AMENDED AND RESTATED AIRCRAFT USE AGREEMENT

 

<PAGE>

 

                                                                    EXHIBIT 10.1

 

             AMENDED AND RESTATED AIRCRAFT AND ENGINE USE AGREEMENT

 

         This Amended and Restated Aircraft Use Agreement (this "Agreement"), is

made as of the 1st day of January, 2004, by and between Kitty Hawk Aircargo,

Inc. ("Aircargo") and the Kitty Hawk Collateral Liquidating Trust, by Langdon

Asset Management, Inc., its Trust Manager (the "Trust").

 

         A.       Aircargo and the Trust entered into that certain Aircraft and

Engine Use Agreement dated as of September 30, 2002 (the "Original Agreement").

 

         B.       Aircargo and the Trust have determined to amend and restate

the Original Agreement in its entirety as set forth herein.

 

         C.       In consideration of the foregoing premises (which constitute

an integral part of this Agreement) and the mutual covenants hereinafter set

forth, and for other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, the parties hereto hereby agree as

follows:

 

         1.       Utilization of Airframes. Until the latest date shown on

Schedule A, Aircargo shall use the airframes identified on Schedule A (the

"Airframes") collectively, in total, a minimum of ***** block hours ("Block

Hours") per month (the "Minimum Airframe Usage"). Each Airframe shall be

available for use by Aircargo for purposes of this Agreement until the date set

forth opposite such Airframe on Schedule A (for each Airframe, the "Available to

Date"). Notwithstanding the foregoing, if for any reason during any month fewer

than four (4) heavy weight Airframes (the four current heavy weight Airframes

being N278US, N279US, N281KH and N284KH, and, collectively, the "Heavy Weight

Airframes") are available for Aircargo's use, the Minimum Airframe Usage for

such month will be reduced by ***** Block Hours for each of the four (4) heavy

weight Airframes not available for Aircargo's use. For purposes of determining

the Minimum Airframe Usage requirement in any month, the Available to Dates of

Airframes N278US and N279US set forth on Schedule A shall apply regardless of

whether Aircargo elects an Airframe Extension Option (as defined below) with

respect to such Airframes. In the event that any Airframe is not available for

use by Aircargo during any part of a month prior to the Available to Date

applicable to such Airframe, the Minimum Airframe Usage requirement for such

month shall be reduced by the number of Block Hours attributable to such

Airframe prorated for such part of the month for which such Airframe is

unavailable based on a thirty-day month.

 

         2.       Rates for Airframes. The Block Hour rate for utilization of

each of the Airframes shall be as follows:

 

<TABLE>

<CAPTION>

Airframe                 Rate per Block Hour

--------                 -------------------

<S>                      <C>

N278US                         $*****

 

N279US                         $*****

 

N281KH                         $*****

 

N284KH                         $*****

</TABLE>

 

         Confidential Treatment has been requested by Kitty Hawk, Inc. for

         certain portions of this document. Confidential portions have been

         filed separately with the Securities and Exchange Commission. Omitted

         portions are indicated in this agreement with "*****"

 

<PAGE>

 

<TABLE>

<CAPTION>

Airframe      Rate per Block Hour

--------      -------------------

<S>           <C>

N69739              $*****

 

N69740              $*****

 

N854AA              $*****

 

N855AA              $*****

 

N252US              $*****

 

N6809               $*****

 

N6827               $*****

 

N6833               $*****

</TABLE>

 

         3.       Modifications to Airframes. The Airframes shall be modified as

provided below. Such modifications shall be completed prior to the date required

by the rules and regulations of the Federal Aviation Administration:

 

                  a.       TCAS (traffic collision avoidance system) Avionics:

For any Airframe requiring the installation of TCAS avionics prior to the

Available to Date applicable to such Airframe, Aircargo will pay for the

installation of such TCAS avionics and the costs for the wiring of such Airframe

to accommodate the installation of the TCAS avionics. The Trust will reimburse

up to $***** of the costs incurred by Aircargo related to the installation of

the TCAS avionics for any such Airframe, including costs related to the

acquisition and installation of the TCAS avionics computer processor (the

"Computer Processor"), upon the receipt by the Trust of written demand for such

reimbursement from Aircargo. The Trust shall own the Computer Processor

following the installation of the TCAS avionics. In the event that Aircargo uses

any Airframe upon which TCAS avionics has been installed for less than *****

Block Hours following the installation of the TCAS avionics and prior to the

Available to Date applicable to such Airframe, Aircargo will, upon the receipt

by Aircargo of written demand notice from the Trust, reimburse the Trust the

lesser of: (i) ***** percent (*****%) of the actual cost of the Computer

Processor or (ii) $*****. If the Trust makes such demand and Aircargo pays the

Trust accordingly, ownership of the TCAS avionics will transfer to Aircargo. The

TCAS avionics shall include the Computer Processor, two (2) IVSI's, two (2)

antennas, a Mode S transponder, Radar Indication and related Control Head.

