EXHIBIT 10.1
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION IN A CONFIDENTIAL TREATMENT REQUEST UNDER
RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE SYMBOL
"[***]" IN THIS EXHIBIT INDICATES THAT INFORMATION HAS BEEN OMITTED.
CODE SHARE AGREEMENT
This CODE SHARE AGREEMENT (this "Agreement") is made and entered into as of
September 18, 2003 (the "Contract Date") to be effective as of January 1, 2004
(the "Effective Date"), by and between FRONTIER AIRLINES, INC., a Colorado
corporation ("Frontier"), and HORIZON AIR INDUSTRIES, INC., a Washington
corporation ("Partner"). Certain capitalized terms not otherwise defined herein
will have the meanings ascribed to them in Schedule A to this Agreement.
R E C I T A L S
A. Frontier holds a certificate of public convenience and necessity issued
by the Department of Transportation ("DOT") authorizing it to engage in the
interstate and overseas air transportation of persons, property and mail between
all points in the United States, its territories and possessions.
B. Partner holds certificates of public convenience and necessity issued
by the DOT authorizing Partner to engage in the interstate transportation of
persons, property and mail in the United States, its territories and
possessions.
C. Frontier owns various trademarks, service marks and logos, including
"Frontier Airlines" and distinctive exterior color decor and patterns on its
aircraft, hereinafter referred to individually and collectively as the "Frontier
Service Marks."
D. Frontier and Partner desire to enter into a code share agreement
whereby Partner will provide certain flight and other services to Frontier on
terms and conditions more particularly set forth in this Agreement from and
after the Effective Date.
NOW, THEREFORE, in consideration of the promises, covenants, representations and
warranties hereinafter set forth, and for other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Frontier and Partner
agree as set forth below.
A G R E E M E N T
1. Rights, Responsibilities and Obligations of Partner:
1.1 Flight Service. During the term of this Agreement, Partner
will operate "Frontier JetExpress" air transportation services
(the "Flight Services") using the Initial Fleet and the Option
Fleet (each as defined in Section 1.3) to and from the cities
and based upon the schedule established from time to time by
Frontier (the "Schedule") and provided to Partner by written
notice (a "Schedule Notice") no less than 70 days for schedule
changes not involving Flight Services to new cities and no
less than 90 days for schedule changes involving the addition
of Flight Services to a new city or cities prior to the
effective date of the schedule change described in the
Schedule Notice. The aircraft comprising the Fleet will be
Bombardier CRJ-700s and are herein collectively referred to as
the "Aircraft."
For purposes of this Agreement, "Flights" means flights
operated pursuant to the Schedule. Frontier may change the
Schedule by issuance of a Schedule Notice at any time. When
creating a Schedule, Frontier shall: (i) create a Schedule
which will permit Partner to schedule flight crews in a manner
consistent with Partner's block time, operational and
maintenance practices set forth on Exhibit 1.1 to this
Agreement, as modified from time to time by mutual agreement
of the parties prior to the due date of the relevant Schedule
Notice; (ii) take into account airport facilities available
for Aircraft handling; (iii) permit maintenance as required by
Section 1.7.2 and scheduled heavy maintenance on Aircraft, as
required; (iv) take into account the Spare Aircraft (as
defined in Section 1.3.1); and (v) provide for at least 70
days prior notice of any holiday cancellations.
1.2 Ad Hoc Schedule Changes. Frontier may at its election require
ad hoc changes to the Schedule for any reason including but
not limited to irregular operations, mechanical problems,
weather conditions, or charter opportunities (such flights as
requested on an ad hoc basis by Frontier and not otherwise
reflected on a Schedule Notice hereby defined as "Ad Hoc
Flights"). Frontier and Partner will discuss Ad Hoc Flights
and Partner will complete such Ad Hoc Flights only upon mutual
agreement of the parties. Ad Hoc Flights completed by Partner
will become part of the Schedule for purposes of Section 6.2
but will be excluded from the Partner's performance
requirements under Section 4.
1.3 Fleet.
1.3.1 Initial Fleet. Each of the Aircraft identified on
Exhibit 1.3.1 as the initial aircraft (the "Initial
Fleet") will be Bombardier CRJ-700s and shall be
placed into Flight Services by Partner in the
calendar months set forth on Exhibit 1.3.1 (the
"Delivery Schedule"). For new aircraft deliveries
Partner will provide no less than 60 days' prior
written notice of the week in which the Aircraft in
the Initial Fleet will be delivered, and no less than
30 days' prior written notice of the day on which the
Aircraft in the Initial fleet will be delivered. In
the event Partner is unable to meet the delivery week
or dates set for on any notice, Partner may use a
Substitute Aircraft (as defined in Section 1.3.4) to
operate any Flight that was scheduled for the delayed
Aircraft for up to 30 days or, with prior consent of
Frontier, for such longer period as may be necessary.
The Initial Fleet will be comprised of eight (8) core
operating Aircraft (the "Core Aircraft") and one (1)
operational spare Aircraft (the "Spare Aircraft").
1.3.2 Option Fleet. Frontier and Partner agree to meet
periodically during the term of this Agreement to
discuss and if possible agree on the expansion of the
Initial Fleet by as many as twelve (12) Aircraft (the
"Option Fleet"). Placement of the Option Fleet into
Flight Services is subject to review and mutual
agreement between the parties, provided, it is
understood and agreed that the terms and conditions
set forth in this Agreement will generally be
applicable to the Option Fleet other than such
changes as may be agreed to by the parties with
respect to the Fixed Costs and Maintenance Parts
relating to the Option Aircraft and the possible
extension of the term of this Agreement
to take into account a reasonable operating
commitment for the Option Fleet. The Initial Fleet
and the Option Fleet are collectively referred to
herein as the "Fleet."
1.3.3 Aircraft Configuration, Decor and Livery. From the
Effective Date until such time that all Aircraft in
the Initial Fleet are operating as Frontier
JetExpress Flights, all but two (2) of the Aircraft
shall be painted, marked and decorated to bear
Frontier Service Marks, consisting of Frontier livery
and the name "Frontier JetExpress" in accordance with
the livery standards to be provided by Frontier (the
"Frontier JetExpress Livery") and, at Frontier's
election, meet the configurations and interior decor
standards set forth in Exhibit 1.3.3 (the
"Configuration Standards"). Thereafter, eighty
percent (80%) of the Fleet, rounded up to the nearest
whole number, shall be painted, marked and decorated
to bear the "Frontier JetExpress Livery" and, at
Frontier's election, meet the Configuration
Standards. Aircraft not required to be in Frontier
JetExpress Livery under the prior sentence and in the
Fleet may be left with an all white exterior and
otherwise be configured in accordance with Partner's
internal standards (such Aircraft referred to as
"White Tail Aircraft"). Costs and expenses incurred
in meeting the Livery and Configuration Standards or
White Tail configuration will be allocated as
follows: For New Aircraft, the Aircraft will be
delivered in the Frontier JetExpress Livery and
covered by the terms of the purchase agreement
between Partner and the Aircraft manufacturer, and
costs relating to the application of the animal motif
tail decal and any costs associated with Frontier
Configuration Standards over and above costs for
Partner's own configuration shall be borne by
Frontier. For Used Aircraft, the costs of removing
the existing livery and placing the exterior of the
Aircraft in an all white condition will be borne by
Partner, and the cost of placing the Frontier
JetExpress Livery and the application of the animal
motif decal for all Used Aircraft not being left as
White Tail Aircraft will be borne by Frontier. Should
Frontier elect to have the New Aircraft delivered to
meet the Configuration Standards, or have the
interior of the Used Aircraft (other than the White
Tail Aircraft) modified to meet the Configuration
Standards, related costs and expenses will be borne
by Frontier. Any changes to the Livery and
Configuration Standards requested by Frontier after
the Aircraft are placed into service as part of the
Fleet will be performed by Partner at Frontier's sole
cost and expense. Such configuration changes must be
accomplished within 120 days following Frontier's
request. In the event Frontier desires changes to
Frontier JetExpress Livery, Frontier will provide
Partner with 120 days' prior written notice and all
requested changes must be accomplished by the end of
such 120 day period, at Frontier's sole cost and
expense. Partner shall use and display suitable signs
on the interior and exterior of each Aircraft
identifying Partner as the operator of the Flight
Services. All announcements, displays or literature
used or viewed by Partner customers on Flights shall
feature Frontier or "Frontier JetExpress," and no
other air carrier.
1.3.4 Substitute Aircraft. In order to address maintenance
requirements, irregular operations, or Aircraft
delivery delays as permitted under Section 1.3.1,
Partner may substitute for any Aircraft in the Fleet
an aircraft from its own operational fleet (each, a
"Substitute Aircraft") for up to thirty (30) days, so
long as such substitute aircraft is a White Tail
Aircraft or Horizon Livery. Permanent substitutions
or substitutions over thirty (30) days for any
aircraft in the Fleet will require the advance
written consent of Frontier.
1.3.5 Fleet Domicile. On or before the Effective Date,
Partner will domicile crews required for the Fleet
Services in Denver, Colorado and establish a line
maintenance base capable of performing A Checks and
clearing MELs at Denver International Airport.
1.4 Other Services. Frontier will be responsible for providing all
Other Services required in connection with the Flight Services
through the use of its own personnel or through the retention
of third party contractors, and will be responsible for all
costs and expenses related to such Other Services. Should
Frontier request proposals to subcontract for Other Services,
Partner will have a right of first refusal to provide such
Other Services upon the most favorable terms and conditions
being offered to Frontier by other subcontractors on a "right
of first refusal" basis. In the event Partner is selected to
perform the Other Services on a subcontract basis, Frontier
and Partner will enter into a separate agreement with respect
to such Other Service, the terms of which will be separate and
apart from this Agreement.
1.5 Personnel; Training. Partner shall hire, engage, employ and
maintain a sufficient number of trained personnel and
subcontractors, including, but not limited to pilots, flight
attendants, and maintenance personnel necessary to provide the
Flight Services required by this Agreement. Pilots, Flight
Attendants, and maintenance personnel shall wear Partner
uniforms. For flights attendants newly hired by Partner to
provide Flight Services, Frontier will be responsible for the
cost of initial training. For current Partner flight
attendants transferring to Frontier Flight Services, Frontier
will be responsible for relocation costs. Frontier will be
responsible for initial Pilot Training costs for new Aircraft
Partner will allocate such costs over a 12 month period
beginning at the time of initial training and no interest will
be assessed by Partner. Partner will be responsible for all
recurrent training expenses relating to pilots, flight
attendants or mechanics, including uniform allowances and
cleaning in accordance with collective bargaining agreements
and its internal policies, except costs related to differences
in training related to Frontier Service requirements. Costs
and expense for which Frontier is responsible under this
Section will be remitted as part of the Pass Thru Costs.
