EXHIBIT 10.12.1
EXECUTION COPY
ENGINE MAINTENANCE AGREEMENT
(GECAS, BOEING AND OTHER - CF6-80C2 ENGINES)
between
Atlas Air, Inc.
Polar Air Cargo, Inc.
2000 Westchester Avenue
Purchase, NY 10577
USA
- - hereinafter collectively referred to as "Operator" -
and
MTU Maintenance Hannover GmbH
Muenchner Strasse 31
30855 Langenhagen
Germany
- -hereinafter referred to as "MTU-H" -
- - Operator and MTU-H individually or together also referred to as the
"Party/Parties" -
for maintenance services on General Electric CF6-80C2 series.
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TABLE OF CONTENTS
RECITAL
Clause 1 DEFINITIONS
Clause 2 SCOPE OF SERVICES
Clause 3 RECORDS AND STANDARDS
Clause 4 DELIVERY, REDELIVERY AND TRANSPORTATION
Clause 5 TURNAROUND TIMES AND EXCUSABLE DELAY
Clause 6 OPERATOR RESPONSIBILITIES
Clause 7 REJECTED PARTS
Clause 8 CHARGES
Clause 9 PAYMENT
Clause 10 TAXES, DUTIES AND CUSTOMS FEES
Clause 11 SUBCONTRACTING
Clause 12 WARRANTY
Clause 13 LIABILITY, INDEMNIFICATION, INSURANCE
Clause 14 MISCELLANEOUS
Clause 15 DURATION AND TERMINATION
Clause 16 DISPUTE RESOLUTION, LAW, JURISDICTION
Clause 17 NOTICES
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This Engine Maintenance Agreement ("Agreement") is entered into as of April 30,
2004 among Atlas Air, Inc., a Delaware corporation ("AAI"), Polar Air Cargo,
Inc., a California corporation ("Polar" and, together with AAI, the "Operator"),
and MTU Maintenance Hannover GmbH, a German limited liability company ("MTU-H").
WHEREAS The Operator requires maintenance, refurbishment, repair and
modification services with respect to certain CF6-80C2
engines; and
MTU-H has the facilities, expertise and experience and is
willing and prepared to provide such services according to
MTU-H's standards and procedures approved/accepted by
FAA/JAA under the bilateral agreement, the Operator's FAA
approved maintenance program, and valid airworthiness
authority regulations as provided in Appendix G at its
facility, the MTU Repair Facilities or the facilities of the
sub-contractors listed in Appendix F; and
MTU-H shall perform such services based on the terms and
conditions set forth in this Agreement
NOW, THEREFORE, in consideration thereof and reliance on the mutual promises
given herein, the Parties hereto agree as follows:
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CLAUSE 1 DEFINITIONS
Within the scope of this Agreement, unless otherwise
individually stipulated, the following definitions shall
apply:
1.1 "Accessory/Components"
Any Quick Engine Change (QEC) item listed in Appendix B.
1.2 "Airworthiness Directive/AD"
A modification to the Equipment classified as compulsory by
the airworthiness authority.
1.3 "AOG"
"Aircraft on Ground" indicates that an aircraft is unable to
continue or be returned to revenue service until the
appropriate action is taken.
1.4 "Bankruptcy Cases"
Shall mean the cases filed by the Operator in the Bankruptcy
Court.
1.5 "Bankruptcy Code"
Shall mean title 11 of the United States Code, as amended.
1.6 "Bankruptcy Court"
Shall mean the United States Bankruptcy Court for the
Southern District of Florida.
1.7 "Business Day"
Means any day that is not a Saturday, Sunday or any day on
which banks in the State of New York, USA or the State of
Lower Saxony, Germany are authorized or obligated to be
closed.
1.8 "Credit Balance"
Shall have the meaning ascribed thereto in Clause 9.1.2.
1.9 "CSLSV"
The number of cycles an item of Equipment has completed
since last Shop Visit.
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1.10 "CSN"
The number of cycles an item of Equipment has completed
since manufacture (new).
1.11 "CSO"
The number of Flight Cycles an item of Equipment has
completed since last Overhaul.
1.12 "Days"
Any calendar days.
1.13 "Designated Party"
With respect to each Engine, the party designated on
Appendix A with respect to such Engine.
1.14 "Effective Date"
Shall have the meaning ascribed thereto in Clause 15.1.
1.15 "Engine(s)"
The CF6-80C2 engine(s) specified from time to time by serial
numbers in Appendix A.
1.16 "Engine Workscope"
The applicable Engine Overhaul Workscope attached hereto as
Appendix D.
1.17 "Equipment"
Engines, Modules, Parts, Accessory/Component or any other
items of associated equipment delivered to MTU-H for the
performance of Services pursuant to this Agreement.
1.18 "FAA"
Shall mean the United States Federal Aviation Administration
or any successor thereto.
1.19 "Flight Cycle"
A completed take-off and landing sequence.
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1.20 "Foreign Object Damage (FOD)"
Damage to any portion of the Engine caused by an object
other than an integral part of the Engine, including but not
limited to an impact or ingestion of birds, stones, hail
and/or runway, taxiway or apron gravel.
1.21 "Lease"
Shall mean each of the GE Leases and the BCC Lease, as such
terms are defined in Appendix A.
1.22 "Life Limited Part"
Any Part which is identified by the manufacturer for a
defined service life.
1.23 "Line Maintenance"
Routine checks, inspections and rectifications of
malfunctions performed en route and at base stations during
transit, turnaround or night stop.
1.24 "Module"
Modular construction - an Engine assembly of which large
subassemblies can be removed, exchanged and installed
separately without adversely affecting the Engine integrity
or performance.
1.25 "MTU Repair Facilities"
All companies within MTU Aero Engines GmbH's ("MTU Munich)"
commercial aircraft engine maintenance group, certified by
the FAA as a FAA 145 repair station or otherwise accepted by
the FAA under FAR 43.17, active in the business of civil
aircraft engine maintenance, overhaul, repair and ancillary
services, such as MTU Maintenance Canada Ltd. specified in
Appendix F hereto, and any other affiliate of MTU-H as
notified by MTU-H to Operator in writing and approved by
Operator in writing.
1.26 "Operator's Maintenance Program"
Shall mean (i) with respect to Equipment owned or operated
by AAI, AAI's FAA-approved B747-400 Maintenance & Inspection
Program and (ii) with respect to Equipment owned or operated
by Polar, Polar's FAA-approved B747-400 Maintenance &
Inspection Program.
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1.27 "Original Equipment Manufacturer (OEM)"
General Electric Co, Cincinnati, Ohio/USA.
1.28 "Overhaul"
Work provided on an Engine in accordance with the applicable
Engine Workscope.
1.29 "Overhaul Price"
Shall have the meaning ascribed thereto in Appendix C.
1.30 "Part"
Any part of an Engine.
1.31 "Prepaid Engine"
Shall mean each Engine for which advance payments will be
made pursuant to the terms of a restructuring agreement
between the Operator and the respective Designated Party, as
identified on Appendix A.
1.32 "Rejected Part"
Any item removed by MTU-H from a Module or Engine and
consequently replaced by a Part.
1.33 "Repair Order"
A written order stating that it is subject to the terms and
conditions of this Agreement issued by Operator to MTU-H and
includes:
a) A statement of or reference to the applicable Work
Statement or Engine Workscope;
b) Return delivery instructions, including packaging and
shipping; and
c) The serial number of the Engine or other Equipment.
1.34 "Repair Part"
Any Part which is repaired to serviceable condition.
