EXHIBIT 10.28
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED
BY [***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
V2500^R
GENERAL TERMS OF SALE
BETWEEN
IAE INTERNATIONAL AERO ENGINES AG
AND
MIDWAY AIRLINES CORPORATION
1
INDEX
Commencement
Recitals
CLAUSE 1 DEFINITIONS
CLAUSE 2 SALE OF PURCHASED ITEMS
2.1 Intent
2.2 Agreement to Place Orders
2.3 Type Approval and Changes in Specification
2.4 Inspection and Acceptance
2.5 Delivery, Shipping, Title and Risk of Loss or Damage
2.6 Price
2.7 Payment
CLAUSE 3 SPARE PARTS PROVISIONS
3.1 Intent and Term
3.2 ATA Standards
3.3 Initial Provisioning
3.4 Change in Initial Provisioning Data
3.5 Discontinuance of Initial Provisioning Data, Use of
Procurement Data
3.6 Stocking of Spare Parts by IAE
3.7 Lead Times
3.8 Ordering Procedure
3.9 Modifications to Spare Parts
3.10 Inspection
3.11 Delivery and Packing
3.12 Prices
3.13 Payment
3.14 Resale of Surplus Spare Parts
3.15 Purchase by Midway from Others
3.16 Special Tools, Ground Equipment and Consumable Stores
3.17 Conflict
CLAUSE 4 WARRANTIES, GUARANTEES AND LIABILITIES
CLAUSE 5 PRODUCT SUPPORT
2
CLAUSE 6 MISCELLANEOUS
6.1 Delay in Delivery
6.2 Patents
6.3 Credit Reimbursement
6.4 Non-Disclosure and Non-Use
6.5 Taxes
6.6 Amendment
6.7 Assignment
6.8 Exhibits
6.9 Headings
6.10 Law
6.11 Notices
6.12 Exclusion of Other Provisions and Previous Understandings
6.13 Termination
EXHIBIT A CONTRACT SPECIFICATION
EXHIBIT B PURCHASED ITEMS, PRICE, ADJUSTMENT FORMULA AND DELIVERY
EXHIBIT C PRODUCT SUPPORT
EXHIBIT D WARRANTIES, GUARANTEES AND PLANS
D-1 ENGINE AND PARTS SERVICE POLICY
D-2 NACELLE SERVICE POLICY
D-3 NON-INSTALLATION ITEMS WARRANTY
D-4 RELIABILITY GUARANTEE
D-5 INFLIGHT SHUTDOWN GUARANTEE
D-6 EXHAUST GAS TEMPERATURE GUARANTEE
D-7 FUEL CONSUMPTION RETENTION GUARANTEE
D-8 DELAY AND CANCELLATION
D-9 FLEET HOUR AGREEMENT
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THIS CONTRACT is made this 17 day of May, l995
BETWEEN
IAE INTERNATIONAL AERO a joint stock company organized and existing
ENGINES AG under the laws of Switzerland, whose
registered office is at ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ (hereinafter
called "IAE") and
MIDWAY AIRLINES CORPORATION a corporation organized and existing under
the laws of Illinois, whose registered
office is at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter called
"Midway")
WHEREAS:
A. Pursuant to an Airbus ▇▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇ Agreement dated 17 March 1995
between A.V.S.A S.A.R.L ("Airbus Industrie") and Midway (the "Aircraft
Purchase Agreement"), Midway has agreed to purchase four firm and has
acquired the option to purchase four Airbus A320 aircraft to be powered by
IAE V2527-A5 propulsion systems from Airbus Industrie.
B. Midway has also agreed to lease four firm Airbus A320 aircraft from Orix
Aviation Systems Limited ("Orix") and intends to lease another Airbus A320
aircraft from Kawasaki Leasing International ("Kawasaki"), all to be
powered by V2500-A1 propulsion systems.
C. IAE is prepared to supply to Midway V2500 engines, modules, spare parts,
special tools, ground equipment, product support services and consumable
stores for the support and operation of the V2500 propulsion systems.
NOW THEREFORE IT IS AGREED AS FOLLOWS:-
CLAUSE 1 DEFINITIONS
In this Contract unless the context otherwise requires:-
1.1 "Aircraft" shall mean collectively the new A320 Firm Aircraft and if
Midway's option is exercised, the Option Aircraft specified below, powered by
new V2527-A5 propulsion systems and being purchased by Midway from Airbus
Industrie scheduled for delivery as follows:
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"Firm Aircraft":
One (1) in December 1998
One (1) in January 1999
One (1) in February 1999
One (1) in December 1999
"Option Aircraft":
One (1) in January ▇▇▇▇
▇▇▇ (1) in February ▇▇▇▇
▇▇▇ (1) in November ▇▇▇▇
▇▇▇ (1) in December 2000
1.2 "Leased Aircraft" shall mean collectively A320 Firm Leased Aircraft and
Option Leased Aircraft specified below, powered by V2500-A1 propulsion systems
leased by Midway scheduled for delivery as follows:
Orix "Firm Leased Aircraft":
Two (2) in April 1995
Two (2) in May 1995
Kawasaki "Option Leased Aircraft":
One (1) in June 1995
1.3 "Aircraft Manufacturer" shall mean Airbus Industrie.
1.4 "Basic Contract Price" shall mean the basic price of each of the Purchased
Items as specified in Exhibit B to this Contract.
1.5 "Certification Authority" shall mean the regulatory authority responsible
for the type certification of the Engine, referred to in Exhibit A.
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1.6 "Engine(s)" shall mean the IAE V2527-A5 aero engine described in the
Specification.
1.7 "Initial Provisioning" shall mean the establishment by Midway of an
initial stock of Spare Parts.
1.8 "Initial Provisioning Data" shall mean information supplied by IAE to
Midway for Initial Provisioning purposes.
1.9 "Initial Provisioning Orders" shall mean orders for Spare Parts for
Initial Provisioning purposes.
1.10 "Installation Items" shall mean Engines, modules, accessories, exhaust
systems, nacelles and all ancillary equipment therefor described in the
Specification which are being supplied pursuant to this Contract for
installation in the Aircraft.
1.11 "Lead Time" shall mean the period between acceptance by IAE of an order of
Midway and commencement of delivery.
1.12 "Non-Installation Items" shall mean jigs, tools, handling and
transportation equipment and all equipment whatsoever to be supplied
pursuant to this Contract for use with the Installation Items and not for
installation in the Aircraft.
1.13 "Other Supplies" shall mean special tools, ground equipment and
consumable stores (e.g. oils, greases, dyes and penetrants).
1.14 "Procurement Data" shall mean information supplied by IAE to Midway about
Spare Parts required to replenish the initial stock.
1.15 "Purchased Items" shall mean those Installation Items and Non-Installation
Items specified in Exhibit B to this Contract.
1.16 "Service Bulletins" shall mean those service bulletins containing advice
and instructions issued by IAE to Midway from time to time in respect of
Engines.
1.17 "Spare Parts" shall mean spare parts for Engines excluding the items
listed in the Specification as being items of supply by Midway.
1.18 "Spare Parts Catalog" shall mean the catalog published by IAE from time to
time providing a description, Lead Time and price at a part number level,
for Spare Parts, tools and Vendor Parts available from IAE.
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1.19 "Specification" shall mean the IAE ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇ ▇▇▇▇▇
which forms Exhibit A to this Contract.
1.20 "Vendor Parts" shall mean Spare Parts described in Initial Provisioning
Data or Procurement Data which are not manufactured pursuant to the
detailed design and order of IAE.
1.21 "Supplies" shall mean Installation Items, Non-Installation Items, Spare
Parts and any other goods or services supplied pursuant to this Contract.
CLAUSE 2 SALE OF PURCHASED ITEMS
2.1 Intent
Subject to the provisions of this Contract, IAE agrees to sell to Midway and
Midway agrees to buy from IAE, the Purchased Items as set forth herein.
2.2 Agreement to Place Orders
2.2.1 Midway has agreed to purchase from the Aircraft Manufacturer in
accordance with the terms of the Aircraft Purchase Agreement at least four
firm and has procured from the Aircraft Manufacturer four options to
purchase new Aircraft powered by new V2527-A5 propulsion systems for
delivery as set forth in Clause 1.1 above.
2.2.2 Midway has agreed to lease from Orix in accordance with the terms of
four aircraft lease agreements at least the four Firm Leased Aircraft and
it intends to enter into an option to lease the one Option Leased Aircraft
powered by V2500-A1 propulsion systems for delivery as set forth in Clause
1.2 above.
2.2.3 Midway hereby enters into a firm and unconditional agreement with
IAE for the purchase of one new V2527-A5 spare Engine for delivery as set
forth in Exhibit B to this Contract.
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2.2.4 If Midway exercises the option to purchase the Option Aircraft,
Midway agrees to enter into a firm and unconditional agreement with IAE
for the purchase of one new V2527-A5 spare Engine to support all the
Option Aircraft purchased and accepted by Midway in addition to the four
Firm Aircraft. Should Midway purchase some but not all four of the Option
Aircraft, then Midway agrees to ensure spare Engine support of the actual
option aircraft purchased to levels which will be determined mutually
between IAE and Midway.
2.3 Type Approval and Changes in Specification
2.3.1 IAE will cause the Purchased Items to be manufactured to the
Specification. After the date of this Contract the Purchased Items
may be varied from time to time by Change Orders in writing which
shall set forth in detail:
2.3.1.1 The changes to be made in the Purchased Items and
2.3.1.2 The effect (if any) of such changes on the Specification
(including but not limited to performance and weight),
on interchangeability of the Purchased Items in the
airframe, on prices and on dates of delivery of the
Purchased Items.
Change Orders shall not be binding on either party until signed by IAE and
Midway but upon being so signed shall constitute amendments to this Contract.
2.3.2 IAE may make any changes in the Purchased Items which do not
adversely affect the Specification, (including but not limited to
performance and weight), interchangeability of the Purchased Items
in the airframe, prices or dates of delivery of the Purchased Items.
In the case of such permitted changes, a Change Order shall not be
required.
2.3.3 At the time of delivery of the Purchased Items there is to be in
existence a Type Approval Certificate in accordance with the
provisions of the Specification.
2.3.4 The Specification has, however, been drawn with a view to the
requirements of the Certification Authority and the official
interpretations of such requirements in existence at the date of
this Contract (such requirements and interpretations being
hereinafter referred to as "Current Rules"). Subject to Clause 2.3.2
above IAE and Midway agree that they will execute an appropriate
Change Order in respect of any change required to the Purchased
Items to enable such Purchased Items to conform to the requirements
of the Certification Authority and the official interpretations of
such requirements in force at the date of delivery of such Purchased
Items.
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2.3.5 The price of any Change Order is to be borne:
2.3.5.1 in the case of changes required to conform to the
Current Rules - by IAE; and
2.3.5.2 in the case of changes required to enable such
Purchased Items to conform to the requirements of the
Certification Authority and the official
interpretations of such requirements in force at the
date of delivery of such Purchased Items and where
such changes have not resulted in IAE increasing its
engine list price in existence at the date of this
Contract for such change then the price of such
changes will be borne by IAE; and
2.3.5.3 in any other case - by Midway.
2.4 Inspection and Acceptance
2.4.1 Conformance to the Specification of Purchased Items which are
Installation Items will be assured by IAE through the maintenance of
procedures, systems and records approved by the Certification
Authority. Conformance documentation will be issued and signed by
personnel authorized for such purposes.
2.4.2 Conformance to the Specification of Purchased Items which are
Non-Installation Items will be assured by IAE conformance
documentation.
2.4.3 Upon issue of conformance documentation pursuant to Clause 2.4.1 or
Clause 2.4.2 above, Midway shall be deemed to have accepted the
Purchased Items and that the Purchased Items conform to the
Specification. IAE shall, subject to the permission of the
appropriate governmental authorities, arrange for Midway to have
reasonable access to the appropriate premises in order to examine
the Purchased Items prior to the issue of conformance documentation
and to witness Engine acceptance tests.
2.4.4 Unless separately agreed in accordance with Clause 6.6, if the
Purchased Items are in accordance with the requirements of this
Contract and IAE is not in material breach of its obligations
hereunder, if Midway refuses or hinders delivery, or if IAE at
Midway's written request agrees to delay delivery of any of the
Purchased Items, Midway shall nevertheless pay or cause IAE to be
paid therefor as if, for the purposes of payment only, the Purchased
Items had been delivered.
9
2.4.5 In any of the cases specified in Clause 2.4.4 above, Midway shall
also pay to IAE such reasonable sum as IAE shall require in respect
of storage, maintenance and insurance of those Purchased Items.
2.5 Delivery, Shipping, Title and Risk of Loss or Damage
2.5.1 IAE will deliver the Purchased Items, at its option, either
ex-works Connecticut, U. S. A. or ex-works Derby, England, in
accordance with the delivery schedule set out in Exhibit B to
this Contract.
2.5.2 Upon such delivery, title to and risk of loss of or damage to the
Purchased Items shall pass to Midway.
2.5.3 Midway will notify IAE at least four (4) weeks before the time for
delivery of the Purchased Items of its instructions as to the
marking and shipping of the Purchased Items.
2.6 Price
The Purchase Price for each of the Purchased Items shall be the Basic Contract
Price, amended pursuant to Clause 2.3 above, and adjusted in accordance with the
adjustment formula contained in Exhibit B to this Contract.
2.7 Payment
2.7.1 Midway will make payment in United States Dollars as follows:
2.7.1.1 Upon signature of this Contract, Midway shall pay to IAE
a deposit of ten percent (10%) of the Estimated Purchase
Price of the Purchased Items.
2.7.1.2 Eighteen months before the scheduled delivery of each of
the Purchased Items, Midway shall pay to IAE a further
deposit of ten percent (10%) of the Estimated Purchase
Price of such item.
2.7.1.3 Twelve months before the scheduled delivery of each of
the Purchased Items, Midway shall pay to IAE a further
deposit of ten percent (10%) of the Estimated Purchase
Price of such item.
2.7.1.4 On delivery of each of the Purchased Items, Midway shall
pay to IAE the balance of the Purchase Price of such
item.
2.7.2 IAE shall have the right to require Midway to make additional
deposits in respect of price changes arising from the provisions of
Clause 2.3 above on a similar basis to that specified in Clause
2.7.1 above.
10
2.7.3 Midway undertakes that IAE shall receive the full amount of payments
falling due under this Clause 2.7, without any set-off or deduction
whatsoever.
2.7.4 All payments under this Clause 2.7 shall be made by cable or
telegraphic transfer and shall be deposited not later than the due
date of payment with the following bank for the account of IAE:
National Westminster Bank, N.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Account No. 2982008199
ABA No. ▇▇▇▇▇▇▇▇▇
2.7.5 For the purpose of this Clause 2.7 "payment" shall only be deemed to
have been made to the extent cleared or good value funds are
received in the numbered IAE bank account specified in Clause 2.7.4
above.
2.7.6 If Midway fails to make any payment for any Purchased Item on or
before the date when such payment is due, then, without prejudice to
any of IAE's other rights, IAE will be entitled to charge interest
on the overdue amount, at the rate of 1.5% per month, from the date
such payment was due to the date such payment is made.
2.7.7 For the purpose of this Clause 2.7, the "Estimated Purchase Price"
of any of the Purchased Items shall be calculated in accordance with
the following formula.
P = B x (1.06)^N
where:
P is the Estimated Purchase Price
B is the applicable Basic Contract Price
N is the year of scheduled delivery minus the
year for which the Basic Contract Price is defined.
CLAUSE 3 SPARE PARTS PROVISIONS
3.1 Intent and Term
3.1.1 For as long as Midway owns and operates one or more Aircraft in
regular commercial service and complies with its obligations to IAE
under the Contract, IAE shall provide that reasonably adequate
supplies of Spare Parts are available for sale to Midway under this
Contract. In consideration thereof, IAE shall sell
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to Midway and, except as hereinafter provided, Midway shall buy from
IAE, Midway's requirements of the following Spare Parts:
3.1.1.1 All Spare Parts manufactured pursuant to the detailed
design and order of IAE where IAE is the only source
from which Midway can purchase such Spare Parts in an
unused condition and in quantities sufficient to meet
Midway's requirements; and
3.1.1.2 Vendor Parts for which direct supply arrangements
between the manufacturers of such Vendor Parts and
Midway cannot be established. Except for the purposes of
Initial Provisioning pursuant to Clause 3.3 below,
Midway shall notify IAE in writing not less than twelve
(12) months before scheduled delivery that Midway
intends to purchase such Vendor Parts from IAE.
3.1.2 In an emergency, IAE shall sell to Midway Vendor Parts which it is
not obliged to sell under this Contract, but which it has in stock
or otherwise has reasonably available to it.
3.2 ATA Standards
The parties to this Contract shall comply with the requirements of ATA
Specifications 200 and 300, provided that any of the parties shall be entitled
to negotiate reasonable changes in those procedures or requirements of the said
specifications which, if complied with exactly, would result in an undue
operating burden or unnecessary economic penalty.
3.3 Initial Provisioning
3.3.1 To assist Midway's Initial Provisioning, IAE shall supply Midway
with Initial Provisioning Data in accordance with ATA Specification
200, subject to Clause 3.2 above.
3.3.2 Details of the format and precise nature of the said Initial
Provisioning Data, including the applicable revision numbers of ATA
Specification 200, definition of Spare Parts Categories, and Lead
Times, and agreement on technical publications shall be agreed
between IAE and Midway at a preliminary meeting held for this
purpose at a time and place to be agreed.
3.3.3 The said Initial Provisioning Data shall cover all Spare Parts,
including agreed Vendor Parts, which may be reasonably required for
Midway's operation of the Installation Items.
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3.3.4 Before Midway places Initial Provisioning Orders, a conference shall
be held for the review of Initial Provisioning Data supplied by IAE
under Clause 3.3.1 above. The said conference shall be held
approximately 18 months before first Aircraft delivery and shall be
attended by the personnel of each party directly responsible for
Initial Provisioning.
3.4 Change In Initial Provisioning Data
IAE shall, free of charge, progressively and promptly revise Initial
Provisioning Data in accordance with ATA Specification 200 to take into account
any changes which may materially affect provisioning decisions.
3.5 Discontinuance of Initial Provisioning Data - Use of Procurement Data
3.5.1 Use of Initial Provisioning Data shall be discontinued on a date to
be agreed by the parties hereto, but in any event no later than the
date of delivery of the last Aircraft firmly ordered by Midway at
the date of this Contract. On or before the said date IAE shall
furnish Midway with Procurement Data complying with ATA
Specification 200 and shall revise the said Procurement Data as a
matter of routine thereafter.
3.5.2 Procurement Data shall be used to enable Midway to continue to order
Spare Parts to support the Installation Items.
3.6 Stocking of Spare Parts
Upon request, Midway shall provide IAE with information reasonably required to
enable IAE to organize the manufacture and stocking of Spare Parts efficiently.
3.7 Lead Times
3.7.1 Spare Parts for Initial Provisioning shall be delivered on or before
the dates specified in Midway's orders, provided that the said dates
comply with the terms of this Contract and do not call for delivery
more than three (3) months before the scheduled date of delivery of
the first Aircraft to Midway and provided further that delivery of
the total Initial Provisioning quantity shall be effected against a
schedule commensurate with Midway's fleet build up and Aircraft
utilization.
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3.7.2 Save as herein provided, replenishment Spare Parts shall be
delivered within the Lead Time specified in the IAE Spare Parts
Catalog, except for certain major Spare Parts which shall be
designated in Initial Provisioning Data and Procurement Data as
being available at prices and lead times to be quoted upon request.
3.7.3 If any order for replenishment Spare Parts shall call for a quantity
materially in excess of Midway's normal requirements, IAE shall
notify Midway and may request a special delivery schedule. If Midway
confirms that the full quantity ordered is required, delivery of the
order shall be effected at delivery dates specified by IAE and the
Lead Times provided by this Clause shall not apply.
3.7.4 In an emergency, IAE shall endeavor to deliver Spare Parts,
including certain major Spare Parts referred to in Clause 3.7.2
above, within the time limits specified by Midway. The action to be
taken on such orders shall be advised as follows within the
following time periods from IAE's receipt of such notice:
3.7.4.1 AOG orders - within 4 hours;
3.7.4.2 other emergency orders - within 24 hours;
3.7.4.3 orders for items of which Midway is out-of-stock -
within 7 days.
3.8 Ordering Procedure
3.8.1 After receipt of Initial Provisioning Data, Midway shall place its
Initial Provisioning Orders in sufficient time to allow IAE to
commence delivery prior to delivery of the first Aircraft. Midway
shall use its best efforts to give priority to ordering major items
designated in the Initial Provisioning Data.
3.8.2 Subsequent orders for Spare Parts shall be placed by Midway from
time to time as may be appropriate. Midway shall give IAE as much
notice as possible of any change in its operation, including, but
not limited to, changes in maintenance or overhaul arrangements
affecting its requirements of Spare Parts, including Vendor Parts.
3.8.3 IAE shall promptly acknowledge receipt of each order for Spare Parts
in accordance with ATA Specification 200 procedure. Unless
qualified, such acknowledgment, subject to variation in accordance
with Clause 3.7.3 above, shall constitute an acceptance of the order
under the terms of this Contract.
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3.8.4 Subject to Clause 3.12.2 below, IAE shall accept "control shipdates"
as defined in ATA Specification 200 in orders for Spare Parts
provided that such dates allow IAE its applicable Lead Times in
making shipment and are not subject to cancellation by Midway at
less than twelve (12) calendar months' notice.
3.8.5 If IAE notifies Midway that certain Spare Parts are packed in
standard package quantities (hereinafter called "SPQ's") or that a
minimum sales quantity (hereinafter called "MSQ") applies, Midway's
subsequent orders for such Spare Parts shall be for SPQ's or
multiples thereof with a minimum of one MSQ.
3.8.6 Unless Midway shall have specified "Total Quantity Required" on its
orders, IAE shall be entitled to consider an order for inexpensive
Spare Parts complete if at least 90% of the quantity ordered is
delivered. For the purpose of this Clause the term "inexpensive"
shall mean a price listed in the IAE Spare Parts Catalog at less
than Ten U.S. Dollars ($10) per unit, but shall be subject to review
by IAE from time to time.
3.8.7 Not later than the time of placing Initial Provisioning Orders,
Midway shall provide IAE with full shipping instructions applicable
to both Initial Provisioning Orders and to subsequent standard
replenishment orders for Spare Parts to be placed by Midway.
3.9 Modifications to Spare Parts
3.9.1 IAE shall be entitled to make modifications or changes to the Spare
Parts ordered by Midway hereunder. IAE shall promptly inform Midway
by means of Initial Provisioning Data, Procurement Data and Service
Bulletins when such modified Spare Parts (or Spare Parts introduced
by a repair scheme) become available for supply hereunder.
Notification of such availability shall be given to Midway before
delivery.
3.9.2 Modified Spare Parts may be supplied unless the modifications stated
in Service Bulletins, in the recommended or optional category are
considered by Midway to be unacceptable and Midway so states in
writing to IAE within 90 days of the transmittal date of a Service
Bulletin, in which case Midway shall be entitled to place a single
order for Midway's anticipated total requirement of pre-modified
Spare Parts, at a price and delivery schedule to be agreed.
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3.9.3 Unless Midway notifies IAE in writing under the provisions of Clause
3.9.2 hereof IAE may supply at the expense of Midway a modification
of any Spare Part ordered (including any additional Spare Part
needed to ensure interchangeability), provided that the said
modification has received the approval of the Certification
Authority. The delivery of such Spare Parts shall begin on dates
indicated by Service Bulletin. The delivery schedule shall be agreed
at the time when orders for modifications are accepted by IAE.
3.9.4 If Spare Parts required for incorporation of a modification are not
ordered as a kit, Midway's orders must distinguish them from normal
replacement Spare Parts in accordance with ATA Specification 200.
3.10 Inspection
3.10.1 Conformance to the Specification of Installation Items will be
assured by IAE through the maintenance of procedures, systems and
records approved by the Certification Authority. Conformance
documentation will be issued and signed by personnel authorized for
such purpose.
3.10.2 Conformance of Non-Installation Items will be assured by IAE
conformance documentation.
3.10.3 Upon the issue of conformance documentation in accordance with
Clauses 3.10.1 or 3.10.2 above, Midway shall be deemed to have
accepted the Installation Items and Non-Installation Items and that
such Items conform to specification.
3.11 Delivery and Packing
3.11.1 IAE shall deliver Spare Parts and Other Supplies ex-works, the IAE
point of manufacture. Shipping documents and invoices shall be in
accordance with ATA Specification 200.
3.11.2 Upon such delivery, title to and risk of loss of or damage to the
said Spare Parts and Other Supplies shall pass to Midway.
3.11.3 In accordance with ATA Specification 200 requirements, Midway shall
advise IAE at time of order of its instructions as to the marking
and shipping of the Spare Parts and Other Supplies.
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3.11.4 The packaging of Spare Parts shall normally be in accordance with
ATA Specification 300 Category 2 standard and shall be free of
charge to Midway. Category 1 standard packaging if required by
Midway shall be paid for by Midway.
3.12 Prices
3.12.1 Subject to Clause 3.7.2 above, prices of all Spare Parts shall be
quoted in U.S. Dollars, in the IAE Spare Parts Price Catalog,
Initial Provisioning Data and Procurement Data. Such prices shall
represent net unit prices, ex-works the IAE point of manufacture.
3.12.2 Prices applicable to each order placed by Midway hereunder shall be
the prices in effect on the date IAE receives such order, except
when delivery of Spare Parts against any order is scheduled to take
place after the Lead Time stated in the IAE Spare Parts Price
Catalog, in which event the prices for such items shall be those
prices in effect ninety (90) days prior to the scheduled time for
delivery in accordance with Clause 3.12.3 below.
3.12.3 IAE may from time to time adjust its prices for Spare Parts upon
not less than ninety (90) days notice to Midway, except that prices
for Spare Parts quoted in Initial Provisioning Data shall be firm,
provided that:
3.12.3.1 Orders are placed within three (3) months of receipt
by Midway of Initial Provisioning Data, and
3.12.3.2 Ordered quantities are agreed by IAE, such agreement
not to be unreasonably withheld by IAE, and
3.12.3.3 Deliveries are scheduled to be made prior to the
scheduled date for delivery of the first Aircraft as at
the date of supply by IAE of Initial Provisioning Data.
If for any reason orders are placed or subsequently rescheduled to specify
delivery more than six months after the date of first Aircraft delivery as
scheduled at the date of supply by IAE of Initial Provisioning Data, then the
prices for such items shall be those prices in effect ninety (90) days prior to
the scheduled time for delivery of such items against a schedule commensurate
with Midway fleet build up and Aircraft utilization. Notwithstanding the above,
individual price errors in the calculation of prices may be adjusted without
advance notice to Midway.
17
3.12.4 On request by Midway, prices of Spare Parts or other materials not
included in the Spare Parts Price Catalog shall be quoted within a
reasonable time by IAE.