Should Frontier elect to provide an initial orientation
program or any similar subsequent refresher programs for any
Partner personnel involved in Flight Services, Frontier will
be responsible for all costs and expenses, including without
limitation expenses relating to travel, room and board. If
Frontier elects to carry hazardous and/or dangerous materials,
Frontier will work with Partner to insure that all such
hazardous materials training meets all governmental
regulations applicable to Frontier and Partner. Such training
and related costs will be the sole responsibility of Frontier.
1.6 Service Quality and Level. All Flight Services and Other
Services shall be provided by Partner at a service quality and
level of service equal to or greater than the service quality
and level of service provided by Frontier to the extent
applicable to the type of Aircraft used to provide the Flight
Services. More specifically, but without limitation:
1.6.1 Partner pilots and flights attendants
providing Flight Services will be required and trained to
comply with Partner's appearance standards as set forth on
Exhibit 1.6.1.
1.6.2 All Aircraft in the Fleet, at the time of
commencing any Flight Service in the Schedule, must have a
functioning lavatory and coffee maker, notwithstanding any
regulations of the FAA that would permit operation of the
Aircraft with such equipment tagged inoperable. Any flight
cancelled pursuant to this subparagraph will be deemed to be a
flight cancellation for purposes of calculating the FCF and
the OTP (each as defined in Section 4).
1.6.3 In the event Frontier is required to
reaccommodate a passenger who is unable to complete a
scheduled flight because of an inoperable seat, Frontier will
apply its applicable policies and procedures and Partner will
be required to reimburse Frontier for all reasonable costs and
expenses relating to the reaccommodation. In the alternative,
Frontier may setoff such amount against its next payment
obligation to Partner arising under this Agreement.
1.6.4 If Frontier changes Frontier's service
requirements and as a result Partner will be required to
modify related training programs or make any capital upgrades
to any Aircraft, Partner, in writing, shall advise Frontier of
the need for such upgrades together with the estimated cost to
complete such upgrades (the "Upgrade Notice"). If, after
receipt of the Upgrade Notice, Frontier, in writing, elects to
require Partner to comply with such changes in service
requirements, then Frontier, within 30 days after receipt of a
written notice, shall reimburse Partner for the costs incurred
by Partner in making such capital upgrades. If Frontier does
not approve the making of the capital upgrades, then Partner
shall not be required to meet the new Frontier service
requirements. Partner will cause each Aircraft in the Fleet to
comply with all aircraft exterior cleanliness and appearance
standards, including appearance and condition of the livery,
established by Frontier.
1.7 Maintenance.
1.7.1 Obligation. Partner, at its own cost and expense,
shall be responsible for the service, repair,
maintenance, overhauling and testing of each
Aircraft: (i) in compliance with the maintenance
program for each Aircraft as approved by the FAA and
pursuant to all applicable aircraft maintenance
manuals applicable to each Aircraft; (ii) so as to
keep each Aircraft in good and safe operating
condition; and (iii) so as to keep the Aircraft in
such operating condition as may be necessary to
enable the airworthiness certification of the
Aircraft to be maintained in good standing. Partner
shall retain full authority and control over the
service, repair, maintenance, overhauling
and testing of each Aircraft. Frontier shall have no
obligations or duties with respect to the service,
repair, maintenance, overhauling or testing of any
Aircraft.
1.7.2 Scheduled Maintenance. At the time Aircraft are
identified to the Fleet, Frontier and Partner will
cooperate to estimate the maintenance schedule for
each Aircraft and will develop a schedule for
required maintenance that will minimize disruptions
to Flight Services required by the Schedule and avoid
non-consecutive scheduled maintenance events. The
Schedule will also provide that each Aircraft that
will remain overnight at DEN, or such other location
as may be mutually agreed by the parties from time to
time (the " MTX RON Location"), will be scheduled in
accordance with Exhibit 1.1. Partner will provide
Frontier with 120 days' prior written notice of any
heavy maintenance check required under the applicable
maintenance program that would require removal of an
Aircraft from the Schedule. Upon receiving such
notice, Frontier and Partner will cooperate to alter
the scheduled maintenance in order to minimize
interruption to the Schedule and to provide maximum
Fleet capacity during holiday periods.
1.7.3 Ground Equipment. Partner will be required to provide
one Aircraft tow bar for each Aircraft in the Fleet.
1.8 Emergency Operations. Prior to the commencement of Flight
Services, Partner and Frontier shall coordinate to develop a
plan that complies with applicable Government Regulations to
be implemented in the event of any incident involving personal
injury or death to a passenger or crew member on a Flight. The
emergency response teams of Frontier and Partner shall
coordinate their efforts and shall cooperate fully in response
to such emergency, and Partner will provide Frontier full
access to all data and records relating to the Flight. The
parties recognize and agree that Frontier will have sole
responsibility for addressing the media and providing all
aspects of family assistance with the exception of Partner's
retention of responsibility for operational requirements
pursuant to Government Regulations and for family assistance
relating to Partner crew members and employees.
1.9 Post-Departure Procedures. Unless otherwise performed by
Frontier personnel, Partner shall perform post-departure
procedures for each Flight. Partner will deposit into bank
accounts identified by Frontier on a daily basis all cash
receipts relating to liquor sales conducted on the Aircraft in
the Fleet. Partner will be liable for all losses arising from
shortfalls from the sales of liquor or other catering, if any.
Partner will reimburse Frontier for all such losses within 30
days following receipt of an invoice or other written notice
setting forth the details of such losses. Frontier and Partner
will each have the right to audit all internal collection
procedures and records relating to Frontier's and Partner's
post-departure procedures and all cash receipts relating to
catering or liquor sales on board the Aircraft in the Fleet.
Should Frontier's audit identify errors or losses exceeding
10% of the amount that should have been reported and paid to
Frontier, Partner, after a fifteen (15) day review period,
will reimburse Frontier for all reasonable costs, expenses and
fees, including without limitation
the fees of any outside auditors, incurred in connection with
the performance of the audits permitted under this Agreement.
2. Rights, Responsibilities and Obligations of Frontier.
2.1 Flight Management Items. Frontier shall: (i) designate from
time to time, pursuant to each Schedule Notice, the routes on
and destinations to which Partner is to provide the Flight
Services and the times of departure for the Flights; (ii) set
the fares to be paid for such Flights by the passengers; and
(iii) be responsible for the passenger booking, yield
management and overbooking of Flights, limited only by the
Fleet operated by Partner pursuant to this Agreement.
2.2 Maintenance Items. Frontier shall provide: (i) adequate access
to hangar and related facilities that insures that Partner can
perform necessary maintenance functions in a timely fashion to
support Flight Services pursuant to this Agreement and related
OTP and FCF requirements; (ii) subject to and in compliance
with Partner's Maintenance Department Manual System as
applicable adequate tooling, ground support equipment, power
carts, fuel bowser (ability to fuel and de-fuel), potable
water equipment (gate and hangar), separate climate controlled
storage of Partner parts inventory; staging and storage area
for U/S components, materials handling equipment and supplies
(including racking, fire cabinets, pallet jack, forklift,
boxes, labels, IATA books, scale, etc); (iii) deicing and snow
removal at maintenance facility; (iv) logistical help for any
AOG parts shipments, i.e. using Frontiers internal co-mat
system to move parts required to support the operation; (v)
office, storage, uniform locker space (with telecommunications
access) for Partner maintenance personnel (including material
clerks), manuals, and records at maintenance facility; (vi)
office and parts storage space at DIA terminal for Partner;
(vii) Partner's internal auditors with the ability to audit
the facilities and services provided to Partner to the extent
of the Agreement's terms or other future agreements between
the parties allows Partner use or procurement of the other
parties' facilities, parts/materials, tools, support
equipment, fueling services, personnel resources, or technical
data to ensure regulatory compliance; and (viii) Partner the
ability to use Frontier's hazardous material disposal
services.
2.3 Marketing/Revenue. Frontier, in its sole discretion and at its
sole cost, shall market, advertise and sell tickets on all
Flights. Frontier shall provide all reservation services for
the Flight Services and shall pay all ticketing and
advertising expenses, credit card charges, travel agent
commissions and CRS fees applicable to such services. Frontier
shall be entitled to retain, and Partner shall pay to
Frontier, all revenue and income generated by the Flight
Services. Frontier agrees that it will not require Partner to
enter into an Essential Air Service market unless Partner, at
its sole discretion, agrees in advance to enter the market and
the parties have agreed in advance to a method for the
establishment of related rates and costs.
3. Compliance with Regulations.
3.1 Regulations. Frontier and Partner shall perform their
obligations and duties under this Agreement, including,
without limitation, all Flight Services and Other Services, in
full compliance with any and all applicable laws, ordinances,
codes, statutes, orders, directives,
mandates, requirements, rules and regulations, whether now in
effect or hereafter adopted or promulgated, of all
governmental agencies having jurisdiction over Partner's
operations, including but not limited to the FAA and the DOT
(collectively, "Regulations") for operations in the 50 states
in the United States of America and throughout Canada and
Mexico. If a party fails to comply with the requirements of
this Section 3.1, that failure will constitute a default under
Section 12.1.2 or Section 12.2.2, as the case may be.
3.2 Flight Operations. Partner shall be responsible for the
operation of each Aircraft and the safe performance of the
Flights in accordance with the Regulations and airline
industry standard practice and shall retain full authority,
operational control and possession of the Aircraft to do so.
Partner, its agents or employees, for the purpose of the safe
performance of the Flights, shall have absolute discretion in
and shall have sole responsibility for all matters concerning
the preparation of each Aircraft for its Flights, and all
other matters relating to the technical operation of the
Aircraft. Partner will provide policies, procedures and
training to Frontier or any other third party providing Other
Services in order to meet its obligations under this Section.
Partner, insofar as it relates to the safe operation of a
Flight, shall have sole and absolute discretion as to the load
carried and its distribution and as to the decision whether
such Flight shall be taken. Partner shall be solely
responsible for and Frontier shall have no obligations or
duties with respect to the dispatch of all Flights, provided,
Partner will provide Frontier at no cost to Partner with
access to its flight operations data on a real-time basis
through Bournemann or such other similar system used by
Partner in tracking its flight operations.