1.35 "Restructuring Agreement"
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Shall have the meaning ascribed thereto in Clause 9.1.1.
1.36 "Services"
All Work in
- Maintenance Those actions required for restoring or
maintaining Equipment in serviceable
condition, including servicing, repair,
modification, overhaul, inspection and
determination of condition.
- Modification Services agreed upon between MTU-H and
Operator, which are based upon a
manufacturer's, FAA or other regulatory
agency airworthiness directive,
configuration change, Operator's
engineering order or other change to
Equipment.
- Testing As defined in the applicable Engine
manufacturer's Overhaul and Repair
manual as well as additional Testing if
required by the MTU-H test procedures.
- Overhaul As defined in Clause 1.28.
- Performance To restore at a minimum the
Repair high-pressure core (including the HPT &
HPC Modules) to achieve the guaranteed
level of EGT margin.
- Repair To make an Engine, Part or Modules
serviceable by replacing or processing
failed or damaged Parts.
- Restoration The Work (on/off the aircraft) necessary
to restore Modules or Parts to a
specific standard.
- Rework To carry out Work on uninstalled Modules
or Parts.
- Replacement The action whereby a Module or Part is
removed and another Module or Part is
installed in its place for any reason.
- Inspection An examination of Equipment against a
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specific standard.
1.37 "Service Bulletin (SB)"
A document issued by the manufacturer to notify Operator and
MTU-H of recommended Modifications, substitution of Parts,
special Inspections/checks, reduction of existing life
limits or establishment of first time life limits and
conversion from one Module to another.
1.38 "Shop Visit"
The performance of Services at MTU-H's facility on an Engine
or Module which makes necessary a total or partial
disassembly (breaking of flanges) of the Equipment.
1.39 "TSLSV" (time since last shop visit)
The time expressed in flight hours an item of Equipment has
completed since last Shop Visit.
1.40 "TSN" (time since new)
The time expressed in flight hours an item of Equipment has
completed since manufacture.
1.41 "TSO" (time since overhaul)
The time expressed in flight hours an item of Equipment has
completed since last Overhaul.
1.42 "Turnaround Time (TAT)"
Shall have the meaning ascribed thereto in Clause 5.
1.43 "Work"
The performance of Services according to the terms and
conditions of this Agreement.
1.44 "Work Statement"
Statement(s) being part of the Repair Order which include(s)
the Work requirements applicable to Engines, Modules or
Parts. The Work Statement(s) shall include details relating
but not necessarily restricted to:
- reason(s) for shop visit
- latest in flight readings of the respective Engines.
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CLAUSE 2 SCOPE OF CONTRACT
2.1 ENGINES SUBJECT TO CONTRACT:
Operator may, by written notice to MTU-H, add to this
Agreement additional CF6-80C2 engines owned or operated by
the Operator which currently are not subject to this
Agreement, provided that if any such additional engines are
not currently operated by Operator and are not in the same
or similar condition as the engines currently operated by
Operator, MTU-H and Operator will agree on any necessary
adjustments to the Overhaul Price for such engines. The
Operator also shall have the right at any time to remove
Engines from coverage under this Agreement by providing
written notice to MTU-H.
2.2 PERFORMANCE OF SERVICES:
All Services will be performed in accordance with Federal
Aviation Regulations ("FAR") of the FAA and supplemented by
MTU-H's procedures accepted/approved by the FAA/JAA under
the bilateral agreement, and the Engine manufacturer's
overhaul and repair manuals, Operator's Maintenance Program
Section 7.6 to 7.9 and Operators Engineering Report 99-02 CF
6- 80C2B1 / B5F - Engine Shop Inspection and Repair
Specification and such other particular conditions as may be
expressly agreed in writing by Operator and MTU-H. All major
deviations either from the OEM manuals and/or Operator's
Maintenance Program shall be approved by a FAA certified
DER. It is understood and agreed that Operator's Maintenance
Program may be revised from time to time by Operator. MTU-H
shall be placed on the distribution list for revisions to
this document and MTU-H shall perform Services according to
such revision upon receipt thereof, provided that if any
such revision represents a material change and has a
substantial impact on the Overhaul Price, then Operator and
MTU-H will discuss an appropriate change to the Overhaul
Price.
For all purposes of this Agreement, Operator shall remain
responsible in terms of airworthiness compliance as well as
responsible for Operator's Maintenance Program as well as
the Engine Workscope and its approval by the airworthiness
authority.
2.3 SCOPE OF SERVICES:
The Services will include but not be limited to the
following:
2.3.1 Inspection of an Engine or Module upon receipt by MTU-H from
the Operator to determine whether any Parts are missing from
or
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extraneous to the Engine or Module or shipping container
including any transportation damages and preparation of a
receipt condition report;
2.3.2 Disassembly, cleaning, Inspection and rebuilding of Engines;
2.3.3 Exchange of Parts;
2.3.4 Repair of Engines, Modules and Parts to a serviceable
condition;
2.3.5 Engine Testing according to the specifications of the Engine
manufacturer and MTU-H;
2.3.6 Parts Management
Incorporation of Modifications as prescribed or advised from
the manufacturer, MTU-H and/or the Operator;
Technical support including Engineering Services when
requested by the Operator, provided the following Engine
documentation is made available to MTU-H:
- Log book or equivalent
- Life of all Life Limited Parts
- Inflight readings of all parameters of the Engine.
2.3.7 Replacement of Life Limited Parts;
2.3.8 MTU-H shall comply with the contents of Clause 4 (Delivery).
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CLAUSE 3 RECORDS AND STANDARDS
3.1 MTU-H will prior to commencement of Services establish and
shall maintain throughout the duration of this Agreement a
FAR 145 certified repair station and facilities for Services
on Engines, Modules and Parts in accordance with the Engine
manufacturer's manuals and other applicable documentation.
The repair station number for MTU-H's facility is FAA
CQ5Y788M as set out in Appendix G hereto.
3.1.1 Within four (4) months of signature of the Agreement the
Parties shall develop and follow the terms of a customer
support manual which amongst other items will describe the
procedures of information exchange between the Parties
technical and commercial departments and will provide that
technical performance review meetings including review of
Operator's Maintenance Program shall be held at least twice
a year at Operator's or MTU-H's facility as agreed by the
Parties.
3.2 In respect of individual Engines or Modules, Operator shall
render MTU-H all documents and supply all information
necessary to establish the extent of Services required. This
includes, but is not limited to:
3.2.1 Repair Order;
3.2.2 Any applicable technical or other documentation;
3.2.3 Any required variations to the Work Statement or, in the
case of an Overhaul, the Engine Workscope. Further
variations to any specific Work on an Engine or Module will
be agreed in writing between MTU-H and Operator;
3.2.4 Reason for removal;
3.2.5 Any further information (as mutually agreed upon) in the
possession of Operator concerning the condition of the
Engine or Module;
3.2.6 Life of all Life Limited and/or time tracking Parts, i.e.
list of hours and cycles (TSN, CSN, TSLSV, CSLSV, TSO, CSO);
3.2.7 Installed powerplant Accessory/Component sheet, a listing by
nomenclature of each Accessory/Component, Part number,
quantity, time and cycles and serial number;
3.2.8 Logbook or equivalent and Part (Module) cards, if available;
3.2.9 In-flight readings (as mutually agreed upon) of all Engine
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parameters on that specific Engine from its last flight
prior to removal.