 

                  b.       RVSM (reduced vertical separation): For any Airframe

for which Aircargo requires the installation of an RVSM system prior to the

Available to Date applicable to such Airframe, the Trust will pay for the

installation of the RVSM system upon thirty (30) days written notice of demand

by Aircargo to install the RVSM system on such Airframe; provided, however, that

the Trust may, within a reasonable time, except as it pertains to an Airframe

upon which Aircargo has elected an Airframe Extension Option (as defined below),

in its sole discretion, elect not to install an RVSM system, at which time

Aircargo may elect to retire and remove the Airframe from Schedule A to this

Agreement. The cost of the parts of the RVSM system for which the Trust will be

obligated will not exceed $***** per Airframe.

 

                  c.       EGPWS/TAWS (enhanced ground proximity warning): For

any Airframe requiring the installation of an EGPWS/TAWS system prior to the

Available to Date applicable to such Airframe, the Trust will pay for the

installation of the EGPWS/TAWS system upon thirty

 

                                       2

 

         Confidential Treatment has been requested by Kitty Hawk, Inc. for

         certain portions of this document. Confidential portions have been

         filed separately with the Securities and Exchange Commission. Omitted

         portions are indicated in this agreement with "*****"

 

<PAGE>

 

(30) days written notice of demand by Aircargo to install the EGPWS/TAWS system

on such Airframe; provided, however, that the Trust may, within a reasonable

time, except as it pertains to an Airframe upon which Aircargo has elected an

Airframe Extension Option, in its sole discretion, elect not to install an

EGPWS/TAWS system at which time Aircargo may elect to retire and remove the

Airframe from Schedule A to this Agreement. The cost of the parts of the

EGPWS/TAWS system for which the Trust will be obligated will not exceed $*****

per Airframe.

 

         4.       Aircraft Extension Option.

 

                  a.       Aircargo may elect, in its sole discretion, to extend

the Available to Date of any or all of Airframes N278US, N279US, N69739 and

N69740 by delivering written notice of such election to the Trust at any time

prior to November 1, 2004 ("Airframe Extension Option"). In the event that any

such notice of election is delivered by Aircargo to the Trust, Aircargo shall

specify in such notice whether Aircargo elects "Option A-Long Term Extension

Option" ("Option A Election") or "Option B-Short Term Extension Option" ("Option

B Election") for any Airframe for which such Airframe Extension Option is

permitted; provided, however, that for Airframe N278US no Option B Election

shall be permitted. In the event that an Option A Election or an Option B

Election is made for any Airframe for which an Airframe Extension Option is

permitted, such election shall be governed by the terms of such Airframe

Extension Option set forth on Schedule B to this Agreement. For purposes of any

Airframe Extension Option listed on Schedule B, the terms "Heavy C check

commitment" and "Light C check commitment" shall refer to the maximum amount

that the Trust shall be obligated to pay for maintenance under such Airframe

Extension Option. The Trust's obligation with respect to the installation of a

9-G Bulkhead on Airframe N69740 shall not exceed $*****.

 

                  b.       In the event that Aircargo elects an Airframe

Extension Option with respect to any Airframe pursuant to Section 4(a) above and

the Trust fulfills its obligation to perform the Heavy C check commitment or

Light C check commitment maintenance applicable to such Airframe Extension

Option, Aircargo shall pay to the Trust an amount equal to the rate per Block

Hour applicable to such Airframe multiplied by the number of actual Block Hours

that such Airframe was used by Aircargo in the manner provided in Section 6 of

this Agreement. Upon the expiration of the Extended Available to Date applicable

to any Airframe Extension Option, Aircargo shall make an additional payment to

the Trust if the total number of Block Hours that Aircargo used the relevant

Airframe prior to the Extended Available to Date is less than the minimum Block

Hours commitment applicable to such Airframe Extension Option. Such payment

shall be made within thirty (30) days after the Extended Available to Date for

such Airframe Extension Option. The payment shall be in an amount equal to the

Block Hour rate applicable to such Airframe multiplied by the number of Block

Hours by which the minimum Block Hours commitment exceeds the actual total Block

Hours such Airframe was used by Aircargo prior to the Extended Available to

Date.