3.3 Registration. All Aircraft shall remain registered in the
United States of America in accordance with the Regulations.
3.4 Disclosure. Partner, upon ten (10) business days' prior
written request, shall provide Frontier the opportunity to
review all operating specifications, operational regulations,
manuals and calculations with respect to all Aircraft and
flight statistics with respect to all Flights at Partner's
corporate or other relevant offices where such records are
located.
3.5 Frontier Stations. Documents will be provided to the relevant
airport authorities as required for Partner to operate the
Fleet into any city set forth in the Schedule, or any other
city to which Frontier provides mainline service in order to
enable Partner to provide Flight Services to any city in
Frontier's system as in effect from time to time.
3.6 Reporting. This Agreement shall be treated as a code share for
DOT reporting and advertising requirements. Frontier shall
provide Partner, within ten (10) days' of Partner's request,
with such information necessary for Partner to make the DOT
reports and disclosures.
4. Operational Performance Criteria. In order to promote efficient
operation of the Flight Services, other than Flight Services conducted
for ad hoc schedule changes described in Section 1.2 of this Agreement
or due to circumstances outside the Partner's Control, the performance
criteria and related bonuses and penalties set forth in this Section 4
will become effective on and after January 1, 2005.
4.1 On Time Performance Rate Bonus and Penalty Criteria. The "OTP
Rate"
is defined as the percentage, rounded down to the nearest full
percentage point if the percentage point(s) fractional amount
is .49 or less and rounded up to the nearest full percentage
point if the fractional amount is .50 or greater (for example
.49 is rounded down to 0.00, 1.49 is rounded down to 1.0, and
1.50 is rounded up to 2.0), determined by dividing the number
of Flights not Delayed (as defined below) by the total number
of Flights flown by Partner pursuant to a Schedule during the
applicable period. For purposes of this Agreement, "Delayed"
means a Flight that does not arrive at the destination within
15 minutes after the scheduled arrival time due to matters
within Partner's Control. All Flights will be included for
calculating the OTP Rate. A cancelled flight (except Flights
cancelled because of no passengers, Flights cancelled by
Frontier for any reason, Flights cancelled for reasons not
within Partner's Control, and the reasons set out in Section
4.2) is a Delayed flight. If Partner's OTP Rate exceeds the
lower of (i) Frontier's OTP Rate, or (ii) [***] (the "OTP
Bonus Threshold") for any given month, Frontier shall pay
Partner a performance bonus in an amount equal to [***] for
each full percentage point over the OTP Bonus Threshold,
provided, no such bonus will be payable from the time of a OTP
Cancellation Event and during the OTP Cure Period described in
Section 7.3 herein. If Partner's OTP Rate falls below the
lower of (i) Frontier's OTP Rate, or (ii) [***] (the "OTP
Penalty Threshold") for any given month, Partner shall pay to
Frontier a performance penalty in the amount of [***] for each
full percentage point below the OTP Penalty Threshold. Amounts
payable in this Section shall be made within 10 business days
of receiving the statements provided for in Section 4.6.
4.2 Flight Completion Factor Bonus and Penalty Criteria. The "FCF"
is defined as the percentage of published, scheduled Flights
completed for a given month rounded to the nearest 1/10th of a
percentage point. For example 97.48% is rounded to 97.5%,
while 97.44% is rounded to 97.4%. Flights not completed due to
matters not in Partner's Control will not be included in
either the numerator or denominator for calculating the FCF.
Any Flight that departs 2 hours or more after its scheduled
departure, or a Flight that fails to depart pursuant to
Section 1.6.2 will be deemed cancelled for purposes of
calculating the FCF. If Partner's FCF for a given month
exceeds the lower of (i) Frontier's FCF for the comparable
period, or (ii) [***] (the "FCF Bonus and Penalty Threshold"),
Frontier shall pay Partner a performance bonus in an amount
equal to [***], provided, no such bonus will be payable from
the time of a FCF Cancellation Event and during the FCF Cure
Period described in Section 7.4 herein. If Partner's FCF falls
below the FCF Bonus and Penalty Threshold for any given month,
Partner shall pay to Frontier a performance penalty as
follows:
CONSECUTIVE MONTH AMOUNT OF PENALTY
BELOW FCF BONUS AND PER PERCENTAGE POINT
PENALTY THRESHOLD BELOW THE FCF BONUS
AND PENALTY THRESHOLD
1st [***]
2nd [***]
3rd [***]
4th and Thereafter [***]
Amounts payable in this Section 4.2 shall be made within 10
business days of receiving the statements provided for in
Section 4.6.
4.3 Daily Performance Data. Partner and Frontier will exchange
Fleet performance statistics, including information relating
to Flight Delays, cancellations, departures and block hours
flown by each Aircraft. Each party will have 7 business days
from the receipt of such information to dispute the
characterization of the performance statistics for purposes of
calculating the OTP Rate and FCF. Failure to dispute such
operating statistics within such 7 day period will be deemed
acceptance. In order to resolve disputes, each party will
designate a single point of contact who will attempt to
resolve any disputes. If these two parties are unable to reach
agreement, the dispute will be directed to the Vice President,
Maintenance, or his or her designee, for each party for final
resolution.
4.4 Combined Performance Criteria. In the event Partner fails to
meet both the OTP Penalty Threshold and the FCF Bonus and
Penalty Threshold in any given month, the Standard Margin to
be paid to Partner pursuant to Section 6 for that month will
be reduced by [***]. In the event Partner exceeds both the OTP
Bonus Threshold and the FCF Bonus and Penalty Threshold in any
given month, the Standard Margin to be paid to Partner
pursuant to Section 6 for that month will be increased by
[***].
4.5 Records. Within 5 business days after the end of each calendar
month Frontier and Partner will provide each other with all
reports, records and supporting documentation as may
reasonably be requested by the other party evidencing the
number of Aircraft operating in the Fleet, block hours and
departures flown by each Aircraft, and passengers carried by
each Aircraft, and Frontier shall provide Partner with
statements detailing its OTP Rate and FCF calculations, and,
if applicable, MBR, for the prior calendar month.
4.6 Right of Setoff. Each party will have the right to set off an
amount due the other party against any amounts to be received
from the other party pursuant to this Agreement.
4.7 Limitation on Applicability of Standards, Criteria,
Incentives, and Penalties. Frontier acknowledges that Partner
operates flights and provides flight services and other
services under its own name and/or under names or service
marks other than Frontier JetExpress using aircraft that are
not included in the Fleet and that are not subject to this
Agreement. Notwithstanding any other term, condition or
provision hereof to the contrary, the standards and criteria
set forth above in this Section 4 apply only to Flight
Services, Flights and Other Services performed by Partner
hereunder operating as Frontier JetExpress and not to any
other flights, flight services or other services performed by
Partner under its own name or under a name or service mark
other than Frontier JetExpress. Thus, in calculating Partner's
OTP Rate and the FCF, only Flight Services and Other Services
performed by Partner under the service mark Frontier
JetExpress shall be taken into account in calculating such
rates and assessing such incentives and penalties.
5. Interline Agreement. Partner maintenance personnel traveling to provide
critical repair services and dead heading Partner crews will be
entitled to travel on Frontier and Frontier JetExpress flights as must
ride passengers. Commuting Partner crew members and all other Partner
employees will be entitled to free travel on Frontier's and Frontier
JetExpress flights at a category one level below the lowest category
for Frontier employees. Frontier employees will be entitled to travel
on Frontier JetExpress Flights under
the category of travel to which they are entitled to travel on Frontier
flights, and will be entitled to travel on all other Partner flights at
a category one level below the lowest category for Partner and Alaska
Air Group employees.
6. Payment of Fees. Frontier hereby agrees to pay the following sums as
consideration for this Agreement and the provision of the Flight
Services and Other Services provided for herein:
6.1 Estimated Payments. Ten (10) business days prior to the first
calendar day of each month in the Term, Frontier will provide
operating statistics for the coming month based on the number
of Aircraft, departures, block hours and revenue passenger
miles to be flown during the coming month assuming a [***] FCF
(the "Estimated Statistics"). No later than five (5) business
days prior to the first calendar day of each month, Partner
will invoice Frontier for the estimated total Fixed Costs,
Variable Costs and Pass Thru Costs, plus a margin of [***]
(the "Standard Margin") of the total of such items (the total
of such costs plus the Standard Margin referred to as the
"Estimated Costs") that will be incurred by Partner in
connection with providing the Flight Services based on the
Estimated Statistics, or, if Frontier fails to provide
Estimated Statistics, based on the Estimated Statistics
provided for the prior month. Frontier will then pay the
Estimated Costs no later than (i) the first business day of
the month for which the Estimated Costs have been invoiced, or
(ii) five (5) business days following receipt by Frontier of
the invoice, whichever is later. .
On or before the Effective Date, Frontier will pay to Partner
the Estimated Costs for the first two months of Flight
Services. Thereafter, on the first business day of each month
during the Term, Frontier will pay to Partner the Estimated
Costs for the subsequent month of Flight Services. For
example, on January 1, 2004, Frontier will pay to Partner the
Estimated Costs for January and February of 2004. On February
1, 2004, Frontier will pay to Partner the Estimated Costs for
March 2004.
6.2 Settlement of Actual Costs.
6.2.1 Fixed Costs. Except as may be modified for the Option
Fleet, Fixed Costs will remain fixed during the term
of this Agreement and payment of the Fixed Costs by
Frontier at the time of payment of the Estimated
Costs will be considered payment in full of the Fixed
Costs.
6.2.2 Variable Costs. Upon receipt of the reports due under
Section 4.6 and determination of the Utilization
Guaranty described in Section 6.5, Frontier will
determine final Variable Costs (the "Final Variable
Costs") for the prior month by multiplying the higher
of (i) the actual Unit of Measure incurred in the
prior month for each of the Variable Cost set forth
on Exhibit 6.1.1, or (ii) the Unit of Measure
applicable under the Utilization Guaranty, times the
relevant Unit Cost. If the Final Variable Costs plus
the Standard Margin exceed the Variable Costs and
Standard Margin paid by Frontier as part of the
Estimated Costs at the beginning of the prior month,
Frontier will pay to Partner the excess within 10
business days or, at Partner's option and request,
add the excess to the next payment of Estimated
Costs. If the Final Variable Costs are less than the
Variable Costs and Standard Margin paid by Frontier
as part of the Estimated Costs under Section 6.1,
Partner will pay the difference to Frontier within 10
business days or, at Frontier's option, Frontier may
deduct the difference from the next payment of
Estimated Costs.