3.3 The MTU-H record system will include documentation of all
Services performed, Rework operations required and
disposition of all Parts replaced. MTU-H agrees to keep all
records herein described in form and detail sufficient for
accurate and expeditious administration of the Agreement and
shall furnish to Operator the following records and reports,
as applicable for each shop visit:
3.3.1 Engine, Module, Part or Accessory/Component serial numbers;
The general exterior condition of the Engine, Module or Part
and shipping conveyance; List of the missing and/or damaged
external Parts; Borescope/chamberscope results, as
applicable.
3.3.2 The following information for each cycle controlled and Life
Limited Part installed during the shop visit:
a) Nomenclature
b) Part number
c) Serial number
d) Total operating cycles and hours accumulated to date
e) Total cycles remaining
f) Major maintenance events (date, TSN, CSN) if available.
3.3.3 A list of all Parts determined to be scrap, with identified
Part number quantity and reason for scrappage in case of the
Life Limited Parts.
3.3.4 A list by nomenclature of each Accessory/Component, Part
number, quantity, Part time and serial number.
3.3.5 One (1) copy of the applicable Engine and/or
Accessory/Component test logs.
3.3.6 A report summarizing condition detected subsequent to Engine
disassembly.
3.3.7 The following additional records:
a) Engine Cert FAA form 337, FAA 8130 and JAA Form One
b) AD Status
c) SB accomplishment listing
d) Parts tracking list
e) LLP on off log (including TSN/CSN)
f) Missing parts list - incoming and outgoing
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g) Off wing inspection task summary completed
h) Listing of Operator engineering orders accomplished
i) Components on off long including p/n, s/n and TSO
j) Engine test cell performance data sheet
k) Fan blade PN/SN; TSN/CSN; TSO/CSO
l) Fan blade distribution sheet (by position and S/N)
3.4 MTU-H shall be required to complete and properly execute
Federal Aviation Administration (FAA) Form 8130-3 for minor
Repairs and FAA Form 337 for major Repairs or its equivalent
for Equipment repaired, modified and/or tested by MTU-H
under this Agreement.
Upon the request from Operator accident and damage reports,
including pictures and laboratory investigation results will
be issued by MTU-H.
3.5 MTU-H will provide to Operator on the first and third Monday
of each calendar month a summary report showing the Engines
then in MTU-H's possession.
3.6 MTU-H will keep the documentation on Services performed on
an Engine during a shop visit until the earlier of (i)
termination of this Agreement, (ii) the next performance of
Services of equal scope and (iii) five (5) years following
such shop visit, after which MTU-H shall ship such
documentation to Operator.
3.7 MTU-H may recommend to Operator the use of certain DER
Repairs and the installation of certain PMA parts. No such
DER Repairs may be used or PMA Parts installed without
Operator's written approval, such approval not to be
unreasonably withheld.
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CLAUSE 4 DELIVERY, REDELIVERY AND TRANSPORTATION
4.1 The Operator shall advise MTU-H when any Equipment is ready
to be shipped to MTU-H's facilities to be overhauled,
repaired, tested and/or modified by MTU-H.
Upon receipt of the Equipment at MTU-H's or other MTU Repair
Facilities, MTU-H will or will have inspected the Equipment
and complete a receipt condition report.
MTU-H will advise the Operator of the completion of the
Equipment overhauled, repaired and/or modified by MTU-H.
4.2 Operator will provide MTU-H with a Repair Order before
commencement of Services.
4.3 In the event that Operator delivers an incomplete Engine or
Module, MTU-H will inform Operator in writing within ten
(10) Days after receipt of the Engine of missing Parts, if
any, and the time when such missing Parts are needed in the
course of Repair of the respective Engine or Module.
Operator shall provide such missing Parts at the relevant
time or advise MTU-H in writing on how to proceed with this
matter. In case Operator does not react upon such
information, MTU-H will redeliver the Engine or Module upon
completion of the Services in received configuration. Should
Operator request MTU-H to add the missing Parts, MTU-H will
use reasonable efforts to deliver the requested Parts
together with the Engine or Module. Should such Accessories/
Components not be available at the date of redelivery of an
Engine or Module, these Accessories/Components will be sent
to Operator separately as expeditiously as possible.
4.4 The Operator will accept redelivery and complete a
redelivery condition report.
The Operator shall provide, at its expense, suitable engine
shipping containers, stands, including mounting adapters,
blanking plugs and covers and shall be responsible for their
serviceability. MTU-H will visually inspect all such
equipment upon arrival and will provide Operator with a
repair cost quotation, in the event these items are found to
be defective or otherwise damaged. If such repair cost
quotation and repair work is authorized by Operator, the
repair cost will not be included in the Overhaul Price set
forth in Appendix C.
The Operator will box, pack and make all equipment available
to the nominated shipping agency for delivery to MTU-H.
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4.5 Except to the extent provided otherwise in Clause 4.6,
transportation of the Operator's Equipment to and from MTU-H
will be the responsibility of the Operator. At the request
of the Operator, MTU-H will arrange any such transportation
for and on behalf of the Operator. The Operator will be the
importer/exporter of record.
4.6 In the event of an Engine Overhaul, transportation charges
for Engines of up to $10,000 each way are included in the
Overhaul Price set forth in Appendix C. In such event, if
air transportation for Engines is provided by the Operator,
the Overhaul Price listed in Appendix C will be reduced by
$10,000 for each way that transportation is provided by the
Operator.
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CLAUSE 5 TURNAROUND TIME (TAT) AND EXCUSABLE DELAY
5.1 Upon delivery of any item of Equipment to MTU-H, MTU-H shall
complete the required Services on each item of Equipment
within fifty-eight (58) days (the "Turnaround Time" or
"TAT").
5.2 Turnaround Time shall start the day after receipt at MTU-H's
facility or other MTU Repair Facility of (a) any Equipment
and (b) all necessary documents, including a Repair Order,
and ends upon notification that the Equipment is
serviceable. Within two Business Days after receipt of
Equipment at a MTU Repair Facility, MTU will deliver to
Operator a written notice stating either that the TAT has
begun or specifying the documentation required from Operator
prior to the beginning of the TAT. If no such notice is
delivered to Operator, the TAT will be deemed to begin one
Business Day after delivery of the Equipment to the MTU
Repair Facility along with the documentation deemed
necessary by Operator.
5.3 Any reasonable technical requests involving issues or
changes to the Work Statement or Engine Workscope that could
affect the TAT which are delivered in writing by MTU-H and
received by the appropriate representative of the Operator
(as designated by the Operator in writing) will be answered
by Operator within two Business Days after being
communicated to such representative in the manner to be
agreed between the Operator and MTU-H. If MTU-H communicates
such request in accordance with this paragraph and the
Operator's designated representative does not respond within
two Business Days, the TAT will be increased by each day in
excess of two Business Days that elapse prior to receiving a
response from the Operator. Any impact on the TAT resulting
from this decision will be promptly advised by MTU-H.
5.4 MTU-H shall not be liable for exceeding the TAT due to
reasons contained in Clause 5.6 regarding Excusable Delays.
MTU-H shall promptly notify the Operator when such delays
occur or impending delays are likely to occur and shall
continue to advise the Operator of new shipping schedules
and/or changes thereto. Except as provided in Clauses 5.3
and 5.6, the TAT shall not be extended for any reason unless
the Operator has agreed to such extension in writing.