3.13 Payment
3.13.1 Payment for all purchases under this Clause 3 shall be made by
Midway to IAE within 30 days after the date of delivery.
3.13.2 Midway undertakes that IAE shall receive payment in U.S. Dollars of
the full amount of payments falling due under this Clause 3.13,
without any set-off or deduction whatsoever.
3.13.3 All payments under this Clause 3.13 shall be made by cable or
telegraphic transfer to, and shall be deposited not later than the
due date of payment with:
National Westminster Bank, N.A
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Account No. 2982008199
ABA No. ▇▇▇▇▇▇▇▇▇
3.13.4 For the purpose of this Clause 3.13, payment shall only be deemed
to have been made to the extent immediately available funds are
received in the numbered IAE bank account specified in sub-clause
3.13.3 above.
3.13.5 Notwithstanding Clause 3.13.1 above, payments for all purchases
shall be due from Midway upon delivery, or at IAE's option prior to
delivery of the purchased items upon the occurrence of any of the
following events: (a) a receiver or trustee is appointed of any of
Midway's property, or (b) Midway is adjudicated or voluntarily
becomes a bankrupt under any bankruptcy or winding up laws or other
similar legislation, or (c) Midway becomes insolvent or makes an
assignment for the benefit of creditors, or (d) an execution is
issued pursuant to a judgment rendered against Midway, or (e) Midway
is unable or refuses to make payment to IAE in accordance with any
of Midway's obligations to IAE.
3.13.6 If Midway fails to make any payment for any Spare Parts or Other
Supplies on or before the date when such payment is due, then,
without prejudice to any of IAE's other rights, IAE will be entitled
to charge interest on the overdue amount, at the rate of 1.5% per
month, from the date such payment was due to the date such payment
is made.
18
3.14 Resale of Surplus Spare Parts
3.14.1 IAE is prepared at any time to consider the repurchase of Spare
Parts from Midway, if they are surplus to Midway's requirements.
3.14.2 Spare Parts to be resold shall be identified on lists submitted by
Midway to IAE at the time of resale and shall be delivered at
Midway's cost to IAE, at the factory of the Manufacturer or other
mutually agreed location.
3.14.3 Prices for Spare Parts resold to IAE under Clause 3.14.1 above
shall be the unit net prices paid therefor by Midway. All payments
made by IAE under this Clause 3.14 shall be by way of credit note to
Midway's account at IAE.
3.15 Purchase by Midway from Others
3.15.1 Midway may purchase from another A320-200 operator Spare Parts,
which by virtue of Clause 3.1 above are required to be purchased
from IAE:
3.15.1.1 on an occasional basis; or
3.15.1.2 where the said operator has excessive stock holdings
of the Spare Parts concerned; or
3.15.1.3 pursuant to a pooling arrangement or joint use agreement
between Midway and the said operator.
3.15.2 Subject to the conditions specified below, in the following
circumstances Midway may obtain from established and approved
sources, other than IAE or other A320-200 operators, Spare Parts
which by virtue of Clause 3.1 above are required to be purchased
from IAE:
3.15.2.1 as a temporary expedient in the event of a temporary
but material failure by IAE to supply Spare Parts as
required herein; or
3.15.2.2 during any period when IAE is hindered or prevented from
delivering Spare Parts due to circumstances beyond its
control provided Midway is thereby able to obtain the
Spare Parts it requires sooner than IAE is able to
supply them, and provided further that Midway will not
unreasonably thereby increase its stock of the Spare
Parts; or
19
3.15.2.3 where IAE identifies a Spare Part as a standard part.
Midway's rights under Clause 3.15.2 above are subject to Midway being
unable to satisfy its requirements for Spare Parts under the provisions
of Clause 3.15.1 above.
3.15.3 Nothing in this Clause 3.15 shall be deemed to extend the
obligations of IAE or to diminish the limitations upon such
obligations under the Warranties referred to in Clauses 4.1 and 4.2
below.
3.15.4 Notwithstanding any extension of the time of delivery in accordance
with the provisions of Clause 6.1.1 below, Midway shall be entitled
to cancel all or part of any order on IAE for Spare Parts which,
pursuant to the terms of Clauses 3.15.2.1 and 3.15.2.2 are purchased
from another source by giving reasonable notice of cancellation of
the said order.
3.15.5 In the event that Midway purchases Spare Parts under this Clause
3.15, Midway shall give written notice to IAE of the extent of such
purchase supported by any other technical information which IAE may
reasonably require.
3.16 Special Tools. Ground Equipment and Consumable Stores
IAE shall sell Other Supplies to Midway subject to the terms and conditions of
this Contract, but the detailed procedures of this Contract with regard to
Initial Provisioning, Procurement Data, prices, stocking and Lead Time shall not
apply. Technical data for special tools and ground equipment shall be in
accordance with ATA Specification 101.
3.17 Conflict
In the event of any conflict between the provisions of this Contract and the
provisions of ATA Specifications 101, 200 and 300, the provisions of this
Contract shall prevail.
20
CLAUSE 4 WARRANTIES, GUARANTEES AND LIABILITIES
4.1 IAE warrants to Midway that at the time of delivery, the Supplies sold
hereunder such Supplies will be free of defects in material and
manufacture and will conform substantially to IAE's applicable
specifications as stipulated in this Contract. IAE's liability and
Midway's remedies under this warranty are limited to the repair or
replacement, at IAE's election, of Supplies or parts thereof returned to
IAE at the factory of the manufacturer which are shown to IAE's
reasonable satisfaction to have been defective; provided, that written
notice of the defect shall have been given by Midway to IAE within ninety
(90) days after the first operation or use of the Supplies (or if the
Supplies are installed in new Aircraft, within ninety (90) days after
acceptance of such Aircraft by its first operator) but in no event later
than one (1) year after the date of delivery of such Supplies by IAE.
Transportation charges for the return of defective Supplies to IAE
pursuant to this Clause 4.1 and their reshipment to Midway and the risk of
loss thereof will be borne by IAE only if the Supplies are returned in
accordance with IAE's written reasonable and normal shipping instructions.
4.2 In addition, IAE grants and Midway accepts the following:
4.2.1 V2500 Engine and Parts Service Policy
4.2.2 V2500 Nacelle and Parts Service Policy
4.2.3 V2500 Non-Installation Items Warranty
4.2.4 V2500 Reliability Guarantee
4.2.5 V2500 Inflight Shutdown Guarantee
4.2.6 V2500 Exhaust Gas Temperature Guarantee
4.2.7 V2500 Fuel Consumption Retention Guarantee
4.2.8 V2500 Delay and Cancellation
4.2.9 V2500 Fleet Hour Agreement
The Service Policies, Warranties and Guarantees referred to in this Clause
4.2 are hereinafter called the "Warranties." The above Service Policies,
Warranties and Guarantees together form Exhibit D to this Contract.
The Firm Aircraft and the firm spare Engine as described in Exhibit B will
be covered by and be eligible for the service policies and guarantees
described in Clause 4.2.
4.3 The parties agree that those of the Warranties set out in Clauses 4.2.1
and 4.2.2 above wherein Midway may be referred to as the "Operator" shall
also apply to any equipment which falls within the categories of equipment
referred to in the Warranties manufactured, supplied or inspected by IAE
howsoever and whenever (whether before, on or after the date first above
written) acquired by Midway from whatsoever source including but not
limited to any V2500 aero engines and any associated equipment therefor,
and any parts for such engines and associated equipment which form part of
any aircraft acquired from the manufacturer.
21
4.4 The Warranties are personal to Midway and the obligations of IAE
thereunder shall only apply insofar as Midway has ownership and possession
of the Supplies covered thereunder.
4.5 Midway shall inform any person to whom it intends to sell, lease, loan or
otherwise dispose of any of the Supplies or equipment referred to in
Clause 4.3 above that such person may obtain from IAE a direct warranty
agreement incorporating those of the Warranties set out in Clauses 4.2.1
and 4.2.2. Midway shall also use its reasonable endeavors to ensure that
such person shall enter into a direct warranty agreement with IAE prior to
delivery of any of the Supplies or such equipment to such person.
4.6 IAE and Midway agree that the intent of the Warranties provided in Clause
4.2 is to provide specified benefits or remedies to Midway as a result of
specified events. It is not the intent however to duplicate benefits or
remedies provided to Midway by IAE or another source, e.g., another
equipment manufacturer or lessor, as a result of the same event.
Therefore, the terms of the Warranties notwithstanding, Midway agrees that
it shall not be eligible to receive benefits or remedies from IAE if it
stands to receive or has received benefits or remedies from IAE or another
source as a result of the same event.
4.7 Midway accepts that the Warranties granted to Midway under Clauses 4.1,
4.2 and 4.3 above together with the express remedies provided to Midway in
respect of the Supplies in accordance with this Contract are expressly in
lieu of, and Midway hereby waives, all other remedies, conditions and
warranties, expressed or implied including without limitation, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE, and
all other obligations and liabilities whatsoever of IAE and of its
shareholders whether in contract or in tort or otherwise for any defect,
deficiency, failure, malfunctioning or failure to function of any item of
the Supplies or of the equipment referred to in Clause 4.3 above,
howsoever and whenever acquired by Midway from whatever sources and Midway
agrees that neither IAE nor any of its shareholders shall be liable to
Midway upon any claim therefor or upon any claim howsoever arising out of
the manufacture or supply or inspection by IAE of any item of the Supplies
or of such equipment or any other item of whatever nature, whether in
contract or in tort or otherwise, except as expressly provided in the said
Warranties, and Midway agrees that IAE shall not be liable to Midway
except as set forth above.
4.8 IAE and Midway agree that this Clause 4 has been the subject of discussion
and negotiation, is fully understood by the parties and the price of the
Supplies and other mutual agreements of the parties set forth in this
Contract are arrived at in consideration of:
22
4.8.1 the express Warranties of IAE and Midway's rights thereunder; and
4.8.2 the exclusions, waivers and limitations set forth in Clause 4.7
above.
CLAUSE 5 PRODUCT SUPPORT SERVICES
5.1 IAE will make available to Midway the Product Support Services described
in Exhibit C to this Contract. Except when identified in such Exhibit as
requiring separate contractual arrangements, such Product Support Services
shall be supplied at no additional charge to Midway and subject to the
provisions of this Contract. IAE may delegate the performance of product
support services to an affiliated company.
CLAUSE 6 MISCELLANEOUS
6.1 Delay in Delivery
6.1.1 If IAE is hindered or prevented from delivering any of the Supplies
within the time for delivery specified in this Contract (as such
time may be extended pursuant to the provisions of this Contract) by
reason of:
6.1.1.1 any cause beyond the reasonable control of IAE, or
6.1.1.2 fires, industrial disputes or introduction of
essential modifications
the time for delivery shall be extended by a period equal to the
period for which delivery shall have been so hindered or prevented,
and IAE shall not be under any liability whatsoever in respect of
such delay.
6.1.2 If, by reason of any of the causes embraced by Clause 6.1.1 above,
IAE is hindered or prevented from or delivering any goods (which are
the same as and include the Supplies) to purchasers (including
Midway) then IAE shall have the right to allocate such goods, as
they become available, at its own discretion among all such
purchasers and IAE shall not be under any liability whatsoever to
Midway for delay in delivery to Midway resulting from such
allocation by IAE and the time for delivery shall be extended by a
period equal to the delay resulting from such allocation by IAE.
23
6.1.3 Should IAE inexcusably delay delivery of any item of the Supplies
beyond the time for delivery specified in this Contract (as such
time may be extended pursuant to the provisions of this Contract),
then in respect of the first two months of such delay, IAE shall not
be under any liability whatsoever and thereafter in respect of any
further delay in delivery the damages recoverable by Midway from IAE
as Midway's sole remedy shall not exceed 1/2% (one half percent) of
the purchase price of the item of Supplies so delayed in respect of
each month of such further delay (and prorata for any period of less
than one month) subject to an overall maximum of 3 1/2% (three and
one half percent) of the purchase price of the item of the Supplies
so delayed. In the alternative, should Midway require a spare Engine
due to a V2527-A5 engine removal from the Aircraft to maintain the
Aircraft operational and IAE has a suitable spare Engine available
for lease, then Midway may lease such a spare engine in accordance
with IAE's Standard Terms of Business. For such a lease IAE will
waive the daily rate normally chargeable, however Midway will pay
the hourly charge associated with the lease. In the event of such a
lease, Midway will not be eligible for the financial remedy
specified above in this clause 6.1.3.
6.1.4 The right of Midway to claim damages shall be conditional upon the
submission of a written notice by Midway that it intends to make a
claim therefor, within thirty days from the date on which IAE
notifies Midway that the item of the Supplies so delayed is ready
for delivery, or from the date on which Midway exercises the right
of cancellation in respect of such item conferred in accordance with
Clause 6.1.5 below, whichever date shall first occur and the receipt
by IAE of a written claim from Midway within thirty days of delivery
to Midway of such item of Supplies so delayed or the date of
cancellation in accordance with Clause 6.1.5 above as appropriate.
6.1.5 Should IAE inexcusably delay delivery of any item of the Supplies
beyond the time for delivery specified in this Contract for a period
of 12 (twelve) months then, in addition to the right of Midway under
Clause 6.1.3, Midway shall be entitled to refuse to take delivery of
such item on giving IAE notice in writing within one month after the
expiration of such period of 12 (twelve) months. Upon receipt of
such notice IAE shall be free from any obligation in respect of such
item except that IAE shall refund to Midway any deposits made in
respect of the purchase price of such item of the Supplies.
24
6.1.6 Should IAE excusably delay delivery of a spare Engine beyond the
time of delivery specified in this contract and should Midway
require a spare Engine due to a V2527-A5 engine removal from the
Aircraft to maintain the Aircraft operational, and IAE has a
suitable spare Engine available for lease, then Midway may lease
such a spare Engine in accordance with IAE's Standard Terms of
Business. For such a lease IAE will waive the daily rate normally
chargeable, however Midway will pay the hourly charge associated
with the lease. Should IAE excusably delay delivery of any item of
the Supplies beyond the time for delivery specified in this Contract
for a period of 15 (fifteen) months and IAE has not provided the
support specified above in this clause 6.1.6, Midway shall be
entitled to refuse to take delivery of such item on giving IAE
notice in writing within one month after the expiration of such
period of 15 (fifteen) months. Upon receipt of such notice IAE shall
be free from any obligation in respect of such item except that IAE
shall refund to Midway any deposits made in respect of the purchase
price of such item of the Supplies. Where IAE has to refund deposits
to Midway due to delay which has been solely attributable to
excusable delay as specified in Clause 6.1.1 above, and IAE has not
provided a lease as set forth above in this Clause 6.1.6, then IAE
will also refund such deposit with interest at a per annum rate of
one-half of the New York Citibank Prime rate calculated from the
later of the scheduled delivery date specified in this Contract or
the date such deposit was paid to IAE to the date of Midways notice
to IAE of its refusal to take delivery.
6.2 Patents
6.2.1 IAE shall, subject to the conditions set out in this Clause and as
the sole liability of IAE in respect of any claims for infringement
of industrial property rights, indemnify Midway against any claim
that the use of any of the Supplies by Midway within any country to
which at the date of such claim the benefits of Article 27 of the
Convention on International Civil Aviation of 7th December 1944 (The
Chicago Convention) apply, infringes any patent, design, or model
duly granted or registered provided, however, that IAE shall not be
liable to Midway for any consequential damage or any loss of use of
the Supplies or of the Aircraft in which the Supplies may be
incorporated arising as a result directly or indirectly of any such
claim.
6.2.2 Midway will give immediate notice in writing to IAE of any such
claim whereupon IAE shall have the right at its own expense to
assume the defense of or to dispose of or to settle such claim in
its sole discretion. IAE will discuss any such disposal or
settlement of a claim with Midway so it will not have an adverse
effect on Midway. Midway will give IAE all reasonable assistance and
will not by any act or omission do anything which may directly or
indirectly prejudice IAE in connection with the defense.
25
6.2.3 IAE shall have the right to substitute for any allegedly infringing
Supplies substantially equivalent non-infringing supplies.
6.2.4 The indemnity contained in Clause 6.2.1 above shall not apply to
claims for infringement in respect of (i) Supplies manufactured to
the specific design instructions of Midway; (ii) Supplies not of IAE
design (but IAE shall in the event of any claim for infringement
pass on to Midway so far as it has the right to do so the benefits
of any indemnity given to IAE by the designer, manufacturer or
supplier of such Supplies); (iii) the manner or method in which any
of the Supplies is installed in the Aircraft; or (iv) any
combination of any of the Supplies with any item or items other than
Supplies.
6.3 Credit Reimbursement
Should Midway not take delivery of the four Firm Aircraft in accordance
with the schedule described in Clause 1.1 or not take delivery of the
Purchased Items in accordance with the schedule described in Exhibit B,
unless extended or changed by mutual agreement between Midway and IAE
which such agreement shall not be unreasonably withheld, then, without
prejudice to IAE's other rights under this Contract, the value of any
credits, hardware or other concessions received by Midway pursuant to this
Contract (including any Side Letters and amendments) will be readjusted so
that for each of the four Firm Aircraft which Midway does not take
delivery of in accordance with the applicable scheduled delivery, then
Midway's total value of fleet introductory assistance credit and V2500
inventory credit will be reduced by an amount of [ * * * ] per Firm
Aircraft not taken as set forth above and by an amount of [ * * *]
if the Purchased Items are not taken as set forth above. If at the time of
such adjustment, the credits, hardware values or value of other
concessions which have been received by Midway exceed the final adjusted
amounts, Midway will promptly reimburse IAE in an amount equal to such
excess plus interest on the excess amounts calculated from the time each
respective amount was applied or value received until reimbursement.
Interest will be calculated to the lesser of 1.25 times the New York
Citibank prime rate or the New York Citibank prime rate plus three and a
one half a percent in effect at the time each respective amount was
applied or value was received. If Midway is in default of any payment
obligations under the terms of this Contract, IAE will without prejudice
to any of its other rights be entitled to offset any unused IAE credit in
Midway's account with IAE against such outstanding amount.
26
6.4 Non-Disclosure and Non-Use
6.4.1 Subject to Clause 6.4.3 below, Midway agrees to hold in confidence
any Information which it acquires directly or indirectly from IAE
and agrees not to use the same other than for the purpose for which
it was disclosed without the written approval of IAE. The expression
"Information" in this Clause 6.4.1 includes but is not limited to
all oral or written information, know-how, data, reports, drawings
and specifications, and all provisions of this Contract.
6.4.2 Midway shall be responsible for the observance of the provisions of
Clause 6.4.1 above by its employees.
6.4.3 The provisions of Clause 6.4.1 above shall not apply to information
which is or becomes generally known in the aero engine industry nor
shall the provisions of Clause 6.4.1 above prevent any necessary
disclosure of information to enable Midway itself to operate,
maintain or overhaul Supplies. 6.4.4 Midway shall be responsible for
obtaining any required authorization including an export license,
import license, exchange permit or any other governmental
authorization required in connection with the transactions
contemplated under this Contract. Midway shall restrict disclosure
of all information and data furnished thereto under this Contract
and shall ship the direct product of such information and data to
only those destinations permitted under such governmental
authorization.
6.4.5 In the event that any of the Information as described in Clause
6.4.1 is required to be disclosed by Midway through a valid
governmental, judicial or regulatory agency order, Midway agrees to
limit the disclosure to only those portions of the Information
specifically required to be disclosed by such order, and to maintain
the confidentiality of as much of the Information as legally
possible.
6.5 Taxes
6.5.1 Subject to Clause 6.5.2 below, IAE shall pay all imposts, duties,
fees, taxes and other like charges levied by the governments of the
United Kingdom, the United States of America, the Federal Republic
of Germany, Japan and Italy or any agency thereof in connection with
the Supplies prior to their delivery.
27
6.5.2 All amounts stated to be payable by Midway pursuant to this Contract
exclude any value added tax, sales tax or taxes on turnover. In the
event that the supply of goods or services under this Contract is
chargeable to any value added tax, sales tax or taxes on turnover
such tax will be borne by Midway. To ensure so far as possible that
Midway is not charged with European Community value added tax
("VAT"), Midway will within 30 days of signature hereof, inform IAE
of its VAT Code (if any) for inclusion on IAE's invoices.
6.5.3 Except as otherwise set forth in this Section 6.5 and except for
taxes imposed on or with respect to the overall gross or net income,
profits or gains or capital or net worth of IAE (including but not
limited to withholding taxes imposed by the Federal Government of
the United States of America), Midway shall pay all other imposed
duties, fees, taxes and other like charges by whomsoever levied.
6.6 Amendment
This Contract shall not be amended in any way other than by agreement in
writing, entered into by the parties hereto after the date of this
Contract, which is expressly stated to amend this Contract.
6.7 Assignment
Except as provided under Clause 5 above, neither party may assign any of its
rights or obligations hereunder without the written consent of the other party
(except that IAE may assign its rights to receive money hereunder). Any
assignment made in violation of this Clause 6.7 shall be null and void.
6.8 Exhibits
In the event of any conflict or discrepancy between the Exhibits (which are
hereby expressly made a part of this Contract) and Clauses of this Contract then
the Clauses shall prevail.
6.9 Headings
The Clause headings and the Index do not form a part of this Contract and shall
not govern or affect the interpretation of this Contract.
6.10 Law
This Contract shall be subject to and interpreted and construed in accordance
with the laws of the State of Connecticut, United States of America. The parties
agree to exclude the application of the United Nations Convention on Contracts
for the International Sale of Goods (1980).
28
6.11 Notices
Any notice to be served pursuant to this Contract is to be sent by registered
post or by telex:
In the case of IAE:
IAE International Aero Engines AG
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇.▇.▇.
Telex No. 4436031 INTLAERO
Attention: Business Director & Chief Legal Officer
In the case of Midway:
Midway Airlines Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ U.S.A
Telecopy No: ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: President
or in each case to such other place of business as may be notified from
time to time by the receiving party.
6.12 Exclusion of Other Provisions and Previous Understandings
6.12.1 This Contract contains the only provisions governing the sale and
purchase of the Supplies and shall apply to the exclusion of any
other provisions on or attached to or otherwise forming part of any
order form of Midway, or any acknowledgment or acceptance by IAE, or
of any other document which may be issued by either party relating
to the sale and purchase of the Supplies.
6.12.2 The parties agree that neither of them have placed any reliance
whatsoever on any representations, agreements, statements or
understandings made prior to the signature of this Contract, whether
orally or in writing, relating to the Supplies, other than those
expressly incorporated in this Contract, which has been negotiated
on the basis that its provisions represent their entire agreement
relating to the Supplies and shall supersede all such
representations, agreements, statements and understandings.
29
6.13 Termination
Either party shall have the option, at its sole discretion, to terminate
this Contract upon the occurrence of any of the following events: (a) a
receiver or trustee is appointed for any of the other party's property,
or (b) the other party is adjudicated or voluntarily becomes a bankrupt
under any bankruptcy or winding up laws or other similar legislation, or
(c) the other party becomes insolvent or makes an assignment for the
benefit of creditors.
30
IN WITNESS WHEREOF the parties hereto have caused this Contract to be signed on
their behalf by the hands of their authorized officers the day and year first
before written.
For IAE International Aero Engines AG /s/ [ILLEGIBLE]
-------------------
In the presence of /s/ [ILLEGIBLE]
-------------------
For Midway Airlines Corporation /s/ [ILLEGIBLE]
-------------------
In the presence of /s/ [ILLEGIBLE]
-------------------
31
EXHIBIT A
CONTRACT SPECIFICATION
32
V2500 TURBOFAN ENGINE MODEL SPECIFICATION
FAA Commercial Type Certificate E40NE Model V2527 - A5
Spec. No. IAE S27A5
SEA LEVEL RATINGS
(With Ideal Inlet and Exhaust Systems - See GENERAL NOTES)
Net
Thrust
lb
------
Takeoff Rating (Static) 24,800
Takeoff Rating (at 0.2 Mn) 22,020
Maximum Continuous Rating 22,240
DESCRIPTION
Type - An axial flow, two spool, turbofan engine with fan and multistage
compressors driven by multistage reaction turbines and designed for operation
with fixed area mixed exhaust system.
Installation Drawing No. 4W6199. The Engine Installation Drawing shows the
Engine envelope and provides dimensions and data for the engine installation
interfaces.
FUEL AND OIL
Fuel - Specification MIL-T-5624, MIL-T-83133 or ASTM-D-1655
Oil - Specification MIL-L-23699 Type II
Oil Consumption, Maximum (As measured over a 10-Hour Period) 0.15 U.S. gal/hr
STANDARD EQUIPMENT
Included in Engine Price
(Partial List Comprised of Major Items)
FUEL SYSTEM AND CONTROL SYSTEM:
LP/HP Fuel Pump, Fuel Filter Element, Fuel Temperature Sensor, Fuel
Diverter/Back to Tank Valve, Fuel Distribution Valve, P2T2 Relay Box, Electronic
Engine Control (EEC), Dedicated Generator, P4.9 Sensors and Manifold, Fuel
Metering Unit, Fuel Supply Pipe, Fuel Nozzles.
IGNITION SYSTEM:
Ignition Exciter, Igniter Plug, Ignition Lead (2 each) (without power
source).
AIR SYSTEM:
No. 4 Bearing Compartment Heat Exchanger, HP/LP Active Clearance Control Valve,
Active Clearance Control Valve Actuator, LP Compressor Bleed Valve Master
Actuator, LP Compressor Bleed Valve Slave Actuator, Variable Stator Vane
Actuator, HP Compressor Bleed Valves, HP Compressor Bleed Valve Solenoids, HPT
Cooling Valve and Solenoid.
ENGINE INDICATING SYSTEM:
33
Exhaust Gas Temperature (EGT) Thermocouples, EGT Harness and Junction Box, No. 4
Bearing Scavenge Pressure Transducer, Fuel Filter and Scavenge Differential
Pressure Switches, Scavenge Oil Temperature Sensor, Oil Pressure Transmitter,
Low Oil Pressure Switch, Vibration Transducers and Harness, Oil Quantity
Transmitter, Magnetic Chip Detectors, Fuel Flowmeter.
OIL SYSTEM:
Oil Tank, Air Cooled Oil Cooler, Fuel Cooled Oil Cooler, Pressure Oil Filter
Element, Air Cooled Oil Cooler Modulating Valve, Scavenge Oil Filter Housing
Assembly and Element, No. 4 Bearing Compartment Scavenge Valve, Electrical Power
Generator Fuel Cooled Oil Cooler.
MISCELLANEOUS:
EEC Harnesses Fan and Core, Ignition Supply Harness, General Service Harness,
Nose Spinner, Core Fuel Drains, Airframe Accessory Mounting Pads and Drives,
Various Brackets on working flanges for attachment of Nacelle and Aircraft
Equipment Electrical Power Generator Piping to Cooler, P2T2 Probe.
ADDITIONAL EQUIPMENT
Available at Increased Price
Shipping Stand
Engine Condition Monitoring Instrumentation
Items of ADDITIONAL EQUIPMENT should be ordered at the time of Engine
procurement in order to assure availability of this equipment at the time of
Engine shipment.
