the requirements of the ERISA and the Code, and any Frontier
Benefit Plan
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intended to be qualified under Section 401(a) of the Code has been determined by
the IRS to be so qualified and has been timely amended and filed with the IRS
with respect to changes required by the Tax Reform Act of 1986 and subsequent
legislation. Neither Frontier nor any ERISA Affiliate of Frontier (during the
period of its affiliated status and prior thereto, to its knowledge) maintains,
contributes to or has in the past maintained or contributed to any benefit plan
which is covered by Title IV of ERISA or Section 412 of the Code. Neither
Frontier nor any Frontier Benefit Plan have incurred any liability or penalty
under, and to Frontier's knowledge, there is no instance that Frontier or any
Frontier Benefit Plan may incur any liability or penalty under, Section 4975 of
the Code or Section 502(i) of ERISA. Each Frontier Benefit Plan has been
maintained and administered in all material respects in compliance with its
terms and with ERISA and the Code to the extent applicable thereto. To
Frontier's knowledge, there are no pending or anticipated material claims
against or otherwise involving any of the Frontier Benefit Plans and no suit,
action or other litigation (excluding claims for benefits incurred in the
ordinary course of Frontier Benefit Plan activities) has been brought against or
with respect to any such Frontier Benefit Plan, except for any of the foregoing
which would not have a Frontier Material Adverse Effect. All contributions
required to be made as of the date hereof to the Frontier Benefit Plans have
been made or provided for. Neither Frontier nor any ERISA Affiliate of Frontier
(during the period of its affiliated status and prior thereto, to its knowledge)
has contributed to, or been required to contribute to, or has any liability or
potential liability to, any "multiemployer plan" (as defined in Sections 3(37)
and 4001(a)(3) of ERISA). Except as required by applicable law or as set forth
in the Frontier Disclosure Schedule, Frontier does not maintain or contribute to
any plan or arrangement which provides or has any liability to provide life
insurance or medical or other employee welfare benefits to any employee or
former employee upon his retirement or termination of employment, and Frontier
has never represented, promised or contracted (whether in oral or written form)
to any employee or former employee that such benefits would be provided. The
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee. No Frontier Benefit Plan which is an
"employee pension plan" within the meaning of Section 3(3) of ERISA has been
completely or partially terminated. None of the Frontier Benefit Plans has any
material unfunded liabilities which are not reflected in the Frontier SEC
Reports. Neither Frontier nor any of its directors, officers, employees or any
other "fiduciary", as such term is defined in Section 3(21) of ERISA, has any
material liability for failure to comply with ERISA or the Code or failure to
act in connection with the administration or investment of any Plan.
4.19. Labor Matters. Frontier is not a party to, or bound by, any
-------------
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. There is no unfair labor practice or
labor arbitration proceeding pending or, to Frontier's knowledge, threatened
against Frontier relating to its business. To Frontier's knowledge, there are
no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of
Frontier. There is no labor strike, dispute, slowdown or work stoppage pending
or threatened against Frontier nor has Frontier experienced any of the same
during the last three years. All employees of Frontier are employed at will. A
list of Frontier's
26
<PAGE>
employees who earned in excess of $50,000.00 during calendar year 1996 or who
Frontier reasonably expects will earn in excess of such amount during calendar
year 1997, together with such employee's current job title and salary history
during the last three years, is described in the Frontier Disclosure Schedule.
4.20. Environmental Matters.
---------------------
(a) Frontier has provided to West Pac, accompanied by a cover letter
specifically identifying each such item and containing a brief description
thereof, true and correct copies of (i) all reports and letters of inspections
of Frontier's business and properties through the date hereof under all
applicable federal, state, foreign and local aviation, transportation,
environmental, health and safety laws and regulations; (ii) all environmental
analyses, environmental audits, reports of inspection, consulting studies and
compilations made by or for Frontier by any non-governmental Person relating to
any property, asset or right of Frontier or non-governmental Person relating to
any property, asset or right of Frontier; and (iii) all correspondence and
summaries of communications with or from any Governmental Entity including,
without limitation, all such correspondence and summaries pursuant to which
Frontier is advised of any noncompliance with any laws or orders or which
otherwise relates to any such noncompliance.
(b) As of the date hereof:
(i) There has been no order, degree, complaint, citation or notice
with regard to air emissions, water discharges, noise emissions, Hazardous
Substances, Environmental Liabilities or other environmental or health
requirement affecting any of the properties occupied or utilized by Frontier
and, to Frontier's knowledge, no facts, circumstances or conditions exist which
could reasonably give rise to such orders, decrees, complaints, citations or
notices.
(ii) To Frontier's knowledge, Frontier is not in violation of any
Environmental Law and has not received any notice from any Governmental Entity,
or any actual, threatened or alleged violation of any Environmental Law by
Frontier or any other Person for whose conduct it is or may be responsible. To
Frontier's knowledge, the conduct of Frontier's business and operations, as
conducted previously and as of the date hereof, complies in all material
respects with all Environmental Laws.
(iii) To Frontier's knowledge, there are not now and there have
not been any Hazardous Substances used, generated or stored or any structures,
fixtures, equipment or other storage vessels including, without limitation,
underground storage tanks, containing Hazardous Substances present upon any of
the premises occupied or utilized by Frontier in the conduct of its business in
violation of applicable Environmental Laws. To Frontier's knowledge, there has
been no spill, discharge, release, contamination or cleanup of any Hazardous
Substances at any of such properties or otherwise including, without limitation,
into or upon the soil, surface water or ground water, such properties leased by
Frontier are clean of all such wastes and substances and none of such properties
leased by Frontier contains any underground treatment or storage tanks or water,
gas or oil wells or other underground improvements.
27
<PAGE>
(iv) To Frontier's knowledge, Frontier has no liability under any
Environmental Law with respect to any of the premises now or formerly utilized
by Frontier and with respect to any adjacent or neighboring sites or facilities
or any other site or facility.
4.21. Takeover Statutes. No Takeover Statute applicable to Frontier
-----------------
applies to the Merger or any of the other transactions contemplated hereby.
4.22. Absence of Indemnifiable Claims, etc. There are no outstanding
------------------------------------
losses, claims, damages, costs, expenses, liabilities or judgments which would
entitle any director, officer or employee of Frontier to indemnification by
Frontier under applicable law, the Amended and Restated Articles of
Incorporation or By-laws of Frontier or any insurance policy maintained by
Frontier.
4.23. Insurance. The Frontier Disclosure Schedule describes all material
---------
insurance policies, to the extent any exist, providing insurance coverage of any
nature to Frontier. To Frontier's knowledge, all of such policies are in full
force and effect, are valid and enforceable in accordance with their terms.
None of Frontier's insurance carriers have threatened to cancel any of
Frontier's insurance policies, or increase the premiums payable under any such
policy by more than 20% from the immediately preceding period of coverage
thereunder.
4.24. No Brokers. Frontier has not entered into any contract,
----------
arrangement or understanding with any person or firm which may result in the
obligation of Frontier or West Pac to pay any finder's fee, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that Frontier has retained Smith Barney as its financial advisor. Other
than the foregoing arrangement, Frontier is not aware of any claim for payment
of any finder's fees, brokerage or agent's commission or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transaction contemplated hereby.
