EXECUTION COPY

SECOND AMENDED AND RESTATED INVESTMENT AGREEMENT
 
dated as of August 13, 2009
 
among
 
REPUBLIC AIRWAYS HOLDINGS INC.
 
FRONTIER AIRLINES HOLDINGS, INC.,
 
FRONTIER AIRLINES, INC.
 
and
 
LYNX AVIATION, INC.

 
 

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TABLE OF CONTENTS

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Page
   
ARTICLE 1
 
Definitions
     
Section 1.01.  Definitions
2
Section 1.02.  Other Definitional and Interpretative Provisions
12
   
ARTICLE 2
 
Issuance And Purchase Of Common Shares
     
Section 2.01.  Issuance and Purchase of Common Shares
13
Section 2.02.  Closing
13
   
ARTICLE 3
 
Representations And Warranties Of The Companies
     
Section 3.01.  Bankruptcy Court Orders
14
Section 3.02.  Capitalization; Securities
14
Section 3.03.  Financial Advisors and Brokers
15
Section 3.04.  Controls
15
Section 3.05.  Aircraft
15
Section 3.06.  Certificated Air Carrier
16
Section 3.07.  Slots and Gate Interests
16
Section 3.08.  Foreign Corrupt Practices Act
16
Section 3.09.  Corporate Existence; Compliance with Law
17
Section 3.10.  Corporate Power, Authorization, Enforceable Obligations.
18
Section 3.11.  Financial Statements and Reports
18
Section 3.12.  Absence of Certain Changes or Events
19
Section 3.13.  Ownership of Property; Real Estate; Liens
19
Section 3.14.  Labor Matters
20
Section 3.15.  Ventures, Subsidiaries and Affiliates; Outstanding Equity
Securities and Indebtedness
20
Section 3.16.  Taxes.
20
Section 3.17.  ERISA
23
Section 3.18.  No Litigation
25
Section 3.19.  Intellectual Property
25
Section 3.20.  Environmental Matters
27
Section 3.21.  Insurance
27
Section 3.22.  Contracts
28
Section 3.23.  Exemption from Registration
29

 
 

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ARTICLE 4
 
Representations And Warranties Of The Investor
     
Section 4.01.  Organization
29
Section 4.02.  Authorization of Agreements
29
Section 4.03.  Consents; No Conflicts
29
Section 4.04.  Financial Advisors and Brokers
30
Section 4.05.  Ownership of Equity Securities; Purpose of Investment
30
Section 4.06.  Citizenship
30
Section 4.07.  Financing
30
   
ARTICLE 5
 
Pre-closing Covenants
     
Section 5.01.  Interim Operations
31
Section 5.02.  Bankruptcy Filings, Covenants and Agreements
31
Section 5.03.  No Solicitation of Alternative Transactions
32
Section 5.04.  Accounting Policies
34
Section 5.05.  Postpetition Transactions and Settlements
34
Section 5.06.  Taxes
34
Section 5.07.  Flight Operations
34
Section 5.08.  Notice of Incidents and Accidents
34
Section 5.09.  Aircraft Maintenance Programs
34
Section 5.10.  No Title IV Liability
34
Section 5.11.  Claims
35
Section 5.12.  Proceeds to General Unsecured Creditors
35
Section 5.13.  Investor Voting Commitment
35
   
ARTICLE 6
 
Additional Covenants
     
Section 6.01.  Information Rights and Access
35
Section 6.02.  Company Reports; Financial Statements
36
Section 6.03.  Publicity
37
Section 6.04.  Tax Contests
37
Section 6.05.  Investor Financing
37
Section 6.06.  Transaction Court Documents
37
Section 6.07.  Director and Officer Liability and Indemnification
38
   
ARTICLE 7
 
Conditions
     
Section 7.01.  Conditions to Both the Investor’s and the Company’s Obligations
40
Section 7.02.  Conditions to the Investor’s Obligations
40
Section 7.03.  Conditions to the Company’s Obligations
42

 
 

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ARTICLE 8
 
Termination
     
Section 8.01.  Termination of Agreement
44
Section 8.02.  Effect of Termination
45
   
ARTICLE 9
 
Miscellaneous
     
Section 9.01.  Collective Bargaining Agreements
47
Section 9.02.  Survival of Representations and Warranties
47
Section 9.03.  Specific Performance
48
Section 9.04.  Notices
48
Section 9.05.  Entire Agreement; Amendment
49
Section 9.06.  Counterparts
49
Section 9.07.  Governing Law; Jurisdiction
49
Section 9.08.  Successors and Assigns
50
Section 9.09.  No Third-Party Beneficiaries
50
Section 9.10.  Binding Effect
50
Section 9.11.  Company Disclosure Schedules
50
   

EXHIBIT A
Form of Investment Agreement and Bidding Procedures Order
EXHIBIT B
Company Disclosure Schedules
EXHIBIT C
Investor Disclosure Schedules
EXHIBIT D
Form of Disclosure Statement
   
Schedule 1.01(b)
Knowledge Group
Schedule 5.06
Taxes
Schedule 5.10
Multiemployer Plan Liabilities and Obligations
Schedule 6.07
D&O Insurance Premium
Schedule  7.02(g)
Regulatory Approvals

 
 

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SECOND AMENDED AND RESTATED INVESTMENT AGREEMENT
 
THIS SECOND AMENDED AND RESTATED INVESTMENT AGREEMENT (together with all
exhibits and schedules hereto and as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof, the
“Agreement”), dated as of August 13, 2009, by and among Republic Airways
Holdings Inc., a Delaware corporation (the “Investor”), Frontier Airlines
Holdings, Inc., a Delaware corporation (the “Company”), Frontier Airlines, Inc.,
a Colorado corporation (“Frontier Airlines”), and Lynx Aviation, Inc., a
Colorado corporation (“Lynx,” and, together with the Company and Frontier
Airlines, the “Companies”), and their respective successors, including, as the
context may require, on or after the Effective Date, as reorganized pursuant to
the Bankruptcy Code.
 
WITNESSETH:
 
WHEREAS, on April 10, 2008, the Companies filed voluntary petitions commencing
cases (the “Cases”) under Chapter 11 of Title 11 of the United States Code (the
“Bankruptcy Code”) in the United States Bankruptcy Court for the Southern
District of New York (the “Bankruptcy Court”);
 
WHEREAS, the Companies have continued in the possession of their assets and in
the management of their businesses pursuant to Sections 1107(a) and 1108 of the
Bankruptcy Code;
 
WHEREAS, pursuant to the Plan (as defined below), the Company intends to cancel
the existing outstanding Equity Securities of the Company upon the Effective
Date (as defined below) and issue a number of common shares of the Company (the
“Common Shares”), representing 100% of the total equity capital of the Company
on a Fully Diluted Basis (as defined below) to the Investor (the “Investment”)
in exchange for the Investment Price (as defined below) and the Investor’s
relinquishment of the Republic Distribution (as defined below) for the benefit
of the holders of Allowed General Unsecured Claims (as such term is defined in
the Plan) other than the Investor and its Affiliates (as defined below);
 
WHEREAS, the parties entered into an Investment Agreement, dated as of June 22,
2009 (the “Original Agreement”), in connection with the Investment;
 
WHEREAS, the parties amended and restated the Original Agreement on July 8, 2009
(the “Amended and Restated Investment Agreement”);
 
WHEREAS, on July 14, 2009, the Bankruptcy Court entered that certain Order (i)
Approving and Authorizing Debtors To Perform Under Investment Agreement, (ii)
Approving Procedures for Consideration of Other Investment Proposals, (iii)
Scheduling Proposal Deadlines and an Auction and (iv) Approving Form and Manner
of Notice Thereof [Docket No. 921] (the “Investment Agreement and Bidding
Procedures Order”) setting forth the procedures for parties other than Republic
to submit alternative proposals to invest in or acquire the Companies;

 
 

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WHEREAS, in accordance with the Investment Agreement and Bidding Procedures
Order, on August 13, 2009, an auction (the “Auction”) was conducted, at which
the Companies, in consultation with the Creditors’ Committee (as defined below),
considered the proposals made by the Investor and the other Qualified Investor
(as that term is defined in the Investment Agreement and Bidding Procedures
Order);
 
WHEREAS, the parties desire to amend and restate the Amended and Restated
Agreement in its entirety to reflect certain binding commitments made by the
Investor at the Auction to improve the terms and conditions of the Amended and
Restated Agreement;
 
WHEREAS, the parties intend that the transactions contemplated hereby will be
implemented by, and take effect on the Effective Date (or such other time as
provided in Section 2.02), subject to the satisfaction of the conditions set
forth herein; and
 
WHEREAS, the Company and the Investor desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated herein;
 
NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows, in the case of the Companies, subject to Bankruptcy Court approval
of this Second Amended and Restated Investment Agreement:
 
ARTICLE 1
Definitions
 
Section 1.01.  Definitions.  As used in this Agreement, the following terms
shall have the meanings set forth below:
 
“Affiliate” means, with respect to any specified Person, a Person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the specified Person, where “control”
(including the terms “controlling,” “controlled by” and “under common control
with”) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract, or otherwise; provided,
however, that when used with respect to the Company, “Affiliate” shall not
include the Investor or any Affiliate of the Investor.
 
“Agreement” has the meaning set forth in the preamble hereto.
 
“Air Carrier” means each of Frontier Airlines and Lynx.
 
“Airport Authority” means any city or any public or private board or other body
or organization chartered or otherwise established for the purpose of
administering, operating or managing airports or related facilities, which in
each case is an owner, administrator, operator or manager of one or more
airports or related facilities.

 
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“Alternative Transaction” means (a) a merger or other business combination or
similar transaction, (b) any sale of assets or other disposition of assets
pursuant to Section 363 of the Bankruptcy Code or pursuant to a plan of
reorganization, in either case that would be materially inconsistent with the
Investment or the transactions contemplated herein, (c) any sale of Equity
Securities of any of the Companies or (d) any Stand Alone Plan.  For the
avoidance of doubt, any transaction expressly permitted under this Agreement or
any transaction to which the Investor, in its sole discretion, consents shall
not be an Alternative Transaction.
 
“Approvals” has the meaning set forth in Section 7.02(g) hereof.
 
“Auction Termination Date” has the meaning set forth in Section 5.02.
 
“Bankruptcy Code” has the meaning set forth in the recitals hereto.
 
“Bankruptcy Court” has the meaning set forth in the recitals hereto.
 
“Board” means the board of directors of the Company (including, with respect to
periods following the Effective Date, the reorganized Company).
 
“Books and Records” means any books and records of each of the Companies
relating to period prior to the Closing.
 
“Business Day” means any day other than a Saturday, Sunday or a day on which
banking institutions of the State of New York are authorized by law or executive
order to close.
 
“Business Plan” is the business plan of the Company identified as version 5.4a,
dated as of June 3, 2009, and delivered to the Investor prior to the date
hereof.
 
“By-Laws” means the by-laws of the Company, as amended from time to time
(including, with respect to periods following the Effective Date, the by-laws of
the reorganized Company).
 
“Cases” has the meaning set forth in the recitals hereto.
 
“Certificated Air Carrier” means a Person holding a certificate of public
convenience and necessity issued pursuant to Chapter 411 of Title 49 and an air
carrier operating certificate issued under Part 121 of the FAR pursuant to
Chapter 447 of Title 49, in each case issued by the Secretary of Transportation,
for aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo, or that is otherwise certified or registered to the extent required to
fall within the purview of Section 1110 of the Bankruptcy Code.
 
“Certificate of Incorporation” means the Certificate of Incorporation of the
Company, as amended from time to time (including, in each case, with respect to
periods following the Effective Date, of the reorganized Company).
 
“Chapter 11” means Chapter 11 of the Bankruptcy Code.

 
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“Common Shares” has the meaning set forth in the recitals hereto.
 
“Closing” means the closing of the sale and purchase of the Common Shares
pursuant to Section 2.01 hereof.
 
“Closing Date” has the meaning set forth in Section 2.02(a) hereof.
 
“Companies” has the meaning set forth in the preamble hereto.
 
“Company” has the meaning set forth in the preamble hereto.
 
“Company Aircraft” has the meaning set forth in Section 3.05(a) hereof.
 
“Company Disclosure Schedules” has the meaning set forth in Article 3.
 
“Computer Software” means all computer software and databases (including,
without limitation, source code, object code and all related documentation).
 
“Confirmation Order” has the meaning set forth in the definition of “Effective
Date” herein.
 
“Contracts” means all contracts now owned or hereafter acquired by any of the
Companies, in any event, including all contracts, undertakings, or agreements in
or under which any of the Companies may now or hereafter have any right, title
or interest.
 
“Creditors’ Committee” means the statutory committee of unsecured creditors
appointed in the Cases pursuant to Section 1102 of the Bankruptcy Code.
 
“DIP Credit Agreement” means the Senior Secured Superpriority
Debtor-in-Possession Credit Agreement, dated as of April 1, 2009, among the
Companies, the Investor and the other lenders and agents from time to time party
thereto, after giving effect to all amendments, waivers, supplements,
modifications and any substitutions therefor.
 
“DIP Facility” means the Companies’ debtor-in-possession term loan facility
provided under the DIP Credit Agreement, as the same may exist from time to time
while the Cases are pending.
 
“Disclosure Statement” means a disclosure statement with respect to the Plan,
substantially in the form of Exhibit D hereto or otherwise reasonably
satisfactory in form and substance to the Investor, subject to Section 6.06
hereof.
 
“DOT” means the United States Department of Transportation and any successor
thereto.
 
“D&O Insurance” has the meaning set forth in Section 6.07(b) hereof.

 
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“Effective Date” means the effective date of the Plan; provided that unless the
Investor agrees otherwise, in no event shall the Effective Date occur (a)
earlier than the date that the Bankruptcy Court approves and enters the order,
in form and substance satisfactory to the Investor in its sole discretion,
subject to Section 6.06 hereof, confirming the Plan (the “Confirmation Order”),
(b) while the Confirmation Order is stayed or after it has been vacated or
overturned, (c) before all Approvals are obtained and have become final, and
(d) before all applicable waiting periods imposed by Law in connection with the
transactions contemplated by the Transaction Documents have expired or have been
terminated.
 
“Employee Plans” has the meaning ascribed to it in Section 3.17(a).
 
“Environmental Laws” means all Laws, now or hereafter in effect, and any
applicable judicial or administrative interpretation thereof, imposing liability
or standards of conduct for or relating to the regulation and protection of
human health, safety, the environment and natural resources (including ambient
air, surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws include CERCLA;
the Hazardous Materials Transportation Act of 1994 (49 U.S.C. Sections 5101 et
seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Sections 136 et seq.); the Resource Conservation and Recovery Act (42 U.S.C.
Sections 6901 et seq.); the Toxic Substances Control Act (15 U.S.C. Sections
2601 et seq.); the Clean Air Act (42 U.S.C. Sections 7401 et seq.); the Clean
Water Act (33 U.S.C. Sections 1251 et seq.); the Occupational Safety and Health
Act (29 U.S.C. Sections 651 et seq.); and the Safe Drinking Water Act (42 U.S.C.
Sections 300(f) et seq.), and any and all regulations promulgated thereunder,
and all analogous state, local and foreign counterparts or equivalents and any
transfer of ownership notification or approval statutes.
 
“Environmental Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, Environmental Laws or
Environmental Permits, in each case, in connection with, or otherwise related
to, any Release or threatened Release or presence of a Hazardous Material
(whether on, at, in, under, from or about or in the vicinity of any real or
personal property) or any environmental matter or any exposure to any Hazardous
Material.
 
“Environmental Permits” means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Entity
under any Environmental Laws.
 
“Equity Securities” means (i) capital stock of, or other equity interests in,
any Person, (ii) securities convertible into or exchangeable for shares of
capital stock, voting securities or other equity interests in such Person or
(iii) options, warrants or other rights to acquire the securities described in
clauses (i) and (ii), whether fixed or contingent, matured or unmatured,
contractual, legal, equitable or otherwise.

 
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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any regulations promulgated thereunder.
 
“ERISA Affiliate” has the meaning ascribed to it in Section 3.17(a).
 
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
 
“Expenses” mean all reasonable, actual and documented out-of-pocket fees and
expenses in an aggregate amount not to exceed $350,000 incurred by or on behalf
of the Investor in connection with the due diligence, negotiation, preparation,
execution, delivery and court approval of the Transaction Documents and the
transactions contemplated thereby and in connection with the exercise of any
rights and remedies thereunder, including, but not limited to, reasonable,
actual and documented fees and expenses of its legal counsel and the third-party
consultants that are engaged by the Investor to assist in such  transactions.
 
“FAA” means the Federal Aviation Administration of the United States and any
successor thereto.
 
“FAA Certificate of Airworthiness” means the certificate of airworthiness issued
by the FAA with respect to the Company Aircraft.
 
“FAPA CBA” has the meaning ascribed to it in Section 9.01(a).
 
“FAR” means the Federal Aviation Regulations.
 
“Financial Statements” has the meaning ascribed to it in Section 3.11(a).
 
“Foreign Corrupt Practices Act” has the meaning set forth in Section 3.08(a)
hereof.
 
“Frontier Airlines” has the meaning set forth in the preamble hereto.
 
