EX-10.5



 





Exhibit 10.5



[*] = Portions of this exhibit have been omitted pursuant to a Confidential Treatment Request.
An unredacted version of this exhibit has been filed separately with the Commission.




EXECUTION COPY




ATLAS AIR WORLDWIDE HOLDINGS, INC.

2000 Westchester Avenue

Purchase, New York 10577




June 28, 2007




Polar Air Cargo Worldwide, Inc.

2000 Westchester Avenue

Purchase, New York 10577




Re: Contribution Agreement




Ladies and Gentlemen:




     1. Contribution Obligations.



          (a) Net Working Capital Contribution. Pursuant to Section 2.6.5 of the Stock
Purchase Agreement dated as of November 28, 2006 (as in effect on the date hereof, the
“Purchase Agreement;” terms used but not defined herein shall have the meaning set forth in
the Purchase Agreement) by and between Polar Air Cargo Worldwide, Inc. (f/k/a/ Airline Acquisition
Corp I), a Delaware corporation (the “Company”) and DHL Network Operations (USA), Inc., an
Ohio corporation (the “Investor”), the Company may be required to make a payment to the
Investor in the amount equal to the negative Net Working Capital amount (the “Net Working
Capital Payment Obligation”). Atlas Air Worldwide Holdings, Inc., a Delaware corporation
(“AAWW”), hereby agrees that, in the event that the Net Working Capital as of and at the
Closing Date and as reflected in the Financial Statement of Net Working Capital is determined to be
less than zero ($0), AAWW will make a capital contribution to the Company in the amount of the Net
Working Capital Payment Obligation so as to cause the Company to have available sufficient liquid
assets to meet punctually its payment obligations to the Investor in full when the Net Working
Capital Payment Obligation becomes due pursuant to the Purchase Agreement.



          (b) AAWW Working Capital Facility. From the Closing Date until such date, if any,
that the Company receives the Refundable Deposit (as defined in the Indemnity Agreement, defined
below) from the Investor upon request by the Company to the Investor in accordance with that
certain Indemnity Agreement dated as of the date hereof by and among AAWW, the Company and the
Investor (the “Indemnity Agreement”), AAWW shall provide the Company with access to working
capital funds on a daily basis (the “AAWW Working Capital Facility”). Such funds under the
AAWW Working Capital Facility will be made available to the Company on an interest-free basis. The
Company may repay any and all amounts due under the AAWW Working Capital Facility at any time from
time to time after the date hereof and prior to the Termination Date; provided,
however, the Company shall, promptly following the date (if any) on which the Company
receives the Refundable Deposit, prepay any amounts outstanding under the AAWW Working Capital
Facility to the extent of the Available Cash (with the “Available Cash” determined after
reduction for any cash used to make non-pro rata distributions or dividends to Class A Common Stock
holders of amounts up to the positive Net Working



 









 







Capital amount payable by the Investor to the Company under Section 2.6.5 of the
Purchase Agreement) if any such cash distributions or dividends are made, regardless of whether
such cash was provided through Company operations, the Refundable Deposit, or other cash payments
(including advance payments under the Blocked Space Agreement) made by the Investor in accordance
with the Purchase Agreement or otherwise. Following any such date, to the extent that the
Company’s working capital requirements exceed the available funds in the Company’s accounts
(including amounts attributable to the Refundable Deposit), AAWW shall continue to provide the
Company with access to working capital funds on an interest-free basis pursuant to the AAWW Working
Capital Facility. This AAWW Working Capital Facility will expire on the BSA Commencement Date and
any outstanding amounts thereunder shall become immediately due and payable to AAWW within five (5)
days of the BSA Commencement Date (the “Termination Date”).