5.5 If MTU-H for reasons other than Excusable Delay fails to
meet the TAT set forth in this section and as a consequence
thereof the Operator's number of Spare Engines (defined
below) falls below the Minimum Spare Engine Level (defined
below), MTU-H will as the Operator's sole remedy for MTU-H's
failure to meet the TAT either (a) provide on request an
additional Spare
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Engine(s) at no additional cost to meet the Operator's
Minimum Spare Engine Level, or (b) if MTU-H is unable to
provide such additional Spare Engine(s), compensate the
Operator at the daily Fair Market Lease Rate (as hereinafter
defined) for each calendar day that the TAT is exceeded
until the Engine is redelivered to the Operator, provided
that the Operator shall not be entitled to compensation for
any days beyond the eighth day after the concerned Engine(s)
is/are notified serviceable, and reimburse to the Operator
the reasonable transportation cost incurred when Operator
actually leases the Spare Engine using the compensation set
forth in this alternative (b). In the event that MTU-H
provides any such additional Spare Engine, it will be leased
by MTU-H to the Operator on a no charge basis subject to the
terms and conditions of a separate lease agreement provided
that such additional Spare Engine while installed by the
Operator on an aircraft will be subject to payment of fees
relating to usage/maintenance reserves at a rate to be
agreed by the Parties. The "Minimum Spare Engine Level" to
support the Operator's operation is two (2) Spare Engines.
"Spare Engine" shall mean any uninstalled serviceable Engine
which is not on- wing on a specific aircraft.
"Fair Market Lease Rate" shall mean and be determined as
follows: MTU-H shall obtain bona fide, at-arms-length offers
regarding the lease of an CF6-80C2 engine from three (3)
CF6-80C2 engine lessors in the market place for a duration
reasonably anticipated to return the Operator's delayed
Engine. The average of such offers shall be deemed to
constitute the Fair Market Lease Rate.
5.6 The Operator agrees that delivery dates are based on the
assumptions that there will be no delays due to causes
beyond the reasonable control of MTU-H. MTU-H shall not be
charged with any liability for delay or non-delivery when
due to delays of the Operator, acts of God, public enemy,
compliance in good faith with any applicable foreign or
domestic governmental regulations or order whether or not it
proves to be valid or invalid, fires, riots, unusually
severe weather or any other cause beyond the reasonable
control of MTU-H ("Excusable Delay"). To the extent such
causes actually retard the deliveries or render them in part
or whole impossible, the time for the performance shall be
extended for as many days beyond the agreed date of delivery
as is required to obtain removal of such causes. This
provision shall, however, not relieve MTU-H from using its
reasonable best efforts to avoid or remove such causes and
to continue performance with reasonable dispatch whenever
such causes are removed.
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CLAUSE 6 OPERATOR RESPONSIBILITIES
6.1 RIGHTS AGAINST OEM
6.1.1 In case of defects or deficiencies in the design or
manufacture of the Equipment by the OEM, Operator agrees to
use all commercially reasonable efforts to assist and to
allow MTU-H to recover from the OEM all costs and expenses
associated with any measure taken by MTU-H to rectify or
repair such defects or deficiencies.
6.1.2 For Engines subject to this Agreement, Operator agrees to
assign to MTU-H, at MTU-H expense, guarantees, warranties or
other remedies related to the maintenance or reliability of
the Engines that Operator is entitled to assign in
accordance with the general terms agreement between Operator
and the OEM, including but not limited to campaign change
allowances and new Parts guarantees.
If these guarantees, warranties or other remedies cannot be
assigned, Operator will raise, at MTU-H expense, claims
under said non-assigned guarantees, warranties or other
remedies and shall transfer any economic benefit to MTU-H.
6.1.3 Operator agrees to reasonably support MTU-H in the
enforcement of any assigned rights as described in this
Clause 6.1.
6.1.4 Notwithstanding anything in this Agreement to the contrary,
Operator shall not be required to assign to MTU-H, or to
transfer to MTU-H the economic benefit of, any guarantees,
warranties, commitment letters or other remedies or claims
against the OEM that are related to Services performed by
MTU-H that are not included in the applicable Overhaul
Price.
6.2 Operator agrees to cooperate reasonably with MTU-H with
respect to the determination of the optimum removal date for
each Engine and the joint development of an Engine removal
plan, taking into consideration the trends from engine
condition monitoring, all financial and operational
requirements of Operator, including Operator's business
plan, and the Parties' interest in cost-efficient engine
removals. Such removal plan, once agreed between the
Parties, shall be binding on the Parties, unless amended
from time to time.
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CLAUSE 7 REJECTED PARTS
7.1 All Parts removed during Work and determined by MTU-H as
scrap or rejected with a value of less than US$ 1,000.00
shall become MTU-H's property and shall be disposed of
locally by MTU-H.
7.2 All Parts removed during Work and determined by MTU-H as
scrap or rejected with a value of US$ 1,000.00 or more will
be stored as Operator owned stock subject to inspection by
the Parties four times per year to determine further action.
At Operator's request, MTU-H shall dispose of any such Parts
at MTU-H's expense. MTU-H shall properly document the
disposal of scrap or rejected parts with a value of US$
1,000.00 or more and shall provide such documentation to
Operator.
7.3 If MTU-H and the Operator cannot agree on any further action
for any such stored Parts within six (6) months after
delivery of the respective Engine(s), MTU-H shall deliver
such Parts to the Operator at Operator's expense in "as is"
condition, provided that if any such Parts are related to an
Engine that is the subject of an investigation or insurance
claim, MTU-H shall store such Parts, at MTU-H's expense, at
the applicable MTU Repair Facility until such time as a
final determination has been made in such investigation or
with respect to such insurance claim.
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CLAUSE 8 CHARGES
For all Services the Operator shall pay the sums charged in
accordance with Appendix C.
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CLAUSE 9 PAYMENT
9.1 ADVANCE PAYMENTS
9.1.1 With respect to each Prepaid Engine, the Operator will make
advance payments to MTU-H into one or more bank accounts
specifically designated by MTU-H to Operator for advance
payments pursuant to this Clause 9.1 on the 15th day of each
month (beginning May 15, 2004) that this Agreement is in
effect as and to the extent required by the terms of the
restructuring agreements entered into by Operator with
certain of Operator's creditors and lessors (each a
"Restructuring Agreement"). As MTU-H is not a party to any
Restructuring Agreement nor has knowledge of any
Restructuring Agreement, MTU-H shall have no obligation at
all to monitor the Operator's compliance with any
Restructuring Agreements. The Operator also may, from time
to time, make other advance payments under this Agreement.
9.1.2 All advance payments made under this Agreement shall be made
on account of a particular Prepaid Engine, and MTU-H shall
keep detailed book-entry records at all times of the credit
balance existing from time to time on a per-Engine basis
(each a "Credit Balance"). The Credit Balances will be
deemed to accrue interest monthly at the 1-month London
Inter-Bank Offered Rate (determined as of the first Business
Day of each month), less 20 basis points. The Credit
Balances will be applied upon the performance of Services on
the Prepaid Engine for which the funds have been credited
or, upon the direction of the Designated Party with respect
to such Prepaid Engine, to another Engine.
9.1.3 The manner of applying the Credit Balances against
outstanding invoices is described in Clause 9.2. MTU-H shall
have no obligation to hold any amounts paid hereunder in a
separate account. Notwithstanding anything in this Agreement
to the contrary, the Operator shall have no obligation to
make the monthly payments described in this Clause 9.1 with
respect to Engines with the serial numbers listed in
Appendix A as "Engines Not Subject to Monthly Payment
Provisions".
9.1.4 Monthly Reporting. Not later than the 25th day of each month
that this Agreement is in effect, MTU-H shall provide to
each of the Operator and each Designated Party (in each
case, or its designee) a report indicating the Credit
Balance for each Prepaid Engine as of the end of the prior
month.