6.2.3 Pass Thru Costs. Within 60 days of the end of each
month during the term, Partner will provide Frontier
with preliminary information and supporting invoices
and other supporting documentation as may reasonably
be requested by Frontier, relating to the actual Pass
Thru Costs incurred by Partner in such month.
Frontier will then calculate the total Pass Thru
Costs as evidenced by the supporting documentation
and invoices times the Standard Margin (the "Actual
Pass Thru Costs"). If the aggregate Actual Pass Thru
Costs plus the Standard Margin for the Fleet exceed
the Pass Through Costs and Standard Margin paid by
Frontier as part of the Estimated Costs under Section
6.1 for the month in which such costs were incurred,
Frontier will pay to Partner the excess within 10
business days or, at Partner's option and request,
add the excess to the next payment by Frontier of
Estimated Costs. If the aggregate Actual Pass Thru
Costs are less than the Pass Thru Costs and Standard
Margin paid by Frontier as part of the Estimated
Costs under Section 6.1 for the month in which such
costs were incurred, Partner will pay the difference
to Frontier within 10 business days or, at Frontier's
option, Frontier may deduct the difference from the
next payment of Estimated Costs. Notwithstanding
settlement of the above payments at the end of the 60
day period described above, it is understood that
Partner may receive additional invoices and
supporting documentation with respect to Pass Thru
Costs after the 60 day period. Partner will have the
right to submit such further invoices or other
supporting documentation to Frontier with respect to
Pass Thru Costs up to 120 days from the end of the
month in which such Pass Thru Costs were incurred by
Partner, at which time Frontier and Partner will
settle any over or underpayment of the Pass Thru
Costs in accordance with the procedures described
above. No further settlement of Pass Through Costs
will be permitted after the close of the 120 day
period.
6.3 Variable Cost Adjustments. The Adjustable Portion of the
Variable Costs as set forth on Exhibit 6.1.1 will be adjusted
as set forth in this Section 6 using the indices set forth
next to the category of Variable Costs.
6.3.1 Definition. "CPI" shall mean the Consumer Price
Index, U.S. City Average, Urban Wage Earners and
Clerical Workers, All Items (base index year 1982-84
= 100) as published by the United States Department
of Labor, Bureau of Labor Statistics. If the manner
in which the Consumer Price Index as determined by
the Bureau of Labor Statistics shall be substantially
revised, including, without limitation, a change in
the base index year, an adjustment shall be made by
the parties in such revised index which would produce
results equivalent, as nearly as possible, to those
which would have been obtained if such Consumer Price
Index had not been so revised. If the Consumer Price
Index shall become unavailable to the public because
publication is not readily available to enable the
parties to make the adjustment referred to in this
Section, then the parties shall mutually agree to
substitute therefore a comparable index based upon
changes in the cost of living or purchasing power of
the consumer dollar published by any other
governmental agency or, if no such index shall be
available, then a comparable index published by a
major bank or other financial institution or by a
university or a recognized financial publication.
6.3.2 Adjustment Formula. On each anniversary of the
Effective Date (each an "Adjustment Date") and except
as otherwise specifically provided for in this
Agreement, to determine the amount of adjustment or
increase based on CPI, the applicable Adjustable
Portion of Variable Costs in effect for the prior
twelve months shall be adjusted by multiplying the
Adjustable Portion of Variable Costs in effect for
the prior twelve months by a fraction, the numerator
which shall be the CPI for the third full calendar
month immediately preceding the Adjustment Date, and
the denominator of which shall be the CPI for the
same calendar month in the immediately preceding
twelve month period (the "Adjustment").
6.3.3 MTX Adjustment. Variable Costs relating to
maintenance operations and identified as adjusted
pursuant to the MTX Index will be adjusted on each
anniversary of the Effective Date pursuant to the
formula set forth on Exhibit 6.3.3.
6.3.4 Negotiated Variable Cost Adjustment. [***].
6.4 Net Pre-Tax Operating Margin Payment. In addition to the
amounts set forth above, Frontier will pay to Partner an
incentive payment (the "Incentive Payment") relating to the
pre-tax net operating margin [***]
The Incentive Payment will be calculated by Frontier within 5
business days following the filing of its quarterly financial
statements with the SEC. The Incentive Payment so determined
will be paid to Partner at the time of the next payment of
Estimated Costs. Notwithstanding the above, Partner will have
no right to receive an Incentive Payment, and the quarterly
Incentive Payment will be pro-rated, for any month during the
quarter Partner is in an OTP Cure Period as defined in section
7.3 or an FCF Cure Period as defined in section 7.4
6.5 Utilization Guarantee. Frontier will guarantee a minimum daily
block hour utilization based on its original estimate of [***]
block hours per Aircraft in the Fleet less all Spare Aircraft.
For example, for 10 Core Aircraft, Frontier would guarantee
any Schedule would require [***] total block hours of flight
per day (10 Core Aircraft times [***] hours per day) during
the Schedule period. If Frontier either (i) scheduled fewer
than the 10 Core Aircraft, or (ii) scheduled the 10 Core
Aircraft for fewer than [***] hours per day, during its
settlement of Variable Costs under Section 6.2.2,
notwithstanding the actual figures reported by Partner,
Frontier would need to calculate the Variable Costs as if the
actual aircraft and block hours flown during the period were
10 and [***], respectively. Frontier will also gross up any
reduction in the Aircraft and block hours flown during any
period from the guaranteed amount due to acts or omissions of
Frontier's employees, agents, or subcontractors.
Notwithstanding the above, Frontier will not be liable for any
reduction in actual Aircraft or block hours flown during any
period due to maintenance requirements (includes heavy
checks), an Extraordinary Maintenance Event (as defined in
Section 6.7), weather, air traffic control, or matters within
Partner's Control.
6.6 Statements and Audit Rights. All statements and other
information supplied by Partner pursuant to Section 4.5 and
this Section 6 shall be accompanied by such supporting
information, documentation described on Exhibit 6.6 attached
hereto, and as Frontier
may reasonably request from time to time (the "Backup
Information"). If Frontier reasonably disputes the amount set
forth in any statement or the Backup Information is
inadequate, incomplete or inaccurate, then Frontier shall pay
the undisputed portion of such statement and the portions for
which the Backup Information is adequate, complete and
accurate, timely, and together with such payment provide
Partner with a written statement detailing any disputed amount
and the specific amounts for which the Backup Information is
inadequate, incomplete or inaccurate. Frontier and Partner
shall meet and confer on a regular basis as necessary to
resolve any disputed amount and inadequate, incomplete or
inaccurate Backup Information within 30 days after Frontier
provides notice of the dispute. Both Frontier and Partner
agree that it is in the best interest of both parties to
initially attempt to resolve disputes without the use of third
parties in a cost effective manner. In the event resolution is
not successful, the parties will mutually agree to use
alternative dispute services as described in Section 15.12,
unless otherwise agreed. Disputed amounts and shall not be
payable until the dispute is resolved and then shall be
payable within 10 days after the dispute is resolved.
Frontier or Partner, upon 10 business days' prior written
notice, may at its sole cost and expense review and audit, or
cause its independent accountants to review and audit for the
preceding twelve months of operations, records, files,
information, data and documentation (including computer data
bases) (the "Record") maintained by the other party
specifically related to the calculation of the payments
required to be made by Frontier pursuant to this Agreement.
Both parties will allow the other's internal auditor or
designees to participate in such review, audit and findings.
If a party's review of the Records reveals an overcharge or
underpayment, then upon demand (subject to the other party's
right to review and dispute such findings), the appropriate
adjustment will be made as specified above. If the overpayment
and/or underpayment is 10% or more than the amount that should
have been charged or paid, then there will also be a
requirement of reimbursement for all reasonable out of pocket
fees, expenses and charges, including the fees and charges of
independent accountants retained by the auditing party to
complete the audit permitted by this Section, within 30 days
following receipt of a detailed invoice setting for the nature
of such fees, charges and expenses. Partner and Frontier shall
maintain all Records used in calculating the sums payable or
receivable under this Agreement in good condition and order at
Frontier's or Partner's corporate headquarters for at least
three (3) years from the date such Records are created.
Frontier and Partner acknowledge and understand that audit
rights under this Section shall be strictly limited to the
Records involving the Frontier JetExpress operations.
6.7 Extraordinary Maintenance Event. When an AD or a major
component failure that affects the Partner's entire fleet of
CRJ-700 aircraft (an "Extraordinary Maintenance Event")
occurs, Partner will advise Frontier's VP Maintenance as soon
as practicable. Partner will then collect records and reports
for all costs and expenses relating to the cure of the
Extraordinary Maintenance Event and submit to Frontier for
review and approval, which approval will not be unreasonably
withheld. Upon approval, Frontier will reimburse Partner for
all such costs and expenses according to the following
formula: the total approved costs and expenses will be divided
by total Partner fleet of CRJ-700 aircraft, with the quotient
further divided by the average number of months remaining on
the leases or loans in place with respect to the Partner's
total Fleet. This amount per month will then be multiplied
by the number of Aircraft in the Fleet and the number of
months remaining in the term of this Agreement. Frontier will
then, at its option, either (i) pay the amounts as a lump sum,
or (ii) pay the amount per month per aircraft during the
remaining term of this Agreement as a Pass Thru Cost; provided
no Standard Margin or Incentive Payment will be made on these
amounts or costs. If Frontier and Partner are unable to agree
whether an Extraordinary Maintenance Event occurred or the
costs associated with addressing the Extraordinary Maintenance
Event, the parties agree to use an independent arbitrator with
expertise in aviation maintenance to resolve the dispute.
Should the arbitrator rule in favor of Partner, the
amortization period will be as if it were the date the costs
were first presented to Frontier. Any cancellations and delays
resulting from an Extraordinary Maintenance Event will not be
included in the determination of Partner's OTP or FCF
calculations under both Section 4 and Section 7. For the
period of the Extraordinary Maintenance Event, Frontier will
only pay a margin and bonus margin on those days not impacted
by the event. For purposes of "Net-Pre Tax Margin Termination"
the quarter during which an Extraordinary Maintenance Event
has occurred will not be included in the calculation.
6.8 Start-up costs. Frontier shall reimburse Partner for Start-up
costs as set forth in Exhibit 6.1.2.