34
GENERAL NOTES
The specified Sea Level Static Ratings are ideal and are based on U.S. Standard
Atmosphere 1962 conditions, the specified fuel and oil, an ideal inlet pressure
recovery, no fan or compressor air bleed or load on accessory drives, a mixed
exhaust system having no internal pressure losses and with a mixed primary
nozzle velocity coefficient equal to 1.0.
Takeoff rating is the maximum thrust certified for takeoff operation. The
specified takeoff thrust is available at and below ISA + 56(degree)F
(31(degree)C) ambient temperature.
Maximum Continuous Rating is the maximum thrust certified for continuous
operation. The specified thrust is available at and below ISA + 18(degree)F
(10(degree)C) ambient temperature.
Maximum Climb Rating is the maximum thrust approved for normal climb operation.
Maximum Cruise Rating is the maximum thrust approved for normal cruise
operation.
Guaranteed Calibration Stand Performance values for specific engine applications
are provided in Appendix A to this specification.
Unless otherwise specified, engines will be supplied with the STANDARD EQUIPMENT
listed.
The Electrical Power Generator Fuel Cooled Oil Cooler and any drains, brackets
and Electrical Power Generator piping, and other external hardware supplied with
the Engine are certified by the FAA-NER to FAR Part 33 requirements.
35
V2500 TURBOFAN ENGINE MODEL SPECIFICATION
Appendix A
FOR A COMPLETE PROPULSION SYSTEM INCLUDING ENGINE AND NACELLE
TO BE INSTALLED IN THE AIRBUS INDUSTRIE A320 AIRPLANE
GUARANTEED CALIBRATION STAND PERFORMANCE
Sea Level Static
----------------
Net Max. Specific.
Thrust Fuel Consumption
lb. lb/hr/lb Thrust
Takeoff Rating 24,200 TBD
Maximum Continuous Rating 21,750 TBD
90% of Maximum Continuous Rating 19,570 TBD
See GENERAL NOTES of the basic specification for rating definitions.
The ratings specified in this Appendix are attainable on the test stand at U.S.
Standard Atmosphere 1962 conditions, with the specified fuel and oil, the air
inlet and exhaust system described below, and without fan or compressor air
bleed for aircraft systems, or load on accessory drives.
The air inlet and exhaust system are shown on Propulsion System Drawing No.
745-7000 and consist of the air inlet duct assembly, fan duct assembly, mixed
nozzle assembly and other associated V2500 Nacelle System hardware as would be
installed in the Airbus Industrie A320 airplane. The specified calibration stand
performance represents installed performance and is based on fuel having a LHV
of 18,400 Btu/lb.
The maximum thrust specific fuel consumption values will he determined based on
the production acceptance to inflight correlation established after the
completion of airplane certification.
36
The following items are included in establishing the specified performance
guarantees:
(a) Air inlet duct contours
(b) Air inlet duct acoustic treatment
(c) Fan duct and mixed nozzle contours
(d) Fan reverser blocker doors and drag links
(e) Fan duct and mixed nozzle acoustic treatment
(f) Fan duct bleed openings except that the precooler bleed duct is shut off
(g) Fan air leakage with the exhaust system conforming to that shown on the
Engine Installation Drawing
(h) Fan air bleed for component cooling and nacelle ventilation
37
EXHIBIT B
PURCHASED ITEMS, PRICE,
ADJUSTMENT FORMULA AND DELIVERY
Firm Spare Engine
-----------------
Purchased Basic Contract Price Qty. Delivery
Item No.: U.S. Dollars (July 1988) --- Date
------------------------------------------- ----
1. [ * * * ] 1 November 1998
Option Spare Engine
-------------------
Purchased Basic Contract Price Qty. Delivery
Item No.: U.S. Dollars (July 1988) --- Date
------------------------------------------- ----
1. [ * * * ] 1 November 1999
38
ADJUSTMENT FORMULA
1. Any Basic Contract Price or other Sum expressed to be subject to
Adjustment from a Base Month to a month of delivery or other date of
determination will be subject to adjustment in accordance with the
following formula:
P = Pb (0.60L + 0.30M + 0.10E)
Lo Mo Eo
Where:
P = The Invoiced Purchase Price or Adjusted Sum rounded to the nearest
dollar.
Pb = The Basic Contract Price or other Sum.
Lo = The "Average Hourly Earnings of Aircraft Engine and Engine Parts
Production Workers" SIC Code 3724 published by the Bureau of Labor
Statistics in the U.S. Department of Labor for the month preceding
the Base Month by four months.
L = The "Average Hourly Earnings of Aircraft Engine and Engine Parts
Production Workers" SIC Code 3724 for the month preceding the month
of delivery or other date of determination by four months.
Mo = The "Producer Price Index, Code 10, For Metals and Metal Products"
published by the Bureau of Labor Statistics in the U.S. Department
of Labor for the month preceding the Base Month by four months.
M = The "Producer Price Index, Code 10, For Metals and Metal Products"
for the month preceding the month of delivery or other date of
determination by four months.
Eo = The "Producer Price Index, Code 5, For Fuel and Related Products
and Power" published by the Bureau of Labor Statistics in the U.S.
Department of Labor for the month preceding the Base Month by four
months.
E = The "Producer Price Index, Code 5, For Fuel and Related Products
and Power" for the month preceding the month of delivery or other
date of determination by four months.
39
2. The values of the factors 0.60L and 0.30 M and 0.10 E
Lo Mo Eo
respectively, shall be determined to the nearest fourth decimal place. If
the fifth decimal is five or more, the fourth decimal place shall be
raised to the next higher number.
3. If the U.S. Department of Labor ceases to publish the above codes or
modifies the basis of their calculation, then IAE may substitute, with
Midays agreement which shall not be unreasonably withheld any officially
recognized and substantially equivalent statistics.
4. The Basic Contract Prices contained in this Exhibit B are subject to from
a Base Month of July 1988 to the month of delivery using Lo, Mo and Eo
values for March 1988.
5. If the application of the formula contained in this Exhibit B results in a
Purchase Price which is lower than the Basic Contract Price, the Basic
Contract Price will be deemed to be the Purchase Price for such Supplies.
40
EXHIBIT C
PRODUCT SUPPORT PLAN
41
PRODUCT SUPPORT
FOR THE
V2500 ENGINE
IAE INTERNATIONAL AERO ENGINES AG
Issue No. 4
TABLE OF CONTENTS
I. INTRODUCTION .......................................................... ii
II. CUSTOMER SUPPORT ...................................................... 1
o Customer Support Manager
o Customer Support Representatives
o Customer Training
o Engine Maintenance Management
o Operations Monitoring
o Special Programs
III. BUSINESS SUPPORT ...................................................... 6
o Engine Warranty Services
o Maintenance Center Support
o Maintenance Facilities Planning Service
o Engine Reliability and Economic Forecasts
o Logistics Support Studies
o Lease Engine Program
IV. TECHNICAL SERVICES .................................................... 9
o Technical Services
o Powerplant Maintenance
o Customer Performance
o Diagnostic Systems
o Human Factors
o Flight Operations
o Repair Services
o Tooling and Support Equipment Services
o Product Support Technical Publications
V. SPARE PARTS ........................................................... 20
o Spare Parts Support
i
I. INTRODUCTION
International Aero Engines AG (IAE) will make the following support personnel
and services available to the V2500 engine customer: Flight Operations, Customer
Performance, Customer Support Representatives, Customer Maintenance Support,
Technical Services, Powerplant Maintenance, Service Data Analysis, Human
Factors, Repair Services, Warranty Administration, Maintenance Facilities
Planning, Tooling and Support Equipment Services, Product Support Technical
Publications, Customer Training, Spare Parts Support and Maintenance Center
Support.
To make these support services readily available to you, our customer, in the
most efficient manner, the Customer Support Group has been established and
assigned primary responsibility within IAE for customer liaison. A Customer
Support Manager is assigned to maintain direct liaison with each individual
Customer. A description of the various product support services available to
each customer follows.
IAE reserves the right to withdraw or modify the services described herein at
any time at its sole discretion. No such withdrawal or modification shall
diminish the level of services and support which the Customer may be entitled to
receive with respect to V2500 engines for which an acceptable order has been
placed with IAE or with respect to aircraft with installed V2500 engines for
which a firm and unconditional order has been placed with the aircraft
manufacturer, prior to the announcement of any such withdrawal or modification.
ii
II. CUSTOMER SUPPORT
CUSTOMER SUPPORT MANAGER
The Customer Support Manager provides a direct liaison between the airline
customer's Engineering, Maintenance, Operations, Logistics, Commercial and
Financial organizations and the corresponding functions within IAE. The Customer
Support Manager assigned to each airline is responsible for coordinating and
monitoring the effort of the Product Support Department functional organization
to achieve timely and responsive support for the airline. The Customer Support
Manager provides the following specific services to the airline customer:
- Readiness Program and planning prior to EIS
- Technical recommendations and information.
- Engine Maintenance Management Plans
- Refurbishment, Modification and Conversion program planning assistance.
- Coordination of customer repair, maintenance and logistics requirements
with the appropriate Product Support functional groups.
- Assist with critical engine warranty/service policy claims.
The Customer Support Manager will represent the airline customer in IAE internal
discussions to ensure that the best interests of the customer and IAE are
considered when making recommendations to initiate a program, implement a change
or improvement in the V2500 engine.
CUSTOMER SUPPORT REPRESENTATIVE
IAE Customer Support Representatives provide the following services to the
airline customer:
- 24 Hour Support
- Maintenance Action Recommendations
- Daily Reporting on Engine Technical Situations
- On-The-Job Training
- Service Policy Preparation Assistance
- Prompt Communication with IAE
ENGINE MAINTENANCE SUPPORT SERVICE
Customer Support Representatives assist airline customer personnel in the
necessary preparation for engine operation and maintenance. The Representative,
teamed with a Customer Support Manager will work closely with the airplane
manufacturer's support team particularly during the initial period of aircraft
operation. Representatives are in frequent contact with the IAE offices on
technical matters. Information and guidance received from the home office is
transmitted promptly to the airline which allows the airline to share in all
related industry experience.
-1-
The practice permits immediate use of the most effective procedures and
avoidance of unsuccessful techniques. The IAE office contact ensures that IAE
Representatives know, in detail, the latest and most effective engine
maintenance procedures and equipment being used for maintenance and overhaul of
V2500 engines. They offer technical information and recommendations to airline
personnel on all aspects of maintenance, repair, assembly, balancing, testing,
and spare parts support of IAE.
ON-THE-JOB TRAINING
Customer Support Representatives will conduct on-the-job training for the
airline's maintenance personnel. This training continues until the maintenance
personnel have achieved the necessary level of proficiency. Training of new
maintenance personnel will be conducted on a continuing basis.
SERVICE POLICY ADMINISTRATION
Customer Support Representatives will provide administrative and technical
assistance in the application of the IAE Engine and Parts Service Policy to
ensure expeditious and accurate processing of airline customer claims.
CUSTOMER TRAINING
IAE Customer Training offers airline customers the following support:
- Technical Training at Purpose Built Facilities
- On-site Technical Training
- Technical Training Consulting Service
- Training Aids and Materials
TRAINING PROGRAM
The IAE Customer Training Center has an experienced full-time training staff
which conducts formal training programs in English for airline customers'
maintenance, training and engineering personnel. The standard training programs
are designed to prepare customer personnel, prior to the delivery of the first
aircraft, to operate and maintain the installed engines. Standard courses in
engine operation, line maintenance, modular maintenance, performance and
trouble-shooting are at so available throughout the production life of the
engine. The courses utilize the latest teaching technology, training aids and
student handouts. IAE Customer Support will coordinate the scheduling of
specific courses as required. The following is the curriculum of standard
courses available. On-site technical training, technical training consulting
services and customized courses may be provided upon customer request and
subject to separate contractual arrangements.
-2-
General V2500 Familiarization
This two day course is designed for experienced gas turbine personnel who will
be responsible for planning, provisioning and maintenance of the V2500 engine.
This course is also designed to appropriately familiarize key staff, supervisory
and operations planning personnel and flight crews. Discussions are concentrated
in the following subject areas:
- Engine construction features internal and external hardware.
- Engine systems operation, major components accessibility for
removal/replacement.
- Operational procedures
- Performance characteristics
- Maintenance concepts, repair and replacement requirements and special
tooling.
The course is normally conducted in preparation for fleet introductory
discussions in the provisioning of spares and tooling, training and line
maintenance areas to acquaint the customer with the engine, its systems,
operations and procedures.
Line Maintenance and Troubleshooting
This course is designed for key line maintenance and troubleshooting personnel
who have not received previous formal training on the V2500 engine. The
classroom phases provide the student with the information essential for timely
completion of line maintenance activities and the procedures for effective
troubleshooting and correction of malfunctions in the V2500 engine systems and
the engine/airframe interfaces. Classroom and shop training are provided for in
the following areas:
- Engine Description
- Systems Operation
- Applied Performance
- Ground Operations
- Troubleshooting Procedures
- Practical Phase Line Maintenance Tasks
V2500 Familiarization and Modular Maintenance
Provides experienced heavy maintenance personnel with engine modular disassembly
and assembly training. The training is concentrated in the following subject
areas:
- Engine Description Overview
- Engine Systems Overview
- Heavy Maintenance Tasks *
* Course duration and "hands-on" coverage are contingent on the
availability of an engine and required tooling.
-3-
ENGINE MAINTENANCE MANAGEMENT PLANS
Planning documents, tailored for individual operators, are developed to serve as
Engine Maintenance Management Program criteria. These are directed toward the
objective of ensuring cost-effective operation with acceptable post-repair test
performance, providing engine reliability to achieve maximum time between shop
visits, and minimizing the adverse effects to operation of inflight shutdowns
and delays/cancellations. Through the institution of specific maintenance
recommendations, proper engine performance, durability, and hot section parts
lives can be achieved.
OPERATIONS MONITORING
The following information is available to the airline customer from the IAE
Product Information Process (IP)^2 Group:
OPERATION EXPERIENCE REPORTS
IAE maintains V2500 Service Data System (SDS) data base from which selected
engine operations and reliability summary reports will be developed and made
available on a scheduled basis to each airline customer. Data reported by IAE
Customer Support Representatives serve as input to this data base. This
computerized data maintenance and retrieval system will permit:
- A pooling and exchange of service experience for the benefit of the
entire airline industry.
- A common statistical base.
- The selective querying of computer data files for answers to customer
inquiries.
In addition to providing operations and reliability reports, SDS serves in-house
programs directed at improving engine design and enhancing overall customer
support, including spare parts provisioning and warranty administration.
SPECIAL PROGRAMS
ENGINE HARDWARE RETROFIT PROGRAMS
Engine Retrofits are carried out to provide modification of engine hardware
configuration when required on delivered engines. This involves assisting in the
marshalling of hardware, special tools, manpower and the scheduling of engine
and material to modification sites.
CONTROLLED SERVICE USE PROGRAMS AND MATERIAL SUPPORT
IAE shall assume responsibility for the planning, sourcing, scheduling and
delivery of Controlled Service Use material, warranty replacement material,
service campaign, material and program support material subject to the terms of
special contracts with customers.
-▇-
▇▇▇▇▇▇ customer shipments, both inbound and outbound, are monitored, traced,
routed and expedited as required. The receipt and movement of customer owned
material returned to IAE is carefully controlled, thus assuring an accurate
accounting at all times.
-5-
III. BUSINESS SUPPORT
The Business Support Group is dedicated to providing prompt and accurate
assistance to you, our V2500 airline customer. This Group provides the following
categories of assistance and support to the V2500 airline customer:
o Engine Warranty Services
o Maintenance Support
o Lease Engine Program
o Engine Reliability and Economic Forecasts
o Logistic Support Studies
ENGINE WARRANTY SERVICES
Engine Warranty Services will provide the following support for the V2500 engine
airline customer:
- Prompt administration of claims concerning Engine Warranty, Service
Policy, other support programs and Guarantee Plans.
- Investigation of part condition and part failure.
- Material provisioning administration for Controlled Service Use
programs and other material support.
PROMPT ADMINISTRATION
Each airline customer is assigned a Warranty Analyst whose job is to provide
individual attention and obtain prompt and effective settlements of Warranty and
Service Policy claims. A typical claim properly submitted is generally settled,
including issuance of applicable credit memo, within thirty days. Experience
generated by much of the data derived from such claims often enables IAE to
monitor trends in operating experience and to address and often eliminate
potential problems.
INVESTIGATION AND REPORTS
Parts returned to IAE pursuant to the terms of the Service Policy are
investigated in appropriate detail to analyze and evaluate part condition and
cause of part failure. A report of findings is prepared and forwarded to the
airline customer and to all IAE departments involved. In the case of vendor
parts, the vendor is promptly informed. Reports often include recommendations to
preclude repetition of the problem.
-6-
MAINTENANCE CENTER SUPPORT
IAE has arranged for the establishment of Maintenance Centers which are
available to accomplish repairs, modifications and conversions, as well as the
complete overhaul of the V2500 engine subject to IAE's standard terms and
conditions for such work.
Through the use of the IAE established Maintenance Centers and their
capabilities, an operator can minimize or eliminate the need for investment in
engine support areas depending on the level of maintenance he elects the
Maintenance Center to perform. Savings in specific engine support areas, such as
spare parts inventory, maintenance and test tooling, support equipment and test
facilities, can be demonstrated. Use of Maintenance Centers can also minimize
the need for off-wing maintenance and test personnel with their associated
overhead.
MAINTENANCE FACILITIES PLANNING SERVICE
Maintenance Facilities Planning Service offers the following support to IAE
customer:
- General Maintenance Facility Planning Publications
- Customized Facility Plans
- Maintenance Facility and Test Cell Planning Consultation Services
Maintenance Facilities Planning Service provides general and customized facility
planning data and consultation services. Facility Planning Manuals for the V2500
engine will present the maintenance tasks, facility equipment and typical
departments floor plans showing arrangement of equipment required to accomplish
the tasks for all levels of maintenance. The Facility Equipment Manual is a
catalog of standard facility equipment such as lathes, process tanks, hoists,
cranes, etc., which is suitable for use in the maintenance and testing of IAE
engines.
Customized facility planning services and consulting services are offered
subject to separate contractual arrangements. Customized facility plans are
developed to meet the requirements of customers' specific fleet sizes,
activities and growth plans. The plans identify floor space, facility equipment,
utilities and manpower requirements. On-site surveys are conducted as a part of
customized plan development to determine the adaptability of existing facilities
and equipment for the desired maintenance program. These plans provide floor
plan layouts to show recommended locations for work stations, major equipment,
marshalling and storage areas, workflow patterns, and structural and utility
requirements to accommodate all the engine models that are maintained in the
customer's shop. The Maintenance Facilities Planning Service also provides
consultant services which are specifically related to the development of engine
test cells, and the adaptation of existing maintenance facilities to accommodate
expanding production requirements and/or new or additional IAE models.
-7-
ENGINE RELIABILITY AND ECONOMIC FORECASTS
Engine reliability and economic forecasts in the forms of predicted shop visit
rates and maintenance costs can be provided to reflect the airline customers'
operating characteristics. Additionally, various analyses can be conducted to
establish life probability profiles of critical engine parts, and to determine
optimum part configuration and engine operating procedures.
LOGISTICS SUPPORT STUDIES
As required, logistics studies are conducted to assist in the planning of engine
operational support. Such studies may include spare engine and spare module
requirements forecasts, level of maintenance analyses, engine type economic
evaluations and life cycle cost estimates.
LEASE ENGINE PROGRAM
An engine lease program will be made available to V2500 Airline Customers
subject to IAE's standard terms and conditions of lease. Pool spares will be
stationed at selected locations to assure emergency protection against
aircraft-on-ground (AOG) situations or to provide supplemental support during
"zero spares" conditions. The lease engines will incorporate the highest
maintenance standards and configuration levels. Availability will be subject to
prior demand, however, the program logistics will be continually reviewed to
assure the most effective deployment of available pool engines.
-8-
IV. TECHNICAL SERVICES
The Technical Services Group provides the following categories of technical
support to the airline customer:
- Technical Services
- Powerplant Maintenance
- Customer Performance
- Diagnostic Systems
- Human Factors
- Flight Operations
- Repair Services
- Tooling and Support Equipment Services
- Technical Publications
TECHNICAL SERVICES
Technical Services is responsible for the overall technical support to the
customers. The following services are provided:
- Technical Problem Identification/Corrective Action Implementation
- Technical Communication
- Engine conversion Program Definition and Management
- Engine Upgrade and Commonality Studies
- Engine Incident Investigation Assistance
TECHNICAL SERVICES
Technical information supplied through IAE Customer Support Representatives,
Customer Support Managers, customer correspondence and direct meetings with
airlines' representatives permits assessment of the factors involved in
technical problems and their impact on engine reliability and operating costs.
Resolution of these problems is coordinated with responsible groups within IAE
and the necessary corrective action is defined. In certain situations the
corrective action involves the establishment of Service Evaluation programs for
proposed modifications, and the establishment of warranty assistance programs in
conjunction with the IAE Warranty Administration Group. Technical Services will
assist customers in the implementation of recommended corrective action and
improvements principally through official IAE technical communications, and
direct customer contact.
-9-
TECHNICAL COMMUNICATIONS
Technical Services is responsible for the release of technical communications.
Primary communication modes involves release of limits and procedures through
engine and maintenance manual revisions and the requirements associated with
engine upgrade and/or conversion, durability and performance improvements, and
problem resolution through Service Bulletins is provided by All Operator Letters
and/or wires or direct technical written response to individual customer
inquiries.
ENGINE CONVERSION PROGRAMS
Technical Services defines minimum configuration levels for conversion of
service engine models. They serve to assist the customer with the implementation
of conversion programs into existing fleets by providing preliminary planning
cost estimates and technical planning information regarding tooling, material
and instructional requirements. Conversion programs are monitored for problem
areas and Technical Services initiates and implements corrective action as may
be necessary.
ENGINE INCIDENT INVESTIGATION ASSISTANCE
Assistance is provided to an airline in conducting engine incident
investigations in responding to the requirements of the appropriate Air
Worthiness authority.
LINE MAINTENANCE AND TROUBLESHOOTING
Line Maintenance and Troubleshooting Seminars can be conducted at the IAE
Training Center with the objective of improving line maintenance effectiveness
fleetwide. Specialized training on V2500 line maintenance and troubleshooting
can be provided through on-site workshops by special contractual arrangement.
Troubleshooting support is provided primarily through powerplant troubleshooting
procedures which are published in IAE and airframe manufacturers manuals. When
an airline encounters an engine problem and corrective action taken has not been
effective, more direct support in troubleshooting and maintenance can also be
provided to the customers line maintenance personnel. Instructions on V2500
powerplant troubleshooting and maintenance can also be provided to customers
line maintenance personnel.
AIRLINE SHOP MAINTENANCE
Reviews of shop practices and procedures of individual airlines can be conducted
to determine the most efficient and cost-effective methods for maintenance and
repair of the V2500 in the environment in which the airline must maintain that
engine.
-10-
POWERPLANT MAINTENANCE
Powerplant Maintenance covers responsibility for maximizing engine
maintainability, establishing maintenance concepts and requirements and
providing maintenance support plant for IAE. This group provided the following
services:
- Definition of Maintenance Tasks and Resource Requirements
- Planning Guides
Powerplant Maintenance conducts design reviews and comprehensive maintenance
analysis of new engine designs and engine design changes to maximize engine
maintainability consistent with performance, reliability, durability and life
cycle cost considerations. Maintenance concepts, requirements and tasks are
established to minimize maintenance costs. This group represents the customer's
maintainability interests in internal IAE operations and upon request will
assist the customer in resolving specific maintenance task problems.
PROGRESSIVE MAINTENANCE PLANNING
Powerplant Maintenance also provides Planning Guides based upon Maintenance Task
Analysis. The. guides present engine maintenance requirements, their subordinate
tasks and the required resources to accomplish on-aircraft engine maintenance
and the off-aircraft repair of engines by modular section/build group
replacement. Maintenance requirements are also presented for the refurbishment
of modular section/build group by parts replacement, the complete repair of
parts, the refurbishment of accessory components and for engine testing. The
data in the Planning Guides is presented in a manner that is primarily intended
to assist new operators by providing a phased introduction of new engines into
their shops and to capitalize on the design maintainability features for the
engine when they are developing their maintenance plans.
Powerplant Maintenance Engineering will assist new operators in planning a
gradual, technically feasible, and economically acceptable expansion from line
maintenance of installed engines through the complete repair of parts and
accessory components.
CUSTOMER PERFORMANCE
Customer Performance provides for the following types of technical assistance to
the airline customer:
- Engine Performance Analysis Computer Programs for Test Cell Use
- Test Cell Correlation Analysis and Correction Factors
- Engine Stability Procedures and Problem Analysis
Although much of the above support is provided in the form of procedures, data
and recommendations in various publications, the group also answers inquiries of
a performance nature which are forwarded to IAE by individual customers.
-11-
ENGINE PERFORMANCE ANALYSIS
Technical support is provided in a number of areas related to operational
suitability including the development of the test requirements and performance
limits for the Adjustment and Test Section of the Engine Manual. Computer
programs that will assist the operator in analyzing engine performance using
test cell data can be provided subject to IAE then current standard license fees
and Terms and Conditions.
TEST CELL CORRELATION
Technical assistance is provided to the customer for developing appropriate
corrections to be used for specific test configurations at customer owned test
cell facilities. Reports are provided presenting correlation analyses and IAE
recommended test cell corrections which permit comparison of the performance of
customer tested engines with the respective Engine Manual limits and guarantee
plan requirements.
ENGINE STABILITY
Technical support is provided to ensure that engine stability and starting
reliability are maintained. Service evaluation programs for proposed
improvements are initiated and monitored to determine their effectiveness. In
addition, problems relating to engine control systems which impact engine
stability and performance are analyzed.
DIAGNOSTIC SYSTEMS
Diagnostic Systems is responsible for the technical support of customer
acquisition of inflight engine data and the assessment of engine performance
through the use of that data. Diagnostic Systems personnel provide the following
services:
- Guidance to help customers define their engine monitoring system
requirements.
- Development of hardware specifications and computer programs (by separate
contractual arrangement) to satisfy engine diagnostic requirements.
- Coordination of all IAE airborne diagnostic support activity.
GUIDANCE IN DEFINING ENGINE MONITORING SYSTEMS REQUIREMENTS
Diagnostic Systems can provide consultation services to assist the customer in
defining his engine condition and performance monitoring requirements and in
selection of appropriate hardware and software systems to meet those
requirements and options between the customer, airframe manufacturer, and
Airborne Integrated Data System (AIDS) manufacturer.
DEVELOPMENT AND COORDINATION
Diagnostic Systems personnel can develop hardware specification and make
computer software available to accomplish Engine Condition Monitoring (ECM) and
performance analysis of
-12-
engine modules using AIDS data. Engine condition monitoring procedures, of both
the manual and computerized variety can also be developed and provided in
support of the customer's selected method of engine condition monitoring.
