CONFIDENTIAL AMENDMENT No. 11 TO PURCHASE AGREEMENT DCT-014/2004
CONFIDENTIAL
TREATMENT
REQUESTED
PURSUANT TO RULE 24b-2
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934. The omittted materials have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL
AMENDMENT
No. 11 TO PURCHASE AGREEMENT DCT-014/2004
This
Amendment No. 11 to Purchase Agreement DCT-014/2004, dated as of August 30,
2005
(“Amendment No. 11”) relates to the Purchase Agreement DCT-014/2004 (the
“Purchase Agreement”) executed between Embraer - Empresa Brasileira de
Aeronáutica S.A. (“Embraer”) and Republic Airline Inc. (“Buyer”) dated March 19,
2004 as amended from time to time (collectively referred to herein as
“Agreement”). This Amendment No. 11 is between Embraer and Buyer, collectively
referred to herein as the “Parties”.
This
Amendment No. 11 sets forth additional agreements between the parties in regard
to various model ERJ 170-100SU aircraft which will be operated by Buyer or
a
Sibling (as defined in Section 14.2 of the Purchase Agreement) and which were
either delivered or to be delivered pursuant to Purchase Agreement DCT-021/03
(the “US Airways Purchase Agreement”), between Embraer and US Airways Group,
Inc. ("US Airways Group").
Except
as
otherwise provided for herein all terms of the Purchase Agreement shall remain
in full force and effect. All capitalized terms used in this Amendment No.
11,
which are not defined herein shall have the meaning given in the Purchase
Agreement. In the event of any conflict between this Amendment No. 11 and the
Purchase Agreement the terms, conditions and provisions of this Amendment No.
11
shall control.
WHEREAS,
according to Buyer, pursuant to the terms and conditions of the Aircraft
Transaction Agreement between Republic Airways Holdings Inc. (“Holdings”) and US
Airways, Inc. (“US Airways”), Holdings has agreed to cause Buyer or a Sibling to
(i) to accept delivery from Embraer of three (3) new ERJ 170-100 SU aircraft
(the “New US Airways Aircraft”) pursuant to lease agreements with an owner
trustee on behalf of an affiliate of General Electric Capital Corporation
("GECC"), immediately following the owner trustee's purchase of such aircraft
pursuant to an assignment of the US Airways Purchase Agreement; (ii) acquire
ten
(10) used ERJ 170-100 SU aircraft (the “Owned Aircraft”) from US Airways,
[*];
and
(iii) assume the leases from US Airways under which fifteen (15) additional
used
ERJ 170-100 SU aircraft (“GECC Aircraft”) are currently leased by an owner
trustee for an affiliate of GECC to US Airways.
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WHEREAS,
Buyer
and Embraer have agreed that the New US Airways Aircraft, the Owned Aircraft
and
the GECC Aircraft shall be incorporated in the Purchase Agreement pursuant
to
the terms and conditions specified in this Amendment No. 11.
NOW,
THEREFORE,
for
good and valuable consideration which is hereby acknowledged Embraer and Buyer
hereby agree as follows:
| 1. |
Aircraft
Serial
Numbers and Registration
Marks
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| 1.1 |
The
New
US
Airways Aircraft are specifically identified as
follows:
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Serial
Number
|
Registration
▇▇▇▇
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1)
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[*]
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[*]
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2)
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[*]
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[*]
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3)
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[*]
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[*]
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| 1.2 |
The
Owned Aircraft
and their delivery dates from Embraer to US Airways are specifically
identified as follows:
|
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Serial
Number
|
Registration
▇▇▇▇
|
Delivery
Date from Embraer
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1)
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[*]
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[*]
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[*]
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2)
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[*]
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3)
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4)
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5)
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6)
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7)
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8)
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[*]
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9)
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[*]
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[*]
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[*]
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10)
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[*]
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[*]
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[*]
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| 1.3 |
The
GECC Aircraft
and their delivery dates from Embraer to US Airways
are specifically identified as
follows:
|
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Serial
Number
|
Registration
▇▇▇▇
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Delivery
Date from Embraer
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1)
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[*]
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[*]
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[*]
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2)
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[*]
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[*]
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[*]
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3)
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[*]
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[*]
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[*]
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6)
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7)
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8)
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9)
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10)
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11)
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12)
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13)
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14)
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15)
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[*]
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[*]
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| 1.4 |
Buyer
shall make commercially reasonable efforts to [*]
and of [*]
and whether Buyer [*].
|
| 2. |
Product
Support
|
| 2.1 |
After
delivery of the New US Airways Aircraft to Buyer, Buyer shall have
the
right to [*]
in
accordance with [*]
|
[*][*].
| 2.2 |
Embraer
shall provide the following [*]
in
accordance with [*]
|
[*][*][*]
| 2.3 |
For
each New US Airways Aircraft, Owned Aircraft and GECC Aircraft, the
following product support provisions shall apply at the time such
aircraft
becomes subject to the Republic Warranty (as provided in Section
3 below):
|
[*][*]
[*]
[*]
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| 3. |
Warranty
and Patent Indemnity
|
| 3.1 |
Upon
delivery, each New US Airways Aircraft shall be warranted pursuant
to
[*]
|
| 3.2 |
At
the time each [*],
the relevant Owned Aircraft shall be [*].