9.1.5 Application of Excess Funds. If MTU-H is released from its
obligations set forth in this Agreement with respect to any
Prepaid Engine, any credit balance held by MTU-H on account
of
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such Engine shall be applied to the account of other Prepaid
Engines in such manner as directed by the applicable
Designated Party or its designee.
9.2 PAYMENTS FOR OVERHAULS
9.2.1 Payments for each Overhaul will be made by Operator to MTU-H
as follows:
a) 25% of the applicable Overhaul Price set forth in
Appendix C upon induction,
b) 25% of the applicable Overhaul Price upon redelivery of
the Engine to the Operator,
c) the balance owed after applying the payments described
in (a) and (b) above and any Credit Balance, within
thirty (30) days after receipt of a preliminary invoice
of such balance, and
d) the balance owed, if any, after applying the payments
described in (a), (b) and (c) above and any Credit
Balance, within thirty (30) days after receipt of a
final invoice.
Notwithstanding the foregoing, if (i) any Engine that is not
operated by the Operator is submitted for Overhaul under
this Agreement, or (ii) the Operator or the applicable
Designated Party (as applicable) is in default under this
Agreement or any other agreement between MTU-H and the
Operator or such Designated Party, payments for such
Overhaul will be made 25% of the applicable Overhaul Price
upon induction and the remaining balance upon redelivery of
the Engine.
Any overpayments made by Operator shall be refunded to
Operator promptly after the date of the final invoice for
each Overhaul, but in no event later than 30 days after the
date of such final invoice.
9.2.2 MTU-H shall apply the Credit Balance for any Prepaid Engine
against the last payment to be received by MTU-H from the
Operator pursuant to Clause 9.2.1, except that if the Credit
Balance at the date of induction exceeds 50% of the Overhaul
Price, the excess will be applied first by MTU-H toward the
payment required by Clause 9.2.1(b) and then toward the
payment required by Clause 9.2.1(c). For example, if a
Credit Balance equal to 60% of the Overhaul cost for a
Prepaid Engine exists, the Operator will pay the first 40%
of the Overhaul cost, and the Credit Balance will be used to
satisfy the remaining 60% of the Overhaul cost, in each case
in accordance with the
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payment terms described in Clause 9.2.1.
9.3 PAYMENT TERMS FOR SERVICES OTHER THAN OVERHAULS
9.3.1 Payments for Services other than Overhaul Services will be
made by Operator to MTU-H as follows:
a) 25% of the total amount of charges estimated by MTU-H
upon induction, such estimate to be delivered to
Operator in writing upon induction,
b) 25% of the total amount of charges estimated by MTU-H
upon redelivery of the Engine to the Operator,
c) the remaining 50% of charges estimated by MTU-H within
thirty (30) days after receipt of a preliminary invoice
of such balance, and
d) the balance owed, if any, after applying the payments
described in (a), (b) and (c) above, within thirty (30)
days after receipt of a final invoice.
Notwithstanding the foregoing, if the Operator or the
applicable Designated Party (as applicable) is in default
under this Agreement or any other agreement between MTU-H
and the Operator or such Designated Party, payments for such
Services will be made 25% of the total amount of charges
estimated by MTU-H upon induction and the remaining 75% of
the total amount of charges estimated by MTU-H upon
redelivery of the Engine.
Any overpayments made by Operator shall be refunded to
Operator promptly after the date of the final invoice for
each Overhaul, but in no event later than 30 days after the
date of such final invoice.
9.4 DISPUTED INVOICES
The payment terms above shall not apply to that portion of
an invoice disputed by Operator in good faith as notified to
MTU-H in writing within thirty (30) Days of receipt of such
invoice. However if such disputed invoice amount can not be
resolved by the Parties through amicable negotiations within
forty-five (45) Days after MTU-H's receipt of Operator's
dispute notification, each Party reserves its rights under
this Agreement and any other rights or remedies it may have
at law or in equity.
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9.5 ADDITIONAL PAYMENT TERMS
9.5.1 Invoices shall be issued in US-Dollar and forwarded to
Operator in duplicate.
9.5.2 Payments shall be effected by wire transfer on the following
bank accounts:
Advance Payments shall be wired to:
Commerzbank Hanover Branch
acc.no.: 3 018 975
SWIFT-Code: COBADEFF250
All other payments shall be wired to:
Bayerische Hypo- und Vereinsbank AG, Muenchen
Account No.: 802828675
Bank Sorting Code: 700 202 70
Swift Code: HYVEDEMM
At MTU-H request, Operator shall promptly furnish copies of
the documents evidencing wire transfer of all such payments
to the attention of the Financial Director of MTU-H.
9.5.3 If Operator is in material default of any payment obligation
in respect of any Services MTU-H may, after giving Operator
written notice of such default, postpone the fulfillment of
its obligation to perform such Services until such payment
is made.
9.5.4 If payments are outstanding for more than thirty (30) Days
following receipt of invoice, MTU-H will without prejudice
to any other contractual or legal rights be entitled to
charge interest of one percent (1%) per month.
9.6 ADMINISTRATIVE EXPENSE PRIORITY
All amounts paid or to be paid to MTU-H under this Agreement
are entitled to administrative expense priority status
pursuant to section 503(b) of the Bankruptcy Code.
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CLAUSE 10 TAXES, DUTIES AND CUSTOMS FEES
MTU-H shall pay all sales, use, excise or other similar
taxes, duties and fees levied on either Party by authorities
for Work performed by MTU-H in the Federal Republic of
Germany or any other country under this Agreement.
Any taxes, duties, customs fees or like charges levied by
any authority outside the Federal Republic of Germany and
the countries of MTU Repair Facilities on MTU-H or Operator
shall be borne by Operator.
In the event that either Party shall be held responsible by
any taxing authority for the collection or payment of taxes,
duties or fees borne by the other Party and shall be
required to pay the same to such authority, such Party shall
reimburse the other Party the full amount of such payment
and any reasonable expenses connected therewith upon first
demand therefor.
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CLAUSE 11 SUBCONTRACTING
MTU-H may subcontract with prior written approval of
Operator Services hereunder to the Engine manufacturer, MTU
Repair Facilities, or to another party deemed qualified by
the Operator to perform Services, which approval may not be
unreasonably withheld or delayed.
Any subcontracting shall not release MTU-H from its
obligations under this Agreement.
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CLAUSE 12 WARRANTY
12.1 MTU-H warrants that at the time of delivery of serviced
Engines the Services will have been performed in a
workmanlike manner. This warranty is limited to MTU-H's
correcting at its facilities such Services as are shown to
MTU-H's reasonable satisfaction being defective, provided
that the defect has arisen within twelve (12) months of
installation by Operator or the first three thousand (3.000)
flight hours following delivery or within eighteen (18)
months after the date of delivery whichever shall first
occur, provided further that written notice of the defect is
received by MTU-H within sixty (60) Days after discovery by
Operator. Transportation charges for return of defective
Engines to MTU-H and their reshipment will be borne by
MTU-H, subject to Clause 12.7 here below. In the event of a
justified warranty claim hereunder the warranty period shall
be extended by the time required to carry out the work.
12.2 Non-compliance of an Engine with the specified performance
and consumption rates can only be determined and
demonstrated by a test run at MTU-H's facilities or any test
cell agreed between both parties.
12.3 MTU-H's warranty shall not apply:
a) if after redelivery by MTU-H, Operator, its servants,
agents, sub-contractors or third parties have
materially abused, altered or repaired the Engine or
Module or have not operated the Engine or Module in
accordance with the manufacturer's operating
instructions or recommendations, or
b) if Operator has not complied with its obligations under
this Agreement.