Computer software will be provided to the customer subject to IAE's then current
standard license fees and Terms and Conditions.
Diagnostic Systems personnel also coordinate activities of cognizant functional
groups at IAE to provide engine related information to the customer, airframe
manufacturer, and AIDS equipment vendor during the planning, installation, and
operation of AIDS.
HUMAN FACTORS
Human Factors supplies data on task time and skill requirements necessary for
accomplishing maintenance procedures.
Task data provided includes estimates of the man-hours, elapsed time and job
skills necessary to accomplish maintenance tasks as described in IAE's Manual
and Service Bulletins. Data is supplied for "on" and "off"' aircraft maintenance
tasks up to modular disassembly/assembly. Additional selected task data can be
supplied on disassembly/assembly to the piece part level and on parts repair. In
addition, the group can help solve problems related to skill requirements, body
dimensions, or excessive man-hours encountered in accomplishing maintenance
tasks.
FLIGHT OPERATIONS
Flight Operations provides the airline customer with the following technical
assistance concerning installed engine operations:
- Introduction of new equipment
- Problem resolution and assistance with in-service equipment
- Contractual commitment and development program support
- Publication of engine operations literature and performance aids
NEW EQUIPMENT
In accordance with customer needs, Flight Operations can provide on-site
assistance in the training of operations personnel and help in solving engine
operational problems that might arise during the initial commercial service
period. Such assistance can include participation in initial delivery flights,
engine operational reviews, and flight crew training activity.
PROBLEM RESOLUTION - IN-SERVICE EQUIPMENT
In accordance with a mutually agreed upon plan, Flight Operations can perform
cockpit observations to identify or resolve engine operating problems and to
assess installed engine performance.
-13-
CONTRACTUAL SUPPORT AND DEVELOPMENT PROGRAMS
As required, Flight Operations can assist in evaluating installed engine
performance relative to contractual commitments and engine improvements which
have an impact on engine operations.
PUBLICATION SUPPORT
Flight Operations is responsible for the issuance of Propulsion System Operating
Instructions and correspondence pertaining to inflight engine operations. Such
material is coordinated with the airframe manufacturers as required. Special
Presentations and Reports are also issued, as required, to support the activity
described above.
REPAIR SERVICES
Repair Services provides the following support to the airline customers:
- Coordinated Repair Development Activity
- Customer Assistance on Repair Procedures and Techniques
- Qualification of Repair Sources
- Repair Workshops
- Repair Development List
COORDINATION OF REPAIR DEVELOPMENT
Repair Services provide direct contact with all sources that initiate repair
schemes. The Group coordinates with representatives of Engineering and Support
Services disciplines in identifying repair needs, evaluating various repair
options and establishing repair development procedures and schedules. The Group
participates in setting repair evaluation and approval requirements. When the
repair is approved and substantiating data is documented, Repair Services
releases the repair to the Engine Manual.
TECHNICAL ASSISTANCE
Repair Services provides daily communications with airline customers via
technical responses to inquiries direct from the airline or through our Customer
Support Representative office at the airline facility. In addition, Repair
Services make periodic visits to airline repair facilities to discuss new
repairs under development, answer specific questions posed by the particular
facility and review actual parts awaiting a repair/scrap decision. Occasionally,
Repair Services make special visits to customer facilities to assist in training
customer personnel in accomplishing particularly complex repairs.
-14-
QUALIFICATION OF REPAIR SOURCES
Repair Services coordinates the qualification of repair sources for repairs
proprietary to IAE or to an outside repair agency. They also perform a review of
the qualifications of repair sources for critical, nonproprietary repairs for
which a source demonstration is deemed necessary. The group participates in
negotiation of the legal and business agreements associated with these
qualification programs.
TOOLING AND SUPPORT EQUIPMENT SERVICES
The Tooling and Support Equipment Services Group assists the customer by
providing the following services:
- Support Equipment Manufacturing/Procurement Documentation
- Engine Accessory Test Equipment and Engine Transportation Equipment
Specifications
- Support Equipment Logistics Planning Assistance
SUPPORT EQUIPMENT DOCUMENTATION
The tooling and Support Equipment Services Group designs the special support
equipment required to disassemble, assemble, inspect, repair and test IAE
engines. Special support equipment design-drawings and Support Equipment Master
Data Sheets, which describe how to use the support equipment, are supplied to
customers in the form of 35mm aperture cards. Support equipment designs are kept
current with engine growth, and tool Bulletins are issued to customers as part
of continuing configuration management service. Updated Design and Master Data
Sheets Aperture Cards and Tool Bulletins are periodically distributed to all IAE
customers.
ENGINE ACCESSORY TEST EQUIPMENT AND ENGINE TRANSPORTATION EQUIPMENT
REQUIREMENTS
Engine accessory test equipment and engine transportation equipment general
requirements and specifications are defined and made available to IAE customers.
If requested, the Tooling and Support Equipment Group will assist customers in
the definition of engine accessory test and engine transportation equipment
required for specific IAE needs.
SUPPORT EQUIPMENT LOGISTICS PLANNING ASSISTANCE
The Tooling and Support Equipment Group will provide, at the customer's request,
special support equipment lists which reflect the customer's unique requirements
such as mix of engine models and desired level of maintenance to aid in support
equipment requirements planning.
-15-
TECHNICAL PUBLICATIONS
IAE and its subcontractors make available the required publications and
maintenance information as described below to support the maintenance and
modification requirements of the airline customer. The publications are prepared
in general accordance with Air Transport Association of America (ATA)
Specification No. 100 and will be available to the airline customer prior to the
delivery of the first aircraft. Customization services and media options will be
available for procurement at established prices.
ON-WING MAINTENANCE DATA
IAE supplies the airplane manufacturer with all the necessary information
required to perform "On-Aircraft" engine maintenance, troubleshooting, and
servicing. This information is developed through close coordination between the
airplane manufacturer and IAE and is integrated by the airplane manufacturer
into his maintenance publications.
TECHNICAL PUBLICATIONS
Listed and described below are the publications that will be made available to
support the airline customer's maintenance program:
Engine Manual
The Engine Manual is a document which will be structured in accordance with ATA
100 section 2-13-0 with JEMTOSS applied in accordance with section 2-13-14.
Potential customer applications will be applied. The manual will provide in one
place the technical data requirements for information needed to maintain the
engine and the maximum potential number of parts that could, regardless of
design responsibility, remain with the engine when it is removed from the
airplane. Additionally the manual includes coverage of interrelated parts (e.g.
thrust reverser, cowlings, mounts, etc.) that can stay with the airplane when
the engine is removed or can be removed for maintenance purpose in lieu of
individual component maintenance manuals. Customized Engine Manuals can be
prepared to incorporate customer originated material related to data or
procedures originated by or peculiar to a specific IAE customer. Such customized
Manuals are provided by separate contractual arrangements. Customer material
authorized by the appropriate Airworthiness Authorities can be incorporated into
customized Manuals and will be identified in the margin by the customer's
initials.
Standard Practices Manual
The Standard Practices Manual supplements the Engine Manual by providing, in a
single document, all IAE recommended or approved general procedures covering
general torques, riveting, lockwiring, cleaning policy, inspection policy
standard repairs, etc., and marking of parts.
-16-
Illustrated Parts Catalog
The Illustrated Parts Catalog will be structured in accordance with ATA 2-l4-0
and is a document which is used in conjunction with the Engine Manual for the
identification and requisitioning of parts and assemblies. Its ATA structure is
to be compatible with the Engine Manual Structure. Additionally the manual
includes coverage of interrelated parts (e.g. thrust reverser, cowlings, mounts,
etc.) that can stay with the airplane when the engine is removed or can be
removed for maintenance purpose in lieu of individual component maintenance
manuals.
IAE Proprietary Component Maintenance Manuals
These manuals will be structured in accordance with ATA 2-5-0 and will cover
data for chapters other than 71, 72, and 78.
Subcontractor Component Maintenance Manuals
These manuals will be structured in accordance with ATA 2-5-0 and are prepared
directly by the accessory manufacturers. All accessory data is subject to IAE
prepublication review and approval.
Engine and Accessory Component service Bulletins
Each Engine and Accessory Component Service Bulletin will be produced in
accordance with ATA 2-7-0. They will cover planning information, engine or
component effectivity, reason for Bulletin, recommended compliance, manpower
requirements, and tooling information relating to parts repair or modification.
Subcontractor prepared Accessory Component Service Bulletins are reviewed by IAE
prior to issuance. Alert Service Bulletins will be issued on all matters
requiring the urgent attention of the airline customer and will generally be
limited to items affecting safety. The Bulletin will contain all the necessary
information to accomplish the required action.
Operating Instructions
Engine operating instructions are presented in the form of General Operating
Instructions supplemented by V2500 Specific Engine Operating Instructions which
provide operating information, procedures, operating curves and engine
limits.
Facilities Planning and Facility Equipment Manuals
The Facilities Planning Manual outlines the requirements for engine/component
overhaul, maintenance, and test facilities in terms of basic operations,
processes, time studies and equipment. The Facility Equipment Manual lists and
describes the facility equipment used for engine maintenance, overhaul and
repair.
-17-
Support Equipment Numerical Index
The Indexes, prepared for each major engine model, provide a listing, in numeric
sequence, by maintenance level, of all IAE ground support equipment required to
maintain and overhaul the engine. The Listings are cross-indexed to the
applicable engine dash model and to the chapter and section of the Engine
Manual.
Publications Index
This index contains a listing of available technical manuals covering components
of the V2500 Nacelle.
Service Bulletin Index
This index will be in a format and on a revision schedule as determined by IAE.
Computer Software Manual
Data, will be supplied in accordance with ATA 102 revision 2 except where such
data are prohibited due to proprietary or Government restrictions.
Composite Engine Parts List
The Composite Engine Parts List, a compilation of all saleable and nonsaleable
engine parts incorporated in production engines, describes the configuration of
each engine and identifies those engine parts for which engineering changes,
service bulletins and service instructions have been issued.
Industry Item Lists
An Industry Item List, consisting of a computer retrievable magnetic tape and a
hard copy printout, is provided after delivery of each new engine to identify
specific parts by part number and serial number which the airline customer may
choose to monitor during the engine operational life. Listed parts represent
approximately 80 percent of engine total value.
Service Bulletin Incorporation Lists
Lists are provided that identify all Service Bulletins which were not
incorporated and, separately, those which were incorporated during initial build
of each new engine.
REVISION SERVICES
Regular, temporary, and "as required" revisions to technical publications will
be made during the service life of IAE equipment. The utilization of advanced
techniques and equipment provides the airline customer with expedited revision
service.
-18-
DISTRIBUTION MEDIA OPTIONS
The primary medium for available IAE technical publications is roll microfilm at
24:1 reduction or magnetic tape. Media options such as microfilm at 36:1
reduction, microfiche, and two side or one-sided paper copy of reproducible
quality will be available for procurement at established prices.
-19-
V. SPARE PARTS
SPARE PARTS SUPPORT
the Spare Parts Group provides the following categories of spare parts support
to airline customers:
- Individual Customer Account Representatives
- Provisioning
- Planning
- Order Administration
- Spare Parts Inventory
- Effective Expedite Service
- Worldwide Distribution
ACCOUNT REPRESENTATIVE
An Account Representative is assigned to each customer using IAE equipment. This
representative provides individualized attention for effective spare parts order
administration, and is the customer's interface on all matters pertaining to new
part planning and procurement. Each representative is responsible for monitoring
each assigned customer's requirements and providing effective administrative
support. The Account Representatives are thoroughly familiar with each
customer's spare parts ordering policies and procedures and are responsible for
ensuring that all customer new parts orders are processed in an effective
manner.
SPARE PARTS PROVISIONING PLANNING
Prior to delivery of the first new aircraft to an airline customer, preplanning
discussions will be held to determine the aircraft/engine program, and engine
spare parts provisioning and order plans. Mutually agreed upon provisioning
target dates are then established and on-time completion tracked by the Customer
Account Representative with the assistance of logistics specialists in Spare
Parts Provisioning and Inventory Management. Meetings are held with airline
customers at a mutually agreeable time to review suggested spare parts
provisioning lists prepared by spare parts Provisioning. These lists are
designed to support each customer's particular fleet size, route structure and
maintenance and overhaul program.
ORDER ADMINISTRATION
IAE subscribes to the general principles of Air Transport Association of America
(ATA) Specification No. 200, Integrated Data Processing - Supply. The procedures
of Air Transport Association of America (ATA) Specification No. 200 may be used
for Initial Provisioning, (Chapter II) Order Administration (either Chapter III
or Chapter VI) Invoicing (Chapter IV).
-20-
A spare parts supply objective is to maintain a 90 percent on-time shipment
performance record to our published lead times. The lead time for replenishment
spare parts is identified in the IAE spare Parts Price Catalog. Initial
provisioning spare parts orders should be placed at least six months prior to
required delivery, while conversions and major modifications require full
manufacturing lead times.
The action to be taken on emergency requests will be answered as follows:
- Aircraft-On-Ground (AOG) - within four hours (in these instances every
effort is made to ship immediately).
- Critical (Imminent Aircraft-On-Ground (AOG) or Work Stoppage) - Within
24 hours.
- Stock Outage - Within seven working days (these items are shipped as per
customer request).
SPARE PARTS INVENTORY
To ensure availability of spare parts in accordance with published lead time,
spare parts provisioning maintains a modern, comprehensive requirements planning
and inventory management system which is responsive to changes in customer
demand, special support programs and engineering design. Organized on an engine
model basis, this system is intended to maintain part availability for delivery
to customers consistent with published lead times.
A majority of parts in the spare parts inventory are continually controlled by
an Automatic Forecasting and Ordering System. Those parts which do not lend
themselves to automatic control due to supercedure, unusual usage or conversion
requirements are under the direct manual control of Spares Planning personnel.
As additional protection against changes in production lead time or unpredicted
demand, certain raw materials are also inventoried. Successful inventory
management is keyed to accurate requirements planning. In support of the
requirements planning effort, a wide ranging data retrieval and analysis program
is offered. This program concerns itself both with the customer logistics and
technical considerations as follows:
- Forecasts of life limited parts requirements are requested and received
semi-annually from major customers.
- Engine technical conferences are held frequency within IAE to assess the
impact of technical problems on parts.
- For a selected group of parts a provisioning conference system is offered
which considers actual part inventory change, including usage and
receipts, as reported monthly by participating customers.
INITIAL PROVISIONING PARTS BUY-BACK
IAE offers an initial provisioning parts buy-back service, the details of which
are contained in individual customer spare parts contracts.
-21-
PACKAGING
All material is packaged in general compliance with Air Transport Association of
America (ATA) Specification No. 300.
WORLD AIRLINE SUPPLIERS' GUIDE
IAE subscribes to the supply objectives set forth in the World Airlines
Supplier's Guide published by the Air Transport Association of America (ATA).
IAE requires that its proprietary component vendors also perform in compliance
with the precepts of the World Airline Suppliers' Guide.
-22-
EXHIBIT D
WARRANTIES, GUARANTEES AND PLANS
42
EXHIBIT D
WARRANTIES, GUARANTEES AND PLANS
IAE INTERNATIONAL AERO ENGINES AG
WARRANTY FOR SPECIAL TOOLS AND GROUND EQUIPMENT
1. If it is shown that a defect in material or workmanship has become
apparent in any item of special tooling and ground equipment within one
year from the date of receipt of such item by the Operator, then IAE will
either as it may in its sole discretion determine repair or exchange such
item free of charge.
2. The obligations of IAE under this Warranty are subject to the following
terms and conditions.
2.1 The defect must not be due to misuse, negligence of anyone other than
IAE, accident or misapplication.
2.2 Such item shall not have been used, maintained, modified, stored or
handled other than in a manner approved by IAE and as set forth in
IAE's maintenance and operations manuals.
2.3 Any claim under this Warranty shall be made in writing to IAE within
90 days of the discovery of the defect and the defective item shall be
made available or sent to IAE for inspection as it may require.
3. IAE shall not be liable for any incidental, consequential or resultant
loss or damage howsoever occurring, nor for Labor costs involved in
removal or replacement of parts.
46
EXHIBIT D-1
ENGINE AND PARTS SERVICE POLICY
43
IAE
INTERNATIONAL AERO ENGINES AG
V2500 ENGINE AND PARTS SERVICE POLICY
Issued: October 25, 1985
Revised: September 9,1988
IAE
INTERNATIONAL AERO ENGINES AG
V2500 ENGINE AND PARTS SERVICE POLICY
This Engine and Parts Service Policy ("Service Policy") is a statement of the
terms and conditions under which IAE International Aero Engines AG ("IAE") will
grant the Operators of new V2500 Engines certain Allowances and adjustments in
the event that Parts of such Engines suffer Failure in Commercial Aviation Use,
or in the event that a Parts Life Limit is established or reduced. This Service
Policy becomes effective for the Operator's first new V2500 Engine.
This Service Policy is divided into seven sections:
Section I describes the Credit Allowances which ▇▇▇▇ ▇▇▇▇ 1
be granted should the Engine suffer a Failure.
Section II describes the Credit Allowances which will be Page 4
granted should a Primary Part Suffer a Failure.
Section III lists the Class Life for those Primary Parts Page 5
for which Credit Allowances will be granted.
Section IV describes the Credit Allowances which will be Page 7
granted when the establishment or reduction of
a Parts Life Limit is mandated.
Section V describes the Credit Allowances and adjustments Page 9
which will be granted when IAE declares a
Campaign Change.
Section VI contains the definitions of certain words and terms Page 12
used throughout this Service Policy. These words
and terms are identified in the text of this Service
Policy by the use of initial capital letters for
such words and terms.
Section VII contains the general conditions governing the Page 18
application of this Service Policy.
I. ENGINE FAILURE CREDIT ALLOWANCES
A. First Run Engine, Module and Part
1. A First Run Engine is an Engine with 3,000 hours or less Engine
Time, a First Run Module is a Module with 3,000 hours or less Module
Time, and a First Run Part is a Part with 3,000 hours or less Parts
Time operating in a First Run Engine or a First Run Module.
2. If a First Run Part suffers Direct Damage or Resultant Damage, and
provided that the Part causing Resultant Damage is also a First Run
Part, IAE will grant to the Operator:
a. A 100 percent Parts Credit Allowance for any First Run Part
Scrapped, or
b. A 100 percent Labor Credit Allowance for any First Run Part
Repaired.
3. If such Damage of a First Run Part requires the removal of the
Engine or a Module from the Aircraft, IAE will, in addition to
Subparagraph A.2. above, grant to the Operator:
a. A 100 percent Labor Credit Allowance for disassembly,
reassembly and necessary testing of the Engine or Module
requiring Reconditioning as a result of such Damage of the
First Run Part, and
b. A 100 percent Parts Credit Allowance for those Expendable
Parts required in the Reconditioning of the Engine or
Module.
4. If such Damage of a First Run Part requires the removal of the
Engine or a Module from the Aircraft, IAE will arrange, upon
request by the Operator, to Recondition the Engine or Module or
accomplish the Parts Repair at no charge to the Operator rather
than providing the above Credit Allowances. Such work will be
accomplished at a V2500 Maintenance Center designated by IAE.
Transportation charges to and from the Maintenance Center shall
be paid by the Operator.
B. Extended First Run Engine. Module and Part
1. An Extended First Run Engine is an Engine with more than 3,000 hours
Engine Time but not more than 3,500 hours Engine Time, an Extended
Run Module is a Module with more than 3,000 hours Module Time, but
not more than 3,500 hours Module Time, and an Extended First Run
Part is a Part with 3,500 hours or less Parts Time operating in an
Extended First Run Engine or an extended First Run Module.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 2
2. If an Extended First Run Part suffers Direct Damage or
Resultant Damage, and provided that the Part causing Resultant
Damage is also an Extended First Run Part, IAE will grant to
the Operator:
a. A pro rata Parts Credit Allowance for any Extended First
Run Part Scrapped, or
b. A pro rata Labor Credit Allowance for any Extended First
Run Part Repaired.
If the Extended First Run Part is a Primary Part (Section
III), the pro rata Credit Allowances will be based on 100
percent at 3,000 hours Engine Time which then decreases, pro
rata, to zero percent at 3,500 hours Engine Time, or, 100
percent to 2,000 hours Parts Time which then decreases, pro
rata, to zero percent at the end of its Class Life (Section
III), whichever is greater.
If the Extended First Run Part is not a Primary Part, the pro
rata Credit Allowances will be based on 100 percent at 3,000
hours Engine Time which then decrease, pro rata, to zero
percent at 3,500 hours Engine Time.
3. If such Damage of an Extended First Run Part requires the
removal of the Engine or a Module from the Aircraft, IAE will,
in addition to Subparagraph B.2. above, grant to the Operator:
a. A pro rata Labor Credit Allowance for disassembly,
reassembly and necessary testing of the Engine or Module
requiring Reconditioning as a result of such Damage of
the Extended First Run Part, and
b. A pro rata Parts Credit Allowance for those Expendable
Parts required in the Reconditioning of the Engine or
Module.
The pro rata Credit Allowances will be based on 100 percent at
3,000 hours Engine Time, which then decreases, pro rata, to
zero percent at 3,500 hours Engine Time.
Note: Section VI, Paragraph D. contains the formulas to be used for
computing the Credit Allowances described above.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 3
C. Engine or Module Failure Credit Allowances Illustration
[Graphic Omitted]
Note: The Primary Parts Credit Allowances Illustration (Section II,
Paragraph B) is also applicable to the Credit Allowances which are
based on Parts Time as described in Section I, Subparagraph B.2.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 4
II. PRIMARY PARTS CREDIT ALLOWANCE
A. Primary Parts Other Than First Run Parts or Extended First Run Parts
1. Primary Parts are limited to those Parts listed in Section III
while such Parts are within the Class Life indicated in
Section III.
2. The Primary Parts Credit Allowances described in Subparagraph
A.3 below will be based on 100 percent to 2,000 hours total
Parts Time which then decreases, pro rata, to zero percent at
the end of the applicable hourly Class Life.
3. If a Primary Part suffers Direct Damage or Resultant Damage,
and provided that the Part causing Resultant Damage is also a
Primary Part, IAE will grant to the Operator:
a. A Parts Credit Allowance for any Primary Part Scrapped,
or
b. A Labor Credit Allowance for any Primary Part Repaired
in accordance with a Parts Repair designated in writing
by IAE as being eligible for a Credit Allowance under
this Section II, Paragraph A.
Note: Section VI, Paragraph D. contains the formulas to be used for
computing the Credit Allowances described above.
B. Primary Parts Credit Allowances Illustration
[Graphic Omitted]
A = CLASS A PRIMARY PARTS (Page 5)
B = CLASS B PRIMARY PARTS (Page 6)
C = CLASS C PRIMARY PARTS (Page 6)
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 5
III IDENTIFICATION OF PRIMARY PARTS
The following Parts are defined as Primary Parts while such Parts are
within the Class Life indicated. Class Life is the period, expressed in
either hours or Parts Time or number of Parts Cycles during which IAE will
grant Credit Allowances for Primary Parts which suffer Direct Damage or
Resultant Damage, or for which a Parts Life Limit is established or
reduced.
CLASS A (4,000 HOURS PARTS TIME)
Cold Section Rotating Parts
LP Compressor Inlet Cone - Spinner
LP Compressor 1st Stage Blade - Fan
LP Compressor 1st Stage Blade Annulus Fillers
LP Compressor 2nd Stage Blade
Radial Drive Bevel Gear
Tower Shaft
HP Compressor 3 through 12th Stage Blades
HP Compressor Front and Rear Rotating Airseals
LP Turbine Shaft Coupling Nut
Cold Section Static Parts
Fan Splitter Fairing
LP Compressor Stage 2 Inlet and Exhaust Stator Assembly
HP Compressor Stage 3 to Stage 6 Variable Stator Assembly
Fan Aerodynamic OGV's
HP Compressor Stage 6 to II Stator Assembly
HP Compressor Exit Stator
Hot Section Rotating Parts
HP Turbine Stage 1 and 2 Blade
HP Turbine Gage Spacer
HP Turbine Lock Nut
LP Turbine Stage 3 to 7 Blades
LP Turbine Lock Nut
Hot Section Static Parts
Fuel Injector
Combustion Chamber Assembly
HPT First Stage Cooling Duct Assembly (TOBI Duct)
HPT 1st and 2nd Stage Nozzle Guide Vane Assembly
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 6
HPT 1st and 2nd Stage Outer Airseal Assembly
HP to LP Turbine Transition Duct (Inner & Outer)
LPT Stage 3 to 7 Nozzle Guide Vane Assembly
LPT Stage 3 to 7 Outer Airseal Assembly
Main and Angle Gearbox
Gearshafts and Bearings
Lay Shaft
All Accessory Drive Shafts
Gearbox Oil Pumps (Pressure and Scavenge)
CLASS B (8,000 HOURS PARTS TIME)
Fan Case Assembly (Includes Intermediate Case)
HP Compressor Front Casings (Split Casings)
HP Compressor Rear Casings
Diffuser Case
HP Turbine Case
LP Turbine Case
Turbine Exhaust Case
Main Gearbox Casing
Oil Tank
CLASS C (20,000 HOURS PARTS TIME FOR DAMAGE
15,000 PARTS CYCLES FOR LIFE LIMIT REDUCTION)
Fan Disk
LPC Drum
HPC 1 to 6 Drum
HPC 7 to l0 Drum
HP Turbine Stage 1 and 2 Disks
HP Turbine Spacer Disk
HP Turbine Stage 1 Front Rotating Airseal
HP Turbine 2nd Stage Disk Rear Seal
LP Turbine Stage 3-7 Disks
LP Turbine Stage 3-7 Rotating Airseals
Shafts
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 7
IV PARTS LIFE LIMIT ALLOWANCES
A. A Parts Life Limit is the maximum allowable Parts Time or Parts
Cycles for specific Parts as established by IAE and the United
States Federal Aviation Administration.
B. Credit Allowances
1. Class A and Class B Primary Parts
If a Parts Life Limit is established which results in Part
Scrappage at less than 4,000 hours Parts Time for a Class A
Primary Part or less than 8,000 hours Parts Time for a Class B
Primary Part, IAE will grant for each such Primary Part
Scrapped as a result thereof, a Parts Credit Allowance based
on 100 percent to 2,000 hours total Parts Time which then
decreases, pro rata, to zero percent at the end of 4,000 hours
total Parts Time for a Class A Primary Part or 8,000 hours
total Parts Time for a Class B Primary Part.
2. Class C Primary Parts
If a Parts Life Limit is established for a Class C Primary
Part which results in Part Scrappage in less than 15,000 total
Parts Cycles, IAE will grant for each such Primary Part
Scrapped as a result thereof, a Parts Credit Allowance based
on 100 percent to 10,000 total Parts Cycles which then
decreases, pro rata, to zero percent at 15,000 total Parts
Cycles.