|
| 3.3 |
At
the time the lease for a GECC Aircraft is assigned to Buyer or a
Sibling,
such aircraft shall be warranted pursuant to [*].
|
| 3.4 |
For
each New US Airways Aircraft, Owned Aircraft and GECC Aircraft
[*]
shall apply.
|
| 3.5 |
Each
New US Airways Aircraft, Owned Aircraft and GECC Aircraft shall be
subject
to Article 15 of the Purchase Agreement -- "Restrictions and Patent
Indemnity"— at the time such aircraft becomes [*].
|
| 3.6 |
For
the avoidance of doubt, at the time each New US Airways Aircraft,
Owned
Aircraft and GECC Aircraft becomes [*]
Buyer shall [*].
|
| 4. |
Other
Guarantees
|
| 4.1 |
Attachment
E to the Purchase Agreement is hereby deleted and replaced by the
new
Attachment E to this Amendment No. 11. The New US Airways Aircraft,
the
Owned Aircraft and the GECC Aircraft shall be [*].
|
| 4.2 |
Attachment
F to the Purchase Agreement is hereby deleted and replaced by the
new
Attachment F to this Amendment No. 11. The New US Airways Aircraft,
the
Owned Aircraft and the GECC Aircraft shall be [*].
|
| 4.3 |
The
Service Life Guarantee under Attachment G to the Purchase Agreement
("Attachment G") shall [*].
|
| 5. |
Spare
Parts Credit
|
| 5.1 |
Buyer
[*]
as
provided in this Article 5.
|
| 5.2 |
The
[*]
shall be [*]only
after [*].
|
| 5.3 |
The
[*]
shall be [*].
|
| 5.4 |
When
the [*] Buyer
may [*].
|
| 5.5 |
[*].
|
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| 6. |
Exercise
of Rights By Siblings
|
The
exercise of rights by a Sibling shall be subject to the provisions of Section
14.1 of the Purchase Agreement; provided that [*].
| 7. |
Miscellaneous
|
All
other
provisions of the Agreement which have not been specifically amended or modified
by this Amendment No. 11 shall remain valid in full force and effect without
any
change. This Amendment No. 11 may be executed in counterparts (including by
facsimile), which together shall constitute one amendment.
[Remainder
of page intentionally left in blank]
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Execution
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CONFIDENTIAL
IN
WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have
entered into and executed this Amendment No. 11 to Purchase Agreement to be
effective as of the date first written above.
|
EMBRAER
- Empresa Brasileira de Aeronáutica S.A.
|
Republic
Airline Inc.
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|
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By
/s/ Antonio ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Name: Antonio
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Executive
Vice President Corporate
& CFO
|
By /s/
▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇
▇▇▇▇▇▇▇
Title:
President & CEO
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|
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By /s/
▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
of Contracts
Airline
Market
|
Date:
Place:
|
|
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Date: August
30, ▇▇▇▇
▇▇▇▇▇: ▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇
|
||
| Witness: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | Witness: /s/ ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ | ||
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| Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ |
Name:
▇▇▇▇-▇▇▇▇
ArnellTitle |
EXHIBIT
A
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ATTACHMENT “E”
- DIRECT MAINTENANCE COST GUARANTEE
| I. |
Embraer,
subject to the terms, conditions and limitations contained in this
Attachment, shall guarantee the incurred direct maintenance cost
(the
“Maintenance Cost Guarantee”) for the fleet of Aircraft subject of the
Purchase Agreement as follows:
|
| a. |
The
Maintenance Guarantee for the Aircraft shall be for the period that
begins
at [*]
(“Guarantee Term”). [*]
|
| b. |
For
the [*]
period commencing with the first Aircraft Actual Delivery Date, the
Achieved cumulative Maintenance Cost - AMC for replacement, repair,
overhauls and inspections of Buyer's Aircraft, shall not exceed a
Maintenance Cost Guarantee (“MCG,”)
rate of:
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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| c. |
For
the [*]
period commencing with the first Aircraft Actual Delivery Date, the
Achieved cumulative Maintenance Cost - AMC for replacement, repair,
overhauls and inspections of Buyer's Aircraft, shall not exceed a
Maintenance Cost Guarantee ("MCG,")
rate of:
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[*]
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[*]
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[*]
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[*]
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[*]
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[*]
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| d. |
The
[*]
shall be [*]
in
accordance with [*].
|
| e. |
Measurement
will be computed annually on the anniversary date of [*].