12.4 If an Engine defect was caused by the failure of a new Part
installed by MTU-H, for avoidance of doubt, MTU-H will
correct such defect in accordance with this Clause 12.
Operator agrees to work with MTU-H to exhaust all avenues to
collect under the manufacturer's warranty. All direct
out-of-pocket expenses relating to such efforts will be
borne by MTU-H. In any event MTU-H's liability shall be
limited to the extent outlined in this Clause 12 and Clause
13 below and shall apply if all attempts of judicial actions
against the manufacturer have failed.
12.5 MTU-H assumes no warranty for Parts supplied by Operator and
properly installed by MTU-H.
12.6 Within two (2) months after notification by Operator MTU-H
will
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use its reasonable efforts to determine if a warranty claim
can be accepted.
12.7 In case Operator asserts a warranty claim according to this
Clause 12 and as a result of the investigation it is
established that MTU-H is not liable for the defects
claimed, the reasonable costs of investigation as well as
any other reasonable costs and expenses connected with such
claim shall be borne by Operator and due and payable upon
receipt of the respective invoice.
12.8 EXCLUSIVE WARRANTIES AND REMEDIES
THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE GIVEN AND
ACCEPTED IN LIEU OF (i) ANY AND ALL OTHER WARRANTIES,
EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE; AND (ii) ANY OBLIGATION, LIABILITY,
RIGHT, CLAIM OR REMEDY IN CONTRACT, TORT OR STRICT
LIABILITY, WHETHER OR NOT ARISING FROM MTU-H's NEGLIGENCE,
ACTUAL OR IMPUTED. THE REMEDIES OF OPERATOR SHALL BE LIMITED
TO THOSE PROVIDED IN THIS AGREEMENT TO THE EXCLUSION OF ANY
AND ALL OTHER REMEDIES, INCLUDING WITHOUT LIMITATION,
INCIDENTAL OR CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR
EXTENDING THE FOREGOING WARRANTY, REMEDIES OR THIS
LIMITATION WILL BE BINDING UPON MTU-H UNLESS IN WRITING,
SIGNED BY TWO DULY AUTHORIZED OFFICERS OF MTU-H.
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CLAUSE 13 LIABILITY, INDEMNIFICATION, INSURANCE
13.1 Subject to the liability cap set forth in Clause 13.2, MTU-H
shall be liable to, and indemnify and hold harmless the
Operator, its directors, officers, agents and employees (the
"Operator Indemnified Parties") from Damages (as defined in
Clause 13.7) arising directly or indirectly out the Services
performed by MTU-H, its officers, directors, employees,
agents and authorized subcontractors (the "MTU-H Indemnified
Parties") under this Agreement to the extent caused by the
negligence or willful misconduct of the MTU-H Indemnified
Parties.
13.2 However, the liability, indemnification and hold harmless
obligations set forth in Clause 13.1 of the MTU-H
Indemnified Parties is limited for any and all Damages which
might arise under or in connection with this Agreement as
follows:
(i) in cases of negligence to US Dollars thirty million
(US$ 30,000,000) per occurrence or US Dollars one
hundred and fifty million (US $150,000,000) in the
aggregate per year, or
(ii) in cases of gross negligence to US Dollars four hundred
million (US$ 400,000,000) per occurrence or in the
aggregate per year,
provided that the MTU-H indemnified Parties shall in no
event be liable to, or be obligated to indemnify the
Operator Indemnified Parties for any indirect or
consequential loss and/or expense (including loss of
profit, loss of use etc.).
13.3 In order to ensure that the US Dollars four hundred million
(US$ 400,000,000) per year limitation contained in Clause
13.2 is effective, Operator indemnifies and holds harmless
the MTU- H Indemnified Parties from Damages arising directly
or indirectly as a result of the negligence of the MTU-H
Indemnified Parties insofar as those Damages exceed, in the
case of negligence, US Dollars thirty million
(US$30,000,000) per occurrence or US Dollars one hundred and
fifty million (US$ 150,000,000) in the aggregate per year
and, in the case of gross negligence, US Dollars four
hundred million (US$ 400,000,000) per occurrence or in the
aggregate per year. However this indemnification by Operator
of MTU-H Indemnified Parties shall be limited to US
$500,000,000 per occurrence and in the aggregate per year.
13.4 Throughout the term of this Agreement, Operator shall
maintain in full force, at its expense, the following
insurance:
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a) Airline liability insurance, including aircraft third
party, passenger (including personal injury offences
sub-limited to a $25,000,000 liability limit), baggage
(checked or unchecked), cargo and mail legal liability
insurance for a combined single limit of least US
Dollars five hundred million (US$ 500,000,000) per
occurrence. Such insurance shall name the MTU-H
Indemnified Parties as additional insured.
b) Hull insurance covering Operator's aircraft against
loss or damage. Such Hull insurance shall contain a
waiver of recourse in favor of the Indemnified Parties,
except in cases of the MTU-H Indemnified Parties'
liability outlined above in this Clause 13.
13.5 Throughout the term of this Agreement, MTU-H shall maintain
in full force, at its expense, the following insurance:
a) Aviation Products and Completed Operations Liability
insurance including but not limited to personal injury,
bodily injury, and property damage with limits of at
least US Dollar four hundred million (US$ 400,000,000)
per occurrence. Such insurance shall include that the
insurers accept and insure the indemnification and hold
harmless provisions of Clauses 13.1 and 13.2 above
regarding the Operator Indemnified Parties, and require
the Operator to be provided with thirty (30) days
written notice of any cancellation or adverse material
change in such insurance.
b) Hangarkeeper's Liability Insurance on the Engine,
Accessory/ Components, and Supplies in an amount not
less than US Dollars fifty million (US$ 50,000,000).
Such insurance shall (1) contain a provision waiving
any and all rights of subrogation MTU-H insurers may
have or may acquire against Operator as a result of
this Agreement or performance hereunder, and (2)
contain a provision requiring MTU-H insurers to provide
Operator with thirty (30) days written notice of any
cancellation or adverse material change in such
insurance.
13.6 Upon request, the Parties shall have their insurers provide
certificates of insurance evidencing the coverage required
herein. Any insurance deductibles carried by either Party
will be the responsibility of the respective policy holder.
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13.7 For the purposes of this Clause 13, "Damages" means any and
all liabilities, damages, expenses, suits or judgments
including reasonable attorneys' fees (based on a solicitor
and client basis) for the death of or bodily injury to any
person and for the loss of, damage to or destruction of any
property in any manner.
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CLAUSE 14 MISCELLANEOUS
14.1 Interpretation
The rule of construction that ambiguities or inconsistencies
are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement to favor
any party against the other. Ambiguities or inconsistencies
shall be resolved by applying the most reasonable
interpretation under the circumstances, giving full
consideration to the intentions of the parties at the time
of conclusion of this Agreement.
14.2 Order of Precedence
In the event that there are any conflicts or inconsistencies
between the provisions of this Agreement and the appendices
hereto, the provisions of this Agreement shall prevail.
14.3 Merger of Negotiations
The terms and provisions contained herein constitute the
entire agreement between the parties relating to the subject
matter hereof. The parties agree that neither of them has
placed any reliance whatsoever on any representations,
agreements, statements or understandings made prior to the
signature of this Agreement whether orally or in writing
relating to the scope of this Agreement other than those
expressly incorporated in this Agreement which has been
negotiated on the basis that its provisions represent their
entire agreement relating to the subject matter hereof and
shall supersede all such representations, agreements,
statements and understandings.