7. Term and Termination.
7.1 Term. The term of this Agreement (the "Term") commences on the
Effective Date and shall expire ("Expiration Date") on the
12th anniversary of the Effective Date or, unless earlier
terminated as provided in this Agreement.
7.2 Agreement Review. Frontier and Partner shall meet within 60
days prior to the third and sixth anniversary of the Effective
Date of the Agreement. The purpose of this meeting shall be to
evaluate and modify the Agreement as the parties may deem
appropriate. In the event the meeting does not occur by the
anniversary date, or no agreement is reached on modifications
of the Agreement proposed by either party, within thirty days
of the receipt of a proposal, at the sole discretion of either
party. Frontier or Partner shall have the right to terminate
this Agreement upon 30 days written notice (an "Interim
Termination Notice"). In the event of an Interim Termination
Notice, there shall be a one year Ramp Down Period as
described in Section 7.9, during which all terms of the
Agreement then effect, shall control both Frontier and
Partner.
7.3 OTP Rate Early Termination. If at any time during the Term
Partner's OTP Rate falls below the lower of (i) Frontier's OTP
Rate, or (ii) [***] (the "OTP Termination Threshold") for
three of any four consecutive calendar months (an "OTP
Cancellation Event"), Frontier, at its election, may by
written notice (an "OTP Performance Notice") inform Partner
that if Partner does not achieve the OTP Termination Threshold
and continue to meet the FCF Termination Threshold for each of
the next two calendar months after receipt of the OTP
Performance Notice (the "OTP Cure Period"), Frontier, at its
option may give an OTP Termination Notice (as defined below).
If, after the OTP Cure Period has expired Partner has not
cured the OTP Cancellation Event as set forth in the notice,
then Frontier may provide Partner with written notice of its
intent to terminate this Agreement on the date set forth
therein ("OTP Termination Notice"), such date to be no earlier
than 180 days from the date the OTP Termination Notice
is received by Partner.
7.4 FCF Early Termination. If Partner's FCF falls below (a) for
calendar year 2004 and Ramp Down Period, the lower of (i)
Frontier's FCF, or (ii) [***], or (b) for any other year
during the Term, the lower of (i) Frontier's FCF, or (ii)
[***] (the "FCF Termination Threshold") for three of any four
consecutive calendar months (an "FCF Cancellation Event"),
Frontier, at its election, may by written notice (an "FCF
Performance Notice") inform Partner that if Partner does not
achieve the FCF Termination Threshold and continue to meet the
OTP Termination Threshold for each of the next two calendar
months after receipt of the FCF Performance Notice (the "FCF
Cure Period"), Frontier, at its option may give an FCF
Termination Notice (as defined below). If, after the FCF Cure
Period has expired Partner has not cured the FCF Cancellation
Event as set forth in the notice by the end of the FCF Cure
Period, then Frontier may provide Partner with written notice
of its intent to terminate this Agreement on the date set
forth therein ("FCF Termination Notice"), such date to be no
earlier than 180 days from the date the FCF Termination Notice
is received by Partner.
7.5 Overall Performance Early Termination. Beginning January 1,
2005 and on January 1 of each subsequent year during the Term,
Frontier will calculate Partner's FCF and OTP for the prior 24
month period. If either (i) Partner's OTP fails to meet the
OTP Termination Threshold, or (ii) Partner's FCF falls below
the FCF Termination Threshold for such 24 month period,
Frontier will have the right, at its option and at any time
until June 30th of the year in which the calculations are
made, to terminate the term of this Agreement upon 180 days'
prior written notice.
7.6 Change of Control Termination. This Agreement may be
terminated by either Partner or Frontier in the event the
other party, including, in the case of Partner, all Affiliated
Service Providers, experiences a change in control or a sale
of substantially all of its assets by providing 30 days' prior
written notice (the "Change Termination Notice"). For purposes
of this paragraph, "change of control" means any person or
group (each as used in section 13(d)(3) and 14(d)(2) of the
Exchange Act) either becomes the beneficial owner, directly or
indirectly, of voting securities of either party representing
50% or more of the combined voting power of all securities of
the party on a fully diluted basis, or otherwise has the
ability, directly or indirectly, to elect a majority of the
board of directors of the party.
7.7 Route Overlap Termination. The following defined terms shall
apply only for purposes of this Section 7.7: (i) "Affiliate"
means an entity majority owned by, owned in common with, or
controlled by a party; (ii) "F9" means Frontier Airlines, Inc.
and all Affiliates; (iii) "QX" means Alaska Air Group and all
Affiliates; (iv) "Routes" means markets served using non-stop
flights; (v) "Flight Leg" is one take-off and landing on a
Route; (vi) "F9 Flight Legs" means the total number of Flight
Legs on all Routes served by F9, or by Partner pursuant
Flights operated under this Agreement, using aircraft operated
by F9 or Partner, but not including Routes served by its other
code share partners operating aircraft not owned
or operated by F9 or Partner; (vii) "F9 Departing Seats" means
the total number of seats on the aircraft operated on the F9
Flight Legs; (viii) "QX Flight Legs" means the total number of
Flight Legs on all Routes served by QX using aircraft operated
by QX, but not including Routes served by its other code share
partners operating aircraft not owned or operated by QX; (ix)
"QX Departing Seats" means the total number of seats on the
aircraft operated on the QX Flight Legs; (x) "Overlap Legs"
means the number of Flight Legs flown by both F9 and QX on the
same Routes; and (xi) "Overlap Seats" means the number of
seats on the aircraft operated on the Overlap Legs.
On the Effective Date, Frontier will calculate the number of
F9 Departing Seats and Partner will calculate the number of QX
Departing Seats, each based on an average peak day in its
schedule for the month of January 2004. An overlap ratio (the
"Base Ratio") will be determined in accordance with the
following formula:
[***]
where,
[***]
with all calculations rounded up to the nearest whole
number
On each anniversary of the Effective Date, Frontier and
Partner will calculate an Overlap Ratio in accordance with the
procedures and formula set forth above. If the then computed
Overlap Ratio is greater than [***] the Base Ratio, then
either party may terminate this Agreement by providing no
fewer than 30 days' prior written notice (a " Route Overlap
Notice") to the other party.
7.8 Effect of Termination. If either party elects to terminate
this Agreement pursuant to this Section 7, Frontier and
Partner shall make all payments as required by this Agreement,
with full rights of setoff as set forth herein, for the period
through and including the termination date set forth in the
notice provided under Sections 7.2, 7.3, 7.4, 7.5, 7.6, or
7.7, as applicable.
7.9 Ramp Down Period. At the final year of the Term, or in the
event of an early termination under Sections 7.2, 7.6 or 7.7,
a one-year ramp down period will be permitted under which
Aircraft will be removed from the Fleet at a rate of 25% of
the Aircraft then in the Fleet, rounded up to the nearest
whole number, per 90 day period following the effective date
of termination upon the end of the Term or as required by such
notice. Any notice of termination under Sections 7.2, 7.6 or
7.7 will state the dates on which the Aircraft are to be
removed from the Fleet. For a termination upon the end of the
Term, Frontier must provide Partner 180 days notice of date
that aircraft will be taken out within each 90-day period.
8. Service Mark License For Services Provided By Partner.
8.1 Grant of License. For the payment of $1.00, Frontier and
Partner each hereby grant to the other a non-exclusive,
non-transferable, revocable license to use the other's Service
Marks as Frontier and Partner may designate, in writing, from
time to time solely for the purpose of conducting the Flight
Services and Other Services to be rendered by Partner;
provided, however, that at any time prior to expiration or
termination of this Agreement Frontier and Partner may alter,
amend or revoke the license hereby granted and require the
other's use of any new or different Frontier or Partner
Service Mark in conjunction with the Flight Services as
Frontier and Partner may determine in its sole discretion and
judgment.
8.2 Terms and Conditions Governing Service Mark License.
8.2.1 Frontier and Partner hereby acknowledge Frontier's
and Partner's ownership of their respective Service
Marks, further acknowledge the validity of their
Service Marks, and agree that it shall not do
anything in any way to infringe or abridge upon the
other's rights in their Service Marks or directly or
indirectly to challenge the validity of the other's
Service Marks. Frontier's and Partner's use of the
Service Marks inures to the benefit of the respective
party. Frontier and Partner will sign any lawful
documents, make any lawful declaration, or provide
affidavits, the other reasonably requests in
connection with any trademark application or
registration for the Frontier or Partner Service
Marks or any variation thereof.
8.2.2 To assure that the production, appearance and quality
of the Frontier Service Marks is consistent with
Frontier's reputation for high quality and the
goodwill associated with the Frontier Service Marks,
Partner agrees to maintain a level of quality
consistent with Frontier's quality in the Flight
Services it provides pursuant to this agreement and
to follow Frontier's written instructions regarding
use of the Frontier's Service Marks, as they may be
amended from time to time. Partner also retains the
right to require Frontier to follow Partner's written
instructions regarding use of the Partner's Service
Marks, as they may be modified from time to time.
8.2.3 Frontier and Partner agree that, in providing the
Flight Services and Other Services, they shall not
advertise or make use of either party's Service Marks
without the prior written consent of the other.
Frontier and Partner shall have absolute discretion
to withhold its consent concerning any and all such
advertising and use of its Service Marks in any
advertising. In the event Frontier or Partner
approves the use of its Service Marks in any
advertising, such advertising shall identify the
owner of such Service Marks and conform with any
additional requirements specified by the owner.
8.2.4 To the extent that either party licenses the use its
Service Marks, the Service Marks shall be used only
in connection with the Flight Services and not in
connection with any other business or activity of
Frontier, Partner or any other entity.
8.2.5 Nothing in this agreement shall be construed to give
either party the exclusive right to use the other's
Service Marks or abridge the owner's right to use and
license the Service Marks, and Frontier and Partner
herby reserve the right to continue to use its
Service Marks and to license such other uses of its
Service Marks, as it may desire.
8.2.6 No term or provision of the Agreement shall be
construed to preclude Frontier from allowing the use
of the Frontier Service Marks, including "Frontier
JetExpress," or the aircraft exterior color decor and
patterns by other individuals or entities not covered
by this Agreement.
8.2.7 Upon the termination or expiration of this Agreement,
the license and use of the Frontier and Partner
Service Marks by the other shall cease and such use
shall not thereafter occur.