“Fully Diluted Basis” means the number of shares of Common Stock, without
duplication, which are issued and outstanding or owned or held, as applicable,
at the date of determination (including, on the Closing Date, all shares of
Common Stock and other Equity Interests reserved for issuance under the Plan)
plus the number of shares of Common Stock issuable pursuant to any Equity
Securities then outstanding convertible into or exchangeable or exercisable for
(whether or not subject to contingencies or passage of time, or both) shares of
Common Stock.
 
“GAAP” means U.S. generally accepted accounting principles as in effect at the
relevant time or for the relevant period.

 
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“Gate Interests” shall mean all of the right, title, privilege, interest, and
authority now or hereafter acquired or held by each Company in connection with
the right to use or occupy holdrooms, jetways and passenger boarding and
deplaning space and any related airport facilities used by each Company for its
operations, including ticket counter space, baggage claim and baggage makeup
space, lounge space, maintenance/hangar facilities, and administrative office
space, in any airport at which such Company conducts scheduled operations.
 
“Governmental Entity” means any government or political subdivision or
department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state, local or foreign.
 
“Hazardous Material” means any substance, material or waste that is, or the
Release of which is, regulated by, or forms the basis of liability now or
hereafter under, any Environmental Laws, including any material or substance
that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous material,”
“hazardous substance,” “extremely hazardous waste,” “restricted hazardous
waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special waste,”
“toxic substance” or other similar term or phrase under any Environmental Laws,
or (b) petroleum or any fraction or by-product thereof, asbestos,
polychlorinated biphenyls (PCBs), mold or any radioactive substance.
 
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations promulgated thereunder.
 
“IBT CBAs” has the meaning ascribed to it in Section 9.01(b).
 
“Initial Approvals” has the meaning ascribed to it in Section  7.02(g).
 
“Intellectual Property” means all material (i) trademarks, service marks, brand
names, certification marks, trade dress, domain names and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of the foregoing, any extension, modification or renewal of any
such registration, (ii) patents, applications for patents (including divisions,
continuations, continuations in part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction, (iii) Trade
Secrets, (iv) copyright rights, whether registered or not, and registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof, and (v) any similar intellectual property or
proprietary rights.
 
“Investment” has the meaning set forth in the recitals hereto.
 
“Investment Agreement and Bidding Procedures Motion” means the motion, as
amended from time to time, filed by the Companies in the Bankruptcy Court
seeking entry of the Investment Agreement and Bidding Procedures Order.

 
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“Investment Agreement and Bidding Procedures Order” has the meaning set forth in
the recitals.
 
“Investment Price” has the meaning set forth in Section 2.01 hereof.
 
“Investor” has the meaning set forth in the preamble hereto.
 
“Investor Disclosure Schedules” has the meaning set forth in Article 4.
 
“IRC” means the Internal Revenue Code of 1986, as amended from time to time.
 
“IT Assets” means computers, Computer Software, firmware, middleware, servers,
workstations, routers, hubs, switches, data communications lines and all other
information technology equipment and elements and all associated documentation.
 
“Knowledge” means the knowledge of the executive officers listed on Schedule
1.01(b) after reasonable inquiry.
 
“Law” means any law, treaty, statute, ordinance, code, principle of common law,
rule or regulation of a Governmental Entity or judgment, decree, order, writ,
award, injunction or determination of an arbitrator or court or other
Governmental Entity.
 
“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever intended for security (including any conditional sale or other
title retention agreement, any easement, right of way or other encumbrance on
title to real property, and any financing lease having substantially the same
economic effect as any of the foregoing).
 
“Loan” has the meaning ascribed to such term in the DIP Credit Agreement.
 
“Lynx” has the meaning set forth in the preamble hereto.
 
“Material Adverse Effect” means any event, change, circumstance, effect or other
matter that has had or is reasonably likely to have a material adverse effect on
(a) the business, operations, condition (financial or otherwise) or results of
operations of the Companies, taken as a whole, or (b) the ability of the
Companies to consummate the transactions contemplated by this Agreement;
provided that none of the following, either alone or in combination, shall
constitute, or be considered in determining whether there has been, a Material
Adverse Effect: (i) the outbreak or escalation of war or major hostilities or
any act of terrorism, (ii) any effect resulting from a pandemic or other public
health risk, (iii) any effect resulting from the announcement, pendency or
consummation of the transactions contemplated by this Agreement, (iv) any effect
resulting from the designation by the Investor of the Rejected Contracts or the
assumption of other Contracts not so designated, (v) changes in GAAP or the
interpretation thereof, (vi) changes that generally affect the commercial
airline industry in the United States, (vii) changes in financial markets or
general economic conditions (including prevailing interest rates, exchange
rates, commodity prices and fuel costs (except as otherwise provided herein),
(viii) any failure, in and of itself, of the Companies to meet any published or
internally prepared projections, budgets, plans or forecasts of revenues,
earnings or other financial performance measures or operating statistics (it
being understood that the facts and circumstances underlying any such failure
that are not otherwise excluded from the definition of a “Material Adverse
Effect” may be considered in determining whether there has been a Material
Adverse Effect) or (ix) any action taken or failed to be taken pursuant to or in
accordance with this Agreement or at the request of, or consented in writing to
by, the Investor, except, in the case of clauses (i), (ii), (vi) and (vii), to
the extent such events, changes, circumstances, effects or other matters have a
materially disproportionate effect on the Companies, taken as a whole, relative
to other businesses engaged in the commercial airline industry in the United
States.

 
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“Material Contract” has the meaning ascribed to it in Section 3.22(a).
 
“Material Real Estate Contracts” means (for purposes of the Agreement only) any
lease, usufruct, use agreement, license, permit or other occupancy or facility
use agreement under which a Company is a tenant, sub-tenant, permittee, licensee
or counterparty relating to major facilities required for a Company’s
operations, the loss of which would result in a Material Adverse Effect.
 
“Multiemployer Plans” has the meaning ascribed to it in Section 3.17(a).
 
“Notice” has the meaning ascribed to it in Section 5.03(b).
 
“Outstanding Amount” means the then-current balance of the outstanding
principal, interest and other amounts owed to the Investor in respect of its
participation in the DIP Facility, including all reasonable, actual and
documented out-of-pocket expenses incurred by the Investor in connection
therewith to the extent such expenses have not been advanced or reimbursed by
the Companies.
 
“Permits” has the meaning ascribed to it in Section 3.06.
 
“Person” means any individual, corporation, company, association, partnership,
limited liability company, joint venture, trust, unincorporated organization or
Governmental Entity.
 
“Plan” means a plan of reorganization substantially in the form attached to the
Disclosure Statement or otherwise consistent with the Term Sheet (including all
plan supplements, exhibits, schedules and plan documents) and in form and
substance satisfactory to the Investor in its sole discretion, subject to
Section 6.06 hereof.
 
“Policy” has the meaning ascribed to it in Section 3.21.
 
“Postpetition” means, when used with respect to any indebtedness, agreement,
instrument, claim, proceeding or other matter, indebtedness pursuant to any
agreement or instrument first entered into or becoming effective, or claim,
proceeding that first arose or was first instituted, or another matter that
first occurred, after the commencement of the Cases.

 
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“Proceeding” means any legal actions, suits, proceedings, claims or disputes.
 
“Real Estate” has the meaning ascribed to it in Section 3.20(a).
 
“Regulatory Approvals” means, to the extent necessary in connection with the
consummation of the transactions contemplated by the Transaction Documents, any
and all certificates, permits, licenses, franchises, concessions, grants,
consents, approvals, orders, registrations, authorizations, waivers, exemptions,
variances or clearances from, or filings or registrations with, Governmental
Entities (and shall not include waiting periods under the HSR Act or otherwise
imposed by Law).
 
“Release” means any release, threatened release, spill, emission, leaking,
pumping, pouring, emitting, emptying, escape, injection, deposit, disposal,
discharge, dispersal, dumping, leaching or migration of Hazardous Material in
the indoor or outdoor environment, including the movement of Hazardous Material
through or in the air, soil, surface water, ground water or property.
 
“Relevant Hearing” has the meaning set forth in Section 6.06(a) hereof.
 
“Representatives” means, with respect to any Person, such Person’s officers,
directors, employees, agents, attorneys, accountants, consultants, equity
financing partners or financial advisors or other Person associated with, or
acting on behalf of, such Person.
 
“Seabury” has the meaning set forth in Section 3.03 hereof.
 
“SEC” means the U.S. Securities and Exchange Commission.
 
“SEC Report” has the meaning ascribed to it in Section 3.11(b).
 
“Securities Act” means the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
 
“Slots” mean each and every (i) “slot” as defined in 14 CFR § 93.213(a)(2), as
that section may be amended or re-codified from time to time, including slots at
Ronald Reagan Washington National Airport; (ii) operating authorization for a
landing or takeoff operation at a specified time period at any airport in the
United States subject to orders or regulations issued by the FAA (including, but
not limited to, operating authorizations at New York LaGuardia Airport, as
defined in the FAA’s final order, Operating Limitations at New York LaGuardia
Airport, Docket No. FAA 2006-25755-82 dated December 13, 2006, published in the
Federal Register at 71 Fed. Reg. 77854 (Dec. 27, 2006)), as such order may be
amended or re-codified from time to time, and in any subsequent order or
regulation issued by the FAA, as such order may be amended or re-codified from
time to time, (iii) authorization granted by a Governmental Entity to conduct a
landing or takeoff during a specific hour or other period at any United States
or foreign airport, and (iv) slot exemption pursuant to 49 U.S.C. §§ 41716 and
41718, as such statute may be amended or re-codified from time to time,
including but not limited to slot exemptions at New York LaGuardia Airport and
Ronald Reagan Washington National Airport, in each case of the Companies now
held or hereafter acquired (other than “slots” which prior to the date of this
Agreement have been permanently allocated to another air carrier and in which
any of the Companies holds temporary use rights).

 
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“SOX Act” has the meaning ascribed to it in Section 3.11(b).
 
“Stand Alone Plan” means any plan of reorganization or plan of liquidation for
which the Investor or an Affiliate of the Investor is not the sponsor, including
without limitation any such plan for which any of the Companies is the sponsor
or there is no sponsor.
 
“Stockholder” means, with respect to any Person, each holder of Common Stock of
such Person.
 
“Subsidiary” means as to any Person, any other Person of which more than fifty
percent (50%) of the shares of the voting stock or other voting interests are
owned or controlled, or the ability to select or elect more than fifty percent
(50%) of the directors or similar managers is held, directly or indirectly, by
such first Person or one or more of its Subsidiaries.
 
“Subsequent Reports” has the meaning set forth in Section 6.02(a) hereof.
 
“Successful Investor” means the Person who makes the highest or otherwise best
investment proposal, as determined in accordance with the Investment Agreement
and Bidding Procedures Order.
 
“Successful Proposal” means the highest or otherwise best investment proposal,
as determined in accordance with the Investment Agreement and Bidding Procedures
Order.
 
“Superior Proposal” has the meaning set forth in Section 5.03(b).
 
“Tax” (and with correlative meaning “Taxes” and “Taxable”) means (1) any
foreign, federal, state or local income, gross receipts, capital, franchise,
import, goods and services, estimated, alternative minimum, add on minimum,
sales, use, transfer, real property gains, registration, value added, excise,
natural resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital stock,
social security, unemployment, disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever, including any interest,
penalties or additions to tax or additional amounts in respect of the foregoing,
(2) any liability for the payment of any amounts of the type described in (1) as
a result of being a member of a consolidated, combined, unitary or aggregate
group for any Taxable period, and (3) any liability for the payment of any
amounts of the type described in (1) or (2) as a result of being a transferee or
successor to any person or as a result of any express or implied obligation to
indemnify any other person.
 
“Tax Contests” has the meaning set forth in Section 6.04 hereof.

 
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“Tax Return” means any return, declaration, report, claim for refund,
information return or other document (including any related or supporting
schedule, statement or information) filed or required to be filed with any
taxing authority in connection with the determination, assessment or collection
of any Tax of any party or the administration of any laws, regulations or
administrative requirements relating to any Tax.
 
“Termination Fee” has the meaning set forth in Section 8.02(b) hereof.
 
“Term Sheet” means the Term Sheet dated June 5, 2009, between the Companies and
the Investor with respect to a plan of reorganization.
 
“Title 11” means Title 11 of the United States Code, as amended and in effect
from time to time.
 
“Title 49” means Title 49 of the United States Code, as amended and in effect
from time to time, and the regulations promulgated pursuant thereto.
 
“Transaction Documents” means this Agreement, the Term Sheet, the Plan, the
Investment Agreement and Bidding Procedures Order and the Confirmation Order.
 
“Transaction Court Documents” means the Disclosure Statement, the order
approving the Disclosure Statement, the Plan and the Confirmation Order.
 
“Treasury Regulation” means the regulation promulgated under the IRC.
 
“TWU CBA” has the meaning ascribed to it in Section 9.01(c).
 
Section 1.02.  Other Definitional and Interpretative Provisions.  The words
“hereof”, “herein” and “hereunder” and words of like import used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.  Unless otherwise specified, any references to a
party’s “judgment”, “satisfaction” or words of a similar import shall mean in
such party’s sole judgment.  The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.  References to Articles, Sections, Exhibits and Schedules are to
Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise
specified.  All Exhibits and Schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein.  Any capitalized terms used in any Exhibit or Schedule but not otherwise
defined therein, shall have the meaning as defined in this Agreement.  Any
singular term in this Agreement shall be deemed to include the plural, and any
plural term the singular.  Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”, whether or not they are in fact followed by
those words or words of like import.  “Writing”, “written” and comparable terms
refer to printing, typing and other means of reproducing words (including
electronic media) in a visible form.  References to any statute shall be deemed
to refer to such statute as amended from time to time and to any rules or
regulations promulgated thereunder.  References from or through any date mean,
unless otherwise specified, from and including or through and including,
respectively.  References to “law”, “laws” or to a particular statute or law
shall be deemed also to include any Law.

 
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ARTICLE 2
Issuance And Purchase Of Common Shares
 
Section 2.01.  Issuance and Purchase of Common Shares.  Upon the terms and
subject to the conditions set forth in this Agreement, and in reliance upon the
representations and warranties hereinafter set forth, at the Closing, the
reorganized Company will issue, sell and deliver to the Investor, and the
Investor will purchase from the reorganized Company, 1,000 Common Shares, free
and clear of all Liens, other than Liens created by the Investor or permitted by
the Investor, and representing 100% of the total equity capital of the Company
on a Fully Diluted Basis for (i) an aggregate purchase price of One Hundred and
Eight Million Seven Hundred and Fifty Thousand Dollars ($108,750,000) (the
“Investment Price”) and (ii) the relinquishment by the Investor and any of its
Affiliates of all rights under the Plan to any distribution on account of the
Investor’s or any of its Affiliates’ Allowed General Unsecured Claims (as such
term is defined in the Plan) (the “Republic Distribution”), it being understand
that the Republic Distribution shall be payable to the holders of Allowed
General Unsecured Claims, other than the Investor and its Affiliates, on a pro
rata basis.
 
Section 2.02.  Closing.  (a) Subject to the satisfaction or, if permissible,
waiver of the conditions set forth in Sections ‎7.01, ‎7.02 and ‎7.03 hereof,
the Closing shall take place at the offices of Fulbright & Jaworski L.L.P., 666
Fifth Avenue, New York, New York, at 10:00 a.m., New York City time, on the
third (3rd) Business Day following satisfaction or, if permissible, waiver, of
such conditions (other than those conditions that by their nature are to be
satisfied by actions to be taken at the Closing, but subject to the satisfaction
or waiver of such conditions), or at such other time and place as the parties
may agree (the date on which the Closing occurs, the “Closing Date”); provided
that the Investor and the Company shall use all commercially reasonable efforts
to have the Closing take place on the Effective Date.
 
(b)        At the Closing, (i) the reorganized Company shall deliver to the
Investor certificates representing the Common Shares to be purchased by, and
sold to, the Investor pursuant to ‎Section 2.01 hereof (registered in the names
and in the denominations designated by the Investor at least two (2) Business
Days prior to the Closing Date), together with the other documents, certificates
and opinions to be delivered pursuant to ‎Section 7.01 and ‎Section 7.02 hereof,
and (ii) the Investor, in full payment for the Common Shares to be purchased by,
and sold to, the Investor pursuant to ‎Section 2.01 hereof, shall pay to the
reorganized Company as provided in ‎Section 2.01 hereof, an aggregate amount
equal to the Investment Price provided that the Investor may, in its sole
discretion, credit all or any portion of the Outstanding Amount against the
Investment Price, and shall deliver the certificate required pursuant to
‎Section 7.03(a) hereof.  The Investor shall make payment hereunder in
immediately available funds by wire transfer to the account or accounts
designated by the Company, or by such other means as may be agreed between the
parties hereto (and by the Creditors’ Committee, in the case of the payment
described in Section 5.12 hereof).  The Company shall make any payment due
hereunder in immediately available funds by wire transfer to the account
designated by the Investor, or by such other means as may be agreed between the
parties hereto.
 
 
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ARTICLE 3
Representations And Warranties Of The Companies
 
Except as set forth in the Company Disclosure Schedules attached hereto as
Exhibit B, the Companies hereby represent and warrant to, and agree with, the
Investor as follows:
 
Section 3.01.  Bankruptcy Court Orders.  The Companies shall have complied with
the terms of all orders of the Bankruptcy Court in respect of the Investment,
this Agreement and the Investment Agreement and Bidding Procedures Order upon
and after the entry of any such order, except to the extent that any such
failure to comply is not material to the Investor (or to the Creditors’
Committee, in the case of the payment described in Section 5.12 hereof).
 