In addition, IAE will grant a similarly calculated Labor
Credit Allowance and Parts Credit Allowance for that labor and
those Expendable Parts which are solely related to the removal
and replacement of such Class C Primary Parts and is
additional to other maintenance being performed on the Engine
or Module.
Note: Section VI, Paragraph D. contains the formulas to be used for
computing the Credit Allowances described above.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 8
C. Parts Life Limit Credit Allowances Illustrations
[Graphic Omitted]
A = CLASS A PRIMARY PARTS (Page 5)
B = CLASS B PRIMARY PARTS (Page 6)
[Graphic Omitted]
C = CLASS C PRIMARY PARTS (Page 6)
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 9
V CAMPAIGN CHANGE CREDIT ALLOWANCES AND ADJUSTMENTS
A. A Campaign Change is an IAE program, so designated in writing, for
the Reoperation, replacement, addition, or deletion of a Part(s).
IAE will grant the Credit Allowances and Adjustments specified in
this Section V to the Operator when Campaign Change recommendations
are complied with by the Operator.
B. Standard Allowances
1. A 100 percent Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed Parts or
serviceable shelf stock Parts which are Scrapped with 3,000
hours or less total Parts Time.
2. A pro rata Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed Parts or
serviceable shelf stock Parts which are Scrapped with more
than 3,000 hours total Parts Time but less than 3,500 hours
total Parts Time. The pro rata Parts Credit Allowance will be
based on 100 percent at 3,000 hours total Parts Time which
then decreases, pro rata, to 50 percent at 3,500 hours total
Parts Time.
3. A 50 percent Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed Parts or
serviceable shelf stock Parts which are Scrapped with more
than 3,500 hours total Parts Time.
4. A 100 percent Labor Credit Allowance for Reoperation of
installed Parts or serviceable shelf stock Parts with 3,000
hours or less total Parts Time which are Reoperated in
accordance with the Campaign Change.
5. A pro rata Labor Credit Allowance for Reoperation of installed
Parts or serviceable shelf stock Parts with more than 3,000
hours total Parts Time but less than 3,500 hours total Parts
Time which are Reoperated in accordance with the Campaign
Change. The pro rata Labor Credit Allowance will be based on
100 percent at 3,000 hours total Parts Time which then
decreases, pro rata, to 50 percent at 3,500 hours total Parts
Time.
6. A 50 percent Labor Credit Allowance for Reoperation of
installed Parts or serviceable shelf stock Parts with more
than 3,500 hours total Parts Time which are Reoperated in
accordance with the Campaign Change.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 10
7. A 100 percent Labor Credit Allowance for disassembly and
reassembly of the Engine or Module, if the disassembly of the
Engine or Module is recommended by IAE for accomplishment of
the Campaign Change and such disassembly is performed solely
for the purpose of accomplishing the Campaign Change.
Note: Section VI, Paragraph D. contains the formulas to be used for
computing the Credit Allowances described above.
C. Campaign Change Credit Allowances Illustration
[Graphic Omitted]
Note: The Labor Credit Allowance for Engine or Module disassembly and
reassembly remains at a constant 100%.
D. Optional Credit Allowances and Adjustments
1. When IAE declares a Campaign Change, IAE, at its sole option,
may grant to the Operator Credit Allowances and adjustments,
such as, but not necessarily limited to:
a. No Charge material.
b. Specifically priced material.
c. Single credit settlements for the Operators' fleet.
d. Fixed Credit Allowance support for each Engine.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 11
2. These optional Credit Allowances and Adjustments may be
provided:
a. Instead of the standard Credit Allowances of Section V,
Paragraph B.,
b. In addition to the standard Credit Allowances of Section
V, Paragraph B or
c. As a portion of the standard Credit Allowances of
Section V, Paragraph B.
3. In no event shall the worth to the Operator, as reasonably
determined by IAE, be less than the amount that would have
been granted to the Operator as a standard Campaign Change
Credit Allowance, per Section V, Paragraph B. In considering
the use of these optional Credit Allowances and adjustments,
IAE will attempt to minimize the financial and administrative
impact on the Operator.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 12
VI DEFINITIONS
A. CAMPAIGN CHANGE is an IAE program, so designated in writing, for the
Reoperation, replacement, addition or deletion of Part(s) and is
characterized by the granting of certain Credit Allowances to the
Operator when such program recommendations are complied with by the
Operator.
B. CLASS LIFE is the period, expressed in either hours of Part Time or
number of Parts Cycles, during which IAE will grant Credit
Allowances for Primary Parts which suffer Direct Damage or Resultant
Damage, or for which a Parts Life Limit is established or reduced.
C. COMMERCIAL AVIATION USE is the operation of Engines in Aircraft used
for commercial, corporate or private transport purposes. The
operation of Engines by government agencies or services is normally
excluded except that IAE will consider written requests for the
inclusion of such Engines under the provisions of this Service
Policy.
D. CREDIT ALLOWANCES
1. PARTS CREDIT ALLOWANCES is an amount determined in accordance
with the following formulas:
a. 100 percent Parts Credit Allowance = P
b. 50 percent Parts Credit Allowance = P/2
c. Pro rata Parts Credit Allowance =
(1) For a Primary Part which suffers Direct or
Resultant Damage, or a Class A or Class B Primary
Part for which a Parts Life Limit is established:
(L(t) - T)/(L(t)) x P
(2) For a Class C Primary Part for which a Parts Life
Limit is established, which is greater than 10,000
total Parts Cycles but is less than 15,000 total
Parts Cycles:
L(c) - C/L(c) x P
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 13
(3) For replacement of a Part because of a Campaign
Change, when such a Part has more than 3,000 hours
Parts Time but less than 3,500 hours Parts Time:
(4,000 - T)/1,000 x P
d. Extended First Run Parts Credit Allowance -
(3,500-E)/500 x P or (L(t) - T)/(L(t) x P)
2. LABOR CREDIT ALLOWANCE is an amount determined in accordance
with the following formulas, except that in no event shall the
amount to be granted for repair of Parts exceed the amount of
the Parts Credit Allowance which would have been granted if
the Part had been Scrapped:
a. 100 percent Labor Credit Allowance = H x R
b. 50 percent Labor Credit Allowance = H/2 x R
c. Pro rata Labor Credit Allowance =
(1) For a Primary Part which suffers Direct or
Resultant Damage, or a Class A or Class B Primary
Part for which a Parts Life Limit is established:
(L(t)-T)/(L(t)) x H x R
(2) For a Class C Primary Part for which a Parts Life
Limit is established which is greater than 10,000
total Parts Cycles but is less than 15,000 total
Parts Cycles:
(L(c) - C)/(L(c)) x H x R
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 14
(3) For replacement of a Part because of a Campaign
Change, which such a Part has more than 3,000
hours Parts Time but less than 3,500 hours Parts
Time:
(4,000-T)/1,000 x H x R
d. Extended First Run Labor Credit Allowance =
(3,500 - E)/500 x H x R or (L(t) - T)/(L(t)) x H x R
3. The variables used in calculating the above allowances are
defined as:
P = a. For a Part Scrapped because of Direct Damage,
Resultant Damage or a Parts Life Limit being
established, the IAE commercial price of the Part
Scrapped current at the time of either the Engine
removal or Part removal, whichever occurs sooner,
or
b. For replacement of a Part because of a Campaign
Change, the IAE commercial price of the replacing
Part specified in the Campaign Change current at
the time of notification to the Operator of the
Campaign Change.
T = a. For a Primary Part which has suffered Direct
Damage or Resultant Damage, the actual Parts Time
on the Part minus 2,000 hours, or
b. For a Class A or Class B Primary Part for which a
Parts Life Limit is established, the actual Parts
Time on the Part minus 2,000 hours, or the Parts
Life Limit minus 2,000 hours, whichever is
greater, or
c. For replacement of a Part because of a Campaign
Change, when such a Part has more than 3,000 hours
Parts Time but less than 3,500 hours Parts Time,
the actual Parts Time on the Part.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 15
C = For a Class C Primary Part for which a Parts Life
Limit is established which is greater than 10,000 Total
Parts Cycles but less than 15,000 Total Parts Cycles,
the greater of either:
a. The actual Parts Cycles on the Part minus 10,000
cycles, or
b. The new Parts Life Limit minus 10,000 Cycles.
L(t)= Either:
a. For a Primary Part which has suffered Direct
Damage or Resultant Damage, the hours indicated in
Section III minus 2,000 hours, or
b. For a Class A or Class B Primary Part for
which a Parts Life Limit is established, the
hours indicated in Section III minus 2,000
hours.
L(c)= For a Class C Primary Part for which a Parts Life
Limit is established which is greater than 10,000 total
Parts Cycle, 5,000 Cycles.
H = The man-hours required to accomplish the work as
established in writing by IAE.
R = The labor rate, expressed in U.S. Dollars per hour,
which will be determined as follows:
a. If the labor is performed at the Operator's
facility, or its subcontractor's facility, the
labor rate will be the greater of the Operator's
labor rate or the subcontractor's labor rate,
where the labor rates were determined in
accordance with IAE Form ____ and provided to the
Operator in writing, or
b. If the labor is performed by IAE, the labor rate
will be the then current labor rate of IAE.
E = Actual Engine Time on an Extended First Run Engine.
E. DIRECT DAMAGE is the damage suffered by a Part itself upon its
failure.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 16
F. ECONOMICALLY REPAIRABLE shall generally mean that the cost of the
repair as determined by IAE, exclusive of modification and
transportation costs, will be equal to or less than 65 percent of
the IAE commercial price of the Part at the time the repair is
considered, or, shall be as otherwise reasonably determined by IAE.
G. ENGINE(S) means those V2500 Engine(s), as described by IAE
Specifications, sold by IAE for Commercial Aviation Use, whether
installed as new equipment in aircraft by the manufacturer thereof
and delivered to the Operator or delivered directly to the Operator
from IAE for use as a spare Engine. An Engine which has been
converted or upgraded in accordance with IAE instructions shall
continue to qualify for Credit Allowances and Adjustments under the
provisions of this Service Policy.
H. ENGINE OR MODULE TIME is the total number of flight hours of
operation of an Engine or a Module.
I. EXPENDABLE PARTS means those nonreusable Parts, as determined by
IAE, which are required to be replaced during inspection or
Reconditioning, regardless of the condition of the Part.
J. EXTENDED FIRST RUN ENGINE OR MODULE is an Engine or Module with more
than 3,000 hours Engine or Module Time but not more than 3,500 hours
Engine or Module Time.
K. EXTENDED FIRST RUN PART means a Part with 3,500 hours or less Parts
Time operating in an Extended First Run Engine.
L. FAILURE (FAILED) is the breakage, injury, or malfunction of a Part
rendering it unserviceable and incapable of continued operation
without corrective action.
M. FIRST RUN ENGINE OR FIRST RUN MODULE is an Engine or Module with
3,000 hours or less Engine or Module Time.
N. FIRST RUN PART is an Engine Part with 3,000 hours or less Parts Time
operating in a First Run Engine.
0. MODULE(S) means any one or more of the following assemblies of
Parts:
Fan Assembly and Low Pressure Compressor Assembly
High Pressure Compressor Assembly
High Pressure Turbine Assembly
Low Pressure Turbine Assembly
Main gearbox
Any other Assembly of Parts so designated by IAE
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 17
P. OPERATOR is the owner of one or more Engines operated for Commercial
Aviation Use, the lessee if such Engine(s) is the subject of a
long-term financing lease or as otherwise reasonably determined by
IAE.
Q. PART(S) means Engine parts sold by IAE and delivered to the Operator
as original equipment in an Engine or Engine parts sold and
delivered by IAE to the Operator as new spare parts in support of an
Engine.
R. PARTS CYCLE(S) means the aggregate total number of times a Part
completes an Aircraft takeoff and landing cycle, whether or not
thrust reverser is used on landing. As pilot training will involve
extra throttle transients such as touch and go landings and
takeoffs, IAE shall evaluate such transients for Parts Cycle
determination.
S. PARTS LIFE LIMIT is the maximum allowable total Parts Time or total
Parts Cycles for specific Parts, including Reoperation if
applicable, as established by IAE or by the United States Federal
Aviation Administration. Parts Life Limits are published in the Time
Limits Section (Chapter 05) of the applicable V2500 Series Engine
Manual.
T. PARTS REPAIR means the IAE designated restoration of Failed Parts to
functional serviceable status, excluding repair of normal wear and
tear, as determined by IAE.
U. PARTS TIME is the total number of flight hours of operation of a
Part.
V. PRIMARY PART(S) are limited to those Parts listed in Section III
while such Parts are within the Class Life indicated in Section III.
W. RECONDITIONING means the restoration of an Engine or Module allowing
substitution of new or serviceable used Parts, to the extent
necessary for continued operation of the Engine or Module as a
serviceable unit. When such Reconditioning is performed by IAE, the
Parts Time or Parts Cycles, as applicable, of the replaced Part
shall, for the purpose of this Service Policy, be applicable to the
substituted new or serviceable used Part. Said replaced Part shall
become the property of IAE.
X. REOPERATION is the alteration to or modification of a Part.
Y. RESULTANT DAMAGE is the damage suffered by a Part because of the
Failure of another Part within the same Engine.
Z. SCRAPPED PARTS (SCRAP, SCRAPPED, SCRAPPAGE) shall mean those Parts
determined by IAE to be unserviceable and not Economically
Repairable. The Operator shall cause such Parts to be mutilated or
disposed of in such a manner as to preclude any possible further use
as an Engine Part.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 18
VII GENERAL CONDITIONS
The following general conditions govern the application of this Service
Policy:
A. Records and Audit
The Operator shall maintain adequate records for the administration
of this Service Policy and shall permit IAE to audit such records at
reasonable intervals.
B. Scrapping of Parts
1. Scrappage Verification
Any Part for which a Parts Credit Allowance is requested shall
be verified as Scrapped prior to the issuance of the Parts
Credit Allowance. Verification of Scrappage shall occur as
follows:
a. At the Operator's, or its subcontractor's, facility.
Such verification shall be accomplished by the IAE Field
Representative.
b. At IAE, provided that IAE concurs that the Part is to be
Scrapped. Sufficient information to identify the Part,
the Engine from which the Part was removed, and the
reason for its return shall be provided.
2. Return of Parts
IAE, at its sole option, may require the Operator to return to
IAE any Part for which a Parts Credit Allowance is requested.
Such return shall be a condition for the issuance of a Parts
Credit Allowance.
3. Transportation Expenses
Transportation expenses shall be at the expense of the
Operator if such Parts are shipped to and from IAE for
examination and verification; except that IAE shall pay the
expense if such Parts as are shipped at the request of IAE.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 19
4. Title
Title to such Parts returned to IAE shall vest in IAE:
a. Upon determination by IAE that the Operator is eligible
for a Parts Credit Allowance. If it is determined that
the Parts are scrapped Parts but are not eligible for
Service Policy coverage, the Operator will be notified
of the decision and the Parts returned at the Operator's
expense if the Operator so requests; otherwise, the
Parts will be disposed of by IAE without any type of
adjustment, or
b. Upon shipment, when such Parts are determined to be
Scrap at the Operator's facility and are shipped to IAE
at the request of IAE.
C. Repairability Requirements
The Operator shall set aside and exclude from the operation of this
Service Policy for a period of six months any Part for which IAE
states it has, or plans to initiate, an active program to achieve a
repair, corrective Reoperation or Parts Life Limit extension. In the
event IAE has not released a repair procedure, corrective
Reoperation, or Parts Life Limit extension by the expiration of this
six month period, such Part shall be retained by the Operator and
excluded from the operation of this Service Policy for additional
periods beyond the expiration of said six month period only if
agreed to by the Operator.
D. Exclusions from Service Policy
This Service Policy will not apply to any Engine, Module or Part if
it has been determined to the reasonable satisfaction of IAE that
said Engine, Module or Part has Failed because it:
1. Has not been properly installed or maintained in accordance
with IAE recommendations unless such improper installation or
maintenance was performed by IAE, or
2. Has been used contrary to the operating and maintenance
instructions or recommendations authorized or issued by IAE
and current at the time, or
3. Has been repaired or altered other than by an IAE designated
V2500 Maintenance Center in such a way as to impair its
safety, operation or efficiency, or
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 20
4. Has been subjected to:
a. Misuse, neglect, or accident, or
b. Ingestion of foreign material, or
5. Has been affected in any way by a part not defined as a Part
herein, or
6. Has been affected in any way by occurrences not associated
with ordinary use, such as, but not limited to, acts of war,
rebellion, seizure or other belligerent acts.
E. Payment Options
IAE at its option may grant any Parts Credit Allowance as either a
credit to the Operator's account with IAE or as a Part replacement.
F. Presentation of Claims
Any request for a Credit Allowance must be presented to IAE not
later than 180 days after the removal from service of the Engine or
Part for which the Credit Allowance is requested. If IAE disallows
the request, written notification will be provided to the Operator.
The Operator shall have 90 days from such notification to request a
reconsideration of the request for Credit Allowance. IAE shall have
the right to refuse any request for a Credit Allowance which is not
submitted within the stated time periods.
G. Duration of Service Policy
This Service Policy will normally cease to apply to all Parts in any
Engine that is more than ten years old as measured from the date of
shipment of the Engine from the factory. Unless advised to the
contrary by IAE, this Service Policy shall, however, continue to be
applicable to individual Engines after the expiration of the ten
year period on a year to year basis so that the Operator may
continue to receive the benefits of the Service Policy on the Parts
in these Engines.
V2500 ENGINE AND PARTS SERVICE POLICY PAGE 21
H. General Administration
On matters concerning this Service Policy, the Operator is requested
to address all correspondence to:
IAE International Aero Engines AG
Corporate Center II
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇
Attention: Warranty Administration
I. Limitation of Liability
1. The express provisions of this Service Policy set forth the
maximum liability of IAE with respect to any claims relating
to this Service Policy. In the event of any conflict or
inconsistency between the express provisions of this Service
Policy and any Illustrations contained herein, the express
provisions shall govern.
2. Except to the extent that the Credit Allowances and
adjustments expressly set forth in this Service Policy may
exceed the limitations of the corresponding portions of any
warranties or representations included in any sales
agreements, the provisions of this Service Policy do not
modify, enlarge or extend in any manner the conditions
governing the sale of its Engines and Parts by IAE.
3. IAE reserves the right to change or retract this Service
Policy at any time at its sole discretion. No such retraction
or change shall diminish the benefits which the Operator may
be entitled to receive with respect to Engines for which an
acceptable order has been placed with IAE or with respect to
aircraft with installed Engines for which a firm unconditional
order has been placed with the aircraft manufacturer prior to
the announcement of any such retraction or change.
J. Assignment of Service Policy
This Service Policy shall not be assigned, either in whole or in
part, by either party. IAE will, however, upon the written request
of the Operator consider an extension of Service Policy Credit
Allowances and adjustments to Engines, Modules and Parts sold or
leased by an Operator to another Operator, to the extent only,
however, that such Credit Allowances and adjustments exist at the
time of such sale or lease and subject to the terms and conditions
of the Service Policy. IAE shall not unreasonably withhold such
extension of such Credit Allowances.
EXHIBIT D-2
NACELLE SERVICE POLICY
44
IAE
INTERNATIONAL AERO ENGINES AG
V2500 NACELLE AND PARTS SERVICE POLICY
Issued: November 16, 1988
IAE
INTERNATIONAL AERO ENGINES AG
V2500 NACELLE AND PARTS SERVICE POLICY
This Nacelle and Parts Service Policy (Service Policy) is a statement of the
terms and conditions under which IAE International Aero Engines AG ("IAE") will
grant the Operators of its V2500 Nacelles certain Allowances and adjustments in
the event that Parts of such Nacelles suffer Failure in service.
This Service Policy is divided into four sections:
Section I describes the Allowances and adjustments Page 1
which will be granted should the Nacelle
or Part(s) suffer a Failure.
Section II describes the Allowances and adjustments Page 3
which will be granted when IAE declares a
Campaign Change.
Section III contains the definitions of certain words Page 5
and terms used throughout this Service
Policy. These words and terms are
identified in the text of this Service
Policy by the use of initial capital
letters for such words and terms.
Section IV contains the general conditions governing Page 9
the application of this Service Policy.
I ALLOWANCES AND ADJUSTMENTS
A. First Run Nacelle and Part
1. A First Run Nacelle is a Nacelle with 6,000 hours or less
Nacelle Time and a First Run Part is a Part with 6,000 hours
or less Parts Time operating in a First Run Nacelle.
2. If a First Run Part suffers Direct Damage or Resultant Damage,
and provided that the Part causing Resultant Damage is also a
First Run Part:
a. IAE will grant to the Operator:
(1) A 100 percent Parts Credit Allowance for any such
First Run Part Scrapped, and
(2) A 100 percent Labor Allowance for Parts Repair of
any First Run Part requiring Parts Repair.
b. If such Damage of a First Run Part causes the removal of
the Nacelle from the Aircraft, IAE will, in addition to
Subparagraph a. above, grant to the Operator:
(1) A 100 percent Labor Allowance for disassembly,
reassembly and necessary testing of the Nacelle
requiring Reconditioning as a result of such
Damage of the First Run Part, and
(2) A 100 percent Parts Credit Allowance for those
Expendable Parts required in the Reconditioning of
the Nacelle.
c. If such Damage of a First Run Part causes the removal of
the Nacelle from the Aircraft, IAE will arrange, upon
request by the Operator, to Recondition the Nacelle or
accomplish the Parts Repair at no charge to the Operator
rather than providing the above Allowances. Such work
will be accomplished at a V2500 Maintenance Center
designated by IAE. Transportation charges to and from
the Maintenance Center shall be paid by the operator.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 2
B. Primary Part
1. A Primary Part is a Part other than a First Run Part but
having not more than 6,000 hours Parts Time.
2. Primary Parts not eligible for those Allowances granted to
First Run Parts are eligible for Allowances under this Section
I, Paragraph B., provided that the Primary Part suffers Direct
Damage or Resultant Damage and Provided that the Part causing
Resultant Damage is also a Primary Part.
3. IAE will grant to the Operator a Parts Credit Allowance for
such a Primary Part Scrapped or a Labor Allowance for such a
Primary Part for which a Parts Repair is designated in writing
by IAE as being eligible for adjustment under this Section I,
Paragraph B. Such Allowance will be based on 100 percent to
1,000 hours total Parts Time which then decreases, pro rata,
to zero percent at 6000 hours Parts time.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 3
II CAMPAIGN CHANGE ALLOWANCES AND ADJUSTMENTS
A. A Campaign Change is an IAE program, so designated in writing, for the
Reoperation, replacement, addition, or deletion of a Part(s). IAE will
grant the Allowances and adjustments specified in this Section II to the
Operator when Campaign Change recommendations are complied with by the
Operator.
B. Standard Allowances
1. A 100 percent Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed or serviceable shelf
stock Nacelle Parts which are Scrapped with 6,000 hours or less
total Parts Time.
2. A 50 percent Parts Credit Allowance for the replacing Parts
specified in the Campaign Change for installed or serviceable shelf
stock Nacelle Parts which are Scrapped with more than 6,000 hours
total Parts Time.
3. A 100 percent Labor Allowance for Reoperation of installed or
serviceable shelf stock Nacelle Parts with 6,000 hours or less total
Parts Time, which are Reoperated in accordance with the Campaign
Change.
4. A 50 percent Labor Allowance for Reoperation of installed or
serviceable shelf stock Nacelle Parts with more than 6,000 hours
total Parts Time, which are Reoperated in accordance with the
Campaign Change.
5. A 100 percent Labor Allowance for disassembly and reassembly of the
Nacelle, if the disassembly is recommended by IAE for accomplishment
of the Campaign Change and such disassembly is performed solely for
the purpose of accomplishing the Campaign Change.
C. Optional Allowances and Adjustments
1. When IAE declares a Campaign Change, IAE, at its sole option, may
grant to the Operator allowances and adjustments, such as, but not
necessarily limited to:
a. No charge material
b. Specially priced material
c. Single payment settlements for the Operators' fleet
d. Fixed allowance support for each Nacelle.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 4
2. These optional allowances and adjustments will be provided either:
a. Instead of the standard Allowances of Paragraph B.,
b. In addition to the standard Allowances of Paragraph B., or
c. As a portion of the standard Allowances of Paragraph B.
3. In no event shall the worth to the Operator, as reasonably
determined by IAE, be less than the amount that would have been
granted to the Operator as a standard Campaign Change Allowance, per
Paragraph B. In considering the use of these optional allowances and
adjustments, IAE will attempt to minimize the financial and
administrative impact on the Operator.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 5
III DEFINITIONS
A. ALLOWANCES
1. PARTS CREDIT ALLOWANCE is an amount determined in accordance with
the following formula:
a. 100 percent Parts Credit Allowance = P
b. 50 percent Parts Credit Allowance = P/2
c. Pro rata Parts Credit Allowance = (6,000 - T/5000) x P
2. LABOR ALLOWANCE is an amount determined in accordance with the
following formulas, except that in no event shall the amount to be
granted for repair of Parts exceed the amount of the Parts Credit
Allowance which would have been granted if the Part had been
Scrapped.
a. 100 percent Labor Allowance = H x R
b. 50 percent Labor Allowance = H/2 x R
c. Pro rata Labor Allowance = (6,000 - T)/5,000 x H x R
3. The variables used in calculating the above Allowances are defined
as:
P = for a Part Scrapped because of Direct Damage or Resultant
Damage, the IAE commercial price of the Part Scrapped current
at the time of either the Nacelle removal or Part removal,
whichever occurs sooner, or
for replacement of Parts because of a Campaign Change, the IAE
price of the replacing Part specified in the Campaign Change
current at the time of notification to the Operator of the
Campaign Change.
T = actual Parts Time hours on a Part which has suffered Direct
Damage or Resultant Damage or the Parts Life Limit as
established for the Part.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 6
H = the man-hours required to accomplish the work as established
in writing by IAE.
R = the labor rate, expressed in dollars per hour, which will be
determined as follows:
a. If the labor is performed at the Operator's facility, or
its subcontractor's facility, the labor rate will be the
greater of the Operator's labor rate or the
subcontractor's labor rate, where the labor rates were
determined in accordance with IAE Form and provided to
the Operator in writing, or
b. If the labor is performed at a V2500 Maintenance Center
designated by IAE, the labor rate will be the then
current labor rate at that Center.
B. CAMPAIGN CHANGE is an IAE program, so designated in writing, for the
Reoperation, replacement, addition or deletion of a Part(s) and is
characterized by the granting of certain Allowances to the Operator
when such recommendations are complied with by the Operator.
C. COMMERCIAL AVIATION USE is the operation of Nacelles in Aircraft
used for commercial, corporate or private transport purposes. The
operation of Nacelles by Government Agencies or Services is normally
excluded except that IAE will consider written requests for the
inclusion of such Nacelles under the provisions of this Service
Policy.
D. DIRECT DAMAGE is the damage suffered by a Part itself upon its
Failure.