The results will be reconciled year by year until [*].
|
| f. |
In
the event at the end of each annual measurement period, the AMC is
higher
than the MCG, Embraer shall provide [*]
to
Buyer as provided for below:
|
[*]
[*]
| g. |
Buyer
shall use [*]
efforts to calculate and submit to Embraer the AMC quarterly, in
electronic format, [*]
after the end of each quarter during the Guarantee Term. In the event
that
Buyer fails to submit such data to Embraer as described in the preceding
sentence, Embraer shall send a written notice to Buyer requesting
such
data, and the guarantee contained in this Attachment shall terminate
in
the event Buyer fails to submit the AMC to Embraer within [*]
of
such written notice.
|
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ATTACHMENT “E”
- DIRECT MAINTENANCE COST
GUARANTEE
The
Parties shall use [*]
efforts
to reach an agreement over the data annually within [*]
after
the submission of AMC in regard to any fourth quarter. In the event that the
AMC
contains [*]
that is
out of the reasonable control of [*],
the
Parties shall also discuss the reasons for such [*]
and
whether it should be included in the calculation of the AMC. Any credit amount
will be credited to Buyer [*]
after
the agreement regarding the annual period. Such credit may be used by Buyer
only
toward [*].
| h. |
This
Maintenance Guarantee is based upon the following assumptions, and
any
change to the assumptions shall result in an appropriate recalculation
of
the MCG rate specified in items “b” and “c” above, at Embraer
criteria.
|
Fleet
Size: A
minimum
fleet size of [*].
Assumptions
01
| § |
Economic
condition:
[*]
|
| § |
Utilization:
The guarantee covers a minimum of [*]
flight hours per cycle, [*]
APU hour per flight hour plus or minus [*]
APU hour per flight hour and [*]
APU cycle per flight cycle plus or minus [*]
APU cycle per flight cycle. Buyer's
fleet-wide average
annual Aircraft utilization shall be [*]
flight hours, plus or minus [*].
|
| § |
Labor
rate: [*]
per man-hour [*]
|
| § |
Maintenance
Review Board Report: MRB
170.
|
Assumptions
02
| § |
Economic
condition:
July 2003.
|
| § |
Utilization:
The guarantee covers a minimum of 1.2 flight hours per cycle, 0.7
APU hour
per flight hour plus or minus 5% APU hour per flight hour and 1.0
APU
cycle per flight cycle plus or minus 5% APU cycle per flight cycle.
Buyer's
fleet-wide average
annual Aircraft utilization shall be 3,500 flight hours, plus or
minus
5%.
|
| § |
Labor
rate:
US$ 35.00 per man-hour (to be escalated in accordance with Attachment
D to
the Purchase Agreement).
|
| § |
Maintenance
Review Board Report: MRB
170.
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| i. |
The
following are the elements covered under this Maintenance
Guarantee:
|
| 1. |
Material
cost for non-repairable parts purchased from or through Embraer and
/ or
Embraer approved vendors.
|
| 2. |
Overhaul/repair
costs incurred at Embraer approved repair
facilities.
|
| 3. |
Expendable
which can be accounted for on an unit basis, i.e. filters, gaskets,
excluding wire, rivets, nuts, bolts, washers, pins, brackets, tie
wraps.
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| 4. |
Parts
and materials consumed through scheduled maintenance according to
the
Maintenance Review Board Report
(MRB).
|
| j. |
The
following elements are not covered under this guarantee:
|
| 1. |
Costs
associated with taxes, levies, imposts, customs
fees.
|
| 2. |
Shipping,
receiving, ferry, packing, storage, warehousing and insurance
expenses.
|
| 3. |
General
administrative and overhead
expenses.
|
| 4. |
Restoration
expenses incurred due to damage to or failure of Aircraft, components
or
parts caused by accident, incident, FOD or Acts of God, negligence,
abuse,
misuse and/or maintenance errors.
|
| 5. |
When
the Aircraft or any of its parts has/have been altered or modified
by
Buyer, without prior approval from Embraer or from the manufacturer
of the
parts through a service bulletin, provided such approvals have not
been
unreasonably withheld.
|
| 6. |
Consumables
including but not limited to fluids, water, oils, sealants, washing
compounds, cleansers, solvents, and
lubricants.
|
| 7. |
Labor
costs (excluding the [*]
related to [*]
and [*]
service bulletins implementation, provided that [*]
have been [*]
in
writing [*]
in
order [*].
|
| 8. |
Normal
line operations activities (i.e. Aircraft servicing) including but
not
limited to walkaround (i.e. visual inspection), fueling, parking,
washing,
lavatory servicing and gallery
servicing.
|
| 9. |
Service
bulletins and or airworthiness
directives.
|
| 10. |
Parts
or components returned from vendors with “no-fault” found, i.e.,
re-certification charges without any repair and associated labor.
Any part
removed and replaced from an Aircraft which does not solve the Aircraft
problem (poor troubleshooting) and associated
labor.
|
| 11. |
Leasing
or loan fees related to the aircraft or any of its parts which are
being
used in place of an unserviceable
unit.
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| 12. |
Any
part supplied on a “no-charge basis” or for which a warranty credit or
replacement part has been supplied.
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| 13. |
Aircraft
downtime costs.
|
| 14. |
Any
parts that are changed during scheduled or unscheduled maintenance,
due to
failure, which are still under the warranty period and, are not submitted
to Embraer or the suppliers for warranty
credit.