Section 3.02.  Capitalization; Securities.  (a) Upon the Closing and after
giving effect to the Confirmation Order, the Plan and the Investment, the
authorized capital stock of the reorganized Company shall consist solely of
Common Shares.  Upon the Closing (after giving effect to the Confirmation Order,
the Plan and the Investment), 1,000 Common Shares, representing 100% of the
total equity capital of the Company on a Fully Diluted Basis, shall be issued to
the Investor.  Upon the Closing Date, all of such Common Shares to be issued and
delivered to the Investor pursuant to the terms hereof shall have been duly
authorized and validly issued, fully paid, nonassessable and not subject to
preemptive or similar rights of third parties.  Upon the Closing and after
giving effect to the Confirmation Order and the Plan, (i) there shall be no
voting trusts, voting agreements, proxies, first refusal rights, first offer
rights, co-sale rights, options, transfer restrictions or other agreements,
instruments or understandings (whether oral, formal or informal) with respect to
the voting, transfer or disposition of capital stock of the Company or any
Subsidiary to which the Company or any Subsidiary is a party or by which it is
bound, or, to the Knowledge of the Company, among or between any Persons other
than the Company or any Subsidiary (as the case may be), except as set forth in
this Agreement, and (ii) there shall be no options, warrants, stock appreciation
rights, restricted stock units, calls, commitments or agreements of any
character to which the Company or any Subsidiary is a party, or by which the
Company or any Subsidiary is bound, calling for the issuance of shares of
capital stock or other Equity Securities of the Company or any Subsidiary or for
settlement in cash based upon the value of any such Equity Securities, or other
arrangement to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound to acquire, at any time or under any
circumstance, capital stock of the Company or any Subsidiary or any such Equity
Securities.  The rights, preferences and privileges of the capital stock of the
Company shall be as set forth in the Certificate of Incorporation of the
Company, as amended pursuant to the Plan and in effect upon the Closing, in the
form approved by the Investor.

 
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Section 3.03.  Financial Advisors and Brokers.  Except for Seabury Securities
LLC and/or its Affiliates (“Seabury”), or as otherwise set forth on Schedule
‎3.03(a) hereto, no Person has acted, directly or indirectly, as a broker,
finder or financial advisor of any of the Companies in connection with the
Transaction Documents or the transactions contemplated thereby, and except for
Seabury and any Person listed on Schedule ‎3.03(a), no Person acting for or on
behalf of any of the Companies is entitled to receive any broker’s, finder’s or
similar fee or commission in respect thereof based in any way on any agreement,
arrangement or understanding made by or on behalf of any of the Companies;
provided that “financial advisors” shall not include any tax, accounting or
other similar providers of financial services to the Companies listed on
Schedule 3.03(b).  True and correct copies of the Company’s agreement with
Seabury and all agreements between any of the Companies, on the one hand, and
each Person listed on Schedule ‎3.03(a) (or any of their respective Affiliates),
on the other, have been delivered to the Investor.
 
Section 3.04.  Controls.  Each of the Companies maintains internal information
systems, cash management systems and other controls sufficient to provide
reasonable assurance that material transactions are executed in accordance with
management’s general or specific authorizations and are recorded in a manner
that permits the preparation of financial statements in accordance with GAAP.
 
Section 3.05.  Aircraft.  (a) Schedule ‎3.05(a) hereto sets forth a list of all
aircraft and aircraft engines owned or leased by any of the Companies as of the
date hereof (the “Company Aircraft”), including a description of the type,
aircraft number or engine number, as the case may be, of each such Company
Aircraft and the date the Company or any of its Subsidiaries placed such Company
Aircraft in service or proposes to place such Company Aircraft in service, which
list is true and complete in all material respects.  All Company Aircraft and
spare parts and other assets and properties that are used by any of the
Companies in the conduct of its business are being maintained in all material
respects according to applicable FAA regulatory standards and the FAA-approved
maintenance program of the respective Companies.  The Companies have implemented
maintenance schedules with respect to their respective Company Aircraft and such
spare parts and other relevant assets that, if complied with, would result in
the satisfaction, in all material respects, of all requirements under all
applicable FARs and airworthiness directives of the FAA, DOT or any other
Governmental Entity required to be complied with in accordance with the
FAA-approved maintenance program of the Companies, and the Companies are in
compliance with such maintenance schedules in all material respects and there is
no reason to believe that they will not satisfy any component of such
maintenance schedules on or prior to the dates specified in such maintenance
schedules.
 
(b)        Each Company Aircraft has a validly issued, current individual
aircraft FAA Certificate of Airworthiness with respect to such Company Aircraft
which satisfies all requirements for the effectiveness of such FAA Certificate
of Airworthiness.
 
(c)        Each Company Aircraft is properly registered on the FAA aircraft
registry.
 
(d)        None of the Companies is a party to any interchange or pooling
agreements with respect to its respective Company Aircraft, spare parts,
rotables or expendables that would have an  adverse effect on its
creditworthiness or its ability to operate its business.

 
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(e)        No Company Aircraft is subleased to or otherwise in the possession of
another air carrier or other Person, other than the Company or any of its
Subsidiaries, to operate such Company Aircraft in air transportation or
otherwise.
 
Section 3.06.  Certificated Air Carrier.  Each Air Carrier is a Certificated Air
Carrier and possesses all necessary certificates, franchises, licenses, permits,
rights, designations, authorizations, exemptions, concessions, approvals,
frequencies, Slots, and consents that are material to the operation of the
routes flown by it and the conduct of its business and operations as currently
conducted (the “Permits”).  Each Air Carrier is a “citizen of the United States”
as that term is defined in Section 40102(a)(15) of Title 49 or successor
statute.  Neither the DOT nor FAA nor any other Governmental Entity has taken
any action or to such Air Carrier’s Knowledge, proposed or threatened to take
any action, to amend, modify, suspend, revoke, terminate, cancel, or otherwise
affect such Permits, in each case, in a materially adverse manner. Except as set
forth in Schedule 3.06, no written notices of violations of the FARs or of DOT
rules, regulations or requirements have been issued and are pending.
 
Section 3.07.  Slots and Gate Interests.  The Companies hold each of the Slots
and each of the Gate Interests pursuant to authority granted by the FAA, other
applicable Governmental Entity or Airport Authority and are in compliance in all
material respects with all of the terms, conditions, and limitations of each
rule, regulation, or requirement of the FAA, DOT, any other applicable
Governmental Entity or Airport Authority applicable thereto and with all
applicable provisions of law, and with respect to Slots, including but not
limited to the applicable Slot use limitations imposed from time to time by
statute, regulation or order, except in each case where non-compliance would not
be reasonably likely to impair the right to hold and use each such Slot or Gate
Interest pursuant to and for the full term of the corresponding authorization or
agreement as such exists on the date hereof.  Subject to any transfers,
exchanges or other dispositions permitted by this Agreement and the DIP Credit
Agreement, the Companies are utilizing or causing to be utilized the Slots and
Gate Interests in all material respects to the extent required to maintain such
rights to each such Slot and Gate Interest by the applicable Governmental Entity
including each applicable Airport Authority.  Other than with respect to Slots
at New York LaGuardia Airport and except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, none of the
Companies has received any notice from any Governmental Entity, including any
Airport Authority, or is aware of any other event or circumstance, that would be
reasonably likely to impair its right to hold and use any of the Gate Interests
or Slots.  With respect to Slots at New York LaGuardia Airport, none of the
Companies has received any notice from any Governmental Entity, including any
Airport Authority, or is aware of any other event or circumstance, that would be
reasonably likely to impair its right to hold and use any such Slot.  Each
Company’s Slots are listed on Schedule 3.07.  Each Company’s Gate Interests are
listed on Schedule 3.07.
 
Section 3.08.  Foreign Corrupt Practices Act.  Except for such matters as would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect:

 
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(a)        The Companies have developed and implemented a compliance program
which includes corporate policies and procedures that provide reasonable
assurance of compliance with the Foreign Corrupt Practices Act, as amended (the
“Foreign Corrupt Practices Act”).
 
(b)        In connection with its compliance with the Foreign Corrupt Practices
Act, there are no adverse or negative past performance evaluations or ratings by
the U.S. Government, or any voluntary disclosures under the Foreign Corrupt
Practices Act, any enforcement actions or threats of enforcement actions, or any
facts to the Knowledge of the Companies that, in each case, could result in any
adverse or negative performance evaluation related to the Foreign Corrupt
Practices Act.
 
(c)        Neither the U.S. Government nor any other Person has notified any of
the Companies in writing of any actual or alleged violation or breach of the
Foreign Corrupt Practices Act.
 
(d)        None of the Companies has undergone and is undergoing any audit,
review, inspection, investigation, survey or examination of records relating to
any of the Companies’ compliance with the Foreign Corrupt Practice Act, and, to
the Company’s Knowledge, there is no basis for any such audit, review,
inspection, investigation, survey or examination of records.
 
(e)        The Companies have not been and are not now under any administrative,
civil or criminal investigation, charge or indictment involving alleged false
statements, false claims or other improprieties relating to any of the
Companies’ compliance with the Foreign Corrupt Practices Act, nor, to the
Company’s Knowledge, is there any basis for any such investigation or
indictment.
 
Section 3.09.  Corporate Existence; Compliance with Law.  Each Company (a) is a
corporation duly organized, validly existing and in good standing under the Laws
of its respective jurisdiction of incorporation set forth in Schedule ‎3.09; (b)
is duly qualified to conduct business and is in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not reasonably be expected to have a Material Adverse Effect;
(c) has the requisite power and authority to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease and to conduct its business as now conducted, except where the failure to
do so would not reasonably be expected to have a Material Adverse Effect; (d)
subject to the specific representations regarding Environmental Laws, has all
licenses, permits, consents or approvals from or by, and has made all filings
with, and has given all notices to, all Governmental Entities having
jurisdiction, to the extent required for such ownership, operation and conduct,
except where the failure to do so would not reasonably be expected to have a
Material Adverse Effect, and, except as would not reasonably be expected to have
a Material Adverse Effect, all such licenses, permits, consents or approvals and
filings are in full force and effect; (e) is in compliance with its charter and
bylaws; and (f) subject to the specific representations set forth herein
regarding ERISA, Environmental Laws, Tax and other Laws, is in compliance with
all applicable provisions of Law, except to the extent permitted by the
Bankruptcy Code or where the failure to comply would not reasonably be expected
to have a Material Adverse Effect.  As of the date hereof, each of the Companies
has made available (including by filing publicly by EDGAR with the SEC) to the
Investor a complete and correct copy of the certificates of incorporation and
the bylaws of the Companies, each as amended to date and each of which as made
available is in full force and effect.

 
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Section 3.10.  Corporate Power, Authorization, Enforceable Obligations. Subject
to the entry of the Confirmation Order and except as contemplated by and
provided for under the Bankruptcy Code, the execution, delivery and performance
by each Company of the Transaction Documents to which it is a party: (a) are
within such Person’s power; (b) have been duly authorized by all necessary
corporate action; (c) do not contravene any provision of such Person’s
certificate of incorporation or bylaws; (d) do not violate any Law; (e) do not
conflict with or result in the breach or termination of, constitute a default
under or accelerate or permit the acceleration of any performance required by,
or require any payment to be made under, any Material Contract; (f) do not
result in the creation or imposition of any Lien upon any of the property of
such Person other than those in favor, or for the benefit, of the Investor, its
successors and assigns or another Successful Investor; (g) do not give rise to
any preemptive rights, rights of first refusal or other similar rights on behalf
of any Person under any applicable Law or any provision of any certificate of
incorporation or bylaws or any agreement or instrument applicable to any of the
Companies; and (h) do not require an Approval of any Governmental Entity or any
other Person, except those referred to on Schedule ‎3.10 and except, in the case
of each of clauses ‎(d) through ‎(h), as would not reasonably be expected to
have a Material Adverse Effect.  Each of the Transaction Documents to which any
of the Companies is a party shall be duly executed and delivered by such company
and each such Transaction Document shall, when so executed, constitute a legal,
valid and binding obligation of such company enforceable against it in
accordance with its terms.
 
Section 3.11.  Financial Statements and Reports. (a) The audited consolidated
balance sheets at March 31, 2009, March 31, 2008 and March 31, 2007 of the
Companies and their Subsidiaries and the related consolidated statements of
operations, stockholders equity and other comprehensive income (loss) and for
the fiscal year then ended, reported on by KPMG LLP (the “Financial Statements”)
have been delivered (including by filing publicly by EDGAR with the SEC) on or
prior to the date hereof, have been prepared in accordance with GAAP
consistently applied throughout the periods covered (except as disclosed therein
and except, with respect to unaudited Financial Statements, for the absence of
footnotes and normal year-end audit adjustments) and present fairly in all
material respects the consolidated financial position of the Companies and their
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.

 
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(b)        The Company (or, where applicable, Frontier Airlines) has made
available (including by filing publicly by EDGAR with the SEC) to the Investor a
true and complete copy of (i) the Annual Report on Form 10-K of the Company (or,
where applicable, Frontier Airlines) for each of the fiscal years ended March
31, 2009, 2008 and 2007; (ii) the Quarterly Report on Form 10-Q of the Company
(or, where applicable, Frontier Airlines) for each of the periods ended June 30,
2008 and 2007, September 30, 2008 and 2007 and December 31, 2008 and 2007; and
(iii) each registration statement, report on Form 8-K, proxy statement,
information statement or other report or statement required to be filed by the
Company (or, where applicable, Frontier Airlines) with the SEC since March 31,
2006 in each case, in the form (including exhibits and any amendments thereto)
filed with the SEC (collectively, the “SEC Reports”).  As of their respective
dates, the SEC Reports (i) were timely filed with the SEC; (ii) complied, in all
material respects, with the applicable requirements of the Exchange Act and the
Securities Act; and (iii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.  The SEC Reports included or will include
all certificates required to be included therein pursuant to Sections 302 and
906 of the Sarbanes-Oxley Act of 2002, as amended (the “SOX Act”), and the
internal control report and attestation of the Company’s outside auditors
required by Section 404 of the SOX Act. As of the date of this Agreement, other
than the SEC Reports, none of the Companies has filed or been required to file
any other reports or statements with the SEC since March 31, 2006.
 
Section 3.12.  Absence of Certain Changes or Events.  As of the date of this
Agreement, since March 31, 2009, except for the transactions contemplated by the
Transaction Documents or as otherwise disclosed in the SEC Reports or this
Agreement, the Companies, taken as a whole, have in all material respects
conducted their respective businesses in the ordinary course of business.
 
Section 3.13.  Ownership of Property; Real Estate; Liens.  (a) Each Company
warrants that it has good, marketable, legal and valid title to, or legal and
valid leasehold interests in, all of its personal property that is material to
the conduct of its business.  Except as would not reasonably be expected to have
a Material Adverse Effect, no portion of any such personal property, nor any
leased Real Estate has suffered any damage by fire or other casualty loss which
has not heretofore been substantially repaired and restored to its original
condition (ordinary wear and tear excepted).  Except as would not reasonably be
expected to have a Material Adverse Effect, none of the material properties and
assets of any of the Companies is subject to any Liens other than the Liens
contemplated by the Transaction Documents.
 
(b)        No Company owns any Real Estate.  As of the date of this Agreement,
the leases and other agreements listed in Schedule 3.13 constitute all of the
Material Real Estate Contracts.  Each Company has valid and enforceable
leasehold interests in all of the real estate leased pursuant to the Material
Real Estate Contracts, excluding any leased Real Estate that is occupied on a
month-to-month or “at-will” basis or which has expired by its terms after the
date hereof.  True, correct and complete copies of all Material Real Estate
Contracts have been delivered or made available to the Investor.  No Company has
received any notice of any, nor to the Knowledge of any of the Companies, is
there any pending, threatened or contemplated, condemnation or eminent domain
proceeding affecting any leased Real Estate or any part thereof or denial of
access to any such leased real property from any current point of public access,
or of any sale or other disposition of any such leased Real Estate or any part
thereof in lieu of condemnation.

 
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Section 3.14.  Labor Matters.  (a) Except as set forth on Schedule ‎3.14(a),
none of the Companies is a party to or bound by any labor agreement or
collective bargaining agreement respecting the employees in or relating to its
business.  Except as set forth on Schedule ‎3.14(a), none of the Companies has
received any written notification of any efforts to organize employees in
respect of any labor or union organization in or relating to its
business.  Except as set forth in Schedule ‎3.14(a), there is no unfair labor
practice or similar charge or complaint against any of the Companies relating to
its business pending, or to the Knowledge of any of the Companies,
threatened.  Each of the Companies is in compliance in all respects with all
applicable Laws respecting employment practices, term and conditions of
employment, collective bargaining agreements and wages and hours and is not
engaged in any unfair labor practice, except where non-compliance would not
reasonably be expected to result in a Material Adverse Effect.
 
(b)        Except as set forth in Schedule ‎3.14(b), neither the execution and
delivery of the Transaction Documents nor the consummation of the transactions
contemplated thereby will result in the breach of, constitute a default or a
change in control under, or otherwise provide any Person with a right to
terminate, rescind, amend, renegotiate or be released from any labor agreement
or collective bargaining agreement, or any provisions thereof, to which any of
the Companies is a party.
 