          (c) P&L True-Up Contribution. Until the earlier of (i) October 31, 2008 and (ii) the
BSA Commencement Date, no later than ten (10) days after the end of the applicable True-Up Period
(defined below), the Company shall provide written notice (“Notice”) to AAWW of the
Company’s estimates of the amount by which, (i) the Net Operating Loss (if any) of the Company for
the applicable True-Up Period, exceeds the Operating Loss Target for such True-Up Period (the
“Excess Loss”); (ii) the Net Operating Loss (if any) of the Company for such True-Up
Period is less than the Operating Loss Target for such True-Up Period (the “Recovered
Loss”) or (iii) the Net Operating Profit (if any) of the Company for such True-Up Period
exceeds the Operating Loss Target for such True-Up Period (the “Excess Profit”). For
illustrative purposes, see examples on Exhibit B. The Company shall attach to such Notice
drafts of financial statements of the Company for such True-Up Period, prepared in accordance with
generally accepted accounting principles (applied consistently with past practice) and the
applicable provisions of the Stockholders Agreement, dated as of the date hereof, by and among the
Investor, AAWW and the Company.




     i. In the event that there is an estimated Excess Loss, within five (5) days of receipt
of the Notice, AAWW will make a cash capital contribution to the Company in the amount equal
to such estimated Excess Loss.




     ii. In the event that there is an estimated Recovered Loss, such amount shall be
available as an amount that may be declared and paid by the Company as a non pro rata cash
dividend or distribution with respect to the Class A Common Stock. In the event that there
is an estimated Excess Profit, such amount shall be reduced by the product of (a) 40% and
(b) the estimated Excess Profit, if the Operating Loss Target is zero, or the estimated Net
Operating Profit, if the Operating Loss Target is negative, (the amount by which such Excess
Profit is reduced being the assumed amount of Taxes that will be owed with respect to such
Excess Profit (or Net Operating Profit) (the “Assumed Taxes”)), and the reduced
amount (the estimated “Assumed After-Tax Excess Profit”) shall be available as an
amount that may be declared and paid by the Company as a non pro rata cash dividend or
distribution with respect to Class A Common Stock.




     iii. The financial statements referred to in Section 1(c) will be subject to
audit by the Auditor (defined in the Stockholder Agreement) as of the end of each True-Up
Period. The cost of the audit shall be borne equally by AAWW and the Investor. Following
the audit, Excess Loss, Recovered Loss, Excess Profit and Assumed After-Tax



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Excess Profit shall be recalculated taking into account any audit adjustments. If
actual Excess Loss based on such audit differs from originally estimated Excess Loss, then
any excess of actual Excess Loss over originally estimated Excess Loss shall be contributed
by AAWW, or any excess of originally estimated Excess Loss over actual Excess Loss, shall be
returned by the Company to AAWW, within five (5) days of completion of the audit. If non
pro rata dividends or distributions relating to estimated Recovered Loss have been paid on
the Class A Common Stock, and actual Recovered Loss based on such audit differs from
originally estimated Recovered Loss, then any excess of actual Recovered Loss over estimated
Recovered Loss shall be available to be declared and paid as an additional non pro rata cash
dividend or distribution on the Class A Common Stock, and any excess of estimated Recovered
Loss over actual Recovered Loss shall be returned by AAWW to the Company. If non pro rata
dividends or distributions relating to estimated Assumed After-Tax Excess Profit have been
paid on the Class A Common Stock, and actual Assumed After-Tax Excess Profit based on such
audit differs from originally estimated Assumed After-Tax Excess Profit, then any excess of
actual Assumed After-Tax Excess Profit over estimated Assumed After-Tax Excess Profit shall
be available to be declared and paid as an additional non pro rata cash dividend or
distribution on Class A Common Stock, and any excess of estimated Assumed After-Tax Excess
Profit over actual Assumed After-Tax Excess Profit shall be returned by AAWW to the Company.
To the extent that non pro rata dividends or distributions relating to estimated Assumed
After-Tax Excess Profit or estimated Recovered Loss have not been paid on the Class A Common
Stock, the amount available for declaration and payment of non pro rata cash dividends or
distributions on the Class A Common Stock shall be based on actual Recovered Loss or actual
Assumed After-Tax Excess Profit based on such audit rather than on estimated Recovered Loss
or estimated Assumed After-Tax Excess Profit.