 

         5.       Transfer of Engines and Rates for Engines.

 

                  a.       Aircargo and the Trust agree and affirm that on

September 15, 2003, each party transferred certain engines that each such party

owned for certain engines owned by the

 

                                       3

 

         Confidential Treatment has been requested by Kitty Hawk, Inc. for

         certain portions of this document. Confidential portions have been

         filed separately with the Securities and Exchange Commission. Omitted

         portions are indicated in this agreement with "*****"

 

<PAGE>

 

other party. Aircargo and the Trust further agree and affirm that the transfer

of such engines from each party to the other constituted a transfer of all

ownership rights in the transferred engines to the other party, effective as of

September 15, 2003, and that each party will transfer all documents of title or

other documents or instruments evidencing ownership of the transferred engines

to the other party no later than February 27, 2004. The engines so transferred

are set forth on Schedule C to this Agreement. Aircargo and the Trust agree that

this Agreement shall serve as a bill of sale for such engine transfers. To the

extent that any Aircargo engine that was transferred to the Trust was subject to

a lien in favor of a secured creditor prior to September 15, 2003, the Trust

affirms that such lien shall remain in place until satisfied. Schedule D to this

Agreement sets forth the engines owned by the Trust as of December 3, 2003 (the

"Engines"), and sets forth the Block Hour rate that Aircargo will pay for the

use of each of the Engines from January 1, 2004 to December 31, 2007 (the

Available to Date of such Engines) regardless of whether such Engines are

installed on one of the Airframes, on an Aircargo airframe or on the airframe of

a third party. In the event that Aircargo does not elect an Airframe Extension

Option prior to November 1, 2004 for any of the Airframes identified in Schedule

B to this Agreement, the Trust or Aircargo may remove up to three Engines from

Schedule D of the type corresponding to such Airframe from Schedule A as

follows:

 

<TABLE>

<CAPTION>

                                           NUMBER OF ENGINES

AIRFRAME             ENGINE TYPE          AVAILABLE FOR REMOVAL

---------------------------------------------------------------

<S>                  <C>                  <C>

 N278US                JT8D-15                     3

---------------------------------------------------------------

 N279US                JT8D-15                     3

---------------------------------------------------------------

 N69739                JT8D-9A                     3

---------------------------------------------------------------

 N69740                JT8D-9A                     3

---------------------------------------------------------------

</TABLE>

 

                  b.       Prior to December 31, 2007, Aircargo will use the

Engines collectively, in total and on a pooled basis, for a minimum of *****

percent (*****%) of the expected Block Hour life of the Engines set forth on

Schedule D ("Minimum Engine Block Hours"). Aircargo shall pay to the Trust an

amount equal to the rate per Block Hour applicable to each Engine multiplied by

the actual number of Block Hours that such Engine was used by Aircargo in the

manner provided in Section 6 below. In the event that the total actual number of

Block Hours used for all Engines between January 1, 2004 and December 31, 2007

do not exceed the Minimum Engine Block Hours, within thirty (30) days after

December 31, 2007, Aircargo shall pay to the Trust an amount equal to the

Weighted Average Engine Block Hour Rate (as provided on Schedule D to this

Agreement) multiplied by the number of hours by which the Minimum Engine Block

Hours exceeds the total actual Engine Block Hours used by Aircargo. In the event

that any Engine is removed from Schedule D to this Agreement in the manner

provided in Section 9 below, the Minimum Engine Block Hours shall be reduced by

the expected Block Hour life attributable to such removed engine as provided on

Schedule D.

 

         6.       Monthly Payments.

 

                  a.       On or about the 10th day of each month after January

2004, Aircargo will provide to the Trust a schedule of the number of Block Hours

that each Airframe and each Engine was used in the immediately preceding month

and will pay to the Trust an amount equal to the applicable Block Hour rate for

each Airframe and each Engine multiplied by the actual

 

                                       4

 

         Confidential Treatment has been requested by Kitty Hawk, Inc. for

         certain portions of this document. Confidential portions have been

         filed separately with the Securities and Exchange Commission. Omitted

         portions are indicated in this agreement with "*****"

 

<PAGE>

 

number of Block Hours that each such Airframe and each such Engine was used in

the immediately preceding month.

 

                  b.       If for any month Aircargo fails to achieve the

Minimum Airframe Usage, then on the date that payment for actual usage for the

month is required under Section 6(a) above, Aircargo shall pay to the Trust an

amount equal to $***** multiplied by the number of Block Hours by which the

Minimum Airframe Usage exceeds the total actual number of Block Hours that the

Airframes were used in the immediately preceding month.

 

         7.       Maintenance. Aircargo will perform line maintenance of the

Airframes and Engines in accordance with Aircargo's current maintenance program.

