As previously announced in a Current Report on Form 8-K filed on July 6, 2011 (the "Prior Form 8-K"), Frontier Airlines, Inc. (“Frontier”), a subsidiary of Republic Airways Holdings Inc. (the “Company”), reached a tentative agreement with the Frontier pilots (the “Pilots”) represented by the Frontier Airlines Pilot Association (“FAPA”) pursuant to which FAPA agreed in principle to the restructuring of certain wages and benefits in exchange for receipt of an equity stake in Frontier. The terms and conditions of FAPA's equity participation and profit sharing in Frontier were set forth in a commercial agreement filed with the Prior Form 8-K, and Frontier and FAPA agreed to negotiate definitive agreements relating to the equity participation in Frontier.
On June 21, 2012, Frontier, the Company and FAPAInvest, a Colorado limited liability company ("FAPAInvest") acting as agent for and on behalf of those persons employed as of June 24, 2011 as pilots by Frontier (such persons, the "Participating Pilots") entered into a Phantom Equity Investment Agreement, effective as of June 1, 2012 (the "Agreement") providing for the terms and
conditions of the Participating Pilots' equity participation in Frontier.
Pursuant to the Agreement, Frontier granted to FAPAInvest, for the benefit of the Participating Pilots, units (the "Units") representing the right to receive cash and/or registered shares of Frontier in an aggregate amount of $7.074 million. The Units vest quarterly as and to the extent Frontier receives the benefit of the restructured wages and benefits as set forth in a schedule to the Agreement. Vesting of the Units and the continued investment by FAPAInvest are subject to the satisfaction of certain conditions that are set forth in the commercial agreement filed as an exhibit to the Prior Form 8-K. Each Participating Pilot is entitled to receive his or her prorata share of the vested Units on one of two payment dates: January 1, 2015 (or within 90 days thereafter), or January 1, 2017 (or within 90 days thereafter). The payment date for the Units may be accelerated upon the occurrence of certain events that qualify as a change in ownership or effective control, or ownership of a substantial portion of assets, under Treas. Reg. section 1.409A-3(i)(5) of the Internal Revenue Code of 1986, as amended, and the amount to be received by Participating Pilots if certain such events occur is
limited as set forth in the Agreement. A particular Participating Pilot's prorata share of the Units ceases to accrue upon the termination
of his or her employment with Frontier. The Agreement also provides that, following the occurrence of an Equity Event (as defined in the Agreement), a majority of the board of directors of Frontier must consist of persons who are not affiliates of the Company, one of whom shall be designated by
FAPAInvest, and Frontier and the Company agree to take all necessary or desirable actions to cause the FAPAInvest representative to
be elected to the Frontier board. An "Equity Event" is defined in the Agreement as (i) a private investment in Frontier that results in
beneficial ownership by persons who are not affiliates of the Company ("Non-Affiliates") of greater than 51% of the outstanding equity in Frontier, (ii) a public offering by Frontier or a subsidiary of the Company of Frontier shares that results in beneficial ownership by Non-Affiliates of greater than 51% of the outstanding equity in Frontier, and (iii) a change in control of Frontier that
results in beneficial ownership by Non-Affiliates of greater than 51% of the business or assets of Frontier.