4.25. Opinion of Financial Advisor. The Board of Directors of Frontier
----------------------------
has received the opinion of Smith Barney to the effect that, as of the date of
this Agreement, the Exchange Ratio is fair to the holders of Frontier Common
Stock from a financial point of view.
4.26. West Pac Stock Ownership. Frontier does not own any shares of West
------------------------
Pac Common Stock or other securities convertible into West Pac Common Stock.
4.27. Rights Agreement. On or prior to the date hereof, Frontier has
----------------
taken all necessary action to cause the provisions of that certain Rights
Agreement dated February 20, 1997, between Frontier and American Securities
Transfer and Trust, Inc., as Rights Agent (the "Rights Agreement"), to be
----------------
inapplicable to the Merger, without any payment to holders of rights issued
pursuant to such Rights Agreement.
28
<PAGE>
ARTICLE V
COVENANTS
5.1. Alternative Proposals. Prior to the Effective Time, each of West
---------------------
Pac and Frontier agrees (a) that it shall not, and it shall direct and cause its
officers, directors, employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it) not to
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a merger,
acquisition, consolidation or similar transaction involving it, or any purchase
of all or any significant portion of its assets or any of its equity securities
(any such proposal or offer being hereinafter referred to as an "Alternative
-----------
Proposal") or engage in any negotiations concerning, or provide any confidential
- --------
information or data to, or have any discussions with, any person relating to an
Alternative Proposal, or otherwise facilitate any effort or attempt to make or
implement an Alternative Proposal; provided, however, that an Alternative
Proposal shall not include (i) a proposal made to West Pac or Frontier to
acquire the Surviving Corporation, whether by merger, acquisition, consolidation
or otherwise (a "Combined Proposal"); (ii) the issuance of securities of West
------------------
Pac in connection with additional equity investments in West Pac or additional
financing transactions involving West Pac, including, without limitation,
aircraft lease transactions; or (iii) a proposal of a merger, acquisition,
consolidation or other similar transaction to a party hereto without any
meetings or other discussions relating to the proposal and such party's sole
response to the proposal is to inform the proposing party that such party is not
interested in the proposal; (b) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing, and it will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 5.1; and (c) that it will notify the
other party immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
--------
contained in this Section 5.1 shall prohibit its Board of Directors from (A)
furnishing information to or entering into discussions or negotiations with, any
person or entity that makes an unsolicited proposal to acquire it pursuant to a
merger, consolidation, share exchange, purchase of a substantial portion of
assets, business combination or other similar transaction, if, and only to the
extent that, (i) its Board of Directors determines in good faith that such
action is required for its Board of Directors to comply with its fiduciary
duties to stockholders imposed by law; (ii) subject to any confidentiality
agreement with such person or entity (which it determined in good faith was
required to be executed in order for its Board of Directors to comply with its
fiduciary duties to stockholders imposed by law), prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, it provides written notice to the other party to the effect that it
is furnishing information to, or entering into discussions or negotiations with,
such person or entity; and (iii) subject to any confidentiality agreement with
such person or entity (which it determined in good faith was required to be
executed in order for its Board of Directors to comply with its fiduciary duties
to stockholders imposed by law), it keeps the other party informed of the status
of any such discussions or negotiations; and (B) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal. Nothing in this Section 5.1 shall (x) permit
29
<PAGE>
West Pac or Frontier to terminate this Agreement (except as specifically
provided in Article VII hereof); (y) permit West Pac or Frontier to enter into
any agreement with respect to an Alternative Proposal during the term of this
Agreement (it being agreed that during the term of this Agreement, neither West
Pac nor Frontier shall enter into any agreement with any person that provides
for, or in any way facilitates, an Alternative Proposal (other than a
confidentiality agreement in customary form)); or (z) affect any other
obligation of West Pac or Frontier under this Agreement. Upon receipt by either
West Pac or Frontier of a Combined Proposal, the receiving party agrees (x) to
provide written notice to the other party immediately of such Combined Proposal;
and (y) to permit one representative of the other party to be present at any
meetings relating to such Combined Proposal (other than non-scheduled phone
calls made by one party of the proposed Combined Proposal to the other);
provided, however, that Frontier shall be prohibited from entering into any
agreement or letter of intent relating to a Combined Proposal.
5.2. Interim Operations.
------------------
(a) Prior to the Effective Time, and to allow West Pac and Frontier to
coordinate their respective operations between the date hereof and the Effective
Time, except as contemplated by any other provision of this Agreement or by the
Frontier Disclosure Schedule, unless West Pac has consented in writing thereto,
Frontier:
(i) Shall conduct its operations according to their usual, regular
and ordinary course in substantially the same manner as heretofore conducted;
(ii) Shall use its reasonable efforts to preserve intact its
business organizations and goodwill, keep available the services of its
respective officers and employees and maintain satisfactory relationships with
those persons having business relationships with it;
(iii) Shall not amend its Articles of Incorporation or Bylaws or
comparable governing instruments;
(iv) Shall promptly notify West Pac of any material emergency or
other material change in its condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its business
or of its properties, any material litigation or material governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the breach of any representation or warranty
contained herein;
(v) Shall promptly deliver to West Pac true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(vi) Shall not (A) except pursuant to (I) the exercise of options,
warrants, conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement; (II) the issuance of options or
warrants in the ordinary course of business consistent with past practices; or
(III) the issuance of Frontier Common Stock in connection with additional equity
investments in Frontier permitted under the provisions of this Section 5(a),
issue any shares of its
30
<PAGE>
capital stock, effect any stock split or otherwise change its capitalization as
it existed on the date hereof; (B) increase any compensation or enter into or
amend any employment agreement with any of its present or future officers,
directors or employees, except for normal increases consistent with past
practice (provided, however, that no such increase shall exceed 5% per annum)
and the payment of cash bonuses to officers pursuant to and consistent with
existing plans or programs; (C) grant any severance or termination package to
any employee or consultant other than in the ordinary course of business
consistent with past practices; or (D) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or amend any
existing employee benefit plan in any material respect, except for changes which
are less favorable to participants in such plans;
(vii) Shall not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock or other ownership interests; or (B) directly or indirectly, redeem,
purchase or otherwise acquire any shares of its capital stock, or make any
commitments for any such action;
(viii) Except in connection with agreements, obligations or
undertakings in effect on the date hereof and disclosed in the Frontier
Disclosure Schedule or otherwise permitted hereunder, shall not enter into any
material transaction, or agree to enter into any material transaction, outside
the ordinary course of business, including, without limitation, any transaction
involving a merger, consolidation, joint venture, partial or complete
liquidation or dissolution, reorganization, recapitalization, restructuring or a
purchase, sale, lease or other disposition of a substantial portion of assets or
capital stock, or enter into any additional aircraft lease; provided, however,
