Frontier Airlines 2006 Annual Report Download - page 253

ARTICLE III RAI COMPENSATION
Section 3.01 Base and Incentive Compensation. For and in consideration of the aircraft and services to be provided by RAI
hereunder, Frontier shall pay RAI the base and incentive compensation as provided in Exhibit D hereto, subject to the terms and
conditions set forth in this Article III.
Section 3.02 Periodic Adjustment of Base Compensation. The rates under this Agreement set forth in Appendix 1 to
Exhibit D hereto shall remain in effect throughout the Term of this Agreement, provided, the rates on Appendix 1 to Exhibit D hereto
will be adjusted from time to time as described in Exhibit D, and, provided further, that the rates on Appendix 1 to Exhibit D
designated as “Subject to Escalation” will remain in effect through December 31, 2007, and thereafter shall be adjusted on each
January 1, beginning with January 1, 2008, as follows: the new rates, applicable beginning on such January 1, shall equal the rates in
effect on the immediately preceding December 31 multiplied by ([*] (Annual Change in PPI [*])), where PPI = the annual Producer
Price Index, Commodities, Finished Goods (not seasonally adjusted), Series ID: WPUSOP3000 as published by the Bureau of Labor
Statistics for January of the applicable year, provided further, annual adjustments will not decrease from the prior year and will not
increase more than [*]over the prior year. Adjustments will be calculated as soon as the PPI for the prior year is published by the
Bureau of Labor Statistics and the adjusted rates will be applied retroactively to the 1st day of the calendar year and paid as part of the
next monthly payment.
Section 3.03 RAI Expenses. Except as provided otherwise in Section 3.04, RAI shall pay in accordance with commercially
reasonable practices all expenses incurred in connection with RAI's provision of Regional Airline Services.
Section 3.04 Frontier Expenses
(a) Certain Expenses. Frontier shall incur directly those expenses relating to the Regional Airlines Services that
are described in Paragraph 6 of Exhibit D.
(b) Design Changes. Except as set forth in Section 2.04 with respect to RAI’s obligation to convert the
Two-Class Aircraft, Frontier shall be responsible for any reasonable out-of-pocket expenses relating to interior and exterior design
changes to the Covered Aircraft and other product-related changes required by Frontier, including facility-related design changes and
the cost of changes in aircraft livery, in each case that occur outside of the Covered Aircraft specifications, livery and other
requirements of Exhibit C to this Agreement or as otherwise specified in this Agreement.
Section 3.05 Audit Rights; Financial Information. RAI shall make available for inspection by Frontier and its outside
auditors and advisors, within a reasonable period of time after Frontier makes a written request therefor, all of RAI's books and
records (including all financial and accounting records and operations reports, and records of other subsidiaries or affiliates of RAI, if
any) as necessary to audit any reimbursement of Pass-Thru Costs or other expenses set forth in Paragraph 6 of Exhibit D hereto. In
connection with such audit, Frontier and its outside auditors and advisors shall be entitled to make copies and notes of such
information as they deem necessary and to discuss such records with RAI's Chief Financial Officer or such other employees or agents
of RAI knowledgeable about such records. Upon the reasonable written request of Frontier or its outside auditors or advisors, RAI will
cooperate with Frontier and its outside auditors and advisors to permit Frontier and its outside auditors and advisors access to RAI
Holding's outside auditors for purposes of reviewing such records. In addition, RAI shall deliver or cause to be delivered to Frontier
(I) as soon as available, but in any event within 90 days after the end of each fiscal year, a copy of the consolidated balance sheet of
RAI Holdings, as at the end of such year, and the related consolidated statements of income and retained earnings and of cash flows of
RAI Holdings for such year, setting forth in each case in comparative form the figures for the previous year, reported on by an
independent certified public accountants of nationally recognized standing; and (II) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of each fiscal year, the unaudited consolidated balance sheet of RAI
Holdings, as at the end of such quarter, and the related unaudited consolidated statements of income and retained earnings and of cash
flows of RAI Holdings for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a responsible officer of RAI Holdings, as being fairly stated in all
material respects (subject to normal year-end audit adjustments); provided , that no party shall be required to deliver financial
statements pursuant to this sentence if such party is a reporting issuer pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, and such financial statements are timely filed with the Securities and Exchange Commission pursuant thereto.
All financial statements delivered hereunder shall be complete and correct in all material respects and shall be prepared in reasonable
detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