(c)        There is no strike, work stoppage, lockout or material labor dispute,
or to the Knowledge of any of the Companies, threat thereof by or with respect
to any employee of the Companies, except those that would not reasonably be
expected to have a Material Adverse Effect.
 
Section 3.15.  Ventures, Subsidiaries and Affiliates; Outstanding Equity
Securities and Indebtedness.  Except as set forth in Schedule ‎3.15, none of the
Companies has any Subsidiaries, is engaged in any joint venture or partnership
with any other Person, or is an Affiliate of any other Person. All of the issued
and outstanding Common Stock of each of the Companies (other than the Company)
is owned by each of the Stockholders, fully paid and non-assessable and in the
amounts set forth in Schedule ‎3.15.  All outstanding indebtedness of each
Company is listed on Schedule ‎3.15.  Other than as set forth on Schedule ‎3.15,
as of the date hereof, none of the Companies is obligated, pursuant to any
agreement or instrument applicable to such Company, to purchase any Equity
Securities of, or make any other equity investment in, any Person.
 
Section 3.16.  Taxes.
 
(a)        Except as disclosed in Schedule 3.16(a), the Companies have duly and
timely filed with the appropriate taxing authorities all income Tax Returns and
all other material Tax Returns that were required to be filed by them.  All such
Tax Returns were true, correct and complete in all material respects and have
been completed in accordance with applicable Law.  Except as disclosed in
Schedule 3.16(a), the Companies have timely paid all income Taxes and all other
material Taxes required to be paid by them (whether or not shown on any Tax
Return), other than in those instances in which such Taxes are being contested
in good faith by appropriate proceedings diligently conducted and for which
adequate reserves have been provided in accordance with GAAP in respect of all
such Taxes in the most recent Financial Statements.  The reserves for Taxes
provided in the Books and Records of the Companies have been determined in
accordance with GAAP and will be sufficient for all Taxes of the Companies with
respect to any period for which Tax Returns have not yet been filed or for Taxes
not yet due and owing for any Tax period or portion thereof through and
including the Closing Date.  Except as disclosed in Schedule 3.16(a), there is
no material Tax liability proposed in writing by any taxing authority for which
there is not an adequate reserve in accordance with GAAP in the most recent
Financial Statements.

 
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(b)        Except as disclosed in Schedule 3.16(b) hereto and other than in
connection with any leases, no audits or investigations relating to any Taxes
for which any of the Companies may be liable are pending or threatened in
writing by any taxing authority.  Except as disclosed in Schedule 3.16(b)
hereto, there are no agreements or applications by any of the Companies for the
extension of the time for filing any federal income Tax Return or other material
Tax Return or paying any federal income Tax or any other material Tax nor have
there been any extensions or waivers of any statutes of limitation for the
assessment of any federal income Taxes or other material Taxes.
 
(c)        Except as disclosed in Schedule 3.16(c), to the Knowledge of the
Companies after due inquiry, none of the Companies (i) has an agreement or
arrangement with any person or entity pursuant to which any of the Companies
would have a material obligation with respect to Taxes of another person or
entity following the Closing, (ii) has any material liability for the Taxes of
any third party under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) as a transferee or successor, by
contract or otherwise (other than entities for which the Company is or was the
common parent), (iii) has been a member of an affiliated group of corporations
within the meaning of Section 1504 of the IRC (other than a group the common
parent of which is the Company), and (iv) has filed or been included in a
combined, consolidated or unitary income Tax Return (except for the group of
which the Company is the parent).
 
(d)        The Companies have withheld and timely paid all Taxes required to
have been withheld and paid in connection with any amounts paid or owing to, or
any options issued to, any employee, independent contractor, creditor,
stockholder, or other third party.
 
(e)        No jurisdiction in which any of the Companies does not file a Tax
Return (i) has asserted in writing that such entity is or may be subject to Tax
in that jurisdiction (including any liability for any Taxes on a “nexus” basis)
or (ii) has sent notices or written communications of any kind requesting
information relating to such entity’s nexus with such jurisdiction.
 
(f)        None of Companies has agreed, or will be required, to make any
adjustment for any period after the date of this Agreement pursuant to Section
481(a) of the IRC by reason of any change in any accounting method made prior to
the date hereof.  There is no application pending with any Governmental Entity
requesting permission for any such change in any accounting method of any of the
Companies, and the Internal Revenue Service has not issued in writing any
pending proposal regarding any such adjustment or change in accounting method.
 
(g)        Except as disclosed in Schedule 3.16(g), none of the Companies owns a
single member limited liability company which is treated as a disregarded
entity, is a stockholder of a “controlled foreign corporation” as defined in
Section 957 of the IRC, or is a stockholder of a “passive foreign investment
company” as defined in Section 1296 of the IRC.

 
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(h)        None of the Companies has invested in any entity or entered into any
arrangement that is a “tax shelter” within the meaning of Section 6662(d)(2)(C)
of the IRC.  None of the Companies has been a participant in or material advisor
to any transaction that is a “listed transaction” as defined by Treasury
Regulations Section 1.6011-4.
 
(i)        Except as disclosed in Schedule 3.16(i) none of the Companies will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any period (or any portion thereof) ending after the
Closing Date as a result of any deferred intercompany gain or any excess loss
account described in Treasury Regulations under Section 1502 of the IRC (or any
corresponding provision of state, local or foreign Tax law) or closing agreement
as described in Section 7121 of the IRC (or any corresponding or similar
provision of state, local or foreign Tax law) executed on or prior to the
Closing Date.  None of the Companies will be required to include in taxable
income for any period (or any portion thereof) ending after the Closing Date any
material amount of income as a result of any installment sale or other open
transaction disposition made on or prior to the Closing Date or prepaid amount
received on or prior to the Closing Date.
 
(j)         None of the assets of any of the Companies directly or indirectly
secures any debt the interest on which is tax-exempt under Section 103(a) of the
IRC.
 
(k)        Except as disclosed in Schedule 3.16(k) none of the Companies (i) is
a party to a lease that is treated as a “Section 467 rental agreement” within
the meaning of Section 467(d) of the IRC, (ii) has ever participated in an
international boycott as defined in Section 999 of the IRC, or (iii) is a party
to a gain recognition agreement under Section 367 of the IRC.
 
(l)         None of the Companies has distributed to its shareholders or
security holders stock or securities of a controlled corporation, nor has stock
or securities of any of the Companies been distributed, in a transaction to
which Section 355 of the IRC applies in the five (5) years prior to the date of
this Agreement.
 
(m)       The Companies have made available to the Investor complete copies of
(A) all material Tax Returns of the Companies relating to Taxable periods ending
on or after March 31, 2004 and (B) any audit reports, examination reports and
statements of deficiencies issued within the last three years relating to any
material amount of Tax due from or with respect to the Companies, its income,
assets or operations.

 
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Section 3.17.  ERISA. (a) Schedule ‎3.17(a) lists each Employee Plan.  “Employee
Plan” means any employee benefit plan (within the meaning of Section 3(3) of
ERISA, whether or not subject to ERISA) and any other employment, bonus,
incentive, deferred compensation, stock option or other equity based, severance,
termination, change in control, fringe benefit or other compensatory
arrangement, agreement, plan, program or policy maintained, sponsored or
contributed to by any of the Companies or by any trade or business, whether or
not incorporated, that together with any of the Companies would be deemed a
“single employer” under Section 414 of the IRC (an “ERISA Affiliate”) or to
which any such Person is or has been obligated to contribute or, with respect to
which any such Person has, or may have, any liability or obligation.  Except as
identified on Schedule ‎3.17(a) hereto, none of the Companies is or, within the
preceding six (6) years, has been obligated to contribute to or has or had any
liability, direct or indirect, under or with respect to, (1) any “multiemployer
plan” as defined in Section 3(37) of ERISA (all such identified plans being the
“Multiemployer Plans”), or (2) any single employer defined benefit pension plan
(within the meaning of Section 3(2) of ERISA) that is or was subject to Title IV
of ERISA.  Except as set forth on Schedule ‎3.17(a), none of the Companies has
an express or implied commitment (1) to create or incur liability with respect
to or cause to exist any new employee benefit plan, program, agreement or
arrangement other than the Employee Plans or (2) except for amendments necessary
to comply with applicable Law, to modify, change or terminate any Employee Plan.
The Company has furnished to Investor true and complete copies of the governing
documents for each Employee Plan and a copy of the current employee handbook(s)
provided to employees of the Company and its Subsidiaries and, where applicable
with respect to an Employee Plan, true and complete copies of the most recent
summary plan description(s), the two most recent Form 5500 filings, the two most
recent actuarial valuation reports, the two most recent Forms PBGC-1, and any
material filings, correspondence or other communication with, to or from any
Person, including, without limitation, the plan actuaries or other consultants,
the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the
Department of Labor. For purposes of the preceding sentence, any filing,
correspondence or communication relating to a plan’s funded status shall be
deemed to be material.
 
(b)        Except as set forth in Schedule ‎3.17(b), neither the execution and
delivery of the Transaction Documents nor the consummation of the transactions
contemplated thereby will accelerate the time of payment, vesting or funding of,
or increase or modify the amount or terms of, any compensation or benefits that
are or may become payable from or by any of the Companies to or in respect of
any current or former executive officer or other key employee of any such
Person.
 
(c)        All employer and employee contributions, and material premiums and
expenses due and payable to or in respect of any Employee Plan or required by
Law or any Employee Plan or labor agreement or arrangement have been timely
paid, or, if not yet due, have been fully and adequately accrued as a liability
on the Company’s most recent financial statements included in the SEC Reports in
accordance with applicable Law.

 
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(d)        Except as set forth on Schedule ‎3.17(d), (i) no trade or business,
whether or not incorporated, is or has been treated as a single employer
together with the Companies for any purpose under ERISA or Section 414 of the
IRC other than the Company’s Subsidiaries, (ii) no liability under Sections 406,
409, 502(i), 502(l) or Part 6 of Title I, of ERISA or the penalty or excise tax
provisions of the IRC relating to employee benefit plans or employee
compensation has been incurred (directly or indirectly, including as a result of
any indemnification obligation or agreement) by any of the Companies and is
still outstanding, and no event, transaction or condition has occurred or exists
which could reasonably be expected to result in any such liability, and (iii) no
reportable event, within the meaning of Section 4043 of ERISA and the
regulations of the PBGC promulgated thereunder (other than a reportable event as
to which notice is waived) has occurred, or could be reasonably expected to
occur, in connection with the consummation of the transactions contemplated by
the Transaction Documents or otherwise, with respect to any Employee Plan.  As
of the Closing, the Company’s employee stock ownership plan will not hold any
Common Shares or other equity securities of the Company.  No claims (other than
routine claims for benefits) have been made or, to the Knowledge of the Company,
threatened against the Company or any of its Affiliates or any other persons in
connection with the acquisition and/or holding of such Common Shares or other
equity securities under the employee stock ownership plan.
 
(e)        Each Employee Plan has been operated and administered in all material
respects in compliance both with its terms and with all applicable Laws.  Each
Employee Plan that is intended to qualify under Section 401(a) of the IRC has
received a favorable determination from the Internal Revenue Service as to its
qualification or an initial application for a determination letter is pending
with the Internal Revenue Service and, to the Knowledge of the Company or any
Subsidiary, no event or condition has occurred or exists since the date of such
letter that could reasonably be expected to have an adverse effect on the
qualified status of such Employee Plan.  Each Employee Plan may be unilaterally
amended or terminated by the sponsoring employer without penalty under the terms
of such Employee Plan or under ERISA, subject to approval by the Bankruptcy
Court during the pendency of the Cases and the terms of Frontier Airlines’
collective bargaining agreements referred to in Section 9.01 of this Agreement.
 
(f)        No liability under Title IV of ERISA has been incurred with respect
to any Employee Plan that has not been satisfied in full, and, with respect to
any Multiemployer Plan, no condition exists that presents a material risk to any
of the Companies or any ERISA Affiliate of incurring a liability under such
Title.  Except for Multiemployer Plans, no Employee Plan is subject to Section
412, 430, 431 or 432 of the IRC or Title IV or Section 302, 303, 304 or 305 of
ERISA.  No Multiemployer Plan has incurred an accumulated funding deficiency,
whether or not waived. None of the assets of any of the Companies or any ERISA
Affiliate are subject to any lien arising under ERISA or Subchapter D of Chapter
1 of the IRC, and no condition exists that presents a material risk of any such
lien arising.
 
(g)        With respect to any Multiemployer Plan, (i) as of the date of this
Agreement, neither any of the Companies nor any ERISA Affiliate has made or
suffered a “complete withdrawal” or a “partial withdrawal” (as respectively
defined in Sections 4203 and 4205 of ERISA), (ii) as of the date of this
Agreement, no event has occurred that presents a material risk of a complete or
partial withdrawal other than in connection with the commencement of the Cases,
(iii) neither any of the Companies nor any ERISA Affiliate has any contingent
liability under Section 4204 of ERISA, and, to the Knowledge of the Company, no
circumstances exist that present a material risk that any such Multiemployer
Plan will go into reorganization, and (iv) as of the date of this Agreement and
as of the Closing Date, neither any of the Companies nor any ERISA Affiliate
would or may be reasonably expected to incur withdrawal liability in excess of
$1,000,000 in the aggregate if a complete withdrawal by the Companies and the
ERISA Affiliates occurred under each Multiemployer Plan as of such date, and (v)
as of the Closing Date, neither any of the Companies nor any ERISA Affiliates
will have incurred withdrawal liability that, together with withdrawal liability
incurred with respect to all other Multiemployer Plans, exceeds $1,000,000 in
the aggregate.  No Multiemployer Plan is, or is reasonably expected to be, in
“endangered status” or “critical status” within the meaning of Section 432 of
the IRC.
 
 
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(h)        No payment or benefit paid or provided, or to be paid or provided, to
current or former employees, directors or other service providers of or to any
of the Companies (including, without limitation, pursuant to, or in connection
with, any of the Transaction Documents or any of the transactions contemplated
thereby) will fail to be deductible for federal income tax by reason of Section
280G of the IRC.
 
(i)        Except as disclosed on Schedule ‎3.17(i), no Employee Plan provides
benefits, including without limitation death or medical benefits (whether or not
insured), with respect to current or former employees, directors or other
service providers after retirement or other termination of service (other than
(i) coverage mandated by applicable Law, (ii) death benefits or retirement
benefits under any funded “employee pension benefit plan” (as defined in Section
3(2) of ERISA) that is intended to be a qualified plan within the meaning of
Section 401(a) of the Code, or (iii) deferred compensation benefits accrued as
liabilities in the Company’s most recent financial statements).  Except as
disclosed on Schedule ‎3.17(i), no Employee Plan is funded through a “welfare
benefit fund” as defined in Section 419 of the IRC.  Each Employee Plan that is
intended to satisfy the requirements of Section 501(c)(9) of the Code satisfies
such requirements in all material respects.
 
(j)        There are no material claims pending, or, to the Knowledge of any of
the Companies, threatened or anticipated (other than routine claims for
benefits) against or involving any Employee Plan, the assets of any Employee
Plan or against any of the Companies or any ERISA Affiliate with respect to any
Employee Plan.
 
Section 3.18.  No Litigation.  As of the date hereof, other than the Cases and
proofs of claim filed in the Cases, no action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the Knowledge of any of the
Companies, threatened against any of the Companies, before any Governmental
Entity or before any arbitrator or panel of arbitrators (collectively,
“Litigation”) that, individually or in the aggregate, (a) challenges any of the
Companies’ right or power to enter into or perform any of its obligations under
the Transaction Documents to which it is a party, or the validity or
enforceability of any Transaction Document or any action taken thereunder or (b)
is reasonably likely to have a Material Adverse Effect.
 
Section 3.19.  Intellectual Property.  (a) Except as set forth in Schedule
‎3.19, each Company owns or has rights to use all Intellectual Property
necessary to continue to conduct its business as now conducted by it or
presently proposed to be conducted by it. To the Knowledge of any of the
Companies, each Company conducts its business and affairs without infringement
of or interference with any Intellectual Property of any other Person in any
material respect. Except as set forth in Schedule ‎3.19, no Company is aware of
any infringement claim by any other Person with respect to any Intellectual
Property.

 
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(b)        Except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect:
 
(i)        With respect to each material agreement, permit, consent, order and
franchise relating to the license, development, use or disclosure of any
Intellectual Property to which any of the Companies, now or hereafter, is a
party or a beneficiary (collectively, the “IP Agreements”): (A) such IP
Agreement is valid and binding and in full force and effect; (B) such IP
Agreement will not cease to be valid and binding and in full force and effect on
terms identical to those currently in effect as a result of the rights and
interest granted herein, nor will the grant of such rights and interest
constitute a breach or default under such IP Agreement or otherwise give any
party thereto a right to terminate such IP Agreement; (C) none of the Companies
has received any notice of termination, cancellation or received any notice of a
breach or default under such IP Agreement; (D) none of the Companies has granted
to any other third party any rights, adverse or otherwise, under such IP
Agreement; and (E) none of the Companies and, to the Knowledge of any of the
Companies, no other party to such IP Agreement, is in breach or default thereof,
and, to the Knowledge of any of the Companies, no event has occurred that, with
notice or lapse of time or both, would constitute such a breach or default or
permit termination, modification or acceleration under such IP Agreement.
 