that the foregoing shall not prohibit Frontier from issuing and selling up to an
aggregate of $10,000,000 of shares of Frontier Common Stock, or any securities
convertible or otherwise exchangeable into shares of Frontier Common Stock at an
issue price, or with respect to convertible or exchangeable securities, a
conversion or exchange price, that shall not exceed a thirty percent (30%)
discount to the market value of such shares of Frontier Common Stock as of the
date of issuance, so long as, (A) the issuance of such shares by Frontier does
not contain any provisions impairing West Pac's ability to issue additional
securities or incur additional indebtedness before or after the Effective Time;
(B) any shares issued by Frontier are not senior to the Series B Preferred or
the Series C Preferred after the consummation of the Merger; (C) the issuance of
such shares by Frontier shall not impair the ability of either party to
consummate the Merger; and (D) in the case of securities convertible or
otherwise exchangeable into shares of Frontier Common Stock, appropriate
provision is made in the governing documents relating to such securities to give
effect to the Merger, including adjustments to the conversion or exchange price
consistent with the adjustments for Frontier Options pursuant to Section 1.5 of
this Agreement;
(ix) Shall not incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities of others other than in the ordinary
course of its business consistent with past practices, but in no event in an
amount exceeding $1,000,000 in the aggregate (other than normal expenditures for
the purchase of raw materials or other supplies); provided, however, that
Frontier may incur up to an aggregate of $10,000,000 of such indebtedness on
commercially reasonable terms with the prior written approval of West Pac, which
approval shall not be unreasonably withheld;
31
<PAGE>
(x) Shall not make any loans, advances or capital contributions
to, or investments in, any other Person, except loans, advances or capital
contributions to, or investments in, any of its Subsidiaries or made in the
ordinary course of business consistent with past practices;
(xi) Except in connection with agreements, obligations or
undertakings in effect on the date hereof and disclosed in the Frontier
Disclosure Schedule or otherwise permitted hereunder, shall not make or commit
to make any capital expenditures in excess of $500,000 in the aggregate;
(xii) Except in connection with agreements, obligations or
undertakings in effect on the date hereof and disclosed in the Frontier
Disclosure Schedule or otherwise permitted hereunder, shall not apply any of its
assets to the direct or indirect payment, discharge, satisfaction or reduction
of any amount payable directly or indirectly to or for the benefit of any
affiliate of Frontier or enter into any transaction with any affiliate of
Frontier;
(xiii) Shall not alter the manner of keeping its books, accounts or
records, or change in any manner the accounting practices therein reflected;
(xiv) Shall not grant or make any mortgage or pledge or subject
itself or any of its material properties or assets to any lien, charge or
encumbrance of any kind, except (A) statutory liens for taxes not yet due, (B)
liens of carriers, warehousemen, mechanics and materialmen incurred in the
ordinary course of business for sums not yet due; and (C) liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security;
(xv) Shall maintain insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are currently in
effect; and
(xvi) Shall use commercially reasonable efforts, which shall not
require the payment of money or other consideration, to terminate, on or before
the Effective Time, that certain Marketing and Code Sharing Agreement, dated as
of January 20, 1997 between Frontier and Exec Express II (d/b/a Aspen Mountain
Air) and Peak International.
(b) Prior to the Effective Time, and to allow West Pac and Frontier to
coordinate their respective operations between the date hereof and the Effective
Time, except as contemplated by any other provision of this Agreement or by the
West Pac Disclosure Schedule, unless Frontier has consented in writing thereto,
West Pac:
(i) Shall conduct its operations according to their usual, regular
and ordinary course in substantially the same manner as heretofore conducted;
(ii) Shall use its reasonable efforts to preserve intact its
business organizations and goodwill, keep available the services of its
respective officers and employees and maintain satisfactory relationships with
those persons having business relationships with it;
32
<PAGE>
(iii) Shall not amend its Restated Certificate of Incorporation or
By-Laws, except for amendments to the Restated Certificate of Incorporation of
West Pac necessary in order to (A) increase the number of authorized shares of
West Pac Common Stock to 40,000,000; or (B) designate the rights of any series
or class of preferred stock of West Pac in connection with the issuance of
securities by West Pac in connection with additional equity investments in West
Pac or additional financing transactions involving West Pac permitted under the
terms of this Section 5.2(b);
(iv) Shall promptly notify Frontier of any material emergency or
other material change in its condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its business
or of its properties, any material litigation or material governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the breach of any representation or warranty
contained herein;
(v) Shall promptly deliver to Frontier true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(vi) Shall not (A) except pursuant to (I) the exercise of options,
warrants, conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement; (II) the issuance of options or
warrants in the ordinary course of business consistent with past practices; or
(III) the issuance of securities in connection with additional equity
investments in West Pac or additional financing transactions involving West Pac
permitted under the provisions of this Section 5(b), including, without
limitation, the issuance of warrants in connection with aircraft lease
transactions, issue any shares of its capital stock, effect any stock split or
otherwise change its capitalization as it existed on the date hereof; (B)
increase any compensation or enter into or amend any employment agreement with
any of its present or future officers, directors or employees, except for normal
increases consistent with past practice (provided, however, that no such
increase shall exceed 5% per annum) and the payment of cash bonuses to officers
pursuant to and consistent with existing plans or programs; (C) grant any
severance or termination package to any employee or consultant other than in the
ordinary course of business consistent with past practices; provided, however,
that West Pac may enter into severance arrangements with any Person who
currently has an employment agreement with West Pac; or (D) adopt any new
employee benefit plan (including any stock option, stock benefit or stock
purchase plan) or amend any existing employee benefit plan in any material
respect, except for changes which are less favorable to participants in such
plans;
(vii) Shall not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock or other ownership interests, other than regularly scheduled dividend
payments on shares of Series B Preferred Stock; or (B) directly or indirectly,
redeem, purchase or otherwise acquire any shares of its capital stock, or make
any commitments for any such action, other than the redemption of shares of
Series B Preferred Stock in accordance with their terms;
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<PAGE>
(viii) Except in connection with agreements, obligations or
undertakings in effect on the date hereof and disclosed in the West Pac
Disclosure Schedule or otherwise permitted hereunder, shall not enter into any
material transaction, or agree to enter into any material transaction, outside
the ordinary course of business, including, without limitation, any transaction
involving a merger, consolidation, joint venture, partial or complete
liquidation or dissolution, reorganization, recapitalization, restructuring or a
purchase, sale, lease or other disposition of a substantial portion of assets or
capital stock or enter into any additional aircraft leases; provided, however,
that the foregoing shall not prohibit West Pac to (A) enter into any additional
aircraft leases for up to an additional seven (7) aircraft; (B) issue and sell
up to an aggregate of $10,000,000 of shares of West Pac Common Stock, or any
securities convertible or otherwise exchangeable into shares of West Pac Common
Stock ("Tranche A") for a per share issue price, or with respect to convertible
---------
or exchangeable securities, a per share conversion or exchange price of not less
than five dollars ($5.00) per share (the "Tranche A Issue Price"), provided,
---------------------
