V2500 General Terms of Sale Agreement - IAE International Aero Engines AG and New Air Corp.
V2500-Registered Trademark-
GENERAL TERMS OF SALE
BETWEEN
IAE INTERNATIONAL AERO ENGINES AG
AND
NEW AIR CORPORATION
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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 Purchase by New Air from Others
3.15 Special Tools, Ground Equipment and Consumable
Stores
3.16 Conflict
CLAUSE 4 WARRANTIES, GUARANTEES AND LIABILITIES
CLAUSE 5 PRODUCT SUPPORT
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CLAUSE 6 MISCELLANEOUS
6.1 Delay in Delivery
6.2 Patents
6.3 Credit Reimbursement; Right of Setoff
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 Conditions Precedent
6.14 Termination
EXHIBIT A
CONTRACT SPECIFICATIONS
EXHIBIT B SCHEDULES
EXHIBIT B1 AIRCRAFT DELIVERY SCHEDULE
EXHIBIT B2 PURCHASED ITEMS, PRICE, ESCALATION
FORMULA AND DELIVERY
EXHIBIT C PRODUCT SUPPORT PLAN
EXHIBIT D WARRANTIES, GUARANTEES AND PLANS
D-1 V2500 ENGINE AND PARTS SERVICE POLICY
D-2 V2500 NACELLE AND PARTS SERVICE POLICY
D-3 V2500 NON-INSTALLATION ITEMS WARRANTY
D-4 V2500 REALIABILITY GUARANTEE
D-5 V2500 DELAY AND CANCELLATION GUARANTEE
D-6 V2500 INFLIGHT SHUTDOWN GUARANTEE
D-7 V2500 FUEL CONSUMPTION RETENTION GUARANTEE
D-8 V2500 EXHAUST GAS TEMPERATURE GUARANTEE
D-9 V2500 MAINTENANCE COST GUARANTEE
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THIS CONTRACT is made this 4th day of May, 1999
BETWEEN
IAE INTERNATIONAL AERO ENGINES AG a joint stock company organized and
existing under the laws of
Switzerland, with a place of business
at 400 Main Street, M/S 121-10, East
Hartford, Connecticut 06108, USA,
(hereinafter called "IAE") and
NEW AIR CORPORATION a corporation organized and existing
under the laws of Delaware (hereinafter
called "New Air"), whose principal place
of business is at 6322 South 3000 East,
Suite L201, Salt Lake City, Utah 84121
WHEREAS:
A New Air has decided to acquire new A320 family aircraft to be powered
by IAE V2500 Propulsion Systems, and
B. IAE is prepared to supply to New Air 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 (i) the twenty-five (25) new Airbus A320-200
aircraft each powered by V2527-A5 series engines (the "Firm Aircraft"),
and (ii) New Air's right to purchase an additional fifty (50) Airbus
A320 family aircraft each powered by V2500-A5 series engines (the
"Option Aircraft"), comprising options to purchase twenty-five (25) new
Airbus A320 family aircraft each powered by V2500-A5 series engines
(the "Option A320 Family Aircraft") and reserve options to purchase
twenty-five (25) new Airbus A320 family aircraft each powered by
V2500-A5 series engines (the "Reserve Option A320 Family Aircraft"),
all for delivery as set forth in Exhibit B1 to this Contract.
1.2 "Aircraft Manufacturer" or "Airbus" shall mean Airbus Industrie G.I.E.,
a groupement d'interet economique, with its principal place of business
at 1, Rond Point Maurice Bellonte, 31707 Blagnac Cedex, France,
together with its successors and assigns.
1.3 "Basic Contract Price" shall mean the basic price of each of the
Purchased Items as specified in Exhibit B2 to this Contract.
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1.4 "Certification Authority" shall mean the regulatory authority referred
to in Exhibit A responsible for the type certification of the Engine.
1.5 "Engine(s)" shall mean the IAE V2500 aero engine described in the
Specifications.
1.6 "Initial Provisioning" Shall mean the establishment by New Air of an
initial stock of Spare Parts.
1.7 "Initial Provisioning Data" shall mean information supplied by IAE to
New Air for Initial Provisioning purposes.
1.8 "Initial Provisioning Orders" shall mean orders for Spare Parts for
Initial Provisioning purposes.
1.9 "Installation Items" shall mean Engines described in the
Specification, modules, accessories, exhaust systems, nacelles and all
ancillary equipment therefor which are being supplied pursuant to this
Contract for installation on the Aircraft.
1.10 "Lead Time" shall mean the period specified in the Spare Parts Catalog
which represents the minimum time required between acceptance by IAE of
an order by New Air for Supplies and commencement of delivery of
such Supplies.
1.11 "Leased Aircraft" shall mean the seven (7) ]eased A320 aircraft to be
acquired by New Air in accordance with the delivery schedule set forth
in Exhibit B1 to this Contract.
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 on 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 New Air
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 B2 to this Contract.
1.16 "Service Bulletins" shall mean those service bulletins containing
advice and instructions issued by IAE to New Air 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 New Air.
1.18 "Spare Parts Catalog" shall mean the catalog published by IAE from time
to time providing a description, Lead Time and price for Spare Parts,
tools and Vendor Parts available for purchase from IAE.
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1.19 "Specification" shall mean the IAE Engine Specification Nos., S24A5/2,
S27A5/2 and S33A5/2 which form Exhibits A1, A2 and A3 respectively to
this Contract.
1.20 "Supplies" shall mean Installation Items, Non-Installation Items, Spare
Parts and any other goods or services supplied pursuant to this
Contract.
1.21 "Vendor Parts" shall mean Spare Parts described in Initial Provisioning
Data or Procurement Data which are not manufactured pursuant to the
detailed design and direction of IAE.
CLAUSE 2 SALE OF PURCHASED ITEMS
2.1 INTENT
IAE agrees to sell to New Air and New Air agrees to buy from IAE, the
Purchased Items, in accordance with the provisions of this Contract.
2.2 AGREEMENT TO PURCHASE
2.2.1 New Air agrees (i) to purchase from the Aircraft Manufacturer
no less than twenty-five (25) Firm Aircraft, and (ii) to
procure from the Aircraft Manufacturer options to purchase
twenty-five (25) Option A320 Family Aircraft and twenty-five
(25) Reserve Option A320 Family Aircraft, all to be powered by
new V2500-A5 Propulsion Systems for delivery according to the
schedule set forth in Exhibit B1 to this Contract.
2.2.2 New Air hereby places a firm and unconditional order with IAE
for the purchase of a minimum of five (5) new V2527-A5 spare
Engines (the "Firm Spare Engines") for delivery according to
the schedule set forth in Exhibit B2 to this Contract.
2.2.3 New Air agrees to place a firm and unconditional order with
IAE to purchase sufficient quantities and appropriate thrust
ratings of new spare Engines to support the Option Aircraft
purchased by New Air and to maintain a minimum direct ratio
(rounding up when the required number of option spare Engines
reaches a fractional value) of delivered new option spare
Engines to delivered new option installed V2500 Engines of
[****] for the V2524-A5, V2527-A5 and V2533-A5 powered
Option Aircraft, for delivery in accordance with the delivery
schedule set forth in Exhibit B2 to this Contract (the "Option
Spare Engines").
2.3 TYPE APPROVAL AND CHANGES IN SPECIFICATION
2.3.1 The Purchased Items will be manufactured to the standards set
forth in the Specification. After the date of this Contract
the Purchased Items may be varied from the standards set forth
in the Specification and other IAE manufacturing
specifications from time to time by Change Orders in writing
which shall set forth in detail:
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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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 New Air 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 or if issued shall not
be binding until signed by IAE and New Air.
2.3.3 At the time of delivery of the Purchased Items there is to be
in existence a Type Approval Certificate for the Purchased
Items in accordance with the provisions of the Specification.
2.3.4 The Specification has 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 New Air 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.
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 any other case - by New Air.
2.4 INSPECTION AND ACCEPTANCE
2.4.1 Conformance of Purchased Items which are Engines to the
Specification will be assured by IAE through the maintenance
of procedures, systems and records approved by the
Certification Authority. An Export Certificate of
Airworthiness or a Certificate of Conformity (as the case may
be) will be issued and signed by personnel authorized for such
purposes.
2.4.2 Conformance of Purchased Items which are Non-Installation
Items to the Specification will be assured by IAE conformance
documentation.
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2.4.3 Upon delivery pursuant to Clause 2.5.1 below and the issue of
an Export Certificate of Airworthiness or a Certificate of
Conformity pursuant to Clause 2.4.1 above or IAE conformance
documentation pursuant Clause 2.4.2 above, New Air shall be
deemed to have accepted the Purchased Items and that the
Purchased Items conform to the Specification. IAE shall, upon
written request from New Air and subject to the permission of
the appropriate governmental authorities, arrange for New Air
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 If New Air is unable to accept, refuses or otherwise hinders
delivery, or if IAE at New Air's written request agrees to
delay delivery, of any of the Purchased Items, New Air shall
nevertheless pay or cause IAE to be paid therefor as if, for
the purposes of payment only, the Purchased Items had been
delivered.
2.4.5 In any of the cases specified in Clause 2.4.4 above, New Air
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 (INCOTERMS 1990) Connecticut, U. S. A. or Ex-Works
(INCOTERMS 1990) Derby, England, in accordance with the
delivery schedule set out in Exhibit B2 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 New Air.
2.5.3 New Air will notify IAE at least four (4) weeks before the
scheduled 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 escalated in
accordance with the escalation formula contained in Exhibit B2 to this
Contract.
2.7 PAYMENT
2.7.1 New Air will make payment in United States Dollars as follows:
2.7.1.1 Upon signature of this Contract, to the extent that
such amount has not already been paid by New Air, New
Air shall pay to IAE a non-refundable deposit of
[****] of the Estimated Purchase Price of the
Purchased Items.
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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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2.7.1.2 Eighteen (18) months before the scheduled delivery of
each of the Purchased Items, New Air shall pay to IAE
a further non-refundable deposit of [****] of the
Estimated Purchase Price of such item.
2.7.1.3 Twelve (12) months before the scheduled delivery of
each of the Purchased Items, New Air shall pay to IAE
a further non-refundable deposit of [****] of the
Estimated Purchase Price of such item.
2.7.1.4 Immediately prior to the delivery of each of the
Purchased Items, New Air shall pay to IAE the
balance of the Purchase Price of such item.
2.7.2 IAE shall have the right to require New Air 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.
2.7.3 New Air undertakes that IAE shall receive the full amount
of payments falling due under this Clause 2.7, without any
withholding 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:
Fleet Bank N.A.
175 Water Street
New York, NY 10038-4924
Account No. 2982-00-8199
ABA No. 021200339
or as otherwise notified from time to time by IAE.
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 New Air 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
(a) 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 and (b) have the
right (but not the obligation) to suspend work on the
manufacture of such Purchased Item pending the remedy of
such failure and to reschedule the date of delivery of such
Purchased Item following the cure of such failure.