(ii)        The Companies have taken reasonable measures to protect the
confidentiality of all trade secrets and confidential information and know-how,
including confidential processes, schematics, business methods, formulae,
drawings, prototypes, models, designs, customer lists and supplier lists
(collectively, “Trade Secrets”), that are owned, used or held by the Companies
and, to the Knowledge of any of the Companies, such Trade Secrets have not been
used, disclosed to or discovered by any Person except pursuant to valid and
appropriate non-disclosure and/or license agreements which have not been
breached.
 
(iii)       The IT Assets of the Companies operate and perform in accordance
with their documentation and functional specifications and otherwise as required
by the Companies for the operation of their respective businesses.  To the
Knowledge of any of the Companies, no Person has gained unauthorized access to
such IT Assets.  The Companies have implemented and maintained for the three (3)
year period immediately preceding the date of this Agreement reasonable and
sufficient backup and disaster recovery technology consistent with industry
practices.

 
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Section 3.20.  Environmental Matters.  (a) Except as set forth in Schedule ‎3.20
or for any matter for which notice has been given under ‎Section 9.04, and
except for any matter that would not reasonably be expected to result in a
Material Adverse Effect: (i) no Company has caused or suffered to occur any
material Release of Hazardous Materials on, at, in, under, above, to, from or
about any of its material leased real estate (the “Real Estate”); (ii) the
Companies are and have been in material compliance with all Environmental Laws;
(iii) the Companies have obtained, and are in material compliance with, all
Environmental Permits required by Environmental Laws for the operations of their
respective businesses as presently conducted, which compliance includes
obtaining, maintaining and complying with required Environmental Permits and all
such Environmental Permits are in full force and effect; (iv) there are no
existing circumstances or conditions, including any Releases of Hazardous
Materials, which is reasonably likely to result in a material Environmental
Liability; (v) there is no unstayed Litigation arising under or related to any
Environmental Laws, Environmental Permits or Hazardous Material that seeks
damages, penalties, fines, costs or expenses or injunctive relief against, or
that alleges criminal misconduct by, any of the Companies; (vi) no notice has
been received by any of the Companies alleging that any of the Companies has any
material Environmental Liability; and (vii) the Companies have provided to the
Investor copies of all material environmental reports, written reviews and
audits in their possession as of the date hereof relating to the Real Estate and
material written information pertaining to any Environmental Liabilities of any
of the Companies.
 
(b)        Each Company hereby acknowledges and agrees that the Investor (i) is
not now, and has not ever been, in control of any of the Real Estate or any of
the Companies’ affairs so as to subject the Investor to any liability under
Environmental Laws, including CERCLA, and (ii) does not have the capacity
through the provisions of the Transaction Documents or otherwise to influence
any of the Companies’ conduct with respect to the ownership, operation or
management of any of its Real Estate or compliance with Environmental Laws or
Environmental Permits.
 
(c)        None of the items set forth on Schedule ‎3.20 either individually or
in the aggregate would be reasonably likely to have a Material Adverse Effect.
 
Section 3.21.  Insurance.  Schedule ‎3.21 sets forth a list as of the date of
this Agreement that is correct and complete in all material respects of the name
of insurer, coverage, policy number and term of each material insurance policy
(collectively, the “Policies”) to which any of the Companies is a party or by
which any of their assets or any of their employees, officers or directors (in
such capacity) are covered by property, fire and casualty, professional
liability, public and product liability, workers’ compensation, extended
coverage, business interruption, directors’ and officers’ liability insurance
and other forms of insurance provided to any of the Companies in connection with
their respective businesses.  All Postpetition premiums required to be paid with
respect to the Policies covering all periods up to and including the date hereof
have been paid.  Except as set forth on Schedule ‎3.21, all such Policies are in
full force and effect and will remain in full force and effect after the
Closing, in accordance with their respective terms.  Except as set forth on
Schedule ‎3.21, none of the Companies has received any notice of default,
cancellation or termination with respect to any provision of any such Policies,
or any notice that the Insurer is unwilling to renew any such Policy following
the currently scheduled expiration of such Policy or intends to materially
modify any term of any such renewed Policy as compared to the existing
Policy.  With respect to its directors’ and officers’ liability insurance
policies, none of the Companies has failed to give any notice or present any
claim thereunder in due and timely fashion or as required by any such Policies
so as to jeopardize full recovery under such Policies.  Except as set forth on
Schedule ‎3.21, none of the Companies have any claims pending under the Policies
in a stated amount in excess of $5,000,000.

 
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Section 3.22.  Contracts.  (a) Except as set forth on Schedule ‎3.22(a) or
3.17(a), as of the date hereof, none of the Companies is a party or subject to
any of the following:
 
(i)         any Contract, understanding or obligation with respect to severance,
termination, retention or change in control, to pay liabilities or fringe
benefits, with any present or former directors of the Board, officers or
employees of any of the Companies, or any such agreement, understanding or
obligation, the assumption of which has been approved by the Bankruptcy Court or
that is a Postpetition Contract;
 
(ii)        any Contract providing for bonuses, pensions, options, deferred
compensation, retirement payments, royalty payments, profit sharing or similar
payment or benefit with respect to any present or former Representative of any
of the Companies, the assumption of which has been approved by the Bankruptcy
Court or that is a Postpetition Contract;
 
(iii)       any Contract under which any of the Companies has created, incurred,
assumed or guaranteed indebtedness for borrowed money or that is an outstanding
guarantee, letter of comfort, letter of assurance, keepwell, letter of credit,
performance bond, surety bond, indemnity agreement or other form of assurance or
guarantee, the assumption of which has been approved by the Bankruptcy Court or
that is a Postpetition Contract;
 
(iv)       any Contract under which any of the Companies is a lessee or lessor
of the Companies’ aircraft;
 
(v)        any Contracts under which any of the Companies has committed to
purchasing or leasing aircraft or aircraft engines; and
 
(vi)        any Contract required pursuant to Item 601 of Regulation S K under
the Securities Act to be filed as an exhibit to any SEC Report, which has not
been so filed (each of the agreements described in clauses ‎(i) - ‎(vi), a
“Material Contract”).
 
(b)        None of the Companies is in material breach or material violation of,
or in default under or with respect to, any Material Contract.
 
(c)        As of the date of this Agreement, none of the Companies is a party to
or is bound by any non-competition Contract or other Contract the assumption of
which has been approved by the Bankruptcy Court or that is a Postpetition
Contract that (i) purports to limit in any material respect either the type of
business in which the Companies may engage or the manner or locations in which
any of them may so engage in any business, or (ii) other than in the ordinary
course of business, could require the disposition of any material assets or line
of business of any of the Companies.

 
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(d)        A true and complete copy of each Material Contract to which any of
the Companies is a party has previously been delivered or made available to the
Investor (subject to applicable confidentiality restrictions) and each such
contract is a valid and binding agreement of such Company, as the case may be,
and is in full force and effect, except to the extent any has previously expired
in accordance with its terms.
 
(e)        As of the date hereof, since the commencement of the Cases, none of
the Companies has rejected and failed to replace, on terms that are no less
favorable to such Company, any Contract that is necessary to conduct the
business of the Companies in substantially the same manner as presently
conducted and as proposed to be conducted.
 
Section 3.23.  Exemption from Registration.  The offering and issuance by the
Company of the Common Shares pursuant to the Plan shall be exempt from
registration pursuant to Section 1145 of the Bankruptcy Code (except with
respect to an entity that is an underwriter as defined in Section 1145(b) of the
Bankruptcy Code) and/or Section 4(2) of the Securities Act, as applicable.
 
ARTICLE 4
Representations And Warranties Of The Investor
 
Except as disclosed in the Investor Disclosure Schedules attached hereto as
Exhibit C, the Investor represents and warrants to, and agrees with, the Company
as follows:
 
Section 4.01.  Organization.  The Investor is (a) a corporation duly organized,
validly existing and in good standing under the Laws of Delaware and (b) has all
requisite power and authority and all requisite governmental licenses,
authorizations, consents and approvals to execute, deliver and perform its
obligations under the Transaction Documents.
 
Section 4.02.  Authorization of Agreements.  The execution, delivery and
performance by the Investor of its obligations under the Transaction Documents,
to the extent that such documents have been delivered as of such date, and the
consummation of the transactions contemplated by the Transaction Documents, are
within the Investor’s corporate powers and have been duly authorized by all
necessary corporate action and do not and will not contravene the terms of its
certificate of incorporation and bylaws.  Each Transaction Document when
delivered will constitute a legal, valid and binding obligation of the Investor,
enforceable against the Investor in accordance with its terms.
 
Section 4.03.  Consents; No Conflicts.  No Approval (other than approval by the
Bankruptcy Court) is necessary or required in connection with the execution,
delivery or performance by, or enforcement against, the Investor of this
Agreement or any other Transaction Document, or for the consummation of the
transactions contemplated hereby and thereby, except for such Approvals listed
on Schedule ‎4.03 hereto or that could not, individually or in the aggregate,
reasonably be expected to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement or materially impair the ability of
the Investor to consummate the Investment and the transactions contemplated
hereby, and all of which have been duly obtained, taken, given or made and are
in full force and effect, except as indicated on Schedule ‎4.03 hereto.  The
execution, delivery and performance by the Investor of the Transaction Documents
to which it is a party do not and will not require any consent or other action
by any Person under or constitute a default under any provision of any agreement
or other instruments binding upon it.
 

 
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Section 4.04.  Financial Advisors and Brokers.  No Person has acted directly or
indirectly as a broker, finder or financial advisor of the Investor in
connection with the Transaction Documents or the transactions contemplated
thereby, and no Person acting for or on behalf of the Investor is entitled to
receive any broker’s, finder’s or similar fee or commission in respect thereof
based in any way on any agreement, arrangement or understanding made by or on
behalf of the Investor.
 
Section 4.05.  Ownership of Equity Securities; Purpose of Investment.  The
Investor is acquiring the Common Shares under this Agreement solely for the
purpose of investment and not with a view to, or for sale in connection with,
any distribution thereof in violation of the Securities Act and applicable state
securities or “blue sky laws”.  The Investor is an “Accredited Investor” as such
term is defined in Regulation D of the Securities Act.  The Investor has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the Common
Shares, and the Investor is capable of bearing the economic risks of such
investment, including a complete loss of its investment in the Common
Shares.  The Investor has been given the opportunity to ask questions of and
receive answers from the Companies concerning the Companies, the Common Shares
and other related matters.  The Investor further represents and warrants to the
Company that it has been furnished with all information it deems necessary or
desirable to evaluate the merits and risks of the acquisition of the Common
Shares and that the Companies have made available to Investor or its agents all
documents and information relating to an investment in the Common Shares
requested by or on behalf of the Investor.  In evaluating the suitability of an
investment in the Common Shares and in making the Investment, the Investor has
not relied upon any representations or warranties of any Person by or on behalf
of any of the Companies other than those representations and warranties that are
expressly set forth in this Agreement or in the DIP Credit Agreement, whether
oral or written.
 
Section 4.06.  Citizenship.  The Investor is a “citizen of the United States,”
as the term is defined in Section 40102(a)(15) of Title 49 or successor statute.
 
Section 4.07.  Financing.  The Investor has sufficient cash, available lines of
credit or other sources of immediately available funds to enable it to make
payment of the Investment Price and any other amounts to be paid by it hereunder
to consummate the transactions contemplated by this Agreement at the Closing.

 
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ARTICLE 5
Pre-closing Covenants
 
Section 5.01.  Interim Operations.  The Company shall not take or permit any of
its Subsidiaries to take any action or refrain from taking any action that would
be reasonably expected to result in the Company’s failure to comply with any of
the covenants in Article V (Affirmative Covenants) or Article VI (Negative
Covenants) of the DIP Credit Agreement, except for taking any action or
refraining to take any action as expressly required pursuant to the terms of
this Agreement (which the parties agree shall not constitute a failure to comply
with any of the covenants of the DIP Credit Agreement).
 
Section 5.02.  Bankruptcy Filings, Covenants and Agreements.  (a) Until August
17, 2009 (the “Auction Termination Date”), the Companies shall be permitted to
solicit inquiries, proposals, offers and bids from, and negotiate with, any
Person regarding a Qualified Proposal (as defined in the Investment Agreement
and Bidding Procedures Order) solely in accordance with the Investment Agreement
and Bidding Procedures Order; provided, however, that none of the Companies may
enter into, or seek Bankruptcy Court approval of, any agreement with respect to
any such Qualified Proposal (other than a confidentiality agreement) unless it
has been approved as the Successful Proposal pursuant to the Investment
Agreement and Bidding Procedures Order.  Notwithstanding anything herein to the
contrary, in connection with any proposed acquisition of or investment in any of
the Companies, none of the Companies shall agree to, or seek approval from the
Bankruptcy Court for, any break-up fee, work fee, expense reimbursement or any
other benefit or protection for any Person other than (i) amounts payable to the
Investor hereunder or (ii) amounts payable to any Person that is approved by the
Bankruptcy Court as the Successful Investor.
 
(b)        If this Agreement is the Successful Proposal, each of the Companies
shall use all commercially reasonable efforts to (i) obtain the approvals of the
Plan by all classes required to confirm the Plan, and (ii) cause the
Confirmation Order to be entered and the Effective Date to occur no later than
December 1, 2009.  Upon request of the Company, the Investor agrees (x) to
assist and cooperate with the Companies in their negotiations with, and
solicitation of approvals from, holders of “claims” and “interests” (as such
terms are defined in the Bankruptcy Code) for the purpose of obtaining the
approvals of any classes required to confirm the Plan and/or (y) to assist the
Companies in obtaining entry of the Confirmation Order.
 
(c)        The Company and the Investor shall cooperate with each other and
(subject to the terms of the Investment Agreement and Bidding Procedures Order
and the process contemplated thereby until the Auction Termination Date) shall
use (and shall cause their respective Subsidiaries to use) all commercially
reasonable efforts to take or cause to be taken all actions, and do or cause to
be done all things, necessary, proper or advisable on its part under this
Agreement and applicable Laws to consummate the Investment and the other
transactions contemplated by this Agreement, including preparing and filing all
documentation to effect all necessary notices, reports and other filings and to
obtain all consents, registrations, approvals, permits and authorizations
necessary to be obtained from any third party and/or any Governmental Entity in
order to consummate the Investment or any of the other transactions contemplated
by this Agreement in accordance with the timelines provided in this
Agreement.  Subject to applicable Laws, to the extent reasonably practicable,
the parties shall provide copies in advance, and consult with each other on, all
filings made with, or written materials submitted to, any Governmental Entity in
connection with the Investment and the Transaction Documents.  To the extent
permitted by Law and reasonably practicable, the parties shall make good faith
efforts to coordinate, and to the extent appropriate, jointly prepare written
communications submitted to a Governmental Entity regarding material matters
with respect to the transactions contemplated by this Agreement.  In exercising
the foregoing rights, each of the Company and the Investor shall act reasonably
and as promptly as practicable.  In furtherance and not in limitation of the
foregoing, each of the Investor and the Companies shall make any required filing
pursuant to the HSR Act with respect to the transactions contemplated hereby as
promptly as practicable and in any event within fifteen (15) Business Days
following the Auction Termination Date if this Agreement is the Successful
Proposal and to supply as promptly as reasonably practicable any additional
information and documentary material that may be requested pursuant to the HSR
Act and to take all other actions necessary to cause the expiration or
termination of the applicable waiting periods under the HSR Act as soon as
practicable thereafter.  Each of the Investor and the Companies will furnish to
the other parties such necessary information and reasonable assistance as such
other parties may reasonably request in connection with the foregoing.

 
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(d)        Each of the Investor and the Companies further covenant and agree
(subject to the terms of the Investment Agreement and Bidding Procedures Order
and the process contemplated thereby until the Auction Termination Date), with
respect to any threatened or pending preliminary or permanent injunction or
other order, decree or ruling or statute, rule, regulation or executive order
that would adversely affect the ability of the parties hereto to consummate the
transactions contemplated hereby, to respectively use all commercially
reasonable efforts to prevent the entry, enactment or promulgation thereof, as
the case may be.
 
(e)        Nothing in this Agreement shall obligate the Investor or any of its
Affiliates to take any action, or agree, (i) to limit in any manner whatsoever
or not to exercise any rights of ownership of any securities, or to divest,
dispose of or hold separate any securities or all or a portion of their
respective businesses, assets or properties or of the business, asset or
properties of any of the Companies, or (ii) to limit in any manner whatsoever
the abilities of such entities (A) to conduct their respective businesses or own
such assets or properties or to conduct the business or own the properties or
assets of any of the Companies or (B) to control their respective businesses or
operations or the business or operations of any of the Companies.
 
Section 5.03.  No Solicitation of Alternative Transactions.  (a) If this
Agreement is the Successful Proposal, from and after the Auction Termination
Date, each of the Companies agrees that neither it nor any of its officers or
directors of the Board shall, and that it shall not authorize or permit its
Representatives to, directly or indirectly, initiate, respond to, solicit or
knowingly encourage or facilitate any inquiries or the making of any proposal or
offer with respect to an Alternative Transaction, enter into negotiations in
respect of, take any actions in furtherance of or enter into an Alternative
Transaction.  If this Agreement is the Successful Proposal, each of the
Companies further agrees that it shall not, and that it shall cause its
Representatives not to, directly or indirectly, provide any confidential
information or data to, or engage in any negotiations with, any Person relating
to an Alternative Transaction, or otherwise knowingly encourage or facilitate
any effort or attempt by any Person to make or implement an Alternative
Transaction.
 