9. Liability and Indemnification.
9.1 Relationship Between the Parties. Nothing contained in this
Agreement will be deemed to create any agency or partnership
or similar relationship between Frontier and Partner. Nothing
contained in this Agreement will be deemed to authorize either
Frontier or Partner to bind or obligate the other. Partner and
its employees engaged in performing the Flight Services and
Other Services shall be employees of Partner for all purposes,
and under no circumstances shall be deemed to be employees,
agents or independent contractors of Frontier. Frontier and
its employees engaged in performing the obligations of
Frontier under this Agreement shall be employees, agents and
independent contractors of Frontier for all purposes, and
under no circumstances shall be deemed to be employees, agents
or independent contractors of Partner. Pursuant to this
Agreement, Partner shall act, for all purposes, as an
independent contractor and not as an agent for Frontier.
Frontier shall have no supervisory power or control over any
employees engaged by Partner in connection with their
performance hereunder, and all complaints or requested changes
in procedures shall be transmitted by Frontier to a designated
officer of Partner. Nothing contained in this Agreement shall
be intended to limit or condition Partner's control over its
operations or the conduct of its business as an air carrier,
and Partner and its principals assume all risks of financial
losses which may result from the operation of the Flight
Services and Other Services to be provided by Partner
hereunder.
Each party accepts full and exclusive liability for the
payments of workers' compensation and employer's liability
insurance premiums with respect to its own employees and for
the payment of all taxes, contributions or other payments for
unemployment compensation or old age benefits, pensions or
annuities now or hereafter imposed upon employers by the
government of the United States or by any other national,
state, or local governmental authority having jurisdiction
with respect to a party's employees, measured by the wages,
salaries, compensation, or other remuneration paid to a
party's employees. Each party further agrees to make such
payments and to make and file all reports, and to do
everything necessary to comply with the laws imposing such
taxes, contributions or other payments.
9.2 Indemnification by Partner. Partner agrees to indemnify,
defend and hold harmless Frontier, its directors, officers,
employees, agents, parent corporation, subsidiaries and
affiliates for, from and against any and all loss, liability,
claim, damage, penalty, fine, charge, cause of action, demand,
cost and expense (including attorneys' and consultants' fees
and costs) whatsoever (collectively, "Damages"), as incurred,
arising out of, or resulting from: (i) the provision of the
Flight Services by Partner or any of its employees, agents,
licensees, officers or directors; (ii) Partner's breach of
this Agreement; (iii) damage or destruction of property of any
person, or injury or death of any person, caused by, arising
out of, or in connection with any act or omission of Partner,
its employees, agents, licensees, contractors, suppliers,
officers or directors; and (iv) Partner's failure to comply
with any Regulations. Partner shall reimburse Frontier or
other Indemnified Party (as defined below) for any legal and
any other expenses reasonably incurred in investigating,
preparing or defending against any claim or action arising out
of or relating to any of the foregoing. The indemnity
provisions of this paragraph 9.2 will not apply if it is
determined by final decision of a court or tribunal that, with
respect to the cause of the applicable Damages, the percentage
of responsibility allocated to Partner is less than the
percentage of responsibility
allocated directly to Frontier for its negligence, gross
negligence, or willful misconduct. The indemnification
obligations of this paragraph 9.2 shall survive termination or
expiration of this Agreement.
9.3 Indemnification by Frontier. Frontier agrees to indemnify,
defend and hold harmless Partner, its directors, officers,
employees, agents, subsidiaries and affiliates and their
officers and directors for, from and against any and all
Damages, as incurred, arising out of, or resulting from: (i)
Frontier's breach of this Agreement; (ii) damage or
destruction of property of any person, or injury or death of
any person, caused by, arising out of, or in connection with
any act or omission of Frontier, its employees, agents,
licensees, contractors, suppliers, officers or directors in
performing Frontier's obligations or in connection with Flight
operations; and (iii) Frontier's failure to comply with any of
the Regulations. Frontier shall reimburse Partner or other
Indemnified Party (as defined below) for any legal and any
other expenses reasonably incurred in investigating, preparing
or defending against any claim or action arising out of or
relating to any of the foregoing. The indemnity provisions of
this paragraph 9.3 will not apply if it is determined by final
decision of a court or tribunal that, with respect to the
cause of the applicable Damages, the percentage of
responsibility allocated to Frontier is less than the
percentage of responsibility allocated directly to Partner for
its negligence, gross negligence, or willful misconduct. The
indemnification obligations of this paragraph 9.3 shall
survive termination or expiration of this Agreement.
9.4 Conduct of Indemnification Proceedings. The person or entity
claiming indemnification hereunder is referred to as the
"Indemnified Party" and the party against whom such claims are
asserted hereunder is referred to as the "Indemnifying Party".
Each Indemnified Party shall give reasonably prompt notice to
the Indemnifying Party of any action or proceeding or
assertion or threat of claim commenced against it in respect
of which indemnity may be sought hereunder, but failure to so
notify the Indemnifying Party (i) shall not relieve the
Indemnifying Party from any liability which it may have under
the indemnity agreement provided in this Agreement, unless and
to the extent the Indemnifying Party did not otherwise learn
of such action, threat or claim and the lack of notice by the
Indemnified Party results in the forfeiture by the
Indemnifying Party of substantial rights and defenses and (ii)
shall not, in any event, relieve the Indemnifying Party from
any obligations to the Indemnified Party other than the
indemnification obligation provided under Sections 9.2 and 9.3
above. If the Indemnifying Party elects within a reasonable
time after receipt of notice, the Indemnifying Party may
assume the defense of the action or proceeding at Indemnifying
Party's own expense with counsel chosen by the Indemnifying
Party and approved by the Indemnified Party; provided,
however, that, if the Indemnified Party reasonably determines
upon advice of counsel that a conflict of interest exists
where it is advisable for the Indemnified Party to be
represented by separate counsel or that, upon advice of
counsel, there may be legal defenses available to it which are
different from or in addition to those available to the
Indemnifying Party, then the Indemnified Party shall be
entitled to separate counsel at its own expense, which counsel
shall be chosen by the Indemnified Party in its sole
discretion. If the Indemnifying Party does not assume the
defense, after having received the notice referred to in the
second
sentence of this Section, the Indemnifying Party will pay the
reasonable fees and expenses of counsel for the Indemnified
Party. Unless and until a final judgment that an Indemnified
Party is not entitled to the costs of defense under the
foregoing provision, the Indemnifying Party shall reimburse,
promptly as they are incurred, the Indemnified Party's costs
of defense.
9.5 Insurance.
9.5.1 Frontier and Partner, at all times during the Term of
this Agreement, shall have and maintain in full force
and effect, policies of insurance of the types of
coverage, and in the minimum amounts stated below
with insurance companies of recognized reputation and
responsibility in the United States commercial air
carrier industry, licensed to do business in the
state(s) of the location(s) covered by this
Agreement, including insurance coverage on all
Aircraft used to provide Flight Services. Unless
otherwise specified, the minimum amounts of insurance
coverage required hereunder shall be per occurrence,
combined single limit for all insurance coverage
required hereunder.
1. Aircraft Liability [***].per Occurence
and Ground Combined Single
Liability Insurance Limit of Liability
(including Commercial for CRJs
General Liability)
a. Bodily Injury Included in
and Personal Combined Single
Injury - Passengers Limit
b. Bodily Injury Included in
and Personal Combined Single
Injury - Third Parties Limit
c. Property Damage Included in
Combined Single
Limit
Per Accident
2. Worker's Compensation Statutory
Insurance (Company
Employees)
Employers' Liability [***].
(Company Employees)
Baggage [***] (per
Liability Passenger),
unlimited for
assistive devices
Cargo Liability [***] any One
Aircraft.
[***] any One
Disaster with
Terms, Limitations
and Conditions
Acceptable to
Frontier
9.5.2 The parties hereby agree that from time to time
during the Term of this Agreement, Frontier and
Partner may agree that it is necessary for Partner to
have and maintain amounts of insurance coverage
different from those amounts set forth in Section
9.5.1. If these changes in coverage are agreed to by
Partner, Partner shall implement these changes upon
the earlier of the renewal of the applicable policy
and the effective date of the Regulation, if any,
requiring the insurance coverage.
9.5.3 Partner and Frontier shall cause all policies of
insurance which they maintain pursuant to this
Agreement, to be duly and properly endorsed by
Partner's insurance underwriters as follows:
9.5.3.1 To provide that Partner's underwriters shall
waive any and all subrogation rights against
Frontier, its directors, officers, agents
and employees without regard to any breach
of warranty by Partner or to provide other
evidence of such waiver of recourse against
Frontier, its directors, officers, agents,
or employees as shall be acceptable to
Frontier to the extent Partner is liable
pursuant to Section 9.2.
9.5.3.2 To provide that Frontier's underwriters
shall waive any and all subrogation rights
against Partner, its directors, officers,
agents and employees without regard to any
breach of warranty by Frontier or to provide
other evidence of such waiver of recourse
against Partner, its directors, officers,
agents, or employees as shall be acceptable
to Partner to the extent Frontier is liable
pursuant to Section 9.3.
9.5.3.3 Be duly and properly endorsed to provide
that each such policy or policies or any
part or parts thereof shall not be canceled,
terminated, or materially altered, changed
or amended by Frontier or Partner's
insurance underwriters, until after 30 days'
written notice to Frontier or Partner which
30 days' written notice shall commence to
run from the date such notice is issued to
Frontier or Partner or such shorter period
(10 days in respect to non-payment of
premium/7days or such shorter period as my
exist in the case of a War Risk coverage).
9.5.4 With respect to policies of insurance described as
Aircraft Liability and Ground Liability Insurance and
to the extent of the indemnity provided by Partner in
Section 9.2 and Frontier in Section 9.3, Frontier and
Partner will provide that Frontier's and Partner's
policies:
9.5.4.1 Name the other party, its directors,
officers, agents, parents, subsidiaries and
employees as Additional Insureds thereunder.
9.5.4.2 Constitute primary insurance for such claims
and acknowledge that any other insurance
policy or policies of the other party will
be secondary or excess insurance; and
9.5.4.3 Provide a cross-liability clause acceptable
to both parties, and a specific contractual
liability insurance provision covering
liability assumed by Frontier and Partner
under this Agreement.
9.5.5 With respect to policies of insurance for coverage
described as Aircraft Liability and Ground Liability
Insurance, Partner shall cause its insurance
underwriters to provide a breach of warranty clause.
9.5.6 Upon request by Frontier and Partner shall furnish
the other with evidence of the aforesaid insurance
coverage and by providing certificates of insurance
certifying that the aforesaid insurance policy or
policies with the aforesaid policy limits are duly
and properly endorsed as aforesaid and are in full
force and effect.
