Frontier Airlines 2005 Annual Report Download - page 41

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We have been named as a defendant in a lawsuit filed by certain US Airways pilots
We and an affiliate of Wexford Capital, among others including US Airways and the Airline Pilots Association, have been
named as defendants in a lawsuit filed in October 2005 by certain US Airways pilots. The lawsuit as it relates to us would require us to
employ certain pilots of US Airways under terms that would be more favorable to the pilots as compared to terms that were
contemplated to be offered to the pilots by us. Subsequent to the filing of the case, an arbitrator has ruled that we are not required to
provide the number of positions that were demanded by the plaintiffs. We, on the advice of our counsel, believe that the lawsuit, as it
relates to us, is wholly without merit and we will ask the court to dismiss the lawsuit against us at the earliest practicable date. The
lawsuit asks for monetary damages of $1.2 billion.
Wexford Capital has significant influence over our affairs by virtue of its significant ownership of our common stock and they
may make decisions with which you disagree.
WexAir LLC, which is owned by several investment funds managed by Wexford Capital, on a fully diluted basis, owns
beneficially approximately 21.5% of our common stock. As a result of its significant level of ownership, Wexford Capital and its
affiliates have significant influence over matters affecting us, including the election of directors as long as they own or control a
significant percentage of our common stock. They may make decisions which you and other stockholders will not be able to affect by
voting your shares.
We may have conflicts of interest with Wexford Capital, and because of its significant ownership, we may not be able to
resolve these conflicts on an arm's length basis.
Wexford Capital and its affiliates are actively engaged in the airline business. Conflicts of interest may in the future arise
between Wexford Capital and its affiliates, on the one hand, and us, on the other hand, in a number of areas relating to our business
and our past and ongoing relationships. Factors that may create a conflict of interest between Wexford Capital and us include the
following:
• on May 6, 2005, we acquired Shuttle America from an affiliate of Wexford Capital, in connection with which we executed a
$1.0 million promissory note in favor of such affiliate of Wexford Capital and assumed less than $0.7 million of Shuttle
America's debt. This promissory note has since been repaid. In addition, for Wexford Capital's assistance in structuring the
investment agreement with US Airways, we agreed to pay Wexford Capital $500,000 upon US Airway's emergence from
bankruptcy as well as the payment of Wexford Capital's expenses, including the payment of up to approximately $850,000 to
an unrelated third party consultant retained by us and Wexford Capital;
• Wexford Capital may in the future make significant investments in other airline companies that directly compete with us;
• sales or distributions by the selling stockholder, WexAir LLC, of all or any portion of its ownership interest in us; and
• two of our directors also are directors, managing members or general partners of Wexford Capital and its affiliates.
Wexford Capital is under no obligation to resolve any conflicts that might develop between it and its affiliates and us in a
manner that is favorable to us and we cannot guarantee that such conflicts will not result in harmful consequences to our business or
future prospects. In addition, Wexford Capital and its affiliates are not obligated to advise us of any investment or business
opportunities of which they are aware, and they are not contractually restricted or prohibited from competing with us. We have
specifically renounced in our certificate of incorporation any interest or expectancy that Wexford Capital and its affiliates, including
its directors and officers, will offer to us any investment or business opportunity of which they are aware.
-22-
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 27, 2006 Powered by Morningstar® Document Research℠