     iv. To the extent the Company actually pays less cash Taxes with respect to Excess
Profit (or Net Operating Profit, if the Operating Loss Target is negative) than the Assumed
Taxes with respect to such Excess Profit (or Net Operating Profit), following the date on
which the relevant Tax Return with respect to such Excess Profit (or Net Operating Profit)
is filed, an amount up to the amount of 100% of the excess of the Assumed Taxes over the
actual Taxes paid (“Excess Assumed Taxes”) shall be available as an amount that may
be declared and paid by the Company as a non pro rata cash dividend or distribution with
respect to the Class A Common Stock. In addition, as and when the Company actually realizes
a cash Tax savings associated with an Excess Loss, an amount equal to such Tax savings
(“Excess Loss Savings”) shall be available as an amount that may be declared and
paid by the Company as a non pro rata cash dividend or distribution with respect to the
Class A Common Stock. For purposes of this paragraph, if the Company has, at the request of
the Investor: (i) operated any routes or frequencies not operated by Polar as of the date of
execution of the Purchase Agreement; or (ii) conducted other specific activities, actual
Taxes paid and actual Tax savings shall be calculated on a hypothetical basis based on Taxes
that would have been paid or Tax savings that would have been realized if such routes or
frequencies had not been operated or such activities not conducted by the Company. In
addition, for purposes of this paragraph, actual Taxes paid and actual cash tax savings
shall be calculated assuming the Refundable Deposit is a nontaxable deposit or advance.



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     “Net Operating Profit” or “Net Operating Loss” shall mean the income or loss
of the Company which shall include all revenues, costs and expenses of the Company, all as
determined in accordance with generally accepted accounting principles (applied consistently with
past practice), whether incurred in the ordinary course of business, or related to unusual,
non-recurring or extraordinary items (which includes, but is not limited to labor disruptions and
catastrophic losses), but with the following adjustments: (1) Net Operating Profit and Net
Operating Loss shall exclude provisions for income tax expense or benefit (whether current or
deferred); (2) Net Operating Profit and Net Operating Loss shall be calculated without taking into
account revenues, costs and expenses related to: (i) the operation of any routes or frequencies
that are operated by the Company at the request of the Investor but are not operated by Polar as of
the date of execution of the Purchase Agreement; or (ii) any other specific activity or activities
conducted at the request of the Investor; (3) Net Operating Profit and Net Operating Loss shall
include depreciation and amortization charges related to capital leases of aircraft, but shall not
include the effects of any depreciation or amortization or revaluation provisions related to fixed
or intangible assets and shall not include any changes in loan loss reserves or any other non-cash
reserves or other non-cash contingencies; and (4) Net Operating Profit and Net Operating Loss shall
include provisions for bad debt expenses or recovery.



     The “True-Up Period” shall mean, as applicable: (i) if the BSA Commencement Date is
[*], (A) the Company’s [*] and (B) the Company’s [*]; (ii) if the BSA Commencement Date is [*], (A)
the Company’s [*] and (B) the Company’s [*]; (iii) if the BSA Commencement Date is [*], the
Company’s [*] only; and (iv) if the BSA Commencement Date is [*], (A) the Company’s [*] and (B) the
Company’s [*]; provided, however, in the event that the BSA Commencement Date is
prior to [*], there shall be no True-Up Period and this Section 1(c) does not apply in its
entirety.



     The “Operating Loss Target” for the Company’s 2007 fiscal year shall be zero and for
each other True-Up Period shall either be equal to zero or to a negative number determined by the
parties. The Operating Loss Target for each True-Up Period other than the Company’s 2007 fiscal
year will be agreed between the parties and set forth on Exhibit A as determined based on a
full fiscal year break even target for the Company’s ongoing scheduled service business and taking
into account the seasonality of such business. The Operating Loss Target shall be calculated
without taking into account revenues, costs and expenses related to: (i) the operation of any
routes or frequencies that are operated by the Company at the request of the Investor but are not
operated by Polar as of the date of execution of the Purchase Agreement; or (ii) any other specific
activity or activities conducted at the request of the Investor.