9.5.7 Frontier shall maintain cargo liability coverage, in
types and amounts required by law, for all airfreight
transported by Partner under a Frontier airbill on
any Flights.
10. Confidentiality.
10.1 Frontier and Partner agree that the terms of this Agreement
shall be treated as confidential and shall not be disclosed to
third parties without the express written consent of Frontier
and Partner, or as required by law. In the event of disclosure
required by law, only those portions of this Agreement
required to be disclosed shall be disclosed. The disclosing
party shall make good faith efforts to minimize the portions
to be disclosed and shall seek confidential treatment by the
receiving party or agency for any portions disclosed. In the
event of one party being served a subpoena
or discovery request, prior to responding to the subpoena or
request, the party served shall notify the other party to
provide the other party an opportunity to contest the
disclosure of any terms of this Agreement.
10.2 "Confidential Information" means the terms and conditions of
this Agreement and any and all information or data shared
between the parties or learned by either party as the result
of the performance of its obligations under this Agreement,
including but not limited to information and data relating to
fares, route performance and profitability, maintenance
programs, technical manuals, or load factors, in any form,
including, without limitation, written documents, oral
communications, recordings, videos, software, data bases,
business plans, and electronic and magnetic media, except for
information generally available to the public. Frontier and
Partner agree that they shall maintain all Confidential
Information in confidence and use such Confidential
Information solely for purposes of performance under this
Agreement. Such Confidential Information shall be distributed
within each party's company only to personnel and to its legal
counsel, auditors and other consultants on a need-to-know
basis for purposes related to this Agreement or in compliance
with a court order or statutory or regulatory requirements.
Except for legal counsel and auditors, and as permitted by
Section 10.1, in no event shall either party disclose
Confidential Information to any third parties except
subcontractors and independent consultants and then only if
approved by both parties in writing in advance of such
disclosure. Confidential Information does not include
information that is available to the general public other than
as a result of disclosure by the disclosing party or
information that was known or independently developed by the
receiving party prior to disclosure, as evidenced by records
kept in the ordinary course of business.
11. Taxes. Partner shall pay, prior to delinquency, those taxes related
directly to the Partner's provision of Flight Services under this
Agreement with the following exceptions. For the purposes of this
Agreement, Partner will not be construed as the seller of
transportation to the passenger. Fuel taxes, property taxes, and sales
taxes on aircraft parts and maintenance equipment associated with this
Agreement will be treated as Pass Thru Costs. Net income taxes on
Partner's profits are the responsibility of Partner. Frontier will pay,
prior to delinquency, all taxes imposed on any sums paid by Partner to
Frontier under this Agreement.
12. Defaults and Remedies.
12.1 Default by Partner. The occurrence of any one or more of the
following events shall constitute a material default and
breach of this Agreement by Partner (an "Event of Default"):
12.1.1 The failure of Partner to make any payment required
to be made to Frontier by Partner hereunder, as and
when due, and such failure continues for five (5)
days after Partner's receipt of written notice from
Frontier;
12.1.2 The failure of Partner to observe or perform any of
the material covenants, conditions or provisions of
this Agreement to be observed or performed by
Partner, other than as described in 12.1.1 and such
failure shall continue for a period of 15 days after
written notice thereof from Frontier to Partner or
such longer period as may be reasonably necessary to
complete the cure of such failure up to 120 days;
provided Partner commences such cure during the
initial 15-day period and pursues the cure to
completion;
12.1.3 (i) the cessation of Partner's business operations as
a going concern; (ii) the making by Partner of any
general assignment, or general arrangement for the
benefit of creditors; (iii) the inability of Partner
to generally pay Partner's debts as they come due and
Partner's written admission of its inability to pay
its debts as they come due; (iv) the filing by or
against Partner of a petition to have Partner
adjudged bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy
(unless, in the case of petition filed against
Partner, the same is dismissed, stayed or vacated
within 120 days); (v) an adjudication of Partner's
insolvency; (vi) appointment of a trustee or receiver
to take possession of substantially all of Partner's
assets which is not dismissed, stayed or vacated
within 120 days; or (vii) the attachment, execution
or other judicial seizure of substantially all of
Partner's assets which is not dismissed, stayed or
vacated within 120 days.
12.1.4 Upon an Event of Default, Frontier may within 30 days
of such Event of Default: (a) by written notice to
Partner (a "Default Termination Notice"), terminate
this Agreement effective as of the date set forth in
the Default Termination Notice which date shall not
be less than 30 nor more than 180 days after the date
of the Default; and/or (b) pursue all other rights
and remedies available at law or in equity to
Frontier for the Event of Default, including, without
limitation, injunctive relief, specific performance
and damages. After receipt of a Default Termination
Notice, Partner shall continue to provide the Flight
Services and Other Services in accordance with this
Agreement until the termination date set forth in the
Default Termination Notice and provided Frontier has
satisfied its obligations under the Agreement. No
remedy or election by Frontier hereunder shall be
deemed exclusive, but shall, wherever possible, be
cumulative with all other rights and remedies at law
or in equity.
12.2 Frontier Default. The occurrence of any one or more of the
following events shall constitute a material default and
breach of this Agreement by Frontier (an "Frontier Event of
Default"):
12.2.1 The failure of Frontier to make any payment required
to be made to Partner by Frontier hereunder, as and
when due, and such failure continues for two (2)
business days after Frontier's receipt of written
notice from Partner;
12.2.2 The failure of Frontier to observe or perform any of
the covenants, conditions or provisions of this
Agreement to be observed or performed by Frontier,
other than as described in Section 12.2.1 and such
failure shall continue for a period of 15 days after
written notice thereof from Partner to Frontier or
such longer period as may be reasonably necessary to
complete the cure of such failure, up to 120 days,
provided Frontier commences such cure during the
initial 15-day period and pursues the cure to
completion;
12.2.3 (i) the cessation of Frontier's business operations
as a going concern; (ii) the making by Frontier of
any general assignment, or general arrangement for
the benefit of creditors; (iii) the inability of
Frontier to generally pay Frontier's debts as they
come due or Frontier's written admission of its
inability to pay its debts as they come due; (iv) the
filing by or against Frontier of a petition to have
Frontier adjudged bankrupt or a petition for
reorganization or arrangement under any law relating
to bankruptcy (unless, in the case of petition filed
against Frontier, the same is dismissed, stayed or
vacated within 120 days); (v) an adjudication of
Frontier's insolvency; (vi) appointment of a trustee
or receiver to take possession of substantially all
of Frontier's assets which is not dismissed, stayed
or vacated within 120 days; or (vii) the attachment,
execution or other judicial seizure of substantially
all of Frontier's assets which is not dismissed,
stayed or vacated within 120 days.
12.2.4 Upon the occurrence and continuance of an Frontier
Event of Default under Section 12.2.1, Partner may
immediately terminate this Agreement, discontinue
Flight Services, and /or pursue all other rights and
remedies available at law or in equity, including,
without limitation, injunctive relief, specific
performance and damages. Under any other Frontier
Event of Default, Partner may: (a) by written notice
to Frontier (an "Frontier Default Notice") terminate
this Agreement effective as of the date set forth in
the Frontier Default Notice which date shall not be
less than 30 nor more than 180 days after the date of
the Frontier Event of Default; and/or (b) pursue all
other rights and remedies available at law or in
equity to Partner for the Frontier Event of Default,
including, without limitation, injunctive relief,
specific performance and damages. After receipt of a
Frontier Default Notice, Frontier shall continue to
perform its obligations under this Agreement until
the termination date set forth in the Frontier
Default Notice. No remedy or election by Partner
hereunder shall be deemed exclusive, but shall,
wherever possible, be cumulative with all other
rights and remedies at law or in equity.
13. Records and Reports.
13.1 Retention of Records. Frontier and Partner shall retain all
records developed in connection with this Agreement in
accordance the express terms of this Agreement and as required
by applicable law and
the Regulations.
13.2 Provision of Additional Records. Subject to DOT practices,
regulations and procedures, Partner shall promptly furnish
Frontier, upon written request by Frontier with a copy of
every final report that it prepares and is required to submit
to the DOT, FAA, National Transportation Safety Board or any
other governmental agency, relating to any accident or
incident involving an Aircraft used in performing Flight
Services under this Agreement, when such accident or incident
is claimed to have resulted in the death of or substantial
injury to any person or the loss of, damage to, or destruction
of any property. Frontier agrees to treat all such material
supplied by Partner pursuant to this Section as Confidential
as defined under Section 10 of this Agreement.
14. Exclusivity. Nothing contained in this Agreement shall restrict either
party from entering into any other code-share agreement with any other
party.
15. Miscellaneous Provisions.
15.1 Notices. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to
this Agreement shall be in writing and given by: (i) hand
delivery; (ii) facsimile; (iii) express overnight delivery
service; or (iv) certified or registered mail, postage
prepaid, return receipt requested. Notices shall be provided
to the parties and addresses (or facsimile numbers, as
applicable) specified below and shall be effective upon
receipt or the rejection of such delivery, except if delivered
by facsimile outside of business hours in which case they
shall be effective on the next succeeding business day:
If to Frontier: Frontier Airlines, Inc.
7001 Tower Road
Denver, Colorado 80239
Attn: Vice President - Marketing & Planning
Telephone: [***]
Facsimile: [***]
If to Partner: Horizon Air
19521 International Boulevard
Attn: Vice President, Finance
Telephone: [***]
Facsimile: [***]
15.2 Waiver and Amendment. No provisions of this Agreement shall be
deemed waived or amended except by a written instrument
unambiguously setting forth the matter waived or amended and
signed by the party against which enforcement of such waiver
or amendment is sought. Waiver of any matter shall not be
deemed a waiver of the same or any other matter on any future
occasion.
15.3 Captions. Captions are used throughout this Agreement for
convenience of reference only and shall not be considered in
any manner in the construction or interpretation hereof.
15.4 Attorneys' Fees. In the event of any judicial or other
adversarial proceeding between the parties concerning this
Agreement, the prevailing party shall be entitled to recover
its attorneys' fees and other costs in addition to any other
relief to which it may be entitled.
15.5 Entire Agreement. This Agreement, including all attached
exhibits and schedules, constitutes the entire agreement
between the parties with respect to the subject matter hereof
and supercedes any prior agreements, whether written or oral,
with respect to such matters, and there are no other
representations, warranties or agreements, written or oral,
between Frontier and Partner with respect to the subject
matter of this Agreement other than as set forth herein.