 
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(b)       Notwithstanding ‎Section 5.03(a), (i) if the Board determines in good
faith, after consultation with outside legal counsel that the failure to take
such action would be inconsistent with its fiduciary duties, each of the
Companies, directly or indirectly through advisors, agents or other
intermediaries, may, upon written notice given to, and received by, the Investor
(the “Notice”), engage in negotiations or discussions with any Person that has
made after the Auction Termination Date a bona fide, unsolicited written
proposal with respect to an Alternative Transaction that the Board reasonably
believes is likely to lead to a Superior Proposal, and furnish to such Person
and its representatives confidential information or data relating to the Company
or any of its Subsidiaries and (ii) the Company may take any other action that
the Bankruptcy Court or any other court of competent jurisdiction orders such
Person to take.  For purposes of this Agreement, “Superior Proposal” means any
bona fide, unsolicited written proposal with respect to an Alternative
Transaction on terms that the Board determines in good faith by a majority vote,
after considering the advice of its financial advisor and outside legal counsel
and taking into account the economic and other terms and conditions of such
proposal (including the conditions to closing), are more favorable and provide
greater value to the constituents than provided hereunder, which the Board
determines is reasonably likely to be consummated and for which financing, if a
cash transaction (whether in whole or in part), is then fully committed or
reasonably determined to be available by the Board.
 
(c)        Each of the Companies agrees that from and after the Auction
Termination Date, if this Agreement is the Successful Proposal, it will cease
and cause to be terminated any existing activities, discussions or negotiations
with any Person with respect to any Alternative Transaction, except as provided
in ‎Section 5.03(b).  Upon this Agreement becoming the Successful Proposal, the
Companies will promptly request that each Person that has heretofore executed a
confidentiality agreement in connection with the auction process described in
the Investment Agreement and Bidding Procedures Order destroy all confidential
information furnished prior thereto.  Each of the Companies agrees that it will
take the necessary steps to promptly inform its Representatives of the
obligations undertaken in this ‎Section 5.03‎(c).
 
(d)        The Company agrees that from and after the Auction Termination Date,
if this Agreement is the Successful Proposal, it will notify the Investor as
promptly as practicable (and, in any event, within twenty-four (24) hours) if
any inquiries, proposals or offers with respect to any Alternative Transaction
are received by, any such information is requested from, or any such discussions
or negotiations are sought to be initiated or continued with, it or any of its
Representatives, indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposal or offer.

 
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Section 5.04.  Accounting Policies.  No Company shall make any changes with
respect to accounting policies or procedures, except as required by changes in
GAAP or by applicable Law or except as such Company, after consultation with the
Investor and each party’s independent auditors, determines in good faith is
preferable.
 
Section 5.05.  Postpetition Transactions and Settlements.  Any Postpetition
transaction, settlement agreement, contract or financing (other than settlements
of prepetition claims that do not require monetary payments and de minimis
ordinary course contracts) and any assumption, rejection or renegotiation of a
pre-petition agreement (x) effectuated after the date hereof, (y) that is not
incorporated or reflected in the Business Plan and (z) that involves net present
value payments by the Companies in excess of $3,000,000 in the aggregate shall
be reasonably acceptable to the Investor; provided, however, that transactions
to replace one or more A-318 aircraft with either A-319 or A-320 aircraft shall
be deemed to be reasonably acceptable to the Investor so long as the terms
thereof do not change materially and adversely from the terms of such
transactions already consummated by the Company or as otherwise agreed by the
parties.
 
Section 5.06.  Taxes.  Except as required by Law, by any currently effective Tax
sharing agreement listed on Schedule 3.16(c) or pursuant to any lease agreement,
none of the Companies shall (i) make any material Tax election or change any
currently or previously effective material Tax election, (ii) take any material
position on any material Tax return filed on or after the date of this Agreement
or adopt or change any accounting method relating to material Taxes that is
inconsistent with positions taken or accounting methods used in preparing or
filing such Tax returns in prior periods, or (iii) except as to matters listed
on Schedule 5.06, enter into any material closing agreement relating to Taxes,
settle or consent to any claim or assessment relating to Taxes, waive the
statute of limitations for any such claim or assessment, or file any amended
material Tax Return.
 
Section 5.07.  Flight Operations.  The Companies shall conduct their operations
in the ordinary course of business in a manner consistent in all material
respects with the Business Plan, provided that the companies may add or delete
service both on an annual and seasonal basis.
 
Section 5.08.  Notice of Incidents and Accidents.  No Company shall fail to
notify the Investor in writing or via electronic mail of any (i) incidents or
accidents that are required to be reported under 49 CFR Part 830 occurring on or
after the date hereof involving any property owned or operated by any of the
Companies or (ii) any accidents occurring after the date hereof involving any
property owned and operated by the Companies, including facilities, hangars, and
other physical property, that resulted or could reasonably be expected to result
in damages or losses in excess of $1,000,000.
 
Section 5.09.  Aircraft Maintenance Programs.  Frontier Airlines and Lynx shall
use all commercially reasonable efforts to keep all owned and leased aircraft in
such condition as may be necessary to enable the FAA Certificate of
Airworthiness of such aircraft under the FAA to be maintained in good standing
at all times.
 
Section 5.10.  No Title IV Liability.  No Company or any ERISA Affiliate shall
incur any liability or obligation in respect of any plan subject to Title IV of
ERISA except for the Multiemployer Plan liabilities and obligations identified
and described on Schedule 5.10, none of which, individually or in the aggregate,
will or could be reasonably likely to result in a Material Adverse Effect.

 
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Section 5.11.  Claims.  On or before June 30, 2009, the Company shall provide
the Investor (and the Creditors’ Committee), (a) the current and projected
allowed claims estimate for each of the classes described in Section I of the
Term Sheet and (b) a list of all of the Company’s material and unexpired real
and personal property leases, executory contracts, secured financings and other
agreements, together with an estimate of known cure amounts, where relevant, and
any known and pending disputes related thereto, in each case broken down by the
applicable creditor where reasonably practicable.
 
Section 5.12.  Proceeds to General Unsecured Creditors.  Upon Closing and
pursuant to the Plan and Confirmation Order, the Companies shall set aside in a
segregated, interest bearing account, for the sole benefit of and exclusively
for distribution to, holders of allowed general unsecured claims, cash from the
Investment Price in the amount of Twenty Eight Million Seven Hundred Fifty
Thousand Dollars ($28,750,000).
 
Section 5.13.  Investor Voting Commitment.  The Investor agrees that it shall
vote in favor of and otherwise support the Plan contemplated by, and approved in
accordance with the terms of, this Agreement.
 
ARTICLE 6
Additional Covenants

Section 6.01.  Information Rights and Access.  (a) From and after the date
hereof, the Company shall (and shall cause each of its Subsidiaries,
Representatives and Affiliates to) afford to the Investor, its Affiliates and
their respective Representatives reasonable access, upon reasonable notice
during normal business hours and in such manner as will not unreasonably
interfere with the conduct of the Companies’ respective businesses, to their
respective facilities, properties, books, contracts, commitments, records
(including information regarding any pending or threatened Proceeding to which
any of the Companies is, or reasonably expects to be, a party), key personnel,
officers, independent accountants and legal counsel.  The Company shall use all
commercially reasonable efforts to cause its lessors to cooperate with the
Investor, its Affiliates and their respective Representatives in connection with
the transactions contemplated by this Agreement.
 
(b)       From and after the Auction Termination Date, if this Agreement is the
Successful Proposal, the Company shall send or otherwise make available to the
Investor, within two Business Days after each meeting of the Board, all written
materials sent to Board members by, or on behalf of, the Company.

 
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(c)        Notwithstanding anything to the contrary herein, the Company shall
not be required to deliver to the Investor any information or materials that the
Company determines in good faith, in its sole discretion, (i) are subject to a
claim of legal privilege, (ii) relate to the relationship or agreements between
the Investor and any of the Companies or (iii) would result in a violation of
applicable Law.
 
(d)       Any information and materials made available to the Investor and its
Representatives by the Company and its Representatives under this Agreement,
including pursuant to ‎Section 6.01 and ‎Section 6.04, are to be held by the
Investor and its Representatives in strict confidence, in accordance with the
terms of the Mutual Confidentiality and Non-Disclosure Agreement dated as of
April 27, 2009, to which the Investor and the Company are parties.
 
(e)        The Company and the Investor agree that, in the event of any
disclosure of privileged and confidential information by the Companies to the
Investor, the Companies and the Investor have a joint and common interest and
accordingly such disclosure shall not constitute waiver of any applicable
privilege or publication of any confidence.
 
Section 6.02.  Company Reports; Financial Statements.  (a) From and after the
date hereof, the Company shall file, in a timely manner, each Annual Report on
Form 10-K, Quarterly Report on Form 10-Q and each registration statement, report
on Form 8-K, proxy statement, information statement or other report or statement
with the SEC, as required by the Exchange Act (the “Subsequent Reports”).  Each
Subsequent Report shall, as of the filing date, (i) comply in all material
respects with the applicable requirements of the Exchange Act and Securities
Act, (ii) not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading and (iii) present fairly, in each case in accordance with GAAP
applied on a consistent basis throughout the periods covered (except as stated
therein or in the notes thereto), the financial position and results of
operation of the entity to which it applies as of the date and for the period
set forth therein.
 
(b)       Each of the consolidated balance sheets (including the related notes
and schedules) included in or incorporated by reference into the Subsequent
Reports shall fairly present, in all material respects, the consolidated
financial position of the entities to which it applies as of the date thereof,
and each of the consolidated statements of income (or statements of results of
operations), stockholders’ equity and cash flows (including the related notes
and schedules) included in or incorporated by reference into the Subsequent
Reports shall fairly present, in all material respects, the results of
operations, retained earnings and cash flows, as the case may be, of the
entities to which it applies (on a consolidated basis) for the periods or as of
the dates, as the case may be, set forth therein, in each case in accordance
with GAAP applied on a consistent basis throughout the periods covered (except
as stated therein or in the notes thereto) and in compliance with the rules and
regulations of the SEC.

 
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Section 6.03.  Publicity.  Except as required by Law or by obligations pursuant
to any listing agreement with or requirement of any national securities exchange
or national quotation system on which the Common Stock is listed, admitted to
trading or quoted, and except for announcements in connection with the auction
process conducted in accordance with the Investment Agreement and Bidding
Procedures Order, neither the Company (nor any of its Affiliates) nor the
Investor (nor any of its Affiliates) shall, without the prior written consent of
each other party hereto, which consent shall not be unreasonably withheld or
delayed, make any public announcement or issue any press release with respect to
the Term Sheet or the transactions contemplated by this Agreement.  Prior to
making any public disclosure required by applicable Law or pursuant to any
listing agreement with or requirement of any relevant national exchange or
national quotation system, the disclosing party shall consult with the other
parties hereto, to the extent feasible, as to the content and timing of such
public announcement or press release.
 
Section 6.04.  Tax Contests.  The Company shall keep the Investor apprised of
any material Tax audits, examinations, assessments, administrative or court
proceedings, or other disputes with respect to any material Tax matter of any of
the Companies (“Tax Contests”).  If upon the Auction Termination Date, the
Investor is the Successful Investor, the Company shall thereafter provide the
Investor with copies of all material written materials received from any taxing
authority in respect of any material Tax Contests, shall consult with the
Investor in good faith regarding the conduct of such Tax Contest, and shall
consider in good faith suggestions made by the Investor and its Representatives
regarding the conduct of such Tax Contests.
 
Section 6.05.  Investor Financing.  The Investor has, and shall have prior to
the Closing, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to make payment of the Investment Price
and any other amounts to be paid by it hereunder to consummate the transactions
contemplated by this Agreement at the Closing.
 
Section 6.06.  Transaction Court Documents.  (a) (i) The Company shall provide
to the Investor copies of all Transaction Court Documents and all motions,
objections, pleadings, notices, proposed orders and other documents seeking the
approval of the any Transaction Court Document or which are primarily related to
the Transaction Court Documents as soon as reasonably practicable prior to
filing the same with the Bankruptcy Court and (ii) the Investor shall provide to
the Company copies of all motions, objections, pleadings, notices, proposed
orders and other documents that are to be filed by or on behalf of the Investor
in the Cases that are primarily related to the Transaction Court Documents as
soon as reasonably practicable prior to filing the same with the Bankruptcy
Court, provided that the obligations under this ‎Section 6.06(a) shall not apply
to Transaction Court Documents and motions that are the same as the drafts of
such Transaction Court Documents and motions attached as exhibits hereto (or
that include only immaterial changes in such Transaction Court Documents or
motions).  If, after delivering the same to the Investor, the Company modifies
any draft Transaction Court Document in any respect, including at the hearing
scheduled to consider such Transaction Court Document (such hearing, the
“Relevant Hearing”), the Company shall provide the modified version to the
Investor as soon as reasonably practicable following such modification.

 
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(b)       With respect to drafts of Transaction Court Documents and motions
seeking approval of the same and any modifications subsequently made to such
drafts and delivered to the Investor pursuant hereto, the Investor shall raise
with the Company in writing  any objections that it might have to such drafts or
modifications as soon as reasonably practicable following receipt of such drafts
or modifications, but in no event later than the Relevant Hearing or the
Company’s intended date of filing the motion, as applicable; provided that if
the Investor has not been given a reasonable amount of time to review and
comment on such drafts or modifications, the Investor may object on the grounds
of failure to provide sufficient time; provided further that if the Investor
raises such an objection or if, after the conclusion of the Relevant Hearing,
the Bankruptcy Court makes any modifications to a Transaction Court Document
that were not discussed or described at the Relevant Hearing, the Investor shall
have five (5) Business Days after the approval or entry of such Transaction
Court Document to raise any objections to such modifications.  So long as the
Company complies with the requirements of this ‎Section 6.06 regarding a given
Transaction Court Document, unless the Investor timely raises an objection to
such document as set forth herein (and such objection has not been resolved to
the reasonable satisfaction of Investor), such document shall be deemed to
fulfill the condition precedent to the Investor’s obligation to make the
Investment set forth in ‎Section 7.01(b) hereof and the Investor shall be deemed
to have waived in all respects any termination right with respect to such
document.  Regardless of whether or not the Investor raises any objection to a
given Transaction Court Document or any modifications thereto in advance of the
Relevant Hearing, the Investor shall be deemed to have waived in all respects
any closing condition or termination right with respect to such document unless
a Representative of the Investor, with decision-making authority, appears at the
Relevant Hearing to provide final approval of such Transaction Court Document
and any modifications thereto made at or prior to such hearing.  Notwithstanding
the foregoing, the Investor shall not be entitled to raise any objections to any
draft Transaction Court Documents and motions that are the same as the draft
Transaction Court Documents and motions attached hereto as exhibits (or that
include only immaterial changes in such Transaction Court Documents or motions).
 
(c)       The Company will also use reasonable efforts to provide to the
Investor, in advance of filing the same with the Court, copies of motions
directly related to the following: (i) credit card processing agreements, (ii)
collective bargaining agreements or ERISA matters, (iii) aircraft sales, (iv)
management retention or (v) any compromise or settlement of a Postpetition claim
that would result in a payment by the Company of more than $500,000.
 
(d)       Notwithstanding anything to the contrary in this Agreement, failure to
comply with the requirements of this ‎Section 6.06 shall not form the basis for
any termination of this Agreement by either party or failure of either party to
satisfy the conditions to their obligations under ‎Article 8.
 
Section 6.07.  Director and Officer Liability and Indemnification.  The Investor
hereby agrees to do the following:
 
(a)        Upon and at all times after the Closing Date, the Certificate of
Incorporation shall contain provisions that require the Company, subject to
appropriate procedures, to indemnify the Company’s former and present directors
and executive officers (each, an “Indemnified Person”), in each case to the
fullest extent permitted by applicable Law.

 
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(b)       Prior to the Closing Date, the Company shall or, if the Company is
unable to, the Investor shall, as of the Closing Date, obtain and fully pay the
premium for the non-cancellable extension of the directors’ and officers ’
liability coverage of the Company’s existing directors’ and officers’ insurance
policies and the Company’s existing fiduciary liability insurance policies
(collectively, “D&O Insurance”), in each case for a claims reporting or
discovery period of at least six years from and after the Closing Date with
respect to any claim related to any period or time at or prior to the Closing
Date from an insurance carrier with the same or better credit rating as the
Company’s current insurance carrier with respect to D&O Insurance with terms,
conditions, retentions and limits of liability that are no less favorable than
the coverage provided under the Company’s existing policies; provided that the
Company shall give the Investor a reasonable opportunity to participate in the
selection of such tail policy and the Company shall give reasonable and good
faith consideration to any comments made by the Investor with respect
thereto.  If the Company or the Investor for any reason fail to obtain such
“tail” insurance policies as of the Closing Date, the Investor shall continue to
maintain in effect, for a period of at least six years from and after the
Closing Date, the D&O Insurance in place as of the date hereof with the
Company’s current insurance carrier or with an insurance carrier with the same
or better credit rating as the Company’s current insurance carrier with respect
to D&O Insurance with terms, conditions, retentions and limits of liability that
are no less favorable than the coverage provided under the Company’s existing
policies as of the date hereof, or the Investor shall purchase from the
Company’s current insurance carrier or from an insurance carrier with the same
or better credit rating as the Company’s current insurance carrier with respect
to D&O Insurance comparable D&O Insurance for such six-year period with terms,
conditions, retentions and limits of liability that are no less favorable than
as provided in the Company’s existing policies as of the date hereof; provided
that in no event shall the Investor be required to expend for such policies
pursuant to this sentence an annual premium amount in excess of 200% of the
amount per annum the Company paid in their last full fiscal year, which amount
is set forth in Schedule 6.07; and provided further that if the aggregate
premiums of such insurance coverage exceed such amount, the Investor shall be
obligated to obtain a policy with the greatest coverage available, with respect
to matters occurring prior to the Closing Date, for a cost not exceeding such
amount.
 