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| 15. |
Cabin
equipment and furnishing materials, such as but not limited to carpets,
seat covers, galley equipment and passenger
commodities.
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| 16. |
Spare
parts prices that exceed the prices obtainable from Embraer, provided,
in
the event that [*]
a
reasonable time frame, [*]may
[*]
and [*]
will reasonably agree on [*].
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ATTACHMENT “E”
- DIRECT MAINTENANCE COST GUARANTEE
| 17. | In cases of deterioration, wear, breakage, damage or any other defect resulting from the use of inadequate packing methods when returning items to Embraer or its representatives. |
| 18. |
Maintenance
problems caused by Buyer’s negligence or misuse of parts or Buyer’s
failure to take all maintenance actions on the Aircraft as recommended
in
all applicable maintenance
manuals.
|
| 19. |
Maintenance
problems involving Aircraft or parts that has / have been involved
in an
accident, or when parts either defective or not complying to
manufacturer’s design or specification have been
used.
|
| 20. |
Maintenance
problems involving parts that have had their identification marks,
designation, seal or serial number altered or
removed.
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| 21. |
Extraordinary
costs incurred as a result of any labor disruption or dispute involving
a
significant work action that affects in whole or part the Aircraft’s
normal operation or maintenance.
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| 22. |
Engines,
related parts and related LRU
costs.
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| 23. |
Nacelle
and Thrust Reverser.
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| 24. |
BFE
(Buyer Furnished Equipment) and / or BIE (Buyer Installed Equipment)
costs.
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| 25. |
Maintenance
reserves.
|
| 26. |
GSE
(Ground Support Equipment) costs.
|
| 27. |
For
the purpose of calculating the Achieved Maintenance Cost Guarantee,
the
materials and labor costs related to the New US Airways Aircraft,
Owned
Aircraft and GECC Aircraft shall be accounted for at the time these
aircraft start their revenue service by Buyer under this Purchase
Agreement. All previous materials cost and labor costs shall be
disregarded. The total number of previous flight hours and cycles
of such
additional aircraft (New US Airways Aircraft, Owned Aircraft and
GECC
Aircraft) New US Airways Aircraft, Owned Aircraft and GECC Aircraft
shall
be considered.
|
| II. |
The
foregoing maintenance guarantee is provided subject to Buyer’s adherence
to the following general
conditions:
|
| a. |
Airplane
Operation: Aircraft shall be operated in airline service in accordance
with the applicable Air Authority regulations and as recommended
by
Embraer through the official and updated Operations and Airplane
Flight
Manual.
|
| b. |
Inspection
Program: The Aircraft shall be maintained in accordance with the
current
Maintenance Review Board Report - (MRB), and the checks shall in
no event
occur at a [*]
Buyer’s Maintenance Program must have provisions for escalating the checks
interval as soon as the applicable Air Authority allows. Buyer’s program
should also include the use of task cards to assist the maintenance
personnel in performing inspection
task.
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| c. |
Aircraft
Manuals: Buyer shall keep a complete set of Embraer recommended manuals
up-to-date and available to airline personnel for assisting them
with the
maintenance and operation of the Aircraft. A set of recommended manuals
or
a electronic link to the data should be available at all maintenance
bases
(line or heavy) and shall be maintained with the latest revisions
at all
times.
|
| d. |
Warranty:
Buyer shall have at minimum, one person which will be dedicated to
the
Aircraft warranty program. This person(s) will be trained by Embraer
warranty department on the correct procedures for filing Buyer warranty
claims in accordance with mutually agreed format. This person(s)
shall
also be responsible for the filing of warranty claims directly to
suppliers for credit, repair or
replacement.
|
| e. |
Parts
Repair: All shop repairs shall be performed in Embraer’s or Embraer’s
suppliers’ authorized repair shops.
|
| f. |
Staff
levels: Buyer shall have available reasonable staff to properly maintain
the Aircraft during scheduled and unscheduled maintenance. This shall
include, but not be limited to, mechanics, electricians, avionics
specialists, inspectors, cleaners, ground personnel and flight crews
licensed or certified by the applicable Air Authority as required
by the
applicable Air Authority
regulations.
|
| g. |
Training:
Buyer is required to put in place a training program approved by
the local
airworthiness authority, which, at a minimum, shall include the following
items:
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| 1. |
initial
and recurrent training for pilots in the
Aircraft;
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| 2. |
initial
and recurrent training for flight attendants in the Aircraft;
and
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| 3. |
initial
and recurrent training for the maintenance staff (airframe, powerplant,
electric avionics specialists) in the
Aircraft.
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A
reasonable number of maintenance specialist will require supplier’s
training.