15.6 Jurisdiction; Choice of Law. For purposes of any action or
proceeding arising out of this Agreement, the parties hereto
hereby expressly submit to the non-exclusive jurisdiction of
all federal and state courts located in the State of Colorado.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15.7 Severability. If this Agreement, any one or more of the
provisions of this Agreement, or the applicability of this
Agreement or any one or more of the provisions of this
Agreement to a specific situation, shall be held invalid,
illegal or unenforceable or in violation of any contract or
agreement to which Partner or Frontier are a party, then
Frontier and Partner shall in good faith amend and modify this
Agreement, consistent with the intent of Partner and Frontier,
as evidenced by this Agreement, to the minimum extent
necessary to make it or its application valid, legal and
enforceable and in accordance with the applicable agreement or
contract, and the validity or enforceability of all other
provisions of this Agreement and all other applications of any
such provision shall not be affected thereby.
15.8 Force Majeure. A party may not consider any default, delay, or
failure to perform by the other party, including Partner's
failure to achieve the OTP and/or the FCF rates required under
this Agreement, other than a failure to pay amounts when due,
as a breach of this Agreement if such default, delay or
failure to perform is shown to be due entirely to causes
beyond the reasonable control of the party charged with a
default including, but not limited to, causes such as strikes
or other labor disputes, riots, civil disturbances, actions of
governmental authorities that effect Partner's fleet of
CRJ-700 aircraft, epidemics, war, embargoes, terrorism,
weather, fire, earthquakes, nuclear disasters, or acts of God
or of the public enemy.
15.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
15.10 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of Frontier and Partner and their respective
successors and permitted assigns.
15.11 No Assignment. The rights, obligations and duties of Frontier
and Partner under this Agreement may not be assigned or
delegated,
except as may otherwise be mutually agreed by Frontier and
Partner, which shall not be unreasonably withheld.
15.12 Arbitration. Except as otherwise expressly provided herein,
any controversy, dispute, disagreement or claim between the
parties arising under or relating to this Agreement (a
"Dispute"), including any question concerning the validity,
termination, interpretation, performance, operation,
enforcement or breach of this Agreement, shall be referred to
binding arbitration. Each of Frontier and Partner irrevocably
submits to the exclusive jurisdiction of such arbitration and
expressly and irrevocably waives its rights to bring suit
against the other party in any court of law except for the
limited purpose of enforcing an arbitral award obtained in
respect of a Dispute, or for obtaining any injunctive relief
available to it under the laws of any jurisdiction for a
breach or threatened breach by the other party of this
Agreement that threatens irreparable damage.
Any Dispute submitted for arbitration will be finally settled
by binding and confidential arbitration according to the
American Arbitration Association Commercial Arbitration Rules
(the "Rules"), except as modified by mutual agreement of
Frontier and Partner. In the event of a conflict between the
Rules and this Section 15.12, the provisions of this Section
15.12 will prevail. The arbitration will be conducted by three
arbitrators, each of whom will be knowledgeable about the
legal, marketing and other business aspects of the airline
industry, unless otherwise agreed. Initially, and until
written notice has been received to the contrary, all
notifications and communications arising from the arbitral
proceedings may be made to the parties in the manner and the
addresses specified in Section 15.1.
In the event that any Dispute is submitted to arbitration, all
then current Disputes (including counterclaims between the
parties) will be consolidated in a single arbitration
proceeding. The arbitral proceeding will not exceed ninety
(90) days commencing on the date the last arbitrator accepts
his or her appointment. If the arbitral award is not issued
within this time, then the arbitration proceeding will be
renewed automatically for another ninety (90) days. Evidence
may not be taken in the arbitral proceeding except in the
presence of both parties and all witnesses, if any, may be
questioned by both parties. Notwithstanding the outcome of any
Dispute, each party will bear its own costs and expenses,
including attorneys' and expert fees, relating to any
arbitration occurring pursuant to this Section.
IN WITNESS WHEREOF, the parties executed and deliver this
Agreement as of the date first written above.
Frontier Airlines, Inc.,
a Colorado corporation
By:
Name:
Title:
HORIZON AIR INDUSTRIES, INC.
a Washington corporation
By:
Name:
Title:
EXHIBITS
Schedule A Certain Defined Terms
Exhibit 1.1 Partner Operational and Maintenance Practices
Exhibit 1.3.1 Initial Fleet
Exhibit 1.3.3 Configuration, Decor and Livery Standards
Exhibit 1.6.1 Pilot and Flight Attendant Appearance Standards
Exhibit 6.1.1 Fixed, Variable and Pass Thru Costs
Exhibit 6.1.2 Training/Start-up Pass Thru Costs
Exhibit 6.3.3 MTX Variable Cost Adjustment Formula
Exhibit 6.6 Backup Documentation
EXHIBIT 1.1
PARTNER'S OPERATIONAL AND MAINTENANCE PRACTICES
1. Aircraft are scheduled to have a minimum turn time of [***] minutes in the
hub, and [***] minutes of minimum turn time in non-hub stations.
2. Three aircraft are scheduled to RON in DEN, or another MTX RON location as
mutually agreed, each night, of which two are scheduled Aircraft and one is a
spare Aircraft. Two Aircraft will have a minimum ground time of [***], and 1
Aircraft will have a minimum ground time of [***]. The Schedule will provide
that each aircraft will remain overnight in DEN or MTX RON location at least
once every [***].
3. Each line of flying that originates at a non-maintenance RON location as
defined in section 1.7.2 in the agreement, will be scheduled to have one [***]
turn in DEN each day.
EXHIBIT 1.3.1
Initial Fleet - 8 + 1 Spare
Anticipated Number of
In-Service Aircraft
Month
[***]2004 3 Core + 1 Spare; 4 Used
[***]2004 2 Core; 2 New
[***]2004 1 Core; Used
[***]2004 1 Core; Used
[***]2004 1 Core; Used
EXHIBIT 1.3.3
CONFIGURATION AND INTERIOR DECOR STANDARDS
Aircraft seating configuration
1. All aircraft will be configured to have 70 seats with a 31 inch pitch,
except for the exit row, which will have a 41 inch pitch.
2. Seats will be covered in color (color#) leather according to the
current Horizon standard interior configuration (reference to Horizon aircraft
configuration manual) for a Bombardier CRJ-700 aircraft.
Carpeting
All aircraft interiors will have carpet according to current Horizon standard
interior configuration (reference to Horizon aircraft configuration manual) for
a Bombardier CRJ-700 aircraft.
Emergency cards
All aircraft will be outfitted with emergency cards in their seatback pocked as
required by federal regulations. Emergency cards will be labeled "Frontier
JetExpress operated by Horizon Airlines".
EXHIBIT 1.6.1
PILOT AND FLIGHT ATTENDANT APPEARANCE STANDARDS
Pilots
All pilots are to adhere to the appearance standards set by the Policies and
Procedures section of the Horizon Air Flight Operations Manual.
Flight Attendants
All flight attendants are to adhere to the appearance standards set by the
Policies and Standards section of the Horizon Air Flight Attendant Manual.
EXHIBIT 6.1.1
FIXED, VARIABLE AND PASS THRU COSTS
[***]
EXHIBIT 6.1.2
TRAINING/START-UP PASS THRU COSTS
[***]
EXHIBIT 6.3.3
MTX VARIABLE COST ADJUSTMENT FORMULA
[***]
EXHIBIT 6.6
BACKUP DOCUMENTATION
Cost Backup Required Minimum Frequency
Hull Insurance Insurance Policy & Invoice Annually or at time of change
Liability Insurance Insurance Policy & Invoice Annually or at time of change
War Risk Insurance Insurance Policy & Invoice Annually or at time of change
Property Taxes Assessment & Evidence of Payment Semi-annually
Deicing Invoices & Evidence of Payment Monthly
Fuel Costs Invoices & Evidence of Payment Monthly
Catering Invoices & Evidence of Payment Monthly
Landing Fees Invoices & Evidence of Payment Monthly
Security Fees Invoices & Evidence of Payment Monthly
Station Rent Lease Document; Invoices & Monthly
Evidence of Payment
Aircraft Ownership Costs Lease or Finance Documents When added to Fleet
Station Costs Subcontracts; All Invoices Monthly
and Evidence of Payment
SCHEDULE A
CERTAIN DEFINED TERMS
"FIXED COSTS" means each of the cost elements identified as
Fixed Costs on Exhibit 6.1 to this Agreement,
or such costs and expenses as may be otherwise
agreed to by the parties from time to time and
evidenced by an appropriate amendment to
Exhibit 6.1.
"OTHER SERVICES" means (i) curb-side service in all locations
where it is normal and customary or where
another airline offers curbside check-in; (ii)
check-in service with automated baggage tags
and boarding pass printers in all locations;
(iii) ticketing and security services in
accordance with the Federal Aviation
Administration and Frontier directives and
guidelines, as may be issued from time to
time, and any other directives or guidelines
as Partner and Frontier may mutually approve,
in all locations; (iv) transportation of mail
and other cargo (other than hazardous
materials) on Flights, at the order of
Frontier, to the extent of available Aircraft
capacity; (v) the acquisition and delivery of
aircraft fuel and oil to the Fleet; (vi)
Aircraft deicing when needed; (vii) station
handling, including aircraft, ticket counter,
gate, ramp, aircraft cleaning and baggage
services; and (viii) communication systems,
office supplies, postage, parking, training,
reaccommodation, in-flight catering.
"PARTNER CONTROL" means acts, omissions or events are not due to
the acts or omissions of a Frontier employee
or agent, including any third party contractor
of Frontier, or Force Majeure as defined in
Section 15.8 of this Agreement, or are not due
to acts taken by Partner in order to comply
with Regulations.
"PASS THRU COSTS" means each of the cost elements identified as
Pass Thru Costs on Exhibit 6.1 to this
Agreement and certain occasional costs
incurred by Partner while providing the Flight
Services, such as costs relating to opening
new cities or costs and expenses relating to
arranging for and conducting Ad Hoc Flights
pursuant to Section 1.2 of this Agreement.
"UNIT OF MEASURE" means the unit used to measure the Fixed Costs,
Variable Costs and Pass Thru Costs as set forth
on Exhibit 6.1 to this Agreement.
"VARIABLE COSTS" means each of the cost elements identified as
Variable Costs on Exhibit 6.1 to this Agreement,
as adjusted from time to time in accordance with
the terms of this Agreement.