E. ECONOMICALLY REPAIRABLE shall generally mean that the cost of the
repair as determined by IAE exclusive of modification and
transportation costs, will be equal to or less than 65 percent of
the IAE commercial price of the Part at the time the repair is
considered, or, shall be as otherwise reasonably determined by IAE.
F. EXPENDABLE PARTS means those nonreusable Parts, as determined by
IAE, which are required to be replaced during inspection or
Reconditioning, regardless of the condition of the Part.
G. FAILURE (FAILED) is the breakage, injury, or malfunction of a Part
rendering it unserviceable and incapable of continued operation
without corrective action.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 7
H. FIRST RUN NACELLE is a Nacelle with 6,000 hours or less Nacelle
Time.
I. FIRST RUN PART is a Nacelle Part with 6,000 hours or less Parts Time
operating in a First Run Nacelle.
J. NACELLE(S) means V2500 nacelle(s) and thrust reverser, as described
in IAE Specifications referenced below, as such Specifications may
be revised from time to time, sold by IAE for Commercial Aviation
Use, whether installed as new equipment in aircraft by the
manufacturer thereof and delivered to the Operator or delivered
directly to the Operator from IAE for use as a spare nacelle. A
Nacelle which has been converted or upgraded in accordance with IAE
instructions shall continue to qualify for Allowances and
adjustments under the provisions of this Service Policy.
Model No. Specification No. Specification Date
--------- ----------------- ------------------
V2500 -- ___________, 198__
K. NACELLE TIME is the total number of flight hours of operation of a
Nacelle.
L. OPERATOR is the owner of one or more Nacelles operated for
Commercial Aviation use, the lessee if such Nacelle(s) is the
subject of a long-term financing lease or as otherwise reasonably
determined by IAE.
M. PART(S) means Nacelle parts sold by IAE and delivered to the
Operator as original equipment in a Nacelle or Nacelle parts sold
and delivered by IAE to the Operator as new spare parts in support
of a Nacelle.
N. PARTS LIFE LIMIT is the maximum allowable Parts Time, for specific
Parts as established by IAE or by the Federal Aviation
Administration in an Airworthiness Directive.
0. PARTS REPAIR means the IAE designated restoration of Failed Parts to
functional serviceable status, excluding repair of normal wear and
tear, as determined by IAE.
P. PARTS TIME is the total number of flight hours of operation of a
Part.
Q. PRIMARY PART means a Part other than a First Run Part but not having
more than 6,000 hours Parts Time.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 8
R. RECONDITIONING means the restoration of a Nacelle allowing
substitution of new or serviceable used Parts, to the extent
necessary for continued operation of the Nacelle as a serviceable
unit. When such Reconditioning is performed by IAE designated V2500
Maintenance Center, the Parts Time, of the replaced Part shall, for
the purpose of this Service Policy, be applicable to the substituted
new or serviceable used Part. Said replaced Part shall become the
property of IAE.
S. REOPERATION is the alternation to or modification of a Part.
T. RESULTANT DAMAGE is the damage suffered by a Part because of the
Failure of another Part within the same Nacelle.
U. SCRAPPED PARTS (SCRAP, SCRAPPED, SCRAPPAGE) shall mean those Parts
determined by IAE to be unserviceable and not Economically
Repairable. The Operator shall cause such Parts to be mutilated or
disposed of in such a manner as to preclude any possible further use
as a Nacelle Part.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 9
IV GENERAL CONDITIONS
The following general conditions govern the application of this Service
Policy:
A. Records and Audit
The Operator shall maintain adequate records for the administration
of this Service Policy and shall permit IAE to audit such records at
reasonable intervals.
B. Scrapping of parts
1. Scrappage Verification
Any Part for which a Parts Credit Allowance is requested shall
be verified as Scrapped prior to the issuance of the
Allowance. Verification of Scrappage shall occur as Follows:
a. At the Operator's, or its subcontractor's, facility.
Such verification shall be accomplished by the IAE Field
Representative.
b. At a V2500 Maintenance Center designated by IAE,
provided that IAE concurs that the Part is to be
Scrapped. Sufficient information to identify the Nacelle
from which the Part was removed, and the reason for its
return shall be provided.
2. Return of Parts
IAE, at its sole option, may require the Operator to return to
IAE any Part for which a Parts Credit Allowance is requested.
Such return shall be a condition for the issuance of a Parts
Credit Allowance.
3. Transportation Expenses
Transportation expenses shall be at the expense of the
Operator if such Parts are shipped to and from a V2500
Maintenance Center designated by IAE for examination and
verification; except, that IAE shall pay the expense of
transport of such Parts as are shipped at the request of IAE.
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 10
4. Title
Title to such Parts returned to IAE shall vest in IAE.
a. Upon determination by IAE that the Operator is eligible
for a Parts Credit Allowance. If it is determined that
the Parts are scrapped Parts but are not eligible for
Service Policy coverage, the Operator will be notified
of the decision and the Parts returned at the Operator's
expense if the Operator so requests; otherwise, the
Parts will be disposed of by IAE without any type of
adjustment, or
b. Upon shipment, when such Parts are determined to be
Scrap at the Operator's facility and are shipped to IAE
at the request of IAE.
C. Repairability Requirements
The Operator shall set aside and exclude from the operation of this
Service Policy for a period of six months any Part for which IAE
states it has, or plans to initiate, an active program to achieve a
repair, corrective Reoperation or Parts Life Limit extension. In the
event IAE has not released a repair procedure, corrective
Reoperation, or Parts Life Limit extension by the expiration of this
six month period, such Part shall be retained by the Operator and
excluded from the operation of this Service Policy for additional
periods beyond the expiration of said six month period only if
agreed to by the Operator.
D. Exclusions from Service Policy
This Service Policy will not apply to any Nacelle, or Part if it has
been determined to the reasonable satisfaction of IAE that said
Nacelle or Part has Failed because it:
1. Has not been properly installed or maintained in accordance
with IAE recommendations unless such improper installation or
maintenance was performed by IAE or at any V2500 Maintenance
Center designated by IAE.
2. Has been used contrary to the operating and maintenance
instructions or recommendations authorized or issued by IAE
and current at the time, or
3. Has been repaired or altered outside any V2500 Maintenance
Center in such a way as to impair its safety, operation or
efficiency, or
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 11
4. Has been subjected to:
a. Misuse, neglect, or accident, or
b. Ingestion of foreign material, or
5. Has been affected in any way by a part not defined as a Part
herein, or
6. Has been affected in any way by occurrences not associated
with ordinary use, such as, but not limited to, acts of war,
rebellion, seizure or other belligerent acts.
E. Payment Options
IAE at its option may grant any Parts Credit Allowance as either a
credit to the Operator's account or as a Part replacement.
F. Presentation of Claims
Any request for an Allowance must be presented to IAE not later than
180 days after the removal from service of the Engine or Part for
which the Allowance is requested. If IAE disallows the request,
written notification will be provided to the Operator. The Operator
shall have 90 days from such notification to request a
reconsideration of the request for Allowance. IAE shall have the
right to refuse any request for an Allowance which is not submitted
within the stated time periods.
G. Duration of Service Policy
This Service Policy will normally cease to apply to all Parts in any
Nacelle that is more than ten years old as measured from the date of
shipment of the Nacelle from the factory. This Service Policy shall,
however, continue to be applicable to individual Nacelles after the
expiration of the ten year period on a year to year basis so that
the Operator may continue to receive the benefits of the Service
Policy on the Parts in these Nacelles.
H. General Administration
On matters concerning this Service Policy, the Operator is requested
to address all correspondence to:
V2500 NACELLE AND PARTS SERVICE POLICY PAGE 12
IAE International Aero Engines AG
Corporate Center II
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇
Attention: Warranty Administration
I. Limitation of Liability
1. The express provisions of this Service Policy set forth the
maximum liability of IAE with respect to any claims relating
to this Service Policy.
2. Except to the extent that the Allowances and adjustments
expressly set forth in this Service Policy may exceed the
limitations of the corresponding portions of any warranties or
representations included in any sales agreements, the
provisions of this Service Policy do not modify, enlarge or
extend in any manner the conditions governing the sale of its
Nacelles and Parts by IAE.
3. IAE reserves the right to change or retract this Service
Policy at any time at its sole discretion. No such retraction
or change shall diminish the benefits which the Operator may
be entitled to receive with respect to Nacelles for which a
acceptable order has been placed with IAE or with respect to
aircraft with installed Nacelles for which firm orders have
been placed or options obtained with the aircraft manufacturer
prior to the announcement of any such retraction or change.
J. Assignment of Service Policy
This Service Policy shall not be assigned, either in whole or in
part, by either party. IAE will, however, upon the written request
of the Operator consider an extension of Service Policy Allowances
and adjustments to Nacelles and Parts sold or leased by an Operator
to another Operator, to the extent only, however, that such
Allowances and adjustments exist at the time of such sale or lease
and subject to the terms and conditions of the Service Policy. IAE
shall not unreasonably withhold such extension of such Allowances.
EXHIBIT D-3
NON-INSTALLATION ITEMS WARRANTY
45
EXHIBIT D-4
RELIABILITY GUARANTEE
47
V2500 RELIABILITY GUARANTEE
I INTRODUCTION
IAE assures Midway that by the end of the five (5) year period commencing
with Midway's first commercial operation of Aircraft powered by V2500
Engines, the cumulative Engine Shop Visit Rate will not exceed a
Guaranteed Rate of 0.110 per 1000 Eligible Engine flight hours. Under this
Guarantee, if the cumulative Engine Shop Visit Rate exceeds the Guaranteed
Rate, IAE will credit Midway's account with IAE an amount of $30,000 U.S.
Dollars for each Eligible Engine Shop Visit determined to have been in
excess of the Guaranteed Rate.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee will start on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate five (5) years from that date.
B. Eligible Engines
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. Eligible Shop Visits
Eligible Shop Visits shall comprise the shop visits of Eligible
Engines required for the following reasons:
1. a Failure of a Part in such Eligible Engines;
2. foreign object damage caused by the ingestion of birds,
hailstones or runway gravel;
V2500 RELIABILITY GUARANTEE (Continued)
Page 2
3. an Airworthiness Directive issued by the applicable
Certification Authority; and
4. maintenance as recommended by IAE.
D. Reporting of Engine Shop Visits and Engine Flight Hours
Eligible Shop Visits shall be reported to IAE by Midway within
thirty days after the date of such Engine Shop Visit using IAE Form
▇▇▇ together with such other information as may be needed to
determine the Eligibility of the Engine Shop Visit. Each such Form
shall be verified by an authorized IAE Representative before
submission. Should it be necessary for him to disqualify a reported
Engine Shop Visit, supporting information will be furnished.
Flight hours accumulated by Eligible Engines during each month
during the Period of Guarantee shall be reported by Midway within
thirty days after each month's end to IAE on IAE Form ▇▇▇ unless
other procedures are established for the reporting of flight hours.
E. Credit Allowance Calculation
A credit of $30,000 U.S. Dollars will be granted by IAE for each
Eligible Engine Shop Visit determined as calculated below to be in
excess of the Guaranteed Rate during the Period of Guarantee. An
annual calculation will be made no later than sixty days after each
yearly anniversary of the commencement of the Period of Guarantee
provided that the necessary Engine Shop Visit records and Eligible
Engine flight hour information have been reported to IAE.
Each annual calculation will be made using data that will be
cumulative from the start of the Period of Guarantee. An interim
credit will be granted, if necessary, following the annual
calculations for the second year and each subsequent year of the
Period of Guarantee. If subsequent annual calculations show that on
a cumulative basis, a previous interim credit (or portion thereof)
was excessive, such excess amount shall be subject to repayment
which will be effected by IAE issuing a debit against Midway's
account with IAE. Credits and debits will be applied to Midway's
account with IAE not later than thirty days following a calculation
for the second year and each subsequent year of the Period of
Guarantee, as applicable.
V2500 RELIABILITY GUARANTEE (Continued)
Page 3
Credit Allowance = (AR - GR) x $30,000 U.S. Dollars
where:
AR = Total Eligible Engine Shop Visits during the period of
the calculation.
GR = 0.110/1,000 x total Engine flight hours accumulated on
Eligible Engines during the period of the calculation.
(NOTE: GR will be rounded to the nearest whole number.)
III DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Engines and Engine
Shop Visits excluded by the General Conditions of the Policy shall be
excluded from this Guarantee except that Engine Shop Visits resulting from
ingestion of birds, hailstones or runway gravel shall be included as
Eligible under this Guarantee.
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
Takeoff and Climb relative to full Takeoff and Climb ratings;
3. An average Aircraft utilization equal to or less than 3160
flight hours per year; and
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) spare Engines as described in
the Proposal or Contract to which this Guarantee is attached.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee, a
variation from the conditions upon which the Guaranteed Rate is
predicated or a discontinuation of ownership by Midway of any Engine
or any V2500 powered Aircraft subsequent to delivery to Midway.
V2500 RELIABILITY GUARANTEE (Continued)
Page 4
C. In the event credits are issued under Section II, such credits will
be dedicated to the procurement of Parts aimed at correction of the
situations contributing to excess Engine Shop Visits. Accordingly,
Midway and IAE will establish jointly the modifications or Parts to
be selected, and Midway will incorporate the changes into Eligible
Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the reliability
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
EXHIBIT D-5
INFLIGHT SHUTDOWN GUARANTEE
V2500 INFLIGHT SHUTDOWN GUARANTEE
I INTRODUCTION
IAE assures Midway that by the end of the five (5) year period commencing
with Midway's first commercial operation of Aircraft powered by V2500
Engines, the cumulative Engine Inflight Shutdown Rate will not exceed a
Guaranteed Rate of 0.020 per 1000 Eligible Engine flight hours. Under this
Guarantee, if the cumulative Eligible Inflight Shutdown Rate is determined
to have exceeded the Guaranteed Rate over the Period of Guarantee, IAE
will credit Midway's account with IAE an amount of $10,000 U.S. Dollars
for each Eligible Inflight Shutdown determined to have been in excess of
the Guaranteed Rate.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee will start on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate five (5) years from that date.
B. Eligible Engines
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. Eligible Inflight Shutdowns
Eligible Inflight Shutdowns shall comprise the inflight shutdown of
an Eligible Engine during a scheduled revenue flight which is
determined to have been caused by a Failure of a Part of such
Engine. Multiple inflight shutdowns of the same Engine during the
same flight leg for the same problem will be counted as one Eligible
Inflight Shutdown. A subsequent inflight shutdown on a subsequent
flight leg for the same problem because corrective action has not
been taken will be excluded.
V2500 INFLIGHT SHUTDOWN GUARANTEE (Continued)
Page 2
D. Reporting of Eligible Inflight Shutdowns
Eligible Inflight Shutdowns shall be reported to IAE by Midway
within thirty days after the date of such Inflight Shutdown using
IAE Form TBD together with such other information as may be needed
to determine the Eligibility of the Inflight Shutdown. Each such
Form shall be verified by an authorized IAE Representative before
submission. Should it be necessary for him to disqualify a reported
Inflight Shutdown, supporting information will be furnished.
Flight hours accumulated by Eligible Engines during each month
during the Period of Guarantee shall be reported by Midway within
thirty days after each month's end to IAE on IAE Form TBD unless
other procedures are established for the reporting of flight hours.
E. Credit Allowance Calculation
A credit of $10,000 U.S. Dollars will be granted by IAE for each
Eligible Inflight Shutdown determined as calculated below to be in
excess of the Guaranteed Rate during the Period of Guarantee. An
annual calculation will be made no later than sixty days after each
yearly anniversary of the commencement of the Period of Guarantee
provided that the necessary Inflight Shutdown records and Eligible
Engine flight hour information have been reported to IAE.
Each annual calculation will be made using data that will be
cumulative from the start of the Period of Guarantee. An interim
credit will be granted, if necessary, following the annual
calculations for the second year and each subsequent year of the
Period of Guarantee. If subsequent annual calculations show that on
a cumulative basis, a previous interim credit (or portion thereof)
was excessive, such excess amount shall be subject to repayment
which will be effected by IAE issuing a debit against Midway's
account with IAE. Credits and debits will be applied to Midway's
account with IAE not later than thirty days following a calculation
for the second year and each subsequent year of the Period of
Guarantee, as applicable.
The Credit Allowance = (AI - GD) x $10,000 U.S. Dollars
Where:
AI = Total Eligible Inflight Shutdowns during the period of
the calculation;
GI = (0.020/1,000) x total Engine flight hours accumulated
on Eligible Engines during the period of the
calculation.
(NOTE: GI will be rounded to the nearest whole number.)
V2500 INFLIGHT SHUTDOWN GUARANTEE (Continued)
Page 3
III DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Engines and Inflight
Shutdowns excluded by the General Conditions of the Policy shall be
excluded from this Guarantee.
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
Takeoff and Climb relative to full Takeoff and Climb ratings;
3. An average Aircraft utilization equal to or less than 3160
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) spare Engines as described in
the Proposal or Contract to which this Guarantee is attached.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee, a
variation from the conditions upon which the Guaranteed Rate is
predicated or a discontinuation of ownership by Midway of any Engine
or any V2500 powered Aircraft subsequent to delivery to Midway.
C. In the event credits are issued under Section II, such credits will
be dedicated to the procurement of Parts aimed at correction of the
situations contributing to excess Inflight Shutdowns. Accordingly,
Midway and IAE will establish jointly the modifications or Parts to
be selected, and Midway will incorporate the changes into Eligible
Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the reliability
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
EXHIBIT D-6
EXHAUST GAS TEMPERATURE GUARANTEE
V2500 EXHAUST GAS TEMPERATURE GUARANTEE
I INTRODUCTION
IAE assures Midway that during the first 4000 hours of operation of each
V2500 Engine, the maximum stabilized takeoff exhaust gas temperature will
not exceed the Certified Limit. Under this Guarantee if it is confirmed
that the Certified Limit has been exceeded, IAE will credit Midway's
account with IAE in the amount of $50,000 USD. For the purpose of this
Guarantee, the Certified Limit is exceeded if the Engine will not achieve
the specified engine pressure ratio for takeoff thrust without exceeding
the Certified Limit for its Exhaust Gas Temperature.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee for each Eligible Engine will start on the
date Midway initiates commercial operation of its first Aircraft
powered by such Engine and will terminate five (5) years from that
date or upon the expiration of the first 4000 hours of operation of
such Engine, whichever is the sooner.
B. Eligible Engine
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. Restoration of Installed Engine
If during the Period of Guarantee, the maximum stabilized takeoff
exhaust gas temperature of an Eligible Engine installed in an
Aircraft operated by Midway exceeds the Certified Limit, Midway
shall undertake on-wing Engine maintenance recommended by IAE, with
technical assistance provided by IAE, to restore the performance of
that Engine.
V2500 EXHAUST GAS TEMPERATURE GUARANTEE (Continued)
Page 2
D. Calibration of Removed Engine
If the performance of an installed Eligible Engine cannot be
restored by, the maintenance recommended under Section II, Paragraph
C, Midway shall promptly remove such Engine from the Aircraft and
dispatch it at its cost for calibration in an IAE designated test
cell. If such calibration verifies that the exhaust gas temperature
of the Engine is not in excess of the Certified Limit or it is
established that any excess is due to causes which are excluded by
the General Conditions in Section III, then the cost of such test
cell calibration and associated transportation will be borne by
Midway.
E. Credit Allowance
A credit of $50,000 USD will be granted by IAE for each event not
meeting the requirements set forth in Section I of this guarantee
and as verified by Section II, Paragraph D. above.
III. SPECIFIC CONDITIONS
A. This EGT Guarantee is predicated on the use by Midway of:
1. An average flight cycle of 1.5 hours;
2. Thrust levels which are derated an average of 10 percent
relative to the full Takeoff and Climb ratings;
3. An average Aircraft utilization equal to or less than 3160
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) firm spare Engines as described
in the Proposal or Contract to which this Guarantee is
attached.
B. IAE reserves the right to make appropriate adjustments to the
Guarantee if there is, during the Period of Guarantee, a variation
from the conditions upon which the Guarantee is predicated or a
discontiuation of ownership by Midway of any Engine or any V2500
powered Aircraft subsequent to delivery to Midway.
V2500 EXHAUST GAS TEMPERATURE GUARANTEE (Continued)
Page 3
IV DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Engines excluded by
the General Conditions of the Policy shall be excluded from this
Guarantee.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the performance
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
EXHIBIT D-7
FUEL CONSUMPTION RETENTION GUARANTEE
50
V2500 FUEL CONSUMPTION RETENTION GUARANTEE
I INTRODUCTION
IAE assures Midway that at the end of the five (5) year period commencing
with Midway's first commercial operation of Aircraft powered by V2500
Engines, the fleet average cruise fuel consumption for Eligible Engines
will not have increased by more than a Guaranteed Margin of 2.0%. Under
this Guarantee, if the fleet average cruise fuel consumption for Eligible
Engines exceeds the Guaranteed Margin at the end of the Guarantee Period,
IAE will credit Midway's account with IAE an amount in respect of excess
fuel consumed.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee will start on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate five (5) years from that date.
B. Eligible Engines
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. Fuel Consumption Measurement
The inflight data required for administration of this Guarantee will
be obtained by Midway during steady state cruise conditions using
methods which will be mutually agreed between Midway and IAE. Steady
state cruise conditions are defined as a minimum of five minutes at
the same altitude, Mach number and thrust setting Engine Pressure
Ratio in clear, smooth air with normal bleed and power extraction
and autothrottle disengaged (unless flight evaluation shows this
disengagement to be unnecessary). Data points falling within the
following envelope of altitude, Mach number and Engine Pressure
Ratio: Mach No. -- TBD to TBD, Altitude - TBD to TBD feet, Engine
Pressure Ratio - TBD to TBD will be deemed to be Acceptable Data
Points, provided that:
V2500 FUEL CONSUMPTION RETENTION GUARANTEE (Continued)
Page 2
a) the fuel consumption data for any Eligible Engine on which the
engine parameters indicate a possible malfunction (including
associated Aircraft systems), other than normal gas path
deterioration, that is subsequently confirmed by maintenance
action will not be considered acceptable data, and
b) data which is obviously inaccurate under normal engine
monitoring practices will not be considered acceptable data;
this type of data will be rejected unless Midway validity
checks have established that Total Air Temperature, Fuel Flow
Aircraft and Engine Bleed Systems and other Aircraft
parameters are within normal operating ranges.
The data to be recorded will be that normally recorded for
Engine Condition Monitoring purposes and will include the
following:
Altitude
Mach Number
Total Air Temperature (TAT)
Indicated Airspeed (IAS)
Engine Pressure Ratio (EPR)
Fuel Flow
Low Compressor Rotor Speed (N(1))
High Compressor Rotor Speed (N(2))
Exhaust Gas Temperature (EGT)
Bleed Air Configuration
Engine Fuel flow measurements will be referred to in the
Standard Engine Fuel Flow-Engine Pressure Ratio Relationship
which will be defined for installed Engines by the Aircraft
manufacturer during the Aircraft flight test certification
program.
D. Base Fuel Flow
The Base Fuel Flow shall be the initial fuel flow level of each
Eligible Engine on commencement of its commercial service. This
shall be the average of the cruise fuel flow values for the first
ten Acceptable Data Points recorded for each Eligible Engine. Base
Fuel Flow is represented as a percentage deviation from the Standard
Engine Fuel Flow-Engine Pressure Ratio Relationship.
V2500 FUEL CONSUMPTION RETENTION GUARANTEE (Continued)
Page 3
E. Cruise Fuel Flow
The Cruise Fuel Flow shall be the average of the cruise fuel flow
values for ten Acceptable Data Points for each installed Eligible
Engine at any time after that Engine's Base Fuel Flow is
established. Cruise Fuel Flow will also be expressed as a percent
deviation from the Standard Engine Fuel Flow-Engine Pressure Ratio
Relationship.
F. Engine Cruise Fuel Flow Deterioration
The Cruise Fuel Flow Deterioration for an Eligible Engine shall be
the difference between its Cruise Fuel Flow and the Base Fuel Flow
expressed in percentage points.
G. Periodic Fleet Average Cruise Fuel Consumption Deterioration
The Periodic Fleet Average Cruise Fuel Consumption Deterioration
shall be the average of the Cruise Fuel Flow Deterioration for all
installed Eligible Engines for a 30 day reporting period. This is to
be reported to IAE every 30 days.
H. Final Fleet Average Cruise Fuel Consumption Deterioration
The Final Fleet Average Cruise Fuel Consumption Deterioration is the
average of the Periodic Fleet Average Cruise Fuel Consumption
Deterioration values for all 30 day periods during the Period of
Guarantee.
I. Operational Data
Midway shall provide the following data to IAE as indicated during
the Period of the Guarantee:
1. Total quantity of fuel consumed by Eligible Engines during the
Period (U.S. Gallons), every thirty days.
2. Average cost of fuel to Midway over the Period of Guarantee
(U.S. Dollars per U.S. Gallon), every thirty days.
3. Individual Eligible Engine operating hours for each 30 day
period during the Period of Guarantee identified by engine
serial number, annually.
4. Engine maintenance action information, as requested.
V2500 FUEL CONSUMPTION RETENTION GUARANTEE (Continued)
Page 4
J. Excess Fuel Consumption Credit Calculation
If at the end of the Period of Guarantee the Final Fleet Average
Fuel Consumption Deterioration exceeds the Guaranteed Margin, IAE
will grant Midway a credit in respect to excess fuel consumption
calculated in accordance with the following formula:
C = (D-GM)% YHF
where:
C = the amount of the credit in U.S. dollars
D = the Final fleet Average Fuel Consumption Deterioration
GM = the Guaranteed Margin
Y = average cruise fuel flow of new Eligible Engines
expressed in U.S. gallons per hour
H = the total of all flight hours flown by Midway's
Eligible Engines during the Period of Guarantee
F = The average net cost to Midway in U.S. Dollars per U.S.
Gallon (after deduction of subsidies or government or
other allowances received by Midway), of aviation fuel
consumed by Midway during the Period of Guarantee.
III DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Engines excluded by
the General Conditions of the Policy shall be excluded from this
Guarantee.
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
Takeoff and Climb relative to full Takeoff and Climb ratings;
V2500 FUEL CONSUMPTION RETENTION GUARANTEE (Continued)
Page 5
3. An avenge Aircraft utilization equal to or less than 3162
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) spare Engines as described in
the Proposal or Contract to which this Guarantee is attached.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee, a
variation from the conditions upon which the Guaranteed Rate is
predicated or a discontinuation of ownership by Midway of any Engine
or any V2500 powered Aircraft subsequent to delivery to Midway.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the performance
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
EXHIBIT D-8
DELAY AND CANCELLATION
51
V2500 DELAY AND CANCELLATION
I INTRODUCTION
IAE assures Midway that by the end of the five (5) year period commencing
with Midway's first commercial operation of Aircraft powered by V2500
Engines, the cumulative Engine-caused Delay and Cancellation Rate will not
exceed a Guaranteed Rate of 0.180 per 100 Aircraft departures. Under this
Guarantee, if the cumulative Engine-caused Delay and Cancellation Rate is
determined to have exceeded the Guaranteed Rate over the Period of
Guarantee, IAE will credit Midway's account with IAE an amount of $10,000
U.S. Dollars for each excess Eligible Delay and Cancellation determined to
have been in excess of the Guaranteed Rate.