14.4 Property and Risk
The risk in respect of loss of or damage to the supplies
shall pass to MTU-H on delivery to MTU-H in accordance with
Clause 4 hereof and shall remain with MTU-H until
redelivered in accordance with Clause 4 hereof.
MTU-H shall maintain adequate insurance coverage for the
full replacement cost against loss of or damage to the
Equipment while they are in its care, custody and control.
Should any of the items delivered to MTU-H according to
Clause 4 above while being in MTU-H's care, custody and
control due to MTU-H's fault be destroyed or damaged,
howsoever, MTU-H as its sole responsibility, and as
Operator's sole remedy with regard
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thereto, will either (as MTU-H may in its discretion decide)
at its expense provide an adequate replacement or pay to
Operator the actual replacement cost of the items concerned.
MTU-H shall at all times ensure that Equipment in its care,
custody and control do not by its act or omission become the
subject of any lien, tax, charge, duty or encumbrance and
MTU-H shall indemnify Operator against all costs, expenses
and damages which Operator may incur or suffer by reason of
MTU-H failing to carry out its obligations under this
Clause.
14.5 Title to Parts
Title to Parts provided by MTU-H and incorporated during
Services shall pass to Operator upon payment in full of
MTU-H's respective invoices for such Services.
14.6 Title to Exchanged Parts
Operator and MTU-H each represent and warrant that they will
accomplish transfer of the full legal title of any item
exchanged hereunder free and clear of all charges, liens and
encumbrances. Operator warrants the authorization of the
owner of such items to effect such exchange of title. Either
party will only with the prior written consent of the other
enter into any arrangement or agreement which might
prejudice or impair its ability to perform its obligations
under this Clause.
14.7 Assignability
The Operator or its assignees may assign their rights and
obligations under this Agreement, in whole or in part, to
any Designated Party. The Operator will provide five days
prior written notice to MTU-H of any assignment of this
Agreement and will identify the party to which this
Agreement is assigned. This Agreement is personal to MTU-H
and shall not be assigned or transferred, in whole or in
part, by MTU-H without the prior written consent of the
Operator.
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14.8 Alterations and Amendments
This Agreement shall not be altered or amended in any way
other than by agreement in writing (to include telex)
entered into by the parties hereto after the date of this
Agreement, which is expressly stated to amend or alter this
Agreement.
14.9 Negation of Waiver
Failure of either party at any time to enforce any of the
provisions of this Agreement shall not be construed as a
waiver or forbearance by such party of such provisions or in
any way affect the validity of this Agreement or part
thereof.
14.10 Partial Invalidity
In case one or more of the provisions contained in this
Agreement should be or become fully or in part invalid,
illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions contained in this
agreement shall not be affected in any way or impaired
thereby, and the parties shall to the extent possible
replace such invalid, illegal or unenforceable provision(s)
by another clause or clauses considering the economic
intention of the parties.
14.11 Operator Representative
MTU-H will provide at no additional cost to Operator
appropriate office accommodation, telephone and access to
facsimile machines within MTU-H facilities. Any expenses
incurred through the use of such communication equipment by
Operator representative shall be borne by Operator. MTU-H
will allow Operator representative reasonable access to all
work areas where services under this Agreement are being
performed.
14.12 MTU-H Representative
Operator will provide at no additional cost to MTU-H
appropriate office accommodation, telephone and access to
facsimile machines within Operator's facilities. Any
expenses incurred through the use of such communication
equipment by MTU-H representative shall be borne by MTU-H.
14.13 Right of Inspection
Operator will have the right to inspect, together with the
FAA, if required and deemed necessary, MTU-H facilities and
all documents and records pertaining to the Services
performed on
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Operator Engine, Accessory/Components and/or Equipment as
assigned under this Agreement. Such inspection will be
permitted to take place on the condition that reasonable
advance notice to this effect will be given by Operator to
MTU-H.
14.14 Third Party Beneficiary
MTU-H acknowledges and agrees that this Agreement is for the
benefit of
a) the Parties, and
b) with respect to each Prepaid Engine, the applicable
Designated Party, as third party beneficiary to this
Agreement, which can enforce rights under this
Agreement directly against MTU-H as set forth in Clause
14.15.
MTU-H further acknowledges that the parties ultimately
benefiting from the rights being given to the Designated
Party pursuant to Clause 14.15 are the parties that entered
into the Restructuring Agreements with the Operator and/or
its affiliates in reliance upon the existence of this
Agreement in particular the advance payment provisions set
forth in Clause 9.1 regarding prospective maintenance on
Prepaid Engines to be performed by MTU-H pursuant to this
Agreement.
14.15 Third Party Beneficiary Rights
After a default by the Operator under this Agreement or an
Event of Default (as defined in the applicable Lease) under
the applicable Lease, and upon receipt by MTU-H from the
Designated Party with respect to any Lease of a written
notice (a "Designated Party Rights Notice") of any such
occurrence stating that the Designated Party has succeeded
to the rights of Operator under this Agreement,
a) this Agreement shall inure to the benefit of, and shall
be enforceable by, such Designated Party, to the same
extent as if originally named the "Operator", and
b) such Designated Party agrees that upon receipt by MTU-H
of the Designated Party Rights Notice the Designated
Party shall be subject to all of the terms and
conditions of this Agreement to the same extent as if
such Designated Party were named the "Operator".
Accordingly, notwithstanding an Event of Default,
termination or rejection of this Agreement by the Operator
(whether in connection with a bankruptcy or any other
insolvency
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proceeding or otherwise), upon a Designated Party Rights
Notice provided by a Designated Party, MTU-H agrees to
perform its obligations under this Agreement but only to the
extent MTU-H has been previously paid by the Operator
(without offset, recoupment, counterclaim or defense as
provided in Clause 14.16). The Operator or any successor to
the Operator shall notify MTU-H from time to time of any
change in any Designated Party, and MTU-H shall not be
obligated to act at the direction of any party unless and
until such notice has been given. MTU-H shall be entitled to
rely upon instructions received from the Operator or any
Designated Party following receipt of notice, and shall not
be obligated to confirm the authority of the Operator or any
Designated Party or the validity of any instructions
received from such parties.
14.16 No Right of Setoff or Recoupment; Waiver
MTU-H shall have no right of reduction, counterclaim, setoff
or recoupment for or against the amounts paid to MTU-H under
this Agreement with respect to any Prepaid Engine on account
of obligations due to MTU-H or its affiliates with respect
to any other Engine or any other obligation due from the
Operator or any affiliate of the Operator. MTU-H hereby
waives and releases (on behalf of itself and each of its
affiliates, successors and assigns) any and all claims,
whether now existing or hereafter arising, for reduction,
setoff or recoupment against the amounts paid to MTU-H under
this Agreement in respect of any Prepaid Engine on account
of obligations due to MTU-H or its affiliates with respect
to any other Engine or any other obligation due from the
Operator or any affiliate of the Operator. For the avoidance
of doubt, it is expressly agreed between the Parties that
nothing contained herein shall limit MTU-H's entitlement to
payment on a per Engine basis for actual Services performed
on such Engine under this Agreement.
14.17 Grant of Security Interest; Consent to Amendments
The Operator shall have the right to collaterally assign
this agreement, in whole or in part, as security or grant a
first priority lien and security interest in and to the
Operator's rights hereunder in favor of each Designated
Party. MTU-H consents to the grant of such security interest
as collateral to the applicable Designated Party; any legal
or attorneys' fees in connection with the preparation,
perfection and/or filing of such security interest shall be
borne by the Operator.