however, that West Pac may issue and sell all or any portion of Tranche A at
less than the Tranche A Issue Price if the Exchange Ratio is adjusted upward as
follows:
Average per Share Tranche A Adjusted Exchange Ratio
--------------------------- -----------------------
Issue Price
-----------
$4.50 - 4.99 0.76
$4.00 - 4.49 0.77
$3.50 - 3.99 0.78
(C) in addition to the issuance of Tranche A, (I) after the issuance of the
entire Tranche A, issue and sell additional shares of West Pac Common Stock, or
any securities convertible or otherwise exchangeable into shares of West Pac
Common Stock ("Tranche B") for a per share issue price, or with respect to
---------
convertible or exchangeable securities, a per share conversion or exchange price
of not less than seven dollars ($7.00) per share (the "Tranche B Issue Price"),
---------------------
provided, however, that West Pac may issue and sell all or any portion of
Tranche B at less than the Tranche B Issue Price if the Exchange Ratio is
adjusted as set forth on Exhibit B attached hereto; or (II) enter into any
---------
additional non-convertible debt financing transactions on commercially
reasonable terms, in an aggregate amount of up to $30,000,000, provided,
however, that with respect to any non-convertible debt incurred by West Pac
between the date hereof and the Effective Time in excess of $15,000,000, such
non-convertible debt may only be incurred by West Pac with the prior written
approval of Frontier, which approval shall not be unreasonably withheld; (D)
enter into a lease with respect to West Pac's satellite terminal located in
Colorado Springs, Colorado in connection with the issuance of Special Facility
Bonds by the City of Colorado Springs (the "Special Bond"); or (E) take any
------------
action directly related to or directly arising from West Pac's contemplated move
to the Denver International Airport and any transaction entered into by West Pac
in connection therewith (the "Denver Transactions");
-------------------
(ix) Except as otherwise permitted by the terms of this Section
5.2(b), including, without limitation, the provisions of Section 5(b)(viii),
shall not incur any indebtedness for borrowed
34
<PAGE>
money or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of others other than in the
ordinary course of its business consistent with past practices (other than
normal expenditures for the purchase of raw materials or other supplies);
(x) Shall not make any loans, advances or capital contributions
to, or investments in, any other Person, except loans, advances or capital
contributions to, or investments in, any of its Subsidiaries or made in the
ordinary course of business consistent with past practices;
(xi) Except for capital expenditures directly related to the
Denver Transactions or in connection with agreements, obligations or
undertakings in effect on the date hereof and disclosed in the West Pac
Disclosure Schedule or otherwise permitted hereunder, shall not make or commit
to make any capital expenditures in excess of $1,500,000 in the aggregate;
(xii) Except in connection with agreements, obligations or
undertakings in effect on the date hereof which are disclosed in the West Pac
Disclosure Schedule or otherwise permitted hereunder, shall not apply any of its
assets to the direct or indirect payment, discharge, satisfaction or reduction
of any amount payable directly or indirectly to or for the benefit of any
affiliate of West Pac or enter into any transaction with any affiliate of West
Pac;
(xiii) Shall not alter the manner of keeping its books, accounts or
records, or change in any manner the accounting practices therein reflected;
(xiv) Except as made in connection with any transaction otherwise
permitted by the terms of this Section 5.2(b), shall not grant or make any
mortgage or pledge or subject itself or any of its material properties or assets
to any lien, charge or encumbrance of any kind, except (A) statutory liens for
taxes not yet due, (B) liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business for sums not yet due;
and (C) liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security taxes not currently due; and
(xv) Shall maintain insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are currently in
effect.
(c) In order to allow Frontier and West Pac to coordinate airline
scheduling and to facilitate West Pac's scheduled move to begin operations at
the Denver International Airport prior to the Effective Time, the operations of
both West Pac and Frontier shall be conducted in accordance with the terms of
the Code Sharing Agreement. Notwithstanding the fact that the Code Sharing
Agreement provides that it shall terminate on December 31, 1997, if the Merger
does not close because the condition set forth in Section 6.3(i) is not
fulfilled, the termination date of the Code Sharing Agreement shall be extended
to December 31, 1998.
5.3. Meetings of Stockholders. Each of West Pac and Frontier will take
------------------------
all action necessary
35
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in accordance with applicable law and their respective Certificates of
Incorporation and Bylaws to convene a meeting of their respective stockholders
as promptly as practicable to consider and vote upon the approval of this
Agreement and the transactions contemplated hereby. The Board of Directors of
each of West Pac and Frontier shall recommend such approval and West Pac and
Frontier shall each take all lawful action to solicit such approval, including,
without limitation, timely mailing the Proxy Statement to their respective
stockholders; provided, however, that such recommendation or solicitation is
subject to any action (including any withdrawal or change of its recommendation)
taken by, or upon authority of, the Board of Directors of West Pac or Frontier,
as the case may be, in the exercise of its good faith judgment as to its
fiduciary duties to its stockholders imposed by law. It shall be a condition to
the mailing of the Proxy Statement that (x) West Pac shall have received a
"comfort" letter from KPMG Peat Marwick LLP, independent public accountants for
Frontier, dated the date of the Proxy Statement, with respect to the financial
statements of Frontier included in the Proxy Statement, substantially in the
form described in Section 6.3(e); and (y) Frontier shall have received a
"comfort" letter from Arthur Andersen LLP, independent public accountants for
West Pac, dated the date of the Proxy Statement, with respect to the financial
statements of West Pac included in the Proxy Statement, substantially in the
form described in Section 6.2(d).
5.4. Filings; Other Action. Subject to the terms and conditions herein
---------------------
provided, Frontier and West Pac shall: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act
with respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; and (ii) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; (c) use commercially reasonable efforts to obtain all
consents under or with respect to, any contract, lease, agreement, purchase
order, sales order or other instrument or Permit, where the consummation of the
transactions contemplated hereby would be prohibited or constitute an event of
default, or grounds for acceleration or termination, in the absence of such
consent; and (d) take, or cause to be taken, all other commercially reasonable
actions as are reasonably necessary, proper or appropriate to consummate and
make effective the transactions contemplated by this Agreement. If, at any time
after the Effective Time, any further reasonable action is necessary or
desirable to carry out the purpose of this Agreement, the proper officers and
directors of the Surviving Corporation shall take all such necessary action.
5.5. Inspection of Records. From the date hereof to the Effective Time,
---------------------
each of Frontier and West Pac shall (a) allow all designated officers,
attorneys, accountants and other representatives of the other reasonable access
at all reasonable times to the offices, records and files, correspondence,
audits and properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs, of Frontier and West Pac and their respective
Subsidiaries, as the case may be; (b) furnish to the other, the other's counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other
36
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information as such persons may reasonably request; and (c) instruct the
employees, counsel and financial advisors of Frontier or West Pac, as the case
may be, to cooperate with the other in the other's investigation of the business
of it and its Subsidiaries. All information disclosed by a party hereto to the
other party hereto and their respective representatives shall be subject to the
terms of that certain Non-Disclosure Agreement (the "Confidentiality Agreement")
-------------------------
dated as of January 15, 1997 between West Pac and Frontier.