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 [****](N)
where:
P is the Estimated Purchase Price
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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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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 New Air owns and operates one or more Aircraft
in regular commercial service and is not in breach of any of
its obligations to IAE under the Contract, IAE shall provide
that reasonably adequate supplies of Spare Parts are available
for sale to New Air under this Contract. In consideration
thereof, IAE shall sell to New Air and, except as hereinafter
provided, New Air shall buy from IAE, New Air'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 New Air can purchase such Spare Parts in
an unused condition and in quantities sufficient to
meet New Air's requirements; and
3.1.1.2 Vendor Parts for which direct supply arrangements
between the manufacturers of such Vendor Parts and
New Air cannot be established. Except for the
purposes of Initial Provisioning pursuant to Clause
3.3 below, New Air shall notify IAE in writing not
less than twelve (12) months before scheduled
delivery requested by New Air that New Air intends to
purchase such Vendor Parts from IAE.
3.1.2 In an emergency, IAE shall sell to New Air 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 2000 and 300, provided that 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. In particular, on written notification by New Air to
IAE prior to placement of Initial Provisioning orders, IAE would agree
to the use of ATA Specification 200 instead of ATA Specification 2000.
3.3 INITIAL PROVISIONING
3.3.1 To assist New Air's Initial Provisioning, IAE shall supply New
Air with Initial Provisioning Data in accordance with ATA
Specification 2000, 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 2000,
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definition of Spare Parts Categories, and Lead Times, and
agreement on technical publications shall be agreed between
IAE and New Air 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 in IAE's opinion
may be reasonably required for New Air's operation of the
Installation Items.
3.3.4 Before New Air 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 as soon as possible 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 2000 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 New Air at the date of this Contract. On or before
the said date IAE shall furnish New Air with Procurement Data
complying with ATA Specification 2000 and shall revise, free
of charge, the said Procurement Data as a matter of routine
thereafter.
3.5.2 Procurement Data shall be used to enable New Air to continue
to order Spare Parts to support the Installation Items.
3.6 STOCKING OF SPARE PARTS
Upon request, New Air shall provide IAE with information reasonably
required to enable IAE to plan and organize the manufacture and
stocking of Spare Parts.
3.7 LEAD TIMES
3.7.1 Spare Parts for Initial Provisioning shall be delivered on or
before the dates specified in New Air's orders, provided that
the said dates comply with lead times and do not call for
delivery more than three (3) months before the scheduled date
of delivery of the first Leased Aircraft to New Air and
provided further that delivery of the total Initial
Provisioning quantity shall be effected in line with New Air's
fleet build up and Aircraft utilization.
3.7.2 Except as herein provided, replenishment Spare Parts shall be
delivered within the Lead Time specified In the IAE Spare
Parts Catalog, except for
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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 New Air's normal
requirements, IAE shall notify New Air and may request a
special delivery schedule. If New Air 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 New Air. 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 (Aircraft on Ground) orders - within 4 hours;
3.7.4.2 Critical (imminent AOG or work stoppage) - within 24
hours;
3.7.4.3 Expedite (less than published or quoted lead time) -
within 7 days.
3.8 ORDERING PROCEDURE
3.8.1 After receipt of Initial Provisioning Data, New Air shall
place, its Initial Provisioning Orders in sufficient time to
allow IAE to commence delivery prior to delivery of the first
Aircraft. New Air 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 New Air
from time to time as may be appropriate. New Air 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 2000 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.
3.8.4 If IAE notifies New Air that certain Spare Parts are packed in
standard package quantities (hereinafter called "SPQs"), New
Air's subsequent orders for such Spare Parts shall be for SPQs
or multiples thereof.
3.8.5 Unless New Air shall have specified "Total Quantity Required"
on its orders, IAE shall be entitled to consider an order for
inexpensive Spare Parts
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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
change by IAE from time to time.
3.8.6 Not later than the time of placing Initial Provisioning
Orders, New Air shall provide IAE in writing with full
shipping instructions applicable to both Initial Provisioning
Orders and to subsequent standard replenishment orders for
Spare Parts to be placed by New Air.
3.9 MODIFICATIONS TO SPARE PARTS
3.9.1 IAE shall be entitled to make modifications or changes to the
Spare Parts ordered by New Air hereunder. IAE shall promptly
inform New Air 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 New Air before delivery.
3.9.2 Modified Spare Parts shall be substituted for Spare Parts
ordered unless the modifications stated in Service Bulletins,
in the recommended or optional category are considered by New
Air to be unacceptable and New Air so states in writing to IAE
within ninety (90) days of the transmittal date of a Service
Bulletin, in which case New Air shall be entitled to place a
single order for New Air's anticipated total requirement of
pre-modified Spare Parts, at a price and delivery schedule to
be agreed.
3.9.3 Unless New Air notifies IAE in writing under the provisions of
Clause 3.9.2 hereof IAE may supply at the expense of New Air 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, New Air's orders must distinguish
them from normal replacement Spare Parts in accordance with
ATA Specification 2000.
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.
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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, New Air shall be deemed to
have accepted the Installation Items and Non-Installation
Items and that such Items conform to the applicable
specification.
3.11 DELIVERY AND PACKING
3.11.1 IAE shall deliver Spare parts and Other Supplies Ex-Works
(INCOTERMS 1990), the point of manufacture. Shipping documents
and invoices shall be in accordance with ATA Specification
2000.
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 New
Air.
3.11.3 In accordance with ATA Specification 2000 requirements, New
Air shall advise IAE at time of order of its instructions as
to the marking and shipping of the Spare Parts and Other
Supplies.
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 New Air. Category 1 standard packaging, if
required by New Air, shall be paid for by New Air.
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 (INCOTERMS
1990) the point of manufacture.
3.12.2 Prices applicable to each order placed by New Air 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 adjust its prices for Spare Parts upon not less than
ninety (90) days notice to New Air, 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 New Air of Initial Provisioning Data, and
3.12.3.2 Ordered quantities are agreed by IAE, and
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3.12.3.3 Deliveries are scheduled to be made prior to the
scheduled date for delivery of the first Aircraft (as
it was scheduled 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 (6) months
after the date of first Aircraft delivery (as it was 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 New Air fleet
build up and Aircraft utilization. Notwithstanding the above,
individual price errors in the calculation of prices may be
adjusted without advance notice to New Air.
3.12.4 On request by New Air, 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
New Air to IAE within thirty (30) days after the date of
delivery.
3.13.2 New Air 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 withholding 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:
Fleet Bank N.A.
175 Water Street
New York, NY 10038-4924
Account No. 2982-00-8199
ABA No. 021200339
or as otherwise notified from time to time by IAE.
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 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 New Air 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 New Air's property, or
(b) New Air is adjudicated or voluntarily becomes a bankrupt
under any bankruptcy or winding up laws or other similar
legislation, or (c) New Air becomes
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insolvent or makes an assignment for the benefit of creditors,
or (d) an execution is issued pursuant to a judgment rendered
against New Air, or (e) New Air is unable or refuses to make
payment to IAE in accordance with any of New Air's obligations
to IAE.
3.13.6 If New Air 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 other rights set forth herein
or under applicable law, 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.
3.14 PURCHASE BY NEW AIR FROM OTHERS
3.14.1 New Air may purchase from another A320 family aircraft
operator Spare Parts, which by virtue of Clause 3.1 above are
required to be purchased from IAE:
3.14.1.1 on an occasional basis; or
3.14.1.2 where the said operator has published details of
excessive stock holdings of the Spare Parts
concerned; or
3.14.1.3 pursuant to a pooling arrangement or joint use
agreement between New Air and the said operator.
3.14.2 Subject to the conditions specified below, in the following
circumstances New Air may obtain from established and approved
sources, other than IAE or other Aircraft operators, Spare
Parts which by virtue of Clause 3.1 above are required to be
purchased from IAE:
3.14.2.1 as a temporary expedient in the event of a temporary
but material failure by IAE to supply Spare Parts as
required herein; or
3.14.2.2 during any period when IAE is hindered or prevented
from delivering Spare Parts due to circumstances
beyond its control provided New Air is thereby able
to obtain the Spare Parts it requires sooner than IAE
is able to supply them, and provided further that New
Air will not unreasonably thereby increase its stock
of the Spare Parts; or
3.14.2.3 where IAE identifies a Spare Part as a standard
part.
New Air's rights under Clause 3.14.2 above are subject to
New Air being unable to satisfy its requirements for Spare
Parts under the provisions of Clause 3.14.1 above.
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3.14.3 Nothing in this Clause 3.14 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.
3.14.4 Notwithstanding any extension of the time of delivery in
accordance with the provisions of Clause 6.1.1 below, New Air
shall be entitled to cancel all or part of any order on IAE
for Spare Parts which, pursuant to the terms of Clauses
3.14.2.1 and 3.14.2.2 are purchased from another source by
giving reasonable written notice to IAE of cancellation of the
said order.
3.14.5 In the event that New Air purchases Spare Parts under Clause
3.14, New Air shall give written notice to IAE of the extent
of such purchase supported by any other technical information
which IAE may reasonably require.
3.15 SPECIAL TOOLS, GROUND EQUIPMENT AND CONSUMABLE STORES
By mutual agreement, IAE may sell Other Supplies to New Air 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.
3.16 CONFLICT
In the event of any conflict between the provisions of this Contract
and the provisions of ATA Specifications 101, 200, 2000 and 300, the
provisions of this Contract shall prevail.
CLAUSE 4 WARRANTIES, GUARANTEES AND LIABILITIES
4.1 IAE warrants to New Air that, at the time of delivery, the Supplies
sold hereunder will be free of defects in material and manufacture, and
will conform substantially to applicable specifications. IAE's
liability and New Air'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 manufacture which are shown
to IAE's reasonable satisfaction to have been defective; provided, that
written notice of the defect shall have been given by New Air 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 Supplies to IAE pursuant to this Clause 4.1 and their
reshipment to New Air and the risk of loss thereof will be borne by
IAE only if the Supplies are returned in accordance with written
shipping instructions from IAE and judged by IAE to be defective.
4.2 In addition, IAE grants and New Air accepts the following:
4.2.1 V2500 Engine and Parts Service Policy
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 17 of 131
<Page>
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 Delay and Cancellation Guarantee
4.2.6 V2500 Inflight Shutdown Guarantee
4.2.7 V2500 Fuel Consumption Retention Guarantee
4.2.8 V2500 Exhaust Gas Temperature Guarantee
4.2.9 V2500 Maintenance Cost Guarantee
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.
4.3 The parties agree that those of the Warranties set out in Clauses 4.2.1
and 4.2.2 above shall apply to any equipment which falls within the
type of equipment covered by those Warranties, which are manufactured,
supplied or inspected by IAE howsoever and whenever (whether before, on
or after the date first above written) acquired by New Air 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.
4.4 The Warranties are personal to New Air and the obligations of IAE
thereunder shall only apply insofar as New Air owns and operates the
Supplies covered thereunder.
4.5 New Air shall inform any entity 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 entity may obtain from IAE a direct
warranty agreement incorporating those of the Warranties set out in
Clauses 4.2.1 and 4.2.2. New Air shall also use its reasonable
endeavors to ensure that such entity shall enter into a direct warranty
agreement with IAE prior to delivery of any of the Supplies or such
equipment to such entity.