In addition, the Parties agree that this Agreement may not
be amended or terminated without the prior written consent
of the other party other than in consequence of failure to
cure an Event
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of Default pursuant to the termination provision, and MTU-H
agrees not to waive any provision hereof without the written
consent of the applicable Designated Party. MTU-H agrees to
recognize the applicable Designated Party or its assignee as
the party entitled to any Credit Balance with respect to
such Designated Party's Prepaid Engines upon termination of
this Agreement by written notice of the Designated Party and
Operator to MTU-H.
Notwithstanding anything contained in this Agreement to the
contrary, nothing contained herein shall limit MTU-H's
entitlement to payment on a per Engine basis for actual
Services performed on such Engine under this Agreement
pursuant to Clause 9 which entitlement shall have priority
over any security interest created in accordance with the
terms and conditions of this Agreement.
14.18 Confidentiality
Each Party agrees not to disclose this Agreement to any
third party (other than each Designated Party or any other
beneficial owner or lessor of any Engine) without first
obtaining the written consent of the other Party, except as
required by law or to enforce any provision of this
Agreement; provided, however, that Operator may disclose
this Agreement to the extent necessary in connection with
the Operator's Chapter 11 case to the Operator's
stakeholders who have agreed to keep this Agreement
confidential. Advertising and promotional material must be
approved in writing by the other Party prior to release.
14.19 Divisibility
This Agreement is divisible and severable on a per-Engine
basis and may only be assumed or rejected under the
Bankruptcy Code on a per-Engine basis. This Agreement shall
not be construed to be a master agreement necessarily
requiring assumption or rejection of the Agreement IN TOTO
as to all Engines at any one time.
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CLAUSE 15 DURATION AND TERMINATION
15.1 This Agreement shall commence on February 1, 2004
("Effective Date") regardless of the date that this
Agreement is signed by the Parties and shall remain in full
force and effect until the third Overhaul has been completed
on each Engine.
15.2 The rights and obligations of the Parties under the
following clauses shall survive any termination or
expiration of this Agreement:
Clause 10 (TAXES)
Clause 12 (WARRANTY)
Clause 13 (LIABILITY)
Clause 14.18 (CONFIDENTIALITY)
Clause 16 (APPLICABLE LAW).
15.3 Termination
If either the Operator or MTU-H commits a breach of any of
its material obligations under this Agreement and such
breach is not cured within thirty (30) days after
notification of such breach by the non-defaulting Party,
such breach shall constitute an "Event of Default." Upon the
occurrence and during the continuance of any Event of
Default, the non-defaulting party shall have the right, but
not the obligation, unless otherwise expressly stipulated in
this Agreement, without prejudice to its other rights or
remedies under applicable laws, which rights or remedies
shall be cumulative and not exclusive:
(a) to terminate this Agreement by written notice (to
include telex), and
(b) to stop any Services already commenced and to refuse to
commence any further Services.
In no event shall the approval of the Bankruptcy Court be
necessary for MTU-H to exercise its rights hereunder.
The suspension, surrender or revocation of MTU-H's Federal
Aviation Administration foreign repair station certificate
shall be deemed to be a breach by MTU-H and will immediately
result in an "Event of Default."
In the event of termination of this Agreement by the
Operator due to an Event of Default caused by MTU-H, MTU-H
shall immediately return to the Operator all credit balances
held by MTU-H at the date of termination, other than amounts
necessary to pay for Services then being performed by MTU-H
on the
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Engines. If the Operator terminates this Agreement other
than in consequence of an Event of Default caused by MTU-H,
the Operator shall have the right to continue to deliver
Prepaid Engines to MTU-H for Services to utilize all
remaining credit balances and shall have the right to apply
any credit balances against Services for any other Prepaid
Engines, and MTU-H agrees to continue to provide Services on
the Prepaid Engines until all such credits are applied.
15.4 Bankruptcy-Related Events of Default
It shall be an Event of Default if at any time (i) the
Bankruptcy Cases are converted to cases under Chapter 7 of
the Bankruptcy Code, or (ii) the appointment in the
Bankruptcy Case of an examiner or trustee with expanded
powers (beyond those set forth in Sections 1106(a)(3) and
(4) of the Bankruptcy Code), but only if such expanded
powers include that such examiner or trustee assumes all or
any substantial part of the responsibilities and duties of
Operator's management or its board of directors or the board
of directors of any other Debtor.
15.5 The parties will meet once each year that this Agreement is
in effect at a time and location to be mutually agreed (but
no later than April 30) for a business review meeting to
discuss the overall performance and business expectations.
Any such review meeting may result in amended business
terms, but only with the consent of each party hereto.
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CLAUSE 16 DISPUTE RESOLUTION, LAW, JURISDICTION
16.1 This Agreement shall be governed by and in accordance with
the laws of the State of New York, USA, without recourse to
its conflict of law principles.
16.2 The Parties hereby submit to the jurisdiction of the Federal
Courts located in the State of New York.
16.3 If a dispute between the Parties arises under this
Agreement, the Parties will use commercially reasonable
efforts to amicably resolve their differences prior to
initiating any court proceeding. Should such efforts be
deemed unsuccessful by either Party, or fail to resolve any
such dispute within fourteen (14) Days of its arising,
either Party may initiate court proceedings.
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CLAUSE 17 NOTICES
Any notice or communication to be served pursuant to this
Agreement shall be sent by registered mail, telefax, telex
or delivered personally and shall be deemed to have been
duly given when received by the addressees under the
following address:
FOR OPERATOR:
Atlas Air, Inc.
Polar Air Cargo, Inc.
2000 Westchester Avenue
Purchase, NY 10577
USA
Attention: Vice President - Technical Operations
Phone: 914.701.8559
Fax: 914.701.8313
with a copy to:
Attn: Divisional Controller
Phone: 914.701.8023
Fax: 914.701.8313
FOR MTU-H:
MTU Maintenance Hannover GmbH
Munchner Strasse 31
D-30855 Langenhagen
Germany
Phone: + 49 511 78 06 9105
Fax: + 49 511 78 06 200
SITA: HAJMTCR
Telex: 9230309 mtuh d
Attn: Executive Vice President - Sales & Marketing
or such other place of business as may be notified in
writing by the other party to this Agreement from time to
time.
All notices, reports, certificates, data and communications
pertaining to this Agreement shall be in the English
language.
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IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be
executed and delivered on its behalf by its duly authorized representative(s) as
of the Day, month and year set forth above.
Atlas Air, Inc. MTU Maintenance Hannover
GmbH
By /s/ Illegible By illegible
----------------------------- ----------------------------------
Title Chief Financial Officer Title EUP-OPS
----------------------------- ----------------------------------
By illegible
----------------------------------
Title Sup Finance
----------------------------------
Polar Air Cargo, Inc.
By /s/ Illegible
-----------------------------
Title Chief Financial Officer
-----------------------------
ATLAS AIR WORLDWIDE HOLDINGS, INC. ("AAWW")
EXHIBIT LIST FOR FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2004
The agreements listed below are substantially identical to this exhibit and are
not being filed separately as exhibits pursuant to instruction 2 to Regulation
S-K, Item 601.
Engine Maintenance Contract dated April 30, 2004 between the
Company and MTU Maintenance Hannover GmbH, with regard to CF6
80C2 Engines in the 1998 EETC Transaction.
Engine Maintenance Contract dated April 30, 2004 between the
Company and MTU Maintenance Hannover GmbH, with regard to CF6
80C2 Engines in the 1999 EETC Transaction.
Engine Maintenance Contract dated April 30, 2004 between the
Company and MTU Maintenance Hannover GmbH, with regard to CF6
80C2 Engines in the 2000 EETC Transaction.