     2. Representations and Warranties of AAWW. AAWW hereby represents and warrants to the
Company on and as of the date hereof that (a) AAWW is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, (b) the execution, delivery
and performance by AAWW of this letter agreement are within its corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene (i) its charter or by-laws or
(ii) any Applicable Law (as defined in the Stockholders Agreement) or any contractual restriction
binding on or affecting it and (c) this letter agreement has been duly executed and delivered by
AAWW and constitutes the legal, valid and binding obligation of AAWW, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency and laws affecting
creditors’ rights generally and to general equitable principles.



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     3. Representations and Warranties of the Company. The Company hereby represents and
warrants to AAWW on and as of the date hereof that (a) the Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware, (b) the execution,
delivery and performance by the Company of this letter agreement are within its corporate powers,
have been duly authorized by all necessary corporate action, and do not contravene (i) its charter
or by-laws or (ii) any Applicable Law or any contractual restriction binding on or affecting it and
(c) this letter agreement has been duly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency and laws affecting creditors’ rights generally
and to general equitable principles.



     4. Amendment, Waiver, etc. No amendment or waiver of any provision of this letter
agreement and no consent to any departure by AAWW therefrom shall in any event be effective unless
the same shall be in writing and signed by each of AAWW and the Company and then such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given. The rights and obligations provided hereunder are the exclusive remedies afforded hereunder
(other than claims with respect to fraud).



     5. Miscellaneous. This letter agreement may be executed in one or more counterparts,
is binding upon and inures to the benefit of the AAWW, the Company and their respective successors
and permitted assigns, provided, however, that neither AAWW nor the Company may
assign, delegate or otherwise transfer either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written consent of the other party. This letter agreement
is for the benefit of the Company and its stockholders, and, upon a material default by AAWW
hereunder for which the Investor has given the Company prior written notice of any action or remedy
it requests the Company take in accordance with this letter agreement, and the Company has not done
so within sixty (60) days following receipt of such notice, the Investor may enforce the rights of
the Company on behalf of the Company under this letter agreement. Subject to such enforcement
right, the parties hereto shall continue to have the ability to amend, waive and exercise all
rights under this letter agreement, and nothing herein shall affect the governance of the Company
under the direction of the Company’s Board and management. Except as set forth in the prior
sentence, (1) NO PERSON OR ENTITY, OTHER THAN THE COMPANY OR AAWW, SHALL HAVE ANY RIGHTS, CLAIMS,
BENEFITS OR POWERS UNDER THIS AGREEMENT AND THIS AGREEMENT SHALL NOT BE CONSTRUED OR INTERPRETED TO
CONFER ANY RIGHTS, CLAIMS, BENEFITS OR POWERS UPON ANY THIRD PARTY and (2) THERE ARE NO THIRD-PARTY
BENEFICIARIES OF THIS AGREEMENT.



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	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	ATLAS AIR WORLDWIDE HOLDINGS, INC.	 	 
	 
	 	 	 	 	 	 
	By:
	 	/s/ William J. Flynn	 	 
	 	 	 	 	 
	 
	 	Name:	 	William J. Flynn	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	ACCEPTED AND AGREED:	 	 
	 
	 	 	 	 	 	 
	POLAR AIR CARGO WORLDWIDE, INC.	 	 
	 
	 	 	 	 	 	 
	By:
	 	/s/ William J. Flynn	 	 
	 	 	 	 	 
	 

	 	Name:
	 	William J. Flynn	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 






[Signature Page to the Contribution Agreement]




 









 








EXHIBIT A

P&L Target




	 	 	 
	Period	 	Operating Loss Target
	[*]

	 	[*]
	[*]

	 	[*]






 









 






EXHIBIT B

Examples





Assuming the Operating Loss Target for the applicable True-Up Period is [*]:




(i) if the Company has a Net Operating Loss for such applicable True-Up Period of [*], the
Company will have an [*];




(ii) if the Company has a Net Operating Loss for the applicable True-Up Period of [*], the
Company will have a [*]; and




(iii) if the Company has a Net Operating Profit for such applicable True-Up Period of [*], the
Company will have an [*].