4.6 IAE and New Air agree that the intent of the Warranties provided in
Clause 4.2 is to provide specified benefits or remedies to New Air as a
result of specified events. It is not the intent, however, to duplicate
benefits or remedies provided to New Air by IAE or another source
(e.g., another equipment manufacturer or lessor) as a result of the
same event or cause. Therefore, notwithstanding the terms of the
Warranties, New Air agrees that it shall not be eligible to receive
benefits or remedies from IAE if it stands to receive or has received
duplicate benefits or remedies from IAE or another source as a result
of the same event or cause. Furthermore, in no event shall
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IAE be required to provide duplicate benefits to New Air and any other
party such as a leasing company as a result of the same event or cause.
4.7 New Air accepts that the Warranties granted to New Air under Clauses
4.1, 4.2 and 4.3 above together with the express remedies provided to
New Air in respect of the Supplies in accordance with this Contract are
expressly in lieu of, and New Air hereby waives, all other remedies,
conditions and warranties, expressed or implied including without
limitation, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR 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 New
Air from whatever sources. New Air agrees that neither IAE nor any of
its shareholders shall be liable to New Air upon any claim therefor or
upon any claim howsoever arising out of the manufacture or supply or
inspection by IAE or any of its shareholders 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 New Air assumes all risk and
liability whatsoever not expressly assumed by IAE in the said
Warranties.
4.8 IAE and New Air 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:
4.8.1 the express Warranties of IAE and New Air'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 New Air the Product Support Services
described in Exhibit C to this Contract. Except when identified in
such Exhibit C as being at additional cost or as requiring separate
contractual arrangements, such Product Support Services shall be
supplied at no additional charge to New Air and subject to the
provisions of this Contract. IAE may delegate the performance of
product support services to an affiliated company or any of IAE's
shareholders.
5.2 New Air will provide to any IAE customer support representative(s)
working at its facility, free of charge:
(a) reasonable, secure office accommodation including furniture
and office equipment and
(b) access to telephone, facsimile and secretarial services and
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(c) access to such first-aid and emergency assistance as is
customarily provided to New Air's own employees and
(d) airfare, accommodations, and subsistence during any period in
which the customer support representative(s) is required by
New Air to travel away from such customer support
representative(s)' normal location at New Air.
New Air further agrees that such customer support representative(s)
will be entitled to all reasonable working benefits allowed pursuant to
normal IAE practice, including but not limited to, leaves of absence
relating to vacation, holiday and sick time.
CLAUSE 6 MISCELLANEOUS
6.1 DELAY IN DELIVERY
6.1.1 If IAE is hindered or prevented from performing any obligation
hereunder including but not limited to 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 delivering any goods
(which are the same as and include the Supplies) to purchasers
(including New Air) then IAE shall have the right to allocate
in good faith such goods, as they become available, at its own
discretion among all such purchasers and IAE shall not be
under any liability whatsoever to New Air for delay in
delivery to New Air 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.
6.1.3 Should IAE inexcusably delay performance of any obligation
hereunder including but not limited to 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
(2) 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 New Air from IAE as New
Air's sole remedy shall be its reasonable actual damages in
an amount not to exceed [****] of the purchase price of the
item of Supplies so delayed in respect of each [****] such
further delay (and prorata for any period of less than
[****]) subject
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 20 of 131
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to an overall maximum of [****] of the purchase price of the
item of the Supplies so delayed.
6.1.4 The right of New Air to claim damages shall be conditional
upon the submission of a written claim therefor, within
forty-five (45) days from the date on which IAE notifies New
Air that the item of the Supplies so delayed is ready for
delivery, or from the date on which New Air exercises the
right of cancellation in respect of such item conferred in
accordance with Clause 6.1.5 below, whichever date shall first
occur.
6.1.5 Should IAE delay performance of any obligation hereunder
including but not limited to delivery of any item of the
Supplies beyond twelve (12) months from the time for delivery
specified in this Contract (as such time may be extended
pursuant to the provisions of this Contract) then, in addition
to the right of New Air under Clause 6.1.3, New Air shall be
entitled to refuse to take delivery of such item on giving IAE
notice in writing within one (1) month after the expiration of
such period of twelve (12) months. Upon receipt of such notice
IAE shall be free from any obligation in respect of such item
except that IAE shall refund to New Air any deposits made in
respect of the purchase price of such item of the Supplies.
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 New Air
against any claim that the use of any of the Supplies by
New Air 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
New Air 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 New Air 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 and New Air will give
IAE all reasonable assistance and will not by any act or
omission do anything which may directly or indirectly
prejudice IAE in this connection.
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 New Air;
(ii) Supplies not of IAE design (but IAE shall in the event of
any claim for infringement pass on to New Air so far as it has
the right to do so the benefits of any indemnity given to IAE
by the designer,
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 21 of 131
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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 AND ASSIGNMENT;
6.3.1 If New Air does not take delivery of the twenty-five (25) Firm
Aircraft, the five (5) Firm Spare Engines and, PRO RATA to the
extent that Option Aircraft are acquired, the eight (8) Option
Spare Engines (each Firm Aircraft, Firm Spare Engine and
Option Spare Engine equally a "Firm Item") in accordance with
the schedules described in Exhibit B to the Contract (as such
may be modified or supplemented pursuant to the terms of the
Contract) then, without prejudice to IAE's other rights and
remedies under the Contract or otherwise, the value of each
and every credit, benefit and other concession received by New
Air pursuant to the Contract (including all Side Letters and
amendments thereto) or from IAE via the Aircraft Manufacturer
will be adjusted to pro-rata amounts, based on the ratio of
the number of Firm Items (whether Aircraft or Spare Engines)
purchased in accordance with the schedules described in
Exhibit B to the Contract to the total number of Firm Items
scheduled to have been so purchased. So, for example, if IAE
is to issue credits on delivery of each Firm Item and New Air
takes delivery of only half the total number of such Firm
Items (whether or not with the consent of Airbus) the value of
each credit to be issued on the Firm Items actually taken and
all other credits (if any) will be reduced by half. Following
such adjustment, New Air will promptly reimburse IAE in an
amount equal to (a) the value of the credits benefits and
other concessions actually provided in excess of the adjusted
amounts, plus (b) the interest on such excess amounts
calculated from the time each respective amount was applied or
value received until reimbursement. Interest will be
calculated at [****] at the time each respective amount was
applied or value was received.
6.3.2 RIGHT OF SETOFF
IAE shall have the right to set off credits from time to time
made available by IAE under the Contract either directly to
New Air (or its affiliates) or via the Aircraft Manufacturer
or its affiliates, in respect of the failure by New Air (or
its affiliates), after any applicable grace period, to cure
any payment default under (x) the Contract or (y) any IAE
financing agreement with New Air for the Aircraft.
6.4 NON-DISCLOSURE AND NON-USE
6.4.1 Subject to Clause 6.4.3 below, New Air agrees not to disclose
to any third party (other than professional advisers of such
party who agree to abide in advance by the non-disclosure
requirements set forth in this Clause 6.4) 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
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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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 New Air 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 New
Air itself to operate, maintain or overhaul Supplies.
6.4.4 New Air shall be responsible for obtaining any required
authorization including any export licenses, import licenses,
exchange permits or any other governmental authorizations
required in connection with the transactions contemplated
under this Contract. New Air shall restrict disclosure of all
information and data furnished under this Contract in
obtaining such licenses, permits, or authorizations. New Air
shall only ship the Supplies and information and data
furnished under this Contract to those destinations permitted
under such licenses, permits, or authorizations.
6.4.5 In the event that any of the Information as described in
Clause 6.4.1 is required to be disclosed by New Air through a
valid governmental, judicial or regulatory agency order, New
Air agrees to advise IAE of the need for disclosure (in
advance of such disclosure when possible) and 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, and Japan or any
agency thereof in connection with the Supplies prior to their
delivery.
6.5.2 All amounts stated to be payable by New Air 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 New
Air. To ensure so far as possible that New Air is not charged
with European Community value added tax ("VAT"), New Air will
within 30 days of signature hereof, inform IAE of its VAT Code
(if any) for inclusion on IAE's invoices.
6.5.3 New Air shall pay all other imposts, duties, fees, taxes and
other like charges by whomsoever levied.
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6.6 AMENDMENT
This Contract shall not be amended in any way other than by written
agreement by the parties on or after the date of this Contract, which
agreement 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 or its rights and obligations, or a portion thereof, to any
wholly owned subsidiary of IAE or to any of IAE's shareholders). Any
assignment made in violation of this Clause 6.7 shall be null and void.
6.8 EXHIBITS
In the event of any unresolved 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 (excluding its conflicts of law provisions). The parties agree
to exclude the application of the United Nations Convention on
Contracts for the International Sale of Goods (1980).
6.11 NOTICES
Any notice to be served pursuant to this Contract shall be in the
English language and is to be sent by certified mail, recognized
international carrier or facsimile (with confirmation copy by any of
the other means) to:
In the case of IAE:
IAE International Aero Engines AG
400 Main Street, M/S 121-10,
East Hartford, Connecticut 06108, USA
Facsimile No. 860-565-5220
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Attention: Business Director and Chief Legal Officer
In the case of New Air:
New Air Corporation
6322 South 3000 East
Suite L201
Salt Lake City, Utah 84121
Facsimile No. 801-944-4840
Attention: Executive Vice President and General Counsel, Thomas Kelly
With a copy to the Chief Financial Officer, John Owen
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 New Air, 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.
6.13 CONDITIONS PRECEDENT
During the term of this Contract, the obligations of IAE to provide, or
cause to be provided Supplies or any other benefits to New Air pursuant
to the terms hereof, shall be subject to the non-existence of any of
the following events on the date when such Supplies or benefits become
due, and should any such event then exist IAE shall be under no
obligation to provide, or cause to be provided any Supplies or any
other benefits to New Air:
(a) A continuing event of default (taking into account any
applicable grace period) by New Air in (x) the payment of
[****] U.S. Dollars [****] or more of other amounts under
the Contract (including any exhibits and letter agreements
thereto), or (y) the payment of any scheduled amount of
principal, interest, lease rental or other similar payment
under any
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 25 of 131
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of the financings implemented pursuant to any IAE financing
agreement with New Air for the Aircraft; or
(b) Any event that is a Termination Event or would be a
Termination Event, but for lapse of time, shall have occurred.
6.14 TERMINATION EVENTS
Any of the following shall constitute a "Termination Event" under this
Contract:
(i) New Air commences any case, proceeding or other action with
respect to New Air or its property in any jurisdiction
relating to bankruptcy, insolvency, reorganization,
dissolution, liquidation, winding-up, or relief from, or with
respect to, or readjustment of, debts or obligations; or
(ii) New Air seeks the appointment of a receiver, trustee,
custodian or other similar official for New Air for all or
substantially all of its assets, or New Air makes a general
assignment for the benefit of its creditors; or
(iii) New Air otherwise becomes the object of any case, proceeding
or action of the type referred to in the preceding clauses (i)
or (ii) which remains unstayed, undismissed or undischarged
for a period of sixty (60) days; or
(iv) An action is commenced against New Air seeking issuance of a
warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which
remains unstayed, undismissed or undischarged for a period of
sixty (60) days; or
(v) A continuing event of default (taking into account any
applicable grace period) by New Air on any payment of
principal or interest on any indebtedness hereunder or in the
payment of any guarantee obligation hereunder or under any
IAE financing agreement with New Air for the Aircraft, or any
other document related hereto to which New Air and IAE, or
their respective affiliates, are parties.