Airframe maintenance shall be limited to "A" checks, "B" checks and Aircargo's

responsibility for repairs or incidental replacement of parts and rotables shall

not exceed $***** per Airframe for any such check or other event. If such repair

or incidental replacement of parts and rotables should exceed $***** and the

Trust elects not to pay the excess above $***** or a mutually agreed upon amount

of the excess above $*****, then that Airframe, at Aircargo's option, can be

deemed not available for Aircargo's use. . In the event that an Engine requires

more than $***** in Engine maintenance in order to remain in serviceable

condition and the Trust elects not to pay the excess above $***** or a mutually

agreed upon amount of the excess above $*****, then Aircargo may elect to

perform such maintenance at its own cost by electing to buy such Engine from the

Trust at a core value of $***** for 9A Engines and $***** for -15 Engines.

 

Aircargo shall be required to make any repairs, replacements or improvements to

any Airframe that are necessary as the result of an Airworthiness Directive or

Service Bulletin or similar requirement issued by any regulating body, such

amount not to exceed $***** per Airframe subject to cost sharing with the Trust

as reflected in Section 3, Section 4 and Schedule B. If such repair,

replacements or improvements to any Airframe that are necessary as a result of

an Airworthiness Directive or Service Bulletin or similar requirement issued by

an regulating body exceeds $***** other than those items subject to cost sharing

with the Trust as reflected in Section 3 and Section 4 and Schedule B, and the

Trust elects not to pay the excess above $***** or a mutually agreed upon amount

of the excess above $*****, then the Airframe, at Aircargo's option, can be

deemed not available for Aircargo's use.

 

         8.       Insurance. Aircargo shall cause the Airframes and Engines to

be covered by hull and liability insurance in accordance with Aircargo's current

fleet plan insurance program. Policies relating to such insurance shall show the

Trust as a loss payee and an additional insured; provided, however, that, for

any Airframe removed from Schedule A and for any Engines mounted on such

Airframe, Aircargo's obligation to insure the Airframe and such Engines shall

terminate upon the Trust's receipt of the Deliverables (as defined below).

Following the execution of this Agreement, each Airframe identified on Schedule

A shall be insured by Aircargo in an amount equal to that set forth opposite

such Airframe on Schedule E to this Agreement.

 

         9.       Removal of Engines and Airframes. In the event the Trust or

Aircargo elects to remove an Engine from Schedule D to this Agreement for any

reason, the Trust or Aircargo shall deliver written notice of removal of such

Engine from Schedule D at least sixty (60) days prior to

 

                                       5

 

         Confidential Treatment has been requested by Kitty Hawk, Inc. for

         certain portions of this document. Confidential portions have been

         filed separately with the Securities and Exchange Commission. Omitted

         portions are indicated in this agreement with "*****"

 

<PAGE>

 

the removal of such Engine. An Engine removed from Schedule D shall be referred

to as a "Terminated Engine." Within sixty (60) days of the receipt of such

notice, Aircargo shall deliver, other than in cases where Aircargo has elected

to buy an Engine as described under Section 7, physical possession of the

Terminated Engine to a place within the United States designated by the Trust,

and shall deliver for such Terminated Engine: (i) a current certificate of

airworthiness and (ii) all technical records, including, but not limited to,

current maintenance and operations records (all of the foregoing, for any

Terminated Engine, the "Deliverables"). In the event that Aircargo proposes to

deliver to the Trust free and clear title to an engine that is not owned by the

Trust in lieu of a Terminated Engine, Aircargo shall convey an engine of similar

type and condition (determined by a comparison of engine disc profiles and

limiters) to the Trust. The Trust shall pay the cost of all shipping and other

expenses required for the delivery of such Terminated Engine to the Trust;

provided, however, that Aircargo shall remove the Engine from any Airframe at

its own expense. In the event that any Airframes are removed from Schedule A

pursuant to the terms of this Agreement, the same procedure for the removal of

Terminated Engines shall apply to the removal of such Airframes.

 

         10.      Operation of Aircraft. Aircargo may operate the Airframes and

Engines in such types of service as Aircargo deems appropriate; provided,

however, that Aircargo shall not "Dry Lease" any of the Airframes or Engines.

 

         11.      Force Majeure. In the event that, through no action or

inaction on the part of Aircargo, Aircargo's fleet of 727 airframes or JT8D

engines (regardless of whether such airframes or engines are owned by Aircargo

or by the Trust) become unavailable for operation for service, the Minimum

Airframe Usage, Minimum Engine Usage and Block Hour commitment under any

Airframe Extension Option will be modified in the following manner:

 

                  a.       If Aircargo's fleet of 727 airframes or JT8D engines

become unavailable for a period of 180 days or less (a "Temporary Period"), then

the Available To Date of all Airframes and Engines will be extended