(c)        If the Investor or any of its successors or assigns (i) consolidates
with or merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers or conveys all or substantially all of its properties and assets to
any Person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of the Investor, as
the case may be, shall assume the obligations set forth in this ‎Section 6.07.
 
(d)       The rights of each Indemnified Person under this ‎Section 6.07 shall
be in addition to any rights such Person may have under the certificate of
incorporation or by-laws of the Company or any of its Subsidiaries, under
Delaware Law or any other applicable Law or under any agreement of any
Indemnified Person with the Company or any of its Subsidiaries.  These rights
shall survive consummation of the transactions contemplated by this Agreement
and the Transaction Documents, and are intended to benefit, and shall be
enforceable by, each Indemnified Person.

 
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ARTICLE 7
Conditions

Section 7.01.  Conditions to Both the Investor’s and the Company’s
Obligations.  Both the obligation of the Investor to make the Investment
pursuant to ‎Section 2.01 hereof and the obligation of the Company to issue and
sell the Common Shares pursuant to ‎Section 2.01 hereof at the Closing are
subject to satisfaction or waiver of each of the following conditions precedent:
 
(a)       Definitive Documents.  Definitive Transaction Documents necessary to
consummate the transactions contemplated herein shall have been prepared,
negotiated and, to the extent applicable, executed by the parties, and approval
by the Bankruptcy Court of such documents, as necessary, shall have been
obtained.  All Transaction Documents (in form and substance reasonably
satisfactory to both the Investor and the Company), to the extent applicable,
shall have been executed by the parties thereto on or prior to the Effective
Date, shall not have been modified without either of the Investor’s or the
Company’s consent and shall be in effect and the consummation of the
transactions contemplated thereby shall not be stayed, and all conditions to the
obligations of the parties under the Transaction Documents shall have been
satisfied or effectively waived.  All corporate and other proceedings to be
taken by the Investor and the Company in connection with the Transaction
Documents and the transactions contemplated thereby to be completed at the
Closing and documents incident thereto shall have been completed in form and
substance reasonably satisfactory to the Investor and the Company, and the
Investor and the Company shall have received all such counterpart originals or
certified or other copies of the Transaction Documents and such other documents
as it may reasonably request.
 
(b)       Transaction Court Documents.  Subject to ‎Section 6.06, the Bankruptcy
Court shall have confirmed the Plan, approved the Disclosure Statement and
entered all orders included in the Transaction Court Documents, each of which
orders shall not have been subsequently modified without the Investor’s and the
Company’s prior written consent, reversed or vacated, and each such Transaction
Court Document shall be in effect and not be stayed.
 
(c)       Effective Date.  The Effective Date shall have occurred.
 
(d)       Compliance with Laws, No Adverse Action or Decision.  Since the date
hereof, (i) no Law shall have been promulgated, enacted or entered that
restrains, enjoins, prevents, materially delays, prohibits or otherwise makes
illegal the performance of any of the Transaction Documents with respect to the
transactions contemplated thereby to be completed at the Closing; and (ii) no
preliminary or permanent injunction or other order by any Governmental Entity
that restrains, enjoins, prevents, delays, prohibits or otherwise makes illegal
the performance of any of the Transaction Documents shall have been issued and
remain in effect.
 
Section 7.02.  Conditions to the Investor’s Obligations.  The obligations of the
Investor to make the Investment pursuant to ‎Section 2.01 hereof is subject to
satisfaction or waiver of each of the following conditions precedent:
 
 
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(a)       Representations and Warranties; Covenants.  The representations and
warranties of the Company set forth in ‎Article 3 herein (without giving effect
to any Material Adverse Effect, materiality or similar qualifier contained
therein) shall be true and correct on and as of the date hereof and at the time
immediately prior to the Closing (except where such representation and warranty
speaks by its terms of “at Closing,” in which case it shall be true and correct
as of the time of Closing) as if made on the Closing Date (except where such
representation and warranty speaks by its terms of a different date, in which
case it shall be true and correct as of such date), with only such exceptions as
have not had and could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.  The Company shall have performed in
all material respects all obligations and complied with all agreements,
undertakings, covenants and conditions required to be performed by it hereunder
at or prior to the Closing, and the Company shall have delivered to the Investor
at the Closing a certificate dated the Closing Date and signed by an officer of
the Company to the effect that the conditions set forth in this ‎Section
7.02‎(a) have been satisfied.
 
(b)       Certificate of Incorporation and By-Laws.  The Certificate of
Incorporation and By-Laws, as provided for in the Plan, shall contain the terms
contemplated hereby, and the Certificate of Incorporation shall have been filed
with and accepted by the Secretary of State of the State of Delaware.  As of the
Closing Date, the Company shall have made available to the Investor a complete
and correct copy of the certificates of incorporation and the by-laws or
comparable governing instruments of each of the Companies, in full force and
effect as of the Closing Date.
 
(c)       Foreign Ownership.  The Company shall be in compliance with the
applicable Laws and requirements regarding foreign ownership or control of U.S.
air carriers, except to the extent that any failure to be in compliance is in
any way attributable to the Investor or any transferee of Investor or any
actions by the Investor.
 
(d)       Litigation.  There shall be no (i) threatened or pending Postpetition
suit, action, investigation, inquiry or other proceeding by or before any court
of competent jurisdiction (excluding the Cases or any Proceedings thereunder,
and any matter that represents a prepetition claim that will be discharged by
the Bankruptcy Court in the Cases) or (ii) Proceedings instituted by any
Governmental Entity that remain pending and seek to restrain, enjoin, prevent,
delay, prohibit or otherwise make illegal the performance of any of the
Transaction Documents, except , in the case of clauses (i) and (ii), as have not
had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
 
(e)       Consents Under Agreements.  The Company shall have obtained the
consent or approval of each Person whose consent or approval shall be required
under any Material Contract to which the Company or any of its Subsidiaries is a
party in connection with the transactions contemplated by this Agreement, except
for (i) Material Contracts as to which consent or approval is unnecessary under
Section 365 of the Bankruptcy Code, (ii) Material Contracts with a party that
received actual, written notice in the Cases and failed to object to the
treatment of such contract thereunder prior to the Effective Date and (iii)
Material Contracts for which the failure to obtain such consent or approval has
not had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 
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(f)        Confirmation Order.  Subject to ‎Section 6.06, the Confirmation Order
shall have been entered by the Bankruptcy Court, shall be unstayed and, once
entered, shall not have been modified without the Investor’s prior written
consent.
 
(g)       Consents and Approvals.  The Company shall have received (i) all
approvals, clearances, consents and authorizations set forth on Schedule
‎7.02(g) required to be obtained from the DOT and FAA for the consummation of
the Investment and the other transactions contemplated hereby, which approvals,
clearances, consents and authorizations have not been stayed or vacated and (ii)
all other Regulatory Approvals (other than waiting periods imposed by applicable
Law as referred to later in this paragraph) set forth on Schedule ‎7.02(g),
which shall have become final and unappealable, and (iii) all other material
approvals, permits, authorizations, exemptions, consents, licenses and
agreements from other third parties that are necessary to permit the
transactions contemplated hereby and to permit the reorganized Company to carry
on its business after such transactions in a manner not materially inconsistent
with the manner in which it was carried on prior to the Effective Date (together
with the Regulatory Approvals (the approvals described in clauses (i), (ii) and
(iii), the “Approvals”), which Approvals shall not contain any condition or
restriction that, in the Investor’s reasonable judgment, materially impairs the
reorganized Company’s ability to carry on its business or materially restricts
any business activity of the Investor or the Companies.  Notwithstanding the
foregoing, the parties recognize that the DOT or FAA may issue temporary or
interim approvals or exemptions (the “Initial Approvals”) that allow the
consummation of the Investment and that may require subsequent additional
approvals.  Such Initial Approvals shall be sufficient to fulfill the
requirements of this Section ‎7.02(g) as to that corresponding Approval, but not
with respect to any other Approvals.  For the avoidance of doubt, the Investor
confirms that any approval, clearance, consent or authorization under the HSR
Act has been received or otherwise satisfied.
 
(h)       No Material Adverse Effect.  Since August 13, 2009, no event,
circumstance or matter shall have occurred or arisen that has had, or would
reasonably be expected to have, a Material Adverse Effect
 
Section 7.03.  Conditions to the Company’s Obligations.  The obligation of the
Company to issue and sell the Common Stock pursuant to ‎Section 2.01 hereof at
the Closing is subject to satisfaction or waiver of each of the following
conditions precedent:
 
(a)       Representations and Warranties; Covenants.  The representations and
warranties of the Investor set forth in ‎Article 4 hereof (without giving effect
to any Material Adverse Effect, materiality or similar qualifier) shall have
been true and correct in all respects, on and as of the date hereof and at the
time immediately prior to the Closing (except where such representation and
warranty speaks by its terms of “at Closing,” in which case it shall be true and
correct as of the time of Closing) as if made on the Closing Date (except where
such representation and warranty speaks by its terms as of a different date, in
which case it shall be true and correct as of such date), except to the extent
that such inaccuracies have not had, and would not, individually or in the
aggregate, reasonably be expected to prevent or materially delay or impede the
Investor’s ability to consummate the Investment.  The Investor shall have
performed in all material respects all obligations and complied with all
agreements, undertakings, covenants and conditions required to be performed by
it at or prior to the Closing, and the Investor shall have delivered to the
Company at the Closing a certificate dated the Closing Date and signed on behalf
of an officer of the Investor to the effect that the conditions set forth in
this ‎Section 7.03‎(a) have been satisfied.

 
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(b)       Compliance with Laws; No Adverse Action or Decision.  Since the date
hereof, (i) no Law shall have been promulgated, enacted or entered that
restrains, enjoins, prevents, materially delays, prohibits or otherwise makes
illegal the performance of any of the Transaction Documents with respect to the
transactions contemplated thereby to be completed at the Closing; (ii) no
preliminary or permanent injunction or other order by any Governmental Entity
that restrains, enjoins, prevents, delays, prohibits or otherwise makes illegal
the performance of any of the Transaction Documents shall have been issued and
remain in effect, except for such injunctions that, if obtained, could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the reorganized Company; and (iii) no Governmental Entity
shall have instituted any Proceeding that seeks to restrain, enjoin, prevent,
delay, prohibit or otherwise make illegal the performance of any of the
Transaction Documents, except for any Proceedings, which have a significant
possibility of being brought to a conclusion which would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
reorganized Companies.
 
(c)       Consents and Approvals.  The Company shall have received the
Approvals, which Approvals shall not contain any condition or restriction that,
in the Investor’s reasonable judgment, materially impairs the reorganized
Company’s ability to carry on its business or materially restricts any business
activity of the Investor or the Companies.  Any Initial Approval shall be
sufficient to fulfill the requirements of this Section 7.03(c) as to the
corresponding Approval, but not with respect to any other Approvals.
 
(d)       Citizenship.  The Company shall have received a certificate from the
Investor certifying that the Investor is a “citizen of the United States,” as
the term is used in Section 40102(a)(15) of Title 49 and is in compliance with
applicable United States law with respect to foreign ownership requirements of
U.S. air carriers.
 
(e)       DIP Credit Agreement.  The DIP Credit Agreement shall not have been
terminated by the Investor as a result of an Event of Default (as defined in the
DIP Credit Agreement), and there shall have been no material breach of the DIP
Credit Agreement by the Investor that is continuing.
 
(f)        Confirmation Order.  The Confirmation Order shall have been entered
by the Bankruptcy Court, shall be unstayed and, once entered, shall not have
been modified without the Company’s prior written consent.

 
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ARTICLE 8
Termination

Section 8.01.  Termination of Agreement.  Subject to ‎Section 6.06 and ‎Section
8.02 hereof, this Agreement may be terminated by notice in writing at any time
prior to the Closing by:
 
(a)        the Investor or the Company, if a Person, other than the Investor or
an Affiliate of the Investor, is approved by the Bankruptcy Court as the
Successful Investor or the Companies otherwise proceed with an Alternative
Transaction;
 
(b)       the Company, if (i) there shall have been a material breach by the
Investor of ‎Section 5.02, (ii) there shall have been a material breach by the
Investor of any representation, warranty, covenant or agreement contained in
this Agreement which breach would result in the failure to satisfy any condition
set forth in ‎Section 7.01 or ‎Section 7.03 hereof to the Company’s obligations
and that has not been cured within ten (10) days following receipt by the
Investor of written notice from the Company of such breach or if such breach is
not capable of being cured or (iii) any condition set forth in ‎Section 7.01 or
‎Section 7.03 hereof to the Company’s obligations is not capable of being
satisfied;
 
(c)        the Investor or the Company, if the Closing shall not have occurred
on or before December 1, 2009; provided that the right to terminate the
agreement hereunder shall not be available to any party whose breach of this
Agreement results in the failure of the Closing to occur prior to such time;
 
(d)        the Investor, if (i) there shall have been a material breach by the
Companies of (A) ‎Section 5.02 or (B) ‎Section 5.03, (ii) there shall have been
a material breach by the Company of any representation, warranty, covenant or
agreement contained in this Agreement, which breach would result in the failure
to satisfy any condition set forth in ‎Section 7.01 or ‎Section 7.02 to the
Investor’s obligations and that has not been cured within ten (10) days
following receipt by the Company of written notice from the Investor of such
breach or if such breach is not capable of being cured, immediately upon such
breach, or (iii) any condition set forth in ‎Section 7.01 or ‎Section 7.02 to
the Investor’s obligations is not capable of being satisfied;
 
(e)        the Investor, if the Investment Agreement and Bidding Procedures
Order does not provide that the Auction Termination Date is on or prior to
August 17, 2009;
 
(f)        the Investor, if (i) the Bankruptcy Court denies the Investment
Agreement and Bidding Procedures Motion, or (ii) the Bankruptcy Court or any
court of competent jurisdiction to which a decision relating to the Cases has
been appealed modifies, in a manner materially adverse to the Investor, the
Investment Agreement and Bidding Procedures Order without the prior written
consent of the Investor, or reverses, vacates or stays such order following its
entry;
 
(g)        the Investor, upon termination of the DIP Credit Agreement upon an
Event of Default (as defined in the DIP Credit Agreement);

 
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(h)       the Investor, if the Cases shall have been converted into Chapter 7
Cases or shall have been dismissed, or a trustee or examiner with expanded
powers relating to any of the Companies’ business shall have been appointed,
prior to the Effective Date;
 
(i)        the Company, if (x) the Board determines in good faith that the
Companies cannot reasonably be expected to have the financial resources that
they will need to conduct their businesses, (y) the Company ceases operations
(other than in connection with a sale of all or substantially all of the assets
of the Companies or a sale of the business of Lynx, in each case in a single
transaction or series of related transactions) and (z) the Company has not
knowingly and intentionally acted in a manner that breached any of its
obligations under this Agreement or the DIP Credit Agreement and would
reasonably be expected to be inconsistent with an intention to proceed with the
Investment on the terms and conditions set forth herein;
 
(j)        mutual agreement in writing by the Company and the Investor;
 
(k)       the Investor, pursuant to ‎Section 9.11;
 
(l)        the Investor, if there shall have been a Material Adverse Effect
prior to the Closing; or
 
(m)      the Investor, upon the delivery of the Notice.
 
In order for the Investor to terminate this Agreement based on the form or
substance of any document or order (including based on alleged non-conformity
with any requirements in the Transaction Documents or based on reasonable
non-satisfaction by the Investor therewith), the Investor must exercise such
termination right prior to the earlier of (i) the fifth (5th) business day after
the Company delivers to the Investor a proposed substantially final form thereof
and (ii) the court hearing at which such document will be approved or such order
entered; provided that if material changes are subsequently made to such
document or order prior to court approval or entry by the Court thereof, the
Investor shall be provided with such changes and shall have until the conclusion
of the court hearing at which such document will be approved or such order
entered to exercise its rights regarding any such changes.  In order for the
Investor to terminate this Agreement on any other basis, it must do so on or
before the tenth (10th) Business Day after the date on which the Investor
becomes aware of its right to so terminate this Agreement.  If the Investor does
not terminate the Agreement in accordance with the requirements of the preceding
two sentences, the Investor shall be deemed to have waived the applicable
condition(s) and termination rights for purposes of ‎Article 7 and ‎Article 8.
 