In the event of the occurrence of a Termination Event, New Air
shall be deemed to be in material breach of this Contract, and IAE
shall at its option have the right to resort to any remedy under
applicable law, including, without limitation, the right by written
notice, effective immediately, to terminate this Contract; provided
that, no such notice need be delivered, and this Contract shall
automatically terminate upon the occurrence of a Termination Event
specified in sub-Clause (i),(ii) or (iii).
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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 New Air Corporation /s/ David Neeleman, CEO
------------------------------
In the presence of /s/ Thomas E. Kelly
------------------------------
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EXHIBIT A1
V2500 TURBOFAN ENGINE MODEL SPECIFICATION
FAA Commercial Type Certificate E40NE Model V2524 - A5
Spec. No. IAE S24A5/2
SEA LEVEL STATIC RATINGS
(See General Notes)
<Table>
<Caption>
Net
Thrust
lb
<S> <C>
Take-off Rating (5 min) 24,480
Maximum Continuous Rating 19,200
</Table>
DESCRIPTION
Type - Dual rotor, axial flow, high bypass turbofan, single-stage fan,
four-stage low compressor, ten-stage high pressure compressor, annular
combustor, two-stage high pressure turbine, five-stage low pressure turbine.
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)
FUEL SYSTEM AND CONTROL SYSTEM COMPRISING:
LP/HP Fuel Pump, Fuel Filter Element, Fuel Temperature Sensor, Fuel
Diverter/Back to Tank Valve, Fuel Distribution Valve, P2T2 Probe, Relay Box,
Electronic Engine Control, Dedicated Generator, P4.9 Sensors and Manifold,
Woodward Governor Company Fuel Metering Unit, Fuel Supply Pipe.
Page 28 of 131
<Page>
IGNITION SYSTEM COMPRISING:
Ignition Exciter, Igniter Plug, Ignition Lead (2 each).
AIR SYSTEM COMPRISING:
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.
ENGINE INDICATING SYSTEM COMPRISING:
Exhaust Gas Temperature (EGT) Thermocouples, EGT Harness and Junction Box.
OIL SYSTEM COMPRISING:
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, No. 4 Bearing
Scavenge Pressure Transducer, IDG Fuel Cooled Oil Cooler.
MISCELLANEOUS:
Electrical EEC Harnesses - Fan and Core, Nose Spinner, PART - Drains, If
Intertwined With Engine parts, Airframe Accessory Mounting Pads and Drives,
PART - Brackets on Working Flanges for attachment of Aircraft Equipment and
EBU, PART - IDG Piping, where Intertwined with Engine Parts.
ADDITIONAL EQUIPMENT
Available at Increased Price
Engine Storage Bag
Engine Transportation Stand
Enhanced 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.
Page 29 of 131
<Page>
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.
Take-off rating is the maximum thrust certified for take-off operation.
Take-off thrust is available at and below ISA + 40 DEG. C (72 DEG. F)
ambient temperatures.
Maximum Continuous Rating is the maximum thrust certified for continuous
operation. The specified thrust is available at and below ISA + 18
DEG. F (10 DEG. 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.
Unless otherwise specified, engines will be supplied with the STANDARD
EQUIPMENT listed.
Page 30 of 131
<Page>
EXHIBIT A2
V2500 TURBOFAN ENGINE MODEL SPECIFICATION
FAA Commercial Type Certificate E4ONE Model V2527 - A5
Spec. No. IAE S27A5/2
SEA LEVEL STATIC RATINGS
(See General Notes)
Net
Thrust
lb
Take-off Rating (5 min) 24,800
Maximum Continuous Rating 22,240
DESCRIPTION
Type - Dual rotor, axial flow, high bypass turbofan, single-stage fan,
four-stage low compressor, ten-stage high pressure compressor, annular
combustor, two-stage high pressure turbine, five-stage low pressure turbine.
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)
FUEL SYSTEM AND CONTROL SYSTEM COMPRISING:
LP/HP Fuel Pump, Fuel Filter Element, Fuel Temperature Sensor, Fuel
Diverter/Back to Tank Valve, Fuel Distribution Valve, P2T2 Probe, Relay Box,
Electronic Engine Control, Dedicated Generator, P4.9 Sensors and Manifold,
Woodward Governor Company Fuel Metering Unit, Fuel Supply Pipe.
Page 31 of 131
<Page>
IGNITION SYSTEM COMPRISING:
Ignition Exciter, Igniter Plug, Ignition Lead (2 each).
AIR SYSTEM COMPRISING:
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.
ENGINE INDICATING SYSTEM COMPRISING:
Exhaust Gas Temperature (EGT) Thermocouples, EGT Harness and Junction Box.
OIL SYSTEM COMPRISING:
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, No. 4 Bearing
Scavenge Pressure Transducer, IDG Fuel Cooled Oil Cooler.
MISCELLANEOUS:
Electrical EEC Harnesses - Fan and Core, Nose Spinner, PART - Drains, If
Intertwined With Engine parts, Airframe Accessory Mounting Pads and Drives,
PART - Brackets on Working Flanges for attachment of Aircraft Equipment and
EBU, PART - IDG Piping, where Intertwined with Engine Parts.
ADDITIONAL EQUIPMENT
Available at Increased Price
Engine Storage Bag
Engine Transportation Stand
Enhanced 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.
Page 32 of 131
<Page>
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.
Take-off rating is the maximum thrust certified for take-off operation.
Take-off thrust is available at and below ISA plus 40DEG.C (72DEG.F) ambient
temperatures.
Maximum Continuous Rating is the maximum thrust certified for continuous
operation. The specified thrust is available at and below ISA plus 18DEG.F
(10DEG.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.
Unless otherwise specified, engines will be supplied with the STANDARD
EQUIPMENT listed.
Page 33 of 131
<Page>
EXHIBIT A3
V2500 TURBOFAN ENGINE MODEL SPECIFICATION
FAA Commercial Type Certificate E4ONE Model V2533 - A5
Spec. No. IAE S33A5/2
SEA LEVEL STATIC RATINGS
(See General Notes)
Net
Thrust
lb
Take-off Rating (5 min) 31,600
Maximum Continuous Rating 26,950
DESCRIPTION
Type - Dual rotor, axial flow, high bypass turbofan, single-stage fan,
four-stage low compressor, ten-stage high pressure compressor, annular
combustor, two-stage high pressure turbine, five-stage low pressure turbine.
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)
FUEL SYSTEM AND CONTROL SYSTEM COMPRISING:
LP/HP Fuel Pump, Fuel Filter Element, Fuel Temperature Sensor, Fuel
Diverter/Back to Tank Valve, Fuel Distribution Valve, P2T2 Probe, Relay Box,
Electronic Engine Control, Dedicated Generator, P4.9 Sensors and Manifold,
Woodward Governor Company Fuel Metering Unit, Fuel Supply Pipe.
Page 34 of 131
<Page>
IGNITION SYSTEM COMPRISING:
Ignition Exciter, Igniter Plug, Ignition Lead (2 each).
AIR SYSTEM COMPRISING:
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.
ENGINE INDICATING SYSTEM COMPRISING:
Exhaust Gas Temperature (EGT) Thermocouples, EGT Harness and Junction Box.
OIL SYSTEM COMPRISING:
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, No. 4 Bearing
Scavenge Pressure Transducer, IDG Fuel Cooled Oil Cooler.
MISCELLANEOUS:
Electrical EEC Harnesses - Fan and Core, Nose Spinner, PART - Drains, If
Intertwined With Engine parts, Airframe Accessory Mounting Pads and Drives,
PART - Brackets on Working Flanges for attachment of Aircraft Equipment and
EBU, PART - IDG Piping, where Intertwined with Engine Parts.
ADDITIONAL EQUIPMENT
Available at Increased Price
Engine Storage Bag
Engine Transportation Stand
Enhanced 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.
Page 35 of 131
<Page>
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.
Take-off rating is the maximum thrust certified for take-off operation.
Take-off thrust is available at and below ISA plus 40DEG.C (72DEG.F) ambient
temperatures.
Maximum Continuous Rating is the maximum thrust certified for continuous
operation. The specified thrust is available at and below ISA plus 18DEG.F
(10DEG.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.
Unless otherwise specified, engines will be supplied with the STANDARD
EQUIPMENT listed.
Page 36 of 131
<Page>
EXHIBIT B
SCHEDULES
<Page>
EXHIBIT B1
AIRCRAFT DELIVERY SCHEDULES
<Table>
<Caption>
FIRM A320 AIRCRAFT
YEAR NUMBER DELIVERY PERIOD
---- ------ ---------------
<S> <C> <C>
2000 6 (1)[****];(1)[****];(1)[****]
(1)[****];(2)[****]
2001 6 (3)[****];(3)[****]
2002 8 (2)[****];(6)[****]
2003 5
TOTAL 25
</Table>
All twenty-five (25) Firm A320 Aircraft have no deferral or conversion
rights.
<Table>
<Caption>
OPTION A320 AIRCRAFT
YEAR NUMBER
---- ------
<S> <C>
2003 3
2004 5
2005 5
2006 6
2007 6
TOTAL 25
</Table>
RESERVE OPTION A320 FAMILY AIRCRAFT
Under the terms of its purchase agreement with Airbus for the Aircraft, New
Air has the right to receive delivery positions for Reserve Option A320
Family Aircraft equal to the number of Option A320 Family Aircraft as to
which New Air has exercised its purchase rights. Because New Air has options
with Airbus for twenty-five (25) Option A320 Family Aircraft, it
correspondingly has rights with Airbus to receive delivery positions for up
to twenty-five (25) Reserve Option A320 Family Aircraft. No dates are
specified for delivery of these Reserve Option A320 Family Aircraft. Such
delivery dates will be determined at the time options are exercised by New
Air. The agreement between New Air and Airbus anticipates that all Reserve
Option A320 Family Aircraft will be delivered prior to the end of 2007.
Airbus has also granted New Air conversion rights for each of the twenty-five
(25) Option A320 Family Aircraft and the twenty-five (25) Reserve Option A320
Family Aircraft to the A321-200 or A319 aircraft type on twenty-one months
notice to Airbus.