5.6. Publicity. In order to coordinate the disclosure of information to
---------
the public prior to the Effective Time, neither party hereto shall make any
press release or public announcement with respect to this Agreement, the Merger
or the transaction contemplated hereby without the prior written consent of the
other party hereto (which consent shall not be unreasonably withheld); provided,
however, that each party hereto may make any disclosure or announcement which
such party, in the opinion of its legal counsel, is obligated to make pursuant
to applicable law or regulation of Nasdaq or any national securities exchange,
in which case, the party desiring to make the disclosure shall consult with the
other party hereto prior to making such disclosure or announcement.
5.7. Registration Statement. West Pac and Frontier shall cooperate and
----------------------
promptly prepare and West Pac shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
--------
with respect to the West Pac Common Stock issuable in the Merger, a portion of
which Registration Statement shall also serve as the Proxy Statement. The
respective parties will cause the Proxy Statement and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. West Pac shall use all reasonable efforts, and Frontier will
cooperate with West Pac, to have the Form S-4 declared effective by the SEC as
promptly as practicable. Subject to the terms and conditions of this Agreement,
West Pac shall use its best efforts to obtain, prior to the effective date of
the Form S-4, all necessary state securities law or "Blue Sky" permits or
approvals required to carry out the transactions contemplated by this Agreement
and will pay all expenses incident thereto. No amendment or supplement to the
Proxy Statement will be made by West Pac or Frontier without the approval of the
other party. West Pac will advise Frontier, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the West Pac Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information.
5.8. Further Action. Subject to the terms and conditions of this
--------------
Agreement, each party hereto shall, subject to the fulfillment at or before the
Effective Time of each of the conditions of performance set forth herein or the
waiver thereof, perform such further acts and execute such documents as may be
reasonably required to effect the Merger.
5.9. Affiliate Letters. 1 At least 30 days prior to the Closing Date,
-----------------
Frontier shall deliver to West Pac a list of names and addresses of those
persons who were, in Frontier's reasonable judgment, at the record date for its
stockholders' meeting to approve the Merger, "affiliates" (each such person, an
"Affiliate") of Frontier within the meaning of Rule 145 of the rules and
---------
regulations promulgated
37
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under the Securities Act. Frontier shall provide West Pac such information and
documents as West Pac shall reasonably request for purposes of reviewing such
list. Frontier shall deliver or cause to be delivered to West Pac, prior to the
Closing Date, from each of the Affiliates of Frontier identified in the
foregoing list, an Affiliate Letter in the form attached hereto as Exhibit C.
---------
West Pac shall be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any West Pac Common Stock to be received
by such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the West Pac
Common Stock, consistent with the terms of such Affiliate Letters.
5.10. Expenses. Whether or not the Merger is consummated, all costs and
--------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein and except that (a) the filing fee in connection with
the HSR Act filing; (b) the filing fee in connection with the filing of the Form
S-4 or Proxy Statement with the SEC; and (c) the expenses incurred in connection
with printing and mailing the Form S-4 and the Proxy Statement shall be shared
equally by Frontier and West Pac.
5.11. Indemnity.
---------
(a) From and after the Effective Time of the Merger, West Pac agrees to
indemnify and hold harmless, and to cause the Surviving Corporation to honor its
separate indemnification to, each person who is an officer or director of
Frontier on the date of this Agreement and all former officers and directors of
Frontier (each an "Indemnified Person") from and against all damages,
------------------
liabilities, judgments and claims (and related expenses (the "Indemnification
---------------
Expenses") including, but not limited to, attorney's fees and amounts paid in
- --------
investigation or settlement)based upon or arising from his or her capacity as an
officer or director of Frontier, to the same extent he or she would have been
indemnified under the Restated Certificate of Incorporation and By-laws of West
Pac and to the extent permitted under applicable law. West Pac shall advance
all Indemnification Expenses reasonably incurred by such Indemnified Person to
the extent permitted under the Restated Certificate of Incorporation and By-Laws
of West Pac and to the extent permitted under applicable law.
(b) The rights granted to the Indemnified Persons hereby shall be
contractual rights inuring to the benefit of all Indemnified Persons and shall
survive this Agreement and any merger, consolidation, reorganization or similar
transaction involving West Pac.
(c) The rights to indemnification granted by this Section 5.11 are
subject to the following limitations: (i) amounts otherwise required to be paid
by West Pac to an Indemnified Person pursuant to this Section 5.11 shall be
reduced by any amounts that such Indemnified Person has recovered by virtue of
the claim for which indemnification is sought and West Pac shall be reimbursed
for any amounts paid by West Pac that such Indemnified Person subsequently
recovers by virtue of such claim; (ii) any claim for indemnification pursuant to
this Section 5.11 must be submitted in writing to the Chief Executive Officer of
West Pac promptly upon such Indemnified Person becoming aware of such claim,
provided that any such failure to advise promptly will not cause a loss of
indemnity unless it has a prejudicial effect on West Pac; and (iii) an
Indemnified Person shall not settle any claim for which indemnification is
provided herein without the prior written consent of West Pac, which
38
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consent shall not be unreasonably withheld.
5.12. Governance. West Pac's Board of Directors shall take all action
----------
necessary to cause the directors comprising the full Board of Directors of West
Pac at the Effective Time to be increased by three (3) directors and shall take
all such action necessary to cause three (3) of the current directors of
Frontier (which directors shall be mutually acceptable to Frontier and West Pac)
to be elected as director(s) of West Pac for terms expiring respectively at each
of the next three annual meeting of stockholders following the Effective Time in
order to fill the vacancies resulting from such newly created directorships.
If, prior to the Effective Time, any of such persons shall decline or be unable
to serve as a director, Frontier shall designate another person to serve in such
person's stead, which person shall be reasonably acceptable to West Pac.
5.13. Pooling; Reorganization. From and after the date hereof and until
-----------------------
the Effective Time, neither Frontier nor any of its affiliates shall (a)
knowingly take any action, or knowingly fail to take any action, that would
jeopardize the treatment of the Merger as a "pooling of interests" for
accounting purposes; (b) knowingly take any action, or knowingly fail to take
any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code; or (c)
knowingly enter into any contract, agreement, commitment or arrangement with
respect to either of the foregoing.
5.14. Employee Benefit Plans. As of the Closing Date, Frontier shall
----------------------
take, or cause to be taken, all such action as may be necessary to effect the
cessation of active participation of employees in the Frontier Benefit Plans and
the future accrual of benefits thereunder. Notwithstanding the foregoing, with
respect to Frontier's welfare benefit plans, any claims incurred under such
plans (regardless whether reported) on or prior to the Closing Date should be
paid in accordance with the provisions under such Plans under such plans prior
to the Closing Date. With respect to Frontier's retirement plans, Frontier and
West Pac shall mutually agree as to the future disposition of such plans and
their assets. After the Effective Time, West Pac shall provide benefits to
employees of Frontier which are substantially similar to the benefits provided
to similarly situated employees of West Pac and its Subsidiaries. With respect
to the West Pac Benefit Plans, West Pac shall grant all employees of Frontier
who become participants in such plans after the Closing Date credit for all
services with Frontier and its predecessors prior to the Closing Date for all
purposes for which such service was recognized by Frontier. To the extent the
West Pac Benefit Plans provide medical or dental welfare benefits after the
Closing Date, West Pac shall cause all pre-existing condition exclusions and
actively at work requirements to be waived and West Pac shall provide that any
expenses incurred on or before the Closing Date shall be taken into account
under the West Pac Benefit Plans for purposes of satisfying the applicable
deductible, coinsurance and maximum out-of-pocket provisions for such employees
and their covered dependents.