Buyer
is
required to train to the above standards a reasonable number of new hired
employee who will work in or on the Aircraft.
| h. |
Spare
Parts Limitation: Spare parts price shall not exceed the prices obtainable
from Embraer. In the event that Embraer cannot supply a part to Buyer
in a
reasonable time frame, Embraer may authorize the purchase of such
part by
Buyer from a third party at a price in excess of Embraer’s price, Embraer
and Buyer will mutually agree on the portion of such price to be
included
in this guarantee provided Buyer maintained the minimum stock level
recommended by Embraer.
|
| i. |
Buyer
will be required to provide Embraer an every three month service
bulletin
status report, containing service bulletin number, Aircraft serial
number,
Aircraft total time and total
cycles.
|
| j. |
Ground
Support Equipment: Embraer shall provide Buyer a list of tooling
and
ground support equipment required to maintain the Aircraft, this
list
shall be subject to Buyer’s reasonable approval. Buyer will be required to
maintain these levels of required tooling and ground support equipment
in
good working order at all times.
|
| k. |
Reliability
Reporting: Buyer is to provide monthly to Embraer an Aircraft reliability
report. This report shall include Aircraft total time and cycles,
component removals, shop finding reports and tear down reports (for
each
failure completed) by authorized agencies and SDR’s (Service Difficult
Report) with date, Aircraft registration, problem description, maintenance
action, and part number and serial number of the components removed
and
installed. Buyer shall use the ATA 100 chapter breakdown format for
all
reports.
|
| l. |
Accounting
System:
|
| 1. |
Buyer
shall have an accounting system, subject to Embraer’s reasonable approval,
which demonstrates the ability to discriminate between chargeable
and
non-chargeable costs and expenses. Buyer’s accounting system shall be
presented to Embraer, upon Embraer’s written request, [*]
before [*]
|
| 2. |
Upon
Embraer’s written request, Buyer shall also provide on a [*]
basis an activity and expenditure report satisfactory to Embraer,
in
electronic format and in accordance with Embraer’s Service News Letter for
data exchange.
|
| 3. |
Upon
Embraer’s written request, Embraer and Buyer may convene frequently
meetings to address issues concerning the AMC and to identify methods
to
decrease Buyer’s maintenance costs. At a minimum, Embraer and Buyer shall
have two meetings per year to confirm and compute all costs claimed
by
Buyer. Buyer shall permit Embraer access to all Buyer data which
can be
used to verify any reports produced pursuant to this Attachment.
|
| m. |
Duplicated
Guarantee: If Buyer negotiates directly with any of Embraer’s
suppliers/vendors a particular maintenance cost guarantee or equivalent
program (including fleet hour agreements), or an alternative support
program with Embraer, the Parties shall negotiate in good faith and
agree
on the
portion of cost related to this equipment/system that shall be excluded
from the MCG rate, specified in Article I.b and I.c, and shall result
in
an appropriate recalculation of the
MCG.
|
| III. |
Buyer
shall not unreasonably reject Embraer’s recommendations, changes or
solutions to elements of maintenance that would result in cost savings,
as
reasonably determined by the
Parties.
|
_____
*
Confidential
| IV. |
EXCEPT
AS OTHERWISE PROVIDED IN THIS AGREEMENT THE GUARANTEES, OBLIGATIONS
AND
LIABILITIES OF EMBRAER, AND REMEDIES OF BUYER SET FORTH IN THIS AIRCRAFT
MAINTENANCE COST GUARANTEE ARE EXCLUSIVE AND IN SUBSTITUTION FOR,
AND
BUYER HEREBY WAIVES, RELEASES AND RENOUNCES, ALL OTHER RIGHTS, CLAIMS,
DAMAGES AND REMEDIES OF BUYER AGAINST EMBRAER OR ANY ASSIGNEE OF
EMBRAER,
EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO
ANY
GUARANTEED LEVEL OF AIRCRAFT MAINTENANCE
COSTS.
|
| V. |
The
guarantee hereby expressed is established between Embraer and Buyer
and it
cannot be transferred or assigned to others, unless stated in this
Agreement or by previous written consent of
Embraer.
|
ATTACHMENT
"F" - SCHEDULE RELIABILITY GUARANTEE
I. Definitions.
a. Available
for Dispatch: An Aircraft which is on the ground and cleared for dispatch by
signature of Buyer's responsible maintenance personnel at least [*]
before
the scheduled departure time of the initial flight in any given day shall be
deemed to be "available for dispatch".
b. Maintenance
Interruption.
1. A
maintenance interruption occurs when the malfunction of an item, or necessary
checking and/or corrective actions, cause a revenue flight not to take place
or
a flight delay exceeding [*].
2. For
the
purposes of this guarantee, only the initial Maintenance Interruption shall
be
accounted as interruption. Maintenance Interruption of any or all flights on
subsequent days arising from the initial Maintenance Interruption shall not
constitute an additional Maintenance Interruption.
3. Before
a
flight may be considered as a Maintenance Interruption for the purpose of this
Schedule Reliability Guarantee the Aircraft must be inspected for mechanical
failure or malfunction.
4. A
repetitive problem, which caused an actual maintenance interruption and was
not
previously corrected, shall not be counted as a Maintenance
Interruption.
5. To
be
accounted as a Maintenance Interruption, any malfunction reported, either verbal
or written, must result in maintenance corrective action. “No-trouble-found” or
“could not duplicate” or “reset” events shall not be accounted as Maintenance
Interruption.