Section 8.02.  Effect of Termination.  (a) If this Agreement is terminated in
accordance with ‎Section 8.01 hereof and the transactions contemplated hereby
are not consummated, this Agreement shall become null and void and of no further
force and effect except that the terms and provisions of this ‎Section 8.02,
‎Section 6.03 and ‎Article 9 hereof shall remain in full force and effect.  If
this Agreement is terminated under any circumstances described in ‎Section
8.02‎(b) or ‎Section 8.02(c), the Investor’s sole and exclusive remedy shall be
as set forth therein.  Notwithstanding the foregoing or any other provision of
this Agreement (including ‎Section 8.02(b) and ‎Section 8.02(c), none of the
Company, its Affiliates nor any of their respective Representatives shall have
any liability under this Agreement or any other Transaction Document (other than
amounts payable under the DIP Agreement) if this Agreement is terminated under
any circumstances other than as described in ‎Section 8.02(b) and ‎Section
8.01(c).

 
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(b)        Notwithstanding the foregoing, in the event that (i) the Investor
terminates this Agreement pursuant to ‎Section 8.01(d)(i) as a result of a
knowing, willful and material breach by the Company, ‎Section 8.01(g) as a
result of a knowing, willful and material breach by any of the Companies of the
DIP Credit Agreement, or ‎Section 8.01(h) as a result of a filing by the Company
seeking the conversion, dismissal or appointment specified therein, (ii) the
Investor terminates this Agreement pursuant to ‎Section 8.01(d)(ii) or
‎8.01(d)(iii) as a result of a knowing, willful and material failure by the
Company to fulfill a condition to the performance of this Agreement by the
Investor resulting in the termination of this Agreement by the Investor and the
completion of an Alternative Transaction or (iii) the Investor or the Company
terminates this Agreement pursuant to ‎Section 8.01(a) or ‎Section 8.01(m), then
the Company shall pay the Investor, by wire transfer of same day funds, a
termination fee of $3,500,000 (the “Termination Fee”) and reimburse the Investor
in full for all accrued and unpaid Expenses; provided that the Termination Fee
and Expenses shall not be payable if the Investor has breached in any material
respect any obligation of the Investor under any Transaction Document and has
not cured such breach within the time periods referred to in ‎Section
8.01(b)(ii).  The Termination Fee and any Expenses payable pursuant to this
‎Section 8.02(b) shall be paid upon the earlier of (i) the closing of any
Alternative Transaction, (ii) the dismissal of the Companies’ Cases, or
(iii) the conversion of the Companies Cases to cases under chapter 7 of the
Bankruptcy Code.
 
(c)        Notwithstanding the foregoing, in the event that (i) the Investor
terminates this Agreement pursuant to ‎Section 8.01(d)(ii) or ‎Section
8.01(d)(iii) due to (whether independently or together with other allegations of
breach) (A) the Company materially breaching the covenant set forth in ‎Section
5.05, (B) the Investor terminates this Agreement pursuant to ‎Section 9.11 or
(ii) the Investor terminates this Agreement pursuant to ‎Section 8.01(l), then
the Company shall promptly reimburse the Investor in full for all accrued and
unpaid Expenses but not the Termination Fee; provided that the Expenses shall
not be payable if the Investor has breached in any material respect any material
obligation of the Investor under this Agreement and has not cured such breach
within the time periods referred to in ‎Section 8.01(b)(ii).
 
(d)        The Company acknowledges that the agreements contained in ‎Section
8.02(b) and ‎Section 8.02(c) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the Investor
would not enter into this Agreement; accordingly, if the Company fails to
promptly pay any amount due pursuant to ‎Section 8.02‎(b) or ‎Section 8.02(c),
and, in order to obtain such payment, the Investor commences a suit which
results in a judgment against the Company for the fee, charges or expenses to
which reference is made in ‎Section 8.02(b) or ‎Section 8.02(c), the Company
shall pay to the Investor its costs and expenses (including attorneys’ fees) in
connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank, N.A. in effect on the date such payment was required
to be made.

 
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(e)        Subject to the last sentence of ‎Section 8.02(a), the Company’s
obligations pursuant to this ‎Section 8.02, including the obligation to pay the
Termination Fee, shall survive termination of this Agreement and shall
constitute an allowed administrative expense of the Companies.
 
ARTICLE 9
Miscellaneous
 
Section 9.01.  Collective Bargaining Agreements.  (a) Frontier Airlines Pilot
Association.  Subject to the provisions of the Railway Labor Act, upon the
Closing, the Investor will (i) be bound by the current Collective Bargaining
Agreement between Frontier Airlines and the Frontier Airlines Pilots Association
as amended and in effect as of the Closing (the “FAPA CBA”), (ii) recognize
Frontier Airlines Pilots Association as the representative of the Frontier
Airlines pilots and (iii) assume employment of such pilots represented by the
Frontier Airlines Pilots Association.  Upon and after the Closing,  the Company
shall continue to be responsible for implementing and carrying out its
obligations under the FAPA CBA.
 
(b)        International Brotherhood of Teamsters.  Subject to the provisions of
the Railway Labor Act, upon the Closing, the Investor agrees to (i) assume the
current Collective Bargaining Agreement between Frontier Airlines and the
International Brother of Teamsters on behalf of Frontier’s Aircraft Technicians,
Ground Service Equipment Technicians, and Tool Room Attendants, as amended by
the November 14, 2008 order of the Bankruptcy Court pursuant to 11 U.S.C. 1113,
and in effect as of the Closing, (ii) assume the current Collective Bargaining
Agreement between Frontier Airlines and the International Brother of Teamsters
on behalf of Frontier’s Material Specialists, as amended by the November 14,
2008 order of the Bankruptcy Court pursuant to 11 U.S.C. 1113, and in effect as
of the Closing and (iii) assume the current Collective Bargaining Agreement
between Frontier Airlines and the International Brother of Teamsters on behalf
of Frontier’s Aircraft Appearance Agents and Maintenance Cleaners, as amended
and in effect as of the Closing (the agreements described in clauses (i), (ii)
and (iii), the “IBT CBAs”).  Upon and after the Closing,  the Company shall
continue to be responsible for implementing and carrying out its obligations
under the IBT CBAs.
 
(c)        Transport Workers Union.  Subject to the provisions of the Railway
Labor Act, upon the Closing, the Investor agrees to assume the current
Collective Bargaining Agreement between Frontier Airlines and the Transport
Workers Union of American AFL-CIO on behalf of Frontier Airlines’ Aircraft
Dispatchers as amended and in effect as of the Closing (the “TWU CBA”). Upon and
after the Closing,  the Company shall continue to be responsible for
implementing and carrying out its obligations under the TWU CBA.
 
Section 9.02.  Survival of Representations and Warranties.  None of the
representations and warranties contained in this Agreement shall survive the
Closing Date.

 
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Section 9.03.  Specific Performance.  The parties hereto specifically
acknowledge that monetary damages are not an adequate remedy for violations of
this Agreement, that any party hereto may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable Law and to the extent the party seeking such relief would be entitled
on the merits to obtain such relief, each party waives any objection to the
imposition of such relief.  Any requirements for the securing or posting of any
bond with such remedy are waived.
 
Section 9.04.  Notices.  All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by fax, to the parties at the following addresses
or fax numbers (or at such other address or fax number for a party as shall be
specified by like notice):
 
(i) 
If to the Investor, to:

 
c/o Republic Airways Holdings Inc.
8909 Purdue Road
Indianapolis, IN  46268
Attention:  Hal Cooper
Fax: (317) 484-4545
 
With a copy to:
 
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY  10103
Attention:  David Rosenzweig, Esq.
Fax: (212) 318-3400
 
(ii) 
If to any of the Companies, to:

 
Frontier Airlines Holdings, Inc.
Frontier Center One
7001 Tower Rd.
Denver, CO  80249-7312
Attention: Matthew R. Henry, Esq.
Fax: (720) 374-4379
 
With a copy to:
 
Davis Polk & Wardwell LLP
1600 El Camino Real
Menlo Park, CA 94025
Attention:  Daniel G. Kelly, Jr., Esq.
Fax: (650) 752-2113

 
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Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Attention: Marshall Huebner, Esq.
Fax: (212) 450-5572

Section 9.05.  Entire Agreement; Amendment.  (a) This Agreement and the
documents described herein (including the Plan) or attached or delivered
pursuant hereto (including, without limitation, the other Transaction Documents)
set forth the entire agreement between the parties hereto with respect to the
transactions contemplated by this Agreement.  Any provision of this Agreement
may only be amended, modified or supplemented in whole or in part at any time by
an agreement in writing among the parties hereto executed in the same manner as
this Agreement.  No failure on the part of any party to exercise, and no delay
in exercising, any right shall operate as waiver thereof, nor shall any single
or partial exercise by either party of any right preclude any other or future
exercise thereof or the exercise of any other right.  No investigation by a
party hereto of any other party hereto prior to or after the date hereof shall
stop or prevent the exercise of any right hereunder or be deemed to be a waiver
of any such right.
 
(b)        Notwithstanding anything to the contrary in this Agreement requiring
any level of “efforts” or “cooperation” or otherwise by the Investor or the
Company, neither the Investor nor the Company shall be obligated to agree to any
amendment, modification, revision or waiver of the DIP Credit Agreement or this
Agreement (or any portion or provision thereof).
 
Section 9.06.  Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same document.
 
Section 9.07.  Governing Law; Jurisdiction.  To the extent not governed by the
Bankruptcy Code, this Agreement shall be governed by, and interpreted in
accordance with, the Laws of the State of New York applicable to contracts made
and to be performed in that State without reference to its conflict of laws
rules.  The parties hereto agree that the appropriate and exclusive forum for
any disputes arising out of this Agreement between the Company and the Investor
shall be the Bankruptcy Court, or if such court will not hear any such suit, any
federal or state court located in New York County, New York, and, the parties
hereto irrevocably consent to the exclusive jurisdiction of such courts, and
agree to comply with all requirements necessary to give such courts
jurisdiction.  The parties hereto further agree that the parties will not bring
suit with respect to any disputes arising out of this Agreement except as
expressly set forth below for the execution or enforcement of judgment, in any
jurisdiction other than the above specified courts.  Each of the parties hereto
irrevocably consents to the service of process in any action or proceeding
hereunder by the mailing of copies thereof by registered or certified airmail,
postage prepaid, to the address specified in ‎Section 9.04 hereof.  The
foregoing shall not limit the rights of any party hereto to serve process in any
other manner permitted by the Law or to obtain execution of judgment in any
other jurisdiction.  The parties further agree, to the extent permitted by Law,
that final and non-appealable judgment against any of them in any action or
proceeding contemplated above shall be conclusive and may be enforced in any
other jurisdiction within or outside the United States by suit on the judgment,
a certified or exemplified copy of which shall be conclusive evidence of the
fact and the amount of indebtedness.  THE PARTIES AGREE TO WAIVE ANY AND ALL
RIGHTS THAT THEY MAY HAVE TO A JURY TRIAL WITH RESPECT TO DISPUTES ARISING OUT
OF THIS AGREEMENT.

 
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Section 9.08.  Successors and Assigns.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors and permitted
assigns.  Neither this Agreement nor any rights hereunder shall be assignable by
any party hereto without the prior written consent of the other parties hereto;
provided, however, that the Investor may assign, without the consent of the
other parties hereto, all or part of its interest in this Agreement and all or
part its rights hereunder to any of its Affiliates; provided, that any such
assignment by the Investor shall not relieve the Investor of any of its
obligations hereunder.  In the case of an assignment to an Affiliate of the
Investor in compliance with the provisions of this ‎Section 9.08, the term
“Investor” shall include, following such assignment, any such Affiliate to the
extent of such assignment and shall mean the assigning Investor and such
Affiliate taken collectively; provided that if such Affiliate ceases to be an
Affiliate of the Investor, the term “Investor” shall no longer include such
Person.
 
Section 9.09.  No Third-Party Beneficiaries.  This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended or shall confer upon
any other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except that the provisions of
‎Section 6.07 shall inure to the benefit of and be enforceable by the persons
described therein.
 
Section 9.10.  Binding Effect.  This Agreement shall not be binding upon the
Companies unless and until the Investment  Agreement and Bidding Procedures
Order shall have been entered.
 
Section 9.11.  Company Disclosure Schedules.  (a) The Company may revise the
Company Disclosure Schedules by delivering revised Company Disclosure Schedules
to the Investor not later than ten (10) Business Days prior to the Closing
Date.  Following receipt of such revised Company Disclosure Schedules, the
Investor shall have a right to terminate this Agreement at any time prior to the
date that is five (5) Business Days after its receipt of such revised Company
Disclosure Schedules by delivering written notice of termination to the Company
if the revised or additional disclosures set forth on such revised Company
Disclosure Schedules would reasonably be expected to have a Material Adverse
Effect.  This notice, if given, shall specify the information forming the basis
for the decision to terminate.  The Company shall have five days after receipt
of such notice to review with the Investor the information forming the basis of
the decision to terminate and to attempt to agree on corrective measures, if
any.  If the parties cannot agree on corrective measures within such five day
period, then this Agreement shall terminate.  If this Agreement is not
terminated as permitted by this Section, the Investor shall be deemed to have
accepted such revisions, and the Company Disclosure Schedules delivered on the
date hereof shall be deemed for all purposes to be superseded by the revised
Company Disclosure Schedules.

 
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(b)        The Company has set forth information in the Company Disclosure
Schedules in a section thereof that corresponds to the section of this Agreement
to which it relates.  A matter set forth in one section of the Company
Disclosure Schedules need not be set forth in any other section so long as its
relevance to such other section of the Company Disclosure Schedules or section
of the Agreement is reasonably apparent on the face of the information disclosed
therein to the Investor.  The parties acknowledge and agree that (i) the Company
Disclosure Schedules to this Agreement may include certain items and information
solely for informational purposes for the convenience of the Investor and (ii)
the disclosure by the Company of any matter in the Company Disclosure Schedules
shall not be deemed to constitute an acknowledgment by the Company that the
matter is required to be disclosed by the terms of this Agreement or that the
matter is material.
 
[Remainder of page intentionally left blank]

 
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IN WITNESS WHEREOF, this Agreement has been executed on behalf of the parties
hereto by their respective duly authorized officers, all as of the date first
above written.
 
REPUBLIC AIRWAYS HOLDINGS INC.
   
By:
/s/ Robert H. Cooper
 
Name:  Robert H. Cooper
 
Title: Executive Vice President and
          Chief Financial Officer

FRONTIER AIRLINES HOLDINGS, INC.
FRONTIER AIRLINES, INC.
   
By:
/s/ Edward M. Christie, III
 
Name: Edward M. Christie, III
 
Title: Senior Vice President and Chief
          Financial Officer

LYNX AVIATION, INC.
   
By:
/s/ Matthew R. Henry
 
Name: Matthew R. Henry
 
Title: Corporate Secretary

 
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LIST OF OMITTED SCHEDULES CONTAINED IN THE COMPANY DISCLOSURE SCHEDULES

Schedule Section
 
Description
3.03
 
Financial Advisors and Brokers
3.05
 
Aircraft
3.06
 
Written Notices of Federal Aviation Authority or Department of Transportation
Violations
3.07
 
Slots and Gate Interests
3.09
 
Corporate Information
3.10
 
Authorization
3.12
 
Absence of Certain Changes or Events
3.13
 
Ownership of Property; Real Estate; Liens
3.14
 
Labor Matters
3.15
 
Ventures, Subsidiaries and Affiliates; Outstanding Equity Securities and
Indebtedness
3.16
 
Tax Matters
3.17
 
ERISA Plan
3.18
 
Litigation
3.19
 
Intellectual Property
3.20
 
Environmental Matters
3.21
 
Insurance
3.22
  
Contracts

 
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[Schedules attached to the Investment Agreement follow]
 
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Schedule 1.01(b)
 
KNOWLEDGE GROUP
 
1.01(b)
 
The following list describes the persons in the Knowledge Group of the
Companies:
 
·
Sean Menke

 
·
Ted Christie

 
·
Matt Henry

 
 
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Schedule 5.06
 
TAXES
 
 
·
Audit by the City and County of Denver of the sales, use and occupational
privilege tax returns of Frontier Airlines and Lynx Aviation relating to the
period beginning October 1, 2004 and ending April 10, 2008; opened November 14,
2007.

 
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Schedule 5.10
 
MULTIEMPLOYER PLAN LIABILITIES
AND OBLIGATIONS

There are no Multiemployer Plan liabilities and obligations which, individually
or in the aggregate, will or could be reasonably likely to result in a Material
Adverse Effect.

 
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Schedule 6.07
 
D&O INSURANCE PREMIUM
 
The Company has paid $273,197 as annual premium for D&O insurance in the fiscal
year ending March 31, 2009.

 
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Schedule 7.02(g)
 
REGULATORY APPROVALS

Approvals, clearances, consents and authorizations required to be obtained from
the DOT, FAA, and any other Governmental Entity for the consummation of the
Investment and the other transactions contemplated hereby, as follows:

·
DOT grant of a pendente lite exemption regarding the de facto transfer of the
certificates and other economic authorities held by the Companies;

 
·
DOT approval of the de facto transfer under Section 41105 of Title 49 of the
certificates and other economic authorities held by the Companies or a
disclaimer of jurisdiction, or any other necessary transfer;

 
·
DOT determination that Frontier Airlines and Lynx remain fit, willing, and able
to provide air transportation and are citizens of the United States;

 
·
TSA authorization as to any resulting changes in TSA approved security program;

 
·
FAA issuance of air carrier certificate and any necessary amendments to
Operations Specifications.

 
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