II GUARANTEE
A. Period of Guarantee
The Period of Guarantee will start on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate five (5) years from that date.
B. Eligible Engines
The Engines that will be Eligible under this Guarantee shall be new
installed and new spare Engines which are owned or operated by
Midway during the Period of Guarantee and which have been acquired
pursuant to the Proposal or Contract to which this Guarantee is
attached and the related proposal or contract for delivery of
Aircraft. The Engines shall remain Eligible provided that Midway or
its authorized maintenance facility maintains them in accordance
with the IAE instructions and recommendations contained in the
applicable IAE publications including the latest Maintenance
Management Plan for Midway.
C. i) Eligible Delay
An Eligible Delay shall occur when by a Failure of a Part in an
Eligible Engine installed in an Aircraft is the sole cause of a
delay in the final Departure of that Aircraft by more than fifteen
minutes after its programmed Departure in either of the following
instances:
1) an originating flight departing later than its scheduled
Departure time; or
2) a through flight or a turnaround flight remaining on the
ground longer than its scheduled ground time.
V2500 DELAY AND CANCELLATION (Continued)
Page 2
C. ii) Eligible Cancellation
A single Cancellation shall occur when a Failure of a Part in an
Eligible Engine installed in an Aircraft is the sole cause of the
elimination of a Departure in either of the following instances:
1) cancellation of a trip comprising a single flight leg; or
2) cancellation of any or all of the flight legs of a multiple
leg trip.
C. iii)
A Departure which is cancelled after an Eligible Delay shall be an
Eligible Cancellation not an Eligible Delay.
C. iv)
Consecutive Delays and Cancellations for the same problem because
corrective action had not been taken will be excluded.
D. Departure
A Departure comprises the movement of an Aircraft from the blocks
for the purpose of an intended scheduled revenue flight provided
that there can be only one Departure for each intended flight.
E. Reporting of Eligible Delays and Cancellations
Eligible Delays and Cancellations shall be reported to IAE by Midway
within thirty days after the date of such Delay or Cancellation
using IAE Form TBD together with such other information as may be
needed to determine the Eligibility of the Delay or Cancellation.
Each such Form shall be verified by an authorized IAE Representative
before submission. Should it be necessary for him to disqualify a
reported Delay or Cancellation, supporting information will be
furnished.
Departures accumulated by Eligible Engines during each month during
the Period of Guarantee shall be reported by Midway within thirty
days after each month's end to IAE on IAE Form TBD unless other
procedures are established for the reporting of Departures.
V2500 DELAY AND CANCELLATION (Continued)
Page 3
F. Credit Allowance Calculation
A credit of $10,000 U.S. Dollars will be granted by IAE for each
Eligible Delay and Eligible Cancellation determined as calculated
below to be in excess of the Guaranteed Rate during the Period of
Guarantee. An annual calculation will be made no later than sixty
days after each yearly anniversary of the commencement of the Period
of Guarantee provided that the necessary records of Delays,
Cancellation and Departure have been reported to IAE.
Each annual calculation will be made using data that will be
cumulative from the start of the Period of Guarantee. An interim
credit will be granted, if necessary, following the annual
calculations for the second year and each subsequent year of the
Period of Guarantee. If subsequent annual calculations show that on
a cumulative basis, a previous interim credit (or portion thereof)
was excessive, such excess amount shall be subject to repayment
which will be effected by IAE issuing a debit against Midway's
account with IAR. Credits and debits will be applied to Midway's
account with IAE not later than thirty days following a calculation
for the second year and each subsequent year of the Period of
Guarantee, as applicable.
Credit Allowance = (ADC - GDC) x $10,000 U.S. Dollars
Where:
ADC = Total qualifying actual Engine Caused Delays and
Cancellations claimed and accepted as eligible during the
applicable period of the calculation.
GDC = (0.180/100) x total Departures accumulated on Eligible
Engines during the applicable period of calculation.
III DEFINITIONS AND GENERAL CONDITIONS
All of the Definitions and General Conditions of the V2500 Engine and
Parts Service Policy shall apply to this Guarantee. Delays and
Cancellation excluded by the General Conditions of the Policy shall be
excluded from this Guarantee.
V2500 DELAY AND CANCELLATION (Continued)
Page 4
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
Takeoff and Climb relative to full Takeoff and Climb ratings;
3. An avenge Aircraft utilization equal to or less than 3160
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of four
(4) firm Aircraft and one (1) spare Engines as described in
the Proposal or Contract to which this Guarantee is attached.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee, a
variation from the conditions upon which the Guaranteed Rate is
predicated or a discontinuation of ownership by Midway of any Engine
or any V2500 powered Aircraft subsequent to delivery to Midway.
C. In the event credits are issued under Section II, such credits will
be dedicated to the procurement of parts aimed at correction of the
situations contributing to excess Delays and Cancellation.
Accordingly, Midway and IAE will establish jointly the modifications
or Parts to be selected, and Midway will incorporate the changes
into Eligible Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to Midway as
a result of the failure of Eligible Engines to achieve the reliability
level stipulated in the Guarantee. It is not the intent, however, to
duplicate benefits provided to Midway under any other applicable
guarantee, sales warranty, service policy, or any special benefit of any
kind as a result of the same failure. Therefore, the terms and conditions
of this Guarantee notwithstanding, if the terms of this Guarantee should
make duplicate benefits available to Midway from IAE or any third-party,
Midway may elect to receive the benefits under this Guarantee or under any
of the other benefits described above, but not both.
EXHIBIT D-9
FLEET HOUR AGREEMENT
52
V2500
ENGINE MAINTENANCE SERVICE PLAN
(FLEET HOUR AGREEMENT)
FOR
Midway
This document contains matter of a proprietary nature and is delivered on the
express condition that it is not to be disclosed or reproduced in whole or in
part without the written consent of IAE International Aero Engines AG. This
restriction does not limit the right to disclose information obtained from other
sources.
V2500
ENGINE MAINTENANCE SERVICE PLAN
FOR
Midway
I. INTRODUCTION
This Maintenance Service Plan (Plan), provided by TAE International Aero
Engines AG (IAE) through the IAE Designated Maintenance Center
(Maintenance Center), is offered in support of V2500 Engines owned and
operated by Midway. The Plan, expressed as a Maintenance Service Rate per
Engine Flight Hour, covers those off-wing maintenance services set forth
in Section IV, Paragraph C, hereof when performed exclusively by the
Maintenance Center.
For the purpose of this Plan, the term "Engine" shall mean the basic V2500
Engine, together with the neutral Quick Engine Change (QEC) parts,
components and assemblies required to install that engine into the V2500
powered Aircraft nacelle.
II. DESCRIPTION
A. Period of the Plan
The Period of the Plan will commence on the date Midway initiates
commercial operation of its first Aircraft powered by Eligible
Engines and will terminate ten (10) years from that date.
B. Eligible Engines
The Engines that will be eligible for coverage under this Plan shall
be the eight (8) new installed Engines and one (1) new spare V2500
Engines which are owned or operated by Midway in support of four (4)
Aircraft during the Period of the Plan.
The first Engine eligible for coverage under this Plan shall be the
first Engine removed from Midway's Aircraft on or after the date of
commencement of the Plan. The last Engine eligible for coverage
under this Plan shall be the last Engine requiring removal from
Midway Aircraft on or before the date of termination of the Plan.
C. Specifications
Midway's V2500 Engines will be repaired, modified, inspected and
tested in accordance with the manufacturer's applicable Engine
Manuals, the Maintenance Center V2500 Maintenance and Build Standard
Manual, Service Bulletins and other approved maintenance procedures
then in effect at the Maintenance Center.
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 2
III. TECHNICAL SUPPORT
The technical support services to be provided by the Maintenance Center
during the Period of the Plan are described below:
A. Program Manager
IAE will arrange for the Maintenance Center to assign a Program
Manager who will be the point of contact for Midway in respect of
services described in this Plan.
The Program Manager, in agreement with Midway, will be responsible
for defining to the shop the work to be accomplished on Engines at
each shop visit, the internal processing of Warranty Claim forms on
behalf of Midway's Eligible Engines, securing from IAE Warranty
Administration its authority to process Engines in accordance with
any applicable Guarantees, periodic engineering updates and overall
Program review.
B. Engineering Support
1. The Maintenance Center shall provide engineering support
services for Eligible Engines. These services shall comprise:
a. Analysis of IAE Service Bulletins to determine those
which are applicable to Midway's Engines;
b. Providing required documentation including but not
limited to, FAA Form 337, V2500 Time Parts Status
Report, Engine test logs and a Major Parts Record Change
List for each Engine returned by the Maintenance Center
to Midway;
c. Providing a written report stating any damage detected
and repair(s) accomplished, including any technical
conclusions as to the cause of such damage; and,
d. Providing, upon request, accident and damage disassembly
reports, including pictures.
IV. MAINTENANCE SERVICES
This section describes the maintenance services to be provided by the
Maintenance Center for Engines during the Period of the Plan.
Each Engine that is returned by Midway to the Maintenance Center for major
or minor repair will be accompanied by an acceptable purchase order
referencing this Plan, which must include Engine and Life Limited Part
total time, date of Engine removal, reason for removal and authorization
for the work to be accomplished.
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 3
A. Planned Engine Stop Visits
Engines shipped to the Maintenance Center for planned shop visits
will be processed in accordance with the specifications set forth in
Section II, Paragraph C, hereof. The following factors shall also be
considered:
1. Operating time since the last scheduled visit and time, since
the last unscheduled maintenance on the various Engine
sections;
2. Present Parts condition;
3. The number of hours planned for the next Engine Shop Visit
interval or as determined by the remaining life on the Life
Limited Parts;
4. The planned maintenance interval for Hot Section Inspection;
5. The requirement for incorporation of recommended IAE Service
Bulletins;
6. The instructions contained in the Midway purchase order.
B. Unplanned Engine Shop Visits
Based upon the review of the Engine's maintenance history,
maintenance will consist of repair or replacement of damaged
assemblies or Parts, if any, and of other deteriorated Parts as
necessary.
C. Maintenance Services Included Under the Plan
The maintenance services to be included under the Maintenance
Service Rate (MSR), defined in Section V, shall be limited to the
following when performed by the Maintenance Center on Eligible
Engines removed from service during the Period of the Plan:
1. All labor, material and material handling charges and any
vendor fees required to perform basic Engine reconditioning
and repair to make the Engine serviceable to the
specifications established in accordance with the provisions
of Section II, Paragraph C, hereof, except the following
charges, which will be invoiced separately if such items are
required):
a. Labor, material and material handling charges associated
with the replacement of disks and shafts solely for
reasons of life limitation.
b. Labor, material, material handling charges and any fees
associated with vendor proprietary accessories (other
than labor expended in the removal or installation of
such accessories for reasons of Engine access).
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 4
c. Labor or material for QEC repair or replacement.
d. Gold or silver (or their alloys) consumed in repairs.
e. Fuel and oil consumed at Engine test.
2. All labor, material handling charges and any vendor fees
required in the event that reduction of a Parts Life Limit (as
defined in the V2500 Engine and Parts Service Policy) renders
a Part unserviceable.
3. All labor, material, material handling charges and any vendor
fees required to repair or replace Engine Parts as required by
Airworthiness Directives issued by the U.S. Federal Aviation
Administration.
4. All labor, material, material handling charges and any vendor
fees required for incorporation of IAE Service Bulletins
having Compliance Codes 1 through 6, or equivalent, in
accordance with the recommendation in the applicable Service
Bulletin.
5. All labor, material, material handling charges and any vendor
fees required to incorporate those IAE Service Bulletins
having Compliance Code 7 or 8, or equivalent, as may be
recommended by the Maintenance Center.
6. All labor to perform the required Engine testing as designated
by the Maintenance Center.
7. All labor, material, material handling charges and any vendor
fees required to repair damage caused by ingestion of birds,
hailstones or runway gravel.
8. All labor to perform QEC disassembly and post-test reassembly
as required to accomplish the above and material limited to
expendable Parts, i.e., 0-rings, gaskets, packings and similar
items etc., required for QEC reinstallation.
D. Maintenance Services Not Included Under the Plan
All other services not specifically included in Paragraph C, above,
are excluded from coverage under the Maintenance Service Rate and
will be accomplished as Excess Work, subject to the rates and
charges in effect at the Maintenance Center during the time of work
performance.
Further, all labor, material and other charges related to
Maintenance Center performance of maintenance services described in
Section IV, Paragraph C, will be identified as Excess Work if it has
been determined to IAE's reasonable satisfaction that such Engine:
1. Requires repairs for recoverable insured inflight and/or
ground accident damage; or
2. Was not maintained and operated in accordance with maintenance
recommendations included in the Maintenance Manuals, the
specifications established in accordance with
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 5
Section II, Paragraph C, and the specific operational
recommendations described in Section V; or
3. Has been used contrary to the operating or maintenance
instructions or recommendations authorized or issued by IAE or
Airbus Industrie and current at the time; or
4. Has been subjected to misuse, neglect, accident or maintenance
error by other than the Maintenance Center; or
5. Has been affected by a Part not originally delivered to Midway
by the Maintenance Center, IAE or a source approved by the
IAE; or
6. Has been affected by occurrences not associated with ordinary
use, such as, but not limited to, acts of war, rebellion,
seizure or other belligerent acts.
The Maintenance Center's current rates and charges applicable to
Excess Work performed in conjunction with this Plan are presented in
Attachment I hereto and incorporated herein.
V. MAINTENANCE SERVICE RATE (MSR)
A. The MSR for the ten (10) year period of the Plan is $98.00 U.S.
Dollars per hour of Eligible Engine operation. The MSR, expressed in
U.S. Dollars, is subject to escalation from a base month of January,
1995 in accordance with the IAE Escalation Formula.
The MSR shall be limited to those maintenance services specified in
Section IV, Paragraph C, and shall apply to Eligible Engines
processed in accordance with the Plan.
The MSR shall apply to each flight hour and/or fraction thereof,
rounded to the nearest one-tenth (1/10) hour, that an Eligible
Midway V2500 Engine has been engaged in flight operations for
whatever reason.
Midway shall keep records in form and detail sufficient for accurate
and expeditious administration of the terms of the Plan and shall
permit IAE Field Engineering Representatives access to such records
for inspection and audit at reasonable intervals. Records maintained
by IAE shall include all Aircraft Engine logs containing hours and
cycles accumulated on Eligible Engines from the date of commencement
of the Plan.
On the tenth day following the first thirty (30) calendar days of
the Plan and continuing every thirty (30) calendar days thereafter,
Midway will forward to the Maintenance Center the actual flight
hours, flight cycles and thrust usage data accumulated on Eligible
Engines during the preceding thirty (30) day period as verified by
the TAR Representative. The format for such reporting by Midway
shall be as presented in an Exhibit hereto.
Provided that the conditions in item V. B. are met, the Maintenance
Center shall calculate the maintenance service charge for that
period and will, within thirty (30) calendar days following the
receipt of such data, render an invoice to Midway, which shall be
equal to
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 6
the hours of flight operation for that reporting period multiplied
by the MSR, including escalation in accordance with the IAE
Escalation Formula. Payment is due within thirty days of the date of
invoice.
B. The MSR is predicated on the use by Midway of:
1. An average flight cycle of no less than 1.5 hours;
2. Thrust levels which are derated an average of 10 percent for
takeoff and climb relative to full takeoff and climb ratings;
and
3. An average aircraft utilization equal to or less than 3160
flight hours per year.
C. IAE reserves the right to make appropriate adjustments to the MSR if
there is, during the Period of the Plan, a variation from the
conditions upon which the MSR is predicated or a discontinuation of
ownership by Midway of any V2500 powered Aircraft subsequent to
delivery to Midway.
VI. TURNAROUND TIME
The following average turnaround times FOB Maintenance Center, are
provided to assist Midway in its scheduling of the V2500 Engines. Actual
turnaround time will vary depending upon the actual condition of the
Engine received by the Maintenance Center.
Calendar Days
-------------
A. Major Engine Disassembly and Repair TBD
B. Hot Section Inspection and Combustion
Area Repairs TBD
Subject to the foregoing, the Maintenance Center will exercise reasonable
efforts to complete the turnaround of any given Engine within the average
turnaround time shown above and give consideration to Midway's scheduling
requirements for that Engine. Subject to Section X, entitled "Material
Support", the Maintenance Center, as Part of its efforts, shall utilize
Midway inventory Parts, if available, to maintain that schedule.
VII. INVOICING AND PAYMENT
A. Maintenance Services Included Under the Plan
Charges for maintenance services included under the Plan shall be
invoiced to Midway by IAE on a monthly basis in accordance with the
provisions of Section V hereof
B. Excess Work
Payment by Midway of all Excess Work charges shall be made to IAE in
U.S. Dollars, Net Cash.
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 7
Notwithstanding the above payment terms, if IAE determines that
Midway's financial condition has materially changed, IAE shall have
the right to specify alternative payment terms which shall, upon IAE
giving written notice to Midway, supersede the payment terms herein
contained.
The monthly indices reported by the U.S. Department of Labor are
published three (3) months after the applicable month's end,
therefore, the actual average index for each annual period cannot be
calculated until three (3) months subsequent to the end of each
period. An estimated escalation factor will be utilized to escalate
the base period MSR for invoicing purposes. As soon as the published
indexes are available, a final calculation will be performed for
each annual period of the Plan, and an invoice will be issued to
adjust the invoices which utilized the estimated rates.
VIII. OTHER SERVICES
The Maintenance Center will from time to time, upon request of Midway,
dispatch to Midway's line stations a salaried supervisor to assist Midway
in certain Engine maintenance requirements. The rates and charges for such
on-site assistance shall be defined in an attachment hereto and shall, in
all instances, be considered as Excess Work.
IX. TRANSPORTATION
Midway shall provide transportation stands in suitable condition as may be
required to ship Engines to the Maintenance Center for maintenance under
this Agreement. The Maintenance Center shall upon completion of work,
reinstall Midway's Engines into Midway's transportation stands for
reshipment.
Transportation charges for Engines shipped to or delivered from the
Maintenance Center shall, except as provided in the IAE Standard Terms and
Conditions of Sale for Overhaul and Repair, be the responsibility of
Midway. The FOB point for all shipments and deliveries shall be the IAE
Maintenance Center facility.
X. MATERIAL SUPPORT
If original Parts cannot be reinstalled because of long lead time repair,
scrap condition, supersedure, or similar circumstances, the following
material support services will be utilized by the Maintenance Center.
A. Maintenance Center New Parts
Maintenance Center New Parts may be used to replace long lead time
repairable items or scrap and superseded materials. When a New Part
is used to replace a repairable Midway Part, the repaired Part will
be placed in an Midway segregated inventory for future use in
Midway's maintenance requirements. The New purchased Part shall be
subject to the terms and conditions contained in an Attachment.
B. Condemned/Superseded Materials
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 8
Parts removed from Midway's Engines which cannot be reinstalled
because of scrap or superseded condition shall remain the property
of Midway. Midway agrees that it will provide the Maintenance Center
with its instructions for disposition of such Parts within sixty
(60) days following delivery of the refurbished Engine from which
they were removed.
The rates and charges for materials not included under the Plan
shall be as presented in an Attachment.
XI. TERMS AND CONDITIONS
A. The IAE Standard Terms and Conditions of Sale for Overhaul and
Repair shall apply to all work accomplished by the Maintenance
Center on V2500 Engines or Parts thereof under this Plan.
B. All terms and conditions appearing on or attached to Midway's
purchase orders which are in addition to or in conflict with the
provisions of this Plan shall not apply.
C. This Plan and the right to receive credits or payment hereunder
shall not be assigned, either in whole or in Part, without the prior
written consent of the other party; such consent shall not be
unreasonably withheld.
D. All of the definitions and general conditions of the V2500 Engine
and Parts Service Policy shall apply to the Plan, except that Parts
damaged by ingestion of birds, hailstones and runway gravel shall be
included under the Plan.
XII. TERMINATION
Midway may terminate this Plan for cause following the first twelve (12)
months in which the Plan has been in effect upon six (6) month's written
notification to the Maintenance Center of such intent to terminate. This
termination shall become effective retroactive to the most recent past
anniversary date of the Plan.
All orders issued by Midway from such retroactive effective date shall be
time and material orders, and all work performed shall be invoiced to
Midway at the then current published rates and charges in effect at the
Maintenance Center.
XIII. EXCLUSION OF BENEFITS
IAE reserves the right to exclude from any credit due, amounts incurred as
the result of a failure by Midway to comply with any of the requirements
specified in the Plan, provided that Midway fails to cure such default
within thirty (30) days after written notice of such default.
XIV. ORDER OF PRECEDENCE
In the event that there are any conflicts or inconsistencies between the
provisions of this Plan and the Attachments hereto, the provisions of this
Plan shall govern.
XV. GOVERNING LAW
This Agreement shall be construed and the performance thereof shall be
determined in accordance with the laws of Switzerland.
V2500 ENGINE MAINTENANCE SERVICE PLAN FOR MIDWAY PAGE 9
This Plan will remain available for Midway's acceptance until TBD. If you concur
with the terms and conditions offered, please have an authorized official of
Midway sign the two duplicate originals and return one of them on or before TBD
to the attention of:
IN WITNESS WHEREOF, the parties hereto have hereunto caused their hands and
seals to be set hereto and to a duplicate this TBD day of TBD.
Witnesses: Midway
____________________________ by _________________________
____________________________ Title ______________________
Witnesses: IAE INTERNATIONAL AERO ENGINES AG
____________________________ by _________________________
____________________________ Title ______________________
Attachment I
Labor Rates and
Charges for Services
for Excess Work
Labor Rates and
Charges for Services
The Maintenance Center agrees to charge Customer for services performed under
this Agreement at Designated Maintenance Center's published rates and handling
charges in effect at the time of work performance. The rates and charges through
_______________, are presented below. Rates and charges for annual periods
subsequent to _______________, will be published by the Maintenance Center at a
later date.
Maintenance Center Labor Rate ....................... $____U.S. Dollars Per Hour
New Engine Parts
New Engine Parts will be charged at the IAE then current commercial price
(manufacturer's list price).
Material Handling Charges
The then current IAE commercial spare Part price (manufacturer's list price)
will be used as the basis for establishment of the handling charges listed
below.
o Any life-limited Part as designated by IAE, new or
customer-furnished ........................................ ______ Percent
o Any other Part with an extended line item value of 30,000.00 U.S. Dollars
and under:
o New ................................................. ______ Percent
o Customer-Furnished .................................. ______ Percent
o Any Part with an extended line item value of 30,000.01 U.S.
Dollars and over:
o New .................................................. ______ U.S. Dollars
o Customer-Furnished ................................... ______ U.S. Dollars
LABOR RATES AND CHARGES FOR SERVICES PAGE 2
Rates and Charges for On-Site Work
The daily and hourly U.S. Dollar rates for each of the Designated Maintenance
Center's employees engaged in the performance of on-site work through
________________, are as follows:
Each
Minimum Rate Additional Hour
o Regular Workday (8 Hours) ______ ______
o Saturdays (4 Hour-Minimum)
o Sundays (4-Hour Minimum)
The above rates are predicated upon a portal-to-portal basis and apply to days
or portions of days spent in transit. Subsistence costs (meals, hotel and ground
transportation when applicable), as well as air fare charges, shall be in
addition to the on-site rates presented above and charged to the customer at the
Designated Maintenance Center's actual cost.
Tooling shall, upon request, be provided by the Maintenance Center for the
Designated Maintenance Center's use in the performance of on-site work. Charges
to the Customer for tooling when used by Maintenance Center's personnel shall be
limited to transportation, insurance and packaging costs.
Attachment II
IAE International Aero Engines AG
Standard Terms and Conditions
of Sale for Overhaul and Repair
IAE INTERNATIONAL AERO ENGINES AG
STANDARD TERMS AND CONDITIONS OF SALE
FOR OVERHAUL AND REPAIR
1. DELIVERY, TITLE AND SHIPPING
Goods delivered to IAE International Aero Engines AG (hereinafter referred
to as the Seller), for overhaul or repair hereunder shall be redelivered
to Midway (hereinafter referred to as the Buyer) FOB Seller's facility, or
to an agent of Buyer, including a common carrier, flyaway, or warehouse as
hereinafter provided. Thereafter, Buyer shall have all risk of loss for
such goods, including new parts incorporated therein by Seller. Wherever
transportation rates and carrier's liability for damage depend upon the
value of the shipment as declared by shipper, Seller will declare such
value as will entitle Buyer to have goods shipped at the lowest
permissible transportation rates unless otherwise instructed in writing by
Buyer. Buyer will furnish written shipping instructions for all goods as
promptly as possible. In the absence of such instructions, Seller may, at
any time beginning ten (10) days after forwarding notice to Buyer by mail
or otherwise that the goods are ready for shipment, do either of the
following for the account and at the expense and risk of the Buyer:
Arrange for shipment of the goods by a carrier of its own selection to
Buyer's place of business or other destination reasonably believed to be
suitable, or warehouse the goods. Buyer will not hold Seller liable for
loss or damage attributed to negligence, either in selection of the
carrier or the warehouse or in agreeing with either of them to contract
terms on Buyer's behalf.
2. INSPECTION
If, upon receipt of the goods by Buyer at destination, the same shall
appear not to have been overhauled or repaired in accordance with this
order, Buyer shall within thirty (30) days after receipt thereof notify
Seller of such condition and afford Seller a reasonable opportunity to
inspect the goods and make any appropriate adjustment or replacement. The
remedies afforded Buyer under the paragraph hereof entitled "Warranties,
Remedies and Limitation" shall be exclusive for defects discovered upon
inspection but shall not be cut off by reason of Buyer's failure to
discover the defects within the inspection period provided in this
paragraph. Buyer shall not delay payment for the overhaul and repair of
the goods pending their inspection.
3. WARRANTIES, REMEDIES AND LIMITATIONS
a. Services -- Seller warrants to Buyer that at the time of delivery of
overhauled or repaired goods, the overhaul and repair services
performed by Seller will have been performed in a workmanlike
manner. Seller's liability and Buyer's remedy under this warranty
are limited to the Seller correcting at the Seller's facility such
services as are shown to Seller's reasonable satisfaction to have
been defective; provided that written notice of the defect shall
have been given by Buyer to Seller within ninety (90) days after
first operation or use of the goods, or within one (1) year after
the date of delivery of such goods by Seller, whichever shall first
occur. Transportation charges
IAE INTERNATIONAL AERO ENGINES AG, STANDARD TERMS AND CONDITIONS OF
SALE FOR OVERHAUL AND REPAIR Page 2
for the return of defectively serviced goods to Seller and their
reshipment to Buyer and risk of loss thereof will be borne by Seller
only if returned in accordance with written shipping instructions
from Seller.
b. New Parts -- The warranties and remedies for new parts utilized in
such overhaul or repair services shall be as set forth below:
(1) Defects -- Seller warrants to Buyer that at the time of delivery of
the overhauled or repaired goods, the new parts utilized will be
free from defects in material and manufacture and will conform
substantially to Seller's applicable specifications as stipulated in
this order. Seller's liability and Buyer's remedy under this
warranty are limited to the repair or replacement, at Seller's
election, of new parts or components thereof returned to Seller
which are shown to Seller's reasonable satisfaction to have been
defective; provided that written notice of the defect shall have
been given by Buyer to Seller within ninety (90) days after the
first operation or use of the goods but in no event later than one
(1) year after the date of delivery of such goods by Seller.