6. A
maintenance interruption that occurs due to failures of systems or parts from
suppliers or vendors that have a separate maintenance interruption guarantee
agreement with Buyer, and which is not assigned to Embraer, shall not be
considered as a Maintenance Interruption.
c. Achieved
Dispatch Reliability Percentage (“ADRP”).
ADRP
is
the actual dispatch reliability percentage obtained by Buyer's fleet of Aircraft
in regular revenue service, which are the subject of this
Agreement.
ADRP
shall be computed monthly commencing with [*]
by
Buyer, as follows:
[*]
II. Embraer,
subject to the conditions and limitations expressed herein, will guarantee
the
Aircraft’s schedule reliability percentage as follows:
_____
*
Confidential
ATTACHMENT
"F" - SCHEDULE RELIABILITY
GUARANTEE
a. The
average ADRP for the first [*]
period
after [*]
delivered under the Purchase Agreement, shall be [*];
for the
[*]
the ADPR
shall be [*];
for the
[*]
the ADPR
shall be [*];
for the
[*]
the ADPR
shall be [*],
for the
[*]
(the
“Final Period”) the ADPR shall be [*].
b. In
the
event that the ADRP in any of the [*]
periods
referred to above is lower than GDR for the relevant period, Embraer shall
diligently, after notification by Buyer:
1. Make
recommendations concerning Buyer's programs, publications and maintenance and
operational policies to improve ADRP.
2. Take
all
measures, as deemed necessary and appropriate by Embraer when vendor action
does
not provide the required improvement in the ADRP.
3. [*]
Embraer
shall issue a proposal to Buyer showing the price of the relevant Service
Bulletin and the effectiveness of such modification for Buyer.
c. In
the
event the average ADRP at the end of any of the [*]
periods
described in paragraph “II.a.” is [*]
for such
period, Embraer shall credit Buyer for Maintenance Interruptions calculated
according to the following formula:
[*] [*]
In
the
event the average ADRP at the end of any of the [*]
periods
described in paragraph “II.a.” above is [*]
for such
period, the [*]
calculated according to the formula above shall be [*].
Measurements
will be calculated and submitted by Buyer [*]
after
the end of each [*]
referred
to in Article II a. herein. The Parties shall do their efforts to reach an
agreement over the data [*]
of the
submission thereof. Any achieved credit amount will be credited to Buyer or
to
Embraer [*]
after
each agreement date for each of the [*]
periods.
Buyer may use such credit only toward [*].
Embraer
may use such credit only for [*].
The
sum
of all credits under this Dispatch Reliability Guarantee shall not exceed
[*]
for
Buyer’s entire Aircraft fleet for the [*]
periods.
d. This
dispatch reliability guarantee is based upon the following assumptions provided
by Buyer, and any change to the assumptions shall be cause for reevaluation
or
adjustments of this guarantee upon the reasonable agreement of the
Parties.
Fleet
Size:
Minimum
[*].
_____
*
Confidential
ATTACHMENT
"F" - SCHEDULE RELIABILITY
GUARANTEE
Utilization:
The
guarantee covers a minimum of [*]
flight
hours per cycle, [*]
APU hour
per flight hour plus or minus [*]
APU hour
per flight hour and [*]
APU
cycle per flight cycle plus or minus [*]
APU
cycle per flight cycle. Buyer's
fleet-wide average
annual Aircraft utilization shall be [*]
flight
hours, plus or minus [*].
For
all
purposes of this guarantee, the regularly scheduled revenue Aircraft departures
and the Maintenance Interruptions related to the SAC Aircraft, Owned Aircraft
and GECC Aircraft shall be accounted for at the time these aircraft start their
revenue service by Buyer under this Purchase Agreement. All previous regularly
scheduled revenue Aircraft departures and Maintenance Interruptions shall be
disregarded.
e. The
following elements are not covered under this guarantee:
- Interruptions
of scheduled flights due to reasons other than Aircraft mechanical failures,
including without limitation:
- Air
Traffic Control
- Weather,
acts of God, FOD, wars, riots, third party criminal acts
- Accidents
- Incident
- Negligence
- Conditions
that exist prior to dispatch which lead to a flight interruption and could
have
been prevented by maintenance prior to dispatch (including but not limited
to
worn, flat and cut tires, servicing (ATA Chapter 12), dead batteries, and worn
brakes)
- Hard
landing.
- Late
out
of maintenance
- Force
majeure
- Crew
refusal
- Optional
equipment other than that identified on Attachment “A” to this
Agreement
- Operational
delays or cancellations not related to maintenance
- Passenger
and/or baggage loading
- Non-availability
of spares or equipment
- Non-availability
of personnel
- Operation
interruptions or Maintenance Interruptions, which occurred due to items, related
in the Minimum Equipment List (“▇▇▇”) issued and/or approved by the local
regulatory authority was followed
- If
the
Aviation Authority grounds Buyer's fleet, or one of Buyer’s
Aircraft
- Maintenance
problems caused by Buyer’s negligence or misuse of parts or Buyer’s failure to
take all maintenance actions on the Aircraft as recommended in all applicable
maintenance manuals
_____
*
Confidential
ATTACHMENT
"F" - SCHEDULE RELIABILITY
GUARANTEE
- Maintenance
problems involving Aircraft or parts that has/have been involved in an accident,
or when parts either defective or not complying to manufacturer’s design or
specification have been used.
