EXHIBIT 10.23
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION IN A CONFIDENTAL 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 XXX 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 xxxxxx (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 xxxx, 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 xxxx 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 xxxx 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 Xxxx 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 Xxxx
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 Xxxx 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.
0000 Xxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
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 XXX in DEN, or another MTX XXX 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 XXX location at least once every [***].
3. Each line of flying that originates at a non-maintenance XXX 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.