5.15. Insurance. For a period of five years after the Effective Time,
---------
West Pac shall provide each individual who served as a director or officer of
Frontier at any time prior to the Effective Time with liability insurance
covering acts or omissions of such persons occurring on or prior to the
Effective Time to the same extent that such insurance is provided to similarly
situated West Pac officers and directors after the Effective Time.
39
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5.16. Access to Employees. From the date hereof and for a period of one
-------------------
year from the date of termination of this Agreement, neither West Pac nor
Frontier shall solicit for employment or employ, without first receiving the
prior written approval of the other party, any employee employed by the other;
provided, however, that the term "solicit for employment" shall not be deemed to
include any advertising in newspapers, trade publications or any other publicly
distributed medium addressed to the general public and either party may employ
any person who, without other solicitation, responds to such an advertisement.
5.17. Severance. West Pac and Frontier hereby acknowledge and agree that
---------
(a) the severance obligations of Frontier attached hereto as Exhibit D shall be
---------
assumed by the Surviving Corporation as of the Effective Time; and (b) except as
otherwise set forth in the Frontier Disclosure Schedule, no other severance
obligations of Frontier shall be assumed by the Surviving Corporation, which
obligations shall be deemed null and void as of the Effective Time.
ARTICLE VI
CONDITIONS
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of each of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved in the manner required by applicable law or by the applicable
regulations of any stock exchange or other regulatory body, as the case may be,
by the holders of the issued and outstanding shares of capital stock of each of
Frontier and West Pac.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger or
materially changes the terms or conditions of this Agreement shall have been
issued and remain in effect. Subject to the terms and conditions of this
Agreement, in the event any such order or injunction shall have been issued,
each party agrees to use its reasonable efforts to have any such injunction
lifted.
(d) The Form S-4 shall have been declared effective by the SEC and shall
be effective at the Effective Time, and no stop order suspending the
effectiveness of the Form S-4 shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals under
state securities laws relating to the issuance or trading of the West Pac Common
Stock to be issued to Frontier stockholders in connection with the Merger shall
have been received.
40
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(e) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Merger and any other documents required to be filed after the Effective
Time and except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a West Pac
Material Adverse Effect or a Frontier Material Adverse Effect, as the case may
be, following the Effective Time.
(f) West Pac shall have received the opinion of D'Ancona & Pflaum,
special counsel to West Pac, dated the Closing Date, to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that Frontier and West Pac
will each be a party to that reorganization within the meaning of Section 368(b)
of the Code.
(g) Frontier shall have received the opinion of Parcel, Mauro, Hultin &
Spaanstra, P.C., special counsel to Frontier, dated the Closing Date, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
Frontier and West Pac will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.
(h) The West Pac Common Stock to be issued to Frontier stockholders in
connection with the Merger shall have been authorized for trading on the Nasdaq
National Market, subject only to official notice of issuance.
6.2. Conditions to Obligation of Frontier to Effect the Merger. The
---------------------------------------------------------
obligation of Frontier to effect the Merger shall be subject to the fulfillment
at or prior to the Closing Date of the following additional conditions:
(a) West Pac shall have performed, in all material respects, all of its
agreements contained herein that are required to be performed by West Pac on or
prior to the Closing Date, and Frontier shall have received a certificate of the
President or a Vice President of West Pac, dated the Closing Date, certifying to
such effect.
(b) The representations and warranties of West Pac contained in this
Agreement and in any document delivered in connection herewith shall be true and
correct, in all material respects, as of the Closing, and Frontier shall have
received a certificate of the President or a Vice President of West Pac, dated
the Closing Date, certifying to such effect.
(c) Frontier shall have received from West Pac certified copies of the
resolutions of West Pac's Boards of Directors approving and adopting this
Agreement and the transactions contemplated hereby.
(d) Frontier shall have received a "comfort" letter from Arthur Andersen
LLP, of the kind contemplated by the Statement of Auditing Standards with
respect to Letters to Underwriters
41
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promulgated by the American Institute of Certified Public Accountants (the
"AICPA Statement"), dated the Closing Date, in form and substance reasonably
---------------
satisfactory to Frontier, in connection with the procedures undertaken by them
with respect to the financial statements of West Pac and its Subsidiaries
contained in the Form S-4 and the other matters contemplated by the AICPA
Statement and customarily included in comfort letters relating to transactions
similar to the Merger.
(e) The fairness opinion from Smith Barney, to the effect that the
Exchange Ratio is fair to the holders of Frontier Common Stock from a financial
point of view, shall not have been withdrawn or materially and adversely
modified as of the Effective Time.
(f) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business,
operations or prospects of West Pac and its Subsidiaries, taken as a whole, that
would have or would be reasonably likely to have a West Pac Material Adverse
Effect.
6.3. Conditions to Obligation of West Pac to Effect the Merger. The
---------------------------------------------------------
obligations of West Pac to effect the Merger shall be subject to the fulfillment
at or prior to the Closing Date of the following additional conditions:
(a) Frontier shall have performed, in all material respects, all of its
agreements contained herein that are required to be performed by Frontier on or
prior to the Closing Date, and West Pac shall have received a certificate of the
President or a Vice President of Frontier, dated the Closing Date, certifying to
such effect.
(b) The representations and warranties of Frontier contained in this
Agreement and in any document delivered in connection herewith shall be true and
correct, in all material respects, as of the Closing, and West Pac shall have
received a certificate of the President or a Vice President of Frontier, dated
the Closing Date, certifying to such effect.
(c) West Pac shall have received from Frontier certified copies of the
resolutions of Frontier's Board of Directors approving and adopting this
Agreement and the transactions contemplated hereby.
(d) West Pac shall have received a "comfort" letter from KPMG Peat
Marwick LLP, of the kind contemplated by the AICPA Statement, dated the Closing
Date, in form and substance reasonably satisfactory to West Pac, in connection
with the procedures undertaken by them with respect to the financial statements
and other financial information of Frontier contained in the Form S-4 and the
other matters contemplated by the AICPA Statement and customarily included in
comfort letters relating to transactions similar to the Merger.
(e) All required consents to transfer to the Surviving Corporation the
aircraft leases of Frontier with respect to aircraft that have been delivered to
Frontier as of the date of this Agreement shall have been obtained or waived,
other than with respect to not more than two 737-200 aircraft. All required
consents to transfer to the Surviving Corporation all other leases or agreements
of
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Frontier (other than aircraft leases) shall have been obtained or waived, except
to the extent that the failure to secure any such consents, either individually
or in the aggregate, shall not have a material adverse effect on the business,
results of operations or financial condition of the Surviving Corporation.