<Table>
<Caption>
LEASED AIRCRAFT
YEAR NUMBER DELIVERY PERIOD
---- ------ ---------------
<S> <C> <C>
1999 1 [****]
2000 3 (1)[****];(1)[****];(1)[****]
2001 3 (1)[****];(1)[****];(1)[****]
TOTAL 7
</Table>
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 38 of 131
<Page>
EXHIBIT B2
PURCHASED ITEMS, PRICE,
ESCALATION FORMULA AND DELIVERY
<Table>
<Caption>
Basic Contract Price
Purchased Item U.S. Dollars (January 1999) Qty. Delivery Date
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
V2527-A5 spare Engine: [****] 1 [****]99
V2527-A5 spare Engine: [****] 1 [****]00
V2527-A5 spare Engine: [****] 1 [****]01
V2527-A5 spare Engine: [****] 1 [****]02
V2527-A5 spare Engine: [****] 1 [****]03
OPTION SPARE ENGINES
----------------------
V2524-A5 spare Engine: [****]
V2527-A5 spare Engine: [****]
V2533-A5 spare Engine: [****]
</Table>
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 39 of 131
<Page>
IAE ESCALATION FORMULA
1. Any unit base price or other sum expressed to be subject to escalation
from a base month to a month of delivery or other date of determination
in accordance with the IAE Escalation Formula will be subject to
escalation in accordance with the following formula:
P=Pb ([****] L + [****] M + [****] E)
--- --- ---
Lo Mo Eo
Where:
P = the invoiced purchase price or escalated sum rounded to the nearest
U.S. Dollar.
Pb = unit base 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.
2. The values of the factors [****] L and [****] M and [****] 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 statistics
or modifies the basis of their calculation, then IAE may substitute any
officially recognized and substantially equivalent statistics.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 40 of 131
<Page>
4. The Basic Contract Prices contained in this Exhibit B are subject to
escalation from a Base Month of January 1999 to the month of delivery
using Lo, Mo and Eo values for September 1998.
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.
Page 41 of 131
<Page>
EXHIBIT C
PROJECT SUPPORT PLAN
Page 42 of 131
<Page>
PRODUCT SUPPORT
FOR THE
V2500 ENGINE
IAE INTERNATIONAL AERO ENGINES AG
Page 43 of 131
<Page>
TABLE OF CONTENTS
1. INTRODUCTION.......................................................46
2. CUSTOMER SUPPORT...................................................47
2.1 Customer Support Manager
2.2 Customer Support Representatives
2.3 Customer Training
2.4 Engine Maintenance Management
2.5 Operations Monitoring
2.6 Special Programs
3. BUSINESS SUPPORT...................................................51
3.1 Engine Warranty Services
3.2 Maintenance Center Support
3.3 Maintenance Facilities Planning Service
3.4 Engine Reliability and Economic Forecasts
3.5 Logistics Support Studies
3.6 Lease Engine Program
4. TECHNICAL SERVICES.................................................54
4.1 Technical Services
4.2 Powerplant Maintenance
4.3 Customer Performance
4.4 Diagnostic Systems
4.5 Human Factors
4.6 Flight Operations
4.7 Repair Services
4.8 Tooling and Support Equipment Services
4.9 Product Support Technical Publications
5. SPARE PARTS........................................................65
5.1 Spare Parts Support
Page 44 of 131
<Page>
1.0 INTRODUCTION
IAE 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.
In general, these services are provided at no charge to V2500
customers, however, some specific customized services as noted in the
descriptions below, may be purchased from IAE.
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.
Page 45 of 131
<Page>
2.0 CUSTOMER SUPPORT
2.1 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.
2.2 CUSTOMER SUPPORT REPRESENTATIVES
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
2.2.1 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
Page 46 of 131
<Page>
the home office is transmitted promptly to the
airline which allows the airline to share in all
related industry experience.
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.
2.2.2 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.
2.2.3 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.
2.3 CUSTOMER TRAINING:
2.3.1 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
2.3.2 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 also 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. Training at the Customer Training Center
is provided to a limit of fifty (50)
Page 47 of 131
<Page>
man-days per aircraft. 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.
2.3.3 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.
2.3.4 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
Additional courses are available in Borescope
utilization and Engine Conditioning Monitoring (ECM)
Page 48 of 131
<Page>
2.3.5 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.
2.4 ENGINE MAINTENANCE MANAGEMENT
Planning documents, tailored for individual operators, are
developed to serve as Engine Maintenance Management Program
criteria and should reflect the FAA requirements under which
New Air will operate. 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.
2.4.1 OPERATIONS MONITORING:
The following information is available to the airline
customer from the IAE Product Information
Process (IP) (2) Group:
2.4.2 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,
Page 49 of 131
<Page>
In addition to providing operations, reliability and
VIS reports, SDS serves in-house programs directed at
improving engine design and enhancing overall
customer support, including spare parts provisioning
and warranty administration.
2.5 SPECIAL PROGRAMS
2.5.1 ENGINE HARDWARE RETROFIT:
Engine Retrofits are carried out to provide
modification of engine hardware configuration when
required on delivered engines. This involves
assisting in the marshaling of hardware, special
tools, manpower and the scheduling of engine and
material to modification sites.
2.5.2 CONTROLLED SERVICE USE PROGRAMS AND MATERIAL:
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.
Urgent 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.
3.0 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:
- Engine Warranty Services
- Maintenance Support
- Lease Engine Program
- Engine Reliability and Economic Forecasts
- Logistic Support Studies
Page 50 of 131
<Page>
3.1 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.
3.1.1 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.
3.1.2 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. Where relevant,
reports will include recommendations to preclude
repetition of the problem.
3.2 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.
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3.3 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, marshaling 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.
3.4 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.
3.5 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.
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3.6 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. Lease
engines offered to New Air will be of a configuration and
certification standard acceptable to New Air. 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.
4.0 TECHINICAL SERVICES
4.1 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 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 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
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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.
4.1.1 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.
4.1.2 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.
4.1.3 ENGINE INCIDENT INVESTIGATION ASSISTANCE:
Assistance is provided to an airline in conducting
engine incident investigations in responding to the
requirements of the appropriate Airworthiness
authority.
4.1.4 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 manufacturer's 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 customer's line maintenance
personnel. Instructions on V2500 powerplant
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troubleshooting and maintenance can also be provided
to customer's line maintenance personnel.
4.1.5 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.
4.2 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.
4.2.1 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.
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4.3 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.
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.
4.3.1 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.
4.3.2 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.
4.4 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:
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- 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.
4.4.1 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.
4.4.2 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 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.
4.5 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.
4.6 FLIGHT OPERATIONS
Flight Operations provides the airline customer with the
following technical assistance concerning installed engine
operations:
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- 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
4.6.1 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.
4.6.2 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.
4.6.3 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.
4.6.4 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.
4.7 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
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4.7.1 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.
4.7.2 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.
4.7.3 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.
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4.8 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
4.8.1 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.
4.8.2 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.
4.8.3 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.
4.9 TECHNICAL PUBLICATIONS
IAE and its subcontractors produce 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. The necessary quantities of manuals and media options
will be available subject to IAE's current terms and
conditions.
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4.9.1 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.
4.9.2 TECHNICAL PUBLICATIONS:
Listed and described below are the publications that
will be made available to support the airline
customer's maintenance program:
4.9.3 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.
4.9.4 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.
4.9.5 ILLUSTRATED PARTS CATALOG
The Illustrated Parts Catalog will be structured in
accordance with ATA 2-14-0 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.
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4.9.6 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.
4.9.7 SUBCONTRACTOR COMPONENT MAINTENANCE
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.
4.9.8 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.
4.9.9 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.
4.9.10 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.
4.9.11 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.
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4.9.12 PUBLICATIONS INDEX
This index contains a listing of available technical
manuals covering components of the V2500 Nacelle.
4.9.13 SERVICE BULLETIN INDEX
This index will be in a format and on a revision
schedule as determined by IAE.
4.9.14 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.
4.9.15 VITAL STATISTICS LOGBOOK
The VSL provides the following information for each
production engine, in an electronic readable format
and/or as hard copy printout:
- Identification of major engine and nacelle
components by part number, serial number and
ATA - location.
- Engine Test Acceptance Certificate.
- List of all incorporated serialized parts by
part number, serial number and ATA -
Location. This list also includes an
Industry Item List to identify specific
parts by part number, serial number and ATA -
Location which the airline customer may
choose to monitor during the engine
operational life. The parts listed represent
approximately 80% of engine total value.
- List of all incorporated life limited parts
by part number, serial number and ATA -
location.
- List of all Service Bulletins that were
incorporated during initial build of each
new engine.
- List of all Service Bulletins that were not
incorporated.
- List of all saleable pick level engine
parts, identifying those parts for which
Service Bulletins and service instructions
have been issued.
4.9.16 REVISION SERVICES:
Regular, temporary, and "as required" revisions to
technical publications will be made during the
service life of IAE equipment. IAE's current standard
is ninety (90) days. The utilization of advanced
techniques and equipment provides the airline
customer with expedited revision service.
4.9.17 DISTRIBUTION MEDIA OPTIONS:
The primary medium for available IAE technical
publications is roll microfilm at 24:1 reduction,
magnetic tape or CD-ROM. Media options
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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.
5.0. SPARE PARTS
5.1 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
5.1.1 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.
5.1.2 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.
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5.1.3 ORDER ADMINISTRATION:
IAE subscribes to the general principles of Air
Transport Association of America (ATA) Specification
No. 2000, 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), or Invoicing
(Chapter IV).
A spare parts supply objective is to maintain a 90
percent on-time shipment performance record to
customer requirements. 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).
5.1.4 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:
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- Forecasts of life limited parts requirements are
requested and received semi-annually from major
customers.
.
- Engine technical conferences are held frequently
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.
5.1.5 PACKAGING
All material is packaged in general compliance with
Air Transport Association of America (ATA)
Specification No. 300.
5.1.6 WORLD AIRLINE SUPPLIER'S 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.
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EXHIBIT D
WARRANTIES, GUARANTEES AND PLANS
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EXHIBIT D-1
V2500 ENGINE AND PARTS SERVICE POLICY
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IAE
INTERNATIONAL AERO ENGINES AG
V2500 ENGINE AND PARTS SERVICE POLICY
Issued: October 25, 1985
Revised: April, 1997
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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 leased or purchased V2500
Engine.
This Service Policy is divided into seven sections:
Section I describes the Credit Allowances which will Page 71
be granted should the Engine suffer a Failure.
Section II describes the Credit Allowances which will be Page 73
granted should a Primary Part Suffer a Failure.
Section III lists the Class Life for those Primary Parts Page 74
for which Credit Allowances will be granted.
Section IV describes the Credit Allowances which will be Page 76
granted when the establishment or reduction of
a Parts Life Limit is mandated.
Section V describes the Credit Allowances and adjustments Page 77
which will be granted when IAE declares a
Campaign Change.
Section VI contains the definitions of certain words and Page 79
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 VII contains the general conditions governing the Page 86
application of this Service Policy.
Page 70 of 131
<Page>
I. ENGINE FAILURE CREDIT ALLOWANCES
A. FIRST RUN ENGINE, MODULE AND PART
1. A First Run Engine is an Engine with [****] hours (or
cycles, whichever comes first), or less Engine Time,
a First Run Module is a Module with [****] hours (or
cycles, whichever comes first), or less Module Time,
and a First Run Part is a Part with [****] hours (or
cycles, whichever comes first), 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 [****] percent Part Credit Allowance for any
First Run Part Scrapped, or
b. A [****] 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 [****] 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 [****] 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 [****] hours (or cycles, whichever comes
first), Engine Time but not more than [****] hours
(or cycles, whichever comes first), Engine Time,
an Extended Run Module is a Module with more than
[****] hours (or cycles, whichever comes first),
Module Time, but not more than [****] hours (or
cycles, whichever comes first), Module Time, and
an Extended First Run Part is a Part with [****]
hours (or cycles, whichever comes first), or less
Parts Time operating in an Extended First Run
Engine or an extended First Run Module.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 71 of 131
<Page>
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 [****] hours (or cycles, whichever comes first),
Engine Time which then decreases, pro rata, to zero percent at
[****] hours (or cycles, whichever comes first), Engine Time,
or, 100 percent to [****] 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 [****]
hours (or cycles, whichever comes first), Engine Time which
then decrease, pro rata, to zero percent at [****] hours (or
cycles, whichever comes first), 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 [****]
percent at [****] hours (or cycles, whichever comes first),
Engine Time, which then decreases, pro rata, to zero
percent at [****] hours (or cycles, whichever comes first),
Engine Time.