- Maintenance
problems involving parts that have had their identification marks, designation,
seal or serial number altered or removed
- Maintenance
problem resulting from inadequate packing for shipment and storage
- A
flight
interruption
shall
not be considered as a Maintenance Interruption if, at the time of the
interruption, Buyer has a spare aircraft in its fleet, even though for a
different model, that could commercially reasonable be used to avoid such
interruption and is not otherwise deployed in service
- Regulatory
changes compliance
- Cancellations
or delays caused by components repaired in non-approved local airworthiness
authority shop
- Flight
cancellation or delay occurred due to one same problem on the same Aircraft
within fourteen (14) consecutive days period.
III. The
foregoing dispatch reliability guarantee is provided subject to Buyer's
adherence in all material respects to the following general
conditions:
a. Airplane
Operation: Aircraft shall be operated in airline service in accordance with
the
Aviation Authority regulations and as recommended by Embraer through the
official and most updated Operations and Airplane Flight Manual. Buyer shall
have available one spare Aircraft for each twenty Aircraft at all
times.
b. Inspection
Program: The Aircraft shall be maintained in accordance with the most current
MRB document. Buyer’s program must have provisions for escalating the checks
intervals as soon as the Aviation Authority allows. Buyer’s program should also
include the use of task cards to assist the maintenance personnel in performing
inspection tasks.
c. Aircraft
Manuals: Buyer shall keep a complete set of Embraer recommended manuals
up-to-date and available to airline personnel for assisting them with the
maintenance and operation of the Aircraft. A set of recommended manuals should
be available at all maintenance bases (line or heavy) and shall be maintained
with the latest revisions at all times.
d. ▇▇▇:
Buyer shall keep its ▇▇▇ up to date, with the most current issue.
e. Stocking
Levels: Buyer shall be responsible to stock and maintain the recommended spare
parts list (RSPL) in inventory, throughout the guarantee period. There shall
be
a minimum inventory level at each line maintenance base along with the major
parts being stored at the heavy maintenance facility. In the event during the
ADR meetings, the Aircraft does not achieve the guaranteed values, and if the
cause of this non-performance is the lack of spare parts initially recommended
by Embraer for the RSPL and not purchased by Buyer, this guarantee will not
be
applicable. Embraer is to receive annually an inventory list from the Buyer
that
shows current stocking levels and the locations of all Aircraft spare parts
and
will make any recommendations on additional inventory if needed.
f. Parts
Repair: All shop repairs shall be performed in Embraer’s or Embraer’s suppliers'
authorized repair shops.
g. Staff
Levels: Buyer shall have available reasonable staff to properly maintain the
Aircraft during scheduled and unscheduled maintenance. This shall include,
but
not be limited to, mechanics, electricians, avionics specialists, inspectors,
cleaners, ground personnel and flight crews licensed or certified by the
Aviation Authority as required by Aviation Authority regulations.
h. Training:
Buyer is required to put in place a training program approved by the Aviation
Authority, which, at a minimum, shall include the following items:
1. Initial
and recurrent training for pilots in the Aircraft;
2. Initial
and recurrent training for flight attendants in the Aircraft; and
3. Initial
and recurrent training for the maintenance staff (airframe, power plant,
electric avionics specialists) in the Aircraft.
Any
maintenance specialist (engine, APU, avionics) will require suppliers' training.
Buyer
is
required to train to the above standards any new hired employee who will work
in
or on the Aircraft.
i. Aircraft
Cleaning: Buyer shall keep the Aircraft reasonably clean, inside and out, by
commercial airline standards at all times. This includes without limitation,
the
engines, wheel ▇▇▇▇▇, nacelles, landing gear and flight control areas.
j. Service
Bulletins: When Embraer recommends that Buyer implement a service bulletin
which
improves performance or dispatch reliability, enhances flight operations or
decreases maintenance costs, [*]
and
Buyer concludes by a cost benefit analysis that the SB is commercially
reasonable, Embraer Customer Support Department shall contact Buyer's Vice
President of Maintenance, in writing, with recommendations that the service
bulletin be complied with. Buyer will schedule the Aircraft for incorporation
of
such service bulletin [*],
but,
subject to Embraer agreement which shall not be unreasonably withheld, Buyer
may
schedule it for incorporation during a maintenance check, so as to minimize
interruption to scheduled service.
k. Ground
Support Equipment: Embraer shall provide Buyer two lists of tooling and ground
support equipment required to maintain the Aircraft, which lists shall be
subject to Buyer's reasonable approval. One list will cover line maintenance
bases while the other will apply to heavy maintenance facilities. Buyer will
be
required to maintain these levels of required tooling and ground support
equipment in good working order at all times.