(f) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business,
operations or prospects of Frontier that would have or would be reasonably
likely to have a Frontier Material Adverse Effect.
(g) West Pac shall have received from Frontier certified copies of the
resolutions of the Compensation Committee of Frontier approving the actions and
transactions contemplated by Section 1.5 of this Agreement.
(h) West Pac shall have received a fairness opinion from Lehman
Brothers, dated as of the date of the Proxy Statement, to the effect that the
Exchange Ratio is fair to West Pac from a financial point of view, which opinion
shall not have been withdrawn or materially and adversely modified as of the
Effective Time.
(i) The holders of not more than three percent (3%) of the outstanding
shares of Frontier Common Stock shall have perfected dissenters' rights under
applicable law.
ARTICLE VII
TERMINATION
7.1. Termination by Mutual Consent. This Agreement may be terminated and
-----------------------------
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of Frontier and/or West
Pac, by the mutual consent of West Pac and Frontier.
7.2. Termination by Either West Pac or Frontier. This Agreement may be
------------------------------------------
terminated and the Merger may be abandoned by action of the Board of Directors
of either West Pac or Frontier if (a) the Merger shall not have been consummated
by December 31, 1997; provided, however, that the right to terminate this
Agreement under this Section 7.2(a) will not be available to any party whose
failure to fulfill any obligation under this Agreement in violation of this
Agreement has been the cause of, or resulted in, the failure of the Merger to
occur on or before such date; (b) the approval of Frontier's stockholders
required by Section 6.1(a) shall not have been obtained at a meeting duly
convened therefor or at any adjournment thereof; provided, however, that
Frontier shall not have the right to terminate this Agreement under this Section
7.2(b) if Frontier caused (directly or indirectly) or aided in the failure to
obtain such approval in violation of this Agreement; (c) the approval of West
Pac's stockholders required by Section 6.1(a) shall not have been obtained at a
meeting duly convened therefor or at any adjournment thereof; provided, however,
that West Pac shall not have the right to terminate this Agreement under this
Section 7.2(c) if West Pac caused (directly or
43
<PAGE>
indirectly) or aided in the failure to obtain such approval in violation of this
Agreement; or (d) a court of competent jurisdiction or a governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action either (i) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement; or (ii) compelling West Pac or the Surviving Corporation to dispose
of or hold separate all or a material portion of the respective businesses or
assets of West Pac and Frontier, and such order, decree, ruling or other action
shall have become final and non-appealable; provided, that the party seeking to
terminate this Agreement pursuant to this clause (d) shall have used all
reasonable efforts to remove such injunction, order or decree.
7.3. Termination by Frontier. This Agreement may be terminated and the
-----------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the stockholders of Frontier referred to in Section
6.1(a), by action of the Board of Directors of Frontier, if (a) Frontier
receives an Alternative Proposal and the Board of Directors of Frontier
determines in good faith and pursuant to the exercise of its fiduciary duties to
its stockholders, that such Alternative Proposal is more favorable to Frontier
stockholders from a financial point of view than the transaction contemplated by
this Agreement, and the Board of Directors of Frontier accepts, recommends or
resolves to accept or recommend to Frontier's stockholders such Alternative
Proposal; (b) the Board of Directors of West Pac shall have recommended an
Alternative Proposal to West Pac stockholders; (c) the Board of Directors of
West Pac shall have withdrawn or modified in a manner materially adverse to
Frontier its approval or recommendation of this Agreement and/or the Merger
(other than upon the happening of an event described in Sections 7.4(d) or
7.4(e)); (d) there has been a breach by West Pac of any representation or
warranty contained in this Agreement which would have a West Pac Material
Adverse Effect; (e) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of West Pac, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by Frontier to West Pac; (f) any Person (other than a
Person that holds shares of Series B Preferred or Series C Preferred, as of the
date hereof), after the date hereof, shall become the beneficial owner (directly
or indirectly) of twenty percent (20%) or more of the outstanding shares of West
Pac Common Stock or any Person shall have commenced a bona fide tender offer or
exchange offer to acquire at least twenty percent (20%) of the then outstanding
shares of West Pac Common Stock; or (g) West Pac enters into a letter of intent
or a binding agreement with respect to a Combined Proposal.
7.4. Termination by West Pac. This Agreement may be terminated and the
-----------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the stockholders of West Pac referred to in Section 6.1(a), by
action of the Board of Directors of West Pac, if (a) West Pac receives an
Alternative Proposal and the Board of Directors of West Pac determines in good
faith and pursuant to the exercise of its fiduciary duties to its stockholders,
that such Alternative Proposal is more favorable to West Pac stockholders from a
financial point of view than the transaction contemplated by this Agreement, and
the Board of Directors of West Pac accepts, recommends or resolves to accept or
recommend to West Pac's stockholders such Alternative Proposal; (b) the Board of
Directors of Frontier shall have recommended an Alternative Proposal to Frontier
stockholders; (c) the Board of Directors of Frontier shall have withdrawn or
modified in a manner materially adverse to West Pac its approval or
recommendation of this Agreement or the Merger
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(other than upon the happening of an event described in Sections 7.3(d) or
7.3(e)); (d) there has been a breach by Frontier of any representation or
warranty contained in this Agreement which would have a Frontier Material
Adverse Effect; (e) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Frontier, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by West Pac to Frontier; or (f) any Person, after the date
hereof, shall become the beneficial owner (directly or indirectly) of twenty
percent (20%) or more of the outstanding shares of Frontier Common Stock or any
Person (other than West Pac or its Subsidiaries) shall have commenced a bona
fide tender offer or exchange offer to acquire at least twenty percent (20%) of
the then outstanding shares of Frontier Common Stock.
7.5. Effect of Termination and Abandonment.
-------------------------------------
(a) In the event that (i) any person shall have made an Alternative
Proposal for Frontier and thereafter this Agreement is terminated by Frontier
pursuant to Section 7.3(a) or by West Pac pursuant to Section 7.4(b); or (ii)
this Agreement is terminated by (A) Frontier pursuant to Section 7.2(a) or (B)
by West Pac pursuant to Sections 7.4(c), 7.4(d), 7.4(e) or 7.4(f), and, in
either case, within six months from the date of termination of this Agreement,
Frontier enters into an agreement regarding an Alternative Proposal with an
entity with whom it had discussions relating to an Alternative Proposal at any
time during the six month period immediately prior to the date of termination of
this Agreement, then Frontier shall promptly, but in no event later than two
days after such termination or entering into such agreement, as the case may be,
pay West Pac a fee in an amount equal to $4,000,000, which amount shall be
payable by wire transfer of same day funds. Frontier acknowledges that the
agreements contained in this Section 7.5(a) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
West Pac would not enter into this Agreement.
