This section is intended to set out DB Schenker’s Code of Practice with regards to the disposal of redundant locomotives. DB Schenker’s policy is to promote the growth and expansion of the UK rail industry and will not support restrictive or anti competitive action by any party.

DB Schenker operates in a free market without government grant or subsidy and will process the disposal of surplus assets in a way that encourages re-use of the locomotives or locomotive components whilst recognising commercial reality, safe practices and the market value of the assets.

Regulatory Authorities
The operation and disposal of locomotives is overseen by a number of government bodies, who have a role to ensure that such disposals take account of:

• Safety implications
• Environmental effects
• Non discrimination

The regulatory bodies have enforcement powers, which may be used if DB Schenker fails to comply with legislation or any relevant Operating Licence conditions.

This Code of Practice sets out in an open and transparent way how DB Schenker intends to dispose of its surplus locomotives and in doing so, seeks to satisfy the various regulatory authorities that the duties, conditions and constraints imposed by Health and Safety Legislation, DB Schenker’s Operating Licences and current Competition Law are met.

Scope
The Code of Practice sets down:

• the categorisation of unused locomotives
• the marketing process for locomotives available for sale by general tender
• tender policy
• safety and environmental considerations
• residual risk and liability

Availability and Categorisation of Locomotives
To effect a timely and controlled withdrawal and disposal process, DB Schenker categorises locomotives as follows:

1. Group 1 Active and Stored Serviceable
   (Locomotives in a condition that are either in service, or can be put back into active service quickly, should operational requirements demand).
   
2. Group 2 Stored Unserviceable
   (Locomotives in a condition where minimal care and maintenance is performed, but could be returned to serviceable status).
   
3. Group 3 For Component Recovery
   (Locomotives used to provide a source of components as may be required to satisfy DB Schenker's operational demands and the demands of maintenance agreements entered into by DB Schenker).
   
4. Group 4 Surplus to Requirements
   (Locomotives available for sale and/or disposal).

The decision to transfer locomotives from one category to another may be driven by a number of factors including those detailed above. Only locomotives in Group 4 will be considered for sale or disposal in accordance with this Code of Practice.

Marketing of Locomotives
Locomotives held in Groups 1 and 2 will be assessed on a quarterly basis in relation to type of locomotive, current demand, and duration of future need. As a consequence, locomotives shall then be, as appropriate:

1. put back into serviceable status, or
2. retained in Group 1 or 2, or
3. placed into Group 3 for component recovery, or
4. deemed to be no longer required by DB Schenker (or DB Schenker Group Companies [1] ) and placed in Group 4 - "Surplus to requirements".

Locomotives may become available for disposal for a variety of reasons including:

• Major component failure
• Damage caused by fire, collision or derailment
• Legislative changes
• Displacement by new or alternative stock
• Obsolescence

Locomotives placed into Group 4 are available for disposal by sale and their reinstatement to Group 1, 2 or 3 would only occur in extreme circumstances, such as catastrophic or unforeseen loss (e.g. derailment, collision, fire, etc.) or shortage of locomotives in the other categories.

Criteria for identifying method of disposal
In general terms, surplus locomotives, as defined above shall be disposed of in a manner, which is fair and non-discriminatory and by a method which generates the best return for DB Schenker. However, this shall be in compliance with safety and environmental considerations and take account of other relevant factors, including asbestos removal.

Advertising of Available Locomotives
DB Schenker shall offer for sale, surplus locomotives, (those in Group 4), in accordance with this Code of Practice, which shall be published on DB Schenker’s website (www.rail.dbschenker.co.uk). Locomotives for sale will also be advertised on DB Schenker’s website and such advertisements shall include, but not be limited to, provision of details of available locomotives, their location and applicable tender details and terms (which may include a reserve price).

Tender Policy
DB Schenker shall offer its surplus locomotives for sale by means of competitive open tendering, accompanied by this Code of Practice, without conditions that restrict further use, and in a manner intended to realise maximum return.

Notwithstanding the above, DB Schenker reserves its right to dispose of locomotives outwith this Code of Practice when this involves transfer within DB Schenker (or DB Schenker Group Companies) or in extreme cases involving donations, or exchange deals. Locomotives transferred to other DB Schenker Group Companies will be returned to DB Schenker when they are no longer required by the relevant DB Schenker Group Company concerned.

Contracts for sale shall be awarded to the Tenderer with the highest present value offered. In addition, financial standing or credit history, good faith of the Tenderer, speed of sale/site clearance and payment terms may also be taken into account.

All Group 4 sales shall be concluded in accordance with this Tender Policy.

All tendering activities and subsequent sales shall be (i) under the authority of the DB Schenker Disposals Manager (telephone 07801 905248; fax 01332 265249) and (ii) subject to preservation of strict confidentiality as may be detailed and necessary for the due performance of a given contract.

Safety and Environmental Considerations
In order to ensure that locomotives are (i) not sold on for future use on rail without proper checks and safety certification and (ii) that locomotives that are sold by DB Schenker comply with current legislation appertaining to Asbestos (Prohibitions) Regulations 1992. DB Schenker shall adopt the following Procedures:

• Locomotives shall be deregistered from the industry's Rolling Stock Library (‘RSL’) and offered for sale accordingly. (Note: Locomotives in Group 4 may be in poor condition and possibly lacking components).

DB Schenker gives no warranties and it shall be the sole responsibility of the Buyer of the locomotive (or component, as applicable) to verify its condition and to demonstrate to the satisfaction of the appropriate Authorities that it is in such a safe condition as may be demanded, and where appropriate, to secure re-registration to the RSL. (Note: The Rail industry has acceptance procedures to control the re-instatement and registration of locomotives on the RSL and Buyers will be responsible for making their own arrangements in this regard. Details of approved Vehicle Acceptance Bodies, of which DB Schenker is currently one, can be obtained from Railway Safety and Standards Board, Evergreen House 160 Euston Road, London NW1 2DX).

Environment
With reference to (ii) in the section above, DB Schenker undertakes to comply with the provisions of the Asbestos (Prohibitions) Regulations 1992 and shall ensure, prior to completion of any sale of a surplus locomotive that asbestos is either removed at a suitably registered site, or as appropriate an exemption is obtained from the Health and Safety Executive, prior to sale.

Residual Risk and Liability
The Contract for Sale does not contain any warranties for fitness for purpose of locomotives disposed of and DB Schenker shall not bear any liability arising from the use of the locomotive in question or any of its parts.