Note: Section VI, Paragraph D. contains the formulas to be used for computing
the Credit Allowances described above.
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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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<Page>
C. ENGINE OR MODULE FAILURE CREDIT ALLOWANCES ILLUSTRATION
[GRAPHIC]
[****]
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.
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 [****]
percent to [****] 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.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 73 of 131
<Page>
B. PRIMARY PARTS CREDIT ALLOWANCES ILLUSTRATION
[GRAPHIC]
[****]
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 ([****] 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 11 Stator Assembly
HP Compressor Exit Stator
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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 74 of 131
<Page>
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
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 ([****] 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 ([****] HOURS PARTS TIME FOR DAMAGE
[****] PARTS CYCLES FOR LIFE LIMIT REDUCTION)
Fan Disk
LPC Drum
HPC 3 to 8 Drum
HPC 9 to 12 Drum
HP Turbine Stage 1 and 2 Disks
HP Turbine Spacer Disk
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 75 of 131
<Page>
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
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 [****] hours Parts Time
for a Class A Primary Part or less than [****] 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 [****] hours total Parts Time which then
decreases, pro rata, to zero percent at the end of
[****] hours total Parts Time for a Class A Primary
Part or [****] 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 [****] 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
[****] total Parts Cycles which then decreases, pro
rata, to zero percent at [****] 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.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 76 of 131
<Page>
C. PARTS LIFE LIMIT CREDIT ALLOWANCES ILLUSTRATIONS
[GRAPHIC]
[****]
[GRAPHIC]
[****]
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 [****] 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 [****] hours (or cycles,
whichever comes first), or less total Parts Time.
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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 77 of 131
<Page>
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 [****] hours (or cycles,
whichever comes first), total Parts Time but less
than [****] hours (or cycles, whichever comes first),
total Parts Time. The pro rata Parts Credit Allowance
will be based on 100 percent at [****] hours (or
cycles, whichever comes first), total Parts Time
which then decreases, pro rata, to 50 percent at
[****] hours (or cycles, whichever comes first),
total Parts Time.
3. A [****] 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 [****]
hours (or cycles, whichever comes first), total
Parts Time.
4. A [****] percent Labor Credit Allowance for
Reoperation of installed Parts or serviceable
shelf stock Parts with [****] hours (or cycles,
whichever comes first), 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 [****] hours (or cycles,
whichever comes first), total Parts Time but less
than [****] hours (or cycles, whichever comes
first), 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 [****] hours (or cycles, whichever
comes first), total Parts Time which then
decreases, pro rata, to [****] percent at [****]
hours (or cycles, whichever comes first), total
Parts Time.
6. A [****] percent Labor Credit Allowance for
Reoperation of installed Parts or serviceable
shelf stock Parts with more than [****] hours (or
cycles, whichever comes first), total Parts Time
which are Reoperated in accordance with the
Campaign Change.
7. A [****] 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.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 78 of 131
<Page>
C. CAMPAIGN CHANGE CREDIT ALLOWANCES ILLUSTRATION
[GRAPHIC]
[****]
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.
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.
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
Page 79 of 131
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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>
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 USE AVIATION 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 ALLOWANCE is an amount determined in
accordance with the following formulas:
a. [****] percent Parts Credit Allowance = P
b. [****] 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
---------- x P
L(t)
(2) For a Class C Primary Part for
which a Parts Life Limit is
established, which is greater than
[****] total Parts Cycles but is
less than [****] total Parts
Cycles:
L(c) - C
---------- x P
L(c)
(3) For replacement of a Part because
of a Campaign Change, when such a
Part has more than [****] hours (or
cycles, whichever comes first),
Parts Time but less than [****]
hours (or cycles, whichever comes
first), Parts Time:
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 80 of 131
<Page>
[****] - T
----------- x P
[****]
d. Extended First Run Parts
Credit Allowance =
[****] - E L(t) - T
----------- x P or ---------- x P
[****] L(t)
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. [****] percent Labor Credit Allowance = H x R
b. [****] percent Labor Credit Allowance = H x R
-----
2
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
---------- x H x R
L(t)
(2) For a Class C Primary Part for
which a Parts Life Limit is
established which is greater than
[****] total Parts Cycles but is
less than [****] total Parts
Cycles:
L(c) - C
---------- x H x R
L(c)
(3) For replacement of a Part because
of a Campaign Change, which such a
Part has more than [****] hours (or
cycles, whichever comes first),
Parts Time but less than [****]
hours (or cycles, whichever comes
first), Parts Time:
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 81 of 131
<Page>
[****] - T
----------- x H x R
[****]
d. Extended First Run Labor Credit Allowance =
[****] - E L(t) - T
----------- x H x R or ---------- x H x R
[****] L(t)
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 [****] 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 [****]
hours, or the Parts Life Limit
minus [****] hours, whichever is
greater, or
c. For replacement of a Part because
of a Campaign Change, when such a
Part has more than [****] hours (or
cycles, whichever comes first),
Parts Time but less than [****]
hours (or cycles, whichever comes
first), Parts Time, the actual
Parts Time on the Part.
C = For a Class C Primary Part for which a Parts
Life Limit is established which is greater
than [****] Total Parts Cycles but less than
[****] Total Parts Cycles, the greater of
either:
a. The actual Parts Cycles on the Part
minus [****] cycles, or
b. The new Parts Life Limit minus
[****] Cycles.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 82 of 131
<Page>
L(t) = Either:
a. For a Primary Part which has
suffered Direct Damage or Resultant
Damage, the hours indicated Section
III minus [****] 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 [****] hours.
L(c) = For a Class C Primary Part for which a Parts
Life Limit is established which is greater
than [****] total Parts Cycle, [****]
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 XIAE380
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.
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 [****]
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.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 83 of 131
<Page>
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 [****] hours (or cycles, whichever comes
first), Engine or Module Time but not more than [****]
hours (or cycles, whichever comes first), Engine or Module
Time.
K. EXTENDED FIRST RUN PART means a Part with [****] hours (or
cycles, whichever comes first), 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 [****] hours (or cycles, whichever comes first), or less
Engine or Module Time.
N. FIRST RUN PART is an Engine Part with [****] hours (or cycles,
whichever comes first), or less Parts Time operating in a
First Run Engine.
O. 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
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.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 84 of 131
<Page>
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.
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<Page>
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 are shipped at
the request of IAE.
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
Page 86 of 131
<Page>
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
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.
Page 87 of 131
<Page>
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.
H. GENERAL ADMINISTRATION
On matters concerning this Service Policy, the Operator is
requested to address all correspondence to:
IAE International Aero Engines AG
400 Main Street
Mail Stop 121-10
East Hartford, CT 06108
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,
Page 88 of 131
<Page>
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.
Page 89 of 131
<Page>
EXHIBIT D-2
V2500 NACELLE AND PARTS SERVICE POLICY
Page 90 of 131
<Page>
IAE
INTERNATIONAL AERO ENGINES AG
V2500 NACELLE AND PARTS SERVICE POLICY
Issued: November 16, 1988
Page 91 of 131
<Page>
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:
<Table>
<Caption>
<S> <C> <C>
Section I describes the Allowances and adjustments which Page 93
will be granted should the Nacelle or Part(s)
suffer a Failure.
Section II describes the Allowances and adjustments which Page 94
will be granted when IAE declares a Campaign
Change.
Section III contains the definitions of certain words and Page 95
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 the Page 98
application of this Service Policy.
</Table>
Page 92 of 131
<Page>
I ALLOWANCES AND ADJUSTMENTS
A. FIRST RUN NACELLE AND PART
1. A First Run Nacelle is a Nacelle with [****] hours or
less Nacelle Time and a First Run Part is a Part with
[****] 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 [****] percent Parts Credit
Allowance for any such First Run
Part Scrapped, and
(2) A [****] percent Labor Allowance
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 [****] 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 [****] 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.
Page 93 of 131
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>
B. PRIMARY PART
1. A Primary Part is a Part other than a First Run Part
but having not more than [****] 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 [****]
percent to [****] hours total Parts Time which then
decreases, pro rata, to zero percent at [****] hours
Parts time.
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 [****] 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 [****] hours or less total Parts Time.
2. A [****] 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 [****] hours total Parts Time.
3. A [****] 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 [****] percent Labor Allowance for Reoperation of installed
or serviceable shelf stock Nacelle Parts with more than
[****] hours total Parts Time, which are Reoperated in
accordance with the Campaign Change.
5. A [****] 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.
Page 94 of 131
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>
C. OPTIONAL ALLOWANCES AND ADJUSTMENTS
1. When IAE declares 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.
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.
III DEFINITIONS
A. ALLOWANCES
1. PARTS CREDIT ALLOWANCE is an amount determined in accordance
with the following formula:
a. [****] percent Parts Credit Allowance = P
b. [****] percent Parts Credit Allowance = P/2
c. Pro rata Parts Credit Allowance = [****] - T
--------- 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. [****] percent Labor Allowance = H x R
b. [****] percent Labor Allowance = H x R
-
Page 95 of 131
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>
2
c. Pro rata Labor Allowance = [****] - T
--------- 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.
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.
Page 96 of 131
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>
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 [****]
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.
H. FIRST RUN NACELLE is a Nacelle with [****] hours or less
Nacelle Time.
I. FIRST RUN PART is a Nacelle Part with [****] 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.
<Table>
<Caption>
Model No. Specification No. Specification Date
--------- ----------------- ------------------
<S> <C> <C>
V2500 IAE-0004 1988
</Table>
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.
Page 97 of 131
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>
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 [****] hours Parts Time.
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.
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.
Page 98 of 131
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>
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.
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.
Page 99 of 131
<Page>
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
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.
Page 100 of 131
<Page>
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:
IAE International Aero Engines AG
400 Main Street
Mail Stop 121-10
East Hartford, CT 06108
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
Page 101 of 131
<Page>
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.
Page 102 of 131
<Page>
EXHIBIT D-3
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.
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.