Transportation charges for the return of defective new parts to
Seller and their reshipment to Buyer and the risk of loss thereof
will be borne by Seller only if returned in accordance with written
shipping instructions from Seller.
(2) Title-- Seller warrants to Buyer that it will convey good title to
the new parts sold hereunder. Seller's liability and Buyer's remedy
under this warranty are limited to the removal of any title defect
or, at the election of the Seller, to the replacement of the new
parts or components thereof which are defective in title; provided,
however, that the rights and remedies of the parties with respect to
patent infringement shall be limited to the provisions of
subparagraph (3) below.
(3) Patent Infringement -- Seller shall conduct, at its own expense, the
entire defense of any claim, suit or action alleging that, without
further combination, the use or resale by Buyer or any subsequent
purchaser or user of the new parts delivered hereunder directly
infringes any United States patent, but only on the conditions that
(a) Seller receives prompt written notice of such claim, suit or
action and full opportunity and authority to assume the sole defense
thereof, including settlement and appeals, and all information
available to Buyer and defendant for such defense; (b) said new
parts are made according to a specification or design furnished by
Seller or, if a process patent is involved, the process performed
with such parts is recommended in writing by the Seller; and (c) the
claim, suit or action is brought against Buyer or one expressly
indemnified by Buyer. Provided all of the foregoing conditions have
been met, Seller shall, at its own expense, either settle said
claim, suit or action or shall pay all damages, excluding
consequential damages, and costs awarded by the court therein,
IAE INTERNATIONAL AERO ENGINES AG, STANDARD TERMS AND CONDITIONS OF
SALE FOR OVERHAUL AND REPAIR Page 3
and if the use or resale of such new parts is finally enjoined,
Seller shall, at Seller's option (i) procure for defendant the right
to use or resell the new parts, (ii) replace them with equivalent
non infringing parts, (iii) modify them so they become non
infringing but equivalent, or (iv) remove them and refund the
purchase price (less a reasonable allowance for use, damage and
obsolescence). If a claim, suit or action is based on a design or
specification furnished by Buyer or on the performance of a process
not recommended in writing by Seller, or on the use or sale of the
new parts delivered hereunder in combination with other new parts
not delivered to Buyer by Seller, Buyer shall indemnify and save
Seller harmless therefrom.
c. EXCLUSIVE WARRANTIES AND REMEDIES - THE FOREGOING WARRANTIES ARE
EXCLUSIVE AND ARE GIVEN AND ACCEPTED IN LIEU OF (i) ANY AND ALL
OTHER WARRANTIES, EXPRESS 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 AGAINST SELLER OR
ITS SHAREHOLDERS, WHETHER OR NOT ARISING FROM THE NEGLIGENCE,
ACTUAL OR IMPUTED, OF SELLER OR ITS SHAREHOLDERS. THE REMEDIES OF
THE BUYER SHALL BE LIMITED TO THOSE PROVIDED HEREIN TO THE EXCLUSION
OF ANY AND ALL OTHER REMEDIES INCLUDING, WITHOUT LIMITATION,
INCIDENTAL OR CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR
EXTENDING THE FOREGOING WARRANTIES, REMEDIES OR THIS LIMITATION
WILL BE BINDING UPON SELLER UNLESS IN WRITING, SIGNED BY A DULY
AUTHORIZED OFFICER OF SELLER.
4. EXCUSABLE DELAYS
Buyer acknowledges that the goods called for hereunder are to be
manufactured, overhauled or repaired by or for Seller to fulfill this
order and that the delivery dates are based on the assumption that there
will be no delay due to causes beyond the reasonable control of Seller.
Seller shall not be charged with any liability for delay or non delivery
when due to delays of suppliers, acts of God or the public enemy,
compliance in good faith with any applicable foreign or domestic
governmental regulation or order whether or not it proves to be invalid,
fires, riots, labor disputes, unusually severe weather or any other cause
beyond the reasonable control of the Seller. To the extent that such
causes actually retard deliveries on the part of Seller, the time for the
performance shall be extended for as many days beyond the delivery date as
is required to obtain removal of such causes. This provision shall not,
however, relieve Seller from using its best efforts to avoid or remove
such causes and continue performance with reasonable dispatch whenever
such causes are removed.
IAE INTERNATIONAL AERO ENGINES AG, STANDARD TERMS AND CONDITIONS OF
SALE FOR OVERHAUL AND REPAIR Page 4
5. CHANGES
No modification of this order shall be binding unless agreed to in writing
and signed by both Buyer and Seller excepting, however, that unless Buyer
expressly provides to the contrary in writing, Seller may proceed prior to
receipt of such written modification with all work necessary to repair,
overhaul or modify the articles furnished by Buyer although such order
may, through error or oversight, (1) erroneously identify the articles to
be serviced, or (2) fail to specify all service work necessary, in
Seller's opinion, which is required to put the articles in usable
condition.
6. TAXES
In addition to the agreed purchase price of this order, any and all taxes
(not including any income or excess profit taxes) which may be imposed by
any taxing authority, arising from the sale, delivery or use of Seller's
products and for which Seller may be held responsible for collection or
payment, either on its own behalf or that of Buyer, shall be paid by Buyer
to Seller upon Seller's demand.
7. COMPLIANCE WITH FAIR LABOR STANDARDS ACT
Seller hereby certifies that all services performed in and all parts
produced or manufactured in the United States of America and utilized in
performing overhaul or repair work hereunder are performed, produced or
manufactured, as the case may be, in compliance with the Fair Labor
Standards Act of 1938, as amended (29 U.S. Code 201-219). All
requirements as to the certificate contemplated in the October 26, 1949,
amendment to the Fair Labor Standards Act of 1938 shall be considered as
satisfied by this certification.
8. MATERIAL DISPOSITION
Goods and parts thereof received from Buyer, which in the opinion of
Seller have no value other than as scrap because they cannot be repaired
to a serviceable condition, will be disposed of by Seller, and no
accountability or liability therefor will be imposed on Seller by Buyer.
Seller agrees, however, to return to Buyer parts which are either scrap,
superseded or uneconomical to repair if so indicated on the face of the
Buyer's purchase order or supplement thereto; these parts will be returned
at Buyer's expense. To assist Buyer in identification of scrap parts
returned at his request, such scrap will be shipped in an altered state
which will indicate that it is clearly unfit for service use. Parts for
which there are currently no repair procedures and which, in the opinion
of Seller, have potential to be repaired to a serviceable condition
sometime in the future, will be returned to the Buyer at Buyer's expense.
IAE INTERNATIONAL AERO ENGINES AG, STANDARD TERMS AND CONDITIONS OF
SALE FOR OVERHAUL AND REPAIR Page 5
9. BUYER'S FINANCIAL STATUS
If before completion of performance of this order by Seller a receiver or
trustee is appointed of any of Buyer's property, or Buyer be adjudicated a
bankrupt, or application for reorganization under the Bankruptcy Act be
filed by or against Buyer which shall not be dismissed within thirty (30)
days, or if Buyer becomes insolvent or makes an assignment for the benefit
of creditors, or takes, or attempts to take, the benefit of any insolvency
acts, or an execution be issued pursuant to a judgment rendered against
Buyer, or should Buyer be unable or refuse to make payment to Seller in
accordance with any of its obligations to Seller, Seller may, at its
option in any of such events, terminate this order by giving to Buyer a
written notice of its intention so to do, and Seller shall thereupon be
relieved of any further obligations to Buyer, and Buyer shall reimburse
Seller for its termination costs and expenses and a reasonable allowance
for profit.
10. LIABILITY LIMITATION
The price allocable in this order to any product or service alleged to be
the cause of any loss or damage to the Buyer shall be the ceiling limit on
Seller's liability, whether founded in contract, tort (including
negligence) or strict liability, arising out of or resulting from (i) this
order or the performance or breach thereof, (ii) the design, manufacture,
delivery, sale, overhaul, repair, replacement, or (iii) the use of any
such product or the furnishing of any such service. In no event shall
Seller have any liability for any incidental or consequential damages.
11. APPLICABLE LAWS, CONSTRUCTION AND CAPTIONS
This order shall be interpreted in accordance with, and the construction
thereof shall be governed by, the laws of the State of Connecticut.
Captions, as used in these terms and conditions, are for convenience of
reference only and shall not be deemed or construed as in any way limiting
or extending the language of the provisions to which such captions may
refer.
Attachment III
IAE International Aero Engines AG
Standard Escalation Formula
Exhibit A
Monthly Statement of Thrust
Usage and Hour/Cycle Utilization
Exhibit A
Monthly Statement of Thrust
Usage and hour/Cycle Utilization
During the thirty (30) day period of the Engine Maintenance Service Plan,
beginning __________ and ending _________________, the average thrust usage for
takeoff and climb were as indicated below:
Average Thrust Percentage of Flights
Flight Mode Rating Reduction at Full Rating
----------- ------ --------- --------------
Takeoff
Climb
Average utilization per Aircraft during this reporting period _________hours.
(Actual fleet Total Hours - Number of Aircraft)
Average flight cycle: _______ hours
_____________________
Authorized Customer
Signature
_____________________
IAE Field Engineering
Representative
[Letterhead of International Aero Engines]
17 May 1995
Midway Airlines Corporation
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Subject: Side Letter Number 1 to the V2500 Support Contact between Midway
Airlines Corporation and IAE International Aero Engines AG dated 17 May
1995.
Gentlemen,
We refer to the V2500(R) Support Contact dated 17 May 1995 between Midway
Airlines Corporation ("Midway") and IAE International Aero Engines AG ("IAE")
(hereinafter referred to as the "Contract"). Terms used herein shall have the
same meaning as those given to them in the Contract.
This Side Letter No. 1 provides Midway with certain credits in respect of the
spare Engine and the V2527-A5 propulsion systems for the Firm Aircraft.
1. Fleet Introductory Assistance Credit
To assist Midway with introducing the spare Engine and the V2527-A5
propulsion systems for the Aircraft into its fleet, IAE will credit
Midway's account with IAE in the amount of [***] at January, 1995
levels for each of the four Firm Aircraft. This credit will be issued
to Midway on delivery of the corresponding Firm Aircraft to and
acceptance by Midway of such Firm Aircraft. This credit may be used by
Midway for the purchase of V2500 Spare Parts from IAE. Alternatively,
with the consent of Airbus Industrie, IAE will, upon Midway's written
notice to IAE at least ninety days prior to the delivery of the
applicable Firm Aircraft, consent to the assignment of part or all of
such credit to Airbus Industrie, to be applied toward the payment for
the V2527-A5 propulsion systems for the corresponding Firm Aircraft.
2. Fleet Expansion Assistance Credit
To assist Midway with expanding its V2527-A5 powered Aircraft fleet,
IAE will credit Midway's account with IAE in the amount of [***] at
January, 1995 levels for each of the four Option Aircraft. This credit
will be issued to Midway on delivery of the corresponding Option
Aircraft to and acceptance by Midway of such Option Aircraft. This
credit may be used by Midway for the purchase of V2500 Spare Parts from
IAE. Alternatively, with the consent of Airbus Industrie, IAE will,
upon Midway's written notice to IAE at least ninety days prior to the
delivery of the applicable Option Aircraft, consent to the assignment
of part or all of such credit to Airbus Industrie, to be applied toward
the payment for the V2527-A5 propulsion systems for the corresponding
Option Aircraft.
3. Right to Convert to A319 Aircraft
Subject to consent from Airbus Industrie, Midway may upon written notice
to IAE at least twenty-four months prior to scheduled delivery, convert
any of the Option Aircraft to A319 aircraft powered by V2524-A5
propulsion systems ("Converted Aircraft").
In place of the credit set forth in Clause 2 above, to assist Midway with
introducing the V2524-A5 powered Converted Aircraft into its fleet, IAE
will credit Midway's account with IAE in the [***] at January 1995
levels per Converted Aircraft. This credit will be issued to Midway on
delivery of the corresponding Converted Aircraft to and acceptance by
Midway of such Converted Aircraft. This credit may be used by Midway for
the purchase of V2500 Spare Parts from IAE. Alternatively, with the
consent of Airbus Industrie, IAE will, upon Midway's written notice to IAE
at least ninety days prior to the delivery of the applicable Converted
Aircraft, consent to the assignment of part or all of such credit to
Airbus Industrie, to be applied toward the payment for the V2524-A5
propulsion systems for the corresponding Converted Aircraft.
4. Credit Adjustment
The credits described in Clause 1, 2 and 3 of this Side Letter are subject
to Adjustment in accordance with the formula established in Exhibit B to
the Contract. The Adjustment will be applicable from the base month of
January 1995 to the earlier of:
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4.1 the date of applicable Aircraft delivery as established in Clause 1.1
of the Contract, or
4.2 the actual delivery date of the corresponding Aircraft if delivered
prior to the delivery date set forth in Clause 1. 1 of the Contract.
5. Customer Support Representative
IAE will assign a Customer Support Representative to Midway, at no charge,
to assist Midway in preparing for V2500 Engine operation, for a period of
one year as of the date such a customer support representative is placed
with Midway.
6. Extended Payment Terms for Spare Engine
The payment terms described in Clause 2.7.1 of the Contract are amended
for payments relative to the first firm spare engine, scheduled for
delivery in November 1998 as specified in Exhibit B to the Contract (the
"Spare Engine") as follows:
"2.7.1 Midway will make payment in United States Dollars as follows:
2.7.1.1 Upon signature of this Contract, Midway shall pay to
IAE a deposit of [***].
2.7.1.2 On or prior to [***], Midway shall pay to IAE a deposit
of [***].
2.7.1.3 On or prior to [***], Midway shall pay to IAE a deposit
of [***].
2.7.1.4 On or prior to [***], Midway shall pay to IAE a deposit
of [***].
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2.7.1.5 On or prior to [***] Midway shall pay to IAE a further
deposit of [***] of the Estimated Purchase Price of the
Spare Engine.
2.7.1.6 On or prior to [***] Midway shall pay to IAE a further
deposit of [***] of the Estimated Purchase Price of the
Spare Engine.
2.7.1.7 On delivery of the Spare Engine, Midway shall pay to
IAE the balance of the Purchase Price of such item."
7. V2500-A1 Inventory Lease and Credit
IAE will provide Midway with a lease of line maintenance tooling
and line replaceable units ("LRU's") up to a maximum value of
[***] at IAE's then current spare parts catalogue prices. Midway
may not take additional material on lease under the terms of this
facility following delivery of the first Firm Aircraft in
accordance with Exhibit A to the Contract. Terms of this lease
are attached hereto as Attachement 1, which Midway agrees to
comply with.
IAE will issue a credit to Midway's account with IAE in the fixed
amount of [***] per Firm Aircraft upon delivery to and acceptance by
Midway of each of the four Firm Aircraft in accordance with Exhibit
A of the Contract. Such credit will be used to purchase on a per
Firm Aircraft basis, one quarter of the new part purchase value of
the line maintenance tooling and LRU's described in this paragraph 7
above. Any credit balance may be used by Midway as described below.
Midway will pay IAE [***] payable on delivery of each of the four
Firm Aircraft in accordance with Exhibit A, due in respect of the
lease charge for the loan of the line maintenance tooling and
LRU's. Such payment may be made to IAE in cash or by the
utilization of any excess credits available to Midway described
within this paragraph 7 or by utilizing part of its credit
available in paragraph 1 (the Fleet Introductory Assistance
Credit). The remaining value of any credits due to Midway under
paragraph 1 would then be reduced accordingly.
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If the total value of the parts purchased to support the lease
inventory for Midway plus the lease charges defined above are
less than [***], and Midway and IAE mutually agree that the level
of inventory purchased is sufficient to cover the Midway V2500-A1
powered leased aircraft, then the balance of the credit may be
used by Midway to reduce the net price of the Firm Aircraft.
Except as revised by this Side Letter No. 1, the provisions of the Contract
shall continue in full force and effect.
Yours faithfully,
for IAE INTERNATIONAL AERO ENGINES AG
By [Illegible]
------------------------------------
Title V P Business
Date 17 May 95
Agreed and accepted on behalf of
MIDWAY AIRLINES CORPORATION
By ▇ ▇ ▇▇▇▇▇▇
------------------------------------
Title Vice President
Date May 17, 1995
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Attachment A
V2500-A1 Inventory Lease - General Terms
IAE is prepared to lease to Midway certain items of equipment in accordance with
the following terms:
1. The items of equipment, hereinafter referred to as the "Equipment",
to be loaned to Midway are listed on the Schedule listed below in
paragraph 6.
2. The loan period will begin and end on the dates specified in the
Schedule.
3. At the commencement of the loan period, IAE will deliver the
Equipment to Midway ex-works IAE's facility.
4. Title to the Equipment shall remain with IAE (unless such Equipment
is purchased by Midway), but Midway shall assume all risk of loss
and damage to the Equipment throughout the loan period and shall be
responsible for all transportation and insurance costs during the
loan period.
5. Midway agrees:
5.1 to insure the Equipment in an amount sufficient to cover the
insurable value as set forth in the Attachment hereto, and
will provide IAE with a certificate of insurance which
verifies the designation of IAE as loss payee as its interest
may appear,
5.2 to use the Equipment exclusively in conjunction with its own
normal V2500 operations,
5.3 to reasonably protect the Equipment from any conditions which
may cause deterioration or damage,
5.4 to maintain the Equipment at its own expense in accordance
with any instructions and maintenance practice recommendations
issued by IAE,
5.5 to pay all imposts, duties, fees, taxes and other like charges
levied in connection with the Equipment or the loan thereof
without any set-off or deduction whatsoever,
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5.6 to indemnify and hold IAE and its Shareholders harmless from
any and all claims, demands, actions, suits and any other
liability whatsoever which may arise out of or in connection
with the use, handling, possession or operation of the
Equipment and Midway will procure and maintain in a form
acceptable to IAE an adequate legal liability insurance policy
to cover in an amount of not less than seven hundred and fifty
thousand United States Dollars (U.S$750,000) which names IAE
as additional insured and as additional loss payee. At the
request of IAE, Midway will provide within 14 days evidence to
IAE's satisfaction, that such a policy exists and IAE's
interests are covered. The policy will provide that it may not
be canceled or materially altered without 28 days written
notice to IAE. IAE will not be liable for any premiums, and
5.7 unless such equipment is purchased by Midway, to redeliver the
Equipment at the end of the loan period to IAE's designated
location in the same condition as when received, fair wear and
tear excepted,
5.8 to maintain nameplates, if any, affixed to the Equipment
indicating IAE's title to such Equipment, and not to alter or
amend the information on such nameplates without IAE's express
written consent.
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6 SCHEDULE TO V2500-A1 INVENTORY LEASE
LIST OF SUPPLIES
DESCRIPTION QTY PLACE OF DATE OF PLACE OF TERM INSURANCE
DELIVERY DELIVERY REDELIVERY VALUE
Fuel Metering 1 Ex-works To be Ex-works To be confirmed US$188,230
Unit ("FMU") IAE facility confirmed IAE facility
PIN FMU
5OOMK1
Electronic 1 Ex-works To be Ex-works To be confirmed US$291,330
Engine Control IAE facility confirmed IAE facility
("EEC")
P/N 808050-4-
045
Starter Motor I Ex-works To be Ex-works To be confirmed US$35,125
P/N 790425-2 IAE facility confirmed IAE facility
Note: The insurable value is shown at January 1995 U.S Dollar value and is
subject to escalation adjustment.
Exhibit A
[Letterhead of International Aero Engines]
5 February ▇▇▇▇
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Subject: Side Letter No. 2 to the V2500(R) Support Contract between Midway
Airlines Corporation and IAE International Aero Engines AG dated 17 May
1995
Gentlemen,
We refer to the V2500(R) Support Contract dated 17 May 1995 between Midway
Airlines Corporation ("Midway") and IAE International Aero Engines AG ("IAE")
(hereinafter referred to as the "Contract"). Capitalized terms used herein shall
have the same meaning as those given to them in the Contract.
This Side Letter No. 2 amends certain terms related to the following provisions
of the Contract: (1) Aircraft delivery dates; (2) Spare Engine delivery dates;
(3) payment terms for Spare Engine; (4) Spare Engine delivery schedule
adjustment; (5) payment terms for Supplies; (6) bank account information; (7)
the mailing addresses for Notices, and (8) V2500-A1 Inventory Lease.
1. The Aircraft Delivery Schedule
The delivery dates for Firm Aircraft as set forth in Clause 1.1 of the
Contract is hereby amended, subject to a similar amendment in the contract
between Midway and Aircraft Manufacturer, to read as follows:
One (1) in December 2005
One (1) in January 2006
One (1) in February 2006
One (1) in December 2006
The delivery dates for Option Aircraft as set forth in Clause 1.1. of the
Contract is hereby amended, subject to a similar amendment in the contract
between Midway and Aircraft Manufacturer, to read as follows:
One (1) in January 2007
One (1) in February 20007
One (1) in November 2007
One (1) in December 2007
2. Spare Engines Delivery Dates
The delivery date set forth in Exhibit B to the Contract for the Firm
Spare Engine is hereby amended to read as follows:
November 2005
The delivery date set forth in Exhibit B to the Contract for the Option
Spare Engine is hereby amended to read as follows:
November 2006
3. Payment terms for Spare Engine
The payment terms relative to the Firm Spare Engine pursuant to Clause
2.7.1.2 thru 2.7.1.7 of the Contract, as described in Section 6 of Side
Letter No. 1 are hereby deleted and revised as follows:
2.7.1.2 On or prior to [ * * * ], Midway shall pay to IAE a
non-refundable deposit of [ * * * ] of the Estimated
Purchase Price of the Spare Engine.
2.7.1.3 On or prior to [ * * * ], Midway shall pay to IAE a
non-refundable deposit of [ * * * ] of the Estimated
Purchase Price of the Spare Engine.
2.7.1.4 On or prior to [ * * * ], Midway shall pay to IAE a
non-refundable deposit of, [ * * * ] of the
Estimated Purchase Price of the Spare Engine.
2.7.1.5 On or prior to [ * * * ], Midway shall pay to IAE a
non-refundable deposit of [ * * * ] of the Estimated
Purchase Price of the Spare Engine.
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2.7.1.6 On delivery of the Spare Engine, Midway shall pay to IAE the
balance of the Purchase Price of such item.
4. Spare Engine Delivery Schedule Adjustment
Midway will have the right to accelerate delivery of the Firm Spare Engine
by up to twenty four (24) months, subject to:
(a) Midway providing IAE written notice of such acceleration at least
eighteen (18) months prior to the accelerated delivery date of the Spare
Engine; and
(b) the accelerated delivery date shall be subject to IAE's industrial
contraints at the time of Midway's request and reasonable contraints
regarding outstanding proposals for sales campaigns in process at the time
of the acceleration request; and
(c) Midway providing IAE payment of non-refundable deposit of ten percent
(10%) of the Estimated Purchase Price of the Spare Engine eighteen (18)
months prior to the accelerated delivery date of the Spare Engine.
Thereafter, Midway shall provide IAE payment of non-refundable deposit of
five percent (5%) of the Estimated Purchase Price of the Spare Engine
twelve (12) months and (6) months before the scheduled delivery of the
Spare Engine.
5. Payment Terms for Supplies
Payment for purchases of Supplies and Other Supplies up to a credit limit
of [ * * * ] shall be payable by Midway on net 30 day terms. Payment for
purchases of Supplies and Other Supplies in excess of [ * * * ], or in
the event that the credit limit has been or will be exceeded by such
purchases, shall be payable cash on delivery.
6. Bank Account Information
Delete Clause 3. 13.3 of the Contract in its entirety and replace by the
following:
All payments under this Clause 3.13 shall be made by cable or telegraphic
transfer to, and shall be deposited not later than the due date of payment
with:
Fleet Bank, N.A.
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Account No. 2-982-00819-9
ABA No. ▇▇▇▇▇▇▇▇▇
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7. Change of Address for Notices
IAE address as set forth in Clause 6. 11 of the Contract is amended to
read as follows:
IAE International Aero Engines AG
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Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Business Director & Chief Legal Officer
Midway address as set forth in Clause 6. 11 of the Contract is amended to
read as follows:
Midway Airlines Corporation
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Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
8. V2500-A1 Inventory Lease
Delete Section 7 of Side Letter No. 1 and Attachment A to Side Letter No.
I in their entirety and replace by the following:
Terms of inventory lease of V2500-A1 line maintenance tooling and line
replaceable units, up to a maximum value of [ * * * ], will be subject
of a separate agreement between IAE and Midway.
IAE will issue a credit to Midway's account with IAE in the fixed amount
of [ * * * ] per Firm Aircraft upon delivery to and acceptance by Midway
of each of the four Firm Aircraft in accordance with revised Clause 1.1
of the Contract. Such credit may be used by Midway to purchase eligible
Spare Parts pursuant to the Contract.
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Except as revised by this Side Letter No. 2, the provisions of the Contract
shall continue in full force and effect.
Yours faithfully,
for IAE INTERNATIONAL AERO ENGINES AG
By [Illegible]
------------------------------------
Title TREASURER
Date 2/21/97
Agreed and accepted on behalf of
MIDWAY AIRLINES CORPORATION
By ▇ ▇ ▇▇▇▇▇▇
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Title Senior Vice President
Date 2/11/97
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[Letterhead of International Aero Engines]
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Senior Vice President and General Counsel
Midway Airlines
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Re: STOBL Termination
Dear ▇▇▇▇:
With the completion of inspection of Engine V0020 which was returned by Midway
pursuant to the IAE Standard Terms of Business for Lease between IAE and Midway,
dated 27 June 1995, as amended (STOBL), and Midway's payment of Invoice No.
9702-19 as final settlement of amounts due under the STOBL, IAE and Midway
agreed to terminate the STOB, as amended. Accordingly, this notice provides for
termination of the STOBL effective immediately.
In the event Midway desires to enter into a separate emergency lease agreement
with IAE, we have submitted for your consideration on February 5, 1997 a revised
lease agreement which will be subject of a separate agreement between IAE and
Midway.
In addition, for your records, we enclosed herein original executed copies of
Side Letter No. 2 to the V2500 Support Contract between Midway and IAE dated 17
May 1995 and Lease Agreement for V2500-Al Supplies between IAE and Midway.
Sincerely yours,
IAE International Aero Engines AG
/s/ Mutahare S. Engin
Mutahare S. Engin
Counsel
Enclosure