(b) In the event that (i) any person shall have made an Alternative
Proposal for West Pac and thereafter this Agreement is terminated by Frontier
pursuant to Section 7.3(b) or by West Pac pursuant to Section 7.4(a); or (ii)
this Agreement is terminated by (A) West Pac pursuant to Section 7.2(a) or (B)
by Frontier pursuant to Sections 7.3(c), 7.3(d), 7.3(e) or 7.3(f), and, in
either case, within six months from the date of termination of this Agreement,
West Pac enters into an agreement regarding an Alternative Proposal with an
entity with whom it had discussions relating to an Alternative Proposal at any
time during the six month period immediately prior to the date of termination of
this Agreement, then West Pac shall promptly, but in no event later than two
days after such termination or entering into such agreement, as the case may be,
pay Frontier a fee in an amount equal to $4,000,000, which amount shall be
payable by wire transfer of same day funds. West Pac acknowledges that the
agreements contained in this Section 7.5(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Frontier would not enter into this Agreement.
(c) If this Agreement is (i) terminated by Frontier pursuant to Sections
7.3(c), 7.3(d) or 7.3(e); or (ii) by West Pac pursuant to Sections 7.4(c),
7.4(d) or 7.4(e), the non-terminating party shall reimburse the terminating
party for all actual out-of-pocket costs and expenses incurred by such
45
<PAGE>
terminating party in connection with this Agreement and the consummation and
negotiation of the transactions contemplated hereby, including, without
limitation, legal, professional and service fees and expenses, but in any event,
in an amount not to exceed $500,000 in the aggregate, which amount shall be
payable by wire transfer of same day funds.
(d) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article VII, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to the
provisions of Sections 5.2(c), 5.6, 5.10, 5.16, 7.5, 8.2, 8.3, 8.4, 8.6, 8.9,
8.12 and 8.13, which Sections shall survive the termination of this Agreement.
7.6. Extension; Waiver. At any time prior to the Effective Time, any
-----------------
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto; and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE VII
GENERAL PROVISIONS
8.1. Nonsurvival of Representations, Warranties and Agreements. All
---------------------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and, shall not survive
the Merger, provided, however, that the agreements contained in Sections 1.4,
1.5, 1.6, 1.8, 1.9, Article II, 5.11, 5.12, 5.14, 5.15 and 5.17 and this Article
8 and the agreements delivered pursuant to this Agreement shall survive the
Merger.
8.2. Notices. Any notice required to be given hereunder shall be
-------
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
(i) if to West Pac, to it at:
Western Pacific Airlines, Inc.
2864 South Circle Drive
Suite 1100
Colorado Springs, Colorado 80906
Telecopier No.: (719) 527-7259
Telephone No.: (719) 527-7421
Attention: Robert A. Peiser
46
<PAGE>
with a copy to:
D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
Telecopier No.: (312) 580-0923
Telephone No.: (312) 580-2111
Attention: Allan J. Reich
(ii) if to Frontier, to it at:
Frontier Airlines, Inc.
12015 East 46th Avenue, Suite 200
Denver, Colorado 80239-3116
Telecopier No.: (303) 371-9669
Telephone No.: (303) 371-7400
Attention: Samuel D. Addoms
with a copy to:
Parcel Mauro, Hultin & Spaanstra, P.C.
1801 California Street, Suite 3600
Denver, Colorado 80202-2636
Telecopier No.: (303) 295-3040
Telephone No.: (303) 292-6400
Attention: Douglas R. Wright
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3. Assignment, Binding Effect. Neither this Agreement nor any of the
--------------------------
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 1.4, 1.5, 1.6, 1.7, 5.11, 5.14 and 5.15, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
8.4. Entire Agreement. This Agreement, the Exhibits, the Frontier
----------------
Disclosure Schedule, the West Pac Disclosure Schedule, the Confidentiality
Agreement and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the
47
<PAGE>
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto. No addition to or modification of any
provision of this Agreement shall be binding upon any party hereto unless made
in writing and signed by all parties hereto.
8.5. Amendment. This Agreement may be amended by the parties hereto, by
---------
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of Frontier and West Pac, but after any such stockholder approval,
no amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.6. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. Each of Frontier and West Pac hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for any litigation arising out of or
---------------
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Delaware
Courts and agrees not to plead or claim in any Delaware Court that such
litigation brought therein has been brought in an inconvenient forum.
8.7. Counterparts. This Agreement may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
8.8. Headings. Headings of the Articles and Sections of this Agreement
--------
are for the convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
8.9. Interpretation. In this Agreement, unless the context otherwise
--------------
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10. Waivers. Except as provided in this Agreement, no action taken
-------
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11. Incorporation of Exhibits. The Frontier Disclosure Schedule, the
-------------------------
West Pac Disclosure Schedule and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
48
<PAGE>
8.12. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.13. Enforcement of Agreement. The parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any Delaware Court, this being in addition to
any other remedy to which they are entitled at law or in equity.
49
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
WESTERN PACIFIC AIRLINES, INC. FRONTIER AIRLINES, INC.
By: _______________________ By: _______________________
Title: _______________________ Title: _______________________
No schedules or exhibits mentioned in this Agreement are being filed with
SEC. The Registrant hereby agrees to furnish supplementally a copy of any
schedule or exhibit to the SEC upon request.
50
<PAGE>
Exhibit 23
INDEPENDENT AUDITOR'S CONSENT
THE STOCKHOLDERS AND
BOARD OF DIRECTORS
FRONTIER AIRLINES, INC.:
We consent to the incorporation by reference in the registration statement (No.
333-07699) on Form S-3 and registration statement (No. 333-13333) on Form S-8 of
Frontier Airlines, Inc. of our report dated June 20, 1997, except as to Note 12,
which is as of June 30, 1997, relating to the balance sheets of Frontier
Airlines, Inc. as of March 31, 1997, and the related statements of operations,
stockholder's equity, and cash flows for each of the years ended March 31, 1997
and 1996, which report appears in March 31, 1997, annual report on Form 10-KSB
of Frontier Airlines, Inc.
[SIGNATURE OF KPMG PEAT MARWICK LLP APPEARS HERE]
KPMG Peat Marwick LLP
Denver, Colorado
July 10, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996
<PERIOD-START> APR-01-1996 APR-01-1995
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> 10,286,453 6,359,254
<SECURITIES> 0 0
<RECEIVABLES> 7,582,105 5,904,299
<ALLOWANCES> 71,713 32,141
<INVENTORY> 997,102 569,176
<CURRENT-ASSETS> 31,470,014 25,797,029
<PP&E> 6,174,942 2,747,599
<DEPRECIATION> 1,833,960 764,539
<TOTAL-ASSETS> 44,092,545 30,990,191
<CURRENT-LIABILITIES> 32,744,835 25,844,576
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0 0
0 0
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<TOTAL-LIABILITY-AND-EQUITY> 44,092,545 30,990,191
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<TOTAL-REVENUES> 116,500,634 70,392,575
<CGS> 0 0
<TOTAL-COSTS> 129,662,086 76,325,239
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<INTEREST-EXPENSE> 20,435 22,671
<INCOME-PRETAX> 0 0
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<INCOME-CONTINUING> (12,186,332) (5,581,682)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,186,332) (5,581,682)
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