Page 103 of 131
<Page>
EXHIBIT D-4
V2500 RELIABILITY GUARANTEE
Page 104 of 131
<Page>
V2500 RELIABILITY GUARANTEE
I INTRODUCTION
IAE assures New Air that by the end of the [****] year period
commencing with New Air's first commercial operation of Aircraft
(including for purposes of this Guarantee, the Leased Aircraft)
powered by V2500 Engines, the cumulative Engine Shop Visit Rate will
not exceed a Guaranteed Rate of [****] per 1000 Eligible Engine flight
hours. Under this Guarantee, if the cumulative Engine Shop Visit
Rate exceeds the Guaranteed Rate, IAE will credit New Air's account
with IAE an amount of [****] 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 New Air
initiates commercial operation of its first Aircraft
(including for purposes of this Guarantee, the Leased
Aircraft) powered by Eligible Engines and will terminate
[****] 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 New Air during the Period of Guarantee and which
have been acquired pursuant to the Contract to which this
Guarantee is attached and the related proposal or contract for
delivery of Aircraft, and shall also include for purposes of
this Guarantee, the Leased Aircraft. The Engines shall remain
Eligible provided that New Air 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 New Air.
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;
3. an Airworthiness Directive issued by the applicable
Certification Authority;
4. maintenance as recommended by IAE; and
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 105 of 131
<Page>
5. removal for LLP time expiration so long as minimum
build cycle requirement pursuant to the Maintenance
Management Plan is adhered to.
D. REPORTING OF ENGINE SHOP VISITS AND ENGINE FLIGHT HOURS
Eligible Shop Visits shall be reported to IAE by New Air
within thirty days after the date of such Engine Shop Visit
using IAE Form SVR Rev 1, July 95 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 New Air
within thirty days after each month's end to IAE on IAE Form
SVR Rev 1, July 95 unless other procedures are established for
the reporting of flight hours.
E. CREDIT ALLOWANCE CALCULATION
A credit of [****] 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 New Air's account with IAE.
Credits and debits will be applied to New Air'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 = (AR - GR) x [****] U.S. Dollars
where:
AR = Total Eligible Engine Shop Visits during the period of
the calculation.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 106 of 131
<Page>
GR = [****]/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 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 New Air of:
1. An average flight cycle of no less than [****] hours;
2. Thrust levels which are derated an average of [****]
for Takeoff relative to full Takeoff ratings;
3. An average Aircraft utilization equal to or less than
[****] flight hours per year;
4. An Aircraft and Engine delivery schedule in respect
of thirty-two (32) Aircraft (composed of twenty-five
(25) Firm Aircraft and seven (7) Leased Aircraft) and
seven (7) spare Engines as described in the Contract
to which this Guarantee is attached; and
5. An average ambient temperature at Takeoff which is no
greater than ISA + 3 DEG. C.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee,
(a) a variation from the conditions upon which the Guaranteed
Rate is predicated, or (b) a discontinuation of ownership by
New Air of any Engine or any V2500 powered Aircraft subsequent
to delivery to New Air, or (c) if New Air takes Option
Aircraft or Option Spare Engines.
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, New Air and IAE will establish
jointly the modifications or Parts to be selected, and New Air
will incorporate the changes into Eligible Engines.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 107 of 131
<Page>
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to New
Air 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 New Air 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 New Air from
IAE or any third-party, New Air may elect to receive the benefits under
this Guarantee or under any of the other benefits described above, but
not both.
Page 108 of 131
<Page>
EXHIBIT D-5
V2500 DELAY AND CANCELLATION
Page 109 of 131
<Page>
V2500 DELAY AND CANCELLATION
I INTRODUCTION
IAE assures New Air that by the end of the [****] year period
commencing with New Air's first commercial operation of Aircraft
(including for purposes of this Guarantee, the Leased Aircraft) powered
by V2500 Engines, the cumulative Engine-caused Delay and Cancellation
Rate will not exceed a Guaranteed Rate of [****] 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 New Air's account
with IAE an amount of [****] 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 New Air
initiates commercial operation of its first Aircraft
(including for purposes of this Guarantee, the Leased
Aircraft) powered by Eligible Engines and will terminate
[****] 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 New Air during the Period of Guarantee and which
have been acquired pursuant to the Contract to which this
Guarantee is attached and the related proposal or contract for
delivery of Aircraft, and shall also include for purposes of
this Guarantee, the Leased Aircraft. The Engines shall remain
Eligible provided that New Air 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 New Air.
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.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 110 of 131
<Page>
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
New Air within thirty days after the date of such Delay or
Cancellation using IAE Form DC Rev 1, July 95, 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 New Air
within thirty days after each month's end to IAE on IAE Form
DC Rev 1, July 95, unless other procedures are established for
the reporting of Departures.
Page 111 of 131
<Page>
F. CREDIT ALLOWANCE CALCULATION
A credit of [****] 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 first 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 New Air's account
with IAE. Credits and debits will be applied to New Air'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 [****] 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 = ([****]/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.
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by New Air of:
1. An average flight cycle of no less than 1.4 hours;
2. Thrust levels which are derated an average of [****]
for Takeoff relative to full Takeoff ratings;
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 112 of 131
<Page>
3. An average Aircraft utilization equal to or less than
3,500 flight hours per year;
4. An Aircraft and Engine delivery schedule in respect
of thirty-two (32) Aircraft (composed of twenty-five
(25) Firm Aircraft and seven (7) Leased Aircraft) and
seven (7) spare Engines as described in the Contract
to which this Guarantee is attached; and
5. An average ambient temperature at Takeoff which is no
greater than ISA + 3 DEG. C.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee,
(a) a variation from the conditions upon which the Guaranteed
Rate is predicated, or (b) a discontinuation of ownership by
New Air of any Engine or any V2500 powered Aircraft subsequent
to delivery to New Air, or (c) if New Air takes Option
Aircraft or Option Spare Engines.
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, New Air and IAE will establish
jointly the modifications or Parts to be selected, and New Air
will incorporate the changes into Eligible Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to New
Air 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 New Air 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 New Air
from IAE or any third-party, New Air may elect to receive the benefits
under this Guarantee or under any of the other benefits described
above, but not both.
Page 113 of 131
<Page>
EXHIBIT D-6
V2500 INFLIGHT SHUTDOWN GUARANTEE
Page 114 of 131
<Page>
V2500 INFLIGHT SHUTDOWN GUARANTEE
I INTRODUCTION
IAE assures New Air that by the end of the [****] year period
commencing with New Airs first commercial operation of Aircraft
(including for purposes of this Guarantee, the Leased Aircraft)
powered by V2500 Engines, the cumulative Engine Inflight Shutdown Rate
will not exceed a Guaranteed Rate of [****] 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 New Air's account
with IAE an amount of [****] 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 New Air initiates
commercial operation of its first Aircraft (including for purposes of
this Guarantee, the Leased Aircraft) powered by Eligible Engines and
will terminate [****] 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 New Air
during the Period of Guarantee and which have been acquired pursuant to
the Contract to which this Guarantee is attached and the related
proposal or contract for delivery of Aircraft, and shall also include
for purposes of this Guarantee, the Leased Aircraft. The Engines shall
remain Eligible provided that New Air 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 New Air.
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.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 115 of 131
<Page>
D. REPORTING OF ELIGIBLE INFLIGHT SHUTDOWNS
Eligible Inflight Shutdowns shall be reported to IAE by New
Air within thirty days after the date of such Inflight
Shutdown using IAE Form IFSD Rev 1, July 95 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 New Air
within thirty days after each month's end to IAE on IAE Form
IFSD Rev 1, July 95 unless other procedures are established
for the reporting of flight hours.
E. CREDIT ALLOWANCE CALCULATION
A credit of [****] 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 New Air's account with
IAE. Credits and debits will be applied to New Air'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 - GI) x [****] U.S. Dollars
Where:
AI = Total Eligible Inflight Shutdowns during the period
of the calculation;
GI = ([****]/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.)
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 116 of 131
<Page>
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 New Air of:
1. An average flight cycle of no less than 1.4 hours;
2. Thrust levels which are derated an average of twenty
percent (20%) for Takeoff relative to full Takeoff
ratings;
3. An average Aircraft utilization equal to or less than
3,500 flight hours per year;
4. An Aircraft and Engine delivery schedule in respect
of thirty-two (32) Aircraft (composed of twenty-five
(25) Firm Aircraft and seven (7) Leased Aircraft) and
seven (7) spare Engines as described in the Contract
to which this Guarantee is attached; and
5. An average ambient temperature at Takeoff which is no
greater than ISA + 3 DEG. C.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee,
(a) a variation from the conditions upon which the Guaranteed
Rate is predicated, or (b) a discontinuation of ownership by
New Air of any Engine or any V2500 powered Aircraft
subsequent to delivery to New Air, or (c) if New Air takes
Option Aircraft or Option Spare Engines.
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, New Air and IAE will establish jointly
the modifications or Parts to be selected, and New Air will
incorporate the changes into Eligible Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to New
Air 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 New Air 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 New Air from
IAE or any third-party, New Air may elect to receive the benefits
under this Guarantee or under any of the other benefits described
above, but not both.
Page 117 of 131
<Page>
EXHIBIT D-7
V2500 FUEL CONSUMPTION RETENTION GUARANTEE
Page 118 of 131
<Page>
V2500-A5 FUEL CONSUMPTION RETENTION GUARANTEE
I INTRODUCTION
IAE assures New Air that during the [****] year period commencing
with New Air's first commercial operation of Aircraft (including for
purposes of this Guarantee, the Leased Aircraft) powered by V2500-A5
Engines, the fleet average cruise fuel consumption for Eligible Engines
will not have increased by more than a Guaranteed Rate of [****]. Under
this Guarantee, if the fleet average cruise fuel consumption for
Eligible Engines exceeds the Guaranteed Rate at the end of the
Guarantee Period, IAE will credit New Air's account with IAE an amount
in respect of excess fuel consumed for that portion of the Period of
the Guarantee that the Guarantee level has been exceeded.
II GUARANTEE
A. PERIOD OF GUARANTEE
The Period of Guarantee will start on the date New Air
initiates commercial operation of its first Aircraft
(including for purposes of this Guarantee, the Leased
Aircraft) powered by Eligible Engines and will terminate
[****] 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 New Air during the Period of Guarantee and which
have been acquired pursuant to the Contract to which this
Guarantee is attached and the related proposal or contract for
delivery of Aircraft, and shall also include for purposes of
this Guarantee, the Leased Aircraft. The Engines shall remain
Eligible provided that New Air 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 New Air.
C. FUEL CONSUMPTION MEASUREMENT
The inflight data required for administration of this
Guarantee will be obtained by New Air during stable cruise
conditions using ECM data recordings and the ECM II software
available from IAE (requires the ECM sales order option from
Airbus).
Provided that:
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
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 119 of 131
<Page>
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 New Air validity checks have established that
Total Air Temperature, Fuel Flow Aircraft and Engine
Bleed Systems and other Aircraft parameters are
within normal operating ranges.
D. PERIODIC 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.
E. FLEET AVERAGE CRUISE FUEL CONSUMPTION DETERIORATION
The 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 Calculation (cumulative from start of Period of Guarantee
to end of the third, fifth, seventh, and tenth years).
F. OPERATIONAL DATA
New Air 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 New Air over the Period of
Guarantee (U.S. Dollars per U.S. Gallon), every
thirty days.
3. Aircraft operating hours for each 30 day period
during the Period of Guarantee
4. Engine maintenance action information, as requested.
Alternatively;
IAE is agreeable to the use of the Airbus performance model to
estimate the total fuel consumption during the period of
guarantee (using typical New Air V2500-A5 powered A320 family
aircraft operating characteristics). Average cost of fuel to
be agreed between IAE and New Air based on typical fuel costs
in the appropriate area of operation during the period of
guarantee. New Air shall notify IAE in writing of its
selection prior to the end of the first settlement period.