_____
*
Confidential
ATTACHMENT
"F" - SCHEDULE RELIABILITY
GUARANTEE
l. Reliability
Reporting: Buyer shall monthly provide to Embraer, in electronic format, a
reliability and maintenance cost report in accordance with the latest revision
of the Embraer’s Service News Letter for data exchange.
m. Rejection:
Buyer shall not unreasonably reject Embraer's recommendations / changes /
solutions which in Embraer's opinion, would result in an improvement in Buyer's
dispatch reliability. Any such rejection shall be cause for re-evaluation and/or
adjustment of this guarantee. Anything in this Agreement to the contrary
notwithstanding, Buyer shall not be required to comply with or implement, and
the benefits and rights provided Buyer hereunder will not be adversely affected
by, Buyer’s not complying with or implementing any Embraer recommendation /
changes / solutions (including without limitation, recommended service
bulletins) or any provision of applicable product literature for which
compliance is not mandated by the local airworthiness authority rules and
regulations if Buyer has determined in good faith that such recommendation
/
change / solution or provision of such product literature is not reasonably
expected to result in a net economic benefit to Buyer in light of all applicable
facts and circumstances, including, without limitation, the number of man-hours
reasonably estimated by Embraer to be required to accomplish such recommendation
/ change / solution, the labor cost to be incurred, the potential reduction
in
maintenance costs to be realized, the time value of money and the period which
would be required for such savings resulting from the improvement in dispatch
reliability to offset the labor and other costs associated with such man-hours
(provided that Buyer may not consider any benefits to Buyer under any product
guarantees to the extent resulting from Buyer’s decision to comply or not to
comply with or implement a recommendation, change, or solution).
n. Certification
or Regulatory Changes: The achieved maintenance interruption shall not take
into
account those interruptions, which were originated by conformity to mandatory
regulatory change.
o. Achieved
Dispatch Reliability Review Meeting: An Achieved Dispatch Reliability Review
Meeting shall be scheduled, if necessary, and at the end of each six (6) month
period of Buyer's Aircraft operation. Representatives of Buyer and Embraer
shall
participate in the meetings and will:
1. Review
current Achieved Dispatch Reliability;
2. Eliminate
irrelevant or non-Aircraft-intrinsic interruption claims from computed
cancellation rates; and
3. Review
Buyer's compliance with Service Bulletins as required by Article III.j herein,
review disputed claims, and consider methods for improvement of Achieved
Dispatch Reliability.
Buyer
shall permit Embraer access to all Buyer data which can be used in understanding
and analyzing the dispatch reliability failure.
p. Duplicated
Guarantee: If Buyer negotiates directly with any of Embraer’s suppliers/vendors
a particular dispatch or completion reliability guarantee, or an alternative
support program with Embraer, this
amount shall be excluded from the guarantee rate, specified in Article III.a,
and shall result in an appropriate recalculation of this guarantee in accordance
with Embraer criteria.
IV. Suspension
| a. |
This
guarantee shall be automatically suspended and shall not apply during
the
period of any labor disruption or dispute involving a significant
work
action, which affects in whole or in part the Aircraft normal operation
and maintenance.
|
| b. |
This
guarantee shall be automatically suspended and shall not apply during
the
computation period of which worldwide EMBRAER 170 fleet (excluding
Buyer’s
Aircraft) average dispatch reliability percentage is at least 1%
higher
than Buyer’s Aircraft dispatch reliability
percentage.
|
V. Buyer
will not include in the calculation of the ADRP Maintenance Interruptions
occurring under any of the circumstances listed below:
a. When
the
Aircraft has been used in an attempt to break records, or subjected to
experimental flights, or in any other way not in conformity with the flight
manual or the airworthiness certificate, or subject to any manner of use in
contravention of the applicable aerial navigation or other regulations or rules,
issued or recommended by government authorities of whatever country in which
the
Aircraft is operated, when accepted and recommended by ICAO; and
b. When
the
Aircraft or any of its parts has/have been altered or modified by Buyer, without
prior approval from Embraer or from the manufacturer of the parts through a
service bulletin, provided such approval has not been unreasonably
withheld.
VI. THE
GUARANTEES, OBLIGATIONS AND LIABILITIES OF EMBRAER, AND REMEDIES OF BUYER SET
FORTH IN THIS SCHEDULE RELIABILITY GUARANTEE ARE EXCLUSIVE AND IN SUBSTITUTION
FOR, AND BUYER HEREBY WAIVES, RELEASES AND RENOUNCES, ALL OTHER RIGHTS, CLAIMS,
DAMAGES AND REMEDIES OF BUYER AGAINST EMBRAER OR ANY ASSIGNEE OF EMBRAER,
EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY ACHIEVED
DISPATCH RELIABILITY.
VII. The
terms
and conditions of this dispatch reliability guarantee do not alter, modify
or
impair, in any way, the terms and conditions of Attachment “C“ (Aircraft
Warranty Certificate) to the Purchase Agreement.
VIII. The
guarantee hereby expressed is established between Embraer and Buyer and it
cannot be transferred or assigned to others, unless by previous written consent
of Embraer.