Page 120 of 131
<Page>
G. EXCESS FUEL CONSUMPTION CREDIT CALCULATION
If at the end of each Period of Calculation the Fleet Average Fuel
Consumption Deterioration exceeds the Guaranteed Rate, IAE will grant
New Air a credit in respect to excess fuel consumption calculated in
accordance with the following formula:
C = (D-GR)% YHF
where:
C = the amount of the credit in U.S. dollars
D = the Fleet Average Fuel Consumption Deterioration (in
percent)
GR = the Guaranteed Rate
Y = initial cruise fuel flow of new Eligible Engines
expressed in U.S. gallons per hour to be established
within 30 days of start of operation (per ECM II
program)
H = the total of all flight hours flown by New Air's
Eligible Engines during that portion of the Period of
Guarantee that the Guarantee level has been exceeded.
F = The average net cost to New Air in U.S. Dollars per
U.S. Gallon of aviation fuel consumed by New Air
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. In the case of
conflict between the Definitions and General Conditions of the Service
Policy and the terms and conditions of this Plan, this Plan shall
govern.
IV SPECIFIC CONDITIONS
A. The Guaranteed Rate is predicated on the use by New Air of:
1. An average flight cycle of no less than 1.4 hours;
2. Thrust levels which are derated an average of twenty
percent (20%) for Takeoff relative to full Takeoff
ratings;
3. An average Aircraft utilization equal to or less than
3,500 flight hours per year;
4. An Aircraft and Engine delivery schedule in respect
of thirty-two (32) Aircraft (composed of twenty-five
(25) Firm Aircraft and seven (7) Leased Aircraft) and
Page 121 of 131
<Page>
seven (7) spare Engines as described in the Contract
to which this Guarantee is attached; and
5. An average ambient temperature at Takeoff which is no
greater than ISA + 3 DEG. C.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee,
(a) a variation from the conditions upon which the Guaranteed
Rate is predicated, or (b) a discontinuation of ownership by
New Air of any Engine or any V2500 powered Aircraft subsequent
to delivery to New Air, or (c) if New Air takes Option
Aircraft or Option Spare Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to New
Air 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 New Air by IAE or any other
source under any 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 New Air, New Air may elect to receive the benefits under this
Guarantee or under any of the other benefits described above, but not
both.
Page 122 of 131
<Page>
EXHIBIT D-8
V2500 EXHAUST GAS TEMPERATURE GUARANTEE
Page 123 of 131
<Page>
V2500 EXHAUST GAS TEMPERATURE GUARANTEE
I INTRODUCTION
IAE assures New Air that during the first [****] hours of operation of
each V2500 Engine (including for purposes of this Guarantee, the Leased
Aircraft), 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 New Air's
account with IAE in the amount of [****] 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 New Air initiates commercial operation of its first
Aircraft (including for purposes of this Guarantee, the Leased
Aircraft) powered by such Engine and will terminate [****]
years from that date or upon the expiration of the first
[****] hours of operation of such Engine, whichever is the
sooner.
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 New Air during the Period of Guarantee and which
have been acquired pursuant to the Contract to which this
Guarantee is attached and the related proposal or contract for
delivery of Aircraft, and shall also include for purposes of
this Guarantee, the Leased Aircraft. The Engines shall remain
Eligible provided that New Air 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 New Air.
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 New Air exceeds the
Certified Limit, New Air shall undertake on-wing Engine
maintenance recommended by IAE, with technical assistance
provided by IAE, to restore the performance of that Engine.
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 124 of 131
<Page>
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, New Air 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
New Air.
E. CREDIT ALLOWANCE
A credit of [****] 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 New Air of:
1. An average flight cycle of [****] hours;
2. Thrust levels which are derated an average of [****]
for Takeoff relative to full Takeoff ratings;
3. An average Aircraft utilization equal to or less than
[****] flight hours per year;
4. An Aircraft and Engine delivery schedule in respect
of thirty-two (32) Aircraft (composed of twenty-five
(25) Firm Aircraft and seven (7) Leased Aircraft) and
seven (7) spare Engines as described in the Contract
to which this Guarantee is attached; and
5. An average ambient temperature at Takeoff which is no
greater than ISA + 30-degrees- C.
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee,
(a) a variation from the conditions upon which the Guaranteed
Rate is predicated, or (b) a discontinuation of ownership by
New Air of any Engine or any V2500 powered Aircraft subsequent
to delivery to New Air, or (c) if New Air takes Option
Aircraft or Option Spare Engines.
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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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<Page>
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 New
Air 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 New Air 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 New Air
from IAE or any third-party, New Air may elect to receive the benefits
under this Guarantee or under any of the other benefits described
above, but not both.
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<Page>
EXHIBIT D-9
V2500 MAINTENANCE COST GUARANTEE
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<Page>
V2500 MAINTENANCE COST GUARANTEE
I INTRODUCTION
IAE assures New Air that by the end of the [****] year period
commencing with New Air's first commercial operation of Aircraft
(including for purposes of this Guarantee, the Leased Aircraft)
powered by V2500 Engines, the cumulative cost of Eligible Maintenance
for Eligible Engines will not, subject to escalation, exceed a
Guaranteed Cost Rate of U.S. [****] per Eligible Engine flight hour.
Under this Guarantee, if the cumulative cost per Eligible Engine flight
hour for Eligible Maintenance of New Air's Engines over the Period of
the Guarantee exceeds the escalated Guaranteed Cost Rate, IAE will
credit New Air's account with IAE an amount of [****] of the excess.
II GUARANTEE
A. PERIOD OF GUARANTEE
The Period of Guarantee will start on the date New Air
initiates commercial operation of its first Aircraft
(including for purposes of this Guarantee, the Leased
Aircraft) powered by Eligible Engines and will terminate
[****] 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 New Air during the Period of Guarantee and which
have been acquired pursuant to the Contract to which this
Guarantee is attached and the related proposal or contract for
delivery of Aircraft, and shall also include for purposes of
this Guarantee, the Leased Aircraft. The Engines shall remain
Eligible provided that New Air 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 New Air.
C. ELIGIBLE MAINTENANCE
Eligible Maintenance shall comprise maintenance of Eligible
Engines or Parts thereof 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;
3. an Airworthiness Directive issued by the applicable
Certification Authority; and
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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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<Page>
4. maintenance as recommended by IAE.
D. ELIGIBLE MAINTENANCE COSTS
Eligible Maintenance Costs shall comprise:
i) PARTS COSTS which shall comprise the costs to New Air
of all Parts removed from Eligible Engines during
Eligible Maintenance which are unfit for further
service except Parts removed upon expiry of their
Limited Life and vendor proprietary accessories and
parts therein;
ii) LABOR COSTS which shall comprise direct shop labor
man hours actually incurred during Eligible
Maintenance valued at the labor rate established by
IAE for New Air; and
iii) OUTSIDE SERVICES COSTS which shall comprise costs
invoiced to New Air for Eligible Proprietary Repair
Maintenance undertaken by outside contractors
approved by IAE.
E. NET MAINTENANCE COST
Within thirty days following each anniversary of the
commencement of the Period of Guarantee, New Air will report
to IAE the Eligible Maintenance Costs incurred by New Air
during the preceding year together with a statement of any
contributions received from IAE or third parties towards such
Eligible Maintenance Costs. Within the following sixty days,
IAE and New Air will jointly calculate the Net Maintenance
Cost for that year making appropriate reductions for
contributions received by New Air from IAE and third parties
and for disallowed costs incurred by New Air on maintenance
undertaken contrary to IAE recommendations or at labor rates
exceeding the warranty labor rate established by IAE or
otherwise excluded from this Guarantee.
F. GUARANTEED MAINTENANCE COST
Within thirty days following each anniversary of the
commencement of the Period of Guarantee, New Air will report
to IAE the flight hours of Eligible Engines operated by New
Air in the preceding year. Within the following sixty days,
IAE and New Air will jointly calculate the Guaranteed
Maintenance Cost for New Air for that year using the following
formula:
GMC = A x Escalated GCR
where:
A is the flight hours of Eligible Engines operated by New Air
in that year;
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<Page>
Escalated GCR is the Escalated Guaranteed Cost Rate for that
year;
and the Escalated Guaranteed Cost Rate for any year is calculated by
determining the arithmetic average of the Guaranteed Cost Rates
calculated for each month of that year using the IAE Escalation
Formula attached to this Contract for the base month of 1 January
1999.
G. ANNUAL STATEMENT
Within one hundred and twenty days following the second and each
subsequent anniversary of the commencement of the Period of
Guarantee, IAE will credit New Air's account with IAE an amount
equal to [****] of the difference between the sum of the Net
Maintenance Costs for each preceding year and the sum of the
Guaranteed Maintenance Costs for each preceding year. 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 New Air's account with IAE.
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
Maintenance excluded by the General Conditions of the Policy shall be
excluded from this Guarantee except that Engine Maintenance resulting from
ingestion of birds, hailstones or runway gravel shall be included as
Eligible under this Guarantee.
IV. SPECIFIC CONDITIONS
A. The Guaranteed Cost Rate is predicated on the use by New Air of:
1. An average flight cycle of no less than [****] hours;
2. Thrust levels which are derated an average of [****] for
Takeoff relative to full Takeoff ratings;
3. An average Aircraft utilization equal to or less than [****]
flight hours per year;
4. An Aircraft and Engine delivery schedule in respect of
thirty-two (32) Aircraft (composed of twenty-five (25) Firm
Aircraft and seven (7) Leased Aircraft) and seven (7) spare
Engines as described in the Proposal or Contract to which this
Guarantee is attached; and
5. An average ambient temperature at Takeoff which is no greater
than ISA + 3(deg) C.
THIS DOCUMENT CONTAINS INFORMATION PROPRIETARY TO IAE
May 1999
----------
[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
Page 130 of 131
<Page>
B. IAE reserves the right to make appropriate adjustments to the
Guaranteed Rate if there is, during the Period of Guarantee,
(a) a variation from the conditions upon which the Guaranteed
Rate is predicated, or (b) a discontinuation of ownership by
New Air of any Engine or any V2500 powered Aircraft subsequent
to delivery to New Air, or (c) if New Air takes Option
Aircraft or Option Spare Engines.
C. In the event credits are issued under Section II, Paragraph F,
such credits will be dedicated to the procurement of parts
aimed at correction of the situations contributing to excess
Engine Maintenance Costs. Accordingly, New Air and IAE will
establish jointly the modifications or Parts to be selected,
and New Air will incorporate the changes into Eligible
Engines.
V EXCLUSION OF BENEFITS
The intent of this Guarantee is to provide specified benefits to New
Air as a result of the failure of Eligible Engines to achieve the
maintenance cost level stipulated in the Guarantee. It is not the
intent, however, to duplicate benefits provided to New Air 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 New
Air from IAE or any third-party, New Air may elect to receive the
benefits under this Guarantee or under any of the other benefits
described above, but not both.
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